CFR 2017 Title42a Vol3

Title 42
Public Health
Parts 414 to 429
Revised as of October 1, 2017
Containing a codification of documents

of general applicability and future effect
As of October 1, 2017
Published by the Office of the Federal Register

National Archives and Records Administration
as a Special Edition of the Federal Register
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Table of Contents
Page
Explanation ................................................................................................ v
Title 42:
Chapter IV—Centers for Medicare & Medicaid Services, Depart-

ment of Health and Human Services (Continued) ........................ 3
Finding Aids:
Table of CFR Titles and Chapters ....................................................... 923
Alphabetical List of Agencies Appearing in the CFR ......................... 943
List of CFR Sections Affected ............................................................. 953

iii
Cite this Code: CFR
To cite the regulations in

this volume use title,
part and section num-
ber. Thus, 42 CFR 414.1
refers to title 42, part
414, section 1.
iv
Explanation
The Code of Federal Regulations is a codification of the general and permanent
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which usually bear the name of the issuing agency. Each chapter is further sub-
divided into parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year and issued
on a quarterly basis approximately as follows:
Title 1 through Title 16..............................................................as of January 1
Title 17 through Title 27 .................................................................as of April 1
Title 28 through Title 41 ..................................................................as of July 1
Title 42 through Title 50 .............................................................as of October 1
The appropriate revision date is printed on the cover of each volume.
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vi
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Director,
Office of the Federal Register.
October 1, 2017.
vii
THIS TITLE
Title 42—PUBLIC HEALTH is composed of five volumes. The parts in these vol-
umes are arranged in the following order: Parts 1–399, parts 400–413, parts 414–
429, parts 430–481, and part 482 to end. The first volume (parts 1–399) contains
current regulations issued under chapter I—Public Health Service (HHS). The
second, third, and fourth volumes (parts 400–413, parts 414–429, and parts 430–481)
include regulations issued under chapter IV—Centers for Medicare & Medicaid
Services (HHS) and the fifth volume (part 482 to end) contains the remaining
regulations in chapter IV and the regulations issued under chapter V by the Of-
fice of Inspector General-Health Care (HHS). The contents of these volumes rep-
resent all current regulations codified under this title of the CFR as of October
1, 2017.
For this volume, Bonnie Fritts was Chief Editor. The Code of Federal Regula-
tions publication program is under the direction of John Hyrum Martinez, as-
sisted by Stephen J. Frattini.
ix
Title 42—Public Health
(This book contains parts 414 to 429)
Part
CHAPTER IV—Centers for Medicare & Medicaid Services, De-

partment of Health and Human Services (Continued) ....... 414
CHAPTER IV—CENTERS FOR MEDICARE &
MEDICAID SERVICES, DEPARTMENT OF HEALTH
AND HUMAN SERVICES (CONTINUED)
EDITORIAL NOTE: Nomenclature changes to chapter IV appear at 62 FR 46037, Aug. 29, 1997;
66 FR 39452, July 31, 2001; and 67 FR 36540, May 24, 2002.
SUBCHAPTER B—MEDICARE PROGRAM (CONTINUED)
Part Page
414 Payment for Part B medical and other health serv-
ices ....................................................................... 5
415 Services furnished by physicians in providers, su-
pervising physicians in teaching settings, and
residents in certain settings ................................ 184
416 Ambulatory surgical services .................................. 202
417 Health maintenance organizations, competitive
medical plans, and health care prepayment plans 229
418 Hospice care ............................................................ 311
419 Prospective payment system for hospital out-
patient department services ................................. 357
420 Program integrity: Medicare .................................. 377
421 Medicare contracting .............................................. 387
422 Medicare advantage program .................................. 402
423 Voluntary medicare prescription drug benefit ........ 573
424 Conditions for Medicare payment ........................... 774
425 Medicare shared savings program ........................... 839
426 Review of national coverage determinations and
local coverage determinations ............................. 892
427–429 [Reserved]
SUBCHAPTER B—MEDICARE PROGRAM (CONTINUED)
PART 414—PAYMENT FOR PART B 414.63 Payment for outpatient diabetes self-
management training.
MEDICAL AND OTHER HEALTH 414.64 Payment for medical nutrition ther-
SERVICES apy.
414.65 Payment for telehealth services.
Subpart A—General Provisions 414.66 Incentive payments for physician
scarcity areas.
Sec. 414.67 Incentive payments for services fur-
414.1 Basis and scope. nished in Health Professional Shortage
414.2 Definitions. Areas.
414.4 Fee schedule areas. 414.68 Imaging accreditation.
414.5 Hospital services paid under Medicare 414.80 Incentive payment for primary care
Part B when a Part A hospital inpatient services.
claim is denied because the inpatient ad- 414.90 Physician Quality Reporting System
mission was not reasonable and nec- (PQRS).
essary, but hospital outpatient services 414.92 Electronic Prescribing Incentive Pro-
would have been reasonable and nec- gram.
essary in treating the beneficiary. 414.94 Appropriate use criteria for advanced
diagnostic imaging services.
Subpart B—Physicians and Other
Practitioners Subpart C—Fee Schedules for Parenteral
414.20 Formula for computing fee schedule and Enteral Nutrition (PEN) Nutrients,
amounts. Equipment and Supplies, Splints, Casts,
414.21 Medicare payment basis. and Certain Intraocular Lenses (IOLs)
414.22 Relative value units (RVUs).
414.24 Publication of RVUs and direct PE 414.100 Purpose.
inputs. 414.102 General payment rules.
414.26 Determining the GAF. 414.104 PEN Items and Services.
414.28 Conversion factors. 414.105 Application of competitive bidding
414.30 Conversion factor update. information.
414.34 Payment for services and supplies in- 414.106 Splints and casts.
cident to a physician’s service. 414.108 IOLs inserted in a physician’s office.
414.36 Payment for drugs incident to a phy-
sician’s service. Subpart D—Payment for Durable Medical
414.39 Special rules for payment of care plan Equipment and Prosthetic and Orthotic
oversight. Devices
414.40 Coding and ancillary policies.
414.42 Adjustment for first 4 years of prac- 414.200 Purpose.
tice. 414.202 Definitions.
414.44 Transition rules. 414.210 General payment rules.
414.46 Additional rules for payment of anes- 414.220 Inexpensive or routinely purchased
thesia services. items.
414.48 Limits on actual charges of non- 414.222 Items requiring frequent and sub-
participating suppliers. stantial servicing.
414.50 Physician or other supplier billing for 414.224 Customized items.
diagnostic tests performed or interpreted 414.226 Oxygen and oxygen equipment.
by a physician who does not share a prac- 414.228 Prosthetic and orthotic devices.
tice with the billing physician or other 414.229 Other durable medical equipment—
supplier. capped rental items.
414.52 Payment for physician assistants’ 414.230 Determining a period of continuous
services. use.
414.54 Payment for certified nurse-mid- 414.232 Special payment rules for trans-
wives’ services. cutaneous electrical nerve stimulators
414.56 Payment for nurse practitioners’ and (TENS).
clinical nurse specialists’ services. 414.234 Prior authorization for items fre-
414.58 Payment of charges for physician quently subject to unnecessary utiliza-
services to patients in providers. tion.
414.60 Payment for the services of CRNAs.
414.61 Payment for anesthesia services fur- Subpart E—Determination of Reasonable

nished by a teaching CRNA. Charges Under the ESRD Program
414.62 Fee schedule for clinical psychologist
services. 414.300 Scope of subpart.
Pt. 414 42 CFR Ch. IV (10–1–17 Edition)
414.310 Determination of reasonable charges 414.509 Reconsideration of basis for and
for physician services furnished to renal amount of payment for a new clinical di-
dialysis patients. agnostic laboratory test.
414.313 Initial method of payment. 414.510 Laboratory date of service for clin-
414.314 Monthly capitation payment meth- ical laboratory and pathology specimens.
od. 414.522 Payment for new advanced diag-
414.316 Payment for physician services to nostic laboratory tests.
patients in training for self-dialysis and
home dialysis. Subpart H—Fee Schedule for Ambulance
414.320 Determination of reasonable charges Services
for physician renal transplantation serv-
ices. 414.601 Purpose.
414.605 Definitions.
414.330 Payment for home dialysis equip-
414.610 Basis of payment.
ment, supplies, and support services.
414.615 Transition to the ambulance fee
414.335 Payment for EPO furnished to a schedule.
home dialysis patient for use in the 414.617 Transition from regional to national
home. ambulance fee schedule.
414.620 Publication of the ambulance fee
Subpart F—Competitive Bidding for Certain schedule.
Durable Medical Equipment, Pros- 414.625 Limitation on review.
thetics, Orthotics, and Supplies
(DMEPOS) Subpart I—Payment for Drugs and
Biologicals
414.400 Purpose and basis.
414.402 Definitions. 414.701 Purpose.
414.404 Scope and applicability. 414.704 Definitions.
414.406 Implementation of programs. 414.707 Basis of payment.
414.408 Payment rules.
414.409 Special payment rules. Subpart J—Submission of Manufacturer’s
414.410 Phased-in implementation of com- Average Sales Price Data
petitive bidding programs. 414.800 Purpose.
414.411 Special rule in case of competitions 414.802 Definitions.
for diabetic testing strips conducted on 414.804 Basis of payment.
or after January 1, 2011. 414.806 Penalties associated with the failure
414.412 Submission of bids under a competi- to submit timely and accurate ASP data.
tive bidding program.
414.414 Conditions for awarding contracts. Subpart K—Payment for Drugs and
414.416 Determination of competitive bid- Biologicals Under Part B
ding payment amounts.
414.418 Opportunity for networks. 414.900 Basis and scope.
414.420 Physician or treating practitioner 414.902 Definitions.
authorization and consideration of clin- 414.904 Average sales price as the basis for
ical efficiency and value of items. payment.
414.422 Terms of contracts. 414.906 Competitive acquisition program as
414.423 Appeals process for breach of a the basis for payment.
DMEPOS competitive bidding program 414.908 Competitive acquisition program.
contract actions. 414.910 Bidding process.
414.912 Conflicts of interest.
414.424 Administrative or judicial review.
414.914 Terms of contract.
414.425 Claims for damages.
414.916 Dispute resolution for vendors and
414.426 Adjustments to competitively bid beneficiaries.
payment amounts to reflect changes in 414.917 Dispute resolution and process for
the HCPCS. suspension or termination of approved
CAP contract and termination of physi-
Subpart G—Payment for Clinical cian participation under exigent cir-
Diagnostic Laboratory Tests cumstances.
414.918 Assignment.
414.500 Basis and scope. 414.920 Judicial review.
414.502 Definitions. 414.930 Compendia for determination of
414.504 Data reporting requirements. medically-accepted indications for off-
414.506 Procedures for public consultation label uses of drugs and biologicals in an
for payment for a new clinical diagnostic anti-cancer chemotherapeutic regimen.
laboratory test.
414.507 Payment for clinical diagnostic lab- Subpart L—Supplying and Dispensing Fees
oratory tests.
414.508 Payment for a new clinical diag- 414.1000 Purpose.
nostic laboratory test.
6
Centers for Medicare & Medicaid Services, HHS § 414.1
414.1001 Basis of Payment. 414.1360 Data submission criteria for the im-
provement activities performance cat-
Subpart M—Payment for Comprehensive egory.
Outpatient Rehabilitation Facility 414.1365 Subcategories for the improvement
(CORF) Services activities performance category.
414.1370 APM scoring standard under MIPS.
414.1100 Basis and scope. 414.1375 Advancing care information per-
414.1105 Payment for Comprehensive Out- formance category.
patient Rehabilitation Facility (CORF) 414.1380 Scoring.
services. 414.1385 Targeted review and review limita-
tions.
Subpart N—Value-Based Payment Modifier 414.1390 Data validation and auditing.
Under the Physician Fee Schedule 414.1395 Public reporting.
414.1400 Third party data submission.
414.1200 Basis and scope. 414.1405 Payment.
414.1205 Definitions. 414.1410 Advanced APM determination.
414.1210 Application of the value-based pay- 414.1415 Advanced APM criteria.
ment modifier. 414.1420 Other payer advanced APMs.
414.1215 Performance and payment adjust- 414.1425 Qualifying APM participant deter-
ment periods for the value-based pay- mination: In general.
ment modifier.
414.1430 Qualifying APM participant deter-
414.1220 Reporting mechanisms for the
mination: QP and partial QP thresholds.
value-based payment modifier.
414.1225 Alignment of Physician Quality Re-
mination: Medicare option.
porting System quality measures and
quality measures for the value-based
mination: All-payer combination option.
payment modifier.
414.1445 Identification of other payer ad-
414.1230 Additional measures for groups and
vanced APMs.
solo practitioners.
414.1235 Cost measures. 414.1450 APM incentive payment.
414.1240 Attribution for quality of care and 414.1455 Limitation on review.
cost measures. 414.1460 Monitoring and program integrity.
414.1245 Scoring methods for the value- 414.1465 Physician-focused payment models.
based payment modifier using the qual- AUTHORITY: Secs. 1102, 1871, and 1881(b)(l) of
ity-tiering approach. the Social Security Act (42 U.S.C. 1302,
414.1250 Benchmarks for quality of care 1395hh, and 1395rr(b)(l)).
measures.
414.1255 Benchmarks for cost measures. SOURCE: 55 FR 23441, June 8, 1990, unless
414.1260 Composite scores. otherwise noted.
414.1265 Reliability of measures. EDITORIAL NOTE: Nomenclature changes to
414.1270 Determination and calculation of part 414 appear at 60 FR 50442, Sept. 29, 1995,
Value-Based Payment Modifier adjust- and 60 FR 53877, Oct. 18, 1995.
ments.
414.1275 Value-based payment modifier
quality-tiering scoring methodology. Subpart A—General Provisions
414.1280 Limitation on review.
414.1285 Informal inquiry process. § 414.1 Basis and scope.
This part implements the following
Subpart O—Merit-Based Incentive Pay- provisions of the Act:
ment System and Alternative Payment
Model Incentive 1802—Rules for private contracts by Medi-
care beneficiaries.
414.1300 Basis and scope. 1833—Rules for payment for most Part B
414.1305 Definitions. services.
414.1310 Applicability. 1834(a) and (h)—Amounts and frequency of
414.1315 [Reserved] payments for durable medical equipment and
414.1320 MIPS performance period. for prosthetic devices and orthotics and pros-
414.1325 Data submission requirements. thetics.
414.1330 Quality performance category. 1834(l)—Establishment of a fee schedule for
414.1335 Data submission criteria for the ambulance services.
quality performance category. 1834(m)—Rules for Medicare reimburse-
414.1340 Data completeness criteria for the ment for telehealth services.
quality performance category. 1834A—Improving policies for clinical diag-

414.1350 Cost performance category. nostic laboratory tests
414.1355 Improvement activities perform- 1842(o)—Rules for payment of certain drugs
ance category. and biologicals.
§ 414.2 42 CFR Ch. IV (10–1–17 Edition)
1847(a) and (b)—Competitive bidding for laboratory tests paid under the fee
certain durable medical equipment, pros- schedule established under section
thetics, orthotics, and supplies (DMEPOS).
1833(h) of the Act).
1848—Fee schedule for physician services.
1881(b)—Rules for payment for services to (5) X-ray, radium, and radioactive
ESRD beneficiaries. isotope therapy, including materials
1887—Payment of charges for physician and services of technicians.
services to patients in providers. (6) Antigens, as described in section
[67 FR 9132, Feb. 27, 2002, as amended at 69 1861(s)(2)(G) of the Act.
FR 1116, Jan. 7, 2004; 71 FR 48409, Aug. 18, (7) Bone mass measurement.
2006; 81 FR 41098, June 23, 2016] RVU stands for relative value unit.
§ 414.2 Definitions. (8) Screening mammography serv-
ices.
As used in this part, unless the con-
text indicates otherwise— [56 FR 59624, Nov. 25, 1991, as amended at 57
AA stands for anesthesiologist assist- FR 42492, Sept. 15, 1992; 58 FR 63686, Dec. 2,
ant. 1993; 59 FR 63463, Dec. 8, 1994; 60 FR 63177,
AHPB stands for adjusted historical Dec. 8, 1995; 63 FR 34328, June 24, 1998; 66 FR
payment basis. 55322, Nov. 1, 2001; 75 FR 73616, Nov. 29, 2010]
CF stands for conversion factor.
CRNA stands for certified registered § 414.4 Fee schedule areas.
nurse anesthetist. (a) General. CMS establishes physi-
CY stands for calendar year. cian fee schedule areas that generally
FY stands for fiscal year. conform to the geographic localities in
GAF stands for geographic adjust- existence before January 1, 1992.
ment factor. (b) Changes. CMS announces proposed
GPCI stands for geographic practice changes to fee schedule areas in the
cost index. FEDERAL REGISTER and provides an op-
HCPCS stands for CMS Common Pro- portunity for public comment. After
cedure Coding System. considering public comments, CMS
Health Professional Shortage Area publishes the final changes in the FED-
(HPSA) means an area designated ERAL REGISTER.
under section 332(a)(1)(A) of the Public
Health Service Act as identified by the [59 FR 63463, Dec. 8, 1994]
Secretary prior to the beginning of
such year. § 414.5 Hospital services paid under
Major surgical procedure means a sur- Medicare Part B when a Part A hos-
gical procedure for which a 10-day or pital inpatient claim is denied be-
cause the inpatient admission was
90-day global period is used for pay- not reasonable and necessary, but
ment under the physician fee schedule hospital outpatient services would
and section 1848(b) of the Act. have been reasonable and nec-
Physician services means the following essary in treating the beneficiary.
services to the extent that they are
covered by Medicare: (a) If a Medicare Part A claim for in-
(1) Professional services of doctors of patient hospital services is denied be-
medicine and osteopathy (including os- cause the inpatient admission was not
teopathic practitioners), doctors of op- reasonable and necessary, or if a hos-
tometry, doctors of podiatry, doctors pital determines under § 482.30(d) of this
of dental surgery and dental medicine, chapter or § 485.641 of this chapter after
and chiropractors. a beneficiary is discharged that the
(2) Supplies and services covered beneficiary’s inpatient admission was
‘‘incident to’’ physician services (ex- not reasonable and necessary, the hos-
cluding drugs as specified in § 414.36). pital may be paid for any of the fol-
(3) Outpatient physical and occupa- lowing Part B inpatient services that
tional therapy services if furnished by would have been reasonable and nec-
a person or an entity that is not a essary if the beneficiary had been
Medicare provider of services as de- treated as a hospital outpatient rather
fined in § 400.202 of this chapter. than admitted as an inpatient, pro-

(4) Diagnostic x-ray tests and other vided the beneficiary is enrolled in
diagnostic tests (excluding diagnostic Medicare Part B:
(1) Services described in § 419.21(a) of § 414.20 Formula for computing fee

this chapter that do not require an out- schedule amounts.
patient status. (a) Participating supplier. The fee
(2) Physical therapy services, speech- schedule amount for a participating
language pathology services, and occu- supplier for a physician service as de-
pational therapy services. fined in § 414.2 is computed as the prod-
(3) Ambulance services, as described uct of the following amounts:
in section 1861(v)(1)(U) of the Act, or, if (1) The RVUs for the service.
applicable, the fee schedule established (2) The GAF for the fee schedule area.
under section 1834(l) of Act.
(3) The CF.
(4) Except as provided in § 419.2(b)(11)
(b) Nonparticipating supplier. The fee
of this chapter, prosthetic devices,
schedule amount for a nonparticipating
prosthetics, prosthetic supplies, and
supplier for a physician service as de-
orthotic devices.
fined in § 414.2 is 95 percent of the fee
(5) Except as provided in § 419.2(b)(10)
schedule amount as calculated in para-
of this chapter, durable medical equip-
graph (a) of this section.
ment supplied by the hospital for the
patient to take home. [62 FR 59101, Oct. 31, 1997]
(6) Clinical diagnostic laboratory
services. § 414.21 Medicare payment basis.
(7)(i) Effective December 8, 2003, Medicare payment is based on the
screening mammography services; and lesser of the actual charge or the appli-
(ii) Effective January 1, 2005, diag- cable fee schedule amount.
nostic mammography services.
[62 FR 59101, Oct. 31, 1997]
(8) Effective January 1, 2011, annual
wellness visit providing personalized § 414.22 Relative value units (RVUs).
prevention plan services as defined in
§ 410.15 of this chapter. CMS establishes RVUs for physi-
(b) If a Medicare Part A claim for in- cians’ work, practice expense, and mal-
patient hospital services is denied be- practice insurance.
cause the inpatient admission was not (a) Physician work RVUs—(1) General
reasonable and necessary, or if a hos- rule. Physician work RVUs are estab-
pital determines under § 482.30(d) of this lished using a relative value scale in
chapter or § 485.641 of this chapter after which the value of physician work for a
a beneficiary is discharged that the particular service is rated relative to
beneficiary’s inpatient admission was the value of work for other physician
not reasonable and necessary, the hos- services.
pital may be paid for hospital out- (2) Special RVUs for anesthesia and ra-
patient services described in diology services)—(i) Anesthesia services.
§ 412.2(c)(5), § 412.405, § 412.540, or The rules for determining RVUs for an-
§ 412.604(f) of this chapter or esthesia services are set forth in
§ 413.40(c)(2) of this chapter that are § 414.46.
furnished to the beneficiary prior to (ii) Radiology services. CMS bases the
the point of inpatient admission (that RVUs for all radiology services on the
is, the inpatient admission order). relative value scale developed under
(c) The claims for the Part B services section 1834(b)(1)(A) of the Act, with
filed under the circumstances described appropriate modifications to ensure
in this section must be filed in accord- that the RVUs established for radi-
ance with the time limits for filing ology services that are similar or re-
claims specified in § 424.44(a) of this lated to other physician services are
chapter. consistent with the RVUs established
for those similar or related services.
[78 FR 50968, Aug. 19, 2013]
(b) Practice expense RVUs. (1) Practice
expense RVUs are computed for each
Subpart B—Physicians and Other service or class of service by applying
Practitioners average historical practice cost per-
centages to the estimated average al-

SOURCE: 56 FR 59624, Nov. 25, 1991; 57 FR lowed charge during the 1991 base pe-
42492, Sept. 15, 1992, unless otherwise noted. riod.
§ 414.22 42 CFR Ch. IV (10–1–17 Edition)
(2) The average practice expense per- ter, or via telehealth under § 410.78 of
centage for a service or class of serv- this chapter.
ices is computed as follows: (B) Nonfacility practice expense RVUs.
(i) Multiply the average practice ex- The nonfacility practice expense RVUs
pense percentage for each specialty by apply to services furnished to patients
the proportion of a particular service in all locations other than those listed
or class of service performed by that in paragraph (b)(5)(i)(A) of this section,
specialty. but not limited to, a physician’s office,
(ii) Add the products for all special- the patient’s home, a nursing facility,
ties. or a comprehensive outpatient reha-
(3) For services furnished beginning
bilitation facility (CORF).
calendar year (CY) 1994, for which 1994
practice expense RVUs exceed 1994 (C) Outpatient therapy and CORF serv-
work RVUs and that are performed in ices. Outpatient therapy services (in-
office settings less than 75 percent of cluding physical therapy, occupational
the time, the 1994, 1995, and 1996 prac- therapy, and speech-language pathol-
tice expense RVUs are reduced by 25 ogy services) and CORF services billed
percent of the amount by which they under the physician fee schedule are
exceed the number of 1994 work RVUs. paid using the nonfacility practice ex-
Practice expense RVUs are not reduced pense RVUs.
to less than 128 percent of 1994 work (ii) [Reserved]
RVUs. (6)(i) CMS establishes criteria for
(4) For services furnished beginning supplemental surveys regarding spe-
January 1, 1998, practice expense RVUs cialty practice expenses submitted to
for certain services are reduced to 110 CMS that may be used in determining
percent of the work RVUs for those practice expense RVUs.
services. The following two categories (ii) Any CMS-designated specialty
of services are excluded from this limi- group may submit a supplemental sur-
tation: vey.
(i) The service is provided more than
(iii) CMS will consider for use in de-
75 percent of the time in an office set-
ting; or termining practice expense RVUs for
(ii) The service is one described in the physician fee schedule survey data
section 1848(c)(2)(G)(v) of the Act, codi- and related materials submitted to
fied at 42 U.S.C. 1395w–4(c)(2)(G). Sec- CMS by March 1, 2004 to determine CY
tion 1848(c)(2)(G)(v) of the Act refers to 2005 practice expense RVUs and by
the 1998 proposed resource-based prac- March 1, 2005 to determine CY 2006
tice expense RVUs (as specified in the practice expense RVUs.
June 18, 1997 physician fee schedule (c) Malpractice insurance RVUs. (1)
proposed rule (62 FR 33158)) for the spe- Malpractice insurance RVUs are com-
cific site, either in-office or out-of-of- puted for each service or class of serv-
fice, increased from its 1997 practice ices by applying average malpractice
expense RVUs.) insurance historical practice cost per-
(5) For services furnished in 2002 and centages to the estimated average al-
subsequent years, the practice expense lowed charge during the 1991 base pe-
RVUs are based entirely on relative riod.
practice expense resources. (2) The average historical mal-
(i) Usually there are two levels of practice insurance percentage for a
practice expense RVUs that correspond service or class of services is computed
to each code. as follows:
(A) Facility practice expense RVUs.
(i) Multiply the average malpractice
The facility practice expense RVUs
apply to services furnished to patients insurance percentage for each specialty
in a hospital, a skilled nursing facility, by the proportion of a particular serv-
a community mental health center, a ice or class of services performed by
hospice, or an ambulatory surgical cen- that specialty.
ter, or in a wholly owned or wholly op- (ii) Add all the products for all the
erated entity providing preadmission specialties.
services under § 412.2(c)(5) of this chap-
10
(3) For services furnished in the year (d) Values for local codes (HCPCS Level
2000 and subsequent years, the mal- 3). (1) Carriers establish relative values
practice RVUs are based on the rel- for local codes for services not included
ative malpractice insurance resources. in HCPCS levels 1 or 2.
(2) Carriers must obtain prior ap-
[56 FR 59624, Nov. 25, 1991, as amended at 57
FR 42493, Sept. 15, 1992; 58 FR 63687, Dec. 2, proval from CMS to establish local
1993; 62 FR 59102, Oct. 31, 1997; 63 FR 58910, codes for services that meet the defini-
Nov. 2, 1998; 64 FR 59441, Nov. 2, 1999; 65 FR tion of ‘‘physician services’’ in § 414.2.
25668, May 3, 2000; 65 FR 65440, Nov. 1, 2000; 67
FR 43558, June 28, 2002; 68 FR 63261, Nov. 7,
FR 42492, Sept. 15, 1992; 79 FR 68003, Nov. 13,
2003; 72 FR 66932, Nov. 27, 2007; 73 FR 69935,
2014]
Nov. 19, 2008; 76 FR 73471, Nov. 28, 2011; 81 FR
79879, Nov. 14, 2016; 81 FR 80553, Nov. 15, 2016]
§ 414.26 Determining the GAF.
§ 414.24 Publication of RVUs and di- CMS establishes a GAF for each serv-
rect PE inputs. ice in each fee schedule area.
(a) Definitions. For purposes of this (a) Geographic indices. CMS uses the
section, the following definitions following indices to establish the GAF:
apply: (1) An index that reflects one-fourth
Existing code means a code that is not of the difference between the relative
a new code under paragraph (c)(2) of value of physicians’ work effort in each
this section, and includes codes for of the different fee schedule areas as
which the descriptor is revised and determined under § 414.22(a) and the na-
codes that are combinations or subdivi- tional average of that work effort.
sions of previously existing codes. (2) An index that reflects the relative
New code means a code that describes costs of the mix of goods and services
a service that was not previously de- comprising practice expenses (other
scribed or valued under the PFS using than malpractice expenses) in each of
any other code or combination of the different fee schedule areas as de-
codes. termined under § 414.22(b) compared to
(b) Revisions of RVUs and Direct PE the national average of those costs.
Inputs. For valuations for calendar (3) An index that reflects the relative
year 2017 and beyond, CMS publishes, costs of malpractice expenses in each
through notice and comment rule- of the different fee schedule areas as
making in the FEDERAL REGISTER (in- determined under § 414.22(c) compared
cluding proposals in a proposed rule), to the national average of those costs.
changes in RVUs or direct PE inputs (b) Class-specific practice cost indices.
for existing codes. If the application of a single index to
(c) Establishing RVUs and Direct PE different classes of services would be
inputs for new codes—(1) General rule. substantially inequitable because of
CMS establishes RVUs and direct PE differences in the mix of goods and
inputs for new codes in the manner de- services comprising practice expenses
scribed in paragraph (b) of this section. for the different classes of services,
(2) Exception for new codes for which more than one index may be estab-
CMS does not have sufficient information. lished under paragraph (a)(2) of this
When CMS determines for a new code section.
that it does not have sufficient infor- (c) Adjusting the practice expense index
mation to include proposed RVUs or di- to account for the Frontier State floor—
rect PE inputs in the proposed rule, (1) General criteria. Effective on or after
but that it is in the public interest for January 1, 2011, CMS will adjust the
Medicare to use a new code during a practice expense index for physicians’
payment year, CMS will publish in the services furnished in qualifying States
FEDERAL REGISTER RVUs and direct PE to recognize the practice expense index
inputs that are applicable on an in- floor established for Frontier States. A
terim basis subject to public comment. qualifying State must meet the fol-
After considering public comments and lowing criteria:
other information on interim RVUs (i) At least 50 percent of counties lo-
and PE inputs for the new code, CMS cated within the State have a popu-
publishes in the FEDERAL REGISTER the lation density less than 6 persons per
final RVUs and PE inputs for the code. square mile.
11
§ 414.28 42 CFR Ch. IV (10–1–17 Edition)
(ii) The State does not receive a non- (a) Base-year CFs. CMS established
labor related share adjustment deter- the CF for 1992 so that had section 1848
mined by the Secretary to take into of the Act applied during 1991, it would
account the unique circumstances of have resulted in the same aggregate
hospitals located in Alaska and Hawaii. amount of payments for physician
(2) Amount of adjustment. The practice services as the estimated aggregate
expense value applied for physicians’ amount of these payments in 1991, ad-
services furnished in a qualifying State justed by the update for 1992 computed
will be not less than 1.00.
as specified in § 414.30.
(3) Process for determining adjustment.
(i) CMS will use the most recent popu- (b) Subsequent CFs. For calendar
lation estimate data published by the years 1993 through 1995, the CF for each
U.S. Census Bureau to determine coun- year is equal to the CF for the previous
ty definitions and population density. year, adjusted in accordance with
This analysis will be periodically re- § 414.30. Beginning January 1, 1996, the
vised, such as for updates to the decen- CF for each calendar year may be fur-
nial census data. ther adjusted so that adjustments to
(ii) CMS will publish annually a list- the fee schedule in accordance with
ing of qualifying Frontier States re- section 1848(c)(2)(B)(ii) of the Act do
ceiving a practice expense index floor not cause total expenditures under the
attributable to this provision. fee schedule to differ by more than $20
(d) Computation of GAF. The GAF for million from the amount that would
each fee schedule area is the sum of the have been spent if these adjustments
physicians’ work adjustment factor, had not been made.
the practice expense adjustment fac-
tor, and the malpractice cost adjust- [56 FR 59624, Nov. 25, 1991, as amended at 57
ment factor, as defined in this section: FR 42492, Sept. 15, 1992; 60 FR 53877, Oct. 18,
(1) The geographic physicians’ work 1995; 60 FR 63177, Dec. 8, 1995]
adjustment factor for a service is the
§ 414.30 Conversion factor update.
product of the proportion of the total
relative value for the service that re- Unless Congress acts in accordance
flects the RVUs for the work compo- with section 1848(d)(3) of the Act—
nent and the geographic physicians’ (a) General rule. The CF update for a
work index value established under CY equals the Medicare Economic
paragraph (a)(1) of this section. Index increased or decreased by the
(2) The geographic practice expense number of percentage points by which
adjustment factor for a service is the the percentage increase in expendi-
product of the proportion of the total tures for physician services (or for a
relative value for the service that re- particular category of physician serv-
flects the RVUs for the practice ex- ices, such as surgical services) in the
pense component, multiplied by the ge- second preceding FY over the third pre-
ographic practice cost index (GPCI)
ceding FY exceeds the performance
value established under paragraph
standard rate of increase established
(a)(2) of this section.
(3) The geographic malpractice ad- for the second preceding FY.
justment factor for a service is the (b) Downward adjustment. The down-
product of the proportion of the total ward adjustment may not exceed the
relative value for the service that re- following:
flects the RVUs for the malpractice (1) For CYs 1992 and 1993, 2 percent-
component, multiplied by the GPCI age points.
value established under paragraph (2) For CY 1994, 2.5 percentage points.
(a)(3) of this section. (3) For CYs 1995 and thereafter, 5 per-
[56 FR 59624, Nov. 25, 1991, as amended at 57 centage points.
FR 42492, Sept. 15, 1992; 75 FR 73616, Nov. 29, [55 FR 23441, June 8, 1990, as amended at 60
2010]
FR 63177, Dec. 8, 1995; 61 FR 42385, Aug. 15,
1996]
§ 414.28 Conversion factors.

CMS establishes CFs in accordance
with section 1848(d) of the Act.
12
§ 414.34 Payment for services and sup- § 414.36 Payment for drugs incident to
plies incident to a physician’s serv- a physician’s service.
ice. Payment for drugs incident to a phy-
(a) Medical supplies. (1) Except as oth- sician’s service is made in accordance
erwise specified in this paragraph, of- with § 405.517 of this chapter.
fice medical supplies are considered to
§ 414.39 Special rules for payment of
be part of a physician’s practice ex- care plan oversight.
pense, and payment for them is in-
cluded in the practice expense portion (a) General. Except as specified in
of the payment to the physician for the paragraphs (b) and (c) of this section,
medical or surgical service to which payment for care plan oversight is in-
cluded in the payment for visits and
they are incidental.
other services under the physician fee
(2) If physician services of the type schedule. For purposes of this section a
routinely furnished in provider settings nonphysician practitioner (NPP) is a
are furnished in a physician’s office, nurse practitioner, clinical nurse spe-
separate payment may be made for cer- cialist or physician assistant.
tain supplies furnished incident to that (b) Exception. Separate payment is
physician service if the following re- made under the following conditions
quirements are met: for physician care plan oversight serv-
(i) It is a procedure that can safely be ices furnished to beneficiaries who re-
furnished in the office setting in appro- ceive HHA and hospice services that
priate circumstances. are covered by Medicare:
(ii) It requires specialized supplies (1) The care plan oversight services
that are not routinely available in phy- require recurrent physician supervision
sicians’ offices and that are generally of therapy involving 30 or more min-
disposable. utes of the physician’s time per month.
(iii) It is furnished before January 1, (2) Payment is made to only one phy-
1999. sician per patient for services furnished
during a calendar month period. The
(3) For the purpose of paragraph
physician must have furnished a serv-
(a)(2) of this section, provider settings
ice requiring a face-to-face encounter
include only the following settings:
with the patient at least once during
(i) Hospital inpatient and outpatient the 6-month period before the month
departments. for which care plan oversight payment
(ii) Ambulatory surgical centers. is first billed. The physician may not
(4) For the purpose of paragraph have a significant ownership interest
(a)(2) of this section, ‘‘routinely fur- in, or financial or contractual relation-
nished in provider settings’’ means fur- ship with, the HHA in accordance with
nished in inpatient or outpatient hos- § 424.22(d) of this chapter. The physi-
pital settings or ambulatory surgical cian may not be the medical director
centers more than 50 percent of the or employee of the hospice and may
time. not furnish services under an arrange-
(5) CMS establishes a list of services ment with the hospice.
for which a separate supply payment (3) If a physician furnishes care plan
may be made under this section. oversight services during a post-
(6) The fee schedule amount for sup- operative period, payment for care plan
plies billed separately is not subject to oversight services is made if the serv-
a GPCI adjustment. ices are documented in the patient’s
(b) Services of nonphysicians that are medical record as unrelated to the sur-
gery.
incident to a physician’s service. Services
(c) Special rules for payment of care
of nonphysicians that are covered as
plan oversight provided by nonphysician
incident to a physician’s service are practitioners for beneficiaries who receive
paid as if the physician had personally HHA services covered by Medicare. (1) An
furnished the service. NPP can furnish physician care plan
[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. oversight (but may not certify a pa-
15, 1992, as amended at 63 FR 58911, Nov. 2, tient as needing home health services)
1998] only if the physician who signs the
13
§ 414.40 42 CFR Ch. IV (10–1–17 Edition)
plan of care provides regular ongoing bilateral surgery, split surgical global
care under the same plan of care as services, team surgery, and unusual
does the NPP billing for care plan over- services).
sight and either—
(i) The physician and NPP are part of § 414.42 Adjustment for first 4 years of
the same group practice; or practice.
(ii) If the NPP is a nurse practitioner (a) General rule. For services fur-
or clinical nurse specialist, the physi- nished during CYs 1992 and 1993, except
cian signing the plan of care also has a as specified in paragraph (b) of this sec-
collaborative agreement with the NPP; tion, the fee schedule payment amount
or or prevailing charge must be phased in
(iii) If the NPP is a physician assist- as specified in paragraph (d) of this sec-
ant, the physician signing the plan of tion for physicians, physical therapists
care is also the physician who provides (PTs), occupational therapists (OTs),
general supervision of physician assist- and all other health care practitioners
ant services for the practice. who are in their first through fourth
(2) Payment may be made for care years of practice.
plan oversight services furnished by an (b) Exception. The reduction required
NPP when: in paragraph (d) of this section does
(i) The NPP providing the care plan not apply to primary care services or
oversight has seen and examined the to services furnished in a rural area as
patient; defined in section 1886(d)(2)(D) of the
(ii) The NPP providing care plan Act that is designated under section
oversight is not functioning as a con- 332(a)(1)(A) of the Public Health Serv-
sultant whose participation is limited ice Act as a Health Professional Short-
to a single medical condition rather age Area.
than multi-disciplinary coordination of (c) Definition of years of practice. (1)
care; and The ‘‘first year of practice‘‘ is the first
(iii) The NPP providing care plan full CY during the first 6 months of
oversight integrates his or her care which the physician, PT, OT, or other
with that of the physician who signed health care practitioner furnishes pro-
the plan of care. fessional services for which payment
may be made under Medicare Part B,
[59 FR 63463, Dec. 8, 1994; 60 FR 49, Jan. 3,
1995; 60 FR 36733, July 18, 1995, as amended at
plus any portion of the prior CY if that
69 FR 66423, Nov. 15, 2004; 70 FR 16722, Apr. 1, prior year does not meet the first 6
2005] months test.
(2) The ‘‘second, third, and fourth
§ 414.40 Coding and ancillary policies. years of practice‘‘ are the first, second,
(a) General rule. CMS establishes uni- and third CYs following the first year
form national definitions of services, of practice, respectively.
codes to represent services, and pay- (d) Amounts of adjustment. The fee
ment modifiers to the codes. schedule payment for the service of a
(b) Specific types of policies. CMS es- new physician, PT, OT, or other health
tablishes uniform national ancillary care practitioner is limited to the fol-
policies necessary to implement the fee lowing percentages for each of the indi-
schedule for physician services. These cated years:
include, but are not limited to, the fol- (1) First year—80 percent
lowing policies: (2) Second year—85 percent
(1) Global surgery policy (for exam- (3) Third year—90 percent
ple, post- and pre-operative periods and (4) Fourth year—95 percent
services, and intra-operative services). [57 FR 42493, Sept. 15, 1992, as amended at 58
(2) Professional and technical compo- FR 63687, Dec. 2, 1993]
nents (for example, payment for serv-
ices, such as an EEG, which typically § 414.44 Transition rules.
comprise a technical component (the (a) Adjusted historical payment basis—
taking of the test) and a professional (1) All services other than radiology and
component (the interpretation)). nuclear medicine services. For all physi-

(3) Payment modifiers (for example, cian services other than radiology serv-
assistant-at-surgery, multiple surgery, ices, furnished in a fee schedule area,
14
the adjusted historical payment basis (1) If the AHPB determined under
(AHPB) is the estimated weighted aver- paragraph (a) of this section is from 85
age prevailing charge applied in the fee percent to 109 percent of the fee sched-
schedule area for the service in CY ule amount for the area for services
1991, as determined by CMS without re- furnished in 1992, payment is at the fee
gard to physician specialty and as ad- schedule amount.
justed to reflect payments for services (2) If the AHPB determined under
below the prevailing charge, adjusted paragraph (a) of this section is less
by the update established for CY 1992. than 85 percent of the fee schedule
(2) Radiology services. For radiology amount for the area for services fur-
services, the AHPB is the amount paid nished in 1992, an amount equal to the
for the service in the fee schedule area AHPB plus 15 percent of the fee sched-
in CY 1991 under the fee schedule estab- ule amount is substituted for the fee
lished under section 1834(b), adjusted schedule amount.
by the update established for CY 1992. (3) If the AHPB determined under
(3) Nuclear medicine services. For nu- paragraph (a) of this section is greater
clear medicine services, the AHPB is than 109 percent of the fee schedule
the amount paid for the service in the amount for the area for services fur-
fee schedule area in CY 1991 under the nished in 1992, an amount equal to the
fee schedule established under section AHPB minus 9 percent of the fee sched-
6105(b) of Public Law 101–239 and sec- ule amount is substituted for the fee
tion 4102(g) of Public Law 101–508, ad- schedule amount.
justed by the update established for CY
(d) Computation of payments for CY
1992.
1993. For physician services subject to
(4) Transition adjustment. CMS adjusts
the transition rules in CY 1992 and fur-
the AHPB for all services by 5.5 percent
nished during CY 1993, the fee schedule
to produce budget-neutral payments
is equal to 75 percent of the amount
for 1992.
that would have been paid in the fee
(b) Adjustment of 1992 payments for
schedule area under the 1992 transition
physician services other than radiology
rules, adjusted by the amount of the
services. For physician services fur-
nished during CY 1992 the following 1993 update, plus 25 percent of the 1993
rules apply: fee schedule amount.
(1) If the AHPB determined under (e) Computation of payments for CY
paragraph (a) of this section is from 85 1994. For physician services subject to
percent to 115 percent of the fee sched- the transition rules in CY 1993, and fur-
ule amount for the area for services nished during CY 1994, the fee schedule
furnished in 1992, payment is at the fee is equal to 67 percent of the amount
schedule amount. that would have been paid in the fee
(2) If the AHPB determined under schedule area under the 1993 transition
paragraph (a) of this section is less rules, adjusted by the amount of the
than 85 percent of the fee schedule 1994 update, plus 33 percent of the 1994
amount for the area for services fur- fee schedule amount.
nished in 1992, an amount equal to the (f) Computation of payments for CY
AHPB plus 15 percent of the fee sched- 1995. For physician services subject to
ule amount is substituted for the fee the transition rules in CY 1994 and fur-
schedule amount. nished during CY 1995, the fee schedule
(3) If the AHPB determined under is equal to 50 percent of the amount
paragraph (a) of this section is greater that would have been paid in the fee
than 115 percent of the fee schedule schedule area under the 1994 transition
amount for the area for services fur- rules, adjusted by the amount of the
nished in 1992, an amount equal to the 1995 update, plus 50 percent of the 1995
AHPB minus 15 percent of the fee fee schedule amount.
schedule amount is substituted for the
fee schedule amount. § 414.46 Additional rules for payment
(c) Adjustment of 1992 payments for ra- of anesthesia services.
diology services. For radiology services (a) Definitions. For purposes of this
furnished during CY 1992 the following section, the following definitions
rules apply: apply:
15
§ 414.46 42 CFR Ch. IV (10–1–17 Edition)
(1) Base unit means the value for each from the 1988 American Society of An-
anesthesia code that reflects all activi- esthesiologists’ Relative Value Guide
ties other than anesthesia time. These except that the number of base units
activities include usual preoperative recognized for anesthesia services fur-
and postoperative visits, the adminis- nished during cataract or iridectomy
tration of fluids and blood incident to surgery is four units.
anesthesia care, and monitoring serv- (3) Modifier units are not allowed.
ices. Modifier units include additional units
(2) Anesthesia practitioner, for the pur- charged by a physician or a CRNA for
pose of anesthesia time, means a physi- patient health status, risk, age, or un-
cian who performs the anesthesia serv- usual circumstances.
ice alone, a CRNA who is not medically (c) Physician personally performs the
directed who performs the anesthesia anesthesia procedure. (1) CMS considers
service alone, or a medically directed an anesthesia service to be personally
CRNA. performed under any of the following
(3) Anesthesia time means the time circumstances:
during which an anesthesia practi- (i) The physician performs the entire
tioner is present with the patient. It anesthesia service alone.
starts when the anesthesia practitioner (ii) The physician establishes an at-
begins to prepare the patient for anes- tending physician relationship in one
thesia services and ends when the anes- or two concurrent cases involving an
thesia practitioner is no longer fur- intern or resident and the service was
nishing anesthesia services to the bene- furnished before January 1, 1994.
ficiary, that is, when the beneficiary (iii) The physician establishes an at-
may be placed safely under post- tending physician relationship in one
operative care. Anesthesia time is a case involving an intern or resident
continuous time period from the start and the service was furnished on or
of anesthesia to the end of an anes- after January 1, 1994 but prior to Janu-
thesia service. In counting anesthesia ary 1, 1996. For services on or after Jan-
time, the anesthesia practitioner can uary 1, 1996, the physician must be the
add blocks of anesthesia time around teaching physician as defined in
an interruption in anesthesia time as §§ 415.170 through 415.184 of this chap-
long as the anesthesia practitioner is ter.
furnishing continuous anesthesia care (iv) The physician and the CRNA or
within the time periods around the AA are involved in a single case and
interruption. the services of each are found to be
(b) Determinations of payment medically necessary.
amount—Basic rule. For anesthesia (v) The physician is continuously in-
services performed, medically directed, volved in a single case involving a stu-
or medically supervised by a physician, dent nurse anesthetist.
CMS pays the lesser of the actual (vi) The physician is continuously in-
charge or the anesthesia fee schedule volved in a single case involving a
amount. CRNA or AA and the service was fur-
(1) The carrier bases the fee schedule nished prior to January 1, 1998.
amount for an anesthesia service on (2) CMS determines the fee schedule
the product of the sum of allowable amount for an anesthesia service per-
base and time units and an anesthesia- sonally performed by a physician on
specific CF. The carrier calculates the the basis of an anesthesia-specific fee
time units from the anesthesia time re- schedule CF and unreduced base units
ported by the anesthesia practitioner and anesthesia time units. One anes-
for the anesthesia procedure. The phy- thesia time unit is equivalent to 15
sician who fulfills the conditions for minutes of anesthesia time, and frac-
medical direction in § 415.110 (Condi- tions of a 15-minute period are recog-
tions for payment: Anesthesiology nized as fractions of an anesthesia time
services) reports the same anesthesia unit.
time as the medically-directed CRNA. (d) Anesthesia services medically di-
(2) CMS furnishes the carrier with rected by a physician. (1) CMS considers
the base units for each anesthesia pro- an anesthesia service to be medically
cedure code. The base units are derived directed by a physician if:
16
(i) The physician performs the activi- (e) Special payment rule for teaching
ties described in § 415.110 of this chap- anesthesiologist involved in a single resi-
ter. dent case or two concurrent cases. For
(ii) The physician directs qualified physicians’ services furnished on or
individuals involved in two, three, or after January 1, 2010, if the teaching
four concurrent cases. anesthesiologist is involved in the
(iii) Medical direction can occur for a training of physician residents in a sin-
single case furnished on or after Janu- gle anesthesia case or two concurrent
ary 1, 1998 if the physician performs the anesthesia cases, the fee schedule
activities described in § 415.110 of this amount must be 100 percent of the fee
chapter and medically directs a single schedule amount otherwise applicable
CRNA or AA. if the anesthesia services were person-
(2) The rules for medical direction ally performed by the teaching anes-
differ for certain time periods depend- thesiologist and the teaching anesthe-
ing on the nature of the qualified indi- siologist fulfilled the criteria in
vidual who is directed by the physi- § 415.178 of this chapter. This special
cian. payment rule also applies if the teach-
(i) If more than two procedures are ing anesthesiologist is involved in one
directed on or after January 1, 1994, the resident case that is concurrent to an-
qualified individuals could be AAs, other case paid under the medical di-
CRNAs, interns, or residents. The med- rection payment rules.
ical direction rules apply to student (f) Physician medically supervises anes-
nurse anesthetists only if the physician thesia services. If the physician medi-
directs two concurrent cases, each of cally supervises more than four concur-
which involves a student nurse anes- rent anesthesia services, CMS bases the
thetist or the physician directs one fee schedule amount on an anesthesia-
case involving a student nurse anes- specific CF and three base units. This
thetist and the other involving a represents payment for the physician’s
CRNA, AA, intern, or resident. involvement in the pre-surgical anes-
(ii) For services furnished on or after thesia services.
January 1, 2010, the medical direction (g) Payment for medical or surgical
rules do not apply to a single anes- services furnished by a physician while
thesia resident case that is concurrent furnishing anesthesia services. (1) CMS
to another case which is paid under the allows separate payment under the fee
medical direction payment rules as schedule for certain reasonable and
specified in paragraph (e) of this sec- medically necessary medical or sur-
tion. gical services furnished by a physician
(3) Payment for medical direction is while furnishing anesthesia services to
based on a specific percentage of the the patient. CMS makes payment for
payment allowance recognized for the these services in accordance with the
anesthesia service personally per- general physician fee schedule rules in
formed by a physician alone. The fol- § 414.20. These services are described in
lowing percentages apply for the years program operating instructions.
specified: (2) CMS makes no separate payment
(i) CY 1994—60 percent of the pay- for other medical or surgical services,
ment allowance for personally per- such as the pre-anesthetic examination
formed procedures. of the patient, pre- or post-operative
(ii) CY 1995—57.5 percent of the pay- visits, or usual monitoring functions,
ment allowance for personally per- that are ordinarily included in the an-
formed services. esthesia service.
(iii) CY 1996—55 percent of the pay- (h) Physician involved in multiple anes-
ment allowance for personally per- thesia services. If the physician is in-
formed services. volved in multiple anesthesia services
(iv) CY 1997—52.5 percent of the pay- for the same patient during the same
ment allowance for personally per- operative session, the carrier makes
formed services. payment according to the base unit as-
(v) CY 1998 and thereafter—50 percent sociated with the anesthesia service
of the payment allowance for person- having the highest base unit value and
ally performed services. anesthesia time that encompasses the
17
§ 414.48 42 CFR Ch. IV (10–1–17 Edition)
multiple services. The carrier makes ment to the billing physician or other
payment for add-on anesthesia codes supplier (less the applicable
according to program operating in- deductibles and coinsurance paid by
structions. the beneficiary or on behalf of the ben-
[56 FR 59624, Nov. 25, 1991, as amended at 57 eficiary) for the TC or PC of the diag-
FR 42492, Sept. 15, 1992; 58 FR 63687, Dec. 2, nostic test may not exceed the lowest
1993; 60 FR 63177, Dec. 8, 1995; 64 FR 59441, of the following amounts:
Nov. 2, 1999; 67 FR 80041, Dec. 31, 2002; 68 FR (i) The performing supplier’s net
63261, Nov. 7, 2003; 74 FR 62006, Nov. 25, 2009] charge to the billing physician or other
supplier. For purposes of this para-
§ 414.48 Limits on actual charges of
nonparticipating suppliers. graph (a)(1) only, with respect to the
TC, the performing supplier is the phy-
(a) General rule. A supplier, as defined sician who supervised the TC, and with
in § 400.202 of this chapter, who is non- respect to the PC, the performing sup-
participating and does not accept as-
plier is the physician who performed
signment may charge a beneficiary an
the PC.
amount up to the limiting charge de-
scribed in paragraph (b) of this section. (ii) The billing physician or other
(b) Specific limits. For items or serv- supplier’s actual charge.
ices paid under the physician fee sched- (iii) The fee schedule amount for the
ule, the limiting charge is 115 percent test that would be allowed if the per-
of the fee schedule amount for non- forming supplier billed directly.
participating suppliers. For items or (2) The following requirements are
services CMS excludes from payment applicable for purposes of paragraph
under the physician fee schedule (in ac- (a)(1) of this section:
cordance with section 1848 (j)(3) of the (i) The net charge must be deter-
Act), the limiting charge is 115 percent mined without regard to any charge
of 95 percent of the payment basis ap- that is intended to reflect the cost of
plicable to participating suppliers as equipment or space leased to the per-
calculated in § 414.20(b). forming supplier by or through the bill-
[58 FR 63687, Dec. 2, 1993, as amended at 62 ing physician or other supplier.
FR 59102, Oct. 31, 1997] (ii) A performing physician shares a
practice with the billing physician or
§ 414.50 Physician or other supplier other supplier if he or she furnishes
billing for diagnostic tests per- substantially all (which, for purposes
formed or interpreted by a physi- of this section, means ‘‘at least 75 per-
cian who does not share a practice
with the billing physician or other cent’’) of his or her professional serv-
supplier. ices through such billing physician or
other supplier. The ‘‘substantially all’’
(a) General rules. (1) For services cov-
requirement will be satisfied if, at the
ered under section 1861(s)(3) of the Act
time the billing physician or other sup-
and paid for under part 414 of this chap-
plier submits a claim for a service fur-
ter (other than clinical diagnostic lab-
nished by the performing physician,
oratory tests paid under section
1833(a)(2)(D) of the Act, which are sub- the billing physician or other supplier
ject to the special billing rules set has a reasonable belief that:
forth in section 1833(h)(5)(A) of the (A) For the 12 months prior to and in-
Act), if a physician or other supplier cluding the month in which the service
bills for the technical component (TC) was performed, the performing physi-
or professional component (PC) of a di- cian furnished substantially all of his
agnostic test that was ordered by the or her professional services through
physician or other supplier (or ordered the billing physician or other supplier;
by a party related to such physician or or
other supplier through common owner- (B) The performing physician will
ship or control as described in § 413.17 furnish substantially all of his or her
of this chapter) and the diagnostic test professional services through the bill-
is performed by a physician who does ing physician or other supplier for the
not share a practice with the billing next 12 months (including the month in
physician or other supplier, the pay- which the service is performed).
18
(iii) A physician will be deemed to § 414.52 Payment for physician assist-

share a practice with the billing physi- ants’ services.
cian or other supplier with respect to Allowed amounts for the services of a
the performance of the TC or PC of a physician assistant furnished begin-
diagnostic test if the physician is an ning January 1, 1992 and ending Decem-
owner, employee or independent con- ber 31, 1997, may not exceed the limits
tractor of the billing physician or specified in paragraphs (a) through (c)
other supplier and the TC or PC is per-
of this section. Allowed amounts for
formed in the office of the billing phy-
the services of a physician assistant
sician or other supplier. The ‘‘office of
furnished beginning January 1, 1998,
the billing physician or other supplier’’
may not exceed the limits specified in
is any medical office space, regardless
paragraph (d) of this section.
of number of locations, in which the or-
(a) For assistant-at-surgery services,
dering physician or other ordering sup-
65 percent of the amount that would be
plier regularly furnishes patient care,
allowed under the physician fee sched-
and includes space where the billing
physician or other supplier furnishes ule if the assistant-at-surgery service
diagnostic testing, if the space is lo- was furnished by a physician.
cated in the same building (as defined (b) For services (other than assist-
in § 411.351) in which the ordering phy- ant-at-surgery services) furnished in a
sician or other ordering supplier regu- hospital, 75 percent of the physician fee
larly furnishes patient care. With re- schedule amount for the service.
spect to a billing physician or other (c) For all other services, 85 percent
supplier that is a physician organiza- of the physician fee schedule amount
tion (as defined in § 411.351 of this chap- for the service.
ter), the ‘‘office of the billing physician (d) For services (other than assist-
or other supplier’’ is space in which the ant-at-surgery services) furnished be-
ordering physician provides substan- ginning January 1, 1998, 85 percent of
tially the full range of patient care the physician fee schedule amount for
services that the ordering physician the service. For assistant-at-surgery
provides generally. The performance of services, 85 percent of the physician fee
the TC includes both the conducting of schedule amount that would be allowed
the TC as well as the supervision of the under the physician fee schedule if the
TC. assistant-at-surgery service were fur-
(b) Restriction on payment. (1) The nished by a physician.
billing physician or other supplier [56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept.
must identify the performing supplier 15, 1992, as amended at 63 FR 58911, Nov. 2,
and indicate the performing supplier’s 1998]
net charge for the test. If the billing
physician or other supplier fails to pro- § 414.54 Payment for certified nurse-
vide this information, CMS makes no midwives’ services.
payment to the billing physician or (a) For services furnished after De-
other supplier and the billing physician cember 31, 1991, allowed amounts under
or other supplier may not bill the bene-
the fee schedule established under sec-
ficiary.
tion 1833(a)(1)(K) of the Act for the pay-
(2) Physicians and other suppliers ment of certified nurse-midwife serv-
that accept Medicare assignment may ices may not exceed 65 percent of the
bill beneficiaries for only the applica-
physician fee schedule amount for the
ble deductibles and coinsurance.
service.
(3) Physicians and other suppliers
(b) For certified nurse-midwife serv-
that do not accept Medicare assign-
ices furnished on or after January 1,
ment may not bill the beneficiary more
2011, allowed amounts may not exceed
than the payment amount described in
100 percent of the physician fee sched-
paragraph (a) of this section.
ule amount that would be paid to a
[72 FR 66400, Nov. 27, 2007, as amended at 73 physician for the services.
FR 2432, Jan. 15, 2008; 73 FR 69935, Nov. 19,
2008] [75 FR 73616, Nov. 29, 2010]
19
§ 414.56 42 CFR Ch. IV (10–1–17 Edition)
§ 414.56 Payment for nurse practi- cost basis set forth in § 415.162 of this
tioners’ and clinical nurse special- chapter if the hospital exercises the
ists’ services. election described in § 415.160 of this
(a) Rural areas. For services furnished chapter.
beginning January 1, 1992 and ending [56 FR 59624, Nov. 25, 1991, as amended at 57
December 31, 1997, allowed amounts for FR 42492, Sept. 15, 1992; 60 FR 63189, Dec. 8,
the services of a nurse practitioner or a 1995]
clinical nurse specialist in a rural area
(as described in section 1861(s)(2)(K)(iii) § 414.60 Payment for the services of
of the Act) may not exceed the fol- CRNAs.
lowing limits: (a) Basis for payment. The allowance
(1) For services furnished in a hos- for the anesthesia service furnished by
pital (including assistant-at-surgery a CRNA, medically directed or not
services), 75 percent of the physician medically directed, is based on allow-
fee schedule amount for the service. able base and time units as defined in
(2) For all other services, 85 percent § 414.46(a). Beginning with CY 1994—
of the physician fee schedule amount (1) The allowance for an anesthesia
for the service. service furnished by a medically di-
(b) Non-rural areas. For services fur- rected CRNA is based on a fixed per-
nished beginning January 1, 1992 and centage of the allowance recognized for
ending December 31, 1997, allowed the anesthesia service personally per-
amounts for the services of a nurse formed by the physician alone, as spec-
practitioner or a clinical nurse spe- ified in § 414.46(d)(3); and
cialist in a nursing facility may not ex- (2) The CF for an anesthesia service
ceed 85 percent of the physician fee furnished by a CRNA not directed by a
schedule amount for the service. physician may not exceed the CF for a
(c) Beginning January 1, 1998. For service personally performed by a phy-
services (other than assistant-at-sur- sician.
gery services) furnished beginning Jan- (b) To whom payment may be made.
uary 1, 1998, allowed amounts for the Payment for an anesthesia service fur-
services of a nurse practitioner or clin- nished by a CRNA may be made to the
ical nurse specialist may not exceed 85 CRNA or to any individual or entity
percent of the physician fee schedule (such as a hospital, critical access hos-
amount for the service. For assistant- pital, physician, group practice, or am-
at-surgery services, allowed amounts bulatory surgical center) with which
for the services of a nurse practitioner the CRNA has an employment or con-
or clinical nurse specialist may not ex- tract relationship that provides for
ceed 85 percent of the physician fee payment to be made to the individual
schedule amount that would be allowed or entity.
under the physician fee schedule if the (c) Condition for payment. Payment
assistant-at-surgery service were fur- for the services of a CRNA may be
nished by a physician. made only on an assignment related
[63 FR 58911, Nov. 2, 1998] basis, and any assignment accepted by
a CRNA is binding on any other person
§ 414.58 Payment of charges for physi- presenting a claim or request for pay-
cian services to patients in pro- ment for the service.
viders.
[60 FR 63178, Dec. 8, 1995, as amended at 62
(a) Payment under the physician fee FR 46037, Aug. 29, 1997; 64 FR 59441, Nov. 2,
schedule. In addition to the special con- 1999; 77 FR 69363, Nov. 16, 2012]
ditions for payment in §§ 415.100
through 415.130, and § 415.190 of this § 414.61 Payment for anesthesia serv-
chapter, CMS establishes payment for ices furnished by a teaching CRNA.
physician services to patients in pro- (a) Basis for payment. Beginning Jan-
viders under the physician fee schedule uary 1, 2010, anesthesia services fur-
in accordance with §§ 414.1 through nished by a teaching CRNA may be
414.48. paid under one of the following condi-
(b) Teaching hospitals. Services fur- tions:

nished by physicians in teaching hos- (1) The teaching CRNA, who is not
pitals may be made on a reasonable under medical direction of a physician,
20
is present with the student nurse anes- (d) Payments made to those not paid
thetist for the pre and post anesthesia under the physician fee schedule. Pay-
services included in the anesthesia base ments may be made to other entities
units payment and is continuously not routinely paid under the physician
present during anesthesia time in a fee schedule, such as hospital out-
single case with a student nurse anes- patient departments, ESRD facilities,
thetist. and DME suppliers. The payment
(2) The teaching CRNA, who is not equals the amounts paid under the phy-
under the medical direction of a physi- sician fee schedule.
cian, is involved with two concurrent (e) Other conditions for fee-for-serv-
anesthesia cases with student nurse an- ice payment. The beneficiary must
esthetists. The teaching CRNA must be meet the following conditions:
present with the student nurse anes- (1) Has not previously received initial
thetist for the pre and post anesthesia training for which Medicare payment
services included in the anesthesia base was made under this benefit.
unit. For the anesthesia time of the (2) Is not receiving services as an in-
two concurrent cases, the teaching patient in a hospital, SNF, hospice, or
CRNA can only be involved with those nursing home.
two concurrent cases and may not per- (3) Is not receiving services as an out-
form services for other patients. patient in an RHC or FQHC.
(b) Level of payment. The allowance
[65 FR 83153, Dec. 29, 2000]
for the service of the teaching CRNA,
furnished under paragraph (a) of this § 414.64 Payment for medical nutrition
section, is determined in the same way therapy.
as for a physician who personally per-
forms the anesthesia service alone as (a) Payment under the physician fee
specified in § 414.46(c) of this subpart. schedule. Medicare payment for med-
ical nutrition therapy is made under
[74 FR 62006, Nov. 25, 2009] the physician fee schedule in accord-
ance with subpart B of this part. Pay-
§ 414.62 Fee schedule for clinical psy- ment to non-physician professionals, as
chologist services. specified in paragraph (b) of this sec-
The fee schedule for clinical psychol- tion, is the lesser of the actual charges
ogist services is set at 100 percent of or 80 percent of 85 percent of the physi-
the amount determined for cor- cian fee schedule amount.
responding services under the physi- (b) To whom payment may be made.
cian fee schedule. Payment may be made to a registered
dietician or nutrition professional
[62 FR 59102, Oct. 31, 1997]
qualified to furnish medical nutrition
§ 414.63 Payment for outpatient diabe- therapy in accordance with part 410,
tes self-management training. subpart G of this chapter.
(c) Effective date of payment. Medicare
(a) Payment under the physician fee pays suppliers of medical nutrition
schedule. Except as provided in para- therapy on or after the effective date of
graph (d) of this section, payment for enrollment of the supplier at the car-
outpatient diabetes self-management rier.
training is made under the physician (d) Limitation on payment. Payment is
fee schedule in accordance with §§ 414.1 made only for documented nutritional
through 414.48. therapy sessions actually attended by
(b) To whom payment may be made. the beneficiary.
Payment may be made to an entity ap- (e) Other conditions for fee-for-service
proved by CMS to furnish outpatient payment. Payment is made only if the
diabetes self-management training in beneficiary:
accordance with part 410, subpart H of
(1) Is not an inpatient of a hospital,
this chapter.
SNF, nursing home, or hospice.
(c) Limitation on payment. Payment
(2) Is not receiving services in an

may be made for training sessions ac-
RHC, FQHC or ESRD dialysis facility.
tually attended by the beneficiary and
documented on attendance sheets. [66 FR 55332, Nov. 1, 2001]
21
§ 414.65 42 CFR Ch. IV (10–1–17 Edition)
§ 414.65 Payment for telehealth serv- system is equal to the current fee
ices. schedule amount applicable to initial
(a) Professional service. Medicare pay- hospital care provided by a physician
ment for the professional service via an or practitioner.
interactive telecommunications sys- (ii) Follow-up inpatient telehealth con-
tem is made according to the following sultations. The Medicare payment
limitations: amount for follow-up inpatient tele-
(1) The Medicare payment amount for health consultations furnished via an
office or other outpatient visits, subse- interactive telecommunications sys-
quent hospital care services (with the tem is equal to the current fee schedule
limitation of one telehealth visit every amount applicable to subsequent hos-
3 days by the patient’s admitting phy- pital care provided by a physician or
sician or practitioner), subsequent practitioner.
nursing facility care services (with the (2) Only the physician or practitioner
limitation of one telehealth visit every at the distant site may bill and receive
30 days by the patient’s admitting phy- payment for the professional service
sician or nonphysician practitioner), via an interactive telecommunications
professional consultations, psychiatric system.
diagnostic interview examination, (3) Payments made to the physician
neurobehavioral status exam, indi- or practitioner at the distant site, in-
vidual psychotherapy, pharmacologic cluding deductible and coinsurance, for
management, end-stage renal disease- the professional service may not be
related services included in the month- shared with the referring practitioner
ly capitation payment (except for one or telepresenter.
‘‘hands on’’ visit per month to examine
(b) Originating site facility fee. For
the access site), individual and group
medical nutrition therapy services, in- telehealth services furnished on or
dividual and group kidney disease edu- after October 1, 2001:
cation services, individual and group (1) For services furnished on or after
diabetes self-management training October 1, 2001 through December 31,
services (except for one hour of ‘‘hands 2002, the payment amount to the origi-
on’’ services to be furnished in the ini- nating site is the lesser of the actual
tial year training period to ensure ef- charge or the originating site facility
fective injection training), individual fee of $20. For services furnished on or
and group health and behavior assess- after January 1 of each subsequent
ment and intervention, smoking ces- year, the facility fee for the origi-
sation services, alcohol and/or sub- nating site will be updated by the
stance abuse and brief intervention Medicare Economic Index (MEI) as de-
services, screening and behavioral fined in section 1842(i)(3) of the Act.
counseling interventions in primary (2) Only the originating site may bill
care to reduce alcohol misuse, screen- for the originating site facility fee and
ing for depression in adults, screening only on an assignment-related basis.
for sexually transmitted infections The distant site physician or practi-
(STIs) and high intensity behavioral tioner may not bill for or receive pay-
counseling (HIBC) to prevent STIs, in- ment for facility fees associated with
tensive behavioral therapy for cardio- the professional service furnished via
vascular disease, behavioral counseling an interactive telecommunications
for obesity, and transitional care man- system.
agement services furnished via an (c) Deductible and coinsurance apply.
interactive telecommunications sys- The payment for the professional serv-
tem is equal to the current fee schedule ice and originating site facility fee is
amount applicable for the service of subject to the coinsurance and deduct-
the physician or practitioner. ible requirements of sections 1833(a)(1)
(i) Emergency department or initial in- and (b) of the Act.
patient telehealth consultations. The (d) Assignment required for physicians,
Medicare payment amount for emer- practitioners, and originating sites. Pay-
gency department or initial inpatient ment to physicians, practitioners, and

telehealth consultations furnished via originating sites is made only on an as-
an interactive telecommunications signment-related basis.
22
(e) Sanctions. A distant site practi- an additional 5 percent payment above

tioner or originating site facility may the amount paid under the physician
be subject to the applicable sanctions fee schedule for their professional serv-
provided for in chapter IV, part 402 and ices furnished on or after January 1,
chapter V, parts 1001, 1002, and 1003 of 2005 and before January 1, 2008.
this title if he or she does any of the [69 FR 66424, Nov. 15, 2004]
following:
(1) Knowingly and willfully bills or § 414.67 Incentive payments for serv-
collects for services in violation of the ices furnished in Health Profes-
limitation of this section. sional Shortage Areas.
(2) Fails to timely correct excess (a) Health Professional Shortage Area
charges by reducing the actual charge (HPSA) physician bonus program. A
billed for the service in an amount that HPSA physician incentive payment
does not exceed the limiting charge for will be made subject to the following:
the service or fails to timely refund ex- (1) HPSA bonuses are payable for
cess collections. services furnished by physicians as de-
(3) Fails to submit a claim on a fined in section 1861(r) of the Act in
standard form for services provided for areas designated as of December 31 of
which payment is made on a fee sched- the prior year as geographic primary
ule basis. medical care HPSAs as defined in sec-
(4) Imposes a charge for completing tion 332(a)(1)(A) of the Public Health
and submitting the standard claims Service Act.
form. (2) HPSA bonuses are payable for
[66 FR 55332, Nov. 1, 2001, as amended at 67 services furnished by psychiatrists in
FR 80041, Dec. 31, 2003; 69 FR 66424, Nov. 15, areas designated as of December 31 of
2004; 70 FR 70332, Nov. 21, 2005; 72 FR 66401, the prior year as geographic mental
Nov. 27, 2007; 73 FR 69936, Nov. 19, 2008; 74 FR health HPSAs if the services are not al-
62006, Nov. 25, 2009; 75 FR 73617, Nov. 29, 2010;
76 FR 73471, Nov. 28, 2011; 77 FR 69363, Nov. 16,
ready eligible for the bonus based on
2012; 78 FR 74812, Dec. 10, 2013] being in a geographic primary care
HPSA.
§ 414.66 Incentive payments for physi- (3) Physicians eligible for the HPSA
cian scarcity areas. physician bonus are entitled to a 10
(a) Definition. As used in this section, percent incentive payment above the
the following definitions apply. amount paid for their professional
Physician scarcity area is defined as services under the physician fee sched-
an area with a shortage of primary ule.
care physicians or specialty physicians (4) Physicians furnishing services in
to the Medicare population in that areas that are designated as geographic
area. HPSAs prior to the beginning of the
Primary care physician is defined as a year but not included on the published
general practitioner, family practice list of zip codes for which automated
practitioner, general internist, obste- HPSA bonus payments are made must
trician or gynecologist. use the AQ modifier to receive the
(b) Physicians’ services furnished to HPSA physician bonus payment.
a beneficiary in a Physician Scarcity (b) HPSA surgical incentive payment
Area (PSA) for primary or specialist program. A HPSA surgical incentive
care are eligible for a 5 percent incen- payment will be made subject to the
tive payment. following:
(c) Primary care physicians fur- (1) A major surgical procedure as de-
nishing services in primary care PSAs fined in § 414.2 of this part is furnished
are entitled to an additional 5 percent by a general surgeon on or after Janu-
incentive payment above the amount ary 1, 2011 and before January 1, 2016 in
paid under the physician fee schedule an area recognized for the HPSA physi-
for their professional services fur- cian bonus program under paragraph
nished on or after January 1, 2005 and (a)(1) of this section.
before January 1, 2008. (2) Payment will be made on a quar-
(d) Physicians, as defined in section terly basis in an amount equal to 10

1861(r)(1) of the Act, furnishing services percent of the Part B payment amount
in specialist care PSAs are entitled to for major surgical procedures furnished
23
§ 414.68 42 CFR Ch. IV (10–1–17 Edition)
as described in paragraph (b)(1) of this accreditation functions specified in

section, in addition to the amount the section 1834(e) of the Act.
physician would otherwise be paid. (c) Application and reapplication proce-
(3) Physicians furnishing services in dures for accreditation organizations. An
areas that are designated as geographic independent accreditation organization
HPSAs eligible for the HPSA physician applying for approval or reapproval of
bonus program under paragraph (a)(1) authority to survey suppliers for pur-
of this section prior to the beginning of poses of accrediting suppliers fur-
the year but not included on the pub- nishing the TC of advanced diagnostic
lished list of zip codes for which auto- imaging services is required to furnish
mated HPSA surgical incentive pay- CMS with all of the following:
ments are made should report HCPCS (1) A detailed description of how the
modifier -AQ to receive the HPSA sur- organization’s accreditation criteria
gical incentive payment. satisfy the statutory standards author-
(4) The payment described in para-
ized by section 1834(e)(3) of the Act,
graph (b)(2) of this section is made to
specifically—
the surgeon or, where the surgeon has
reassigned his or her benefits to a crit- (i) Qualifications of medical per-
ical access hospital (CAH) paid under sonnel who are not physicians and who
the optional method, to the CAH based furnish the TC of advanced diagnostic
on an institutional claim. imaging services;
(ii) Qualifications and responsibil-
[75 FR 73617, Nov. 29, 2010] ities of medical directors and super-
vising physicians (who may be the
§ 414.68 Imaging accreditation.
same person), such as their training in
(a) Scope and purpose. Section 1834(e) advanced diagnostic imaging services
of the Act requires the Secretary to in a residency program, expertise ob-
designate and approve independent ac- tained through experience, or con-
creditation organizations for purposes tinuing medical education courses;
of accrediting suppliers furnishing the (iii) Procedures to ensure the reli-
technical component (TC) of advanced ability, clarity, and accuracy of the
diagnostic imaging services and estab- technical quality of diagnostic images
lish procedures to ensure that the cri- produced by the supplier, including a
teria used by an accreditation organi- thorough evaluation of equipment per-
zation is specific to each imaging mo- formance and safety;
dality. Suppliers of the TC of advanced
(iv) Procedures to ensure the safety
diagnostic imaging services for which
of persons who furnish the TC of ad-
payment is made under the fee sched-
vanced diagnostic imaging services and
ule established in section 1848(b) of the
individuals to whom such services are
Act must become accredited by an ac-
furnished;
creditation organization designated by
the Secretary beginning January 1, (v) Procedures to assist the bene-
2012. ficiary in obtaining the beneficiary’s
(b) Definitions. As used in this sec- imaging records on request; and
tion, the following definitions are ap- (vi) Procedures to notify the accredi-
plicable: tation organization of any changes to
Accredited supplier means a supplier the modalities subsequent to the orga-
that has been accredited by a CMS-des- nization’s accreditation decision.
ignated accreditation organization as (2) An agreement to conform accredi-
specified in this part. tation requirements to any changes in
Advanced diagnostic imaging service Medicare statutory requirements au-
means any of the following diagnostic thorized by section 1834(e) of the Act.
services: The accreditation organization must
(i) Magnetic resonance imaging. maintain or adopt standards that are
(ii) Computed tomography. equal to, or more stringent than, those
(iii) Nuclear medicine. of Medicare.
(iv) Positron emission tomography. (3) Information that demonstrates
CMS-approved accreditation organiza- the accreditation organization’s knowl-

tion means an accreditation organiza- edge and experience in the advanced di-
tion designated by CMS to perform the agnostic imaging arena.
24
(4) The organization’s proposed fees (x) The evaluation systems used to
for accreditation for each modality in monitor the performance of individual
which the organization intends to offer surveyors and survey teams.
accreditation, including any plans for (xi) The policies and procedures re-
reducing the burden and cost of accred- garding an individual’s participation in
itation to small and rural suppliers. the survey or accreditation decision
(5) Any specific documentation re- process of any organization with which
quirements and attestations requested the individual is professionally or fi-
by CMS as a condition of designation nancially affiliated.
under this part. (xii) The policies and procedures used
(6) A detailed description of the orga- when an organization has a dispute re-
nization’s survey process, including the
garding survey findings or an adverse
following:
decision.
(i) Type and frequency of the surveys
performed. (7) Detailed information about the
(ii) The ability of the organization to size and composition of survey teams
conduct timely reviews of accredita- for each category of advanced medical
tion applications, to include the orga- imaging service supplier accredited.
nizations national capacity. (8) A description of the organization’s
(iii) Description of the organization’s data management and analysis system
audit procedures, including random for its surveys and accreditation deci-
site visits, site audits, or other strate- sions, including the kinds of reports,
gies for ensuring suppliers maintain tables, and other displays generated by
compliance for the duration of accredi- that system.
tation. (9) The organization’s procedures for
(iv) Procedures for performing unan- responding to and for the investigation
nounced site surveys. of complaints against accredited facili-
(v) Copies of the organization’s sur- ties, including policies and procedures
vey forms. regarding coordination of these activi-
(vi) A description of the accredita- ties with appropriate licensing bodies
tion survey review process and the ac- and CMS.
creditation status decision-making (10) The organization’s policies and
process, including the process for ad- procedures for the withholding or re-
dressing deficiencies identified with moval of accreditation status for facili-
the accreditation requirements, and ties that fail to meet the accreditation
the procedures used to monitor the cor- organization’s standards or require-
rection of deficiencies found during an ments, and other actions taken by the
accreditation survey. organization in response to noncompli-
(vii) Procedures for coordinating surance with its standards and require-
veys with another accrediting organi- ments. These policies and procedures
zation if the organization does not ac- must include notifying CMS of Medi-
credit all products the supplier pro- care facilities that fail to meet the re-
vides.
quirements of the accrediting organiza-
(viii) Detailed information about the
tion.
individuals who perform evaluations
for the accreditation organization, in- (11) A list of all currently accredited
cluding all of the following informa- suppliers, the type and category of ac-
tion: creditation currently held by each sup-
(A) The number of professional and plier, and the expiration date of each
technical staff that are available for supplier’s current accreditation.
surveys. (12) A written presentation that dem-
(B) The education, employment, and onstrates the organization’s ability to
experience requirements surveyors furnish CMS with electronic data in
must meet. ASCII comparable code.
(C) The content and length of the ori- (13) A resource analysis that dem-
entation program. onstrates that the organization’s staff-
(ix) The frequency and types of in- ing, funding, and other resources are
service training provided to survey per- adequate to perform the required sur-
sonnel. veys and related activities.
25
§ 414.68 42 CFR Ch. IV (10–1–17 Edition)
(14) A statement acknowledging that, and afforded an opportunity to provide

as a condition for approval of designa- the additional information.
tion, the organization agrees to carry (e) Visits to the organization’s office.
out the following activities: CMS may visit the organization’s of-
(i) Prioritize surveys for those sup- fices to verify representations made by
pliers needing to be accredited by Jan- the organization in its application, in-
uary 1, 2012. cluding, but not limited to, reviewing
(ii) Notify CMS, in writing, of any documents and interviewing the orga-
Medicare supplier that had its accredi- nization’s staff.
tation revoked, withdrawn, revised, or (f) Formal notice from CMS. The ac-
any other remedial or adverse action creditation organization will receive a
taken against it by the accreditation formal notice from CMS stating wheth-
organization within 30 calendar days of er the request for designation has been
any such action taken. approved or denied. If approval was de-
(iii) Notify all accredited suppliers
nied the notice includes the basis for
within 10 calendar days of the organi-
denial and reconsideration and re-
zation’s removal from the list of des-
application procedures.
ignated accreditation organizations.
(iv) Notify CMS, in writing, at least (g) Ongoing responsibilities of a CMS-
30 calendar days in advance of the ef- approved accreditation organization. An
fective date of any significant proposed accreditation organization approved by
changes in its accreditation require- CMS must carry out the following ac-
ments. tivities on an ongoing basis:
(v) Permit its surveyors to serve as (1) Provide CMS with all of the fol-
witnesses if CMS takes an adverse ac- lowing in written format (either elec-
tion based on accreditation findings. tronic or hard copy):
(vi) Notify CMS, in writing (elec- (i) Copies of all accreditation sur-
tronically or hard copy), within 2 busi- veys, together with any survey-related
ness days of a deficiency identified in information that CMS may require (in-
any accreditation supplier from any cluding corrective action plans and
source where the deficiency poses an summaries of findings with respect to
immediate jeopardy to the supplier’s unmet CMS requirements).
beneficiaries or a hazard to the general (ii) Notice of all accreditation deci-
public. sions.
(vii) Provide, on an annual basis, (iii) Notice of all complaints related
summary data specified by CMS that to suppliers.
relates to the past year’s accredita- (iv) Information about all accredited
tions and trends. suppliers against which the accredita-
(viii) Attest that the organization tion organization has taken remedial
will not perform any accreditation sur- or adverse action, including revoca-
veys of Medicare-participating sup- tion, withdrawal, or revision of the
pliers with which it has a financial re- supplier’s accreditation.
lationship in which it has an interest.
(v) Notice of any proposed changes in
(ix) Conform accreditation require-
its accreditation standards or require-
ments to changes in Medicare require-
ments. ments or survey process. If the organi-
(x) If CMS withdraws an accredita- zation implements the changes before
tion organization’s approved status, or without CMS’ approval, CMS may
work collaboratively with CMS to di- withdraw its approval of the accredita-
rect suppliers to the remaining accred- tion organization.
itation organizations within a reason- (2) Within 30 calendar days after a
able period of time. change in CMS requirements, the ac-
(d) Determination of whether additional creditation organization must submit
information is needed. If CMS deter- an acknowledgment of receipt of CMS’
mines that additional information is notification to CMS.
necessary to make a determination for (3) The accreditation organization
approval or denial of the accreditation must permit its surveyors to serve as

organization’s application for designa- witnesses if CMS takes an adverse ac-
tion, the organization must be notified tion based on accreditation findings.
26
(4) Within 2 business days of identi- creditation organization and findings

fying a deficiency of an accredited sup- by CMS on standards that do not con-
plier that poses immediate jeopardy to stitute immediate jeopardy to patient
a beneficiary or to the general public, health and safety if unmet; or
the accreditation organization must (B) Any disparity between findings
provide CMS with written notice of the by the accreditation organization and
deficiency and any adverse action im- findings by CMS on standards that con-
plemented by the accreditation organi- stitute immediate jeopardy to patient
zation. health and safety if unmet; or,
(5) Within 10 calendar days after (C) Irrespective of the rate of dis-
CMS’ notice to a CMS-approved accred- parity, widespread or systemic prob-
itation organization that CMS intends lems in an organization’s accreditation
to withdraw approval of the accredita- process such that accreditation by that
tion organization, the accreditation or- accreditation organization no longer
ganization must provide written notice provides CMS with adequate assurance
of the withdrawal to all of the organi- that suppliers meet or exceed the Medi-
zation’s accredited suppliers. care requirements; then CMS will give
(6) The organization must provide, on the organization written notice of its
an annual basis, summary data speci- intent to withdraw approval as speci-
fied by CMS that relate to the past fied in paragraph (h)(3) of this section.
year’s accreditation activities and (ii) CMS may also provide the organi-
trends. zation written notice of its intent to
(h) Continuing Federal oversight of ap- withdraw approval if an equivalency
proved accreditation organizations. This review, onsite observation, or CMS’
paragraph establishes specific criteria daily experience with the accreditation
and procedures for continuing over- organization suggests that the accredi-
sight and for withdrawing approval of a tation organization is not meeting the
CMS-approved accreditation organiza- requirements of this section.
tion. (3) Withdrawal of approval. CMS may
(1) Validation audits. (i) CMS or its withdraw its approval of an accredita-
contractor may conduct an audit of an tion organization at any time if CMS
accredited supplier to validate the sur- determines that—
vey accreditation process of approved (i) Accreditation by the organization
accreditation organizations for the TC no longer adequately assures that the
of advanced diagnostic imaging serv- suppliers furnishing the technical com-
ices. ponent of advanced diagnostic imaging
(ii) The audits must be conducted on service are meeting the established in-
a representative sample of suppliers dustry standards for each modality and
who have been accredited by a par- that failure to meet those require-
ticular accrediting organization or in ments could jeopardize the health or
response to allegations of supplier non- safety of Medicare beneficiaries and
compliance with the standards. could constitute a significant hazard to
(A) When conducted on a representa- the public health; or
tive sample basis, the audit is com- (ii) The accreditation organization
prehensive and addresses all of the has failed to meet its obligations with
standards, or may focus on a specific respect to application or reapplication
standard in issue. procedures.
(B) When conducted in response to an (i) Reconsideration. An accreditation
allegation, CMS audits any standards organization dissatisfied with a deter-
that CMS determines are related to the mination that its accreditation re-
allegations. quirements do not provide or do not
(2) Notice of intent to withdraw ap- continue to provide reasonable assur-
proval. (i) If, during the audit specified ance that the suppliers accredited by
in paragraph (h)(1) of this section, CMS the accreditation organization meet
identifies any accreditation programs the applicable quality standards is en-
for which validation audit results indi- titled to a reconsideration. CMS recon-
cate— siders any determination to deny, re-

(A) A 10 percent or greater rate of move, or not renew the approval of des-
disparity between findings by the ac- ignation to accreditation organizations
27
§ 414.80 42 CFR Ch. IV (10–1–17 Edition)
if the accreditation organization files a the production of witnesses, papers, or

written request for reconsideration by other evidence.
its authorized officials or through its (v) Within 45 calendar days of the
legal representative. close of the hearing, the hearing officer
(1) Filing requirements. (i) The request presents the findings and recommenda-
must be filed within 30 calendar days of tions to the accreditation organization
the receipt of CMS notice of an adverse that requested the reconsideration.
determination or non-renewal. (vi) The written report of the hearing
(ii) The request for reconsideration officer includes separate numbered
must specify the findings or issues with findings of fact and the legal conclu-
which the accreditation organization sions of the hearing officer.
disagrees and the reasons for the dis- (vii) The hearing officer’s decision is
agreement. final.
(iii) A requestor may withdraw its re- [74 FR 62006, Nov. 25, 2009]
quest for reconsideration at any time
before the issuance of a reconsideration § 414.80 Incentive payment for pri-
determination. mary care services.
(2) CMS response to a filing request. In (a) Definitions. As defined in this sec-
response to a request for reconsider- tion—
ation, CMS provides the accreditation Eligible primary care practitioner
organization with— means one of the following:
(i) The opportunity for an informal (i) A physician (as defined in section
hearing to be conducted by a hearing 1861(r)(1) of the Act) who meets all of
officer appointed by the Administrator the following criteria:
of CMS and provide the accreditation (A) Enrolled in Medicare with a pri-
organization the opportunity to mary specialty designation of 08-family
present, in writing and in person, evi- practice, 11-internal medicine, 37-pedi-
dence or documentation to refute the atrics, or 38-geriatrics.
determination to deny approval, or to (B) At least 60 percent of the physi-
withdraw or not renew designation; cian’s allowed charges under the physi-
and cian fee schedule (excluding hospital
(ii) Written notice of the time and inpatient care and emergency depart-
place of the informal hearing at least ment visits) during a reference period
10 business days before the scheduled specified by the Secretary are for pri-
date. mary care services.
(3) Hearing requirements and rules. (i) (ii) A nurse practitioner, clinical
The informal reconsideration hearing nurse specialist, or physician assistant
is open to all of the following: (as defined in section 1861(aa)(5) of the
(A) CMS. Act) who meets all of the following cri-
teria:
(B) The organization requesting the
(A) Enrolled in Medicare with a pri-
reconsideration including—
mary specialty designation of 50-nurse
(1) Authorized representatives; practitioner, 89-certified clinical nurse,
(2) Technical advisors (individuals or 97-physician assistant.
with knowledge of the facts of the case (B) At least 60 percent of the practi-
or presenting interpretation of the tioner’s allowed charges under the phy-
facts); and sician fee schedule (excluding hospital
(3) Legal counsel. inpatient care and emergency depart-
(ii) The hearing is conducted by the ment visits) during a reference period
hearing officer who receives testimony specified by the Secretary are for pri-
and documents related to the proposed mary care services.
action. Primary care services means—
(iii) Testimony and other evidence (i) New and established patient office
may be accepted by the hearing officer or other outpatient evaluation and
even though such evidence may be in- management (E/M) visits;
admissible under the Federal Rules of (ii) Initial, subsequent, discharge,
Civil Procedure. and other nursing facility E/M services;

(iv) The hearing officer does not have (iii) New and established patient
the authority to compel by subpoena domiciliary, rest home (for example,
28
boarding home), or custodial care E/M which are furnished by an eligible pro-
services; fessional.
(iv) Domiciliary, rest home (for ex- Direct electronic health record (EHR)
ample, assisted living facility), or product means an electronic health
home care plan oversight services; and record vendor’s product and version
(v) New and established patient home that submits data on PQRS measures
E/M visits. directly to CMS.
(b) Payment. (1) For primary care Electronic health record (EHR) data
services furnished by an eligible pri- submission vendor product means an en-
mary care practitioner on or after Jan- tity that receives and transmits data
uary 1, 2011 and before January 1, 2016, on PQRS measures from an EHR prod-
payment is made on a quarterly basis uct to CMS.
in an amount equal to 10 percent of the Eligible professional means any of the
payment amount for the primary care following:
services under Part B, in addition to (i) A physician.
the amount the primary care practi- (ii) A practitioner described in sec-
tioner would otherwise be paid for the tion 1842(b)(18)(C) of the Act.
primary care services under Part B. (iii) A physical or occupational ther-
(2) The payment described in para- apist or a qualified speech-language pa-
graph (b)(1) of this section is made to thologist.
the eligible primary care practitioner (iv) A qualified audiologist (as de-
or, where the physician has reassigned fined in section 1861(ll)(3)(B) of the
his or her benefits to a critical access Act).
hospital (CAH) paid under the optional
Group practice means a physician
method, to the CAH based on an insti-
group practice that is defined by a TIN,
tutional claim.
with 2 or more individual eligible pro-
[75 FR 73617, Nov. 29, 2010] fessionals (or, as identified by NPIs)
that has reassigned their billing rights
§ 414.90 Physician Quality Reporting to the TIN.
System (PQRS). Group practice reporting option (GPRO)
(a) Basis and scope. This section im- web interface means a web product de-
plements the following provisions of veloped by CMS that is used by group
the Act: practices that are selected to partici-
(1) 1848(a)—Payment Based on Fee pate in the group practice reporting op-
Schedule. tion (GPRO) to submit data on PQRS
(2) 1848(k)—Quality Reporting Sys- quality measures.
tem. Maintenance of Certification Program
(3) 1848(m)—Incentive Payments for means a continuous assessment pro-
Quality Reporting. gram, such as qualified American
(b) Definitions. As used in this sec- Board of Medical Specialties Mainte-
tion, unless otherwise indicated— nance of Certification Program or an
Administrative claims means a report- equivalent program (as determined by
ing mechanism under which an eligible the Secretary), that advances quality
professional or group practice uses and the lifelong learning and self-as-
claims to report data on PQRS quality sessment of board certified specialty
measures. Under this reporting mecha- physicians by focusing on the com-
nism, CMS analyzes claims data to de- petencies of patient care, medical
termine which measures an eligible knowledge, practice-based learning,
professional or group practice reports. interpersonal and communication
Certified survey vendor means a ven- skills, and professionalism. Such a pro-
dor that is certified by CMS for a par- gram must include the following:
ticular program year to transmit sur- (i) The program requires the physi-
vey measures data to CMS. cian to maintain a valid unrestricted
Covered professional services means license in the United States.
services for which payment is made (ii) The program requires a physician
under, or is based on, the Medicare to participate in educational and self-

physician fee schedule as provided assessment programs that require an
under section 1848(k)(3) of the Act and assessment of what was learned.
29
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
(iii) The program requires a physi- (i) Submit quality measures data or
cian to demonstrate, through a formal- results to CMS for purposes of dem-
ized secure examination, that the phy- onstrating that, for a reporting period,
sician has the fundamental diagnostic its eligible professionals have satisfac-
skills, medical knowledge, and clinical torily participated in PQRS. A quali-
judgment to provide quality care in fied clinical data registry must have in
their respective specialty. place mechanisms for the transparency
(iv) The program requires successful of data elements and specifications,
completion of a qualified maintenance risk models, and measures.
of certification program practice as- (ii) Submit to CMS, for purposes of
sessment. demonstrating satisfactory participa-
Maintenance of Certification Program tion, quality measures data on mul-
Practice Assessment means an assess- tiple payers, not just Medicare pa-
ment of a physician’s practice that— tients.
(i) Includes an initial assessment of (iii) Provide timely feedback, at least
an eligible professional’s practice that four times a year, on the measures at
is designed to demonstrate the physi- the individual participant level for
cian’s use of evidence-based medicine. which the qualified clinical data reg-
(ii) Includes a survey of patient expe- istry reports on the eligible profes-
rience with care. sional’s behalf for purposes of the indi-
(iii) Requires a physician to imple- vidual eligible professional’s satisfac-
ment a quality improvement interven- tory participation in the clinical qual-
tion to address a practice weakness ity data registry.
identified in the initial assessment
(iv) Possess benchmarking capacity
under paragraph (h) of this section and
then to remeasure to assess perform- that measures the quality of care an el-
ance improvement after such interven- igible professional provides with other
tion. eligible professionals performing the
Measures group means a subset of six same or similar functions.
or more PQRS measures that have a Qualified registry means a medical
particular clinical condition or focus in registry or a maintenance of certifi-
common. The denominator definition cation program operated by a specialty
and coding of the measures group iden- body of the American Board of Medical
tifies the condition or focus that is Specialties that, with respect to a par-
shared across the measures within a ticular program year, has self-nomi-
particular measures group. nated and successfully completed a
Physician Quality Reporting System vetting process (as specified by CMS)
(PQRS) means the physician reporting to demonstrate its compliance with the
system under section 1848(k) of the Act PQRS qualification requirements spec-
for the reporting by eligible profes- ified by CMS for that program year.
sionals of data on quality measures and The registry may act as a data submis-
the incentive payment associated with sion vendor, which has the requisite
this physician reporting system. legal authority to provide PQRS data
Performance rate means the percent- (as specified by CMS) on behalf of an
age of a defined population who re- eligible professional to CMS. If CMS
ceives a particular process of care or finds that a qualified registry submits
achieve a particular outcome for a par- grossly inaccurate data for reporting
ticular quality measure. periods occurring in a particular year,
Qualified clinical data registry means a CMS reserves the right to disqualify a
CMS-approved entity that has self- registry for reporting periods occurring
nominated and successfully completed in the subsequent year.
a qualification process that collects Reporting rate means the percentage
medical and/or clinical data for the
of patients that the eligible profes-
purpose of patient and disease tracking
sional indicated a quality action was or
to foster improvement in the quality of
care provided to patients. A qualified was not performed divided by the total
clinical data registry must perform the number of patients in the denominator
following functions: of the measure.
30
(c) Incentive payments. For 2007 to (i) The eligible professional’s (or, in
2014, with respect to covered profes- the case of a group practice under para-
sional services furnished during a re- graph (i) of this section, the group
porting period by an eligible profes- practice’s) total estimated allowed
sional, an eligible professional (or in charges for covered professional serv-
the case of a group practice under para- ices furnished during a reporting period
graph (i) of this section, a group prac- are determined based on claims proc-
tice) may receive an incentive if— essed in the National Claims History
(1) There are any quality measures (NCH) no later than 2 months after the
that have been established under the end of the applicable reporting period;
PQRS that are applicable to any such (ii) In the case of the eligible profes-
services furnished by such professional sional who furnishes covered profes-
(or in the case of a group practice sional services in more than one prac-
under paragraph (i) of this section, tice, incentive payments are separately
such group practice) for such reporting determined for each practice based on
period; and claims submitted for the eligible pro-
(2) If the eligible professional (or in fessional for each practice;
the case of a group practice under para- (iii) Incentive payments to a group
graph (j) of this section, the group practice under this paragraph must be
practice) satisfactorily submits (as de- in lieu of the payments that would oth-
termined under paragraph (g) of this erwise be made under the PQRS to eli-
section for the eligible professional and gible professionals in the group prac-
paragraph (i) of this section for the tice for meeting the criteria for satis-
group practice) to the Secretary data factory reporting for individual eligible
on such quality measures in accord- professionals. For any program year in
ance with the PQRS for such reporting which the group practice (as identified
period, in addition to the amount oth- by the TIN) is selected to participate in
erwise paid under section 1848 of the the PQRS group practice reporting op-
Act, there also must be paid to the eli- tion, the eligible professional cannot
gible professional (or to an employer or individually qualify for a PQRS incen-
facility in the cases described in sec- tive payment by meeting the require-
tion 1842(b)(6)(A) of the Act or, in the ments specified in paragraph (g) of this
case of a group practice under para- section.
graph (i) of this section, to the group (iv) Incentive payments earned by
practice) from the Federal Supple- the eligible professional (or in the case
mentary Medical Insurance Trust Fund of a group practice under paragraph (i)
established under section 1841 of the of this section, by the group practice)
Act an amount equal to the applicable for a particular program year will be
quality percent (as specified in para- paid as a single consolidated payment
graph (c)(3) of this section) of the eligi- to the TIN holder of record.
ble professional’s (or, in the case of a (5) The Secretary must treat an indi-
group practice under paragraph (i) of vidual eligible professional, as identi-
this section, the group practice’s) total fied by a unique TIN/NPI combination,
estimated allowed charges for all cov- as satisfactorily submitting data on
ered professional services furnished by quality measures (as determined under
the eligible professional (or, in the case paragraph (g) of this section), if the eli-
of a group practice under paragraph (i) gible professional is satisfactorily par-
of this section, by the group practice) ticipating (as determined under para-
during the reporting period. graph (h) of this section), in a qualified
(3) The applicable quality percent is clinical data registry.
as follows: (d) Additional incentive payment.
(i) For 2007 and 2008, 1.5 percent. Through 2014, if an eligible professional
(ii) For 2009 and 2010, 2.0 percent. meets the requirements described in
(iii) For 2011, 1.0 percent. paragraph (d)(2) of this section, the ap-
(iv) For 2012, 2013, and 2014, 0.5 per- plicable percent for such year, as de-
cent. scribed in paragraphs (c)(3)(iii) and (iv)

(4) For purposes of this paragraph of this section, must be increased by 0.5
(c)— percentage points.
31
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
(1) In order to qualify for the addi- the Act), the fee schedule amount for
tional incentive payment described in such services furnished by such profes-
paragraph (d) of this section, an eligi- sional during the year (including the
ble professional must meet all of the fee schedule amount for purposes for
following requirements: determining a payment based on such
(i) Satisfactorily submits data on amount) must be equal to the applica-
quality measures, or, for 2014, in lieu of ble percent of the fee schedule amount
satisfactory reporting, satisfactorily that would otherwise apply to such
participates in a qualified clinical data services under this paragraph (e).
registry for purposes of this section for (1) The applicable percent is as fol-
the applicable incentive year. lows:
(ii) Have such data submitted on (i) For 2015, 98.5 percent.
their behalf through a Maintenance of (ii) For 2016 through 2018, 98 percent.
Certification program that meets: (2) The Secretary must treat an indi-
(A) The criteria for a registry (as vidual eligible professional, as identi-
specified by CMS); or fied by a unique TIN/NPI combination,
(B) An alternative form and manner as satisfactorily submitting data on
determined appropriate by the Sec- quality measures (as determined under
retary. paragraph (h) of this section), if the eli-
(iii) The eligible professional, more gible professional is satisfactorily par-
frequently than is required to qualify ticipating, in a qualified clinical data
for or maintain board certification sta- registry.
tus— (f) Use of appropriate and consensus-
(A) Participates in a maintenance of based quality measures. For measures se-
certification program for a year; and lected for inclusion in the PQRS qual-
(B) Successfully completes a quali- ity measure set, CMS will use group
fied maintenance of certification pro- practice measures determined appro-
gram practice assessment for such priate by CMS and consensus-based
year. quality measures that meet one of the
(2) In order for an eligible profes- following criteria:
sional to receive the additional incen- (1) Be such measures selected by the
tive payment, a Maintenance of Cer- Secretary from measures that have
tification Program must submit to the been endorsed by the entity with a con-
Secretary, on behalf of the eligible pro- tract with the Secretary under section
fessional, information— 1890(a) of the Act. In the case of a spec-
(i) In a form and manner specified by ified area or medical topic determined
the Secretary, that the eligible profes- appropriate by the Secretary for which
sional has successfully met the require- a feasible and practical measure has
ments of paragraph (d)(1)(iii) of this not been endorsed by the entity with a
section, which may be in the form of a contract under section 1890(a) of the
structural measure. Act, the Secretary may specify a meas-
(ii) If requested by the Secretary, on ure that is not so endorsed as long as
the survey of patient experience with due consideration is given to measures
care. that have been endorsed or adopted by
(iii) As the Secretary may require, on a consensus organization identified by
the methods, measures, and data used the Secretary.
under the Maintenance of Certification (2) For each quality measure adopted
Program and the qualified Mainte- by the Secretary under this paragraph,
nance of Certification Program prac- the Secretary ensures that eligible pro-
tice assessment. fessionals have the opportunity to pro-
(e) Payment adjustments. For 2015 vide input during the development, en-
through 2018, with respect to covered dorsement, or selection of quality
professional services furnished by an measures applicable to services they
eligible professional, if the eligible pro- furnish.
fessional does not satisfactorily submit (g) Use of quality measures for satisfac-
data on quality measures for covered tory participation in a qualified clinical
professional services for the quality re- data registry. For measures selected for
porting period for the year (as deter- reporting to meet the criteria for satis-
mined under section 1848(m)(3)(A) of factory participation in a qualified
32
clinical data registry, CMS will use (A) If an eligible professional re-sub-
measures selected by qualified clinical mits a Medicare Part B claim for re-
data registries based on parameters set processing, the eligible professional
by CMS. may not attach a G–code at that time
(h) Satisfactory reporting requirements for reporting on individual PQRS meas-
for the incentive payments. In order to ures or measures groups.
qualify to earn a PQRS incentive pay- (B) [Reserved]
ment for a particular program year, an (ii) Registry. Reporting PQRS quality
individual eligible professional, as measures or PQRS measures groups to
identified by a unique TIN/NPI com- a qualified registry in the form and
bination, must meet the criteria for manner and by the deadline specified
satisfactory reporting specified by by the qualified registry selected by
CMS under paragraph (h)(3) of (h)(5) of the eligible professional. The selected
this section for such year by reporting registry must submit information, as
on either individual PQRS quality required by CMS, for covered profes-
measures or PQRS measures groups sional services furnished by the eligible
identified by CMS during a reporting professional during the applicable re-
period specified in paragraph (h)(1) of porting period to CMS on the eligible
this section, using one of the reporting professional’s behalf.
mechanisms specified in paragraph (iii) Direct EHR product. Reporting
(h)(2) or (4) of this section, and using
PQRS quality measures to CMS by ex-
one of the reporting criteria specified
tracting clinical data using a secure
in paragraph (h)(3) or (5) of this sec-
data submission method, as required by
tion.
CMS, from a direct EHR product by the
(1) Reporting periods. For purposes of
deadline specified by CMS for covered
this paragraph, the reporting period
professional services furnished by the
is—
eligible professional during the appli-
(i) The 12-month period from January
cable reporting period.
1 through December 31 of such program
year. (iv) EHR data submission vendor. Re-
(ii) A 6-month period from July 1 porting PQRS quality measures to
through December 31 of such program CMS by extracting clinical data using
year. a secure data submission method, as
(A) For 2011, such 6-month reporting required by CMS, from an EHR data
period is not available for EHR–based submission vendor product by the dead-
reporting of individual PQRS quality line specified by CMS for covered pro-
measures. fessional services furnished by the eli-
(B) For 2012 and subsequent program gible professional during the applicable
years, such 6-month reporting period reporting period.
from July 1 through December 31 of (v) Although an eligible professional
such program year is only available for may attempt to qualify for the PQRS
registry-based reporting of PQRS incentive payment by reporting on
measures groups by eligible profes- both individual PQRS quality measures
sionals. and measures groups, using more than
(2) Reporting mechanisms for individual one reporting mechanism (as specified
eligible professionals. An individual eli- in paragraph (g)(2) of this section), or
gible professional who wishes to par- reporting for more than one reporting
ticipate in the PQRS must report infor- period, he or she will receive only one
mation on PQRS quality measures PQRS incentive payment per TIN/NPI
identified by CMS in one of the fol- combination for a program year.
lowing manners: (3) Satisfactory reporting criteria for in-
(i) Claims. Reporting PQRS quality dividual eligible professionals for the 2014
measures or PQRS measures groups to PQRS incentive. An individual eligible
CMS, by no later than 2 months after professional who wishes to qualify for
the end of the applicable reporting pe- the 2014 PQRS incentive must report
riod, on the eligible professional’s information on PQRS quality measures
Medicare Part B claims for covered data in one of the following manners:
professional services furnished during (i) Via Claims. For the 12-month 2014
the applicable reporting period. PQRS incentive reporting period—
33
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
(A) Report at least 9 measures cov- measures and/or measures covering ad-
ering at least 3 National Quality Strat- ditional National Quality Strategy do-
egy domains, and report each measure mains. Measures with a 0 percent per-
for at least 50 percent of the Medicare formance rate would not be counted.
Part B FFS patients seen during the (2) Report at least 1 measures group
reporting period to which the measure and report each measures group for at
applies; or if less than 9 measures cov- least 20 patients, a majority of which
ering at least 3 National Quality Strat- much be Medicare Part B FFS pa-
egy domains apply to the eligible pro- tients. Measures with a 0 percent per-
fessional, report 1 to 8 measures cov- formance rate or measures groups con-
ering 1 to 3 National Quality Strategy taining a measure with a 0 percent per-
domains and report each measure for formance rate will not be counted.
at least 50 percent of the Medicare Part (B) For the 6-month 2014 PQRS incen-
B FFS patients seen during the report- tive reporting period, report at least 1
ing period to which the measure ap- measures group and report each meas-
plies. For an eligible professional who ures group for at least 20 patients, a
reports fewer than 9 measures covering majority of which much be Medicare
at least 3 NQS domains via the claims- Part B FFS patients. Measures groups
based reporting mechanism, the eligi- containing a measure with a 0 percent
ble professional would be subject to the performance rate will not be counted.
Measures Applicability Validation (iii) Via EHR Direct Product. For the
process, which would allow us to deter- 12-month 2014 PQRS incentive report-
mine whether an eligible professional ing period, report 9 measures covering
should have reported quality data at least 3 of the National Quality
codes for additional measures and/or Strategy domains. If an eligible profes-
covering additional National Quality sional’s CEHRT does not contain pa-
Strategy domains. Measures with a 0 tient data for at least 9 measures cov-
percent performance rate would not be ering at least 3 domains, then the eligi-
counted. ble professional must report the meas-
(B) [Reserved] ures for which there is Medicare pa-
(ii) Via Qualified Registry. (A) For the tient data. An eligible professional
12-month 2014 PQRS incentive report- must report on at least 1 measure for
ing period— which there is Medicare patient data.
(1) Report at least 9 measures cov- (iv) Via EHR Data Submission Vendor.
ering at least 3 of the National Quality For the 12-month 2014 PQRS incentive
Strategy domains report each measure reporting period, report 9 measures
for at least 50 percent of the eligible covering at least 3 of the National
professional’s Medicare Part B FFS pa- Quality Strategy domains. If an eligi-
tients seen during the reporting period ble professional’s CEHRT does not con-
to which the measure applies; or, if less tain patient data for at least 9 meas-
than 9 measures covering at least 3 ures covering at least 3 domains, then
NQS domains apply to the eligible pro- the eligible professional must report
fessional, report 1 to 8 measures cov- the measures for which there is Medi-
ering 1 to 3 National Quality Strategy care patient data. An eligible profes-
domains for which there is Medicare sional must report on at least 1 meas-
patient data and report each measure ure for which there is Medicare patient
for at least 50 percent of the eligible data.
professional’s Medicare Part B FFS pa- (4) Reporting mechanisms for group
tients seen during the reporting period practices. With the exception of a group
to which the measure applies. For an practice who wishes to participate in
eligible professional who reports fewer the PQRS using the certified survey
than 9 measures covering at least 3 vendor mechanism (as specified in
NQS domains via the qualified reg- paragraph (h)(4)(v) of this section), a
istry-based reporting mechanism, the group practice must report information
eligible professional will be subject to on PQRS quality measures identified
the Measures Applicability Validation by CMS in one of the following report-
process, which would allow us to deter- ing mechanisms:

mine whether an eligible professional (i) Web interface. For 2013 and subse-
should have reported on additional quent years, reporting PQRS quality
34
measures to CMS using a CMS web tive. A group practice who wishes to
interface in the form and manner and qualify for the 2014 PQRS incentive
by the deadline specified by CMS. must report information on PQRS
(ii) Registry. For 2013 and subsequent quality measures identified by CMS in
years, reporting on PQRS quality one of the following manners:
measures to a qualified registry in the (i) Via the GPRO web interface. (A)
form and manner and by the deadline For the 12-month 2014 PQRS incentive
specified by the qualified registry se- reporting period, for a group practice
lected by the eligible professional. The of 25 to 99 eligible professionals, report
selected registry must submit informa- on all measures included in the web
tion, as required by CMS, for covered interface and populate data fields for
professional services furnished by the the first 218 consecutively ranked and
eligible professional during the appli- assigned beneficiaries in the order in
cable reporting period to CMS on the which they appear in the group’s sam-
eligible professional’s behalf. ple for each module or preventive care
(iii) Direct EHR product. For 2014 and measure. If the pool of eligible assigned
subsequent years, reporting PQRS beneficiaries is less than 218, then re-
quality measures to CMS by extracting port on 100 percent of assigned bene-
clinical data using a secure data sub- ficiaries.
mission method, as required by CMS,
(B) For the 12-month 2014 PQRS in-
from a direct EHR product by the dead-
centive reporting period, for a group
line specified by CMS for covered pro-
practice of 100 or more eligible profes-
fessional services furnished by the eli-
sionals, report on all measures in-
gible professional during the applicable
cluded in the web interface and popu-
reporting period.
late data fields for the first 411 con-
(iv) EHR data submission vendor. For
2014 and subsequent years, reporting secutively ranked and assigned bene-
PQRS quality measures to CMS by ex- ficiaries in the order in which they ap-
tracting clinical data using a secure pear in the group’s sample for each
data submission method, as required by module or preventive care measure. If
CMS, from an EHR data submission the pool of eligible assigned bene-
vendor product by the deadline speci- ficiaries is less than 411, then report on
fied by CMS for covered professional 100 percent of assigned beneficiaries. In
services furnished by the eligible pro- addition, for the 12-month 2014 PQRS
fessional during the applicable report- incentive reporting period, the group
ing period. practice must report all CAHPS for
(v) Certified survey vendors. For 2014 PQRS survey measures via a CMS-cer-
and subsequent years, reporting tified survey vendor, and report at
CAHPS for PQRS survey measures to least 6 measures covering at least 2 of
CMS using a vendor that is certified by the National Quality Strategy domains
CMS for a particular program year to using a qualified registry, direct EHR
transmit survey measures data to product, or EHR data submission ven-
CMS. Group practices that elect this dor.
reporting mechanism must select an (ii) Via Qualified Registry. For the 12-
additional group practice reporting month 2014 PQRS incentive reporting
mechanism in order to meet the cri- period, for a group practice of 2 or
teria for satisfactory reporting for the more eligible professionals, report at
incentive payments. least 9 measures, covering at least 3 of
(vi) Although a group practice may the National Quality Strategy domains
attempt to qualify for the PQRS incen- and report each measure for at least 50
tive payment by using more than one percent of the group practice’s Medi-
reporting mechanism (as specified in care Part B FFS patients seen during
paragraph (g)(3) of this section), or re- the reporting period to which the
porting for more than one reporting pe- measure applies; or, if less than 9 meas-
riod, the group practice will receive ures covering at least 3 NQS domains
only one PQRS incentive payment for a apply to the group practice, then the
program year. group practice must report 1–8 meas-

(5) Satisfactory reporting criteria for ures for which there is Medicare pa-
group practices for the 2014 PQRS incen- tient data and report each measure for
35
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
at least 50 percent of the group prac- uct, EHR data submission vendor, or
tice’s Medicare Part B FFS patients GPRO web interface.
seen during the reporting period to (i) Satisfactory participation require-
which the measure applies. For a group ments for the incentive payments for indi-
practice who reports fewer than 9 vidual eligible professionals. To qualify
measures covering at least 3 NQS do- for the 2014 PQRS incentive using a
mains via the qualified registry-based qualified clinical data registry, an indi-
reporting mechanism, the group prac- vidual eligible professional, as identi-
tice would be subject to the Measures fied by a unique TIN/NPI combination,
Applicability Validation process, which must meet the criteria for satisfactory
would allow us to determine whether a participation as specified under para-
group practice should have reported on graph (i)(3) of this section by reporting
additional measures and/or measures on quality measures identified by a
covering additional National Quality qualified clinical data registry during a
Strategy domains. Measures with a 0 reporting period specified in paragraph
percent performance rate would not be (i)(1) of this section, and using the re-
counted. porting mechanism specified in para-
(iii) Via EHR Direct Product. For the graph (i)(2) of this section.
12-month 2014 PQRS incentive report- (1) Reporting period. For purposes of
ing period, for a group practice of 2 or this paragraph, the reporting period is
more eligible professionals, report 9 the 12–month period from January 1
measures covering at least 3 of the Na- through December 31.
tional Quality Strategy domains. If a (2) Reporting Mechanism. An indi-
group practice’s CEHRT does not con- vidual eligible professional who wishes
tain patient data for at least 9 meas- to meet the criteria for satisfactory
ures covering at least 3 domains, then participation in a qualified clinical
the group practice must report the data registry must use a qualified clin-
measures for which there is Medicare ical data registry to report information
patient data. A group practice must re- on quality measures identified by the
port on at least 1 measure for which qualified clinical data registry.
there is Medicare patient data. (3) Satisfactory participation criteria for
(iv) Via EHR Data Submission Vendor. individual eligible professionals for the
For the 12-month 2014 PQRS incentive 2014 PQRS incentive. An individual eli-
reporting period, for a group practice gible professional who wishes to qual-
of 2 or more eligible professionals, re- ify for the 2014 PQRS incentive through
port 9 measures covering at least 3 of satisfactory participation in a quali-
the National Quality Strategy do- fied clinical data registry must report
mains. If a group practice’s CEHRT information on quality measures iden-
does not contain patient data for at tified by the qualified clinical data reg-
least 9 measures covering at least 3 do- istry in the following manner:
mains, then the group practice must (i) For the 12-month 2014 PQRS in-
report the measures for which there is centive reporting period, report at
Medicare patient data. A group prac- least 9 measures designated for report-
tice must report on at least 1 measure ing under a qualified clinical data reg-
for which there is Medicare patient istry covering at least 3 of the National
data. Quality Strategy domains and report
(v) Via a Certified survey vendor, in ad- each measure for at least 50 percent of
dition to the GPRO web interface, quali- the eligible professional’s patients. Of
fied registry, direct EHR product, or EHR the measures reported via a qualified
data submission vendor reporting mecha- clinical data registry, the eligible pro-
nisms. For the 12-month 2014 PQRS in- fessional must report on at least 1 out-
centive reporting period, for a group come measure.
practice of 25 or more eligible profes- (ii) [Reserved]
sionals, report all CAHPS for PQRS (j) Satisfactory reporting requirements
survey measures via a CMS-certified for the payment adjustments. In order to
survey vendor, and report at least 6 satisfy the requirements for the PQRS
measures covering at least 2 of the Na- payment adjustment for a particular

tional Quality Strategy domains using program year, an individual eligible
a qualified registry, direct EHR prod- professional, as identified by a unique
36
TIN/NPI combination, or a group prac- (A) If an eligible professional re-sub-

tice must meet the criteria for satis- mits a Medicare Part B claim for re-
factory reporting specified by CMS for processing, the eligible professional
such year by reporting on either indi- may not attach a G-code at that time
vidual PQRS measures or PQRS meas- for reporting on individual PQRS meas-
ures groups identified by CMS during a ures or measures groups.
reporting period specified in paragraph (B) [Reserved]
(j)(1) of this section, using one of the (ii) Registry. Reporting PQRS quality
reporting mechanisms specified in measures or PQRS measures groups to
paragraph (j)(2) or (4) of this section, a qualified registry in the form and
and using one of the reporting criteria manner and by the deadline specified
specified in section (j)(3) or (5) of this by the qualified registry selected by
section. the eligible professional. The selected
(1) For purposes of this paragraph (j), registry must submit information, as
the reporting period for the payment required by CMS, for covered profes-
adjustment, with respect to a payment sional services furnished by the eligible
adjustment year, is the 12-month pe- professional during the applicable re-
riod from January 1 through December porting period to CMS on the eligible
31 that falls 2 years prior to the year in professional’s behalf.
which the payment adjustment is ap- (iii) Direct EHR product. Reporting
plied. PQRS quality measures to CMS by ex-
(i) For the 2015 and 2016 PQRS pay- tracting clinical data using a secure
ment adjustments only, an alternative data submission method, as required by
6-month reporting period, from July 1– CMS, from a direct EHR product by the
December 31 that fall 2 years prior to deadline specified by CMS for covered
the year in which the payment adjust- professional services furnished by the
ment is applied, is also available. eligible professional during the appli-
(ii) Secondary Reporting Period for cable reporting period.
the 2017 PQRS payment adjustment for (iv) EHR data submission vendor. Re-
certain eligible professionals or group porting PQRS quality measures to
practices– Individual eligible profes- CMS by extracting clinical data using
sionals or group practices, who bill a secure data submission method, as
under the TIN of an ACO participant if required by CMS, from an EHR data
the ACO failed to report data on behalf submission vendor product by the dead-
of such EPs or group practices during line specified by CMS for covered pro-
the previously established reporting fessional services furnished by the eli-
period for the 2017 PQRS payment ad- gible professional during the applicable
justment, may separately report dur- reporting period.
ing a secondary reporting period for (v) Administrative claims. For 2015, re-
the 2017 PQRS payment adjustment. porting data on PQRS quality meas-
The secondary reporting period for the ures via administrative claims during
2017 PQRS payment adjustment for the the applicable reporting period. Eligi-
affected individual eligible profes- ble professionals that are administra-
sionals or group practices is January 1, tive claims reporters must meet the
2016 through December 31, 2016. following requirement for the payment
(2) Reporting mechanisms for individual adjustment:
eligible professionals. An individual eli- (A) Elect to participate in the PQRS
gible professional participating in the using the administrative claims report-
PQRS must report information on ing option.
PQRS quality measures identified by (B) Reporting Medicare Part B
CMS in one of the following manners: claims data for CMS to determine
(i) Claims. Reporting PQRS quality whether the eligible professional has
measures or PQRS measures groups to performed services applicable to cer-
CMS, by no later than 2 months after tain individual PQRS quality meas-
the end of the applicable reporting pe- ures.
riod, on the eligible professional’s (3) Satisfactory reporting criteria for in-
Medicare Part B claims for covered dividual eligible professionals for the 2016
professional services furnished during PQRS payment adjustment. An indi-
the applicable reporting period. vidual eligible professional who wishes
37
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
to meet the criteria for satisfactory re- at least 50 percent of the eligible pro-
porting for the 2016 PQRS payment ad- fessional’s Medicare Part B FFS pa-
justment must report information on tients seen during the reporting period
PQRS quality measures identified by to which the measure applies. For an
CMS in one of the following manners: eligible professional who reports fewer
(i) Via Claims. (A) For the 12-month than 9 measures covering at least 3
2016 PQRS payment adjustment report- NQS domains via the qualified reg-
ing period— istry-based reporting mechanism, the
(1)(i) Report at least 9 measures cov- eligible professional would be subject
ering at least 3 National Quality Strat- to the Measures Applicability Valida-
egy domains and report each measure tion process, which would allow us to
for at least 50 percent of the Medicare determine whether an eligible profes-
Part B FFS patients seen during the sional should have reported on addi-
reporting period to which the measure tional measures and/or measures cov-
applies; or if less than 9 measures covering additional National Quality
ering at least 3 NQS domains apply to Strategy domains; or
the eligible professional, report 1–8 (ii) Report at least 3 measures cov-
measures covering 1–3 National Quality ering at least 1 of the NQS domains; or
Strategy domains, and report each if less than 3 measures covering at
measure for at least 50 percent of the least 1 NQS domain apply to the eligi-
Medicare Part B FFS patients seen ble professional, report 1 to 2 measures
during the reporting period to which covering 1 National Quality Strategy
the measure applies. For an eligible domain for which there is Medicare pa-
professional who reports fewer than 9 tient data, and report each measure for
measures covering at least 3 NQS do- at least 50 percent of the eligible pro-
mains via the claims-based reporting fessional’s Medicare Part B FFS pa-
mechanism, the eligible professional tients seen during the reporting period
would be subject to the Measures Ap- to which the measure applies. For an
plicability Validation process, which eligible professional who reports fewer
would allow us to determine whether than 3 measures covering 1 NQS do-
an eligible professional should have remain via the registry-based reporting
ported quality data codes for addi- mechanism, the eligible professional
tional measures and/or covering addi- would be subject to the Measures Ap-
tional National Quality Strategy do- plicability Validation process, which
mains; or would allow us to determine whether
(ii) Report at least 3 measures cov- an eligible professional should have re-
ering at least 1 NQS domain, or, if less ported on additional measures; or
than 3 measures covering at least 1 (iii) Report at least 1 measures group
NQS domain apply to the eligible pro- and report each measures group for at
fessional, report 1–2 measures covering least 20 patients, a majority of which
at least 1 NQS domain; and report each much be Medicare Part B FFS pa-
measure for at least 50 percent of the tients.
eligible professional’s Medicare Part B (2) Measures with a 0 percent per-
FFS patients seen during the reporting formance rate or measures groups con-
period to which the measure applies. taining a measure with a 0 percent per-
(2) Measures with a 0 percent performance rate will not be counted.
formance rate would not be counted. (B) For the 6-month 2016 PQRS pay-
(ii) Via Qualified Registry. (A) For the ment adjustment reporting period—
12-month 2016 PQRS payment adjust- (1) Report at least 1 measures group
ment reporting period— and report each measures group for at
(1)(i) Report at least 9 measures cov- least 20 patients, a majority of which
ering at least 3 of the National Quality much be Medicare Part B FFS pa-
Strategy domains; or if less than 9 tients. Measures groups containing a
measures covering at least 3 NQS do- measure with a 0 percent performance
mains apply to the eligible profes- rate will not be counted.
sional, report 1 to 8 measures covering (iii) Via EHR Direct Product. For the
1 to 3 National Quality Strategy do- 12-month 2016 PQRS payment adjust-

mains for which there is Medicare pa- ment reporting period, report 9 meas-
tient data, and report each measure for ures covering at least 3 of the National
38
Quality Strategy domains. If an eligi- (ii) Via Qualified Registry. (A) For the
ble professional’s CEHRT does not con- 12-month 2017 PQRS payment adjust-
tain patient data for at least 9 meas- ment reporting period—
ures covering at least 3 domains, then (1)(i) Report at least 9 measures, cov-
the eligible professional must report ering at least 3 of the NQS domains and
the measures for which there is Medi- report each measure for at least 50 per-
care patient data. An eligible profes- cent of the eligible professional’s Medi-
sional must report on at least 1 meas- care Part B FFS patients seen during
ure for which there is Medicare patient the reporting period to which the
data. measure applies. Of the 9 measures re-
(iv) Via EHR Data Submission Vendor. ported, if the eligible professional sees
For the 12-month 2016 PQRS payment at least 1 Medicare patient in a face-to-
adjustment reporting period, report 9 face encounter, the eligible profes-
measures covering at least 3 of the Na- sional must report on at least 1 meas-
tional Quality Strategy domains. If an ure contained in the cross-cutting
eligible professional’s CEHRT does not measure set specified by CMS. If less
contain patient data for at least 9 than 9 measures apply to the eligible
measures covering at least 3 domains, professional, report up to 8 measures
then the eligible professional must re- and report each measure for at least 50
port the measures for which there is percent of the Medicare Part B FFS pa-
Medicare patient data. An eligible pro- tients seen during the reporting period
fessional must report on at least 1 to which the measure applies.
measure for which there is Medicare (ii) Report at least 1 measures group
patient data. and report each measures group for at
(4) Satisfactory Reporting Criteria for least 20 patients, a majority of which
Individual Eligible Professionals for the much be Medicare Part B FFS pa-
2017 PQRS Payment Adjustment. An indi- tients.
vidual eligible professional who wishes (2) Measures with a 0 percent per-
to meet the criteria for satisfactory re- formance rate or measures groups con-
porting for the 2017 PQRS payment ad- taining a measure with a 0 percent per-
justment must report information on formance rate will not be counted.
PQRS quality measures identified by (iii) Via EHR Direct Product. For the
CMS in one of the following manners: 12-month 2017 PQRS payment adjust-
(i) Via Claims. (A) For the 12-month ment reporting period, report 9 meas-
2017 PQRS payment adjustment report- ures covering at least 3 of the NQS do-
ing period— mains. If an eligible professional’s di-
(1)(i) Report at least 9 measures, cov- rect EHR product does not contain pa-
ering at least 3 of the NQS domains and tient data for at least 9 measures cov-
report each measure for at least 50 per- ering at least 3 domains, then the eligi-
cent of the eligible professional’s Medi- ble professional must report the meas-
care Part B FFS patients seen during ures for which there is Medicare pa-
the reporting period to which the tient data. An eligible professional
measure applies. Of the 9 measures re- must report on at least 1 measure for
ported, if the eligible professional sees which there is Medicare patient data.
at least 1 Medicare patient in a face-to- (iv) Via EHR Data Submission Vendor.
face encounter, the eligible profes- For the 12-month 2017 PQRS payment
sional must report on at least 1 meas- adjustment reporting period, report 9
ure contained in the cross-cutting measures covering at least 3 of the
measure set specified by CMS. If less NQS domains. If an eligible profes-
than 9 measures apply to the eligible sional’s EHR data submission vendor
professional, report up to 8 measures product does not contain patient data
and report each measure for at least 50 for at least 9 measures covering at
percent of the Medicare Part B FFS pa- least 3 domains, then the eligible pro-
tients seen during the reporting period fessional must report the measures for
to which the measure applies. Measures which there is Medicare patient data.
with a 0 percent performance rate An eligible professional must report on

would not be counted. at least 1 measure for which there is
(ii) [Reserved] Medicare patient data.
39
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
(v) Paragraphs (j)(8)(ii), (iii), and (iv) ures via administrative claims during
of this section apply to individuals re- the applicable reporting period. Group
porting using the secondary reporting practices that are administrative
period established under paragraph claims reporters must meet the fol-
(j)(1)(ii) of this section for the 2017 lowing requirement for the payment
PQRS payment adjustment. adjustment:
(5) Reporting mechanisms for group (A) Elect to participate in the PQRS
practices. With the exception of a group using the administrative claims report-
practice who wishes to participate in ing option.
the PQRS using the certified survey (B) Reporting Medicare Part B
vendor mechanism, a group practice claims data for CMS to determine
participating in the PQRS must report whether the group practice has per-
information on PQRS quality measures formed services applicable to certain
identified by CMS in one of the fol- individual PQRS quality measures.
lowing reporting mechanisms: (vi) Certified Survey Vendors. For 2016
(i) Web interface. For the 2015 pay- and subsequent years, reporting
ment adjustment and subsequent pay- CAHPS for PQRS survey measures to
ment adjustments, reporting PQRS CMS using a vendor that is certified by
quality measures to CMS using a CMS CMS for a particular program year to
web interface in the form and manner transmit survey measures data to
and by the deadline specified by CMS. CMS. Group practices that elect this
(ii) Registry. For the 2015 subsequent reporting mechanism must select an
adjustment and subsequent payment additional group practice reporting
adjustments, reporting on PQRS qual- mechanism in order to meet the cri-
ity measures to a qualified registry in teria for satisfactory reporting for the
the form and manner and by the dead- payment adjustment.
line specified by the qualified registry (6) Satisfactory reporting criteria for
selected by the eligible professional. group practices for the 2016 PQRS pay-
The selected registry will submit infor- ment adjustment. A group practice who
mation, as required by CMS, for cov- wishes to meet the criteria for satisfac-
ered professional services furnished by tory reporting for the 2016 PQRS pay-
the eligible professional during the ap- ment adjustment must report informa-
plicable reporting period to CMS on tion on PQRS quality measures identi-
the eligible professional’s behalf. fied by CMS in one of the following
(iii) Direct EHR product. For the 2016 manners:
subsequent adjustment and subsequent (i) Via the GPRO web interface. (A)
payment adjustments, reporting PQRS For the 12-month 2016 PQRS payment
quality measures to CMS by extracting adjustment reporting period, for a
clinical data using a secure data subgroup practice of 25 to 99 eligible pro-
mission method, as required by CMS, fessionals, report on all measures in-
from a direct EHR product by the dead- cluded in the web interface and popu-
line specified by CMS for covered pro- late data fields for the first 218 con-
fessional services furnished by the eli- secutively ranked and assigned bene-
gible professional during the applicable ficiaries in the order in which they ap-
reporting period. pear in the group’s sample for each
(iv) EHR data submission vendor. For module or preventive care measure. If
the 2016 subsequent adjustment and the pool of eligible assigned bene-
subsequent payment adjustments, re- ficiaries is less than 218, then report on
porting PQRS quality measures to 100 percent of assigned beneficiaries.
CMS by extracting clinical data using (B) For the 12-month 2016 PQRS pay-
a secure data submission method, as ment adjustment reporting period, for
required by CMS, from an EHR data a group practice of 100 or more eligible
submission vendor product by the dead- professionals, report on all measures
line specified by CMS for covered pro- included in the Web interface and pop-
fessional services furnished by the ulate data fields for the first 411 con-
group practice during the applicable secutively ranked and assigned bene-
reporting period. ficiaries in the order in which they ap-

(v) Administrative claims. For 2015, re- pear in the group’s sample for each
porting data on PQRS quality meas- module or preventive care measure. If
40
the pool of eligible assigned bene- plicability Validation process, which

ficiaries is less than 411, then report on would allow us to determine whether a
100 percent of assigned beneficiaries. In group practice should have reported on
addition, the group practice must also additional measures. Measures with a 0
report all CAHPS for PQRS survey percent performance rate would not be
measures via certified survey vendor. counted.
(ii) Via Qualified Registry. (A) For the (iii) Via EHR Direct Product. For a
12-month 2016 PQRS payment adjust- group practice of 2 or more eligible
ment reporting period, for a group professionals, for the 12-month 2016
practice of 2 or more eligible profes- PQRS payment adjustment reporting
sionals—
period, report 9 measures covering at
(1) Report at least 9 measures, cov-
least 3 of the National Quality Strat-
ering at least 3 of the National Quality
Strategy domains and report each egy domains. If a group practice’s
measure for at least 50 percent of the CEHRT does not contain patient data
group practice’s Medicare Part B FFS for at least 9 measures covering at
patients seen during the reporting pe- least 3 domains, then the group prac-
riod to which the measure applies; or If tice must report the measures for
less than 9 measures covering at least which there is Medicare patient data. A
3 NQS domains apply to the eligible group practice must report on at least
professional, then the group practices 1 measure for which there is Medicare
must report 1–8 measures for which patient data.
there is Medicare patient data and re- (iv) Via EHR Data Submission Vendor.
port each measure for at least 50 per- For a group practice of 2 or more eligi-
cent of the group practice’s Medicare ble professionals, for the 12-month 2016
Part B FFS patients seen during the PQRS payment adjustment reporting
reporting period to which the measure period, report 9 measures covering at
applies. For a group practice who re- least 3 of the National Quality Strat-
ports fewer than 9 measures covering egy domains. If a group practice’s
at least 3 NQS domains via the reg- CEHRT does not contain patient data
istry-based reporting mechanism, the for at least 9 measures covering at
group practice would be subject to the least 3 domains, then the group prac-
Measures Applicability Validation
tice must report the measures for
process, which would allow us to deter-
which there is Medicare patient data. A
mine whether a group practice should
group practice must report on at least
have reported on additional measures.
Measures with a 0 percent performance 1 measure for which there is Medicare
rate would not be counted; or patient data.
(2) Report at least 3 measures, cov- (v) Via a Certified survey vendor, in ad-
ering at least 1 of the National Quality dition to the GPRO Web interface, quali-
Strategy domains and report each fied registry, direct EHR product, or EHR
measure for at least 50 percent of the data submission vendor reporting mecha-
group practice’s Medicare Part B FFS nisms. For a group practice of 25 or
patients seen during the reporting pe- more eligible professionals, for the 12-
riod to which the measure applies; or if month 2016 PQRS payment adjustment
less than 3 measures covering at least reporting period, report all CAHPS for
1 NQS domain apply to the group prac- PQRS survey measures via a CMS-cer-
tice, then the group practice must re- tified survey vendor and report at least
port 1–2 measures for which there is 6 measures covering at least 2 of the
Medicare patient data and report each National Quality Strategy domains
measure for at least 50 percent of the using a qualified registry, direct EHR
group practice’s Medicare Part B FFS product, EHR data submission vendor,
patients seen during the reporting pe- or GPRO Web interface.
riod to which the measure applies. For (7) Satisfactory reporting criteria for
a group practice who reports fewer
group practices for the 2017 PQRS pay-
than 3 measures covering at least 1
ment adjustment. A group practice who

NQS domain via the registry-based re-
porting mechanism, the group practice
would be subject to the Measures Ap-
41
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
wishes to meet the criteria for satisfac- covering at least 3 domains, then the
tory reporting for the 2017 PQRS pay- group practice must report the meas-
ment adjustment must report informa- ures for which there is Medicare pa-
tion on PQRS quality measures identi- tient data. A group practice must re-
fied by CMS in one of the following port on at least 1 measure for which
manners: there is Medicare patient data.
(i) Via the GPRO web interface. For (iv) Via EHR Data Submission Vendor.
the 12-month 2017 PQRS payment ad- For a group practice of 2 to 99 eligible
justment reporting period, for a group professionals, for the 12-month 2017
practice of 25 to 99 eligible profes- PQRS payment adjustment reporting
sionals, report on all measures in- period, report 9 measures covering at
cluded in the web interface and popu- least 3 of the NQS domains. If a group
late data fields for the first 248 con- practice’s EHR data submission vendor
secutively ranked and assigned bene- product does not contain patient data
ficiaries in the order in which they ap- for at least 9 measures covering at
pear in the group’s sample for each least 3 domains, then the group prac-
module or preventive care measure. If tice must report the measures for
the pool of eligible assigned bene- which there is Medicare patient data. A
ficiaries is less than 248, then report on group practice must report on at least
100 percent of assigned beneficiaries. A 1 measure for which there is Medicare
group practice must report on at least patient data.
1 measure for which there is Medicare (v) Via a Certified Survey Vendor in ad-
patient data. dition to a Qualified Registry. For a
(ii) Via Qualified Registry. For a group group practice of 2 or more eligible
practice of 2 to 99 eligible profes- professionals, for the 12-month 2017
sionals, for the 12-month 2017 PQRS PQRS payment adjustment reporting
payment adjustment reporting period, period, report all CAHPS for PQRS sur-
report at least 9 measures, covering at vey measures via a CMS-certified sur-
least 3 of the NQS domains and report vey vendor and report at least 6 addi-
each measure for at least 50 percent of tional measures covering at least 2 of
the group practice’s Medicare Part B the NQS domains using a qualified reg-
FFS patients seen during the reporting istry. If less than 6 measures apply to
period to which the measure applies; or the group practice, the group practice
if less than 9 measures covering at must report up to 5 measures. Of the
least 3 NQS domains apply to the eligi- additional measures that must be re-
ble professional, then the group prac- ported in conjunction with reporting
tice must report up to 8 measures for the CAHPS for PQRS survey measures,
which there is Medicare patient data if any eligible professional in the group
and report each measure for at least 50 practice sees at least 1 Medicare pa-
percent of the group practice’s Medi- tient in a face-to-face encounter, the
care Part B FFS patients seen during group practice must report on at least
the reporting period to which the 1 measure in the cross-cutting measure
measure applies. Of the measures re- set specified by CMS.
ported, if any eligible professional in (vi) Via a Certified Survey Vendor in
the group practice sees at least 1 Medi- addition a Direct EHR Product or EHR
care patient in a face-to-face encoun- Data Submission Vendor. For a group
ter, the group practice must report on practice of 2 or more eligible profes-
at least 1 measure contained in the sionals, for the 12-month 2017 PQRS
cross-cutting measure set specified by payment adjustment reporting period,
CMS. Measures with a 0 percent per- report all CAHPS for PQRS survey
formance rate would not be counted; or measures via a CMS-certified survey
(iii) Via EHR Direct Product. For a vendor and report at least 6 additional
group practice of 2 to 99 eligible profes- measures, outside of CAHPS for PQRS,
sionals, for the 12-month 2017 PQRS covering at least 2 of the NQS domains
payment adjustment reporting period, using the direct EHR product that is
report 9 measures covering at least 3 of CEHRT or EHR data submission vendor
the NQS domains. If a group practice’s product that is CEHRT. If less than 6
direct EHR product does not contain measures apply to the group practice,
patient data for at least 9 measures the group practice must report up to 5
42
measures. Of the additional measures measures apply to the eligible profes-

that must be reported in conjunction sional, the eligible professional must
with reporting the CAHPS for PQRS report on each measure that is applica-
survey measures, the group practice ble, AND report each measure for at
must report on at least 1 measure for least 50 percent of the Medicare Part B
which there is Medicare patient data. FFS patients seen during the reporting
(vii) Via a Certified Survey Vendor in period to which the measure applies.
addition to the GPRO Web interface. (A) Measures with a 0 percent performance
For a group practice of 25 or more eli- rate would not be counted.
gible professionals, for the 12-month (ii) [Reserved]
2017 PQRS payment adjustment report-
(2) [Reserved]
ing period, report all CAHPS for PQRS
survey measures via a CMS-certified (B) [Reserved]
survey vendor and report on all meas- (ii) Via qualified registry. (A) For the
ures included in the GPRO web inter- 12-month 2018 PQRS payment adjust-
face; AND populate data fields for the ment reporting period—
first 248 consecutively ranked and as- (1)(i) Report at least 9 measures, cov-
signed beneficiaries in the order in ering at least 3 of the NQS domains
which they appear in the group’s sam- AND report each measure for at least
ple for each module or preventive care 50 percent of the eligible professional’s
measure. If the pool of eligible assigned Medicare Part B FFS patients seen
beneficiaries is less than 248, then the during the reporting period to which
group practice would report on 100 per- the measure applies. Of the measures
cent of assigned beneficiaries. A group reported, if the eligible professional
practice must report on at least 1 sees at least 1 Medicare patient in a
measure for which there is Medicare face-to-face encounter, the eligible pro-
patient data. fessional will report on at least 1 meas-
(B) [Reserved] ure contained in the proposed cross-
(viii) Paragraphs (j)(9)(ii), (iii), and cutting measure set. If less than 9
(iv) of this section apply to group prac-
measures apply to the eligible profes-
tices reporting using the secondary re-
sional, the eligible professional must
porting period established under para-
report on each measure that is applica-
graph (j)(1)(ii) of this section for the
2017 PQRS payment adjustment. ble to the eligible professional, AND
(8) Satisfactory reporting criteria for in- report each measure for at least 50 per-
dividual eligible professionals for the 2018 cent of the Medicare Part B FFS pa-
PQRS payment adjustment. An indi- tients seen during the reporting period
vidual eligible professional who wishes to which the measure applies.
to meet the criteria for satisfactory re- (ii) Report at least 1 measures group
porting for the 2018 PQRS payment ad- and report each measures group for at
justment must report information on least 20 patients, a majority of which
PQRS quality measures identified by must be Medicare Part B FFS patients.
CMS in one of the following manners: (2) Measures with a 0 percent per-
(i) Via claims. (A) For the 12-month formance rate or measures groups con-
2018 PQRS payment adjustment report- taining a measure with a 0 percent per-
ing period— formance rate will not be counted.
(1)(i) Report at least 9 measures, cov- (B) [Reserved]
ering at least 3 of the NQS domains (iii) Via EHR direct product. For the
AND report each measure for at least 12-month 2018 PQRS payment adjust-
50 percent of the eligible professional’s
ment reporting period, report 9 meas-
Medicare Part B FFS patients seen
ures covering at least 3 of the NQS do-
during the reporting period to which
the measure applies. Of the measures mains. If an eligible professional’s di-
reported, if the eligible professional rect EHR product or EHR data submis-
sees at least 1 Medicare patient in a sion vendor product does not contain
face-to-face encounter, the eligible pro- patient data for at least 9 measures
fessional will report on at least 1 meas- covering at least 3 domains, then the
ure contained in the proposed cross- eligible professional must report all of
cutting measure set. If less than 9
43
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
the measures for which there is Medi- (ii) Via qualified registry. For a group
care patient data. An eligible profes- practice of 2 or more eligible profes-
sional must report on at least 1 meas- sionals, for the 12-month 2018 PQRS
ure for which there is Medicare patient payment adjustment reporting period,
data. report at least 9 measures, covering at
(iv) Via EHR data submission vendor. least 3 of the NQS domains. Of these
For the 12-month 2018 PQRS payment measures, if a group practice sees at
adjustment reporting period, report 9 least 1 Medicare patient in a face-to-
measures covering at least 3 of the face encounter, the group practice
NQS domains. If an eligible profes- would report on at least 1 measure in
sional’s direct EHR product or EHR the cross-cutting measure set. If less
data submission vendor product does than 9 measures covering at least 3
not contain patient data for at least 9 NQS domains apply to the group prac-
measures covering at least 3 domains, tice, the group practice would report
then the eligible professional would be on each measure that is applicable to
required to report all of the measures the group practice, AND report each
for which there is Medicare patient measure for at least 50 percent of the
data. An eligible professional would be group’s Medicare Part B FFS patients
required to report on at least 1 meas- seen during the reporting period to
ure for which there is Medicare patient which the measure applies. Measures
data. with a 0 percent performance rate
would not be counted.
(9) Satisfactory reporting criteria for
(iii) Via EHR direct product. For a
group practices for the 2018 PQRS pay-
group practice of 2 or more eligible
ment adjustment. A group practice who
professionals, for the 12-month 2018
wishes to meet the criteria for satisfac-
PQRS payment adjustment reporting
tory reporting for the 2018 PQRS pay- period, report 9 measures covering at
ment adjustment must report informa- least 3 domains. If the group practice’s
tion on PQRS quality measures identi- direct EHR product or EHR data sub-
fied by CMS in one of the following mission vendor product does not con-
manners: tain patient data for at least 9 meas-
(i) Via the GPRO web interface. For ures covering at least 3 domains, then
the 12-month 2018 PQRS payment ad- the group practice must report all of
justment reporting period, for a group the measures for which there is Medi-
practice of 25 or more eligible profes- care patient data. A group practice
sionals, report on all measures in- must report on at least 1 measure for
cluded in the web interface; AND popu- which there is Medicare patient data.
late data fields for the first 248 con- (iv) Via EHR data submission vendor.
secutively ranked and assigned bene- For a group practice of 2 or more eligi-
ficiaries in the order in which they ap- ble professionals, for the 12-month 2018
pear in the group’s sample for each PQRS payment adjustment reporting
module or preventive care measure. If period, report 9 measures covering at
the pool of eligible assigned bene- least 3 domains. If the group practice’s
ficiaries is less than 248, then the group direct EHR product or EHR data sub-
practice must report on 100 percent of mission vendor product does not con-
assigned beneficiaries. In some in- tain patient data for at least 9 meas-
stances, the sampling methodology will ures covering at least 3 domains, then
not be able to assign at least 248 pa- the group practice must report all of
tients on which a group practice may the measures for which there is Medi-
report, particularly those group prac- care patient data. A group practice
tices on the smaller end of the range of must report on at least 1 measure for
25–99 eligible professionals. If the group which there is Medicare patient data.
practice is assigned less than 248 Medi- (v) Via a certified survey vendor in ad-
care beneficiaries, then the group prac- dition to a qualified registry. For a group
tice must report on 100 percent of its practice of 2 or more eligible profes-
assigned beneficiaries. A group prac- sionals that elects to report via a cer-
tice must report on at least 1 measure tified survey vendor in addition to a

for which there is Medicare patient qualified registry for the 12-month 2018
data. PQRS payment adjustment reporting
44
period, the group practice must have the first 248 consecutively ranked and
all CAHPS for PQRS survey measures assigned beneficiaries in the order in
reported on its behalf via a CMS-cer- which they appear in the group’s sam-
tified survey vendor, and report at ple for each module or preventive care
least 6 additional measures, outside of measure. If the pool of eligible assigned
CAHPS for PQRS, covering at least 2 of beneficiaries is less than 248, then the
the NQS domains using the qualified group practice must report on 100 per-
registry. If less than 6 measures apply cent of assigned beneficiaries. A group
to the group practice, the group prac- practice will be required to report on
tice must report on each measure that at least 1 measure for which there is
is applicable to the group practice. Of Medicare patient data.
the additional measures that must be (B) [Reserved]
reported in conjunction with reporting (viii) If the CAHPS for PQRS survey
the CAHPS for PQRS survey measures, is applicable to the practice, group
if any eligible professional in the group practices comprised of 100 or more eli-
practice sees at least 1 Medicare pa- gible professionals that register to par-
tient in a face-to-face encounter, the ticipate in the GPRO must administer
group practice must report on at least the CAHPS for PQRS survey, regard-
1 measure in the cross-cutting measure less of the GPRO reporting mechanism
set. selected.
(vi) Via a certified survey vendor in ad- (k) Satisfactory participation require-
dition to a direct EHR product or EHR ments for the payment adjustments for in-
data submission vendor. For a group dividual eligible professionals and group
practice of 2 or more eligible profes- practices. In order to satisfy the re-
sionals that elects to report via a cer- quirements for the PQRS payment ad-
tified survey vendor in addition to a di- justment for a particular program year
rect EHR product or EHR data submis- through participation in a qualified
sion vendor for the 12-month 2018 PQRS clinical data registry, an individual eli-
payment adjustment reporting period, gible professional, as identified by a
the group practice must have all unique TIN/NPI combination, or group
CAHPS for PQRS survey measures re- practice must meet the criteria for sat-
ported on its behalf via a CMS-certified isfactory participation as specified in
survey vendor, and report at least 6 ad- paragraph (k)(3) of this section for such
ditional measures, outside of CAHPS year, by reporting on quality measures
for PQRS, covering at least 2 of the identified by a qualified clinical data
NQS domains using the direct EHR registry during a reporting period spec-
product or EHR data submission ven- ified in paragraph (k)(1) of this section,
dor product. If less than 6 measures using the reporting mechanism speci-
apply to the group practice, the group fied in paragraph (k)(2) of this section.
practice must report all of the meas- (1) Reporting period. For purposes of
ures for which there is patient data. Of this paragraph, the reporting period
the additional 6 measures that must be is—
reported in conjunction with reporting (i) The 12-month period from January
the CAHPS for PQRS survey measures, 1 through December 31 that falls 2
a group practice would be required to years prior to the year in which the
report on at least 1 measure for which payment adjustment is applied.
there is Medicare patient data. (ii) [Reserved]
(vii) Via a certified survey vendor in (2) Reporting mechanism. An indi-
addition to the GPRO web interface. (A) vidual eligible professional or group
For a group practice of 25 or more eli- practice who wishes to meet the cri-
gible professionals, for the 12-month teria for satisfactory participation in a
2018 PQRS payment adjustment report- qualified clinical data registry must
ing period, the group practice must use the qualified clinical data registry
have all CAHPS for PQRS survey meas- to report information on quality meas-
ures reported on its behalf via a CMS- ures identified by the qualified clinical
certified survey vendor. In addition, data registry.
the group practice must report on all (3) Satisfactory participation criteria
measures included in the GPRO web for individual eligible professionals for
interface; AND populate data fields for the 2016 PQRS payment adjustment. An
45
§ 414.90 42 CFR Ch. IV (10–1–17 Edition)
individual eligible professional who sional or group practice who wishes to

wishes to meet the criteria for satisfac- meet the criteria for satisfactory par-
tory participation in a qualified clin- ticipation in a QCDR for the 2018 PQRS
ical data registry for the 2016 PQRS payment adjustment must report infor-
payment adjustment must report information on quality measures identified
mation on quality measures identified by the QCDR in the following manner:
by the qualified clinical data registry (i) If a group practice does not report
in one of the following manners: the CAHPS for PQRS survey measures,
(i) For the 12-month 2016 PQRS pay- report at least 9 measures available for
ment adjustment reporting period— reporting under a QCDR covering at
(A) Report at least 9 measures avail- least 3 of the NQS domains, and report
able for reporting under a qualified each measure for at least 50 percent of
clinical data registry covering at least the eligible professional’s patients. Of
3 of the National Quality Strategy do- these measures, report on at least 3
mains and report each measure for at outcome measures, or, if 3 outcomes
least 50 percent of the eligible profes- measures are not available, report on
sional’s patients; or at least 2 outcome measures and at
(B) Report at least 3 measures avail- least 1 of the following types of meas-
able for reporting under a qualified ures—resource use, patient experience
clinical data registry covering at least of care, efficiency/appropriate use, or
1 of the National Quality Strategy do- patient safety. If a group practice re-
mains and report each measure for at ports the CAHPS for PQRS survey
least 50 percent of the eligible profes- measures, apply reduced criteria as fol-
sional’s patients. lows: 6 QCDR measures covering 2 NQS
(4) Satisfactory participation criteria for domains; and, of the non-CAHPS for
individual eligible professionals for the PQRS measures, 2 outcome measures
2017 PQRS payment adjustment. An indi- or 1 outcome and 1 other specified type
vidual eligible professional who wishes of measure, as applicable.
to meet the criteria for satisfactory (ii) [Reserved]
participation in a QCDR for the 2017 (l) Requirements for group practices.
PQRS payment adjustment must re- Under the PQRS, a group practice must
port information on quality measures meet all of the following requirements:
identified by the QCDR in one of the (1) Meet the participation require-
following manner: ments specified by CMS for the PQRS
(i) For the 12-month 2017 PQRS pay- group practice reporting option.
ment adjustment reporting period, re- (2) Report measures in the form and
port at least 9 measures available for manner specified by CMS.
reporting under a QCDR covering at (3) Meet other requirements for satis-
least 3 of the NQS domains, and report factory reporting specified by CMS.
each measure for at least 50 percent of (4) Meet participation requirements.
the eligible professional’s patients. Of (i) If an eligible professional, as iden-
these measures, report on at least 2 tified by an individual NPI, has reas-
outcome measures, or, if 2 outcomes signed his or her Medicare billing
measures are not available, report on rights to a group practice (as identified
at least 2 outcome measures and at by the TIN) selected to participate in
least 1 of the following types of meas- the PQRS group practice reporting op-
ures—resource use, patient experience tion for a program year, then for that
of care, efficiency/appropriate use or program year the eligible professional
patient safety. must participate in the PQRS via the
(ii) Section 414.90(k)(5) applies to in- group practice reporting option.
dividuals and group practices reporting (ii) If, for the program year, the eligi-
using the secondary reporting period ble professional participates in the
established under paragraph (j)(1)(ii) of PQRS as part of a group practice (as
this section for the 2017 PQRS payment identified by the TIN) that is not se-
adjustment. lected to participate in the PQRS
(5) Satisfactory participation criteria for group practice reporting option for
individual eligible professionals and group that program year, then the eligible
practices for the 2018 PQRS payment ad- professional may individually partici-
justment. An individual eligible profes- pate and qualify for a PQRS incentive
46
by meeting the requirements specified tion, there is no administrative or judi-

in paragraph (g) of this section under cial review under section 1869 or 1879 of
that TIN. the Act, or otherwise of—
(m) Informal review. Eligible profes- (1) The determination of measures
sionals or group practices may seek an applicable to services furnished by eli-
informal review of the determination gible professionals under the PQRS;
that an eligible professional or group (2) The determination of satisfactory
practices did not satisfactorily submit reporting; and
data on quality measures under the (3) The determination of any Physi-
PQRS, or, for individual eligible profes- cian Quality Reporting System incen-
sionals, in lieu of satisfactory report- tive payment and the PQRS payment
ing, did not satisfactorily participate adjustment.
in a qualified clinical data registry. (o) Public reporting of an eligible pro-
(1) To request an informal review for fessional’s or group practice’s PQRS data.
reporting periods that occur prior to For each program year, CMS will post
2014, an eligible professional or group on a public Web site, in an easily un-
practice must submit a request to CMS derstandable format, a list of the
within 90 days of the release of the names of eligible professionals (or in
feedback reports. To request an infor- the case of reporting under paragraph
mal review for reporting periods that (g) of this section, group practices) who
occur in 2014 and subsequent years, an satisfactorily submitted PQRS quality
eligible professional or group practice measures.
must submit a request to CMS within [78 FR 74812, Dec. 10, 2013, as amended at 79
60 days of the release of the feedback FR 68003, Nov. 13, 2014; 81 FR 34913, June 1,
reports. The request must be submitted 2016; 81 FR 77537, Nov. 4, 2016; 81 FR 80554,
in writing and summarize the con- Nov. 15, 2016]
cern(s) and reasons for requesting an
informal review and may also include § 414.92 Electronic Prescribing Incen-
information to assist in the review. tive Program.
(2) CMS will provide a written re- (a) Basis and scope. This section im-
sponse within 90 days of the receipt of plements the following provisions of
the original request. the Act:
(i) All decisions based on the infor- (1) Section 1848(a)—Payment Based
mal review will be final. on Fee Schedule.
(ii) There will be no further review or (2) Section 1848(m)—Incentive Pay-
appeal. ments for Quality Reporting.
(3) If, during the informal review (b) Definitions. As used in this sec-
process, CMS finds errors in data that tion, unless otherwise indicated—
was submitted by a third-party vendor Certified electronic health record tech-
on behalf of an eligible professional or nology means an electronic health
group practice using either the quali- record vendor’s product and version as
fied registry, EHR data submission described in 45 CFR 170.102.
vendor, or QCDR reporting mecha- Covered professional services means
nisms, CMS may allow for the resub- services for which payment is made
mission of data to correct these errors. under, or is based on, the Medicare
(i) CMS will not allow resubmission physician fee schedule which are fur-
of data submitted via claims, direct nished by an eligible professional.
EHR, and the GPRO web interface re- Electronic Prescribing Incentive Pro-
porting mechanisms. gram means the incentive payment pro-
(ii) CMS will only allow resubmission gram established under section 1848(m)
of data that was already previously of the Act for the adoption and use of
submitted to CMS. electronic prescribing technology by
(iii) CMS will only accept data that eligible professionals.
was previously submitted for the re- Eligible professional means any of the
porting periods for which the cor- following healthcare professionals who
responding informal review period ap- have prescribing authority:
plies. (i) A physician.

(n) Limitations on review. Except as (ii) A practitioner described in sec-
specified in paragraph (i) of this section 1842(b)(18)(C) of the Act.
47
§ 414.92 42 CFR Ch. IV (10–1–17 Edition)
(iii) A physical or occupational ther- gible professional (or to an employer or

apist or a qualified speech-language pa- facility in the cases described in sec-
thologist. tion 1842(b)(6)(A) of the Act) or, in the
(iv) A qualified audiologist (as de- case of a group practice under para-
fined in section 1861(ll)(3)(B) of the graph (e) of this section, to the group
Act). practice, from the Federal Supple-
Group practice means a group practice mentary Medical Insurance Trust Fund
that is— established under section 1841 of the
(i)(A) Defined at § 414.90(b), that is Act an amount equal to the applicable
participating in the Physician Quality electronic prescribing percent (as spec-
Reporting System; or ified in paragraph (c)(1)(ii) of this sec-
(B) In a Medicare-approved dem- tion) of the eligible professional’s (or,
onstration project or other Medicare in the case of a group practice under
program, under which Physician Qual- paragraph (e) of this section, the group
ity Reporting System requirements practice’s) total estimated allowed
and incentives have been incorporated; charges for all covered professional
and services furnished by the eligible pro-
(ii) Has indicated its desire to par- fessional (or, in the case of a group
ticipate in the electronic prescribing practice under paragraph (e) of this
group practice option. section, by the group practice) during
Qualified electronic health record prod- the applicable reporting period.
uct means an electronic health record (i) For purposes of paragraph (c)(1) of
product and version that, with respect this section,
to a particular program year, is des- (A) The eligible professional’s (or, in
ignated by CMS as a qualified elec- the case of a group practice under para-
tronic health record product for the graph (e) of this section, the group
purpose of the Physician Quality Re- practice’s) total estimated allowed
porting System (as described in § 414.90) charges for covered professional serv-
and the product’s vendor has indicated ices furnished during a reporting period
a desire to have the product qualified are determined based on claims proc-
for purposes of the product’s users to essed in the National Claims History
submit information related to the elec- (NCH) no later than 2 months after the
tronic prescribing measure. end of the applicable reporting period;
Qualified registry means a medical (B) In the case of an eligible profes-
registry or a Maintenance of Certifi- sional who furnishes covered profes-
cation Program operated by a specialty sional services in more than one prac-
body of the American Board of Medical tice, incentive payments are separately
Specialties that, with respect to a par- determined for each practice based on
ticular program year, is designated by claims submitted for the eligible pro-
CMS as a qualified registry for the pur- fessional for each practice;
pose of the Physician Quality Report- (C) Incentive payments earned by an
ing System (as described in § 414.90) and eligible professional (or in the case of a
that has indicated its desire to be group practice under paragraph (e) of
qualified to submit the electronic pre- this section, by a group practice) for a
scribing measure on behalf of eligible particular program year will be paid as
professionals for the purposes of the a single consolidated payment to the
Electronic Prescribing Incentive Pro- TIN holder of record.
gram. (ii) Applicable electronic prescribing
(c) Incentive payments and payment percent. The applicable electronic pre-
adjustments. (1) Incentive payments. Sub- scribing percent is as follows:
ject to paragraph (c)(3) of this section, (A) For the 2011 and 2012 program
with respect to covered professional years, 1.0 percent.
services furnished during a reporting (B) For the 2013 program year, 0.5
period by an eligible professional, if percent.
the eligible professional is a successful (iii) Limitation with respect to elec-
electronic prescriber for such reporting tronic health record (EHR) incentive pay-
period, in addition to the amount oth- ments. The provisions of this paragraph
erwise paid under section 1848 of the do not apply to an eligible professional
Act, there also must be paid to the eli- (or, in the case of a group practice
48
under paragraph (e) of this section, a (1) The practice is located in a rural
group practice) if, for the electronic area without high speed internet ac-
health record reporting period the eli- cess.
gible professional (or group practice) (2) The practice is located in an area
receives an incentive payment under without sufficient available phar-
section 1848(o)(1)(A) of the Act with re- macies for electronic prescribing.
spect to a certified electronic health (3) Registration to participate in the
record technology (as defined in sec- Medicare or Medicaid EHR Incentive
tion 1848(o)(4) of the Act) that has the Program and adoption of Certified EHR
capability of electronic prescribing. Technology.
(2) Payment adjustment. Subject to (4) Inability to electronically pre-
paragraphs (c)(1)(ii) and (c)(3) of this scribe due to local, State or Federal
section, with respect to covered profes- law or regulation.
sional services furnished by an eligible (5) Eligible professionals who achieve
professional during 2012, 2013, or 2014, if meaningful use during the respective 6
the eligible professional (or in the case or 12-month payment adjustment re-
of a group practice under paragraph (e) porting periods.
of this section, the group practice) is (6) Eligible professionals who have
not a successful electronic prescriber registered to participate in the EHR
(as specified by CMS for purposes of the Incentive Program and adopted Cer-
payment adjustment) for an applicable tified EHR Technology prior to appli-
reporting period (as specified by CMS) cation of the respective payment ad-
the fee schedule amount for such serv- justment.
ices furnished by such professional (or (B) From the 2013 and 2014 payment
group practice) during the program adjustments by meeting one of the fol-
year (including the fee schedule lowing:
amount for purposes of determining a (1) The eligible professional or group
payment based on such amount) is practice is located in a rural area with-
equal to the applicable percent (as out high speed internet access.
specified in paragraph (c)(2)(i) of this (2) The eligible professional or group
section) of the fee schedule amount practice is located in an area without
that would otherwise apply to such sufficient available pharmacies for
services under section 1848 of the Act. electronic prescribing.
(i) Applicable percent. The applicable (3) The eligible professional or group
percent is as follows: practice is unable to electronically pre-
(A) For 2012, 99 percent; scribe due to local, State, or Federal
(B) For 2013, 98.5 percent; and law or regulation.
(C) For 2014, 98 percent. (4) The eligible professional or group
(ii) Significant hardship exception. practice has limited prescribing activ-
CMS may, on a case-by-case basis, ex- ity, as defined by an eligible profes-
empt an eligible professional (or in the sional generating fewer than 100 pre-
case of a group practice under para- scriptions during a 6-month reporting
graph (e) of this section, a group prac- period.
tice) from the application of the pay- (iii) Other limitations to the payment
ment adjustment under paragraph adjustment. An eligible professional (or
(c)(2) of this section if, CMS deter- in the case of a group practice under
mines, subject to annual renewal, that paragraph (b) of this section, a group
compliance with the requirement for practice) is exempt from the applica-
being a successful electronic prescriber tion of the payment adjustment under
would result in a significant hardship. paragraph (c)(2) of this section if one of
Eligible professionals (or, in the case of the following applies:
a group practice under paragraph (e) of (A) The eligible professional is not an
this section, a group practice) may re- MD, DO, podiatrist, nurse practitioner,
quest consideration for a significant or physician assistant.
hardship exemption from a eRx pay- (B) The eligible professional does not
ment adjustment if one of the fol- have at least 100 cases containing an
lowing circumstances apply: encounter code that falls within the de-
(A) From the 2012 payment adjust- nominator of the electronic prescribing
ments by meeting one of the following: measure for dates of service during the
49
§ 414.92 42 CFR Ch. IV (10–1–17 Edition)
6-month reporting period specified in ing period, on the eligible profes-

paragraph (f)(1) of this section. sional’s Medicare Part B claims for
(3) Limitation with respect to electronic covered professional services furnished
prescribing quality measures. The provi- by the eligible professional during the
sions of paragraphs (c)(1) and (c)(2) of reporting period specified in paragraph
this section do not apply to an eligible (d)(1) of this section;
professional (or, in the case of a group (ii) A qualified registry (as defined in
practice under paragraph (e) of this paragraph (b) of this section) in the
section, a group practice) if for the re- form and manner and by the deadline
porting period the allowed charges specified by the qualified registry se-
under section 1848 of the Act for all lected by the eligible professional. The
covered professional services furnished selected qualified registry will submit
by the eligible professional (or group, information, as required by CMS, for
as applicable) for the codes to which covered professional services furnished
the electronic prescribing measure ap- by the eligible professional during the
plies are less than 10 percent of the reporting period specified in paragraph
total of the allowed charges under sec- (d)(1) of this section to CMS on the eli-
tion 1848 of the Act for all such covered gible professional’s behalf; or
professional services furnished by the (iii) CMS by extracting clinical data
eligible professional (or the group prac- using a secure data submission method,
tice, as applicable). as required by CMS, from a qualified
(d) Requirements for individual eligible electronic health record product (as de-
professionals to qualify to receive an in- fined in paragraph (b) of this section)
centive payment. In order to be consid- by the deadline specified by CMS for
ered a successful electronic prescriber covered professional services furnished
and qualify to earn an electronic pre- by the eligible professional during the
scribing incentive payment (subject to reporting period specified in paragraph
paragraph (c)(3) of this section), an in- (d)(1) of this section. Prior to actual
dividual eligible professional, as identi- data submission for a given program
fied by a unique TIN/NPI combination, year and by a date specified by CMS,
must meet the criteria for being a suc- the eligible professional must submit a
cessful electronic prescriber under sec- test file containing real or dummy
tion 1848(m)(3)(B) of the Act and as clinical quality data extracted from
specified by CMS during the reporting the qualified electronic health record
period specified in paragraph (d)(1) of product selected by the eligible profes-
this section and using one of the re- sional using a secure data submission
porting mechanisms specified in para- method, as required by CMS.
graph (d)(2) of this section. Although (e) Requirements for group practices to
an eligible professional may attempt to qualify to receive an incentive payment.
qualify for the electronic prescribing (1) A group practice (as defined in para-
incentive payment using more than graph (b) of this section) will be treat-
one reporting mechanism (as specified ed as a successful electronic prescriber
in paragraph (d)(2) of this section), the for covered professional services for a
eligible professional will receive only reporting period if the group practice
one electronic prescribing incentive meets the criteria for successful elec-
payment per TIN/NPI combination for tronic prescriber specified by CMS in
a program year. the form and manner and at the time
(1) Reporting period. For purposes of specified by CMS.
this paragraph, the reporting period (2) No double payments. Payments to a
with respect to a program year is the group practice under this paragraph
entire calendar year. must be in lieu of the payments that
(2) Reporting mechanisms. An eligible would otherwise be made under the
professional who wishes to participate Electronic Prescribing Incentive Pro-
in the Electronic Prescribing Incentive gram to eligible professionals in the
Program must report information on group practice for being a successful
the electronic prescribing measure electronic prescriber.
identified by CMS to— (i) If an eligible professional, as iden-

(i) CMS, by no later than 2 months tified by an individual NPI, has reas-
after the end of the applicable report- signed his or her Medicare billing
50
rights to a TIN selected to participate (A) The 12-month period from Janu-
in the electronic prescribing group ary 1, 2012 through December 31, 2012.
practice reporting option for a program (B) The 6-month period from January
year, then for that program year the 1, 2013 through June 30, 2013.
eligible professional must participate (2) Reporting mechanisms. An eligible
in the Electronic Prescribing Incentive professional (or, in the case of a group
Program via the group practice report- practice under paragraph (e) of this
ing option. For any program year in section, a group practice) who wishes
which the TIN is selected to partici- to participate in the Electronic Pre-
pate in the Electronic Prescribing In- scribing Incentive Program must re-
centive Program group practice report- port information on the electronic pre-
ing option, the eligible professional scribing measure identified by CMS to
cannot individually qualify for an elec- one of the following:
tronic prescribing incentive payment (i) For the 6- and 12-month reporting
by meeting the requirements specified periods under paragraph (f)(1) of this
in paragraph (d) of this section. section, CMS, by no later than 2
(ii) If, for the program year, the eligi- months after the end of the applicable
ble professional participates in the 12-month reporting period or by no
Electronic Prescribing Incentive Pro- later than 1 month after the end of the
gram under a TIN that is not selected applicable 6-month reporting period, on
to participate in the Electronic Pre- the eligible professional’s Medicare
scribing Incentive Program group prac- Part B claims for covered professional
tice reporting option for that program services furnished by the eligible pro-
year, then the eligible professional fessional during the reporting period
may individually qualify for an elec- specified in paragraph (f)(1) of this sec-
tronic prescribing incentive by meet- tion.
ing the requirements specified in para- (A) If an eligible professional re-sub-
graph (d) of this section under that mits a Medicare Part B claim for re-
TIN. processing, the eligible professional
may not attach a G-code at that time
(f) Requirements for individual eligible
for reporting on the electronic pre-
professionals and group practices for the
scribing measure.
payment adjustment. In order to be con-
(B) [Reserved]
sidered a successful electronic pre-
(ii) For the 12-month reporting period
scriber for the electronic prescribing
under paragraph (f)(1) of this section, a
payment adjustment, an individual eli-
qualified registry (as defined in para-
gible professional (or, in the case of a
graph (b) of this section) in the form
group practice under paragraph (b) of
and manner and by the deadline speci-
this section, a group practice), as iden- fied by the qualified registry selected
tified by a unique TIN/NPI combina- by the eligible professional. The se-
tion, must meet the criteria for being a lected qualified registry submits infor-
successful electronic prescriber speci- mation, as required by CMS, for cov-
fied by CMS, in the form and manner ered professional services furnished by
specified in paragraph (f)(2) of this sec- the eligible professional during the re-
tion, and during the reporting period porting period specified in paragraph
specified in paragraph (f)(1) of this sec- (f)(1) of this section to CMS on the eli-
tion. gible professional’s behalf.
(1) Reporting periods. (i) For purposes (iii) For the 12-month reporting pe-
of this paragraph (f), the reporting period under paragraph (f)(1) of this sec-
riod for the 2013 payment adjustment is tion, CMS by extracting clinical data
either of the following: using a secure data submission method,
(A) The 12-month period from Janu- as required by CMS, from a qualified
ary 1, 2011 through December 31, 2011. electronic health record product (as de-
(B) The 6-month period from January fined in paragraph (b) of this section)
1, 2012 through June 30, 2012. by the deadline specified by CMS for
(ii) For purposes of this paragraph (f), covered professional services furnished
the reporting period for the 2014 pay- by the eligible professional during the
ment adjustment is either of the fol- reporting period specified in paragraph
lowing: (f)(1) of this section. Prior to actual
51
§ 414.94 42 CFR Ch. IV (10–1–17 Edition)
data submission for a given program section, group practices) who are suc-
year and by a date specified by CMS, cessful electronic prescribers.
the eligible professional must submit a [75 FR 73620, Nov. 29, 2010, as amended at 76
test file containing dummy clinical FR 54968, Sept. 6, 2011; 76 FR 73472, Nov. 28,
quality data extracted from the quali- 2011; 77 FR 69368, Nov. 16, 2012; 80 FR 71379,
fied electronic health record product Nov. 16, 2015]
selected by the eligible professional
using a secure data submission method, § 414.94 Appropriate use criteria for
advanced diagnostic imaging serv-
as required by CMS. ices.
(g) Informal review. Eligible profes-
sionals (or in the case of reporting (a) Basis and scope. This section im-
under paragraph (e) of this section, plements the following provisions of
the Act:
group practices) may seek an informal
(1) Section 1834(q)—Recognizing Ap-
review of the determination that an el-
propriate Use Criteria for Certain Im-
igible professional (or in the case of re-
aging Services.
porting under paragraph (e) of this sec- (2) Section 1834(q)(1)—Program Es-
tion, group practices) did not meet the tablished.
requirements for the 2012 and 2013 in- (3) Section 1834(q)(2)—Establishment
centives or the 2013 and 2014 payment of Applicable Appropriate Use Criteria.
adjustments. (b) Definitions. As used in this section
(1) To request an informal review for unless otherwise indicated—
the 2012 and 2013 incentives, an eligible Advanced diagnostic imaging service
professional or group practice must means an imaging service as defined in
submit a request to CMS via email section 1834(e)(1)(B) of the Act.
within 90 days of the release of the Applicable imaging service means an
feedback reports. The request must be advanced diagnostic imaging service
submitted in writing and summarize (as defined in section 1834(e)(1)(B) of
the concern(s) and reasons for request- the Act) for which the Secretary deter-
ing an informal review and may also mines—
include information to assist in the re- (i) One or more applicable appro-
view. priate use criteria apply;
(2) To request an informal review for (ii) There are one or more qualified
the 2013 and 2014 payment adjustments, clinical decision support mechanisms
an eligible professional or group prac- listed; and
tices must submit a request to CMS via (iii) One or more of such mechanisms
email by February 28 of the year in is available free of charge.
which the eligible professional is re- Applicable payment system means the
ceiving the applicable payment adjust- following:
ment. The request must be submitted (i) The physician fee schedule estab-
in writing and summarize the con- lished under section 1848(b) of the Act;
cern(s) and reasons for requesting an (ii) The prospective payment system
informal review and may also include for hospital outpatient department
information to assist in the review. services under section 1833(t) of the
Act; and
(3) CMS will provide a written re-
(iii) The ambulatory surgical center
sponse of CMS’ determination.
payment systems under section 1833(i)
(i) All decisions based on the infor- of the Act.
mal review will be final. Applicable setting means a physician’s
(ii) There will be no further review or office, a hospital outpatient depart-
appeal. ment (including an emergency depart-
(h) Public reporting of an eligible pro- ment), an ambulatory surgical center,
fessional’s or group practice’s Electronic and any other provider-led outpatient
Prescribing Incentive Program data. For setting determined appropriate by the
each program year, CMS will post on a Secretary.
public Web site, in an easily under- Appropriate use criteria (AUC) means
standable format, a list of the names of criteria only developed or endorsed by

eligible professionals (or in the case of national professional medical specialty
reporting under paragraph (e) of this societies or other provider-led entities,
52
to assist ordering professionals and fur- (c) Qualified provider-led entity. To be

nishing professionals in making the qualified by CMS, a PLE must adhere
most appropriate treatment decision to the evidence-based processes de-
for a specific clinical condition for an scribed in paragraph (c)(1) of this sec-
individual. To the extent feasible, such tion when developing or modifying
criteria must be evidence-based. An AUC. A qualified PLE may develop
AUC set is a collection of individual AUC, modify AUC developed by an-
appropriate use criteria. An individual other qualified PLE, or endorse AUC
criterion is information presented in a developed by other qualified PLEs.
manner that links: a specific clinical (1) Requirements for qualified PLEs de-
condition or presentation; one or more veloping or modifying AUC. A PLE must
services; and, an assessment of the ap- perform all of the following when de-
propriateness of the service(s). veloping or modifying AUC:
Clinical decision support mechanism (i) Utilize an evidentiary review proc-
(CDSM) means the following: an inter- ess when developing or modifying AUC
active, electronic tool for use by clini- that includes:
cians that communicates AUC informa- (A) A systematic literature review of
tion to the user and assists them in the clinical topic and relevant imaging
making the most appropriate treat- studies; and
ment decision for a patient’s specific (B) An assessment of the evidence
clinical condition. Tools may be mod- using a formal, published and widely
ules within or available through cer- recognized methodology for grading
tified EHR technology (as defined in evidence. Consideration of relevant
section 1848(o)(4)) of the Act or private published consensus statements by pro-
sector mechanisms independent from fessional medical specialty societies
certified EHR technology or estab- must be part of the evidence assess-
lished by the Secretary. ment.
(ii) Utilize at least one multidisci-
Furnishing professional means a physi-
plinary team with autonomous govern-
cian (as defined in section 1861(r) of the
ance, decision-making and account-
Act) or a practitioner described in sec-
ability for developing or modifying
tion 1842(b)(18)(C) of the Act who fur-
AUC. At a minimum the team must be
nishes an applicable imaging service.
comprised of seven members including
Ordering professional means a physi- at least one practicing physician with
cian (as defined in section 1861(r) of the expertise in the clinical topic related
Act) or a practitioner described in sec- to the appropriate use criterion being
tion 1842(b)(18)(C) of the Act who orders developed or modified, at least one
an applicable imaging service. practicing physician with expertise in
Priority clinical areas means clinical the imaging studies related to the ap-
conditions, diseases or symptom com- propriate use criterion, at least one
plexes and associated advanced diag- primary care physician or practitioner
nostic imaging services identified by as described in sections 1833(u)(6),
CMS through annual rulemaking and 1833(x)(2)(A)(i)(I), and 1833(x)(2)(A)(i)(II)
in consultation with stakeholders of the Act, at least one expert in statis-
which may be used in the determina- tical analysis and at least one expert in
tion of outlier ordering professionals. clinical trial design. A given team
Provider-led entity (PLE) means a na- member may be the team’s expert in
tional professional medical specialty more than one domain.
society or other organization that is (iii) Utilize a publicly transparent
comprised primarily of providers or process for identifying potential con-
practitioners who, either within the or- flicts of interest and for resolving con-
ganization or outside of the organiza- flicts of interest of members on the
tion, predominantly provide direct pa- multidisciplinary team, the PLE and
tient care. any other party participating in AUC
Specified applicable appropriate use cri- development or modification, to in-
teria means any individual appropriate clude recusal or exclusion of individ-
use criterion or AUC set developed, uals as appropriate. The PLE must doc-
modified or endorsed by a qualified ument the following information and
PLE. make it available in timely fashion to
53
§ 414.94 42 CFR Ch. IV (10–1–17 Edition)
a public request, for a period of not less (ix) Disclose parties external to the
than 5 years after the most recent pub- PLE when such parties have involve-
lished update of the relevant AUC: ment in the AUC development process.
(A) Direct or indirect financial rela- (2) Process to identify qualifying PLEs.
tionships that exist between individ- PLEs must meet all of the following
uals or the spouse or minor child of in- criteria:
dividuals who have substantively par- (i) PLEs must submit an application
ticipated in the development of AUC to CMS for review that documents ad-
and companies or organizations includ- herence to each of the AUC develop-
ing the PLE and any other party par- ment requirements outlined in para-
ticipating in AUC development or graph (c)(1) of this section;
modification that may financially ben- (ii) Applications will be accepted by
CMS only from PLEs that meet the
efit from the AUC. These financial re-
definition of PLE in paragraph (b) of
lationships may include, for example,
this section;
compensation arrangements such as
(iii) Applications must be received by
salary, grant, speaking or consulting CMS annually by January 1;
fees, contract, or collaboration agree- (iv) All approved qualified PLEs in
ments. each year will be included on the list of
(B) Ownership or investment inter- qualified PLEs posted to the CMS Web
ests between individuals or the spouse site by June 30 of that year; and
or minor child of individuals who have (v) Approved PLEs are qualified for a
substantively participated in the devel- period of 5 years.
opment of AUC and companies or orga- (vi) Qualified PLEs are required to
nizations including the PLE or any re-apply. The application must be re-
other party participating in AUC devel- ceived by CMS by January 1 of the 5th
opment or modification that may fi- year after the PLE’s most recent ap-
nancially benefit from the AUC. proval date.
(iv) Publish each individual criterion (d) Endorsement. Qualified PLEs may
on the PLE’s Web site and include an endorse the AUC set or individual cri-
identifying title, authors (at a min- teria of other qualified PLEs, under
imum, all members of the multidisci- agreement by the respective parties, in
plinary AUC development team must order to enhance an AUC set.
be listed as authors), and key ref- (e) Identifying priority clinical areas.
erences used to establish the evidence. (1) CMS identifies priority clinical
(v) Identify each appropriate use cri- areas through annual rulemaking and
terion or AUC subset that are relevant in consultation with stakeholders.
to a priority clinical area with a state- (2) CMS will consider incidence and
ment on the PLE’s Web site. To be prevalence of disease, the volume and
identified as being relevant to a pri- variability of use of particular imaging
ority clinical area, the criterion or services, and strength of evidence sup-
porting particular imaging services.
AUC subset must reasonably address
We will also consider applicability of
the entire clinical scope of the cor-
the clinical area to a variety of care
responding priority clinical area.
settings and to the Medicare popu-
(vi) Identify key points in an indi- lation.
vidual criterion as evidence-based or (3) The Medicare Evidence Develop-
consensus-based, and grade such key ment & Coverage Advisory Committee
points in terms of strength of evidence (MEDCAC) may make recommenda-
using a formal, published and widely tions to CMS.
recognized methodology. (4) Priority clinical areas will be used
(vii) Utilize a transparent process for by CMS to identify outlier ordering
the timely and continual updating of professionals (section 1834(q)(5) of the
each criterion. Each criterion must be Act).
reviewed and, when appropriate, up- (5) Priority clinical areas include the
dated at least annually. following:
(viii) Publicly post the process for de- (i) Coronary artery disease (suspected
veloping or modifying the AUC on the or diagnosed).
PLE’s Web site. (ii) Suspected pulmonary embolism.
54
(iii) Headache (traumatic and non- (vi) Generate and provide a certifi-
traumatic). cation or documentation at the time of
(iv) Hip pain. order that documents which qualified
(v) Low back pain. CDSM was consulted; the name and na-
(vi) Shoulder pain (to include sus- tional provider identifier (NPI) of the
pected rotator cuff injury). ordering professional that consulted
(vii) Cancer of the lung (primary or the CDSM; whether the service ordered
metastatic, suspected or diagnosed). would adhere to specified applicable
(viii) Cervical or neck pain. AUC; whether the service ordered
(f) Identification of non-evidence-based would not adhere to specified applica-
AUC or other non-adherence to require- ble AUC; or whether the specified ap-
ments for qualified PLEs. (1) CMS will plicable AUC consulted was not appli-
accept public comment to facilitate cable to the service ordered. Certifi-
identification of AUC sets, subsets or cation or documentation must:
individual criterion that are not evi- (A) Be generated each time an order-
dence-based, giving priority to AUC as- ing professional consults a qualified
sociated with priority clinical areas CDSM.
and to AUC that conflict with one an- (B) Include a unique consultation
other. CMS may also independently identifier generated by the CDSM.
identify AUC of concern. (vii) Modifications to AUC within the
(2) The evidentiary basis of the iden- CDSM must comply with the following
tified AUC may be reviewed by the timeline requirements:
MEDCAC. (A) Make available updated AUC con-
(3) If a qualified PLE is found non-ad- tent within 12 months from the date
herent to the requirements in para- the qualified PLE updates AUC.
graph (c) of this section, CMS may ter-
(B) A protocol must be in place to ex-
minate its qualified status or may con-
peditiously remove AUC determined by
sider this information during re-quali-
the qualified PLE to be potentially
fication.
dangerous to patients and/or harmful if
(g) Qualified clinical decision support
followed.
mechanisms (CDSMs). Qualified CDSMs
are those specified as such by CMS. (C) Specified applicable AUC that
Qualified CDSMs must adhere to the reasonably address common and impor-
requirements described in paragraph tant clinical scenarios within any new
(g)(1) of this section. priority clinical area must be made
(1) Requirements for qualification of available for consultation through the
CDSMs. A CDSM must meet all of the qualified CDSM within 12 months of
the priority clinical area being final-
following requirements:
ized by CMS.
(i) Make available specified applica-
ble AUC and its related supporting doc- (viii) Meet privacy and security
umentation. standards under applicable provisions
(ii) Identify the appropriate use cri- of law.
terion consulted if the CDSM makes (ix) Provide to the ordering profes-
available more than one criterion rel- sional aggregate feedback regarding
evant to a consultation for a patient’s their consultations with specified ap-
specific clinical scenario. plicable AUC in the form of an elec-
(iii) Make available, at a minimum, tronic report on at least an annual
specified applicable AUC that reason- basis.
ably address common and important (x) Maintain electronic storage of
clinical scenarios within all priority clinical, administrative, and demo-
clinical areas identified in paragraph graphic information of each unique
(e)(5) of this section. consultation for a minimum of 6 years.
(iv) Be able to incorporate specified (xi) Comply with modification(s) to
applicable AUC from more than one any requirements under paragraph
qualified PLE. (g)(1) of this section made through
(v) Determines, for each consulta- rulemaking within 12 months of the ef-
tion, the extent to which the applicable fective date of the modification.
imaging service is consistent with (xii) Notify ordering professionals
specified applicable AUC. upon de-qualification.
55
§ 414.100 42 CFR Ch. IV (10–1–17 Edition)
(2) Process to specify qualified CDSMs. (h) Identification of non-adherence to

(i) The CDSM developer must submit requirements for qualified CDSMs. (1) If a
an application to CMS for review that qualified CDSM is found non-adherent
documents adherence to each of the to the requirements in paragraph (g)(1)
CDSM requirements outlined in para- of this section, CMS may terminate its
graph (g)(1) of this section; qualified status or may consider this
(ii) Receipt of applications. (A) Appli- information during requalification.
cations must be received by CMS annu- (i) Exceptions. Consulting and report-
ally by January 1 (except as stated in ing requirements are not required for
paragraph (g)(2)(ii)(B) of this section). orders for applicable imaging services
(B) For CDSM applicants seeking made by ordering professionals under
qualification in CY 2017, applications the following circumstances:
must be submitted by March 1, 2017; (1) Emergency services when provided
and to individuals with emergency medical
(1) Applications that document cur- conditions as defined in section
rent adherence to qualified CDSM re- 1867(e)(1) of the Act.
quirements will receive full qualifica- (2) For an inpatient and for which
tion. payment is made under Medicare Part
A.
(2) Applications that do not docu-
(3) Ordering professionals who are
ment current adherence to each quali-
granted a significant hardship excep-
fied CDSM requirement, but that docu-
tion to the Medicare EHR Incentive
ment how and when each requirement
Program payment adjustment for that
is reasonably expected to be met, will
year under § 495.102(d)(4) of this chap-
receive preliminary qualification.
ter, except for those granted such an
(3) A preliminary qualification period exception under § 495.102(d)(4)(iv)(C) of
begins under paragraph (2) on June 30, this chapter.
2017 and ends on the effective date of
the requirements under sections [80 FR 71380, Nov. 16, 2015, as amended at 80
1834(q)(4)(A) and 1834(q)(4)(B) of the FR 80554, Nov. 15, 2016]
Act.
(4) A CDSM with preliminary quali- Subpart C—Fee Schedules for Par-
fication will become fully qualified by enteral and Enteral Nutrition
the end of the preliminary qualifica- (PEN) Nutrients, Equipment
tion period, or earlier if CMS deter- and Supplies, Splints, Casts,
mines that the CDSM has dem- and Certain Intraocular
onstrated adherence to each qualified
CDSM requirement, unless we deter-
Lenses (IOLs)
mine that the CDSM fails to meet all
requirements (including those require- SOURCE: 66 FR 45176, Aug. 28, 2001, unless
otherwise noted.
ments they expected to meet in para-
graph (g)(2)(ii)(B)(2) of this section) by § 414.100 Purpose.
the end of the preliminary qualifica-
tion period. This subpart implements fee sched-
(iii) All qualified CDSMs specified by ules for PEN items and services, splints
CMS in each year will be included on and casts, and IOLs inserted in a physi-
the list of specified qualified CDSMs cian’s office as authorized by section
posted to the CMS Web site by June 30 1842(s) of the Act.
of that year; and [78 FR 72252, Dec. 2, 2013]
(iv) Qualified CDSMs are specified by
CMS as such for a period of 5 years. § 414.102 General payment rules.
(v) Qualified CDSMs are required to (a) General rule. For PEN items and
re-apply during the fifth year after services furnished on or after January
they are specified by CMS in order to 1, 2002, and for splints and casts and
maintain their status as qualified IOLs inserted in a physician’s office on
CDSMs. This application must be re- or after April 1, 2014, Medicare pays for
ceived by CMS by January 1 of the 5th the items and services as described in
year after the most recent approval paragraph (b) of this section on the
date. basis of 80 percent of the lesser of—-
56
(1) The actual charge for the item or plementation of the programs under
service; or subpart F using the methodologies set
(2) The fee schedule amount for the forth at § 414.210(g).
item or service, as determined in ac- [79 FR 66262, Nov. 6, 2014]
cordance with §§ 414.104 thru 414.108.
(b) Payment classification. (1) CMS or § 414.106 Splints and casts.
the carrier determines fee schedules for
parenteral and enteral nutrition (PEN) (a) Payment rules. Payment is made
nutrients, equipment, and supplies, in a lump sum for splints and casts.
(b) Fee schedule amount. The fee
splints and casts, and IOLs inserted in
schedule amount for payment for an
a physician’s office, as specified in
item or service furnished in 2014 is the
§§ 414.104 thru 414.108.
(2) CMS designates the specific items reasonable charge amount for 2013, up-
and services in each category through dated by the percentage increase in the
program instructions. CPI–U for the 12-month period ending
(c) Updating the fee schedule amounts. with June of 2013.
For the years 2003 through 2010 for PEN [78 FR 72253, Dec. 2, 2013]
items and services, the fee schedule
amounts of the preceding year are up- § 414.108 IOLs inserted in a physician’s
dated by the percentage increase in the office.
CPI–U for the 12-month period ending (a) Payment rules. Payment is made
with June of the preceding year. For in a lump sum for IOLs inserted in a
each year subsequent to 2010 for PEN physician’s office.
items and services and for each year (b) Fee schedule amount. The fee
subsequent to 2014 for splints and casts, schedule amount for payment for an
and IOLs inserted in a physician’s of- IOL furnished in 2014 is the national
fice, the fee schedule amounts of the average allowed charge for the IOL fur-
preceding year are updated by the per- nished from in calendar year 2012, up-
centage increase in the CPI–U for the dated by the percentage increase in the
12-month period ending with June of CPI–U for the 24-month period ending
the preceding year, reduced by the pro- with June of 2013.
ductivity adjustment described in sec- [78 FR 72253, Dec. 2, 2013]
tion 1886(b)(3)(B)(xi)(II) of the Act.
[66 FR 45176, Aug. 28, 2001, as amended at 78 Subpart D—Payment for Durable
FR 72252, Dec. 2, 2013] Medical Equipment and Pros-
§ 414.104 PEN Items and Services. thetic and Orthotic Devices
(a) Payment rules. Payment for PEN § 414.200 Purpose.
items and services is made in a lump
This subpart implements sections
sum for nutrients and supplies that are
1834(a), (h) and (i) of the Act by speci-
purchased and on a monthly basis for
fying how payments are made for the
equipment that is rented.
purchase or rental of new and used du-
(b) Fee schedule amount. The fee
rable medical equipment, prosthetic
schedule amount for payment for an
and orthotic devices, and surgical
item or service furnished in 2002 is the
dressings for Medicare beneficiaries.
lesser of—
(i) The reasonable charge from 1995; [78 FR 72253, Dec. 2, 2013]
or
(ii) The reasonable charge that would § 414.202 Definitions.
have been used in determining pay- For purposes of this subpart, the fol-
ment for 2002. lowing definitions apply:
Complex rehabilitative power-driven
§ 414.105 Application of competitive wheelchair means a power-driven wheel-
bidding information. chair that is classified as—
For enteral nutrients, equipment and (1) Group 2 power wheelchair with
supplies furnished on or after January power options that can accommodate
1, 2011, the fee schedule amounts may rehabilitative features (for example,
be adjusted based on information on tilt in space); or
the payment determined as part of im- (2) Group 3 power wheelchair.
57
§ 414.210 42 CFR Ch. IV (10–1–17 Edition)
Covered item update means the per- at least 50 percent of the total geo-
centage increase in the consumer price graphic area of the area included in the
index for all urban consumers (U.S. zip code is estimated to be outside any
city average) (CPI-U) for the 12-month metropolitan area (MSA). A rural area
period ending with June of the previous also includes a geographic area rep-
year. resented by a postal zip code that is a
Durable medical equipment means low population density area excluded
equipment, furnished by a supplier or a from a competitive bidding area in ac-
home health agency that meets the fol- cordance with the authority provided
lowing conditions: by section 1847(a)(3)(A) of the Act at
(1) Can withstand repeated use. the time the rules at § 414.210(g) are ap-
(2) Effective with respect to items plied.
classified as DME after January 1, 2012,
has an expected life of at least 3 years. FR 73622, Nov. 29, 2010; 76 FR 70314, Nov. 10,
(3) Is primarily and customarily used 2011; 79 FR 66262, Nov. 6, 2014]
to serve a medical purpose.
(4) Generally is not useful to an indi- § 414.210 General payment rules.
vidual in the absence of an illness or (a) General rule. For items furnished
injury. on or after January 1, 1989, except as
(5) Is appropriate for use in the home. provided in paragraphs (c), (d), and (g)
Prosthetic and orthotic devices means— of this section, Medicare pays for dura-
(1) Devices that replace all or part of ble medical equipment, prosthetics and
an internal body organ, including orthotics, including a separate pay-
ostomy bags and supplies directly re- ment for maintenance and servicing of
lated to ostomy care, and replacement the items as described in paragraph (e)
of such devices and supplies; of this section, on the basis of 80 per-
(2) One pair of conventional eye- cent of the lesser of—
glasses or contact lenses furnished sub- (1) The actual charge for the item;
sequent to each cataract surgery with (2) The fee schedule amount for the
insertion of an intraocular lens; and item, as determined in accordance with
(3) Leg, arm, back, and neck braces, the provisions of §§ 414.220 through
and artificial legs, arms, and eyes, in- 414.232
cluding replacements if required be- (b) Payment classification. (1) The car-
cause of a change in the beneficiary’s rier determines fee schedules for the
physical condition. following classes of equipment and de-
The following are neither prosthetic vices:
nor orthotic devices— (i) Inexpensive or routinely pur-
(1) Parenteral and enteral nutrients, chased items, as specified in § 414.220.
supplies, and equipment; (ii) Items requiring frequent and sub-
(2) Intraocular lenses; stantial servicing, as specified in
(3) Medical supplies such as cath- § 414.222.
eters, catheter supplies, ostomy bags, (iii) Certain customized items, as
and supplies related to ostomy care specified in § 414.224.
that are furnished by an HHA as part of (iv) Oxygen and oxygen equipment,
home health services under § 409.40(e) of as specified in § 414.226.
this chapter; (v) Prosthetic and orthotic devices,
(4) Dental prostheses. as specified in § 414.228.
Region means, for the purpose of im- (vi) Other durable medical equipment
plementing § 414.210(g), geographic (capped rental items), as specified in
areas defined by the Bureau of Eco- § 414.229.
nomic Analysis in the United States (vii) Transcutaneous electrical nerve
Department of Commerce for economic stimulators (TENS), as specified in
analysis purposes, and, for the purpose § 414.232.
of implementing § 414.228, those con- (2) CMS designates the items in each
tractor service areas administered by class of equipment or device through
CMS regional offices. its program instructions.
Rural area means, for the purpose of (c) Exception for certain HHAs. Public
implementing § 414.210(g), a geographic HHAs and HHAs that furnish services
area represented by a postal zip code if or items free-of-charge or at nominal
58
prices to a significant number of low- (iii) The supplier must visit the bene-
income patients, as defined in § 413.13(a) ficiary’s home (including an institution
of this chapter, are paid on the basis of used as the beneficiary’s home) to in-
80 percent of the fee schedule amount spect the equipment during the first
determined in accordance with the pro- month of the 6-month period.
vision of §§ 414.220 through 414.230. (3) Exception to maintenance and serv-
(d) Prohibition on special limits. For icing payments. For items purchased on
items furnished on or after January 1, or after June 1, 1989, no payment is
1989 and before January 1, 1991, neither made under the provisions of paragraph
CMS nor a carrier may establish a spe- (e)(1) of this section for the mainte-
cial reasonable charge for items cov- nance and servicing of:
ered under this subpart on the basis of (i) Items requiring frequent and sub-
inherent reasonableness as described in stantial servicing, as defined in
§ 405.502(g) of this chapter. § 414.222(a);
(e) Maintenance and servicing—(1) (ii) Capped rental items, as defined in
General rule. Except as provided in § 414.229(a), that are not beneficiary-
paragraph (e)(3) of this section, the car- owned in accordance with § 414.229(d),
rier pays the reasonable and necessary § 414.229(f)(2), or § 414.229(h); and
charges for maintenance and servicing (iii) Capped rental items, as defined
of beneficiary-owned equipment. Rea- in § 414.229(a), that are not beneficiary-
sonable and necessary charges are owned in § 414.229(d), § 414.229(f)(2), or
those made for parts and labor not oth- § 414.229(h); and
erwise covered under a manufacturer’s (iv) Oxygen equipment, as described
or supplier’s warranty. Payment is in § 414.226.
made for replacement parts in a lump (4) Supplier replacement of beneficiary-
sum based on the carrier’s consider- owned equipment based on accumulated
ation of the item. The carrier estab- repair costs. A supplier that transfers
lishes a reasonable fee for labor associ- title to a capped rental item to a bene-
ated with repairing, maintaining, and ficiary in accordance with § 414.229(f)(2)
servicing the item. Payment is not is responsible for furnishing replace-
made for maintenance and servicing of ment equipment at no cost to the bene-
a rented item other than the mainte- ficiary or to the Medicare program if
nance and servicing fee for oxygen the carrier determines that the item
equipment described in paragraph (e)(2) furnished by the supplier will not last
of this section or for other durable for the entire reasonable useful life-
medical equipment as described in time established for the equipment in
§ 414.229(e). accordance with § 414.210(f)(1). In mak-
(2) Maintenance and servicing payment ing this determination, the carrier may
for certain oxygen equipment furnished consider whether the accumulated
after the 36-month rental period from Jan- costs of repair exceed 60 percent of the
uary 1, 2009 through June 30, 2010. The cost to replace the item.
carrier makes a maintenance and serv- (5) Maintenance and servicing payment
icing payment for oxygen equipment for certain oxygen equipment furnished
other than liquid and gaseous equip- after the 36-month rental period and on or
ment (stationary and portable) as fol- after July 1, 2010. For oxygen equipment
lows: other than liquid and gaseous equip-
(i) For the first 6-month period fol- ment (stationary and portable), the
lowing the date on which the 36-month carrier makes payment as follows:
rental period ends in accordance with (i) For the first 6-month period fol-
§ 414.226(a)(1) of this subpart, no pay- lowing the date on which the 36-month
ments are made. rental period ends in accordance with
(ii) For each succeeding 6-month pe- § 414.226(a)(1) of this subpart, no pay-
riod, payment may be made during the ments are made.
first month of that period for 30 min- (ii) For each succeeding 6-month pe-
utes of labor for routine maintenance riod, payment may be made during the
and servicing of the equipment in the first month of that period for routine
beneficiary’s home (including an insti- maintenance and servicing of the
tution used as the beneficiary’s home). equipment in the beneficiary’s home
59
§ 414.210 42 CFR Ch. IV (10–1–17 Edition)
(including an institution used as the cluding information on the payment

beneficiary’s home). determined in accordance with the spe-
(iii) Payment for maintenance and cial payment rules at § 414.409. In the
servicing is made based on a reasonable case of such adjustments, the rules at
fee not to exceed 10 percent of the pur- § 405.502(g) and (h) of this chapter shall
chase price for a stationary oxygen not be applied. The methodologies for
concentrator. This payment includes adjusting fee schedule amounts are
payment for maintenance and servicing provided below. In any case where ap-
of all oxygen equipment other than liq- plication of these methodologies re-
uid or gaseous equipment (stationary sults in an increase in the fee schedule
or portable). amount, the adjustment to the fee
(iv) The supplier must visit the bene- schedule amount is not made.
ficiary’s home (including an institution (1) Payment adjustments for areas with-
used as the beneficiary’s home) to in- in the contiguous United States using in-
spect the equipment during the first formation from competitive bidding pro-
month of the 6-month period. grams. For an item or service subject to
(f) Payment for replacement of equip- the programs under subpart F of this
ment. If an item of DME or a prosthetic part, the fee schedule amounts for such
or orthotic device paid for under this item or service for areas within the
subpart has been in continuous use by contiguous United States shall be ad-
the patient for the equipment’s reason- justed as follows:
able useful lifetime or if the carrier de- (i) CMS determines a regional price
termines that the item is lost, stolen, for each state in the contiguous United
or irreparably damaged, the patient States and the District of Columbia
may elect to obtain a new piece of equal to the un-weighted average of the
equipment. single payment amounts for an item or
(1) The reasonable useful lifetime of service established in accordance with
DME or prosthetic and orthotic devices § 414.416 for competitive bidding areas
is determined through program in- that are fully or partially located in
structions. In the absence of program the same region that contains the state
instructions, carriers may determine or District of Columbia.
the reasonable useful lifetime of equip- (ii) CMS determines a national aver-
ment but in no case can it be less than age price equal to the un-weighted av-
5 years. Computation is based on when erage of the regional prices determined
the equipment is delivered to the bene- under paragraph (g)(1)(i) of this sec-
ficiary, not the age of the equipment. tion.
(2) If the beneficiary elects to obtain (iii) A regional price determined
replacement oxygen equipment, pay- under paragraph (g)(1)(i) of this section
ment is made in accordance with cannot be greater than 110 percent of
§ 414.226(a). the national average price determined
(3) If the beneficiary elects to obtain under paragraph (g)(1)(ii) of this sec-
a replacement capped rental item, pay- tion nor less than 90 percent of the na-
ment is made in accordance with tional average price determined under
§ 414.229(a)(2) or (a)(3). paragraph (g)(1)(ii) of this section.
(4) For all other beneficiary-owned (iv) The fee schedule amount for all
items, if the beneficiary elects to ob- areas within a state that are not de-
tain replacement equipment, payment fined as rural areas for purposes of this
is made on a purchase basis. subpart is adjusted to the regional
(g) Application of Competitive Bidding price determined under paragraphs
Information and Limitation of Inherent (g)(1)(i) and (iii) of this section.
Reasonableness Authority. For items fur- (v) The fee schedule amount for all
nished on or after January 1, 2011, the areas within a state that are defined as
fee schedule amounts may be adjusted, rural areas for the purposes of this sub-
and for DME items furnished on or part is adjusted to 110 percent of the
after January 1, 2016, the fee schedule national average price determined
amounts shall be adjusted, based on in- under paragraph (g)(1)(ii) of this sec-
formation on the payment determined tion.

as part of implementation of the pro- (2) Payment adjustments for areas out-
grams under subpart F, of this part, ex- side the contiguous United States using
60
information from competitive bidding pro- CPI–U for the 12-month period ending 6
grams. For an item or service subject to months prior to the date the updated
the programs under subpart F, the fee payment adjustments would go into ef-
schedule amounts for areas outside the fect.
contiguous United States are reduced (5) Adjusted payment amounts for ac-
to the greater of— cessories used with different types of base
(i) The average of the single payment equipment. In situations where a
amounts for the item or service for HCPCS code that describes an item
CBAs outside the contiguous United used with different types of base equip-
States. ment is included in more than one
(ii) 110 percent of the national aver- product category in a CBA under com-
age price for the item or service deter- petitive bidding, a weighted average of
mined under paragraph (g)(1)(ii) of this the single payment amounts for the
section. code is computed for each CBA based
(3) Payment adjustments for items and on the total number of allowed services
services included in no more than ten for the item on a national basis for the
competitive bidding programs. Notwith- code from each product category prior
standing paragraph (g)(1) of this sec- to applying the payment adjustment
tion, for an item or service that is in- methodologies in this section.
cluded in ten or fewer competitive bid- (6) Adjustments of single payment
ding programs as defined at § 414.402, amounts resulting from price inversions
the fee schedule amounts applied for under the DMEPOS Competitive Bidding
all areas within and outside the contig- Program. (i) In situations where a price
uous United States are reduced to 110 inversion defined in § 414.402 occurs
percent of the un-weighted average of under the DMEPOS Competitive Bid-
the single payment amounts from the ding Program in a competitive bidding
ten or fewer competitive bidding pro- area (CBA) following a competition for
grams for the item or service in the a grouping of similar items identified
areas where the ten or fewer competi- in paragraph (g)(6)(ii) of this section,
tive bidding programs are in place. prior to adjusting the fee schedule
(4) Payment adjustments using data on amounts under paragraph (g) of this
items and services included in competitive section the single payment amount for
bidding programs no longer in effect. In each item in the grouping of similar
the case where adjustments to fee items in the CBA is adjusted to be
schedule amounts are made using any equal to the weighted average of the
of the methodologies described, if the single payment amounts for the items
adjustments are based solely on single in the grouping of similar items in the
payment amounts from competitive CBA.
bidding programs that are no longer in (ii) The groupings of similar items
effect, the single payment amounts are subject to this rule include—
updated before being used to adjust the (A) Hospital beds (HCPCS codes
fee schedule amounts. The single pay- E0250, E0251, E0255, E0256, E0260, E0261,
ment amounts are updated based on E0290, E0291, E0292, E0293, E0294, E0295,
the percentage change in the Consumer E0301, E0302, E0303, and E0304).
Price Index for all Urban Consumers (B) Mattresses and overlays (HCPCS
(CPI–U) from the mid-point of the last codes E0277, E0371, E0372, and E0373)
year the single payment amounts were (C) Power wheelchairs (HCPCS codes
in effect to the month ending 6 months K0813, K0814, K0815, K0816, K0820, K0821,
prior to the date the initial fee sched- K0822, and K0823).
ule reductions go into effect. Following (D) Seat lift mechanisms (HCPCS
the initial adjustments to the fee codes E0627 and E0629).
schedule amounts, if the adjustments (E) TENS devices (HCPCS codes E0720
continue to be based solely on single and E0730).
payment amounts from competitive (F) Walkers (HCPCS codes E0130,
bidding programs that are no longer in E0135, E0141, and E0143).
effect, the single payment amounts (iii) The weight for each item
used to reduce the fee schedule (HCPCS code) used in calculating the
amounts are updated every 12 months weighted average described in para-
using the percentage change in the graph (g)(6)(ii) of this section is equal
61
§ 414.220 42 CFR Ch. IV (10–1–17 Edition)
to the proportion of total nationwide percent of the time during the period
allowed services furnished in calendar July 1986 through June 1987.
year 2012 for the item (HCPCS code) in (3) Accessories. Effective January 1,
the grouping of similar items, relative 1994, accessories used in conjunction
to the total nationwide allowed serv- with a nebulizer, aspirator, or venti-
ices furnished in calendar year 2012 for lator excluded from § 414.222 meet the
each of the other items (HCPCS codes) definitions of ‘‘inexpensive equipment’’
in the grouping of similar items. and ‘‘routinely purchased equipment’’
(7) Payment adjustments for mail order in paragraphs (a)(1) and (a)(2) of this
items furnished in the Northern Mariana section, respectively.
Islands. The fee schedule amounts for (b) Payment rules. (1) Subject to the
mail order items furnished to bene- limitation in paragraph (b)(3) of this
ficiaries in the Northern Mariana Is- section, payment for inexpensive and
lands are adjusted so that they are routinely purchased items is made on a
equal to 100 percent of the single pay- rental basis or in a lump sum amount
ment amounts established under a na- for purchase of the item based on the
tional mail order competitive bidding applicable fee schedule amount.
program. (2) Effective January 1, 1994, payment
(8) Updating adjusted fee schedule for ostomy supplies, tracheostomy sup-
amounts. The adjusted fee schedule plies, urologicals, and surgical
amounts are revised each time a single dressings not furnished as incident to a
payment amount for an item or service physician’s professional service or fur-
is updated following one or more new nished by an HHA is made using the
competitions and as other items are methodology for the inexpensive and
added to programs established under routinely purchased class.
Subpart F of this part. (3) The total amount of payments
(9) Transition rules. The payment ad- made for an item may not exceed the
justments described above are phased fee schedule amount recognized for the
in as follows: purchase of that item.
(i) For applicable items and services (c) Fee schedule amount for 1989 and
furnished with dates of service from 1990. The fee schedule amount for pay-
January 1, 2016, through June 30, 2016, ment of purchase or rental of inexpen-
based on the fee schedule amount for sive or routinely purchased items fur-
the area is equal to 50 percent of the nished in 1989 and 1990 is the local pay-
adjusted payment amount established ment amount determined as follows:
under this section and 50 percent of the (1) The carrier determines the aver-
unadjusted fee schedule amount. age reasonable charge for inexpensive
(ii) For items and services furnished or routinely purchased items that were
with dates of service on or after July 1, furnished during the period July 1, 1986
2016, the fee schedule amount for the through June 30, 1987 based on the
area is equal to 100 percent of the ad- mean of the carrier’s allowed charges
justed payment amount established for the item. A separate determination
under this section. of an average reasonable charge is
made for rental equipment, new pur-
FR 65932, Nov. 9, 2006; 73 FR 69936, Nov. 19, chased equipment, and used purchased
2008; 73 FR 80304, Dec. 31, 2008; 74 FR 62009, equipment.
Nov. 25, 2009; 79 FR 66262, Nov. 6, 2013; 81 FR (2) The carrier adjusts the amount
77965, Nov. 4, 2016] determined under paragraph (c)(1) of
this section by the change in the level
§ 414.220 Inexpensive or routinely pur- of the CPI-U for the 6-month period
chased items. ending December 1987.
(a) Definitions. (1) Inexpensive equip- (d) Updating the local payment
ment means equipment the average pur- amounts for years after 1990. For each
chase price of which did not exceed $150 year subsequent to 1990, the local pay-
during the period July 1986 through ment amounts of the preceding year
June 1987. are increased or decreased by the cov-
(2) Routinely purchased equipment ered item update. For 1991 and 1992, the
means equipment that was acquired by covered item update is reduced by 1
purchase on a national basis at least 75 percentage point.
62
(e) Calculating the fee schedule local payment amount exceeds the
amounts for years after 1990. For years weighted average of all local payment
after 1990, the fee schedule amounts are amounts.
equal to the national limited payment (iii) 85 percent of the weighted aver-
amount. age of all local payment amounts if the
(f) Calculating the national limited pay- local payment amount is less than 85
ment amount. The national limited pay- percent of the weighted average of all
ment amount is computed as follows: local payment amounts.
(1) The 1991 national limited payment (4) For 1994 and subsequent years, the
amount is equal to: national limited payment amount is
(i) 100 percent of the local payment equal to one of the following:
amount if the local payment amount is (i) If the local payment amount is
neither greater than the weighted aver- not in excess of the median, nor less
age nor less than 85 percent of the than 85 percent of the median, of all
weighted average of all local payment local payment amounts—100 percent of
amounts; the local payment amount.
(ii) The sum of 67 percent of the local
(ii) If the local payment amount ex-
payment amount plus 33 percent of the
ceeds the median—100 percent of the
weighted average of all local payment
median of all local payment amounts.
amounts if the local payment amount
exceeds the weighted average of all (iii) If the local payment amount is
local payment amounts; or less than 85 percent of the median—85
(iii) The sum of 67 percent of the percent of the median of all local pay-
local payment amount plus 33 percent ment amounts.
of 85 percent of the weighted average of (g) Payment for surgical dressings. For
all local payment amounts if the local surgical dressings furnished after De-
payment amount is less than 85 percent cember 31, 1993, the national limited
of the weighted average of all local payment amount is computed based on
payment amounts. local payment amounts using average
(2) The 1992 national limited payment reasonable charges for the 12-month pe-
amount is equal to: riod ending December 31, 1992, in-
(i) 100 percent of the local payment creased by the covered item updates for
amount if the local payment amount is 1993 and 1994.
neither greater than the weighted aver- [57 FR 57689, Dec. 7, 1992, as amended at 60
age nor less than 85 percent of the FR 35497, July 10, 1995]
weighted average of all local payment
amounts; § 414.222 Items requiring frequent and
(ii) The sum of 33 percent of the local substantial servicing.
payment amount plus 67 percent of the (a) Definition. Items requiring fre-
weighted average of all local payment quent and substantial servicing in
amounts if the local payment amount
order to avoid risk to the beneficiary’s
exceeds the weighted average; or
health are the following:
(iii) The sum of 33 percent of the
(1) Ventilators (except those that are
local payment amount plus 67 percent
of 85 percent of the weighted average of either continuous airway pressure de-
all local payment amounts if the local vices or respiratory assist devices with
payment amount is less than 85 percent bi-level pressure capability with or
of the weighted average. without a backup rate, previously re-
(3) For 1993, the national limited pay- ferred to as ‘‘intermittent assist de-
ment amount is equal to one of the fol- vices with continuous airway pressure
lowing: devices’’).
(i) 100 percent of the local payment (2) Continuous and intermittent posi-
amount if the local payment amount is tive pressure breathing machines.
neither greater than the weighted aver- (3) Continuous passive motion ma-
age nor less than 85 percent of the chines.
weighted average of all local payment (4) Other items specified in CMS pro-
amounts. gram instructions.

(ii) 100 percent of the weighted aver- (5) Other items identified by the car-
age of all local payment amounts if the rier.
63
§ 414.224 42 CFR Ch. IV (10–1–17 Edition)
(b) Payment rule. Rental payments for a wheelchair) must be uniquely con-
items requiring frequent and substan- structed or substantially modified for a
tial servicing are made on a monthly specific beneficiary according to the
basis, and continue until medical ne- description and orders of a physician
cessity ends. and be so different from another item
(c) Fee schedule amount for 1989 and used for the same purpose that the two
1990. The fee schedule amount for items items cannot be grouped together for
requiring frequent and substantial pricing purposes.
servicing is the local payment amount (b) Payment rule. Payment is made on
determined as follows: a lump sum basis for the purchase of a
(1) The carrier determines the aver- customized item based on the carrier’s
age reasonable charge for rental of individual consideration and judgment
items requiring frequent and substan- of a reasonable payment amount for
tial servicing that were furnished dur- each customized item. The carrier’s in-
ing the period July 1, 1986 through dividual consideration takes into ac-
June 30, 1987 based on the mean of the count written documentation on the
carrier’s allowed charges for the item. costs of the item including at least the
(2) The carrier adjusts the amounts cost of labor and materials used in cus-
determined under paragraph (c)(1) of tomizing an item.
this section by the change in the level
of the CPI-U for the 6-month period
FR 34919, June 30, 1993]
ending December 1987.
(d) Updating the fee schedule amounts § 414.226 Oxygen and oxygen equip-
for years after 1990. For years after 1990, ment.
the fee schedules are determined using (a) Payment rules—(1) Oxygen equip-
the methodology contained in para- ment. Payment for rental of oxygen
graphs (d), (e), and (f) of § 414.220. equipment is made based on a monthly
(e) Transition to other payment classes. fee schedule amount during the period
For purposes of calculating the 15- of medical need, but for no longer than
month rental period, beginning Janu- a period of continuous use of 36
ary 1, 1994, if an item has been paid for months. A period of continuous use is
under the frequent and substantial determined under the provisions in
servicing class and is subsequently paid § 414.230.
for under another payment class, the (2) Oxygen contents. Payment for pur-
rental period begins with the first chase of oxygen contents is made based
month of continuous rental, even if on a monthly fee schedule amount
that period began before January 1, until medical necessity ends.
1994. For example, if the rental period (b) Monthly fee schedule amount for
began on July 1, 1993, the carrier must items furnished prior to 2007. (1) Monthly
use this date as beginning the first fee schedule amounts are separately
month of rental. Likewise, for purposes calculated for the following items:
of calculating the 10-month purchase (i) Stationary oxygen equipment and
option, the rental period begins with oxygen contents (stationary and port-
the first month of continuous rental able oxygen contents).
without regard to when that period (ii) Portable oxygen equipment only.
started. For example, if the rental pe- (iii) Stationary and portable oxygen
riod began in August 1993, the 10-month contents only.
purchase option must be offered to the (iv) Portable oxygen contents only.
beneficiary in May 1994, the tenth (2) For 1989 and 1990, the monthly fee
month of continuous rental. schedule amounts are the local pay-
[57 FR 57690, Dec. 7, 1992, as amended at 60 ment amounts determined as follows:
FR 35497, July 10, 1995; 71 FR 4525, Jan. 27, (i) The carrier determines the base
2006] local average monthly payment rate
equal to the total reasonable charges
§ 414.224 Customized items. for the item for the 12-month period
(a) Criteria for a customized item. To be ending December 1986 divided by the
considered a customized item for pay- total number of months for all bene-
ment purposes under paragraph (b) of ficiaries receiving the item for the
this section, a covered item (including same period. In determining the local
64
average monthly payment rate, the fol- equal to the weighted average of the
lowing limitations apply: fee schedule amounts established under
(A) Purchase charges for oxygen sys- paragraph (b)(5) of this section.
tems are not included as items classi- (4) The national limited monthly
fied under paragraph (b)(1)(i) of this payment rate for items described in
section. paragraph (c)(1)(iii) of this section is
(B) Purchase charges for portable equal to the national limited monthly
equipment are not included as items payment rate established under para-
classified under paragraph (b)(1)(ii) of graph (c)(5) of this section, multiplied
this section. by 24, and divided by 36.
(ii) The carrier determines the local (5) The national limited monthly
monthly payment amount equal to 0.95 payment rate for items described in
times the base local average monthly paragraphs (c)(1)(iv) and (c)(1)(v) of this
payment amount adjusted by the section is equal to 50 percent of the
change in the CPI-U for the six-month weighted average fee schedule amounts
period ending December 1987. established under paragraph (b)(3) of
(3) For 1991 through 2006, the fee this section for items described in
schedule amounts for items described paragraph (b)(1)(iii) of this section.
in paragraphs (b)(1)(iii) and (iv) of this (6) Beginning in 2008, CMS makes an
section are determined using the meth- annual adjustment to the national lim-
odology contained in § 414.220(d), (e), ited monthly payment rate for items
and (f). described in paragraph (c)(1)(i) of this
(4) For 1991 through 2006, the fee section to ensure that such payment
schedule amounts for items described rates do not result in expenditures for
in paragraphs (b)(1)(i) and (ii) of this any year that are more or less than the
section are determined using the meth- expenditures that would have been
odology contained in § 414.220(d), (e), made if such classes had not been es-
and (f). tablished.
(5) For 2005 and 2006, the fee schedule
(d) Application of monthly fee schedule
amounts determined under paragraph
amounts. (1) The fee schedule amount
(b)(4) of this section are reduced using
for items described in paragraph
the methodology described in section
(c)(1)(i) of this section is paid when the
1834(a)(21)(A) of the Act.
beneficiary rents stationary oxygen
(c) Monthly fee schedule amount for
equipment.
items furnished for years after 2006. (1)
(2) Subject to the limitation set forth
For 2007, national limited monthly
in paragraph (e)(2) of this section, the
payment rates are calculated and paid
fee schedule amount for items de-
as the monthly fee schedule amounts
scribed in paragraphs (c)(1)(ii) and
for the following classes of items:
(c)(1)(iii) of this section is paid when
(i) Stationary oxygen equipment (in-
the beneficiary rents portable oxygen
cluding stationary concentrators) and
equipment.
oxygen contents (stationary and port-
able). (3) The fee schedule amount for items
(ii) Portable equipment only (gaseous described in paragraph (c)(1)(iv) of this
or liquid tanks). section is paid when the beneficiary—
(iii) Oxygen generating portable (i) Owns stationary oxygen equip-
equipment only. ment that requires delivery of gaseous
(iv) Stationary oxygen contents only. or liquid oxygen contents; or
(v) Portable oxygen contents only. (ii) Rents stationary oxygen equip-
(2) The national limited monthly ment that requires delivery of gaseous
payment rate for items described in or liquid oxygen contents after the pe-
paragraph (c)(1)(i) of this section is riod of continuous use of 36 months de-
equal to the weighted average fee scribed in paragraph (a)(1) of this sec-
schedule amount established under tion.
paragraph (b)(5) of this section reduced (4) The fee schedule amount for items
by $1.44. described in paragraph (c)(1)(v) of this
(3) The national limited monthly section is paid when the beneficiary—
payment rate for items described in (i) Owns portable oxygen equipment
paragraph (c)(1)(ii) of this section is described in (c)(1)(ii) of this section;
65
§ 414.226 42 CFR Ch. IV (10–1–17 Edition)
(ii) Rents portable oxygen equipment month during which payment is made
described in paragraph (c)(1)(ii) of this under this section must—
section during the period of continuous (i) Continue to furnish the equipment
use of 36 months described in para- during any period of medical need for
graph (a)(1) of this section and does not the remainder of the reasonable useful
rent stationary oxygen equipment; or lifetime established for the equipment
(iii) Rents portable oxygen equip- in accordance with § 414.210(f)(1); or
ment described in paragraph (c)(1)(ii) of (ii) Arrange for furnishing the oxygen
this section after the period of contin- equipment with another supplier if the
uous use of 36 months described in beneficiary relocates to an area that is
paragraph (a)(1) of this section. outside the normal service area of the
(e) Volume adjustments. (1) The fee supplier that initially furnished the
schedule amount for an item described equipment.
in paragraph (c)(1)(i) of this section is (2) The supplier that furnishes liquid
adjusted as follows: or gaseous oxygen equipment (sta-
(i) If the attending physician pre- tionary or portable) for the 36th con-
scribes an oxygen flow rate exceeding tinuous month during which payment
four liters per minute, the fee schedule is made under this section must—
amount is increased by 50 percent, sub- (i) Continue to furnish the oxygen
ject to the limit in paragraph (e)(2) of contents necessary for the effective use
this section. of the liquid or gaseous equipment dur-
(ii) If the attending physician pre- ing any period of medical need for the
scribes an oxygen flow rate of less than remainder of the reasonable useful life-
one liter per minute, the fee schedule time established for the equipment in
amount is decreased by 50 percent. accordance with § 414.210(f)(1); or
(2) If portable oxygen equipment is (ii) Arrange for furnishing the oxygen
used and the prescribed oxygen flow contents with another supplier if the
rate exceeds four liters per minute, the beneficiary relocates to an area that is
total fee schedule amount recognized outside the normal service area of the
for payment is limited to the higher supplier that initially furnished the
of— equipment.
(i) The sum of the monthly fee sched- (g) Additional supplier requirements for
ule amount for the items described in rentals that begin on or after January 1,
paragraphs (c)(1)(i) and (c)(1)(ii) or 2007. (1) The supplier that furnishes ox-
(c)(1)(iii) of this section; or ygen equipment for the first month
(ii) The adjusted fee schedule amount during which payment is made under
described in paragraph (e)(1)(i) of this this section must continue to furnish
section. the equipment for the entire 36-month
(3) In establishing the volume adjust- period of continuous use, unless med-
ment for those beneficiaries whose phy- ical necessity ends or—
sicians prescribe varying flow rates, (i) The item becomes subject to a
the following rules apply: competitive acquisition program im-
(i) If the prescribed flow rate is dif- plemented in accordance with section
ferent for stationary oxygen equipment 1847(a) of the Act;
than for portable oxygen equipment, (ii) The beneficiary relocates to an
the flow rate for the stationary equip- area that is outside the normal service
ment is used. area of the supplier that initially fur-
(ii) If the prescribed flow rate is dif- nished the equipment;
ferent for the patient at rest than for (iii) The beneficiary elects to obtain
the patient at exercise, the flow rate oxygen equipment from a different sup-
for the patient at rest is used. plier prior to the expiration of the 36-
(iii) If the prescribed flow rate is dif- month rental period; or
ferent for nighttime use and daytime (iv) CMS or the carrier determines
use, the average of the two flow rates that an exception should apply in an
is used. individual case based on the cir-
(f) Furnishing oxygen and oxygen cumstances.
equipment after the 36-month rental cap. (2) Oxygen equipment furnished
(1) The supplier that furnishes oxygen under this section may not be replaced
equipment for the 36th continuous by the supplier prior to the expiration
66
of the reasonable useful lifetime estab- change in the level of the CPI-U for the
lished for the equipment in accordance 6-month period ending December 1987.
with § 414.210(f)(1) unless: (ii) For 1991 through 1993, the local
(i) The supplier replaces an item with purchase price for the preceding year is
the same, or equivalent, make and adjusted by the applicable percentage
model of equipment because the item increase for the year. The applicable
initially furnished was lost, stolen, ir- percentage increase is equal to 0 per-
reparably damaged, is being repaired, cent for 1991. For 1992 and 1993, the ap-
or no longer functions; plicable percentage increase is equal to
(ii) A physician orders different the percentage increase in the CPI-U
equipment for the beneficiary. If the for the 12-month period ending with
order is based on medical necessity, June of the previous year.
then the order must indicate why the (iii) For 1994 and 1995, the applicable
equipment initially furnished is no percentage increase is 0 percent.
longer medically necessary and the (iv) For all subsequent years the ap-
supplier must retain this order in the plicable percentage increase is equal to
beneficiary’s medical record; the percentage increase in the CPI-U
(iii) The beneficiary chooses to ob- for the 12-month period ending with
tain a newer technology item or up- June of the previous year.
graded item and signs an advanced ben- (3) CMS determines the regional pur-
eficiary notice (ABN); or chase price equal to the following:
(iv) CMS or the carrier determines (i) For 1992, the average (weighted by
that a change in equipment is war- the relative volume of all claims
ranted. among carriers) of the local purchase
(3) Before furnishing oxygen equip- prices for the carriers in the region.
ment, the supplier must disclose to the (ii) For 1993 and subsequent years,
beneficiary its intentions regarding the regional purchase price for the pre-
whether it will accept assignment of ceding year adjusted by the applicable
all monthly rental claims for the dura- percentage increase for the year.
tion of the rental period. A supplier’s (4) CMS determines a purchase price
intentions could be expressed in the equal to the following:
form of a written agreement between (i) For 1989, 1990 and 1991, 100 percent
the supplier and the beneficiary. of the local purchase price.
[57 FR 57690, Dec. 7, 1992, as amended at 71 (ii) For 1992, 75 percent of the local
FR 65933, Nov. 9, 2006; 73 FR 69936, Nov. 19, purchase price plus 25 percent of the re-
2008; 78 FR 72253, Dec. 2, 2013] gional purchase price.
(iii) For 1993, 50 percent of the local
§ 414.228 Prosthetic and orthotic de- purchase price plus 50 percent of the re-
vices. gional purchase price.
(a) Payment rule. Payment is made on (iv) For 1994 and subsequent years,
a lump-sum basis for prosthetic and 100 percent of the regional purchase
orthotic devices subject to this sub- price.
part. (5) For 1992 and subsequent years,
(b) Fee schedule amounts. The fee CMS determines a national average
schedule amount for prosthetic and purchase price equal to the unweighted
orthotic devices is determined as fol- average of the purchase prices deter-
lows: mined under paragraph (b)(4) of this
(1) The carrier determines a base section for all carriers.
local purchase price equal to the aver- (6) CMS determines the fee schedule
age reasonable charge for items pur- amount equal to 100 percent of the pur-
chased during the period July 1, 1986 chase price determined under para-
through June 30, 1987 based on the graph (b)(4) of this section, subject to
mean of the carrier’s allowed charges the following limitations:
for the item. (i) For 1992, the amount cannot be
(2) The carrier determines a local greater than 125 percent nor less than
purchase price equal to the following: 85 percent of the national average pur-
(i) For 1989 and 1990, the base local chase price determined under para-
purchase price is adjusted by the graph (b)(5) of this section.
67
§ 414.229 42 CFR Ch. IV (10–1–17 Edition)
(ii) For 1993 and subsequent years, recognized as determined under para-
the amount cannot be greater than 120 graph (c) of this section subject to the
percent of the national average nor less following limitation: For 1989 and 1990,
than 90 percent of the national average the fee schedule amount cannot be
purchase price determined under para- greater than 115 percent nor less than
graph (b)(5) of this section. 85 percent of the prevailing charge, as
(c) Payment for therapeutic shoes. The determined under § 405.504 of this chap-
payment rules specified in paragraphs ter, established for rental of the item
(a) and (b) of this section are applicable in January 1987, as adjusted by the
to custom molded and extra depth change in the level of the CPI-U for the
shoes, modifications, and inserts 6-month period ending December 1987.
(therapeutic shoes) furnished after De- (2) For 1991 and subsequent years, the
cember 31, 2004. monthly fee schedule amount for rent-
al of other covered durable medical
FR 35498, July 10, 1995; 73 FR 69937, Nov. 19, equipment equals 10 percent of the pur-
2008] chase price recognized as determined
under paragraph (c) of this section for
§ 414.229 Other durable medical equip- each of the first 3 months and 7.5 per-
ment—capped rental items. cent of the purchase price for each of
(a) General payment rule. Payment is the remaining months.
made for other durable medical equip- (3) For power-driven wheelchairs fur-
ment that is not subject to the pay- nished on or after January 1, 2011, the
ment provisions set forth in § 414.220 monthly fee schedule amount for rent-
through § 414.228 as follows: al equipment equals 15 percent of the
(1) For items furnished prior to Janu- purchase price recognized as deter-
ary 1, 2006, payment is made on a rent- mined under paragraph (c) of this sec-
al or purchase option basis in accord- tion for each of the first 3 months and
ance with the rules set forth in para- 6 percent of the purchase price for each
graphs (b) through (e) of this section. of the remaining months.
(2) For items other than power-driven (c) Determination of purchase price.
wheelchairs furnished on or after Janu- The purchase price of other covered du-
ary 1, 2006, payment is made in accord- rable medical equipment is determined
ance with the rules set forth in para- as follows:
graph (f) of this section. (1) For 1989 and 1990. (i) The carrier
(3) For power-driven wheelchairs fur- determines a base local purchase price
nished on or after January 1, 2006 amount equal to the average of the
through December 31, 2010, payment is purchase prices submitted on an as-
made in accordance with the rules set signment-related basis of new items
forth in paragraphs (f) or (h) of this supplied during the 6-month period
section. ending December 1986.
(4) For power-driven wheelchairs that (ii) The purchase price is equal to the
are not classified as complex rehabili- base local purchase price adjusted by
tative power-driven wheelchairs, fur- the change in the level of the CPI-U for
nished on or after January 1, 2011, pay- the 6-month period ending December
ment is made in accordance with the 1987.
rules set forth in paragraph (f) of this (2) For 1991. (i) The local payment
section. amount is the purchase price for the
(5) For power-driven wheelchairs preceding year adjusted by the covered
classified as complex rehabilitative item update for 1991 and decreased by
power-driven wheelchairs, furnished on the percentage by which the average of
or after January 1, 2011, payment is the reasonable charges for claims paid
made in accordance with the rules set for all other items described in § 414.229,
forth in paragraphs (f) or (h) of this is lower than the average of the pur-
section. chase prices submitted for such items
(b) Fee schedule amounts for rental. (1) during the final 9 months of 1988.
For 1989 and 1990, the monthly fee (ii) The purchase price for 1991 is the
schedule amount for rental of other national limited payment amount as

covered durable medical equipment determined using the methodology
equals 10 percent of the purchase price contained in § 414.220(f).
68
(3) For years after 1991. The purchase not exceed 10 percent of the purchase
price is determined using the method- price recognized as determined under
ology contained in paragraphs (d) paragraph (c) of this section.
through (f) of § 414.220. (2) Payment of the fee for mainte-
(d) Purchase option. Suppliers must nance and servicing of other durable
offer a purchase option to beneficiaries medical equipment that is rented is
during the 10th continuous rental made only for equipment that con-
month and, for power-driven wheel- tinues to be used after 15 months of
chairs, the purchase option must also rental payments have been made and is
be made available at the time the limited to the following:
equipment is initially furnished. (i) For the first 6-month period, no
(1) Suppliers must offer beneficiaries payments are to be made.
the option of purchasing power-driven (ii) For each succeeding 6-month pe-
wheelchairs at the time the supplier riod, payment may be made during the
first furnishes the item. On or after first month of that period.
January 1, 2011, this option is available (3) Payment for maintenance and
only for complex rehabilitative power- servicing DME purchased in accord-
driven wheelchairs. Payment must be ance with paragraphs (d)(1) and
on a lump-sum fee schedule purchase (d)(2)(ii) of this section, is made on the
basis if the beneficiary chooses the pur- basis of reasonable and necessary
chase option. The purchase fee is the charges.
amount established in paragraph (c) of (f) Rules for capped rental items fur-
this section. nished beginning on or after January 1,
(2) Suppliers must offer beneficiaries 2006. (1) For items furnished on or after
the option of converting capped rental January 1, 2006, payment is made based
items (including power-driven wheel- on a monthly rental fee schedule
chairs not purchased when initially amount during the period of medical
furnished) to purchased equipment dur- need, but for no longer than a period of
ing their 10th continuous rental continuous use of 13 months. A period
month. Beneficiaries have one month of continuous use is determined under
from the date the supplier makes the the provisions in § 414.230.
offer to accept the purchase option. (2) The supplier must transfer title to
(i) If the beneficiary does not accept the item to the beneficiary on the first
the purchase option, payment con- day that begins after the 13th contin-
tinues on a rental basis not to exceed a uous month in which payments are
period of continuous use of longer than made under paragraph (f)(1) of this sec-
15 months. After 15 months of rental tion.
payments have been paid, the supplier (3) Payment for maintenance and
must continue to provide the item servicing of beneficiary-owned equip-
without charge, other than a charge for ment is made in accordance with
maintenance and servicing fees, until § 414.210(e).
medical necessity ends or Medicare (g) Additional supplier requirements for
coverage ceases. A period of continuous capped rental items that are furnished be-
use is determined under the provisions ginning on or after January 1, 2007. (1)
in § 414.230. The supplier that furnishes an item for
(ii) If the beneficiary accepts the pur- the first month during which payment
chase option, payment continues on a is made using the methodology de-
rental basis not to exceed a period of scribed in paragraph (f)(1) of this sec-
continuous use of longer than 13 tion must continue to furnish the
months. On the first day after 13 con- equipment until medical necessity
tinuous rental months during which ends, or the 13-month period of contin-
payment is made, the supplier must uous use ends, whichever is earlier, un-
transfer title to the equipment to the less—
beneficiary. (i) The item becomes subject to a
(e) Payment for maintenance and serv- competitive acquisition program im-
icing. (1) The carrier establishes a rea- plemented in accordance with section
sonable fee for maintenance and serv- 1847(a) of the Act;

icing for each rented item of other du- (ii) The beneficiary relocates to an
rable medical equipment. The fee may area that is outside the normal service
69
§ 414.230 42 CFR Ch. IV (10–1–17 Edition)
area of the supplier that initially fur- driven wheelchairs at the time the
nished the equipment; equipment is initially furnished.
(iii) The beneficiary elects to obtain (2) Payment is made on a lump-sum
the equipment from a different supplier purchase basis if the beneficiary choos-
prior to the expiration of the 13-month es this option.
rental period; or (3) On or after January 1, 2011, this
(iv) CMS or the carrier determines option is available only for complex re-
that an exception should apply in an habilitative power-driven wheelchairs.
individual case based on the cir- [57 FR 57691, Dec. 7, 1992, as amended at 60
cumstances. FR 35498, July 10, 1995; 71 FR 65934, Nov. 9,
(2) A capped rental item furnished 2006; 75 FR 73622, Nov. 29, 2010]
under this section may not be replaced
by the supplier prior to the expiration § 414.230 Determining a period of con-
of the 13-month rental period unless: tinuous use.
(i) The supplier replaces an item with (a) Scope. This section sets forth the
the same, or equivalent, make and rules that apply in determining a pe-
model of equipment because the item riod of continuous use for rental of du-
initially furnished was lost, stolen, ir- rable medical equipment.
reparably damaged, is being repaired, (b) Continuous use. (1) A period of
or no longer functions; continuous use begins with the first
(ii) A physician orders different month of medical need and lasts until
equipment for the beneficiary. If the a beneficiary’s medical need for a par-
need for different equipment is based ticular item of durable medical equip-
on medical necessity, then the order ment ends.
must indicate why the equipment ini- (2) In the case of a beneficiary receiv-
tially furnished is no longer medically ing oxygen equipment on December 31,
necessary and the supplier must retain 2005, the period of continuous use for
this order in the beneficiary’s medical the equipment begins on January 1,
record; 2006.
(iii) The beneficiary chooses to ob- (c) Temporary interruption. (1) A pe-
tain a newer technology item or up- riod of continuous use allows for tem-
graded item and signs an advanced ben- porary interruptions in the use of
eficiary notice (ABN); or equipment.
(iv) CMS or the carrier determines (2) An interruption of not longer than
that a change in equipment is war- 60 consecutive days plus the days re-
ranted. maining in the rental month in which
(3) Before furnishing a capped rental use ceases is temporary, regardless of
item, the supplier must disclose to the the reason for the interruption.
beneficiary its intentions regarding (3) Unless there is a break in medical
whether it will accept assignment of necessity that lasts lnnger than 60 con-
all monthly rental claims for the dura- secutive days plus the days remaining
tion of the rental period. A supplier’s in the rental month in which use
intentions could be expressed in the ceases, medical necessity is presumed
form of a written agreement between to continue.
the supplier and the beneficiary. (d) Criteria for a new rental period. If
(4) No later than two months before an interruption in the use of equipment
the date on which the supplier must continues for more than 60 consecutive
transfer title to a capped rental item days plus the days remaining in the
to the beneficiary, the supplier must rental month in which use ceases, a
disclose to the beneficiary whether it new rental period begins if the supplier
can maintain and service the item submits all of the following informa-
after the beneficiary acquires title to tion—
it. CMS or its carriers may make ex- (1) A new prescription.
ceptions to this requirement on a case- (2) New medical necessity docu-
by-case basis. mentation.
(h) Purchase of power-driven wheel- (3) A statement describing the reason
chairs furnished on or after January 1, for the interruption and demonstrating

2006. (1) Suppliers must offer bene- that medical necessity in the prior epi-
ficiaries the option to purchase power- sode ended.
70
(e) Beneficiary moves. A permanent or (3) Effective January 1, 1994—the re-

temporary move made by a beneficiary duced payment amount in paragraph
does not constitute an interruption in (a)(1) is reduced by 45 percent.
the period of continuous use. (b) Exception. In order to permit an
(f) New equipment. (1) If a beneficiary attending physician time to determine
changes equipment or requires addi- whether the purchase of the TENS is
tional equipment based on a physi- medically appropriate for a particular
cian’s prescription, and the new or ad- patient, two months of rental pay-
ditional equipment is found to be nec- ments may be made in addition to the
essary, a new period of continuous use purchase price. The rental payments
begins for the new or additional equip- are equal to 10 percent of the purchase
ment. A new period of continuous use price.
does not begin for base equipment that [57 FR 57692, Dec. 7, 1992, as amended at 60
is modified by an addition. FR 35498, July 10, 1995]
(2) A new period of continuous use
does not begin when a beneficiary § 414.234 Prior authorization for items
changes from one stationary oxygen frequently subject to unnecessary
utilization.
equipment modality to another or from
one portable oxygen equipment modal- (a) Definitions. For the purpose of this
ity to another. section, the following definitions
(g) New supplier. If a beneficiary apply:
changes suppliers, a new period of con- Prior authorization is a process
tinuous use does not begin. through which a request for provisional
(h) Oxygen equipment furnished after affirmation of coverage is submitted to
the 36-month rental period. A new period CMS or its contractors for review be-
of continuous use does not begin under fore the item is furnished to the bene-
any circumstance in the case of oxygen ficiary and before the claim is sub-
equipment furnished after the 36- mitted for processing.
month rental period in accordance with Provisional affirmation is a prelimi-
§ 414.226(f) until the end of the reason- nary finding that a future claim meets
able useful lifetime established for Medicare’s coverage, coding, and pay-
such equipment in accordance with ment rules.
§ 414.210(f). Unnecessary utilization means the fur-
nishing of items that do not comply
[56 FR 50823, Oct. 9, 1991, as amended at 57 FR with one or more of Medicare’s cov-
57111, Dec. 3, 1992; 71 FR 65935, Nov. 9, 2006; 73 erage, coding, and payment rules.
FR 69937, Nov. 19, 2008]
(b) Master list of items frequently sub-
§ 414.232 Special payment rules for ject to unnecessary utilization. (1) The
transcutaneous electrical nerve Master List of Items Frequently Sub-
stimulators (TENS). ject to Unnecessary Utilization in-
cludes items listed on the Durable Med-
(a) General payment rule. Except as ical Equipment, Prosthetics, Orthotics,
provided in paragraph (b) of this sec- and Supplies fee schedule with an aver-
tion, payment for TENS is made on a age purchase fee of $1,000 (adjusted an-
purchase basis with the purchase price nually for inflation using consumer
determined using the methodology for price index for all urban consumers
purchase of inexpensive or routinely (CPI–U)) or greater or an average rent-
purchased items as described in al fee schedule of $100 (adjusted annu-
§ 414.220. The payment amount for ally for inflation using CPI–U) or
TENS computed under § 414.220(c)(2) is greater that also meet one of the fol-
reduced according to the following for- lowing two criteria:
mula: (i) The item has been identified as
(1) Effective April 1, 1990—the origi- having a high rate of fraud or unneces-
nal payment amount is reduced by 15 sary utilization in a report that is na-
percent. tional in scope from 2007 or later pub-
(2) Effective January 1, 1991—the re- lished by any of the following:

duced payment amount in paragraph (A) The Office of Inspector General
(a)(1) is reduced by 15 percent. (OIG).
71
§ 414.234 42 CFR Ch. IV (10–1–17 Edition)
(B) The General Accountability Of- (i) The Required Prior Authorization
fice (GAO). List specified in paragraph (c)(1) of this
(ii) The item is listed in the 2011 or section is selected from the Master
later Comprehensive Error Rate Test- List of Items Frequently Subject to
ing (CERT) program’s Annual Medicare Unnecessary Utilization (as described
Fee-For-Service (FFS) Improper Pay- in paragraph (b) of this section). CMS
ment Rate Report DME and/or may consider factors such as geo-
DMEPOS Service Specific Report(s). graphic location, item utilization or
(2) The Master List of DMEPOS cost, system capabilities, administra-
Items Frequently Subject to Unneces- tive burden, emerging trends,
sary Utilization is self-updating annu- vulnerabilities identified in official
ally and is published in the FEDERAL agency reports, or other data analysis.
REGISTER. (ii) CMS may elect to limit the prior
(3) DMEPOS items identified as hav- authorization requirement to a par-
ing a high rate of fraud or unnecessary ticular region of the country if claims
utilization in any of the following re- data analysis shows that unnecessary
ports that are national in scope and utilization of the selected item(s) is
meeting the payment threshold cri- concentrated in a particular region.
teria set forth in paragraph (b)(1) of (iii) The Required Prior Authoriza-
this section are added to the Master tion List is effective no less than 60
List: days after publication and posting.
(i) OIG reports published after 2015. (2) Denial of claims. (i) CMS or its con-
tractors denies a claim for an item
(ii) GAO reports published after 2015.
that requires prior authorization if the
(iii) CERT program’s Annual Medi- claim has not received a provisional af-
care FFS Improper Payment Rate Re- firmation.
port DME and/or DMEPOS Service Spe- (ii) Claims receiving a provisional af-
cific Report(s) published after 2015, also firmation may be denied based on ei-
referred to as the Comprehensive Error ther of the following:
Rate Testing (CERT) program’s Annual (A) Technical requirements that can
Medicare FFS Improper Payment Rate only be evaluated after the claim has
Report DME Service Specific Report(s). been submitted for formal processing.
(4) Items remain on the Master List (B) Information not available at the
for 10 years from the date the item was time of a prior authorization request.
added to the Master List. (d) Submission of prior authorization re-
(5) Items that are discontinued or are quests. A prior authorization request
no longer covered by Medicare are re- must do the following:
moved from the Master List. (1) Include all relevant documenta-
(6) An item is removed from the list tion necessary to show that the item
if the purchase amount drops below the meets applicable Medicare coverage,
payment threshold (an average pur- coding, and payment rules, including
chase fee of $1,000 or greater or an aver- all of the following:
age monthly rental fee schedule of $100 (i) Order.
or greater). (ii) Relevant information from the
(7) An item is removed from the Mas- beneficiary’s medical record.
ter List and replaced by its equivalent (iii) Relevant supplier produced docu-
when the Healthcare Common Proce- mentation.
dure Coding System (HCPCS) code rep- (2) Be submitted before the item is
resenting the item has been discon- furnished to the beneficiary and before
tinued and cross-walked to an equiva- the claim is submitted for processing.
lent item. (e) Review of prior authorization re-
(c) Condition of payment—(1) Items requests. (1) After receipt of a prior au-
quiring prior authorization. CMS pub- thorization request, CMS or its con-
lishes in the FEDERAL REGISTER and tractor reviews the prior authorization
posts on the CMS Prior Authorization request for compliance with applicable
Web site a list of items, the Required Medicare coverage, coding, and pay-
Prior Authorization List, that require ment rules.

prior authorization as a condition of (2) If applicable Medicare coverage,
payment. coding, and payment rules are met,
72
CMS or its contractor issues a provi- (b) Physician services related to

sional affirmation to the requester. renal transplantation.
(3)(i) If applicable Medicare coverage, (c) Home dialysis equipment, sup-
coding, and payment rules are not met, plies, and support services.
CMS or its contractor issues a non-af- (d) Epoetin (EPO) furnished by a sup-
firmation decision to the requester. plier of home dialysis equipment and
(ii) If the requester receives a non-af- supplies to a home dialysis patient for
firmation decision, the requester may use in the home.
resubmit a prior authorization request
before the item is furnished to the ben- [55 FR 23441, June 8, 1990, as amended at 56
FR 43710, Sept. 4, 1991; 59 FR 1285, Jan. 10,
eficiary and before the claim is sub-
1994]
mitted for processing.
(4) Expedited reviews. (i) A prior au- § 414.310 Determination of reasonable
thorization request for an expedited re- charges for physician services fur-
view must include documentation that nished to renal dialysis patients.
shows that processing a prior author-
(a) Principle. Physician services fur-
ization request using a standard
nished to renal dialysis patients are
timeline for review could seriously
subject to payment if the services are
jeopardize the life or health of the ben-
otherwise covered by the Medicare pro-
eficiary or the beneficiary’s ability to
gram and if they are considered reason-
regain maximum function.
able and medically necessary in ac-
(ii) If CMS or its contractor agrees
cordance with section 1862(a)(1)(A) of
that processing a prior authorization
the Act.
request using a standard timeline for
(b) Scope and applicability—(1) Scope.
review could seriously jeopardize the
This section pertains to physician serv-
life or health of the beneficiary or the
ices furnished to the following pa-
beneficiary’s ability to regain max-
tients:
imum function, then CMS or its con-
tractor expedites the review of the (i) Outpatient maintenance dialysis
prior authorization request and com- patients who dialyze—
municates the decision following the (A) In an independent or hospital-
receipt of all applicable Medicare rebased ESRD facility, or
quired documentation. (B) At home.
(f) Suspension of prior authorization re- (ii) Hospital inpatients for which the
quests. (1) CMS may suspend prior au- physician elects to continue payment
thorization requirements generally or under the monthly capitation payment
for a particular item or items at any (MCP) method described in § 414.314.
time and without undertaking rule- (2) Applicability. These provisions
making. apply to routine professional services
(2) CMS provides notification of the of physicians. They do not apply to ad-
suspension of the prior authorization ministrative services performed by
requirements via— physicians, which are paid for as part
(i) FEDERAL REGISTER notice; and of a prospective payment for dialysis
(ii) Posting on the CMS prior author- services made to the facility under
ization Web site. § 413.170 of this chapter.
(c) Definitions. For purposes of this
[80 FR 81706, Dec. 30, 2015]
section, the following definitions
apply:
Subpart E—Determination of Rea- Administrative services are physician
sonable Charges Under the services that are differentiated from
ESRD Program routine professional services and other
physician services because they are su-
§ 414.300 Scope of subpart. pervision, as described in the definition
This subpart sets forth criteria and of ‘‘supervision of staff’’ of this section,
procedures for payment of the fol- or are not related directly to the care
lowing services furnished to ESRD pa- of an individual patient, but are sup-
tients: portive of the facility as a whole and of

(a) Physician services related to benefit to patients in general. Exam-
renal dialysis. ples of administrative services include
73
§ 414.313 42 CFR Ch. IV (10–1–17 Edition)
supervision of staff, staff training, par- (iii) Evaluation of the patient’s psy-
ticipation in staff conferences and in chosocial status and the appropriate-
the management of the facility, and ness of the treatment modality.
advising staff on the procurement of (2) Medical direction of staff in deliv-
supplies. ering services to a patient during a di-
Dialysis session is the period of time alysis session.
that begins when the patient arrives at (3) Pre-dialysis and post-dialysis ex-
the facility and ends when the patient aminations, or examinations that
departs from the facility. In the case of could have been furnished on a pre-di-
home dialysis, the period begins when alysis or post-dialysis basis.
the patient prepares for dialysis and (4) Insertion of catheters for patients
generally ends when the patient is dis- who are on peritoneal dialysis and do
connected from the machine. In this not have indwelling catheters.
context, a dialysis facility includes (e) Payment for routine professional
only those parts of the building used as services. Beginning August 7, 1990, rou-
a facility. It does not include any areas tine professional services furnished by
used as a physician’s office. physicians may be paid under either
Medical direction, in contrast to su- the ‘‘initial method’’ of payment de-
pervision of staff, is a routine profes- scribed in § 414.313, (if all of the physi-
sional service that entails substantial cians at the facility elect the initial
direct involvement and the physical method) or under the ‘‘physician MCP
presence of the physician in the deliv- method’’ described in § 414.314. Physi-
ery of services directly to the patient. cian services furnished after July 31,
Routine professional services include 1983 and before August 6, 1990, are pay-
all physicians’ services furnished durable only under the MCP method de-
ing a dialysis session and all services scribed in § 414.314.
listed in paragraph (d) of this section § 414.313 Initial method of payment.
that meet the following requirements:
(1) They are personally furnished by (a) Basic rule. Under this method, the
a physician to an individual patient. intermediary pays the facility for rou-
(2) They contribute directly to the di- tine professional services furnished by
agnosis or treatment of an individual physicians. Payment is in the form of
patient. an add-on to the facility’s composite
rate payment, which is described in
(3) They ordinarily must be per-
part 413, subpart H of this subchapter.
formed by a physician.
(b) Services for which payment is not
Supervision of staff, in contrast to included in the add-on payment. (1) Phy-
medical direction, is an administrative sician administrative services are con-
service that does not necessarily re- sidered to be facility services and are
quire the physician to be present at the paid for as part of the facility’s com-
dialysis session. It is a general activity posite rate.
primarily concerned with monitoring (2) The carrier pays the physician or
performance of and giving guidance to the beneficiary (as appropriate) under
other health care personnel (such as the reasonable charge criteria set forth
nurses and dialysis technicians) who in subpart E of part 405 of this chapter
deliver services to patients. for the following services:
(d) Types of routine professional serv- (i) Physician services that must be
ices. Routine professional services in- furnished at a time other than during
clude at least all of the following serv- the dialysis session (excluding pre-di-
ices when medically appropriate: alysis and post-dialysis examinations
(1) Visits to the patient during dialy- and examinations that could have been
sis, and review of laboratory test re- furnished on a pre-dialysis or post-di-
sults, nurses’ notes and any other med- alysis basis), such as monthly and
ical documentation, as a basis for— semi-annual examinations to review
(i) Adjustment of the patient’s medi- health status and treatment.
cation or diet, or the dialysis proce- (ii) Physician surgical services other
dure; than insertion of catheters for patients

(ii) Prescription of medical supplies; who are on peritoneal dialysis and do
and not have indwelling catheters.
74
(iii) Physician services furnished to § 414.314 Monthly capitation payment

hospital inpatients who were not ad- method.
mitted solely to receive maintenance
(a) Basic rules. (1) Under the monthly
dialysis.
capitation payment (MCP) method, the
(iv) Administration of hepatitis B
carrier pays an MCP amount for each
vaccine.
(c) Physician election of the initial patient, to cover all professional serv-
method. (1) Each physician in a facility ices furnished by the physician, except
must submit to the appropriate carrier those listed in paragraph (b) of this
and intermediary that serve the facil- section.
ity a statement of election of the ini- (2) The carrier pays the MCP amount,
tial method of payment for all the subject to the deductible and coinsur-
ESRD facility patients that he or she ance provisions, either to the physician
attends. if the physician accepts assignment or
(2) The initial method of payment ap- to the beneficiary if the physician does
plies to dialysis services furnished be- not accept assignment.
ginning with the second calendar (3) The MCP method recognizes the
month after the month in which all need of maintenance dialysis patients
physicians in the facility elect the ini- for physician services furnished peri-
tial method and continues until the ef- odically over relatively long periods of
fective date of a termination of the time, and the capitation amounts are
election described in paragraph (d) of consistent with physicians’ charging
this section. patterns in their localities.
(d) Termination of the initial method. (4) Payment of the capitation
(1) Physicians may terminate the ini- amount for any particular month is
tial method of payment by written no- contingent upon the physician fur-
tice to the carrier(s) that serves each nishing to the patient all physician
physician and to the intermediary that services required by the patient during
serves the facility. the month, except those listed in para-
(2) If the notice terminating the ini- graph (b) of this section.
tial method is received by the car-
(5) Payment for physician adminis-
rier(s) and intermediary—
(i) On or before November 1, the ef- trative services (§ 414.310) is made to
fective date of the termination is Janu- the dialysis facility as part of the fa-
ary 1 of the year following the calendar cility’s composite rate (part 413, sub-
year in which the termination notice is part H of this subchapter) and not to
received by the carrier(s) and inter- the physician under the MCP.
mediary; or (b) Services not included in the MCP.
(ii) After November 1, the effective (1) Services that are not included in
date of the termination is January 1 of the MCP and which may be paid in ac-
the second year after the calendar year cordance with the reasonable charge
in which the notice is received by the rules set forth in subpart E of part 405
carrier(s) and intermediary. of this chapter are limited to the fol-
(e) Determination of payment amount. lowing:
The factors used in determining the (i) Administration of hepatitis B vac-
add-on amount are related to program cine.
experience. They are re-evaluated peri- (ii) Covered physician services fur-
odically and may be adjusted, as deter- nished by another physician when the
mined necessary by CMS, to maintain patient is not available to receive, or
the payment at a level commensurate the attending physician is not avail-
with the prevailing charges of other able to furnish, the outpatient services
physicians for comparable services. as usual (see paragraph (b)(3) of this
(f) Publication of payment amount. Re- section).
visions to the add-on amounts are pub- (iii) Covered physician services fur-
lished in the FEDERAL REGISTER in ac- nished to hospital inpatients, including
cordance with the Department’s estab- services related to inpatient dialysis,
lished rulemaking procedures. by a physician who elects not to con-

[55 FR 23441, June 8, 1990, as amended at 62 tinue to receive the MCP during the pe-
FR 43674, Aug. 15, 1997] riod of inpatient stay.
75
§ 414.316 42 CFR Ch. IV (10–1–17 Edition)
(iv) Surgical services, including (c) The payment is made at the end
declotting of shunts, other than the in- of the training course, is subject to the
sertion of catheters for patients on deductible and coinsurance provisions,
maintenance peritoneal dialysis who and is in addition to any amounts pay-
do not have indwelling catheters. able under the initial or MCP methods
(v) Needed physician services that set forth in §§ 414.313 and 414.314, respec-
are— tively.
(A) Furnished by the physician fur- (d) If the training is not completed,
nishing renal care or by another physi- the payment amount is proportionate
cian; to the time spent in training.
(B) Not related to the treatment of
the patient’s renal condition; and § 414.320 Determination of reasonable
(C) Not furnished during a dialysis charges for physician renal trans-
session or an office visit required be- plantation services.
cause of the patient’s renal condition. (a) Comprehensive payment for services
(2) For the services described in para- furnished during a 60-day period. (1) The
graph (b)(1)(v) of this section, the fol- comprehensive payment is subject to
lowing rules apply: the deductible and coinsurance provi-
(i) The physician must provide docu- sions and is for all surgeon services fur-
mentation to show that the services nished during a period of 60 days in
are not related to the treatment of the connection with a renal transplan-
patient’s renal condition and that addi- tation, including the usual pre-
tional visits are required. operative and postoperative care, and
(ii) The carrier’s medical staff, acting for immunosuppressant therapy if su-
on the basis of the documentation and pervised by the transplant surgeon.
appropriate medical consultation ob-
(2) Additional sums, in amounts es-
tained by the carrier, determines
tablished on the basis of program expe-
whether additional payment for the ad-
rience, may be included in the com-
ditional services is warranted.
prehensive payment for other surgery
(3) The MCP is reduced in proportion
performed concurrently with the trans-
to the number of days the patient is—
plant operation.
(i) Hospitalized and the physician
elects to bill separately for services (3) The amount of the comprehensive
furnished during hospitalization; or payment may not exceed the lower of
(ii) Not attended by the physician or the following:
his or her substitute for any reason, in- (i) The actual charges made for the
cluding when the physician is not services.
available to furnish patient care or (ii) Overall national payment levels
when the patient is not available to re- established under the ESRD program
ceive care. and adjusted to give effect to vari-
(c) Determination of payment amount. ations in physician’s charges through-
The amount of payment for the MCP is out the nation. (These adjusted
determined under the Medicare physi- amounts are the maximum allowances
cian fee schedule described in this part in a carrier’s service area for renal
414. transplantation surgery and related
services by surgeons.)
[55 FR 23441, June 8, 1990, as amended at 59
(4) Maximum allowances computed
FR 63463, Dec. 8, 1994; 62 FR 43674, Aug. 15,
1997] under these instructions are revised at
the beginning of each calendar year to
§ 414.316 Payment for physician serv- the extent permitted by the lesser of
ices to patients in training for self- the following:
dialysis and home dialysis. (i) Changes in the economic index as
(a) For each patient, the carrier pays described in § 405.504(a)(3)(i) of this
a flat amount that covers all physician chapter.
services required to create the capacity (ii) Percentage changes in the
for self-dialysis and home dialysis. weighted average of the carrier’s pre-
(b) CMS determines the amount on vailing charges (before adjustment by

the basis of program experience and re- the economic index) for—
views it periodically. (A) A unilateral nephrectomy; or
76
(B) Another medical or surgical serv- eficiary is also entitled to military or

ice designated by CMS for this purpose. veteran’s benefits, one military or Vet-
(b) Other payments. Payments for cov- erans Administration hospital, for each
ered medical services furnished to the patient. (See part 494 of this chapter
transplant beneficiary by other spe- for the requirements for a Medicare ap-
cialists, as well as for services by the proved dialysis facility.) Under the
transplant surgeon after the 60-day pe- agreement, the facility or military or
riod covered by the comprehensive pay- VA hospital agrees to the following:
ment, are made under the reasonable (1) To furnish all home dialysis sup-
charge criteria set forth in § 405.502 (a) port services for each patient in ac-
through (d) of this chapter. The pay- cordance with part 494 (Conditions for
ments for physicians’ services in con- Coverage for End-Stage Renal Disease
nection with renal transplantations are Facilities) of this chapter. (§ 410.52 sets
changed on the basis of program expe- forth the scope and conditions of Medi-
rience and the expected advances in the care Part B coverage of home dialysis
medical art for this operation. services, supplies, and equipment.)
(2) To furnish institutional dialysis
§ 414.330 Payment for home dialysis services and supplies. (§ 410.50 sets forth
equipment, supplies, and support the scope and conditions for Medicare
services. Part B coverage of institutional dialy-
(a) Equipment and supplies—(1) Basic sis services and supplies.)
rule. Except as provided in paragraph (3) To furnish dialysis-related emer-
(a)(2) of this section, Medicare pays for gency services.
home dialysis equipment and supplies (4) To arrange for a Medicare ap-
only under the prospective payment proved laboratory to perform dialysis-
rates established at § 413.210. related laboratory tests that are cov-
(2) Exception for equipment and sup- ered under the composite rate estab-
plies furnished prior to January 1, 2011. If lished at § 413.170 and to arrange for the
the conditions in subparagraphs (a)(2) laboratory to seek payment from the
(i) through (iv) of this section are met, facility. The facility then includes
Medicare pays for home analysis equip- these laboratory services in its claim
ment and supplies on a reasonable for payment for home dialysis support
charge basis in accordance with sub- services.
part E (Criteria for Determination of (5) To arrange for a Medicare ap-
Reasonable Charges; Reimbursement proved laboratory to perform dialysis-
for Services of Hospital Interns, Resi- related laboratory tests that are not
dents, and Supervising Physicians) of covered under the composite rate es-
part 405, but the amount of payment tablished at § 413.170 and for which the
may not exceed the limit for equip- laboratory files a Medicare claim di-
ment and supplies in paragraph (c)(2) of rectly.
this section. (6) To furnish all other necessary di-
(i) The patient elects to obtain home alysis services and supplies (that is,
dialysis equipment and supplies from a those which are not home dialysis
supplier that is not a Medicare ap- equipment and supplies).
proved dialysis facility. (7) To satisfy all documentation, rec-
(ii) The patient certifies to CMS that ordkeeping and reporting requirements
he or she has only one supplier for all in part 494 (Conditions for Coverage for
home dialysis equipment and supplies. End-Stage Renal Disease Facilities) of
This certification is made on CMS this chapter. This includes maintaining
Form 382 (the ‘‘ESRD Beneficiary Se- a complete medical record of ESRD re-
lection’’ form). lated items and services furnished by
(iii) In writing, the supplier— other parties. The facility must report,
(A) Agrees to receive Medicare pay- on the forms required by CMS or the
ment for home dialysis supplies and ESRD network, all data for each pa-
equipment only on an assignment-re- tient in accordance with subpart U.
lated basis; and (iv) The facility with which the
(B) Certifies to CMS that it has a agreement is made must be located

written agreement with one Medicare within a reasonable distance from the
approved dialysis facility or, if the ben- patient’s home (that is, located so that
77
§ 414.335 42 CFR Ch. IV (10–1–17 Edition)
the facility can actually furnish the tient per month for home dialysis sup-
needed services in a practical and time- port services, as determined by CMS,
ly manner, taking into account vari- plus the median cost per treatment for
ables like the terrain, whether the pa- all dialysis facilities for laboratory
tient’s home is located in an urban or tests included under the composite
rural area, the availability of transpor- rate, as determined by CMS, multiplied
tation, and the usual distances trav- by the national average number of
eled by patients in the area to obtain treatments per month.
health care services). (2) Equipment and supplies. Payment
(C) Agrees to report to the ESRD fa- for home dialysis equipment and sup-
cility providing support services, at plies is limited to an amount equal to
least every 45 days, all data (meaning the result obtained by subtracting the
information showing what supplies and support services payment limit in para-
services were provided to the patient graph (c)(1) of this section from the
and when each was provided) for each amount (or, in the case of continuous
patient regarding services and items cycling peritoneal dialysis, 130 percent)
furnished to the patient in accordance of the national median payment as de-
with § 494.100(c)(2) of this chapter. termined by CMS that would have been
(b) Support services—(1) Basic rule. Ex-
made under the prospective payment
cept as provided in paragraph (b)(2) of
rates established in § 413.170 of this
this section, Medicare pays for support
chapter for hospital-based facilities.
services only under the prospective
payment rates established in § 413.210 of (3) Notification of changes to the pay-
this chapter. ment limits. Updated data are incor-
(2) Exception for home support services porated into the payment limits when
furnished prior to January 1, 2011. If the the prospective payment rates estab-
patient elects to obtain home dialysis lished at § 413.170 of this chapter are up-
equipment and supplies from a supplier dated, and changes are announced by
that is not an approved ESRD facility, notice in the FEDERAL REGISTER with-
Medicare pays for support services, out a public comment period. Revisions
other than support services furnished of the methodology for determining the
by military or VA hospitals referred to limits are published in the FEDERAL
in paragraph (a)(2)(iii)(B) of this sec- REGISTER in accordance with the De-
tion, under paragraphs (b)(2) (i) and (ii) partment’s established rulemaking
of this section but in no case may the procedures.
amount of payment exceed the limit [57 FR 54187, Nov. 17, 1992, as amended at 73
for support services in paragraph (c)(1) FR 20474, Apr. 15, 2008; 75 FR 49202, Aug. 12,
of this section: 2010]
(i) For support services furnished by
a hospital-based ESRD facility, Medi- § 414.335 Payment for EPO furnished
care pays on a reasonable cost basis in to a home dialysis patient for use in
accordance with part 413 of this chap- the home.
ter. (a) Prior to January 1, 2011, payment
(ii) For support services furnished by for EPO used at home by a home dialy-
an independent ESRD facility, Medi- sis patient is made only to either a
care pays on the basis of reasonable Medicare approved ESRD facility or a
charges that are related to costs and supplier of home dialysis equipment
allowances that are reasonable when and supplies. Effective January 1, 2011,
the services are furnished in an effec- payment for EPO used at home by a
tive and economical manner. home dialysis patient is made only to a
(c) Payment limits for support serv- Medicare-approved ESRD facility in
ices, equipment and supplies, and noti- accordance with the per treatment
fication of changes to the payment payment as defined in § 413.230.
limits apply prior to January 1, 2011 as (b) After January 1, 2011, a home and
follows: self training amount is added to the
(1) Support services. The amount of
per treatment base rate for adult and

payment for home dialysis support
pediatric patients as defined in § 413.230
services is limited to the national aver-
age Medicare-allowed charge per pa- [75 FR 49202, Aug. 12, 2010]
78
Subpart F—Competitive Bidding submitted by a bidder as part of an

for Certain Durable Medical original bid submission under a com-
petitive acquisition program in order
Equipment, Prosthetics, to meet the required financial stand-
Orthotics, and Supplies ards.
(DMEPOS) Covered document review date means
§ 414.400 Purpose and basis. the later of—
(1) The date that is 30 days before the
This subpart implements competitive final date for the closing of the bid
bidding programs for certain DMEPOS window; or
items as required by sections 1847(a) (2) The date that is 30 days after the
and (b) of the Act. opening of the bid window.
[72 FR 18084, Apr. 10, 2007] DMEPOS stands for durable medical
equipment, prosthetics, orthotics, and
§ 414.402 Definitions. supplies.
For purposes of this subpart, the fol- Grandfathered item means all rented
lowing definitions apply: items within a product category for
Affected party means a contract sup- which payment was made prior to the
plier that has been notified that their implementation of a competitive bid-
DMEPOS CBP contract will be termi- ding program to a grandfathered sup-
nated for a breach of contract. plier that chooses to continue to fur-
Bid means an offer to furnish an item nish the items in accordance with
for a particular price and time period § 414.408(j) of this subpart and that fall
that includes, where appropriate, any within the following payment cat-
services that are directly related to the egories for competitive bidding:
furnishing of the item. (1) An inexpensive or routinely pur-
Bidding entity means the entity chased item described in § 414.220 of this
whose legal business name is identified part.
in the ‘‘Form A: Business Organization (2) An item requiring frequent and
Information’’ section of the bid. substantial servicing, as described in
Breach of contract means any devi- § 414.222 of this part.
ation from contract requirements, in- (3) Oxygen and oxygen equipment de-
cluding a failure to comply with a gov- scribed in § 414.226 of this part.
ernmental agency or licensing organi- (4) Other DME described in § 414.229 of
zation requirements, constitutes a this part.
breach of contract. Grandfathered supplier means a non-
Competitive bidding area (CBA) means contract supplier that chooses to con-
an area established by the Secretary tinue to furnish grandfathered items to
under this subpart. a beneficiary in a CBA.
Competitive bidding program means a Hearing officer means an individual,
program established under this subpart who was not involved with the CBIC
within a designated CBA. recommendation to take action for a
Composite bid means the sum of a sup- breach of a DMEPOS Competitive Bid-
plier’s weighted bids for all items with- ding Program contract, who is des-
in a product category for purposes of ignated by CMS to review and make an
allowing a comparison across bidding unbiased and independent rec-
suppliers. ommendation when there is an appeal
Contract supplier means an entity of CMS’s initial determination to take
that is awarded a contract by CMS to action for a breach of a DMEPOS Com-
furnish items under a competitive bid- petitive Bidding Program contract.
ding program. Hospital has the same meaning as in
Corrective action plan (CAP) means a section 1861(e) of the Act.
contract supplier’s written document Item means a product included in a
with supporting information that de- competitive bidding program that is
scribes the actions the contract sup- identified by a HCPCS code, which may
plier will take within a specified time- be specified for competitive bidding
frame to remedy a breach of contract. (for example, a product when it is fur-

Covered document means a financial, nished through mail order), or a com-
tax, or other document required to be bination of codes and/or modifiers, and
79
§ 414.402 42 CFR Ch. IV (10–1–17 Edition)
includes the services directly related thetics, Inc., or the Board for
to the furnishing of that product to the Orthotist/Prosthetist Certification) or
beneficiary. Items that may be in- an individual who has specialized train-
cluded in a competitive bidding pro- ing.
gram are: National mail order DMEPOS competi-
(1) Durable medical equipment (DME) tive bidding program means a program
other than class III devices under the whereby contracts are awarded to sup-
Federal Food, Drug and Cosmetic Act, pliers for the furnishing of mail order
as defined in § 414.202 of this part and items across the nation.
group 3 complex rehabilitative wheel- Nationwide competitive bidding area
chairs and further classified into the means a CBA that includes the United
following categories: States, its Territories, and the District
(i) Inexpensive or routinely pur- of Columbia.
chased items, as specified in § 414.220(a). Nationwide mail order contract supplier
(ii) Items requiring frequent and sub- means a mail order contract supplier
stantial servicing, as specified in that furnishes items in a nationwide
§ 414.222(a). competitive bidding area.
(iii) Oxygen and oxygen equipment, Network means a group of small sup-
as specified in § 414.226(c)(1). pliers that form a legal entity to pro-
(iv) Other DME (capped rental vide competitively bid items through-
items), as specified in § 414.229. out the entire CBA.
(2) Supplies necessary for the effec- Noncontract supplier means a supplier
tive use of DME other than inhalation that is not awarded a contract by CMS
drugs. to furnish items included in a competi-
(3) Enteral nutrients, equipment, and tive bidding program.
supplies. Non-mail order item means any item
(4) Off-the-shelf orthotics, which are (for example, diabetic testing supplies)
orthotics described in section 1861(s)(9) that a beneficiary or caregiver picks up
of the Act that require minimal self- in person at a local pharmacy or sup-
adjustment for appropriate use and do plier storefront.
not require expertise in trimming, Parties to the hearing means the
bending, molding, assembling or cus- DMEPOS contract supplier and CMS.
tomizing to fit a beneficiary. Physician has the same meaning as in
Item weight is a number assigned to section 1861(r) of the Act.
an item based on its beneficiary utili- Pivotal bid means the lowest com-
zation rate using national data when posite bid based on bids submitted by
compared to other items in the same suppliers for a product category that
product category. includes a sufficient number of sup-
Mail order contract supplier is a con- pliers to meet beneficiary demand for
tract supplier that furnishes items the items in that product category.
through the mail to beneficiaries who Price inversion means any situation
maintain a permanent residence in a where the following occurs: One item
competitive bidding area. (HCPCS code) in a grouping of similar
Mail order item means any item (for items (e.g., walkers, enteral infusion
example, diabetic testing supplies) pumps, or power wheelchairs) in a
shipped or delivered to the bene- product category includes a feature
ficiary’s home, regardless of the meth- that another, similar item in the same
od of delivery. product category does not have (e.g.,
Metropolitan Statistical Area (MSA) wheels, alarm, or Group 2 perform-
has the same meaning as that given by ance); the average of the 2015 fee sched-
the Office of Management and Budget. ule amounts (or initial, unadjusted fee
Minimal self-adjustment means an ad- schedule amounts for subsequent years
justment that the beneficiary, care- for new items) for the code with the
taker for the beneficiary, or supplier of feature is higher than the average of
the device can perform and does not re- the 2015 fee schedule amounts for the
quire the services of a certified code without the feature; and, fol-
orthotist (that is, an individual cer- lowing a competition, the SPA for the
tified by either the American Board for code with the feature is lower than the
Certification in Orthotics and Pros- SPA for the code without that feature.
80
Product category means a grouping of that all of the following conditions are
related items that are used to treat a satisfied:
similar medical condition. (i) The items furnished are limited to
Regional competitive bidding area crutches, canes, walkers, folding man-
means a CBA that consists of a region ual wheelchairs, blood glucose mon-
of the United States, its Territories, itors, and infusion pumps that are
and the District of Columbia. DME, and off-the-shelf (OTS) orthotics.
Regional mail order contract supplier (ii) The items are furnished by the
means a mail order contract supplier physician or treating practitioner to
that furnishes items in a regional com- his or her own patients as part of his or
petitive bidding area. her professional service or by a hos-
Single payment amount means the al- pital to its own patients during an ad-
lowed payment for an item furnished mission or on the date of discharge.
under a competitive bidding program. (iii) The items are billed under a bill-
Small supplier means, a supplier that ing number assigned to the hospital,
generates gross revenue of $3.5 million physician, the treating practitioner (if
or less in annual receipts including possible), or a group practice to which
Medicare and non-Medicare revenue. the physician or treating practitioner
Supplier means an entity with a valid has reassigned the right to receive
Medicare supplier number, including Medicare payment.
an entity that furnishes an item (2) A physical therapist in private
through the mail. practice (as defined in § 410.60(c) of this
Total nationwide allowed services chapter) or an occupational therapist
means the total number of services al- in private practice (as defined in
lowed for an item furnished in all § 410.59(c) of this chapter) may furnish
states, territories, and the District of competitively bid off-the-shelf
Columbia where Medicare beneficiaries orthotics without submitting a bid and
reside and can receive covered being awarded a contract under this
DMEPOS items and services. subpart, provided that the items are
Treating practitioner means a physi- furnished only to the therapist’s own
cian assistant, nurse practitioner, or patients as part of the physical or oc-
clinical nurse specialist, as those terms cupational therapy service.
are defined in section 1861(aa)(5) of the (3) Payment for items furnished in
Act. accordance with paragraphs (b)(1) and
Weighted bid means the item weight (b)(2) of this section will be paid in ac-
multiplied by the bid price submitted cordance with § 414.408(a).
for that item. [72 FR 18084, Apr. 10, 2007, as amended at 74
[72 FR 18084, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 75 FR 73623, Nov. 29,
FR 2880, Jan. 16, 2009; 74 FR 62009, Nov. 25, 2010; 76 FR 70314, Nov. 10, 2011]
2009; 75 FR 73622, Nov. 29, 2010; 76 FR 70314,
Nov. 10, 2011; 81 FR 77966, Nov. 4, 2016] § 414.406 Implementation of programs.
(a) Implementation contractor. CMS
§ 414.404 Scope and applicability. designates one or more implementa-
(a) Applicability. Except as specified tion contractors for the purpose of im-
in paragraph (b) of this section, this plementing this subpart.
subpart applies to all suppliers that (b) Competitive bidding areas. CMS des-
furnish the items defined in § 414.402 to ignates through program instructions
beneficiaries, including providers, phy- or by other means, such as the request
sicians, treating practitioners, physical for bids, each CBA in which a competi-
therapists, and occupational therapists tive bidding program may be imple-
that furnish such items under Medicare mented under this subpart.
Part B. (c) Revisions to competitive bidding
(b) Exceptions. (1) Physicians, treat- areas. CMS may revise the CBAs des-
ing practitioners, and hospitals may ignated under paragraph (b) of this sec-
furnish certain types of competitively tion.
bid durable medical equipment without (d) Competitively bid items. CMS des-
submitting a bid and being awarded a ignates the items that are included in
contract under this subpart, provided a competitive bidding program through
81
§ 414.408 42 CFR Ch. IV (10–1–17 Edition)
program instructions or by other (ii) Medicare may make a secondary

means payment for an item furnished by a
(e) Claims processing. The Durable noncontract supplier that the bene-
Medical Equipment Medicare Adminis- ficiary is required to use under his or
trative Contractor designated to proc- her primary insurance policy. The pro-
ess DMEPOS claims for a particular ge- visions of this paragraph do not super-
ographic region also processes claims sede Medicare secondary payer statu-
for items furnished under a competi- tory and regulatory provisions, includ-
tive bidding program in the same geo- ing the Medicare secondary payment
graphic region. rules located in §§ 411.32 and 411.33 of
[71 FR 48409, Aug. 18, 2006, as amended at 72 this subchapter, and payment will be
FR 18085, Apr. 10, 2007] calculated in accordance with those
rules.
§ 414.408 Payment rules. (iii) If a beneficiary is outside of the
(a) Payment basis. (1) The payment CBA in which he or she maintains a
basis for an item furnished under a permanent residence, he or she may ob-
competitive bidding program is 80 pertain an item from a—
cent of the single payment amount cal- (A) Contract supplier, if the bene-
culated for the item under § 414.416 for ficiary obtains the item in another
the CBA in which the beneficiary main- CBA and the item is included in the
tains a permanent residence. competitive bidding program for that
(2) If an item that is included in a CBA; or
competitive bidding program is fur- (B) Supplier with a valid Medicare
nished to a beneficiary who does not billing number, if the beneficiary ob-
maintain a permanent residence in a tains the item in an area that is not a
CBA, the payment basis for the item is CBA, or if the beneficiary obtains the
80 percent of the lesser of the actual item in another CBA but the item is
charge for the item, or the applicable not included in the competitive bidding
fee schedule amount for the item, as program for that CBA.
determined under subpart C or subpart
(iv) A physician, treating practi-
D.
tioner, physical therapist in private
(b) No changes to the single payment
practice, occupational therapist in pri-
amount. The single payment amount
vate practice, or hospital may furnish
calculated for each item under each
an item in accordance with § 414.404(b)
competitive bidding program is paid
of this subpart.
for the duration of the competitive bid-
(3) Unless paragraph (e)(2) of this sec-
ding program and will not be adjusted
tion applies:
by any update factor.
(c) Payment on an assignment-related (i) Medicare will not make payment
basis. Payment for an item furnished for an item furnished in violation of
under this subpart is made on an as- paragraph (e)(1) of this section, and
signment-related basis. (ii) A beneficiary has no financial li-
(d) Applicability of advanced bene- ability to a noncontract supplier that
ficiary notice. Implementation of a pro- furnishes an item included in the com-
gram in accordance with this subpart petitive bidding program for a CBA in
does not preclude the use of an ad- violation of paragraph (e)(1) of this sec-
vanced beneficiary notice. tion, unless the beneficiary has signed
(e) Requirement to obtain competitively an advanced beneficiary notice.
bid items from a contract supplier. (1) (4) CMS separately designates the
General rule. Except as provided in Medicare billing number of all noncon-
paragraph (e)(2) of this section, all tract suppliers to monitor compliance
items that are included in a competi- with paragraphs (e)(1) and (e)(2) of this
tive bidding program must be furnished section.
by a contract supplier for that pro- (f) Purchased equipment. (1) The single
gram. payment amounts for new purchased
(2) Exceptions. (i) A grandfathered durable medical equipment, including
supplier may furnish a grandfathered power wheelchairs that are purchased

item to a beneficiary in accordance when the equipment is initially fur-
with paragraph (j) of this section. nished and enteral nutrition equipment
82
are calculated based on the bids sub- fathered supplier under paragraph (j) of
mitted and accepted for these items. this section. Payment is made using
For contracts entered into beginning the methodology described in para-
on or after January 1, 2011, payment on graph (h)(1) of this section. The con-
a lump sum purchase basis is only tract supplier must transfer title to
available for power wheelchairs classi- the item to the beneficiary on the first
fied as complex rehabilitative power day that begins after the 13th contin-
wheelchairs. uous month in which payments are
(2) Payment for used purchased dura- made in accordance with this para-
ble medical equipment and enteral nu- graph.
trition equipment is made in an (ii) Medicare does not make payment
amount equal to 75 percent of the sin- to a contract supplier under paragraph
gle payment amounts calculated for (h)(3)(i) of this section if the contract
new purchased equipment under para- supplier furnishes capped rental dura-
graph (f)(1) of this section. ble medical equipment to a beneficiary
(g) Purchased supplies and orthotics. who previously rented the equipment
The single payment amounts for the from another contract supplier.
following purchased items are cal- (4) Maintenance and servicing of rented
culated based on the bids submitted DME. Separate maintenance and serv-
and accepted for the following items: icing payments are not made for any
(1) Supplies used in conjunction with rented durable medical equipment.
durable medical equipment.
(5) Payment for rented enteral nutrition
(2) Enteral nutrients.
equipment. Payment for rented enteral
(3) Enteral nutrition supplies.
nutrition equipment is made in an
(4) OTS orthotics.
amount equal to 10 percent of the sin-
(h) Rented equipment—(1) Capped rent-
gle payment amounts calculated for
al DME. Subject to the provisions of
new enteral nutrition equipment under
paragraph (h)(2) of this section, pay-
paragraph (f)(1) of this section for each
ment for capped rental durable medical
of the first 3 months, and 7.5 percent of
equipment is made in an amount equal
the single payment amount calculated
to 10 percent of the single payment
amounts calculated for new durable for these items under paragraph (f)(1)
medical equipment under paragraph of this section for each of the remain-
(f)(1) of this section for each of the first ing months 4 through 15. The contract
3 months, and 7.5 percent of the single supplier to which payment is made in
payment amounts calculated for these month 15 for furnishing enteral nutri-
items for each of the remaining months tion equipment on a rental basis must
4 through 13. continue to furnish, maintain and serv-
(2) For contracts entered into begin- ice the equipment until a determina-
ning on or after January 1, 2011, the tion is made by the beneficiary’s physi-
monthly fee schedule amount for rent- cian or treating practitioner that the
al of power wheelchairs equals 15 per- equipment is no longer medically nec-
cent of the single payment amounts essary.
calculated for new durable medical (6) Maintenance and servicing of rented
equipment under paragraph (f)(1) of enteral nutrition equipment. Payment for
this section for each of the first 3 the maintenance and servicing of
months, and 6 percent of the single rented enteral nutrition equipment be-
payment amounts calculated for these ginning 6 months after 15 months of
items for each of the remaining months rental payments is made in an amount
4 through 13. equal to 5 percent of the single pay-
(3) Additional payment to certain con- ment amounts calculated for these
tract suppliers for capped rental DME. (i) items under paragraph (f)(1) of this sec-
Except as specified in paragraph tion.
(h)(3)(ii) of this section, Medicare (7) Payment for inexpensive or routinely
makes 13 monthly payments to a con- purchased durable medical equipment.
tract supplier that furnishes capped Payment for inexpensive or routinely
rental durable medical equipment to a purchased durable medical equipment

beneficiary who would otherwise be en- furnished on a rental basis is made in
titled to obtain the item from a grand- an amount equal to 10 percent of the
83
§ 414.408 42 CFR Ch. IV (10–1–17 Edition)
single payment amount calculated for must transfer title of the oxygen equip-
new purchased equipment. ment to the beneficiary.
(8) Payment amounts for rented DME (iii) Medicare does not make pay-
requiring frequent and substantial serv- ment to a contract supplier under para-
icing—(i) General rule. Except as pro- graph (i)(2) of this section if the con-
vided in paragraph (h)(7)(ii) of this sec- tract supplier furnishes oxygen equip-
tion, the single payment amounts for ment to a beneficiary who previously
rented durable medical equipment re- rented the equipment from another
quiring frequent and substantial serv- contract supplier.
icing are calculated based on the rental (j) Special rules for certain rented dura-
bids submitted and accepted for the ble medical equipment and oxygen and ox-
furnishing of these items on a monthly ygen equipment—(1) Supplier election. (i)
basis. A supplier that is furnishing durable
(ii) Exception. The single payment medical equipment or is furnishing ox-
amounts for continuous passive motion ygen or oxygen equipment on a rental
exercise devices are calculated based basis to a beneficiary prior to the im-
on the bids submitted and accepted for plementation of a competitive bidding
the furnishing of these items on a daily program in the CBA where the bene-
basis. ficiary maintains a permanent resi-
(i) Monthly payment amounts for oxy- dence may elect to continue furnishing
gen and oxygen equipment—(1) Basic the item as a grandfathered supplier.
payment amount. Subject to the provi- (ii) A supplier that elects to be a
sions of paragraph (i)(2) of this section, grandfathered supplier must continue
the single payment amounts for oxygen to furnish the grandfathered items to
and oxygen equipment are calculated all beneficiaries who elect to continue
based on the bids submitted and ac- receiving the grandfathered items from
cepted for the furnishing on a monthly that supplier for the remainder of the
basis of each of the five classes of oxy- rental period for that item.
gen and oxygen equipment described in (2) Payment for grandfathered items
§ 414.226(c)(1). furnished during the first competitive bid-
(2) Additional payment to certain con- ding program implemented in a CBA.
tract suppliers. (i) Except as specified in Payment for grandfathered items fur-
paragraph (i)(2)(iii) of this section, nished during the first competitive bid-
Medicare makes monthly payments to ding program implemented in a CBA is
a contract supplier that furnishes oxy- made as follows:
gen equipment to a beneficiary who (i) For inexpensive and routinely pur-
would otherwise be entitled to obtain chased items described in § 414.220(a),
the item from a grandfathered supplier payment is made in the amount deter-
under paragraph (j) of this section as mined under § 414.220(b).
follows: (ii) For other durable medical equip-
(A) If Medicare made 26 or less ment or capped rental items described
monthly payments to the former sup- in § 414.229, payment is made in the
plier, Medicare makes a monthly pay- amount determined under § 414.229(b).
ment to the contract supplier for up to (iii) For items requiring frequent and
the number of months equal to the dif- substantial servicing described in
ference between 36 and the number of § 414.222, payment is made in accord-
months for which payment was made ance with paragraph (a)(1) of this sec-
to the former supplier. tion.
(B) If Medicare made 27 or more (iv) For oxygen and oxygen equip-
monthly payments to the former sup- ment described in § 414.226(c)(1), pay-
plier, Medicare makes 10 monthly payment is made in accordance with para-
ments to the contract supplier. graph (a)(1) of this section.
(ii) Payment is made using the meth- (3) Payment for grandfathered items
odology described in paragraph (i)(1) of furnished during all subsequent competi-
this section. On the first day after the tive bidding programs in a CBA. Begin-
month in which the final rental pay- ning with the second competitive bid-
ment is made under paragraph (i)(2)(i) ding program implemented in a CBA,
of this section, the contract supplier payment is made for grandfathered
84
items in accordance with paragraph (5) State that the beneficiary has the
(a)(1) of this section. choice to continue to receive a grand-
(4) Choice of suppliers. (i) Bene- fathered item(s) from the grand-
ficiaries who are renting an item that fathered supplier or may elect to re-
meets the definition of a grandfathered ceive the item(s) from a contract sup-
item in § 414.402 of this subpart may plier after the end of the last month for
elect to obtain the item from a grand- which a rental payment is made to the
fathered supplier. noncontract supplier.
(ii) A beneficiary who is otherwise (6) Provide the supplier’s telephone
entitled to obtain a grandfathered item number and instruct the beneficiary to
from a grandfathered supplier under call the supplier with any questions
paragraph (j) of this section may elect and to notify the supplier of his or her
to obtain the same item from a con- decision to use or not use the supplier
tract supplier at any time after a com- as a grandfathered supplier.
petitive bidding program is imple- (7) State that the beneficiary can ob-
mented. tain information about the competitive
(iii) If a beneficiary elects to obtain bidding program by calling 1–800–
the same item from a contract sup- MEDICARE or on the Internet at http://
plier, payment is made for the item ac- www.Medicare.gov.
(B) Record of beneficiary’s choice. The
cordance with paragraph (a)(1) of this
supplier should obtain an election from
section.
the beneficiary regarding whether to
(5) Notification of beneficiaries and
use or not use the supplier as a grand-
CMS by suppliers that choose to become fathered supplier. The supplier must
grandfathered suppliers. (i) Notification maintain a record of its attempts to
of beneficiaries by suppliers. (A) Require- communicate with the beneficiary to
ments of notification. A noncontract obtain the beneficiary’s election re-
supplier that elects to become a grand- garding grandfathering. When the sup-
fathered supplier must provide a 30-day plier obtains such an election, the sup-
written notification to each Medicare plier must maintain a record of the
beneficiary that resides in a competi- beneficiary decision including the date
tive bidding area and is currently rent- the choice was made, and how the ben-
ing a competitively bid item from that eficiary communicated his or her
supplier. The 30-day notification to the choice to the supplier.
beneficiary must meet the following (C) Notification. If the beneficiary
requirements: chooses not to continue to receive a
(1) Be sent by the supplier to the ben- grandfathered item(s) from their cur-
eficiary at least 30 business days before rent supplier, the supplier must pro-
the start date of the implementation of vide the beneficiary with 2 more no-
the competitive bidding program for tices in addition to the 30-day notice
the CBA in which the beneficiary re- prior to the supplier picking up its
sides. equipment.
(2) Identify the grandfathered items (1) 10-day notification: Ten business
that the supplier is willing to continue days prior to picking up the item, the
to rent to the beneficiary. supplier should have direct contact (for
(3) Be in writing (for example, by let- example, a phone call) with the bene-
ter or postcard) and the supplier must ficiary or the beneficiary’s caregiver
maintain proof of delivery. and receive acknowledgement that the
(4) State that the supplier is willing beneficiary understands their equip-
to continue to furnish certain rented ment will be picked up. This should
Durable Medical Equipment (DME), ox- occur on the first anniversary date
ygen and oxygen equipment, and sup- after the start of the CBP or on an-
plies that the supplier is currently fur- other date agreed to by the beneficiary
nishing to the beneficiary (that is, be- or the beneficiary’s caregiver. The
fore the start of the competitive bid- beneficiary’s anniversary date occurs
ding program) and is willing to con- every month and is the date of the
tinue to provide these items to the ben- month on which the item was first de-
eficiary for the remaining rental livered to the beneficiary by the cur-
months. rent supplier. When a date other than
85
§ 414.408 42 CFR Ch. IV (10–1–17 Edition)
the anniversary date is chosen by the they should not pick up the equipment
beneficiary or the beneficiary’s care- before that date unless an alternative
giver, the noncontract supplier will arrangement has been made with the
still receive payment up to the anni- beneficiary and the new contract sup-
versary date after the start of the CBP, plier.
and the new contract supplier may not (ii) Notification to CMS by suppliers. A
bill for any period of time before the noncontract supplier that elects to be-
anniversary date. come a grandfathered supplier must
(2) 2-day notification: Two business provide a written notification to CMS
days prior to picking up the item the of this decision. This notification must
supplier should contact the beneficiary meet the following requirements:
or the beneficiary’s caregiver by phone (A) State that the supplier agrees to
to notify the beneficiary of the date continue to furnish certain rented
the supplier will pick up the item. This DME, oxygen and oxygen equipment
date should not be before the bene- that it is currently furnishing to bene-
ficiary’s first anniversary date that oc- ficiaries (that is, before the start of the
curs after the start of the competitive competitive bidding program) in a CBA
bidding program unless an alternative and will continue to provide these
arrangement has been made with the items to these beneficiaries for the re-
beneficiary and the new contract sup- maining months of the rental period.
plier. (B) Include the following informa-
(D) Pickup procedures. (1) The pickup tion:
of the noncontract supplier’s equip- (1) Name and address of the supplier.
ment and the delivery of the new con- (2) The 6-digit NSC number of the
tract supplier’s equipment should supplier.
occur on the same date, that is, the (3) Product category(s) by CBA for
first rental anniversary date of the which the supplier is willing to be a
equipment that occurs after the start grandfathered supplier.
of the competitive bidding program un- (C) State that the supplier agrees to
less an alternative arrangement has meet all the terms and conditions per-
been made with the beneficiary and the taining to grandfathered suppliers.
new contract supplier. (D) Be provided by the supplier to
(2) Under no circumstance should a CMS in writing at least 30 business
supplier pick up a rented item prior to days before the start date of the imple-
the supplier’s receiving acknowledge- mentation of the Medicare DMEPOS
ment from the beneficiary that the Competitive Bidding Program.
beneficiary is aware of the date on (6) Suppliers that choose not to become
which the supplier is picking up the grandfathered suppliers. (i) Requirement
item and the beneficiary has made ar- for non-grandfathered supplier. A non-
rangements to have the item replaced contract supplier that elects not to be-
on that date by a contract supplier. come a grandfathered supplier is re-
(3) When a beneficiary chooses to quired to pick up the item it is cur-
switch to a new contract supplier, the rently renting to the beneficiary from
current noncontract supplier and the the beneficiary’s home after proper no-
new contract supplier must make ar- tification.
rangements that are suitable to the (ii) Notification. Proper notification
beneficiary. includes a 30-day, a 10-day, and a 2-day
(4) The contract supplier may not notice of the supplier’s decision not to
submit a claim with a date of delivery become a grandfathered supplier to its
for the new equipment that is prior to Medicare beneficiaries who are cur-
the first anniversary date that occurs rently renting certain DME competi-
after the beginning of the CBP, and the tively bid item(s) and who reside in a
contract supplier may not begin billing CBA.
until the first anniversary date that (iii) Requirements of notification.
occurs after the beginning of the CBP. These notifications must meet all of
(5) The noncontract supplier must the requirements listed in paragraph
submit a claim to be paid up to the (j)(5)(i) of this section for the 30-day,
first anniversary date that occurs after 10-day and 2-day notices that must be
the beginning of the CBP. Therefore, sent by suppliers who decide to be
86
grandfathered suppliers, with the fol- (k) Payment for maintenance, servicing
lowing exceptions for the 30-day notice. and replacement of beneficiary-owned
(A) State that, for those items for items. (1) Payment is made for the
which the supplier has decided not to maintenance and servicing of bene-
be a grandfathered supplier, the sup- ficiary-owned items, provided the
plier will only continue to rent these maintenance and servicing is per-
competitively bid item(s) to its bene- formed by a contract supplier or a non-
ficiaries up to the first anniversary contract supplier having a valid Medi-
date that occurs after the start of the care billing number, as follows:
Medicare DMEPOS Competitive Bid- (i) Payment for labor is made in ac-
ding Program. cordance with § 414.210(e)(1) of subpart
(B) State that the beneficiary must D.
select a contract supplier for Medicare (ii) Payment for parts that are not
to continue to pay for these items. items (as defined in § 414.402) is made in
(C) Refer the beneficiary to the con- accordance with § 414.210(e)(1) of sub-
tract supplier locator tool on and to 1– part D.
800–MEDICARE to obtain information (iii) Payment for parts that are items
about the availability of contract sup- (as defined in § 414.402) is made in ac-
pliers for the beneficiary’s area. cordance with paragraph (a)(1) of this
(iv) Pickup procedures. (A) The pick- section.
up of the noncontract supplier’s equip- (2) Additional payments are made in
ment and the delivery of the new con- accordance with § 414.210(e)(2), (e)(3)
tract supplier’s equipment should and (e)(5) of this part for the mainte-
occur on the same date, that is, the nance and servicing of oxygen equip-
first rental anniversary date of the ment if performed by a contract sup-
equipment that occurs after the start plier or a noncontract supplier having
of the competitive bidding program un- a valid Medicare billing number.
less an alternative arrangement has (3) Beneficiaries must obtain a re-
been made with the beneficiary and the placement of a beneficiary-owned item,
new contract supplier. other than parts needed for the repair
(B) Under no circumstance should a of beneficiary-owned equipment from a
supplier pick up a rented item prior to contract supplier. Payment is made for
the supplier’s receiving acknowledge- the replacement item in accordance
ment from the beneficiary that the with paragraph (a)(1) of this section.
beneficiary is aware of the date on (l) Exceptions for certain items and
which the supplier is picking up the services paid in accordance with special
item and the beneficiary has made ar- payment rules. The payment rules in
rangements to have the item replaced paragraphs (f) thru (h), (j)(2), (j)(3), and
on that date by a contract supplier. (j)(7), and (k) of this section do not
(C) When a beneficiary chooses to apply to items and services paid in ac-
switch to a new contract supplier, the cordance with the special payment
current noncontract supplier and the rules at § 414.409.
new contract supplier must make ar- [72 FR 18085, Apr. 10, 2007, as amended at 74
rangements that are agreeable to the FR 2880, Jan. 16, 2009; 74 FR 62009, Nov. 25,
beneficiary. 2009; 75 FR 73623, Nov. 29, 2010; 76 FR 70315,
(D) The contract supplier cannot sub- Nov. 10, 2011; 79 FR 66264, Nov. 6, 2014]
mit a claim with a date of delivery for
the new equipment that is prior to the § 414.409 Special payment rules.
first anniversary date that occurs after (a) Payment on a bundled, continuous
the beginning of the CBP. rental basis. In no more than 12 CBAs,
(7) Payment for accessories and supplies in conjunction with competitions that
for grandfathered items. Accessories and begin after January 1, 2015, payment is
supplies that are used in conjunction made on a bundled, continuous month-
with and are necessary for the effective ly rental basis for standard power
use of a grandfathered item may be fur- wheelchairs and continuous positive
nished by the same grandfathered sup- airway pressure (CPAP) devices. The
plier that furnishes the grandfathered CBAs and competitions where these
item. Payment is made in accordance payment rules apply are announced in
with paragraph (a)(1) of this section. advance of each competition, with the
87
§ 414.410 42 CFR Ch. IV (10–1–17 Edition)
payment rules in this section used in of title to the equipment to the bene-
lieu of the payment rules at § 414.408(f) ficiary. The responsibility of the con-
thru (h), (j)(2), (j)(3), and (j)(7), and (k). tract supplier to repair, maintain and
The single payment amounts are estab- service beneficiary-owned power wheel-
lished based on bids submitted and ac- chairs does not apply to power wheel-
cepted for furnishing rented standard chairs that the contract supplier did
power wheelchairs and CPAP devices not furnish to the beneficiary. For
on a monthly basis for each month of power wheelchairs that the contract
medical need during the contract pe- supplier furnishes during the contract
riod. The single payment amount for period, the responsibility of the con-
the monthly rental of the DME in- tract supplier to repair, maintain and
cludes payment for the rented equip- service the power wheelchair once it is
ment, maintenance and servicing of the owned by the beneficiary continues
rented equipment, and replacement of until the reasonable useful lifetime of
supplies and accessories necessary for the equipment expires, coverage for the
the effective use of the rented equip- power wheelchair ends, or the bene-
ment. Separate payment for replace- ficiary relocates outside the CBA
ment of equipment, repair or mainte- where the item was furnished. The con-
nance and servicing of equipment, or tract supplier may not charge the ben-
for replacement of accessories and sup- eficiary or the program for any nec-
plies necessary for the effective use of essary repairs or maintenance and
equipment is not allowed under any servicing of a beneficiary-owned power
circumstance. wheelchair it furnished during the con-
(b) Payment for grandfathered DME tract period.
items paid on a bundled, continuous rent- [79 FR 66264, Nov. 6, 2014]
al basis. Payment to a supplier that
elects to be a grandfathered supplier of § 414.410 Phased-in implementation of
DME furnished in CBPs where these competitive bidding programs.
special payment rules apply is made in (a) Phase-in of competitive bidding pro-
accordance with § 414.408(a)(1). grams. CMS phases in competitive bid-
(c) Supplier transitions for DME paid ding programs so that competition
on a bundled, continuous rental basis. under the programs occurs—
Changes from a non-contract supplier (1) In CY 2009, in Cincinnati—Middle-
to a contract supplier at the beginning town (Ohio, Kentucky and Indiana),
of a CBP where payment is made on a Cleveland—Elyria—Mentor (Ohio),
bundled, continuous monthly rental Charlotte—Gastonia—Concord (North
basis results in the contract supplier Carolina and South Carolina), Dallas—
taking on responsibility for meeting Fort Worth—Arlington (Texas), Kansas
all of the monthly needs for furnishing City (Missouri and Kansas), Miami—
the covered DME. In the event that a Fort Lauderdale—Miami Beach (Flor-
beneficiary relocates from a CBA ida), Orlando (Florida), Pittsburgh
where these special payment rules (Pennsylvania), and Riverside—San
apply to an area where rental cap rules Bernardino—Ontario (California).
apply, a new period of continuous use (2) In CY 2011, in an additional 91
begins for the capped rental item as MSAs (the additional 70 MSAs selected
long as the item is determined to be by CMS as of June 1, 2008, and the next
medically necessary. 21 largest MSAs by total population
(d) Responsibility for repair and mainte- based on 2009 population estimates, and
nance and servicing of power wheelchairs. not already phased in as of June 1,
In no more than 12 CBAs where pay- 2008). CMS may subdivide any of the 91
ment for power wheelchairs is made on MSAs with a population of greater
a capped rental basis, for power wheel- than 8,000,000 into separate CBAs,
chairs furnished in conjunction with thereby resulting in more than 91
competitions that begin after January CBAs.
1, 2015, contract suppliers that furnish (3) After CY 2011, additional CBAs
power wheelchairs under contracts (or, in the case of national mail order
awarded based on these competitions for items and services, after CY 2010).
shall continue to repair power wheel- (4) For competitions (other than for
chairs they furnish following transfer national mail order items and services)
88
after CY 2011 and prior to CY 2015, the wide or regional mail order contract
following areas are excluded: suppliers.
(i) Rural areas. [72 FR 18085, Apr. 10, 2007, as amended at 74
(ii) MSAs not selected under para- FR 2880, Jan. 16, 2009; 75 FR 73623, Nov. 29,
graphs (a)(1) or (a)(2) of this section 2010; 76 FR 70315, Nov. 10, 2011]
with a population of less than 250,000.
(iii) An area with low population den- § 414.411 Special rule in case of com-
sity within an MSA not selected under petitions for diabetic testing strips
conducted on or after January 1,
paragraphs (a)(1) or (a)(2) of this sec- 2011.
tion.
(b) Selection of MSAs for CY 2007 and (a) National mail order competitions. A
supplier must demonstrate that their
CY 2009. CMS selects the MSAs for pur-
bid submitted as part of a national
poses of designating CBAs in CY 2007
mail order competition for diabetic
and CY 2009 by considering the fol-
testing strips covers the furnishing of a
lowing variables: sufficient number of different types of
(1) The total population of an MSA. diabetic testing strip products that, in
(2) The Medicare allowed charges for the aggregate, and taking into account
DMEPOS items per fee-for-service ben- volume for the different products, in-
eficiary in an MSA. cludes at least 50 percent of all the dif-
(3) The total number of DMEPOS ferent types of products on the market.
suppliers per fee-for-service beneficiary A type of diabetic testing strip means
who received DMEPOS items in an a specific brand and model of testing
MSA. strips.
(4) An MSA’s geographic location. (b) Other competitions. CMS may
(c) Exclusions from a CBA. CMS may apply this special rule to non-mail
exclude from a CBA a rural area (as de- order or local competitions for diabetic
fined in § 412.64(b)(1)(ii)(C) of this sub- testing strips.
chapter), or an area with low popu- [75 FR 73623, Nov. 29, 2010]
lation density based on one or more of
the following factors— § 414.412 Submission of bids under a
(1) Low utilization of DMEPOS items competitive bidding program.
by Medicare beneficiaries receiving fee- (a) Requirement to submit a bid. Except
for-service benefits relative to similar as provided under § 414.404(b), in order
geographic areas; for a supplier to receive payment for
(2) Low number of DMEPOS suppliers items furnished to beneficiaries under
relative to similar geographic areas; or a competitive bidding program, the
(3) Low number of Medicare fee-for- supplier must submit a bid to furnish
service beneficiaries relative to similar those items and be awarded a contract
geographic areas. under this subpart.
(d) Selection of additional CBAs after (b) Grouping of items into product cat-
CY 2009. (1) Beginning after CY 2009, egories. (1) Bids are submitted for items
grouped into product categories.
CMS designates through program in-
structions or by other means addi- (2) The bids submitted for each item
in a product category cannot exceed
tional CBAs based on CMS’ determina-
the payment amount that would other-
tion that the implementation of a com-
wise apply to the item under subpart C
petitive bidding program in a par- of this part, without the application of
ticular area would be likely to result in § 414.210(g), or subpart D of this part,
significant savings to the Medicare without the application of § 414.105, or
program. subpart I of this part. The bids sub-
(2) Beginning after CY 2009, CMS may mitted for items in accordance with
designate through program instruc- paragraph (d)(2) of this section cannot
tions or by other means a nationwide exceed the weighted average, weighted
CBA or one or more regional CBAs for by total nationwide allowed services,
purposes of implementing competitive as defined in § 414.202, of the payment

bidding programs for items that are amounts that would otherwise apply to
furnished through the mail by nation- the grouping of similar items under
89
§ 414.412 42 CFR Ch. IV (10–1–17 Edition)
subpart C of this part, without the ap- for this code would also be used to cal-
plication of § 414.210(g), or subpart D of culate the single payment amounts for
this part, without the application of the other codes within the grouping of
§ 414.105. similar items in accordance with
(3) The bids submitted for standard § 414.416(b)(3). For subsequent competi-
power wheelchairs paid in accordance tions, the lead item is identified as the
with the special payment rules at code with the highest total nationwide
§ 414.409(a) cannot exceed the average allowed services for the most recent
monthly payment for the bundle of and complete calendar year that pre-
items and services that would other- cedes the competition. The groupings
wise apply to the item under subpart D of similar items subject to this rule in-
of this part. clude—
(4) The bids submitted for continuous (i) Hospital beds (HCPCS codes E0250,
positive airway pressure (CPAP) de- E0251, E0255, E0256, E0260, E0261, E0266,
vices paid in accordance with the spe- E0265, E0290, E0291, E0292, E0293, E0294,
cial payment rules at § 414.409(a) cannot E0295, E0296, E0297, E0301, E0302, E0303,
exceed the 1993 fee schedule amounts and E0304).
for these items, increased by the cov- (ii) Mattresses and overlays (HCPCS
ered item update factors provided for codes E0277, E0371, E0372, and E0373).
these items in section 1834(a)(14) of the (iii) Power wheelchairs (HCPCS codes
Act. K0813, K0814, K0815, K0816, K0820, K0821,
(5) Suppliers shall take into consider- K0822, K0823, K0824, K0825, K0826, K0827,
ation the special payment rules at K0828, and K0829).
§ 414.409(d) when submitting bids for (iv) Seat lift mechanisms (HCPCS
furnishing power wheelchairs under codes E0627 and E0629).
competitions where these rules apply. (v) TENS devices (HCPCS codes E0720
(c) Furnishing of items. A bid must in- and E0730).
clude all costs related to furnishing an (vi) Walkers (HCPCS codes E0130,
item, including all services directly re- E0135, E0140, E0141, E0143, E0144, E0147,
lated to the furnishing of the item. E0148, and E0149).
(d) Separate bids. (1) Except as pro- (e) Commonly-owned or controlled
vided in paragraph (d)(2) of this sec- suppliers. (1) For purposes of this para-
tion, for each product category that a graph—
supplier is seeking to furnish under a (i) An ownership interest is the pos-
Competitive Bidding Program, the sup- session of equity in the capital, stock
plier must submit a separate bid for or profits of another supplier;
each item in that product category. (ii) A controlling interest exists if
(2) An exception to paragraph (d)(1) one or more of owners of a supplier is
of this section can be made in situa- an officer, director or partner in an-
tions where price inversions defined in other supplier; and
§ 414.402 have occurred in past competi- (iii) Two or more suppliers are com-
tions for items within groupings of monly-owned if one or more of them
similar items within a product cat- has an ownership interest totaling at
egory. In these situations, an alter- least 5 percent in the other(s).
native method for submitting bids for (2) A supplier must disclose in its bid
these combinations of codes may be an- each supplier in which it has an owner-
nounced at the time the competition ship or controlling interest and each
begins. Under this alternative method, supplier which has an ownership or
the combination of codes for the simi- controlling interest in it.
lar items is the item for bidding pur- (3) Commonly-owned or controlled
poses, as defined under § 414.402. Sup- suppliers must submit a single bid to
pliers submit bids for the code with the furnish a product category in a CBA.
highest total nationwide allowed serv- Each commonly-owned or controlled
ices for calendar year 2012 (the ‘‘lead supplier that is located in the CBA for
item’’) within the grouping of codes for which the bid is being submitted must
similar items, and the bids for this be included in the bid. The bid must
code are used to calculate the single also include any commonly-owned or
payment amounts for this code in ac- controlled supplier that is located out-
cordance with § 414.416(b)(1). The bids side of the CBA but would furnish the
90
product category to the beneficiaries is returned for not meeting bid for-
who maintain a permanent residence in feiture conditions.
the CBA. (3) Forfeiture of bid surety bond. (i)
(f) Mail order suppliers. (1) Suppliers When a bidding entity is offered a con-
that furnish items through the mail tract for a CBA/product category
must submit a bid to furnish these (‘‘competition’’) and its composite bid
items in a CBA in which a mail order for the competition is at or below the
competitive bidding program that in- median composite bid rate for all bid-
cludes the items is implemented. ding entities included in the calcula-
(2) Suppliers that submit one or more tion of the single payment amounts
bids under paragraph (f)(1) of this sec- within the competition and the bidding
tion may submit the same bid amount entity does not accept the contract
for each item under each competitive offer, its bid surety bond submitted for
bidding program for which it submits a that CBA will be forfeited and CMS
bid. will collect on the bond via Electronic
(g) Applicability of the mail order com- Funds Transfer (EFT) from the respec-
petitive bidding program. Suppliers that tive bonding company. As one bid sur-
do not furnish items through the mail ety bond is required for each CBA in
are not required to participate in a na- which the bidding entity is submitting
tionwide or regional mail order com- a bid, the failure to accept a contract
petitive bidding program that includes offer for any product category within
the same items. Suppliers may con- the CBA when the entity’s bid is at or
tinue to furnish these items in— below the median composite bid rate
(1) A CBA, if the supplier is awarded will result in forfeiture of the bid sur-
a contract under this subpart; or ety bond for that CBA.
(2) An area not designated as a CBA. (ii) Where the bid(s) does not meet
(h) Requiring bid surety bonds for bid- the specified forfeiture conditions in
ding entities—(1) Bidding requirements. paragraph (h)(3)(i) of this section, the
For competitions beginning on or after bid surety bond liability will be re-
January 1, 2017, and no later than Jan- turned within 90 days of the public an-
uary 1, 2019, a bidding entity may not nouncement of contract suppliers for
submit a bid(s) for a CBA unless it ob- the CBA. CMS will notify the bidding
tains a bid surety bond for the CBA entity that it did not meet the speci-
from an authorized surety on the De- fied forfeiture requirements and the
partment of the Treasury’s Listing of bid surety bond will not be collected by
Certified Companies and provides proof CMS.
of having obtained the bond by submit- (4) Penalties. (i) A bidding entity that
ting a copy to CMS by the deadline for has been determined to have falsified
bid submission. its bid surety bond may be prohibited
from participation in the DMEPOS
(2) Bid surety bond requirements. (i)
Competitive Bidding Program for the
The bid surety bond issued must in-
current round of the Competitive Bid-
clude at a minimum:
ding Program in which it submitted a
(A) The name of the bidding entity as
bid and also from participating in the
the principal/obligor;
next round of the Competitive Bidding
(B) The name and National Associa- Program. Offending suppliers will also
tion of Insurance Commissioners num- be referred to the Office of Inspector
ber of the authorized surety; General and Department of Justice for
(C) CMS as the named obligee; further investigation.
(D) The conditions of the bond as (ii) A bidding entity, whose com-
specified in paragraph (h)(3) of this sec- posite bid is at or below the median
tion; composite bid rate, that—
(E) The CBA covered by the bond; (A) Accepts a contract award; and
(F) The bond number; (B) Is found to be in breach of con-
(G) The date of issuance; and tract for nonperformance of the con-
(H) The bid bond value of $50,000.00. tract to avoid forfeiture of the bid sur-
(ii) The bid surety bond must be ety bond will have its contract termi-
maintained until it is either collected nated and will be precluded from par-
upon due to forfeiture or the liability ticipation in the in the next round of
91
§ 414.414 42 CFR Ch. IV (10–1–17 Edition)
the DMEPOS Competitive Bidding Pro- uments (as defined in § 414.402) specified
gram. in the request for bids.
(2) Process for reviewing covered docu-
[72 FR 18085, Apr. 10, 2007, as amended at 79
FR 66264, Nov. 6, 2014; 81 FR 77966, Nov. 4,
ments—(i) Submission of covered docu-
2016] ments for CMS review. To receive notifi-
cation of whether there are missing
§ 414.414 Conditions for awarding con- covered documents, the supplier must
tracts. submit its applicable covered docu-
ments by the later of the following cov-
(a) General rule. The rules set forth in
ered document review dates:
this section govern the evaluation and
(A) The date that is 30 days before
selection of suppliers for contract
the final date for the closing of the bid
award purposes under a competitive
window; or
bidding program.
(B) The date that is 30 days after the
(b) Basic supplier eligibility. (1) Each
opening of the bid window.
supplier must meet the enrollment
(ii) CMS feedback to a supplier with
standards specified in § 424.57(c) of this
missing covered documents. (A) For
chapter.
Round 1 bids. CMS has up to 45 days
(2) Each supplier must disclose infor- after the covered document review date
mation about any prior or current to review the covered documents and
legal actions, sanctions, revocations to notify suppliers of any missing docu-
from the Medicare program, program- ments.
related convictions as defined in sec- (B) For subsequent Round bids. CMS
tion 1128(a)(1) through (a)(4) of the Act, has 90 days after the covered document
exclusions or debarments imposed review date to notify suppliers of any
against it, or against any members of missing covered documents.
the board of directors, chief corporate (iii) Submission of missing covered doc-
officers, high-level employees, affili- uments. Suppliers notified by CMS of
ated companies, or subcontractors, by missing covered documents have 10
any Federal, State, or local agency. business days after the date of such no-
The supplier must certify in its bid tice to submit the missing documents.
that this information is completed and CMS does not reject the supplier’s bid
accurate. on the basis that the covered docu-
(3) Each supplier must have all State ments are late or missing if all the ap-
and local licenses required to perform plicable missing covered documents
the services identified in the request identified in the notice are submitted
for bids. CMS may not award a con- to CMS not later than 10 business days
tract to any entity in a CBA unless the after the date of such notice.
entity meets applicable State licensure (e) Evaluation of bids. CMS evaluates
requirements. bids submitted for items within a prod-
(4) Each supplier must submit a bona uct category by—
fide bid that complies with all the (1) Calculating the expected bene-
terms and conditions contained in the ficiary demand in the CBA for the
request for bids. items in the product category;
(5) Each network must meet the re- (2) Calculating the total supplier ca-
quirements specified in § 414.418. pacity that would be sufficient to meet
(c) Quality standards and accredita- the expected beneficiary demand in the
tion. Each supplier furnishing items CBA for the items in the product cat-
and services directly or as a subcon- egory;
tractor must meet applicable quality (3) Establishing a composite bid for
standards developed by CMS in accord- each supplier and network that sub-
ance with section 1834(a)(20) of the Act mitted a bid for the product category.
and be accredited by a CMS-approved (4) Arraying the composite bids from
organization that meets the require- the lowest composite bid price to the
ments of § 424.58 of this subchapter, un- highest composite bid price;
less a grace period is specified by CMS. (5) Calculating the pivotal bid for the
(d) Financial standards—(1) General product category;

rule. Each supplier must submit along (6) Selecting all suppliers and net-
with its bid the applicable covered doc- works whose composite bids are less
92
than or equal to the pivotal bid for ments have sufficient capacity to sat-
that product category, and that meet isfy beneficiary demand for the product
the requirements in paragraphs (b) category calculated under paragraph
through (d) of this section. (e)(1) of this section.
(f) Expected savings. A contract is not (3) The provisions of paragraph (h)(1)
awarded under this subpart unless CMS of this section do not apply to regional
determines that the amounts to be paid or nationwide mail order CBAs under
to contract suppliers for an item or § 414.410(d)(2) of this subpart.
drug under a competitive bidding pro- (i) Selection of new suppliers after bid-
gram are expected to be less than the ding. (1) Subsequent to the awarding of
amounts that would otherwise be paid contracts under this subpart, CMS may
for the same item under subpart C or award additional contracts if it deter-
subpart D or the same drug under sub- mines that additional contract sup-
part I. pliers are needed to meet beneficiary
(g) Special rules for small suppliers—(1) demand for items under a competitive
Target for small supplier participation. bidding program. CMS selects addi-
CMS ensures that small suppliers have tional contract suppliers by—
the opportunity to participate in a (i) Referring to the arrayed list of
competitive bidding program by taking suppliers that submitted bids for the
the following steps: product category included in the com-
(i) Setting a target number for small petitive bidding program for which
supplier participation by multiplying beneficiary demand is not being met;
30 percent by the number of suppliers and
that meet the requirements in para- (ii) Beginning with the supplier
graphs (b) through (d) of this section whose composite bid is the first com-
and whose composite bids are equal to posite bid above the pivotal bid for
or lower than the pivotal bid cal- that product category, determining if
culated for the product category; that supplier is willing to become a
(ii) Identifying the number of quali- contract supplier under the same terms
fied small suppliers whose composite and conditions that apply to other con-
bids are at or below the pivotal bid for tract suppliers in the CBA.
the product category; (2) Before CMS awards additional
(iii) Selecting additional small sup- contracts under paragraph (i)(1) of this
pliers whose composite bids are above section, a supplier must submit up-
the pivotal bid for the product cat- dated information demonstrating that
egory in ascending order based on the the supplier meets the requirements
proximity of each small supplier’s com- under paragraphs (b) through (d) of this
posite bid to the pivotal bid, until the section.
number calculated in paragraph [72 FR 18085, Apr. 10, 2007, as amended at 74
(g)(1)(i) of this section is reached or FR 2880, Jan. 16, 2009; 76 FR 70315, Nov. 10,
there are no more composite bids sub- 2011; 79 FR 66264, Nov. 6, 2014; 81 FR 77967,
mitted by small suppliers for the prod- Nov. 4, 2016]
uct category.
(2) The bids by small suppliers that § 414.416 Determination of competitive
are selected under paragraph (g)(1)(iii) bidding payment amounts.
of this section are not used to calculate (a) General rule. CMS establishes a
the single payment amounts for any single payment amount for each item
items under § 414.416 of this subpart. furnished under a competitive bidding
(h) Sufficient number of suppliers. (1) program.
Except as provided in paragraph (h)(3) (b) Methodology for setting payment
of this section. CMS will award at least amount. (1) The single payment amount
five contracts, if there are five sup- for an item furnished under a competi-
pliers satisfying the requirements in tive bidding program is equal to the
paragraphs (b) through (f) of this sec- median of the bids submitted for that
tion; or item by suppliers whose composite bids
(2) CMS will award at least two con- for the product category that includes
tracts, if there are less than five sup- the item are equal to or below the piv-
pliers meeting these requirements and otal bid for that product category. If
the suppliers satisfying these require- there is an even number of bids, the
93
§ 414.418 42 CFR Ch. IV (10–1–17 Edition)
single payment amount for the item is tion that regulates anticompetitive be-
equal to the average of the two middle havior.
bids. (5) A bid submitted by a network
(2) The single payment amount for an must include a statement from each
item must be less than or equal to the network member certifying that the
amount that would otherwise be paid network member joined the network
for the same item under subpart C or because it is unable independently to
subpart D. furnish all of the items in the product
(3) In the case of competitions where category for which the network is sub-
bids are submitted for an item that is mitting a bid to beneficiaries through-
a combination of codes for similar out the entire geographic area of the
items within a product category as CBA.
identified under § 414.412(d)(2), the sin- (6) At the time that a network sub-
gle payment amount for each code mits a bid, the network’s total market
within the combination of codes is share for each product category that is
equal to the single payment amount the subject of the network’s bid cannot
for the lead item or code with the high- exceed 20 percent of the Medicare de-
est total nationwide allowed services mand for that product category in the
multiplied by the ratio of the average CBA.
of the 2015 fee schedule amounts for all (c) If the network is awarded a con-
areas (i.e., all states, the District of Co- tract, each supplier must submit its
lumbia, Puerto Rico, and the United own claims and will receive payment
States Virgin Islands) for the code to directly from Medicare for the items
the average of the 2015 fee schedule that it furnishes under the competitive
amounts for all areas for the lead item. bidding program.
[72 FR 18085, Apr. 10, 2007, as amended at 81 [72 FR 18085, Apr. 10, 2007]
FR 77967, Nov. 4, 2016]
§ 414.420 Physician or treating practi-
§ 414.418 Opportunity for networks. tioner authorization and consider-
(a) A network may be comprised of at ation of clinical efficiency and
least 2 but not more than 20 small sup- value of items.
pliers. (a) Prescription for a particular brand
(b) The following rules apply to net- item or mode of delivery. (1) A physician
works that seek contracts under this or treating practitioner may prescribe,
subpart: in writing, a particular brand of an
(1) Each network must form a single item for which payment is made under
legal entity that acts as the bidder and a competitive bidding program, or a
submits the bid. Any agreement en- particular mode of delivery for an
tered into for purposes of forming a item, if he or she determines that the
network must be submitted to CMS. particular brand or mode of delivery
The network must identify itself as a would avoid an adverse medical out-
network and identify all of its mem- come for the beneficiary.
bers. (2) When a physician or treating
(2) Each member of the network must practitioner prescribes a particular
satisfy the requirements in § 414.414(b) brand or mode of delivery of an item
through (d). under paragraph (a)(1) of this section,
(3) A small supplier may join one or the physician or treating practitioner
more networks but cannot submit an must document the reason in the bene-
individual bid to furnish the same ficiary’s medical record why the par-
product category in the same CBA as ticular brand or mode of delivery is
any network in which it is a member. medically necessary to avoid an ad-
A small supplier may not be a member verse medical outcome.
of more than one network if those net- (b) Furnishing of a prescribed par-
works submit bids to furnish the same ticular brand item or mode of delivery. If
product category in the same CBA. a physician or treating practitioner
(4) The network cannot be anti- prescribes a particular brand of an

competitive, and this section does not item or mode of delivery, the contract
supersede any Federal law or regula- supplier must—
94
(1) Furnish the particular brand or later than 60 days before the antici-
mode of delivery as prescribed by the pated date of the change.
physician or treating practitioner; (2) CMS may transfer a contract to
(2) Consult with the physician or an entity that merges with, or ac-
treating practitioner to find an appro- quires, a contract supplier if the entity
priate alternative brand of item or meets the following requirements:
mode of delivery for the beneficiary (i) A successor entity—
and obtain a revised written prescrip- (A) Meets all requirements applicable
tion from the physician or treating to contract suppliers for the applicable
practitioner; or competitive bidding program;
(3) Assist the beneficiary in locating (B) Submits to CMS the documenta-
a contract supplier that can furnish tion described under § 414.414(b)
the particular brand of item or mode of through (d) if documentation has not
delivery prescribed by the physician or previously been submitted by the suc-
treating practitioner. cessor entity or if the documentation
(c) Payment for a particular brand of is no longer sufficient for CMS to make
item or mode of delivery. Medicare does a financial determination. A successor
not make an additional payment to a entity is not required to duplicate pre-
contract supplier that furnishes a par- viously submitted information if the
ticular brand or mode of delivery for an previously submitted information is
item, as directed by a prescription not needed to make a financial deter-
written by the beneficiary’s physician mination. This documentation must be
or treating practitioner. submitted no later than 30 days prior
(d) Prohibition on billing for an item to the anticipated effective date of the
different from the particular brand of item change of ownership; and
or mode of delivery prescribed. A con- (C) Submits to CMS, at least 30 days
tract supplier is prohibited from sub- before the anticipated effective date of
mitting a claim to Medicare if it fur- the change of ownership, a signed nova-
nishes an item different from that tion agreement acceptable to CMS
specified in the written prescription re- stating that it will assume all obliga-
ceived from the beneficiary’s physician tions under the contract; or
or treating practitioner. Payment will (ii) A new entity—
not be made to a contract supplier that (A) Meets the requirements of
submits a claim prohibited by this (d)(2)(i)(A) and (B) of this section; and
paragraph. (B) Contract supplier submits to
CMS, at least 30 days before the antici-
[72 FR 18085, Apr. 10, 2007] pated effective date of the change of
ownership, its final draft of a novation
§ 414.422 Terms of contracts.
agreement as described in paragraph
(a) Basic rule. CMS specifies the (d)(2)(C) of this section for CMS review.
terms and conditions of the contracts The new entity submits to CMS, within
entered into with contract suppliers 30 days after the effective date of the
under this subpart. A contract supplier change of ownership, an executed nova-
must comply with all terms of its con- tion agreement acceptable to CMS.
tract, including any option exercised (3) Except as specified in paragraph
by CMS, for the full duration of the (d) (4) of this section, CMS transfers
contract period. the entire contract, including all prod-
(b) Recompeting competitive bidding uct categories and competitive bidding
contracts. CMS recompetes competitive areas, to a new qualified entity.
bidding contracts at least once every 3 (4) For contracts issued in the Round
years. 2 Recompete and subsequent rounds in
(c) Nondiscrimination. The items fur- the case of a CHOW where a contract
nished by a contract supplier under supplier sells a distinct company, (e.g.,
this subpart must be the same items an affiliate, subsidiary, sole proprietor,
that the contract supplier makes avail- corporation, or partnership) that fur-
able to other customers. nishes a specific product category or
(d) Change of ownership. (1) A con- services a specific CBA, CMS may
tract supplier must notify CMS if it is transfer the portion of the contract
negotiating a change in ownership no performed by that company to a new
95
§ 414.423 42 CFR Ch. IV (10–1–17 Edition)
qualified entity, if the following condi- ficiary unless the beneficiary requests
tions are met: such information.
(i) Every CBA, product category, and (f) Disclosure of subcontracting ar-
location of the company being sold rangements. (1) Initial disclosure. Not
must be transferred to the new quali- later than 10 days after the date a sup-
fied owner who meets all competitive plier enters into a contract under this
bidding requirements; i.e. financial, ac- section the supplier must disclose in-
creditation and licensure; formation on both of the following:
(iii) All CBAs and product categories (i) Each subcontracting arrangement
in the original contract that are not that the supplier has in furnishing
explicitly transferred by CMS remain items and services under the contract.
unchanged in that original contract for (ii) Whether each subcontractor
the duration of the contract period un- meets the requirement of section
less transferred by CMS pursuant to a 1834(a)(20)(F)(i) of the Act if applicable
subsequent CHOW; to such subcontractor.
(iv) All requirements of paragraph (2) Subsequent disclosure. Not later
(d)(2) of this section are met; and than 10 days after the date a supplier
(v) The sale of the distinct company enters into a subcontracting arrange-
includes all of the contract supplier’s ment subsequent to contract award
assets associated with the CBA and/or with CMS, the supplier must disclose
product category(s); and information on both of the following:
(vi) CMS determines that transfer of (i) The subcontracting arrangement
part of the original contract will not that the supplier has in furnishing
result in disruption of service or harm items and services under the contract.
to beneficiaries. (ii) Whether the subcontractor meets
(e) Furnishing of items. Except as oth- the requirement of section
erwise prohibited under section 1877 of 1834(a)(20)(F)(i) of the Act, if applicable
the Act, or any other applicable law or to such subcontractor.
regulation: (g) Breach of contract. (1) Any devi-
(1) A contract supplier must agree to ation from contract requirements, in-
furnish items under its contract to any cluding a failure to comply with gov-
beneficiary who maintains a perma- ernmental agency or licensing organi-
nent residence in, or who visits, the zation requirements, constitutes a
CBA and who requests those items breach of contract.
from that contract supplier. (2) In the event a contract supplier
(2) A skilled nursing facility defined breaches its contract, CMS may take
under section 1819(a) of the Act or a one or more of the following actions,
nursing facility defined under section which will be specified in the notice of
1919(a) of the Act that has elected to breach of contract:
furnish items only to its own residents (i) Suspend the contract supplier’s
and that is also a contract supplier contract;
may furnish items under a competitive (ii) Terminate the contract;
bidding program to its own patients to (iii) Preclude the contract supplier
whom it would otherwise furnish Part from participating in the competitive
B services. bidding program; or
(3) Contract suppliers for diabetic (iv) Avail itself of other remedies al-
testing supplies must furnish the brand lowed by law.
of diabetic testing supplies that work [72 FR 18085, Apr. 10, 2007, as amended at 74
with the home blood glucose monitor FR 2881, Jan. 16, 2009; 75 FR 73623, Nov. 29,
selected by the beneficiary. The con- 2010; 76 FR 70315, Nov. 10, 2011; 79 FR 66264,
tract supplier is prohibited from influ- Nov. 6, 2014; 81 FR 77967, Nov. 4, 2016]
encing or incentivizing the beneficiary
by persuading, pressuring, or advising § 414.423 Appeals process for breach of
them to switch from their current a DMEPOS competitive bidding
brand or for new beneficiaries from program contract actions.
their preferred brand of glucose mon- This section implements an appeals
itor and testing supplies. The contract process for suppliers that CMS has de-
supplier may not furnish information termined are in breach of their Medi-
about alternative brands to the bene- care DMEPOS Competitive Bidding
96
Program contract and where CMS has cause harm to beneficiaries. CMS will
issued a notice of breach of contract in- not allow a CAP if the supplier has
dicating its intent to take action(s) been excluded from any Federal pro-
pursuant to § 414.422(g)(2). gram, debarred by a Federal agency, or
(a) Breach of contract. CMS may take convicted of a healthcare-related
one or more of the actions specified in crime, or for any other reason deter-
§ 414.422(g)(2) as a result of a supplier’s mined by CMS.
breach of their DMEPOS Competitive (ii) If a supplier chooses not to sub-
Bidding Program contract. mit a CAP, if CMS determines that a
(b) Notice of breach of contract—(1) supplier’s CAP is insufficient, or if
CMS notification. If CMS determines a CMS does not allow the supplier the
supplier to be in breach of its contract, option to submit a CAP, the supplier
it will notify the supplier of the breach may request a hearing on the breach of
of contract in a notice of breach of con- contract action(s).
tract. (2) Submission of a CAP. (i) If allowed
(2) Content of the notice of breach of by CMS, a CAP must be submitted
contract. The CMS notice of breach of within 30 days from the date on the no-
contract will include the following: tice of breach of contract. If the sup-
(i) The details of the breach of con- plier decides not to submit a CAP the
tract. supplier may, within 30 days of the
(ii) The action(s) that CMS is taking date on the notice, request a hearing
as a result of the breach of the con- by a CBIC hearing officer.
tract pursuant to § 414.422(g)(2), and the
(ii) Suppliers will have the oppor-
duration of or timeframe(s) associated
tunity to submit a CAP when they are
with the action(s), if applicable.
first notified that they have been de-
(iii) The right to request a hearing by
termined to be in breach of contract. If
a CBIC hearing officer and, depending
the CAP is not acceptable to CMS or is
on the nature of the breach, the sup-
not properly implemented, suppliers
plier may also be allowed to submit a
will receive a subsequent notice of
corrective action plan (CAP) in lieu of
breach of contract. The subsequent no-
requesting a hearing by a CBIC hearing
tice of breach of contract may, at CMS’
officer, as specified in paragraph
discretion, allow the supplier to submit
(c)(1)(i) of this section.
another written CAP pursuant to para-
(iv) The address to which the written
graph (c)(1)(i) of this section.
request for a hearing must be sub-
mitted. (d) The purpose of the CAP. The pur-
(v) The address to which the CAP pose of the CAP is:
must be submitted, if applicable. (1) For the supplier to remedy all of
(vi) The effective date of the ac- the deficiencies that were identified in
tion(s) that CMS is taking is the date the notice of breach of contract.
specified by CMS in the notice of (2) To identify the timeframes by
breach of contract, or 45 days from the which the supplier will implement each
date of the notice of breach of contract of the components of the CAP.
unless: (e) Review of the CAP. (1) The CBIC
(A) A timely hearing request has will review the CAP. Suppliers may
been filed; or only revise their CAP one time during
(B) A CAP has been submitted within the review process based on the defi-
30 days of the date of the notice of ciencies identified by the CBIC. The
breach of contract where CMS allows a CBIC will submit a recommendation to
supplier to submit a CAP. CMS for each applicable breach of con-
(c) Corrective action plan (CAP)—(1) tract action concerning whether the
Option for a CAP. (i) CMS has the op- CAP includes the steps necessary to
tion to allow a supplier to submit a remedy the contract deficiencies as
written CAP to remedy the deficiencies identified in the notice of breach of
identified in the notice at its sole dis- contract.
cretion, including where CMS deter- (2) If CMS accepts the CAP, including
mines that the delay in the effective the supplier’s designated timeframe for
date of the breach of contract action(s) its completion, the supplier must pro-
caused by allowing a CAP will not vide a follow-up report within 5 days
97
§ 414.423 42 CFR Ch. IV (10–1–17 Edition)
after the supplier has fully imple- (4) The hearing officer may, on his or
mented the CAP that verifies that all her own motion, or at the request of a
of the deficiencies identified in the party, change the time and place for
CAP have been corrected in accordance the hearing, but must give the parties
with the timeframes accepted by CMS. to the hearing 30 days’ notice of the
(3) If the supplier does not implement change.
a CAP that was accepted by CMS, or if (5) The hearing officer’s scheduling
CMS does not accept the CAP sub- notice must provide the parties to the
mitted by the supplier, then the sup- hearing the following information:
plier will receive a subsequent notice (i) A description of the hearing proce-
of breach of contract, as specified in dure.
paragraph (b) of this section. (ii) The specific issues to be resolved.
(f) Right to request a hearing by the (iii) The supplier has the burden to
CBIC Hearing Officer. (1) A supplier who prove it is not in violation of the con-
receives a notice of breach of contract tract or that the breach of contract ac-
(whether an initial notice of breach of tion(s) is not appropriate.
contract or a subsequent notice of (iv) The opportunity for parties to
breach of contract under § 414.422(e)(3)) the hearing to submit additional evi-
has the right to request a hearing be- dence to support their positions, if re-
fore a CBIC hearing officer who was not quested by the hearing officer.
involved with the original breach of (v) A notification that all evidence
contract determination. submitted, both from the supplier and
(2) A supplier that wishes to appeal CMS, will be provided in preparation
the breach of contract action(s) speci- for the hearing to all affected parties
fied in the notice of breach of contract at least 15 days prior to the scheduled
must submit a written request to the date of the hearing.
CBIC. The request for a hearing must (h) Burden of proof and evidence sub-
be received by the CBIC within 30 days mission. (1) The burden of proof is on
from the date of the notice of breach of the Competitive Bidding Program con-
contract. tract supplier to demonstrate to the
(3) A request for hearing must be in hearing officer with convincing evi-
writing and submitted by an author- dence that it has not breached its con-
ized official of the supplier. tract or that the breach of contract ac-
(4) The appeals process for the Medi- tion(s) is not appropriate.
care DMEPOS Competitive Bidding (2) The supplier’s evidence must be
Program is not to be used in place of submitted with its request for a hear-
other existing appeals processes that ing.
apply to other parts of Medicare. (3) If the supplier fails to submit the
(5) If the supplier is given the oppor- evidence at the time of its submission,
tunity to submit a CAP and a CAP is the Medicare DMEPOS supplier is pre-
not submitted and the supplier fails to cluded from introducing new evidence
timely request a hearing, the breach of later during the hearing process, unless
contract action(s) will take effect 45 permitted by the hearing officer.
days from the date of the notice of (4) CMS also has the opportunity to
breach of contract. submit evidence to the hearing officer
(g) The CBIC Hearing Officer schedules within 10 days of receiving the sched-
and conducts the hearing. (1) Within 30 uling notice.
days from the receipt of the supplier’s (5) The hearing officer will share all
timely request for a hearing the hear- evidence submitted by the supplier and/
ing officer will contact the parties to or CMS, with all parties to the hearing
schedule the hearing. at least 15 days prior to the scheduled
(2) The hearing may be held in person date of the hearing.
or by telephone at the parties’ request. (i) Role of the hearing officer. The
(3) The scheduling notice to the par- hearing officer will conduct a thorough
ties must indicate the time and place and independent review of the evidence
for the hearing and must be sent to the including the information and docu-
parties at least 30 days before the date mentation submitted for the hearing
of the hearing. and other information that the hearing
98
officer considers pertinent for the hear- ommendation(s) will not allow the sup-
ing. The role of the hearing officer in- plier to submit new information.
cludes, at a minimum, the following: (2) After reviewing the hearing offi-
(1) Conduct the hearing and decide cer’s recommendation(s), CMS’ deci-
the order in which the evidence and the sion(s) will be made within 30 days
arguments of the parties are presented; from the date of receipt of the hearing
(2) Determine the rules on admissi- officer’s recommendation(s). In situa-
bility of the evidence; tions where there is more than one
(3) Examine the witnesses, in addi- breach of contract action presented at
tion to the examinations conducted by the hearing, and the hearing officer
CMS and the contract supplier; issues multiple recommendations, CMS
(4) The CBIC may assist CMS in the will render separate decisions for each
appeals process including being present breach of contract action.
at the hearing, testifying as a witness, (3) A notice of CMS’ decision will be
or performing other, related ministe- sent to the supplier and the hearing of-
rial duties; ficer. The notice will indicate:
(5) Determine the rules for requesting (i) If any breach of contract action(s)
documents and other evidence from included in the notice of breach of con-
other parties; tract, specified in paragraph (b)(1) of
(6) Ensure a complete record of the this section, still apply and will be ef-
hearing is made available to all parties fectuated, and
to the hearing; (ii) The effective date for any breach
(7) Prepare a file of the record of the of contract action specified in para-
hearing which includes all evidence graph (k)(3)(i) of this section.
submitted as well as any relevant docu-
(4) This decision(s) is final and bind-
ments identified by the hearing officer
ing.
and considered as part of the hearing;
and (l) Effect of breach of contract ac-
(8) Comply with all applicable provi- tion(s)—(1) Effect of contract suspension.
sions of 42 U.S.C. Title 18 and related (i) All locations included in the con-
provisions of the Act, the applicable tract cannot furnish competitive bid
regulations issued by the Secretary, items to beneficiaries within a CBA
and manual instructions issued by and the supplier cannot be reimbursed
CMS. by Medicare for these items for the du-
(j) Hearing officer recommendation. (1) ration of the contract suspension.
The hearing officer will issue a written (ii) The supplier must notify all bene-
recommendation(s) to CMS within 30 ficiaries who are receiving rented com-
days of the close of the hearing unless petitive bid items or competitive bid
an extension has been granted by CMS items on a recurring basis of the sus-
because the hearing officer has dem- pension of their contract.
onstrated that an extension is needed (A) The notice to the beneficiary
due to the complexity of the matter or from the supplier must be provided
heavy workload. In situations where within 15 days of receipt of the final
there is more than one breach of con- notice.
tract action presented at the hearing, (B) The notice to the beneficiary
the hearing officer will issue separate must inform the beneficiary that they
recommendations for each breach of must select a new contract supplier to
contract action. furnish these items in order for Medi-
(2) The recommendation(s) will ex- care to pay for these items.
plain the basis and the rationale for (2) Effect of contract termination. (i)
the hearing officer’s recommenda- All locations included in the contract
tion(s). can no longer furnish competitive bid
(3) The hearing officer must include items to beneficiaries within a CBA
the record of the hearing, along with and the supplier cannot be reimbursed
all evidence and documents produced by Medicare for these items after the
during the hearing along with its rec- effective date of the termination.
ommendation(s). (ii) The supplier must notify all bene-

(k) CMS’ final determination. (1) CMS’ ficiaries, who are receiving rented com-
review of the hearing officer’s rec- petitive bid items or competitive bid
99
§ 414.424 42 CFR Ch. IV (10–1–17 Edition)
items received on a recurring basis, of that was awarded a contract for the
the termination of their contract. Round 1 Durable Medical Prosthetics,
(A) The notice to the beneficiary Orthotics, and Supplies Competitive
from the supplier must be provided Bidding Program (DMEPOS CBP) that
within 15 days of receipt of the final believes it has been damaged by the
notice of termination. termination of its competitive bid con-
(B) The notice to the beneficiary tract, may file a claim under this sec-
must inform the beneficiary that they tion.
are going to have to select a new con- (2) A subcontractor of a contract sup-
tract supplier to furnish these items in plier is not eligible to submit a claim
order for Medicare to pay for these under this section.
items. (b) Timeframe for filing a claim. (1) A
(3) Effect of preclusion. A supplier who completed claim, including all docu-
is precluded will not be allowed to par- mentation, must be filed within 90 days
ticipate in a specific round of the Com- of January 1, 2010 (the effective date of
petitive Bidding Program, which will these damages provisions), unless that
be identified in the original notice of day is a Federal holiday or Sunday in
breach of contract, as specified in para- which case it will fall to the next busi-
graph (b)(1) of this section. ness day.
(4) Effect of other remedies allowed by (2) The date of filing is the actual
law. If CMS decides to impose other date of receipt by the CBIC of a com-
remedies under § 414.422(g)(2)(iv), the pleted claim that includes all the infor-
details of the remedies will be included mation required by this rule.
in the notice of breach of contract, as
(c) Information that must be included in
specified in paragraph (b)(2) of this sec-
a claim. (1) Supplier’s name, name of
tion.
authorized official, U.S. Post Office
[81 FR 77967, Nov. 4, 2016] mailing address, phone number, email
address and bidding number, and Na-
§ 414.424 Administrative or judicial re- tional Supplier Clearinghouse Number;
view.
(2) A copy of the signed contract en-
(a) There is no administrative or ju- tered into with CMS for the Round 1
dicial review under this subpart of the DMEPOS Competitive Bidding Pro-
following: gram;
(1) Establishment of payment (3) A detailed explanation of the
amounts. damages incurred by this supplier as a
(2) Awarding of contracts. direct result of the termination of the
(3) Designation of CBAs. Round 1 competitive bid contract by
(4) Phase-in of the competitive bid- MIPPA. The explanation must include
ding programs. all of the following:
(5) Selection of items for competitive (i) Documentation of the supplier’s
bidding. damages through receipts.
(6) Bidding structure and number of (ii) Records that substantiate the
contract suppliers selected for a com- supplier’s damages and demonstrate
petitive bidding program. that the damages are directly related
(b) A denied claim is not appealable to performance of the Round 1 contract
if the denial is based on a determina- and are consistent with information
tion by CMS that a competitively bid the supplier provided as part of their
item was furnished in a CBA in a man- bid.
ner not authorized by this subpart.
(4) The supplier must explain how it
[72 FR 18085, Apr. 10, 2007] would be damaged if not reimbursed.
(5) The claim must document steps
§ 414.425 Claims for damages. the supplier took to mitigate any dam-
(a) Eligibility for filing a claim for damages they may have incurred due to the
ages as a result of the termination of sup- contract termination, including a de-
plier contracts by the Medicare Improve- tailed explanation of the steps of all at-
ments for Patients and Providers Act of tempts to use for other purposes, re-
2008 (MIPPA). (1) Any aggrieved sup- turn or dispose of equipment or other
plier, including a member of a network assets purchased or rented for the use
100
in the Round 1 DMEPOS CBP contract tion from the claimant when making
performance. its recommendation to the Deter-
(d) Items that will not be considered in mining Authority. The CBIC may set a
a claim. The following items will not be deadline for receipt of additional infor-
considered in a claim: mation. A claimant’s failure to respond
(1) The cost of submitting a bid. timely may result in a denial of the
(2) Any fees or costs incurred for con- claim.
sulting or marketing. (iii) The CBIC will make a rec-
(3) Costs associated with accredita- ommendation to the Determining Au-
tion or licensure. thority for each claim filed and include
(4) Costs incurred before March 20, an explanation that supports its rec-
2008. ommendation.
(5) Costs incurred for contract per- (iv) The recommendation must be ei-
formance after July 14, 2008 except for ther to award damages for a particular
costs incurred to mitigate damages. amount (which may not be the same
(6) Any profits a supplier may have amount requested by the claimant) or
expected from the contract. that no damages should be awarded.
(7) Costs that would have occurred (A) If the CBIC recommends that
without a contract having been award- damages are warranted, the CBIC will
ed. calculate a recommended reasonable
(8) Costs for items such as inventory, amount of damages based on the claim
delivery vehicles, office space and submitted.
equipment, personnel, which the sup- (B) The reasonable amount will con-
plier did not purchase specifically to sider both costs incurred and the con-
perform the contract. tractor’s attempts and action to limit
(9) Costs that the supplier has re- the damages;
couped by any means, and may include (v) The recommendation will be sent
use of personnel, material, suppliers, or to the Determining Authority for a
equipment in the supplier’s business final determination.
operations. (2) CMS’ role as the Determining Au-
(e) Filing a claim. (1) A claim, with all thority. (i) The Determining Authority
supporting documentation, must be shall review the recommendation of
filed with the CMS Competitive Bid- the CBIC.
ding Implementation Contractor (ii) The Determining Authority may
(CBIC). seek further information from the
(2) Claims must include a statement claimant or the CBIC in making a con-
from a supplier’s authorized official currence or non-concurrence deter-
certifying the accuracy of the informa- mination.
tion provided on the claim and all sup- (iii) The Determining Authority may
porting documentation. set a deadline for receipt of additional
(3) The CBIC does not accept elec- information. A claimant’s failure to re-
tronic submissions of claims for dam- spond timely may result in a denial of
ages. the claim.
(f) Review of claim. (1) Role of the (iv) If the Determining Authority
CBIC. (i) The CBIC will review the concurs with the CBIC recommenda-
claim to ensure it is submitted timely, tion, the Determining Authority shall
complete, and by an eligible claimant. submit a final signed decision to the
When the CBIC identifies that a claim CBIC and direct the CBIC to notify the
is incomplete or not filed timely, it claimant of the decision and the rea-
will make a recommendation to the sons for the final decision.
Determining Authority not to process (v) If the Determining Authority
the claim further. Incomplete or un- non-concurs with the CBIC rec-
timely claims may be dismissed by the ommendation, the Determining Au-
Determining Authority without fur- thority may return the claim for fur-
ther processing. ther processing or the Determining Au-
(ii) For complete, timely claims, the thority may:
CBIC will review the claim on its mer- (A) Write a determination granting
its to determine if damages are war- (in whole or in part) a claim for dam-
ranted and may seek further informa- ages or denying a claim in its entirety;
101
§ 414.426 42 CFR Ch. IV (10–1–17 Edition)
(B) Direct the CBIC to write said de- code is equal to the total of the sepa-
termination for the Determining rate single payment amounts for the
Authority’s signature; or components. Contract suppliers must
(C) Return the claim to the CBIC furnish the item and submit claims
with further instructions. using the new HCPCS code.
(vi) The Determining Authority’s de- (d) If multiple HCPCS codes for simi-
termination is final and not subject to lar items are merged into a single
administrative or judicial review. HCPCS code, the items to which the
(g) Timeframe for determinations. (1) new HCPCS codes apply may be fur-
Every effort will be made to make a de- nished by any supplier that has a valid
termination within 120 days of initial Medicare billing number. Payment for
receipt of the claim for damages by the these items will be made in accordance
CBIC or the receipt of additional infor- with Subpart C or Subpart D.
mation that was requested by the [72 FR 18085, Apr. 10, 2007]
CBIC, whichever is later.
(2) In the case of more complex cases,
or in the event of a large workload, a Subpart G—Payment for Clinical
decision will be issued as soon as prac- Diagnostic Laboratory Tests
ticable.
(h) Notification to claimant of damage SOURCE: 71 FR 69786, Dec. 1, 2006, unless
determination. The CBIC must mail the otherwise noted.
Determining Authority’s determina-
tion to the claimant by certified mail § 414.500 Basis and scope.
return receipt requested, at the address This subpart implements provisions
provided in the claim. of 1833(h)(8) of the Act and 1834A of the
Act—procedures for determining the
[74 FR 62011, Nov. 25, 2009]
basis for, and amount of, payment for a
§ 414.426 Adjustments to competitively clinical diagnostic laboratory test
bid payment amounts to reflect (CDLT).
changes in the HCPCS. [81 FR 41098, June 23, 2016]
If a HCPCS code for a competitively
bid item is revised after the contract § 414.502 Definitions.
period for a competitive bidding pro- For purposes of this subpart—
gram begins, CMS adjusts the single Actual list charge means the publicly
payment amount for that item as fol- available rate on the first day the new
lows: advanced diagnostic laboratory test
(a) If a single HCPCS code for an (ADLT) is obtainable by a patient who
item is divided into two or more is covered by private insurance, or
HCPCS codes for the components of marketed to the public as a test a pa-
that item, the sum of single payment tient can receive, even if the test has
amounts for the new HCPCS codes not yet been performed on that date.
equals the single payment amount for Advanced diagnostic laboratory test
the original item. Contract suppliers (ADLT) means a clinical diagnostic lab-
must furnish the components of the oratory test (CDLT) covered under
item and submit claims using the new Medicare Part B that is offered and fur-
HCPCS codes. nished only by a single laboratory and
(b) If a single HCPCS code is divided not sold for use by a laboratory other
into two or more separate HCPCS than the single laboratory that de-
codes, the single payment amount for signed the test or a successor owner of
each of the new separate HCPCS codes that laboratory, and meets one of the
is equal to the single payment amount following criteria:
applied to the single HCPCS code. Con- (1) The test—
tract suppliers must furnish the items (i) Is an analysis of multiple bio-
and submit claims using the new sepa- markers of deoxyribonucleic acid
rate HCPCS codes. (DNA), ribonucleic acid (RNA), or pro-
(c) If the HCPCS codes for compo- teins;
nents of an item are merged into a sin- (ii) When combined with an empiri-
gle HCPCS code for the item, the single cally derived algorithm, yields a result
payment amount for the new HCPCS that predicts the probability a specific
102
individual patient will develop a cer- Data reporting period is the 3-month
tain condition(s) or respond to a par- period, January 1 through March 31,
ticular therapy(ies); during which a reporting entity reports
(iii) Provides new clinical diagnostic applicable information to CMS and
information that cannot be obtained that follows the preceding data collec-
from any other test or combination of tion period.
tests; and National Provider Identifier (NPI)
(iv) May include other assays. means the standard unique health iden-
(2) The test is cleared or approved by tifier used by health care providers for
the Food and Drug Administration. billing payors, assigned by the Na-
Applicable information, with respect to tional Plan and Provider Enumeration
each CDLT for a data collection period: System (NPPES) in 45 CFR part 162.
(1) Means— New advanced diagnostic laboratory
(i) Each private payor rate for which test (ADLT) means an ADLT for which
final payment has been made during payment has not been made under the
the data collection period; clinical laboratory fee schedule prior
(ii) The associated volume of tests to January 1, 2018.
performed corresponding to each pri- New ADLT initial period means a pe-
vate payor rate; and riod of 3 calendar quarters that begins
(iii) The specific Healthcare Common on the first day of the first full cal-
Procedure Coding System (HCPCS) endar quarter following the later of the
code associated with the test. date a Medicare Part B coverage deter-
(2) Does not include information mination is made or ADLT status is
about a test for which payment is made granted by CMS.
on a capitated basis. New clinical diagnostic laboratory test
Applicable laboratory means an entity (CDLT) means a CDLT that is assigned
that: a new or substantially revised
(1) Is a laboratory, as defined in Healthcare Common Procedure Coding
§ 493.2 of this chapter; System (HCPCS) code, and that does
(2) Bills Medicare Part B under its not meet the definition of an ADLT.
own National Provider Identifier (NPI); New test means any clinical diag-
(3) In a data collection period, re- nostic laboratory test for which a new
ceives more than 50 percent of its Medi- or substantially revised Healthcare
care revenues, which includes fee-for- Common Procedure Coding System
service payments under Medicare Parts Code is assigned on or after January 1,
A and B, Medicare Advantage pay- 2005.
ments under Medicare Part C, prescrip-
Private payor means:
tion drug payments under Medicare
(1) A health insurance issuer, as de-
Part D, and any associated Medicare
fined in section 2791(b)(2) of the Public
beneficiary deductible or coinsurance
Health Service Act.
for services furnished during the data
collection period from one or a com- (2) A group health plan, as defined in
bination of the following sources: section 2791(a)(1) of the Public Health
(i) This subpart G. Service Act.
(ii) Subpart B of this part. (3) A Medicare Advantage plan under
(4) Receives at least $12,500 of its Medicare Part C, as defined in section
Medicare revenues from this subpart G. 1859(b)(1) of the Act.
Except, for a single laboratory that of- (4) A Medicaid managed care organi-
fers and furnishes an ADLT, this $12,500 zation, as defined in section
threshold— 1903(m)(1)(A) of the Act.
(i) Does not apply with respect to the Private payor rate, with respect to ap-
ADLTs it offers and furnishes; and plicable information:
(ii) Applies with respect to all the (1) Is the final amount that is paid by
other CDLTs it furnishes. a private payor for a CDLT after all
Data collection period is the 6 months private payor price concessions are ap-
from January 1 through June 30 during plied and does not include price conces-
which applicable information is col- sions applied by a laboratory.

lected and that precedes the data re- (2) Includes any patient cost sharing
porting period. amounts, if applicable.
103
§ 414.504 42 CFR Ch. IV (10–1–17 Edition)
(3) Does not include information (3) Corporation. The merger of the sin-
about denied payments. gle laboratory corporation into an-
Publicly available rate means the low- other corporation, or the consolidation
est amount charged for an ADLT that of two or more corporations, including
is readily accessible in such forums as the single laboratory, resulting in the
a company Web site, test registry, or creation of a new corporation. Transfer
price listing, to anyone seeking to of corporate stock or the merger of an-
know how much a patient who does not other corporation into the single lab-
have the benefit of a negotiated rate oratory corporation does not con-
would pay for the test. stitute change of ownership.
Reporting entity is the entity that re- Taxpayer Identification Number (TIN)
ports tax-related information to the In- means a Federal taxpayer identifica-
ternal Revenue Service (IRS) using its tion number or employer identification
Taxpayer Identification Number (TIN) number as defined by the IRS in 26
for its components that are applicable
CFR 301.6109–1.
laboratories.
Single laboratory, for purposes of an [71 FR 69786, Dec. 1, 2006, as amended at 72
ADLT, means: FR 66401, Nov. 27, 2007; 81 FR 41098, June 23,
(1) The laboratory, as defined in 42 2016]
CFR 493.2, which furnishes the test, and
§ 414.504 Data reporting requirements.
that may also design, offer, or sell the
test; and (a) In a data reporting period, a re-
(2) The following entities, which may porting entity must report applicable
design, offer, or sell the test: information for each CDLT furnished
(i) The entity that owns the labora- by its component applicable labora-
tory. tories during the corresponding data
(ii) The entity that is owned by the collection period, as follows—
laboratory. (1) For CDLTs that are not ADLTs,
Specific HCPCS code means a HCPCS every 3 years beginning January 1, 2017.
code that does not include an unlisted (2) For ADLTs that are not new
CPT code, as established by the Amer- ADLTs, every year beginning January
ican Medical Association, or a Not Oth- 1, 2017.
erwise Classified (NOC) code, as estab- (3) For new ADLTs—
lished by the CMS HCPCS Workgroup. (i) Initially, no later than the last
Substantially Revised Healthcare Com- day of the second quarter of the new
mon Procedure Coding System Code ADLT initial period; and
means a code for which there has been (ii) Thereafter, every year.
a substantive change to the definition (b) Applicable information must be
of the test or procedure to which the
reported in the form and manner speci-
code applies (such as a new analyte or
fied by CMS.
a new methodology for measuring an
existing analyte specific test). (c) A laboratory seeking new ADLT
status for its test must, in its new
Successor owner, for purposes of an
ADLT, means a single laboratory, that ADLT application, attest to the actual
has assumed ownership of the single list charge.
laboratory that designed the test or of (d) To certify data integrity, the
the single laboratory that is a suc- President, CEO, or CFO of a reporting
cessor owner to the single laboratory entity, or an individual who has been
that designed the test, through any of delegated authority to sign for, and
the following circumstances: who reports directly to, such an officer,
(1) Partnership. The removal, addi- must sign the certification statement
tion, or substitution of a partner, un- and be responsible for assuring that the
less the partners expressly agree other- data provided are accurate, complete,
wise, as permitted by applicable State and truthful, and meets all the report-
law. ing parameters described in this sec-
(2) Unincorporated sole proprietorship. tion.

Transfer of title and property to an- (e) If the Secretary determines that a
other party. reporting entity has failed to report
104
applicable information for its applica- (b) CMS publishes a FEDERAL REG-
ble laboratories, or made a misrepre- ISTER notice of a meeting to receive
sentation or omission in reporting ap- public comments and recommendations
plicable information for its applicable (and data on which recommendations
laboratories, the Secretary may apply are based) on the appropriate basis, as
a civil monetary penalty to a reporting specified in § 414.508, for establishing
entity in an amount of up to $10,000 per payment amounts for the list of codes
day, as amended by the Federal Civil made available to the public.
Penalties Inflation Adjustment Act Im- (c) Not fewer than 30 days after publi-
provements Act of 2015 (Sec. 701 of the cation of the notice in the FEDERAL
Bipartisan Budget Act of 2015, Pub. L. REGISTER, CMS convenes a meeting
114–74, November 2, 2015), for each fail- that includes representatives of CMS
ure to report or each such misrepresen- officials involved in determining pay-
tation or omission. The provisions for ment amounts, to receive public com-
civil monetary penalties that apply in ments and recommendations (and data
general to the Medicare program under on which the recommendations are
42 U.S.C. 1320a–7b apply in the same based).
manner to the laboratory data report- (d) Considering the comments and
ing process under this section. recommendations (and accompanying
(f) CMS or its contractors will not data) received at the public meeting,
disclose applicable information re- CMS develops and makes available to
ported to CMS under this section in a the public (through an Internet Web
manner that would identify a specific site and other appropriate mecha-
payor or laboratory, or prices charged nisms) a list of—
or payments made to a laboratory, ex- (1) Proposed determinations with re-
cept to permit the Comptroller Gen- spect to the appropriate basis for es-
eral, the Director of the Congressional tablishing a payment amount for each
Budget Office, and the Medicare Pay- code, with an explanation of the rea-
ment Advisory Commission, to review sons for each determination, the data
the information, or as CMS determines on which the determinations are based,
is necessary to implement this subpart, including recommendations from the
such as disclosures to the HHS Office of Advisory Panel on CDLTs described in
Inspector General or the Department of paragraph (e) of this section, and a re-
Justice for oversight and enforcement quest for written public comments
activities. within a specified time period on the
(g) Applicable information may not proposed determination; and
be reported for an entity that does not (2) Final determinations of the pay-
meet the definition of an applicable ment amounts for tests, with the ra-
laboratory. For a single laboratory tionale for each determination, the
that offers and furnishes an ADLT that data on which the determinations are
is not an applicable laboratory except based, and responses to comments and
with respect to its ADLTs, the applica- suggestions from the public.
ble information of its CDLTs that are (3) On or after January 1, 2018, in ap-
not ADLTs may not be reported. plying paragraphs (d)(1) and (2) of this
section, CMS will provide an expla-
[81 FR 41099, June 23, 2016] nation of how it took into account the
recommendations of the Advisory
§ 414.506 Procedures for public con- Panel on CDLTs described in paragraph
sultation for payment for a new (e) of this section.
clinical diagnostic laboratory test.
(4) On or after January 1, 2018, in ap-
For a new CDLT, CMS determines plying paragraphs (d)(1) and (2) of this
the basis for and amount of payment section and § 414.509(b)(2)(i) and (iii)
after performance of the following: when CMS uses the gapfilling method
(a) CMS makes available to the pub- described in § 414.508(b)(2), CMS will
lic (through CMS’s Internet Web site) a make available to the public an expla-
list that includes codes for which es- nation of the payment rate for the test.
tablishment of a payment amount is (e) CMS will consult with an expert

being considered for the next calendar outside advisory panel, called the Advi-
year. sory Panel on CDLTs, composed of an
105
§ 414.507 42 CFR Ch. IV (10–1–17 Edition)
appropriate selection of individuals (e) There is no administrative or ju-

with expertise, which may include mo- dicial review under sections 1869 and
lecular pathologists researchers, and 1878 of the Social Security Act, or oth-
individuals with expertise in labora- erwise, of the payment rates estab-
tory science or health economics, in lished under this subpart.
issues related to CDLTs. This advisory (f) Effective April 1, 2014, the nominal
panel will provide input on the estab- fee that would otherwise apply for a
lishment of payment rates under sample collected from an individual in
§ 414.508 and provide recommendations a Skilled Nursing Facility (SNF) or by
to CMS under this subpart. a laboratory on behalf of a Home
Health Agency (HHA) is $5.
[71 FR 69786, Dec. 1, 2006, as amended at 72 (g) For a CDLT for which CMS re-
FR 66401, Nov. 27, 2007; 81 FR 41099, June 23,
ceives no applicable information, pay-
2016]
ment is made based on the
§ 414.507 Payment for clinical diag- crosswalking or gapfilling methods de-
nostic laboratory tests. scribed in § 414.508(b)(1) and (2).
(h) For ADLTs that are furnished be-
(a) General rule. Except as provided in tween April 1, 2014 and December 31,
paragraph (d) of this section, and 2017, payment is based on the
§§ 414.508 and 414.522, the payment rate crosswalking or gapfilling methods de-
for a CDLT furnished on or after Janu- scribed in § 414.508(a).
ary 1, 2018, is equal to the weighted me-
dian for the test, as calculated under [81 FR 41099, June 23, 2016]
paragraph (b) of this section. Each pay-
§ 414.508 Payment for a new clinical
ment rate will be in effect for a period diagnostic laboratory test.
of one calendar year for ADLTs and
three calendar years for all other (a) For a new CDLT that is assigned
CDLTs, until the year following the a new or substantially revised code be-
next data collection period. tween January 1, 2005 and December 31,
(b) Methodology. For each test under 2017, CMS determines the payment
paragraph (a) of this section for which amount based on either of the fol-
applicable information is reported, the lowing:
weighted median is calculated by (1) Crosswalking. Crosswalking is used
arraying the distribution of all private if it is determined that a new CDLT is
payor rates, weighted by the volume comparable to an existing test, mul-
for each payor and each laboratory. tiple existing test codes, or a portion of
(c) The payment amounts established an existing test code.
under this section are not subject to (i) CMS assigns to the new CDLT
any adjustment, such as geographic, code, the local fee schedule amounts
budget neutrality, annual update, or and national limitation amount of the
other adjustment. existing test.
(ii) Payment for the new CDLT code
(d) Phase-in of payment reductions. For
is made at the lesser of the local fee
years 2018 through 2023, the payment
schedule amount or the national limi-
rates established under this section for
tation amount.
each CDLT that is not a new ADLT or
(2) Gapfilling. Gapfilling is used when
new CDLT, may not be reduced by
no comparable existing CDLT is avail-
more than the following amounts for—
able.
(1) 2018—10 percent of the national (i) In the first year, Medicare Admin-
limitation amount for the test in 2017. istrative Contractor-specific amounts
(2) 2019—10 percent of the payment are established for the new CDLT code
rate established in 2018. using the following sources of informa-
(3) 2020—10 percent of the payment tion to determine gapfill amounts, if
rate established in 2019. available:
(4) 2021—15 percent of the payment (A) Charges for the CDLT and routine
rate established in 2020. discounts to charges;
(5) 2022—15 percent of the payment (B) Resources required to perform the
rate established in 2021. CDLT;

(6) 2023—15 percent of the payment (C) Payment amounts determined by
rate established in 2022. other payors; and
106
(D) Charges, payment amounts, and (E) Other criteria CMS determines
resources required for other tests that appropriate.
may be comparable or otherwise rel- (ii) In the second year, the CDLT
evant. code is paid at the median of the Medi-
(ii) In the second year, the test code care Administrative Contractor-spe-
is paid at the national limitation cific amounts.
amount, which is the median of the
[81 FR 41100, June 23, 2016]
contractor-specific amounts.
(iii) For a new CDLT for which a new § 414.509 Reconsideration of basis for
or substantially revised HCPCS code and amount of payment for a new
was assigned on or before December 31, clinical diagnostic laboratory test.
2007, after the first year of gapfilling,
For a new CDLT, the following recon-
CMS determines whether the con-
sideration procedures apply:
tractor-specific amounts will pay for
(a) Reconsideration of basis for pay-
the test appropriately. If CMS deter-
ment. (1) CMS will receive reconsider-
mines that the contractor-specific
ation requests in written format for 60
amounts will not pay for the test ap-
days after making a determination of
propriately, CMS may crosswalk the
the basis for payment under
test.
§ 414.506(d)(2) regarding whether CMS
(b) For a new CDLT that is assigned
should reconsider the basis for pay-
a new or substantially revised HCPCS
ment and why a different basis for pay-
code on or after January 1, 2018, CMS
ment would be more appropriate. If a
determines the payment amount based
requestor recommends that the basis
on either of the following until applica-
for payment should be changed from
ble information is available to estab-
gapfilling to crosswalking, the re-
lish a payment amount under the
questor may also recommend the code
methodology described in § 414.507(b):
or codes to which to crosswalk the new
(1) Crosswalking. Crosswalking is used test.
if it is determined that a new CDLT is (2)(i) A requestor that submitted a
comparable to an existing test, mul- request under paragraph (a)(1) of this
tiple existing test codes, or a portion of section may also present its reconsid-
an existing test code. eration request at the public meeting
(i) CMS assigns to the new CDLT convened under § 414.506(c), provided
code, the payment amount established that the requestor requests an oppor-
under § 414.507 of the comparable exist- tunity to present at the public meeting
ing CDLT. as part of its written submission under
(ii) Payment for the new CDLT code paragraph (a)(1) of this section.
is made at the payment amount estab- (ii) If the requestor presents its re-
lished under § 414.507. consideration request at the public
(2) Gapfilling. Gapfilling is used when meeting convened under § 414.506(c),
no comparable existing CDLT is avail- members of the public may comment
able. on the reconsideration request verbally
(i) In the first year, Medicare Admin- at the public meeting and may submit
istrative Contractor-specific amounts written comments after the public
are established for the new CDLT code meeting (within the timeframe for pub-
using the following sources of informa- lic comments established by CMS).
tion to determine gapfill amounts, if (3) Considering reconsideration re-
available: quests and other comments received,
(A) Charges for the test and routine CMS may reconsider its determination
discounts to charges; of the basis for payment. As the result
(B) Resources required to perform the of such a reconsideration, CMS may
test; change the basis for payment from
(C) Payment amounts determined by crosswalking to gapfilling or from
other payors; gapfilling to crosswalking.
(D) Charges, payment amounts, and (4) If the basis for payment is revised
resources required for other tests that as the result of a reconsideration, the
may be comparable or otherwise rel- new basis for payment is final and is
evant; and not subject to further reconsideration.
107
§ 414.510 42 CFR Ch. IV (10–1–17 Edition)
(b) Reconsideration of amount of pay- (iv) For 30 days after CMS posts final
ment—(1) Crosswalking. (i) For 60 days Medicare Administrative Contractor-
after making a determination under specific payment amounts on the CMS
§ 414.506(d)(2) of the code or codes to Web site, CMS will receive reconsider-
which a new test will be crosswalked, ation requests in written format re-
CMS receives reconsideration requests garding whether CMS should recon-
in written format regarding whether sider the final Medicare Administra-
CMS should reconsider its determina- tive Contractor-specific payment
tion and the recommended code or amount and median of the Medicare
codes to which to crosswalk the new Administrative Contractor-specific
test. payment amount for the CDLT.
(ii)(A) A requestor that submitted a (v) Considering reconsideration re-
request under paragraph (b)(1)(i) of this quests received, CMS may reconsider
section may also present its reconsid- its determination of the amount of
eration request at the public meeting payment. As the result of a reconsider-
convened under § 414.506(c), provided ation, CMS may revise the median of
that the requestor requests an oppor- the Medicare Administrative Con-
tunity to present at the public meeting tractor-specific payment amount for
as part of its written submission under the CDLT.
paragraph (b)(1)(i) of this section. (3) For both gapfilled and
(B) If a requestor presents its recon- crosswalked new tests, if CMS revises
sideration request at the public meet- the amount of payment as the result of
ing convened under § 414.506(c), mem- a reconsideration, the new amount of
bers of the public may comment on the payment is final and is not subject to
reconsideration request verbally at the further reconsideration.
public meeting and may submit writ- (c) Effective date. If CMS changes a
ten comments after the public meeting determination as the result of a recon-
(within the timeframe for public com- sideration, the new determination re-
ments established by CMS). garding the basis for or amount of pay-
(iii) Considering comments received, ment is effective January 1 of the year
CMS may reconsider its determination following reconsideration. Claims for
of the amount of payment. As the re- services with dates of service prior to
sult of such a reconsideration, CMS the effective date will not be reopened
may change the code or codes to which or otherwise reprocessed.
the new test is crosswalked.
(d) Jurisdiction for reconsideration deci-
(iv) If CMS changes the basis for pay-
sions. Jurisdiction for reconsidering a
ment from gapfilling to crosswalking
determination rests exclusively with
as a result of a reconsideration, the
the Secretary. A decision whether to
crosswalked amount of payment is not
reconsider a determination is com-
subject to reconsideration.
mitted to the discretion of the Sec-
(2) Gapfilling. (i) By April 30 of the
retary. A decision not to reconsider an
year after CMS makes a determination
initial determination is not subject to
under § 414.506(d)(2) or paragraph (a)(3)
administrative or judicial review.
of this section that the basis for pay-
ment for a CDLT will be gapfilling, [72 FR 66401, Nov. 27, 2007, as amended at 73
CMS posts interim Medicare Adminis- FR 2432, Jan. 15, 2008; 81 FR 41100, June 23,
trative Contractor-specific amounts on 2016]
the CMS Web site.
(ii) For 60 days after CMS posts in- § 414.510 Laboratory date of service
terim Medicare Administrative Con- for clinical laboratory and pathol-
ogy specimens.
tractor-specific amounts on the CMS
Web site, CMS will receive public com- The date of service for either a clin-
ments in written format regarding the ical laboratory test or the technical
interim Medicare Administrative Con- component of physician pathology
tractor-specific amounts. service is as follows:
(iii) After considering the public (a) Except as provided under para-
comments, CMS will post final Medi- graph (b) of this section, the date of
care Administrative Contractor-spe- service of the test must be the date the
cific amounts on the CMS Web site. specimen was collected.
108
(b)(1) If a specimen was collected test that requires a fresh tissue sample
over a period that spans 2 calendar to test the sensitivity of tumor cells to
days, then the date of service must be various chemotherapeutic agents. The
the date the collection ended. Secretary identifies such tests through
(2) In the case of a test performed on program instructions.
a stored specimen, if a specimen was [71 FR 69786, Dec. 1, 2006, as amended at 72
stored for— FR 66402, Nov. 27, 2007]
(i) Less than or equal to 30 calendar
days from the date it was collected, the § 414.522 Payment for new advanced
date of service of the test must be the diagnostic laboratory tests.
date the test was performed only if— (a) The payment rate for a new
(A) The test is ordered by the pa- ADLT—
tient’s physician at least 14 days fol- (1) During the new ADLT initial pe-
lowing the date of the patient’s dis- riod, is equal to its actual list charge.
charge from the hospital; (2) Prior to the new ADLT initial pe-
(B) The specimen was collected while riod, is determined by the Medicare Ad-
the patient was undergoing a hospital ministrative Contractor based on infor-
surgical procedure; mation provided by the laboratory
(C) It would be medically inappro- seeking new ADLT status for its lab-
priate to have collected the sample oratory test.
other than during the hospital proce- (b) After the new ADLT initial pe-
dure for which the patient was admit- riod, the payment rate for a new ADLT
ted; is equal to the weighted median estab-
(D) The results of the test do not lished under the payment methodology
guide treatment provided during the described in § 414.507(b).
hospital stay; and (c) If, after the new ADLT initial pe-
(E) The test was reasonable and riod, the actual list charge of a new
medically necessary for the treatment ADLT is greater than 130 percent of the
of an illness. weighted median established under the
(ii) More than 30 calendar days before payment methodology described in
testing, the specimen is considered to § 414.507, CMS will recoup the difference
have been archived and the date of between the ADLT actual list charge
service of the test must be the date the and 130 percent of the weighted me-
specimen was obtained from storage. dian.
(3) In the case of a chemotherapy sen- (d) If CMS does not receive any appli-
sitivity test performed on live tissue, cable information for a new ADLT by
the date of service of the test must be the last day of the second quarter of
the date the test was performed only the new ADLT initial period, the pay-
if— ment rate for the test is determined ei-
(i) The decision regarding the specific ther by the gapfilling or crosswalking
chemotherapeutic agents to test is method as described in § 414.508(b)(1)
made at least 14 days after discharge; and (2).
(ii) The specimen was collected while
[81 FR 41100, June 23, 2016]
the patient was undergoing a hospital
surgical procedure;
(iii) It would be medically inappro- Subpart H—Fee Schedule for
priate to have collected the sample Ambulance Services
other than during the hospital proce-
dure for which the patient was admit- SOURCE: 67 FR 9132, Feb. 27, 2002, unless
ted; otherwise noted.
(iv) The results of the test do not
guide treatment provided during the § 414.601 Purpose.
hospital stay; and, This subpart implements section
(v) The test was reasonable and medi- 1834(l) of the Act by establishing a fee
cally necessary for the treatment of an schedule for the payment of ambulance
illness. services. Section 1834(l) of the Act re-
(4) For purposes of this section, quires that, except for services fur-
‘‘chemotherapy sensitivity test’’ means nished by certain critical access hos-
a test identified by the Secretary as a pitals (see § 413.70(b)(5) of this chapter),
109
§ 414.605 42 CFR Ch. IV (10–1–17 Edition)
payment for all ambulance services, Advanced life support (ALS) personnel
otherwise previously payable on a rea- means an individual trained to the
sonable charge basis or retrospective level of the emergency medical techni-
reasonable cost basis, be made under a cian-intermediate (EMT-Intermediate)
fee schedule. or paramedic. The EMT-Intermediate
is defined as an individual who is quali-
§ 414.605 Definitions. fied, in accordance with State and
As used in this subpart, the following local laws, as an EMT-Basic and who is
definitions apply to both land and also qualified in accordance with State
water (hereafter collectively referred and local laws to perform essential ad-
to as ‘‘ground’’) ambulance services vanced techniques and to administer a
and to air ambulance services unless limited number of medications. The
otherwise specified: EMT-Paramedic is defined as pos-
Advanced life support (ALS) assessment sessing the qualifications of the EMT-
is an assessment performed by an ALS Intermediate and also, in accordance
crew as part of an emergency response with State and local laws, as having
that was necessary because the pa- enhanced skills that include being able
tient’s reported condition at the time to administer additional interventions
of dispatch was such that only an ALS and medications.
crew was qualified to perform the as- Basic life support (BLS) means trans-
sessment. An ALS assessment does not portation by ground ambulance vehicle
necessarily result in a determination and medically necessary supplies and
that the patient requires an ALS level services, plus the provision of BLS am-
of service. bulance services. The ambulance must
Advanced life support (ALS) interven- be staffed by at least two people who
tion means a procedure that is, in ac- meet the requirements of state and
cordance with State and local laws, re- local laws where the services are being
quired to be furnished by ALS per- furnished. Also, at least one of the staff
sonnel. members must be certified, at a min-
imum, as an emergency medical tech-
Advanced life support, level 1 (ALS1)
nician-basic (EMT-Basic) by the State
means transportation by ground ambu-
or local authority where the services
lance vehicle, medically necessary sup-
are furnished and be legally authorized
plies and services and either an ALS
to operate all lifesaving and life-sus-
assessment by ALS personnel or the
taining equipment on board the vehi-
provision of at least one ALS interven-
cle. These laws may vary from State to
tion.
State.
Advanced life support, level 2 (ALS2)
Conversion factor (CF) is the dollar
means either transportation by ground
amount established by CMS that is
ambulance vehicle, medically nec-
multiplied by relative value units to
essary supplies and services, and the
produce ground ambulance service base
administration of at least three medi-
rates.
cations by intravenous push/bolus or
Emergency response means responding
by continuous infusion, excluding crys-
immediately at the BLS or ALS1 level
talloid, hypotonic, isotonic, and
of service to a 911 call or the equivalent
hypertonic solutions (Dextrose, Normal
in areas without a 911 call system. An
Saline, Ringer’s Lactate); or transpor-
immediate response is one in which the
tation, medically necessary supplies
ambulance entity begins as quickly as
and services, and the provision of at
possible to take the steps necessary to
least one of the following ALS proce-
respond to the call.
dures:
Fixed wing air ambulance (FW) means
(1) Manual defibrillation/ transportation by a fixed wing aircraft
cardioversion. that is certified as a fixed wing air am-
(2) Endotracheal intubation. bulance and such services and supplies
(3) Central venous line. as may be medically necessary.
(4) Cardiac pacing. Geographic adjustment factor (GAF)
(5) Chest decompression. means the practice expense (PE) por-

(6) Surgical airway. tion of the geographic practice cost
(7) Intraosseous line. index (GPCI) from the physician fee
110
schedule as applied to a percentage of ecutive Office of Management and

the base rate. For ground ambulance Budget.
services, the PE portion of the GPCI is
[67 FR 9132, Feb. 27, 2002, as amended at 68
applied to 70 percent of the base rate FR 67693, Dec. 5, 2003; 71 FR 69787, Dec. 1,
for each level of service. For air ambu- 2006; 80 FR 71382, Nov. 16, 2015]
lance services, the PE portion of the
GPCI is applied to 50 percent of the ap- § 414.610 Basis of payment.
plicable base rate. (a) Method of payment. Medicare pay-
Loaded mileage means the number of ment for ambulance services is based
miles the Medicare beneficiary is on the lesser of the actual charge or
transported in the ambulance vehicle. the applicable fee schedule amount.
Paramedic ALS intercept (PI) means The fee schedule payment for ambu-
EMT-Paramedic services furnished by lance services equals a base rate for the
an entity that does not furnish the level of service plus payment for mile-
ground ambulance transport, provided age and applicable adjustment factors.
the services meet the requirements Except for services furnished by cer-
specified in § 410.40(c) of this chapter. tain critical access hospitals or enti-
Point of pick-up means the location of ties owned and operated by them, as
the beneficiary at the time he or she is described in § 413.70(b) of this chapter,
placed on board the ambulance. all ambulance services are paid under
Relative value units (RVUs) means a the fee schedule specified in this sub-
value assigned to a ground ambulance part (regardless of the vehicle fur-
service. nishing the service).
Rotary wing air ambulance (RW) (b) Mandatory assignment. Effective
means transportation by a helicopter with implementation of the ambulance
that is certified as an ambulance and fee schedule described in § 414.601 (that
such services and supplies as may be is, for services furnished on or after
April 1, 2002), all payments made for
medically necessary.
ambulance services are made only on
Rural adjustment factor (RAF) means
an assignment-related basis. Ambu-
an adjustment applied to the base pay- lance suppliers must accept the Medi-
ment rate when the point of pick-up is care allowed charge as payment in full
located in a rural area. and may not bill or collect from the
Rural area means an area located out- beneficiary any amount other than the
side an urban area, or a rural census unmet Part B deductible and Part B
tract within a Metropolitan Statistical coinsurance amounts. Violations of
Area as determined under the most re- this requirement may subject the pro-
cent version of the Goldsmith modi- vider or supplier to sanctions, as pro-
fication as determined by the Office of vided by law (part 402 of this chapter).
Rural Health Policy of the Health Re- (c) Formula for computation of payment
sources and Services Administration. amounts. The fee schedule payment
Specialty care transport (SCT) means amount for ambulance services is com-
interfacility transportation of a criti- puted according to the following provi-
cally injured or ill beneficiary by a sions:
ground ambulance vehicle, including (1) Ground ambulance service levels.
medically necessary supplies and serv- The CF is multiplied by the applicable
ices, at a level of service beyond the RVUs for each level of service to
scope of the EMT-Paramedic. SCT is produce a service-level base rate.
necessary when a beneficiary’s condi- (i) For services furnished during the
tion requires ongoing care that must period July 1, 2004 through December
be furnished by one or more health pro- 31, 2006, ambulance services originating
fessionals in an appropriate specialty in—
area, for example, nursing, emergency (A) Urban areas (both base rate and
medicine, respiratory care, cardio- mileage) are paid based on a rate that
vascular care, or a paramedic with ad- is 1 percent higher than otherwise is
ditional training. applicable under this section; and

Urban area means a Metropolitan (B) Rural areas (both base rate and
Statistical Area, as defined by the Ex- mileage) are paid based on a rate that
111
§ 414.610 42 CFR Ch. IV (10–1–17 Edition)
is 2 percent higher than otherwise is and a rate for all levels of ground
applicable under this section. transportation.
(ii) For services furnished during the (4) Geographic adjustment factor (GAF).
period July 1, 2008 through December For ground ambulance services, the PE
31, 2017, ambulance services originating portion of the GPCI from the physician
in: fee schedule is applied to 70 percent of
(A) Urban areas (both base rate and the base rate for ground ambulance
mileage) are paid based on a rate that services. For air ambulance services,
is 2 percent higher than otherwise is the PE portion of the physician fee
applicable under this section. schedule GPCI is applied to 50 percent
(B) Rural areas (both base rate and of the base rate for air ambulance serv-
mileage) are paid based on a rate that ices.
is 3 percent higher than otherwise is (5) Rural adjustment factor (RAF). (i)
applicable under this section. For ground ambulance services where
(iii) The service-level base rate is the point of pickup is in a rural area,
then adjusted by the GAF. Compare the mileage rate is increased by 50 per-
this amount to the actual charge. The cent for each of the first 17 miles and,
lesser of the actual charge or the GAF for services furnished before January 1,
adjusted base rate amount is added to 2004, by 25 percent for miles 18 through
the lesser of the actual mileage 50. The standard mileage rate applies
charges or the payment rate per mile, to every mile over 50 miles and, for
multiplied by the number of miles that services furnished after December 31,
the beneficiary was transported. When 2003, to every mile over 17 miles. For
applicable, the appropriate RAF is ap- air ambulance services where the point
plied to the ground mileage rate to de- of pickup is in a rural area, the total
termine the appropriate payment payment is increased by 50 percent;
rates. The RVU scale for the ambu- that is, the rural adjustment factor ap-
lance fee schedule is as follows: plies to the sum of the base rate and
the mileage rate.
Relative
Service level value units (ii) For services furnished during the
(RVUs) period July 1, 2004 through December
BLS ...................................................................... 1.00
31, 2017, the payment amount for the
BLS-Emergency ................................................... 1.60 ground ambulance base rate is in-
ALS1 .................................................................... 1.20 creased by 22.6 percent where the point
ALS1-Emergency ................................................. 1.90 of pickup is in a rural area determined
ALS2 .................................................................... 2.75
SCT ...................................................................... 3.25 to be in the lowest 25 percent of rural
PI ......................................................................... 1.75 population arrayed by population den-
sity. The amount of this increase is
(2) Air ambulance service levels. The based on CMS’s estimate of the ratio of
base payment rate for the applicable the average cost per trip for the rural
type of air ambulance service is ad- areas in the lowest quartile of popu-
justed by the GAF and, when applica- lation compared to the average cost
ble, by the appropriate RAF to deter- per trip for the rural areas in the high-
mine the amount of payment. Air am- est quartile of population. In making
bulance services have no CF or RVUs. this estimate, CMS may use data pro-
This amount is compared to the actual vided by the GAO.
charge. The lesser of the charge or the (6) Multiple patients. The allowable
adjusted GAF rate amount is added to amount per beneficiary for a single am-
the payment rate per mile, multiplied bulance transport when more than one
by the number of miles that the bene- patient is transported simultaneously
ficiary was transported. When applica- is based on the total number of pa-
ble, the appropriate RAF is also ap- tients (both Medicare and non-Medi-
plied to the air mileage rate. care) on board. If two patients are
(3) Loaded mileage. Payment is based transported simultaneously, then the
on loaded miles. Payment for air mile- payment allowance for the beneficiary
age is based on loaded miles flown as (or for each of them if both patients
expressed in statute miles. There are are beneficiaries) is equal to 75 percent

three mileage payment rates: a rate for of the service payment allowance ap-
FW services, a rate for RW services, plicable for the level of care furnished
112
to the beneficiary, plus 50 percent of index for all urban consumers (CPI–U)
the applicable mileage payment allow- (U.S. city average) for the 12-month pe-
ance. If three or more patients are riod ending with June of the previous
transported simultaneously, the pay- year and, for 2011 and each subsequent
ment allowance for the beneficiary (or year, is reduced by the productivity ad-
each of them) is equal to 60 percent of justment described in section
the service payment allowance applica- 1886(b)(3)(B)(xi)(II) of the Act.
ble for the level of care furnished to (g) Adjustments. The Secretary mon-
the beneficiary, plus the applicable itors payment and billing data on an
mileage payment allowance divided by ongoing basis and adjusts the CF and
the number of patients on board. air ambulance rates as appropriate to
(7) Payment rate for mileage greater reflect actual practices under the fee
than 50 miles. For services furnished schedule. These rates are not adjusted
during the period July 1, 2004 through solely because of changes in the total
December 31, 2008, each loaded ambu- number of ambulance transports.
lance mile greater than 50 (that is, (h) Treatment of certain areas for pay-
miles 51 and greater) for ambulance ment for air ambulance services. Any area
transports originating in either urban that was designated as a rural area for
areas or in rural areas are paid based purposes of making payments under
on a rate that is 25 percent higher than the ambulance fee schedule for air am-
otherwise is applicable under this sec- bulance services furnished on Decem-
tion. ber 31, 2006, must be treated as a rural
(8) For ambulance services furnished area for purposes of making payments
on or after October 1, 2013 consisting of under the ambulance fee schedule for
non-emergency basic life support (BLS) air ambulance services furnished dur-
services involving transport of an indi- ing the period July 1, 2008 through
vidual with end-stage renal disease for June 30, 2013.
renal dialysis services (as described in [67 FR 9132, Feb. 27, 2002, as amended at 68
section 1881(b)(14)(B)) furnished other FR 67693, Dec. 5, 2003; 69 FR 40292, July 1,
than on an emergency basis by a pro- 2004; 71 FR 69787, Dec. 1, 2006; 73 FR 69937,
vider of services or a renal dialysis fa- Nov. 19, 2008; 74 FR 62012, Nov. 25, 2009; 75 FR
cility, the fee schedule amount other- 73625, Nov. 29, 2010; 76 FR 70315, Nov. 10, 2011;
77 FR 69368, Nov. 16, 2012; 78 FR 74820, Dec. 10,
wise applicable (both base rate and 2013; 79 FR 68005, Nov. 13, 2014; 80 FR 71382,
mileage) is reduced by 10 percent. Nov. 16, 2015]
(d) Payment. Payment, in accordance
with this subpart, represents payment § 414.615 Transition to the ambulance
in full (subject to applicable Medicare fee schedule.
Part B deductible and coinsurance re- The fee schedule for ambulance serv-
quirements as described in subpart G of ices will be phased in over 5 years be-
part 409 of this chapter or in subpart I ginning April 1, 2002. Subject to the
of part 410 of this chapter) for all serv- first sentence in § 414.610(a), payment
ices, supplies, and other costs for an for services furnished during the tran-
ambulance service furnished to a Medi- sition period is made based on a com-
care beneficiary. No direct payment bination of the fee schedule payment
will be made under this subpart if bill- for ambulance services and the amount
ing for the ambulance service is re- the program would have paid absent
quired to be consolidated with billing the fee schedule for ambulance serv-
for another benefit for which payment ices, as follows:
may be made under this chapter. (a) 2002 Payment. For services fur-
(e) Point of pick-up. The zip code of nished in 2002, the payment for the
the point of pick-up must be reported service component, the mileage compo-
on each claim for ambulance services nent and, if applicable, the supply com-
so that the correct GAF and RAF may ponent is based on 80 percent of the
be applied, as appropriate. reasonable charge for independent sup-
(f) Updates. The CF, the air ambu- pliers or on 80 percent of reasonable
lance base rates, and the mileage rates cost for providers, plus 20 percent of
are updated annually by an inflation the ambulance fee schedule amount for
factor established by law. The inflation the service and mileage components.
factor is based on the consumer price The reasonable charge or reasonable
113
§ 414.617 42 CFR Ch. IV (10–1–17 Edition)
cost portion of payment in CY 2002 is 2001, the inflation update factor is 4.7
equal to the supplier’s reasonable percent. The average for the year is 3.7
charge allowance or provider’s reason- percent. Thus, the annualized (average)
able cost allowance for CY 2001, multi- CY 2001 payment amounts used to de-
plied by the statutory inflation factor rive the CY 2002 payment amounts are
for ambulance services. equivalent to the CY 2001 payment
(b) 2003 Payment. For services fur- amounts that would have been deter-
nished in CY 2003, payment is based on mined had the inflation update factor
60 percent of the reasonable charge or for the entire CY 2001 been 3.7 percent.
reasonable cost, as applicable, plus 40 Both portions of the transition pay-
percent of the ambulance fee schedule ment (that is, the portion that is based
amount. The reasonable charge and on reasonable charge or reasonable
reasonable cost portion in CY 2003 is cost and the portion that is based on
equal to the supplier’s reasonable the ambulance fee schedule) are up-
charge or provider’s reasonable cost for dated annually for inflation by the in-
CY 2002, multiplied by the statutory inflation factor described in § 414.610(f).
flation factor for ambulance services. (g) Exception. There will be no blend-
(c) 2004 Payment. For services fur- ed payment allowance as described in
nished in CY 2004, payment is based on paragraphs (a), (b), (c), and (d) of this
40 percent of the reasonable charge or section for ground mileage in those
reasonable cost, as applicable, plus 60 States where the Medicare carrier paid
percent of the ambulance fee schedule separately for all out-of-county ground
amount. The reasonable charge and ambulance mileage, but did not, before
reasonable cost portion in CY 2004 is the implementation of the Medicare
equal to the supplier’s reasonable ambulance fee schedule, make a sepa-
charge or provider’s reasonable cost for rate payment for any ground ambu-
CY 2003, multiplied by the statutory in- lance mileage within the county in
flation factor for ambulance services. which the beneficiary was transported.
(d) 2005 Payment. For services fur- Payment for ground ambulance mile-
nished in CY 2005, payment is based on age in that State will be made based on
20 percent of the reasonable charge or the full ambulance fee schedule
reasonable cost, as applicable, plus 80 amount for ground mileage. This ex-
percent of the ambulance fee schedule ception applies only to carrier-proc-
amount. The reasonable charge and essed claims and only in those States
reasonable cost portion in CY 2005 is in which the carrier paid separately for
equal to the supplier’s reasonable out-of-county ambulance mileage, but
charge or provider’s reasonable cost for did not make separate payment for any
CY 2004, multiplied by the statutory in- in-county mileage throughout the en-
flation factor for ambulance services. tire State.
(e) 2006 and Beyond Payment. For
services furnished in CY 2006 and there- § 414.617 Transition from regional to
after, the payment is based solely on national ambulance fee schedule.
the ambulance fee schedule amount. For services furnished during the pe-
(f) Updates. The portion of the transi- riod July 1, 2004 through December 31,
tion payment that is based on the ex- 2009, the amount for the ground ambu-
isting payment methodology (that is, lance base rate is subject to a floor
the non-fee-schedule portion) is up- amount determined by establishing
dated annually for inflation by a factor nine fee schedules based on each of the
equal to the percentage increase in the nine census divisions using the same
CPI-U (U.S. city average) for the 12- methodology as used to establish the
month period ending with June of the national fee schedule. If the regional
previous year. The CY 2002 inflation fee schedule methodology for a given
update factor used to update the 2001 census division results in an amount
payment amounts is applied to the that is less than or equal to the na-
annualized (average) payment amounts tional ground base rate, then it is not
for CY 2001. For the period January 1, used, and the national FS amount ap-
2001 through June 30, 2001, the inflation plies. If the regional fee schedule meth-
update factor is 2.7 percent. For the pe- odology for a given census division re-
riod July 1, 2001 through December 31, sults in an amount that is greater than
114
the national ground base rate, then the § 414.701 Purpose.

FS portion of the base rate for that
This subpart implements section
census division is equal to a blend of
1842(o) of the Social Security Act by
the national rate and the regional rate
specifying the methodology for deter-
in accordance with the following sched-
mining the payment allowance limit
ule:
for drugs and biologicals covered under
Time period Regional National Part B of Title XVIII of the Act (here-
percent percent after in this subpart referred to as the
7/1/04–12/31/04 ................................. 80 20 ‘‘program’’) that are not paid on a cost
CY 2005 ............................................ 60 40 or prospective payment system basis.
CY 2006 ............................................ 40 60 Examples of drugs that are subject to
CY 2007–CY 2009 ............................ 20 80
CY 2010 and thereafter ..................... 0 100 the rules contained in this subpart are:
drugs furnished incident to a physi-
cian’s service; durable medical equip-
[69 FR 40292, July 1, 2004]
ment (DME) drugs; separately billable
§ 414.620 Publication of the ambulance drugs at independent dialysis facilities
fee schedule. not under the ESRD composite rate;
statutorily covered drugs, for example,
(a) Changes in payment rates result-
influenza, pneumococcal and hepatitis
ing from incorporation of the annual
vaccines, antigens, hemophilia blood
inflation factor and the productivity
clotting factor, immunosuppressive
adjustment as described in § 414.610(f)
drugs and certain oral anti-cancer
will be announced by CMS by instruc-
drugs.
tion and on the CMS Web site.
(b) CMS will follow applicable rule- § 414.704 Definitions.
making procedures in publishing revi-
sions to the fee schedule for ambulance As used in this subpart, the following
services that result from any factors definition applies. Drug refers to both
other than those described in drugs and biologicals.
§ 414.610(f).
§ 414.707 Basis of payment.
[75 FR 73626, Nov. 29, 2010]
(a) Method of payment. (1) Payment
§ 414.625 Limitation on review. for a drug in calendar year 2004 is based
on the lesser of—
There will be no administrative or ju- (i) The actual charge on the claim for
dicial review under section 1869 of the program benefits; or
Act or otherwise of the amounts estab- (ii) 85 percent of the average whole-
lished under the fee schedule for ambu- sale price determined as of April 1,
lance services, including the following: 2003, subject to the exceptions as speci-
(a) Establishing mechanisms to con- fied in paragraphs (a)(2) through (a)(8)
trol increases in expenditures for am- of this section.
bulance services. (2) The payment limits for the fol-
(b) Establishing definitions for ambu- lowing drugs are calculated using 95
lance services that link payments to percent of the average wholesale price:
the type of services provided. (i) Blood clotting factors.
(c) Considering appropriate regional (ii) A drug or biological furnished
and operational differences. during 2004 that was not available for
(d) Considering adjustments to pay- Medicare payment as of April 1, 2003.
ment rates to account for inflation and
(iii) Pneumococcal and influenza vac-
other relevant factors.
cines as well as hepatitis B vaccine
(e) Phasing in the application of the
that is furnished to individuals at high
payment rates under the fee schedule
or intermediate risk of contracting
in an efficient and fair manner.
hepatitis B (as determined by the Sec-
retary).
Subpart I—Payment for Drugs and (iv) A drug or biological furnished
Biologicals during 2004 in connection with the fur-
nishing of renal dialysis services if sep-

SOURCE: 69 FR 1116, Jan. 7, 2004, unless oth- arately billed by renal dialysis facili-
erwise noted. ties.
115
§ 414.800 42 CFR Ch. IV (10–1–17 Edition)
(3) The payment limits for infusion (7) In the case of blood and blood
drugs furnished through a covered item products (other than blood clotting fac-
of durable medical equipment are cal- tors), the payment limits shall be de-
culated using 95 percent of the average termined in the same manner as such
wholesale price in effect on October 1, payment limit was determined on Oc-
2003. tober 1, 2003.
(4) The payments limits for drugs (b) Mandatory assignment. Effective
contained in the following table are with services furnished on or after Feb-
calculated based on the percentages of ruary 1, 2001, payment for any drug
the average wholesale price determined covered under Part B of Medicare may
as of April 1, 2003 that are specified in be made on an assignment-related basis
the table. only. All billers must accept the pro-
gram allowed charge as payment in full
Percentage
used to cal- and may not bill nor collect from the
Drug culate 2004 beneficiary any amount other than the
payment
limit unmet Part B deductible and Part B
coinsurance amounts, if applicable.
EPOETIN ALFA ................................................. 87 Violations of this requirement may
LEUPROLIDE ACETATE .................................. 81
GOSERELIN ACETATE .................................... 80
subject the supplier to sanctions, as
RITUXIMAB ....................................................... 81 provided by the statute (See § 402 of
PACLITAXEL ..................................................... 81 this chapter).
DOCETAXEL ..................................................... 80 (c) Mandatory reporting of anemia
CARBOPLATIN ................................................. 81
IRINOTECAN ..................................................... 80 quality indicators. The following provi-
GEMCITABINE HCL .......................................... 80 sions are effective January 1, 2008:
PAMIDRONATE DISODIUM ............................. 85 (1) Each request for payment for
DOLASETRON MESYLATE .............................. 80
anti-anemia drugs furnished to treat
FILGRASTIM ..................................................... 81
HYLAN G-F 20 .................................................. 82 anemia resulting from the treatment of
MYCOPHENOLATE MOFETIL ......................... 86 cancer must report the beneficiary’s
GRANISETRON HCL ........................................ 80 most recent hemoglobin or hematocrit
ONDANSETRON ............................................... 87
VINORELBINE TARTATE ................................. 81
level;
SARGRAMOSTIM ............................................. 80 (2) Each request for payment for use
TOPOTECAN .................................................... 84 of erythropoiesis stimulating agents
IPRATROPIUM BROMIDE ................................ 80 must report the beneficiary’s most re-
ALBUTEROL SULFATE .................................... 80
IMMUNE GLOBULIN ......................................... 80
cent hemoglobin or hematocrit level.
LEUCOVORIN CALCIUM .................................. 80 [69 FR 1116, Jan. 7, 2004, as amended at 72 FR
DOXORUBICIN HCL ......................................... 80
66402, Nov. 27, 2007]
DEXAMETHOSONE SODIUM PHOSPHATE ... 86
HEPARIN SODIUM LOCK-FLUSH ................... 80
CROMOLYN SODIUM ......................................
ACETYLCYSTEINE ...........................................
80
80
Subpart J—Submission of Manu-
facturer’s Average Sales Price
(5) The payment limits for Data
imiglucerase and alglucerase are cal-
culated using 94 percent of the average SOURCE: 69 FR 17938, Apr. 6, 2004, unless
wholesale price determined as of April otherwise noted.
1, 2003.
(6) Exception. The payment limit for § 414.800 Purpose.
a drug otherwise subject to paragraph This subpart implements section
(a)(1)(ii) or paragraph (a)(4) of this sec- 1847A of the Act by specifying the re-
tion may be calculated using the per- quirements for submission of a manu-
centage of the average wholesale price facturer’s average sales price data for
as the Secretary deems appropriate certain drugs and biologicals covered
based on data and information sub- under Part B of Title XVIII of the Act
mitted by the drug manufacturer. that are paid under sections
(i) The manufacturer must submit 1842(o)(1)(D), 1847A, and
data after October 15, 2003 and before 1881(b)(13)(A)(ii) of the Act.
January 1, 2004.
(ii) The percentage only applies for § 414.802 Definitions.

drugs furnished on or after April 1, As used in this subpart, unless the
2004. context indicates otherwise—
116
Bona fide service fees means fees paid then deducting price concessions as
by a manufacturer to an entity, that specified in paragraphs (a)(2) and (a)(3)
represent fair market value for a bona of this section) divided by the total
fide, itemized service actually per- number of units sold by the manufac-
formed on behalf of the manufacturer turer in that quarter (after excluding
that the manufacturer would otherwise units associated with sales as specified
perform (or contract for) in the absence in paragraph (a)(4) of this section).
of the service arrangement, and that (2) Price concessions. (i) In calculating
are not passed on in whole or in part to the manufacturer’s average sales price,
a client or customer of an entity, a manufacturer must deduct price con-
whether or not the entity takes title to cessions. Price concessions include the
the drug. following types of transactions and
Drug means both drugs and items:
biologicals. (A) Volume discounts.
Manufacturer means any entity that (B) Prompt pay discounts.
is engaged in the following (This term (C) Cash discounts.
does not include a wholesale dis- (D) Free goods that are contingent on
tributor of drugs or a retail pharmacy any purchase requirement.
licensed under State law): (E) Chargebacks and rebates (other
(1) Production, preparation, propaga- than rebates under the Medicaid pro-
tion, compounding, conversion or proc- gram).
essing of prescription drug products, ei- (ii) For the purposes of paragraph
ther directly or indirectly by extrac- (a)(2)(i), bona fide services fees are not
tion from substances of natural origin, considered price concessions.
or independently by means of chemical (3) To the extent that data on price
synthesis, or by a combination of ex- concessions, as described in paragraph
traction and chemical synthesis. (a)(2) of this section, are available on a
(2) The packaging, repackaging, la- lagged basis, the manufacturer must
beling, relabeling, or distribution of estimate this amount in accordance
prescription drug products. with the methodology described in this
Unit means the product represented paragraph.
by the 11-digit National Drug Code, un- (i)(A) For each National Drug Code
less otherwise specified by CMS to ac- with at least 12 months of sales (in-
count for situations where labeling including products for which the manu-
dicates that the amount of drug prod- facturer has redesignated the National
uct represented by a National Drug Drug Code for the specific product and
Code varies. The method of counting package size and has 12 months of sales
units excludes units of CAP drugs (as across the prior and current National
defined in § 414.902 of this part) sold to Drug Codes), after adjusting for ex-
an approved CAP vendor (as defined in empted sales, the manufacturer cal-
§ 414.902 of this part) for use under the culates a percentage equal to the sum
CAP (as defined in § 414.902 of this of the price concessions for the most
part). recent 12-month period available asso-
[69 FR 17938, Apr. 6, 2004, as amended at 71 ciated with sales subject to the average
FR 48143, Aug. 18, 2006; 71 FR 69787, Dec. 1, sales price reporting requirement di-
2006; 74 FR 62012, Nov. 25, 2009; 76 FR 73473, vided by the total in dollars for the
Nov. 28, 2011] sales subject to the average sales price
reporting requirement for the same 12-
§ 414.804 Basis of payment. month period.
(a) Calculation of manufacturer’s aver- (B) For each National Drug Code
age sales price. (1) The manufacturer’s with less than 12 months of sales, the
average sales price for a quarter for a calculation described in paragraph
drug represented by a particular 11- (i)(A) of this section is performed for
digit National Drug Code must be cal- the time period equaling the total
culated as the manufacturer’s sales to number of months of sales.
all purchasers in the United States for (ii) The manufacturer multiplies the
that particular 11-digit National Drug applicable percentage described in

Code (after excluding sales as specified paragraph (a)(3)(i)(A) or (a)(3)(i)(B) of
in paragraph (a)(4) of this section and this section by the total in dollars for
117
§ 414.806 42 CFR Ch. IV (10–1–17 Edition)
the sales subject to the average sales (ii) In determining nominal sales ex-
price reporting requirement (after ad- empted under section
justing for exempted sales) for the 1927(c)(1)(C)(ii)(III) of the Act, the man-
quarter being submitted. (The manu- ufacturer calculates the average manu-
facturer must carry a sufficient num- facturer price as defined in section
ber of decimal places in the calculation 1927(k) of the Act and then identifies
of the price concessions percentage in sales that are eligible to be considered
order to round accurately the net total a nominal sale under section
sales amount for the quarter to the 1927(c)(1)(D) of the Act and are at less
nearest whole dollar.) The result of than 10 percent of the average manu-
this multiplication is then subtracted facturer price. To identify nominal
from the total in dollars for the sales sales, the manufacturer must use the
subject to the average sales price re- average manufacturer price for the cal-
porting requirement (after adjusting endar quarter that is the same cal-
for exempted sales) for the quarter endar quarter as the average sales
being submitted. price reporting period.
(iii) The manufacturer uses the result (5) The manufacturer’s average sales
of the calculation described in para- price must be calculated by the manu-
graph (a)(3)(ii) of this section as the facturer every calendar quarter and
numerator and the number of units submitted to CMS within 30 days of the
sold in the quarter (after adjusting for close of the quarter. The first quarter
exempted sales) as the denominator to submission must be submitted by April
calculate the manufacturer’s average 30, 2004. Subsequent reports are due not
sales price for the National Drug Code later than 30 days after the last day of
for the quarter being submitted. each calendar quarter.
(iv) Example. After adjusting for ex- (6) The manufacturer’s average sales
empted sales, the total lagged price price must be calculated based on the
concessions (discounts, rebates, etc.) amount of product in a vial or other
over the most recent 12-month period container as conspicuously reflected on
available associated with sales for Na- the FDA approved label as defined by
tional Drug Code 12345–6789–01 subject section 201(k) of the Food, Drug, and
to the ASP reporting requirement Cosmetic Act.
equal $200,000, and the total in dollars (7) Each report must be certified by
for the sales subject to the average one of the following:
sales price reporting requirement for (i) The manufacturer’s Chief Execu-
the same period equals $600,000. The tive Officer (CEO).
lagged price concessions percentage for (ii) The manufacturer’s Chief Finan-
this period equals 200,000/600,000 = cial Officer (CFO).
0.33333. The total in dollars for the (iii) An individual who has delegated
sales subject to the average sales price authority to sign for, and who reports
reporting requirement for the quarter directly to, the manufacturer’s CEO or
being reported, equals $50,000 for 10,000 CFO.
units sold. The manufacturer’s average (b) [Reserved]
sales price calculation for this Na- [69 FR 17938, Apr. 6, 2004, as amended at 69
tional Drug Code for this quarter is: FR 55764, Sept. 16, 2004; 70 FR 70332, Nov. 21,
$50,000¥(0.33333 × $50,000) = $33,334 (net 2005; 71 FR 69787, Dec. 1, 2006; 72 FR 18914,
total sales amount); $33,334/10,000 = Apr. 16, 2007; 75 FR 73626, Nov. 29, 2010]
$3.33 (average sales price).
(4) Exempted sales. (i) In calculating § 414.806 Penalties associated with the
the manufacturer’s average sales price, failure to submit timely and accu-
a manufacturer must exclude sales rate ASP data.
that are exempt from inclusion in the Section 1847A(d)(4) specifies the pen-
determination of the best price under alties associated with misrepresenta-
section 1927(c)(1)(C)(i) of the Act and tions associated with ASP data. If the
sales that are merely nominal in Secretary determines that a manufac-
amount as applied for purposes of sec- turer has made a misrepresentation in
tion 1927(c)(1)(C)(ii)(III) of the Act, as the reporting of ASP data, a civil

limited by section 1927(c)(1)(D) of the money penalty in an amount of up to
Act. $10,000 may be applied for each price
118
misrepresentation and for each day in abbreviated application for a license of

which the price misrepresentation was a biological product that relies in part
applied. Section 1927(b)(3)(C) of the on data or information in an applica-
Act, as amended by section 303(i)(4) of tion for another biological product li-
the MMA, specifies the penalties asso- censed under section 351 of the Public
ciated with a manufacturer’s failure to Health Service Act (PHSA) as defined
submit timely information or the sub- at section 1847A(c)(6)(H) of the Act.
mission of false information. CAP drug means a physician-adminis-
tered drug or biological furnished on or
Subpart K—Payment for Drugs after January 1, 2006 described in sec-
and Biologicals Under Part B tion 1842(o)(1)(C) of the Act and sup-
plied by an approved CAP vendor under
the CAP as provided in this subpart.
SOURCE: 69 FR 66424, Nov. 15, 2004, unless
Competitive acquisition area means a
otherwise noted.
geographic area established by the Sec-
§ 414.900 Basis and scope. retary for purposes of implementing
the CAP required by section 1847B of
(a) This subpart implements sections the Act.
1842(o), 1847A, and 1847B of the Act and Competitive acquisition program (CAP)
outlines two payment methodologies means a program as defined under sec-
applicable to drugs and biologicals cov- tion 1847B of the Act.
ered under Medicare Part B that are Designated carrier means an entity as-
not paid on a cost or prospective pay- signed by CMS to process and pay
ment system basis. claims for drugs and biologicals under
(b) Examples of drugs that are sub- the CAP.
ject to the requirements specified in Drug means both drugs and
this subpart are: biologicals.
(1) Drugs furnished incident to a phy- Emergency delivery means delivery of
sician’s service; durable medical equip- a CAP drug within one business day in
ment (DME) drugs. appropriate shipping and packaging, in
(2) Separately billable drugs at inde- all areas of the United States and its
pendent dialysis facilities not under territories, with the exception of the
the ESRD composite rate. Pacific Territories. In the Pacific Ter-
(3) Statutorily covered drugs, for ex- ritories, emergency delivery means de-
ample— livery of a CAP drug within 5 business
(i) Influenza. days in appropriate shipping and pack-
(ii) Pneumococcal and Hepatitis B aging. In each case, this timeframe
vaccines. shall be reduced if product stability re-
(iii) Antigens. quires it, meaning that the manufac-
(iv) Hemophilia blood clotting factor. turer’s labeling instructions, drug com-
(v) Immunosuppressive drugs. pendia, or specialized drug stability
(vi) Certain oral anti-cancer drugs. references indicate that a shorter de-
[69 FR 66424, Nov. 15, 2004, as amended at 70 livery timeframe is necessary to avoid
FR 39093, July 6, 2005] adversely affecting the product’s integ-
rity, safety, or efficacy.
§ 414.902 Definitions. Emergency situation means, for the
As used in this subpart, unless the purposes of the CAP, an unforeseen oc-
context indicates otherwise— currence or situation determined by
Approved CAP vendor means an entity the participating CAP physician, in his
that has been awarded a contract by or her clinical judgment, to require
CMS to participate in the competitive prompt action or attention for pur-
acquisition program under 1847B of the poses of permitting the participating
Act. CAP physician to use a drug from his
Bid means an offer to furnish a CAP or her own stock, if the other require-
drug within a category of CAP drugs in ments of § 414.906(e) are met.
a competitive acquisition area for a Local carrier means an entity as-
particular price and time period. signed by CMS to process and pay
Biosimilar biological product means a claims for administration of drugs and
biological product approved under an biologicals under the CAP.
119
§ 414.904 42 CFR Ch. IV (10–1–17 Edition)
Manufacturer’s average sales price Timely delivery means delivery of a

means the price calculated and re- CAP drug within the defined routine
ported by a manufacturer under part and emergency delivery timeframes.
414, subpart J of this chapter. Compliance with timely delivery
Multiple source drug means a drug de- standards is also a factor for evalua-
scribed by section 1847A(c)(6)(C) of the tion of potential and approved CAP
Act. vendors.
Pacific Territories means, for purposes Unit is defined as in part 414, subpart
of the CAP, American Samoa, Guam, J of this chapter.
or the Northern Mariana Islands. Wholesale acquisition cost (WAC)
Participating CAP physician means a means the price described by section
physician electing to participate in the 1847A(c)(6)(B) of the Act.
CAP, as described in this subpart. The
participating CAP physician must com-
FR 39093, July 6, 2005; 75 FR 73626, Nov. 29,
plete and sign the participating CAP 2010]
physician election agreement. Physi-
cians who do not participate in Medi- § 414.904 Average sales price as the
care but who elect to participate in the basis for payment.
CAP must agree to accept assignment
(a) Method of payment. Payment for a
for CAP drug administration claims.
drug furnished on or after January 1,
Participating CAP physician election
2005 is based on the lesser of—
agreement means the agreement that
(1) The actual charge on the claim for
the physician signs to notify CMS of
program benefits; or
the physician’s election to participate
in the CAP and to agree to the terms (2) 106 percent of the average sales
and conditions of CAP participation as price, subject to the applicable limita-
set forth in this subpart. tions specified in paragraph (d) of this
Prescription order means a written section or subject to the exceptions de-
order submitted by the participating scribed in paragraph (e) of this section.
CAP physician to the approved CAP (3) For purposes of this paragraph—
vendor that meets the requirements of (i) CMS calculates an average sales
this subpart. price payment limit based on the
Reference biological product means the amount of product included in a vial or
biological product licensed under such other container as reflected on the
section 351 of the PHSA that is referred FDA-approved label.
to in the application of the biosimilar (ii) Additional product contained in
biological product as defined at section the vial or other container does not
1847A(c)(6)(I) of the Act. represent a cost to providers and is not
Routine delivery means delivery of a incorporated into the ASP payment
drug within 2 business days in appro- limit.
priate shipping and packaging in all (iii) No payment is made for amounts
areas of the United States and its terri- of product in excess of that reflected on
tories, with the exception of the Pa- the FDA-approved label.
cific Territories. In the Pacific Terri- (b) Multiple source drugs—(1) Average
tories, routine delivery of drug means sales prices. The average sales price for
delivery of a CAP drug within 7 busi- all drug products included within the
ness days in appropriate shipping and same multiple source drug billing and
packaging. In each case, this time- payment code is the volume-weighted
frame will be reduced if product sta- average of the manufacturers’ average
bility requires it, meaning that the sales prices for those drug products.
manufacturer’s labeling instructions, (2) Calculation of the average sales
drug compendia, or specialized drug price. (i) For dates of service before
stability references indicate that a April 1, 2008, the average sales price is
shorter delivery timeframe is nec- determined by—
essary to avoid adversely affecting the (A) Computing the sum of the prod-
product’s integrity, safety, or efficacy. ucts (for each National Drug Code as-
Single source drug means a drug designed to the drug products) of the
scribed by section 1847A(c)(6)(D) of the manufacturer’s average sales price and
Act. the total number of units sold; and
120
(B) Dividing that sum by the sum of (B) Dividing the sum determined
the total number of units sold for all under clause (A) by the sum of the
NDCs assigned to the drug products. products (for each National Drug Code
(ii) For dates of service on or after assigned to such drug products) of the
April 1, 2008, the average sales price is total number of units sold and the
determined by— total number of billing units for the
(A) Computing the sum of the prod- National Drug Code for the billing and
ucts (for each National Drug Code as- payment code.
signed to such drug products) of the (d) Limitations on the average sales
manufacturer’s average sales price, de- price—(1) Wholesale acquisition cost for a
termined by the Secretary without di- single source drug. The payment limit
viding such price by the total number for a single source drug product is the
of billing units for the National Drug lesser of 106 percent of the average
Code for the billing and payment code sales price for the product or 106 per-
and the total number of units sold; and cent of the wholesale acquisition cost
(B) Dividing the sum determined for the product.
under clause (A) by the sum of the (2) Payment limit for a drug furnished
products (for each National Drug Code to an end-stage renal disease patient. (i)
assigned to such drug products) of the Effective for drugs and biologicals fur-
total number of units sold and the nished in 2005, the payment for such
total number of billing units for the drugs and biologicals, including eryth-
National Drug Code for the billing and ropoietin, furnished to an end-stage
payment code. renal disease patient that is separately
billed by an end-stage renal disease fa-
(iii) For purposes of this subsection
cility and not paid on a cost basis is ac-
and subsection (c), the term billing
quisition cost as determined by the In-
unit means the identifiable quantity
spector General report as required by
associated with a billing and payment
section 623(c) of the Medicare Prescrip-
code, as established by CMS.
tion Drug, Improvement, and Mod-
(c) Single source drugs—(1) Average ernization Act of 2003 inflated by the
sales price. The average sales price is percentage increase in the Producer
the volume-weighted average of the Price Index.
manufacturers’ average sales prices for (ii) Except as provided in paragraph
all National Drug Codes assigned to the (a) of this section, the payment for
drug or biological product. drugs and biologicals, furnished to an
(2) Calculation of the average sales end-stage renal disease patient that is
price. (i) For dates of service before separately billed by an end-stage renal
April 1, 2008, the average sales price is disease facility, is based on 106 percent
determined by— of the average sales price.
(A) Computing the sum of the prod- (iii) Effective for drugs and
ucts (for each National Drug Code as- biologicals furnished in CY 2006 and
signed to the drug product) of the man- subsequent calendar years, the pay-
ufacturer’s average sales price and the ment for such drugs and biologicals
total number of units sold; and furnished in connection with renal di-
(B) Dividing that sum by the sum of alysis services and separately billed by
the total number of units sold for all freestanding and hospital-based renal
NDCs assigned to the drug product. dialysis facilities not paid on a cost
(ii) For dates of service on or after basis is the amount determined under
April 1, 2008, the average sales price is section 1847A of the Act.
determined by— (3) Widely available market price and
(A) Computing the sum of the prod- average manufacturer price. If the In-
ucts (for each National Drug Code as- spector General finds that the average
signed to such drug products) of the sales price exceeds the widely available
manufacturer’s average sales price, de- market price or the average manufac-
termined by the Secretary without di- turer price by the applicable threshold
viding such price by the total number percentage specified in paragraph
of billing units for the National Drug (d)(3)(iii) or (iv) of this section, the In-
Code for the billing and payment code spector General is responsible for in-
and the total number of units sold; and forming the Secretary (at such times
121
§ 414.904 42 CFR Ch. IV (10–1–17 Edition)
as specified by the Secretary) and the calculated using 95 percent of the aver-
payment amount for the drug or bio- age wholesale price.
logical will be substituted subject to (2) Infusion drugs furnished through a
the following adjustments: covered item of durable medical equip-
(i) The payment amount substitution ment. The payment limit for an infu-
will be applied at the next average sion drug furnished through a covered
sales price payment amount calcula- item of durable medical equipment is
tion period after the Inspector General calculated using 95 percent of the aver-
informs the Secretary (at such times age wholesale price in effect on Octo-
specified by the Secretary) about bill- ber 1, 2003 and is not updated in 2006.
ing codes for which the average sales (3) Blood and blood products. In the
price has exceeded the average manu- case of blood and blood products (other
facturer price by the applicable thresh- than blood clotting factors), the pay-
old percentage, and will remain in ef- ment limits are determined in the
fect for 1 quarter after publication. same manner as the payment limits
(ii) Payment at 103 percent of the av- were determined on October 1, 2003.
erage manufacturer price for a billing (4) Payment limit in a case where the
code will be applied at such times when average sales price during the first quar-
all of the following criteria are met: ter of sales is unavailable. In the case of
(A) The threshold for making price a drug during an initial period (not to
substitutions, as defined in paragraph exceed a full calendar quarter) in
(d)(3)(iii) of this section is met. which data on the prices for sales of
(B) 103 percent of the average manu- the drug are not sufficiently available
facturer price is less than the 106 per- from the manufacturer to compute an
cent of the average sales price for the average sales price for the drug, the
quarter in which the substitution payment limit is based on the whole-
would be applied. sale acquisition cost or the applicable
(C) Beginning in 2013, the drug and Medicare Part B drug payment meth-
dosage form described by the HCPCS odology in effect on November 1, 2003.
code is not identified by the FDA to be (5) Treatment of certain drugs. Begin-
in short supply at the time that ASP ning with April 1, 2008, the payment
calculations are finalized. amount for—
(iii) The applicable percentage (i) Each single source drug or biologi-
threshold for average manufacturer cal described in section 1842(o)(1)(G)
price comparisons is 5 percent and is that is treated as a multiple source
reached when— drug because of the application of sec-
(A) The average sales price for the tion 1847A(c)(6)(C)(ii) is the lower of—
billing code has exceeded the average (A) The payment amount that would
manufacturer price for the billing code be determined for such drug or biologi-
by 5 percent or more in 2 consecutive cal applying section 1847A(c)(6)(C)(ii);
quarters, or 3 of the previous 4 quarters or
immediately preceding the quarter to (B) The payment amount that would
which the price substitution would be have been determined for such drug or
applied; and biological if section 1847A(c)(6)(C)(ii)
(B) The average manufacturer price were not applied.
for the billing code is calculated using (ii) A multiple source drug described
the same set of National Drug Codes in section 1842(o)(1)(G) (excluding a
used for the average sales price for the drug or biological that is treated as a
billing code. multiple source drug because of the ap-
(iv) The applicable percentage plication of section 1847A(c)(6)(C)(ii)) is
threshold for widely available market the lower of—
price comparisons is 5 percent. (A) The payment amount that would
(e) Exceptions to the average sales be determined for such drug or biologi-
price—(1) Vaccines. The payment limits cal taking into account the application
for hepatitis B vaccine furnished to in- of section 1847A(c)(6)(C)(ii); or
dividuals at high or intermediate risk (B) The payment amount that would
of contracting hepatitis B (as deter- have been determined for such drug or
mined by the Secretary), pneumococcal biological if section 1847A(c)(6)(C)(ii)
vaccine, and influenza vaccine and are were not applied.
122
(f) Except as otherwise specified (see (1) The CAP drug is supplied under
paragraph (e)(2) of this section) for in- the CAP by an approved CAP vendor as
fusion drugs, the payment limits are specified in § 414.908(b).
updated quarterly. (2) The claim for the prescribed drug
(g) The payment limit is computed is submitted by the approved CAP ven-
without regard to any special pack- dor that supplied the drug, and pay-
aging, labeling, or identifiers on the ment is made only to that vendor.
dosage form or product or package. (3) The approved CAP vendor collects
(h) The payment amount is subject to applicable deductible and coinsurance
applicable deductible and coinsurance. with respect to the drug furnished
under the CAP only after the drug is
(i) If manufacturer ASP data is not
administered to the beneficiary.
available prior to the publication dead-
(4) The approved CAP vendor delivers
line for quarterly payment limits and CAP drugs directly to the participating
the unavailability of manufacturer CAP physician in unopened vials or
ASP data significantly changes the other original containers as supplied
quarterly payment limit for the billing by the manufacturer or from a dis-
code when compared to the prior quar- tributor that has acquired the products
ter’s billing code payment limit, the directly from the manufacturer and in-
payment limit is calculated by car- cludes language with the shipping ma-
rying over the most recent available terial stating that the drug was ac-
manufacturer ASP price from a pre- quired in a manner consistent with all
vious quarter for an NDC in the billing statutory requirements. If the ap-
code, adjusted by the weighted average proved CAP vendor opts to split ship-
of the change in the manufacturer ments, the participating CAP physi-
ASPs for the NDCs that were reported cian must be notified in writing which
for both the most recently available can be included with the initial ship-
previous quarter and the current quar- ment, and each incremental shipment
ter. must arrive at least 2 business days be-
(j) Biosimilar biological products. Effec- fore the anticipated date of adminis-
tive January 1, 2016, the payment tration.
amount for a biosimilar biological drug (5) The approved CAP vendor bills
product (as defined in § 414.902) for all Medicare only for the amount of the
NDCs assigned to such product is the drug administered to the patient, and
sum of the average sales price of all the beneficiary’s coinsurance will be
NDCs assigned to the biosimilar bio- calculated from the quantity of drug
logical products included within the that is administered.
same billing and payment code as de- (b) Exceptions to competitive acquisi-
tion. Specific CAP drugs, including a
termined under section 1847A(b)(6) of
category of these drugs, may be ex-
the Act and 6 percent of the amount
cluded from the CAP if the application
determined under section 1847A(b)(4) of
of competitive bidding to these drugs—
the Act for the reference drug product (1) Is not likely to result in signifi-
(as defined in § 414.902). cant savings; or
[69 FR 66424, Nov. 15, 2004, as amended at 70 (2) Is likely to have an adverse im-
FR 70332, Nov. 21, 2005; 71 FR 69788, Dec. 1, pact on access to those drugs.
2006; 72 FR 66402, Nov. 27, 2007; 73 FR 69937, (c) Computation of payment amount.
Nov. 19, 2008; 73 FR 80304, Dec. 31, 2008; 74 FR Except as specified in paragraph (c)(2)
62012, Nov. 25, 2009; 75 FR 73626, Nov. 29, 2010; of this section, payment for CAP drugs
76 FR 73473, Nov. 28, 2011; 77 FR 69368, Nov. 16, is based on bids submitted as a result
2012; 80 FR 71382, Nov. 16, 2015] of the bidding process as described in
§ 414.910 of this subpart.
§ 414.906 Competitive acquisition pro-
(1) Single payment amount. (i) A single
gram as the basis for payment.
payment amount for each CAP drug in
(a) Program payment. Beginning in the competitive acquisition area is de-
2006, as an alternative to payment termined on the basis of the bids sub-
under § 414.904, payment for a CAP drug mitted and accepted and updated from
may be made through the CAP if the the bidding period to the beginning of
following occurs: the payment year.
123
§ 414.906 42 CFR Ch. IV (10–1–17 Edition)
(ii) The single payment amount is ment limits available to CMS under
then updated quarterly based on the section 1847A of the Act.
approved CAP vendor’s reasonable net (vii) The following payment amount
acquisition costs for that category as update calculation must be applied for
determined by CMS, and limited by the the group of all drugs for which a com-
weighted payment amount established posite bid is required.
under section 1847A of the Act across (A) The most recent previous com-
all drugs for which a composite bid is posite payment amount for the group
required in the category. is updated by—
(iii) The payment amount for each (1) Calculating the percent change in
other drug for which the approved CAP reasonable net acquisition costs for
vendor submits a bid in accordance each approved CAP vendor;
with § 414.910 of this subpart and each (2) Calculating the median of all par-
other drug that is approved by CMS for ticipating approved CAP vendors’ ad-
the approved CAP vendor to furnish justed CAP payment amounts; and
under the CAP is also updated quar- (3) Limiting the payment as de-
terly based on the approved CAP ven- scribed in paragraph (c)(1) of this sec-
dor’s reasonable net acquisition costs tion.
for each HCPCS code and limited by
(B) The median percent change, sub-
the payment amount established under
ject to the limit described in paragraph
section 1847A of the Act.
(c)(1) of this section, must be the up-
(2) Updates to payment amount. (i) The
date percentage for that quarter.
first update is effective on the first day
of claims processing for the first quar- (C) The single update percentage
ter of an approved CAP vendor’s con- must be applied to the payment
tract. The first quarterly contract up- amount for each drug in the group of
date is based on the reasonable net ac- drugs for which a composite bid is re-
quisition cost (RNAC) data reported to quired in the category.
CMS or its designee for any purchases (viii) The following payment amount
of drug before the beginning of CAP update calculation must be applied for
claims processing for the contract pe- each of the following items: Each
riod and reported to CMS no later than HCPCS code not included in the com-
30 days before the beginning of CAP posite bid list; Each HCPCS code added
claims processing. to the drug list during the contract pe-
(ii) For subsequent quarters, each ap- riod; and each drug that has not yet
proved CAP vendor must report to CMS been assigned a HCPCS code, but for
or its designee RNAC data for a quarter which a HCPCS code will be estab-
of CAP drug purchases within 30 days lished.
of the close of that quarter. (A) The most recent previous pay-
(iii) For all quarters, only RNAC data ment amount for each drug must be up-
from approved CAP vendors that are dated by calculating the percent
supplying CAP drugs under their CAP change in reasonable net acquisition
contract at the time updates are being costs for each approved CAP vendor,
calculated must be used to calculate then calculating the median of all par-
updated CAP payment amounts. ticipating approved CAP vendors’ ad-
(iv) CMS excludes such RNAC data justed CAP payment amounts.
submitted by an approved CAP vendor (B) The median percent change cal-
if, during the time calculations are culated for each drug, subject to the
being done, CMS knows that the ap- limit described in paragraph (c)(1) of
proved CAP vendor will not be under this section, must be applied to the
contract for the applicable quarterly payment amount for each drug.
update. (3) Alternative payment amount. The
(v) The payment amount weights alternative payment amount estab-
must be calculated based on the more lished under section 1847A of the Act
recent of the following: may be used to establish payment for a
(A) Contract bidding weights. CAP drug if—
(B) CAP claims data. (i) The drug is properly assigned to a

(vi) The payment limit must be de- category established under the CAP;
termined using the most recent pay- and
124
(ii) It is a drug for which a HCPCS (iii) Proposed addition of—

code must be established. (A) One or more newly issued HCPCS
(d) Adjustments. There is an estab- codes; or
lished process for adjustments to pay- (B) One of the following single indi-
ments to account for drugs that were cation orphan drug J codes or their up-
billed, but which were not adminis- dates: J0205, J0256, J9300, J1785, J2355,
tered. J3240, J7513, J9010, J9015, J9017, J9160,
(e) Resupply of participating CAP phy- J9216.
sician drug inventory. A participating (iv) Beginning January 1, 2007, the
CAP physician may acquire drugs proposed addition of a drug(s) that has
under the CAP to resupply his or her not yet been assigned a HCPCS code,
private inventory if all of the following but for which a HCPCS code must be
requirements are met: established.
(1) The drugs were required imme- (v) On or after January 1, 2010, the
diately. proposed addition of drugs with similar
(2) The participating CAP physician therapeutic uses to drugs already sup-
could not have anticipated the need for plied under the CAP by the approved
the drugs. CAP vendor(s).
(3) The approved CAP vendor could (3) Requesting the addition or substi-
not have delivered the drugs in a time- tution of CAP drug. An approved CAP
ly manner. For purposes of this sec- vendor that meets the one of the cri-
tion, timely manner means delivery teria specified in paragraph (f)(2) must
within the emergency delivery time- submit a written request to CMS or its
frame, as defined in § 414.902. designee. The request must—
(4) The participating CAP physician (i) Specify the NDC(s) and the respec-
administered the drugs in an emer- tive HCPCS code that is to be added or
gency situation, as defined in § 414.902. substituted.
(f) Substitution or addition of drugs on (ii) Address the rationale for the sub-
an approved CAP vendor’s CAP drug stitution or addition of the NDC(s) or
list—(1) Short-term substitution of a CAP the addition of the HCPCS code(s) as
drug. On an occasional basis (for a pe- applicable; and
riod of time less than 2 weeks), an ap-
(iii) Address the impact of the substi-
proved CAP vendor may agree to fur-
tution of the NDC(s) or the addition of
nish a substitute NDC within a HCPCS
the NDC(s) or HCPCS code(s), or both
code on the approved CAP vendor’s
on—
CAP drug list if the approved CAP ven-
(A) Patient and drug safety;
dor—
(i) Is willing to accept the payment (B) Drug waste; and
amount that was established for the (C) The potential for cost savings.
HCPCS code under this section; and (iv) In the case of additions requested
(ii) Obtains the participating CAP under paragraph (f)(2)(v) of this sec-
physician’s prior approval. tion, address and document the need
(2) Long-term substitution or addition for such an expansion based on demand
of a CAP drug. An approved CAP vendor for the product(s).
may submit a request, as specified in (4) Approval of a request(s). CMS or its
paragraph (f)(3) of this section, for ap- designee notifies the approved CAP
proval to substitute an NDC supplied vendor of its decision.
by the approved CAP vendor for an- (i) Except as specified in paragraph
other NDC within the same HCPCS (f)(4)(ii) of this section, an approved re-
code or to add an NDC to the approved quest is effective at the beginning of
CAP vendor’s drug list, if at least one the next calendar quarter.
of the following criteria is met: (ii) Approved substitutions for re-
(i) Proposed substitution of an NDC quest based on a drug shortage or other
for a period of 2 weeks or longer. exigent circumstance may become ef-
(ii) Proposed addition of one or more fective immediately provided that—
NDCs within a HCPCS code included in (A) CMS approves the immediate sub-
the CAP drug category specified by stitution; and

CMS or on the approved CAP vendor’s (B) The approved CAP vendor’s noti-
approved CAP drug list. fies its CAP participating physicians of
125
§ 414.908 42 CFR Ch. IV (10–1–17 Edition)
the substitution immediately following egory for the remainder of the year im-
CMS approval. mediately upon notice to CMS and the
(5) Payment for an approved drug approved CAP vendor); or
change(s). The payment for— (v) Other exigent circumstances de-
(i) Substituted or added CAP drugs fined by CMS are present, including—
that are within a HCPCS code for (A) If, up to and including 60 days
which payment is computed under after the effective date of the physi-
paragraph (c)(1) of this section is the cian’s CAP election agreement, the
single payment for that HCPCS code, participating CAP physician submits a
as determined and updated in accord- written request to the designated car-
ance with paragraph (c)(1) of this sec- rier to terminate the CAP election
tion; or agreement because CAP participation
(ii) Added CAP drugs that are not imposes a burden on the physician’s
within a HCPCS code for which pay- practice. The written request must
ment is computed under paragraph document the burden. The designated
(c)(1) of this section is specified under carrier will process the participating
paragraph (c)(2) of this section. CAP physician’s request and CMS will
(g) Deletion of drugs on an approved approve or deny the request under the
CAP vendor’s CAP drug list. Deletion of dispute resolution process as specified
drugs on an approved CAP vendor’s under § 414.917 of this subpart.
CAP drug list due to unavailability re- (B) If, more than 60 days after the ef-
quires a written request and approval fective date of the physician’s CAP
as described in paragraphs (f)(3)(i) election agreement, the participating
through (iii) and (f)(4) of this section. CAP physician submits a written re-
[70 FR 39094, July 6, 2005, as amended at 70 quest to the designated carrier to ter-
FR 70333, Nov. 21, 2005; 71 FR 9460, Feb. 24, minate the CAP election agreement be-
2006; 74 FR 62012, Nov. 25, 2009] cause, based on a change in cir-
cumstances of which the participating
§ 414.908 Competitive acquisition pro- CAP physician was not previously
gram. aware, CAP participation imposes a
(a) Participating CAP physician selec- burden on the physician’s practice. The
tion of an approved CAP vendor. (1) CMS written request must document the
provides the participating CAP physi- burden. The designated carrier will
cian with a process for the selection of process the participating CAP physi-
an approved CAP vendor on an annual cian’s request and CMS will approve or
basis, with exceptions as specified in deny the request under the dispute res-
§ 414.908(a)(2). Participating CAP physi- olution process as specified under
cians will also receive information § 414.917 of this subpart.
about the CAP in the enrollment proc- (3) The physician participating in the
ess for Medicare participation set forth CAP—
in section 1842(h) of the Act. (i) Elects to use an approved CAP
(2) A participating CAP physician vendor for the drug category and area
may select an approved CAP vendor as set forth in § 414.908(b);
outside the annual selection process or (ii) Completes and signs the CAP
opt out of the CAP for the remainder of election agreement;
the annual selection period when— (iii) Submits a written prescription
(i) The selected approved CAP vendor order to the approved CAP vendor with
ceases participation in the CAP; complete patient information for pa-
(ii) The physician leaves a group tients new to the approved CAP vendor
practice participating in CAP; or when information changes. Abbre-
(iii) The participating CAP physician viated information may be sent on all
relocates to another competitive acqui- subsequent orders for a patient for
sition area; or which the approved CAP vendor has
(iv) The approved CAP vendor refuses previously received complete informa-
to ship to the participating CAP physi- tion and that has no changes to the
cian because the conditions of original information. Prescription or-
§ 414.914(i) have been met (if this sub- ders may be initiated by telephone,
paragraph (a)(2)(iv) applies, the physi- with a follow-up written order provided
cian can withdraw from the CAP cat- within 8 hours for routine deliveries
126
and immediately for emergency deliv- (viii) Notifies the approved CAP ven-
eries; dor when a drug is not administered or
(iv) Does not receive payment for the a smaller amount was administered
CAP drug; than was originally ordered. The par-
(v) Except where applicable State ticipating CAP physician and the ap-
pharmacy law prohibits it, provides the proved CAP vendor agree on how to
following information to the approved handle the unused CAP drug. If it is
CAP vendor to facilitate collection of agreed that the participating CAP phy-
applicable deductible and coinsurance sician will maintain the CAP drug in
as described in § 414.906(a)(3): his inventory for administration at a
(A) Date of order. later date, the participating CAP phy-
(B) Beneficiary name, address, and sician submits a new prescription order
phone number. at that time. This prescription order
(C) Physician identifying informa- specifies that the CAP drug is being ob-
tion: tained from the participating CAP phy-
Name, practice location/shipping ad- sician’s CAP inventory and shipment
dress, group practice information (if should not occur;
applicable), PIN, and UPIN. (ix) Maintains a separate electronic
(D) Drug name. or paper inventory for each CAP drug
obtained;
(E) Strength.
(x) Agrees to file the Medicare claim
(F) Quantity ordered.
within 30 calendar days of the date of
(G) Dose. drug administration.
(H) Frequency/instructions. (xi) Agrees to submit documentation
(I) Anticipated date of administra- such as medical records or certifi-
tion. cation, as necessary, to support pay-
(J) Beneficiary Medicare informa- ment for a CAP drug;
tion/Health insurance (HIC) number. (xii) Agrees not to transport CAP
(K) Supplementary insurance infor- drugs from one practice location or
mation (if applicable). place of service to another location ex-
(L) Medicaid information (if applica- cept in accordance with a written
ble). agreement between the participating
(M) Additional patient information: CAP physician and the approved CAP
date of birth, allergies, height/weight, vendor that requires that drugs are not
ICD–9–CM (if necessary). subjected to conditions that will jeop-
(vi) Agrees to accept the particular ardize their integrity, stability, and/or
National Drug Codes (NDCs) supplied sterility while being transported.
by the approved CAP vendor for the du- (xiii) Agrees to provide the CMS-de-
ration of the participating CAP physi- veloped CAP fact sheet to bene-
cian’s enrollment with the approved ficiaries; and
CAP vendor, subject to paragraphs (xiv) May receive payment under the
(a)(3)(vii) and (a)(3)(xiv) of this section. ASP system when medical necessity re-
By electing to participate with an ap- quires a certain brand or formulation
proved CAP vendor, the participating of a drug that the approved CAP ven-
CAP physician also agrees to accept dor has not been contracted to furnish
the changes to the approved CAP ven- under the CAP.
dor’s CAP drug list that have been ap- (4) Physician group practices. If a
proved in accordance with § 414.906(f). physician group practice using a group
(vii) Agrees to place routine orders billing number(s) elects to participate
for CAP drugs at the HCPCs level, ex- in the CAP, all physicians in the group
cept when medical necessity requires a are considered to be participating CAP
particular formulation on the approved physicians when using the group’s bill-
CAP vendor’s CAP drug list. Medical ing number(s).
necessity must be documented. When (b) Program requirements. (1) CMS se-
the conditions of this paragraph are lects approved CAP vendors through a
met, the participating CAP physician competition among entities based on
may submit a prescription order to the the following:

approved CAP vendor that specifies the (i) Submission of the bid prices using
NDC. the OMB-approved Vendor Application
127
§ 414.910 42 CFR Ch. IV (10–1–17 Edition)
and Bid Form for CAP drugs within the within each billing and payment code
category and competitive acquisition within each category for each competi-
area that— tive acquisition area.
(A) Places the vendor among the (e) Multiple contracts for a category
qualified bidders with the lowest five and area. The number of bidding quali-
composite bids; and fied entities that are awarded a con-
(B) Does not exceed the weighted tract for a given category and area
payment amount established under sec- may be limited to no fewer than two.
tion 1847A of the Act across all drugs in
[70 FR 39094, July 6, 2005, as amended at 70
that category. FR 70333, Nov. 21, 2005; 72 FR 66402, Nov. 27,
(ii) Ability to ensure product integ- 2007; 74 FR 62013, Nov. 25, 2009]
rity.
(iii) Customer service/Grievance § 414.910 Bidding process.
process. (a) Entities may bid to furnish CAP
(iv) At least 3 years experience in fur- drugs in all competitive acquisition
nishing Part B injectable drugs. areas of the United States, or one or
(v) Financial performance and sol- more specific competitive acquisition
vency. areas.
(vi) Record of integrity and the im- (b) The amount of the bid for any
plementation of internal integrity CAP drug for a specific competitive ac-
measures. quisition area must be uniform for all
(vii) Internal financial controls. portions of that competitive acquisi-
(viii) Acquisition of all CAP drugs dition area.
rectly from the manufacturer or from a (c) A submitted bid price must in-
distributor that has acquired the prod- clude the following:
ucts directly from the manufacturer. (1) All costs related to the delivery of
(ix) Maintenance of appropriate li- the drug to the participating CAP phy-
censure to supply CAP drugs in States sician.
in which they are supplying CAP drugs. (2) The costs of dispensing (including
(x) Cost-sharing assistance as de- shipping) of the drug and management
scribed in § 414.914(g). fees. The costs related to the adminis-
(xi) Other factors as determined by tration of the drug or wastage, spill-
CMS. age, or spoilage may not be included.
(2) Approved CAP vendors must also
meet the contract requirements under [70 FR 39095, July 6, 2005]
§ 414.914.
(c) Additional considerations. CMS § 414.912 Conflicts of interest
may refuse to award a contract or ter- (a) Approved CAP vendors and appli-
minate an approved CAP vendor con- cants that bid to participate in the
tract based upon the following: CAP are subject to the following:
(1) Suspension or revocation by the (1) The conflict of interest standards
Federal or State government of the en- and requirements of the Federal Acqui-
tity’s license for distribution of drugs, sition Regulation (FAR) organizational
including controlled substances. conflict of interest guidance, found
(2) Exclusion of the entity under sec- under FAR subpart 9.5.
tion 1128 of the Act from participation (2) Those requirements and standards
in Medicare or other Federal health contained in each individual contract
care programs. These considerations awarded to perform functions under
are in addition to CMS’ ability to ter- section 1847B of the Act.
minate the approved CAP vendor for (b) Post-award conflicts of interest. Ap-
cause as specified in § 414.914(a). proved CAP vendors must have a code
(3) Past violations or misconduct re- of conduct that establishes policies and
lated to the pricing, marketing, dis- procedures for recognizing and resolv-
tribution, or handling of drugs pro- ing conflicts of interest between the
vided incident to a physician’s service. approved CAP vendor and any entity,
(d) Multiple source drugs. In the case including the Federal Government,
of multiple source drugs, there must be with whom it does business. The code
a competition among entities for the of conduct which is submitted as part
acquisition of at least one CAP drug of the application must—
128
(1) State the need for management, (4) Enforcement of standards through
employees, contractors, and agents to well publicized disciplinary guidelines.
comply with the approved CAP ven- (5) Procedures for effective internal
dor’s code of conduct, and policies and monitoring and auditing.
procedures for conflicts of interest; and (6) Procedures for ensuring prompt
(2) State the approved CAP vendor’s responses to detected offenses and de-
expectations for management, employ- velopment of corrective action initia-
ees, contractors, and agents to comply tives relating to the organization’s
with the approved CAP vendor’s code of contract as an approved CAP vendor.
conduct, and policies and procedures (i) If the approved CAP vendor dis-
for detecting, preventing, and resolving covers evidence of misconduct related
conflicts of interest. to payment or delivery of drugs or
biologicals under the contract, it will
[70 FR 39094, July 6, 2005]
conduct a timely and reasonable in-
§ 414.914 Terms of contract. quiry into that conduct.
(ii) The approved CAP vendor will
(a) The contract between CMS and conduct appropriate corrective actions
the approved CAP vendor will be for a including, but not limited to, repay-
term of 3 years, unless terminated or ment of overpayments and disciplinary
suspended earlier as provided in this actions against responsible individuals,
section or provided in § 414.917. The in response to potential violations ref-
contract may be terminated— erenced at paragraph (c)(6)(i) of this
(1) By CMS for default if the ap- section.
proved CAP vendor violates any term (7) Procedures to voluntarily self-re-
of the contract; or port potential fraud or misconduct re-
(2) In the absence of a contract viola- lated to the CAP to the appropriate
tion, by either CMS or the approved government agency.
CAP vendor, if the terminating party (d) The contract must provide for dis-
notifies the other party by June 30 for closure of the approved CAP vendor’s
an effective date of termination of De- reasonable, net acquisition costs for a
cember 31 of that year. specified period of time, not to exceed
(b) The contract will provide for a quarterly.
code of conduct for the approved CAP (e) The contract must provide for ap-
vendor that includes standards relating propriate adjustments as described in
to conflicts of interest standards as set § 414.906(c)(1).
forth at § 414.912. (f) Under the terms of the contract,
(c) The approved CAP vendor will the approved CAP vendor must also—
have and implement a compliance plan (1) Have sufficient arrangements to
that contains policies and procedures acquire and deliver CAP drugs within
that control program fraud, waste, and the category in the competitive acqui-
abuse, and consists of the following sition area specified by the contract;
minimum elements: (2) Have arrangements in effect for
(1) Written policies, procedures, and shipment at least 5 weekdays each
standards of conduct articulating the week of CAP drugs under the contract,
organization’s commitment to comply including the ability to comply with
with all applicable Federal and State the routine and emergency delivery
laws, regulations, and guidance, includ- timeframes defined in § 414.902;
ing, but not limited to, the Prescrip- (3) Have procedures in place to ad-
tion Drug Marketing Act (PDMA), the dress and resolve complaints of partici-
physician self-referral (‘‘Stark’’) prohi- pating CAP physicians and individuals
bition, the Anti-Kickback statute and and inquiries regarding shipment of
the False Claims Act. CAP drugs;
(2) The designation of a compliance (4) Have a grievance and appeals
officer and compliance committee ac- process for dispute resolution;
countable to senior management. (5) Respond within 2 business days to
(3) Effective training and education any inquiry, or sooner if the inquiry is
of the compliance officer and organiza- related to drug quality;

tion employees, contractors, agents, (6) Staff a toll-free telephone line
and directors. from 8:30 a.m. or earlier and until 5
129
§ 414.914 42 CFR Ch. IV (10–1–17 Edition)
p.m. or later for all time zones served vide under the CAP program. Notwith-
in the continental United States by the standing any relationship the CAP ven-
CAP vendor on business days (Monday dor may have with any subcontractor,
through Friday excluding Federal holi- the approved CAP vendor maintains ul-
days) to provide customer assistance, timate responsibility for adhering to
and establish reasonable hours of oper- and otherwise fully complying with all
ation for Hawaii, Alaska, Puerto Rico, terms and conditions of its contract
and the other U.S. territories; with CMS;
(7) Staff an emergency toll-free tele- (15) Comply with product integrity
phone line for weekend and evening ac- and record keeping requirements in-
cess when the call center is closed, and cluding but not limited to drug acquisi-
determine what hours on Saturday and tion, handling, storage, shipping, drug
Sunday the call center is staffed and waste, and return processes; and
which hours a toll-free emergency line (16) Comply with such other terms
is activated; and and conditions as CMS may specify in
(8) Include assistance for the dis- the CAP contract consistent with sec-
abled, the hearing impaired, and Span- tion 1847B of the Act.
ish-speaking inquirers in all customer (g) Under the terms of the contract,
service operations. the approved CAP vendor must provide
(9) Meet applicable licensure require- assistance to beneficiaries experiencing
ments in each State in which it sup- financial difficulty in paying their
plies drugs under the CAP; cost-sharing amounts through any one
(10) Be enrolled in Medicare as a par- or all of the following:
ticipating supplier; (1) Referral to a bona fide and inde-
(11) Comply with all applicable Fed- pendent charitable organization.
eral and State laws, regulations and (2) Implementation of a reasonable
guidance related to the prevention of payment plan.
fraud and abuse; (3) A full or partial waiver of the
(12) Supply CAP drugs upon receipt of cost-sharing amount after determining
a prescription order to all participating in good faith that the individual is in
CAP physicians who have selected the financial need or the failure of reason-
approved CAP vendor, except when the able collection efforts, provided that
conditions of paragraph (h) of this sec- the waiver meets all of the require-
tion or § 414.916(b) of this subpart are ments of section 1128A(i)(6)(A) of the
met; Act and the corresponding regulations
(13) Provide direct notification to at paragraph (1) of the definition of
participating CAP physicians enrolled ‘‘Remuneration’’ in § 1003.101 of this
with them of updates to the approved title. The availability of waivers may
CAP vendor’s CAP drug list on a quar- not be advertised or be made as part of
terly basis. Changes must be dissemi- a solicitation. Approved CAP vendors
nated at least 30 days before the ap- must inform beneficiaries that they
proved changes are due to take effect, generally make available the cat-
unless immediate notification as de- egories of assistance described in para-
scribed in § 414.906(f)(4) is required. The graphs (g)(1), (g)(2), and (g)(3) of this
approved CAP vendor’s entire CAP section. In no event may the approved
drug list must be disseminated at least CAP vendor include or make any state-
once yearly; and approved CAP vendors ments or representations that promise
must make a complete list that incor- or guarantee that beneficiaries receive
porates the most recent updates avail- cost-sharing waivers.
able to physicians on an ongoing basis. (h) The approved CAP vendor must
CMS posts on its web site the updated verify drug administration prior to col-
CAP drug lists for each approved CAP lection of any applicable cost sharing
vendor. amount.
(14) Ensure that subcontractors who (1) The approved CAP vendor docu-
are involved in providing services ments, in writing, the following infor-
under the approved CAP contractor’s mation necessary to verify drug admin-
CAP contract meet all requirements istration:

and comply with all laws and regula- (i) Beneficiary name.
tions relating to the services they pro- (ii) Health insurance number.
130
(iii) Expected date of administration. ficiary by the participating CAP physi-

(iv) Actual date of administration. cian on behalf of the approved CAP
(v) Identity of the participating CAP vendor.
physician. (i) Except as specified in paragraph
(vi) Prescription order number. (i)(5)(ii) of this section, if after 45 days
(vii) Identity of the individuals who from delivery of the approved CAP ven-
supply and receive the information. dor’s bill to the beneficiary, the bene-
(viii) Dosage supplied. ficiary’s cost-sharing obligation re-
(ix) Dosage administered. mains unpaid, the approved CAP ven-
(2) If the information is obtained ver- dor may refuse further shipments to
bally, the approved CAP vendor must
the participating CAP physician for
also maintain the following informa-
that beneficiary.
tion:
(i) The identities of individuals who (ii) If the beneficiary has requested
exchanged the information. cost-sharing assistance within 45 days
(ii) The date and time that the infor- of receiving delivery of the approved
mation was obtained. CAP vendor’s bill, provisions of para-
(3) The approved CAP vendor must graphs (i)(6), (i)(7), or (i)(8) of this sec-
provide this information to CMS or the tion, apply.
beneficiary upon request. (6) If the approved CAP vendor imple-
(i) The approved CAP vendor must ments a reasonable payment plan, as
comply with the following procedures specified in § 414.914(g)(2), the approved
before it may refuse to make further CAP vendor must continue to ship CAP
shipments of CAP drugs to a partici- drugs for the beneficiary, as long as the
pating CAP physician on behalf of a beneficiary remains in compliance with
beneficiary: the payment plan and makes an initial
(1) Subsequent to receipt of payment payment under the plan within 15 days
by Medicare, or the verification of drug after the delivery of the approved CAP
administration by the participating vendor’s written notice to the bene-
CAP physician, the approved CAP ven- ficiary offering the payment plan.
dor must bill any applicable supple-
(7) If the approved CAP vendor has
mental insurance policies.
waived the cost-sharing obligations in
(2) An approved CAP vendor that has
received payment from the designated accordance with section 1128A of the
carrier for CAP drugs that have not Act and § 414.914(g)(3), the approved
been administered must promptly re- CAP vendor may not refuse to ship
fund payment for such drugs to the drugs for that beneficiary.
designated carrier and must refund any (8) If the approved CAP vendor refers
coinsurance and deductible collected the beneficiary to a bona fide and inde-
from the beneficiary and his or her sup- pendent charity in accordance with
plemental insurer. § 414.914(g)(1), the approved CAP vendor
(3) At the time of billing the bene- may refuse to ship drugs if the past due
ficiary, or the participating CAP physi- balance is not paid 15 days after the
cian’s presentation of the bill on behalf date of delivery of the approved CAP
of the approved CAP vendor, the ap- vendor’s written notice to the bene-
proved CAP vendor must inform the ficiary containing the referral for cost-
beneficiary of any types of cost-sharing sharing assistance.
assistance that may be available con- (9) The approved CAP vendor may
sistent with the requirements of sec- refuse to make further shipments to
tion 1128A(a)(5) of the Act and that participating CAP physician on
§ 414.914(g). behalf of the beneficiary for the lesser
(4) If the beneficiary demonstrates a of the end of the calendar year or until
financial need, the approved CAP ven-
the beneficiary’s balance is paid in full.
dor must follow the conditions outlined
in paragraph (g) of this section. [70 FR 39096, July 6, 2005, as amended at 70
(5) For purposes of paragraph (i) of FR 70333, Nov. 21, 2005; 72 FR 66403, Nov. 27,
this section delivery means postmark 2007; 74 FR 62013, Nov. 25, 2009]
date, or the date the coinsurance bill
or notice was presented to the bene-
131
§ 414.916 42 CFR Ch. IV (10–1–17 Edition)
§ 414.916 Dispute resolution for ven- pating CAP physician until the suspen-
dors and beneficiaries. sion has been lifted.
(a) General rule. Cases of an approved (5) The participating CAP physician
CAP vendor’s dissatisfaction with de- may appeal that suspension by request-
nied drug claims are resolved through a ing a reconsideration of CMS’ decision.
voluntary alternative dispute resolu- The reconsideration will address
tion process delivered by the des- whether the participating CAP physi-
ignated carrier, and a reconsideration cian’s denied claims and appeals were
process provided by CMS. the result of the participating CAP
physician’s failure to participate in ac-
(b) Dispute resolution. (1) When an ap-
cordance with the requirements of
proved CAP vendor is not paid on
§ 414.908(a)(3).
claims submitted to the designated
(c) Reconsideration—(1) Right to a re-
carrier, the vendor may appeal to the
consideration. A participating CAP phy-
designated carrier to counsel the re-
sician dissatisfied with a determina-
sponsible participating CAP physician
tion that his or her CAP election
on his or her agreement to file a clean
agreement has been suspended by CMS
claim and pursue an administrative ap-
or a determination under § 414.917(d) de-
peal in accordance with subpart H of
nying the participating CAP physi-
part 405 of this chapter. If problems
cian’s request to terminate participa-
persist, the approved CAP vendor may
tion in the CAP under § 414.908(a)(v) is
ask the designated carrier to—
entitled to a reconsideration as pro-
(i) Review the participating CAP vided in this subpart.
physician’s performance; and (2) Eligibility for reconsideration. CMS
(ii) Potentially recommend to CMS reconsiders any determination to sus-
that CMS suspend the participating pend a participating CAP physician’s
CAP physician’s CAP election agree- election agreement if the participating
ment. CAP physician files a written request
(2) The designated carrier— for reconsideration in accordance with
(i) Gathers information from the paragraphs (c)(3) and (c)(4) of this sec-
local carrier, the participating CAP tion.
physician, the beneficiary, and the ap- (3) Manner and timing of request for re-
proved CAP vendor; and consideration. A participating CAP phy-
(ii) Makes a recommendation to CMS sician who is dissatisfied with a CMS
on whether the participating CAP phy- decision to suspend his or her CAP
sician has been filing his or her CAP election agreement may request a re-
drug administration claims in accord- consideration of the decision by filing
ance with the requirements for physi- a request with CMS. The request must
cian participation in the CAP as set be filed within 30 days of receipt of the
forth in § 414.908(a)(3). The rec- CMS decision letter notifying the par-
ommendation will include numbered ticipating CAP physician of CMS’ deci-
findings of fact. sion to suspend his or her CAP election
(3) CMS will review the recommenda- agreement. From the date of receipt of
tion of the designated carrier and gath- the decision letter until the day the re-
er relevant additional information consideration determination is final,
from the participating CAP physician the ASP payment methodology under
before deciding whether to suspend the section 1847A of the Act applies to the
participating CAP physician’s CAP physician.
election agreement. A suspension com- (4) Content of request. The request for
mencing before October 1 will conclude reconsideration must specify—
on December 31 of the same year. A (i) The findings or issues with which
suspension commencing on or after Oc- the participating CAP physician dis-
tober 1 will conclude on December 31 of agrees;
the next year. (ii) The reasons for the disagreement;
(4) Upon notification from CMS of a (iii) A recital of the facts and law
participating CAP physician’s suspen- supporting the participating CAP phy-
sion from the program, the approved sician’s position;

CAP vendor must cease delivery of (iv) Any supporting documentation;
CAP drugs to the suspended partici- and
132
(v) Any supporting statements from (E) The hearing officer does not have
approved CAP vendors, local carriers, the authority to compel by subpoena
or beneficiaries. the production of witnesses, papers, or
(5) Withdrawal of request for reconsid- other evidence.
eration. A participating CAP physician (8) Hearing officer’s findings. (i) Within
may withdraw his or her request for re- 30 days of the hearing officer’s receipt
consideration at any time before the of the hearing request, the hearing offi-
issuance of a reconsideration deter- cer presents the findings and rec-
mination. ommendations to the participating
(6) Discretionary informal hearing. In CAP physician who requested the re-
response to a request for reconsider- consideration. If the hearing officer de-
ation, CMS may, at its discretion, pro- cides to conduct an in-person or tele-
vide the participating CAP physician phone hearing, the hearing officer will
the opportunity for an informal hear- send a hearing notice to the partici-
ing that— pating CAP physician within 10 days of
(i) Is conducted by a hearing officer receipt of the hearing request, and the
appointed by the director of the CMS findings and recommendations are due
Center for Medicare Management or to the participating CAP physician
his or her designee; and within 30 days of the hearing’s conclu-
(ii) Provides the participating CAP sion.
physician the opportunity to present, (ii) The written report of the hearing
by telephone or in person, evidence to officer includes separate numbered
rebut CMS’ decision to suspend or ter- findings of fact and the legal conclu-
minate a participating CAP physician’s sions of the hearing officer.
CAP election agreement. (9) Final reconsideration determination.
(7) Informal hearing procedures. (i) (i) The hearing officer’s decision is
CMS provides written notice of the final unless the director of the CMS
time and place of the informal hearing Center for Medicare Management or
at least 10 days before the scheduled his or her designee chooses to review
date. that decision within 30 days. If the de-
(ii) The informal reconsideration cision is favorable to the participating
hearing will be conducted in accord- CAP physician, then the participating
ance with the following procedures: CAP physician may resume his or her
(A) The hearing is open to CMS and participation in CAP. The hearing offi-
the participating CAP physician recer and the CMS official may review
questing the reconsideration, includ- decisions that are favorable or unfavor-
ing— able to the participating CAP physi-
(1) Authorized representatives; cian.
(2) Technical advisors (individuals (ii) The CMS official may accept, re-
with knowledge of the facts of the case ject, or modify the hearing officer’s
or presenting interpretation of the findings.
facts); (iii) If the CMS official reviews the
(3) Representatives from the local hearing officer’s decision, the CMS offi-
carrier; cial issues a final reconsideration de-
(4) Representatives from the ap- termination to the participating CAP
proved CAP vendor; and physician on the basis of the hearing
(5) Legal counsel. officer’s findings and recommendations
(B) The hearing is conducted by the and other relevant information.
hearing officer who receives relevant (iv) The reconsideration determina-
testimony; tion of the CMS official is final. If the
(C) Testimony and other evidence final decision is unfavorable to the par-
may be accepted by the hearing officer ticipating CAP physician, then the par-
even though it would be inadmissible ticipating CAP physician’s CAP elec-
under the rules of evidence applied in tion agreement is terminated.
Federal courts; (d) The approved CAP vendor may
(D) Either party may call witnesses not charge the beneficiary for the full
from among those individuals specified drug coinsurance amount if the des-
in paragraph (c)(7)(ii)(A) of this sec- ignated contractor did not pay the ap-
tion; and proved CAP vendor in full, unless a
133
§ 414.917 42 CFR Ch. IV (10–1–17 Edition)
properly executed advance beneficiary (ii) Potentially recommend termi-

notice is in place. When a beneficiary nation of the approved CAP vendor’s
receives an inappropriate coinsurance CAP contract.
bill, the beneficiary may participate in (2) Responsibility of the designated car-
the approved CAP vendor’s grievance rier. The designated carrier—
process to request correction of the ap- (i) Gathers information from the
proved CAP vendor’s file. If the bene- local carrier, the participating CAP
ficiary is dissatisfied with the result of physician, the beneficiary, and the ap-
the approved CAP vendor’s grievance proved CAP vendor; and
process, the beneficiary may request (ii) Makes a recommendation to CMS
intervention from the designated car- on whether the approved CAP vendor
rier. This is in addition to, rather than has been meeting the service and qual-
in place of, any other beneficiary ap- ity obligations of its CAP contract.
peal rights. The designated carrier will This recommendation will include
first investigate the facts and then fa- numbered findings of fact.
cilitate correction to the appropriate (3) CMS will review the recommenda-
claim record and beneficiary file. tion of the designated carrier and,
gather relevant additional information
[70 FR 39097, July 6, 2005, as amended at 72 from the approved CAP vendor, the
FR 66403, Nov. 27, 2007; 74 FR 62013, Nov. 25, participating CAP physician, the local
2009]
carrier, and the beneficiary before de-
ciding whether to terminate the ap-
§ 414.917 Dispute resolution and proc-
ess for suspension or termination of proved CAP vendor’s CAP contract.
approved CAP contract and termi- (4) The approved CAP vendor may ap-
nation of physician participation peal that termination by requesting a
under exigent circumstances. reconsideration. A determination must
be made as to whether the approved
(a) General rule. If a participating
CAP vendor has been meeting the serv-
CAP physician finds an approved CAP
ice and quality obligations of its CAP
vendor’s service, or the quality of a
contract. The approved CAP vendor’s
CAP drug supplied by the approved
contract will remain suspended during
CAP vendor to be unsatisfactory, then
the reconsideration process.
the physician may address the issue
(c) Reconsideration—(1) Right to recon-
first through the approved CAP ven- sideration. An approved CAP vendor dis-
dor’s grievance process, and second satisfied with a determination that its
through an alternative dispute resolu- CAP contract has been suspended or
tion process administered by the des- terminated by CMS is entitled to a re-
ignated carrier and CMS. If CMS sus- consideration as provided in this sub-
pends an approved CAP vendor’s CAP part.
contract for noncompliance or termi- (2) Eligibility for reconsideration. CMS
nates the CAP contract in accordance will reconsider any determination to
with § 414.914(a), the approved CAP ven- suspend or terminate an approved CAP
dor may request a reconsideration in vendor’s contract if the approved CAP
accordance with paragraph (c) of this vendor files a written request for re-
section. consideration in accordance with para-
(b) Dispute resolution. (1) When a par- graphs (c)(3) and (c)(4) of this section.
ticipating CAP physician is dissatisfied (3) Manner and timing of request for re-
with an approved CAP vendor’s service consideration. An approved CAP vendor
or the quality of a CAP drug supplied that is dissatisfied with a CMS decision
by the approved CAP vendor, then the to suspend or terminate its CAP con-
participating CAP physician may use tract may request a reconsideration of
the approved CAP vendor’s grievance the decision by filing a request with
process. If the service or quality issues CMS. The request must be filed within
are not resolved through the grievance 30 days of receipt of the CMS decision
process to the physician’s satisfaction, letter notifying the approved CAP ven-
then the participating CAP physician dor of the suspension or termination of
may ask the designated carrier to— its CAP contract.

(i) Review the approved CAP vendor’s (4) Content of request. The request for
performance; and reconsideration must specify—
134
(i) The findings or issues with which even though it would be inadmissible
the approved CAP vendor disagrees; under the rules of evidence applied in
(ii) The reasons for the disagreement; Federal courts;
(iii) A recital of the facts and law (D) Either party may call witnesses
supporting the approved CAP vendor’s from among those individuals specified
position; in the paragraph (c)(7)(ii)(A) of this
(iv) Any supporting documentation; section; and
and (E) The hearing officer does not have
(v) Any supporting statements from the authority to compel by subpoena
participating CAP physicians, the local the production of witnesses, papers, or
carrier, or beneficiaries. other evidence.
(5) Withdrawal of request for reconsid- (8) Hearing officer’s findings. (i) Within
eration. An approved CAP vendor may 30 days of the hearing officer’s receipt
withdraw its request for reconsider- of the hearing request, the hearing offi-
ation at any time before the issuance cer will present the findings and rec-
of a reconsideration determination. ommendations to the approved CAP
(6) Discretionary informal hearing. In vendor that requested the reconsider-
response to a request for reconsideration. If the hearing officer conducts a
ation, CMS may, at its discretion, pro- hearing in person or by phone, the
vide the approved CAP vendor the op- hearing officer will send a hearing no-
portunity for an informal hearing tice to the approved CAP vendor within
that— 10 days of receipt of the hearing re-
(i) Is conducted by a hearing officer quest, and the findings and rec-
appointed by the Director of the CMS ommendations are due to the approved
Center for Medicare Management or CAP vendor within 30 days from of the
his or her designee; and hearing’s conclusion.
(ii) Provides the approved CAP ven- (ii) The written report of the hearing
dor the opportunity to present, by tele- officer will include separate numbered
phone or in person, evidence to rebut findings of fact and the legal conclu-
CMS’ decision to suspend or terminate sions of the hearing officer.
the approved CAP vendor’s CAP con- (9) Final reconsideration determination.
tract. (i) The hearing officer’s decision is
(7) Informal hearing procedures. (i) final unless the Director of the CMS
CMS will provide written notice of the Center for Medicare Management or
time and place of the informal hearing his or her designee (CMS official)
at least 10 days before the scheduled chooses to review that decision within
date. 30 days. If the decision is favorable to
(ii) The informal reconsideration the approved CAP vendor, then the ap-
hearing will be conducted in accord- proved CAP vendor may resume par-
ance with the following procedures: ticipation in CAP. The hearing officer
(A) The hearing is open to CMS and and the CMS official may review deci-
the approved CAP vendor requesting sions that are favorable or unfavorable
the reconsideration, including— to the approved CAP vendor.
(1) Authorized representatives; (ii) The CMS official may accept, re-
(2) Technical advisors (individuals ject, or modify the hearing officer’s
with knowledge of the facts of the case findings.
or presenting interpretation of the (iii) If the CMS official reviews the
facts); hearing officer’s decision, the CMS offi-
(3) Representatives from the local cial will issue a final reconsideration
carriers and the designated carrier; determination to the approved CAP
(4) The participating CAP physician vendor on the basis of the hearing offi-
who requested the suspension, if any; cer’s findings and recommendations
and and other relevant information.
(5) Legal counsel. (iv) The reconsideration determina-
(B) The hearing will be conducted by tion of the CMS official is final.
the hearing officer, who will receive (d) CAP participating physicians’ exi-
relevant testimony; gent circumstances provision. The fol-

(C) Testimony and other evidence lowing process must be completed for
may be accepted by the hearing officer participating CAP physicians’ requests
135
§ 414.918 42 CFR Ch. IV (10–1–17 Edition)
to terminate their participation in the the CAP prior to the effective date of
program under exigent circumstances the physician’s termination from the
provisions described in § 414.908(a)(2)(v): CAP consistent with § 414.908(a) until
(1) The designated carrier must— all such claims are timely submitted.
(i) Determine whether a request to (ii) Return any unused CAP drugs
terminate CAP participation was re- that had not been administered to the
lated to approved CAP vendor service, beneficiary prior to the effective date
and if so, forward the issue to the ap- of the physician’s termination from the
proved CAP vendor’s grievance process CAP to the approved CAP vendor con-
within 1 business day of the receipt of sistent with applicable law and regula-
the request; or tion and any agreement with the ap-
(ii) Continue to investigate, con- proved CAP vendor.
sistent with § 414.916(b)(2) of this chap- (iii) Cooperate in any post-payment
ter, and within 2 business days of re- review activities on claims submitted
ceipt, do any of the following: under the CAP, as required under sec-
(A) Request a single, 2-business day tion 1847B(a)(3) of the Act.
extension. No later than the end of any (5) An approved CAP vendor that has
2-business day extension, the des- billed and been paid for CAP drugs that
ignated carrier must make findings and have not been administered must re-
a recommendation as provided in sub- fund any payments made by CMS or
paragraph (B) or (C). the beneficiary and his or her supple-
(B) Submit a recommendation and mental insurer in accordance with
relevant findings to CMS that the re- § 414.914(h)(3)(i)(2) of this chapter.
questing participating CAP physician [70 FR 39098, July 6, 2005, as amended at 72
be permitted to terminate his or her FR 66403, Nov. 27, 2007; 74 FR 62013, Nov. 25,
participation in the CAP. 2009]
(C) Submit a recommendation and
relevant findings to CMS that the re- § 414.918 Assignment.
questing participating CAP physician Payment for a CAP drug may be
not be permitted to terminate his or made only on an assignment-related
her participation in the CAP. basis.
(ii) In the case of a request made
under § 414.908(a)(2)(v)(B), the des- [70 FR 39099, July 6, 2005]
ignated carrier also shall include in its
§ 414.920 Judicial review.
recommendation its finding with re-
spect to whether the request is based The following areas under the CAP
on a change in circumstances of which are not subject to administrative or ju-
the participating CAP physician was dicial review:
previously unaware. (a) The establishment of payment
(2) CMS will consider the carrier’s amounts.
findings and recommendation and may (b) The awarding of vendor contracts.
also make its own findings. As a result, (c) The establishment of competitive
CMS will— acquisition areas.
(i) Approve or deny the request to (d) The selection of CAP drugs.
terminate participation in the CAP (e) The bidding structure.
within 2 business days of receipt of the (f) The number of vendors selected.
recommendation. [70 FR 39099, July 6, 2005]
(ii) Communicate the decision to the
appropriate Medicare contractors and § 414.930 Compendia for determination
the participating CAP physician. of medically-accepted indications
(3) A denial of the participating CAP for off-label uses of drugs and
physician’s request to terminate par- biologicals in an anti-cancer
ticipation in the CAP must include chemotherapeutic regimen.
written notification of the right to re- (a) Definitions. For the purposes of
quest reconsideration under § 414.916(c). this section:
(4) Upon termination of participation Compendium means a comprehensive
in the CAP a physician must— listing of FDA-approved drugs and

(i) Continue to submit claims for biologicals or a comprehensive listing
drugs supplied and administered under of a specific subset of drugs and
136
biologicals in a specialty compendium, or collaboration agreements between

for example a compendium of anti-can- individuals or the spouse or minor
cer treatment. A compendium— child of individuals who have sub-
(i) Includes a summary of the phar- stantively participated in the review
macologic characteristics of each drug and disposition of the request and the
or biological and may include informa- manufacturer or seller of the drug or
tion on dosage, as well as recommended biological being reviewed by the com-
or endorsed uses in specific diseases. pendium.
(ii) Is indexed by drug or biological. (ii) Ownership or investment inter-
(iii) Has a publicly transparent proc- ests between individuals or the spouse
ess for evaluating therapies and for or minor child of individuals who have
identifying potential conflicts of inter- substantively participated in the devel-
ests. opment or disposition of compendia
Publicly transparent process for evalu- recommendations and the manufac-
ating therapies means that the process turer or seller of the drug or biological
provides that the following informa- being reviewed by the compendium.
tion from an internal or external re- (b) Process for listing compendia for de-
quest for inclusion of a therapy in a termining medically-accepted uses of
compendium are available to the public drugs and biologicals in anti-cancer treat-
for a period of not less than 5 years, ment. (1) The CMS process—
which includes availability on the com-
(i) Receives formal written requests
pendium’s Web site for a period of not
for changes to the list of compendia
less than 3 years, coincident with the
during a 30 day window beginning Jan-
compendium’s publication of the re-
uary 15 each year.
lated recommendation:
(ii) Publishes a listing of the timely,
(i) The internal or external request
complete requests by March 15th and
for listing of a therapy recommenda-
solicits public comment on the re-
tion including criteria used to evaluate
quests for 30 days. The listing identi-
the request.
fies the requestor and the requested ac-
(ii) A listing of all the evidentiary
tion.
materials reviewed or considered by
the compendium pursuant to the re- (iii) Considers a compendium’s at-
quest. tainment of the MedCAC (Medicare
(iii) A listing of all individuals who Evidence Development and Coverage
have substantively participated in the Advisory Committee, previously known
review or disposition of the request. as the MCAC—Medicare Coverage Advi-
(iv) Minutes and voting records of sory Committee) recommended desir-
meetings for the review and disposition able characteristics of compendia (in-
of the request. cluding explicit listing and rec-
Publicly transparent process for identi- ommendations) in reviewing requests.
fying potential conflicts of interests CMS may consider additional reason-
means that process provides that the able factors.
following information is identified and (iv) Considers a compendium’s grad-
made timely available in response to a ing of evidence used in making rec-
public request for a period of not less ommendations regarding off-label uses
than 5 years, coincident with the com- and the process by which the compen-
pendium’s publication of the related dium grades the evidence.
recommendation: (v) Considers whether the publication
(i) Direct or indirect financial rela- that is the subject of the request meets
tionships that exist between individ- the definition of a compendium in this
uals or the spouse or minor child of in- section.
dividuals who have substantively par- (vi) Publishes its decision no later
ticipated in the development or dis- than 90 days after the close of the pub-
position of compendia recommenda- lic comment period.
tions and the manufacturer or seller of (2) Exception. In addition to the an-
the drug or biological being reviewed nual process outlined in paragraph
by the compendium. This may include, (b)(1) of this section, CMS may inter-
for example, compensation arrange- nally generate a request for changes to
ments such as salary, grant, contract, the list of compendia at any time.
137
§ 414.1000 42 CFR Ch. IV (10–1–17 Edition)
(c) Written request for review. (1) CMS macy provided to a beneficiary during
will review a complete, written request a 30-day period.
that is submitted in writing, electroni- (2) A supplying fee of $16 is paid to a
cally or via hard copy (no duplicate pharmacy for each prescription fol-
submissions) and includes the following the first prescription (as speci-
lowing: fied in paragraph (a)(1) of this section)
(i) The full name and contact infor- of drugs and biologicals described in
mation of the requestor. sections 1861(s)(2)(J), 1861(s)(2)(Q), and
(ii) The full identification of the 1861(s)(2)(T) of the Act, that the phar-
compendium that is the subject of the macy provided to a beneficiary during
request, including name, publisher, edi- a 30-day period.
tion if applicable, date of publication, (3) A separate supplying fee is paid to
and any other information needed for a pharmacy for each prescription of
the accurate and precise identification drugs and biologicals described in sec-
of the specific compendium. tions 1861(s)(2)(J), 1861(s)(2)(Q), and
(iii) A complete written copy of the 1861(s)(2)(T) of the Act.
compendium that is the subject of the (b) Supplying fees following transplant.
request. Beginning CY 2006—(1) A supplying fee
(iv) The specific action that is re- of $50 is paid to pharmacy for the ini-
quested of CMS. tial supplied prescription of drugs and
(v) Materials that the requestor must biologicals described in section
submit for CMS review in support of 1861(s)(2)(J) of the Act, that the phar-
the requested action. macy provided to a patient during the
(vi) A single compendium as its sub- first 30-day period following a trans-
ject. plant.
(d) CMS may at its discretion com- (2) A supplying fee of $16 is paid to a
bine and consider multiple requests pharmacy for each prescription fol-
that refer to the same compendium. lowing an initial prescription after a
(e) For the purposes of this section, transplant (as specified in paragraph
publication by CMS may be accom- (b)(1) of this section) of drugs and
plished by posting on the CMS Web biologicals describe in section
site. 1861(s)(2)(J) of the Act, that the phar-
[72 FR 66404, Nov. 27, 2007, as amended at 74 macy provided to a beneficiary during
FR 62013, Nov. 25, 2009] a 30-day period.
(c) 30-day dispensing fees. Beginning
Subpart L—Supplying and CY 2006—(1) A dispensing fee of $57 is
paid to a supplier to the extent that
Dispensing Fees the prescription is for the initial dis-
§ 414.1000 Purpose. pensed 30-day supply of inhalation
drugs furnished through durable med-
This subpart implements section
ical equipment covered under section
1842(o)(2) and section 1842(o)(6) of the
1861(n) of the Act, regardless of the
Act, as added by section 303(e)(2) of the
number of partial shipments of that 30-
MMA, by specifying a supplying fee for
day supply.
drugs and biologicals covered under
(2) Except for supplied inhalation
Part B of Title XVIII of the Act that
drugs that meet criteria described in
are described in sections 1861(s)(2)(J),
paragraph (c)(1) of this section, a dis-
1861(s)(2)(Q), and 1861(s)(2)(T) of the
pensing fee of $33 is paid for each dis-
Act.
pensed 30-day supply of inhalation
[69 FR 66425, Nov. 15, 2004] drugs furnished through durable med-
ical equipment covered under section
§ 414.1001 Basis of payment. 1861(n) of the Act, regardless of the
(a) Supplying fees. Beginning in CY number of partial shipments of that 30-
2006— day supply.
(1) A supplying fee of $24 is paid to a (d) 90-day dispensing fee. Beginning
pharmacy for the first prescription of CY 2006, a dispensing fee of $66 is paid
drugs and biologicals described in sec- to a supplier for each dispensed 90-day
tions 1861(s)(2)(J), 1861(s)(2)(Q), and supply of inhalation drugs furnished
1861(s)(2)(T) of the Act, that the phar- through durable medical equipment
138
covered under section 1861(n) of the (1) The actual charge for the service
Act, regardless of the number of partial provided that payment for such item is
shipments of that 90-day supply. not included in the payment amount
[70 FR 70334, Nov. 21, 2005]
for other CORF services paid under
paragraphs (a) or (d); or
(2) The amount determined under the
Subpart M—Payment for Com- DMEPOS fee schedule established
prehensive Outpatient Reha- under part 414 subparts D and F for the
bilitation Facility (CORF) Serv- item or the single payment amount es-
ices tablished under the DMEPOS competi-
tive bidding program provided that
SOURCE: 72 FR 66404, Nov. 27, 2007, unless payment for such item is not included
otherwise noted. in the payment amount for other CORF
services paid under paragraphs (a) or
§ 414.1100 Basis and scope. (d).
This subpart implements sections (d) Payment for drugs and biologicals.
1834(k)(1) and (k)(3) of the Act by speci- Drugs and biologicals that are CORF
fying the payment methodology for services under § 410.100(j) of this chap-
comprehensive outpatient rehabilita- ter, are paid the lesser of 80 percent of
tion facility services covered under the following:
Part B of Title XVIII of the Act that (1) The actual charge for the service
are described at section 1861(cc)(1) of provided that payment for such item is
the Act.
not included in the payment amount
§ 414.1105 Payment for Comprehensive for other CORF services paid under
Outpatient Rehabilitation Facility paragraphs (a) or (c); or
(CORF) services. (2) The amount determined using the
(a) Payment under the physician fee same methodology for drugs (as defined
schedule. Except as otherwise specified in § 414.704 of this chapter) described in
under paragraphs (b), (c), (d), and (e) of section 1842(o)(1) of the Act provided
this section payment for CORF serv- that payment for such drug is not in-
ices, as defined under § 410.100 of this cluded in the payment amount for
chapter, is paid the lesser of 80 percent other CORF services paid under para-
of the following: graphs (a) or (c).
(1) The actual charge for the item or (e) Payment for CORF services when no
service; or fee schedule amount for the service. If
(2) The nonfacility amount deter- there is no fee schedule amount estab-
mined under the physician fee schedule lished for a CORF service, payment for
established under section 1848(b) of the the item or service will be the lesser of
Act for the item or service. 80 percent of:
(b) Payment for physician services. No (i) The actual charge for the service
separate payment for physician serv- provided that payment for such item or
ices that are CORF services under service is not included in the payment
§ 410.100(a) of this chapter will be made. amount for other CORF services paid
(c) Payment for supplies and durable under paragraphs (a), (c), or (d) of this
medical equipment, prosthetic and section.
orthotic devices, and drugs and (ii) The amount determined under
biologicals. Supplies and durable med- the fee schedule established for a com-
ical equipment that are CORF services parable service as specified by the Sec-
under § 410.100(l) of this chapter, pros- retary provided that payment for such
thetic device services that are CORF
item or service is not included in the
services under § 410.100(f), orthotic de-
payment amount for other CORF serv-
vices that are CORF services under
§ 410.100(g) of this chapter and drugs ices paid under paragraphs (a), (c), or
and biologicals that are CORF services (d) of this section.
under § 410.100(k) of this chapter are

paid the lesser of 80 percent of the fol-
lowing:
139
§ 414.1200 42 CFR Ch. IV (10–1–17 Edition)
Subpart N—Value-Based Payment this term under section 1861(bb)(2) of

Modifier Under the Physician the Act.
Fee Schedule Critical access hospital has the same
meaning given this term under § 400.202
of this chapter.
otherwise noted.
Electronic health record (EHR) has the
same meaning given this term under
§ 414.1200 Basis and scope. § 414.92 of this chapter.
(a) Basis. This subpart implements Eligible professional has the same
section 1848(p) of the Act by estab- meaning given this term under section
lishing a payment modifier that pro- 1848(k)(3)(B) of the Act.
vides for differential payment starting Federally Qualified Health Center has
in 2015 to a group of physicians and the same meaning given this term
starting in 2017 to a group and a solo under § 405.2401(b) of this chapter.
practitioner under the Medicare Physi- Group of physicians (Group) means a
cian Fee Schedule based on the quality single Taxpayer Identification Number
of care furnished compared to cost dur- (TIN) with 2 or more eligible profes-
ing a performance period. sionals, as identified by their indi-
(b) Scope. This subpart sets forth the vidual National Provider Identifier
following: (NPI), who have reassigned their Medi-
(1) The application of the value-based care billing rights to the TIN.
payment modifier. Performance period means the cal-
(2) Performance and payment adjust- endar year that will be used to assess
ment periods. the quality of care furnished compared
(3) Reporting mechanisms for the to cost.
value-based payment modifier. Performance rate mean the calculated
(4) Alignment of PQRS quality of rate for each quality or cost measure
care measures with the quality meas- such as the percent of times that a par-
ures for the value-based payment modi- ticular clinical quality action was re-
fier. ported as being performed, or a par-
(5) Additional measures for groups ticular outcome was attained, for the
and solo practitioners. applicable persons to whom a measure
(6) Cost measures. applies as described in the denominator
(7) Attribution for quality of care and for the measure.
cost measures. Physician has the same meaning
(8) Scoring methods for the value- given this term under section 1861(r) of
based payment modifier. the Act.
(9) Benchmarks for quality of care Physician assistant (PA), nurse practi-
measures. tioner (NP), and clinical nurse specialist
(10) Benchmarks for cost measures. (CNS) have the same meanings given
(11) Composite scores. these terms under section 1861(aa)(5) of
(12) Reliability of measures. the Act.
(13) Payment adjustments. Physician Fee Schedule has the same
(14) Value-based payment modifier meaning given this term under part 410
quality-tiering scoring methodology. of this chapter.
(15) Limitation of review. Physician Quality Reporting System
(16) Inquiry process. means the system established under
[77 FR 69368, Nov. 16, 2012, as amended at 79 section 1848(k) of the Act.
FR 68005, Nov. 13, 2014] Risk score means the beneficiary risk
score derived from the CMS Hier-
§ 414.1205 Definitions. archical Condition Categories (HCC)
As used in this subpart, unless other- model.
wise indicated— Solo practitioner means a single Tax-
Accountable care organization (ACO) payer Identification Number (TIN)
has the same meaning given this term with one eligible professional who is
under § 425.20 of this chapter. identified by an individual National

Certified registered nurse anesthetist Provider Identifier (NPI) billing under
(CRNA) has the same meaning given the TIN.
140
Taxpayer Identification Number (TIN) any adjustments under the value-based

has the same meaning given this term payment modifier for CY 2015 and CY
under § 425.20 of this chapter. 2016.
Value-based payment modifier means (2) Application of the value-based pay-
the percentage as determined under ment modifier to participants in the
§ 414.1270 by which amounts paid to a Shared Savings Program.
group or solo practitioner under the (i) For the CY 2017 payment adjust-
Medicare Physician Fee Schedule es- ment period and each subsequent cal-
tablished under section 1848 of the Act endar year payment adjustment period,
are adjusted based upon a comparison the value-based payment modifier is
of the quality of care furnished to cost applicable to physicians in groups with
as determined by this subpart. 2 or more eligible professionals and to
[77 FR 69368, Nov. 16, 2012, as amended at 79 physicians who are solo practitioners
FR 68005, Nov. 13, 2014; 80 FR 71382, Nov. 16, that participate in an ACO under the
2015] Shared Savings Program during the
performance period for the payment
§ 414.1210 Application of the value-
based payment modifier. adjustment period as described at
§ 414.1215. The value-based payment
(a) The value-based payment modi- modifier for a group or solo practi-
fier is applicable: tioner that participates in an ACO
(1) For the CY 2015 payment adjust- under the Shared Savings Program
ment period, to physicians in groups during the performance period is deter-
with 100 or more eligible professionals mined based on paragraphs (b)(2)(i)(A)
based on the performance period de- through (D) of this section.
scribed at § 414.1215(a).
(A) The cost composite is classified
(2) For the CY 2016 payment adjust-
as ‘‘average’’ under § 414.1275(b).
ment period, to physicians in groups
with 10 or more eligible professionals (B) For groups and solo practitioners
based on the performance period de- that participate in a Shared Savings
scribed at § 414.1215(b). Program ACO that successfully reports
(3) For the CY 2017 payment adjust- quality data as required by the Shared
ment period and each subsequent cal- Savings Program under § 425.504 of this
endar year payment adjustment period, chapter, the quality composite score is
to physicians in groups with 2 or more calculated under § 414.1260(a) using
eligible professionals and to physicians quality data reported by the ACO for
who are solo practitioners based on the the performance period through the
performance period for the payment ACO GPRO Web interface as required
adjustment period as described at under § 425.504(a)(1) of this chapter or
§ 414.1215. another mechanism specified by CMS
(4) For the CY 2018 payment adjust- and the ACO all-cause readmission
ment period, to nonphysician eligible measure. Groups and solo practitioners
professionals who are physician assist- that participate in two or more ACOs
ants, nurse practitioners, clinical nurse during the applicable performance pe-
specialists, and certified registered riod receive the quality composite
nurse anesthetists in groups with 2 or score of the ACO that has the highest
more eligible professionals and to phy- numerical quality composite score. For
sician assistants, nurse practitioners, the CY 2018 payment adjustment pe-
clinical nurse specialists, and certified riod, the CAHPS for ACOs survey also
registered nurse anesthetists who are will be included in the quality com-
solo practitioners based on the per- posite score. For the CY 2017 and 2018
formance period for the payment ad- payment adjustment periods, for
justment period as described at groups and solo practitioners who par-
§ 414.1215. ticipate in a Shared Savings Program
(b) Exceptions. (1) Groups of physi- ACO that does not successfully report
cians that are participating in the quality data as required by the Shared
Medicare Shared Savings Program, the Savings Program under § 425.504 and
testing of the Pioneer ACO model, or who meet the requirements to avoid
other similar Innovation Center or the PQRS payment adjustment for CY
CMS initiatives shall not be subject to 2018 by reporting to the PQRS outside
141
§ 414.1210 42 CFR Ch. IV (10–1–17 Edition)
the ACO, the quality composite is clas- ment period, the group or solo practi-
sified as ‘‘average’’ under § 414.1275(b). tioner receives an upward adjustment
(C) For the CY 2017 payment adjust- of +3 × (rather than +2 ×) if the group
ment period, the value-based payment of physicians has 10 or more eligible
modifier adjustment will be equal to professionals, +2 × (rather than +1 ×)
the amount determined under § 414.1275 for a physician solo practitioner or if
for the payment adjustment period, ex- the group of physicians has two to nine
cept that if the ACO (or groups and eligible professionals, or +2 × (rather
solo practitioners that participate in than +1 ×) for a solo practitioner who is
the ACO) does not successfully report a nonphysician eligible professional or
quality data as described in paragraph if the group consists of nonphysician
(b)(2)(i)(B) of this section for the per- eligible professionals.
formance period, such adjustment will (E) For the CY 2017 payment adjust-
be equal to –4% for groups of physi- ment period and each subsequent cal-
cians with 10 or more eligible profes- endar year payment adjustment period,
sionals and equal to –2% for groups of the value-based payment modifier for
physicians with two to nine eligible groups and solo practitioners that par-
professionals and for physician solo ticipate in an ACO under the Shared
practitioners. If the ACO has an as- Savings Program during the applicable
signed beneficiary population during performance period is determined as
the performance period with an aver- described under paragraph (b)(2) of this
age risk score in the top 25 percent of section, regardless of whether any eli-
the risk scores of beneficiaries nation- gible professionals in the group or the
wide, and a group of physician or phy- solo practitioner also participate in an
sician solo practitioner that partici- Innovation Center model during the
pates in the ACO during the perform- performance period.
ance period is classified as high qual- (F) For groups and solo practitioners
ity/average cost under quality-tiering that participate in a Shared Savings
for the CY 2017 payment adjustment Program ACO that successfully reports
period, the group or solo practitioner quality data as required by the Shared
receives an upward adjustment of +3 × Savings Program under § 425.504 of this
(rather than +2 ×) if the group has 10 or chapter, the same value-based payment
more eligible professionals or +2 × modifier adjustment will be applied in
(rather than +1 ×) for a solo practi- the payment adjustment period to all
tioner or the group has two to nine eli- groups based on size as specified under
gible professionals. § 414.1275 and solo practitioners that
(D) For the CY 2018 payment adjust- participated in the ACO during the per-
ment period, the value-based payment formance period.
modifier adjustment will be equal to (ii) For the CY 2018 payment adjust-
the amount determined under § 414.1275 ment period and each subsequent cal-
for the payment adjustment period, ex- endar year payment adjustment period,
cept that if the ACO (or groups and the value-based payment modifier is
solo practitioners that participate in applicable to nonphysician eligible pro-
the ACO) does not successfully report fessionals in groups with 2 or more eli-
quality data as described in paragraph gible professionals and to nonphysician
(b)(2)(i)(B) of this section for the per- eligible professionals who are solo
formance period, such adjustment will practitioners that participate in an
be equal to the downward payment ad- ACO under the Shared Savings Pro-
justment amounts described at gram during the performance period for
§ 414.1270(d)(1). If the ACO has an as- the payment adjustment period as de-
signed beneficiary population during scribed at § 414.1215. The value-based
the performance period with an aver- payment modifier for nonphysician eli-
age risk score in the top 25 percent of gible professionals is determined in the
the risk scores of beneficiaries nation- same manner as for physicians as de-
wide, and a group or solo practitioner scribed under paragraphs (b)(2)(i)(A)
that participates in the ACO during the through (D) of this section.
performance period is classified as high (3) Application of the value-based pay-

quality/average cost under quality- ment modifier to participants in the Pio-
tiering for the CY 2018 payment adjust- neer ACO Model and the Comprehensive
142
Primary Care Initiative. (i) For the CY are solo practitioners that participate
2017 payment adjustment period, the in other similar Innovation Center
value-based payment modifier is models during the performance period
waived under section 1115A(d)(1) of the for the payment adjustment period as
Act for physicians in groups with 2 or described at § 414.1215.
more eligible professionals and for phy- (iii) For purposes of the value-based
sicians who are solo practitioners that payment modifier, a group or solo prac-
participate in the Pioneer ACO Model titioner is considered to be partici-
or the Comprehensive Primary Care pating in a similar Innovation Center
(CPC) Initiative during the perform- model if at least one eligible profes-
ance period for the payment adjust- sional billing under the TIN in the per-
ment period as described at § 414.1215. formance period for the payment ad-
(ii) For the CY 2018 payment adjust- justment period as described at
ment period, the value-based payment § 414.1215 is participating in the similar
modifier is waived under section model in the performance period.
1115A(d)(1) of the Act for physicians (c) Group size and composition deter-
and nonphysician eligible professionals mination. (1) The list of groups of physi-
in groups with 2 or more eligible pro- cians subject to the value-based pay-
fessionals and for physicians and non- ment modifier for the CY 2015 payment
physician eligible professionals who adjustment period is based on a query
are solo practitioners that participate of PECOS on October 15, 2013. For each
in the Pioneer ACO Model or the Com- subsequent calendar year payment ad-
prehensive Primary Care (CPC) Initia- justment period, the list of groups and
tive during the performance period for solo practitioners subject to the value-
the payment adjustment period as de- based payment modifier is based on a
scribed at § 414.1215. query of PECOS that occurs within 10
(iii) For purposes of the value-based days of the close of the Physician Qual-
payment modifier, a group or solo prac- ity Reporting System group registra-
titioner is considered to be partici- tion process during the applicable per-
pating in the Pioneer ACO Model or formance period described at § 414.1215.
CPC Initiative if at least one eligible Groups are removed from the PECOS-
professional billing under the TIN in generated list if, based on a claims
the performance period for the pay- analysis, the group did not have the re-
ment adjustment period as described at quired number of eligible professionals,
§ 414.1215 is participating in the Pioneer as defined in paragraph (a) of this sec-
ACO Model or CPC Initiative in the tion, that submitted claims during the
performance period. performance period for the applicable
(4) Application of the value-based pay- calendar year payment adjustment pe-
ment modifier to participants in other riod. Solo practitioners are removed
similar Innovation Center models. (i) For from the PECOS-generated list if,
the CY 2017 payment adjustment pe- based on a claims analysis, the solo
riod, the value-based payment modifier practitioner did not submit claims dur-
is waived under section 1115A(d)(1) of ing the performance period for the ap-
the Act for physicians in groups with 2 plicable calendar year payment adjust-
or more eligible professionals and for ment period.
physicians who are solo practitioners (2) Beginning with the CY 2016 pay-
that participate in other similar Inno- ment adjustment period, the size of a
vation Center models during the per- group during the applicable perform-
formance period for the payment ad- ance period will be determined by the
justment period as described at lower number of eligible professionals
§ 414.1215. as indicated by the PECOS-generated
(ii) For the CY 2018 payment adjust- list or claims analysis.
ment period, the value-based payment (3) For the CY 2018 payment adjust-
modifier is waived under section ment period, the composition of a
1115A(d)(1) of the Act for physicians group during the applicable perform-
and nonphysician eligible professionals ance period will be determined based
in groups with 2 or more eligible pro- on whether the group includes physi-
fessionals and for physicians and non- cians, physician assistants, nurse prac-
physician eligible professionals who titioners, clinical nurse specialists,
143
§ 414.1215 42 CFR Ch. IV (10–1–17 Edition)
certified registered nurse anesthetists, System in a given calendar year are

and/or other types of nonphysician eli- used to calculate the value-based pay-
gible professionals as indicated by the ment modifier for the applicable pay-
PECOS-generated list or claims anal- ment adjustment period, as defined in
ysis. § 414.1215, to the extent a solo practi-
[77 FR 69368, Nov. 16, 2012, as amended at 78 tioner or a group (or individual eligible
FR 74820, Dec. 10, 2013; 79 FR 68005, Nov. 13, professionals within such group) sub-
2014; 80 FR 71382, Nov. 16, 2015; 81 FR 80555, mit data on such measures.
Nov. 15, 2016]
[79 FR 68006, Dec. 13, 2014]
§ 414.1215 Performance and payment
adjustment periods for the value- § 414.1230 Additional measures for
based payment modifier. groups and solo practitioners.
(a) The performance period is cal- The value-based payment modifier
endar year 2013 for value-based pay- includes the following additional qual-
ment modifier adjustments made in ity measures (outcome measures) as
the calendar year 2015 payment adjust- applicable for all groups and solo prac-
ment period. titioners subject to the value-based
(b) The performance period is cal- payment modifier:
endar year 2014 for value-based pay- (a) A composite of rates of poten-
ment modifier adjustments made in tially preventable hospital admissions
the calendar year 2016 payment adjust- for heart failure, chronic obstructive
ment period. pulmonary disease, and diabetes. The
(c) The performance period is cal- rate of potentially preventable hospital
endar year 2015 for value-based pay- admissions for diabetes is a composite
ment modifier adjustments made in measure of uncontrolled diabetes, short
the calendar year 2017 payment adjust- term diabetes complications, long term
ment period. diabetes complications and lower ex-
(d) The performance period is cal- tremity amputation for diabetes.
endar year 2016 for value-based pay- (b) A composite of rates of poten-
ment modifier adjustments made in tially preventable hospital admissions
the calendar year 2018 payment adjust- for dehydration, urinary tract infec-
ment period. tions, and bacterial pneumonia.
[77 FR 69368, Nov. 16, 2012, as amended at 78 (c) Rates of an all-cause hospital re-
FR 74820, Dec. 10, 2013; 80 FR 71383, Nov. 16, admissions measure, except for groups
2015] with between two to nine eligible pro-
fessionals and solo practitioners start-
§ 414.1220 Reporting mechanisms for
the value-based payment modifier. ing with the CY 2017 payment adjust-
ment period.
Solo practitioners and groups subject
to the value-based payment modifier [77 FR 69368, Nov. 16, 2012, as amended at 79
(or individual eligible professionals FR 68007, Nov. 13, 2014; 80 FR 71383, Nov. 16,
within such groups) may submit data 2015]
on quality measures as specified under
§ 414.1235 Cost measures.
the Physician Quality Reporting Sys-
tem using the reporting mechanisms (a) Included measures. Beginning with
for which they are eligible. the CY 2016 payment adjustment pe-
riod, costs for groups and solo practi-
FR 68006, Nov. 13, 2014] tioners subject to the value-based pay-
ment modifier are assessed based on a
§ 414.1225 Alignment of Physician cost composite comprised of the fol-
Quality Reporting System quality lowing 6 cost measures (only the meas-
measures and quality measures for ures identified in paragraphs (a)(1)
the value-based payment modifier. through (5) of this section are included
All of the quality measures for which for the value-based payment modifier
solo practitioners and groups (or indi- for the CY 2015 payment adjustment
vidual eligible professionals within period):

such groups) are eligible to report (1) Total per capita costs for all at-
under the Physician Quality Reporting tributed beneficiaries.
144
(2) Total per capita costs for all at- ber of eligible professionals in the
tributed beneficiaries with diabetes. group with the relevant specialty,
(3) Total per capita costs for all at- times the proportion of eligible profes-
tributed beneficiaries with coronary sionals in the group with the relevant
artery disease. specialty.
(4) Total per capita costs for all at-
tributed beneficiaries with chronic ob-
FR 68007, Nov. 13, 2014; 80 FR 71383, Nov. 16,
structive pulmonary disease. 2015]
(5) Total per capita costs for all at-
tributed beneficiaries with heart fail- § 414.1240 Attribution for quality of
ure. care and cost measures.
(6) Medicare Spending per Bene-
(a) Beneficiaries are attributed to
ficiary associated with an acute inpa-
groups and solo practitioners subject
tient hospitalization.
to the value-based payment modifier
(b) Included payments. Cost measures
using a method generally consistent
enumerated in paragraph (a) of this
with the method of assignment of bene-
section include all fee-for-service pay-
ficiaries under § 425.402 of this chapter,
ments made under Medicare Part A and
for measures other than the Medicare
Part B.
Spending per Beneficiary measure.
(c) Cost measure adjustments. (1) Pay-
ments under Medicare Part A and Part (b) For the Medicare Spending per
B will be adjusted using CMS’ payment Beneficiary (MSPB) measure, an MSPB
standardization methodology to ensure episode is attributed to the group or
fair comparisons across geographic the solo practitioner subject to the
areas. value-based payment modifier whose
(2) The CMS–HCC model (and adjust- eligible professionals submitted the
ments for ESRD status) is used to ad- plurality of claims (as measured by al-
just standardized payments for the lowable charges) under the group’s or
measures listed at paragraphs (a)(1) solo practitioner’s TIN for Medicare
through (5) of this section. Part B services, rendered during an in-
(3) The beneficiary’s age and severity patient hospitalization that is an index
of illness are used to adjust the Medi- admission for the MSPB measure dur-
care Spending per Beneficiary measure ing the applicable performance period
as specified in paragraph (a)(6) of this described at § 414.1215.
section. [79 FR 68007, Nov. 13, 2014]
(4) Beginning with the CY 2016 pay-
ment adjustment period, the cost § 414.1245 Scoring methods for the
measures of a group and solo practi- value-based payment modifier
tioner subject to the value-based pay- using the quality-tiering approach.
ment modifier are adjusted to account For each quality of care and cost
for the group’s and solo practitioner’s measure, a standardized score is cal-
specialty mix, by computing the culated for each group and solo practi-
weighted average of the national spe- tioner subject to the value-based pay-
cialty specific expected costs and comment modifier by dividing—
paring this to the group’s actual risk (a) The difference between their per-
adjusted costs. Each national spe- formance rate and the benchmark, by
cialty-specific expected cost is weight- (b) The measure’s standard deviation.
ed by the proportion of Part B pay-
ments incurred by each specialty with- [77 FR 69368, Nov. 16, 2012, as amended at 79
in the group. FR 68007, Nov. 13, 2014]
(5) The national specialty-specific ex-
pected costs referenced in paragraph § 414.1250 Benchmarks for quality of
(c)(4) of this section are derived by cal- care measures.
culating, for each specialty, the (a) The benchmark for quality of care
weighted average of the risk-adjusted measures reported through the PQRS
costs computed across all groups, using the claims, registries, QCDR, or
where the weight for each group is web interface is the national mean for
equal to the number of beneficiaries at- that measure’s performance rate (re-
tributed to the group, times the num- gardless of the reporting mechanism)
145
§ 414.1255 42 CFR Ch. IV (10–1–17 Edition)
during the year prior to the perform- of beneficiaries used to calculate the
ance period. In calculating the national group of physician’s performance rate.
benchmark, solo practitioners’ and (b) Beginning with the CY 2016 pay-
groups’ (or individual eligible profes- ment adjustment period, the bench-
sionals’ within such groups) perform- mark for each cost measure is the na-
ance rates are weighted by the number tional mean of the performance rates
of beneficiaries used to calculate the calculated among all groups and solo
solo practitioners’ or groups’ (or indi- practitioners that meet the minimum
vidual eligible professionals’ within number of cases for that measure under
such groups) performance rate. Begin- § 414.1265(a). In calculating the national
ning with the CY 2016 performance pe- benchmark, groups and solo practi-
riod, eCQMs reported via EHRs are ex- tioners’ performance rates are weight-
cluded from the overall benchmark for ed by the number of beneficiaries used
quality of care measures and separate to calculate the group or solo practi-
eCQM benchmarks will be developed. tioner’s performance rate.
The eCQM benchmark is the national [78 FR 74821, Dec. 10, 2013, as amended at 79
mean for the measure’s performance FR 68007, Nov. 13, 2014; 80 FR 71384, Nov. 16,
rate during the year prior to the per- 2015]
formance period. In calculating the na-
§ 414.1260 Composite scores.
tional benchmark, solo practitioners’
and groups’ (or individual eligible pro- (a)(1) The standardized score for each
fessionals’ within such groups) per- quality of care measure is classified
formance rates are weighted by the into one of the following equally
number of beneficiaries used to cal- weighted domains to determine the
culate the solo practitioners’ or quality composite:
groups’ (or individual eligible profes- (i) Patient safety.
sionals’ within such groups) perform- (ii) Patient experience.
ance rate. (iii) Care coordination.
(b) The benchmark for each outcome (iv) Clinical care.
(v) Population/community health.
measure under § 414.1230, is the national
(vi) Efficiency.
mean for that measure’s performance
(2) If a domain includes no measure
rate during the year prior to the per-
or does not reach the minimum case
formance period. In calculating the na-
size in § 414.1265, the remaining do-
tional benchmark, solo practitioners’
mains are equally weighted to form the
and groups’ (or individual eligible pro- quality of care composite.
fessionals’ within such groups) per- (b)(1) The standardized score for each
formance rates are weighted by the cost measure is grouped into two sepa-
number of beneficiaries used to cal- rate and equally weighted domains to
culate the solo practitioners’ or determine the cost composite:
groups’ (or individual eligible profes- (i) Total per capita costs for all at-
sionals’ within such groups) perform- tributed beneficiaries: Total per capita
ance rate. costs measure and Medicare Spending
[79 FR 68007, Nov. 13, 2014, as amended at 80 per Beneficiary measure; and
FR 71384, Nov. 16, 2015] (ii) Total per capita costs for all at-
tributed beneficiaries with specific
§ 414.1255 Benchmarks for cost meas- conditions: Diabetes, coronary artery
ures. disease, chronic obstructive pulmonary
(a) For the CY 2015 payment adjust- disease, or heart failure (four meas-
ment period, the benchmark for each ures).
cost measure is the national mean of (2) Measures within each domain are
the performance rates calculated equally weighted.
among all groups of physicians for [77 FR 69368, Nov. 16, 2012, as amended at 78
which beneficiaries are attributed to FR 74821, Dec. 10, 2013]
the group of physicians that are sub-
ject to the value-based payment modi- § 414.1265 Reliability of measures.
fier. In calculating the national bench- To calculate a composite score for a

mark, groups of physicians’ perform- quality measure or a cost measure, a
ance rates are weighted by the number group or solo practitioner subject to
146
the value-based payment modifier meets the minimum number of cases

must have 20 or more cases for that under paragraph (a) of this section.
measure. [77 FR 69368, Nov. 16, 2012, as amended at 79
(a) In a performance period, if a FR 68007, Nov. 13, 2014; 80 FR 71384, Nov. 16,
group or solo practitioner has fewer 2015]
than 20 cases for a measure, that meas-
ure is excluded from its domain and the § 414.1270 Determination and calcula-
remaining measures in the domain are tion of Value-Based Payment Modi-
fier adjustments.
given equal weight.
(1) Starting with the CY 2017 pay- (a) For the CY 2015 payment adjust-
ment adjustment period, the exception ment period:
to this paragraph (a) is the all-cause (1) Downward payment adjustments. A
hospital readmissions measure de- downward payment adjustment will be
scribed at § 414.1230(c). In a performance applied to a group of physicians subject
period, if a group has fewer than 200 to the value-based payment modifier
cases for this all-cause hospital re- if—
admissions measure, that measure is (i) Such group neither self-nominates
excluded from its domain and the re- for the PQRS GPRO and reports at
least one measure, nor elects the PQRS
maining measures in the domain are
administrative claims option for CY
given equal weight.
2013 as defined in § 414.90(h).
(2) Starting with the CY 2017 pay-
(A) Such adjustment will be ¥1.0 per-
ment adjustment period, the Medicare cent.
Spending Per Beneficiary measure de-
(B) [Reserved]
scribed at § 414.1235(a)(6) is an exception
(ii) Such group elects that its value-
to this paragraph (a). In a performance based payment modifier be calculated
period, if a group or a solo practitioner using a quality-tiering approach, and is
has fewer than 125 episodes for this determined to have poor performance
MSPB measure, that measure is ex- (low quality and high costs; low qual-
cluded from its domain and the remain- ity and average costs; or average qual-
ing measures in the domain are given ity and high costs).
equal weight. (A) Such adjustment will not exceed
(b)(1) For the CY 2015 payment ad- ¥1.0 percent as specified in
justment period, if a reliable quality of § 414.1275(c)(1).
care composite or cost composite can- (B) [Reserved]
not be calculated, payments will not be (2) No payment adjustments. There will
adjusted under the value-based pay- be no value-based payment modifier
ment modifier. adjustment applied to a group of physi-
(2) Beginning with the CY 2016 pay- cians subject to the value-based pay-
ment adjustment period, a group and a ment modifier if such group either:
solo practitioner subject to the value- (i) Self-nominates for the PQRS
based payment modifier will receive a GPRO and reports at least one meas-
quality composite score that is classi- ure; or
fied as ‘‘average’’ under § 414.1275(b)(1) (ii) Elects the PQRS administrative
if such group and solo practitioner do claims option for CY 2013 as defined in
not have at least one quality measure § 414.90(h).
that meets the minimum number of (3) Upward payment adjustments. If a
cases under paragraph (a) of this sec- group of physicians subject to the
tion. value-based payment modifier elects
(3) Beginning with the CY 2016 pay- that the value-based payment modifier
ment adjustment period, a group and a be calculated using a quality-tiering
approach, upward payment adjust-
solo practitioner subject to the value-
ments are determined based on the pro-
based payment modifier will receive a
jected aggregate amount of downward
cost composite score that is classified payment adjustments determined
as ‘‘average’’ under § 414.1275(b)(2) if under paragraph (a)(1) of this section

such group and solo practitioner do not and applied as specified in
have at least one cost measure that § 414.1275(c)(1).
147
§ 414.1270 42 CFR Ch. IV (10–1–17 Edition)
(b) For the CY 2016 payment adjust- ance period as defined in § 414.1215, the
ment period: following apply:
(1) A downward payment adjustment (i) Such group does not meet the cri-
of ¥2.0 percent will be applied to a teria as a group to avoid the PQRS
group of physicians subject to the payment adjustment for CY 2017 as
value-based payment modifier if, dur- specified by CMS; and
ing the applicable performance period (ii) Fifty percent of the eligible pro-
as defined in § 414.1215, the following fessionals in such group do not meet
apply: the criteria as individuals to avoid the
(i) Such group does not self-nominate PQRS payment adjustment for CY 2017
for the PQRS GPRO and meet the cri- as specified by CMS; or
teria as a group to avoid the PQRS (iii) Such solo practitioner does not
payment adjustment for CY 2016 as meet the criteria as an individual to
specified by CMS; and avoid the PQRS payment adjustment
(ii) Fifty percent of the eligible pro- for CY 2017 as specified by CMS.
fessionals in such group do not meet
(2) For a group comprised of 10 or
the criteria as individuals to avoid the
more eligible professionals that is not
PQRS payment adjustment for CY 2016
included in paragraph (c)(1) of this sec-
as specified by CMS.
tion, the value-based payment modifier
(2) For a group of physicians com-
adjustment will be equal to the amount
prised of 100 or more eligible profes-
determined under § 414.1275(c)(3)(i).
sionals that is not included in para-
graph (b)(1) of this section, the value- (3) For a group comprised of between
based payment modifier adjustment two to nine eligible professionals and a
will be equal to the amount determined solo practitioner that are not included
under § 414.1275(c)(2). in paragraph (c)(1) of this section, the
(3) For a group of physicians com- value-based payment modifier adjust-
prised of between 10 and 99 eligible pro- ment will be equal to the amount de-
fessionals that is not included in para- termined under § 414.1275(c)(3)(ii).
graph (b)(1) of this section, the value- (4) If at least fifty percent of the eli-
based payment modifier adjustment gible professionals in the group meet
will be equal to the amount determined the criteria as individuals to avoid the
under § 414.1275(c)(2), except that such PQRS payment adjustment for CY 2017
adjustment will be 0.0 percent if the as specified by CMS, and all of those el-
group of physicians is determined to be igible professionals use a qualified clin-
low quality/high cost, low quality/aver- ical data registry and CMS is unable to
age cost, or average quality/high cost. receive quality performance data for
(4) If at least fifty percent of the eli- them, the quality composite score for
gible professionals in the group meet such group will be classified as ‘‘aver-
the criteria as individuals to avoid the age’’ under § 414.1275(b)(1).
PQRS payment adjustment for CY 2016 (d) For the CY 2018 payment adjust-
as specified by CMS, and all of those el- ment period:
igible professionals use a qualified clin- (1) A downward payment adjustment
ical data registry and CMS is unable to of ¥2.0 percent will be applied to a
receive quality performance data for group with two to nine eligible profes-
them, the quality composite score for sionals and a solo practitioner, a down-
such group will be classified as ‘‘aver- ward payment adjustment of ¥4.0 per-
age’’ under § 414.1275(b)(1). cent will be applied to a group with 10
(c) For the CY 2017 payment adjust- or more eligible professionals, and a
ment period: downward payment adjustment of ¥2.0
(1) A downward payment adjustment percent will be applied to a group or
of ¥2.0 percent will be applied to a solo practitioner consisting of non-
group with two to nine eligible profes- physician eligible professionals subject
sionals and a solo practitioner and a to the value-based payment modifier if,
downward payment adjustment of ¥4.0 during the applicable performance pe-
percent will be applied to a group with riod as defined in § 414.1215, the fol-
10 or more eligible professionals sub- lowing apply:

ject to the value-based payment modi- (i) Such group does not meet the cri-
fier if, during the applicable perform- teria as a group to avoid the PQRS
148
payment adjustment for CY 2018 as such group will be classified as ‘‘aver-

specified by CMS; and age’’ under § 414.1275(b)(1).
(ii) Fifty percent of the eligible pro-
fessionals in such group do not meet
FR 68007, Nov. 13, 2014; 80 FR 71384, Nov. 16,
the criteria as individuals to avoid the 2015]
PQRS payment adjustment for CY 2018
as specified by CMS; or § 414.1275 Value-based payment modi-
(iii) Such solo practitioner does not fier quality-tiering scoring method-
meet the criteria as an individual to ology.
avoid the PQRS payment adjustment (a) The value-based payment modi-
for CY 2018 as specified by CMS.
fier amount for a group and a solo
(2) For a group composed of 10 or
practitioner subject to the value-based
more eligible professionals that is not
payment modifier is based upon a com-
included in paragraph (d)(1) of this sec-
parison of the composite of quality of
tion, the value-based payment modifier
care measures and a composite of cost
adjustment will be equal to the amount
measures.
determined under § 414.1275(c)(4)(i).
(3) For a group composed of between (b) Quality composite and cost com-
two to nine eligible professionals and a posite are classified into high, average,
solo practitioner that are not included and low categories based on whether
in paragraph (d)(1) of this section, the the composites are statistically above,
value-based payment modifier adjust- not different from, or below the mean
ment will be equal to the amount de- composite scores.
termined under § 414.1275(c)(4)(ii). (1) Quality composites that are one
(4) For a group and a solo practi- or more standard deviations above the
tioner consisting of nonphysician eligi- mean are classified into the high cat-
ble professionals that are not included egory. Quality composites that are one
in paragraph (d)(1) of this section, the or more standard deviations below the
value-based payment modifier adjust- mean are classified into the low cat-
ment will be equal to the amount de- egory.
termined under § 414.1275(c)(4)(iii). (2) Cost composites that are one or
(5) If at least 50 percent of the eligi- more standard deviations below the
ble professionals in the group meet the mean are classified into the low cat-
criteria as individuals to avoid the egory. Cost composites that are one or
PQRS payment adjustment for CY 2018 more standard deviations above the
as specified by CMS, and all of those el- mean are classified into the high cat-
igible professionals use a qualified clin- egory.
ical data registry and CMS is unable to (c)(1) The following value-based pay-
receive quality performance data for ment modifier percentages apply to the
them, the quality composite score for CY 2015 payment adjustment period:
CY 2015 VALUE-BASED PAYMENT MODIFIER AMOUNTS FOR THE QUALITY-TIERING APPROACH
Average High cost
Quality/cost Low cost cost (percent)
High quality .................................................................................................................... + 2.0x* + 1.0x* + 0.0

Average quality .............................................................................................................. + 1.0x* + 0.0% –0.5
Low quality .................................................................................................................... + 0.0% –0.5% –1.0
* Groups of physicians eligible for an additional + 1.0x if (1) reporting Physician Quality Reporting System quality measures
through the GPRO web-interface or CMS-qualified registry, and (2) average beneficiary risk score is in the top 25 percent of all
beneficiary risk scores.
(2) The following value-based payment modifier percentages apply to the CY

2016 payment adjustment period:
CY 2016 VALUE-BASED PAYMENT MODIFIER AMOUNTS FOR THE QUALITY-TIERING APPROACH

Average High cost
High quality .................................................................................................................... + 2.0x* + 1.0x* + 0.0

Average quality .............................................................................................................. + 1.0x* + 0.0% –1.0
149
§ 414.1275 42 CFR Ch. IV (10–1–17 Edition)
CY 2016 VALUE-BASED PAYMENT MODIFIER AMOUNTS FOR THE QUALITY-TIERING APPROACH—

Continued
Average High cost
Low quality .................................................................................................................... + 0.0% –1.0% –2.0

* Groups of physicians eligible for an additional + 1.0x if reporting Physician Quality Reporting System quality measures and
average beneficiary risk score is in the top 25 percent of all beneficiary risk scores.
(3) The following value-based payment modifier percentages apply to the CY

2017 payment adjustment period:
(i) For groups with 10 or more eligible professionals:
CY 2017 VALUE-BASED PAYMENT MODIFIER AMOUNTS FOR THE QUALITY-TIERING APPROACH FOR
GROUPS WITH 10 OR MORE ELIGIBLE PROFESSIONALS
Cost/quality Low quality Average quality High quality
Low Cost ......................................................................................... + 0.0% * + 2.0x * + 4.0x

Average Cost ................................................................................... ¥2.0% + 0.0% * + 2.0x
High Cost ......................................................................................... ¥4.0% ¥2.0% + 0.0%
* Groups eligible for an additional + 1.0x if reporting Physician Quality Reporting System quality measures and average bene-
ficiary risk score is in the top 25 percent of all beneficiary risk scores, where ‘x’ represents the upward payment adjustment
factor.
(ii) For groups with two to nine eligible professionals and solo practitioners:
CY 2017 VALUE-BASED PAYMENT MODIFIER AMOUNTS FOR THE QUALITY-TIERING APPROACH FOR
GROUPS WITH TWO TO NINE ELIGIBLE PROFESSIONALS AND SOLO PRACTITIONERS
Cost/quality Low quality Average quality High quality
Low Cost ......................................................................................... + 0.0% * + 1.0x * + 2.0x

Average Cost ................................................................................... + 0.0% + 0.0% * + 1.0x
High Cost ......................................................................................... + 0.0% + 0.0% + 0.0%
* Groups and solo practitioners eligible for an additional + 1.0x if reporting Physician Quality Reporting System quality meas-
ures and average beneficiary risk score is in the top 25 percent of all beneficiary risk scores, where ‘x’ represents the upward
payment adjustment factor.
(4) The following value-based pay- CY 2018 VALUE-BASED PAYMENT MODIFIER

ment modifier percentages apply to the AMOUNTS FOR THE QUALITY-TIERING AP-
CY 2018 payment adjustment period: PROACH FOR PHYSICIANS, PHYSICIAN ASSIST-
(i) For physicians, physician assist- ANTS, NURSE PRACTITIONERS, CLINICAL
ants, nurse practitioners, clinical nurse NURSE SPECIALISTS, AND CERTIFIED REG-
specialists, and certified registered ISTERED NURSE ANESTHETISTS IN GROUPS OF
nurse anesthetists in groups with 10 or PHYSICIANS WITH 10 OR MORE ELIGIBLE PRO-
more eligible professionals: FESSIONALS—Continued
Average
CY 2018 VALUE-BASED PAYMENT MODIFIER Cost/quality Low quality High quality
quality
AMOUNTS FOR THE QUALITY-TIERING AP-
High Cost .............. ¥4.0% ...... ¥2.0% ..... +0.0%
PROACH FOR PHYSICIANS, PHYSICIAN ASSIST-
ANTS, NURSE PRACTITIONERS, CLINICAL *Groups eligible for an additional +1.0x if reporting Physi-
cian Quality Reporting System quality measures and average
NURSE SPECIALISTS, AND CERTIFIED REG- beneficiary risk score is in the top 25 percent of all beneficiary
ISTERED NURSE ANESTHETISTS IN GROUPS OF risk scores, where ‘x’ represents the upward payment adjust-
ment factor.
PHYSICIANS WITH 10 OR MORE ELIGIBLE PRO-
FESSIONALS (ii) For physicians, physician assist-
ants, nurse practitioners, clinical nurse
Average
Cost/quality Low quality High quality specialists, and certified registered
quality
nurse anesthetists in groups with two
Low Cost ............... +0.0% ....... +2.0x* ....... +4.0x*
to nine eligible professionals and phy-
Average Cost ........ ¥2.0% ..... +0.0% ....... +2.0x*

sician solo practitioners:
150
CY 2018 VALUE-BASED PAYMENT MODIFIER receive a greater upward payment ad-

AMOUNTS FOR THE QUALITY-TIERING AP- justment as follows:
PROACH FOR PHYSICIANS, PHYSICIAN ASSIST- (i) Classified as high quality/low cost
ANTS, NURSE PRACTITIONERS, CLINICAL receive an upward adjustment of + 3x
NURSE SPECIALISTS, AND CERTIFIED REG- (rather than + 2x); and
ISTERED NURSE ANESTHETISTS IN GROUPS OF (ii) Classified as either high quality/
PHYSICIANS WITH TWO TO NINE ELIGIBLE average cost or average quality/low
PROFESSIONALS AND PHYSICIAN SOLO PRAC- cost receive an upward adjustment of +
TITIONERS 2x (rather than + 1x).
(2) Groups and solo practitioners sub-
Average
Cost/quality Low quality quality High quality ject to the value-based payment modi-
fier that have an attributed beneficiary
Low Cost ............... +0.0% ....... +1.0x* ....... +2.0x* population with an average risk score
Average Cost ........ ¥1.0% ..... +0.0% ....... +1.0x*
High Cost .............. ¥2.0% ...... ¥1.0% ..... +0.0% in the top 25 percent of the risk scores
*Groups and solo practitioners eligible for an additional
of beneficiaries nationwide and for the
+1.0x if reporting Physician Quality Reporting System quality CY 2017 payment adjustment period are
measures and average beneficiary risk score is in the top 25 subject to the quality-tiering approach,
percent of all beneficiary risk scores, where ‘x’ represents the
upward payment adjustment factor. receive a greater upward payment ad-
justment as follows:
(iii) For physician assistants, nurse
(i) Classified as high quality/low cost
practitioners, clinical nurse special-
receive an upward adjustment of + 5x
ists, and certified registered nurse an-
(rather than + 4x) if the group has 10 or
esthetists in groups that consist of
more eligible professionals or + 3x
nonphysician eligible professionals,
(rather than + 2x) if a solo practitioner
and solo practitioners who are physi-
or the group has two to nine eligible
cian assistants, nurse practitioners,
professionals; and
clinical nurse specialists, and certified
(ii) Classified as either high quality/
registered nurse anesthetists:
average cost or average quality/low
CY 2018 VALUE-BASED PAYMENT MODIFIER cost receive an upward adjustment of +
AMOUNTS FOR THE QUALITY-TIERING AP- 3x (rather than + 2x) if the group has 10
PROACH FOR PHYSICIAN ASSISTANTS, NURSE or more eligible professionals or + 2x
PRACTITIONERS, CLINICAL NURSE SPECIAL- (rather than + 1x) if a solo practitioner
ISTS, AND CERTIFIED REGISTERED NURSE AN- or the group has two to nine eligible
ESTHETISTS IN GROUPS CONSISTING OF NON- professionals.
PHYSICIAN ELIGIBLE PROFESSIONALS, AND (3) Groups and solo practitioners sub-
SOLO PRACTITIONERS WHO ARE PHYSICIAN ject to the value-based payment modi-
ASSISTANTS, NURSE PRACTITIONERS, CLINICAL fier that have an attributed beneficiary
NURSE SPECIALISTS, AND CERTIFIED REG- population with an average risk score
ISTERED NURSE ANESTHETISTS in the top 25 percent of the risk scores
of beneficiaries nationwide and for the
Cost/quality Low quality Average High quality CY 2018 payment adjustment period are
quality
subject to the quality-tiering approach,
Low Cost ............... +0.0% ....... +1.0x* ....... +2.0x* receive a greater upward payment ad-
Average Cost ........ +0.0% ....... +0.0% ....... +1.0x* justment as follows:
High Cost .............. +0.0% ....... +0.0% ....... +0.0%
(i) Classified as high quality/low cost
*Groups and solo practitioners eligible for an additional receive an upward adjustment of +5x
+1.0x if reporting Physician Quality Reporting System quality
measures and average beneficiary risk score is in the top 25 (rather than +4x) if the group has 10 or
percent of all beneficiary risk scores, where ‘x’ represents the more eligible professionals, +3x (rather
upward payment adjustment factor.
than +2x) if a solo practitioner or the
(d)(1) Groups of physicians subject to group has two to nine eligible profes-
the value-based payment modifier that sionals, or +3x (rather than +2x) if a
have an attributed beneficiary popu- solo practitioner or group consisting of
lation with an average risk score in the nonphysician eligible professionals;
top 25 percent of the risk scores of and
beneficiaries nationwide and for the CY (ii) Classified as either high quality/
2015 payment adjustment period elect average cost or average quality/low
the quality-tiering approach or for the cost receive an upward adjustment of

CY 2016 payment adjustment period are +3x (rather than +2x) if the group has
subject to the quality-tiering approach, 10 or more eligible professionals, +2x
151
§ 414.1280 42 CFR Ch. IV (10–1–17 Edition)
(rather than +1x) if a solo practitioner (2) Section 1848(a)—Payment for Phy-
or the group has two to nine eligible sicians’ Services Based on Fee Sched-
professionals, or +2x (rather than +1x) ule.
if a solo practitioner or group con- (3) Section 1848(k)—Quality Report-
sisting of nonphysician eligible profes- ing System.
sionals. (4) Section 1848(q)—Merit-based In-
[77 FR 69368, Nov. 16, 2012, as amended at 78 centive Payment System.
FR 74822, Dec. 10, 2013; 79 FR 68008, Nov. 13, (b) Scope. This subpart part sets forth
2014; 80 FR 71385, Nov. 16, 2015] the following:
(1) The circumstances under which
§ 414.1280 Limitation on review.
eligible clinicians are not considered
(a) There shall be no administrative MIPS eligible clinicians with respect
or judicial review under section 1869 of to a year.
the Act, section 1878 of the Act, or oth- (2) How individual MIPS eligible cli-
erwise of all of the following: nicians can have their performance as-
(1) The establishment of the value- sessed as a group.
based payment modifier.
(3) The data submission methods and
(2) The evaluation of the quality of
care composite, including the estab- data submission criteria for each of the
lishment of appropriate measure of the MIPS performance categories.
quality of care. (4) Methods for calculating a per-
(3) The evaluation of costs composite, formance category score for each of the
including establishment of appropriate MIPS performance categories.
measures of costs. (5) Methods for calculating a MIPS
(4) The dates of implementation of final score and applying the MIPS pay-
the value-based payment modifier. ment adjustment to MIPS eligible cli-
(5) The specification of the initial nicians.
performance period and any other per- (6) Requirements for an APM to be
formance period. designated an ‘‘Advanced APM.’’
(6) The application of the value-based (7) Methods for eligible clinicians and
payment modifier. entities participating in Advanced
(7) The determination of costs. APMs to meet the participation
(b) [Reserved] thresholds to become Qualifying APM
Participants (QPs) and Partial QPs.
§ 414.1285 Informal inquiry process.
(8) Methods and processes for count-
After the dissemination of the annual ing participation in Other Payer Ad-
Physician Feedback reports, a group vanced APMs in making QP and Par-
and a solo practitioner may contact tial QP determinations.
CMS to inquire about its report and (9) Methods for calculating and pay-
the calculation of the value-based paying the APM Incentive Payment to
ment modifier. QPs.
[77 FR 69368, Nov. 16, 2012, as amended at 79 (10) Criteria for Physician-Focused
FR 68008, Nov. 13, 2014] Payment Models (PFPMs).
Subpart O—Merit-Based Incentive § 414.1305 Definitions.

Payment System and Alter- As used in this section, unless other-
native Payment Model Incen- wise indicated—
tive Additional performance threshold
means the numerical threshold for a
SOURCE: 81 FR 77537, Nov. 4, 2016, unless MIPS payment year against which the
otherwise noted. final scores of MIPS eligible clinicians
are compared to determine the addi-
§ 414.1300 Basis and scope. tional MIPS payment adjustment fac-
(a) Basis. This subpart implements tors for exceptional performance.
the following provisions of the Act: Advanced Alternative Payment Model
(1) Section 1833(z)—Incentive Pay- (Advanced APM) means an APM that

ments for Participation in Eligible Al- CMS determines meets the criteria set
ternative Payment Models. forth in § 414.1415.
152
Advanced APM Entity means an APM attributed beneficiaries at the time of

Entity that participates in an Ad- a QP determination.
vanced APM or Other Payer Advanced Attribution-eligible beneficiary means a
APM. beneficiary who during the QP Per-
Affiliated practitioner means an eligi- formance Period:
ble clinician identified by a unique (1) Is not enrolled in Medicare Advan-
APM participant identifier on a CMS- tage or a Medicare cost plan;
maintained list who has a contractual (2) Does not have Medicare as a sec-
relationship with the Advanced APM ondary payer;
Entity for the purposes of supporting (3) Is enrolled in both Medicare Parts
the Advanced APM Entity’s quality or A and B;
cost goals under the Advanced APM. (4) Is at least 18 years of age;
Affiliated practitioner list means the (5) Is a United States resident; and
list of Affiliated Practitioners of an (6) Has a minimum of one claim for
APM Entity that is compiled from a evaluation and management services
CMS-maintained list. furnished by an eligible clinician who
Alternative Payment Model (APM) is in the APM Entity for any period
means any of the following: during the QP Performance Period or,
(1) A model under section 1115A of for an Advanced APM that does not
the Act (other than a health care inno- base attribution on evaluation and
vation award). management services and for which at-
(2) The shared savings program under tributed beneficiaries are not a subset
section 1899 of the Act. of the attribution-eligible beneficiary
(3) A demonstration under section population based on the requirement to
1866C of the Act. have at least one claim for evaluation
(4) A demonstration required by Fed- and management services furnished by
eral law. an eligible clinician who is in the APM
APM Entity means an entity that par- Entity for any period during the QP
ticipates in an APM or payment ar- Performance Period, the attribution
rangement with a non-Medicare payer basis determined by CMS based upon
through a direct agreement or through the methodology the Advanced APM
Federal or State law or regulation. uses for attribution, which may include
APM Entity group means the group of a combination of evaluation and man-
eligible clinicians participating in an agement and/or other services.
APM Entity, as identified by a com- Certified Electronic Health Record
bination of the APM identifier, APM Technology (CEHRT) means the fol-
Entity identifier, Taxpayer Identifica- lowing:
tion Number (TIN), and National Pro- (1) For any calendar year before 2018,
vider Identifier (NPI) for each partici- EHR technology (which could include
pating eligible clinician. multiple technologies) certified under
APM Incentive Payment means the the ONC Health IT Certification Pro-
lump sum incentive payment for a year gram that meets one of the following:
paid to an eligible clinician who is a (i) The 2014 Edition Base EHR defini-
QP for the year from 2019 through 2024. tion (as defined at 45 CFR 170.102) and
Attestation means a secure mecha- that has been certified to the certifi-
nism, specified by CMS, with respect to cation criteria that are necessary to
a particular performance period, report on applicable objectives and
whereby a MIPS eligible clinician or measures specified for the MIPS ad-
group may submit the required data for vancing care information performance
the advancing care information or the category, including the applicable
improvement activities performance measure calculation certification cri-
categories of MIPS in a manner speci- terion at 45 CFR 170.314(g)(1) or (2) for
fied by CMS. all certification criteria that support
Attributed beneficiary means a bene- an objective with a percentage-based
ficiary attributed to the Advanced measure.
APM Entity under the terms of the Ad- (ii) Certification to—
vanced APM or Other Payer Advanced (A) The following certification cri-
APM and listed as an attributed bene- teria:
ficiary on the latest available list of (1) CPOE at—
153
§ 414.1305 42 CFR Ch. IV (10–1–17 Edition)
(i) 45 CFR 170.314(a)(1), (18), (19) or (B) Clinical quality measures at—
(20); or (1) 45 CFR 170.314(c)(1) or 170.315(c)(1);
(ii) 45 CFR 170.315(a)(1), (2) or (3). (2) 45 CFR 170.314(c)(2) or 170.315(c)(2);
(2)(i) Record demographics at 45 CFR (3) Clinical quality measure certifi-
170.314(a)(3); or cation criteria that support the cal-
(ii) 45 CFR 170.315(a)(5). culation and reporting of clinical qual-
(3)(i) Problem list at 45 CFR ity measures at 45 CFR 170.314(c)(2) and
170.314(a)(5); or (3) and optionally (4); or 45 CFR
(ii) 45 CFR 170.315(a)(6). 170.315(c)(3)(i) and (ii) and optionally
(4)(i) Medication list at 45 CFR (c)(4); and can be electronically accept-
170.314(a)(6); or ed by CMS if the data is submitted
(ii) 45 CFR 170.315(a)(7). electronically.
(5)(i) Medication allergy list 45 CFR (C) Privacy and security at—
170.314(a)(7); or (1) 45 CFR 170.314(d)(1) or 170.315(d)(1);
(ii) 45 CFR 170.315(a)(8). (2) 45 CFR 170.314(d)(2) or 170.315(d)(2);
(6)(i) Clinical decision support at 45 (3) 45 CFR 170.314(d)(3) or 170.315(d)(3);
CFR 170.314(a)(8); or (4) 45 CFR 170.314(d)(4) or 170.315(d)(4);
(ii) 45 CFR 170.315(a)(9). (5) 45 CFR 170.314(d)(5) or 170.315(d)(5);
(7) Health information exchange at (6) 45 CFR 170.314(d)(6) or 170.315(d)(6);
transitions of care at one of the fol- (7) 45 CFR 170.314(d)(7) or 170.315(d)(7);
lowing: (8) 45 CFR 170.314(d)(8) or 170.315(d)(8);
(i) 45 CFR 170.314(b)(1) and (2). and
(ii) 45 CFR 170.314(b)(1), (b)(2), and (D) The certification criteria that are
(h)(1). necessary to report on applicable ob-
(iii) 45 CFR 170.314(b)(1), (b)(2), and jectives and measures specified for the
(b)(8). MIPS advancing care information per-
(iv) 45 CFR 170.314(b)(1), (b)(2), (b)(8), formance category, including the appli-
and (h)(1). cable measure calculation certification
(v) 45 CFR 170.314(b)(8) and (h)(1). criterion at 45 CFR 170.314(g)(1) or (2)
(vi) 45 CFR 170.314(b)(1), (b)(2), and or 45 CFR 170.315(g)(1) or (2) for all cer-
170.315(h)(2). tification criteria that support an ob-
(vii) 45 CFR 170.314(b)(1), (b)(2), (h)(1), jective with a percentage-based meas-
and 170.315(h)(2). ure.
(viii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (iii) The definition for 2018 and subse-
and 170.315(h)(2). quent years specified in paragraph (2)
(ix) 45 CFR 170.314(b)(1), (b)(2), (b)(8), of this definition.
(h)(1), and 170.315(h)(2). (2) For 2018 and subsequent years,
(x) 45 CFR 170.314(b)(8), (h)(1), and EHR technology (which could include
170.315(h)(2). multiple technologies) certified under
(xi) 45 CFR 170.314(b)(1), (b)(2), and the ONC Health IT Certification Pro-
170.315(b)(1). gram that meets the 2015 Edition Base
(xii) 45 CFR 170.314(b)(1), (b)(2), (h)(1), EHR definition (as defined at 45 CFR
and 170.315(b)(1). 170.102) and has been certified to the
(xiii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), 2015 Edition health IT certification cri-
and 170.315(b)(1). teria—
(xiv) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (i) At 45 CFR 170.315(a)(12) (family
(h)(1), and 170.315(b)(1). health history) and 45 CFR 170.315(e)(3)
(xv) 45 CFR 170.314(b)(8), (h)(1), and (patient health information capture);
170.315(b)(1). and
(xvi) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (ii) Necessary to report on applicable
(h)(1), 170.315(b)(1), and 170.315(h)(1). objectives and measures specified for
(xvii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), the MIPS advancing care information
(h)(1), 170.315(b)(1), and 170.315(h)(2). performance category including the
(xviii) 45 CFR 170.314(h)(1) and following:
170.315(b)(1). (A) The applicable measure calcula-
(xix) 45 CFR 170.315(b)(1) and (h)(1). tion certification criterion at 45 CFR
(xx) 45 CFR 170.315(b)(1) and (h)(2). 170.315(g)(1) or (2) for all certification
(xxi) 45 CFR 170.315(b)(1), (h)(1), and criteria that support an objective with
(h)(2); and a percentage-based measure.
154
(B) Clinical quality measure certifi- egory score and each performance
cation criteria that support the cal- category’s assigned weight, multiplied
culation and reporting of clinical qual- by 100.
ity measures at 45 CFR 170.315(c)(2) and Group means a single TIN with two
(c)(3)(i) and (ii) and optionally (c)(4), or more eligible clinicians (including
and can be electronically accepted by at least one MIPS eligible clinician), as
CMS. identified by their individual NPI, who
CMS-approved survey vendor means a have reassigned their billing rights to
survey vendor that is approved by CMS the TIN.
for a particular performance period to Health Professional Shortage Areas
administer the CAHPS for MIPS sur- (HPSA) means areas as designated
vey and to transmit survey measures under section 332(a)(1)(A) of the Public
data to CMS. Health Service Act.
CMS Web Interface means a web prod- High priority measure means an out-
uct developed by CMS that is used by come, appropriate use, patient safety,
groups that have elected to utilize the efficiency, patient experience, or care
CMS Web Interface to submit data on coordination quality measure.
the MIPS measures and activities. Hospital-based MIPS eligible clinician
Covered professional services has the is a MIPS eligible clinician who fur-
meaning given by section 1848(k)(3)(A) nishes 75 percent or more of his or her
of the Act. covered professional services in sites of
Eligible clinician means ‘‘eligible pro- service identified by the Place of Serv-
fessional’’ as defined in section ice codes used in the HIPAA standard
1848(k)(3) of the Act, as identified by a transaction as an inpatient hospital,
unique TIN and NPI combination and, on-campus outpatient hospital or
includes any of the following: emergency room setting based on
(1) A physician. claims for a period prior to the per-
(2) A practitioner described in section formance period as specified by CMS.
1842(b)(18)(C) of the Act. Improvement activities means an activ-
(3) A physical or occupational thera- ity that relevant MIPS eligible clini-
pist or a qualified speech-language pa- cian, organizations and other relevant
thologist. stakeholders identify as improving
(4) A qualified audiologist (as defined clinical practice or care delivery and
in section 1861(ll)(3)(B) of the Act). that the Secretary determines, when
Episode payment model means an APM effectively executed, is likely to result
or other payer arrangement designed in improved outcomes.
to improve the efficiency and quality Incentive payment base period means
of care for an episode of care by bun- the calendar year prior to the year in
dling payment for services furnished to which CMS disburses the APM Incen-
an individual over a defined period of tive Payment.
time for a specific clinical condition or Low-volume threshold means an indi-
conditions. vidual MIPS eligible clinician or group
Estimated aggregate payment amounts who, during the low-volume threshold
means the total payments to a QP for determination period, have Medicare
Medicare Part B covered professional Part B allowed charges less than or
services for the incentive payment base equal to $30,000 or provides care for 100
period, estimated by CMS as described or fewer Part B-enrolled Medicare
in § 414.1450(b). beneficiaries.
Final score means a composite assess- Meaningful EHR user for MIPS means
ment (using a scoring scale of 0 to 100) a MIPS eligible clinician who possesses
for each MIPS eligible clinician for a CEHRT, uses the functionality of
performance period determined using CEHRT, and reports on applicable ob-
the methodology for assessing the total jectives and measures specified for the
performance of a MIPS eligible clini- advancing care information perform-
cian according to performance stand- ance category for a performance period
ards for applicable measures and ac- in the form and manner specified by
tivities for each performance category. CMS, supports information exchange

The final score is the sum of each of and the prevention of health informa-
the products of each performance cat- tion blocking, and engages in activities
155
§ 414.1305 42 CFR Ch. IV (10–1–17 Edition)
related to supporting providers with that include primary care physicians

the performance of CEHRT. and practitioners and offer primary
Measure benchmark means the level of care services. For the purposes of this
performance that the MIPS eligible cli- provision, primary care focus means
nician is assessed on for a specific per- the inclusion of specific design ele-
formance period at the measures and ments related to eligible clinicians
activities level. practicing under one or more of the fol-
Medicaid APM means a payment ar- lowing Physician Specialty Codes: 01
rangement authorized by a State Med- General Practice; 08 Family Medicine;
icaid program that meets the criteria 11 Internal Medicine; 16 Obstetrics and
for an Other Payer Advanced APM Gynecology; 37 Pediatric Medicine; 38
under § 414.1420(a). Geriatric Medicine; 50 Nurse Practi-
Medical Home Model means an APM tioner; 89 Clinical Nurse Specialist; and
under section 1115A of the Act that is 97 Physician Assistant;
determined by CMS to have the fol- (2) Empanelment of each patient to a
lowing characteristics: primary clinician; and
(1) The APM has a primary care focus (3) At least four of the following:
with participants that primarily in- (i) Planned coordination of chronic
clude primary care practices or multi- and preventive care.
specialty practices that include pri- (ii) Patient access and continuity.
mary care physicians and practitioners (iii) Risk-stratified care manage-
and offer primary care services. For ment.
the purposes of this provision, primary (iv) Coordination of care across the
care focus means the inclusion of spe- medical neighborhood.
cific design elements related to eligible (v) Patient and caregiver engage-
clinicians practicing under one or more ment.
of the following Physician Specialty
(vi) Shared decision-making.
Codes: 01 General Practice; 08 Family
(vii) Payment arrangements in addi-
Medicine; 11 Internal Medicine; 16 Ob-
tion to, or substituting for, fee-for-
stetrics and Gynecology; 37 Pediatric
service payments (for example, shared
Medicine; 38 Geriatric Medicine; 50
savings or population-based payments).
Nurse Practitioner; 89 Clinical Nurse
Specialist; and 97 Physician Assistant; Merit-based Incentive Payment System
(2) Empanelment of each patient to a (MIPS) means the program required by
primary clinician; and section 1848(q) of the Act.
(3) At least four of the following: MIPS APM means an APM that meets
(i) Planned coordination of chronic the criteria specified under § 414.1370(b).
and preventive care. MIPS eligible clinician as identified by
(ii) Patient access and continuity of a unique billing TIN and NPI combina-
care. tion used to assess performance, means
(iii) Risk-stratified care manage- any of the following (excluding those
ment. identified at § 414.1310(b)):
(iv) Coordination of care across the (1) A physician as defined in section
medical neighborhood. 1861(r) of the Act.
(v) Patient and caregiver engage- (2) A physician assistant, a nurse
ment. practitioner, and clinical nurse spe-
(vi) Shared decision-making. cialist as such terms are defined in sec-
(vii) Payment arrangements in addition 1861(aa)(5) of the Act.
tion to, or substituting for, fee-for- (3) A certified registered nurse anes-
service payments (for example, shared thetist as defined in section 1861(bb)(2)
savings or population-based payments). of the Act.
Medicaid Medical Home Model means a (4) A group that includes such clini-
payment arrangement under title XIX cians.
that CMS determines to have the fol- MIPS payment year means a calendar
lowing characteristics: year in which the MIPS payment ad-
(1) The payment arrangement has a justment factor, and if applicable the
primary care focus with participants additional MIPS payment adjustment

that primarily include primary care factor, are applied to Medicare Part B
practices or multispecialty practices payments.
156
New Medicare-Enrolled MIPS eligible ance category for a performance period

clinician means an eligible clinician based on the performance standards for
who first becomes a Medicare-enrolled those measures and activities.
eligible clinician within the Provider Performance standards means the level
Enrollment, Chain and Ownership Sys- of performance and methodology that
tem (PECOS) during the performance the MIPS eligible clinician is assessed
period for a year and had not pre- on for a MIPS performance period at
viously submitted claims under Medi- the measures and activities level for
care as an individual, an entity, or a all MIPS performance categories.
part of a physician group or under a Performance threshold means the nu-
different billing number or tax identi- merical threshold for a MIPS payment
fier. year against which the final scores of
Non-patient facing MIPS eligible clini- MIPS eligible clinicians are compared
cian means an individual MIPS eligible to determine the MIPS payment ad-
clinician that bills 100 or fewer patient justment factors.
facing encounters (including Medicare QP patient count threshold means the
telehealth services defined in section minimum threshold score specified in
1834(m) of the Act) during the non-pa- § 414.1430(a)(3) and (b)(3) that an eligible
tient facing determination period, and clinician must attain through a patient
a group provided that more than 75 per- count methodology described in
cent of the NPIs billing under the §§ 414.1435(b) and 414.1440(c) to become a
group’s TIN meet the definition of a QP for a year.
non-patient facing individual MIPS eli- QP payment amount threshold means
gible clinician during the non-patient the minimum threshold score specified
facing determination period. in § 414.1430(a)(1) and (b)(1) that an eli-
Other Payer Advanced APM means a gible clinician must attain through the
payment arrangement that meets the payment amount methodology de-
criteria set forth in § 414.1420. scribed in §§ 414.1435(a) and 414.1440(b)
Other payer arrangement means a pay- to become a QP for a year.
ment arrangement with any payer that QP Performance Period means the
is not an APM. time period that CMS will use to assess
Partial Qualifying APM Participant the level of participation by an eligible
(Partial QP) means an eligible clinician clinician in Advanced APMs and Other
determined by CMS to have met the Payer Advanced APMs for purposes of
relevant Partial QP threshold under making a QP determination for the eli-
§ 414.1430(a)(2) and (4) and (b)(2) and (4) gible clinician for the year as specified
for a year. in § 414.1425. The QP Performance Pe-
Partial QP patient count threshold riod begins on January 1 and ends on
means the minimum threshold score August 31 of the calendar year that is
specified in § 414.1430(a)(4) and (b)(4) 2 years prior to the payment year.
that an eligible clinician must attain Qualified Clinical Data Registry
through a patient count methodology (QCDR) means a CMS-approved entity
described in §§ 414.1435(b) and 414.1440(c) that has self-nominated and success-
to become a Partial QP for a year. fully completed a qualification process
Partial QP payment amount threshold to determine whether the entity may
means the minimum threshold score collect medical or clinical data for the
specified in § 414.1430(a)(2) and (b)(2) purpose of patient and disease tracking
that an eligible clinician must attain to foster improvement in the quality of
through a payment amount method- care provided to patients.
ology described §§ 414.1435(a) and Qualified registry means a medical
414.1440(b) to become a Partial QP for a registry, a maintenance of certifi-
year. cation program operated by a specialty
Participation List means the list of body of the American Board of Medical
participants in an APM Entity that is Specialties or other data intermediary
compiled from a CMS-maintained list. that, with respect to a particular per-
Performance category score means the formance period, has self-nominated
assessment of each MIPS eligible clini- and successfully completed a vetting

cian’s performance on the applicable process (as specified by CMS) to dem-
measures and activities for a perform- onstrate its compliance with the MIPS
157
§ 414.1310 42 CFR Ch. IV (10–1–17 Edition)
qualification requirements specified by the option to voluntarily report meas-

CMS for that performance period. The ures and activities for MIPS.
registry must have the requisite legal (c) Treatment of new Medicare-enrolled
authority to submit MIPS data (as eligible clinicians. New Medicare-en-
specified by CMS) on behalf of a MIPS rolled eligible clinician, as defined at
eligible clinician or group to CMS. § 414.1305, will not be treated as a MIPS
Qualifying APM Participant (QP) eligible clinician until the subsequent
means an eligible clinician determined year and the performance period for
by CMS to have met or exceeded the such subsequent year.
relevant QP payment amount or QP pa- (d) Clarification. In no case will a
tient count threshold under MIPS payment adjustment apply to
§ 414.1430(a)(1), (a)(3), (b)(1), or (b)(3) for the items and services furnished during
a year based on participation in an Ad- a year by individual eligible clinicians,
vanced APM Entity. as described in paragraphs (b) and (c) of
Rural areas means clinicians in zip this section, who are not MIPS eligible
codes designated as rural, using the clinicians, including eligible clinicians
most recent HRSA Area Health Re- who voluntarily report on applicable
source File data set available. measures and activities specified under
Small practices means practices con- MIPS.
sisting of 15 or fewer clinicians and (e) Requirements for groups. (1) The
solo practitioners. following way is for individual eligible
Threshold Score means the percentage clinicians and individual MIPS eligible
value that CMS determines for an eli- clinicians to have their performance
gible clinician based on the calcula- assessed as a group:
tions described in § 414.1435 or § 414.1440. (i) As part of a single TIN associated
Topped out non-process measure means with two or more eligible clinicians
a measure where the Truncated Coeffi- (including at least one MIPS eligible
cient of Variation is less than 0.10 and clinician), as identified by a NPI, that
the 75th and 90th percentiles are within have their Medicare billing rights reas-
2 standard errors. signed to the TIN.
Topped out process measure means a (ii) [Reserved]
measure with a median performance (2) A group must meet the definition
rate of 95 percent or higher. of a group at all times during the per-
formance period for the MIPS payment
§ 414.1310 Applicability. year in order to have its performance
(a) Program Implementation. Except as assessed as a group.
specified in paragraph (b) of this sec- (3) Eligible clinicians and MIPS eligi-
tion, MIPS applies to payments for ble clinicians within a group must ag-
items and services furnished by MIPS gregate their performance data across
eligible clinicians on or after January the TIN in order for their performance
1, 2019. to be assessed as a group.
(b) Exclusions. (1) For a year, a MIPS (4) A group that elects to have its
eligible clinician does not include an performance assessed as a group will be
eligible clinician who: assessed as a group across all four
(i) Is a Qualifying APM Participant MIPS performance categories.
(as defined at § 414.1305); (5) A group must adhere to an elec-
(ii) Is a Partial Qualifying APM Par- tion process established and required
ticipant (as defined at § 414.1305) and by CMS.
does not report on applicable measures
and activities that are required to be § 414.1315 [Reserved]
reported under MIPS for any given per-
formance period in a year; or § 414.1320 MIPS performance period.
(iii) For the performance period with (a) For purposes of the 2019 MIPS
respect to a year, does not exceed the payment year, the performance period
low-volume threshold as defined at for all performance categories and sub-
§ 414.1305. mission mechanisms except for the
(2) Eligible clinicians, as defined at cost performance category and data for
§ 414.1305, who are not MIPS eligible cli- the quality performance category re-
nicians, as defined at § 414.1305, have ported through the CMS Web Interface,
158
for the CAHPS for MIPS survey, and (5) Attestation for the improvement
for the all-cause hospital readmission activities and advancing care informa-
measure, is a minimum of a continuous tion performance categories.
90-day period within CY 2017, up to and (c) Data submission mechanisms for
including the full CY 2017 (January 1, groups that are not reporting through an
2017 through December 31, 2017). For APM. Groups may submit their MIPS
purposes of the 2019 MIPS payment data using:
year, for data reported through the (1) A qualified registry for the qual-
CMS Web Interface or the CAHPS for ity, improvement activities, or advanc-
MIPS survey and administrative ing care information performance cat-
claims-based cost and quality meas- egories;
ures, the performance period under (2) The EHR submission mechanism
MIPS is CY 2017 (January 1, 2017 (which includes the submission of data
through December 31, 2017). by health IT vendors on behalf of
(b) For purposes of the 2020 MIPS groups) for the quality, improvement
payment year, the performance period activities, or advancing care informa-
for: tion performance categories;
(1) The quality and cost performance (3) A QCDR for the quality, improve-
categories is CY 2018 (January 1, 2018 ment activities, or advancing care in-
through December 31, 2018). formation performance categories;
(2) The advancing care information (4) A CMS Web Interface (for groups
and improvement activities perform- comprised of at least 25 MIPS eligible
ance categories is a minimum of a con- clinicians) for the quality, improve-
tinuous 90-day period within CY 2018, ment activities, and advancing care in-
up to and including the full CY 2018 formation performance categories;
(January 1, 2018 through December 31,
(5) Attestation for the improvement
2018).
activities and advancing care informa-
§ 414.1325 Data submission require- tion performance categories; or
ments. (6) A CMS-approved survey vendor for
groups that elect to include the CAHPS
(a) Data submission performance cat-
for MIPS survey as a quality measure.
egories. MIPS eligible clinicians and
Groups that elect to include the
groups must submit measures, objec-
tives, and activities for the quality, CAHPS for MIPS survey as a quality
improvement activities, and advancing measure must select one of the above
care information performance cat- data submission mechanisms to submit
egories. their other quality information.
(b) Data submission mechanisms for in- (d) Requirement to use only one submis-
dividual eligible clinicians. An individual sion mechanism per performance category.
MIPS eligible clinician may elect to Except as described in paragraph (c)(6)
submit their MIPS data using: of this section, MIPS eligible clinicians
(1) A qualified registry for the qual- and groups may elect to submit infor-
ity, improvement activities, or advanc- mation via multiple mechanisms; how-
ing care information performance cat- ever, they must use the same identifier
egories; for all performance categories and they
(2) The EHR submission mechanism may only use one submission mecha-
(which includes submission of data by nism per performance category.
health IT vendors or other authorized (e) No data submission requirements for
providers on behalf of MIPS eligible the cost performance category and certain
clinicians) for the quality, improve- quality measures. There are no data sub-
ment activities, or advancing care in- mission requirements for the cost per-
formation performance categories; formance category and for certain
(3) A QCDR for the quality, improve- quality measures used to assess per-
ment activities, or advancing care in- formance in the quality performance
formation performance categories; category. CMS will calculate perform-

(4) Medicare Part B claims for the ance on these measures using adminis-
quality performance category; or trative claims data.
159
§ 414.1330 42 CFR Ch. IV (10–1–17 Edition)
(f) Data submission deadlines for all other high priority measure (appro-
submission mechanisms for individual eli- priate use, patient safety, efficiency,
gible clinicians and groups for all per- patient experience, and care coordina-
formance categories. The submission tion measures). If fewer than six meas-
deadlines are: ures apply to the MIPS eligible clini-
(1) For the qualified registry, QCDR, cian or group, report on each measure
EHR, and attestation submission that is applicable.
mechanisms are March 31 following the (ii) Subject to paragraph (a)(1)(i) of
close of the performance period. this section, MIPS eligible clinicians
(2) For Medicare Part B claims, data and groups can either select their
must be submitted on claims with measures from the complete MIPS
dates of service during the performance final measure list or a subset of that
period that must be processed no later
list, MIPS specialty-specific measure
than 60 days following the close of the
sets, as designated by CMS.
performance period.
(3) For the CMS Web Interface, data (2) Via the CMS Web Interface—for
must be submitted during an 8-week groups only. For the 12-month perform-
period following the close of the per- ance period-
formance period. The period must (i) For a group of 25 or more MIPS el-
begin no earlier than January 2 and igible clinicians, report on all meas-
end no later than March 31. ures included in the CMS Web Inter-
face. The group must report on the
§ 414.1330 Quality performance cat- first 248 consecutively ranked bene-
egory. ficiaries in the sample for each meas-
(a) For purposes of assessing perform- ure or module.
ance of MIPS eligible clinicians on the (ii) If the sample of eligible assigned
quality performance category, CMS beneficiaries is less than 248, then the
will use: group must report on 100 percent of as-
(1) Quality measures included in the signed beneficiaries. In some instances,
MIPS final list of quality measures. the sampling methodology will not be
(2) Quality measures used by QCDRs. able to assign at least 248 patients on
(b) Subject to CMS’s authority to re- which a group may report, particularly
weight performance category weights those groups on the smaller end of the
under section 1848(q)(5)(F) of the Act, range of 25–99 MIPS eligible clinicians.
performance in the quality perform- (iii) The group is required to report
ance category will comprise: on at least one measure for which there
(1) 60 percent of a MIPS eligible clini- is Medicare patient data.
cian’s final score for MIPS payment (iv) Groups reporting via the CMS
year 2019. Web Interface are required to report on
(2) 50 percent of a MIPS eligible clini-
all of the measures in the set.
cian’s final score for MIPS payment
(3) Via CMS-approved survey vendor for
year 2020.
(3) 30 percent of a MIPS eligible clini- CAHPS for MIPS survey- for groups only.
cian’s final score for each MIPS pay- (i) For the 12-month performance pe-
ment year thereafter. riod, a group that wishes to voluntarily
elect to participate in the CAHPS for
§ 414.1335 Data submission criteria for MIPS survey measures must use a sur-
the quality performance category. vey vendor that is approved by CMS for
(a) Criteria. A MIPS eligible clinician a particular performance period to
or group must submit data on MIPS transmit survey measures data to
quality measures in one of the fol- CMS.
lowing manners, as applicable: (A) The CAHPS for MIPS survey
(1) Via claims, qualified registry, EHR counts for one measure towards the
or QCDR submission mechanism. For the MIPS quality performance category
performance period— and, as a patient experience measure,
(i) Submit data on at least six meas- also fulfills the requirement to report
ures including at least one outcome at least one high priority measure in
measure. If an applicable outcome the absence of an applicable outcome
measure is not available, report one measure.
160
(B) Groups that elect this data sub- performance in the cost performance
mission mechanism must select an ad- category comprises:
ditional group data submission mecha- (1) 0 percent of a MIPS eligible clini-
nism in order to meet the data submis- cian’s final score for MIPS payment
sion criteria for the MIPS quality per- year 2019.
formance category. (2) 10 percent of a MIPS eligible clini-
(ii) [Reserved] cian’s final score for MIPS payment
(b) [Reserved] year 2020.
(3) 30 percent of a MIPS eligible clini-
§ 414.1340 Data completeness criteria cian’s final score for each MIPS pay-
for the quality performance cat-
egory. ment year thereafter.
(a) MIPS eligible clinicians and § 414.1355 Improvement activities per-

groups submitting quality measures formance category.
data using the QCDR, qualified reg- (a) For purposes of assessing perform-
istry, or EHR submission mechanism ance of MIPS eligible clinicians on the
must submit data on:
improvement activities performance
(1) At least 50 percent of the MIPS el- category, CMS specifies an inventory
igible clinician or group’s patients that of measures and activities for a per-
meet the measure’s denominator cri-
formance period.
teria, regardless of payer for MIPS pay-
(b) Subject to CMS’s authority to re-
ment year 2019.
weight performance category weights
(2) At least 60 percent of the MIPS el-
under section 1848(q)(5)(F) of the Act,
igible clinician or group’s patients that
performance in the improvement ac-
meet the measure’s denominator cri-
tivities performance category com-
teria, regardless of payer for MIPS pay-
ment year 2020. prises:
(b) MIPS eligible clinicians submit- (1) 15 percent of a MIPS eligible clini-
ting quality measures data using Medi- cian’s final score for MIPS payment
care Part B claims, must submit data year 2019 and for each MIPS payment
on: year thereafter.
(1) At least 50 percent of the applica- (2) [Reserved].
ble Medicare Part B patients seen dur- (c) For purposes of assessing perform-
ing the performance period to which ance of MIPS eligible clinicians on the
the measure applies for MIPS payment improvement activities performance
year 2019. category, CMS uses activities included
(2) At least 60 percent of the applica- in the improvement activities inven-
ble Medicare Part B patients seen dur- tory established by CMS through rule-
ing the performance period to which making.
the measure applies for MIPS payment
year 2020. § 414.1360 Data submission criteria for
the improvement activities per-
(c) Groups submitting quality meas- formance category.
ures data using the CMS Web Interface
or a CMS-approved survey vendor to (a) MIPS eligible clinicians must sub-
submit the CAHPS for MIPS survey mit data on MIPS improvement activi-
must meet the data submission re- ties in one of the following manners:
quirement on the sample of the Medi- (1) Via qualified registry, EHR sub-
care Part B patients CMS provides. mission mechanisms, QCDR, CMS Web
Interface or Attestation. For activities
§ 414.1350 Cost performance category. that are performed for at least a con-
(a) For purposes of assessing perform- tinuous 90-days during the performance
ance of MIPS eligible clinicians on the period, MIPS eligible clinicians must—
cost performance category, CMS speci- (i) Submit a yes response for activi-
fies cost measures for a performance ties within the improvement activities
period. inventory.
(b) Subject to CMS’s authority to re- (ii) [Reserved]

weight performance category weights (2) [Reserved]
under section 1848(q)(5)(F) of the Act, (b) [Reserved]
161
§ 414.1365 42 CFR Ch. IV (10–1–17 Edition)
§ 414.1365 Subcategories for the im- behavioral health and primary care
provement activities performance services; shared/integrated behavioral
category. health and primary care records; cross-
(a) The following are the list of sub- training of MIPS eligible clinicians,
categories, of which, with the excep- and integrating behavioral health with
tion of Participation in an APM, in- primary care to address substance use
clude activities for selection by a MIPS disorders or other behavioral health
eligible clinician or group: conditions, as well as integrating men-
(1) Expanded practice access, such as tal health with primary care.
same day appointments for urgent (b) [Reserved]
needs and after-hours access to clini-
cian advice. § 414.1370 APM scoring standard
under MIPS.
(2) Population management, such as
monitoring health conditions of indi- (a) General. The APM scoring stand-
viduals to provide timely health care ard is the MIPS scoring methodology
interventions or participation in a applicable for MIPS eligible clinicians
QCDR. identified on the Participation List for
(3) Care coordination, such as timely the performance period of an APM En-
communication of test results, timely tity participating in a MIPS APM.
exchange of clinical information to pa- (b) Criteria for MIPS APMs. MIPS
tients or other clinicians, and use of re- APMs are those in which:
mote monitoring or telehealth. (1) APM Entities participate in the
(4) Beneficiary engagement, such as APM under an agreement with CMS or
the establishment of care plans for in- through a law or regulation;
dividuals with complex care needs, ben- (2) The APM is designed such that
eficiary self-management assessment APM Entities participating in the APM
and training, and using shared deci- include at least one MIPS eligible cli-
sion-making mechanisms. nician on a Participation List;
(5) Patient safety and practice assess- (3) The APM bases payment on cost/
ment, such as through the use of clin- utilization and quality measures; and
ical or surgical checklists and practice (4) The APM is not either of the fol-
assessments related to maintaining lowing:
certification. (i) New APMs. An APM for which the
(6) Participation in an APM. first performance year begins after the
(7) Achieving health equity, such as first day of the MIPS performance pe-
for MIPS eligible clinicians that riod for the year.
achieve high quality for underserved (ii) APM in final year of operation for
populations, including persons with be- which the APM scoring standard is im-
havioral health conditions, racial and practicable. An APM in the final year of
ethnic minorities, sexual and gender operation for which CMS determines,
minorities, people with disabilities, within 60 days after the beginning of
people living in rural areas, and people the MIPS performance period for the
in geographic HPSAs. year, that it is impracticable for APM
(8) Emergency preparedness and re- Entity groups to report to MIPS using
sponse, such as measuring MIPS eligi- the APM scoring standard.
ble clinician participation in the Med- (c) APM scoring standard performance
ical Reserve Corps, measuring registra- period. The MIPS performance period
tion in the Emergency System for Ad- under § 414.1320 applies for the APM
vance Registration of Volunteer Health scoring standard.
Professionals, measuring relevant re- (d) APM participant identifier. The
serve and active duty uniformed serv- APM participant identifier for an eligi-
ices MIPS eligible clinician activities, ble clinician is the combination of four
and measuring MIPS eligible clinician identifiers:
volunteer participation in domestic or (1) APM identifier (established for
international humanitarian medical the APM by CMS);
relief work. (2) APM Entity identifier (estab-
(9) Integrated behavioral and mental lished for the APM Entity by CMS);
health, such as measuring or evalu- (3) Medicare-enrolled billing TIN; and
ating such practices as: Co-location of (4) Eligible clinician NPI.
162
(e) APM Entity group determination. care information performance category

The APM Entity group is determined as specified in § 414.1375(b) and perform-
in the manner prescribed in ance on the advancing care informa-
§ 414.1425(b)(1). tion performance category is assessed
(f) APM Entity group scoring under the for the APM Entity group by calcu-
APM scoring standard. The MIPS final lating the weighted mean of the TIN
score calculated for the APM Entity level scores, weighted based on the
group is applied to each MIPS eligible number of MIPS eligible clinicians in
clinician in the APM Entity group. The the TINs as compared to the total
MIPS payment adjustment is applied number of MIPS eligible clinicians in
at the TIN/NPI level for each of the the APM Entity group.
MIPS eligible clinicians in the APM (ii) For APM Entity groups in MIPS
Entity group. In the event that a APMs other than the Shared Savings
Shared Savings Program ACO does not Program, CMS uses one score for each
report quality measures as required by MIPS eligible clinician in the APM En-
the Shared Savings Program, the ACO tity group to derive a single average
participant TINs will each be consid- APM Entity group score for advancing
ered a unique APM Entity for purposes care information. The score for each
of the APM scoring standard. MIPS eligible clinician is the higher of
(g) MIPS performance category scoring either:
under the APM scoring standard—(1) (A) A group score based on the meas-
Quality—(i) MIPS APMs that require ure data for the advancing care infor-
APM Entities to submit quality data using mation performance category reported
the CMS Web Interface. The MIPS per- by a TIN for the MIPS eligible clini-
formance category score for quality for cian according to the MIPS submission
a performance period will be calculated and reporting requirements for groups;
for the APM Entity group using the or
data submitted for the APM Entity (B) An individual score based on the
through the CMS Web Interface accord- measure data for the advancing care
ing to the terms of the APM. In the information performance category re-
event that a Shared Savings Program ported by the MIPS eligible clinician
ACO does not report on quality meas- according to the MIPS submission and
ures as required by the Shared Savings reporting requirements for individuals.
Program, the ACO participant TINs (h) APM scoring standard performance
must report data for the MIPS quality category weights. The performance cat-
performance category according to the egory weights used to calculate the
MIPS submission and reporting re- final score for an APM Entity group
quirements. are:
(ii) [Reserved] (1) Quality. (i) For the Shared Sav-
(2) Cost. The cost performance cat- ings Program and other MIPS APMs
egory weight is zero percent for APM that require APM Entities to submit
Entity groups in MIPS APMs. quality data through the CMS Web
(3) Improvement activities. (i) CMS as- Interface: 50 percent.
signs an improvement activities score (ii) For 2017, for MIPS APMs that do
for each MIPS APM for a performance not require APM Entities to submit
period based on the requirements of the quality data through the CMS Web
MIPS APM. The assigned improvement Interface: 0 percent.
activities score applies to each APM (2) Cost. 0 percent.
Entity group in the MIPS APM for the (3) Improvement activities. (i) For the
performance year. In the event that Shared Savings Program and other
the assigned score does not represent MIPS APMs that require APM Entities
the maximum improvement activities to submit quality data through the
score, APM Entities may report addi- CMS Web Interface: 20 percent.
tional activities. (ii) For 2017, for MIPS APMs that do
(ii) [Reserved] not require APM Entities to submit
(4) Advancing care information. (i) For quality data through the CMS Web
APM Entity groups in the Shared Sav- Interface: 25 percent.

ings Program, each ACO participant (4) Advancing care information. (i) For
TIN submits data on the advancing the Shared Savings Program and other
163
§ 414.1375 42 CFR Ch. IV (10–1–17 Edition)
MIPS APMs that require APM Entities if a request to assist in ONC direct re-
to submit quality data through the view is received; and
CMS Web Interface: 30 percent. (2) If requested, cooperated in good
(ii) For 2017, for MIPS APMs that do faith with ONC direct review of his or
not require APM Entities to submit her health information technology cer-
quality data through the CMS Web tified under the ONC Health IT Certifi-
Interface: 75 percent. cation Program as authorized by 45
§ 414.1375 Advancing care information CFR part 170, subpart E, to the extent
performance category. that such technology meets (or can be
used to meet) the definition of CEHRT,
(a) Final score. Subject to CMS’s au-
including by permitting timely access
thority to reweight performance cat-
to such technology and demonstrating
egory weights under section
1848(q)(5)(E)(ii) and (q)(5)(F) of the Act, its capabilities as implemented and
performance in the advancing care in- used by the MIPS eligible clinician in
formation performance category will the field.
comprise 25 percent of a MIPS eligible (B) Optionally, may also attest that
clinician’s final score for MIPS pay- he or she:
ment year 2019 and each MIPS payment (1) Acknowledges the option to co-
year thereafter. operate in good faith with ONC–ACB
(b) Reporting for the advancing care in- surveillance of his or her health infor-
formation performance category: To earn mation technology certified under the
a performance category score for the ONC Health IT Certification Program
advancing care information perform- if a request to assist in ONC–ACB sur-
ance category for inclusion in the final veillance is received; and
score, a MIPS eligible clinician must: (2) If requested, cooperated in good
(1) CEHRT. Use CEHRT as defined at faith with ONC–ACB surveillance of his
§ 414.1305 for the performance period; or her health information technology
(2) Report MIPS—advancing care infor- certified under the ONC Health IT Cer-
mation objectives and measures. Report tification Program as authorized by 45
on the objectives and associated meas-
CFR part 170, subpart E, to the extent
ures as specified by CMS for the ad-
that such technology meets (or can be
vancing care information performance
category for the performance period as used to meet) the definition of CEHRT,
follows: including by permitting timely access
(i) Report the numerator (of at least to such technology and demonstrating
one) and denominator, or yes/no state- its capabilities as implemented and
ment as applicable, for each required used by the MIPS eligible clinician in
measure; or the field.
(ii) Report a null value for each re- (ii) Support for health information ex-
quired measure that includes a null change and the prevention of information
value as an acceptable result in the blocking. The MIPS eligible clinician
measure specification. must attest to CMS that he or she—
(3) Support information exchange and (A) Did not knowingly and willfully
the prevention of health information take action (such as to disable
blocking, and engage in activities related functionality) to limit or restrict the
to supporting providers with the perform- compatibility or interoperability of
ance of CEHRT. (i) Supporting pro- certified EHR technology.
viders with the performance of CEHRT (B) Implemented technologies, stand-
(SPPC). To engage in activities related ards, policies, practices, and agree-
to supporting providers with the per- ments reasonably calculated to ensure,
formance of CEHRT, the MIPS eligible
to the greatest extent practicable and
clinician—
permitted by law, that the certified
(A) Must attest that he or she:
(1) Acknowledges the requirement to EHR technology was, at all relevant
cooperate in good faith with ONC di- times—
rect review of his or her health infor- (1) Connected in accordance with ap-
mation technology certified under the plicable law;
ONC Health IT Certification Program
164
(2) Compliant with all standards ap- ported activity are summed and scored
plicable to the exchange of informa- against a total potential performance
tion, including the standards, imple- category score of 40 points.
mentation specifications, and certifi- (iv) For the advancing care informa-
cation criteria adopted at 45 CFR part tion performance category, the per-
170; formance category score is the sum of
(3) Implemented in a manner that al- a base score, performance score, and
lowed for timely access by patients to bonus score.
their electronic health information; (2) [Reserved]
and (b) Performance categories. MIPS eligi-
(4) Implemented in a manner that al- ble clinicians are scored under MIPS in
lowed for the timely, secure, and trust- four performance categories.
ed bi-directional exchange of struc- (1) Quality performance category. For
tured electronic health information the 2017 performance period. MIPS eli-
with other health care providers (as de- gible clinicians receive three to ten
fined by 42 U.S.C. 300jj(3)), including achievement points for each scored
unaffiliated providers, and with dis- quality measure in the quality per-
parate certified EHR technology and formance category based on the MIPS
health IT vendors. eligible clinician’s performance com-
(C) Responded in good faith and in a pared to measure benchmarks. A MIPS
timely manner to requests to retrieve quality measure must have a measure
or exchange electronic health informa- benchmark to be scored based on per-
tion, including from patients, health formance. MIPS quality measures that
care providers (as defined by 42 U.S.C. do not have a benchmark will not be
300jj(3)), and other persons, regardless scored based on performance. Instead,
of the requestor’s affiliation or tech- these measures will receive 3 points for
nology vendor. the 2017 performance period.
(i) Measure benchmarks are based on
§ 414.1380 Scoring. historical performance for the measure
(a) General. MIPS eligible clinicians based on a baseline period. Each bench-
are scored under MIPS based on their mark must have a minimum of 20 indi-
performance on measures and activi- vidual clinicians or groups who re-
ties in four performance categories. ported the measure meeting the data
MIPS eligible clinicians are scored completeness requirement and min-
against performance standards for each imum case size criteria and perform-
performance category and receive a ance greater than zero. We will restrict
final score, composed of their scores on the benchmarks to data from MIPS eli-
individual measures and activities, and gible clinicians and comparable APM
calculated according to the final score data, including data from QPs and Par-
methodology. tial QPs.
(1) Measures and activities in the (ii) As an exception, if there is no
four performance categories are scored comparable data from the baseline pe-
against performance standards. riod, CMS would use information from
(i) For the quality performance cat- the performance period to create meas-
egory, measures are scored between ure benchmarks, which would not be
zero and 10 points. Performance is published until after the performance
measured against benchmarks. Bonus period. For the 2017 performance pe-
points are available for both submit- riod, CMS would use information from
ting specific types of measures and sub- CY 2017 during which MIPS eligible cli-
mitting measures using end-to-end nicians may report for a minimum of
electronic reporting. any continuous 90-day period.
(ii) For the cost performance cat- (A) CMS Web Interface submission
egory, measures are scored between uses benchmarks from the cor-
one and 10 points. Performance is responding reporting year of the
measured against a benchmark. Shared Savings Program.
(iii) For the improvement activities (B) [Reserved]
performance category, each improve- (iii) Separate benchmarks are used

ment activity is worth a certain num- for the following submission mecha-
ber of points. The points for each re- nisms:
165
§ 414.1380 42 CFR Ch. IV (10–1–17 Edition)
(A) EHR submission options; (xi) CMS assigns partial points based
(B) QCDR and qualified registry sub- on the percentile distribution.
mission options; (xii) MIPS eligible clinicians are re-
(C) Claims submission options; quired to submit measures consistent
(D) CMS Web Interface submission with § 414.1335.
options; (xiii) Bonus points are available for
(E) CMS-approved survey vendor for measures determined to be high pri-
CAHPS for MIPS submission options; ority measures when two or more high
and priority measures are reported.
(A) Bonus points are not available for
(F) Administrative claims submis-
the first reported high priority meas-
sion options.
ure which is required to be reported. To
(iv) Minimum case requirements for
qualify for bonus points, each measure
quality measures are 20 cases, unless a
must be reported with sufficient case
measure is subject to an exception.
volume to the meet the required case
(v) As an exception, the minimum minimum and the required data com-
case requirements for the all-cause pleteness criteria and does not have a
hospital readmission measure is 200 zero percent performance rate, regard-
cases. less of whether it is included in the cal-
(vi) MIPS eligible clinicians failing culation of the quality performance
to report a measure required under this category score.
category receive zero points for that (B) Outcome and patient experience
measure. measures receive two bonus points.
(vii) MIPS eligible clinicians do not (C) Other high priority measures re-
receive zero points if the expected ceive one bonus point.
measure is submitted but is unable to (D) Bonus points for high priority
be scored because it does not meet the measures cannot exceed 10 percent of
required case minimum or if the meas- the total possible points for MIPS pay-
ure does not have a measure bench- ment year 2019 and 2020.
mark for MIPS payment year 2019. In- (xiv) One bonus point is also avail-
stead, these measures as well as meas- able for each measure submitted with
ures that are below the data complete- end-to-end electronic reporting for a
ness requirement receive a score of 3 quality measure under certain criteria
points in MIPS payment year 2019. determined by the Secretary. Bonus
(viii) As an exception, the adminis- points cannot exceed 10 percent of the
trative claims-based measures and total possible points for MIPS payment
CMS Web Interface measures will not year 2019 and 2020.
be scored if these measures do not meet (xv) A MIPS eligible clinician’s qual-
the required case minimum. For CMS ity performance category score is the
Web Interface measures, we will recog- sum of all the points assigned for the
nize the measure was submitted but ex- measures required for the quality per-
clude the measure from being scored. formance category criteria plus the
For CMS Web Interface measures: bonus points in paragraph (b)(1)(xiii) of
measures that do not have a measure this section and bonus points in para-
benchmark will also not be scored, al- graph (b)(1)(xiv) of this section. The
though we will recognize that the sum is divided by the sum of total pos-
measure was submitted, and measures sible points. The quality performance
that are below the data completeness category score cannot exceed the total
requirement receive 0 points. possible points for the quality perform-
(ix) Measures submitted by MIPS eli- ance category.
gible clinicians are scored using a per- (2) Cost performance category. A MIPS
centile distribution, separated by dec- eligible clinician receives one to ten
ile categories. achievement points for each cost meas-
(x) For each set of benchmarks, CMS ure attributed to the MIPS eligible cli-
calculates the decile breaks for meas- nician based on the MIPS eligible clini-
ure performance and assigns points cian’s performance compared to the
based on which benchmark decile range measure benchmark.

the MIPS eligible clinician’s measure (i) Cost measure benchmarks are
rate is between. based on the performance period. Cost
166
measures must have a benchmark to be (B) The practice is participating in a

scored. Medicaid Medical Home Model or Med-
(ii) A MIPS eligible clinician must ical Home Model.
meet the minimum case volume speci- (C) The practice is a comparable spe-
fied by CMS to be scored on a cost cialty practice that has received the
measure. NCQA Patient-Centered Specialty Rec-
(iii) A MIPS eligible clinician’s cost ognition.
performance category score is the (D) The practice has received accredi-
equally-weighted average of all scored tation from other certifying bodies
cost measures. that have certified a large number of
(3) Improvement activities performance medical organizations and meet na-
category. MIPS eligible clinicians and tional guidelines, as determined by the
groups receive points for improvement Secretary. The Secretary must deter-
activities based on patient-centered mine that these certifying bodies must
medical home or comparable specialty have 500 or more certified member
practice participation, APM participa- practices, and require practices to in-
tion, and improvement activities re- clude the following:
ported by the MIPS eligible clinician (1) Have a personal physician/clini-
in comparison to the highest potential cian in a team-based practice.
score (40 points) for a given MIPS year. (2) Have a whole-person orientation.
(i) CMS assigns credit for the total (3) Provide coordination or inte-
possible category score for each re- grated care.
ported improvement activity based on (4) Focus on quality and safety.
two weights: Medium-weighted; and (5) Provide enhanced access.
high-weighted activities. (v) CMS compares the points associ-
(ii) Improvement activities with a ated with the reported activities
high weighting receive credit for 20 against the highest potential category
points, toward the total possible cat- score of 40 points.
egory score. (vi) A MIPS eligible clinician or
group’s improvement activities cat-
(iii) Improvement activities with a
egory score is the sum of points for all
medium weighting receive credit for
of their reported activities, which is
10 points toward the total possible
capped at 40 points, divided by the
category score.
highest potential category score of 40
(iv) A MIPS eligible clinician or points.
group in a practice that is certified as (vii) Non-patient facing MIPS eligi-
a patient-centered medical home or ble clinicians and groups, small prac-
comparable specialty practice, as de- tices, and practices located in rural
termined by the Secretary, receives areas and geographic HPSAs receive
full credit for performance on the im- full credit for improvement activities
provement activities performance cat- by selecting one high-weighted im-
egory. For purposes of this paragraph provement activity or two medium-
(b)(3)(iv), ‘‘full credit’’ means that the weighted improvement activities. Non-
MIPS eligible clinician or group has patient facing MIPS eligible clinicians
met the highest potential score of 40 and groups, small practices, and prac-
points. A practice is certified as a pa- tices located in rural areas and geo-
tient-centered medical home if it graphic HPSAs receive half credit for
meets any of the following criteria: improvement activities by selecting
(A) The practice has received accredi- one medium-weighted improvement ac-
tation from one of four accreditation tivity.
organizations that are nationally rec- (viii) To receive full credit as a cer-
ognized; tified patient-centered medical home
(1) The Accreditation Association for or comparable specialty practice re-
Ambulatory Health Care; quires that a TIN that is reporting in-
(2) The National Committee for Qual- cludes at least one practice which is a
ity Assurance (NCQA); certified patient-centered medical
(3) The Joint Commission; or home or comparable specialty practice.

(4) The Utilization Review Accredita- (ix) MIPS eligible clinicians partici-
tion Commission (URAC). pating in APMs that are not patient-
167
§ 414.1385 42 CFR Ch. IV (10–1–17 Edition)
centered medical homes for a perform- (iv) Advancing care information per-
ance period shall earn a minimum formance category weight is defined
score of one-half of the highest poten- under § 414.1375(a).
tial score for the improvement activi- (2) Reweighting the performance cat-
ties performance category. egories. If CMS determines there are
(4) Advancing care information perform- not sufficient measures and activities
ance category. (i) A MIPS eligible clini- applicable and available to MIPS eligi-
cian’s advancing care information per- ble clinicians, CMS will assign weights
formance category score equals the to the performance categories that are
sum of the base score, performance different from the weights specified in
score, Public Health and Clinical Data § 414.1380(c)(1).
Registry bonus score and completing
(d) Scoring for APM entities. MIPS eli-
improvement activities using CEHRT
gible clinicians in APM Entities that
bonus score. The advancing care infor-
mation performance category score are subject to the APM scoring stand-
will not exceed 100 percentage points. ard are scored using the methodology
(A) A MIPS eligible clinician earns a under § 414.1370.
base score by reporting the numerator § 414.1385 Targeted review and review
(of at least one) and denominator or limitations.
yes/no statement or null value as appli-
cable, for each required measure (a) Targeted review. MIPS eligible cli-
(B) A MIPS eligible clinician earns a nicians or groups may request a tar-
performance score by reporting on cer- geted review of the calculation of the
tain measures specified by CMS. MIPS MIPS payment adjustment factor
eligible clinicians may earn up to 10 or under section 1848(q)(6)(A) of the Act
20 percentage points as specified by and, as applicable, the calculation of
CMS for each measure reported for the the additional MIPS payment adjust-
performance score. ment factor under section 1848(q)(6)(C)
(C) A MIPS eligible clinician earn a of the Act applicable to such MIPS eli-
bonus of five percentage points for re- gible clinician or group for a year. The
porting any measures beyond than the process for targeted reviews is:
Immunization Registry Reporting (1) MIPS eligible clinicians and
measure for the Public Health and groups have a 60-day period to submit a
Clinical Data Registry objective. request for targeted review, which be-
(D) A MIPS eligible clinician earns a gins on the day CMS makes available
bonus of 10 percentage points for at- the MIPS payment adjustment factor,
testing to completing one or more im- and if applicable the additional MIPS
provement activities specified by CMS payment adjustment factor, for the
using CEHRT. MIPS payment year and ends on Sep-
(ii) [Reserved] tember 30 of the year prior to the MIPS
(c) Final score calculation. Each MIPS payment year or a later date specified
eligible clinician receives a final score by CMS.
of 0 to 100 points equal to the sum of (2) CMS will respond to each request
each of the products of each perform- for targeted review timely submitted
ance category score and each perform-
and determine whether a targeted re-
ance category’s assigned weight, multi-
view is warranted.
plied by 100.
(3) The MIPS eligible clinician or
(1) Performance category weights. Sub-
ject to CMS’s authority to reweight, group may include additional informa-
performance category weights under tion in support of their request for tar-
section 1848(q)(5)(F) of the Act: geted review at the time the request is
(i) Quality performance category submitted. If CMS requests additional
weight is defined under § 414.1330(b). information from the MIPS eligible cli-
(ii) Cost performance category nician or group, it must be provided
weight is defined under § 414.1350(b). and received by CMS within 30 days of
(iii) Improvement activities perform- the request. Non-responsiveness to the

ance category weight is defined under request for additional information may
§ 414.1355(b).
168
result in the closure of the targeted re- claims, medical records for applicable
view request, although the MIPS eligi- patients, or other resources used in the
ble clinician or group may submit an- data calculations for MIPS measures,
other request for targeted review be- objectives, and activities. Primary
fore the deadline. source documentation also may include
(4) Decisions based on the targeted verification of records for Medicare and
review are final, and there is no further non-Medicare beneficiaries where ap-
review or appeal. plicable.
(b) Limitations on review. Except as (b) [Reserved]
specified in paragraph (a)(4) of this sec-
tion, there is no administrative or judi- § 414.1395 Public reporting.
cial review under section 1869 or 1879 of (a) Public reporting of a MIPS eligible
the Act, or otherwise of— clinician’s MIPS data. For each program
(1) The methodology used to deter- year, CMS will post on a public Web
mine the amount of the MIPS payment site, in an easily understandable for-
adjustment factor and the amount of mat, information regarding the per-
the additional MIPS payment adjust- formance of MIPS eligible clinicians or
ment factor and the determination of groups under the MIPS.
such amounts; (b) [Reserved]
(2) The establishment of the perform-
ance standards and the performance pe- § 414.1400 Third party data submis-
riod; sion.
(3) The identification of measures (a) General. (1) MIPS data may be
and activities specified for a MIPS per- submitted by third party inter-
formance category and information mediaries on behalf of a MIPS eligible
made public or posted on the Physician clinician or group by:
Compare Internet Web site of the CMS; (i) A qualified registry;
and (ii) A QCDR;
(4) The methodology developed that (iii) A health IT vendor or other au-
is used to calculate performance scores thorized third party that obtains data
and the calculation of such scores, in- from a MIPS eligible clinician’s
cluding the weighting of measures and CEHRT; or
activities under such methodology. (iv) A CMS-approved survey vendor.
(2) Qualified registries, QCDRs, and
§ 414.1390 Data validation and audit- health IT vendors or other authorized
ing. third parties may submit data on
(a) General. CMS will selectively measures, activities, or objectives for
audit MIPS eligible clinicians and any of the following MIPS performance
groups on a yearly basis. If a MIPS eli- categories:
gible clinician or group is selected for (i) Quality;
audit, the MIPS eligible clinician or (ii) Improvement activities; or
group will be required to do the fol- (iii) Advancing care information, if
lowing in accordance with applicable the MIPS eligible clinician or group is
law and timelines CMS establishes: using CEHRT.
(1) Comply with data sharing re- (3) CMS-approved survey vendors
quests, providing all data as requested may submit data for the CAHPS for
by CMS or our designated entity. All MIPS survey under the MIPS quality
data must be shared with CMS or our performance category.
designated entity within 45 days of the (4) Third party intermediaries must
data sharing request, or an alternate meet all the criteria specified by CMS
timeframe that is agreed to by CMS to qualify and be approved as a third
and the MIPS eligible clinician or party intermediary for purposes of
group. Data will be submitted via MIPS, including, but not limited to,
email, facsimile, or an electronic meth- the following criteria:
od via a secure Web site maintained by (i) For measures, activities, and ob-
CMS. jectives under the quality, advancing
(2) Provide substantive, primary care information, and improvement ac-

source documents as requested. These tivities performance categories, if the
documents may include: Copies of data is derived from CEHRT, the
169
§ 414.1400 42 CFR Ch. IV (10–1–17 Edition)
QCDR, qualified registry, or health IT (1) A measure that is not contained

vendor must be able to indicate its in the annual list of MIPS quality
data source. measures for the applicable perform-
(ii) All submitted data must be sub- ance period.
mitted in the form and manner speci- (2) A measure that may be in the an-
fied by CMS. nual list of MIPS quality measures but
(b) QCDR self-nomination criteria. has substantive differences, as deter-
QCDRs must self-nominate, for the 2017 mined by the Secretary, in the manner
performance period, from November 15, it is reported by the QCDR.
2016 until January 15, 2017. For future (3) CAHPS for MIPS survey. Al-
years of the program, starting with the though the CAHPS for MIPS survey in-
2018 performance period, QCDRs must cluded in the MIPS measure set, we
self-nominate from September 1 of the consider the changes that need to be
prior year until November 1 of the made for reporting by individual MIPS
prior year. Entities that desire to qual- eligible clinicians (and not as a part of
ify as a QCDR for the purposes of MIPS a group) significant enough as to treat
for a given performance period will the CAHPS for MIPS survey as a non-
need to self-nominate for that perform- MIPS quality measure for purposes of
ance period and provide all information individual MIPS eligible clinicians re-
requested by CMS at the time of self- porting the CAHPS for MIPS survey
nomination. Having qualified as a via a QCDR.
QCDR does not automatically qualify (f) QCDR measure specifications cri-
the entity to participate in subsequent teria. A QCDR must provide specifica-
MIPS performance periods. tions for each measure, activity, or ob-
(c) Establishment of a QCDR entity. jective the QCDR intends to submit to
For an entity to become qualified for a CMS. The QCDR must provide CMS de-
given performance period as a QCDR, scriptions and narrative specifications
the entity must: for each measure, activity, or objective
(1) Be in existence as of January 1 of no later than January 15 of the applica-
the performance period for which the ble performance period for which the
entity seeks to become a QCDR. QCDR wishes to submit quality meas-
(2) Have at least 25 participants by ures or other performance category
January 1 of the performance period. (improvement activities and advancing
(d) Collaboration of entities to become a care information) data. In future years,
QCDR. In situations where an entity starting with the 2018 performance pe-
may not meet the criteria of a QCDR riod, those specifications must be pro-
solely on its own but can do so in con- vided to CMS by no later than Novem-
junction with another entity, the enti- ber 1 prior to the applicable perform-
ty must also comply with the fol- ance period for which the QCDR wishes
lowing: to submit quality measures or other
(1) An entity that uses an external performance category (improvement
organization for purposes of data col- activities and advancing care informa-
lection, calculation, or transmission tion) data.
may meet the definition of a QCDR as (1) For non-MIPS quality measures,
long as the entity has a signed, written the quality measure specifications
agreement that specifically details the must include the following for each
relationship and responsibilities of the measure: Name/title of measures, NQF
entity with the external organization number (if NQF-endorsed), descriptions
effective as of September 1 the year of the denominator, numerator, and
prior to the year for which the entity when applicable, denominator excep-
seeks to become a QCDR. tions, denominator exclusions, risk ad-
(2) [Reserved] justment variables, and risk adjust-
(e) Identifying non-MIPS quality meas- ment algorithms. The narrative speci-
ures. For purposes of QCDRs submit- fications provided must be similar to
ting data for the MIPS quality per- the narrative specifications we provide
formance category, CMS considers the in our measures list. CMS will consider
following types of quality measures to all non-MIPS quality measures sub-
be non-MIPS quality measures: mitted by the QCDR but the measures
170
must address a gap in care and out- data to CMS. All CMS-approved survey
come or other high priority measures vendor applications and materials will
are preferred. Documentation or be due by April 30 of the performance
‘‘check box’’ measures are discouraged. period.
Measures that have very high perform- (j) Auditing of entities submitting MIPS
ance rates already or address ex- data. Any third party intermediary
tremely rare gaps in care (thereby al- (that is, a QCDR, health IT vendor,
lowing for little or no quality distinc- qualified registry, or CMS-approved
tion between eligible clinicians) are survey vendor) must comply with the
also unlikely to be approved for inclu- following procedures as a condition of
sion. their qualification and approval to par-
(2) For MIPS quality measures, the ticipate in MIPS as a third party inter-
QCDR only needs to submit the MIPS mediary.
measure numbers or specialty-specific (1) The entity must make available
measure sets (if applicable). to CMS the contact information of
(3) The QCDR must publicly post the each MIPS eligible clinician or group
measure specifications (no later than on behalf of whom it submits data. The
15 days following CMS approval of the contact information will include, at a
measure specifications) for each non- minimum, the MIPS eligible clinician
MIPS quality measure it intends to or group’s practice phone number, ad-
submit for MIPS. The QCDR may use dress, and, if available, email.
any public format it prefers. Imme- (2) The entity must retain all data
diately following posting of the meas- submitted to CMS for MIPS for a min-
ures specification, the QCDR must pro- imum of 10 years.
vide CMS with the link to where this (3) For the purposes of auditing, CMS
information is posted. may request any records or data re-
(g) Qualified registry self-nomination tained for the purposes of MIPS for up
criteria. Qualified registries must self- to 6 years and 3 months.
nominate, for the 2017 performance pe- (k) Probation and disqualification of a
riod from November 15, 2016 until Janu- third party intermediary. (1) If at any
ary 15, 2017. For future years of the pro- time we determine that a third party
gram, starting with the 2018 perform- intermediary (that is, a QCDR, health
ance period, the qualified registry must IT vendor, qualified registry, or CMS-
self-nominate from September 1 of the approved survey vendor) has not met
prior year until November 1 of the all of the applicable criteria for quali-
prior year. Entities that desire to qual- fication and approval, CMS may place
ify as a qualified registry for a given the third party intermediary on proba-
performance period must self-nominate tion for the current performance period
and provide all information requested or the following performance period, as
by CMS at the time of self-nomination. applicable.
Having qualified as a qualified registry (2) For purposes of this section, pro-
does not automatically qualify the en- bation means that, for the applicable
tity to participate in subsequent MIPS performance period, the third party
performance periods. intermediary must meet all applicable
(h) Establishment of a qualified registry criteria for qualification and approval
entity. For an entity to become quali- and must submit a corrective action
fied for a given performance period as a plan for remediation or correction of
qualified registry, the entity must: any deficiencies identified by CMS that
(1) Be in existence as of January 1 of resulted in the probation.
the performance period for which the (3) CMS requires a corrective action
entity seeks to become a qualified reg- plan from the third party intermediary
istry. to address any deficiencies or issues
(2) Have at least 25 participants by and prevent them from recurring. The
January 1 of the performance period. corrective action plan must be received
(i) CMS-approved survey vendor appli- and accepted by CMS within 14 days of
cation criteria. Vendors are required to the CMS notification to the third party
undergo the CMS approval process for intermediary of the deficiency or pro-
each year in which the survey vendor bation. If the corrective action plan is
seeks to transmit survey measures not received and accepted by CMS
171
§ 414.1405 42 CFR Ch. IV (10–1–17 Edition)
within the specified time, CMS may (1) MIPS eligible clinicians with a
disqualify the third party intermediary final score at or above the performance
from the MIPS program for the subse- threshold receive a zero or positive
quent performance period. MIPS payment adjustment factor on a
(4) If the third party intermediary linear sliding scale such that an adjust-
has data inaccuracies including (but ment factor of 0 percent is assigned for
not limited to) TIN/NPI mismatches, a final score at the performance
formatting issues, calculation errors, threshold and an adjustment factor of
data audit discrepancies affecting in the applicable percent is assigned for a
excess of 3 percent (but less than 5 per- final score of 100.
cent) of the total number of MIPS eli- (2) MIPS eligible clinicians with a
gible clinicians or groups submitted by final score below the performance
the third party intermediary, such in- threshold receive a negative MIPS pay-
accuracies will trigger paragraph (k)(3) ment adjustment factor on a linear
of this section and may result in this sliding scale such that an adjustment
information being posted on the CMS factor of 0 percent is assigned for a
Web site. final score at the performance thresh-
(5) If the third party intermediary old and an adjustment factor of the
does not reduce their data error rate negative of the applicable percent is
below 3 percent for the subsequent per- assigned for a final score of 0; further,
formance period, the third party inter- MIPS eligible clinicians with final
mediary will continue to be on proba- scores that are equal to or greater than
tion and have their listing on the CMS zero, but not greater than one-fourth of
Web site continue to note the poor the performance threshold, receive a
quality of the data they are submitting negative MIPS payment adjustment
for MIPS for one additional year. After factor that is equal to the negative of
2 years on probation, the third party the applicable percent.
intermediary will be disqualified for (3) A scaling factor not to exceed 3.0
the subsequent performance period. may be applied to positive MIPS pay-
(6) Before placing the third party ment adjustment factors to ensure
intermediary on probation; CMS would budget neutrality such that the esti-
notify the third party intermediary of mated increase in aggregate allowed
the identified issues, at the time of discharges resulting from the application
covery of such issues. of the positive MIPS payment adjust-
(7) If the third party intermediary ment factors for the MIPS payment
does not submit an acceptable correc- year equals the estimated decrease in
tive action plan within 14 days of noti- aggregate allowed charges resulting
fication of deficiencies, and correct the from the application of negative MIPS
deficiencies within 30 days or before payment adjustment factors for the
the submission deadline—whichever is MIPS payment year.
sooner, CMS may disqualify the third (c) Applicable percent. For MIPS pay-
party intermediary from participating ment year 2019, 4 percent. For MIPS
in MIPS for the current performance payment year 2020, 5 percent. For MIPS
period or the following performance pe- payment year 2021, 7 percent. For MIPS
riod, as applicable. payment year 2022 and each subsequent
MIPS payment year, 9 percent.
§ 414.1405 Payment. (d) Additional performance threshold.
(a) General. Each MIPS eligible clini- An additional performance threshold
cian receives a MIPS payment adjust- will be specified for each of the MIPS
ment factor, and if applicable an addi- payment years 2019 through 2024.
tional MIPS payment adjustment fac- (1) In addition to the MIPS payment
tor for exceptional performance, for a adjustment factor, MIPS eligible clini-
MIPS payment year determined by cians with a final score at or above the
comparing their final score to the per- additional performance threshold re-
formance threshold and additional per- ceive an additional MIPS payment ad-
formance threshold for the year. justment factor for exceptional per-
(b) Performance threshold. A perform- formance on a linear sliding scale such

ance threshold will be specified for that an additional adjustment factor of
each MIPS payment year. 0.5 percent is assigned for a final score
172
at the additional performance thresh- (iii) CMS makes final Other Payer
old and an additional adjustment fac- Advanced APM determinations and no-
tor of 10 percent is assigned for a final tifies Advanced APM Entities and eli-
score of 100, subject to the application gible clinicians of such determinations
of a scaling factor as determined by as soon as practicable.
CMS, such that the estimated aggre-
gate increase in payments resulting § 414.1415 Advanced APM criteria.
from the application of the additional (a) Use of certified electronic health
MIPS payment adjustment factors for record technology (CEHRT)—(1) Required
the MIPS payment year shall not ex- use of CEHRT. To be an Advanced APM,
ceed $500,000,000 for each of the MIPS an APM must:
payment years 2019 through 2024. (i) Require at least 50 percent of eli-
(2) [Reserved] gible clinicians in each participating
(e) Application of adjustments to pay- APM Entity group, or, for APMs in
ments. For each MIPS payment year, which hospitals are the APM Entities,
the MIPS payment adjustment factor, each hospital, to use CEHRT to docu-
and if applicable the additional MIPS ment and communicate clinical care to
payment adjustment factor, are applied their patients or other health care pro-
to Medicare Part B payments for items viders; or
and services furnished by the MIPS eli- (ii) For the Shared Savings Program,
gible clinician during the year. apply a penalty or reward to an APM
Entity based on the degree of the use of
§ 414.1410 Advanced APM determina- CEHRT of the eligible clinicians in the
tion. APM Entity.
(a) General. An APM is an Advanced (b) Payment based on quality measures.
APM for a payment year if CMS deter- (1) To be an Advanced APM, an APM
mines that it meets the criteria in must include quality measure results
§ 414.1415 during the QP Performance as a factor when determining payment
Period. to participants under the terms of the
APM.
(b) Advanced APM and Other Payer
(2) At least one of the quality meas-
Advanced APM determination process.
ures upon which an Advanced APM
CMS identifies Advanced APMs and
bases the payment in paragraph (b)(1)
Other Payer Advanced APMs in the fol-
of this section must have an evidence-
lowing manner:
based focus, be reliable and valid, and
(1) Advanced APM determination. (i) meet at least one of the following cri-
No later than January 1, 2017, CMS will teria:
post on its Web site a list of all Ad- (i) Used in the MIPS quality perform-
vanced APMs for the first QP Perform- ance category as described in § 414.1330;
ance Period. (ii) Endorsed by a consensus-based
(ii) CMS updates the Advanced APM entity;
list on its Web site at intervals no less (iii) Developed under section 1848(s)
than annually. of the Act;
(iii) CMS will include notice of (iv) Submitted in response to the
whether a new APM is an Advanced MIPS Call for Quality Measures under
APM in the first public notice of the section 1848(q)(2)(D)(ii) of the Act; or
new APM. (v) Any other quality measures that
(2) Other Payer Advanced APM deter- CMS determines to have an evidence-
mination. (i) CMS identifies Other based focus and to be reliable and
Payer Advanced APMs following con- valid.
clusion of the QP Performance Period (3) In addition to the quality measure
using information submitted to CMS requirements under paragraph (b)(2) of
according to § 414.1445. CMS will not this section, the quality measures upon
make determinations for other payer which an Advanced APM bases the pay-
arrangements for which insufficient in- ment in paragraph (b)(1) of this section
formation is submitted. must include at least one outcome
(ii) CMS makes Other Payer Ad- measure. This requirement does not
vanced APM determinations prior to apply if CMS determines that there are
QP determinations under § 414.1440. no available or applicable outcome
173
§ 414.1415 42 CFR Ch. IV (10–1–17 Edition)
measures included in the MIPS quality (3) Generally applicable nominal

measures list for the Advanced APM’s amount standard. (i) Except as provided
first QP Performance Period. in paragraph (c)(4) of this section, the
(c) Financial risk. To be an Advanced total amount an APM Entity poten-
APM, an APM must either meet the fi- tially owes CMS or foregoes under an
nancial risk standard under paragraph APM must be at least equal to either:
(d)(1) or (2) of this section and the (A) For QP Performance Periods 2017
nominal amount standard under para- and 2018, 8 percent of the estimated av-
graph (d)(3) or (4) of this section or be erage total Medicare Parts A and B
an expanded Medical Home Model revenues of participating APM Enti-
under section 1115A(c) of the Act. ties; or
(1) Generally applicable financial risk (B) 3 percent of the expected expendi-
standard. Except for paragraph (c)(2) of tures for which an APM Entity is re-
this section, to be an Advanced APM, sponsible under the APM.
an APM must, based on whether an (ii) [Reserved]
APM Entity’s actual expenditures for
(4) Medical Home Model nominal
which the APM Entity is responsible
amount standard. (i) For a Medical
under the APM exceed expected ex-
Home Model to be an Advanced APM,
penditures during a specified QP Per-
the total annual amount that an Ad-
formance Period, do one or more of the
vanced APM Entity potentially owes
following:
CMS or foregoes must be at least the
(i) Withhold payment for services to
following amounts:
the APM Entity or the APM Entity’s
(A) For QP Performance Period 2017,
eligible clinicians;
2.5 percent of the estimated average
(ii) Reduce payment rates to the
total Medicare Parts A and B revenues
APM Entity or the APM Entity’s eligi-
of participating APM Entities.
ble clinicians; or
(iii) Require the APM Entity to owe (B) For QP Performance Period 2018,
payment(s) to CMS. 3 percent of the estimated average
(2) Medical Home Model financial risk total Medicare Parts A and B revenues
standard. The following standard ap- of participating APM Entities;
plies only for APM Entities that are (C) For QP Performance Period 2019,
participating in Medical Home Models, 4 percent of the estimated average
and, starting in the 2018 QP Perform- total Medicare Parts A and B revenues
ance Period, such APM Entities must of participating APM Entities.
be owned and operated by an organiza- (D) For QP Performance Period 2020
tion with fewer than 50 eligible clini- and later, 5 percent of the estimated
cians whose Medicare billing rights average total Medicare Parts A and B
have been reassigned to the TIN(s) of revenues of participating APM Enti-
the organization(s) or any of the orga- ties.
nization’s subsidiary entities. The (5) Expected expenditures. For the pur-
APM Entity participates in a Medical poses of this section, expected expendi-
Home Model that, based on the APM tures is defined as the beneficiary ex-
Entity’s failure to meet or exceed one penditures for which an APM Entity is
or more specified performance stand- responsible under an APM. For episode
ards, which may include expected ex- payment models, expected expendi-
penditures, does one or more of the fol- tures mean the episode target price.
lowing: (6) Capitation. A full capitation ar-
(i) Withholds payment for services to rangement meets this Advanced APM
the APM Entity or the APM Entity’s criterion. For purposes of this part, a
eligible clinicians; capitation arrangement means a pay-
(ii) Reduces payment rates to the ment arrangement in which a per cap-
APM Entity or the APM Entity’s eligi- ita or otherwise predetermined pay-
ble clinicians; ment is made under the APM for all
(iii) Requires the APM Entity to owe items and services for which payment
payment(s) to CMS; or is made through the APM furnished to
(iv) Causes the APM Entity to lose a population of beneficiaries, and no

the right to all or part of an otherwise settlement is performed to reconcile or
guaranteed payment or payments. share losses incurred or savings earned
174
by the APM Entity. Arrangements be- valid, and meet at least one of the fol-
tween CMS and Medicare Advantage lowing criteria:
Organizations under the Medicare Ad- (i) Used in the MIPS quality perform-
vantage program (42 U.S.C. 422) are not ance category, as described in § 414.1330;
considered capitation arrangements for (ii) Endorsed by a consensus-based
purposes of this paragraph. entity;
(iii) Developed under section 1848(s)
§ 414.1420 Other payer advanced of the Act;
APMs.
(iv) Submitted in response to the
(a) Other Payer Advanced APM cri- MIPS Call for Quality Measures under
teria. A payment arrangement with a section 1848(q)(2)(D)(ii) of the Act; or
payer other than Medicare is an Other (v) Any other quality measures that
Payer Advanced APM for a QP Per- CMS determines to have an evidence-
formance Period if CMS determines based focus and to be reliable and
that the arrangement meets the fol- valid.
lowing criteria during the QP Perform- (3) To meet the quality measure use
ance Period: criterion, an other payment arrange-
(1) Use of CEHRT, as described in ment must use an outcome measure if
paragraph (b) of this section; there is an applicable outcome measure
(2) Quality measures comparable to on the MIPS quality measure list. If an
measures under the MIPS quality per- Other Payer Advanced APM has no
formance category apply, as described outcome measure, the Advanced APM
in paragraph (c) of this section; and Entity must attest that there is no ap-
(3) Either: plicable outcome measure on the MIPS
(i) Requires APM Entities to bears list.
more than nominal financial risk if ac- (d) Other Payer Advanced APM finan-
tual aggregate expenditures exceed ex- cial risk. To be an Other Payer Ad-
pected aggregate expenditures, as de- vanced APM, an other payer arrange-
scribed in paragraph (d) of this section; ment must meet either the financial
or risk standard under paragraph (d)(1) or
(ii) Is a Medicaid Medical Home (2) of this section and the nominal risk
Model that meets criteria comparable standard under paragraph (d)(3) or (4)
to Medical Home Models expanded of this section, make payment using a
under section 1115A(c) of the Act, as de- full capitation arrangement under
scribed in paragraph (d)(3) of this sec- paragraph (d)(6) of this section, or be a
tion. Medicaid Medical Home Model that
(b) Use of CEHRT. To be an Other meets criteria comparable to an ex-
Payer Advanced APM, an other payer panded Medical Home Model under sec-
arrangement must require participants tion 1115A(c) of the Act.
to use CEHRT as defined in § 414.1305. (1) Other Payer Advanced APM finan-
The other payer arrangement must re- cial risk standard. Except for APM Enti-
quire at least 50 percent of eligible cli- ties to which paragraph (d)(2) of this
nicians in each participating APM En- section applies, to be an Other Payer
tity group, or each hospital if hospitals Advanced APM, an APM Entity must,
are the APM Entities, to use CEHRT to based on whether an APM Entity’s ac-
document and communicate clinical tual expenditures for which the APM
care. Entity is responsible under the APM
(c) Quality measure use. (1) To be an exceed expected expenditures during a
Other Payer Advanced APM, a pay- specified performance period do one or
ment arrangement must apply quality more of the following:
measures comparable to measures (i) Withhold payment for services to
under the MIPS quality performance the APM Entity or the APM Entity’s
category, as described in paragraph eligible clinicians;
(c)(2) of this section. (ii) Reduce payment rates to the
(2) At least one of the quality meas- APM Entity or the APM Entity’s eligi-
ures used in the payment arrangement ble clinicians; or

with an APM Entity must have an evi- (iii) Require direct payment by the
dence-based focus, be reliable and APM Entity to the payer.
175
§ 414.1420 42 CFR Ch. IV (10–1–17 Edition)
(2) Medicaid Medical Home Model fi- (i) For QP Performance Period 2019, 4
nancial risk standard. For an APM Enti- percent of the estimated average total
ty owned and operated by an organiza- revenue of participating APM Entities
tion with fewer than 50 eligible clini- from the payer.
cians whose Medicare billing rights (ii) For QP Performance Period 2020
have been reassigned to the TIN(s) of and later, 5 percent of the estimated
the organization(s) or any of the orga- average total revenue of participating
nization’s subsidiary entities, the fol- APM Entities for the payer.
lowing standard applies. The APM En- (5) Marginal risk rate. For purposes of
tity participates in a Medicaid Medical this section, the marginal risk rate is
Home Model that, based on the APM defined as the percentage of actual ex-
Entity’s failure to meet or exceed one penditures that exceed expected ex-
or more specified performance stand- penditures for which an APM Entity is
ards, does one or more of the following: responsible under an APM.
(i) Withhold payment for services to (i) In the event that the marginal
the APM Entity or the APM Entity’s risk rate varies depending on the
eligible clinicians; amount by which actual expenditures
(ii) Require direct payment by the exceed expected expenditures, the low-
APM Entity to the Medicaid program; est marginal risk rate across all pos-
(iii) Reduce payment rates to the sible levels of actual expenditures
APM Entity or the APM Entity’s eligi- would be used for comparison to the
ble clinicians; or marginal risk rate specified in para-
(iv) Require the APM Entity to lose graph (d)(3)(ii)(A) of this section, with
the right to all or part of an otherwise exceptions for large losses as described
guaranteed payment or payments. in paragraph (d)(5)(ii) of this section
(3) Other Payer Advanced APM nomi- and small losses as described in para-
nal amount standard. (i) Except for risk graph (d)(5)(iii) of this section.
arrangements described under para- (ii) Allowance for large losses. The
graph (d)(2) of this section, the total determination in paragraph (d)(3)(ii)(A)
amount an APM Entity potentially of this section may disregard the mar-
owes us or foregoes under an Other ginal risk rates that apply in cases
Payer Advanced APM is at least be when actual expenditures exceed ex-
equal to 3 percent of the expected expected expenditures by an amount suf-
penditures for which an APM Entity is ficient to require the APM Entity to
responsible under the payment ar- make financial risk payments under
rangement. the Other Payer Advanced APM great-
(ii) Except for risk arrangements de- er than or equal to the total risk re-
scribed under paragraph (d)(2) of this quirement under paragraph (d)(3)(i) of
section, the risk arrangement must this section.
have: (iii) Allowance for minimum loss
(A) A marginal risk rate of at least 30 rate. The determination in paragraph
percent; and (d)(3)(ii)(A) of this section may dis-
(B) Total potential risk of at least 4 regard the marginal risk rates that
percent of expected expenditures. apply in cases when actual expendi-
(4) Medicaid Medical Home Model nomi- tures exceed expected expenditures by
nal amount standard. For an APM Enti- less than 4 percent of expected expendi-
ty owned and operated by an organiza- tures.
tion with fewer than 50 eligible clini- (6) Expected expenditures. For the pur-
cians whose Medicare billing rights poses of this section, expected expendi-
have been reassigned to the TIN(s) of tures is defined as the Other Payer Ad-
the organization(s) or any of the orga- vanced APM benchmark, except for
nization’s subsidiary entities, the fol- episode payment models, for which it is
lowing standard applies. For a Med- defined as the episode target price.
icaid Medical Home Model to be an (7) Capitation. A capitation arrange-
Other Payer Advanced APM, the total ment meets this Other Payer Advanced
annual amount that an Advanced APM APM criterion. For purposes of para-
Entity potentially owes CMS or fore- graph (d)(3) of this section, a capitation
goes must be at least the following arrangement means a payment ar-
amounts: rangement in which a per capita or
176
otherwise predetermined payment is APM Entity group on one of the dates:

made under the APM for all items and March 31, June 30, or August 31 of the
services for which payment is made QP Performance Period. An eligible cli-
through the APM furnished to a popu- nician included on a Participation List
lation of beneficiaries, and no settle- on any one of these dates is included
ment is performed for the purpose of the APM Entity group even if that eli-
reconciling or sharing losses incurred gible clinician is not included on that
or savings earned by the APM Entity. Participation List at one of the prior
Arrangements made directly between or later listed dates. CMS performs QP
CMS and Medicare Advantage Organi- determinations for the eligible clini-
zations under the Medicare Advantage cians in APM Entity group three times
program (42 U.S.C. 422) are not consid- during the QP Performance Period
ered capitation arrangements for pur- using claims data for services furnished
poses of this paragraph. from January 1 through each of the re-
§ 414.1425 Qualifying APM participant spective QP determination dates:
determination: In general. March 31, June 30, and August 31. An
eligible clinician can only be deter-
(a) List used for QP determination. (1)
For Advanced APMs with Advanced mined to be a QP if the eligible clini-
APM Entities that include eligible cli- cian appears on the Participation List
nicians on a Participation List, the on a date (March 31, June 30, or August
Participation List defines the APM En- 31) CMS uses to determine the APM
tity group, regardless of whether the Entity group and to make QP deter-
Advanced APM Entity also has eligible minations collectively for the APM En-
clinicians on an Affiliated Practitioner tity group based on participation in
List. the Advanced APM.
(2) For Advanced APMs with Ad- (2) Affiliated practitioner individual de-
vanced APM Entities that do not in- termination. When the Affiliated Practi-
clude eligible clinicians on a Participa- tioner List defines the eligible clini-
tion List but do include eligible clinicians to be assessed, for purposes of the
cians on an Affiliated Practitioner QP determinations for a year, those el-
List, the Affiliated Practitioner List igible clinicians are assessed individ-
defines the eligible clinicians who will ually. To be assessed as an Affiliated
be assessed to become QPs. Practitioner, an eligible clinician must
(3) For Advanced APMs with some be identified on an Affiliated Practi-
Advanced APM Entities that include tioner List on one of the dates: March
eligible clinicians on a Participation 31, June 30, or August 31 of the QP Per-
List and other Advanced APM Entities formance Period. An eligible clinician
that only include eligible clinicians on included on an Affiliated Practitioner
an Affiliated Practitioner List, para- List on any one of these dates is as-
graph (a)(1) applies to APM Entities sessed as an Affiliated Practitioner
that include eligible clinicians on a even if that eligible clinician is not in-
Participation List, and paragraph (a)(2) cluded on that Affiliated Practitioner
applies to APM Entities that only in-
List at one of the prior or later listed
clude eligible clinicians on an Affili-
dates. For such eligible clinicians, CMS
ated Practitioner List.
performs QP determinations during the
(b) Group or individual determination—
(1) APM Entity group determination. Ex- QP Performance Period using claims
cept for § 414.1445 and paragraph (b)(2) data for services furnished from Janu-
of this section, for purposes of the QP ary 1 through each of the respective QP
determinations for a year, eligible cli- determination dates that the eligible
nicians are grouped and assessed clinician is on the Affiliated Practi-
through their collective participation tioner List: March 31, June 30, and Au-
in an APM Entity group that is in an gust 31.
Advanced APM. To be included in the (c) QP determination. (1) CMS makes
APM Entity group for purposes of the QP determinations as set forth in
QP determination, an eligible clini- §§ 414.1435 and 414.1440.

cian’s APM participant identifier must (2) An eligible clinician cannot be
be present on a Participation List of an both a QP and a Partial QP for a year.
177
§ 414.1425 42 CFR Ch. IV (10–1–17 Edition)
A determination that an eligible clini- QP threshold, or the eligible clinician

cian is a QP means that the eligible is an Affiliated Practitioner; and
clinician is not a Partial QP. (ii) CMS determines that the eligible
(3) An eligible clinician is a QP for a clinician individually achieves a
year if the eligible clinician is in an Threshold Score that meets or exceeds
APM Entity group that achieves a the corresponding Partial QP Thresh-
Threshold Score that meets or exceeds old.
the corresponding QP payment amount (3) Notwithstanding paragraph (d)(1)
threshold or QP patient count thresh- of this section, an eligible clinician is
old for that QP Performance Period, as
not a Partial QP for a year if the APM
described in § 414.1430(a)(1) and (3) and
Entity group voluntarily or involun-
(b)(1) and (3).
(4) Notwithstanding paragraph (c)(3) tarily terminates from an Advanced
of this section, an eligible clinician is a APM before the end of the QP Perform-
QP for a year if: ance Period.
(i) The eligible clinician is included (4) Notwithstanding paragraph (d)(2)
in more than one Advanced APM Enti- of this section, an eligible clinician is
ty group and none of the Advanced not a Partial QP for a year if any of
APM Entity groups in which the eligi- the Advanced APM Entities in which
ble clinician is included meets the QP the eligible clinician participates vol-
payment amount threshold or the QP untarily or involuntarily terminates
patient count threshold, or the eligible from the Advanced APM before the end
clinician is an Affiliated Practitioner; of the QP Performance Period.
and (e) Notification of QP determination.
(ii) CMS determines that the eligible CMS notifies eligible clinicians deter-
clinician individually achieves a mined to be QPs or Partial QPs for a
Threshold Score that meets or exceeds year as soon as practicable following
the QP payment amount threshold or each QP determination date in the QP
the QP patient count threshold. Performance Period.
(5) Notwithstanding paragraph (c)(3)
(f) Order of threshold options. (1) For
of this section, an eligible clinician is
payment years 2019 and 2020, CMS per-
not a QP for a year if the APM Entity
group voluntarily or involuntarily ter- forms QP determinations for an eligi-
minates from an Advanced APM before ble clinicians only under the Medicare
the end of the QP Performance Period. Option described in § 414.1435.
(6) Notwithstanding paragraph (c)(4) (2) For payment years 2021 and later,
of this section, an eligible clinician is CMS performs QP determinations for
not a QP for a year if any of the Ad- eligible clinicians under the Medicare
vanced APM Entities in which the eli- Option, as described in § 414.1435 and,
gible clinician participates voluntarily except as specified in paragraphs
or involuntarily terminates from the (d)(2)(i) and (ii) of this section, the All-
Advanced APM before the end of the Payer Combination Option, described
QP Performance Period. in § 414.1440.
(d) Partial QP determination. (1) An el- (i) If CMS determines the eligible cli-
igible clinician is a Partial QP for a nician to be a QP under the Medicare
year if the APM Entity group collec- Option, then CMS does not calculate a
tively achieves a Threshold Score that Threshold Score for such eligible clini-
meets or exceeds the corresponding cian under the All-Payer Combination
Partial QP threshold for that year, as Option.
described in § 414.1430(a)(2) and (4) and (ii) If the Threshold Score for an eli-
(b)(2) and (4).
gible clinician under the Medicare Op-
(2) Notwithstanding paragraph (d)(1)
tion is less than the amount specified
of this section, an eligible clinician is a
Partial QP for a year if: in § 414.1430(b)(2)(ii) and (b)(3)(iii), then
(i) The eligible clinician is included CMS does not perform a QP determina-
in more than one APM Entity group tion for such eligible clinician(s) under
and none of the APM Entity groups in the All-Payer Combination Option.
which the eligible clinician is included
meets the corresponding QP or Partial
178
§ 414.1430 Qualifying APM participant (B) 2023 and later: 50 percent.

determination: QP and partial QP (ii) To meet the QP patient count
thresholds. threshold under this option, the eligi-
(a) Medicare Option—(1) QP payment ble clinician must also meet a 20 per-
amount threshold. The QP payment cent QP patient count threshold under
amount thresholds are the following the Medicare Option.
values for the indicated payment years: (4) Partial QP patient count threshold.
(i) 2019 and 2020: 25 percent. (i) The Partial QP patient count
(ii) 2021 and 2022: 50 percent. thresholds are the following values for
(iii) 2023 and later: 75 percent. the indicated payment years:
(2) Partial QP payment amount thresh- (A) 2021 and 2022: 25 percent.
old. The Partial QP payment amount (B) 2023 and later: 35 percent.
thresholds are the following values for (ii) To meet the Partial QP patient
the indicated payment years: count threshold under this option, the
(i) 2019 and 2020: 20 percent. eligible clinician group or eligible cli-
(ii) 2021 and 2022: 40 percent. nician must also meet a 10 percent QP
(ii) 2023 and later: 50 percent. patient count threshold under the
(3) QP patient count threshold. The QP Medicare Option.
patient count thresholds are the fol-
lowing values for the indicated pay- § 414.1435 Qualifying APM participant
determination: Medicare option.
ment years:
(i) 2019 and 2020: 20 percent (a) Payment amount method. The
(ii) 2021 and 2022: 35 percent Threshold Score for an Advanced APM
(ii) 2023 and later: 50 percent Entity group or eligible clinician is
(4) Partial QP patient count threshold. calculated as a percent by dividing the
The Partial QP patient count thresh- value described under paragraph (a)(1)
olds are the following values for the in- of this section by the value described
dicated payment years: under paragraph (a)(2) of this section.
(i) 2019 and 2020: 10 percent (1) Numerator. The aggregate of pay-
(ii) 2021 and 2022: 25 percent ments for Medicare Part B covered pro-
(iii) 2023 and later: 35 percent fessional services furnished by the Ad-
(b) All-Payer Combination Option—(1) vanced APM Entity group to attrib-
QP payment amount threshold. uted beneficiaries during the QP Per-
(i) The QP payment amount thresh- formance Period.
olds are the following values for the in- (2) Denominator. The aggregate of
dicated payment years: payments for Medicare Part B covered
(A) 2021 and 2022: 50 percent. professional services furnished by the
(B) 2023 and later: 75 percent. APM Entity group to all attribution-
(ii) To meet the QP payment amount eligible beneficiaries during the QP
threshold under this option, the eligi- Performance Period.
ble clinician must also meet a 25 per- (3) Claims and adjustments. In the cal-
cent QP payment amount threshold culations under paragraphs (a)(1) and
under the Medicare Option. (2) of this section, CMS compiles
(2) Partial QP payment amount thresh- claims and treats claims adjustments,
old. (i) The Partial QP payment supplemental service payments, and al-
amount thresholds are the following ternative payment methods in the
values for the indicated payment years: same manner as described in § 414.1450.
(A) 2021 and 2022: 40 percent. (b) Patient count method. The Thresh-
(B) 2023 and later: 50 percent. old Score for each eligible clinician in
(ii) To meet the QP payment amount an APM Entity group is calculated as a
threshold under this option, the eligi- percent under the patient count meth-
ble clinician must also meet a 20 per- od by dividing the value described
cent Partial QP payment amount under paragraph (b)(1) of this section
threshold under the Medicare Option. by the value described under paragraph
(3) QP patient count threshold. (i) The (b)(2) of this section.
QP patient count thresholds are the (1) Numerator. The number of attrib-
following values for the indicated pay- uted beneficiaries to whom the Ad-
ment years: vanced APM Entity group furnishes
(A) 2021 and 2022: 35 percent. Medicare Part B covered professional
179
§ 414.1440 42 CFR Ch. IV (10–1–17 Edition)
services or services by a Rural Health services and all other payments for all
Clinic (RHC) or Federally-Qualified other payers, except for payments
Health Center (FQHC) during the QP made by:
Performance Period. (i) The Secretary of Defense for the
(2) Denominator. The number of attri- costs of Department of Defense health
bution-eligible beneficiaries to whom care programs;
the APM Entity group or eligible clini- (ii) The Secretary of Veterans Affairs
cian furnish Medicare Part B covered for the cost of Department of Veterans
professional services or services by a Affairs health care programs; and
Rural Health Clinic (RHC) or Feder- (iii) Under Title XIX in a State in
ally-Qualified Health Center (FQHC) which no Medicaid Medical Home
during the QP Performance Period. Model or APM is available.
(3) Unique beneficiaries. For each Ad- (2) Title XIX payments will only be
vanced APM Entity group, a unique included in the numerator and denomi-
Medicare beneficiary is counted no nator as specified in paragraphs (b)(2)
more than one time for the numerator
and (3) of this section for an Advanced
and no more than one time for the de-
APM Entity if:
nominator.
(i) A State has at least one Medicaid
(4) Beneficiaries count multiple times.
Medical Home Model or Medicaid APM
Based on attribution under the terms
of an Advanced APM, a single Medicare in operation that is determined to be
beneficiary may be counted in the nu- an Other Payer Advanced APM; and
merator or denominator for multiple (ii) The Advanced APM Entity is eli-
different Advanced APM Entity groups. gible to participate in at least one of
(c) Attribution. (1) Attributed bene- such Other Payer Advanced APMs dur-
ficiaries are determined from Advanced ing the QP Performance Period, regard-
APM attributed beneficiary lists gen- less of whether the Advanced APM En-
erated by each Advanced APM’s spe- tity actually participates in such Other
cific attribution methodology. Payer Advanced APMs. This will apply
(2) When operationally feasible, this to both the payment amount and pa-
attributed beneficiary list will be the tient count methods.
final beneficiary list used for reconcili- (b) Payment amount method—(1) In
ation purposes in the Advanced APM. general. The Threshold Score for an Ad-
(3) When it is not operationally fea- vanced APM Entity group or eligible
sible to use the final attributed bene- clinician will be calculated by dividing
ficiary list, the attributed beneficiary the value described under the numer-
list will be taken from the Advanced ator by the value described under the
APM’s most recently available attrib- denominator as specified in paragraphs
uted beneficiary list at the end of the (b)(2) and (3) of this section.
QP Performance Period. (2) Numerator. The aggregate amount
(d) Use of methods. CMS calculates of all payments from all payers, except
Threshold Scores for an Advanced APM those excluded under paragraph (a) of
Entity under both the payment this section, to the Advanced APM En-
amount and patient count methods for tity group or eligible clinician under
each QP Performance Period. CMS the terms of Other Payer Advanced
then assigns the score to the eligible APMs during the QP Performance Pe-
clinicians included in the Advanced riod. CMS calculates Medicare Part B
APM Entity that results in the greater covered professional services under the
QP status. QP status is greater than a All-Payer Combination Option in the
Partial QP status, which is greater same manner as it is calculated under
than no QP status. the Medicare Option.
(3) Denominator. The aggregate
§ 414.1440 Qualifying APM participant amount of all payments from all pay-
determination: All-payer combina- ers, except those excluded under para-
tion option. graph (a) of this section, to the Ad-
(a) Payments excluded from calcula- vanced APM Entity group during the
tions. (1) These calculations include a QP Performance Period. The portion of

combination of both Medicare pay- this amount that relates to Medicare
ments for Part B covered professional Part B covered professional services is
180
calculated under the All-Payer Com- submit the following information for
bination Option in the same manner as each other payment arrangement in a
it is calculated under the Medicare Op- manner and by a date specified by
tion. CMS:
(c) Patient count method—(1) In gen- (1) Payment arrangement informa-
eral. The Threshold Score for an Ad- tion necessary to assess the other
vanced APM Entity group or eligible payer arrangement on all Other Payer
clinician is calculated by dividing the Advanced APM criteria under § 414.1420;
value described under the numerator (2) For each other payment arrange-
by the value described under the de- ment, the amount of revenues for serv-
nominator as specified in paragraphs ices furnished through the arrange-
(c)(2) and (3) of this section). ment, the total revenues from the
(2) Numerator. The number of unique payer, the numbers of patients fur-
patients to whom the Advanced APM nished any service through the ar-
Entity group or eligible clinician fur- rangement, and the total numbers of
nishes services that are included in the patients furnished any service through
measures of aggregate expenditures the payer.
used under the terms of all of their (3) An attestation from the payer
Other Payer Advanced APMs during that the submitted information is ac-
the QP Performance Period, plus the curate.
patient count numerator specified in (c) Requirement to submit adequate in-
paragraph (a)(1) of this section. formation. (1) CMS makes a QP deter-
(3) Denominator. The number of mination with respect to the individual
unique patients to whom eligible clini- eligible clinician under the All-Payer
cians in the Advanced APM Entity Combination Option if:
group furnish services under all non-ex- (i) The eligible clinician’s Advanced
cluded payers during the QP Perform- APM Entity submits the information
ance Period. required under this section for CMS to
(d) Participation in multiple Other assess the APM Entity group under the
Payer Advanced APMs. (1) For each All-Payer Combination Option; or
APM Entity group or eligible clinician, (ii) The eligible clinician submits
a unique patient is counted no more adequate information under this sec-
than one time for the numerator and tion.
no more than one time for the denomi- (2) If neither the Advanced APM En-
nator for each payer. tity nor the eligible clinician submits
(2) CMS may count a single patient all of the information required under
in the numerator and/or denominator this section, then CMS does not make
for multiple different Advanced APM a QP assessment for such eligible clini-
Entities or eligible clinicians. cian under the All-Payer Combination
(3) For purposes of this section, Ad- Option.
vanced APM Entities are considered (d) Outcome measure. An Other Payer
the same entity across Other Payer Ad- Advanced APM must base payment on
vanced APMs if CMS determines that at least one outcome measure.
the Participation Lists are substan- (1) Exception. If an Other Payer Ad-
tially similar or if one entity is a sub- vanced APM has no outcome measure,
set of the other. the Advanced APM Entity must submit
an attestation in a manner and by a
§ 414.1445 Identification of other payer date determined by CMS that there is
advanced APMs. no available or applicable outcome
(a) Identification of Medicaid APMs. measure on the MIPS list of quality
CMS will make an annual determina- measures.
tion prior to the QP Performance Pe- (2) [Reserved]
riod to identify Medicaid Medical
Home Models and Medicaid APMs. § 414.1450 APM incentive payment.
(b) Data used to calculate the Thresh- (a) In general. (1) CMS makes a lump
old Score under the All-Payer Combina- sum payment to QPs in the amount de-
tion Option. To be assessed under the scribed in paragraph (b) of this section
All-Payer Combination Option, APM in the manner described in paragraphs
Entities or eligible clinicians must (d) and (e) of this section.
181
§ 414.1450 42 CFR Ch. IV (10–1–17 Edition)
(2) CMS provides notice of the under section 1832(a) and defined under
amount of the APM Incentive Payment section 1861(s) of the Act.
to QPs as soon as practicable following (ii) Is made for only Part B services
the calculation and validation of the under the criterion in paragraph
APM Incentive Payment amount, but (b)(9)(i) of this section.
in any event no later than 1 year after (iii) Is directly attributable to serv-
the incentive payment base period. ices furnished to an individual bene-
(b) APM Incentive Payment amount. (1) ficiary.
The amount of the APM Incentive Pay- (iv) Is directly attributable to an eli-
ment is equal to 5 percent of the esti- gible clinician, including an eligible
mated aggregate payments for covered clinician that is a group of individual
professional services as defined in sec- eligible clinicians.
tion 1848(k)(3)(A) of the Act furnished (8) For payment amounts that are af-
during the calendar year immediately
fected by a cash flow mechanism, the
preceding the payment year.
payment amounts that would have oc-
(2) The estimated aggregate payment
curred if the cash flow mechanism were
amount for covered professional serv-
not in place are used in calculating the
ices includes all such payments to any
APM Incentive Payment amount.
and all of the TIN/NPI combinations
associated with the NPI of the QP. (c) APM Incentive Payment recipient.
(3) In calculating the estimated ag- (1) CMS pays the entire APM Incentive
gregate payment amount for a QP, Payment amount to the TIN associated
CMS uses claims submitted with dates with the QP’s participation in the Ad-
of service from January 1 through De- vanced APM entity that met the appli-
cember 31 of the incentive payment cable QP threshold during the QP Per-
base period, and processing dates of formance Period.
January 1 of the base period through (2) In the event that an eligible clini-
March 31 of the subsequent payment cian is no longer affiliated with the
year. TIN associated with the QP’s participa-
(4) The payment adjustment tion in the Advanced APM Entity that
amounts, negative or positive, as de- met the applicable QP threshold during
scribed in sections 1848(m), (o), (p), and the QP Performance Period at the time
(q) of the Act are not included in calcu- of the APM Incentive Payment dis-
lating the APM Incentive Payment tribution, CMS makes the APM Incen-
amount. tive Payment to the TIN listed on the
(5) Incentive payments made to eligi- eligible clinician’s CMS–588 EFT Appli-
ble clinicians under sections 1833(m), cation form on the date that the APM
(x), and (y) of the Act are not included Incentive Payment is distributed.
in calculating the APM Incentive Pay- (3) In the event that an eligible clini-
ment amount. cian becomes a QP through participa-
(6) Financial risk payments such as tion in multiple Advanced APMs, CMS
shared savings payments or net rec- divides the APM Incentive Payment
onciliation payments are excluded amount between the TINs associated
from the amount of covered profes- with the QP’s participation in each Ad-
sional services in calculating the APM vanced APM during the QP Perform-
Incentive Payment amount. ance Period. Such payments will be di-
(7) Supplemental service payments in vided in proportion to the amount of
the amount of covered professional payments associated with each TIN
services are included in calculating the that the eligible clinician received for
APM Incentive Payment amount ac- covered professional services during
cording to this paragraph (b). Supple- the QP Performance Period.
mental service payments are included (d) Timing of the APM Incentive Pay-
in the amount of covered professional ment. APM Incentive Payments made
services when calculating the APM In- under this section are made as soon as
centive Payment amount when the practicable following the calculation
supplemental service payment meets and validation of the APM Incentive
the following four criteria: Payment amount, but in any event no

(i) Is payment for services that con- later than 1 year after the incentive
stitute physicians services authorized payment base period.
182
(e) Treatment of APM Incentive Pay- (c) Information submitted for All-Payer
ment amount in APMs. (1) APM Incen- Combination Option. Information sub-
tive Payments made under this section mitted by eligible clinicians or Ad-
are not included in determining actual vanced APM Entities to meet the re-
expenditures under an APM. quirements of the All-Payer Combina-
(2) APM Incentive Payments made tion Option may be subject to audit by
under this section are not included in CMS. Eligible clinicians and Advanced
calculations for the purposes of re- APM Entities must maintain copies of
basing benchmarks in an APM. any supporting documentation related
(f) Treatment of APM Incentive Pay- to All-Payer Combination Option for at
ment for other Medicare incentive pay- least 10 years and must attest to the
ments and payment adjustments. APM accuracy and completeness of the data
Incentive Payments made under this submitted.
section will not be included in deter- (d) Recoupment of APM Incentive Pay-
mining the amount of incentive payment. For any QPs who are terminated
ment made to eligible clinicians under from an Advanced APM or found to be
section 1833(m), (x), and (y) of the Act. in violation of any Federal, State, or
tribal statute, regulation, or other
§ 414.1455 Limitation on review. binding guidance during the QP Per-
formance Period or Incentive Payment
There is no administrative or judicial Base Period or terminated after these
review under sections 1869, 1878, or oth- periods as a result of a violation occur-
erwise, of the Act of the following: ring during either period, CMS may re-
(a) The determination that an eligi- scind such eligible clinicians’ QP deter-
ble clinician is a QP or Partial QP minations and, if necessary, recoup
under § 414.1425 and the determination part or all of any such eligible clini-
that an APM Entity is an Advanced cians’ APM Incentive Payment or de-
APM Entity under § 414.1410. duct such amount from future pay-
(b) The determination of the amount ments to such individuals. CMS may
of the APM Incentive Payment under reopen and recoup any payments that
§ 414.1450, including any estimation as were made in error in accordance with
part of such determination. procedures similar to those set forth at
42 CFR 405.980 and 42 CFR 405.370
§ 414.1460 Monitoring and program in- through 405.379 or established under the
tegrity.
relevant APM. The APM Incentive
(a) Vetting eligible clinicians prior to Payment will be recouped if an audit
payment of the APM Incentive Payment. reveals a lack of support for attested
Prior to payment of the APM Incentive statements provided by eligible clini-
Payment, CMS determines if eligible cians and Advanced APM Entities.
clinicians were in compliance with all (e) Maintenance of records. An Ad-
Medicare conditions of participation vanced APM Entity or eligible clini-
and the terms of the relevant Advanced cian that submits information to CMS
APMs in which they participate during under § 414.1445 for assessment under
the QP Performance Period. For QPs the All-Payer Combination Option
not meeting these standards there may must maintain such books contracts,
be a reduction or denial of the APM In- records, documents, and other evidence
centive Payment. A determination for a period of 10 years from the final
under this provision is not binding for date of the QP Performance Period or
other purposes. from the date of completion of any
(b) Termination by Advanced APMs. audit, evaluation, or inspection, which-
CMS may reduce or deny an APM In- ever is later, unless:
centive Payment to eligible clinicians (1) CMS determines there is a special
who are terminated by APMs or whose need to retain a particular record or
Advanced APM Entities are terminated group of records for a longer period and
by APMs for non-compliance with all notifies the Advanced APM Entity of
Medicare conditions of participation or eligible clinician at least 30 days before
the terms of the relevant Advanced the formal disposition date; or

APMS in which they participate during (2) There has been a termination, dis-
the QP Performance Periods. pute, or allegation of fraud or similar
183
§ 414.1465 42 CFR Ch. IV (10–1–17 Edition)
fault against the Advanced APM Enti- through this methodology how Medi-
ty or eligible clinician, in which case care, and other payers if applicable,
the Advanced APM Entity or eligible pay APM Entities, how the payment
clinician must retain records for an ad- methodology differs from current pay-
ditional 6 years from the date of any ment methodologies, and why the
resulting final resolution of the termi- PFPM cannot be tested under current
nation, dispute, or allegation of fraud payment methodologies.
or similar fault. (v) Scope: aim to broaden or expand
(f) OIG authority. None of the provi- the CMS APM portfolio by addressing
sions of this part limit or restrict an issue in payment policy in a new
OIG’s authority to audit, evaluate, in- way or including APM Entities whose
vestigate, or inspect the Advanced opportunities to participate in APMs
APM Entity, its eligible clinicians, and have been limited.
other individuals or entities per- (vi) Ability to be evaluated: have
forming functions or services related to evaluable goals for quality of care,
its APM activities. cost, and any other goals of the PFPM.
(2) Care delivery improvements: Promote
§ 414.1465 Physician-focused payment better care coordination, protect patient
models.
safety, and encourage patient engage-
(a) Definition. A physician-focused ment. (i) Integration and Care Coordi-
payment model (PFPM) is an Alter- nation: encourage greater integration
native Payment Model: and care coordination among practi-
(1) In which Medicare is a payer; tioners and across settings where mul-
(2) In which eligible clinicians that tiple practitioners or settings are rel-
are eligible professionals as defined in evant to delivering care to the popu-
section 1848(k)(3)(B) of the Act are par- lation treated under the PFPM.
ticipants and play a core role in imple- (ii) Patient Choice: encourage great-
menting the APM’s payment method- er attention to the health of the popu-
ology; and lation served while also supporting the
(3) Which targets the quality and unique needs and preferences of indi-
costs of services that eligible profes- vidual patients.
sionals participating in the Alternative (iii) Patient Safety: aim to maintain
Payment Model provide, order, or can or improve standards of patient safety.
significantly influence. (3) Information Enhancements: Improv-
(b) Criteria. In carrying out its review ing the availability of information to
of physician-focused payment model guide decision-making. (i) Health Infor-
proposals, the PTAC must assess mation Technology: encourage use of
whether the physician-focused pay- health information technology to in-
ment model meets the following cri- form care.
teria for PFPMs sought by the Sec- (ii) [Reserved]
retary. The Secretary seeks PFPMs
that:
(1) Incentives: Pay for higher-value PART 415—SERVICES FURNISHED BY
care. (i) Value over volume: provide in- PHYSICIANS IN PROVIDERS, SU-
centives to practitioners to deliver PERVISING PHYSICIANS IN
high-quality health care. TEACHING SETTINGS, AND RESI-
(ii) Flexibility: provide the flexibility DENTS IN CERTAIN SETTINGS
needed for practitioners to deliver
high-quality health care. Subpart A—General Provisions
(iii) Quality and Cost: are anticipated
to improve health care quality at no Sec.
additional cost, maintain health care 415.1 Basis and scope.
quality while decreasing cost, or both
improve health care quality and de- Subpart B—Fiscal Intermediary Payments
crease cost. to Providers for Physician Services
(iv) Payment methodology: pay APM 415.50 Scope.
Entities with a payment methodology 415.55 General payment rules.

designed to achieve the goals of the 415.60 Allocation of physician compensation
PFPM Criteria. Addresses in detail costs.
184
415.70 Limits on compensation for physician Subpart A—General Provisions
services in providers.
§ 415.1 Basis and scope.
Subpart C—Part B Carrier Payments for
Physician Services to Beneficiaries in (a) Basis. This part is based on the
Providers provisions of the following sections of
the Act: Section 1848 establishes a fee
415.100 Scope. schedule for payment for physician
415.102 Conditions for fee schedule payment
for physician services to beneficiaries in
services. Section 1861(q) specifies what
providers. is included in the term ‘‘physician
415.105 Amounts of payment for physician services’’ covered under Medicare. Sec-
services to beneficiaries in providers. tion 1862(a)(14) sets forth the exclusion
415.110 Conditions for payment: Medically of nonphysician services furnished to
directed anesthesia services. hospital patients under Part B of Medi-
415.120 Conditions for payment: Radiology care. Section 1886(d)(5)(B) provides for
services. a payment adjustment under the pro-
415.130 Conditions for payment: Physician
pathology services.
spective payment system for the oper-
ating costs of inpatient hospital serv-
Subpart D—Physician Services in Teaching ices furnished to Medicare beneficiaries
Settings in cost reporting periods beginning on
or after October 1, 1983, to account for
415.150 Scope. the indirect costs of medical education.
415.152 Definitions. Section 1886(h) establishes the method-
415.160 Election of reasonable cost payment
for direct medical and surgical services
ology for Medicare payment of the cost
of physicians in teaching hospitals: Gen- of direct GME activities.
eral provisions. (b) Scope. This part sets forth rules
415.162 Determining payment for physician for fiscal intermediary payments to
services furnished to beneficiaries in providers for physician services, Part B
teaching hospitals. carrier payments for physician services
415.164 Payment to a fund. to beneficiaries in providers, physician
415.170 Conditions for payment on a fee
services in teaching settings, and serv-
schedule basis for physician services in a
teaching setting. ices of residents.
415.172 Physician fee schedule payment for
services of teaching physicians. Subpart B—Fiscal Intermediary
415.174 Exception: Evaluation and manage- Payments to Providers for Phy-
ment services furnished in certain cen-
ters. sician Services
415.176 Renal dialysis services.
415.178 Anesthesia services. § 415.50 Scope.
415.180 Teaching setting requirements for This subpart sets forth rules for pay-
the interpretation of diagnostic radi- ment by fiscal intermediaries to pro-
ology and other diagnostic tests.
415.184 Psychiatric services.
viders for services furnished by physi-
415.190 Conditions of payment: Assistants at cians. Payment for covered services is
surgery in teaching hospitals. made either under the prospective pay-
ment system (PPS) to PPS-partici-
Subpart E—Services of Residents pating providers in accordance with
part 412 of this chapter or under the
415.200 Services of residents in approved
reasonable cost method to non-PPS
GME programs.
415.202 Services of residents not in approved
participating providers in accordance
GME programs. with part 413 of this chapter.
415.204 Services of residents in skilled nurs-
ing facilities and home health agencies. § 415.55 General payment rules.
415.206 Services of residents in nonprovider (a) Allowable costs. Except as specified
settings.
otherwise in §§ 413.102 of this chapter
415.208 Services of moonlighting residents.
(concerning compensation of owners),
AUTHORITY: Secs. 1102 and 1871 of the Social 415.60 (concerning allocation of physi-
Security Act (42 U.S.C. 1302 and 1395hh). cian compensation costs), and 415.162
SOURCE: 60 FR 63178, Dec. 8, 1995, unless (concerning payment for physician
otherwise noted. services furnished to beneficiaries in
185
§ 415.60 42 CFR Ch. IV (10–1–17 Edition)
teaching hospitals), costs a provider in- ices for the provider under arrange-
curs for services of physicians are al- ments within the meaning of the Act.
lowable only if the following condi- (b) General rule. Except as provided in
tions are met: paragraph (d) of this section, each pro-
(1) The services do not meet the con- vider that incurs physician compensa-
ditions in § 415.102(a) regarding fee tion costs must allocate those costs, in
schedule payment for services of physi- proportion to the percentage of total
cians to a beneficiary in a provider. time that is spent in furnishing each
(2) The services include a surgeon’s category of services, among—
supervision of services of a qualified (1) Physician services to the provider
anesthetist, but do not include physi- (as described in § 415.55);
cian availability services, except for (2) Physician services to patients (as
reasonable availability services fur- described in § 415.102); and
nished for emergency rooms and the
(3) Activities of the physician, such
services of standby surgical team phy-
as funded research, that are not paid
sicians.
under either Part A or Part B of Medi-
(3) The provider has incurred a cost
care.
for salary or other compensation it fur-
nished the physician for the services. (c) Allowable physician compensation
(4) The costs incurred by the provider costs. Only costs allocated to payable
for the services meet the requirements physician services to the provider (as
in § 413.9 of this chapter regarding costs described in § 415.55) are allowable costs
related to patient care. to the provider under this subpart.
(5) The costs do not include super- (d) Allocation of all compensation to
vision of interns and residents unless services to the provider. Generally, the
the provider elects reasonable cost pay- total physician compensation received
ment as specified in § 415.160, or any by a physician is allocated among all
other costs incurred in connection with services furnished by the physician, un-
an approved GME program that are less—
payable under §§ 413.75 through 413.83 of (1) The provider certifies that the
this chapter. compensation is attributable solely to
(b) Allocation of allowable costs. The the physician services furnished to the
provider must follow the rules in provider; and
§ 415.60 regarding allocation of physi- (2) The physician bills all patients for
cian compensation costs to determine the physician services he or she fur-
its costs of services. nishes to them and personally receives
(c) Limits on allowable costs. The the payment from or on behalf of the
intermediary must apply the limits on patients. If returned directly or indi-
compensation set forth in § 415.70 to de- rectly to the provider or an organiza-
termine its payments to a provider for tion related to the provider within the
the costs of services. meaning of § 413.17 of this chapter,
these payments are not compensation
FR 47490, Aug. 12, 2005] for physician services furnished to the
provider.
§ 415.60 Allocation of physician com- (e) Assumed allocation of all compensa-
pensation costs. tion to beneficiary services. If the pro-
(a) Definition. For purposes of this vider and physician agree to accept the
subpart, physician compensation costs assumed allocation of all the physician
means monetary payments, fringe ben- services to direct services to bene-
efits, deferred compensation, and any ficiaries as described under § 415.102(a),
other items of value (excluding office CMS does not require a written alloca-
space or billing and collection services) tion agreement between the physician
that a provider or other organization and the provider.
furnishes a physician in return for the (f) Determination and payment of al-
physician services. Other organizations lowable physician compensation costs. (1)
are entities related to the provider Except as provided under paragraph (e)
within the meaning of § 413.17 of this of this section, the intermediary pays
chapter or entities that furnish serv- the provider for these costs only if—
186
(i) The provider submits to the inter- (2) Limits established under this sec-
mediary a written allocation agree- tion do not apply to costs of physician
ment between the provider and the compensation attributable to fur-
physician that specifies the respective nishing inpatient hospital services that
amounts of time the physician spends are paid for under the prospective pay-
in furnishing physician services to the ment system implemented under part
provider, physician services to pa- 412 of this chapter or to costs of physi-
tients, and services that are not pay- cian compensation attributable to ap-
able under either Part A or Part B of proved GME programs that are payable
Medicare; and under §§ 413.75 through 413.83 of this
(ii) The compensation is reasonable chapter.
in terms of the time devoted to these (3) Compensation that a physician re-
services. ceives for activities that may not be
(2) In the absence of a written alloca- paid for under either Part A or Part B
tion agreement, the intermediary as- of Medicare is not considered in apply-
sumes, for purposes of determining rea- ing these limits.
sonable costs of the provider, that 100 (b) Methodology for establishing limits.
percent of the physician compensation (1) For cost reporting periods beginning
cost is allocated to services to bene- before January 1, 2015. CMS establishes
ficiaries as specified in paragraph (b)(2) a methodology for determining annual
of this section. reasonable compensation equivalency
(g) Recordkeeping requirements. Except limits and, to the extent possible, con-
for services furnished in accordance siders average physician incomes by
with the assumed allocation under specialty and type of location using the
paragraph (e) of this section, each pro- best available data.
vider that claims payment for services (2) For cost reporting periods beginning
of physicians under this subpart must on or after January 1, 2015. CMS estab-
meet all of the following requirements: lishes a methodology for determining
(1) Maintain the time records or annual reasonable compensation
other information it used to allocate equivalency limits and, to the extent
physician compensation in a form that possible, considers average physician
permits the information to be vali- incomes by specialty using the best
dated by the intermediary or the car- available data.
rier. (c) Application of limits. If the level of
(2) Report the information on which compensation exceeds the limits estab-
the physician compensation allocation lished under paragraph (b) of this sec-
is based to the intermediary or the car- tion, Medicare payment is based on the
rier on an annual basis and promptly level established by the limits.
notify the intermediary or carrier of (d) Adjustment of the limits. The inter-
any revisions to the compensation allo- mediary may adjust limits established
cation. under paragraph (b) of this section to
(3) Retain each physician compensa- account for costs incurred by the phy-
tion allocation, and the information on sician or the provider related to mal-
which it is based, for at least 4 years practice insurance, professional mem-
after the end of each cost reporting pe- berships, and continuing medical edu-
riod to which the allocation applies. cation.
(1) For the costs of membership in
§ 415.70 Limits on compensation for professional societies and continuing
physician services in providers. medical education, the intermediary
(a) Principle and scope. (1) Except as may adjust the limit by the lesser of—
provided in paragraphs (a)(2) and (a)(3) (i) The actual cost incurred by the
of this section, CMS establishes reason- provider or the physician for these ac-
able compensation equivalency limits tivities; or
on the amount of compensation paid to (ii) Five percent of the appropriate
physicians by providers. These limits limit.
are applied to a provider’s costs in- (2) For the cost of malpractice ex-
curred in compensating physicians for penses incurred by either the provider

services to the provider, as described in or the physician, the intermediary may
§ 415.55(a). adjust the reasonable compensation
187
§ 415.100 42 CFR Ch. IV (10–1–17 Edition)
equivalency limit by the cost of the general requirements for determining

malpractice insurance expense related the amounts of payment for services
to the physician service furnished to that meet the conditions of this sec-
patients in providers. tion. Sections 415.120 and 415.130 set
(e) Exception to limits. An inter- forth additional conditions for pay-
mediary may grant a provider an ex- ment for physician services in the spe-
ception to the limits established under cialties of radiology and pathology
paragraph (b) of this section only if the (laboratory services).
provider can demonstrate to the inter-
mediary that it is unable to recruit or § 415.102 Conditions for fee schedule
maintain an adequate number of physi- payment for physician services to
beneficiaries in providers.
cians at a compensation level within
these limits. (a) General rule. If the physician fur-
(f) Notification of changes in meth- nishes services to beneficiaries in pro-
odologies and payment limits. (1) Before viders, the carrier pays on a fee sched-
the start of a cost reporting period to ule basis provided the following re-
which limits established under this sec- quirements are met:
tion will be applied, CMS publishes a (1) The services are personally fur-
notice in the FEDERAL REGISTER that nished for an individual beneficiary by
sets forth the amount of the limits and a physician.
explains how it calculated the limits. (2) The services contribute directly
(2) If CMS proposes to revise the to the diagnosis or treatment of an in-
methodology for establishing payment dividual beneficiary.
limits under this section, CMS pub- (3) The services ordinarily require
lishes a notice, with opportunity for performance by a physician.
public comment, in the FEDERAL REG- (4) In the case of radiology or labora-
ISTER. The notice explains the proposed tory services, the additional require-
basis and methodology for setting lim- ments in § 415.120 or § 415.130, respec-
its, specifies the limits that would re- tively, are met.
sult, and states the date of implemen- (b) Exception. If a physician furnishes
tation of the limits. services in a provider that do not meet
(3) If CMS updates limits by applying the requirements in paragraph (a) of
the most recent economic index data this section, but are related to bene-
without revising the limit method- ficiary care furnished by the provider,
ology, CMS publishes the revised limits the intermediary pays for those serv-
in a notice in the FEDERAL REGISTER ices, if otherwise covered. The inter-
without prior publication of a proposal mediary follows the rules in §§ 415.55
or public comment period. and 415.60 for payment on the basis of
reasonable cost or PPS, as appropriate.
[60 FR 63178, Dec. 8, 1995, as amended at 70 (c) Effect of billing charges for physi-
FR 47490, Aug. 12, 2005; 79 FR 50358, Aug. 22,
2014]
cian services to a provider. (1) If a physi-
cian furnishes services that may be
paid under the reasonable cost rules in
Subpart C—Part B Carrier Pay- § 415.55 or § 415.60, and paid by the inter-
ments for Physician Services mediary, or would be paid under those
to Beneficiaries in Providers rules except for the PPS rules in part
412 of this chapter, and under the pay-
§ 415.100 Scope. ment rules for GME established by
This subpart implements section §§ 413.75 through 413.83 of this chapter,
1887(a)(1)(A) of the Act by providing neither the provider nor the physician
general conditions that must be met in may seek payment from the carrier,
order for services furnished by physi- beneficiary, or another insurer.
cians to beneficiaries in providers to be (2) If a physician furnishes services to
paid for on the basis of the physician an individual beneficiary that do not
fee schedule under part 414 of this meet the applicable conditions in
chapter. Section 415.102 sets forth the §§ 415.120 (concerning conditions for
conditions for fee schedule payment for payment for radiology services) and
physician services to beneficiaries in 415.130 (concerning conditions for pay-
providers. Section 415.105 sets forth ment for physician pathology services),
188
the carrier does not pay on a fee sched- schedule payment in part 414 of this
ule basis. chapter, except as provided in para-
(3) If the physician, the provider, or graph (b) of this section.
another entity bills the carrier or the (b) Application in certain settings—(1)
beneficiary or another insurer for phy- Teaching hospitals. The carrier applies
sician services furnished to the pro- the rules in subpart D of this part (con-
vider, as described in § 415.55(a), CMS cerning physician services in teaching
considers the provider to which the settings), in addition to those in this
services are furnished to have violated section, in determining whether fee
its provider participation agreement, schedule payment should be made for
and may terminate that agreement. physician services to individual bene-
See part 489 of this chapter for rules ficiaries in a teaching hospital.
governing provider agreements. (2) Hospital-based ESRD facilities. The
(d) Effect of physician assumption of carrier applies §§ 414.310 through 414.314
operating costs. If a physician or other of this chapter, which set forth deter-
entity enters into an agreement (such mination of reasonable charges under
as a lease or concession) with a pro- the ESRD program, to determine the
vider, and the physician (or entity) as- amount of payment for physician serv-
sumes some or all of the operating ices furnished to individual bene-
costs of the provider department in ficiaries in a hospital-based ESRD fa-
which the physician furnishes physi- cility approved under part 405 subpart
cian services, the following rules apply: U.
(1) If the conditions set forth in para-
graph (a) of this section are met, the § 415.110 Conditions for payment:
carrier pays for the physician services Medically directed anesthesia serv-
under the physician fee schedule in ices.
part 414 of this chapter. (a) General payment rule. Medicare
(2) To the extent the provider incurs pays for the physician’s medical direc-
a cost payable on a reasonable cost tion of anesthesia services for one serv-
basis under part 413 of this chapter, the ice or two through four concurrent an-
intermediary pays the provider on a esthesia services furnished after De-
reasonable cost basis for the costs asso- cember 31, 1998, only if each of the serv-
ciated with producing these services, ices meets the condition in § 415.102(a)
including overhead, supplies, equip- and the following additional condi-
ment costs, and services furnished by tions:
nonphysician personnel. (1) For each patient, the physician—
(3) The physician (or other entity) is (i) Performs a pre-anesthetic exam-
treated as being related to the provider ination and evaluation;
within the meaning of § 413.17 of this (ii) Prescribes the anesthesia plan;
chapter (concerning cost to related or- (iii) Personally participates in the
ganizations). most demanding aspects of the anes-
(4) The physician (or other entity) thesia plan including, if applicable, in-
must make its books and records avail- duction and emergence;
able to the provider and the inter- (iv) Ensures that any procedures in
mediary as necessary to verify the na- the anesthesia plan that he or she does
ture and extent of the costs of the serv- not perform are performed by a quali-
ices furnished by the physician (or fied individual as defined in operating
other entity). instructions;
[60 FR 63178, Dec. 8, 1995, as amended at 70 (v) Monitors the course of anesthesia
FR 47490, Aug. 12, 2005] administration at frequent intervals;
(vi) Remains physically present and
§ 415.105 Amounts of payment for phy- available for immediate diagnosis and
sician services to beneficiaries in treatment of emergencies; and
providers. (vii) Provides indicated post-anes-
(a) General rule. The carrier deter- thesia care.
mines amounts of payment for physi- (2) The physician directs no more
cian services to beneficiaries in pro- than four anesthesia services concur-

viders in accordance with the general rently and does not perform any other
rules governing the physician fee services while he or she is directing the
189
§ 415.120 42 CFR Ch. IV (10–1–17 Edition)
single or concurrent services so that § 415.130 Conditions for payment: Phy-

one or more of the conditions in para- sician pathology services.
graph (a)(1) of this section are not vio- (a) Definitions. The following defini-
lated. tions are used in this section.
(3) If the physician personally per- (1) Covered hospital means, with re-
forms the anesthesia service, the pay- spect to an inpatient or an outpatient,
ment rules in § 414.46(c) of this chapter a hospital that had an arrangement
apply (Physician personally performs with an independent laboratory that
the anesthesia procedure). was in effect as of July 22, 1999, under
(b) Medical documentation. The physi- which a laboratory furnished the tech-
cian alone inclusively documents in nical component of physician pathol-
the patient’s medical record that the ogy services to fee-for-service Medicare
conditions set forth in paragraph (a)(1) beneficiaries who were hospital inpa-
of this section have been satisfied, spe- tients or outpatients, and submitted
cifically documenting that he or she claims for payment for this technical
performed the pre-anesthetic exam and component directly to a Medicare car-
evaluation, provided the indicated rier.
post-anesthesia care, and was present (2) Fee-for-service Medicare bene-
during the most demanding procedures, ficiaries means those beneficiaries who
including induction and emergence are entitled to benefits under Part A or
where applicable. are enrolled under Part B of Title
XVIII of the Act or both and are not
[63 FR 58912, Nov. 2, 1998]
enrolled in any of the following:
§ 415.120 Conditions for payment: Ra- (i) A Medicare + Choice plan under
diology services. Part C of Title XVIII of the Act.
(ii) A plan offered by an eligible orga-
(a) Services to beneficiaries. The car- nization under section 1876 of the Act;
rier pays for radiology services fur- (iii) A program of all-inclusive care
nished by a physician to a beneficiary for the elderly (PACE) under 1894 of the
on a fee schedule basis only if the serv- Act; or
ices meet the conditions for fee sched- (iv) A social health maintenance or-
ule payment in § 415.102(a) and are iden- ganization (SHMO) demonstration
tifiable, direct, and discrete diagnostic project established under section
or therapeutic services furnished to an 4018(b) of the Omnibus Budget Rec-
individual beneficiary, such as inter- onciliation Act of 1987.
pretation of x-ray plates, angiograms, (b) Physician pathology services. The
myelograms, pyelograms, or carrier pays for pathology services fur-
ultrasound procedures. The carrier nished by a physician to an individual
pays for interpretations only if there is beneficiary on a fee schedule basis only
a written report prepared for inclusion if the services meet the conditions for
in the patient’s medical record main- payment in § 415.102(a) and are one of
tained by the hospital. the following services:
(b) Services to providers. The carrier (1) Surgical pathology services.
does not pay on a fee schedule basis for (2) Specific cytopathology, hema-
physician services to the provider (for tology, and blood banking services that
example, administrative or supervisory have been identified to require per-
services) or for provider services need- formance by a physician and are listed
ed to produce the x-ray films or other in program operating instructions.
items that are interpreted by the radi- (3) Clinical consultation services that
ologist. However, the intermediary meet the requirements in paragraph (c)
pays the provider for these services in of this section.
accordance with § 415.55 for provider (4) Clinical laboratory interpretative
costs; § 415.102(d)(2) for costs incurred services that meet the requirements of
by a physician, such as under a lease or paragraphs (c)(1), (c)(3), and (c)(4) of
concession agreement; or part 412 of this section and that are specifically
this chapter for payment under PPS. listed in program operating instruc-
tions.
190
(c) Clinical consultation services. For (b) Provider services through the di-
purposes of this section, clinical con- rect GME payment mechanism in
sultation services must meet the fol- §§ 413.75 through 413.83 of this chapter.
lowing requirements: (c) Physician services to beneficiaries
(1) Be requested by the beneficiary’s under the physician fee schedule as set
attending physician. forth in part 414 of this chapter.
(2) Relate to a test result that lies [60 FR 63178, Dec. 8, 1995, as amended at 70
outside the clinically significant nor- FR 47490, Aug. 12, 2005]
mal or expected range in view of the
condition of the beneficiary. § 415.152 Definitions.
(3) Result in a written narrative re- As used in this subpart—
port included in the beneficiary’s med- Approved graduate medical education
ical record. (GME) program means one of the fol-
(4) Require the exercise of medical lowing:
judgment by the consultant physician. (1) A residency program approved by
(d) Physician pathology services fur- the Accreditation Council for Graduate
nished by an independent laboratory. (1) Medical Education, by the American
The technical component of physician Osteopathic Association, by the Com-
pathology services furnished by an mission on Dental Accreditation of the
independent laboratory to a hospital American Dental Association, or by
inpatient or outpatient on or before the Council on Podiatric Medical Edu-
June 30, 2012, may be paid to the lab- cation of the American Podiatric Med-
oratory by the contractor under the ical Association.
physician fee schedule if the Medicare (2) A program otherwise recognized
beneficiary is a patient of a covered as an ‘‘approved medical residency pro-
hospital as defined in paragraph (a)(1) gram’’ under § 413.75(b) of this chapter.
of this section. Direct medical and surgical services
(2) For services furnished after June means services to individual bene-
30, 2012, an independent laboratory may ficiaries that are either personally fur-
not bill the Medicare contractor for the nished by a physician or furnished by a
technical component of physician pa- resident under the supervision of a
thology services furnished to a hospital physician in a teaching hospital mak-
inpatient or outpatient. ing the cost election described in
(3) For services furnished on or after §§ 415.160 through 415.162.
January 1, 2008, the date of service pol- Nonprovider setting means a setting
icy in § 414.510 of this chapter applies to other than a hospital, skilled nursing
the TC of specimens for physician pa- facility, home health agency, or com-
thology services. prehensive outpatient rehabilitation
facility in which residents furnish serv-
[60 FR 63178, Dec. 8, 1995, as amended at 64 ices. These include, but are not limited
FR 59442, Nov. 2, 1999; 66 FR 55332, Nov. 1, to, family practice or multispecialty
2001; 71 FR 69788, Dec. 1, 2006; 72 FR 66405,
clinics and physician offices.
Nov. 27, 2007; 73 FR 69938, Nov. 19, 2008; 75 FR
73626, Nov. 29, 2010; 76 FR 73473, Nov. 28, 2011; Resident means one of the following:
77 FR 69371, Nov. 16, 2012] (1) An individual who participates in
an approved GME program, including
programs in osteopathy, dentistry, and
Subpart D—Physician Services in podiatry.
Teaching Settings (2) A physician who is not in an ap-
proved GME program, but who is au-
§ 415.150 Scope.
thorized to practice only in a hospital,
This subpart sets forth the rules gov- for example, individuals with tem-
erning payment for the services of phy- porary or restricted licenses, or unli-
sicians in teaching settings and the cri- censed graduates of foreign medical
teria for determining whether the pay- schools. For purposes of this subpart,
ments are made as one of the following: the term resident is synonymous with
(a) Services to the hospital under the the terms intern and fellow.
reasonable cost election in §§ 415.160 Teaching hospital means a hospital
through 415.164. engaged in an approved GME residency
191
§ 415.160 42 CFR Ch. IV (10–1–17 Edition)
program in medicine, osteopathy, den- to individual beneficiaries are covered

tistry, or podiatry. as hospital services, and
Teaching physician means a physician (2) The intermediary pays the hos-
(other than another resident) who in- pital for those services on a reasonable
volves residents in the care of his or cost basis under the rules in § 415.162.
her patients. (Payment for other physician com-
Teaching setting means any provider, pensation costs related to approved
hospital-based provider, or nonprovider GME programs is made as described in
settings in which Medicare payment § 413.78 of this chapter.)
for the services of residents is made (d) Election declined. If the teaching
under the direct GME payment provi- hospital does not make this election,
sions of §§ 413.75 through 413.83, or on a payment is made—
reasonable-cost basis under the provi- (1) For physician services furnished
sions of § 409.26 or § 409.40(f) for resident to beneficiaries on a fee schedule basis
services furnished in skilled nursing fa- as described in part 414 subject to the
cilities or home health agencies, re- rules in this subpart, and
spectively. (2) For the supervision of interns and
residents as described in §§ 413.75
through 413.83.
FR 59554, Nov. 22, 1996; 63 FR 26359, May 12,
1998; 70 FR 47490, Aug. 12, 2005; 74 FR 44001, [60 FR 63178, Dec. 8, 1995, as amended at 70
Aug. 27, 2009; 75 FR 50418, Aug. 16, 2010] FR 47490, Aug. 12, 2005]
§ 415.160 Election of reasonable cost § 415.162 Determining payment for

payment for direct medical and sur- physician services furnished to
gical services of physicians in beneficiaries in teaching hospitals.
teaching hospitals: General provi- (a) General rule. Payments for direct
sions.
medical and surgical services of physi-
(a) Scope. A teaching hospital may cians furnished to beneficiaries and su-
elect to receive payment on a reason- pervision of interns and residents fur-
able cost basis for the direct medical nishing care to beneficiaries is made by
and surgical services of its physicians Medicare on the basis of reasonable
in lieu of fee schedule payments that cost if the hospital exercises the elec-
might otherwise be made for these tion as provided for in § 415.160. If this
services. election is made, the following occurs:
(b) Conditions. A teaching hospital (1) Physician services furnished to
may elect to receive these payments beneficiaries and supervision of interns
only if— and residents furnishing care to bene-
(1) The hospital notifies its inter- ficiaries are paid on a reasonable-cost
mediary in writing of the election and basis, as provided for in paragraph (b)
meets the conditions of either para- of this section.
graph (b)(2) or paragraph (b)(3) of this (2) Payment for certain medical
section; school costs may be made as provided
(2) All physicians who furnish serv- for in paragraph (c) of this section.
ices to Medicare beneficiaries in the (3) Payments for services donated by
hospital agree not to bill charges for volunteer physicians to beneficiaries
these services; or are made to a fund designated by the
(3) All physicians who furnish serv- organized medical staff of the teaching
ices to Medicare beneficiaries in the hospital or medical school as provided
hospital are employees of the hospital for in paragraph (d) of this section.
and, as a condition of employment, are (b) Reasonable cost of physician serv-
precluded from billing for these services and supervision of interns and resi-
ices. dents. (1) Physician services furnished
(c) Effect of election. If a teaching hos- to beneficiaries and supervision of in-
pital elects to receive reasonable cost terns and residents furnishing care to
payment for physician direct medical beneficiaries in a teaching hospital are
and surgical services furnished to bene- payable as provider services on a rea-
ficiaries— sonable-cost basis.

(1) Those services and the supervision (2) For purposes of this paragraph,
of interns and residents furnishing care reasonable cost is defined as the direct
192
salary paid to these physicians, plus medical school for services furnished to
applicable fringe benefits. beneficiaries.
(3) The costs must be allocated to the (B) Costs incurred under an arrange-
services as provided by paragraph (j) of ment must be allocated to the full
this section and apportioned to pro- range of services furnished to the hos-
gram beneficiaries as provided by para- pital by the medical school physicians
graph (g) of this section. on the same basis as provided for under
(4) Other allowable costs incurred by paragraph (j) of this section, and costs
the provider related to the services de- allocated to direct medical and sur-
scribed in this paragraph are payable gical services furnished to hospital pa-
subject to the requirements applicable tients must be apportioned to bene-
to all other provider services. ficiaries as provided for under para-
(c) Reasonable costs for the services fur-
graph (g) of this section.
nished by a medical school or related or-
(C) If the medical school and the hos-
ganization in a hospital. An amount is
payable to the hospital by CMS under pital are not related organizations
the Medicare program provided that under the provisions of § 413.17 of this
the costs would be payable if incurred chapter and the hospital makes pay-
directly by the hospital rather than ment to the medical school only for the
under the arrangement. The amount costs of those services furnished to
must not be in excess of the reasonable beneficiaries, costs of the medical
costs (as defined in paragraphs (c)(1) school not to exceed 105 percent of the
and (c)(2) of this section) incurred by a sum of physician direct salaries, appli-
teaching hospital for services furnished cable fringe benefits, employer’s por-
by a medical school or organization as tion of FICA taxes, Federal and State
described in § 413.17 of this chapter for unemployment taxes, and workmen’s
certain costs to the medical school (or compensation paid by the medical
a related organization) in furnishing school or an organization related to
services in the hospital. the medical school may be recognized
(1) Reasonable costs of physician serv- as allowable costs of the medical
ices—(i) When the medical school and the school.
hospital are related organizations. If the (D) These allowable medical school
medical school (or organization related costs must be allocated to the full
to the medical school) and the hospital range of services furnished by the phy-
are related by common ownership or sicians of the medical school or organi-
control as described in § 413.17 of this zation related as provided by paragraph
chapter— (j) of this section.
(A) The costs of these services are al- (E) Costs allocated to direct medical
lowable costs to the hospital under the
and surgical services furnished to hos-
provisions of § 413.17 of this chapter;
pital patients must be apportioned to
and
beneficiaries as provided by paragraph
(B) The reimbursable costs to the
(g) of this section.
hospital are determined under the pro-
visions of this section in the same (2) Reasonable costs of other than direct
manner as the costs incurred for physi- medical and surgical services. These costs
cians on the hospital staff and without are determined in accordance with
regard to payments made to the med- paragraph (c)(1) of this section except
ical school by the hospital. that—
(ii) When the medical school and the (i) If the hospital makes payment to
hospital are not related organizations. (A) the medical school for other than di-
If the medical school and the hospital rect medical and surgical services fur-
are not related organizations under the nished to beneficiaries and supervision
provisions of § 413.17 of this chapter and of interns and residents furnishing care
the hospital makes payment to the to beneficiaries, these payments are
medical school for the costs of those subject to the required cost-finding and
services furnished to all patients, pay- apportionment methods applicable to
ment is made by Medicare to the hos- the cost of other hospital services (ex-
pital for the reasonable cost incurred cept for direct medical and surgical
by the hospital for its payments to the services furnished to beneficiaries); or
193
§ 415.162 42 CFR Ch. IV (10–1–17 Edition)
(ii) If the hospital makes payment to by common ownership or control (with-

the medical school only for these serv- in the meaning of § 413.17 of this chap-
ices furnished to beneficiaries, the cost ter) for direct medical and surgical
of these services is not subject to cost- services furnished to any patient in the
finding and apportionment as other- hospital is not considered an unpaid
wise provided by this subpart, and the voluntary physician for purposes of
reasonable cost paid by Medicare must this paragraph.
be determined on the basis of the (v) If, however, a physician receives
health insurance ratio(s) used in the compensation from the hospital or re-
apportionment of all other provider lated medical school or organization
costs (excluding physician direct med- only for services that are other than
ical and surgical services furnished to direct medical and surgical services, a
beneficiaries) applied to the allowable salary equivalent payment for the phy-
medical school costs incurred by the sician’s regularly scheduled direct
medical school for the services fur- medical and surgical services to bene-
nished to all patients of the hospital. ficiaries in the hospital may be im-
(d) ‘‘Salary equivalent’’ payments for puted. However, the sum of the im-
direct medical and surgical services fur- puted value for volunteer services and
nished by physicians on the voluntary the physician’s actual compensation
staff of the hospital. (1) CMS makes pay- from the hospital and the related med-
ments under the Medicare program to a ical school (or organization) may not
fund as defined in § 415.164 for direct exceed the amount that would have
medical and surgical services furnished been imputed if all of the physician’s
to beneficiaries on a regularly sched- hospital and medical school services
uled basis by physicians on the unpaid (compensated and volunteer) had been
voluntary medical staff of the hospital volunteer services, or paid at the rate
(or medical school under arrangement of $30,000 per year, whichever is less.
with the hospital). (2) The following examples illustrate
(i) These payments represent com- how the allowable imputed value for
pensation for contributed medical staff volunteer services is determined. In
time which, if not contributed, would each example, it has been assumed that
have to be obtained through employed the average salary equivalent hourly
staff on a payable basis. rate is equal to the hourly rate for the
(ii) Payments for volunteer services individual physician’s compensated
are determined by applying to the reg- services.
ularly scheduled contributed time an
hourly rate not to exceed the equiva- Example No: 1. Dr. Jones received $3,000 a
year from Hospital X for services other than
lent of the average direct salary (exclu-
direct medical services to all patients, for
sive of fringe benefits) paid to all full- example, utilization review and administra-
time, salaried physicians (other than tive services. Dr. Jones also voluntarily fur-
interns and residents) on the hospital nished direct medical services to bene-
staff or, if the number of full-time sala- ficiaries. The imputed value of the volunteer
ried physicians is minimal in absolute services amounted to $10,000 for the cost re-
terms or in relation to the number of porting period. The full imputed value of Dr.
physicians on the voluntary staff, to Jones’ volunteer direct medical services
would be allowed since the total amount of
physicians at like institutions in the
the imputed value ($10,000) and the com-
area. pensated services ($3,000) does not exceed
(iii) This ‘‘salary equivalent’’ is a sin- $30,000.
gle hourly rate covering all physicians Example No: 2. Dr. Smith received $25,000
regardless of specialty and is applied to from Hospital X for services as a department
the actual regularly scheduled time head in a teaching hospital. Dr. Smith also
contributed by the physicians in fur- voluntarily furnished direct medical services
nishing direct medical and surgical to beneficiaries. The imputed value of the
services to beneficiaries including su- volunteer services amounted to $10,000. Only
$5,000 of the imputed value of volunteer serv-
pervision of interns and residents in
ices would be allowed since the total amount
that care.
of the imputed value ($10,000) and the com-

(iv) A physician who receives any pensated services ($25,000) exceeds the $30,000
compensation from the hospital or a maximum amount allowable for all of Dr.
medical school related to the hospital Smith’s services.
194
COMPUTATION: this section and are not subject to
Maximum amount allowable for all cost-finding as described in § 413.24 of
services performed by Dr. Smith this chapter.
for purposes of this computation $30,000 (2) Physicians on the medical school
Less compensation received from faculty. Payment is made to a hospital
Hospital X for other than direct
medical services to individual pa- for the costs of services of physicians
tients ........................................... $25,000 on the medical school faculty, provided
Allowable amount of imputed value that if the medical school is not re-
for the volunteer services fur- lated to the hospital (within the mean-
nished by Dr. Smith .................... $5,000 ing of § 413.17 of this chapter, con-
Example No. 3. Dr. Brown is not com- cerning cost to related organizations),
pensated by Hospital X for any services fur- the hospital does not make payment to
nished in the hospital. Dr. Brown voluntarily the medical school for services fur-
furnished direct surgical services to bene- nished to all patients and the following
ficiaries for a period of 6 months, and the im- requirements are met: If the hospital
puted value of these services amounted to makes payment to the medical school
$20,000. The allowable amount of the imputed
value for volunteer services furnished by Dr.
for services furnished to all patients,
Brown would be limited to $15,000 ($30,000 × 6/ these requirements do not apply. (See
12). paragraph (c)(1)(ii) of this section.)
(i) There is a written agreement be-
(3) The amount of the imputed value
tween the hospital and the medical
for volunteer services applicable to
school or organization, specifying the
beneficiaries and payable to a fund is
types and extent of services to be fur-
determined in accordance with the ag-
nished by the medical school and speci-
gregate per diem method described in
fying that the hospital must pay to the
paragraph (g) of this section.
medical school an amount at least
(4) Medicare payments to a fund must
equal to the reasonable cost (as defined
be used by the fund solely for improve-
in paragraph (c) of this section) of fur-
ment of care of hospital patients or for
nishing the services to beneficiaries.
educational or charitable purposes
(which may include but are not limited (ii) The costs are paid to the medical
to medical and other scientific re- school by the hospital no later than
search). the date on which the cost report cov-
(i) No personal financial gain, either ering the period in which the services
direct or indirect, from benefits of the were furnished is due to CMS.
fund may inure to any of the hospital (iii) Payment for the services fur-
staff physicians, medical school fac- nished under an arrangement would
ulty, or physicians for whom Medicare have been made to the hospital had the
imputes costs for purposes of payment services been furnished directly by the
into the fund. hospital.
(ii) Expenses met from contributions (3) Physicians on the voluntary staff of
made to the hospital from a fund are the hospital (or medical school under ar-
not included as a reimbursable cost rangement with the hospital). If the con-
when expended by the hospital, and de- ditions for payment to a fund outlined
preciation expense is not allowed with in § 415.164 are met, payments are made
respect to equipment or facilities do- on a ‘‘salary equivalent’’ basis (as de-
nated to the hospital by a fund or pur- fined in paragraph (d) of this section)
chased by the hospital from monies in to a fund.
a fund. (f) Requirements for payment for med-
(e) Requirements for payment—(1) Phy- ical school faculty services other than
sicians on the hospital staff. The require- physician direct medical and surgical
ments under which the costs of physi- services. If the requirements for pay-
cian direct medical and surgical serv- ment for physician direct medical and
ices (including supervision of interns surgical services furnished to bene-
and residents) to beneficiaries are the ficiaries in a teaching hospital de-
same as those applicable to the cost of scribed in paragraph (e) of this section
all other covered provider services ex- are met, payment is made to a hospital
cept that the costs of these services are for the costs of medical school faculty
separately determined as provided by services other than physician direct
195
§ 415.162 42 CFR Ch. IV (10–1–17 Edition)
medical and surgical services furnished physician direct medical and surgical
in a teaching hospital. services furnished in a teaching hos-
(g) Aggregate per diem methods of ap- pital to patients is determined.
portionment—(1) For the costs of physi-
cian direct medical and surgical services. TEACHING HOSPITAL Y
The cost of physician direct medical Statistical and financial data:
and surgical services furnished in a
Total inpatient days as defined in
teaching hospital to beneficiaries is de-
paragraph (h)(2) of this section
termined on the basis of an average and outpatient visit days as de-
cost per diem as defined in paragraph fined in paragraph (h)(3) of this
(h)(1) of this section for physician di- section ...................................... 75,000
rect medical and surgical services to Total inpatient Part A days ........ 20,000
all patients (see §§ 415.172 through Total inpatient Part B days
415.184) for each of the following cat- where Part A coverage is not
egories of physicians: available ................................... 1,000
(i) Physicians on the hospital staff. Total outpatient Part B visit
(ii) Physicians on the medical school days .......................................... 5,000
faculty. Total cost of direct medical and
(2) For the imputed value of physician surgical services furnished to
all patients by physicians on
volunteer direct medical and surgical serv- the hospital staff as determined
ices. The imputed value of physician di- in accordance with paragraph
rect medical and surgical services fur- (i) of this section ...................... $1,500,000
nished to beneficiaries in a teaching Total cost of direct medical and
hospital is determined on the basis of surgical services furnished to
an average per diem, as defined in para- all patients by physicians on
graph (h)(1) of this section, for physi- the medical school faculty as
cian direct medical and surgical serv- determined in accordance with
paragraph (i) of this section ..... $1,650,000
ices to all patients except that the av-
erage per diem is derived from the im- Computation of cost applicable to program
puted value of the physician volunteer for physicians on the hospital staff:
direct medical and surgical services Average cost per diem for direct medical
furnished to all patients. and surgical services to patients by physi-
(h) Definitions. (1) Average cost per cians on the hospital staff: $1,500,000 ÷ 75,000
diem for physician direct medical and sur- = $20 per diem.
gical services (including supervision of in- Cost of physician direct medical
terns and residents) furnished in a teach- and surgical services furnished
ing hospital to patients in each category to inpatient beneficiaries cov-
ered under Part A: $20 per diem
of physician services described in para-
× 20,000 ...................................... $400,000
graph (g)(1) of this section means the
Cost of physician direct medical
amount computed by dividing total and surgical services furnished
reasonable costs of these services in to inpatient beneficiaries cov-
each category by the sum of— ered under Part B: $20 per diem
(i) Inpatient days (as defined in para- × 1,000 ........................................ $20,000
graph (h)(2) of this section); and Cost of physician direct medical
(ii) Outpatient visit days (as defined and surgical services furnished
in paragraph (h)(3) of this section). to outpatient beneficiaries cov-
(2) Inpatient days are determined by ered under Part B: $20 per diem
× 5,000 ........................................ $100,000
counting the day of admission as 3.5
days and each day after a patient’s day Computation of cost applicable to program
of admission, except the day of dis- for physicians on the medical school faculty:
charge, as 1 day. Average cost per diem for direct medical
(3) Outpatient visit days are deter- and surgical services to patients by physi-
mined by counting only one visit day cians on the medical school faculty:
for each calendar day that a patient $1,650,000 ÷ 75,000 = $22 per diem.
visits an outpatient department or Cost of physician direct medical
multiple outpatient departments. and surgical services furnished
(i) Application. (1) The following illus- to inpatient beneficiaries cov-

ered under Part A: $22 per diem
trates how apportionment based on the
× 20,000 ...................................... $440,000
aggregate per diem method for costs of
196
Cost of physician direct medical Imputed value of physician direct

and surgical services furnished medical and surgical services
to inpatient beneficiaries cov- furnished to inpatient bene-
ered under Part B: $20 per diem ficiaries covered under Part A:
× 1,000 ........................................ $22,000 $1.28 per diem × 20,000 ............... $25,600
Cost of physician direct medical Imputed value of physician direct
and surgical services furnished medical and surgical services
to outpatient beneficiaries cov- furnished to inpatient bene-
ered under Part B: $22 per diem ficiaries covered under Part B:
× 5,000 ........................................ $110,000 $1.28 per diem × 1,000 ................. $1,280
(2) The following illustrates how the im- Imputed value of physician direct
puted value of physician volunteer direct medical and surgical services
medical and surgical services furnished in a furnished to outpatient bene-
teaching hospital to beneficiaries is deter- ficiaries covered under Part B:
mined. $1.28 per diem × 5,000 ................. $6,400
Total ........................................... $33,280
Example: The physicians on the medical
staff of Teaching Hospital Y donated a total (j) Allocation of compensation paid to
of 5,000 hours in furnishing direct medical physicians in a teaching hospital. (1) In
and surgical services to patients of the hos- determining reasonable cost under this
pital during a cost reporting period and did section, the compensation paid by a
not receive any compensation from either teaching hospital, or a medical school
the hospital or the medical school. Also, the or related organization under arrange-
imputed value for any physician volunteer ment with the hospital, to physicians
services did not exceed the rate of $30,000 per in a teaching hospital must be allo-
year per physician. cated to the full range of services im-
STATISTICAL AND FINANCIAL DATA: plicit in the physician compensation
arrangements. (However, see paragraph
Total salaries paid to the full-
time salaried physicians by the (d) of this section for the computation
hospital (excluding interns and of the ‘‘salary equivalent’’ payments
residents) .................................. $800,000 for volunteer services furnished to pa-
Total physicians who were paid tients.)
for an average of 40 hours per (2) This allocation must be made and
week or 2,080 (52 weeks × 40 must be capable of substantiation on
hours per week) hours per year 20 the basis of the proportion of each phy-
Average hourly rate equivalent: sician’s time spent in furnishing each
$800,000 ÷ 41,600 (2,080 × 20) ......... $19.23
type of service to the hospital or med-
Computation of total imputed value of ical school.
physician volunteer services applicable to all
patients: § 415.164 Payment to a fund.
(Total donated hours × average (a) General rules. Payment for certain
hourly rate equivalent): 5,000 × voluntary services by physicians in
$19.23 ......................................... $96,150
teaching hospitals (as these services
Total inpatient days (as defined
in paragraph (h)(2) of this sec-
are described in § 415.160) is made on a
tion) and outpatient visit days salary equivalent basis (as described in
(as defined in paragraph (h)(3) § 415.162(d)) subject to the conditions
of this section) ......................... 75,000 and limitations contained in parts 405
Total inpatient Part A days ........ 20,000 and 413 of this chapter and this part
Total inpatient Part B days if 415, to a single fund (as defined in para-
Part A coverage is not avail- graph (b) of this section) designated by
able ........................................... 1,000 the organized medical staff of the hos-
Total outpatient Part B visit pital (or, if the services are furnished
days .......................................... 5,000 in the hospital by the faculty of a med-
Computation of imputed value of physician ical school, to a fund as may be des-
volunteer direct medical and surgical serv- ignated by the faculty), if the following
ices furnished to Medicare beneficiaries: conditions are met:
Average per diem for physician direct med- (1) The hospital (or medical school
ical and surgical services to all patients: furnishing the services under arrange-
$96,150 ÷ 75,000 = $1.28 per diem ment with the hospital) incurs no ac-
tual cost in furnishing the services.
197
§ 415.170 42 CFR Ch. IV (10–1–17 Edition)
(2) The hospital has an agreement outpatient and certain other ambula-
with CMS under part 489 of this chap- tory settings), § 415.176 (concerning
ter. renal dialysis services), and § 415.184
(3) The intermediary, or CMS as ap- (concerning psychiatric services), as
propriate, has received written assur- applicable.
ances that—
(i) The payment is used solely for the § 415.172 Physician fee schedule pay-
improvement of care of hospital pa- ment for services of teaching physi-
tients or for educational or charitable cians.
purposes; and (a) General rule. If a resident partici-
(ii) Neither the individuals who are pates in a service furnished in a teach-
furnished the services nor any other ing setting, physician fee schedule pay-
persons are charged for the services ment is made only if a teaching physi-
(and if charged, provision is made for cian is present during the key portion
the return of any monies incorrectly of any service or procedure for which
collected). payment is sought.
(b) Definition of a fund. For purposes (1) In the case of surgical, high-risk,
of paragraph (a) of this section, a fund or other complex procedures, the
is an organization that meets either of teaching physician must be present
the following requirements: during all critical portions of the pro-
(1) The organization has and retains cedure and immediately available to
exemption, as a governmental entity or furnish services during the entire serv-
under section 501(c)(3) of the Internal ice or procedure.
Revenue Code (nonprofit educational, (i) In the case of surgery, the teach-
charitable, and similar organizations), ing physician’s presence is not required
from Federal taxation. during opening and closing of the sur-
(2) The organization is an organiza- gical field.
tion of physicians who, under the
(ii) In the case of procedures per-
terms of their employment by an enti-
formed through an endoscope, the
ty that meets the requirements of
teaching physician must be present
paragraph (b)(1) of this section, are re-
during the entire viewing.
quired to turn over to that entity all
income that the physician organization (2) In the case of evaluation and man-
derives from the physician services. agement services, the teaching physi-
(c) Status of a fund. A fund approved cian must be present during the por-
for payment under paragraph (a) of this tion of the service that determines the
section has all the rights and respon- level of service billed. (However, in the
sibilities of a provider under Medicare case of evaluation and management
except that it does not enter into an services furnished in hospital out-
agreement with CMS under part 489 of patient departments and certain other
this chapter. ambulatory settings, the requirements
of § 415.174 apply.)
§ 415.170 Conditions for payment on a (b) Documentation. Except for services
fee schedule basis for physician furnished as set forth in §§ 415.174 (con-
services in a teaching setting. cerning an exception for services fur-
Services meeting the conditions for nished in hospital outpatient and cer-
payment in § 415.102(a) furnished in tain other ambulatory settings), 415.176
teaching settings are payable under the (concerning renal dialysis services),
physician fee schedule if— and 415.184 (concerning psychiatric
(a) The services are personally fur- services), the medical records must
nished by a physician who is not a resi- document the teaching physician was
dent; or present at the time the service is fur-
(b) The services are furnished by a nished. The presence of the teaching
resident in the presence of a teaching physician during procedures may be
physician except as provided in § 415.172 demonstrated by the notes in the med-
(concerning physician fee schedule pay- ical records made by a physician, resi-
ment for services of teaching physi- dent, or nurse. In the case of evalua-
cians), § 415.174 (concerning an exception and management procedures, the
tion for services furnished in hospital teaching physician must personally
198
document his or her participation in (4) The range of services furnished by

the service in the medical records. residents in the center includes all of
(c) Payment level. In the case of serv- the following:
ices such as evaluation and manage- (i) Acute care for undifferentiated
ment for which there are several levels problems or chronic care for ongoing
of service codes available for reporting conditions.
purposes, the appropriate payment (ii) Coordination of care furnished by
level must reflect the extent and com- other physicians and providers.
plexity of the service when fully fur- (iii) Comprehensive care not limited
nished by the teaching physician. by organ system, or diagnosis.
(5) The patients seen must be an
§ 415.174 Exception: Evaluation and identifiable group of individuals who
management services furnished in
certain centers. consider the center to be the con-
tinuing source of their health care and
(a) In the case of certain evaluation in which services are furnished by resi-
and management codes of lower and dents under the medical direction of
mid-level complexity (as specified by teaching physicians.
CMS in program instructions), carriers (b) Nothing in paragraph (a) of this
may make physician fee schedule pay- section may be construed as providing
ment for a service furnished by a resi- a basis for the coverage of services not
dent without the presence of a teaching determined to be covered under Medi-
physician. For the exception to apply, care, such as routine physical check-
all of the following conditions must be ups.
met:
(1) The services must be furnished in [60 FR 63178, Dec. 8, 1995, as amended at 61
a center that is located in an out- FR 59554, Nov. 22, 1996; 70 FR 47490, Aug. 12,
patient department of a hospital or an- 2005]
other ambulatory care entity in which
§ 415.176 Renal dialysis services.
the time spent by residents in patient
care activities is included in deter- In the case of renal dialysis services,
mining intermediary payments to a physicians who are not paid under the
hospital under §§ 413.75 through 413.83. physician monthly capitation payment
(2) Any resident furnishing the serv- method (as described in § 414.314 of this
ice without the presence of a teaching chapter) must meet the requirements
physician must have completed more of §§ 415.170 and 415.172 (concerning phy-
than 6 months of an approved residency sician fee schedule payment for serv-
program. ices of teaching physicians).
(3) The teaching physician must not
direct the care of more than four resi- § 415.178 Anesthesia services.
dents at any given time and must di- (a) General rule. (1) For services fur-
rect the care from such proximity as to nished prior to January 1, 2010, an unre-
constitute immediate availability. The duced physician fee schedule payment
teaching physician must— may be made if a physician is involved
(i) Have no other responsibilities at in a single anesthesia procedure involv-
the time; ing an anesthesia resident. In the case
(ii) Assume management responsi- of anesthesia services, the teaching
bility for those beneficiaries seen by physician must be present during all
the residents; critical portions of the procedure and
(iii) Ensure that the services fur- immediately available to furnish serv-
nished are appropriate; ices during the entire service or proce-
(iv) Review with each resident during dure. The teaching physician cannot
or immediately after each visit, the receive an unreduced fee if he or she
beneficiary’s medical history, physical performs services involving other pa-
examination, diagnosis, and record of tients during the period the anesthesia
tests and therapies; and resident is furnishing services in a sin-
(v) Document the extent of the teach- gle case. Additional rules for payment
ing physician’s participation in the re- of anesthesia services involving resi-

view and direction of the services fur- dents are specified in § 414.46(c)(1)(iii) of
nished to each beneficiary. this chapter.
199
§ 415.180 42 CFR Ch. IV (10–1–17 Edition)
(2) For services furnished on or after surgery in a teaching hospital. This

January 1, 2010, payment made under section is based on section
§ 414.46(e) of this chapter if the teaching 1842(b)(7)(D)(I) of the Act and applies
anesthesiologist (or different teaching only to hospitals with an approved
anesthesiologists in the same anes- GME residency program. Except as
thesia group practice) is present during specified in paragraph (c) of this sec-
all critical or key portions of the anes- tion, fee schedule payment is not avail-
thesia service or procedure involved; able for assistants at surgery in hos-
and the teaching anesthesiologist (or pitals with—
another anesthesiologist with whom (1) A training program relating to
the teaching anesthesiologist has en- the medical specialty required for the
tered into an arrangement) is imme- surgical procedure; and
diately available to furnish anesthesia (2) A resident in a training program
services during the entire procedure. relating to the specialty required for
(b) Documentation. Documentation the surgery available to serve as an as-
must indicate the teaching physician’s sistant at surgery.
presence during all critical or key por- (b) Definition. Assistant at surgery
tions of the anesthesia procedure and means a physician who actively assists
the immediate availability of another the physician in charge of a case in
teaching anesthesiologist. performing a surgical procedure.
(c) Conditions for payment for assist-
[74 FR 62014, Nov. 25, 2009]
ants at surgery. Payment on a fee sched-
§ 415.180 Teaching setting require- ule basis is made for the services of an
ments for the interpretation of di- assistant at surgery in a teaching hos-
agnostic radiology and other diag- pital only if the services meet one of
nostic tests. the following conditions:
(a) General rule. Physician fee sched- (1) Are required as a result of excep-
ule payment is made for the interpreta- tional medical circumstances.
tion of diagnostic radiology and other (2) Are complex medical procedures
diagnostic tests if the interpretation is performed by a team of physicians,
performed or reviewed by a physician each performing a discrete, unique
other than a resident. function integral to the performance of
(b) Documentation. Documentation a complex medical procedure that re-
must indicate that the physician per- quires the special skills of more than
sonally performed the interpretation or one physician.
reviewed the resident’s interpretation (3) Constitute concurrent medical
with the resident. care relating to a medical condition
that requires the presence of, and ac-
§ 415.184 Psychiatric services. tive care by, a physician of another
To qualify for physician fee schedule specialty during surgery.
payment for psychiatric services fur- (4) Are medically required and are
nished under an approved GME pro- furnished by a physician who is pri-
gram, the physician must meet the re- marily engaged in the field of surgery,
quirements of §§ 415.170 and 415.172, in- and the primary surgeon does not use
cluding documentation, except that the interns and residents in the surgical
requirement for the presence of the procedures that the surgeon performs
teaching physician during the service (including preoperative and post-
in which a resident is involved may be operative care).
met by observation of the service by (5) Are not related to a surgical pro-
use of a one-way mirror, video equip- cedure for which CMS determines that
ment, or similar device. assistants are used less than 5 percent
of the time.
§ 415.190 Conditions of payment: As-
sistants at surgery in teaching hos- Subpart E—Services of Residents
pitals.
(a) Basis, purpose, and scope. This sec- § 415.200 Services of residents in ap-
tion describes the conditions under proved GME programs.

which Medicare pays on a fee schedule (a) General rules. Services furnished
basis for the services of an assistant at in hospitals by residents in approved
200
GME programs are specifically ex- which the skilled nursing facility has a
cluded from being paid as ‘‘physician transfer agreement that provides, in
services’’ defined in § 414.2 of this chap- part, for the transfer of patients and
ter and are payable as hospital serv- the interchange of medical records.
ices. This exclusion applies whether or (2) Home health agency. A partici-
not the resident is licensed to practice pating home health agency may re-
under the laws of the State in which he ceive payment for the cost of the serv-
or she performs the service. The pay- ices of an intern or resident who is
ment methodology for services of resi- under an approved GME program of a
dents in hospitals and hospital-based hospital with which the home health
providers is set forth in §§ 413.75 agency is affiliated or under common
through 413.83 of this chapter. control if these services are furnished
(b) Exception. For low and mid-level as part of the home health visits for a
evaluation and management services Medicare beneficiary. (Nevertheless,
furnished under certain conditions in see §§ 413.75 through 413.83 of this chap-
centers located in hospital outpatient ter for the costs of approved GME pro-
departments and other ambulatory set- grams in hospital-based providers.)
tings, see § 415.174. (b) Medicare Part B payment. Medical
(c) Definitions. See § 415.152 for defini- services of a resident of a hospital that
tions of terms used in this subpart E. are furnished by a skilled nursing facil-
[60 FR 63178, Dec. 8, 1995, as amended at 70 ity or home health agency are paid
FR 47490, Aug. 12, 2005] under Medicare Part B if payment is
not provided under Medicare Part A.
§ 415.202 Services of residents not in Payment is made under Part B for a
approved GME programs. resident’s services by reducing the rea-
(a) General rules. For services of a sonable costs of furnishing the services
physician employed by a hospital who by the beneficiary deductible and pay-
is authorized to practice only in a hos- ing 80 percent of the remaining
pital setting and for the services of a amount.
resident who is not in any approved
GME program, payment is made to the
FR 47490, Aug. 12, 2005]
hospital on a Part B reasonable cost
basis regardless of whether the services § 415.206 Services of residents in non-
are furnished to hospital inpatients or provider settings.
outpatients.
(b) Payment. For services described in Patient care activities of residents in
paragraph (a) of this section, payment approved GME programs that are fur-
is made under Part B by reducing the nished in nonprovider settings are pay-
reasonable costs of furnishing the serv- able in one of the following two ways:
ices by the beneficiary deductible and (a) Direct GME payments. If the condi-
paying 80 percent of the remaining tions in § 413.78 regarding patient care
amount. No payment is made for other activities and training of residents are
costs of unapproved programs, such as met, the time residents spend in non-
administrative costs related to teach- provider settings such as clinics, nurs-
ing activities of physicians. ing facilities, and physician offices in
connection with approved GME pro-
§ 415.204 Services of residents in grams is included in determining the
skilled nursing facilities and home number of full-time equivalency resi-
health agencies. dents in the calculation of a teaching
(a) Medicare Part A payment. Payment hospital’s resident count. The teaching
is made under Medicare Part A for in- physician rules on carrier payments in
terns’ and residents’ services furnished §§ 415.170 through 415.184 apply in these
in the following settings that meet the teaching settings.
specified requirements: (b) Physician fee schedule. (1) Services
(1) Skilled nursing facility. Payment to furnished by a resident in a nonpro-
a participating skilled nursing facility vider setting are covered as physician
may include the cost of services of an services and payable under the physi-
intern or resident who is in an ap- cian fee schedule if the following re-
proved GME program in a hospital with quirements are met:
201
§ 415.208 42 CFR Ch. IV (10–1–17 Edition)
(i) The resident is fully licensed to tistry, or podiatry by the State in

practice medicine, osteopathy, den- which the services are performed.
tistry, or podiatry in the State in (iii) The services performed can be
which the service is performed. separately identified from those serv-
(ii) The time spent in patient care ac- ices that are required as part of the ap-
tivities in the nonprovider setting is proved GME program.
not included in a teaching hospital’s (3) If the criteria specified in para-
full-time equivalency resident count graph (b)(2) of this section are met, the
for the purpose of direct GME pay- services of the moonlighting resident
ments. are considered to have been furnished
(2) Payment may be made regardless by the individual in his or her capacity
of whether a resident is functioning as a physician, rather than in the ca-
within the scope of his or her GME pro- pacity of a resident. The carrier must
gram in the nonprovider setting. review the contracts and agreements
(3) If fee schedule payment is made for these services to ensure compliance
for the resident’s services in a nonpro- with the criteria specified in paragraph
vider setting, payment must not be (b)(2) of this section.
made for the services of a teaching (4) No payment is made for services
physician. of a ‘‘teaching physician’’ associated
(4) The carrier must apply the physi- with moonlighting services, and the
cian fee schedule payment rules set time spent furnishing these services is
forth in subpart A of part 414 of this not included in the teaching hospital’s
chapter to payments for services fur- full-time equivalency count for the in-
nished by a resident in a nonprovider direct GME payment (§ 412.105 of this
setting. chapter) and for the direct GME pay-
[60 FR 63178, Dec. 8, 1995, as amended at 70 ment (§§ 413.75 through 413.83 of this
FR 47490, Aug. 12, 2005] chapter).
(c) Other settings. Moonlighting serv-
§ 415.208 Services of moonlighting ices of a licensed resident in an ap-
residents. proved GME program furnished outside
(a) Definition. For purposes of this the scope of that program in a hospital
section, the term services of moon- or other setting that does not partici-
lighting residents refers to services that pate in the approved GME program are
licensed residents perform that are payable under the physician fee sched-
outside the scope of an approved GME ule as set forth in § 415.206(b)(1).
program. [60 FR 63178, Dec. 8, 1995, as amended at 70
(b) Services in GME program hospitals. FR 47490, Aug. 12, 2005]
(1) The services of residents to inpa-
tients of hospitals in which the resi- PART 416—AMBULATORY
dents have their approved GME pro-
gram are not covered as physician serv-
SURGICAL SERVICES
ices and are payable under §§ 413.75
Subpart A—General Provisions and
through 413.83 regarding direct GME
Definitions
payments.
(2) Services of residents that are not Sec.
related to their approved GME pro- 416.1 Basis and scope.
grams and are performed in an out- 416.2 Definitions.
patient department or emergency de-
partment of a hospital in which they Subpart B—General Conditions and
have their training program are cov- Requirements
ered as physician services and payable 416.25 Basic requirements.
under the physician fee schedule if all 416.26 Qualifying for an agreement.
of the following criteria are met: 416.30 Terms of agreement with CMS.
(i) The services are identifiable phy- 416.35 Termination of agreement.
sician services and meet the conditions
Subpart C—Specific Conditions for
for payment of physician services to
Coverage
beneficiaries in providers in § 415.102(a).
(ii) The resident is fully licensed to 416.40 Condition for coverage—Compliance
practice medicine, osteopathy, den- with State licensure law.
202
416.41 Condition for coverage—Governing 416.179 Payment and coinsurance reduction
body and management. for devices replaced without cost or when
416.42 Condition for coverage—Surgical full or partial credit is received.
services.
416.43 Conditions for coverage—Quality as- Subpart G—Adjustment in Payment
sessment and performance improvement. Amounts for New Technology Intra-
416.44 Condition for coverage—Environ- ocular Lenses Furnished by Ambula-
ment.
416.45 Condition for coverage—Medical
tory Service Centers
staff. 416.180 Basis and scope.
416.46 Condition for coverage—Nursing serv- 416.185 Process for establishing a new class
ices. of new technology IOLs.
416.47 Condition for coverage—Medical
416.190 Request for review of payment
records.
amount.
416.48 Condition for coverage—Pharma-
ceutical services. 416.195 Determination of membership in
416.49 Condition for coverage—Laboratory new classes of new technology IOLs.
and radiologic services. 416.200 Payment adjustment.
416.50 Condition for coverage—Patient
rights. Subpart H—Requirements Under the Am-
416.51 Conditions for coverage—Infection bulatory Surgical Center Quality Re-
control. porting (ASCQR) Program
416.52 Conditions for coverage—Patient ad-
mission, assessment and discharge. 416.300 Basis and scope of subpart.
416.54 Condition for coverage—Emergency 416.305 Participation and withdrawal re-
preparedness. quirements under the ASCQR Program.
416.310 Data collection and submission re-
Subpart D—Scope of Benefits for Services quirements under the ASCQR Program.
Furnished Before January 1, 2008 416.315 Public reporting of data under the
ASCQR Program.
416.60 General rules. 416.320 Retention and removal of quality
416.61 Scope of facility services. measures under the ASCQR Program.
416.65 Covered surgical procedures.
416.325 Measure maintenance under the
416.75 Performance of listed surgical proce-
ASCQR Program.
dures on an inpatient hospital basis.
416.330 Reconsiderations under the ASCQR
416.76 Applicability.
Program.
Subpart E—Prospective Payment System AUTHORITY: Secs. 1102, 1138, and 1871 of the
for Facility Services Furnished Before Social Security Act (42 U.S.C. 1302, 1320b–8,
January 1, 2008 and 1395hh) and section 371 of the Public
Health Service Act (42 U.S.C. 273).
416.120 Basis for payment.
416.121 Applicability. SOURCE: 47 FR 34094, Aug. 5, 1982, unless
416.125 ASC facility services payment rate. otherwise noted.
416.130 Publication of revised payment
methodologies. Subpart A—General Provisions
416.140 Surveys.
and Definitions
Subpart F—Coverage, Scope of ASC Serv-
ices, and Prospective Payment System
for ASC Services Furnished on or After (a) Statutory basis. (1) Section
January 1, 2008 1832(a)(2)(F)(i) of the Act provides for
Medicare Part B coverage of facility
416.160 Basis and scope services furnished in connection with
416.161 Applicability of this subpart
416.163 General rules
surgical procedures specified by the
416.164 Scope of ASC services Secretary under section 1833(i)(1) of the
416.166 Covered surgical procedures Act.
416.167 Basis of payment (2) Section 1833(i)(1)(A) of the Act re-
416.171 Determination of payment rates for quires the Secretary to specify the sur-
ASC services gical procedures that can be performed
416.172 Adjustments to national payment safely on an ambulatory basis in an
rates
ambulatory surgical center.
416.173 Publication of revised payment

methodologies and payment rates (3) Sections 1833(i)(2)(A) and (D) and
416.178 Limitations on administrative and 1833(a)(1)(G) of the Act specify the
judicial review amounts to be paid for facility services
203
§ 416.2 42 CFR Ch. IV (10–1–17 Edition)
furnished in connection with the speci- that are furnished in an ASC, and be-
fied surgical procedures when they are ginning January 1, 2008, means the
performed in an ASC. combined facility services and covered
(4) Section 1833(i)(2)(C) of the Act ancillary services that are furnished in
provides that if the Secretary has not an ASC in connection with covered sur-
updated amounts for ASC facility serv- gical procedures.
ices furnished during a fiscal year Covered ancillary services means items
through 2005 or a calendar year begin- and services that are integral to a cov-
ning with 2006, the amounts shall be in- ered surgical procedure performed in
creased by the percentage increase in an ASC as provided in § 416.164(b), for
the Consumer Price Index for all urban which payment may be made under
consumers as estimated by the Sec- § 416.171 in addition to the payment for
retary for the 12-month period ending the facility services.
with the midpoint of the year involved, Covered surgical procedures means
except that, in fiscal year 2005, the last those surgical procedures furnished be-
quarter of calendar year 2005, and each fore January 1, 2008, that meet the cri-
of the calendar years 2006 through 2009, teria specified in § 416.65 and those sur-
the increase shall be zero percent. gical procedures furnished on or after
(5) Section 1833(i)(2)(E) of the Act January 1, 2008, that meet the criteria
provides that, with respect to surgical specified in § 416.166.
procedures furnished on or after Janu- Facility services means for the period
ary 1, 2007, and before the effective date before January 1, 2008, services that are
of the implementation of a revised pay- furnished in connection with covered
ment system, the payment amount surgical procedures performed in an
shall be the lesser of the ASC payment ASC, and beginning January 1, 2008,
rate established under section means services that are furnished in
1833(i)(2)(A) of the Act or the prospec- connection with covered surgical pro-
tive payment rate for hospital out- cedures performed in an ASC as pro-
patient department services estab- vided in § 416.164(a) for which payment
lished under section 1833(t)(3)(D) of the is included in the ASC payment estab-
Act. The lesser payment amount shall lished under § 416.171 for the covered
be determined prior to application of surgical procedure.
any geographic adjustment.
(b) Scope. This part sets forth— [56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20,
1991, as amended at 71 FR 68226, Nov. 24, 2006;
(1) The conditions that an ASC must
72 FR 42544, Aug. 2, 2007; 73 FR 68811, Nov. 18,
meet in order to participate in the 2008]
Medicare program;
(2) The scope of covered services; and
(3) The conditions for Medicare pay- Subpart B—General Conditions
ment for facility services. and Requirements
[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, § 416.25 Basic requirements.
1991, as amended at 71 FR 68226, Nov. 24, 2006]
Participation as an ASC is limited to
§ 416.2 Definitions. facilities that—
(a) Meet the definition in § 416.2; and
As used in this part: (b) Have in effect an agreement ob-
Ambulatory surgical center or ASC tained in accordance with this subpart.
means any distinct entity that oper-
ates exclusively for the purpose of pro- [56 FR 8843, Mar. 1, 1991]
viding surgical services to patients not
requiring hospitalization and in which § 416.26 Qualifying for an agreement.
the expected duration of services would (a) Deemed compliance. CMS may
not exceed 24 hours following an admis- deem an ASC to be in compliance with
sion. The entity must have an agree- any or all of the conditions set forth in
ment with CMS to participate in Medi- subpart C of this part if—
care as an ASC, and must meet the (1) The ASC is accredited by a na-
conditions set forth in subparts B and tional accrediting body, or licensed by
C of this part. a State agency, that CMS determines

ASC services means, for the period be- provides reasonable assurance that the
fore January 1, 2008, facility services conditions are met;
204
(2) In the case of deemed status (b) Limitation on charges to bene-

through accreditation by a national ac- ficiaries. 1 The ASC agrees to charge the
crediting body, where State law re- beneficiary or any other person only
quires licensure, the ASC complies the applicable deductible and coinsur-
with State licensure requirements; and ance amounts for facility services for
(3) The ASC authorizes the release to which the beneficiary—
CMS, of the findings of the accredita- (1) Is entitled to have payment made
tion survey. on his or her behalf under this part; or
(b) Survey of ASCs. (1) Unless CMS (2) Would have been so entitled if the
deems the ASC to be in compliance ASC had filed a request for payment in
with the conditions set forth in subpart accordance with § 410.165 of this chap-
C of this part, the State survey agency ter.
must survey the facility to ascertain (c) Refunds to beneficiaries. (1) The
compliance with those conditions, and ASC agrees to refund as promptly as
report its findings to CMS. possible any money incorrectly col-
(2) CMS surveys deemed ASCs on a lected from beneficiaries or from some-
sample basis as part of CMS’s valida- one on their behalf.
tion process. (2) As used in this section, money in-
(c) Acceptance of the ASC as qualified correctly collected means sums collected
to furnish ambulatory surgical services. If in excess of those specified in para-
CMS determines, after reviewing the graph (b) of this section. It includes
survey agency recommendation and amounts collected for a period of time
other evidence relating to the quali- when the beneficiary was believed not
fication of the ASC, that the facility to be entitled to Medicare benefits if—
meets the requirements of this part, it (i) The beneficiary is later deter-
sends to the ASC— mined to have been entitled to Medi-
(1) Written notice of the determina- care benefits; and
tion; and (ii) The beneficiary’s entitlement pe-
(2) Two copies of the ASC agreement. riod falls within the time the ASC’s
(d) Filing of agreement by the ASC. If agreement with CMS is in effect.
the ASC wishes to participate in the (d) Furnishing information. The ASC
program, it must— agrees to furnish to CMS, if requested,
(1) Have both copies of the ASC information necessary to establish pay-
agreement signed by its authorized rep- ment rates specified in §§ 416.120–416.130
resentative; and in the form and manner that CMS re-
(2) File them with CMS. quires.
(e) Acceptance by CMS. If CMS accepts (e) Acceptance of assignment. The ASC
the agreement filed by the ASC, re- agrees to accept assignment for all fa-
turns to the ASC one copy of the agree- cility services furnished in connection
ment, with a notice of acceptance with covered surgical procedures. For
specifying the effective date. purposes of this section, assignment
(f) Appeal rights. If CMS refuses to means an assignment under § 424.55 of
enter into an agreement or if CMS ter- this chapter of the right to receive pay-
minates an agreement, the ASC is enti- ment under Medicare Part B and pay-
tled to a hearing in accordance with ment under § 424.64 of this chapter
part 498 of this chapter. (when an individual dies before assign-
ing the claim).
[56 FR 8843, Mar. 1, 1991]
(f) ASCs operated by a hopsital. In an
§ 416.30 Terms of agreement with ASC operated by a hospital—
CMS. (1) The agreement is made effective
on the first day of the next Medicare
As part of the agreement under cost reporting period of the hospital
§ 416.26 the ASC must agree to the fol- that operates the ASC; and
lowing:
(a) Compliance with coverage condi-
1 For facility services furnished before July
tions. The ASC agrees to meet the con-
1987, the ASC had to agree to make no charge

ditions for coverage specified in sub- to the beneficiary, since those services were
part C of this part and to report not subject to the part B deductible and co-
promptly to CMS any failure to do so. insurance provisions.
205
§ 416.35 42 CFR Ch. IV (10–1–17 Edition)
(2) The ASC participates and is paid least 15 days before the effective date
only as an ASC. stated in the notice.
(3) Costs for the ASC are treated as a (3) Appeal by the ASC. An ASC may
non-reimbursable cost center on the appeal the termination of its agree-
hopsital’s cost report. ment in accordance with the provisions
(g) Additional provisions. The agree- set forth in part 498 of this chapter.
ment may contain any additional pro- (c) Effect of termination. Payment is
visions that CMS finds necessary or de- not available for ASC services fur-
sirable for the efficient and effective nished on or after the effective date of
administration of the Medicare pro- termination.
gram. (d) Notice to the public. Prompt notice
of the date and effect of termination is
[47 FR 34094, Aug. 5, 1982, as amended at 51
FR 41351, Nov. 14, 1986; 56 FR 8844, Mar. 1,
given to the public by—
1991; 74 FR 60680, Nov. 20, 2009] (1) The ASC, after CMS has approved
or set a termination date; or
§ 416.35 Termination of agreement. (2) CMS, when it has terminated the
(a) Termination by the ASC—(1) Notice agreement.
to CMS. An ASC that wishes to termi- (e) Conditions for reinstatement after
nate its agreement must send CMS termination of agreement by CMS. When
written notice of its intent. an agreement with an ASC is termi-
(2) Date of termination. The notice nated by CMS, the ASC may not file
may state the intended date of termi- another agreement to participate in
nation which must be the first day of a the Medicare program unless CMS—
calendar month. (1) Finds that the reason for the ter-
(i) If the notice does not specify a mination of the prior agreement has
date, or the date is not acceptable to been removed; and
CMS, CMS may set a date that will not (2) Is assured that the reason for the
be more than 6 months from the date termination will not recur.
on the ASC’s notice of intent. [47 FR 34094, Aug. 5, 1982, as amended at 52
(ii) CMS may accept a termination FR 22454, June 12, 1987; 56 FR 8844, Mar. 1,
date that is less than 6 months after 1991; 61 FR 40347, Aug. 2, 1996; 82 FR 38515,
the date on the ASC’s notice if it deter- Aug. 14, 2017]
mines that to do so would not unduly
disrupt services to the community or Subpart C—Specific Conditions for
otherwise interfere with the effective Coverage
and efficient administration of the
Medicare program. § 416.40 Condition for coverage—Com-
(3) Voluntary termination. If an ASC pliance with State licensure law.
ceases to furnish services to the com- The ASC must comply with State li-
munity, that shall be deemed to be a censure requirements.
voluntary termination of the agree-
ment by the ASC, effective on the last § 416.41 Condition for coverage—Gov-
day of business with Medicare bene- erning body and management.
ficiaries. The ASC must have a governing body
(b) Termination by CMS—(1) Cause for that assumes full legal responsibility
termination. CMS may terminate an for determining, implementing, and
agreement if it determines that the monitoring policies governing the
ASC— ASC’s total operation. The governing
(i) No longer meets the conditions for body has oversight and accountability
coverage as specified under § 416.26; or for the quality assessment and per-
(ii) Is not in substantial compliance formance improvement program, en-
with the provisions of the agreement, sures that facility policies and pro-
the requirements of this subpart, and grams are administered so as to pro-
other applicable regulations of sub- vide quality health care in a safe envi-
chapter B of this chapter, or any appli- ronment, and develops and maintains a
cable provisions of title XVIII of the disaster preparedness plan.
Act. (a) Standard: Contract services. When

(2) Notice of termination. CMS sends services are provided through a con-
notice of termination to the ASC at tract with an outside resource, the
206
ASC must assure that these services cational program. In those cases in
are provided in a safe and effective which a non-physician administers the
manner. anesthesia, unless exempted in accord-
(b) Standard: Hospitalization. (1) The ance with paragraph (c) of this section,
ASC must have an effective procedure the anesthetist must be under the su-
for the immediate transfer, to a hos- pervision of the operating physician,
pital, of patients requiring emergency and in the case of an anesthesiologist’s
medical care beyond the capabilities of assistant, under the supervision of an
the ASC. anesthesiologist.
(2) This hospital must be a local, (c) Standard: State exemption. (1) An
Medicare-participating hospital or a ASC may be exempted from the re-
local, nonparticipating hospital that quirement for physician supervision of
meets the requirements for payment CRNAs as described in paragraph (b)(2)
for emergency services under § 482.2 of of this section, if the State in which
this chapter. the ASC is located submits a letter to
(3) The ASC must— CMS signed by the Governor, following
(i) Have a written transfer agreement consultation with the State’s Boards of
with a hospital that meets the require- Medicine and Nursing, requesting ex-
ments of paragraph (b)(2) of this sec- emption from physician supervision of
tion; or CRNAs. The letter from the Governor
(ii) Ensure that all physicians per- must attest that he or she has con-
forming surgery in the ASC have ad- sulted with State Boards of Medicine
mitting privileges at a hospital that and Nursing about issues related to ac-
meets the requirements of paragraph cess to and the quality of anesthesia
(b)(2) of this section. services in the State and has concluded
[73 FR 68811, Nov. 18, 2008, as amended at 81 that it is in the best interests of the
FR 64022, Sept. 16, 2016] State’s citizens to opt-out of the cur-
rent physician supervision require-
§ 416.42 Condition for coverage—Sur- ment, and that the opt-out is con-
gical services. sistent with State law.
Surgical procedures must be per- (2) The request for exemption and
formed in a safe manner by qualified recognition of State laws, and the
physicians who have been granted clin- withdrawal of the request may be sub-
ical privileges by the governing body of mitted at any time, and are effective
the ASC in accordance with approved upon submission.
policies and procedures of the ASC. [57 FR 33899, July 31, 1992, as amended at 66
(a) Standard: Anesthetic risk and eval- FR 56768, Nov. 13, 2001; 73 FR 68812, Nov. 18,
uation. (1) A physician must examine 2008; 79 FR 27153, May 12, 2014]
the patient immediately before surgery
to evaluate the risk of anesthesia and § 416.43 Conditions for coverage—
of the procedure to be performed. Quality assessment and perform-
(2) Before discharge from the ASC, ance improvement.
each patient must be evaluated by a The ASC must develop, implement
physician or by an anesthetist as de- and maintain an ongoing, data-driven
fined at § 410.69(b) of this chapter, in ac- quality assessment and performance
cordance with applicable State health improvement (QAPI) program.
and safety laws, standards of practice, (a) Standard: Program scope. (1) The
and ASC policy, for proper anesthesia program must include, but not be lim-
recovery. ited to, an ongoing program that dem-
(b) Standard: Administration of anes- onstrates measurable improvement in
thesia. Anesthetics must be adminis- patient health outcomes, and improves
tered by only— patient safety by using quality indica-
(1) A qualified anesthesiologist; or tors or performance measures associ-
(2) A physician qualified to admin- ated with improved health outcomes
ister anesthesia, a certified registered and by the identification and reduction
nurse anesthetist (CRNA), or an anes- of medical errors.
thesiologist’s assistant as defined in (2) The ASC must measure, analyze,

§ 410.69(b) of this chapter, or a super- and track quality indicators, adverse
vised trainee in an approved edu- patient events, infection control and
207
§ 416.44 42 CFR Ch. IV (10–1–17 Edition)
other aspects of performance that in- (4) Clearly establishes its expecta-
cludes care and services furnished in tions for safety.
the ASC. (5) Adequately allocates sufficient
(b) Standard: Program data. (1) The staff, time, information systems and
program must incorporate quality indi- training to implement the QAPI pro-
cator data, including patient care and gram.
other relevant data regarding services
furnished in the ASC. [73 FR 68812, Nov. 18, 2008]
(2) The ASC must use the data col-
lected to— § 416.44 Condition for coverage—Envi-
ronment.
(i) Monitor the effectiveness and
safety of its services, and quality of its The ASC must have a safe and sani-
care. tary environment, properly con-
(ii) Identify opportunities that could structed, equipped, and maintained to
lead to improvements and changes in protect the health and safety of pa-
its patient care. tients.
(c) Standard: Program activities. (1) (a) Standard: Physical environment.
The ASC must set priorities for its per- The ASC must provide a functional and
formance improvement activities sanitary environment for the provision
that— of surgical services.
(i) Focus on high risk, high volume, (1) Each operating room must be de-
and problem-prone areas. signed and equipped so that the types
(ii) Consider incidence, prevalence, of surgery conducted can be performed
and severity of problems in those in a manner that protects the lives and
areas. assures the physical safety of all indi-
(iii) Affect health outcomes, patient viduals in the area.
safety, and quality of care. (2) The ASC must have a separate re-
(2) Performance improvement activi- covery room and waiting area.
ties must track adverse patient events, (b) Standard: Safety from fire. (1) Ex-
examine their causes, implement im-
cept as otherwise provided in this sec-
provements, and ensure that improve-
tion, the ASC must meet the provisions
ments are sustained over time.
applicable to Ambulatory Health Care
(3) The ASC must implement preven-
Occupancies, regardless of the number
tive strategies throughout the facility
of patients served, and must proceed in
targeting adverse patient events and
accordance with the Life Safety Code
ensure that all staff are familiar with
(NFPA 101 and Tentative Interim
these strategies.
Amendments TIA 12–1, TIA 12–2, TIA
(d) Standard: Performance improvement
12–3, and TIA 12–4).
projects. (1) The number and scope of
distinct improvement projects con- (2) In consideration of a rec-
ducted annually must reflect the scope ommendation by the State survey
and complexity of the ASC’s services agency or Accrediting Organization or
and operations. at the discretion of the Secretary, may
(2) The ASC must document the waive, for periods deemed appropriate,
projects that are being conducted. The specific provisions of the Life Safety
documentation, at a minimum, must Code, which would result in unreason-
include the reason(s) for implementing able hardship upon an ASC, but only if
the project, and a description of the the waiver will not adversely affect the
project’s results. health and safety of the patients.
(e) Standard: Governing body respon- (3) The provisions of the Life Safety
sibilities. The governing body must en- Code do not apply in a State if CMS
sure that the QAPI program— finds that a fire and safety code im-
(1) Is defined, implemented, and posed by State law adequately protects
maintained by the ASC. patients in an ASC.
(2) Addresses the ASC’s priorities and (4) An ASC may place alcohol-based
that all improvements are evaluated hand rub dispensers in its facility if the
for effectiveness. dispensers are installed in a manner

(3) Specifies data collection methods, that adequately protects against inap-
frequency, and details. propriate access.
208
(5) When a sprinkler system is shut Center, 7500 Security Boulevard, Balti-
down for more than 10 hours, the ASC more, MD or at the National Archives
must: and Records Administration (NARA).
(i) Evacuate the building or portion For information on the availability of
of the building affected by the system this material at NARA, call 202–741–
outage until the system is back in 6030, or go to: http://www.archives.gov/
service, or federallregister/
(ii) Establish a fire watch until the codeloflfederallregulations/
system is back in service. ibrllocations.html. If any changes in
(6) Beginning July 5, 2017, an ASC this edition of the Code are incor-
must be in compliance with Chapter porated by reference, CMS will publish
21.3.2.1, Doors to hazardous areas. a document in the FEDERAL REGISTER
(c) Standard: Building Safety. Except to announce the changes.
as otherwise provided in this section, (1) National Fire Protection Associa-
the ASC must meet the applicable pro- tion, 1 Batterymarch Park, Quincy,
visions and must proceed in accordance MA 02169, www.nfpa.org, 1.617.770.3000.
with the 2012 edition of the Health Care (i) NFPA 99, Standards for Health
Facilities Code (NFPA 99, and Ten- Care Facilities Code of the National
tative Interim Amendments TIA 12–2, Fire Protection Association 99, 2012
TIA 12–3, TIA 12–4, TIA 12–5 and TIA 12– edition, issued August 11, 2011.
6). (ii) TIA 12–2 to NFPA 99, issued Au-
(1) Chapters 7, 8, 12, and 13 of the gust 11, 2011.
adopted Health Care Facilities Code do (iii) TIA 12–3 to NFPA 99, issued Au-
not apply to an ASC. gust 9, 2012.
(2) If application of the Health Care (iv) TIA 12–4 to NFPA 99, issued
Facilities Code required under para- March 7, 2013.
graph (c) of this section would result in (v) TIA 12–5 to NFPA 99, issued Au-
unreasonable hardship for the ASC, gust 1, 2013.
CMS may waive specific provisions of (vi) TIA 12–6 to NFPA 99, issued
the Health Care Facilities Code, but March 3, 2014.
only if the waiver does not adversely (vii) NFPA 101, Life Safety Code, 2012
affect the health and safety of patients. edition, issued August 11, 2011;
(d) Standard: Emergency equipment. (viii) TIA 12–1 to NFPA 101, issued
The ASC medical staff and governing August 11, 2011.
body of the ASC coordinates, develops, (ix) TIA 12–2 to NFPA 101, issued Oc-
and revises ASC policies and proce- tober 30, 2012.
dures to specify the types of emergency (x) TIA 12–3 to NFPA 101, issued Oc-
equipment required for use in the tober 22, 2013.
ASC’s operating room. The equipment (xi) TIA 12–4 to NFPA 101, issued Oc-
must meet the following requirements: tober 22, 2013.
(1) Be immediately available for use (2) [Reserved]
during emergency situations.
[47 FR 34094, Aug. 5, 1982, amended at 53 FR
(2) Be appropriate for the facility’s
11508, Apr. 7, 1988; 54 FR 4026, Jan. 27, 1989; 68
patient population. FR 1385, Jan. 10, 2003; 69 FR 18803, Apr. 9,
(3) Be maintained by appropriate per- 2004; 70 FR 15237, Mar. 25, 2005; 71 FR 55339,
sonnel. Sept. 22, 2006; 77 FR 29030, May 16, 2012; 81 FR
(e) Standard: Emergency personnel. 26896, May 4, 2016; 81 FR 42548, June 30, 2016]
Personnel trained in the use of emer-
gency equipment and in § 416.45 Condition for coverage—Med-
cardiopulmonary resuscitation must be ical staff.
available whenever there is a patient in The medical staff of the ASC must be
the ASC. accountable to the governing body.
(f) The standards incorporated by ref- (a) Standard: Membership and clinical
erence in this section are approved for privileges. Members of the medical staff
incorporation by reference by the Di- must be legally and professionally
rector of the Office of the Federal Reg- qualified for the positions to which
ister in accordance with 5 U.S.C. 552(a) they are appointed and for the perform-
and 1 CFR part 51. You may inspect a ance of privileges granted. The ASC
copy at the CMS Information Resource grants privileges in accordance with
209
§ 416.46 42 CFR Ch. IV (10–1–17 Edition)
recommendations from qualified med- (5) Any allergies and abnormal drug
ical personnel. reactions.
(b) Standard: Reappraisals. Medical (6) Entries related to anesthesia ad-
staff privileges must be periodically re- ministration.
appraised by the ASC. The scope of pro- (7) Documentation of properly exe-
cedures performed in the ASC must be cuted informed patient consent.
periodically reviewed and amended as (8) Discharge diagnosis.
appropriate.
(c) Standard: Other practitioners. If the § 416.48 Condition for coverage—Phar-
ASC assigns patient care responsibil- maceutical services.
ities to practitioners other than physi- The ASC must provide drugs and
cians, it must have established policies biologicals in a safe and effective man-
and procedures, approved by the gov- ner, in accordance with accepted pro-
erning body, for overseeing and evalu- fessional practice, and under the direc-
ating their clinical activities. tion of an individual designated respon-
sible for pharmaceutical services.
§ 416.46 Condition for coverage—Nurs- (a) Standard: Administration of drugs.
ing services. Drugs must be prepared and adminis-
The nursing services of the ASC must tered according to established policies
be directed and staffed to assure that and acceptable standards of practice.
the nursing needs of all patients are (1) Adverse reactions must be re-
met. ported to the physician responsible for
(a) Standard: Organization and staff- the patient and must be documented in
ing. Patient care responsibilities must the record.
be delineated for all nursing service (2) Blood and blood products must be
personnel. Nursing services must be administered by only physicians or reg-
provided in accordance with recognized istered nurses.
standards of practice. There must be a (3) Orders given orally for drugs and
registered nurse available for emer- biologicals must be followed by a writ-
gency treatment whenever there is a ten order, signed by the prescribing
patient in the ASC. physician.
(b) [Reserved] (b) [Reserved]
§ 416.47 Condition for coverage—Med- § 416.49 Condition for coverage—Lab-

ical records. oratory and radiologic services.
The ASC must maintain complete, (a) Standard: Laboratory services. If
comprehensive, and accurate medical the ASC performs laboratory services,
records to ensure adequate patient it must meet the requirements of part
care. 493 of this chapter. If the ASC does not
(a) Standard: Organization. The ASC provide its own laboratory services, it
must develop and maintain a system must have procedures for obtaining
for the proper collection, storage, and routine and emergency laboratory
use of patient records. services from a certified laboratory in
(b) Standard: Form and content of accordance with part 493 of this chap-
record. The ASC must maintain a med- ter. The referral laboratory must be
ical record for each patient. Every certified in the appropriate specialties
record must be accurate, legible, and and subspecialties of service to perform
promptly completed. Medical records the referred tests in accordance with
must include at least the following: the requirements of Part 493 of this
(1) Patient identification. chapter.
(2) Significant medical history and (b) Standard: Radiologic services. (1)
results of physical examination. Radiologic services may only be pro-
(3) Pre-operative diagnostic studies vided when integral to procedures of-
(entered before surgery), if performed. fered by the ASC and must meet the re-
(4) Findings and techniques of the op- quirements specified in § 482.26(b),
eration, including a pathologist’s re- (c)(2), and (d)(2) of this chapter.
port on all tissues removed during sur- (2) If radiologic services are utilized,
gery, except those exempted by the the governing body must appoint an in-
governing body. dividual qualified in accordance with
210
State law and ASC policies who is re- (3) Document in a prominent part of
sponsible for assuring all radiologic the patient’s current medical record,
services are provided in accordance whether or not the individual has exe-
with the requirements of this section. cuted an advance directive.
[73 FR 68812, Nov. 18, 2008, as amended at 79 (d) Standard: Submission and investiga-
FR 27153, May 12, 2014] tion of grievances. The ASC must estab-
lish a grievance procedure for docu-
§ 416.50 Condition for coverage—Pa- menting the existence, submission, in-
tient rights. vestigation, and disposition of a pa-
The ASC must inform the patient or tient’s written or verbal grievance to
the patient’s representative or surro- the ASC. The following criteria must
gate of the patient’s rights and must be met:
protect and promote the exercise of (1) All alleged violations/grievances
these rights, as set forth in this sec- relating, but not limited to, mistreat-
tion. The ASC must also post the writ- ment, neglect, verbal, mental, sexual,
ten notice of patient rights in a place or physical abuse, must be fully docu-
or places within the ASC likely to be mented.
noticed by patients waiting for treat- (2) All allegations must be imme-
ment or by the patient’s representative diately reported to a person in author-
or surrogate, if applicable. ity in the ASC.
(a) Standard: Notice of Rights. An ASC (3) Only substantiated allegations
must, prior to the start of the surgical must be reported to the State author-
procedure, provide the patient, the pa- ity or the local authority, or both.
tient’s representative, or the patient’s (4) The grievance process must speci-
surrogate with verbal and written no- fy timeframes for review of the griev-
tice of the patient’s rights in a lan- ance and the provisions of a response.
guage and manner that ensures the pa- (5) The ASC, in responding to the
tient, the representative, or the surro- grievance, must investigate all griev-
gate understand all of the patient’s ances made by a patient, the patient’s
rights as set forth in this section. The representative, or the patient’s surro-
ASC’s notice of rights must include the gate regarding treatment or care that
address and telephone number of the is (or fails to be) furnished.
State agency to which patients may re- (6) The ASC must document how the
port complaints, as well as the Web grievance was addressed, as well as pro-
site for the Office of the Medicare Ben- vide the patient, the patient’s rep-
eficiary Ombudsman. resentative, or the patient’s surrogate
(b) Standard: Disclosure of physician fi- with written notice of its decision. The
nancial interest or ownership. The ASC decision must contain the name of an
must disclose, in accordance with Part ASC contact person, the steps taken to
420 of this subchapter, and where appli- investigate the grievance, the result of
cable, provide a list of physicians who the grievance process and the date the
have financial interest or ownership in grievance process was completed.
the ASC facility. Disclosure of infor- (e) Standard: Exercise of rights and re-
mation must be in writing. spect for property and person. (1) The pa-
(c) Standard: Advance directives. The tient has the right to the following:
ASC must comply with the following (i) Be free from any act of discrimi-
requirements: nation or reprisal.
(1) Provide the patient or, as appro- (ii) Voice grievances regarding treat-
priate, the patient’s representative ment or care that is (or fails to be) pro-
with written information concerning vided.
its policies on advance directives, in- (iii) Be fully informed about a treat-
cluding a description of applicable ment or procedure and the expected
State health and safety laws and, if re- outcome before it is performed.
quested, official State advance direc- (2) If a patient is adjudged incom-
tive forms. petent under applicable State laws by a
(2) Inform the patient or, as appro- court of proper jurisdiction, the rights
priate, the patient’s representative of of the patient are exercised by the per-
the patient’s right to make informed son appointed under State law to act
decisions regarding the patient’s care. on the patient’s behalf.
211
§ 416.51 42 CFR Ch. IV (10–1–17 Edition)
(3) If a State court has not adjudged § 416.52 Conditions for coverage—Pa-
a patient incompetent, any legal rep- tient admission, assessment and
resentative or surrogate designated by discharge.
the patient in accordance with State The ASC must ensure each patient
law may exercise the patient’s rights has the appropriate pre-surgical and
to the extent allowed by State law. post-surgical assessments completed
(f) Standard: Privacy and safety. The and that all elements of the discharge
patient has the right to— requirements are completed.
(1) Personal privacy.
(a) Standard: Admission and pre-sur-
(2) Receive care in a safe setting.
gical assessment. (1) Not more than 30
(3) Be free from all forms of abuse or
days before the date of the scheduled
harassment.
surgery, each patient must have a com-
(g) Standard: Confidentiality of clinical
prehensive medical history and phys-
records. The ASC must comply with the
ical assessment completed by a physi-
Department’s rules for the privacy and
cian (as defined in section 1861(r) of the
security of individually identifiable
health information, as specified at 45 Act) or other qualified practitioner in
CFR parts 160 and 164. accordance with applicable State
health and safety laws, standards of
[73 FR 68812, Nov. 18, 2008, as amended at 76 practice, and ASC policy.
FR 65889, Oct. 24, 2011] (2) Upon admission, each patient
§ 416.51 Conditions for coverage—In- must have a pre-surgical assessment
fection control. completed by a physician or other
qualified practitioner in accordance
The ASC must maintain an infection with applicable State health and safety
control program that seeks to mini-
laws, standards of practice, and ASC
mize infections and communicable dis-
policy that includes, at a minimum, an
eases.
updated medical record entry docu-
(a) Standard: Sanitary environment.
menting an examination for any
The ASC must provide a functional and
changes in the patient’s condition
sanitary environment for the provision
of surgical services by adhering to pro- since completion of the most recently
fessionally acceptable standards of documented medical history and phys-
practice. ical assessment, including documenta-
(b) Standard: Infection control program. tion of any allergies to drugs and
The ASC must maintain an ongoing biologicals.
program designed to prevent, control, (3) The patient’s medical history and
and investigate infections and commu- physical assessment must be placed in
nicable diseases. In addition, the infec- the patient’s medical record prior to
tion control and prevention program the surgical procedure.
must include documentation that the (b) Standard: Post-surgical assessment.
ASC has considered, selected, and im- (1) The patient’s post-surgical condi-
plemented nationally recognized infection must be assessed and documented
tion control guidelines. The program in the medical record by a physician,
is— other qualified practitioner, or a reg-
(1) Under the direction of a des- istered nurse with, at a minimum,
ignated and qualified professional who post-operative care experience in ac-
has training in infection control; cordance with applicable State health
(2) An integral part of the ASC’s and safety laws, standards of practice,
quality assessment and performance and ASC policy.
improvement program; and (2) Post-surgical needs must be ad-
(3) Responsible for providing a plan of dressed and included in the discharge
action for preventing, identifying, and notes.
managing infections and commu- (c) Standard: Discharge. The ASC
nicable diseases and for immediately must—
implementing corrective and preven- (1) Provide each patient with written
tive measures that result in improve- discharge instructions and overnight

ment. supplies. When appropriate, make a fol-
[73 FR 68813, Nov. 18, 2008] lowup appointment with the physician,
212
and ensure that all patients are in- (b) Policies and procedures. The ASC
formed, either in advance of their sur- must develop and implement emer-
gical procedure or prior to leaving the gency preparedness policies and proce-
ASC, of their prescriptions, post-opera- dures, based on the emergency plan set
tive instructions and physician contact forth in paragraph (a) of this section,
information for followup care. risk assessment at paragraph (a)(1) of
(2) Ensure each patient has a dis- this section, and the communication
charge order, signed by the physician plan at paragraph (c) of this section.
who performed the surgery or proce- The policies and procedures must be re-
dure in accordance with applicable viewed and updated at least annually.
State health and safety laws, standards At a minimum, the policies and proce-
of practice, and ASC policy. dures must address the following:
(3) Ensure all patients are discharged (1) A system to track the location of
in the company of a responsible adult, on-duty staff and sheltered patients in
except those patients exempted by the the ASC’s care during an emergency. If
attending physician. on-duty staff or sheltered patients are
[73 FR 68813, Nov. 18, 2008] relocated during the emergency, the
ASC must document the specific name
§ 416.54 Condition for coverage— and location of the receiving facility or
Emergency preparedness. other location.
The Ambulatory Surgical Center (2) Safe evacuation from the ASC,
(ASC) must comply with all applicable which includes the following:
Federal, State, and local emergency (i) Consideration of care and treat-
preparedness requirements. The ASC ment needs of evacuees.
must establish and maintain an emer- (ii) Staff responsibilities.
gency preparedness program that (iii) Transportation.
meets the requirements of this section. (iv) Identification of evacuation loca-
The emergency preparedness program tion(s).
must include, but not be limited to, the (v) Primary and alternate means of
following elements: communication with external sources
(a) Emergency plan. The ASC must de- of assistance.
velop and maintain an emergency pre- (3) A means to shelter in place for pa-
paredness plan that must be reviewed, tients, staff, and volunteers who re-
and updated at least annually. The main in the ASC.
plan must do the following: (4) A system of medical documenta-
(1) Be based on and include a docu- tion that does the following:
mented, facility-based and community- (i) Preserves patient information.
based risk assessment, utilizing an all- (ii) Protects confidentiality of pa-
hazards approach. tient information.
(2) Include strategies for addressing (iii) Secures and maintains the avail-
emergency events identified by the ability of records.
risk assessment. (5) The use of volunteers in an emer-
(3) Address patient population, in- gency and other staffing strategies, in-
cluding, but not limited to, the type of cluding the process and role for inte-
services the ASC has the ability to pro- gration of State and Federally des-
vide in an emergency; and continuity ignated health care professionals to ad-
of operations, including delegations of dress surge needs during an emergency.
authority and succession plans. (6) The role of the ASC under a waiv-
(4) Include a process for cooperation er declared by the Secretary, in accord-
and collaboration with local, tribal, re- ance with section 1135 of the Act, in
gional, State, and Federal emergency the provision of care and treatment at
preparedness officials’ efforts to main- an alternate care site identified by
tain an integrated response during a emergency management officials.
disaster or emergency situation, in- (c) Communication plan. The ASC
cluding documentation of the ASC’s ef- must develop and maintain an emer-
forts to contact such officials and, gency preparedness communication
when applicable, of its participation in plan that complies with Federal, State,
collaborative and cooperative planning and local laws and must be reviewed
efforts. and updated at least annually. The
213
§ 416.54 42 CFR Ch. IV (10–1–17 Edition)
communication plan must include all ment, and volunteers, consistent with
of the following: their expected roles.
(1) Names and contact information (ii) Provide emergency preparedness
for the following: training at least annually.
(i) Staff. (iii) Maintain documentation of all
(ii) Entities providing services under emergency preparedness training.
arrangement. (iv) Demonstrate staff knowledge of
(iii) Patients’ physicians. emergency procedures.
(iv) Volunteers. (2) Testing. The ASC must conduct ex-
(2) Contact information for the fol- ercises to test the emergency plan at
lowing: least annually. The ASC must do the
(i) Federal, State, tribal, regional, following:
and local emergency preparedness (i) Participate in a full-scale exercise
staff. that is community-based or when a
community-based exercise is not acces-
(ii) Other sources of assistance.
sible, individual, facility-based. If the
(3) Primary and alternate means for
ASC experiences an actual natural or
communicating with the following:
man-made emergency that requires ac-
(i) ASC’s staff. tivation of the emergency plan, the
(ii) Federal, State, tribal, regional, ASC is exempt from engaging in an
and local emergency management community-based or individual, facil-
agencies. ity-based full-scale exercise for 1 year
(4) A method for sharing information following the onset of the actual event.
and medical documentation for pa- (ii) Conduct an additional exercise
tients under the ASC’s care, as nec- that may include, but is not limited to
essary, with other health care pro- the following:
viders to maintain the continuity of (A) A second full-scale exercise that
care. is individual, facility-based.
(5) A means, in the event of an evacu- (B) A tabletop exercise that includes
ation, to release patient information as a group discussion led by a facilitator,
permitted under 45 CFR 164.510(b)(1)(ii). using a narrated, clinically-relevant
(6) A means of providing information emergency scenario, and a set of prob-
about the general condition and loca- lem statements, directed messages, or
tion of patients under the facility’s prepared questions designed to chal-
care as permitted under 45 CFR lenge an emergency plan.
164.510(b)(4). (iii) Analyze the ASC’s response to
(7) A means of providing information and maintain documentation of all
about the ASC’s needs, and its ability drills, tabletop exercises, and emer-
to provide assistance, to the authority gency events and revise the ASC’s
having jurisdiction, the Incident Com- emergency plan, as needed.
mand Center, or designee. (e) Integrated healthcare systems. If an
(d) Training and testing. The ASC ASC is part of a healthcare system con-
must develop and maintain an emer- sisting of multiple separately certified
gency preparedness training and test- healthcare facilities that elects to have
ing program that is based on the emer- a unified and integrated emergency
gency plan set forth in paragraph (a) of preparedness program, the ASC may
this section, risk assessment at para- choose to participate in the healthcare
graph (a)(1) of this section, policies and system’s coordinated emergency pre-
procedures at paragraph (b) of this sec- paredness program. If elected, the uni-
tion, and the communication plan at fied and integrated emergency pre-
paragraph (c) of this section. The train- paredness program must—
ing and testing program must be re- (1) Demonstrate that each separately
viewed and updated at least annually. certified facility within the system ac-
(1) Training program. The ASC must tively participated in the development
do all of the following: of the unified and integrated emer-
(i) Initial training in emergency pre- gency preparedness program.
paredness policies and procedures to all (2) Be developed and maintained in a

new and existing staff, individuals pro- manner that takes into account each
viding on-site services under arrange- separately certified facility’s unique
214
circumstances, patient populations, appliances and equipment directly re-

and services offered. lated to the provision of surgical proce-
(3) Demonstrate that each separately dures;
certified facility is capable of actively (4) Diagnostic or therapeutic services
using the unified and integrated emer- or items directly related to the provi-
gency preparedness program and is in sion of a surgical procedure;
compliance. (5) Administrative, recordkeeping
(4) Include a unified and integrated and housekeeping items and services;
emergency plan that meets the require- and
ments of paragraphs (a)(2), (3), and (4) (6) Materials for anesthesia.
of this section. The unified and inte- (7) Intra-ocular lenses (IOLs).
grated emergency plan must also be (8) Supervision of the services of an
based on and include the following: anesthetist by the operating surgeon.
(i) A documented community-based (b) Excluded services. Facility services
risk assessment, utilizing an all-haz- do not include items and services for
ards approach. which payment may be made under
(ii) A documented individual facility- other provisions of part 405 of this
based risk assessment for each sepa- chapter, such as physicians’ services,
rately certified facility within the laboratory, X-ray or diagnostic proce-
health system, utilizing an all-hazards dures (other than those directly related
approach. to performance of the surgical proce-
(5) Include integrated policies and dure), prosthetic devices (except IOLs),
procedures that meet the requirements ambulance services, leg, arm, back and
set forth in paragraph (b) of this sec- neck braces, artificial limbs, and dura-
tion, a coordinated communication ble medical equipment for use in the
plan and training and testing programs patient’s home. In addition, they do
that meet the requirements of para- not include anesthetist services fur-
graphs (c) and (d) of this section, re- nished on or after January 1, 1989.
spectively.
[56 FR 8844, Mar. 1, 1991, as amended at 57 FR
[81 FR 64022, Sept. 16, 2016] 33899, July 31, 1992]
§ 416.65 Covered surgical procedures.

Subpart D—Scope of Benefits for
Services Furnished Before Effective for services furnished be-
January 1, 2008 fore January 1, 2008, covered surgical
procedures are those procedures that
§ 416.60 General rules. meet the standards described in para-
graphs (a) and (b) of this section and
(a) The services payable under this
are included in the list published in ac-
part are facility services furnished to
cordance with paragraph (c) of this sec-
Medicare beneficiaries, by a partici-
tion.
pating facility, in connection with cov-
(a) General standards. Covered sur-
ered surgical procedures specified in
gical procedures are those surgical and
§ 416.65.
other medical procedures that—
(b) The surgical procedures, including
(1) Are commonly performed on an
all preoperative and post-operative
inpatient basis in hospitals, but may be
services that are performed by a physi-
safely performed in an ASC;
cian, are covered as physician services
(2) Are not of a type that are com-
under part 410 of this chapter.
monly performed, or that may be safe-
[56 FR 8844, Mar. 1, 1991] ly performed, in physicians’ offices;
(3) Are limited to those requiring a
§ 416.61 Scope of facility services. dedicated operating room (or suite),
(a) Included services. Facility services and generally requiring a post-opera-
include, but are not limited to— tive recovery room or short-term (not
(1) Nursing, technician, and related overnight) convalescent room; and
services; (4) Are not otherwise excluded under
(2) Use of the facilities where the sur- § 411.15 of this chapter.
gical procedures are performed; (b) Specific standards. (1) Covered sur-
(3) Drugs, biologicals, surgical gical procedures are limited to those
dressings, supplies, splints, casts, and that do not generally exceed—
215
§ 416.75 42 CFR Ch. IV (10–1–17 Edition)
(i) A total of 90 minutes operating equipment, etc., as specified in § 416.61.

time; and The rate does not cover physician serv-
(ii) A total of 4 hours recovery or ices or other medical services covered
convalescent time. under part 410 of this chapter (for ex-
(2) If the covered surgical procedures ample, X-ray services or laboratory
require anesthesia, the anesthesia services) which are not directly related
must be— to the performance of the surgical pro-
(i) Local or regional anesthesia; or cedures. Those services may be billed
(ii) General anesthesia of 90 minutes separately and paid on a reasonable
or less duration. charge basis.
(3) Covered surgical procedures may (2) Single and multiple surgical proce-
not be of a type that— dures. (i) If one covered surgical proce-
(i) Generally result in extensive dure is furnished to a beneficiary in an
blood loss; operative session, payment is based on
(ii) Require major or prolonged inva- the prospectively determined rate for
sion of body cavities; that procedure.
(iii) Directly involve major blood ves- (ii) If more than one surgical proce-
sels; or dure is furnished in a single operative
(iv) Are generally emergency or life- session, payment is based on—
threatening in nature. (A) The full rate for the procedure
(c) Publication of covered procedures. with the highest prospectively deter-
CMS will publish in the FEDERAL REG- mined rate; and
ISTER a list of covered surgical proce- (B) One half of the prospectively de-
dures and revisions as appropriate. termined rate for each of the other pro-
[47 FR 34094, Aug. 5, 1982, as amended at 71 cedures.
FR 68226, Nov. 24, 2006] (3) Deductibles and coinsurance. Part B
deductible and coinsurance amounts
§ 416.75 Performance of listed surgical apply as specified in § 410.152 (a) and (i)
procedures on an inpatient hospital of this chapter.
basis.
[56 FR 8844, Mar. 1, 1991; 56 FR 23022, May 20,
The inclusion of any procedure as a
1991, as amended at 71 FR 68226, Nov. 24, 2006]
covered surgical procedure under
§ 416.65 does not preclude its coverage § 416.121 Applicability.
in an inpatient hospital setting under
Medicare. The provisions of this subpart apply
to facility services furnished before
§ 416.76 Applicability. January 1, 2008.
The provisions of this subpart apply [71 FR 68226, Nov. 24, 2006]
to facility services furnished before
January 1, 2008. § 416.125 ASC facility services pay-
ment rate.
[71 FR 68226, Nov. 24, 2006]
(a) The payment rate is based on a
prospectively determined standard
Subpart E—Prospective Payment overhead amount per procedure derived
System for Facility Services from an estimate of the costs incurred
Furnished Before January 1, by ambulatory surgical centers gen-
2008 erally in providing services furnished
in connection with the performance of
§ 416.120 Basis for payment. that procedure.
The basis for payment depends on (b) The payment must be substan-
where the services are furnished. tially less than would have been paid
(a) Hospital outpatient department. under the program if the procedure had
Payment is in accordance with part 419 been performed on an inpatient basis in
of this chapter. a hospital.
(b) [Reserved] (c) For services furnished on or after
(c) ASC—(1) General rule. Payment is January 1, 2007, and before the effective
based on a prospectively determined date of implementation of a revised

rate. This rate covers the cost of serv- payment system, the ASC payment
ices such as supplies, nursing services, rate for a surgical procedure is the
216
lesser of the ASC payment rate estab- Medicare beneficiaries under this sub-
lished under paragraph (a) of this sec- part.
tion or the prospective payment rate (2) Within 60 days of a request from
for the procedure established under CMS submit, in the form and detail as
§ 419.32 of this chapter. The lesser pay- may be required by CMS, a report of—
ment amount is determined prior to (i) Their operations, including the al-
application of any geographic adjust- lowable costs actually incurred for the
ment. period and the actual number and
[56 FR 8844, Mar. 1, 1991, as amended at 71 FR kinds of surgical procedures furnished
68226, Nov. 24, 2006] during the period; and
(ii) Their customary charges for each
§ 416.130 Publication of revised pay- surgical procedure furnished for the pe-
ment methodologies. riod.
Whenever CMS proposes to revise the
payment rate for ASCs, CMS publishes FR 8845, Mar. 1, 1991]
a notice in the FEDERAL REGISTER de-
scribing the revision. The notice also
explains the basis on which the rates Subpart F—Coverage, Scope of
were established. After reviewing pub- ASC Services, and Prospec-
lic comments, CMS publishes a notice tive Payment System for ASC
establishing the rates authorized by Services Furnished on or After
this section. In setting these rates, January 1, 2008
CMS may adopt reasonable classifica-
tions of facilities and may establish SOURCE: 72 FR 42545, Aug. 2, 2007, unless
different rates for different types of otherwise noted.
surgical procedures.
[47 FR 34094, Aug. 5, 1982, as amended at 56 § 416.160 Basis and scope.
FR 8844, Mar. 1, 1991] (a) Statutory basis. (1) Section
1833(i)(2)(D) of the Act requires the
§ 416.140 Surveys. Secretary to implement a revised pay-
(a) Timing, purpose, and procedures. (1) ment system for payment of surgical
No more often than once a year, CMS services furnished in ASCs. The statute
conducts a survey of a randomly se- requires that, in the year such system
lected sample of participating ASCs to is implemented, the system shall be de-
collect data for analysis or reevalua- signed to result in the same amount of
tion of payment rates. aggregate expenditures for such serv-
(2) CMS notifies the selected ASCs by ices as would be made if there was no
mail of their selection and of the form requirement for a revised payment sys-
and content of the report the ASCs are tem. The revised payment system shall
required to submit within 60 days of be implemented no earlier than Janu-
the notice. ary 1, 2006, and no later than January
(3) If the facility does not submit an 1, 2008. The statute provides that the
adequate report in response to CMS’s Secretary may implement a reduction
survey request, CMS may terminate in any annual update for failure to re-
the agreement to participate in the port on quality measures as specified
Medicare program as an ASC. by the Secretary. The statute also re-
(4) CMS may grant a 30-day postpone- quires that, for CY 2011 and each subse-
ment of the due date for the survey re- quent year, any annual update to the
port if it determines that the facility ASC payment system, after application
has demonstrated good cause for the of any reduction in the annual update
delay. for failure to report on quality meas-
(b) Requirements for ASCs. ASCs ures as specified by the Secretary, be
must— reduced by a productivity adjustment.
(1) Maintain adequate financial There shall be no administrative or ju-
records, in the form and containing the dicial review under section 1869 of the
data required by CMS, to allow deter- Act, section 1878 of the Act, or other-
mination of the payment rates for cov- wise of the classification system, the
ered surgical procedures furnished to relative weights, payment amounts,
217
§ 416.161 42 CFR Ch. IV (10–1–17 Edition)
and the geographic adjustment factor, provides payment for the associated fa-
if any, of the revised payment system. cility services and covered ancillary
(2) Section 1833(a)(1)(G) of the Act services;
provides that, beginning with the im- (2) The basis of payment for facility
plementation date of a revised pay- services and for covered ancillary serv-
ment system for ASC facility services ices furnished in an ASC in connection
furnished in connection with a surgical with a covered surgical procedure;
procedure pursuant to section (3) The methodologies by which
1833(i)(1)(A) of the Act, the amount Medicare determines payment amounts
paid shall be 80 percent of the lesser of for ASC services.
the actual charge for such services or [72 FR 42545, Aug. 2, 2007, as amended at 75
the amount determined by the Sec- FR 72264, Nov. 24, 2010; 77 FR 68558, Nov. 15,
retary under the revised payment sys- 2012]
tem.
(3) Section 1833(i)(1)(A) of the Act re- § 416.161 Applicability of this subpart.
quires the Secretary to specify the sur- The provisions of this subpart apply
gical procedures that can be performed to ASC services furnished on or after
safely on an ambulatory basis in an January 1, 2008.
ASC.
(4) Section 1834(d) of the Act specifies § 416.163 General rules.
that, when screening colonoscopies or (a) Payment is made under this sub-
screening flexible sigmoidoscopies are part for ASC services specified in
performed in an ASC or hospital out- §§ 416.164(a) and (b) furnished to Medi-
patient department, payment shall be care beneficiaries by a participating
based on the lesser of the amount ASC in connection with covered sur-
under the fee schedule that would gical procedures as determined by the
apply to such services if they were per- Secretary in accordance with § 416.166.
formed in a hospital outpatient depart- (b) Payment for physicians’ services
ment in an area or the amount under and payment for anesthetists’ services
the fee schedule that would apply to are made in accordance with part 414 of
such services if they were performed in this subchapter.
an ambulatory surgical center in the (c) Payment for items and services
same area. Section 1834(d) of the Act other than physicians’ and anes-
also specifies that, in the case of thetists’ services, as specified in
screening flexible sigmoidoscopy and § 416.164(c), is made in accordance with
screening colonoscopy services, the § 410.152 of this subchapter.
payment amounts must not exceed the
payment rates established for the re- § 416.164 Scope of ASC services.
lated diagnostic services. (a) Included facility services. ASC serv-
(5) Section 1833(a)(1) of the Act re- ices for which payment is packaged
quires 100 percent payment for preven- into the ASC payment for a covered
tive services described in section surgical procedure under § 416.166 in-
1861(ww)(2) of the Act (excluding elec- clude, but are not limited to—
trocardiograms) to which the United (1) Nursing, technician, and related
States Preventive Services Task Force services;
(USPSTF) has given a grade of A or B (2) Use of the facility where the sur-
for any indication or population. Sec- gical procedures are performed;
tion 1833(b)(1) of the Act also specifies (3) Any laboratory testing performed
that the Part B deductible shall not under a Clinical Laboratory Improve-
apply with respect to preventive serv- ment Amendments of 1988 (CLIA) cer-
ices described in section 1861(ww)(2) of tificate of waiver;
the Act (excluding electrocardiograms) (4) Drugs and biologicals for which
to which the USPSTF has given a separate payment is not allowed under
grade of A or B for any indication or the hospital outpatient prospective
population. payment system (OPPS);
(b) Scope. This subpart sets forth— (5) Medical and surgical supplies not
(1) The scope of ASC services and the on pass-through status under subpart G
criteria for determining the covered of part 419 of this subchapter;
surgical procedures for which Medicare (6) Equipment;
218
(7) Surgical dressings; (3) Radiology services (other than

(8) Implanted prosthetic devices, in- those integral to performance of a cov-
cluding intraocular lenses (IOLs), and ered surgical procedure);
related accessories and supplies not on (4) Diagnostic procedures (other than
pass-through status under subpart G of those directly related to performance
part 419 of this subchapter; of a covered surgical procedure);
(9) Implanted DME and related acces- (5) Ambulance services;
sories and supplies not on pass-through (6) Leg, arm, back, and neck braces
status under subpart G of part 419 of other than those that serve the func-
this subchapter; tion of a cast or splint;
(10) Splints and casts and related de- (7) Artificial limbs;
vices; (8) Nonimplantable prosthetic de-
(11) Radiology services for which sep- vices and DME.
arate payment is not allowed under the
OPPS and other diagnostic tests or in- [72 FR 42545, Aug. 2, 2007, as amended at 79
terpretive services that are integral to FR 67030, Nov. 10, 2014; 80 FR 70604, Nov. 13,
2015]
a surgical procedure, except certain di-
agnostic tests for which separate pay-
§ 416.166 Covered surgical procedures.
ment is allowed under the OPPS;
(12) Administrative, recordkeeping (a) Covered surgical procedures. Effec-
and housekeeping items and services; tive for services furnished on or after
(13) Materials, including supplies and January 1, 2008, covered surgical proce-
equipment for the administration and dures are those procedures that meet
monitoring of anesthesia; and the general standards described in
(14) Supervision of the services of an paragraph (b) of this section (whether
anesthetist by the operating surgeon. commonly furnished in an ASC or a
(b) Covered ancillary services. Ancil- physician’s office) and are not excluded
lary items and services that are inte- under paragraph (c) of this section.
gral to a covered surgical procedure, as (b) General standards. Subject to the
defined in § 416.166, and for which sepa- exclusions in paragraph (c) of this sec-
rate payment is allowed include: tion, covered surgical procedures are
(1) Brachytherapy sources; surgical procedures specified by the
(2) Certain implantable items that Secretary and published in the FED-
have pass-through status under the ERAL REGISTER and/or via the Internet
OPPS; on the CMS Web site that are sepa-
(3) Certain items and services that rately paid under the OPPS, that
CMS designates as contractor-priced, would not be expected to pose a signifi-
including, but not limited to, the ac- cant safety risk to a Medicare bene-
quisition or procurement of corneal tis- ficiary when performed in an ASC, and
sue for corneal transplant procedures; for which standard medical practice
(4) Certain drugs and biologicals for dictates that the beneficiary would not
which separate payment is allowed typically be expected to require active
under the OPPS; medical monitoring and care at mid-
(5) Certain radiology services and night following the procedure.
certain diagnostic tests for which sepa- (c) General exclusions. Notwith-
rate payment is allowed under the standing paragraph (b) of this section,
OPPS. covered surgical procedures do not in-
(c) Excluded services. ASC services do clude those surgical procedures that—
not include items and services outside (1) Generally result in extensive
the scope of ASC services for which blood loss;
payment may be made under part 414 of (2) Require major or prolonged inva-
this subchapter in accordance with sion of body cavities;
§ 410.152, including, but not limited to— (3) Directly involve major blood ves-
(1) Physicians’ services (including sels;
surgical procedures and all pre- (4) Are generally emergent or life-
operative and postoperative services threatening in nature;

that are performed by a physician); (5) Commonly require systemic
(2) Anesthetists’ services; thrombolytic therapy;
219
§ 416.167 42 CFR Ch. IV (10–1–17 Edition)
(6) Are designated as requiring inpa- national unadjusted payment rate for
tient care under § 419.22(n) of this sub- ASC services is to calculate the prod-
chapter; uct of the applicable conversion factor
(7) Can only be reported using a CPT and the relative payment weight estab-
unlisted surgical procedure code; or lished under § 416.167(b), unless other-
(8) Are otherwise excluded under wise indicated in this section.
§ 411.15 of this subchapter. (1) Conversion factor for CY 2008. CMS
[72 FR 42545, Aug. 2, 2007, as amended at 76 calculates a conversion factor so that
FR 74582, Nov. 30, 2011] payment for ASC services furnished in
CY 2008 would result in the same aggre-
§ 416.167 Basis of payment. gate amount of expenditures as would
(a) Unit of payment. Under the ASC be made if the provisions in this Sub-
payment system, prospectively deter- part F did not apply, as estimated by
mined amounts are paid for ASC serv- CMS.
ices furnished to Medicare beneficiaries (2) Conversion factor for CY 2009 and
in connection with covered surgical subsequent calendar years. The conver-
procedures. Covered surgical proce- sion factor for a calendar year is equal
dures and covered ancillary services to the conversion factor calculated for
are identified by codes established the previous year, updated as follows:
under the Healthcare Common Proce- (i) For CY 2009, the update is equal to
dure Coding System (HCPCS). The zero percent.
unadjusted national payment rate is (ii) For CY 2010 and subsequent cal-
determined according to the method- endar years, the update is the Con-
ology described in § 416.171. The manner sumer Price Index for All Urban Con-
in which the Medicare payment sumers (U.S. city average) as estimated
amount and the beneficiary coinsur- by the Secretary for the 12-month pe-
ance amount for each ASC service is riod ending with the midpoint of the
determined is described in § 416.172. year involved.
(b) Ambulatory payment classification (iii) For CY 2014 and subsequent cal-
(APC) groups and payment weights. (1) endar years, the Consumer Price Index
ASC covered surgical procedures are for All Urban Consumers update deter-
classified using the APC groups de- mined under paragraph (a)(2)(ii) of this
scribed in § 419.31 of this subchapter. section is reduced by 2.0 percentage
(2) For purposes of calculating ASC points for an ASC that fails to meet
national payment rates under the the standards for reporting of ASC
methodology described in § 416.171, ex- quality measures as established by the
cept as specified in paragraph (b)(3) of Secretary for the corresponding cal-
this section, an ASC relative payment endar year.
weight is determined based on the APC (iv) Productivity adjustment. (A) For
relative payment weight for each cov- calendar year 2011 and subsequent
ered surgical procedure and covered an- years, the Consumer Price Index for All
cillary service that has an applicable Urban Consumers determined under
APC relative payment weight described paragraph (a)(2)(ii) of this section,
in § 419.31 of this subchapter. after application of any reduction
(3) Notwithstanding paragraph (b)(2) under paragraph (a)(2)(iii) of this sec-
of this section, the relative payment tion, is reduced by the productivity ad-
weights for services paid in accordance justment described in section
with § 416.171(d) are determined so that 1886(b)(3)(B)(xi)(II) of the Act.
the national ASC payment rate does (B) The application of the provisions
not exceed the unadjusted nonfacility of paragraph (a)(2)(iv)(A) of this sec-
practice expense amount paid under tion may result in the update being
the Medicare physician fee schedule for less than zero percent for a year, and
such procedures under subpart B of may result in payment rates for a year
part 414 of this subchapter. being less than the payment rates for
the preceding year.
§ 416.171 Determination of payment (b) Exception. The national ASC pay-
rates for ASC services. ment rates for the following items and
(a) Standard methodology. The stand- services are not determined in accord-
ard methodology for determining the ance with paragraph (a) of this section
220
but are paid an amount derived from calculated under the methodology de-
the payment rate for the equivalent scribed in paragraph (a) of this section.
item or service set under the payment (5) Covered ancillary services de-
system established in part 419 of this scribed in § 416.164(b) and surgical pro-
subchapter as updated annually in the cedures identified as covered when per-
FEDERAL REGISTER and/or via the Inter- formed in an ASC under § 416.166 for the
net on the CMS Web site. If a payment first time beginning on or after Janu-
rate is not available, the following ary 1, 2008, are not subject to the tran-
items and services are designated as sitional payment rates applicable in
contractor-priced: CYs 2008 through 2010 for ASC facility
(1) Covered ancillary services speci- services.
fied in § 416.164(b), with the exception of (d) Limitation on payment rates for of-
radiology services and certain diag- fice-based surgical procedures and covered
nostic tests as provided in
ancillary radiology services and certain
§ 416.164(b)(5);
diagnostic tests. Notwithstanding the
(2) The device portion of device-in- provisions of paragraph (a) of this sec-
tensive procedures, which are proce-
tion, for any covered surgical proce-
dures with a HCPCS code-level device
dure under § 416.166 that CMS deter-
offset of greater than 40 percent when
mines is commonly performed in physi-
calculated according to the standard
OPPS APC ratesetting methodology. cians’ offices or for any covered ancil-
lary radiology service or diagnostic
(3) Procedures using certain sepa-
test under § 416.164(b)(5), excluding
rately paid implantable devices that
are approved for transitional pass- those listed in paragraphs (d)(1) and
through payment in accordance with (d)(2) of this section, the national
§ 419.66 of this subchapter. unadjusted ASC payment rates for
(c) Transitional payment rates. (1) ASC these procedures and services will be
payment rates for CY 2008 are a transi- the lesser of the amount determined
tional blend of 75 percent of the CY 2007 under paragraph (a) of this section or
ASC payment rate for a covered sur- the amount calculated at the non-
gical procedure on the CY 2007 ASC list facility practice expense relative value
of surgical procedures and 25 percent of units under § 414.22(b)(5)(i)(B) of this
the payment rate for the procedure cal- chapter multiplied by the conversion
culated under the methodology de- factor described in § 414.20(a)(3) of this
scribed in paragraph (a) of this section. chapter.
(2) ASC payment rates for CY 2009 are (1) The national unadjusted ASC pay-
a transitional blend of 50 percent of the ment rate for covered ancillary radi-
CY 2007 ASC payment rate for a cov- ology services that involve certain nu-
ered surgical procedure on the CY 2007 clear medicine procedures will be the
ASC list of surgical procedures and 50 amount determined under paragraph
percent of the payment rate for the (a) of this section.
procedure calculated under the meth- (2) The national unadjusted ASC pay-
odology described in paragraph (a) of ment rate for covered ancillary radi-
this section. ology services that use contrast agents
(3) ASC payment rates for CY 2010 are will be the amount determined under
a transitional blend of 25 percent of the paragraph (a) of this section.
CY 2007 ASC payment rate for a cov- (e) Budget neutrality. (1) For CY 2008,
ered surgical procedure on the CY 2007 CMS establishes the conversion factor
ASC list of surgical procedures and 75 to result in budget neutrality as esti-
percent of the payment rate for the mated by CMS in accordance with
procedure calculated under the meth-
paragraph (a)(1) of this section.
odology described in paragraph (a) of
this section. (2) For CY 2009 and subsequent cal-
endar years, CMS adjusts the ASC rel-
(4) The national ASC payment rate
for CY 2011 and subsequent calendar ative payment weights under
years for a covered surgical procedure § 416.167(b)(2) as needed so that any up-
designated in accordance with § 416.166 dates and adjustments made under
is the payment rates for the procedure
221
§ 416.172 42 CFR Ch. IV (10–1–17 Edition)
§ 419.50(a) of this subchapter are budget (ii) 50 percent of the applicable ASC
neutral as estimated by CMS. payment amount for all other covered
[72 FR 42545, Aug. 2, 2007, as amended at 75 surgical procedures.
FR 72264, Nov. 24, 2010; 76 FR 74582, Nov. 30, (2) Exception: Procedures not subject to
2011; 77 FR 277, Jan. 4, 2012; 77 FR 68558, Nov. multiple procedure discounting. CMS
15, 2012; 79 FR 67030, Nov. 10, 2014; 81 FR 79879, may apply any policies or procedures
Nov. 14, 2016] used with respect to multiple proce-
dures under the prospective payment
§ 416.172 Adjustments to national pay-
ment rates. system for hospital outpatient depart-
ment services under Part 419 of this
(a) General rule. Contractors adjust subchapter as may be consistent with
the payment rates established for ASC the equitable and efficient administra-
services to determine Medicare pro-
tion of this part.
gram payment and beneficiary coinsur-
(f) Interrupted procedures. (1) Subject
ance amounts in accordance with para-
graphs (b) through (g) of this section. to the provisions of paragraph (f)(2) of
(b) Lesser of actual charge or geo- this section, when a covered surgical
graphically adjusted payment rate. Pay- procedure or covered ancillary service
ments to ASCs equal 80 percent of the is terminated prior to completion due
lesser of— to extenuating circumstances or cir-
(1) The actual charge for the service; cumstances that threaten the well-
or being of the patient, the Medicare pro-
(2) The geographically adjusted pay- gram payment amount and the bene-
ment rate determined under this sub- ficiary coinsurance amount are based
part. on one of the following:
(c) Geographic adjustment—(1) General (i) The full program and beneficiary
rule. Except as provided in paragraph coinsurance amounts if the procedure
(c)(2) of this section, the national ASC for which anesthesia is planned is dis-
payment rates established under continued after the induction of anes-
§ 416.171 for covered surgical procedures thesia or after the procedure is started;
are adjusted for variations in ASC (ii) One-half of the full program and
labor costs across geographic areas beneficiary coinsurance amounts if the
using wage index values, labor and procedure for which anesthesia is
nonlabor percentages, and localities planned is discontinued after the pa-
specified by the Secretary. tient is prepared for surgery and taken
(2) Exception. The geographic adjust- to the room where the procedure is to
ment is not applied to the payment be performed but before the anesthesia
rates set for drugs, biologicals, devices is induced; or
with OPPS transitional pass-through (iii) One-half of the full program and
payment status, and brachytherapy
beneficiary coinsurance amounts if a
sources.
covered surgical procedure or covered
(d) Deductibles and coinsurance. Part
ancillary service for which anesthesia
B deductible and coinsurance amounts
is not planned is discontinued after the
apply as specified in §§ 410.152(a) and
patient is prepared and taken to the
(i)(2) of this subchapter.
(e) Payment reductions for multiple sur- room where the service is to be pro-
gical procedures—(1) General rule. Ex- vided.
cept as provided in paragraph (e)(2) of (2) Beginning CY 2016, if the covered
this section, when more than one cov- surgical procedure is a device-intensive
ered surgical procedure for which pay- procedure, the full device portion of
ment is made under the ASC payment the ASC device-intensive procedure is
system is performed during an opera- removed prior to determining the
tive session, the Medicare program Medicare program payment amount
payment amount and the beneficiary and the beneficiary coinsurance
coinsurance amount are based on— amount identified in paragraph (f)(1)(ii)
(i) 100 percent of the applicable ASC of this section.
payment amount for the procedure (g) Payment adjustment for new tech-
with the highest national unadjusted nology intraocular lenses (NTIOLs). A
ASC payment rate; and payment adjustment will be made for
222
insertion of an IOL approved as belong- graphs (a)(1) and (a)(2) of this section is
ing to a class of NTIOLs as defined in calculated in the same manner as the
subpart G. device payment reduction that would
be applied to the ASC payment for the
FR 70604, Nov. 13, 2015] covered surgical procedure in order to
remove predecessor device costs so that
§ 416.173 Publication of revised pay- the ASC payment amount for a device
ment methodologies and payment with pass-through status under § 419.66
rates. of this subchapter represents the full
CMS publishes annually, through no- cost of the device, and no packaged de-
tice and comment rulemaking in the vice payment is provided through the
FEDERAL REGISTER and/or via the Inter- ASC payment for the covered surgical
net on the CMS Web site, the payment procedure.
methodologies and payment rates for (2) The amount of the reduction to
ASC services and designates the cov- the ASC payment made under para-
ered surgical procedures and covered graph (a)(3) of this section is 50 percent
ancillary services for which CMS will of the payment reduction that would
make an ASC payment and other revi- be calculated under paragraph (b)(1) of
sions as appropriate. this section.
[76 FR 74582, Nov. 30, 2011] (c) Amount of beneficiary coinsurance.
The beneficiary coinsurance is cal-
§ 416.178 Limitations on administra- culated based on the ASC payment for
tive and judicial review. the covered surgical procedure after
There is no administrative or judicial application of the reduction under
review under section 1869 of the Act, paragraph (b) of this section.
section 1878 of the Act, or otherwise of [72 FR 42545, Aug. 2, 2007, as amended at 72
the following: FR 66932, No. 27, 2007]
(a) The classification system;
(b) Relative weights;
(c) Payment amounts; and
Subpart G—Adjustment in Pay-
(d) Geographic adjustment factors. ment Amounts for New Tech-
nology Intraocular Lenses Fur-
§ 416.179 Payment and coinsurance re- nished by Ambulatory Service
duction for devices replaced with- Centers
out cost or when full or partial
credit is received.
(a) General rule. CMS reduces the otherwise noted.
amount of payment for a covered sur-
gical procedure for which CMS deter- § 416.180 Basis and scope.
mines that a significant portion of the
payment is attributable to the cost of (a) Basis. This subpart implements
an implanted device not on pass- section 141 of Public Law 103–432, which
through status under subpart G of part provides for adjustments to payment
419 of this subchapter when one of the amounts for new technology intra-
following situations occur: ocular lenses (IOLs) furnished at ambu-
(1) The device is replaced without latory surgical centers (ASCs).
cost to the ASC or the beneficiary; (b) Scope. This subpart sets forth—
(2) The ASC receives full credit for (1) The process for interested parties
the cost of a replaced device; or to request that CMS review the appro-
(3) The ASC receives partial credit priateness of the ASC facility fee for
for the cost of a replaced device but insertion of an IOL. This process in-
only where the amount of the device cludes a review of whether that pay-
credit is greater than or equal to 50 ment is reasonable and related to the
percent of the cost of the new replace- cost of acquiring a lens determined by
ment device being implanted. CMS as belonging to a class of new
(b) Amount of reduction to the ASC technology IOLs;
payment for the covered surgical proce- (2) Factors that CMS considers for
dure. (1) The amount of the reduction determination of a new class of new
to the ASC payment made under para- technology IOLs; and
223
§ 416.185 42 CFR Ch. IV (10–1–17 Edition)
(3) Application of the payment ad- (c) Content of a request. In order to be

justment. accepted by CMS for review, a request
for review of the ASC payment amount
§ 416.185 Process for establishing a for insertion of an IOL must include all
new class of new technology IOLs. the information as specified by CMS.
(a) Announcement of deadline for re- (d) Confidential information. In order
quests for review. CMS announces the for CMS to invoke the protection al-
deadline for each year’s requests for re- lowed under Exemption 4 of the Free-
view of a new class of new technology dom of Information Act (5 U.S.C.
IOLs in the final rule updating the ASC 552(b)(4)) and, with respect to trade se-
payment rates for that calendar year. crets, the Trade Secrets Act (18 U.S.C.
(b) Announcement of new classes of new 1905), the requestor must clearly iden-
technology IOLs for which review re- tify all information that is to be char-
quests have been made and solicitation of acterized as confidential.
public comments. CMS announces the re-
quests for review received in a calendar § 416.195 Determination of member-
year and the deadline for public com- ship in new classes of new tech-
ments regarding the requests in the nology IOLs.
proposed rule updating the ASC pay- (a) Factors to be considered. CMS uses
ment rates for the following calendar the following criteria to determine
year. The deadline for submission of whether an IOL qualifies for a payment
public comments is 30 days following adjustment as a member of a new class
the date of the publication of the proof new technology IOLs when inserted
posed rule. at an ASC:
(c) Announcement of determinations re- (1) The IOL is considered new. CMS
garding requests for review. CMS an- will evaluate an application for a new
nounces its determinations for a cal- technology IOL only if the IOL type
endar year in the final rule updating has received initial FDA premarket ap-
the ASC payment rates for the fol- proval within the 3 years prior to the
lowing calendar year. CMS publishes new technology IOL application sub-
the codes and effective dates allowed mission date.
for those lenses recognized by CMS as (2) The IOL shall have a new lens
belonging to a class of new technology characteristic in comparison to cur-
IOLs. New classes of new technology rently available IOLs. The labeling,
IOLs are effective 30 days following the which must be approved by FDA, shall
date of publication of the final rule. contain a claim of a specific clinical
benefit imparted by the new lens char-
§ 416.190 Request for review of pay- acteristic.
ment amount. (3) The IOL is not described by an ac-
(a) When requests can be submitted. A tive or expired class of new technology
request for review of the appropriate- IOLs; that is, it does not share a pre-
ness of ASC payment for insertion of dominant, class-defining characteristic
an IOL that might qualify for a pay- associated with improved clinical out-
ment adjustment as belonging to a new comes with members of an active or ex-
class of new technology IOLs must be pired class.
submitted to CMS in accordance with (4) Any specific clinical benefit re-
the annual published deadline. ferred to in paragraph (a)(2) of this sec-
(b) Who may submit a request. Any in- tion must be supported by evidence
dividual, partnership, corporation, as- that demonstrates that the IOL results
sociation, society, scientific or aca- in a measurable, clinically meaningful,
demic establishment, or professional or improved outcome. Improved outcomes
trade organization able to furnish the include:
information required in paragraph (c) (i) Reduced risk of intraoperative or
of this section may request that CMS postoperative complication or trauma;
review the appropriateness of the pay- (ii) Accelerated postoperative recov-
ment amount provided under section ery;
1833(i)(2)(A)(iii) of the Act with respect (iii) Reduced induced astigmatism;

to an IOL that meets the criteria of a (iv) Improved postoperative visual
new technology IOL under § 416.195. acuity;
224
(v) More stable postoperative vision; § 416.300 Basis and scope of subpart.
(vi) Other comparable clinical advan- (a) Statutory basis. Section
tages. 1833(i)(2)(D)(iv) and (i)(7) of the Act au-
(b) CMS determination of eligibility for thorizes the Secretary to implement a
payment adjustment. CMS reviews the revised ASC payment system in a man-
information submitted with a com- ner so as to provide for a 2.0 percentage
pleted request for review, public com- point reduction in any annual update
ments submitted timely, and other per- for an ASC’s failure to report on qual-
tinent information and makes a deter- ity measures in accordance with the
mination as follows: Secretary’s requirements.
(1) The IOL is eligible for a payment (b) Scope. This subpart contains spe-
adjustment as a member of a new class cific requirements and standards for
of new technology IOLs. the ASCQR Program.
(2) The IOL is a member of an active
class of new technology IOLs and is eli- § 416.305 Participation and with-
gible for a payment adjustment for the drawal requirements under the
remainder of the period established for ASCQR Program.
that class. (a) Participation in the ASCQR Pro-
(3) The IOL does not meet the cri- gram. Except as provided in paragraph
teria for designation as a new tech- (c) of this section, an ambulatory sur-
nology IOL and a payment adjustment gical center (ASC) is considered as par-
is not appropriate. ticipating in the ASCQR Program once
the ASC submits any quality measure
[71 FR 68226, Nov. 24, 2006, as amended at 77 data to the ASCQR Program and has
FR 68558, Nov. 15, 2012; 80 FR 70604, Nov. 13,
been designated as open in the Certifi-
2015]
cation and Survey Provider Enhanced
§ 416.200 Payment adjustment. Reporting system for at least four
months prior to the beginning of data
(a) CMS establishes the amount of collection for a payment determina-
the payment adjustment for classes of tion.
new technology IOLs through proposed (b) Withdrawal from the ASCQR Pro-
and final rulemaking in connection gram. (1) An ASC may withdraw from
with ASC facility services. the ASCQR Program by submitting to
(b) CMS adjusts the payment for in- CMS a withdrawal of participation
sertion of an IOL approved as belong- form that can be found in the secure
ing to a class of new technology IOLs portion of the QualityNet Web site.
for the 5-year period of time estab- (2) An ASC may withdraw from the
lished for that class. ASCQR Program any time up to and
(c) Upon expiration of the 5-year pe- including August 31 of the year pre-
riod of the payment adjustment, pay- ceding a payment determination.
ment reverts to the standard rate for (3) Except as provided in paragraph
IOL insertion procedures performed in (c) of this section, an ASC will incur a
ASCs. 2.0 percentage point reduction in its
(d) ASCs that furnish an IOL des- ASC annual payment update for that
ignated by CMS as belonging to a class payment determination year and any
of new technology IOLs must submit subsequent payment determinations in
claims using billing codes specified by which it is withdrawn.
CMS to receive the new technology IOL (4) An ASC will be considered as re-
payment adjustment. joining the ASCQR Program if it be-
gins to submit any quality measure
data again to the ASCQR Program.
Subpart H—Requirements Under
(c) Minimum case volume for program
the Ambulatory Surgical Cen- participation. ASCs with fewer than 240
ter Quality Reporting (ASCQR) Medicare claims (Medicare primary
Program and secondary payer) per year during
an annual reporting period for a pay-

SOURCE: 80 FR 70604, Nov. 13, 2015, unless ment determination year are not re-
otherwise noted. quired to participate in the ASCQR
225
§ 416.310 42 CFR Ch. IV (10–1–17 Edition)
Program for the subsequent annual rebased measures using QDCs for the
porting period for that subsequent pay- ASCQR Program.
ment determination year. (b) Requirements for claims-based meas-
(d) Indian Health Service hospital out- ures not using QDCs. The data collec-
patient department participation. Begin- tion period for claims-based quality
ning with the CY 2017 payment deter- measures not using QDCs is paid Medi-
mination, Indian Health Service hos- care fee-for-service claims from the
pital outpatient departments that bill calendar year 2 years prior to the pay-
Medicare under the Ambulatory Sur- ment determination year. Only claims
gical Center payment system are not for services furnished in each calendar
considered ASCs for the purposes of the year paid by the MAC by April 30 of the
ASCQR Program. These facilities are following year of the ending data col-
not required to meet ASCQR Program lection time period will be included in
requirements and will not receive pay- the data used for the payment deter-
ment reductions under the ASCQR Pro- mination.
gram. (c) Requirements for data submitted via
an online data submission tool—(1) Re-
§ 416.310 Data collection and submis- quirements for data submitted via a CMS
sion requirements under the online data submission tool—(i)
ASCQR Program.≤ QualityNet account for Web-based meas-
(a) Requirements for claims-based measures. ASCs must maintain a QualityNet
ures using quality data codes (QDCs). (1) account in order to submit quality
measure data to the QualityNet Web
ASCs must submit complete data on
site for all Web-based measures sub-
individual claims-based quality meas-
mitted via a CMS online data submis-
ures through a claims-based reporting
sion tool. A QualityNet security ad-
mechanism by submitting the appro-
ministrator is necessary to set-up such
priate QDCs on the ASC’s Medicare
an account for the purpose of submit-
claims.
ting this information.
(2) The data collection period for (ii) Data collection requirements. The
claims-based quality measures re- data collection time period for quality
ported using QDCs is the calendar year measures for which data are submitted
2 years prior to the payment deter- via a CMS online data submission tool
mination year. Only claims for services is for services furnished during the cal-
furnished in each calendar year paid by endar year 2 years prior to the pay-
the Medicare Administrative Con- ment determination year. Beginning
tractor (MAC) by April 30 of the fol- with the CY 2017 payment determina-
lowing year of the ending data collection year, data collected must be sub-
tion time period will be included in the mitted during the time period of Janu-
data used for the payment determina- ary 1 to May 15 in the year prior to the
tion year. payment determination year.
(3) For ASCQR Program purposes, (2) Requirements for data submitted via
data completeness for claims-based a non-CMS online data submission tool.
measures using QDCs is determined by The data collection time period for
comparing the number of Medicare ASC–8: Influenza Vaccination Coverage
claims (where Medicare is the primary Among Healthcare Personnel is from
or secondary payer) meeting measure October 1 of the year 2 years prior to
specifications that contain the appro- the payment determination year to
priate QDCs with the number of Medi- March 31 during the year prior to the
care claims that meet measure speci- payment determination year. Data col-
fications, but do not have the appro- lected must be submitted by May 15 in
priate QDCs on the submitted Medicare the year prior to the payment deter-
claim. The minimum threshold for suc- mination year.
cessful reporting is that at least 50 per- (d) Extension or exemption. CMS may
cent of Medicare claims meeting meas- grant an extension or exemption for
ure specifications contain the appro- the submission of information in the
priate QDCs. ASCs that meet this min- event of extraordinary circumstances
imum threshold are regarded as having beyond the control of an ASC, or a sys-
provided complete data for the claims- tematic problem with one of CMS’ data
226
collection systems directly or indi- view the data to be made public. CMS
rectly affects data submission. CMS will publicly display ASC data by the
may grant an extension or exemption National Provider Identifier (NPI)
as follows: when data are submitted by the NPI.
(1) Upon request of the ASC. ASCs CMS will publicly display ASC data by
may request an extension or exemption the CMS Certification Number (CCN)
within 90 days of the date that the ex- when data are submitted by the CCNs.
traordinary circumstance occurred.
Specific requirements for submission of § 416.320 Retention and removal of
a request for an extension or exemp- quality measures under the ASCQR
tion are available on the QualityNet Program.
Web site; or (a) General rule for the retention of
(2) At the discretion of CMS. CMS quality measures. Quality measures
may grant extensions or exemptions to adopted for an ASCQR Program meas-
ASCs that have not requested them ure set for a previous payment deter-
when CMS determines that an extraor- mination year are retained in the
dinary circumstance has occurred. ASCQR Program for measure sets for
(e) Requirements for Outpatient and
subsequent payment determination
Ambulatory Surgery Consumer Assessment
years, except when they are removed,
of Healthcare Providers and Systems
suspended, or replaced as set forth in
(OAS CAHPS) Survey. OAS CAHPS is
paragraphs (b) and (c) of this section.
the Outpatient and Ambulatory Sur-
gical Center Consumer Assessment of (b) Immediate measure removal. In
Healthcare Providers and Systems sur- cases where CMS believes that the con-
vey that measures patient experience tinued use of a measure as specified
of care after a recent surgery or proce- raises patient safety concerns, CMS
dure at either a hospital outpatient de- will immediately remove a quality
partment or an ambulatory surgical measure from the ASCQR Program and
center. Ambulatory surgical centers will promptly notify ASCs and the pub-
must use an approved OAS CAHPS sur- lic of the removal of the measure and
vey vendor to administer and submit the reasons for its removal through the
OAS CAHPS data to CMS. ASCQR Program ListServ and the
(1) [Reserved] ASCQR Program QualityNet Web site.
(2) CMS approves an application for CMS will confirm the removal of the
an entity to administer the OAS measure for patient safety concerns in
CAHPS survey as a vendor on behalf of the next ASCQR Program rulemaking.
one or more ambulatory surgical cen- (c) Measure removal, suspension, or re-
ters when the applicant has met the placement through the rulemaking proc-
Minimum Survey Requirements and ess. Unless a measure raises specific
Rules of Participation that can be safety concerns as set forth in para-
found on the official OAS CAHPS Web graph (b) of this section, CMS will use
site, and agrees to comply with the the regular rulemaking process to re-
current survey administration proto- move, suspend, or replace quality
cols that can be found on the official measures in the ASCQR Program to
OAS CAHPS Web site. An entity must allow for public comment.
be an approved OAS CAHPS Survey (1) Criteria for removal of quality meas-
vendor in order to administer the OAS ures. (i) CMS will use the following cri-
CAPHS Survey and submit data to teria to determine whether to remove a
CMS on behalf of one or more ambula- measure from the ASCQR Program:
tory surgical centers. (A) Measure performance among
[80 FR 70604, Nov. 13, 2015, as amended at 81 ASCs is so high and unvarying that
FR 79879, Nov. 14, 2016] meaningful distinctions and improve-
ments in performance can no longer be
§ 416.315 Public reporting of data made (topped-out measures);
under the ASCQR Program. (B) Availability of alternative meas-
Data that an ASC submitted for the ures with a stronger relationship to pa-
ASCQR Program will be made publicly tient outcomes;

available on a CMS Web site after pro- (C) A measure does not align with
viding the ASC an opportunity to recurrent clinical guidelines or practice;
227
§ 416.325 42 CFR Ch. IV (10–1–17 Edition)
(D) The availability of a more broad- ual so that it clearly identifies the
ly applicable (across settings, popu- changes to that measure and provide
lations, or conditions) measure for the links to where additional information
topic; on the changes can be found. When a
(E) The availability of a measure measure undergoes subregulatory
that is more proximal in time to de- maintenance, CMS will provide notifi-
sired patient outcomes for the par- cation of the measure specification up-
ticular topic; date on the QualityNet Web site and in
(F) The availability of a measure the ASCQR Program Specifications
that is more strongly associated with Manual, and will provide sufficient
desired patient outcomes for the par- lead time for ASCs to implement the
ticular topic; and revisions where changes to the data
(G) Collection or public reporting of collection systems would be necessary.
a measure leads to negative unintended
consequences other than patient harm. § 416.330 Reconsiderations under the
(ii) The benefits of removing a meas- ASCQR Program.
ure from the ASCQR Program will be (a) Reconsiderations of ASCQR Program
assessed on a case-by-case basis. A decisions. An ASC may request recon-
measure will not be removed solely on sideration of a decision by CMS that it
the basis of meeting any specific cri- has not met the requirements of the
terion. ASCQR Program for a particular pay-
(2) Criteria to determine topped-out ment determination year. An ASC
measures. For the purposes of the must submit a reconsideration request
ASCQR Program, a measure is consid- to CMS by no later than the first busi-
ered to be topped-out under paragraph ness day on or after March 17 of the af-
(c)(1)(i)(A) of this section when it fected payment year.
meets both of the following criteria: (b) Requirements for reconsideration re-
(i) Statistically indistinguishable quests. A reconsideration request must
performance at the 75th and 90th per- contain the following information:
centiles (defined as when the difference (1) The ASC CCN and related NPI(s);
between the 75th and 90th percentiles (2) The name of the ASC;
for an ASC’s measure is within two (3) The CMS-identified reason for not
times the standard error of the full meeting the requirements of the
data set); and ASCQR Program for the affected pay-
(ii) A truncated coefficient of vari- ment determination year as provided
ation less than or equal to 0.10. in any CMS notification to the ASC;
(4) The ASC’s basis for requesting re-
§ 416.325 Measure maintenance under consideration. The ASC must identify
the ASCQR Program. its specific reason(s) for believing it
(a) Measure maintenance under the met the ASCQR Program requirements
ASCQR Program. CMS follows different for the affected payment determina-
procedures to update the measure spection year and should not be subject to
ifications under the ASCQR Program the reduced ASC annual payment up-
based on whether the change is sub- date;
stantive or nonsubstantive. CMS will (5) The ASC-designated personnel
determine what constitutes a sub- contact information, including name,
stantive versus a nonsubstantive email address, telephone number, and
change to a measure’s specifications on mailing address (must include physical
a case-by-case basis. mailing address, not just a post office
(b) Substantive changes. CMS will con- box); and
tinue to use rulemaking to adopt sub- (6) A copy of all materials that the
stantive updates to measures in the ASC submitted to comply with the re-
ASCQR Program. quirements of the affected ASCQR Pro-
(c) Nonsubstantive changes. If CMS de- gram payment determination year.
termines that a change to a measure With regard to information on claims,
previously adopted in the ASCQR Pro- ASCs are not required to submit copies
gram is nonsubstantive, CMS will use a of all submitted claims, but instead
subregulatory process to revise the may focus on the specific claims at
ASCQR Program Specifications Man- issue. For these claims, ASCs should
228
Centers for Medicare & Medicaid Services, HHS Pt. 417
submit relevant information, which 417.126 Recordkeeping and reporting re-

could include copies of the actual quirements.
claims at issue.
Subpart D—Application for Federal
(c) Reconsideration process. Upon re-
Qualification
ceipt of a request for reconsideration,
CMS will do the following: 417.140 Scope.
(1) Provide an email acknowledge- 417.142 Requirements for qualification.
ment, using the contact information 417.143 Application requirements.
provided in the reconsideration re- 417.144 Evaluation and determination proce-
quest, notifying the ASC that the re- dures.
quest has been received; and Subpart E—Inclusion of Qualified Health
(2) Provide a formal response to the Maintenance Organizations in Em-
ASC contact using the information ployee Health Benefits Plans
provided in the reconsideration request
notifying the ASC of the outcome of 417.150 Definitions.
the reconsideration process. 417.151 Applicability.
(d) Final ASCQR Program payment de- 417.153 Offer of HMO alternative.
417.155 How the HMO option must be in-
termination. For an ASC that submits a
cluded in the health benefits plan.
timely reconsideration request, the re- 417.156 When the HMO must be offered to
consideration determination is the employees.
final ASCQR Program payment deter- 417.157 Contributions for the HMO alter-
mination. For an ASC that does not native.
submit a timely reconsideration re- 417.158 Payroll deductions.
quest, the CMS determination is the 417.159 Relationship of section 1310 of the
final payment determination. There is Public Health Service Act to the Na-
tional Labor Relations Act and the Rail-
no appeal of any final ASCQR Program way Labor Act.
payment determination.
Subpart F—Continued Regulation of Feder-
PART 417—HEALTH MAINTENANCE ally Qualified Health Maintenance Or-
ORGANIZATIONS, COMPETITIVE ganizations
MEDICAL PLANS, AND HEALTH 417.160 Applicability.
CARE PREPAYMENT PLANS 417.161 Compliance with assurances.
417.162 Reporting requirements.
Subpart A—General Provisions 417.163 Enforcement procedures.
417.164 Effect of revocation of qualification
Sec. on inclusion in employee’s health benefit
417.1 Definitions. plans.
417.2 Basis and scope. 417.165 Reapplication for qualification.
417.166 Waiver of assurances.
Subpart B—Qualified Health Maintenance
Organizations: Services Subparts G–I [Reserved]
417.101 Health benefits plan: Basic health Subpart J—Qualifying Conditions for
services. Medicare Contracts
417.102 Health benefits plan: Supplemental
health services. 417.400 Basis and scope.
417.103 Providers of basic and supplemental 417.401 Definitions.
health services. 417.402 Effective date of initial regulations.
417.104 Payment for basic health services. 417.404 General requirements.
417.105 Payment for supplemental health 417.406 Application and determination.
services. 417.407 Requirements for a Competitive
417.106 Quality assurance program; Avail- Medical Plan (CMP).
ability, accessibility, and continuity of 417.408 Contract application process.
basic and supplemental health services. 417.410 Qualifying conditions: General rules.
417.412 Qualifying condition: Administra-
Subpart C—Qualified Health Maintenance tion and management.
Organizations: Organization and Operation 417.413 Qualifying condition: Operating ex-
perience and enrollment.
417.120 Fiscally sound operation and as- 417.414 Qualifying condition: Range of serv-
sumption of financial risk. ices.
417.122 Protection of enrollees. 417.416 Qualifying condition: Furnishing of
417.124 Administration and management. services.
229
417.418 Qualifying condition: Quality assur- 417.490 Renewal of contract.
ance program. 417.492 Nonrenewal of contract.
417.494 Modification or termination of con-
Subpart K—Enrollment, Entitlement, and tract.
Disenrollment Under Medicare Contract 417.500 Intermediate sanctions for and civil
monetary penalties against HMOs and
417.420 Basic rules on enrollment and enti- CMPs.
tlement.
417.422 Eligibility to enroll in an HMO or Subpart M—Change of Ownership and
CMP.
Leasing of Facilities: Effect on Medi-
417.423 Special rules: ESRD and hospice pa-
tients. care Contract
417.424 Denial of enrollment. 417.520 Effect on HMO and CMP contracts.
417.426 Open enrollment requirements.
417.427 Extending MA and Part D program
disclosure requirements to section 1876
Subpart N—Medicare Payment to HMOs
cost contract plans. and CMPs: General Rules
417.428 Marketing activities.
417.524 Payment to HMOs or CMPs: General.
417.430 Application procedures.
417.526 Payment for covered services.
417.432 Conversion of enrollment.
417.434 Reenrollment. 417.528 Payment when Medicare is not pri-
417.436 Rules for enrollees. mary payer.
417.440 Entitlement to health care services
from an HMO or CMP. Subpart O—Medicare Payment: Cost Basis
417.442 Risk HMO’s and CMP’s: Conditions
417.530 Basis and scope.
for provision of additional benefits.
417.531 Hospice care services.
417.444 Special rules for certain enrollees of
risk HMOs and CMPs. 417.532 General considerations.
417.446 [Reserved] 417.533 Part B carrier responsibilities.
417.448 Restriction on payments for services 417.534 Allowable costs.
received by Medicare enrollees of risk 417.536 Cost payment principles.
HMOs or CMPs. 417.538 Enrollment and marketing costs.
417.450 Effective date of coverage. 417.540 Enrollment costs.
417.452 Liability of Medicare enrollees. 417.542 Reinsurance costs.
417.454 Charges to Medicare enrollees. 417.544 Physicians’ services furnished di-
417.456 Refunds to Medicare enrollees. rectly by the HMO or CMP.
417.458 Recoupment of uncollected deduct- 417.546 Physicians’ services and other Part
ible and coinsurance amounts. B supplier services furnished under ar-
417.460 Disenrollment of beneficiaries by an rangements.
HMO or CMP. 417.548 Provider services through arrange-
417.461 Disenrollment by the enrollee. ments.
417.464 End of CMS’s liability for payment: 417.550 Special Medicare program require-
Disenrollment of beneficiaries and termi- ments.
nation or default of contract. 417.552 Cost apportionment: General provi-
sions.
Subpart L—Medicare Contract 417.554 Apportionment: Provider services
Requirements furnished directly by the HMO or CMP.
417.556 Apportionment: Provider services
furnished by the HMO or CMP through
417.472 Basic contract requirements.
arrangements with others.
417.474 Effective date and term of contract.
417.476 Waived conditions. 417.558 Emergency, urgently needed, and
417.478 Requirements of other laws and reg- out-of-area services for which the HMO
ulations. or CMP accepts financial responsibility.
417.479 Requirements for physician incen- 417.560 Apportionment: Part B physician
tive plans. and supplier services.
417.480 Maintenance of records: Cost HMOs 417.564 Apportionment and allocation of ad-
and CMPs. ministrative and general costs.
417.481 Maintenance of records: Risk HMOs 417.566 Other methods of allocation and ap-
or CMPs. portionment.
417.482 Access to facilities and records. 417.568 Adequate financial records, statis-
417.484 Requirement applicable to related tical data, and cost finding.
entities. 417.570 Interim per capita payments.
417.572 Budget and enrollment forecast and
417.486 Disclosure of information and con-

fidentiality. interim reports.
417.488 Notice of termination and of avail- 417.574 Interim settlement.
able alternatives: Risk contract. 417.576 Final settlement.
230
Subpart P—Medicare Payment: Risk Basis 1301, 1306, and 1310 of the Public Health Serv-
ice Act (42 U.S.C. 300e, 300e–5, and 300e–9),
417.580 Basis and scope. and 31 U.S.C. 9701.
417.584 Payment to HMOs or CMPs with risk
contracts. Subpart A—General Provisions
417.585 Special rules: Hospice care.
417.588 Computation of adjusted average per § 417.1 Definitions.
capita cost (AAPCC). As used in this part, unless the con-
417.590 Computation of the average of the text indicates otherwise—
per capita rates of payment.
Basic health services means health
417.592 Additional benefits requirement.
417.594 Computation of adjusted community services described in § 417.101(a).
rate (ACR). Community rating system means a sys-
417.596 Establishment of a benefit stabiliza- tem of fixing rates of payments for
tion fund. health services that meets the require-
417.597 Withdrawal from a benefit stabiliza- ments of § 417.104(a)(3).
tion fund. Comprehensive health services means
417.598 Annual enrollment reconciliation. as a minimum the following services
which may be limited as to time and
Subpart Q—Beneficiary Appeals
cost:
417.600 Basis and scope. (1) Physician services (§ 417.101(a)(1));
(2) Outpatient services and inpatient
Subpart R—Medicare Contract Appeals hospital services (§ 417.101(a)(2));
417.640 Applicability. (3) Medically necessary emergency
health services (§ 417.101(a)(3)); and
Subparts S–T [Reserved] (4) Diagnostic laboratory and diag-
nostic and therapeutic radiologic serv-
Subpart U—Health Care Prepayment Plans ices (§ 417.101(a)(6)).
Direct service contract means a con-
417.800 Payment to HCPPs: Definitions and
basic rules. tract for the provision of basic or sup-
417.801 Agreements between CMS and plemental health services or both be-
health care prepayment plans. tween an HMO and (1) a health profes-
417.802 Allowable costs. sional other than a member of the staff
417.804 Cost apportionment. of the HMO, or (2) an entity other than
417.806 Financial records, statistical data, a medical group or an IPA.
and cost finding. Enrollee means an individual for
417.808 Interim per capita payments.
whom an HMO, CMP, or HCPP assumes
417.810 Final settlement.
417.830 Scope of regulations on beneficiary the responsibility, under a contract or
appeals. agreement, for the furnishing of health
417.832 Applicability of requirements and care services on a prepaid basis.
procedures. Full-time student means a student who
417.834 Responsibility for establishing ad- is enrolled for a sufficient number of
ministrative review procedures. credit hours in a semester or other aca-
417.836 Written description of administra- demic term to enable the student to
tive review procedures.
complete the course of study within
417.838 Organization determinations.
417.840 Administrative review procedures. not more than the number of semesters
or other academic terms normally re-
Subpart V—Administration of Outstanding quired to complete that course of study
Loans and Loan Guarantees on a full-time basis at the school in
which the student is enrolled.
417.910 Applicability. Furnished, when used in connection
with prepaid health care services,
417.920 Planning and initial development.
417.930 Initial costs of operation. means services that are maid available
417.931 [Reserved] to an enrollee either dierctly by, or
417.934 Reserve requirement. under arrangements made by, the
417.937 Loan and loan guarantee provisions. HMO, CMP, or HCPP.
417.940 Civil action to enforce compliance Health maintenance organization
with assurances. (HMO) means a legal entity that pro-

AUTHORITY: Secs. 1102 and 1871 of the Social vides or arranges for the provision of
Security Act (42 U.S.C. 1302 and 1395hh), secs. basic and supplemental health services
231
§ 417.1 42 CFR Ch. IV (10–1–17 Edition)
to its enrollees in the manner pre- which the HMO for which the group
scribed by, is organized and operated in provides health services becomes a
the manner prescribed by, and other- qualified HMO, as their principal pro-
wise meets the requirements of, section fessional activity (over 50 percent indi-
1301 of the PHS Act and the regulations vidually) engage in the coordinated
in subparts B and C of this part. practice of their profession and as a
Health professionals means physicians group responsibility have substantial
(doctors of medicine and doctors of os- responsibility (over 35 percent in the
teopathy), dentists, nurses, podiatrists, aggregate of their professional activ-
optometrists, physicians’ assistants, ity) for the delivery of health services
clinical psychologists, social workers, to enrollees of an HMO;
pharmacists, nutritionists, occupa- (ii) Pool their income from practice
tional therapists, physical therapists, as members of the group and distribute
and other professionals engaged in the it among themselves according to a
delivery of health services who are li- prearranged salary or drawing account
censed, practice under an institutional or other similar plan unrelated to the
license, are certified, or practice under provision of specific health services;
authority of the HMO, a medical group, (iii) Share health (including medical)
individual practice association, or records and substantial portions of
other authority consistent with State major equipment and of professional,
law. technical, and administrative staff;
Individual practice association (IPA) (iv) Establish an arrangement where-
means a partnership, association, cor- by an enrollee’s enrollment status is
poration, or other legal entity that de- not known to the health professional
livers or arranges for the delivery of who provides health services to the en-
health services and which has entered rollee.
into written services arrangement or Medical group members means (1) a
arrangements with health profes- health professional engaged as a part-
sionals, a majority of whom are li- ner, associate, or shareholder in the
censed to practice medicine or osteop- medical group, or (2) any other health
athy. The written services arrange- professional employed by the group
ment must provide: who may be designated as a medical
(1) That these health professionals group member by the medical group.
will provide their professional services Medically underserved population
in accordance with a compensation ar- means the population of an urban or
rangement established by the entity; rural area as described in Sec.
and 417.912(d).
(2) To the extent feasible, for the Nonmetropolitan area means an area
sharing by these health professionals of no part of which is within a standard
health (including medical) and other metropolitan statistical area as des-
records, equipment, and professional, ignated by the Office of Management
technical, and administrative staff. and Budget and which does not contain
Medical group means a partnership, a city whose population exceeds 50,000
association, corporation, or other individuals.
group: Party in interest means: (1) Any direc-
(1) That is composed of health profes- tor, officer, partner, or employee re-
sionals licensed to practice medicine or sponsible for management or adminis-
osteopathy and of such other licensed tration of an HMO, any person who is
health professionals (including den- directly or indirectly the beneficial
tists, optometrists, and podiatrists) as owner of more than 5 percent of the eq-
are necessary for the provision of uity of the HMO, any person who is the
health services for which the group is beneficial owner of a mortgage, deed of
responsible; trust, note, or other interest secured
(2) A majority of the members of by, and valuing more than 5 percent of
which are licensed to practice medicine the assets of the HMO, and, in the case
or osteopathy; and of an HMO organized as a nonprofit
(3) The members of which: corporation, an incorporator or mem-

(i) After the end of the 48 month pe- ber of the corporation under applicable
riod beginning after the month in State corporation law;
232
(2) Any entity in which a person de- Staff of the HMO means health profes-
scribed in paragraph (1): sionals who are employees of the HMO
(i) Is an officer or director; and who—
(ii) Is a partner (if the entity is orga- (1) Provide services to HMO enrollees
nized as a partnership); at an HMO facility subject to the staff
(iii) Has directly or indirectly a bene- policies and operational procedures of
ficial interest of more than 5 percent of the HMO;
the equity; or (2) Engage in the coordinated prac-
(iv) Has a mortgage, deed of trust, tice of their profession and provide to
note, or other interest valuing more enrollees of the HMO the health serv-
than 5 percent of the assets of such en- ices that the HMO has contracted to
tity;
provide;
(3) Any spouse, child, or parent of an
(3) Share medical and other records,
individual described in paragraph (1).
Policymaking body of an HMO means a equipment, and professional, technical,
board of directors, governing body, or and administrative staff of the HMO;
other body of individuals that has the and
authority to establish policy for the (4) Provide their professional services
HMO. in accordance with a compensation ar-
Qualified HMO means an HMO found rangement, other than fee-for-service,
by CMS to be qualified within the established by the HMO. This arrange-
meaning of section 1310 of the PHS Act ment may include, but is not limited
and subpart D of this part. to, fee-for-time, retainer or salary.
Rural area means any area not listed Subscriber means an enrollee who has
as a place having a population of 2,500 entered into a contractual relationship
or more in Document #PC(1)A, ‘‘Num- with the HMO or who is responsible for
ber of Inhabitants,’’ Table VI, ‘‘Popu- making payments for basic health serv-
lation of Places,’’ and not listed as an ices (and contracted for supplemental
urbanized area in Table XI, ‘‘Popu- health services) to the HMO or on
lation of Urbanized Areas’’ of the same whose behalf these payments are made.
document (1970 Census or most recent Supplemental health services means
update of this document, Bureau of the health services described in
Census, U.S. Department of Com- § 417.102(a).
merce). Unusual or infrequently used health
Secretary means the Secretary of services means:
Health and Human Services and any (1) Those health services that are
other officer or employee of the De- projected to involve fewer than 1 per-
partment of Health and Human Serv- cent of the encounters per year for the
ices to whom the authority involved entire HMO enrollment, or,
has been delegated.
(2) Those health services the provi-
Service area means a geographic area,
sion of which, given the enrollment
defined through zip codes, census
tracts, or other geographic measure- projection of the HMO and generally
ments, that is the area, as determined accepted staffing patterns, is projected
by CMS, within which the HMO fur- will require less than 0.25 full time
nishes basic and supplemental health equivalent health professionals.
services and makes them available and [45 FR 72528, Oct. 31, 1980, as amended at 47
accessible to all its enrollees in accord- FR 19338, May 5, 1982; 52 FR 22321, June 11,
ance with § 417.106(b). Facilities in 1987. Redesignated at 52 FR 36746, Sept. 30,
which individuals are incarcerated are 1987. Redesignated and amended at 56 FR
not included in the geographic service 51985, Oct. 17, 1991; 58 FR 38067, July 15, 1993;
area of an HMO or CMP plan. 60 FR 34887, July 5, 1995; 60 FR 45674, Sept. 1,
Significant business transaction means 1995; 79 FR 29955, May 23, 2014]
any business transaction or series of
transactions during any one fiscal year
of the HMO, the total value of which (a) Subparts B through F of this part
exceeds the lesser of $25,000 or 5 percent pertain to the Federal qualification of

of the total operating expenses of the HMOs under title XIII of the Public
HMO. Health Service (PHS) Act.
233
§ 417.101 42 CFR Ch. IV (10–1–17 Edition)
(b) Subparts G through R of this part therapy, and administration of whole

set forth the rules for Medicare con- blood and blood plasma;
tracts with, and payment to, HMOs and (iii) Outpatient services and inpa-
competitive medical plans (CMPs) tient hospital services must include
under section 1876 of the Act and 8 short-term rehabilitation services and
U.S.C. 1611. physical therapy, the provision of
(c) Subpart U of this part pertains to which the HMO determines can be ex-
Medicare payment to health care pre- pected to result in the significant im-
payment plans under section provement of a member’s condition
1833(a)(1)(A) of the Act. within a period of two months;
(d) Subpart V of this part applies to (3) Instructions to its enrollees on
the administration of outstanding procedures to be followed to secure
loans and loan guarantees previously medically necessary emergency health
granted under title XIII of the PHS services both in the service area and
Act. out of the service area;
(4) Twenty outpatient visits per en-
[56 FR 51985, Oct. 17, 1991, as amended at 60
rollee per year, as may be necessary
FR 45675, Sept. 1, 1995; 80 FR 7958, Feb. 12,
2015] and appropriate for short-term evalua-
tive or crisis intervention mental
health services, or both;
Subpart B—Qualified Health Main- (5) Diagnosis, medical treatment and
tenance Organizations: Serv- referral services (including referral
ices services to appropriate ancillary serv-
ices) for the abuse of or addiction to al-
§ 417.101 Health benefits plan: Basic cohol and drugs:
health services.
(i) Diagnosis and medical treatment
(a) An HMO must provide or arrange for the abuse of or addiction to alcohol
for the provision of basic health serv- and drugs must include detoxification
ices to its enrollees as needed and with- for alcoholism or drug abuse on either
out limitations as to time and cost an outpatient or inpatient basis,
other than those prescribed in the PHS whichever is medically determined to
Act and these regulations, as follows: be appropriate, in addition to the other
(1) Physician services (including con- required basic health services for the
sultant and referral services by a phy- treatment of other medical conditions;
sician), which must be provided by a li- (ii) Referral services may be either
censed physician, or if a service of a for medical or for nonmedical ancillary
physician may also be provided under services. Medical services must be a
applicable State law by other health part of basic health services; nonmed-
professionals, an HMO may provide the ical ancillary services (such as voca-
service through these other health pro- tional rehabilitation and employment
fessionals; counseling) and prolonged rehabilita-
(2)(i) Outpatient services, which must tion services in a specialized inpatient
include diagnostic services, treatment or residential facility need not be a
services and x-ray services, for patients part of basic health services;
who are ambulatory and may be pro- (6) Diagnostic laboratory and diag-
vided in a non-hospital based health nostic and therapeutic radiologic serv-
care facility or at a hospital; ices in support of basic health services;
(ii) Inpatient hospital services, which (7) Home health services provided at
must include but not be limited to, an enrollee’s home by health care per-
room and board, general nursing care, sonnel, as prescribed or directed by the
meals and special diets when medically responsible physician or other author-
necessary, use of operating room and ity designated by the HMO; and
related facilities, use of intensive care (8) Preventive health services, which
unit and services, x-ray services, lab- must be made available to members
oratory, and other diagnostic tests, and must include at least the fol-
drugs, medications, biologicals, anes- lowing:
thesia and oxygen services, special (i) A broad range of voluntary family
duty nursing when medically nec- planning services;
essary, radiation therapy, inhalation (ii) Services for infertility;
234
(iii) Well-child care from birth; (9) Vision and hearing care except as
(iv) Periodic health evaluations for required by sections 1302(1)(A) and
adults; 1302(1)(H)(vi) of the PHS Act and para-
(v) Eye and ear examinations for graphs (a)(1) and (a)(8) of this section;
children through age 17, to determine (10) Custodial or domiciliary care;
the need for vision and hearing correc- (11) Experimental medical, surgical,
tion; and or other experimental health care pro-
(vi) Pediatric and adult immuniza- cedures, unless approved as a basic
tions, in accord with accepted medical health service by the policymaking
practice. body of the HMO;
(b) In addition, an HMO may include (12) Personal or comfort items and
a health service described in § 417.102 as private rooms, unless medically nec-
a supplemental health service in the essary during inpatient hospitaliza-
basic health services that it provides or tion;
arranges for its enrollees for a basic
(13) Whole blood and blood plasma;
health services payment.
(14) Long-term physical therapy and
(c) To the extent that a natural dis-
rehabilitation;
aster, war, riot, civil insurrection, epi-
demic or any other emergency or simi- (15) Durable medical equipment for
lar event not within the control of an home use (such as wheel chairs, sur-
HMO results in the facilities, per- gical beds, respirators, dialysis ma-
sonnel, or financial resources of an chines); and
HMO being unavailable to provide or (16) Health services that are unusual
arrange for the provision of a basic or and infrequently provided and not nec-
supplemental health service in accord- essary for the protection of individual
ance with the requirements of §§ 417.101 health, as approved by CMS upon appli-
through 417.106 and §§ 417.168 and cation by the HMO.
417.169, the HMO is required only to (e) An HMO may not offer to provide
make a good-faith effort to provide or or arrange for the provision of basic
arrange for the provision of the service, health services on a prepayment basis
taking into account the impact of the that do not include all the basic health
event. For purposes of this paragraph, services set forth in paragraph (a) of
an event is not within the control of an this section or that are limited as to
HMO if the HMO cannot exercise influ- time and cost except in a manner pre-
ence or dominion over its occurrence. scribed by this subpart.
(d) The following are not required to
be provided as basic health services: [45 FR 72528, Oct. 31, 1980. Redesignated at 52
FR 36746, Sept. 30, 1987, and amended at 58
(1) Corrective appliances and artifi-
FR 38077, July 15, 1993]
cial aids;
(2) Mental health services, except as § 417.102 Health benefits plan: Supple-
required under section 1302(1)(D) of the mental health services.
PHS Act and paragraph (a)(4) of this
section; (a) An HMO may provide to its en-
(3) Cosmetic surgery, unless medi- rollees any health service that is not
cally necessary; included as a basic health service under
(4) Prescribed drugs and medicines § 417.101(a). These health services may
incidental to outpatient care; be limited as to time and cost.
(5) Ambulance services, unless medi- (b) An HMO must determine the level
cally necessary; and scope of supplemental health serv-
(6) Care for military service con- ices included with basic health services
nected disabilities for which the en- provided to its enrollees for a basic
rollee is legally entitled to services and health services payment or those serv-
for which facilities are reasonably ices offered to its enrollees as supple-
available to this enrollee; mental health services.
(7) Care for conditions that State or [45 FR 72528, Oct. 31, 1980, as amended at 47
local law requires be treated in a public FR 19339, May 5, 1982. Redesignated at 52 FR

facility; 36746, Sept. 30, 1987, as amended at 58 FR
(8) Dental services; 38082, 38083, July 15, 1993]
235
§ 417.103 42 CFR Ch. IV (10–1–17 Edition)
§ 417.103 Providers of basic and sup- (ii) Demonstrating that compliance

plemental health services. by the entity with the ‘‘substantial re-
(a)(1) The HMO must provide that the sponsibility’’ requirement is unreason-
services of health professionals that able or impractical because (A) the
are provided as basic health services HMO serves a non-metropolitan or
will, except as provided in paragraph rural area as defined in § 417.100, or (B)
(c) of this section, be provided or ar- the entity is a multi-speciality group
ranged for through (i) health profes- that provides medical consultation
sionals who are staff of the HMO, (ii) a upon referral on a regional or national
medical group or groups, (iii) an IPA or basis, or (C) the majority of the resi-
IPAs, (iv) physicians or other health dents of the HMO’s service area are not
professionals under direct service con- eligible for employer-employee health
tracts with the HMO for the provision benefits plans and the HMO has an in-
of these services, or (v) any combina- sufficient number of enrollees to re-
tion of staff, medical group or groups, quire utilization of at least 35 percent
IPA or IPAs, or physicians or other of the entity’s services.
health professionals under direct serv-
(b) HMOs must have effective proce-
ice contracts with the HMO.
dures to monitor utilization and to
(2) A staff or medical group model
HMO may have as providers of basic control cost of basic and supplemental
health services physicians who have health services and to achieve utiliza-
also entered into written services ar- tion goals, which may include mecha-
rangements with an IPA or IPAs, but nisms such as risk sharing, financial
only if either (i) these physicians num- incentives, or other provisions agreed
ber less than 50 percent of the physi- to by providers.
cians who have entered into arrange- (c) Paragraph (a) of this section does
ments with the IPA or IPAs, or (ii) if not apply to the provision of the serv-
the sharing is 50 percent or greater, ices of a physician:
CMS approves the sharing as being con- (1) Which the HMO determines are
sistent with the purposes of section unusual or infrequently used services;
1310(b) of the PHS Act. or
(3) After the 4 year period beginning (2) Which, because of an emergency,
with the month following the month in it was medically necessary to provide
that an HMO becomes a qualified HMO, to the enrollee other than as required
an entity that meets the requirements by paragraph (a) of this section; or
of the definition of medical group in (3) Which are provided as part of the
§ 417.100, except for subdivision (3)(i) of inpatient hospital services by employ-
that definition, may be considered a ees or staff of a hospital or provided by
medical group if CMS determines that staff of other entities such as commu-
the principal professional activity nity mental health centers, home
(over 50 percent individually) of the en- health agencies, visiting nurses’ asso-
tity’s members is the coordinated prac- ciations, independent laboratories, or
tice of their profession, and if the HMO family planning agencies.
has demonstrated to the satisfaction of
(d) Supplemental health services
CMS that the entity is committed to
must be provided or arranged for by
the delivery of medical services on a
prepaid group practice basis by either: the HMO and need not be provided by
(i) Presenting a reasonable time- providers of basic health services under
phased plan for the entity to achieve contract with the HMO.
compliance with the ‘‘substantial re- (e) Each HMO must:
sponsibility’’ requirement of subdivi- (1) Pay the provider, or reimburse its
sion (3)(i) of the definition of ‘‘medical enrollees for the payment of reasonable
group’’ in § 417.100. The HMO must up- charges for basic health services (or
date the plan annually and must dem- supplemental health services that the
onstrate to the satisfaction of CMS HMO agreed to provide on a prepay-
that the entity is making continuous ment basis) for which its enrollees have
efforts and progress towards compli- contracted, which were medically nec-
ance with the requirements of the defi- essary and immediately required to be
nition of ‘‘medical group,’’ or obtained other than through the HMO
236
because of an unforeseen illness, in- rollees covered by the subscriber’s con-

jury, or condition, as determined by tract with the HMO) in any calendar
the HMO; year, when the copayments made by
(2) Adopt procedures to review the subscriber (or enrollees) in that
promptly all claims from enrollees for calendar year total 200 percent of the
reimbursement for the provision of total annual premium cost which that
health services described in paragraph subscriber (or enrollees) would be re-
(e)(1) of this section, including a proce- quired to pay if he (or they) were en-
dure for the determination of the med- rolled under an option with no copay-
ical necessity for obtaining the serv- ments. This limitation applies only if
ices other than through the HMO; and the subscriber (or enrollees) dem-
(3) Provide instructions to its enroll- onstrates that copayments in that
ees on procedures to be followed to se- amount have been paid in that year.
cure these health services. (b) Community rating system. Under a
(Sec. 215 of the Public Health Service Act, as community rating system, rates of
amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. payment for health services may be de-
216); secs. 1301–1318, as amended, Pub. L. 97– termined on a per person or per family
35, 95 Stat. 572–578 (42 U.S.C. 300e–300e–17) basis, as described in paragraph (b)(1)
[45 FR 72528, Oct. 31, 1980; 45 FR 77031, Nov. of this section or on a per group basis
21, 1980, as amended at 47 FR 19339, May 5, as described in paragraph (b)(2) of this
1982; 50 FR 6174, Feb. 14, 1985. Redesignated section. An HMO may fix its rates of
at 52 FR 36746, Sept. 30, 1987, as amended at
payment under the system described in
58 FR 38082, 38083, July 15, 1993]
paragraph (b)(1) or (b)(2) of this section
§ 417.104 Payment for basic health or under both such systems, but an
services. HMO may use only one such system for
(a) Basic health services payment. Each fixing its rates of payment for any one
HMO must provide or arrange for the group.
provision of basic health services for a (1) A system of fixing rates of pay-
basic health services payment that: ment for health services may provide
(1) Is to be paid on a periodic basis that the rates will be fixed on a per
without regard to the dates these serv- person or per family basis and may
ices are provided; vary with the number of persons in a
(2) Is fixed without regard to the fre- family. Except as otherwise authorized
quency, extent, or kind of basic health in this paragraph, these rates must be
services actually furnished; equivalent for all individuals and for
(3) Except as provided in paragraph all families of similar composition.
(c) of this section, is fixed under a com- Rates of payment may be based on ei-
munity rating system, as described in ther a schedule of rates charged to
paragraph (b) of this section; and each subscriber group or on a per-en-
(4) May be supplemented by nominal rollee-per-month (or per-subscriber-
copayments which may be required for per-month) revenue requirement for
the provision of specific basic health the HMO. In the former event, rates
services. Each HMO may establish one may vary from group to group if the
or more copayment options calculated projected total revenue from each
on the basis of a community rating group is substantially equivalent to
system. the revenue that would be derived if
(i) An HMO may not impose copay- the schedule of rates were uniform for
ment charges that exceed 50 percent of all groups. In the latter event, the pay-
the total cost of providing any single ments from each group of subscribers
service to its enrollees, nor in the ag- must be calculated to yield revenues
gregate more than 20 percent of the substantially equivalent to the product
total cost of providing all basic health of the total number of enrollees (or
services. subscribers) expected to be enrolled
(ii) To insure that copayments are from the group and the per-enrollee-
not a barrier to the utilization of per-month (or per-subscriber-per-
health services or enrollment in the month) revenue requirement for the

HMO, an HMO may not impose copay- HMO. Under the system described in
ment charges on any subscriber (or en- this paragraph, rates of payment may
237
§ 417.104 42 CFR Ch. IV (10–1–17 Edition)
not vary because of actual or antici- (ii) Differentials in rates may be es-
pated utilization of services by individ- tablished for subscribers enrolled in an
uals associated with any specific group HMO: (A) Under a contract with a gov-
of subscribers. These provisions do not ernmental authority under section 1079
preclude changes in the rates of pay- (‘‘Contracts for Medical Care for
ment that are established for new en- Spouses and Children: Plans’’) or sec-
rollments or re-enrollments and that tion 1086 (‘‘Contracts for Health Bene-
do not apply to existing contracts until fits for Certain Members, Former Mem-
the renewal of these contracts. bers and their Dependents’’) of title 10
(2) A system of fixing rates of pay- (‘‘Armed Forces’’), United States Code;
ment for health services may provide or (B) under any other governmental
that the rates will be fixed for individ- program (other than the health bene-
uals and families by groups. Except as fits program authorized by chapter 89
otherwise authorized in this paragraph, (‘‘Health Insurance’’) of title 5 (‘‘Gov-
such rates must be equivalent for all ernment Organization and Employ-
individuals in the same group and for ees’’), United States Code; or (C) under
all families of similar composition in any health benefits program for em-
the same group. If an HMO is to fix ployees of States, political subdivisions
rates of payment for individuals and of states, and other public entities.
families by groups, it must: (4) An HMO may establish a separate
(i) Classify all of the enrollees of the community rate for separate regional
organization into classes based on fac- components of the organization upon
tors that the HMO determines predict satisfactory demonstration to CMS of
the differences in the use of health the following:
services by the individuals or families (i) Each regional component is geo-
in each class and which have not been graphically distinct and separate from
disapproved by CMS, any other regional component; and
(ii) Determine its revenue require- (ii) Each regional component pro-
ments for providing services to the en- vides substantially the full range of
rollees of each class established under basic health services to its enrollees,
paragraph (b)(2)(i) of this section, and without extensive referral between
(iii) Fix the rates of payment for the components of the organization for
individuals and families of a group on these services, and without substantial
the basis of a composite of the organi- utilization by any two components of
zation’s revenue requirements deter- the same health care facilities. The
mined under paragraph (b)(2)(ii) of this separate community rate for each re-
section for providing services to them gional component of the HMO must be
as members of the classes established based on the different costs of pro-
under paragraph (b)(2)(i) of this sec- viding health services in the respective
tion. CMS will review the factors used regions.
by each HMO to establish classes under (c) Exceptions to community rating re-
paragraph (b)(2)(i) of this section. If quirement. (1) In the case of an HMO
CMS determines that any such factor that provided comprehensive health
may not reasonably be used to predict services on a prepaid basis before it be-
the use of the health services by indi- came a qualifed HMO, the requirement
viduals and families, CMS will dis- of community rating shall not apply to
approve the factor for that purpose. the HMO during the forty-eight month
(3)(i) Nominal differentials in rates period beginning with the month fol-
may be established to reflect dif- lowing the month in which it became a
ferences in marketing costs and the qualifed HMO.
different administrative costs of col- (2) The requirement of community
lecting payments from the following rating does not apply to the basic
categories of potential subscribers: health services payment for basic
(A) Individual (non-group) sub- health services provided an enrollee
scribers (including their families). who is a full-time student at an accred-
(B) Small groups of subscribers (100 ited institution of higher education.
subscribers or fewer). (d) Late payment penalty. HMOs may

(C) Large groups of subscribers (over charge a late payment penalty on ac-
100 subscribers). counts receivable that are in arrears.
238
(e) Review procedures for evaluating health services provided its enrollees
the community rating by class system for a basic health services payment.
under paragraph (b)(2). 1 An HMO may (b) Supplemental health services pay-
establish a community rating system ments may be made in any agreed upon
under paragraph (b)(2) of this section manner, such as prepayment or fee-for-
or revised factors used to establish service. Supplemental health services
classes after it receives written ap- payments that are fixed on a prepay-
proval of the factors from CMS. CMS ment basis, however, must be fixed
will give approval if it concludes that under a community rating system, un-
the factors can reasonably be used to less the supplemental health services
predict the use of health services by in- payment is for a supplemental health
dividuals and families. service provided an enrollee who is a
(1) An HMO must make a written re- full-time student at an accredited in-
quest to CMS, listing the factors to be stitution of higher education. In the
used in the community rating by class case of an HMO that provided com-
system under paragraph (b)(2) of this prehensive health services on a prepaid
section. basis before it became a qualifed HMO,
(2) CMS will notify each HMO within
the community rating requirement
30 days of receipt of the request and ap-
shall not apply to that HMO during the
plication of one of the following:
forty-eight month period beginning
(i) The application is approved;
(ii) Additional information or data with the month following the month in
are required and CMS will notify the which it became a qualifed HMO.
HMO of its decision within 30 days (Sec. 215 of the Public Health Service Act, as
from the date of receipt of this infor- amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C.
mation or data; or 216); secs. 1301–1318, as amended, Pub. L. 97–
(iii) CMS needs additional time to re- 35, 95 Stat. 572–578 (42 U.S.C. 300e–300e–17)
view the written request and the HMO [45 FR 72528, Oct. 31, 1980, as amended at 50
will be notified of CMS’s decision with- FR 6175, Feb. 14, 1985. Redesignated at 52 FR
in 90 days. 36746, Sept. 30, 1987, as amended at 58 FR
(Approved by the Office of Management and 38082, 38083, July 15, 1993]
Budget under control number 0915–0051)
§ 417.106 Quality assurance program;
(Sec. 215 of the Public Health Service Act, as Availability, accessibility, and con-
amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. tinuity of basic and supplemental
216); secs. 1301–1318, as amended, Pub. L. 97– health services.
35, 95 Stat. 572–578 (42 U.S.C. 300e–300e–17)
(a) Quality assurance program. Each
[45 FR 72528, Oct. 31, 1980, as amended at 47
FR 19339, May 5, 1982; 50 FR 6175, Feb. 14,
HMO or CMP must have an ongoing
1985. Redesignated at 52 FR 36746, Sept. 30, quality assurance program for its
1987, as amended at 56 FR 8853, Mar. 1, 1991; health services that meets the fol-
58 FR 38082, 38083, July 15, 1993] lowing conditions:
(1) Stresses health outcomes to the
§ 417.105 Payment for supplemental extent consistent with the state of the
health services. art.
(a) An HMO may require supple- (2) Provides review by physicians and
mental health services payments, in other health professionals of the proc-
addition to the basic health services ess followed in the provision of health
payments, for the provision of each services.
health service included in the supple- (3) Uses systematic data collection of
mental health services set forth in performance and patient results, pro-
§ 417.102 for which subscribers have con- vides interpretation of these data to its
tracted, or it may include supple- practitioners, and institutes needed
mental health services in the basic change.
1 Further information entitled ‘‘Guidelines
(4) Includes written procedures for
taking appropriate remedial action
for Rating by Class’’ may be obtained from
whenever, as determined under the
the Office of Prepaid Health Care, Division of

Qualification Analysis, HHS Cohen Bldg., quality assurance program, inappro-
room 4360, 330 Independence Ave. SW., Wash- priate or substandard services have
ington, DC 20201. been provided or services that ought to
239
§ 417.120 42 CFR Ch. IV (10–1–17 Edition)
have been furnished have not been pro- that the HMO or the health profes-
vided. sional who coordinates the enrollee’s
(b) Availability and accessibility of overall health care is kept informed
health care services. Basic health serv- about the services that the referral re-
ices and those supplemental health sources furnish to the enrollee.
services for which enrollees have con- (d) Confidentiality of health records.
tracted must be provided or arranged Each HMO must establish adequate
for by the HMO in accordance with the procedures to ensure the confiden-
following rules: tiality of the health and medical
(1) Except as provided in paragraph records of its enrollees.
(b)(2) of this section, the services must
be available to each enrollee within the [58 FR 38068, July 15, 1993]
HMO’s service area.
(2) Exception. If the HMO’s service Subpart C—Qualified Health
area is located wholly within a non- Maintenance Organizations:
metropolitan area, the HMO may make Organization and Operation
available outside its service area any
basic health service that is not a pri-
SOURCE: 58 FR 38068, July 15, 1993, unless
mary care or emergency care service, if otherwise noted.
the number of providers of that basic
health service who will provide the § 417.120 Fiscally sound operation and
service to the HMO’s enrollees is insuf- assumption of financial risk.
ficient to meet the demand. As used in
(a) Fiscally sound operation—(1) Gen-
this paragraph, primary care includes
eral requirements. Each HMO must have
general practice, family practice, gen-
a fiscally sound operation, as dem-
eral internal medicine, general pediat-
onstrated by the following:
rics, and general obstetrics and gyne-
cology. An HMO that provides the serv- (i) Total assets greater than total
ices covered by these fields through at unsubordinated liabilities. In evalu-
least a general or family practitioner, ating assets and liabilities, loan funds
or a pediatrician and a general inter- awarded or guaranteed under section
nist, is considered to be providing pri- 1306 of the PHS Act are not included as
mary care. liabilities.
(3) The services must be available (ii) Sufficient cash flow and adequate
and accessible with reasonable prompt- liquidity to meet obligations as they
ness to each of the HMO’s enrollees as become due.
ensured through— (iii) A net operating surplus, or a fi-
(i) Staffing patterns within generally nancial plan that meets the require-
accepted norms for meeting the pro- ments of paragraph (a)(2) of this sec-
jected enrollment needs; and tion.
(ii) Geographic location, hours of op- (iv) An insolvency protection plan
eration, and arrangements for after- that meets the requirements of
hours services. (Medically necessary § 417.122(b) for protection of enrollees.
emergency services must be available (v) A fidelity bond or bonds, procured
24 hours a day, 7 days a week.) and maintained by the HMO, in an
(c) Continuity of care. The HMO must amount fixed by its policymaking body
ensure continuity or care through ar- but not less than $100,000 per indi-
rangements that include but are not vidual, covering each officer and em-
limited to the following: ployee entrusted with the handling of
(1) Use of a health professional who is its funds. The bond may have reason-
primarily responsible for coordinating able deductibles, based upon the finan-
the enrollee’s overall health care. cial strength of the HMO.
(2) A system of health and medical (vi) Insurance policies or other ar-
records that accumulates pertinent in- rangements, secured and maintained
formation about the enrollee’s health by the HMO and approved by CMS to
care and makes it available to appro- insure the HMO against losses arising
priate professionals. from professional liability claims, fire,

(3) Arrangements made directly or theft, fraud, embezzlement, and other
through the HMO’s providers to ensure casualty risks.
240
(2) Financial plan requirement. (i) If an (ii) Insurance, acceptable to CMS.

HMO has not earned a cumulative net (iii) Financial reserves, acceptable to
operating surplus during the three CMS, that are held for the HMO and re-
most recent fiscal years, did not earn a stricted for use only in the event of in-
net operating surplus during the most solvency.
recent fiscal year or does not have (iv) Any other arrangements accept-
positive net worth, the HMO must sub- able to CMS.
mit a financial plan satisfactory to (2) The requirements of this para-
CMS to achieve net operating surplus graph do not apply to an HMO if CMS
within available fiscal resources. determines that State law protects the
(ii) This plan must include— HMO enrollees from liability for pay-
(A) A detailed marketing plan; ment of any fees that are the legal ob-
(B) Statements of revenue and ex- ligation of the HMO.
pense on an accrual basis; (b) Protection against loss of benefits if
(C) Sources and uses of funds state- the HMO becomes insolvent. The insol-
ments; and vency protection plan required under
(D) Balance sheets. § 417.120(a) must provide for continu-
(b) Assumption of financial risk. Each ation of benefits as follows:
HMO must assume full financial risk (1) For all enrollees, for the duration
on a prospective basis for the provision of the contract period for which pay-
of basic health services, except that it ment has been made.
may obtain insurance or make other (2) For enrollees who are in an inpa-
arrangements as follows: tient facility on the date of insolvency,
(1) For the cost of providing to any until they are discharged from the fa-
enrollee basic health services with an cility.
aggregate value of more than $5,000 in
any year. § 417.124 Administration and manage-
(2) For the cost of basic health serv- ment.
ices obtained by its enrollees from (a) General requirements. Each HMO
sources other than the HMO because must have administrative and manage-
medical necessity required that they be rial arrangements satisfactory to CMS,
furnished before they could be secured as demonstrated by at least the fol-
through the HMO. lowing:
(3) For not more than 90 percent of (1) A policymaking body that exer-
the amount by which its costs for any cises oversight and control over the
of its fiscal years exceed 115 percent of HMO’s policies and personnel to ensure
its income for that fiscal year. that management actions are in the
(4) For physicians or other health best interest of the HMO and its enroll-
professionals, health care institutions, ees.
or any other combination of such indi- (2) Personnel and systems sufficient
viduals or institutions to assume all or for the HMO to organize, plan, control
part of the financial risk on a prospec- and evaluate the financial, marketing,
tive basis for their furnishing of basic health services, quality assurance pro-
health services to the HMO’s enrollees. gram, administrative and management
aspects of the HMO.
§ 417.122 Protection of enrollees. (3) At a minimum, management by
(a) Liability protection. (1) Each HMO an executive whose appointment and
must adopt and maintain arrange- removal are under the control of the
ments satisfactory to CMS to protect HMO’s policymaking body.
its enrollees from incurring liability (b) Full and fair disclosure—(1) Basic
for payment of any fees that are the rule. Each HMO must prepare a written
legal obligation of the HMO. These ar- description of the following:
rangements may include any of the fol- (i) Benefits (including limitations
lowing: and exclusions).
(i) Contractual arrangements that (ii) Coverage (including a statement
prohibit health care providers used by of conditions on eligibility for bene-
the enrollees from holding any enrollee fits).

liable for payment of any fees that are (iii) Procedures to be followed in ob-
the legal obligation of the HMO. taining benefits and a description of
241
§ 417.124 42 CFR Ch. IV (10–1–17 Edition)
circumstances under which benefits enrollees may be from the medically

may be denied. underserved population unless the area
(iv) Rates. in which that population resides is a
(v) Grievance procedures. rural area.
(vi) Service area. (d) Health status and enrollment. (1)
(vii) Participating providers. The HMO may not, on the basis of
(viii) Financial condition including health status, health care needs, or age
at least the following most recently of the individual—
audited information: Current assets, (i) Expel or refuse to reenroll any en-
other assets, total assets; current li- rollee; or
abilities, long term liabilities; and net (ii) Refuse to enroll individual mem-
worth. bers of a group.
(2) Requirements for the description. (i)
(2) For purposes of this paragraph, a
The description must be written in a
‘‘group’’ is composed of individuals who
way that can be easily understood by
the average person who might enroll in enroll in the HMO under a contract or
the HMO. other arrangement that covers two or
(ii) The description of benefits and more subscribers. Examples of groups
coverage may be in general terms if are employees who enroll under a con-
reference is made to a detailed state- tract between their employer and the
ment of benefits and coverage that is HMO, or members of an organization
available without cost to any person that arranges coverage for its member-
who enrolls in the HMO or to whom the ship.
opportunity for enrollment is offered. (3) Nothing in this subpart prohibits
(iii) The HMO must provide the de- an HMO from requiring that, as a con-
scription to any enrollee or person who dition for continued eligibility for en-
is eligible to elect the HMO option and rollment, enrolled dependent children,
who requests the material from the upon reaching a specified age, convert
HMO or the administrator of a health to individual enrollment, consistent
benefits plan. For purposes of this re- with paragraph (e) of this section.
quirement, ‘‘administrator’’ (of a (e) Conversion of enrollment. (1) Each
health benefits plan) has the meaning HMO must offer individual enrollment
it is given in the Employment Retire- to the following:
ment Income Security Act of 1974 (i) Each enrollee (and his or her en-
(ERISA) at 29 U.S.C. 1002(16)(A). rolled dependents) leaving a group.
(iv) If the HMO provides health serv- (ii) Each enrollee who would other-
ices through individual practice asso- wise cease to be eligible for HMO en-
ciations (IPAs), the HMO must specify rollment because of his or her age, or
the number of member physicians by the death or divorce of an enrollee.
specialty, and a listing of the hospitals (2) The individual enrollment offered
where HMO enrollees will receive basic
must meet the conditions of subpart B
and supplemental health services.
of this part and this subpart C.
(v) If the HMO provides health serv-
ices other than through IPAs, the HMO (3) The HMO is not required to offer
must specify, for each ambulatory care individual enrollment except to the en-
facility, the facility’s address, days and rollees specified in this paragraph.
hours of operation, and the number of (4) The HMO must offer the enroll-
physicians by specialty, and a listing of ment on the same terms and conditions
the hospitals where HMO enrollees will that it makes available to other
receive basic and supplemental health nongroup enrollees.
services. (f) [Reserved]
(c) Broadly representative enrollment. (g) Grievance procedures. Each HMO
(1) Each HMO must offer enrollment to must have and use meaningful proce-
persons who are broadly representative dures for hearing and resolving griev-
of the various age, social, and income ances between the HMO’s enrollees and
groups within its service area. the HMO, including the HMO staff and
(2) If an HMO has a medically under- medical groups and IPAs that furnish
served population located in its service services. These procedures must ensure
area, not more than 75 percent of its that:
242
(1) Grievances and complaints are (5) Information demonstrating that

transmitted in a timely manner to ap- the HMO has a fiscally sound oper-
propriate HMO decisionmaking levels ation.
that have authority to take corrective (6) Other matters that CMS may re-
action; and quire.
(2) Appropriate action is taken (b) Significant business transactions.
promptly, including a full investiga- Each HMO must report to CMS annu-
tion if necessary and notification of ally, within 120 days of the end of its
concerned parties as to the results of fiscal year (unless for good cause
the HMO’s investigation. shown, CMS authorizes an extension of
(h) Certification of institutional pro- time), the following:
viders. Each HMO must ensure that its (1) A description of significant busi-
affiliated institutional providers meet ness transactions (as defined in para-
one of the following conditions: graph (c) of this section) between the
(1) In the case of hospitals, are either HMO and a party in interest.
accredited by the Joint Commission on (2) With respect to those trans-
Accreditation of Health Care Organiza- actions—
tions, or certified by Medicare. (i) A showing that the costs of the
(2) In the case of laboratories, are ei- transactions listed in paragraph (c) of
ther CLIA-exempt, or have in effect a this section do not exceed the costs
valid certificate of one of the following that would be incurred if these trans-
types, issued by CMS in accordance actions were with someone who is not
with section 353 of the PHS Act and a party in interest; or
part 493 of this chapter: (ii) If they do exceed, a justification
(i) Registration certificate. that the higher costs are consistent
(ii) Certificate. with prudent management and fiscal
(iii) Certificate of waiver. soundness requirements.
(3) A combined financial statement
(iv) Certificate of accreditation.
for the HMO and a party in interest if
(3) In the case of other affiliated in-
either of the following conditions is
stitutional providers, are certified for met:
participation in Medicare and Medicaid
(i) Thirty-five percent or more of the
in accordance with part 405, 416, 418,
costs of operation of the HMO go to a
488, or 491 of this chapter, as appro-
party in interest.
priate.
(ii) Thirty-five percent or more of the
[58 FR 38068, July 15, 1993, as amended at 59 revenue of a party in interest is from
FR 49843, Sept. 30, 1994] the HMO.
(c) ‘‘Significant business transaction’’
§ 417.126 Recordkeeping and reporting defined. As used in paragraph (b) of this
requirements. section—
(a) General reporting and disclosure re- (1) Business transaction means any of
quirements. Each HMO must have an ef- the following kinds of transactions:
fective procedure to develop, compile, (i) Sale, exchange or lease of prop-
evaluate, and report to CMS, to its en- erty.
rollees, and to the general public, at (ii) Loan of money or extension of
the times and in the manner that CMS credit.
requires, and while safeguarding the (iii) Goods, services, or facilities fur-
confidentiality of the doctor-patient nished for a monetary consideration,
relationship, statistics and other infor- including management services, but
mation with respect to the following: not including—
(1) The cost of its operations. (A) Salaries paid to employees for
(2) The patterns of utilization of its services performed in the normal
services. course of their employment; or
(3) The availability, accessibility, (B) Health services furnished to the
and acceptability of its services. HMO’s enrollees by hospitals and other
(4) To the extent practical, develop- providers, and by HMO staff, medical
ments in the health status of its enroll- groups, or IPAs, or by any combination
ees. of those entities.
243
§ 417.140 42 CFR Ch. IV (10–1–17 Edition)
(2) Significant business transaction (2) Significant business transaction

means any business transaction or se- means any business transaction or se-
ries of transactions of the kind speci- ries of transactions of the kind speci-
fied in paragraph (c)(1) of this section fied in paragraph (c)(1) of this section
that, during any fiscal year of the that, during any fiscal year of the
HMO, have a total value that exceeds HMO, have a total value that exceeds
$25,000 or 5 percent of the HMO’s total $25,000 or 5 percent of the HMO’s total
operating expenses, whichever is less. operating expenses, whichever is less.
(d) Requirements for combined financial (d) Requirements for combined financial
statements. (1) The combined financial statements. (1) The combined financial
statements required by paragraph (b)(3) statements required by paragraph (b)(3)
of this section must display in separate of this section must display in separate
columns the financial information for columns the financial information for
the HMO and each of these parties in the HMO and each of these parties in
interest. interest.
(2) Inter-entity transactions must be (2) Inter-entity transactions must be
eliminated in the consolidated column. eliminated in the consolidated column.
(3) These statements must have been (3) These statements must have been
examined by an independent auditor in examined by an independent auditor in
accordance with generally accepted ac- accordance with generally accepted ac-
counting principles, and must include counting principles, and must include
appropriate opinions and notes. appropriate opinions and notes.
(4) Upon written request from an (4) Upon written request from an
HMO showing good cause, CMS may HMO showing good cause, CMS may
waive the requirement that its com- waive the requirement that its com-
bined financial statement include the bined financial statement include the
financial information required in this financial information required in this
paragraph (d) with respect to a par- paragraph (d) with respect to a par-
ticular entity. ticular entity.
(e) Reporting and disclosure under (e) Reporting and disclosure under
ERISA. (1) For any employees’ health ERISA. (1) For any employees’ health
benefits plan that includes an HMO in benefits plan that includes an HMO in
its offerings, the HMO must furnish, its offerings, the HMO must furnish,
upon request, the information the plan upon request, the information the plan
needs to fulfill its reporting and disclo- needs to fulfill its reporting and disclo-
sure obligations (with respect to the sure obligations (with respect to the
particular HMO) under the Employee particular HMO) under the Employee
Retirement Income Security Act of Retirement Income Security Act of
1974 (ERISA). 1974 (ERISA).
(i) The HMO must furnish the infor- (2) The HMO must furnish the infor-
mation to the employer or the employ- mation to the employer or the employ-
er’s designee, or to the plan adminis- er’s designee, or to the plan adminis-
trator, as the term ‘‘administrator’’ is trator, as the term ‘‘administrator’’ is
defined in ERISA. defined in ERISA.
(ii) Loan of money or extension of
credit. Subpart D—Application for
(iii) Goods, services, or facilities fur- Federal Qualification
nished for a monetary consideration,
including management services, but § 417.140 Scope.
not including— This subpart sets forth—
(A) Salaries paid to employees for (a) The requirements for—
services performed in the normal (1) Entities that seek qualification as
course of their employment; or HMOs under title XIII of the PHS Act;
(B) Health services furnished to the and
HMO’s enrollees by hospitals and other (2) HMOs that seek—
providers, and by HMO staff, medical (i) Qualification for their regional
groups, or IPAs, or by any combination components; or
of those entities. (ii) Expansion of their service areas;
244
(b) The procedures that CMS follows (v) Will continue to comply with any
to make determinations; and other assurances that it has given to
(c) Other related provisions, includ- CMS.
ing application fees. (c) Preoperational qualified HMO. (1)
CMS may determine that an entity is a
[59 FR 49836, Sept. 30, 1994]
preoperational qualified HMO if it pro-
§ 417.142 Requirements for qualifica- vides, within 30 days of CMS’s deter-
tion. mination, satisfactory assurances that
it will become operational within 60
(a) General rules. (1) An entity seek-
days following that determination and
ing qualification as an HMO must meet
will, when it becomes operational,
the requirements and provide the as-
meet the requirements of subparts B
surances specified in paragraphs (b)
and C of this part.
through (f) of this section, as appro-
priate. (2) Within 30 days after receiving no-
tice that the entity has begun oper-
(2) CMS determines whether the enti-
ation, CMS determines whether it is an
ty is an HMO on the basis of the enti-
operational qualified HMO. In the ab-
ty’s application and any additional in-
sence of this determination, the entity
formation and investigation (including
is not an operational qualified HMO
site visits) that CMS may require.
even though it becomes operational.
(3) CMS may determine that an enti-
ty is any of the following: (d) Transitional qualified HMO: Gen-
eral rules—(1) Basic requirements. CMS
(i) An operational qualified HMO.
may determine that an entity is a
(ii) A preoperational qualified HMO.
transitional qualified HMO if the enti-
(iii) A transitional qualified HMO.
ty—
(b) Operational qualified HMO. CMS
(i) Meets the requirements of para-
determines that an entity is an oper-
graph (d)(2) through (d)(4) of this sec-
ational qualified HMO if—
tion; and
(1) CMS finds that the entity meets
the requirements of subparts B and C (ii) Provides the assurances specified
of this part. in paragraphs (d)(5) through (d)(7) of
this section within 30 days of CMS’s de-
(2) The entity, within 30 days of
termination.
CMS’s determination, provides written
assurances, satisfactory to CMS, that (2) Organization and operation. The
it— entity is organized and operated in ac-
(i) Provides and will provide basic cordance with subpart C of this part,
health services (and any supplemental except that it need not—
health services included in any con- (i) Assume full financial risk for the
tract) to its enrollees; provision of basic health services as re-
(ii) Provides and will provide these quired by § 417.120(b); or
services in the manner prescribed in (ii) Comply with the limitations that
sections 1301(b) and 1301(c) of the PHS are imposed on insurance by
Act and subpart B of this part; § 417.120(b)(1).
(iii) Is organized and operated and (3) Range of services. The entity is
will continue to be organized and oper- currently providing the following serv-
ated in the manner prescribed in sec- ices on a prepaid basis:
tion 1301(c) of the PHS Act and subpart (i) Physician services.
C of this part; (ii) Outpatient services and inpatient
(iv) Under arrangements that safe- hospital services. (The entity need not
guard the confidentiality of patient in- provide or pay for hospital inpatient or
formation and records, will provide ac- outpatient services that it can show
cess to CMS and the Comptroller Gen- are being provided directly, through in-
eral or any of their duly authorized surance, or under arrangements, by
representatives for the purpose of other entities.)
audit, examination or evaluation to (iii) Medically necessary emergency
any books, documents, papers, and services.
records of the entity relating to its op- (iv) Diagnostic laboratory services
eration as an HMO, and to any facili- and diagnostic and therapeutic
ties that it operates; and radiologic services.
245
§ 417.142 42 CFR Ch. IV (10–1–17 Edition)
These services must meet the require- (i) Be organized and operated in ac-
ment of § 417.101, but may be limited in cordance with subpart C of this part;
time and cost without regard to the and
constraints imposed by § 417.101(a). (ii) Provide basic health services and
(4) Payment for services—(i) General any supplemental health services in-
rule. The entity pays for basic health cluded in the contract, in accordance
services in accordance with § 417.104, with subpart B of this part.
except that it need not comply with (e) Failure to sign assurances timely. If
the copayments limitations imposed by CMS determines that an entity meets
§ 417.104(a)(4). the requirements for qualification and
(ii) Determination of payment rates. In the entity fails to sign its assurances
determining payment rates, the entity within 30 days following the date of the
need not comply with the community determination, CMS gives the entity
rating requirements of §§ 417.104(b) and written notice that its application is
417.105(b). considered withdrawn and that it is not
(5) Contracts in effect on the date of a qualified HMO.
CMS’s determination. The entity gives (f) Qualification of regional compo-
assurances that it will meet the fol- nents. An HMO that has more than one
lowing conditions with respect to its regional component is considered
group and individual contracts that are qualified for those regional compo-
in effect on the date of CMS’s deter- nents for which assurances have been
mination, and which are renewed or re- signed in accordance with this section.
negotiated during the period approved (g) Special rules: Enrollees entitled to
by CMS under paragraph (d)(6) of this Medicare or Medicaid. For an HMO that
section: accepts enrollees entitled to Medicare
(i) Continue to provide services in ac- or Medicaid, the following rules apply:
cordance with paragraph (d)(3) of this (1) The requirements of titles XVIII
section. and XIX of the Act, as appropriate,
(ii) Continue to be organized and op- take precedence over conflicting re-
erated and to pay for basic health serv- quirements of sections 1301(b) and
ices in accordance with paragraphs 1301(c) of the PHS Act.
(d)(2) and (d)(4) of this section, respec- (2) The HMO must, with respect to its
tively. enrollees entitled to Medicare or Med-
(6) Time-phased plan. The entity gives icaid, comply with the applicable re-
assurances as follows: quirement of title XVIII or XIX, in-
(i) It will implement a time-phased cluding those that pertain to—
plan acceptable to CMS that— (i) Deductibles and coinsurance;
(A) May not extend for more than 3 (ii) Enrollment mix and enrollment
years from the date of CMS’s deter- practices;
mination; and (iii) State plan rules on copayment
(B) Specifies definite steps for meet- options; and
ing, at the time of renewal of each (iv) Grievance procedures.
group or individual contract, all the re- (3) An HMO that complies with para-
quirements of subparts B and C of this graph (g)(2) of this section may obtain
part. and retain Federal qualification if, for
(ii) Upon completion of this time- its other enrollees, the HMO meets the
phased plan, it will— requirements of sections 1301(b) and
(A) Provide basic and supplemental 1301(c) of the PHS Act and imple-
services to all of its enrollees; and menting regulations in this subpart D
(B) Be organized and operated, and and in subparts B and C of this part.
provide services, in accordance with (h) Special rules: Enrollees under the
subparts B and C of this part. Federal employee health benefits program
(7) Contracts entered into after the date (FEHBP). An HMO that accepts enroll-
of CMS’s determination. The entity gives ees under the FEHBP (Chapter 89 of
assurances that, with respect to any title 5 of the U.S.C.) may obtain and re-
group or individual contract entered tain Federal qualification if, for its
into after the date of CMS’s determina- other enrollees, it complies with the
tion, it will— requirements of section 1301(b) and
246
1301(c) of the PHS Act and imple- site visit, $8,000 will be returned to the
menting regulations in this subpart D applicant.
and subparts B and C of this part. (2) $6,900 for an HMO seeking expan-
[59 FR 49836, Sept. 30, 1994] sion of its service area.
(3) $3,100 for a CMP seeking qualifica-
§ 417.143 Application requirements. tion as an HMO.
(a) General requirements. This section (e) Refund of an application fee. CMS
sets forth application requirements for refunds an application fee only if the
entities that seek qualification as entity withdraws its application within
HMOs; HMOs that seek expansion of 10 working days after receipt by CMS.
their service areas; and HMOs that Application fees are not returned in
seek qualification of their regional any other circumstance, even if quali-
components as HMOs. fication or certification is denied.
(b) Completion of an application form. (f) Procedure for changing the amount
(1) In order to receive a determination of an application fee. If CMS determines
concerning whether an entity is a that a change in the amount of a fee is
qualified HMO, an individual author- appropriate, CMS issues a notice of
ized to act for the entity (the appli- proposed rulemaking in the FEDERAL
cant) must complete an application REGISTER to announce the proposed
form provided by CMS. new amount.
(2) The authorized individual must (g) New application after denial. An en-
describe thoroughly how the entity tity may not submit another applica-
meets, or will meet, the requirements tion under this subpart for the same
for qualified HMOs described in the type of determination for four full
PHS Act and in subparts B and C of months after the date of the notice in
this part, this subpart D, and 417.168 which CMS denied the application.
and 417.169 of subpart F. (h) Disclosure of application informa-
(c) Collection of an application fee. In tion under the Freedom of Information
accordance with the requirements of 31 Act. An applicant submitting material
U.S.C. 9701, Fees and charges for Gov- that he or she believes is protected
ernment services and things of value, from disclosure under 5 U.S.C. 552, the
CMS determines the amount of the ap- Freedom of Information Act, or be-
plication fee that must be submitted cause of exceptions provided in 45 CFR
with each type of application. part 5, the Department’s regulations
(1) The fee is reasonably related to providing exceptions to disclosure,
the Federal government’s cost of quali- should label the material ‘‘privileged’’
fying an entity and may vary based on and include an explanation of the ap-
the type of application. plicability of an exception described in
(2) Each type of application has one 45 CFR part 5.
set fee rather than a charge based on [52 FR 22321, June 11, 1987. Redesignated at 52
the specific cost of each determination. FR 36746, Sept. 30, 1987, as amended at 58 FR
(For example, each Federally qualified 38077, July 15, 1993]
HMO applicant seeking Federal quali-
fication of one of its regional compo- § 417.144 Evaluation and determina-
nents as an HMO is charged the same tion procedures.
amount, unless the amount of the fee (a) Basis for evaluation and determina-
has been changed under paragraph (f) tion. (1) CMS evaluates an application
of this section.) for Federal qualification on the basis
(d) Application fee amounts. The appli- of information contained in the appli-
cation fee amounts for applications cation itself and any additional infor-
completed on or after July 13, 1987 are mation that CMS obtains through on-
as follows: site visits, public hearings, and any
(1) $18,400 for an entity seeking quali- other appropriate procedures.
fication as an HMO or qualification of (2) If the application is incomplete,
a regional component of an HMO. CMS notifies the entity and allows 60
If, in the case of an HMO seeking quali- days from the date of the notice for the
fication of a regional component, CMS entity to furnish the missing informa-
determines that there is no need for a tion.
247
§ 417.150 42 CFR Ch. IV (10–1–17 Edition)
(3) After evaluating all relevant in- of newly qualified HMOs and describes
formation, CMS determines whether the expanded service areas of other
the entity meets the applicable re- qualified HMOs.
quirements of §§ 417.142 and 417.143. (2) Listings. A cumulative list of
(b) Notice of determination. CMS noti- qualified HMOs is available from the
fies each entity that applies for quali- following office, which is open from 8:30
fication under this subpart of its deter- a.m. to 5 p.m., Monday through Friday:
mination and the basis for the deter- Office of Managed Care, room 4360,
mination. The determination may be Cohen Building, 400 Independence Ave-
granting of qualification, intent to nue SW., Washington, DC 20201.
deny, or denial.
[59 FR 49837, Sept. 30, 1994]
(c) Intent to deny. (1) If CMS finds
that the entity does not appear to meet
the requirements for qualification and Subpart E—Inclusion of Qualified
appears to be able to meet those re- Health Maintenance Organi-
quirements within 60 days, CMS gives zations in Employee Health
the entity notice of intent to deny Benefits Plans
qualification and a summary of the
basis for this preliminary finding.
SOURCE: 45 FR 72517, Oct. 31, 1980, unless
(2) Within 60 days from the date of otherwise noted. Redesignated at 52 FR 36746,
the notice, the entity may respond in Sept. 30, 1987.
writing to the issues or other matters
that were the basis for CMS’s prelimi- § 417.150 Definitions.
nary finding, and may revise its appli-
cation to remedy any defects identified As used in this subpart, unless the
by CMS. context indicates otherwise—
(d) Denial and reconsideration of de- Agreement means a collective bar-
nial. (1) If CMS denies an application gaining agreement.
for qualification under this subpart, Bargaining representative means an in-
CMS gives the entity written notice of dividual or entity designated or se-
the denial and an opportunity to re- lected, under any applicable Federal,
quest reconsideration of that deter- State, or local law, or public entity
mination. collective bargaining agreement, to
(2) A request for reconsideration represent employees in collective bar-
must— gaining, or any other employee rep-
(i) Be submitted in writing, within 60 resentative designated or selected
days following the date of the notice of under any law.
denial; Carrier means a voluntary associa-
(ii) Be addressed to the CMS officer tion, corporation, partnership, or other
or employee who denied the applica- organization that is engaged in pro-
tion; and viding, paying for, or reimbursing all
(iii) Set forth the grounds upon or part of the cost of health benefits
which the entity requests reconsider- under group insurance policies or con-
ation, specifying the material issues of tracts, medical or hospital service
fact and of law upon which the entity agreements, enrollment or subscription
relies. contracts, or similar group arrange-
(3) CMS bases its reconsideration ments, in consideration of premiums or
upon the record compiled during the other periodic charges payable to the
qualification review proceedings, mate- carrier.
rials submitted in support of the re- Collective bargaining agreement means
quest for reconsideration, and other an agreement entered into between an
relevant materials available to CMS. employing entity and the bargaining
(4) CMS gives the entity written no- representative of its employees.
tice of the reconsidered determination Contract means an employer-em-
and the basis for the determination. ployee or public entity-employee con-
(e) Information on qualified HMOs—(1) tract, or a contract for health benefits.
FEDERAL REGISTER notices. In quarterly Designee means any person or entity

FEDERAL REGISTER notices, CMS gives authorized to act on behalf of an em-
the names, addresses, and service areas ploying entity or a group of employing
248
entities to offer the option of enroll- to select among the alternatives in-
ment in a qualified health maintenance cluded in a health benefits plan.
organization to their eligible employ- Health benefits contract means a con-
ees. tract or other agreement between an
Eligible employee means an employee employing entity or a designee and a
who meets the employer’s require- carrier for the provision of, or payment
ments for participation in the health for, health benefits to eligible employ-
benefits plan. ees or to eligible employees and their
Employee means any individual em- eligible dependents.
ployed by an employer or public entity Health benefits plan means any ar-
on a full-time or part-time basis. rangement, to provide or pay for health
Employer has the meaning given that services, that is offered to eligible em-
term in section 3(d) of the Fair Labor ployees, or to eligible employees and
Standards Act of 1938, except that it— their eligible dependents, by or on be-
(1) Includes non-appropriated fund in- half of an employing entity.
strumentalities of the United States Public entity means the 50 states,
Government; and Puerto Rico, Guam, the Virgin Islands,
(2) Excludes the following: the Northern Mariana Islands and
(i) The governments of the United American Samoa and their political
States, the District of Columbia and subdivisions, the District of Columbia,
the territories and possessions of the and any agency or instrumentality of
United States, the 50 States and their the foregoing, and political subdivisions
political subdivisions, and any agencies include counties, parishes, townships,
or instrumentalities of any of the fore- cities, municipalities, towns, villages,
going, including the United States and incorporated villages.
Postal Service and Postal Rate Com- Qualified HMO means an HMO that
mission. has in effect a determination, made
(ii) Any church, or convention or as- under subpart D of this part, that the
sociation of churches, and any organi- HMO is an operational, preoperational,
zation operated, supervised, or con- or transitional qualified HMO.
trolled by a church, or convention or To offer a health benefits plan means
association of churches that meets the to make participation in a health bene-
following conditions: fits plan available to eligible employ-
(A) Is an organization that is de- ees, or to eligible employees and their
scribed in section 501(c)(3) of the Inter- eligible dependents regardless of
whether the employing entity makes a
nal Revenue Code of 1954.
financial contribution to the plan on
(B) Does not discriminate, in the em-
behalf of these employees, directly or
ployment, compensation, promotion or
indirectly, for example, through pay-
termination of employment of any per-
ments on any basis into a health and
sonnel, or in the granting of staff and
welfare trust fund.
other privileges to physicians or other
health personnel, on the grounds that [45 FR 72517, Oct. 31, 1980, as amended at 47
the individuals obtain health care FR 19341, May 5, 1982. Redesignated at 52 FR
through HMOs, or participate in fur- 36746, Sept. 30, 1987, as amended at 58 FR
38077, July 15, 1993; 59 FR 49837, 49843, Sept.
nishing health care through HMOs.
30, 1994]
Employing entity means an employer
or public entity. § 417.151 Applicability.
Employing entity-employee contract
(a) Basic rule. Effective October 24,
means a legally enforceable agreement
1995, 1 this subpart applies to any em-
(other than a collective bargaining
ploying entity that offers a health ben-
agreement) between an employing enti-
efits plan to its employees, meets the
ty and its employees for the provision
of, or payment for, health benefits for
1 Before October 24, 1995, an employing en-
its employees, or for its employees and
tity that met the conditions specified in
their eligible dependents. § 417.151 was required to include one or more
Group enrollment period means the pe-
qualified HMOs, if it received from at least

riod of at least 10 working days each one qualified HMO a written request for in-
calendar year during which each eligi- clusion and that request met the timing,
ble employee is given the opportunity Continued
249
§ 417.153 42 CFR Ch. IV (10–1–17 Edition)
conditions specified in paragraphs (b) must be offered directly to those em-

through (e) of this section, and elects ployees.
to include one or more qualified HMOs [59 FR 49839, Sept. 30, 1994, as amended at 61
in the health plan alternatives it offers FR 27287, May 31, 1996]
its employees.
(b) Number of employees. During any § 417.155 How the HMO option must be
calendar quarter of the preceding cal- included in the health benefits
endar year, the employer or public en- plan.
tity employed an average of not less (a) HMO access to employees—(1) Pur-
than 25 employees. pose and timing—(i) Purpose. The em-
(c) Minimum wage. During any cal- ploying entity must provide each HMO
endar quarter of the preceding calendar included in its health benefits plan fair
year, the employer was required to pay and reasonable access to all employees
the minimum wage specified in section specified in § 417.153(b), so that the
6 of the Fair Labor Standards Act of HMO can explain its program in ac-
1938, or would have been required to cordance with § 417.124(b).
pay that wage but for section 13(a) of (ii) Timing. The employing entity
that Act. must provide access beginning at least
(d) Federal assistance under section 317 30 days before, and continuing during,
of the PHS Act. The public entity has a the group enrollment period.
pending application for, or is receiving, (2) Nature of access. (i) Access must
assistance under section 317 of the PHS include, at a minimum, opportunity to
Act. distribute educational literature, bro-
chures, announcements of meetings,
(e) Employees in HMO’s service area.
and other relevant printed materials
At least 25 of the employing entity’s
that meet the requirements of
employees reside within the HMO’s
§ 417.124(b).
service area.
(ii) Access may not be more restric-
[59 FR 49838, Sept. 30, 1994, as amended at 61 tive or less favorable than the access
FR 27287, May 31, 1996] the employing entity provides to other
offerors of options included in the
§ 417.153 Offer of HMO alternative. health benefits plan, whether or not
(a) Basic rule. An employing entity those offerors elect to avail themselves
that is subject to this subpart and that of that access.
elects to include one or more qualified (b) Review of HMO offering materials.
HMOs must offer the HMO alternative (1) The HMO must give the employing
in accordance with this section. entity or designee opportunity to re-
(b) Employees to whom the HMO option view, revise, and approve HMO edu-
must be offered. Each employing entity cational and offering materials before
must offer the option of enrollment in distribution.
a qualified HMO to each eligible em- (2) Revisions must be limited to cor-
ployee and his or her eligible depend- recting factual errors and misleading
ents who reside in the HMO’s service or ambiguous statements, unless—
area. (i) The HMO and the employing enti-
ty agree otherwise; or
(c) Manner of offering the HMO option.
(ii) Other revisions are required by
(1) For employees who are represented
law.
by a bargaining representative, the op-
(3) The employing entity or designee
tion of enrollment in a qualified HMO—
must complete revision of the mate-
(i) Must first be presented to the bar- rials promptly so as not to delay or
gaining representative; and otherwise interfere with their use dur-
(ii) If the representative accepts the ing the group enrollment period.
option, must then be offered to each (c) Group enrollment period; prohibition
represented employee. of restrictions; effective date of HMO cov-
(2) For employees not represented by erage—(1) Prohibition of restrictions. If
a bargaining representative, the option an employing entity or designee in-
cludes the option of enrollment in a

content, and procedural requirements speci- qualified HMO in the health benefits
fied in § 417.152. plan offered to its eligible employees,
250
it must provide a group enrollment pe- tion continue to be eligible for dental
riod before the effective date of HMO coverage. (If the dental coverage is not
coverage. The employing entity may optional for employees selecting the
not impose waiting periods as a condi- non-HMO option, nothing in this regu-
tion of enrollment in the HMO or of lation requires that the coverage be
transfer from HMO to non-HMO cov- made optional for employees selecting
erage, or exclusions, or limitations the HMO option. Conversely, if this
based on health status. coverage is optional for employees se-
(2) Effective date of coverage. Unless lecting the non-HMO option, nothing in
otherwise agreed to by the employing this regulation requires that the cov-
entity, or designee, and the HMO, coverage be mandatory for employees se-
erage under the HMO contract for em- lecting the non-HMO option.) -
ployees selecting the HMO option be- (ii) The non-HMO option provides
gins on the day the non-HMO contract free-standing coverage for optical serv-
expires or is renewed without lapse. ices (such as refraction and the provi-
(3) Coordination of benefits. Nothing in sion of eyeglasses), and the HMO does
this subpart precludes the uniform ap- not. The employing entity must pro-
plication of coordination of benefits vide that employees who select the
agreements between the HMOs and the HMO option continue to be eligible for
other carriers that are included in the optical coverage.
health benefits plan. (iii) The non-HMO option includes
(d) Continued eligibility for ‘‘free-stand- dental coverage in its major medical
ing’’ health benefits—(1) Basic require- package, with a common deductible ap-
ment. At the request of a qualified plied to dental as well as non-dental
HMO, the employing entity or its des- benefits. The HMO provides no dental
ignee must provide that employees se- coverage as part of its pre-paid health
lecting the option of HMO membership services. Because the dental coverage
will not, because of this selection, lose is not free-standing, the employing en-
their eligibility for free-standing den- tity is not required to provide that em-
tal, optical, or prescription drug bene- ployees who select the HMO option
fits for which they were previously eli- continue to be eligible for dental cov-
gible or would be eligible if selecting a erage, but is free to do so.
non-HMO option and that are not in- (e) Opportunity to select among cov-
cluded in the services provided by the erage options: Requirement for affirmative
HMO to its enrollees as part of the written selection—(1) Opportunity other
HMO prepaid benefit package. than during a group enrollment period.
(2) ‘‘Free-standing’’ defined. For pur- The employing entity or designee must
poses of this paragraph, the term ‘‘free- provide opportunity (in addition to the
standing’’ refers to a benefit that— group enrollment period) for selection
(i) Is not integrated or incorporated among coverage options, by eligible
into a basic health benefits package or employees who meet any of the fol-
major medical plan, and lowing conditions:
(ii) Is— (i) Are new employees.
(A) Offered by a carrier other than (ii) Have been transferred or have
the one offering the basic health bene- changed their place of residence, re-
fits package or major medical plan; or sulting in—
(B) Subject to a premium separate (A) Eligibility for enrollment in a
from the premium for the basic health qualified HMO for which they were not
benefits package or major medical previously eligible by place of resi-
plan. dence; or
(3) Examples of the employing entity’s (B) Residence outside the service
obligation with respect to the continued area of a qualified HMO in which they
eligibility. (i) The health benefits plan were previously enrolled.
includes a free-standing dental benefit. (iii) Are covered by any coverage op-
The HMO does not offer any dental cov- tion that ceases operation.
erage as part of its health services pro- (2) Prohibition of restrictions. When the
vided to members on a prepaid basis. employees specified in paragraph (e)(1)

The employing entity must provide of this section are eligible to partici-
that employees who select the HMO op- pate in the health benefits plan, the
251
§ 417.156 42 CFR Ch. IV (10–1–17 Edition)
employing entity or designee must a qualified HMO at the earliest date

make available, without waiting peri- permitted under the terms of existing
ods or exclusions based on health sta- agreements or contracts.
tus as a condition, the opportunity to (2) If the HMO’s request for inclusion
enroll in an HMO, or transfer from in a health benefits plan is received at
HMO coverage to non-HMO coverage. a time when existing contracts or
(3) Affirmative written selection. The agreements do not provide for inclu-
employing entity or designee must re- sion, the employing entity must in-
quire that the eligible employee make clude the HMO option in the health
an affirmative written selection in any benefits plan at the time that new
of the following circumstances: agreements or contracts are offered or
(i) Enrollment in a particular quali- negotiated.
fied HMO is offered for the first time. (b) Specific requirements. Unless mutu-
(ii) The eligible employee elects to ally agreed otherwise, the following
change from one option to another. rules apply:
(iii) The eligible employee is one of (1) Collective bargaining agreement.
those specified in paragraph (e)(1) of The employing entity or designee must
this section. raise the HMO’s request during the col-
(f) Determination of copayment levels lective bargaining process—
and supplemental health services. The se- (i) When a new agreement is nego-
lection of a copayment level and of tiated;
supplemental health services to be con- (ii) At the time prescribed, in an
tracted for must be made as follows: agreement with a fixed term of more
(1) For employees represented by a than 1 year, for discussion of change in
collective bargaining representative, health benefits; or
the selection of copayment levels and (iii) In accordance with a specific
supplemental health services is subject process for review of HMO offers.
to the collective bargaining process.
(2) Contracts. For employees not cov-
(2) For employees not represented by
ered by a collective bargaining agree-
a bargaining representative, the selec-
ment, the employing entity or designee
tion of copayment levels and supple-
must include the HMO option in any
mental health services is subject to the
health benefits plan offered to eligible
same decisionmaking process used by
employees when the existing contract
the employing entity with respect to
is renewed or when a new health bene-
the non-HMO option in its health bene-
fits contract or other arrangement is
fits plan.
negotiated.
(3) In all cases, the HMO has the
right to include, with the basic benefits (i) If a contract has no fixed term or
package it provides to its enrollees for has a term in excess of 1 year, the con-
a basic health services payment, on a tract must be treated as renewable on
non-negotiable basis, those supple- its earliest anniversary date.
mental health services that meet the (ii) If the employing entity or des-
following conditions: ignee is self-insured, the budget year
(i) Are required to be offered under must be treated as the term of the ex-
State law. isting contract.
(ii) Are included uniformly by the (3) Multiple arrangements. In the case
HMO in its prepaid benefit package. of a health benefits plan that includes
(iii) Are available to employees who multiple contracts or other arrange-
select the non-HMO option but not ments with varying expiration or re-
available to those who select the HMO newal dates, the employing entity
option. must include the HMO option, in ac-
cordance with paragraphs (b)(1) and
[59 FR 49840, Sept. 30, 1994, as amended at 61 (b)(2) of this section,—
FR 27288, May 31, 1996]
(i) At the time each contract or ar-
§ 417.156 When the HMO must be of- rangement is renewed or reissued; or
fered to employees. (ii) The benefits provided under the
contract or arrangement are offered to

(a) General rules. (1) The employing
employees.
entity or designee must offer eligible
employees the option of enrollment in [59 FR 49841, Sept. 30, 1994]
252
§ 417.157 Contributions for the HMO premiums for the other alternatives of-
alternative. fered). If, for example the employer has
(a) General principles—(1) Non- a policy of requiring all employees to
discrimination. The employer contribu- contribute to their health benefits
tion to an HMO must be in an amount plan, the employer may require HMO
that does not discriminate financially enrollees who would otherwise pay lit-
against an employee who enrolls in an tle or nothing at all, to make a pay-
HMO. A contribution does not discrimi- ment that does not exceed 50 percent of
nate financially if the method of deter- the employee contribution to the prin-
mining the contribution is reasonable cipal non-HMO alternative. The prin-
and is designed to ensure that employ- cipal non-HMO alternative is the one
ees have a fair choice among health that covers the largest number of en-
benefits plan alternatives. rollees from the particular employer.
(2) Effect of agreements or contracts. (b) Administrative expenses. (1) In de-
The employing entity or designee is termining the amount of its contribu-
not required to pay more for health tion to the HMO, the employing entity
benefits as a result of offering the HMO or designee may not consider adminis-
alternative than it would otherwise be trative expenses incurred in connection
required to pay under a collective bar- with offering any alternative in the
gaining agreement or contract that health benefits plan.
provides for health benefits and is in (2) However, if the employing entity
effect at the time the HMO alternative or designee has special requirements
is included. for other than standard solicitation
(3) Examples of acceptable employer brochures and enrollment literature, it
contributions. The following are meth- must, in the case of the HMO alter-
ods that are considered nondiscrim- native, determine and distribute any
inatory: administrative costs attributable to
(i) The employer contribution to the those requirements in a manner con-
HMO is the same, per employee, as the sistent with its method of determining
contribution to non-HMO alternatives. and distributing those costs for the
(ii) The employer contribution re- non-HMO alternatives.
flects the composition of the HMO’s en- (c) Exclusion for contribution for cer-
rollment in terms of enrollee attain benefits. In determining the
tributes that can reasonably be used to amount of the employing entity’s con-
predict utilization, experience, costs, tribution or the designee’s cost for the
or risk. For each enrollee in a given HMO alternative, the employing entity
class established on the basis of those or designee may exclude those portions
attributes, the employer contributes of the contribution allocable to bene-
an equal amount, regardless of the fits (such as life insurance or insurance
health benefits plan chosen by the em- for supplemental health benefits)—
ployee. (1) For which eligible employees and
(iii) The employer contribution is a their eligible dependents are covered
fixed percentage of the premium for notwithstanding selection of the HMO
each of the alternatives offered. alternative; and
(iv) The employer contribution is de- (2) That are not offered on a prepay-
termined under a mutually acceptable ment basis by the HMO to the employ-
arrangement negotiated by the HMO ing entity’s employees.
and the employer. In negotiating the (d) Contributions determined by agree-
arrangement, the employer may not in- ments or contracts or by law. If the spe-
sist on terms that would cause the cific amount of the employing entity’s
HMO to violate any of the require- contribution for health benefits is fixed
ments of this part. by an agreement or contract, or by
(4) Adjustment of employer contribu- law, that amount constitutes the em-
tion. An employer contribution deter- ploying entity’s obligation for con-
mined by an acceptable method may in tribution toward the HMO premiums.
some cases be adjusted if it would re- (e) Allocation of portion of a contribu-
sult in a nominal payment or no pay- tion determined by an agreement. In some

ment at all by HMO enrollees (because cases, the employing entity’s contribu-
the HMO premium is lower than the tion for health benefits is determined
253
§ 417.158 42 CFR Ch. IV (10–1–17 Edition)
by an agreement that also provides for Labor Act, and other laws of similar ef-
benefits other than health benefits. In fect.
that case, the employing entity must [59 FR 49841, Sept. 30, 1994, as amended at 61
determine, or instruct its designee to FR 27288, May 31, 1996]
determine, what portion of its con-
tribution is applicable to health bene-
fits.
Subpart F—Continued Regulation
(f) Retention and availability of data. of Federally Qualified Health
Each employing entity or designee Maintenance Organizations
must retain the following data for
three years and make it available to SOURCE: 43 FR 32255, July 25, 1978, unless
CMS upon request: otherwise noted. Redesignated at 52 FR 36746,
Sept. 30, 1987.
(1) The data used to compute the
level of contribution for each of the § 417.160 Applicability.
plans offered to employees.
(2) Related data about the employees This subpart applies to any entity
who are eligible to enroll in a plan. that has been determined to be a quali-
(3) A description of the methodology fied HMO under subpart D of this part.
for computation. [59 FR 49841, Sept. 30, 1994]
(g) CMS review of data. (1) CMS may
request and review the data specified in § 417.161 Compliance with assurances.
paragraph (f) of this section on its own Any entity subject to this subpart
initiative or in response to requests must comply with the assurances that
from HMOs or employees. it provided to CMS, unless compliance
(2) The purpose of CMS’s review is to is waived under § 417.166.
determine whether the methodology [58 FR 38071, July 15, 1993]
and the level of contribution comply
with the requirements of this subpart. § 417.162 Reporting requirements.
(3) HMOs and employees that request
Entities subject to this subpart must
CMS to review must set forth reason-
submit:
able grounds for making the request.
(a) The reports that may be required
[61 FR 27287, May 31, 1996] by CMS under § 417.126, and
(b) Any additional reports CMS may
§ 417.158 Payroll deductions. reasonably require.
Each employing entity that provides [58 FR 38071, July 15, 1993]
payroll deductions as a means of pay-
ing employees’ contributions for health § 417.163 Enforcement procedures.
benefits or provides a health benefits (a) Complaints. Any person, group, as-
plan that does not require an employee sociation, corporation, or other entity
contribution must, with the consent of may file with CMS a written complaint
an employee who selects the HMO op- with respect to an HMO’s compliance
tion, arrange for the employee’s con- with assurances it gave under subpart
tribution, if any, to be paid through D of this part. A complaint must—
payroll deductions. (1) State the grounds and underlying
[59 FR 49841, Sept. 30, 1994] facts of the complaint;
(2) Give the names of all persons in-
§ 417.159 Relationship of section 1310 volved; and
of the Public Health Service Act to (3) Assure that all appropriate griev-
the National Labor Relations Act ance and appeals procedures estab-
and the Railway Labor Act. lished by the HMO and available to the
The decision of an employing entity complainant have been exhausted.
subject to this subpart to include the (b) Investigations. (1) CMS may ini-
HMO alternative in any health benefits tiate investigations when, based on a
plan offered to its eligible employees report, a complaint, or any other infor-
must be carried out consistently with mation, CMS has reason to believe that
the obligations imposed on that em- a Federally qualified HMO is not in

ploying entity under the National compliance with any of the assurances
Labor Relations Act, the Railway it gave under subpart D of this part.
254
(2) When CMS initiates an investiga- after the day of the notice unless CMS
tion, it gives the HMO written notice receives a request for reconsideration
that includes a full statement of the by that date.
pertinent facts and of the matters (4) If after reconsideration CMS
being investigated and indicates that again determines to revoke the HMO’s
the HMO may submit, within 30 days of qualification, this revocation is effec-
the date of the notice, a written report tive on the tenth calendar day after
concerning these matters. the date of the notice of reconsidered
(3) CMS obtains any information it determination.
considers necessary to resolve issues (5) CMS publishes in the FEDERAL
related to the assurances, and may use REGISTER each determination it makes
site visits, public hearings, or any under this paragraph (d).
other procedures that CMS considers (6) A revocation under this paragraph
appropriate in seeking this informa- (d) has the effect described in § 417.164.
tion. (e) Notice by the HMO. Within 15 days
(c) Determination and notice by CMS— after the date CMS issues a notice of
(1) Determination. (i) On the basis of the revocation, the HMO must prepare a
investigation, CMS determines wheth- notice that explains, in readily under-
er the HMO has failed to comply with standable language, the reasons for the
any of the assurances it gave under determination that it is not a qualified
subpart D of this part. HMO, and send the notice to the fol-
(ii) CMS publishes in the FEDERAL lowing:
REGISTER a notice of each determina- (1) The HMO’s enrollees.
tion of non-compliance. (2) Each employer or public entity
(2) Notice of determination: Corrective that has offered enrollment in the HMO
action. (i) CMS gives the HMO written in accordance with subpart E of this
notice of the determination. part.
(ii) The notice specifies the manner (3) Each lawfully recognized collec-
in which the HMO has not complied tive bargaining representative or other
with its assurances and directs the representative of the employees of the
HMO to initiate the corrective action employer or public entity.
that CMS considers necessary to bring (f) Reimbursement of enrollees for serv-
the HMO into compliance. ices improperly denied, or for charges im-
(iii) The HMO must initiate this cor- properly imposed. (1) If CMS determines,
rective action within 30 days of the under paragraph (c)(1) of this section,
date of the notice from CMS, or within that an HMO is out of compliance, CMS
any longer period that CMS determines may require the HMO to reimburse its
to be reasonable and specifies in the enrollees for the following—
notice. The HMO must carry out the (i) Expenses for basic or supple-
corrective action within the time pe- mental health services that the en-
riod specified by CMS in the notice. rollee obtained from other sources be-
(iv) The notice may provide the HMO cause the HMO failed to provide or ar-
an opportunity to submit, for CMS’s range for them in accordance with its
approval, proposed methods for achiev- assurances.
ing compliance. (ii) Any amounts the HMO charged
(d) Remedy: Revocation of qualification. the enrollee that are inconsistent with
If CMS determines that a qualified its assurances. (Rules applicable to
HMO has failed to initiate or to carry charges for all enrollees are set forth in
out corrective action in accordance §§ 417.104 and 417.105. The additional
with paragraph (c)(2) of this section— rules applicable to Medicare enrollees
(1) CMS revokes the HMO’s qualifica- are in § 415.454.)
tion and notifies the HMO of this ac- (2) This paragraph applies regardless
tion. of when the HMO failed to comply with
(2) In the notice, CMS provides the the appropriate assurances.
HMO with an opportunity for reconsid- (g) Remedy: Civil suit—(1) Applica-
eration of the revocation, including, at bility. This paragraph applies to any
the HMO’s election, a fair hearing. HMO or other entity to which a grant,
(3) The revocation of qualification is loan, or loan guarantee was awarded,
effective on the tenth calendar day as set forth in subpart V of this part,
255
§ 417.164 42 CFR Ch. IV (10–1–17 Edition)
on the basis of its assurances regarding (1) The qualification requirements

the furnishing of basic and supple- are changed by Federal law; or
mental services or its operation and or- (2) The HMO shows good cause, con-
ganization, as the case may be. sistent with the purposes of title XIII
(2) Basis for action. If CMS determines of the PHS Act.
that the HMO or other entity has failed (b) Basis for finding of good cause. (1)
to initiate or refuses to carry out cor- Grounds upon which CMS may find
rective action in accordance with para- good cause include but are not limited
graph (c)(2) of this section, CMS may to the following:
bring civil action in the U.S. district (i) The HMO has filed for reorganiza-
court for the district in which the HMO tion under Federal bankruptcy provi-
or other entity is located, to enforce sions and the reorganization can only
compliance with the assurances it gave be approved with the waiver of the as-
in applying for the grant, loan, or loan surances.
guarantee.
(ii) State laws governing the entity
[59 FR 49841, Sept. 30, 1994] have been changed after it signed the
assurances so as to prohibit the HMO
§ 417.164 Effect of revocation of quali- from being organized and operated in a
fication on inclusion in employee’s manner consistent with the signed as-
health benefit plans.
surances.
When an HMO’s qualification is re- (2) Changes in State laws do not con-
voked under § 417.163(d), the following stitute good cause to the extent that
rules apply: the changes are preempted by Federal
(a) The HMO may not seek inclusion law under section 1311 of the PHS Act.
in employees health benefits plans (c) Consequences of waiver. If CMS
under subpart E of this part. waives any assurances regarding com-
(b) Inclusion of the HMO in an em- pliance with section 1301 of the PHS
ployer’s health benefits plan— Act, CMS concurrently revokes the
(1) Is disregarded in determining HMO’s qualification unless the waiver
whether the employer is subject to the is based on paragraph (a)(1) of this sec-
requirements of subpart E of this part; tion.
and
(2) Does not constitute compliance [59 FR 49842, Sept. 30, 1994, as amended at 61
FR 27288, May 31, 1996]
with subpart E of this part by the em-
ployer.
Subparts G–I [Reserved]
[59 FR 49842, Sept. 30, 1994, as amended at 61
FR 27288, May 31, 1996]
Subpart J—Qualifying Conditions
§ 417.165 Reapplication for qualifica- for Medicare Contracts
tion.
An entity whose qualification as an SOURCE: 50 FR 1346, Jan. 10, 1985, unless
HMO has been revoked by CMS for pur- otherwise noted.
poses of section 1310 of the PHS Act
may, after completing the corrective § 417.400 Basis and scope.
action required under § 417.163(c)(2), re- (a) Statutory basis. The regulations in
apply for a determination of qualifica- this subpart implement section 1876 of
tion in accordance with the procedures the Act, which authorizes Medicare
specified in subpart D of this part. payment to HMOs and CMPs that con-
[43 FR 32255, July 25, 1978. Redesignated at 52 tract with CMS to furnish covered
FR 36746, Sept. 30, 1987, and amended at 58 services to Medicare beneficiaries.
FR 38078, July 15, 1993] (b) Scope. (1) This subpart sets forth
the requirements an HMO or CMP must
§ 417.166 Waiver of assurances. meet in order to enter into a contract
(a) General rule. CMS may release an with CMS under section 1876 of the Act.
HMO from compliance with any assur- It also specifies the procedures that
ances the HMO gives under subpart D CMS follows to evaluate applications
of this part if— and make determinations.
256
(2) The rules for payment to HMOs with CMS under section 1876 of the Act
and CMPs are set forth in subparts N, and subpart L of this part.
O, and P of this part. Demonstration project means a dem-
(3) The rules for HCPP participation onstration project under section 402 of
in Medicare under section 1833(a)(1)(A) the Social Security Amendments of
of the Act are set forth in subpart U of 1967 (42 U.S.C. 1395b–1) or section 222(a)
this part. of the Social Security Amendments of
1972 (42 U.S.C. 1395b–1 (note)), relating
[60 FR 45675, Sept. 1, 1995]
to the provision of services for which
§ 417.401 Definitions. payment is made under Medicare on a
prospectively determined basis.
As used in this subpart and subparts Emergency services means covered in-
K through R of this part, unless the patient or outpatient services that are
context indicates otherwise— furnished by an appropriate source
Adjusted average per capita cost other than the HMO or CMP and that
(AAPCC) means an actuarial estimate meet the following conditions:
made by CMS in advance of an HMO’s (1) Are needed immediately because
or CMP’s contract period that rep- of an injury or sudden illness.
resents what the average per capita (2) Are such that the time required to
cost to the Medicare program would be reach the HMO’s or CMP’s providers or
for each class of the HMO’s or CMP’s suppliers (or alternatives authorized by
Medicare enrollees if they had received the HMO or CMP) would mean risk of
covered services other than through permanent damage to the enrollee’s
the HMO or CMP in the same geo- health.
graphic area or in a similar area. Once initiated, the services continue to
Adjusted community rate (ACR) is the be considered emergency services as
equivalent of the premium that a risk long as transfer of the enrollee to the
HMO or CMP would charge Medicare HMO’s or CMP’s source of health care
enrollees independently of Medicare or authorized alternative is precluded
payments if the HMO or CMP used the because of risk to the enrollee’s health
same rates it charges non-Medicare en- or because transfer would be unreason-
rollees for a benefit package limited to able, given the distance and the nature
covered Medicare services. of the medical condition.
Arrangement means a written agree- Geographic area means the area found
ment between an HMO or CMP and an- by CMS to be the area within which
other entity, under which— the HMO or CMP furnishes, or arranges
(1) The other entity agrees to furnish for furnishing, the full range of serv-
specified services to the HMO’s or ices that it offers to its Medicare en-
CMP’s Medicare enrollees; rollees.
(2) The HMO or CMP retains respon- Medicare enrollee means a Medicare
sibility for the services; and beneficiary who has been identified on
(3) Medicare payment to the HMO or CMS records as an enrollee of an HMO
CMP discharges the beneficiary’s obli- or CMP that has a contract with CMS
gation to pay for the services. under section 1876 of the Act and sub-
Benefit stabilization fund means a fund part L of this part.
established by CMS, at the request of a New Medicare enrollee means a Medi-
risk HMO or CMP, to withhold a por- care beneficiary who—
tion of the per capita payments avail- (1) Enrolls with an HMO or CMP after
able to the HMO or CMP and pay that the date on which the HMO or CMP
portion in a subsequent contract period first enters into a risk contract under
for the purpose of stabilizing fluctua- subpart L of this part; and
tions in the availability of the addi- (2) Was not enrolled with the HMO or
tional benefits the HMO or CMP pro- CMP at the time he or she became enti-
vides to its Medicare enrollees. tled to benefits under Part A or eligible
Cost contract means a Medicare con- to enroll in Part B of Medicare.
tract under which CMS pays the HMO Risk contract means a Medicare con-
or CMP on a reasonable cost basis. tract under which CMS pays the HMO
Cost HMO or CMP means an HMO or or CMP on a risk basis for Medicare
CMP that has in effect a cost contract covered services.
257
§ 417.402 42 CFR Ch. IV (10–1–17 Edition)
Risk HMO or CMP means an HMO or (2) There were two or more coordi-
CMP that has in effect a risk contract nated care plan-model MA local plans
with CMS under section 1876 of the Act not offered by the same MA organiza-
and subpart L of this part. tion in the same service area or portion
Urgently needed services means cov- of a service area for the entire previous
ered services that are needed by an en- calendar year meeting the conditions
rollee who is temporarily absent from in paragraph (c)(3) of this section.
the HMO’s or CMP’s geographic area (3) Minimum enrollment requirements.
and that— With respect to any service area or por-
(1) Are required in order to prevent tion of a service area that is within a
serious deterioration of the enrollee’s Metropolitan Statistical Area (MSA)
health as a result of unforeseen injury with a population of more than 250,000
or illness; and and counties contiguous to the MSA
(2) Cannot be delayed until the en- that are not in another MSA with a
rollee returns to the HMO’s or CMP’s population of more than 250,000, 5000
geographic area. enrolled individuals. If the service area
includes a portion in more than one
[50 FR 1346, Jan. 10, 1985, as amended at 56 MSA with a population of more than
FR 51986, Oct. 17, 1991; 58 FR 38072, July 15, 250,000, the minimum enrollment deter-
1993; 60 FR 45675, Sept. 1, 1995]
mination is made with respect to each
§ 417.402 Effective date of initial regu- such MSA and counties contiguous to
lations. the MSA that are not in another MSA
with a population of more than 250,000.
(a) The changes made to section 1876
of the Act by section 114 of the Tax Eq- [63 FR 35066, June 26, 1998, as amended at 65
uity and Fiscal Responsibility Act of FR 40314, June 29, 2000; 67 FR 13288, Mar. 22,
2002; 70 FR 4713, Jan. 28, 2005; 73 FR 54248,
1982 became effective on February 1,
Sept. 18, 2008; 76 FR 21560, Apr. 15, 2011; 76 FR
1985, the effective date of the initial 54633, Sept. 1, 2011]
implementing regulations.
(b) No new cost plan contracts are ac- § 417.404 General requirements.
cepted by CMS. CMS will, however, ac- (a) In order to contract with CMS
cept and approve applications to mod- under the Medicare program, an entity
ify cost plan contracts in order to ex- must—
pand service areas, provided they are
(1) Be determined by CMS to be an
submitted on or before September 1,
HMO or CMP (in accordance with
2006, and CMS determines that the or-
§§ 117.142 and 417.407, respectively); and
ganization continues to meet regu-
(2) Comply with the contract require-
latory requirements and the require-
ments set forth in subpart L of this
ments in its cost plan contract. Sec-
part.
tion 1876 cost plan contracts will not be
(b) CMS enters into or renews a con-
extended or renewed beyond December
tract only if it determines that action
31, 2007, where conditions in paragraph
would be consistent with the effective
(c) of this section are present.
and efficient implementation of section
(c) Mandatory HMO or CMP and con-
1876 of the Act.
tract non-renewal or service area reduc-
tion. CMS will non-renew all or a por- [60 FR 45675, Sept. 1, 1995]
tion of an HMO’s or CMP’s contracted
service area using procedures in § 417.406 Application and determina-
§ 417.492(b) and § 417.494(a) for any pe- tion.
riod beginning on or after January 1, (a) Responsibility for making determina-
2013, where— tions. CMS is responsible for deter-
(1) There were two or more coordi- mining whether an entity meets the re-
nated care plan-model MA regional quirements to be an HMO or CMP.
plans not offered by the same MA orga- (b) Application requirements. (1) The
nization in the same service area or application requirements for HMOs are
portion of a service area for the entire set forth in § 417.143.
previous calendar year meeting the (2) The requirements of § 417.143 also
conditions in paragraph(c)(3) of this apply to CMPs except that there are no
section; or application fees.
258
(c) Determination. CMS uses the pro- apply also to CMPs except that ref-
cedures set forth in § 417.144(a) through erence to ‘‘basic services’’ must be read
(d) to determine whether an entity is as reference to the required services
an HMO or CMP. listed in paragraph (b) of this section.
(d) Oversight of continuing compliance. (f) Protection of enrollees. The entity
(1) CMS oversees an entity’s continued provides adequately against the risk of
compliance with the requirements for insolvency by meeting the require-
an HMO as defined in § 417.1 or for a ments of §§ 417.120(a) and 417.122 for pro-
CMP as set forth in § 417.407.
tection of enrollees against loss of ben-
(2) If an entity no longer meets those
requirements, CMS terminates the con- efits and liability for payment of any
tract of that entity in accordance with fees that are the legal responsibility of
§ 417.494. the entity.
[60 FR 45675, Sept. 1, 1995] [60 FR 45675, Sept. 1, 1995]
§ 417.407 Requirements for a Competi- § 417.408 Contract application process.

tive Medical Plan (CMP). (a) Contents of application. (1) The ap-
(a) General rule. To qualify as a CMP, plication for a contract must include
an entity must be organized under the supporting information in the form and
laws of a State and must meet the re- detail required by CMS. (2) Whenever
quirements of paragraphs (b) through feasible, CMS exempts the HMO or
(f) of this section. CMP from resubmittal of information
(b) Required services—(1) Basic rule. it has already submitted to CMS in
Except as provided in paragraph (b)(2)
connection with a determination made
of this section, the entity furnishes to
under the provisions of § 417.406.
its enrollees at least the following
services: (b) Approval of application. (1) If CMS
(i) Physicians’ services performed by approves the application, it gives writ-
physicians. ten notice to the HMO or CMP, indi-
(ii) Laboratory, x-ray, emergency, cating that it meets the requirements
and preventive services. for either a risk or reasonable cost con-
(iii) Out-of-area coverage. tract or only for a reasonable cost con-
(iv) Inpatient hospital services. tract.
(2) Exception for Medicaid prepay- (2) If the HMO or CMP is dissatisfied
ment risk contracts. An entity that with a determination that it meets the
had, before 1970, a Medicaid prepay- requirements only for a reasonable cost
ment risk contract that did not include contract, it may request reconsider-
provision of inpatient hospital services ation in accordance with the proce-
is not required to provide those serv- dures specified in subpart R of this
ices. part.
(c) Compensation for services. The enti- (c) Denial of application. If CMS de-
ty receives compensation (except for
nies the application, it gives written
deductibles, coinsurance, and copay-
notice to the HMO or CMP indicating—
ments) for the health care services it
provides to enrollees on a periodic, pre- (1) That it does not meet the con-
paid capitation basis regardless of the tract requirements under section 1876
frequency, extent, or kind of services of the Act;
provided to any enrollee. (2) The reasons why the HMO or CMP
(d) Source of physicians’ services. The does not meet the contract require-
entity provides physicians’ services ments; and
primarily through— (3) The HMO’s or CMP’s right to re-
(1) Physicians who are employees or quest reconsideration in accordance
partners of the entity; or with the procedures specified in sub-
(2) Physicians or groups of physicians part R of this part.
(organized on a group or individual
practice basis) under contract with the [50 FR 1346, Jan. 10, 1985, as amended at 56
entity to provide physicians’ services. FR 8853, Mar. 1, 1991; 58 FR 38078, July 15,
1993; 60 FR 45676, Sept. 1, 1995]
(e) Assumption of financial risk. The
rules set forth in § 417.120(b) for HMOs
259
§ 417.410 42 CFR Ch. IV (10–1–17 Edition)
§ 417.410 Qualifying conditions: Gen- (1) The HMO or CMP qualifies for a
eral rules. risk contract, but chooses a reasonable
cost contract.
(a) Basic requirement. In order to qual-
(2) The HMO or CMP meets the condi-
ify for a contract with CMS under this
tions for entering into a risk contract
subpart, an HMO or CMP must dem-
specified in paragraph (e) of this sec-
onstrate its ability to enroll Medicare
tion except that CMS does not judge
beneficiaries and other individuals and the HMO or CMP capable of bearing the
groups and to deliver a specified com- potential losses of a risk contract.
prehensive range of high quality serv- (g) Regulations on reasonable cost
ices efficiently, effectively, and eco- and risk reimbursement are set forth
nomically to its Medicare enrollees. in subparts O and P of this part.
(b) Other qualifying conditions. An
HMO or CMP must meet qualifying [50 FR 20570, May 17, 1985, as amended at 58
FR 38078, July 15, 1993; 60 FR 45676, Sept. 1,
conditions that pertain to operating 1995]
experience, enrollment, range of serv-
ices, furnishing of services, and a qual- § 417.412 Qualifying condition: Admin-
ity assurance program. istration and management.
(c) Standards. Generally, each quali- The HMO or CMP must demonstrate
fying condition is interpreted by a se- that it—
ries of standards that are used in sur- (a) Has sufficient administrative ca-
veying an HMO or CMP to determine pability to carry out the requirements
its qualifications for a Medicare con- of the contract; and
tract. (b) Does not have any agents or man-
(d) Application of standards. Applica- agement staff or persons with owner-
tion of the standards enables the sur- ship or control interests who have been
veyor to determine— convicted of criminal offenses related
(1) The HMO’s or CMP’s activities; to their involvement in Medicaid,
(2) The extent to which the HMO or Medicare, or social service programs
CMP complies with each condition; under title XX of the Act.
(3) The nature and extent of any defi- [50 FR 1346, Jan. 10, 1985, as amended at 58
ciencies; and FR 38082, July 15, 1993; 60 FR 45676, Sept. 1,
(4) The need for improvement if CMS 1995]
should enter into a contract with the
HMO or CMP. § 417.413 Qualifying condition: Oper-
ating experience and enrollment.
(e) Requirements for a risk contract. An
HMO or CMP may enter into a risk (a) Condition. The HMO or CMP must
contract with CMS if it— demonstrate that it has operating ex-
(1) Meets all the applicable require- perience and an enrolled population
ments in the statute and regulations; sufficient to provide a reasonable basis
for establishing a prospective per cap-
(2) Has at least 5,000 enrollees or 1,500
ita reimbursement rate or a reasonable
enrollees if it serves a primarily rural
cost reimbursement rate, as appro-
area as defined in § 417.413(b)(3);
priate.
(3) Has at least 75 Medicare enrollees (b) Standard: Enrollment and operating
or has an acceptable plan to achieve experience for HMOs or CMPs to contract
this Medicare membership within 2 on a risk basis. To be eligible to con-
years; tract on a risk basis—
(4) Satisfies CMS that it can bear the (1) A nonrural HMO or CMP must
potential losses of a risk contract; and currently have the following:
(5) Has not previously terminated or (i) At least 5,000 enrollees; and
failed to renew a risk contract within (ii) At least 75 Medicare enrollees or
the preceding 5 years, unless CMS de- a plan acceptable to CMS for achieving
termines that circumstances warrant a Medicare enrollment of 75 within 2
special consideration. years from the beginning of its initial
(f) Requirements for a reasonable cost contract period.
sontract. An HMO or CMP may enter (2) A rural HMO or CMP must cur-
into a reasonable cost contract if it rently have—
meets one of the following: (i) At least 1,500 enrollees; and
260
(ii) At least 75 Medicare enrollees or (i) The HMO or CMP serves a geo-
a plan acceptable to CMS for achieving graphic area in which Medicare bene-
a Medicare enrollment of 75 within 2 ficiaries and Medicaid beneficiaries
years from the beginning of its initial constitute more than 50 percent of the
contract period. population. (CMS does not grant a
(3) For purposes of this paragraph, an waiver that would permit the percent-
HMO or CMP is considered rural if at age of Medicare and Medicaid enrollees
least 50 percent of its enrollees reside to exceed the percentage of Medicare
in nonmetropolitan areas. A nonmetro- beneficiaries and Medicaid bene-
politan area is an area— ficiaries in the population of the geo-
(i) No part of which is within a met- graphic area.)
ropolitan statistical area (MSA) as des- (ii) The HMO or CMP is owned and
ignated by the Executive Office of operated by a government entity. The
Management and Budget; and waiver may be for a period up to three
(ii) That does not contain a city years after the date the HMO or CMP
whose population exceeds 50,000 indi- first enters into a contract under this
viduals. subpart, and may not be extended.
(4) A subdivision or subsidiary of an (iii) The HMO or CMP requests waiv-
HMO or CMP that meets the require- er of the composition rule because it is
ments of paragraph (b)(1) or (b)(2) of in the public interest. The organization
this section need not demonstrate that provides documentation that supports
it meets those requirements as an inde- one of the following:
pendent unit if the HMO or CMP as-
(A) The organization serves a medi-
sumes responsibility for the financial
cally underserved rural or urban area.
risk, and adequate management and
supervision of health care services fur- (B) The organization demonstrates a
nished by its subdivision or subsidiary. long-term business and community
(c) Standard: Enrollment and operating service commitment to the area.
experience for HMOs or CMPs to contract (C) The organization believes that a
on a cost basis. To be eligible to con- waiver is necessary to promote man-
tract on a reasonable cost basis, an aged care choices in an area with lim-
HMO or CMP must currently have en- ited or no managed care choices.
rollees sufficient in number to provide (3) Waiver granted on or before October
a reasonable basis for entering into a 21, 1986. An HMO or CMP (or a suc-
contract, as follows: cessor HMO or CMP) that as of October
(1) At least 1,500 enrollees. 21, 1986, had been granted an exception,
(2) At least 75 Medicare enrollees, or waiver, or modification of the require-
a plan acceptable to CMS for achiev- ments of paragraph (d)(1) of this sec-
ing— tion, but that does not meet the re-
(i) A Medicare enrollment of 75 with- quirements of paragraph (d)(2) of this
in 2 years from the beginning of its ini- section, must make (and throughout
tial contract period; and the period of the exception, waiver, or
(ii) At least 250 Medicare enrollees by modification continue to make) rea-
the beginning of its fourth contract pe- sonable efforts to meet scheduled en-
riod. rollment goals, consistent with a
(d) Standard: Composition of enroll- schedule of compliance approved by
ment—(1) Requirement. Except as speci- CMS.
fied in paragraphs (d)(2) and (e) of this (i) If CMS determines that the HMO
section, not more than 50 percent of an or CMP has complied, or made signifi-
HMO’s or CMP’s enrollment may be cant progress toward compliance, with
Medicare beneficiaries. the approved schedule, and that an ex-
(2) Waiver of composition of enrollment tension is in the best interest of the
standard. CMS may waive compliance Medicare program, CMS may extend
with the requirements of paragraph the waiver of modification.
(d)(1) of this section if the HMO or CMP (ii) If CMS determines that the HMO
has made and is making reasonable ef- or CMP has not complied with the ap-
forts to enroll individuals who are not proved schedule, CMS may apply the
Medicare beneficiaries and it meets one sanctions described in paragraphs (d)(6)
of the following requirements: and (d)(7) of this section.
261
§ 417.414 42 CFR Ch. IV (10–1–17 Edition)
(4) Basis for application of sanctions. compliance would prevent compliance

CMS may, as an alternative to con- with the limitation on enrollment of
tract termination, apply the sanctions Medicare beneficiaries and Medicaid
specified in paragraph (d)(6) of this sec- beneficiaries (paragraph (d) of this sec-
tion if CMS determines that the HMO tion) or result in an enrollment sub-
or CMP is not complying with the re- stantially nonrepresentative of the
quirements in paragraphs (d)(1), (d)(2), population of the HMO’s or CMP’s geo-
or (d)(3) of this section, as applicable. graphic area. The enrollment would be
(5) Notice of sanction. Before applying ‘‘substantially nonrepresentative’’ if
the sanctions specified in paragraph the proportion of a subgroup to the
(d)(6) of this section, CMS sends a writ- total enrollment exceeded, by 10 per-
ten notice to the HMO or CMP stating cent or more, its proportion of the pop-
the proposed action and its basis. CMS ulation in the HMO’s or CMP’s geo-
gives the HMO or CMP 15 days after graphic area, as shown by census data
the date of the notice to provide evi- or other data acceptable to CMS. For
dence establishing the HMO’s or CMP’s purposes of this paragraph, a subgroup
compliance with the requirements in means a class of Medicare enrollees as
paragraph (d)(1), (d)(2), or (d)(3) of this defined in § 417.582.
section, as applicable. [50 FR 1346, Jan. 10, 1985, as amended at 56
(6) Sanctions. If, following review of FR 46570, Sept. 13, 1991; 58 FR 38082, July 15,
the HMO’s or CMP’s timely response to 1993; 60 FR 45676, Sept. 1, 1995; 63 FR 35066,
CMS’s notice, CMS determines that an June 26, 1998]
HMO or CMP does not comply with the
requirements of paragraphs (d)(1), § 417.414 Qualifying condition: Range
(d)(2), or (d)(3) of this section, CMS of services.
may apply either of the following sanc- (a) Condition. The HMO or CMP must
tions: demonstrate that it is capable of deliv-
(i) Require the HMO or CMP to stop ering to Medicare enrollees the range
accepting new enrollment applications of services required in accordance with
after a date specified by CMS. this section.
(ii) Deny payment for individuals (b) Standard: Range of services fur-
who are formally added or ‘‘accreted’’ nished by eligible HMOs or CMPs—(1)
to CMS’s records as Medicare enrollees Basic requirement. Except as specified in
after a date specified by CMS. paragraph (b)(3) of this section, an
(7) Termination by CMS. In addition to HMO or CMP must furnish to its Medi-
the sanctions described in paragraph care enrollees (directly or through ar-
(d)(6) of this section. CMS may decline rangements with others) all the Medi-
to renew an HMO’s or CMP’s contract care services to which those enrollees
in accordance with § 417.492(b), or ter- are entitled to the extent that they are
minate its contract in accordance with available to Medicare beneficiaries who
§ 417.494(b) if CMS determines that the reside in the HMO’s or CMP’s geo-
HMO or CMP no longer substantially graphic area but are not enrolled in the
meets the requirements of paragraphs HMO or CMP.
(d)(1), (d)(2), or (d)(3) of this section. (2) Criteria for availability. The serv-
(8) Termination of composition stand- ices are considered available if—
ard. The 50 percent composition of (i) The sources are located within the
Medicare beneficiaries terminates for HMO’s or CMP’s geographic area; or
all managed care plans on December 31, (ii) It is common practice to refer pa-
1998. tients to sources outside that geo-
(e) Standard: Open enrollment. (1) Ex- graphic area.
cept as specified in paragraph (e)(2) of (3) Exception for hospice care. An HMO
this section, an HMO or CMP must en- or CMP is not required to furnish hos-
roll Medicare beneficiaries on a first- pice care as described in part 418 of this
come, first-served basis to the limit of chapter. However, HMOs or CMPs must
its capacity and provide annual open inform their Medicare enrollees about
enrollment periods of at least 30 days the availability of hospice care if—
duration for Medicare beneficiaries. (i) A hospice participating in Medi-

(2) CMS may waive the requirement care is located within the HMO’s or
of paragraph (e)(1) of this section if CMP’s geographic area; or
262
(ii) It is common practice to refer pa- ticular service, the HMO or CMP may
tients to hospices outside the geo- select the type of practitioner to be
graphic area. used.
(c) Standard: Financial responsibility (c) Standard: Physician supervision.
for services furnished outside the HMO or The HMO or CMP must provide for su-
CMP. (1) An HMO or CMP must assume pervision by a physician of other
financial responsibility and provide health care professionals who are di-
reasonable reimbursement for emer- rectly involved in the provision of
gency services and urgently needed health care as generally authorized
services (as defined in § 417.401) that are under section 1861 of the Act. Except as
obtained by its Medicare enrollees specified in paragraph (d) of this sec-
from providers and suppliers outside tion, with respect to medical services
the HMO or CMP even in the absence of furnished in an HMO’s or CMP’s clinic
the HMO’s or CMP’s prior approval. or the office of a physician with whom
(2) An HMO or CMP must assume fi- the HMO or CMP has a service agree-
nancial responsibility for services that ment, the HMO or CMP must ensure
the Medicare enrollee attempted to ob- that—
tain from the HMO or CMP, but that (1) Services furnished by para-
the HMO or CMP failed to furnish or medical, ancillary, and other nonphysi-
unreasonably denied, and that are cian personnel are furnished under the
found, upon appeal by the enrollee direct supervision of a physician;
under subpart Q of this part, to be serv- (2) A physician is present to perform
ices that the enrollee was entitled to medical (as opposed to administrative)
have furnished to him or her by the services whenever the clinics or offices
HMO or CMP. are open; and
[50 FR 1346, Jan. 10, 1985, as amended at 58 (3) Each patient is under the care of
FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, a physician.
1995] (d) Exceptions to physician supervision
requirement. The following services may
§ 417.416 Qualifying condition: Fur- be furnished without the direct per-
nishing of services. sonal supervision of a physician:
(a) Condition. The HMO or CMP must (1) Services of physician assistants
furnish the required services to its and nurse practitioners (as defined in
Medicare enrollees through providers § 491.2 of this chapter), and the services
and suppliers that meet applicable and supplies incident to their services.
Medicare statutory definitions and im- The conditions for payment, as set
plementing regulations. The HMO or forth in §§ 405.2414 and 405.2415 of this
CMP must also ensure that the re- chapter for services furnished by rural
quired services, additional services, health clinics and Federally qualified
and any other supplemental services health centers, respectively, also apply
for which the Medicare enrollee has when those services are furnished by an
contracted are available and accessible HMO or CMP.
and are furnished in a manner that en- (2) When furnished by an HMO or
sures continuity. CMP, services of clinical psychologists
(b) Standard: Conformance with condi- who meet the qualifications specified
tions of participation, conditions for cov- in § 410.71(d) of this chapter, and the
erage, and conditions for certification. (1) services and supplies incident to their
Hospitals, SNFs, HHAs, CORFs, and professional services.
providers of outpatient physical ther- (3) When an HMO or CMP contracts
apy or speech-language pathology serv- on—
ices must meet the applicable condi- (i) A risk basis, the services of a clin-
tions of participation in Medicare, as ical social worker (as defined at § 410.73
set forth elsewhere in this chapter. of this chapter) and the services and
(2) Suppliers must meet the condi- supplies incident to their professional
tions for coverage or conditions for cer- services; or
tification of their services, as set forth (ii) A cost basis, the services of a
elsewhere in this chapter. clinical social worker (as defined in

(3) If more than one type of practi- § 410.73 of this chapter). Services inci-
tioner is qualified to furnish a par- dent to the professional services of a
263
§ 417.418 42 CFR Ch. IV (10–1–17 Edition)
clinical social worker furnished by an CMS pays the HMO or CMP on his or
HMO or CMP contracting on a cost her behalf for the services to which he
basis are not covered by Medicare and or she is entitled.
payment will not be made for these (c) Beneficiary liability. (1) The HMO
services. or CMP may require payment, in the
(e) Standard: Accessibility and conform of premiums or otherwise, from
tinuity. (1) The HMO or CMP must en- individuals for services not covered
sure that the required services and any under Medicare, as well as deductible
other services for which Medicare en- and coinsurance amounts attributable
rollees have contracted are accessible, to Medicare covered services.
with reasonable promptness, to the en- (2) As described in § 417.448, Medicare
rollees with respect to geographic loca- enrollees of risk HMOs or CMPs are lia-
tion, hours of operation, and provision ble for services that they obtain from
of after hours service. Medically nec- sources other than the HMO or CMP,
essary emergency services must be unless the services are—
available twenty-four hours a day, (i) Emergency or urgently needed; or
seven days a week. (ii) Determined, on appeal under sub-
(2) The HMO or CMP must maintain part Q of this part, to be services that
a health (including medical) record- should have been furnished by the HMO
keeping system through which perti- or CMP.
nent information relating to the health
care of its Medicare enrollees is accu- [50 FR 1346, Jan. 10, 1985, as amended at 58
mulated and is readily available to ap- FR 38078, July 15, 1993; 60 FR 45677, Sept. 1,
1995; 80 FR 7958, Feb. 12, 2015]
propriate professionals.
[50 FR 1346, Jan. 10, 1985, as amended at 58 § 417.422 Eligibility to enroll in an
FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, HMO or CMP.
1995; 63 FR 20130, Apr. 23, 1998]
Except as specified in §§ 417.423 and
§ 417.418 Qualifying condition: Quality 417.424, an HMO or CMP must enroll,
assurance program. either for an indefinite period or for a
specified period of at least 12 months,
(a) Condition. The HMO or CMP must
any individual who meets all of the fol-
make arrangements for a quality as-
lowing:
surance program that meets the re-
(a) Is entitled to Medicare benefits
quirements of this section.
(b) Standard. An HMO or CMP must under Parts A and B or under Part B
have an ongoing quality assurance pro- only.
gram that meets the requirements set (b) Lives within the geographic area
forth in § 417.106(a). served by the HMO or CMP.
(c) Is not enrolled in any other HMO
[58 FR 38072, July 15, 1993] or CMP that has entered into a con-
tract under subpart L of this part.
Subpart K—Enrollment, Entitle- (d) During an enrollment period of
ment, and Disenrollment the HMO or CMP, completes the HMO’s
under Medicare Contract or CMP’s application form or another
CMS-approved election mechanism and
SOURCE: 50 FR 1346, Jan. 10, 1985, unless gives whatever information is required
otherwise noted. for enrollment.
(e) Agrees to abide by the HMO’s or
§ 417.420 Basic rules on enrollment CMP’s rules after they are disclosed to
and entitlement. him or her in connection with the en-
(a) Enrollment. Eligible individuals rollment process.
who are entitled to benefits under both (f) Is not denied enrollment by the
Part A and Part B of Medicare or only HMO or CMP under a selection policy,
Part B may elect to receive those bene- if any, that has been approved by CMS
fits through an HMO or CMP that has under § 417.424(b).
in effect a contract with CMS under (g) Is not denied enrollment by the
subpart L of this part. HMO or CMP on the basis of any of the

(b) Entitlement. If a Medicare bene- administrative criteria concerning de-
ficiary enrolls with an HMO or CMP, nial of enrollment in § 417.424(a).
264
(h) Is a United States citizen or an unless, as a result of the enrollment,

individual who is lawfully present in the proportion of the subgroup of en-
the United States as determined in 8 rollees to which the enrollee belongs as
CFR 1.3. compared to the HMO’s or CMP’s total
[50 FR 1346, Jan. 10, 1985, as amended at 58
enrollment exceeds by at least ten per-
FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, cent the subgroup’s proportion of the
1995; 77 FR 22166, Apr. 12, 2012; 80 FR 7958, general population in the geographic
Feb. 12, 2015] area of the HMO or CMP. (A subgroup
is a class of Medicare enrollees of an
§ 417.423 Special rules: ESRD and hos- HMO or CMP that CMS constructs on
pice patients. the basis of actuarial factors.)
(a) ESRD patients. (1) A Medicare ben-
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
eficiary who has been medically deter- 1985, as amended at 58 FR 38078, July 15, 1993;
mined to have end-stage renal disease 60 FR 45677, Sept. 1, 1995]
is not eligible to enroll in an HMO or
CMP. § 417.426 Open enrollment require-
(2) However, if a beneficiary is al- ments.
ready enrolled in an HMO or CMP when (a) Basic requirements. (1) HMOs or
he or she is determined to have end- CMPs must provide open enrollment
stage renal disease, the HMO or CMP— for Medicare beneficiaries for at least
(i) Must reenroll the beneficiary as 30 consecutive days during each con-
required by § 417.434; and tract year.
(ii) May not disenroll the beneficiary (2) During open enrollment, the HMO
except as provided in § 417.460. or CMP must enroll eligible Medicare
(b) Hospice patients. A Medicare bene- beneficiaries in the order in which
ficiary who elects hospice care under their applications are received and
§ 418.24 of this chapter is not eligible to until its enrollment capacity is
enroll in an HMO or CMP as long as the reached.
hospice election remains in effect. (3) The HMO or CMP may accept ap-
[60 FR 45677, Sept. 1, 1995] plications from Medicare beneficiaries
after it has reached capacity if it
§ 417.424 Denial of enrollment. places those individuals on a waiting
(a) Basis for denial. An HMO or CMP list and enrolls them in chronological
may deny enrollment to an individual order as vacancies occur.
who meets the criteria of § 417.422 if ac- (4) An HMO or CMP with a risk con-
ceptance would— tract must accept applications from el-
(1) Cause the number of enrollees who igible Medicare beneficiaries during
are Medicare or Medicaid beneficiaries the month of November 1998.
to exceed 50 percent of the HMO’s or (b) Capacity to accept new enrollees. (1)
CMP’s total enrollment; If an HMO or CMP chooses to limit en-
(2) Prevent the HMO or CMP from rollments because of its capacity, it
complying with any of the other con- must notify CMS at least 90 days be-
tract qualifying conditions set forth in fore the beginning of its open enroll-
subpart J of this part; ment period and, at that time, provide
(3) Require the HMO or CMP to ex- CMS with its reasons for limiting en-
ceed its enrollment capacity; or rollment.
(4) Cause the enrollment to become (2) CMS evaluates the HMO’s or
substantially nonrepresentative of the CMP’s submittal under paragraph (b)(1)
general population in the HMO’s or of this section.
CMP’s geographic area. (3) The HMO or CMP must promptly
(b) Selection policies. (1) Denial under notify CMS if there is any change in its
paragraph (a)(4) of this section must be enrollment capacity.
in accordance with written selection (c) Reserved vacancies. (1) Subject to
policies approved by CMS. (2) Enroll- CMS’s approval, an HMO or CMP may
ment of individuals will not be consid- set aside a reasonable number of vacan-
ered to make the enrollment of the cies for an anticipated new group con-
HMO or CMP substantially nonrep- tract or for anticipated new enrollees

resentative of the general population under an existing group contract that
in the HMO’s or CMP’s geographic area will have its enrollment period after
265
§ 417.427 42 CFR Ch. IV (10–1–17 Edition)
the Medicare open enrollment period (2) The HMO or CMP must file and re-
during the contract year. tain application forms for the period
(2) Any set aside vacancies that are specified in CMS instructions.
not filled within a reasonable time (b) Handling of applications. An HMO
after the beginning of the group con- or CMP must have an effective system
tract enrollment period must be made for receiving, controlling, and proc-
available to Medicare beneficiaries and essing applications from Medicare
other nongroup applicants under the beneficiaries. The system must meet
requirements of this subpart. the following conditions and require-
ments:
[50 FR 1346, Jan. 10, 1985, as amended at 58 (1) Each application is dated as of the
FR 38079, July 15, 1993; 60 FR 45677, Sept. 1, day it is received.
1995; 63 FR 35066, June 26, 1998] (2) Applications are processed in
chronological order by date of receipt.
§ 417.427 Extending MA and Part D (3) The HMO or CMP gives the bene-
program disclosure requirements to
section 1876 cost contract plans. ficiary prompt notice of acceptance or
denial in a format specified by CMS.
(a) The procedures and requirements (4) The notice of acceptance. If the
relating to disclosure in § 422.111 and HMO or CMP is currently enrolled to
§ 423.128 apply to Medicare contracts capacity, explains the procedures that
with HMOs and CMPs under section will be followed when vacancies occur.
1876 of the Act. (5) The notice of denial explains the
(b) In applying the provisions of reason for denial.
§§ 422.111 and 423.128, references to part (6) The HMO or CMP transmits the
422 and part 423 of this chapter must be information necessary for CMS to add
read as references to this part, and ref- the beneficiary to its records of the
erences to MA organizations and Part HMO’s or CMP’s Medicare enrollees—
D sponsors as references to HMOs and (i) Within 30 days from the date of
CMPs. application or from the date a vacancy
occurs for an applicant who was ac-
[77 FR 22166, Apr. 12, 2012] cepted (for future enrollment) while
there were no vacancies; or
§ 417.428 Marketing activities. (ii) Within an additional period of
(a) With the exception of § 422.2276 of time approved by CMS on a showing by
this chapter, the procedures and re- the HMO or CMP that it needs more
quirements relating to marketing re- time.
quirements set forth in subpart V of (7) The HMO or CMP promptly noti-
part 422 of this chapter also apply to fies the beneficiary of the effective
Medicare contracts with HMOs and month of his or her enrollment as a
CMPs under section 1876 of the Act. Medicare enrollee, when it receives
(b) In applying those provisions, ref- that information from CMS.
erences to part 422 of this chapter must (8) If the HMO or CMP accepts appli-
be read as references to this part, and cations while it is enrolled to capacity,
references to MA organizations as ref- its procedures ensure that vacancies
erences to HMOs and CMPs. are filled in chronological order by
date of application of beneficiaries who
[75 FR 19802, Apr. 15, 2010] are still eligible to enroll, unless that
would result in failure to comply with
§ 417.430 Application procedures. any of the qualifying conditions set
(a) Application forms and other enroll- forth in § 417.413.
ment mechanisms. (1) The application [50 FR 1346, Jan. 10, 1985, as amended at 58
form must comply with CMS instruc- FR 38082, July 15, 1993; 60 FR 45677, Sept. 1,
tions regarding content and format and 1995; 76 FR 21560, Apr. 15, 2011]
be approved by CMS. The application
must be completed by an HMO or CMP § 417.432 Conversion of enrollment.
eligible (or soon to become eligible) in- (a) Basic rule. An HMO or CMP must
dividual and include authorization for accept as a Medicare enrollee any indi-
disclosure between the HHS and its vidual who is enrolled in the HMO or
designees and the HMO or CMP. CMP for the month immediately before
266
the month in which he or she is enti- § 417.436 Rules for enrollees.

tled to both Medicare Parts A and B or (a) Maintaining rules. An HMO or
Part B only. CMP must maintain written rules that
(b) Effective date of conversion. Unless deal with, but need not be limited to
the individual chooses to disenroll the following:
from the HMO or CMP the individual’s (1) All benefits provided under the
conversion to a Medicare enrollee is ef- contract, as described in § 417.440.
fective the month in which he or she is (2) How and where to obtain services
entitled to both Medicare Parts A and from or through the HMO or CMP.
B or Part B only. (3) The restrictions on coverage for
(c) Prohibition against disenrollment. services furnished from sources outside
An HMO or CMP may not disenroll an a risk HMO or CMP, other than emer-
individual who is converting under the gency services and urgently needed
provisions of paragraph (a) of this sec- services (as defined in § 417.401).
tion unless one of the conditions speci- (4) The obligation of the HMO or
fied in § 417.460 is met. CMP to assume financial responsibility
(d) Application form. The individual and provide reasonable reimbursement
who is converting must complete an for emergency services and urgently
application form or another CMS-ap- needed services as required by
proved election mechanism as de- § 417.414(c).
scribed in § 417.430(a). (5) Any services other than the emer-
(e) Expedited submittal of information gency or urgently needed services that
to CMS. The HMO or CMP must notify the HMO or CMP chooses to provide as
CMS, within the following time frames, permitted by this part, from sources
of the enrollee’s authorization for dis- outside the HMO or CMP. A cost HMO
closure and exchange of information or CMP must disclose that the enrollee
and the information necessary for CMS may receive services through any
Medicare providers and suppliers.
to include the enrollee in its records as
(6) Premium information, including
a Medicare enrollee of the HMO or
the amount (or if the amount cannot
CMP:
be included, the telephone number of
(1) At least 30, but no earlier than 90, the source from which this information
days before the enrollee— may be obtained) and the procedures
(i) Attains age 65; or for paying premiums and other charges
(ii) Reaches his or her 25th month of for which enrollees may be liable.
entitlement to social security dis- (7) Grievance and appeal procedures.
ability benefits under title II of the Act (8) Disenrollment rights.
or railroad retirement disability bene- (9) The obligation of an enrollee who
fits under section 7(d) of the Railroad is leaving the HMO’s or CMP’s geo-
Retirement Act of 1974. graphic area for more than 90 days to
(2) Within 30 days after the enrollee notify the HMO or CMP of the move or
initiates a course of renal dialysis, or extended absence and the HMO’s or
on or before the day he or she enters a CMP’s policies concerning retention of
hospital in anticipation of a kidney enrollees who leave the geographic
transplant. area for more than 90 days, as de-
scribed in § 417.460(a)(2).
(10) The expiration date of the Medi-
FR 46570, Sept. 13, 1991; 58 FR 38082, July 15,
1993; 60 FR 45677, Sept. 1, 1995; 77 FR 22166, care contract with CMS and notice
Apr. 12, 2012] that both CMS and the HMO or CMP
are authorized by law to terminate or
§ 417.434 Reenrollment. refuse to renew the contract, and that
termination or nonrenewal of the con-
If an HMO or CMP requires periodic
tract may result in termination of the
reenrollment, it must reenroll Medi-
individual’s enrollment in the HMO or
care enrollees unless there is a basis
CMP.
for disenrollment as set forth in
(11) Advance directives as specified in
§ 417.460.
paragraph (d) of this section.
[50 FR 1346, Jan. 10, 1985, as amended at 58 (12) Any other matters that CMS
FR 38082, July 15, 1993] may prescribe.
267
§ 417.436 42 CFR Ch. IV (10–1–17 Edition)
(b) Availability of rules. The HMO or each enrollee at the time of initial en-
CMP must furnish a copy of the rules rollment. If an enrollee is incapaci-
to each Medicare enrollee at the time tated at the time of initial enrollment
of enrollment and at least annually and is unable to receive information
thereafter. (due to the incapacitating condition or
(c) Changes in rules. If an HMO or a mental disorder) or articulate wheth-
CMP changes its rules, it must submit er or not he or she has executed an ad-
the changes to CMS in accordance with vance directive, the HMO or CMP may
§ 417.428(a)(3), and notify its Medicare give advance directive information to
enrollees of the changes at least 30 the enrollee’s family or surrogate in
days before the effective date of the the same manner that it issues other
changes. materials about policies and proce-
(d) Advance directives. (1) An HMO or dures to the family of the incapaci-
CMP must maintain written policies tated enrollee or to a surrogate or
and procedures concerning advance di- other concerned persons in accordance
rectives, as defined in § 489.100 of this with State law. The HMO or CMP is
chapter, with respect to all adult indi- not relieved of its obligation to provide
viduals receiving medical care by or this information to the enrollee once
through the HMO or CMP and are re- he or she is no longer incapacitated or
quired to: unable to receive such information.
(i) Provide written information to Follow-up procedures must be in place
those individuals concerning— to ensure that the information is given
(A) Their rights under the law of the to the individual directly at the appro-
State in which the organization fur- priate time.
nishes services (whether statutory or (iii) Document in the individual’s
recognized by the courts of the State) medical record whether or not the indi-
to make decisions concerning such vidual has executed an advance direc-
medical care, including the right to active;
cept or refuse medical or surgical (iv) Not condition the provision of
treatment and the right to formulate, care or otherwise discriminate against
at the individual’s option, advance dian individual based on whether or not
rectives. Providers are permitted to the individual has executed an advance
contract with other entities to furnish directive;
this information but are still legally (v) Ensure compliance with require-
responsible for ensuring that the re- ments of State law (whether statutory
quirements of this section are met. or recognized by the courts of the
Such information must reflect changes State) regarding advance directives;
in State law as soon as possible, but no (vi) Provide for education of staff
later than 90 days after the effective concerning its policies and procedures
date of the State law; and on advance directives; and
(B) The HMO’s or CMP’s written poli- (vii) Provide for community edu-
cies respecting the implementation of cation regarding advance directives
those rights, including a clear and pre- that may include material required in
cise statement of limitation if the paragraph (d)(1)(i)(A) of this section,
HMO or CMP cannot implement an ad- either directly or in concert with other
vance directive as a matter of con- providers or entities. Separate commu-
science. At a minimum, this statement nity education materials may be devel-
should: oped and used, at the discretion of the
(1) Clarify any differences between HMO or CMP. The same written mate-
institution-wide conscience objections rials are not required for all settings,
and those that may be raised by indi- but the material should define what
vidual physicians; constitutes an advance directive, em-
(2) Identify the state legal authority phasizing that an advance directive is
permitting such objection; and designed to enhance an incapacitated
(3) Describe the range of medical con- individual’s control over medical treat-
ditions or procedures affected by the ment, and describe applicable State
conscience objection. law concerning advance directives. An

(ii) Provide the information specified HMO or CMP must be able to document
in paragraphs (d)(1)(i) of this section to its community education efforts.
268
(2) The HMO or CMP—(i) Is not re- (2) Supplemental services elected by an
quired to provide care that conflicts enrollee. (i) Except as provided under
with an advance directive. paragraph (b)(2)(ii) of this section, a
(ii) Is not required to implement an Medicare enrollee of an HMO or CMP
advance directive if, as a matter of may elect to pay for optional services
conscience, the HMO or CMP cannot that are offered by the HMO or CMP in
implement an advance directive and addition to the covered Part A and
State law allows any health care pro- Part B services.
vider or any agent of such provider to (ii) An HMO or CMP may elect to
conscientiously object. provide qualified prescription drug cov-
(3) The HMO or CMP must inform in- erage (as defined at § 423.104 of this
dividuals that complaints concerning chapter) as an optional supplemental
non-compliance with the advance di- service in accordance with the applica-
rective requirements may be filed with ble requirements under part 423 of this
the State survey and certification chapter, including § 423.104(f)(4) of this
agency. chapter.
[58 FR 38072, July 15, 1993, as amended at 59 (iii) The HMO or CMP may not set
FR 49843, Sept. 30, 1994; 60 FR 33292, June 27, health status standards for those en-
1995] rollees whom it accepts for these op-
tional supplemental services.
§ 417.440 Entitlement to health care (3) Supplemental services imposed by a
services from an HMO or CMP. risk HMO or CMP. (i) Subject to CMS’s
(a) Basic rules. (1) Subject to the con- approval, a risk HMO or CMP may re-
ditions and limitations set forth in this quire Medicare enrollees to accept and
subpart, a Medicare enrollee of an HMO pay for services in addition to those
or CMP is entitled to receive health covered by Medicare. (ii) If the HMO or
care services and supplies directly CMP elects this option, it must impose
from, or through arrangements made the requirement on all Medicare enroll-
by, the HMO or CMP as specified in ees, without regard to health status.
this section and §§ 417.442–417.446. (iii) CMS approves supplemental bene-
(2) A Medicare enrollee is also enti- fits of this type if CMS determines that
tled to receive timely and reasonable imposition of the requirements will not
payment directly (or have payment discourage other Medicare bene-
made on his or her behalf) for services ficiaries from enrolling in the risk
he or she obtained from a provider or HMO or CMP.
supplier outside the HMO or CMP if (4) Additional benefits from risk HMOs
those services are— or CMPs required by statute. Subject to
(i) Emergency services or urgently the conditions stated in § 417.442, a new
needed services as defined § 417.401; Medicare enrollee or a current nonrisk
(ii) Services denied by the HMO or Medicare enrollee who converts to risk
CMP and found (upon appeal under sub- reimbursement under § 417.444 is eligi-
part Q of this part) to be services the ble to receive, in addition to the cov-
enrollee was entitled to have furnished ered Part A and Part B benefits for
by the HMO or CMP. which he or she is eligible, benefits
(b) Scope of services—(1) Part A and consisting of one or both of the fol-
Part B services. Except as specified in lowing:
paragraphs (c), (d), and (e) of this sec- (i) A reduction in the HMO’s or
tion, a Medicare enrollee is entitled to CMP’s premium rate or in other
receive from an HMO or CMP all the charges for services furnished to Medi-
Medicare-covered services that are care enrollees.
available to individuals residing in the (ii) Provision of health benefits or
HMO’s or CMP’s geographic area, as services beyond the required Part A
follows: and Part B coverage.
(i) Medicare Part A and Part B serv- (5) Special supplemental benefits. Under
ices if the enrollee is entitled to bene- conditions described in § 417.444(c), cur-
fits under both programs. rent nonrisk Medicare enrollees who
(ii) Medicare Part B services if the are not converted to the risk portion of
enrollee is entitled only under that the contract, may enroll in a special
program. supplemental plan, if offered by the
269
§ 417.440 42 CFR Ch. IV (10–1–17 Edition)
HMO or CMP, for some or all of the ad- (3) Is responsible for the full scope of
ditional benefits described in para- services under paragraph (b) of this
graph (b)(4) of this section. section, other than inpatient hospital
(c) Limitation on hospice care—(1) Ex- services under Part A, beginning on the
tent of limitation—(i) Basic rule. Except effective date of enrollment.
as provided in paragraph (c)(1)(ii) of (e) Extension of provision of inpatient
this section, a Medicare enrollee who hospital services. If an enrollee’s effec-
elects to receive hospice care under tive date of disenrollment, as defined
§ 418.24 of this chapter waives the right by § 417.460, occurs during an inpatient
to receive from the HMO or CMP any stay in a hospital paid for under part
Medicare services (including services
412 of this chapter and the stay is pro-
equivalent to hospice care) that are re-
vided or arranged for by the HMO or
lated to the terminal condition for
which the enrollee elected hospice CMP, or the HMO or CMP is financially
care, or to a related condition. responsible for the hospitalization
(ii) Exception. An enrollee who elects under paragraph (a)(2) of this section,
hospice care retains the right to serv- the HMO or CMP—
ices furnished by his or her attending (1) Is financially responsible for pay-
physician if that physician— ment of the inpatient services under
(A) Is an employee or contractor of Part A through the date the bene-
the HMO or CMP; and ficiary is discharged from the inpatient
(B) Is not an employee of the des- stay; and
ignated hospice and does not receive (2) Is not responsible for the provi-
compensation from the hospice for sion of services, furnished on or after
those services. the effective date of disenrollment,
(2) Effective date of limitation. The other than inpatient hospital services
limitation in paragraph (c)(1) of this under Part A.
section begins on the effective date of (f) Notice of noncoverage of inpatient
the beneficiary’s election of hospice hospital care. (1) If an enrollee is an in-
care and remains in effect until the patient of a hospital, entitlement to in-
earlier of the following:
patient hospital care continues until
(i) The effective date of the enrollee’s
he or she receives notice of noncov-
revocation of the election of hospice
care as described in § 418.28 of this erage of that care.
chapter. (2) Before giving notice of noncov-
(ii) The date the enrollee exhausts erage, the HMO or CMP must obtain
his or her hospice benefits. the concurrence of its affiliated physi-
(3) Payment to HMO or CMP. For the cian responsible for the hospital care of
period that the Medicare enrollee’s the enrollee, or other physician as au-
election of hospice care is in effect, thorized by the HMO or CMP.
CMS pays a cost HMO or CMP only as (3) The HMO or CMP must give the
described in § 417.585. enrollee written notice that includes
(d) Limitation on provision of inpatient the following:
hospital services. If a beneficiary’s effec- (i) The reason why inpatient hospital
tive date of coverage, as specified in care is no longer needed.
§ 417.450, in a risk HMO or CMP occurs (ii) The effective date of the enroll-
during an inpatient stay in a hospital ee’s liability for continued inpatient
paid for under part 412 of this chapter, care.
the HMO or CMP— (iii) The enrollee’s appeal rights.
(1) Is not responsible for the provi-
(4) If the HMO or CMP delegates to
sion of any of the inpatient hospital
services under Part A during the stay the hospital the determination of non-
and is not required to pay for those coverage of inpatient care, the hospital
services; obtains the concurrence of the HMO- or
(2) Must assume responsibility for CMP-affiliated physician responsible
payment for or provision of inpatient for the hospital care of the enrollee, or
hospital services under Part A on the other physician as authorized by the

day after the day of discharge from the
inpatient stay; and
270
HMO or CMP, and sends notice, fol- (i) In an HMO or CMP that had in ef-
lowing the procedures set forth in fect a cost contract entered into under
§ 412.42(c)(3) of this chapter. section 1876 of the Act in accordance
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
with regulations in effect before Feb-
1985, as amended at 52 FR 8901, Mar. 20, 1987; ruary 1, 1985; or
58 FR 38079, July 15, 1993; 59 FR 59941, Nov. 21, (ii) In an HCPP that was being reim-
1994; 60 FR 45678, Sept. 1, 1995; 70 FR 4525, bursed on a reasonable cost basis under
Jan. 28, 2005] section 1833(a)(1)(A) of the Act.
(2) Has continued enrollment in the
§ 417.442 Risk HMO’s and CMP’s: Con- same entity without interruption or
ditions for provision of additional disenrolled after February 1, 1985, and
benefits.
later reenrolled in the same entity.
(a) General rule. Except as provided in (b) Retention of nonrisk status—(1) A
paragraph (b) of this section, a risk ‘‘nonrisk’’ enrollee is a Medicare bene-
HMO or CMP must, during any con- ficiary who meets the conditions of
tract period, provide to its Medicare paragraph (a) of this section and is en-
enrollees the additional benefits de- rolled in an entity that enters into a
scribed in § 417.440(b)(4) if its ACRs (cal- risk contract as an HMO or CMP. A
culated in accordance with § 417.594) are ‘‘nonrisk’’ enrollee may retain nonrisk
less than the average per capita rates status indefinitely unless CMS deter-
that CMS pays for the Medicare enroll- mines under paragraph (c)(1) of this
ees during the contract period. section, that the enrollee’s status must
(b) Exceptions—(1) Reduced payment be changed, or the enrollee requests
election. An HMO or CMP is not obli- the change, as provided in paragraph
gated to furnish additional services (c)(2) of this section.
under paragraph (a) of this section if it (2) A nonrisk enrollee of a risk HMO
has requested a reduction in its month- or CMP is not entitled to additional
ly payment from CMS under § 417.592(e), benefits under § 417.442.
and it— (c) Conversion to risk status—(1) Con-
(i) Elects to receive reduced payment version based on CMS determination. If
so that there is no difference between CMS determines that, for administra-
the average of its per capita rates of tive reasons or because there are fewer
payment and its ACR; or than 75 current nonrisk Medicare en-
(ii) Elects to receive partially re- rollees remaining in the HMO or CMP,
duced payment and furnish Medicare all of its nonrisk Medicare enrollees
enrollees with additional benefits de- must be covered under the risk provi-
scribed in § 417.440 (b)(4) so that the sions of the contract, the conversion
combined value of benefits and reduced process is as follows:
payment is equivalent to the difference (i) CMS notifies each affected en-
between the average of its per capita rollee of the decision at least 90 days
rates of payment and its ACR. prior to the effective date.
(2) Benefit stabilization fund. An HMO (ii) The nonrisk Medicare enrollees
or CMP may elect to have a part of the complete and sign forms stating that
value of the additional benefits it must they understand and accept the new
provide under paragraph (a) of this sec- rules and benefits that will be applica-
tion withheld in a benefit stabilization ble to them.
fund as described in § 417.596. (iii) The HMO or CMP notifies each
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, affected enrollee, in writing, at least 30
1985; 58 FR 38082, July 15, 1993; 60 FR 45678, days in advance, of the date upon
Sept. 1, 1995] which his or her coverage under the
risk portion of the contract takes ef-
§ 417.444 Special rules for certain en- fect.
rollees of risk HMOs and CMPs. (2) Conversion based on enrollee’s re-
(a) Applicability. This section applies quest. A nonrisk Medicare enrollee re-
to any Medicare enrollee of a risk HMO quests, using a form identical or simi-
or CMP who meets the following condi- lar to the form described in paragraph
tions: (c)(1) of this section, that he or she be

(1) On February 1, 1985, was en- covered under the risk portion of the
rolled— contract.
271
§ 417.446 42 CFR Ch. IV (10–1–17 Edition)
(d) Notification. An HMO or CMP con- § 417.450 Effective date of coverage.

verting from a cost contract to a risk (a) Basic rules. Except as specified in
contract must, within 60 days of sign- paragraph (b) of this section, and not-
ing the risk contract, inform nonrisk withstanding the provisions of
enrollees of their right to remain § 417.440(d).
nonrisk Medicare enrollees or to con- (1) CMS’s liability for payments to an
vert to risk enrollment at any time in HMO or CMP on behalf of a Medicare
accordance with paragraph (c)(2) of this beneficiary begins on the first day of
section. the month in which he or she is—
[58 FR 38073, July 15, 1993] (i) Entitled to Medicare benefits; and
(ii) Enrolled in an HMO or CMP; and
§ 417.446 [Reserved] (2) The effective month of coverage
may not be earlier than the first
§ 417.448 Restriction on payments for month after, nor later than the third
services received by Medicare en- month after the month in which CMS
rollees of risk HMOs or CMPs. receives the information necessary to
(a) Basic rule. Except for emergency include the beneficiary as a Medicare
and urgently needed services as defined enrollee of the HMO or CMP in CMS
records.
in § 417.401, risk HMOs or CMPs are not
(b) Exceptions. (1) CMS may approve a
required to make payments to or on be-
later month if it is requested by the
half of certain Medicare enrollees, for
HMO or CMP and the beneficiary.
any services received by the enrollees (2) If an individual becomes an HMO
that are not provided— or CMP enrollee before becoming enti-
(1) Directly by the HMO or CMP; or tled to Medicare Part B benefits, the
(2) Through arrangements made by effective month of coverage is the first
the HMO or CMP. month for which he or she becomes en-
(b) Application. The restriction on titled to Medicare Part B benefits.
payments for services imposed by para- (c) Notice of effective date of coverage.
graph (a) of this section applies to serv- For each beneficiary added to CMS’s
ices received by— records as an enrollee of an HMO or
(1) New Medicare enrollees; CMP, CMS gives the HMO or CMP
(2) Nonrisk Medicare enrollees who prompt written notice of the month
convert to risk reimbursement; and with which CMS’s liability begins.
(3) Nonrisk Medicare enrollees who [50 FR 1346, Jan. 10, 1985, as amended at 52
elect special supplemental benefit FR 8901, Mar. 20, 1987; 58 FR 38079, July 15,
plans. 1993; 60 FR 45678, Sept. 1, 1995]
(c) End of restriction. The restriction
§ 417.452 Liability of Medicare enroll-
of payments imposed by paragraph (a) ees.
of this section ends when a Medicare
enrollee leaves the HMO’s or CMP’s ge- (a) Deductibles and coinsurance. (1) A
ographic area for an extended period as Medicare enrollee of an HMO or CMP is
defined in § 471.460(a)(2) and the HMO or responsible for applicable Medicare de-
CMP and the enrollee make arrange- ductible and coinsurance amounts, un-
ments for enrollment to continue as less the HMO’s or CMP’s charges for
provided in § 417.460(a)(2)(iv). these amounts are reduced under the
additional benefits provision of
(d) Timing. The effective date for the
§ 417.442.
end of the restriction on payments, as (2) The deductible and coinsurance
discussed in paragraph (c) of this sec- amounts may be paid by or on behalf of
tion is the first day of the first month the enrollee in the form of a premium,
following the month in which the en- membership fee, charge per unit, or
rollee notifies the HMO or CMP as re- other similar charge.
quired in § 417.436(a)(9), that he or she (3) The sum of the amounts the HMO
has left the HMO’s or CMP’s geo- or CMP charges its Medicare enrollees
graphic area for an extended period. for Medicare deductibles and coinsur-
[51 FR 28573, Aug. 8, 1986, as amended at 56 ance may not exceed, on the average,
FR 46571, Sept. 13, 1991; 58 FR 38079, July 15, the actuarial value of the deductible
1993] and coinsurance the Medicare enrollees
272
otherwise would have been liable for weighted average AAPCC for Part A
had they not enrolled in the HMO or services (or the Medicare payment for
CMP or in another HMO or CMP. Part A services, if it is less) for the
(b) Services not covered under Medi- Medicare enrollee of the HMO or CMP.
care. Unless the services are provided
as additional benefits under § 417.442, a FR 38079, July 15, 1993; 60 FR 45678, Sept. 1,
Medicare enrollee of an HMO or CMP is 1995]
liable for payment for—
(1) All services that are not covered § 417.454 Charges to Medicare enroll-
under Medicare Part A or Part B; or ees.
(2) If entitled only to Medicare Part
(a) Limits on charges. The HMO or
B benefits, all services that are not
CMP must agree to charge its Medicare
covered under Medicare Part B.
enrollees only for the—
(c) Services for which Medicare is not
(1) Deductible and coinsurance
primary payer. A Medicare enrollee of
amounts applicable to furnished cov-
an HMO or CMP is liable for payments
ered services;
made to the enrollee for all covered
services for which Medicare is not the (2) Charges for noncovered services or
primary payer as provided in § 417.528. services for which the enrollee is liable
(d) Optional supplemental benefits plan. as described in § 417.452; and
(1) The HMO or CMP may offer its (3) Services for which Medicare is not
Medicare enrollees a supplemental ben- the primary payor as provided in
efit plan to cover deductible and coin- § 417.528.
surance amounts, or services not cov- (b) Limit on charges for inpatient hos-
ered under Medicare, or both. pital care. If a Medicare enrollee who is
(2) If a supplemental benefit plan pre- an inpatient of a hospital requests im-
mium includes charges for both non- mediate QIO review (as provided in
covered services and the deductible and § 417.605) of any determination by the
coinsurance amounts applicable to cov- hospital furnishing services or the
ered services, the portion of the pre- HMO or CMP that the inpatient hos-
mium that is for deductibles and coin- pital services will no longer be covered,
surance must be computed separately the HMO or CMP may not charge the
and must be disclosed to the bene- enrollee for any inpatient care costs
ficiary during the enrollment process incured before noon of the first work-
and before he or she elects coverage oping day after the QIO issues its review
tions. decision.
(3) The sum of the amounts an HMO (c) Reporting requirements. A risk
or CMP charges its Medicare enrollees HMO or CMP must report, within 90
for services that are not covered under days after the end of the contract pe-
Part A or Part B may not exceed the riod, all premiums, enrollment fees,
ACR for these services. and other charges collected from its
(e) Coverage of Part A services for Part Medicare enrollees during that period.
B-only Medicare enrollees. If an HMO or (d) Limit on charges for specified pre-
CMP furnishes coverage of Medicare ventive services. An HMO may not
Part A services to a Medicare enrollee charge deductibles, copayments, or co-
entitled to Part B only, the HMO’s or insurance for in-network Medicare-cov-
CMP’s premium (or other payment ered preventive services (as defined in
method) for these services may not ex- § 410.152(l)).
ceed the ACR for these services. In ad- (e) Services for which cost sharing may
dition, if a risk HMO or CMP furnishes not exceed cost sharing under original
these services and supplemental serv- Medicare. On an annual basis, CMS will
ices, which are the same as the addi- evaluate whether there are service cat-
tional benefits furnished Medicare en- egories for which HMOs’ cost sharing
rollees of the HMO or CMP who are en- may not exceed that required under
titled to benefits under both Parts A original Medicare and specify in regu-
and B, the HMO’s or CMP’s combined lation which services are subject to
premium for both these groups of serv- that cost sharing limit. The following
ices that the Part B enrollee must pay services are subject to this limit on
may not exceed 95 percent of the cost sharing:
273
§ 417.456 42 CFR Ch. IV (10–1–17 Edition)
(1) Chemotherapy administration (d) Refund by premium adjustment or

services to include chemotherapy drugs lump sum payment or both. An HMO or
and radiation therapy integral to the CMP may make refund by adjustment
treatment regimen. of future premiums, by lump sum pay-
(2) Renal dialysis services as defined ment, or by a combination of both
at section 1881(b)(14)(B) of the Act. methods, for amounts that were incor-
(3) Skilled nursing care defined as rectly collected in the form of pre-
services provided during a covered stay miums or through a combination of
in a skilled nursing facility during the premium payments and other charges.
period for which cost sharing would (e) Refund when enrollee has died or
apply under Original Medicare. cannot be located. If an enrollee has died
or cannot be located after reasonable
FR 38082, July 15, 1993; 59 FR 59941, Nov. 21,
effort by the HMO or CMP, the HMO or
1994; 60 FR 45678, Sept. 1, 1995; 76 FR 21561, CMP must make the refund in accord-
Apr. 15, 2011] ance with State law.
(f) Reduction by CMS. If the HMO or
§ 417.456 Refunds to Medicare enroll- CMP does not make refund in accord-
ees. ance with paragraphs (b) through (d) of
(a) Definitions. As used in this sec- this section by the end of the contract
tion— period following the contract period
Amounts incorrectly collected means during which an amount was deter-
amounts collected that are in excess of mined to be due an enrollee, CMS re-
those specified in § 417.452. It includes duces its payment to the HMO or CMP
amounts collected when the enrollee by the amounts incorrectly collected
was believed not entitled to Medicare or otherwise due, and arranges for
benefits if the enrollee is later deter- those amounts to be paid to the Medi-
mined to have been entitled to Medi- care enrollee.
care benefits and CMS is liable for pay- [50 FR 1346, Jan. 10, 1985, as amended at 58
ments as specified in § 417.450. FR 38079, July 15, 1993; 60 FR 45678, Sept. 1,
Other amounts due means amounts 1995]
due a Medicare enrollee for services ob-
tained outside the HMO or CMP if they § 417.458 Recoupment of uncollected
were— deductible and coinsurance
(1) Emergency services; amounts.
(2) Urgently needed services for An HMO or CMP agrees not to recoup
which the HMO or CMP has assumed fi- deductible and coinsurance amounts
nancial responsibility; or for which Medicare enrollees were lia-
(3) On appeal under subpart Q of this ble in a previous contract period except
part, found to be services the enrollee in the following circumstances:
was entitled to have furnished by the (a) The HMO or CMP failed to collect
HMO or CMP. the deductible and coinsurance
(b) Basic commitment. An HMO or amounts during the contract period in
CMP must agree to refund all amounts which they were due because of—
incorrectly collected from its Medicare (1) Underestimation of the actuarial
enrollees, or from others on behalf of value of the deductible and coinsurance
the enrollees, and any other amounts amounts; or
due the enrollees or others on their be- (2) A billing error.
half. (b) The HMO or CMP has identified
(c) Refund by lump sum payment. An the amounts and obtained advance
HMO or CMP must make refunds to its CMS approval of the recoupment and
current and former Medicare enrollees, the method and timing of recoupment.
or to others who have made payments (c) The HMO or CMP collects these
on behalf of enrollees, by lump sum amounts no later than the end of the
payment for the following: contract period following the contract
(1) Incorrectly collected amounts period during which they were found to
that were not collected as premiums. be due.
(2) Other amounts due. [50 FR 1346, Jan. 10, 1985, as amended at 58
(3) All amounts due, if the HMO or FR 38082, July 15, 1993; 60 FR 45678, Sept. 1,
CMP is going out of business. 1995]
274
§ 417.460 Disenrollment of bene- (iii) Sends the notice of

ficiaries by an HMO or CMP. disenrollment to the enrollee before it
(a) General rule. Except as provided in notifies CMS.
paragraphs (b) through (i) of this sec- (2) Exception. If the enrollee fails to
tion, an HMO or CMP may not— pay the premium for optional supple-
(1) Disenroll a Medicare beneficiary; mental benefits (that is, a package of
or benefits that an enrollee is not re-
(2) Orally or in writing, or by any acquired to accept), but pays the basic
tion or inaction, request or encourage premium and other charges, the HMO
a Medicare enrollee to disenroll. or CMP may discontinue the optional
(b) Bases for disenrollment: Overview— benefits but may not disenroll the ben-
(1) Optional disenrollment. Generally, an eficiary.
HMO or CMP may disenroll a Medicare (3) Good cause and reinstatement.
enrollee if he or she— When an individual is disenrolled for
(i) Fails to pay the required pre- failure to pay premiums or other
miums or other charges; charges imposed by the HMO or CMP
(ii) Commits fraud or permits abuse for deductible and coinsurance
of his or her enrollment card; or amounts for which the enrollee is lia-
(iii) Behaves in a manner that seri- ble, CMS (or a third party to which
ously impairs the HMO’s or CMP’s abil- CMS has assigned this responsibility,
ity to furnish health care services to such as an HMO or CMP) may reinstate
the particular enrollee or to other en- enrollment in the plan, without inter-
rollees. ruption of coverage, if the individual
(2) Required disenrollment. Generally, shows good cause for failure to pay and
an HMO or CMP must disenroll a Medi- pays all overdue premiums or other
care enrollee if he or she— charges within 3 calendar months after
(i) Moves out of the HMO’s or CMP’s the disenrollment date. The individual
geographic service area or is incarcer- must establish by a credible statement
ated; that failure to pay premiums or other
(ii) Fails to convert to the risk provi- charges was due to circumstances for
sions of the HMO’s or CMP’s Medicare which the individual had no control, or
contract; which the individual could not reason-
(iii) Loses entitlement to Medicare ably have been expected to foresee.
Part B benefits; (4) Exception for reinstatement. A bene-
(iv) Is not lawfully present in the ficiary’s enrollment in the plan will
United States; or not be reinstated if the only basis for
(v) Dies. such reinstatement is a change in the
(3) Related provisions. Specific re- individual’s circumstances subsequent
quirements, limitations, and excep- to the involuntary disenrollment for
tions are set forth in paragraphs (c) non-payment of premiums or other
through (j) of this section. charges.
(c) Failure to pay premiums or other (d) Enrollee commits fraud or permits
charges—(1) Basic rule. Except as speci- abuse of the enrollment card—(1) Basis
fied in paragraph (c)(2) of this section, for disenrollment. An HMO or CMP may
an HMO or CMP may disenroll a Medi- disenroll a Medicare beneficiary if the
care enrollee who fails to pay pre- beneficiary—
miums or other charges imposed by the (i) Knowingly provides, on the appli-
HMO or CMP for deductible and coin- cation form, fraudulent information
surance amounts for which the enrollee that materially affects the bene-
is liable, if the HMO or CMP— ficiary’s eligibility to enroll in the
(i) Can demonstrate to CMS that it HMO or CMP; or
made reasonable efforts to collect the (ii) Intentionally permits others to
unpaid amount; use his or her enrollment card to ob-
(ii) Gives the enrollee written notice tain services from the HMO or CMP.
of disenrollment, including an expla- (2) Notice requirement. If
nation of the enrollee’s right to a hear- disenrollment is for either of the rea-
ing under the HMO’s or CMP’s griev- sons specified in paragraph (d)(1) of
ance procedures; and this section, the HMO or CMP must
275
§ 417.460 42 CFR Ch. IV (10–1–17 Edition)
give the beneficiary a written notice of disenrollment that meets the require-
termination of enrollment. ments set forth in paragraphs (d)(2)(i)
(i) The notice must be mailed to the and (d)(2)(ii) of this section.
enrollee before submission of the (f) Enrollee moves out of the HMO’s or
disenrollment notice to CMS. CMP’s geographic area—(1) Basic rules—
(ii) The notice must include an expla- (i) Disenrollment. Except as provided in
nation of the enrollee’s right to have paragraph (f)(2) of this section, an HMO
the disenrollment heard under the or CMP must disenroll a Medicare en-
grievance procedures established in ac- rollee who moves out of its geographic
cordance with § 417.436. area if the HMO or CMP establishes, on
(3) Report to the Inspector General. The the basis of a written statement from
HMO or CMP must report to the Office the enrollee, or other evidence accept-
of the Inspector General of the Depart- able to CMS, that the enrollee has per-
ment any disenrollment based on fraud manently moved out of its geographic
or abuse by the enrollee. area.
(e) Disenrollment for cause—(1) Basis (A) Incarceration. The HMO or CMP
for disenrollment. An HMO or CMP may must disenroll an individual if the
disenroll a Medicare enrollee for cause HMO or CMP establishes, on the basis
if the enrollee’s behavior is disruptive, of evidence acceptable to CMS, that
unruly, abusive, or uncooperative to the individual is incarcerated and does
the extent that his or her continuing not reside in the geographic service
enrollment in the HMO or CMP seri- area of the HMO or CMP per § 417.1.
ously impairs the HMO’s or CMP’s abil- (B) Notification by CMS of incarcer-
ity to furnish services to either the ation. When CMS notifies an HMO or
particular enrollee or other enrollees. CMP of disenrollment due to the indi-
(2) Effort to resolve the problem. The vidual being incarcerated and not re-
HMO or CMP must make a serious ef- siding in the geographic service area of
fort to resolve the problem presented the HMO or CMP, as per § 417.1, the
by the enrollee, including the use (or disenrollment is effective the first of
attempted use) of internal grievance the month following the start of incar-
procedures. ceration, unless otherwise specified by
(3) Consideration of extenuating cir- CMS.
cumstances. The HMO or CMP must as- (C) Exception. The exception in para-
certain that the enrollee’s behavior is graph (f)(2) of this section does not
not related to the use of medical serv- apply to individuals who are incarcer-
ices or to mental illness. ated.
(4) Documentation. The HMO or CMP (ii) Notice requirement. The HMO or
must document the problems, efforts, CMP must comply with the notice re-
and medical conditions as described in quirements set forth in paragraph (d)(2)
paragraphs (e)(1) through (e)(3) of this of this section.
section. (iii) Effect on geographic area. Failure
(5) CMS review of an HMO’s or CMP’s to disenroll an enrollee who has moved
proposed disenrollment for cause. (i) CMS out of the HMO’s or CMP’s geographic
decides on the basis of review of the area does not expand that area to en-
documentation submitted by the HMO compass the location of the enrollee’s
or CMP, whether disenrollment renew residence.
quirements have been met. (2) Exception. An HMO or CMP may
(ii) CMS makes this decision within retain a Medicare enrollee who is ab-
20 working days after receipt of the sent from its geographic area for an ex-
documentation material, and notifies tended period, but who remains within
the HMO or CMP within 5 working the United States as defined in § 400.200
days after making its decision. of this chapter if the enrollee agrees.
(6) Effective date of disenrollment. If For purposes of this exception, the fol-
CMS permits an HMO or CMP to lowing provisions apply:
disenroll an enrollee for cause, the (i) An absence for an extended period
disenrollment takes effect on the first means an uninterrupted absence from
day of the calendar month after the the HMO’s or CMP’s geographic area
month in which the HMO or CMP gives for more than 90 days but less than 1
the enrollee a written notice of year.
276
(ii) The HMO or CMP and the en- (h) Loss of entitlement to Medicare ben-
rollee may mutually agree upon re- efits—(1) Loss of entitlement to Part A
strictions for obtaining services while benefits. If an enrollee loses entitle-
the enrollee is absent for an extended ment to benefits under Part A of Medi-
period from the HMO’s or CMP’s geo- care but remains entitled to benefits
graphic area. However, restrictions under Part B, the enrollee automati-
may not be imposed on the scope of cally continues as a Medicare enrollee
services described in § 417.440. of the HMO or CMP and is entitled to
(iii) HMOs and CMPs that choose to receive and have payment made for
exercise this exception must make the Part B services, beginning with the
option available to all Medicare enroll- month immediately following the last
ees who are absent for an extended pe- month of his or her entitlement to
riod from their geographic areas. How- Part A benefits.
ever, HMOs and CMPs may limit this (2) Loss of entitlement to Part B bene-
option to enrollees who go to a geo- fits. If a Medicare enrollee loses entitle-
graphic area served by an affiliated ment to Part B benefits, the HMO or
HMO or CMP. CMP must disenroll him or her as a
(iv) As used in this paragraph, ‘‘af- Medicare enrollee effective with the
filiated HMO or CMP’’ means an HMO month following the last month of en-
or CMP that— titlement to Part B benefits. However,
(A) Is under common ownership or the HMO or CMP may continue to en-
control of the HMO or CMP that seeks roll the individual under its regular
to retain the absent enrollees; or plan if the individual so chooses.
(B) Has in effect an agreement to fur- (i) Death of the enrollee.
nish services to enrollees who are on an Disenrollment is effective with the
extended absence from the geographic month following the month of death.
area of the HMO or CMP that seeks to (j) Enrollee is not lawfully present in
retain them. the United States. Disenrollment is ef-
(v) When the enrollee returns to the fective the first day of the month fol-
HMO’s or CMP’s geographic area (even lowing notice by CMS that the indi-
temporarily), the restrictions of vidual is ineligible in accordance with
§ 417.448(a) (which limit payment for § 417.422(h).
services not provided or arranged for
by the HMO or CMP) apply again im- [60 FR 45678, Sept. 1, 1995, as amended at 77
mediately. FR 22166, Apr. 12, 2012; 79 FR 29955, May 23,
2014; 80 FR 7958, Feb. 12, 2015]
(vi) If the enrollee fails to return to
the HMO’s or CMP’s geographic area § 417.461 Disenrollment by the en-
within 1 year from the date he or she rollee.
left that area, the HMO or CMP must
disenroll the beneficiary on the first (a) Request for disenrollment. (1) A
day of the month following the anni- Medicare enrollee who wishes to
versary of the date the enrollee left disenroll may at any time give the
that area in accordance with paragraph HMO or CMP a signed, dated request in
(f)(1) of this section. the form and manner prescribed by
(g) Failure to convert to risk provisions CMS.
of Medicare contract—(1) Basis for (2) The enrollee may request a cer-
disenrollment. A risk HMO or CMP must tain disenrollment date but it may be
disenroll a nonrisk Medicare enrollee no earlier than the first day of the
who refuses to convert to the risk pro- month following the month in which
visions of the Medicare contract after the HMO or CMP receives the request.
CMS determines that all of the HMO’s (b) Responsibilities of the HMO or CMP.
or CMP’s nonrisk Medicare enrollees The HMO or CMP must—
must convert. (1) Submit a disenrollment notice to
(2) Advance notice requirement. At CMS promptly;
least 30 days before it gives CMS notice (2) Provide the enrollee with a copy
of disenrollment, the HMO or CMP of the request for disenrollment; and
must give the enrollee written notice (3) In the case of a risk HMO or CMP,
of the fact that failure to convert will also provide the enrollee with a state-
result in disenrollment. ment explaining that he or she—
277
§ 417.464 42 CFR Ch. IV (10–1–17 Edition)
(i) Remains enrolled until the effec- (c) Effect of termination or default of
tive date of disenrollment; and contract—(1) Termination of contract. If
(ii) Until that date, is subject to the the contract between CMS and the
restrictions of § 417.448(a) under which HMO or CMP is terminated by mutual
neither the HMO or CMP nor CMS pays consent or by unilateral action of ei-
for services not provided or arranged ther party, CMS’s liability for pay-
for by the HMO or CMP. ments ends as of the first day of the
(c) Effect of failure to submit month after the last month for which
disenrollment notice to CMS promptly. If the contract is in effect.
the HMO or CMP fails to submit timely (2) Default of contract. If the HMO or
the correct and complete notice re- CMP defaults on the contract before
quired in paragraph (b)(1) of this sec- the end of the contract year because of
tion, the HMO or CMP must reimburse bankruptcy or other reasons, CMS—
CMS for any capitation payments re- (i) Determines the month in which
ceived after the month in which pay- its liability for payments ends; and
ments would have ceased if the require- (ii) Notifies the HMO or CMP and all
ment had been met timely. affected Medicare enrollees as soon as
[60 FR 45679, Sept. 1, 1995] practicable.
[60 FR 45680, Sept. 1, 1995]
§ 417.464 End of CMS’s liability for
payment: Disenrollment of bene-
ficiaries and termination or default Subpart L—Medicare Contract
of contract. Requirements
(a) Effect of disenrollment: General
rule. (1) CMS’s liability for monthly SOURCE: 50 FR 1346, Jan. 10, 1985, unless
capitation payments to the HMO or otherwise noted.
CMP generally ends as of the first day
of the month following the month in § 417.470 Basis and scope.
which disenrollment is effective, as (a) Basis. This subpart implements
shown on CMS’s records. those portions of section 1857(e)(2) of
(2) Disenrollment is effective no ear- the Act pertaining to cost sharing in
lier than the month immediately after, enrollment-related costs and section
and no later than the third month 1876(c), (g), (h), and (i) of the Act that
after, the month in which CMS receives pertain to the contract between CMS
the disenrollment notice in acceptable and an HMO or CMP for participation
form. in the Medicare program.
(b) Effect of disenrollment: Special (b) Scope. This subpart sets forth—
rules—(1) Fraud or abuse by the enrollee. (1) Specific contract requirements;
If disenrollment is on the basis of fraud and
committed or abuse permitted by the (2) Procedures for renewal, non-
enrollee, CMS’s liability ends as of the renewal, or termination of a contract.
first day of the month in which
disenrollment is effective. [50 FR 1346, Jan. 10, 1985, as amended at 58
(2) Loss of entitlement to Part B bene- FR 38079, July 15, 1993; 62 FR 63673, Dec. 2,
fits. If disenrollment is on the basis of 1997]
loss of entitlement to Part B benefits,
§ 417.472 Basic contract requirements.
CMS’s liability ends as of the first day
of the month following the last month (a) Submittal of contract. An HMO or
of Part B entitlement. CMP that wishes to contract with CMS
(3) Death of enrollee. If the enrollee to furnish services to Medicare bene-
dies, CMS’s liability ends as of the first ficiaries must submit a signed contract
day of the month following the month that meets the requirements of this
of death. subpart and any other requirements es-
(4) Disenrollment at enrollee’s request. tablished by CMS.
If disenrollment is in response to the (b) Agreement to comply with regula-
enrollee’s request, CMS’s liability ends tions and instructions. The contract
as of the first day of the month fol- must provide that the HMO or CMP
lowing the month of termination re- agrees to comply with all the applica-
quested by the enrollee. ble requirements and conditions set
278
forth in this subpart and in general in- ment of Healthcare Providers and Sys-
structions issued by CMS. tems (CAHPS) survey vendors to con-
(c) Other contract provisions. In addi- duct the Medicare CAHPS satisfaction
tion to the requirements set forth in survey of Medicare plan enrollees in
§§ 417.474 through 417.488, the contract accordance with CMS specifications
must contain any other terms and con- and submit the survey data to CMS.
ditions that CMS requires to imple-
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
ment section 1876 of the Act. 1985, as amended at 57 FR 8202, Mar. 6, 1992;
(d) Exemption from Federal procure- 58 FR 38079, July 15, 1993; 60 FR 45680, Sept.
ment regulations. The Federal Acquisi- 1, 1995; 63 FR 35067, June 26, 1998; 75 FR 19802,
tion Regulations and HHS Acquisition Apr. 15, 2010]
Regulations contained in title 48 of the
Code of Federal Regulations do not § 417.474 Effective date and term of
apply to Medicare contracts under sec- contract.
tion 1876 of the Act. (a) Effective date. The contract must
(e) Compliance with civil rights laws. specify its effective date, which may
The HMO or CMP must comply with not be earlier than the date it is signed
title VI of the Civil Rights Act of 1964 by both CMS and the HMO or CMP.
(regulations at 45 CFR part 80), section (b) Term. The contract must specify
504 of the Rehabilitation Act of 1973 the duration of its term as follows:
(regulations at 45 CFR part 84), and the (1) For the initial term, at least 12
Age Discrimination Act of 1975 (regula- months, but no more than 23 months.
tions at 45 CFR part 91). (2) For any subsequent term, 12
(f) Requirements for advance directives. months.
The HMO or CMP must meet all the re-
quirements for advance directives at [60 FR 45680, Sept. 1, 1995]
§ 417.436(d).
(g) Authority to waive conflicting con- § 417.476 Waived conditions.
tract requirements. Under section If CMS waives any of the qualifying
1876(i)(5) of the Act, CMS is authorized conditions required under subpart J of
to administer the terms of this subpart this part, the contract must specify the
without regard to provisions of law or following information for each waived
other regulations relating to the mak- condition:
ing, performance, amendment, or modi- (a) The specific terms of the waiver.
fication of contracts of the United (b) The expiration date of the waiver.
States if it determines that those pro- (c) Any other information required
visions are inconsistent with the effi- by CMS.
cient and effective administration of
the Medicare program. [60 FR 45680, Sept. 1, 1995]
(h) Collection of fees from risk HMOs
§ 417.478 Requirements of other laws
and CMPs. (1) The rules set forth in and regulations.
§ 422.10 of this chapter for M + C plans
also apply to collection of fees from The contract must provide that the
risk HMOs and CMPs. HMO or CMP agrees to comply with—
(2) In applying the part 422 rules, ref- (a) The requirements for QIO review
erences to ‘‘M + C organizations’’ or of services furnished to Medicare en-
‘‘M + C plans’’ must be read as ref- rollees as set forth in subchapter D of
erences to ‘‘risk HMOs and CMPs’’. this chapter;
(i) The HMO or CMP must comply (b) Sections 1318(a) and (c) of the PHS
with the requirements at § 422.152(b)(5). Act, which pertain to disclosure of cer-
(j) All coordinated care contracts (in- tain financial information;
cluding local and regional PPOs, con- (c) Section 1301(c)(8) of the PHS Act,
tracts with exclusively SNP benefit which relates to liability arrangements
packages, private fee-for-service con- to protect enrollees of the HMO or
tracts, and MSA contracts), and all CMP; and
cost contracts under section 1876 of the (d) The reporting requirements in
Act, with 600 or more enrollees in July § 417.126(a), which pertain to the moni-
of the prior year, must contract with toring of an HMO’s or CMP’s continued
approved Medicare Consumer Assess- compliance.
279
§ 417.479 42 CFR Ch. IV (10–1–17 Edition)
(e) Sections 422.222 and 422.224 of this physician’s own services, referral serv-
chapter which requires all providers or ices, or all medical services.
suppliers that are types of individuals Payments means any amounts the
or entities that can enroll in Medicare HMO or CMP pays physicians or physi-
in accordance with section 1861 of the cian groups for services they furnish
Act, to be enrolled in Medicare in an directly, plus amounts paid for admin-
approved status and prohibits payment istration and amounts paid (in whole
to providers and suppliers that are ex- or in part) based on use and costs of re-
cluded or revoked. This includes locum ferral services (such as withhold
tenens suppliers and, if applicable, in- amounts, bonuses based on referral lev-
cident-to suppliers. els, and any other compensation to the
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, physician or physician group to influ-
1985, as amended at 56 FR 8853, Mar. 1, 1991; ence the use of referral services). Bo-
58 FR 38079, 38082, July 15, 1993; 80 FR 80556, nuses and other compensation that are
Nov. 15, 2016] not based on referral levels (such as bo-
nuses based solely on quality of care
§ 417.479 Requirements for physician furnished, patient satisfaction, and
incentive plans.
participation on committees) are not
(a) The contract must specify that an considered payments for purposes of
HMO or CMP may operate a physician this section.
incentive plan only if— Physician group means a partnership,
(1) No specific payment is made di- association, corporation, individual
rectly or indirectly under the plan to a practice association, or other group
physician or physician group as an in- that distributes income from the prac-
ducement to reduce or limit medically tice among members. An individual
necessary services furnished to an indi- practice association is a physician
vidual enrollee; and group only if it is composed of indi-
(2) The stop-loss protection, enrollee vidual physicians and has no sub-
survey, and disclosure requirements of contracts with physician groups.
this section are met.
Physician incentive plan means any
(b) Applicability. The requirements in
compensation arrangement between an
this section apply to physician incen-
HMO or CMP and a physician or physi-
tive plans between HMOs and CMP and
cian group that may directly or indi-
individual physicians or physician
groups with which they contract to rectly have the effect of reducing or
provide medical services to enrollees. limiting services furnished to Medicare
The requirements in this section also beneficiaries or Medicaid beneficiaries
apply to subcontracting arrangements enrolled in the HMO or CMP.
as specified in § 417.479(i). These re- Referral services means any specialty,
quirements apply only to physician in- inpatient, outpatient, or laboratory
centive plans that base compensation services that a physician or physician
(in whole or in part) on the use or cost group orders or arranges, but does not
of services furnished to Medicare bene- furnish directly.
ficiaries or Medicaid beneficiaries. Risk threshold means the maximum
(c) Definitions. For purposes of this risk, if the risk is based on referral
section: services, to which a physician or physi-
Bonus means a payment an HMO or cian group may be exposed under a
CMP makes to a physician or physician physician incentive plan without being
group beyond any salary, fee-for-serv- at substantial financial risk.
ice payments, capitation, or returned Withhold means a percentage of pay-
withhold. ments or set dollar amounts that an
Capitation means a set dollar pay- HMO or CMP deducts from a physi-
ment per patient per unit of time (usu- cian’s service fee, capitation, or salary
ally per month) that an organization payment, and that may or may not be
pays a physician or physician group to returned to the physician, depending
cover a specified set of services and ad- on specific predetermined factors.
ministrative costs without regard to (d) Prohibited physician payments. No

the actual number of services provided. specific payment of any kind may be
The services covered may include the made directly or indirectly under the
280
incentive plan to a physician or physi- 25 percent of the maximum potential

cian group as an inducement to reduce payments; or
or limit covered medically necessary (ii) The maximum and minimum po-
services covered under the HMO’s or tential payments are not clearly ex-
CMP’s contract furnished to an indi- plained in the physician’s or physician
vidual enrollee. Indirect payments in- group’s contract.
clude offerings of monetary value (such (6) Any other incentive arrangements
as stock options or waivers of debt) that have the potential to hold a physi-
measured in the present or future. cian or physician group liable for more
(e) General rule: Determination of sub- than 25 percent of potential payments.
stantial financial risk. Substantial fi- (g) Requirements for physician incen-
nancial risk occurs when the incentive tive plans that place physicians at sub-
arrangements place the physician or stantial financial risk. HMOs and CMPs
physician group at risk for amounts be- that operate incentive plans that place
yond the risk threshold, if the risk is physicians or physician groups at sub-
based on the use or costs of referral stantial financial risk must do the fol-
services. Amounts at risk based solely lowing:
on factors other than a physician’s or (1) Conduct enrollee surveys. These
physician group’s referral levels do not surveys must—
contribute to the determination of sub- (i) Include either all current Medi-
stantial financial risk. The risk thresh- care/Medicaid enrollees in the HMO or
old is 25 percent. CMP and those who have disenrolled
(f) Arrangements that cause substantial (other than because of loss of eligi-
financial risk. For purposes of this para- bility in Medicaid or relocation outside
graph, potential payments means the the HMO’s or CMP’s service area) in
maximum anticipated total payments the past 12 months, or a sample of
(based on the most recent year’s utili- these same enrollees and disenrollees;
zation and experience and any current (ii) Be designed, implemented, and
or anticipated factors that may affect analyzed in accordance with commonly
payment amounts) that could be re- accepted principles of survey design
ceived if use or costs of referral serv- and statistical analysis;
ices were low enough. The following (iii) Address enrollees/disenrollees
physician incentive plans cause sub- satisfaction with the quality of the
stantial financial risk if risk is based services provided and their degree of
(in whole or in part) on use or costs of access to the services; and
referral services and the patient panel (iv) Be conducted no later than 1 year
size is not greater than 25,000 patients: after the effective date of the Medicare
(1) Withholds greater than 25 percent contract and at least annually there-
of potential payments. after.
(2) Withholds less than 25 percent of (2) Ensure that all physicians and
potential payments if the physician or physician groups at substantial finan-
physician group is potentially liable cial risk have either aggregate or per-
for amounts exceeding 25 percent of po- patient stop-loss protection in accord-
tential payments. ance with the following requirements:
(3) Bonuses that are greater than 33 (i) If aggregate stop-loss protection is
percent of potential payments minus provided, it must cover 90 percent of
the bonus. the costs of referral services (beyond
(4) Withholds plus bonuses if the allocated amounts) that exceed 25 per-
withholds plus bonuses equal more cent of potential payments.
than 25 percent of potential payments. (ii) If the stop-loss protection pro-
The threshold bonus percentage for a vided is based on a per-patient limit,
particular withhold percentage may be the stop-loss limit per patient must be
calculated using the formula— determined based on the size of the pa-
tient panel and may be a single com-
Withhold = 0.75 (Bonus %) + 25%.
bined limit or consist of separate lim-
(5) Capitation, arrangements, if— its for professional services and insti-
(i) The difference between the max- tutional services. In determining pa-
imum potential payments and the min- tient panel size, the patients may be
imum potential payments is more than pooled in accordance with paragraph
281
§ 417.479 42 CFR Ch. IV (10–1–17 Edition)
(h)(2) of this section. Stop-loss protec- (i) Requirements related to subcon-

tion must cover 90 percent of the costs tracting arrangements—(1) Physician
of referral services that exceed the per groups. An HMO or CMP that contracts
patient limit. The per-patient stop-loss with a physician group that places the
limit is as follows: individual physician members at sub-
Single Separate Separate stantial financial risk for services they
Panel size combined institutional profes- do not furnish must do the following:
limit limit sional limit
(i) Disclose to CMS any incentive
1–1000 ..................... $6,000 $10,000 $3,000 plan between the physician group and
1,001–5000 .............. 30,000 40,000 10,000 its individual physicians that bases
5,001–8,000 ............. 40,000 60,000 15,000
8,001–10,000 ........... 75,000 100,000 20,000 compensation to the physician on the
10,001–25,000 ......... 150,000 200,000 25,000 use or cost of services furnished to
>25,000 .................... none none none
Medicare beneficiaries or Medicaid
beneficiaries. The disclosure must in-
(h) Disclosure and other requirements
for organizations with physician incentive clude the information specified in para-
plans—(1) Disclosure to CMS. Each graphs (h)(1)(i) through (h)(1)(vii) of
health maintenance organization or this section and be made at the times
competitive medical plan must provide specified in paragraph (h)(2) of this sec-
to CMS information concerning its tion.
physician incentive plans as requested. (ii) Provide adequate stop-loss pro-
(2) Pooling of patients. Pooling of pa- tection to the individual physicians.
tients is permitted only if— (iii) Conduct enrollee surveys as
(i) It is otherwise consistent with the specified in paragraph (g)(1) of this sec-
relevant contracts governing the com- tion.
pensation arrangements for the physi- (2) Intermediate entities. An HMO or
cian or physician group; CMP that contracts with an entity
(ii) The physician or physician group (other than a physician group) for the
is at risk for referral services with re- provision of services to Medicare bene-
spect to each of the categories of pa- ficiaries must do the following:
tients being pooled;
(i) Disclose to CMS any incentive
(iii) The terms of the compensation
plan between the entity and a physi-
arrangements permit the physician or
cian or physician group that bases
physician group to spread the risk
across the categories of patients being compensation to the physician or phy-
pooled; sician group on the use or cost of serv-
(iv) The distribution of payments to ices furnished to Medicare beneficiaries
physicians from the risk pool is not or Medicaid beneficiaries. The disclo-
calculated separately by patient cat- sure must include the information re-
egory; and quired to be disclosed under paragraphs
(v) The terms of the risk borne by the (h)(1)(i) through (h)(1)(vii) of this sec-
physicians or physician group are com- tion and be made at the times specified
parable for all categories of patients in paragraph (h)(2) of this section.
being pooled. (ii) If the physician incentive plan
(3) Disclosure to Medicare beneficiaries. puts a physician or physician group at
Each health maintenance organization substantial financial risk for the cost
or competitive medical plan must proof services the physician or physician
vide the following information to any group does not furnish—
Medicare beneficiary who requests it: (A) Meet the stop-loss protection re-
(i) Whether the prepaid plan uses a quirements of this subpart; and
physician incentive plan that affects
(B) Conduct enrollee surveys as speci-
the use of referral services.
fied in paragraph (g)(1) of this section.
(ii) The type of incentive arrange-
ment. (3) For purposes of paragraph (i)(2) of
(iii) Whether stop-loss protection is this section, an entity includes, but is
provided. not limited to, an individual practice
(iv) If the prepaid plan was required association that contracts with one or
to conduct a survey, a summary of the more physician groups and a physician
survey results. hospital organization.
282
(j) Sanctions against the HMO or CMP. § 417.481 Maintenance of records: Risk
CMS may apply intermediate sanc- HMOs and CMPs.
tions, or the Office of Inspector Gen- A risk contract must provide that
eral may apply civil money penalties the HMO or CMP agrees to maintain
described at § 417.500, if CMS deter- and make available to CMS upon re-
mines that an HMO or CMP fails to quest, books, records, documents, and
comply with the requirements of this other evidence of acounting procedures
section. and practices that—
(a) Are sufficient to—
[61 FR 13446, Mar. 27, 1996; 61 FR 46385, Sept.
(1) Establish component rates of the
3, 1996, as amended at 61 FR 69049, Dec. 31,
1996; 68 FR 50855, Aug. 22, 2003]
ACR for determining additional and
supplementary benefits; and
§ 417.480 Maintenance of records: Cost (2) Determine the rates utilized in
HMOs and CMPs. setting premiums for State insurance
agency purposes; and
A reasonable cost contract must pro- (b) Include at least any records or fi-
vide that the HMO or CMP agrees to nancial reports filed with other Federal
maintain books, records, documents, agencies or State authorities.
and other evidence of accounting pro-
cedures and practices that— [50 FR 1346, Jan. 10, 1985, as amended at 58
FR 38082, July 15, 1993; 60 FR 45680, Sept. 1,
(a) Are sufficient to— 1995]
(1) Ensure an audit trail; and
(2) Properly reflect all direct and in- § 417.482 Access to facilities and
direct costs claimed to have been in- records.
curred under the contract; and The contract must provide that the
(b) Include at least records of the fol- HMO or CMP agrees to the following:
lowing: (a) HHS may evaluate, through in-
(1) Ownership, HMO or CMP, and op- spection or other means, the quality,
eration of the HMO’s or CMP’s finan- appropriateness, and timeliness of serv-
cial, medical, and other recordkeeping ices furnished under the contract to its
systems. Medicare enrollees.
(b) HHS may evaluate, through in-
(2) Financial statements for the cur-
spection or other means, the facilities
rent contract period and three prior pe-
of the HMO or CMP when there is rea-
riods.
sonable evidence of some need for that
(3) Federal income tax or informa- inspection.
tion returns for the current contract (c) HHS, the Comptroller General, or
period and three prior periods. their designees may audit or inspect
(4) Asset acquisition, lease, sale, or any books and records of the HMO or
other action. CMP or its transferee that pertain to
(5) Agreements, contracts, and sub- any aspect of services performed, rec-
contracts. onciliation of benefit liabilities, and
(6) Franchise, marketing, and man- determination of amounts payable
agement agreements. under the contract.
(7) Schedules of charges for the (d) HHS may evaluate, through in-
HMO’s or CMP’s fee-for-service pa- spection or other means, the enroll-
tients. ment and disenrollment records for the
(8) Matters pertaining to costs of op- current contract period and three prior
erations. periods, when there is reasonable evi-
(9) Amounts of income received by dence of some need for that inspection.
source and payment. (e) In the case of a reasonable cost
HMO or CMP to make available for the
(10) Cash flow statements.
purposes specified in paragraphs (a),
(11) Any financial reports filed with (b), (c), and (d) of this section, its
other Federal programs or State au- premises, physical facilities, and equip-
thorities. ment, its records relating to its Medi-
[50 FR 1346, Jan. 10, 1985, as amended at 58 care enrollees, the records specified in
FR 38082, July 15, 1993; 60 FR 45680, Sept. 1, § 417.480 and any additional relevant in-
1995] formation that CMS may require.
283
§ 417.484 42 CFR Ch. IV (10–1–17 Edition)
(f) That the right to inspect, evalu- with section 1861 of the Act, are en-
ate, and audit, will extend through rolled in Medicare in an approved sta-
three years from the date of the final tus.
settlement for any contract period un-
less—
FR 38082, July 15, 1993; 81 FR 80556, Nov. 15,
(1) CMS determines there is a special 2016]
need to retain a particular record or
group of records for a longer period and § 417.486 Disclosure of information
notifies the HMO or CMP at least 30 and confidentiality.
days before the normal disposition
date; The contract must provide that the
(2) There has been a termination, dis- HMO or CMP agrees to the following:
pute, fraud, or similar fault by the (a) To submit to CMS—
HMO or CMP, in which case the reten- (1) All financial information required
tion may be extended to three years under subpart O of this part and for
from the date of any resulting final final settlement; and
settlement; or (2) Any other information necessary
(3) CMS determines that there is a for the administration or evaluation of
reasonable possibility of fraud, in the Medicare program.
which case it may reopen a final settle- (b) To comply with the requirements
ment at any time. set forth in part 420, subpart C, of this
[50 FR 1346, Jan. 10, 1985, as amended at 58 chapter pertaining to the disclosure of
FR 38082, July 15, 1993] ownership and control information.
(c) To comply with the requirements
§ 417.484 Requirement applicable to of the Privacy Act, as implemented by
related entities. 45 CFR part 5b and subpart B of part
(a) Definition. As used in this section, 401 of this chapter, with respect to any
related entity means any entity that is system of records developed in per-
related to the HMO or CMP by common forming carrier or intermediary func-
ownership or control and— tions under §§ 417.532 and 417.533.
(1) Performs some of the HMO’s or (d) To meet the confidentiality re-
CMP’s management functions under quirements of § 482.24(b)(3) of this chap-
contract or delegation; ter for medical records and for all
(2) Furnishes services to Medicare en- other enrollee information that is—
rollees under an oral or written agree- (1) Contained in its records or ob-
ment; or tained from CMS or other sources; and
(3) Leases real property or sells mate- (2) Not covered under paragraph (c) of
rials to the HMO or CMP at a cost of this section.
more than $2,500 during a contract pe-
riod. [50 FR 1346, Jan. 10, 1985, as amended at 58
(b) Requirement. The contract must FR 38082, July 15, 1993; 60 FR 45680, Sept. 1,
1995]
provide that the HMO or CMP agrees to
require all related entities to agree
§ 417.488 Notice of termination and of
that— available alternatives: Risk con-
(1) HHS, the Comptroller General, or tract.
their designees have the right to in-
spect, evaluate, and audit any perti- A risk contract must provide that
nent books, documents, papers, and the HMO or CMP agrees to give notice
records of the subcontractor involving as follows if the contract is termi-
transactions related to the sub- nated:
contract; and (a) At least 60 days before the effec-
(2) The right under paragraph (b)(1) tive date of termination, to give its
of this section to information for any Medicare enrollees a written notice
particular contract period will exist for that—
a period equivalent to that specified in (1) Specifies the termination date;
§ 417.482(f). and
(3) All providers or suppliers that are (2) Describes the alternatives avail-
types of individuals or entities that able for obtaining Medicare services
can enroll in Medicare in accordance after termination.
284
(b) To pay the cost of the written no- § 417.494 Modification or termination
tices. of contract.
[60 FR 45680, Sept. 1, 1995] (a) Modification or termination by mu-
tual consent. (1) CMS and an HMO or
§ 417.490 Renewal of contract. CMP may modify or terminate a con-
tract at any time by written mutual
A contract with an HMO or CMP is consent.
renewed automatically for the next 12- (2) If the contract is modified, the
month period unless CMS or the HMO HMO or CMP must notify its Medicare
or CMP decides not to renew, in ac- enrollees of any changes that CMS de-
cordance with § 417.492. termines are appropriate for notifica-
[50 FR 1346, Jan. 10, 1985, as amended at 58 tion.
FR 38082, July 15, 1993] (3) If the contract is terminated, the
HMO or CMP must notify its Medicare
§ 417.492 Nonrenewal of contract. enrollees, and CMS notifies the general
public, at least 30 days before the ter-
(a) Nonrenewal by the HMO or CMP. mination date.
(1) If an HMO or CMP does not intend (b) Termination by CMS. (1) CMS may
to renew its contract, it must— terminate a contract for any of the fol-
(i) Give written notice to CMS at lowing reasons:
least 90 days before the end of the cur- (i) The HMO or CMP has failed sub-
rent contract period; and stantially to carry out the terms of the
(ii) Notify each Medicare enrollee by contract.
mail at least 60 days before the end of (ii) The HMO or CMP is carrying out
the contract period. the contract in a manner that is incon-
(2) CMS may accept a nonrenewal no- sistent with the effective and efficient
tice submitted less than 90 days before implementation of section 1876 of the
the end of a contract period if— Act.
(i) The HMO or CMP notifies its (iii) The HMO or CMP has failed sub-
Medicare enrollees and the public in stantially to comply with the composi-
tion of enrollment requirements speci-
accordance with paragraph (a)(1) of
fied in § 417.413(d).
this section; and
(iv) CMS determines that the HMO or
(ii) Acceptance would not otherwise CMP no longer meets the requirements
jeopardize the effective and efficient of section 1876 of the Act and this sub-
administration of the Medicare pro- part for being an HMO or CMP.
gram. (2) If CMS decides to terminate a
(b) Nonrenewal by CMS—(1) Notice of contract, it sends a written notice in-
nonrenewal. If CMS decides not to forming the HMO or CMP of its right
renew a contract, it gives written no- to appeal the termination in accord-
tice of nonrenewal as follows: ance with part 422 subpart N of this
(i) To the HMO or CMP at least 90 chapter.
days before the end of the contract pe- (3) An HMO or CMP with a risk con-
riod. tract must notify its Medicare enroll-
(ii) To the HMO’s or CMP’s Medicare ees of the termination as described in
enrollees at least 60 days before the end § 417.488.
of the contract period. (4) CMS notifies the HMO’s or CMP’s
Medicare enrollees and the general
(2) Notice of appeal rights. CMS gives
public of the termination at least 30
the HMO or CMP written notice of its
days before the effective date of termi-
right to appeal the nonrenewal deci-
nation.
sion, in accordance with part 422 sub- (c) Termination by the HMO or CMP.
part N of this chapter, if CMS’s deci- The HMO or CMP may terminate the
sion was based on any of the reasons contract if CMS has failed substan-
specified in § 417.494(b). tially to carry out the terms of the
[50 FR 1346, Jan. 10, 1985, as amended at 58 contract.
FR 38079, July 15, 1993; 60 FR 45681, Sept. 1, (1) The HMO or CMP must notify
1995; 75 FR 19803, Apr. 15, 2010; 77 FR 22166, CMS at least 90 days before the effec-
Apr. 12, 2012] tive date of the termination and must
285
§ 417.500 42 CFR Ch. IV (10–1–17 Edition)
include in its notice the reasons for the Subpart M—Change of Ownership
termination. and Leasing of Facilities: Ef-
(2) The HMO or CMP must notify its fect on Medicare Contract
Medicare enrollees of the termination
at least 60 days before the termination § 417.520 Effect on HMO and CMP con-
date. Risk HMOs or CMPs must also tracts.
provide a written description of alter- (a) The provisions set forth in sub-
natives available for obtaining Medi- part L of part 422 of this chapter also
care services after termination of the apply to Medicare contracts with
contract. The HMO or CMP is respon- HMOs and CMPs under section 1876 of
sible for the cost of these notices. the Act.
(3) The HMO or CMP must notify the (b) In applying these provisions, ref-
general public of the termination at erences to ‘‘M + C organizations’’ must
least 30 days before the termination be read as references to ‘‘HMOs and
date. CMPs’’.
(4) The contract is terminated effec- (c) In § 422.550, reference to ‘‘subpart
tive 60 days after the HMO or CMP K of this part’’ must be read as ref-
mails the notice to Medicare enrollees erence to ‘‘subpart L of part 417 of this
as required in paragraph (c)(2) of this chapter’’.
section. (d) In § 422.553, reference to ‘‘subpart
K of this part’’ must be read as ref-
(5) CMS’s liability for payment ends
erence to ‘‘subpart J of part 417 of this
as of the first day of the month after
chapter’’.
the last month for which the contract
is in effect. [63 FR 35067, June 26, 1998]

FR 22322, June 11, 1987; 56 FR 46571, Sept. 13, Subpart N—Medicare Payment to
1991; 58 FR 38079, 38082, July 15, 1993; 60 FR HMOs and CMPs: General Rules
45681, Sept. 1, 1995; 75 FR 19803, Apr. 15, 2010]
§ 417.524 Payment to HMOs or CMPs:
§ 417.500 Intermediate sanctions for General.
and civil monetary penalties (a) Basic rule. The payments that
against HMOs and CMPs. CMS makes to an HMO or CMP under
(a) Except as provided in paragraph this subpart and subparts O and P of
(c) of this section, the rights, proce- this part for furnishing covered Medi-
dures, and requirements related to in- care services are in place of any pay-
termediate sanctions and civil money ment that CMS would otherwise make
penalties set forth in part 422 subparts to a beneficiary or the HMO or CMP
under sections 1814(b) and 1833(a) of the
O and T of this chapter also apply to
Act.
Medicare contracts with HMOs or
(b) Basis of payment. (1) CMS pays the
CMPs under sections 1876 of the Act.
HMOs or CMPs on either a reasonable
(b) In applying paragraph (a) of this cost basis or a risk basis depending on
section, references to part 422 of this the type of contract the HMO or CMP
chapter must be read as references to has with CMS.
this part and references to MA organi- (2) In certain cases a risk HMO or
zations must be read as references to CMP also receives payments on a rea-
HMOs or CMPs. sonable cost basis for certain Medicare
(c) In applying paragraph (a) of this enrollees who retain nonrisk status, as
section, the amounts of civil money provided in § 417.444, after the HMO or
penalties that can be imposed are gov- CMP enters into a risk contract.
erned by section 1876(i)(6)(B) and (C) of [60 FR 46229, Sept. 6, 1995]
the Act, not by the provisions in part
422 of this chapter. § 417.526 Payment for covered serv-
ices.
[75 FR 19803, Apr. 15, 2010]
Subpart O of this part set forth the

principles that CMS follows in deter-
mining Medicare payment to an HMO
286
or CMP that has a reasonable cost con- (2) Determine the amounts payable
tract. Subpart P of this part describes by these payers; and
the per capita method of Medicare pay- (3) Coordinate the benefits of its
ment to HMOs or CMPs that contract Medicare enrollees with these payers.
on a risk basis.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, FR 38080, July 15, 1993; 60 FR 46229, Sept. 6,
1985, as amended at 58 FR 38080, July 15, 1993; 1995]
60 FR 46229, Sept. 6, 1995]
§ 417.528 Payment when Medicare is

Subpart O—Medicare Payment:
not primary payer. Cost Basis
(a) Limits on payments and charges. (1)
SOURCE: 50 FR 1346, Jan. 10, 1985, unless
CMS may not pay for services to the
otherwise noted.
extent that Medicare is not the pri-
mary payer under section 1862(b) of the § 417.530 Basis and scope.
Act and part 411 of this chapter.
(2) The circumstances under which an This subpart sets forth the principles
HMO or CMP may charge, or authorize that CMS follows to determine the
a provider to charge, for covered Medi- amount it pays for services furnished
care services for which Medicare is not by a cost HMO or CMP to its Medicare
the primary payer are stated in para- enrollees. These principles are based on
graphs (b) and (c) of this section. sections 1861(v) and 1876 of the Act and
are, for the most part, the same as
(b) Charge to other insurers or the en-
those set forth—
rollee. If a Medicare enrollee receives
from an HMO or CMP covered services (a) In part 412 of this chapter, for
that are also covered under State or paying the costs of inpatient hospital
Federal worker’s compensation, auto- services which, for cost HMOs and
mobile medical, or any no-fault insur- CMPs, are considered ‘‘reasonable’’
ance, or any liability insurance policy only if they do not exceed the amounts
or plan, including a self-insured plan, allowed under the prospective payment
the HMO or CMP may charge, or au- system; and
thorize a provider that furnished the (b) In part 413 of this chapter, for the
service to charge— costs of all other covered services.
(1) The insurance carrier, employer, [60 FR 46230, Sept. 6, 1995]
or other entity that is liable to pay for
these services; or § 417.531 Hospice care services.
(2) The Medicare enrollee, to the ex- (a) If a Medicare enrollee of an HMO
tent that he or she has been paid by the or CMP with a reasonable cost contract
carrier, employer, or other entity. makes an election under § 418.24 of this
(c) Charge to group health plans chapter to receive hospice care serv-
(GHPs) or large group health plans ices, payment for these services is
(LGHPs). An HMO or CMP may charge made to the hospice that furnishes the
a GHP or LGHP for covered services it services in accordance with part 418 of
furnished to a Medicare enrollee and this chapter.
may charge the Medicare enrollee to (b) While the enrollee’s hospice elec-
the extent that he or she has been paid tion is in effect, CMS pays the HMO or
by the GHP or LGHP for these covered CMP on a reasonable cost basis for
services if— only the following covered Medicare
(1) The Medicare enrollee is covered services furnished to the Medicare en-
under the plan; and rollee:
(2) Under section 1862(b) of the Act, (1) Services of the enrollee’s attend-
CMS is precluded from paying for the ing physician if the physician is an em-
covered services . ployee or contractor of the HMO or
(d) Responsibilities of HMO or CMP. An CMP and is not employed by or under
HMO or CMP must— contract to the enrollee’s hospice.
(1) Identify payers that are primary (2) Services not related to the treat-
to Medicare under section 1862(b) of the ment of the terminal condition for
Act; which hospice care was elected or a
287
§ 417.532 42 CFR Ch. IV (10–1–17 Edition)
condition related to the terminal con- SNF services it furnishes to Medicare

dition. enrollees:
(1) Direct payment by CMS.
FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, (2) Direct payment by the HMO or
1995] CMP.
(d) Notice of election. The election
§ 417.532 General considerations. must be made in writing before the be-
(a) Conditions and criteria for payment. ginning of the contract period and is
(1) The costs incurred by the HMO or binding for that period.
CMP to furnish services covered by (e) Payment by HMO or CMP. If the
Medicare are reimbursable if they are— HMO or CMP elects to pay providers di-
(i) Proper and necessary; rectly, as provided in paragraph (c) of
(ii) Reasonable in amount; and this section, it must—
(iii) Except as provided in § 417.550, (1) Determine the eligibility of its
appropriately apportioned among the Medicare enrollees to receive covered
HMO’s or CMP’s Medicare enrollees, services through the HMO or CMP;
other enrollees, and nonenrolled pa- (2) Make proper coverage decisions
tients. and appropriate payments, in accord-
(2) In determining fair and equitable ance with §§ 421.100 and 421.200 of this
payment for the HMOs or CMPs, CMS chapter, for the services furnished to
generally applies the cost payment its Medicare enrollees;
principles set forth in § 413.5 of this (3) Ensure that providers maintain
chapter. and furnish appropriate documentation
(3) In judging whether costs are rea- of physician certification and recertifi-
sonable, CMS applies the weighted av- cation, to the extent required under
erage of the AAPCCs of each class of subpart B of part 424 of this chapter;
the HMO’s or CMP’s Medicare enrollees and
(as defined in § 417.582) for the HMO’s or (4) Carry out any other procedures
CMP’s geographic area as an absolute required by CMS.
limitation on the total amount pay- (f) Review of HMO’s or CMP’s bill proc-
able. essing capabilities. If the HMO or CMP
(b) Method and amount of payment to elects to pay providers directly, CMS
the HMO or CMP. (1) CMS makes in- determines whether the HMO or CMP
terim per capita payments each month has the experience and capability to
for each Medicare enrollee, equivalent carry out the responsibilities specified
to the interim per capita cost rate de- in paragraph (e) of this section in an ef-
termined in accordance with § 417.570. ficient and effective manner.
(2) CMS adjusts the interim per cap- (g) Direct payment by CMS. (1) If the
ita rate as necessary during the con- HMO or CMP elects to have CMS pay
tract period and makes final adjust- for provider services, CMS pays each
ments at the end of the contract pe- provider on a reasonable cost basis or
riod. under the PPS system, whichever is ap-
(3) In determining the amount due propriate for the particular provider
the HMO or CMP, CMS deducts from under part 412 or part 413 of this chap-
the reasonable cost actually incurred ter.
by the HMO or CMP for covered serv- (2) In computing the Medicare pay-
ices furnished to its Medicare enrollment to the HMO or CMP, CMS deducts
ees, an amount equal to the actuarial these payments and any other pay-
value of the applicable Medicare Part ments made by the Medicare inter-
A and Part B deductible and coinsur- mediary or carrier on behalf of the
ance amounts that would have applied HMO or CMP (such as payment for
to the covered services for which pay- emergency or urgently needed services
ment is being made if these enrollees under § 417.558).
had not enrolled in the HMO or CMP or (h) Payment for services furnished to
another HMO or CMP. Medicare beneficiaries not enrolled in the
(c) Election by HMO or CMP. An HMO HMO or CMP. CMS pays the HMO or
or CMP must elect, on an individual CMP for services it furnishes to Medi-

provider basis, one of the following care beneficiaries who are not its en-
methods for payment for hospital and rollees through the HMO’s or CMP’s
288
Medicare intermediary or carrier, as costs related to the offering or provi-

appropriate. sion of Part D benefits are reimbursed
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
under this part. These costs are reim-
1985, as amended at 53 FR 6648, Mar. 2, 1988; bursed solely under the applicable pro-
58 FR 38082, July 15, 1993; 60 FR 46230, Sept. visions of part 423 of this chapter.
6, 1995] [50 FR 1346, Jan. 10, 1985, as amended at 58
FR 38082, July 15, 1993; 70 FR 4525, Jan. 28,
§ 417.533 Part B carrier responsibil- 2005]
ities.
In paying for Part B services fur- § 417.536 Cost payment principles.
nished to its enrollees by suppliers, the (a) Applicability. Unless otherwise
HMO or CMP must— specified in this subpart, the principles
(a) Determine the eligibility of indi- set forth in parts 412 and 413 of this
viduals to receive those services chapter are applicable to the costs in-
through the HMO or CMP; curred by an HMO or CMP or by pro-
(b) Make proper coverage decisions viders and other facilities owned or op-
and appropriate payment as authorized erated by the HMO or CMP or related
under § 421.200 of this chapter for the to it by common ownership or control.
services for which its Medicare enroll- The most common examples of these
ees are eligible; and costs are set forth in this section.
(c) Carry out any other procedures (b) Depreciation. An appropriate al-
that CMS may require. lowance for depreciation on buildings
[50 FR 1346, Jan. 10, 1985, as amended at 58 and equipment is an allowable cost, in
FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, accordance with §§ 413.134, 413.144, and
1995] 413.149 of this chapter.
(c) Interest expense. Necessary and
§ 417.534 Allowable costs. proper interest on both current and
(a) Definition—Allowable costs means capital indebtedness is an allowable
the direct and indirect costs, including cost, in accordance with § 413.153 of this
normal standby costs incurred by the chapter.
HMO or CMP, that are proper and nec- (d) Cost of educational activities. An
essary for efficient delivery of needed appropriate part of the net cost of ap-
health care services. They include the proved educational activities of a pro-
costs of furnishing services to the vider or other health care facility
HMO’s or CMP’s Medicare enrollees, owned or operated by an HMO or CMP
other enrollees, and nonenrolled pa- is an allowable cost in accordance with
tients, which are typical ‘‘provider’’ § 413.85 of this chapter.
costs, and costs (such as marketing, (e) Compensation of owners. An appro-
enrollment, membership, and operation priate amount of compensation for
of the HMO or CMP) that are peculiar services of owners is an allowable cost,
to health care prepayment organiza- if the services are actually performed
tions. and are necessary, as specified in
(b) Basic rules. (1) The allowability of § 413.102 of this chapter.
an HMO’s or CMP’s costs for furnishing (f) Bad debts. (1) Bad debts attrib-
services is generally determined in ac- utable to Medicare deductible and coin-
cordance with principles applicable to surance amounts are allowable only if
provider costs, as set forth in § 417.536. the requirements of § 413.89 of this
(2) The allowability of other costs is chapter are met, subject to the limita-
determined in accordance with prin- tions described under § 413.89(h) and the
ciples set forth in §§ 417.538 through exceptions for services described under
417.550. § 413.89(i).
(3) Costs for covered services for (2) If all or part of the deductible and
which Medicare is not the primary coinsurance amounts is payable
payor, as described in § 417.528, are not through a monthly premium or other
allowable. periodic payment, the amount allowed
(c) Medicare Part D program costs. To as a bad debt may not exceed three
the extent that an HMO or CMP pro- times the monthly rate for the actu-
vides qualified prescription drug cov- arial value of the deductible and coin-
erage to enrollees under Part D, no surance amounts, or its equivalent, if
289
§ 417.538 42 CFR Ch. IV (10–1–17 Edition)
the periodic payment is on other than used in providing services is allowable

a monthly basis. in addition to the reasonable cost of
(3) Any bad debt related to a service services furnished by a proprietary pro-
furnished to a Medicare enrollee of the vider owned by the HMO or CMP. The
HMO or CMP, and claimed on a cost re- amount of the allowance is determined
port submitted for payment by a pro- in accordance with § 413.157 of this
vider or other facility reimbursed on a chapter.
cost basis, may not be claimed as a bad (m) Limitations on payment. Medicare
debt by the HMO or CMP. payment for covered services furnished
(g) Charity and courtesy allowances. As by entities owned by or operated by, or
specified in § 413.80 of this chapter, related to, an HMO or CMP paid on a
charity and courtesy allowances are reasonable cost basis is subject to cer-
deductions from revenue and may not tain provisions of parts 412 and 413 of
be included as allowable costs. this chapter that pertain to reasonable
(h) Research costs. As specified in cost and reasonable charge. Those pro-
§ 413.90 of this chapter, costs incurred visions include, but are not necessarily
for research purposes, over and above limited to, the following:
patient care, are not allowable costs. (1) For ESRD treatment, the limita-
(i) Value of services of nonpaid workers. tions authorized under § 413.170 of this
The value of services of nonpaid work- chapter.
ers of an organization is not an allow- (2) For services of physical, occupa-
able cost, except as provided in § 413.94 tional, and speech therapists and other
of this chapter. therapists and nonphysician health
(j) Purchase discounts and allowances specialists, the limitations set forth in
and refund of expenses. Discounts and § 413.106 of this chapter.
allowances that an HMO or CMP re-
(3) For drugs, the allowable cost as
ceives on purchases of goods and serv-
determined under §§ 405.517 and 410.29 of
ices and refunds of previous expense
this chapter.
payments must be deducted from the
(4) The overall cost limits established
costs to which they relate, in accord-
in accordance with § 413.30 of this chap-
ance with § 413.98 of this chapter.
ter.
(k) Cost to related entities. (1) The
costs of services, facilities, or supplies (5) The limitation to the lesser of
furnished to an HMO or CMP by a re- reasonable cost or customary charges,
lated entity are allowable at the cost as set forth in § 413.13 of this chapter.
to the related entity in accordance [50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
with § 413.17 of this chapter. 1985, as amended at 51 FR 34832, Sept. 30,
(2) An entity is not considered re- 1986; 51 FR 37398, Oct. 22, 1986; 58 FR 38080,
lated to the HMO or CMP merely be- July 15, 1993; 60 FR 46230, Sept. 6, 1995; 77 FR
cause— 67531, Nov. 9, 2012]
(i) It has a risk or incentive agree-
ment under which the HMO or CMP re- § 417.538 Enrollment and marketing
costs.
imburses or compensates the entity for
services it furnishes to the HMOs’ or (a) Principle. Costs incurred by an
CMPs’ enrollees; or HMO or CMP in performing the enroll-
(ii) Substantially all the services the ment and marketing activities de-
entity furnishes are furnished to the scribed in subpart k of this part are al-
HMO’s or CMP’s enrollees. lowable.
(3) However, an entity described in (b) Included costs. Allowable enroll-
paragraph (k)(2) of this section and an ment and marketing costs are those
HMO or CMP are considered related if necessary and proper costs incurred in
either of them is in a position to exer- offering the HMO’s or CMP’s plan to
cise significant management or owner- potential enrollees in accordance with
ship influence or control over the this part. Those costs include selling,
other. advertising, promotional, and other
(l) Return on equity capital of propri- marketing costs and may not exceed an
etary providers owned by the HMO or amount that would be incurred by a

CMP. An allowance for a reasonable re- prudent and cost-conscious manage-
turn on equity capital invested and ment.
290
(c) Application. Enrollment and mar- salaries, wages, incentive payments,

keting costs are allowable, whether in- fringe benefits) must be distinguished
curred directly by HMO or CMP staff or from the cost of nonpersonal services
under contract with marketing special- (for example, expenses attributable to
ists or other outside consultants. facilities, equipment, support per-
(d) Limitation on payment. The rel- sonnel, supplies).
atively higher costs that an HMO or (2) To be allowable, compensation
CMP is likely to incur in initially of- must be reasonable in relation to the
fering its plan to Medicare bene- personal services furnished.
ficiaries are taken into account in de- [50 FR 1346, Jan. 10, 1985, as amended at 58
termining whether enrollment and FR 38082, July 15, 1993; 60 FR 46230, Sept. 6,
marketing costs are reasonable in 1995]
amount. However, if those costs exceed
amounts that would be paid by prudent § 417.546 Physicians’ services and
management, the excess is not allow- other Part B supplier services fur-
able. nished under arrangements.
[50 FR 1346, Jan. 10, 1985, as amended at 58 General principle. The amount paid by
FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, an HMO or CMP for physicians’ serv-
1995] ices and other Part B supplier services
furnished under arrangements is an al-
§ 417.540 Enrollment costs. lowable cost to the extent it is reason-
(a) Principle. Enrollment costs are al- able. Costs are considered reasonable if
lowable if incurred in maintaining and they—
servicing subscriber contracts for pre- (a) Do not exceed those that a pru-
payment enrollees. dent and cost-conscious buyer would
(b) Kind of costs included. Enrollment incur to purchase those services; and
costs include, but are not limited to, (b) Are comparable to costs incurred
reasonable costs incurred in connection for similar services furnished by simi-
with maintaining statistical, financial, lar physicians or other suppliers in the
and other data on enrollees. same or a similar geographic area.
[50 FR 1346, Jan. 10, 1985, as amended at 58 [50 FR 1346, Jan. 10, 1985, as amended at 58
FR 38082, July 15, 1993] FR 38082, July 15, 1993; 60 FR 34887, July 5,
1995; 60 FR 45372, Aug. 31, 1995]
§ 417.542 Reinsurance costs.
§ 417.548 Provider services through ar-
Reinsurance costs are not allowable. rangements.
§ 417.544 Physicians’ services fur- (a) Principle. The cost incurred by an
nished directly by the HMO or HMO or CMP for covered services fur-
CMP. nished under arrangement with a pro-
(a) Principles. (1) Compensation paid vider is allowable to the extent that it
by an HMO or CMP to physicians is an would be allowable and payable under
allowable cost to the extent that it is parts 412 and 413 of this chapter, unless
commensurate with the compensation the HMO or CMP petitions CMS and
paid for similar services performed by demonstrates to HFCA’s satisfaction
similar physicians practicing in the that payment in excess of the amount
same or a similar locality. authorized under parts 412 and 413 of
(2) Physician compensation may take this chapter is justified on the basis of
various forms, but the aggregate com- advantages gained by the HMO or CMP.
pensation allowable must be reasonable (b) Application. An advantage gained
in relation to the services personally must represent a real and tangible ben-
furnished. efit received by the HMO or CMP for
(3) If aggregate physician compensa- the excess cost incurred, and any ex-
tion costs exceed what is normally in- cess payment is subject to other appli-
curred, the excess is not a reasonable cable requirements of parts 405, 412 and
cost. 413 of this chapter, including tests of
(b) Application. (1) In determining the reasonableness.
allowability of the costs of physicians’ (c) Example. In the case of an ar-

services, the cost of personal services rangement an HMO or CMP has with a
(for example, expenses attributable to provider that is located outside the
291
§ 417.550 42 CFR Ch. IV (10–1–17 Edition)
HMO’s or CMP’s geographic area and § 417.552 Cost apportionment: General

that is not related to the HMO or CMP provisions.
by common ownership or control, pay- (a) Basic rule. The HMO or CMP must
ment of the provider’s charges to the apportion its total allowable direct and
HMO or CMP (rather than the payment indirect costs among its Medicare en-
amounts determined under part 412 or rollees, its other enrollees, and its non-
part 413 of this chapter) may be justi- enrolled patients—
fied in exchange for the advantages of (1) In accordance with this subpart;
not having to incur the administrative and
costs of determining the provider’s rea- (2) Using methods approved by CMS.
sonable cost and of making a more (b) Purpose of apportionment. The pur-
timely final settlement with the HMO pose of apportionment is to ensure
or CMP. However, repayment of the that—
provider’s charges would be acceptable (1) The cost of services furnished to
only if— Medicare enrollees is not borne by
(1) The provider furnishes services to other enrollees and nonenrolled pa-
the HMO’s or CMP’s enrollees infre- tients; and
quently; (2) The cost of the services furnished
(2) The charges represent an insig- to other enrollees and nonenrolled pa-
nificant portion of total Medicare re- tients is not borne by Medicare.
imbursement to the HMO or CMP; and
(3) The charges do not exceed the cus- FR 38082, July 15, 1993; 60 FR 46230, Sept. 6,
tomary charges by the provider to its 1995]
other patients for similar services.
§ 417.554 Apportionment: Provider
services furnished directly by the
FR 34832, Sept. 30, 1986; 58 FR 38080, July 15,
HMO or CMP.
1993; 60 FR 46230, Sept. 6, 1995]
The Medicare share of the cost of
§ 417.550 Special Medicare program recovered services furnished to Medicare
quirements. enrollees by providers that are owned
(a) Principle. CMS pays the full rea- or operated by the HMO or CMP or are
sonable cost incurred by an HMO or related to the HMO or CMP by common
CMP for activities that are solely for ownership or control must be deter-
Medicare purposes and unique to Medi- mined in accordance with the appor-
care contracts under section 1876 of the tionment methods set forth in part 412,
Act. §§ 413.24, 413.55, and 415.55 of this chap-
(b) Application. CMS pays the full rea- ter.
sonable cost of the following activities: [51 FR 28574, Aug. 8, 1986, as amended at 51
(1) Reporting increases and decreases FR 34832, Sept. 30, 1986; 58 FR 38082, July 15,
in the number of Medicare enrollees. 1993; 60 FR 46231, Sept. 6, 1995; 60 FR 63189,
(2) Obtaining independent certifi- Dec. 8, 1995]
cation of the HMO’s or CMP’s cost re-
port to the extent that it is for Medi- § 417.556 Apportionment: Provider
services furnished by the HMO or
care purposes. CMP through arrangements with
(3) Reporting special data that CMS others.
requires solely for program planning
The Medicare share of the cost of
and evaluation.
covered services furnished to Medicare
(c) Prior approval requirement. The
enrollees through arrangements with
costs specified in paragraph (b) of this
providers other than those specified in
section must be separately budgeted
§ 417.554 must be determined as follows:
and approved by CMS before the con-
(a) The Medicare share must be based
tract period begins.
on the cost the HMO or CMP pays the
(d) Limit on full payment. Full pay-
provider under their arrangement, to
ment is limited to the costs specified
the extent that cost is reasonable and
in paragraph (b) of this section. All
within the limits established by
other administrative costs must be ap-

§§ 417.534 through 417.548.
portioned in accordance with § 417.552.
(b) Except as specified in paragraph
[60 FR 46230, Sept. 6, 1995] (c) of this section, apportionment must
292
be on the same approved basis that is or partners of the HMO or CMP or by a

used by the provider for Medicare bene- related entity of the HMO or CMP
ficiaries who are not Medicare enroll- must be apportioned on the basis of the
ees of the HMO or CMP, subject to the ratio of covered Part B services fur-
conditions and limitations set forth in nished to Medicare enrollees to total
§ 417.548. services furnished to all the HMO’s or
(c) If, because of the special nature or CMP’s enrollees and nonenrolled pa-
terms of the HMO’s or CMP’s arrange- tients. The HMO or CMP must use a
ment with the provider, apportionment method for reporting costs that is ap-
on the basis specified in paragraph (b) proved by CMS. CMS bases its approval
of this section would result in Medi- on a finding that the method—
care’s bearing the costs of furnishing (1) Results in an accurate and equi-
services to individuals other than the table allocation of allowable costs; and
HMO’s or CMP’s Medicare enrollees, (2) Is justifiable from an administra-
apportionment must be on another tive and cost efficiency standpoint.
basis that is approved by CMS and that (b) Medical services furnished under ar-
will ensure that Medicare does not pay rangements made by the HMO or CMP.
any of the cost of furnishing services to When the HMO or CMP pays for Part B
individuals who are not Medicare en- physician and supplier services on
rollees of the HMO or CMP. some basis other than fee-for-service,
(d) If the HMO or CMP elects to have the reasonable cost the HMO or CMP
providers reimbursed by the HMO’s or pays under its financial arrangement
CMP’s Medicare intermediary, the with the physician or supplier must be
Medicare share is the amount the apportioned between Medicare enroll-
intermediary paid the provider. ees and others based on the ratio of
[50 FR 1346, Jan. 10, 1985, as amended at 58 covered services furnished to Medicare
FR 38082, July 15, 1993] enrollees to the total services fur-
nished to all enrollees and nonenrolled
§ 417.558 Emergency, urgently needed, patients. If apportionment on this
and out-of-area services for which basis would result in Medicare bearing
the HMO or CMP accepts responsi-
bility. the cost of furnishing services to indi-
viduals who are not Medicare enrollees,
(a) Source of payment. Either CMS or the Medicare share must be determined
the HMO or CMP may pay a provider on another basis (approved by CMS) to
for emergency or urgently needed serv- ensure that Medicare pays only for
ices or other covered out-of-area serv- services furnished to Medicare enroll-
ices for which the HMO or CMP accepts ees.
responsibility. (c) Medical services furnished under an
(b) Limits on payment. If the HMO or arrangement that provides for the HMO
CMP pays, the payment amount may or CMP to pay on a fee-for-service basis.
not exceed the amount that is allow- The Medicare share of the cost of Part
able under part 412 or part 413 of this B physician and supplier services fur-
chapter. nished to Medicare enrollees under ar-
(c) Exception to limit on payment. Pay- rangements, and paid for by the HMO
ment in excess of the limit imposed by or CMP on a fee-for-service basis, is de-
paragraph (b) of this section is allow- termined by multiplying the total
able only if the HMO or CMP dem- amount for all such services by the
onstrates to CMS’s satisfaction that it ratio of charges for covered services
is justified on the basis of advantages furnished to Medicare enrollees to the
gained by the HMO or CMP, as set total charges for all such services.
forth in § 417.548. (d) Emergency services, urgently needed
[60 FR 46231, Sept. 6, 1995] services, and other covered medical serv-
ices for which the HMO or CMP assumes
§ 417.560 Apportionment: Part B physi- financial responsibility. The Medicare
cian and supplier services. share of the cost of Part B emergency
(a) Medical services furnished directly or urgently needed services or other
by the HMO or CMP. The total allow- Part B services that are not furnished
able cost of Part B physician and sup- by a provider and for which the HMO or
plier services furnished by employees CMP accepts financial responsibility is
293
§ 417.564 42 CFR Ch. IV (10–1–17 Edition)
determined in accordance with para- on the basis of a ratio of total incurred

graphs (b) and (c) of this section. and distributed costs per component to
the total incurred and distributed costs
FR 38082, July 15, 1993; 60 FR 34888, July 5, for all components.
1995] (iii) For the costs incurred under
paragraphs (b)(1)(i) through (iv) of this
§ 417.564 Apportionment and alloca- section that include personnel costs,
tion of administrative and general the organization must be able to iden-
costs. tify the person hours expended for each
(a) Costs not directly associated with administrative task and the rate of pay
providing medical care. Enrollment, for those persons performing the tasks.
marketing, and other administrative Administrative tasks performed and
and general costs that benefit the total rate of pay for the persons performing
enrollment of the HMO or CMP and are those tasks must match in terms of the
not directly associated with furnishing skill level needed to accomplish those
medical care must be apportioned on tasks. This information must be made
the basis of a ratio of Medicare enroll- available to CMS upon request.
ees to the total HMO or CMP enroll- (c) Costs excluded from administrative
ment. costs. In accordance with section 1861(v)
(b) Costs significantly related to proof the Act, the following costs must be
viding medical services. (1) The following excluded from administrative costs:
administrative and general costs, (1) Donations.
which bear a significant relationship to (2) Fines and penalties.
the services furnished, are not appor- (3) Political and lobbying activities.
tioned to Medicare directly; they must (4) Charity or courtesy allowances.
be allocated or distributed to the HMO (5) Spousal education.
or CMP components and then appor- (6) Entertainment.
(7) Return on equity.
tioned to Medicare in accordance with
§§ 417.552 through 417.560: [60 FR 46231, Sept. 6, 1995, as amended at 75
(i) Facility costs. FR 19803, Apr. 15, 2010]
(ii) Interest expense.
(iii) Medical record costs. § 417.566 Other methods of allocation
and apportionment.
(iv) Centralized purchasing costs.
(v) Accounting and data processing (a) Justification. A method of appor-
costs. tionment or allocation of costs, other
(vi) Other administrative and general than the methods prescribed in this
costs that are not included in para- subpart may be used if it results in a
graph (a) of this section. more accurate and equitable apportion-
(2) The allocation or distribution ment of allowable costs and is justifi-
process must be as follows: able from an administrative and cost
(i) If a separate entity or department standpoint.
of an HMO or CMP performs adminis- (b) Required approval. (1) An HMO or
trative functions the benefit of which CMP that desires to use an alternative
can be quantitatively measured (such method must submit a written request
as centralized purchasing and data for CMS approval at least 90 days be-
processing), the total allowable costs of fore the beginning of the period for
this entity or department must be allo- which the different method is to be
cated or distributed to the components used.
of the HMO or CMP in reasonable pro- (2) If CMS approves use of a different
portion to the benefits received by method, the HMO or CMP may not re-
these components. vert to another method without first
(ii) If a separate entity or depart- obtaining CMS’s approval.
ment of an HMO or CMP performs ad- [50 FR 1346, Jan. 10, 1985, as amended at 58
ministrative functions the benefit of FR 38082, July 15, 1993]
which cannot be quantitatively meas-
ured (such as facility costs), the total § 417.568 Adequate financial records,
allowable costs of this entity or depart- statistical data, and cost finding.
ment must be allocated or distributed (a) Maintenance of records. (1) An
to the components of the HMO or CMP HMO or CMP must maintain sufficient
294
financial records and statistical data those services in the form and detail
for proper determination of costs pay- prescribed by CMS.
able by CMS for covered services the [50 FR 1346, Jan. 10, 1985, as amended at 58
HMO or CMP furnished to its Medicare FR 38082, July 15, 1993; 60 FR 46231, Sept. 6,
enrollees either directly or under ar- 1995]
rangements with others. These include
accurate and sufficient detail of in- § 417.570 Interim per capita payments.
curred costs and enrollment data. (a) Principle of payment. (1) CMS
(2) Unless otherwise provided for in makes monthly advance payments
this subpart, the HMO or CMP must equivalent to the HMO’s or CMP’s in-
follow standardized definitions and ac- terim per capita rate for each bene-
counting, statistics, and reporting ficiary who is registered in CMS
practices that are widely accepted in records as a Medicare enrollee of the
HMO or CMP.
the health care industry.
(2) Additional lump-sum payments
(b) Provision of data. (1) The HMO or may be made at other times during the
CMP must provide adequate cost and contract period, at CMS’s discretion, to
statistical data, based on its financial adjust the total amounts paid during
and statistical records, that can be the contract period to the level of in-
verified by qualified auditors. curred costs.
(2) The cost data must be based on an (b) Determination of rate. The interim
approved method of cost finding and, per capita rate of payment is equal to
except as provided in paragraph (b)(3) the estimated per capita cost of pro-
of this section, on the accrual method viding covered services to the HMO’s or
of accounting. CMP’s Medicare enrollees, based upon
(3) For governmental institutions the types and components of costs that
that use a cash basis of accounting, are reimbursable under this part. The
cost data developed on this basis is ac- interim per capita rate is determined
ceptable. However, only depreciation annually by CMS on the basis of the
on capital assets, rather than the ex- HMO’s or CMP’s annual operating and
penditure for the capital asset, is al- enrollment forecast (as set forth in
lowable. § 417.572) and may be revised during the
contract period as explained in para-
(c) Provider services furnished directly
graphs (c) and (d) of this section.
by the HMO or CMP. If the HMO or (c) Adjustments of payments. In order
CMP furnishes provider services di- to maintain the interim payments at
rectly, the provider is subject to the the level of current reasonable costs,
cost-finding and cost-reporting require- CMS will adjust the interim per capita
ments set forth in parts 412 and 413 of rate, to the extent necessary, on the
this chapter. The provider must use an basis of adequate data supplied by the
approved cost-finding method described HMO or CMP in its interim estimated
in § 413.24 of this chapter to determine cost and enrollment reports or on other
the actual cost of these covered serv- evidence showing that the rate based
ices. on actual costs is more or less than the
(d) Supplier services furnished directly current rate. Adjustments may also be
by the HMO or CMP. If the HMO or made if there is—
CMP furnishes Part B physician and (1) A change in the number of Medi-
supplier services directly, it must fur- care enrollees that affects the per cap-
nish statistics that indicate the fre- ita rate;
quency and type of service provided, in (2) A material variation from the
the form and detail prescribed by CMS. costs estimated when the annual oper-
(e) Part B physician and supplier serv- ating budget was prepared; or
(3) A significant change in the use of
ices furnished through arrangement. If
covered services by the HMO’s or
the HMO or CMP furnishes Part B phy-
CMP’s Medicare enrollees.
sician and supplier services under ar- (d) Reduction of interim payments. If
rangements with others, it must fur- the HMO or CMP does not submit, on
nish to CMS statistical, financial, and time, the reports and other data re-
other information with respect to quired to determine the proper amount
295
§ 417.572 42 CFR Ch. IV (10–1–17 Edition)
of payment, CMS may reduce interim § 417.574 Interim settlement.

payments to the extent appropriate, or
(a) Determination. Within 30 days fol-
may take any other action authorized
lowing the receipt of the HMO’s or
under this part. An interim payment
CMP’s final interim cost and enroll-
reduction remains in effect until CMS
can make a reasonable estimate of per ment reports, CMS will make an in-
capita costs. terim determination of the estimated
amount payable to the HMO or CMP
[50 FR 1346, Jan. 10, 1985, as amended at 58 for the reasonable cost of covered serv-
FR 38082, July 15, 1993] ices furnished to its Medicare enrollees
during the contract period. CMS will
§ 417.572 Budget and enrollment fore- base the determination on the interim
cast and interim reports.
cost report and enrollment data sub-
(a) Annual submittal. The HMO or mitted by the HMO or CMP, and any
CMP must submit an annual operating other relevant data CMS finds appro-
budget and enrollment forecast, in the priate. For this purpose, CMS will ac-
form and detail required by CMS, at cept costs as reported, subject to later
least 90 days before the beginning of review or audit, unless there are obvi-
each contract period. The forecast ous errors or inconsistencies.
must be based on financial and statis- (b) Payment. Any difference between
tical data and records that can be the total amount of interim payments
verified if CMS requires a detailed re- and the amount found payable on the
view of supporting records. The data basis of the interim determination
and records include, but are not lim- under paragraph (a) of this section,
ited to, all ledgers, books, records, and must be paid by the HMO or CMP or
original evidence of costs, and statis- will be paid by CMS, whichever is ap-
tical data used in the determination of propriate, no later than 30 days after
reasonable cost. CMS’s determination.
(b) Effect of failure to submit on time. If
the HMO or CMP does not submit the [50 FR 1346, Jan. 10, 1985, as amended at 58
budget and enrollment forecast on FR 38082, July 15, 1993]
time, CMS may—
(1) Establish an interim per capita § 417.576 Final settlement.
rate of payment on the basis of the (a) General rule. Final settlement and
best available data and adjust pay- payment of amounts due the HMO or
ments on the basis of that rate until CMP or the appropriate Medicare trust
the required reports are submitted and funds are made following the HMO’s or
a new interim per capita rate can be es- CMP’s submission and CMS’s review of
tablished; or an independently certified cost report
(2) If there is not enough data on and supporting documents as described
which to base an interim per capita in paragraph (b) of this section.
rate, inform the HMO or CMP that in- (b) Certified cost report as basis for
terim payments will not be made until final settlement—(1) Timing of cost report.
the required reports are submitted. The HMO or CMP must submit to CMS
(c) Interim cost reports. (1) An HMO or an independently certified cost report
CMP must submit interim cost reports and supporting documents, in the form
on a quarterly basis in the form and de- and detail required by CMS, no later
tail prescribed by CMS. These interim than 180 days after the end of each con-
cost reports must be submitted no tract period, unless CMS extends the
later than 60 days after the close of period for good cause shown by the
each quarter of the contract period. HMO or CMP.
(2) CMS may reduce the frequency of (2) Content of cost report. The cost re-
the reports required under paragraph port and supporting documents must
(c)(1) of this section if CMS determines include the following:
that, on the basis of the HMO’s or (i) The per capita costs incurred in
CMP’s reporting experience, there is furnishing covered services to its Medi-
good cause to do so. care enrollees, determined in accord-

[50 FR 1346, Jan. 10, 1985, as amended at 58 ance with subpart O of this part and in-
FR 38082, July 15, 1993] cluding—
296
(A) The costs incurred by entities re- paragraph (b) of this section, are rea-
lated to the HMO or CMP by common sonable and that the interest of the
ownership or control; and Medicare program would best be served
(B) For reports for cost-reporting pe- by not delaying final settlement with
riods that begin on or after January 1, the HMO or CMP until there is a final
1996, the costs of hospital and SNF settlement with the provider for serv-
services paid by Medicare’s inter- ices furnished to Medicare beneficiaries
mediaries under the option provided by not enrolled in the HMO or CMP; and
§ 417.532(d). (ii) Prompt settlement with the HMO
(ii) The HMO’s or CMP’s methods of or CMP would be in the best interest of
apportioning cost among Medicare en- the Medicare program if, for instance,
rollees, and nonenrolled patients, in ac- the provider’s costs represent an insig-
cordance with the payment procedures nificant portion of total payment due
specified in this subpart (as, applicable, to the HMO or CMP; or if CMS is satis-
in parts 412 and 413 of this chapter); fied that the provider’s costs, as shown
and in the reports specified in paragraph (b)
(iii) Any other information required of this section, will not be modified, to
by CMS. any significant extent, by the final set-
(3) Failure to report required financial tlement with the provider under parts
information. If the HMO or CMP fails to 412 and 413 of this chapter.
submit the required cost report and (d) Notice of amount of payment. The
supporting documents within 180 days notice of amount of Medicare pay-
(or an extended period approved by ment—
CMS under paragraph (b)(1) of this sec- (1) Explains CMS’s determination re-
tion), CMS may— garding total Medicare payment due
(i) Consider the failure to report as the HMO or CMP for the contract pe-
evidence of likely overpayment; and riod covered by the financial informa-
(ii) Initiate recovery of amounts pre- tion specified in paragraph (b) of this
viously paid, or reduce interim pay- section;
ments, or both. (2) Relates this determination to the
(c) Final determination and adjustment. HMO’s or CMP’s claimed total payable
(1) After receipt of acceptable reports cost for that period;
as specified in paragraph (b) of this sec- (3) Explains the amounts and rea-
tion, CMS determines the total pay- sons, by appropriate reference to law,
ment due the HMO or CMP for fur- regulations, and Medicare program pol-
nishing covered services to its Medi- icy and procedures, if the determined
care enrollees (which is subject to the amounts differ from the HMO’s or
audit provisions of this subpart) and CMP’s claim; and
makes a retroactive adjustment to (4) Informs the HMO or CMP of its
bring interim payments into agree- right to a hearing in accordance with
ment with the payable amount due the the requirements specified in
HMO or CMP. § 405.1801(b)(2) of this chapter
(2) A final settlement may be made (e) Basis for retroactive adjustment. (1)
with the HMO or CMP even though a CMS’s determination (as contained in
provider that is not owned or operated the notice of amount of Medicare pay-
by the HMO or CMP or related to the ment) constitutes the basis for making
HMO or CMP by common ownership or retroactive adjustments to any Medi-
control and that provides services to care payment made to the HMO or
the HMO’s or CMP’s Medicare enrollees CMP during the period to which the de-
has not had a final settlement with termination applies.
CMS under parts 412 and 413 of this (2) Further payments to the HMO or
chapter for services furnished by the CMP may be withheld or offset in order
provider to Medicare beneficiaries who to recover, or to aid in the recovery of,
are not enrolled in the HMO or CMP. In any overpayment identified in the de-
this situation— termination as having been made to
(i) CMS must be satisfied that the the HMO or CMP, even if the HMO or
costs of covered services furnished to CMP requests a hearing in accordance

the HMO’s or CMP’s Medicare enroll- with the requirements specified in
ees, as shown in the reports specified in § 405.1801(b)(2) of this chapter.
297
§ 417.580 42 CFR Ch. IV (10–1–17 Edition)
(3) Any withholding continues until Class of Medicare enrollees means a

the earliest of the following occurs: group of Medicare enrollees of an HMO
(i) The overpayment is liquidated. or CMP that CMS constructs on the
(ii) The HMO or CMP enters into an basis of actuarial factors.
agreement with CMS to refund the Similar area means an area similar to
overpaid amount. the HMO’s or CMP’s geographic area
(iii) CMS, on the basis of subse- but free from special characteristics
quently acquired information, deter- that would distort the determination
mines that there was no overpayment. of the AAPCC.
(iv) The decision of a hearing speci- U.S. per capita incurred cost means the
fied in paragraph (d)(4) of this section average per capita cost, including
is that there was no overpayment. intermediary or carrier administrative
costs, incurred by Medicare, as deter-
mined on an accrual basis, for covered
FR 34833, Sept. 30, 1986; 58 FR 38082, July 15,
1993; 60 FR 34888, July 5, 1995; 60 FR 46231, services furnished to Medicare bene-
Sept. 6, 1995; 73 FR 30267, May 23, 2008] ficiaries nationwide during the most
recent period for which CMS has com-
plete data.
Subpart P—Medicare Payment:
Risk Basis [50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
1985, as amended at 58 FR 38080, July 15, 1993;
60 FR 46232, Sept. 6, 1995]
otherwise noted. § 417.584 Payment to HMOs or CMPs
with risk contracts.
Except in the circumstances specified
(a) Basis. This subpart implements in § 417.440(d) for inpatient hospital
those portions of section 1876 (a), (e), care, and as provided in § 417.585 for
and (g) of the Act that pertain to the hospice care, CMS makes payment for
amount CMS pays an organization for covered services only to the HMO or
its Medicare enrollees who are enrolled CMP.
on a risk basis.
(a) Principle of payment. CMS makes
(b) Scope. This subpart sets forth—
monthly advance payments equivalent
(1) Method of payment; to the HMO’s or CMP’s per capita rate
(2) Procedures for determining the of payment for each beneficiary who is
HMO’s or CMP’s payment rate; and registered in CMS records as a Medi-
(3) Procedures for determining the care enrollee of the HMO or CMP.
additional benefits (and their value) (b) Determination of rate. (1) The an-
the HMO or CMP must provide to its nual per capita rate of payment for
Medicare enrollees. each class of Medicare enrollees is
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, equal to 95 percent of the AAPCC (as
1985, as amended at 58 FR 38080, July 15, 1993; determined under the provisions of
60 FR 46231, Sept. 6, 1995] § 417.588) for that class of Medicare en-
rollees.
§ 417.582 Definitions. (2) CMS furnishes each HMO or CMP
As used in this subpart— with its per capita rate of payment for
AAPCC stands for adjusted average each class of Medicare enrollees not
per capita cost. later than 90 days before the beginning
ACR stands for adjusted community of the HMO’s or CMP’s contract period.
rate. (c) Adjustments to payments. If the ac-
Actuarial factors means factors such tual number of Medicare enrollees dif-
as the age, sex, and disability level dis- fers from the estimated number on
tribution of the population and any which the amount of advance monthly
other relevant factors that CMS deter- payment was based, CMS adjusts subse-
mines have a significant effect on the quent monthly payments to take ac-
level of utilization and cost of health count of the difference.
services. (d) Reduction of payments. If an HMO

APCRP stands for average of per cap- or CMP requests a reduction in its
ita rates of payment. monthly payment in accordance with
298
§ 417.592(b)(2), CMS reduces the amount § 417.588 Computation of adjusted av-

of payment by the appropriate amount. erage per capita cost (AAPCC).
(e) Determination of rate for calendar (a) Basic data. In computing the
year 1998. For calendar year 1998, HMOs AAPCC, CMS uses the U.S. per capita
or CMPs with risk contracts will be incurred cost and adjusts it by the fac-
paid in accordance with principles con- tors specified in paragraph (c) of this
tained in subpart F of part 422 of this section to establish an AAPCC for each
chapter. class of Medicare enrollees.
(b) Advance notice to the HMO or CMP.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
1985, as amended at 52 FR 8901, Mar. 20, 1987; Before the beginning of a contract pe-
58 FR 38082, July 15, 1993; 60 FR 46232, Sept. riod, CMS informs the HMO or CMP of
6, 1995; 63 FR 35067, June 26, 1998] the specific adjustment factors it will
use in computing the AAPCC.
§ 417.585 Special rules: Hospice care. (c) Adjustment factors—(1) Geographic.
CMS makes an adjustment to reflect
(a) No payment is made to an HMO or
the relative level of Medicare expendi-
CMP on behalf of a Medicare enrollee
tures for beneficiaries who reside in the
who has elected hospice care under HMO’s or CMP’s geographic area (or a
§ 418.24 of this chapter except for the similar area). This adjustment is based
portion of the payment applicable to on reimbursement for Medicare cov-
the additional benefits described in ered services and uses the most accu-
§ 417.592. This no-payment rule is effec- rate and timely data that pertain to
tive from the first day of the month the HMO’s or CMP’s geographic area
following the month of election to re- and that is available to CMS when it
ceive hospice care, until the first day makes the determination.
of the month following the month in (2) Enrollment. CMS makes a further
which the enrollee resumes normal adjustment to remove the cost effect of
Medicare coverage. all area Medicare beneficiaries who are
(b) During the time the election is in enrolled in the HMO or CMP or another
effect, the HMO or CMP may bill CMS HMO or CMP.
on a fee-for-service basis (subject to (3) Age, sex, and disability status. CMS
the usual Medicare rules of payment) makes adjustments to reflect the age
but only for the following covered and sex distribution and the disability
Medicare services: status of the HMO’s or CMP’s enrollees
(1) Services of the enrollee’s attend- based on Medicare program experience
ing physician if the physician is an em- and available data that indicate cost
ployee or contractor of the HMO or differences that result from those fac-
tors.
CMP and is not employed by or under
(4) Other relevant factors. If accurate
contract to the enrollee’s hospice.
data are available and appropriate,
(2) Services not related to the treat-
CMS makes adjustments to reflect wel-
ment of the terminal condition for fare and institutional status and other
which the enrollee elected hospice care relevant factors.
or a condition related to the terminal
condition. [50 FR 1346, Jan. 10, 1985, as amended at 58
FR 38083, July 15, 1993; 60 FR 46232, Sept. 6,
(3) Services furnished after the rev-
1995]
ocation or expiration of the enrollee’s
hospice election until the full monthly § 417.590 Computation of the average
capitation payments begin again. of the per capita rates of payment.
(c) Payment for hospice care services (a) Computation by the HMO or CMP.
furnished to Medicare enrollees of an As indicated in § 417.584(b), before an
HMO or CMP is made to the Medicare- HMO’s or CMP’s contract period be-
participating hospice elected by the en- gins, CMS determines a per capita rate
rollee. of payment for each class of the HMO’s
or CMP’s Medicare enrollees. In order

FR 38082, July 15, 1993; 60 FR 46232, Sept. 6, to determine the additional benefits re-
1995] quired under § 417.592, weighted aver-
ages of those per capita rates must be
299
§ 417.592 42 CFR Ch. IV (10–1–17 Edition)
computed separately for enrollees enti- (2) The HMO or CMP may elect to
tled to Part A and Part B, and for en- provide additional benefits in any of
rollees entitled only to Part B. Except the following forms—
as provided in paragraph (b) of this sec- (i) A reduction in the HMO’s or
tion, the HMO or CMP must make the CMP’s premium or in other charges it
computations. imposes in the form of deductibles or
(b) Computation by CMS. If the HMO coinsurance.
or CMP claims to have insufficient en- (ii) Health benefits in addition to the
rollment experience to make the com- required Part A and Part B covered
putations required by paragraph (a) of services.
this section, and CMS agrees with the (iii) A combination of reduced
claim, CMS makes the computations, charges and additional benefits.
using the best available information, (d) Notification to CMS. (1) The HMO
which may include the enrollment ex- or CMP must give CMS notice of its
perience of other risk HMOs and CMPs. ACR and its weighted APCRP at least
[58 FR 38075, July 15, 1993] 45 days before its contract period be-
gins.
§ 417.592 Additional benefits require- (2) An HMO or CMP that elects the
ment. option of providing additional benefits
(a) General rules. (1) An HMO or CMP must include in its submittal—
that has an APCRP (as determined (i) A description of the additional
under § 417.590) greater than its ACR (as benefits it will provide to its Medicare
determined under § 417.594) must elect enrollees; and
one of the options specified in para- (ii) Supporting evidence to show that
graph (b) of this section. the selected benefits meet the require-
(2) The dollar value of the elected op- ments of paragraph (a)(2) of this sec-
tion must, over the course of a con- tion with respect to dollar value
tract period, be at least equal to the equivalence.
difference between the APCRP and the [60 FR 46232, Sept. 6, 1995]
proposed ACR.
(b) Options—(1) Additional benefits. § 417.594 Computation of adjusted
Provide its Medicare enrollees with ad- community rate (ACR).
ditional benefits in accordance with
(a) Basic rule. Each HMO or CMP
paragraph (c) of this section.
must compute its basic rate as follows:
(2) Payment reduction. Request CMS
(1) Compute an initial rate in accord-
to reduce its monthly payments.
ance with paragraph (b) of this section.
(3) Combination of additional benefits
(2) Adjust and reduce the initial rate
and payment reduction. Provide fewer
in accordance with paragraphs (c) and
than the additional benefits required
(d) of this section.
under paragraph (b)(1) of this section
(b) Computation of initial rates. (1) The
and request CMS to reduce the month-
HMO or CMP must compute its initial
ly payments by the remaining dif-
rate using either of the following sys-
ference between the APCRP and the
tems:
ACR.
(i) A community rating system as de-
(4) Combination of additional benefits
fined in § 417.104(b); or
and withholding in a stabilization fund.
(ii) A system, approved by CMS,
Provide fewer than the additional ben-
under which the HMO or CMP develops
efits required under paragraph (b)(1) of
an aggregate premium for all its en-
this section, and request CMS to with-
rollees and weights the aggregate by
hold in a stabilization fund (as pro-
the size of the various enrolled groups
vided in § 417.596) the remaining dif-
that compose its enrollment.
ference between the APCRP and the
ACR. (For purposes of this section, enrolled
(c) Special rules: Additional benefits op- groups are defined as employee groups
tion. (1) The HMO or CMP must deter- or other bodies of subscribers that en-
mine additional benefits separately for roll in the HMO or CMP through pay-
enrollees entitled to both Part A and ment of premiums.)

Part B benefits and those entitled only (2) Regardless of which method the
to Part B. HMO or CMP uses—
300
(i) The initial rate must be equal to tion to assure CMS that rates do not
the premium it would charge its non- include past losses but only premiums
Medicare enrollees for the Medicare- for the price of additional benefits and
covered services; services of the upcoming contract pe-
(ii) The HMO or CMP must compute riod.
the rates separately for enrollees enti- (c) Adjustment of initial rates—(1) Pur-
tled to Medicare Part A and Part B and pose of adjustment. The purpose of ad-
for those entitled only to Part B; and justment is to reflect the utilization
(iii) The HMO or CMP must identify characteristics of Medicare enrollees.
and take into account anticipated rev- (2) Adjustment by the HMO or CMP.
enue from health insurance payers for The HMO or CMP may adjust the rate
those services for which Medicare is for a particular service using more
not the primary payer as provided in than one of the following factors if
§ 417.528. they do not duplicate each other:
(3) Except as provided in paragraph (i) Unit of service. If the HMO or CMP
(b)(4) of this section, the HMO or CMP purchases or identifies services on a
must identify in its initial rate cal- unit of service basis and the unit of
culation, the following components service is defined the same for all en-
whose rates must be consistent with rollees, the HMO or CMP may make an
rates used by the HMO or CMP in cal- adjustment in its initial rate to reflect
culating premiums for non-Medicare
the number of units of services fur-
enrollees:
nished to its Medicare enrollees in
(i) Hospital services (services covered
comparison to those furnished to other
under Medicare Part A and Part B
enrollees.
shown separately).
(ii) Physicians’ services. (ii) Complexity or intensity of services.
(iii) Other medical services (for ex- The HMO or CMP may make an adjust-
ample, X-ray and laboratory services). ment to reflect the differences in the
(iv) Home health services. complexity or intensity of services fur-
(v) Out-of-plan claims for emergency nished to its Medicare enrollees if the
services. calculation of its initial rate includes
(vi) Skilled nursing care services. the elements of this adjustment.
(vii) Ambulance services. (3) Support documentation. All adjust-
(viii) Other Medicare covered serv- ments made by the HMO or CMP must
ices. be accompanied by adequate sup-
(ix) General and administrative. porting data. If an HMO or CMP does
(x) Noncovered Medicare services (for not have sufficient enrollment experi-
example, eyeglasses). ence to develop this data, it may, dur-
(xi) Services for which Medicare is ing its initial contract period, use doc-
the secondary payer. umented statistics from a nationally
(xii) Enrollee liabilities (for example, recognized statistical source.
deductibles, coinsurance, or copay- (4) Adjustment by CMS. If the HMO or
ments) for covered services. CMP does not have adequate data to
(4) An HMO or CMP that does not adjust the initial rate calculated under
usually separate its premium compo- paragraph (b) of this section to reflect
nents as described in paragraph (b)(3) the utilization characteristics of its
of this section may calculate its initial Medicare enrollees, CMS will, at the
rate with the methods it uses for its HMO’s or CMP’s request, adjust the
other enrolled groups if the HMO or initial rate. CMS adjusts the rate on
CMP provides CMS with the docu- the basis of differences in the utiliza-
mentation necessary to support any tion characteristics of—
adjustments the HMO or CMP makes (i) Medicare and non-Medicare enroll-
to the initial rate in accordance with ees in other HMOs or CMPs; or
paragraph (e) of this section. (ii) Medicare beneficiaries (in the
(5) The initial rate calculation must HMO’s or CMP’s area, or State, or the
not carry forward any losses experi- United States) who are eligible to en-
enced by the HMO or CMP during prior roll in an HMO or CMP and other indi-
contract periods. The HMO or CMP viduals in that same area, or State, or
must submit supporting documenta- the United States.
301
§ 417.596 42 CFR Ch. IV (10–1–17 Edition)
(d) Reduction of adjusted rates. The (2) Cumulative limit. If CMS has estab-
HMO or CMP or CMS further reduces lished a benefit stabilization fund for
the adjusted rates by the actuarial an HMO or CMP, it does not approve a
value of applicable Medicare request for withholding made by that
deductibles and coinsurance. HMO or CMP for a subsequent contract
(e) CMS review—(1) Submission of data. period that would cause the total value
The HMO or CMP must submit its ACR of the benefit stabilization fund to ex-
and the methodology used to compute ceed 25 percent of the difference be-
it for CMS review and approval, and tween the HMO’s or CMP’s ACR and
must include adequate supporting data. the average of its per capita rates of
(2) Appeals procedures. (i) If CMS de- payment for that subsequent contract
termines that an HMO’s or CMP’s ACR period.
computation is not acceptable, the (3) Exception. CMS may grant an ex-
HMO or CMP may, within 30 days after ception to the limit described in para-
receipt of notice of the determination, graph (c)(1) of this section if an HMO or
file with CMS a request for a hearing. CMP can demonstrate to CMS’s satis-
(ii) The request must state why the faction that the value of the additional
HMO or CMP believes the determina- benefits it provides to its Medicare en-
tion is incorrect, and include any sup- rollees fluctuates substantially in ex-
porting evidence the HMO or CMP con- cess of 15 percent from one contract pe-
siders pertinent. riod to another.
(iii) A hearing officer designated by (d) Financial management of benefit
CMS conducts the hearing in accord- stabilization funds. (1) The amounts
ance with the hearing procedures set withheld by CMS to establish and
forth in §§ 405.1819 through 405.1833 of maintain a benefit stabilization fund
this chapter. are in the custody of the Federal
Health Insurance Trust Fund and the
[50 FR 1346, Jan. 10, 1985, as amended at 58 Federal Supplementary Medical Insur-
FR 38080, July 15, 1993; 60 FR 46232, Sept. 6, ance Trust Fund.
1995] (2) The amounts withheld in a benefit
stabilization fund are accounted for by
§ 417.596 Establishment of a benefit CMS in accounts in which interest does
stabilization fund.
not accrue to the HMO or CMP.
(a) General. If an HMO or CMP is re-
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17,
quired to provide its Medicare enroll- 1985, as amended by 56 FR 46571, Sept. 13,
ees with additional benefits as de- 1991; 58 FR 38083, July 15, 1993; 60 FR 46233,
scribed in § 417.592, the organization Sept. 6, 1995]
may request that CMS withhold a part
of its monthly per capita payment in a § 417.597 Withdrawal from a benefit
benefit stabilization fund. The fund stabilization fund.
will be used to prevent excessive fluc- (a) Notification to CMS. An HMO’s or
tuation in the provision of those addi- CMP’s request to make a withdrawal
tional benefits in subsequent contract from its benefit stabilization fund for
periods. use during a contract period must be
(b) Notification to CMS. An HMO’s or made when the HMO or CMP notifies
CMP’s request to have monies withheld CMS of its ACR and its ACPRP for that
in a benefit stabilization fund must be contract period. In making its request,
made when the HMO or CMP notifies the HMO or CMP must—
CMS under § 417.592(d) of its ACR and (1) Indicate how it intends to use the
its APCRP in preparation for its next withdrawn amounts;
contract period. (2) Justify the need for the with-
(c) Limitations on the amounts withdrawal in terms of stabilizing the addi-
held—(1) Limit per contract period. Ex- tional benefits it provides to Medicare
cept as provided in paragraph (c)(3) of enrollees;
this section, CMS does not withhold in (3) Document the HMO’s or CMP’s ex-
a benefit stabilization fund more than perience with fluctuations of revenue
15 percent of the difference between an requirements relative to the additional

HMO’s or CMP’s ACR and its ACPRP benefits it provides to Medicare enroll-
for a given contract period. ees; and
302
(4) Document its experience during not exceed or fall short of the appro-
the contract period previous to the one priate per capita rate of payment for
for which it requests withdrawal to en- each Medicare enrollee of the HMO or
sure that the HMO or CMP will not be CMP during the contract period. The
using the withdrawn amounts to refi- HMO or CMP must submit any infor-
nance losses suffered during that pre- mation or reports required by CMS to
vious contract period. conduct the reconciliation.
(b) Criteria for CMS approval. CMS ap-
proves a request for a withdrawal from FR 38080, July 15, 1993; 60 FR 46233, Sept. 6,
a benefit stabilization fund for use dur- 1995]
ing the next contract period only if—
(1) The HMO’s or CMP’s average of
its per capita rates of payment for the
Subpart Q—Beneficiary Appeals
next contract period is less than that § 417.600 Basis and scope.
of the previous contract period;
(2) The HMO’s or CMP’s ACR for the (a) Statutory basis. (1) Section 1869 of
next contract period is significantly the Act provides the right to a redeter-
higher than that of the previous con- mination, reconsideration, hearing,
tract period; or and judicial review for individuals dis-
(3) The HMO’s or CMP’s revenue re- satisfied with a determination regard-
quirements for the next contract pe- ing their Medicare benefits.
riod for providing the additional bene- (2) Section 1876 of the Act provides
fits it provided during the previous for Medicare payments to HMOs and
contract period is significantly higher CMPs that contract with CMS to enroll
than the requirements for that pre- Medicare beneficiaries and furnish
vious period and the ACR for the next Medicare-covered health care services
contract period results in an additional to them.
(3) Section 234 of the MMA requires
benefits package that is less in total
section 1876 contractors to operate
value than that of the previous con-
under the same provisions as MA plans
tract period.
(c) Basis for denial. CMS does not ap- where two plans of the same type enter
prove a request for a withdrawal from the cost plan contract’s service area.
(b) Applicability. (1) The rights, proce-
a benefit stabilization fund if the with-
dures, and requirements relating to
drawal would allow the HMO or CMP
beneficiary appeals and grievances set
to—
(1) Offer without charge the supple- forth in subpart M of part 422 of this
mental services it provides to its Medi- chapter also apply to Medicare con-
care enrollees under the provisions of tracts with HMOs and CMPs under sec-
§ 417.440 (b)(2) or (b)(3); or tion 1876 of the Act.
(2) Refinance prior contract period (2) In applying those provisions, ref-
losses or to avoid losses in the upcom- erences to section 1852 of the Act must
ing contract period. be read as references to section 1876 of
(d) Form of payment. Payment of mon- the Act, and references to MA organi-
ies withdrawn from a benefit stabiliza- zations as references to HMOs and
tion fund is made, in equal parts, as an CMPs.
additional amount to the monthly ad- [60 FR 46233, Sept. 6, 1995, as amended at 62
vance payment made to the HMO or FR 23374, Apr. 30, 1997; 70 FR 4713, Jan. 28,
CMP under § 417.584 during the period of 2005]
the contract.
Subpart R—Medicare Contract
FR 46233, Sept. 6, 1995] Appeals
§ 417.598 Annual enrollment reconcili- SOURCE: 50 FR 1346, Jan. 10, 1985, unless
ation. otherwise noted.
CMS’s payment to an HMO or CMP
may be subject to an enrollment rec- § 417.640 Applicability.
onciliation at least annually. CMS con- (a) The rights, procedures, and re-
ducts this reconciliation as necessary quirements relating to contract deter-
to ensure that the payments made do minations and appeals set forth in part
303
§ 417.800 42 CFR Ch. IV (10–1–17 Edition)
422 subpart N of this chapter also apply (b) Qualifying conditions. (1) Except as
to Medicare contracts with HMOs or provided in paragraph (b)(2) of this sec-
CMPs under section 1876 of the Act. tion, an organization wishing to par-
(b) In applying paragraph (a) of this ticipate as an HCPP must—
section, references to part 422 of this (i) Enter into a written agreement
chapter must be read as references to with CMS as specified in § 417.801;
this part and references to MA organi- (ii) Furnish physicians’ services
zations must be read as references to through its employees or under a for-
HMOs or CMPs. mal arrangement with a medical group,
independent practice association or in-
[75 FR 19803, Apr. 15, 2010]
dividual physicians; and
(iii) Furnish covered Part B services
Subparts S–T [Reserved] to its Medicare enrollees through insti-
tutions, entities, and persons that have
Subpart U—Health Care qualified under the applicable require-
Prepayment Plans ments of title XVIII of the Social Secu-
rity Act and section 353 of the PHS
Act.
otherwise noted. (2) An organization that, as of Janu-
ary 31, 1983, was being reimbursed on a
§ 417.800 Payment to HCPPs: Defini- reasonable cost basis under section
tions and basic rules. 1833(a)(1)(A) of the Act, and that would
not otherwise meet the conditions
(a) Definitions. As used in this sub-
specified in paragraph (b)(1) of this sec-
part, unless the context indicates oth-
tion, may receive reimbursement on a
erwise—
reasonable cost basis as an HCPP, pro-
Covered Part B services means physi- vided it files an agreement with CMS
cians’ services, diagnostic X-ray tests, as required by § 417.801.
laboratory, other diagnostic tests, and (c) Payment of reasonable cost. (1) Ex-
any additional medical and other cept as otherwise provided in this sub-
health services, that the HCPP fur- part, CMS pays an HCPP on the basis
nishes to its Medicare enrollees. of the reasonable cost it incurs, as
Health care prepayment plan (HCPP) specified in subpart O of this part, for
means an organization that meets the the covered Part B services furnished
following conditions: to its Medicare enrollees.
(1) Effective January 1, 1999, (or on (2) Payment for Part B services: Basic
the effective date of the HCPP agree- rules—(i) Cost basis payment. Except as
ment in the case of a 1998 applicant) ei- provided in paragraph (d) of this sec-
ther— tion, CMS pays an HCPP on the basis
(A) Is union or employer sponsored; of the reasonable costs it incurs, as
or specified in subpart O of this part, for
(B) Does not provide, or arrange for the covered Part B services furnished
the provision of, any inpatient hospital to its Medicare enrollees.
services. (ii) Deductions. In determining the
(2) Is responsible for the organiza- amount due an HCPP for covered Part
tion, financing, and delivery of covered B services furnished to its Medicare en-
Part B services to a defined population rollees, CMS deducts, from the reason-
on a prepayment basis. able cost actually incurred by the
(3) Meets the conditions specified in HCPP, the following:
paragraph (b) of this section. (A) The actuarial value of the Part B
(4) Elects to be reimbursed on a rea- deductible.
sonable cost basis. (B) An amount equal to 20 percent of
Medicare enrollee means a beneficiary the cost incurred for any service that
under Part B of Medicare who has been is subject to the Medicare coinsurance.
identified on CMS records as an en- (d) Covered services not reimbursed to
rollee of the HCPP. Reporting period an HCPP. (1) Services reimbursed under
means the period specified by CMS for Part A are not reimbursable to an
which an HCPP must report its costs HCPP. CMS makes payment for these
and utilization. services directly to the hospital, or
304
other provider of services, on a reason- (3) Refund, as promptly as possible,

able cost basis through the provider’s any money incorrectly collected as
Medicare fiscal intermediary (for more charges or premiums, or in any other
details, see parts 412 and 413 of this way from Medicare enrollees in the
chapter). HCPP in accordance with the require-
(2) Covered Part B services furnished ments specified in § 417.456;
by a provider of services to an HCPP’s (4) Not impose any limitations on the
Medicare enrollees are not payable to acceptance of Medicare enrollees or
the HCPP. CMS makes payment for beneficiaries for care and treatment
these services to the provider on behalf that it does not impose on all other in-
of the Medicare enrollee through the dividuals;
provider’s Medicare fiscal inter- (5) Meet the advance directives re-
mediary. This requirement does not af- quirements specified in § 417.436(d) of
fect Medicare payment to the HCPP for this part;
physicians’ services furnished to its (6) Establish administrative review
Medicare enrollees for which the physi- procedures in accordance with §§ 417.830
cians are compensated by the HCPP. through 417.840 for Medicare enrollees
(e) Payment for services to nonenrollees. who are dissatisfied with denied serv-
CMS makes payment to an HCPP for ices or claims; and
covered Part B services furnished by (7) Consider any additional require-
the HCPP to a Medicare beneficiary ments that CMS finds necessary or de-
who is not enrolled in the HCPP if the sirable for efficient and effective pro-
beneficiary assigns his rights to pay- gram administration.
ment in accordance with § 424.55 of this (c) Duration of agreement. Except for
chapter. Payment is made on a reason- the term of the initial agreement, the
able charge basis through the HCPP’s agreement is for a term of one year and
Medicare carrier. may be renewed annually by mutual
consent. The term of the initial agree-
FR 34833, Sept. 30, 1986; 53 FR 6648, Mar. 2, ment is set by CMS.
1988; 57 FR 7135, Feb. 28, 1992; 58 FR 38081, (d) Termination or nonrenewal of agree-
July 15, 1993; 60 FR 34888, July 5, 1995; 63 FR ment by CMS. (1) CMS may terminate
35067, June 26, 1998; 63 FR 52611, Oct. 1, 1998] or not renew an agreement if it deter-
mines that—
§ 417.801 Agreements between CMS (i) The HCPP no longer meets the re-
and health care prepayment plans. quirements for participation and reim-
(a) General requirement. (1) In order to bursement as an HCPP as specified in
participate and receive payment under § 417.800;
the Medicare program as an HCPP as (ii) The HCPP is not in substantial
defined in § 417.800, an organization compliance with the provisions of the
must enter into a written agreement agreement, applicable CMS regula-
with CMS. tions, or applicable provisions of the
(2) An existing group practice prepay- Medicare law. This includes, but is not
ment plan (GPPP) that continues as an limited to, the following:
HCPP under this subpart U must have (A) Failure to provide for and docu-
entered into a written agreement with ment adequate access to providers.
CMS within 60 days of January 31, 1983. (B) Failure to comply with CMS re-
(b) Terms. The agreement must pro- quirements concerning provision of
vide that the HCPP agrees to— data and maintenance of records.
(1) Maintain compliance with the re- (C) Failure to comply with financial
quirements for participation and reim- requirements specified at § 417.806; or
bursement on a reasonable cost basis of (iii) The HCPP undergoes a change in
HCPPs as specified in § 417.800; ownership as specified in subpart M of
(2) Not charge the Medicare enrollee this part.
or any other person for items or serv- (2) CMS will give notice of termi-
ices for which that enrollee is entitled nation or nonrenewal to the HCPP at
to have payment made under the provi- least 90 days before the effective date
sions of this part, except for any de- stated in the notice.
ductible or coinsurance amounts for (e) Termination or nonrenewal of agree-
which the enrollee is liable; ment by HCPP. (1) If an HCPP does not
305
§ 417.802 42 CFR Ch. IV (10–1–17 Edition)
wish to renew its agreement at the end (ii)(A) If a physician group to whom
of the term, it must give written notice the HCPP makes payment compensates
to CMS at least 90 days before the end its physicians on a fee-for-service
of the term of the agreement. If an basis, the HCPP’s payment to the
HCPP wishes to terminate its agree- group may not exceed the reasonable
ment before the end of the term, it charges for those services, as defined in
must file a written notice with CMS subpart E of part 405 of this chapter.
stating the intended effective date of (B) Payment in excess of the limits
termination. specified in paragraph (b)(2)(ii)(A) of
(2) CMS may approve the termination this section is allowable if the group
date proposed by the HCPP, or set a has procedures under which members
different date no later than 6 months of the group accept effective incen-
after that date. CMS makes this deci- tives, such as risk-sharing, designed to
sion based on a finding that termi- avoid unnecessary or unduly costly uti-
nation on a specific date would not— lization of health services. In such
(i) Unduly disrupt the furnishing of cases, the amount paid by the HCPP is
services to the community serviced by considered reasonable if it meets the
the HCPP; or conditions specified in paragraph
(ii) Otherwise interfere with the effi- (b)(2)(i) of this section.
cient administration of the Medicare (3) Application: Payment on a fee-for-
program. service basis. If the HCPP pays for phy-
sicians’ services and other Part B sup-
[50 FR 1375, Jan. 10, 1985, as amended at 57 plier services on a fee-for-service
FR 8202, Mar. 6, 1992; 58 FR 38081, July 15,
1993; 59 FR 49843, Sept. 30, 1994; 59 FR 59943,
basis—
Nov. 21, 1994; 77 FR 22166, Apr. 12, 2012] (i) Except as specified in paragraph
(b)(3)(ii) of this section, the costs in-
§ 417.802 Allowable costs. curred by the HCPP are considered rea-
(a) General rule. The costs that are sonable if they do not exceed—
considered allowable for HCPP reim- (A) The reasonable charges for those
bursement are the same as those for services, as defined in subpart E of part
reasonable cost HMOs and CMPs speci- 405 of this chapter; and
fied in subpart O of this part, except (B) The amount that CMS would pay
those in §§ 417.531, 417.532 (a)(3) and (c) for those services if they were fur-
through (g), 417.536 (l) and (m), 417.546, nished to beneficiaries who are not en-
417.548, and 417.550(b)(2). rolled in the HCPP and who receive the
(b) Physicians’ services and other Part services from sources other than pro-
B supplier services furnished under ar- viders of services or other entities that
rangements—(1) Principle. The amount are reimbursed on a reasonable cost
paid by an HCPP for physicians’ serv- basis.
ices and other Part B supplier services (ii) Payment to a physician group or-
furnished under arrangements is an al- ganized on an individual-practice basis
lowable cost to the extent it is reason- is not subject to the paragraph (b)(3)(i)
able. of this section if the group pays its
(2) Application: Payment on other than physicians on a fee-for-service basis
a fee-for-service basis. If the HCPP pays and has procedures under which the
for physicians’ services and other Part members of the group accept effective
B supplier services on other than a fee- incentives, such as risk-sharing, de-
for-service basis— signed to avoid unnecessary or unduly
(i) Except as specified in paragraph costly utilization of health services. In
(b)(2)(ii) of this section, the costs in- these cases, the amount paid by an
curred by the HCPP may be considered HCPP is considered reasonable if it
reasonable if they— meets the conditions specified in para-
(A) Do not exceed those that a pru- graph (b)(2)(i) of this section.
dent and cost-conscious buyer would [50 FR 1375, Jan. 10, 1985, as amended at 58
incur to purchase those services; and FR 38081, July 15, 1993]
(B) Are comparable to costs incurred
for similar services furnished by simi- § 417.804 Cost apportionment.

lar physicians and other suppliers in (a) The HCPP follows the cost appor-
the same or a similar locality. tionment principles specified in
306
§§ 417.552 through 417.566, except for pro- (c) An HCPP must submit to CMS an
visions on provider costs and provi- interim cost report and enrollment
sions on departmental apportionment. data applicable to the first 6-month pe-
(b) The HCPP may use a method for riod of the HCPP’s reporting period in
reporting costs that is approved by the form and detail specified by CMS.
CMS. CMS bases its approval on a find- The interim cost report must be sub-
ing that the method— mitted not later than 45 days after the
(1) Results in an accurate and equi- close of the first 6-month period of the
table allocation of allowable costs; and HCPP’s reporting period.
(2) Is justifiable from an administra- (d) In lieu of an interim payment
tive and cost efficiency standpoint. based on the actual monthly enroll-
§ 417.806 Financial records, statistical ment in an HCPP, CMS and the HCPP
data, and cost finding. may agree to a uniform monthly in-
terim reimbursement rate for a report-
(a) The principles specified in § 417.568 ing period. This interim rate is based
apply to HCPPs, except those in para-
on the HCPP’s budget and enrollment
graph (c) of that section.
forecast, if CMS is satisfied that the
(b) The HCPP may use a method for
rate is consistent with efficiency and
reporting costs that is approved by
CMS. CMS bases its approval on a find- economy, and will not result in exces-
ing that the method— sive adjustment at the end of the re-
(1) Results in an accurate and equi- porting period.
table allocation of allowable costs; and
§ 417.810 Final settlement.
(2) Is justifiable from an administra-
tive and cost efficiency standpoint. (a) General requirement. CMS and an
(c) An HCPP must permit the Depart- HCPP must make a final settlement,
ment and the Comptroller General to and payment of amounts due either to
audit or inspect any books and records the HCPP or to CMS, following the
of the HCPP and of any related organi- submission and review of the HCPP’s
zation that pertain to the determina- annual cost report and the supporting
tion of amounts payable for covered documents specified in paragraph (b) of
Part B services furnished its Medicare this section.
enrollees. For purposes of this require- (b) Annual cost report as basis for final
ment, the principles specified in settlement—(1) Form and due date. An
§ 417.486 apply to HCPPs. HCPP must submit to CMS a cost re-
[50 FR 1375, Jan. 10, 1985, as amended at 58 port and supporting documents in the
FR 38081, July 15, 1993] form and detail specified by CMS, no
later than 120 days following the close
§ 417.808 Interim per capita payments. of a reporting period.
The HCPP follows the principles (2) Contents. The report must in-
specified in §§ 417.570 and 417.572 on include—
terim per capita payments, except for (i) The HCPP’s per capita incurred
the following: costs of providing covered Part B serv-
(a) When applying these principles to ices to its Medicare enrollees during
HCPPs, the term ‘‘reporting period’’ the reporting period, including any
should be used instead of the term costs incurred by another organization
‘‘contract period’’ contained in that related to the HCPP by common own-
section. ership or control;
(b) An HCPP must submit to CMS an
(ii) The HCPP’s methods of appor-
annual operating budget and enroll-
tioning costs among its Medicare en-
ment forecast, in the form and detail
rollees, enrollees who are not Medicare
specified by CMS, at least 60 days be-
fore the beginning of each reporting pe- beneficiaries, and other nonenrollees,
riod. A reporting period must be 12 con- including Medicare beneficiaries re-
secutive months, except that the ceiving health care services on a fee-
HCPP’s initial reporting period for par- for-service or other basis; and
ticipating in Medicare may be as short (iii) Information on enrollment and
as 6 months or as long as 18 months. other data as specified by CMS.
307
§ 417.830 42 CFR Ch. IV (10–1–17 Edition)
(3) Extension of time to submit cost re- (e) Tentative settlement. (1) If a final
port. CMS may grant an HCPP an ex- settlement cannot be made within 90
tension of time to submit a cost report days after the HCPP submits the re-
for good cause shown. port specified in paragraph (b) of this
(4) Failure to report required financial section, CMS will make an interim set-
information. If an HCPP does not sub- tlement by estimating the amount pay-
mit the required cost report and sup- able to the HCPP.
porting documents within the time (2) CMS or the HCPP will make pay-
specified in paragraph (b)(1) of this sec- ment within 30 days of CMS’s deter-
tion, and has not requested and re- mination under the tentative settle-
ceived an extension of time for good ment of any estimated amounts due.
cause shown, CMS may— (3) The tentative settlement is sub-
(i) Regard the failure to report this ject to adjustment at the time of a
information as evidence of likely over- final settlement.
payment and reduce or suspend interim
payments to the HCPP; and [50 FR 1375, Jan. 10, 1985, as amended at 58
(ii) Determine that amounts pre- FR 38081, July 15, 1993; 73 FR 30267, May 23,
viously paid are overpayments, and 2008]
make appropriate recovery.
§ 417.830 Scope of regulations on bene-
(c) Determination of final settlement. ficiary appeals.
Following the HCPP’s submission of
the reports specified in paragraph (b) of Sections 417.832 through 417.840 estab-
this section in acceptable form, CMS lish procedures for the presentation
makes a determination of the total re- and resolution of organization deter-
imbursement due the HCPP for the re- minations, reconsiderations, hearings,
porting period and the difference, if Departmental Appeals Board review,
any, between this amount and the total court reviews, and finality of decisions
interim payments made to the HCPP. that are applicable to Medicare enroll-
CMS sends to the HCPP a notice of the ees of an HCPP.
amount of reimbursement by the Medi-
care program. This notice—
FR 32348, June 24, 1996]
(1) Explains CMS’s determination of
total reimbursement due the HCPP for § 417.832 Applicability of requirements
the reporting period; and and procedures.
(2) Informs the HCPP of its right to
(a) The administrative review rights
have the determination reviewed at a
hearing in accordance with the require- and procedures specified in §§ 417.834
ments specified in § 405.1801(b)(2) of this through 417.840 pertain to disputes in-
chapter. volving an organization determination,
(d) Payment of amounts due. (1) Within as defined in § 417.838, with which the
30 days of CMS’s determination, CMS enrollee is dissatisfied.
or the HCPP, as appropriate, will make (b) Physicians and other individuals
payment of any difference between the who furnish items or services under ar-
total amount due and the total interim rangements with an HCPP have no
payments made to the HCPP by CMS. right of administrative review under
(2) If the HCPP does not pay CMS §§ 417.834 through 417.840.
within 30 days of CMS’s determination (c) The provisions of part 405 dealing
of any amounts the HCPP owes CMS, with the representation of parties
CMS may offset further payments to apply to organization determinations
the HCPP to recover, or to aid in the and appeals.
recovery of, any overpayment identi- (d) The provisions of part 405 dealing
fied in its determination. with administrative law judge hear-
(3) Any offset of payments CMS ings, Medicare Appeals Council review,
makes under paragraph (d)(2) of this and judicial review are applicable, un-
section will remain in effect even if the less otherwise provided.
HCPP has requested a hearing in ac-

cordance with the requirements speci- [59 FR 59943, Nov. 21, 1994, as amended at 70
fied in § 405.1801(b)(2) of this chapter. FR 4713, Jan. 28, 2005]
308
§ 417.834 Responsibility for estab- Subpart V—Administration of Out-

lishing administrative review pro- standing Loans and Loan
cedures.
Guarantees
The HCPP is responsible for estab-
lishing and maintaining the adminis- § 417.910 Applicability.
trative review procedures that are The regulations in this subpart
specified in §§ 417.830 through 417.840. apply, as appropriate, to public and pri-
[59 FR 59943, Nov. 21, 1994] vate entities that have loans or loan
guarantees that—
§ 417.836 Written description of admin- (a) Were awarded to them before Oc-
istrative review procedures. tober 1986 under section 1304 or section
1305 of the PHS Act; and
Each HCPP is responsible for ensur-
(b) Are still outstanding.
ing that all Medicare enrollees are in-
formed in writing of the administrative [59 FR 49842, Sept. 30, 1994]
review procedures that are available to
them. § 417.911 Definitions.
As used in this subpart—
[59 FR 59943, Nov. 21, 1994]
Any 12-month period means the 12-
§ 417.838 Organization determinations. month period beginning on the first
day of any month.
(a) Actions that are organization deter- Expansion of services means—
minations. For purposes of §§ 417.830 (1) The addition of any health service
through 417.840, an organization deter- not previously provided by or through
mination is a refusal to furnish or ar- the HMO, that requires an increase in
range for services, or reimburse the the facilities, equipment, or health
party for services provided to the bene- professionals of the HMO; or
ficiary, on the grounds that the serv- (2) The improvement or upgrading of
ices are not covered by Medicare. existing facilities or equipment, or an
(b) Actions that are not organization increase in the number of categories of
determinations. The following are not health professionals, of the HMO so
organization determinations for pur- that the HMO could provide directly
poses of §§ 417.830 through 417.840: services that it previously provided
(1) A determination regarding serv- through contract or referral or which
ices that were furnished by the HCPP, it could not previously provide with its
either directly or under arrangement, existing facilities or equipment.
for which the enrollee has no further First 60 months of operation or expan-
obligation for payment. sion means the 60-month period begin-
(2) A determination regarding serv- ning on the first day of the month dur-
ices that are not covered under the ing which the HMO first provided serv-
HCPP’s agreement with CMS. ices to enrollees, or in the case of sig-
nificant expansion, first provided serv-
[59 FR 59943, Nov. 21, 1994] ices in accordance with its expansion
plan.
§ 417.840 Administrative review proce- Health system agency means an entity
dures. that has been designated in accordance
The HCPP must apply § 422.568 with section 1515 of the PHS Act; and
through § 422.626 of this chapter to— the term State health planning and de-
(a) Organization determinations and velopment agency means an agency that
fast-track appeals that affect its Medi- has been designated in accordance with
care enrollees; and section 1521 of the PHS Act.
(b) Reconsiderations, hearings, Medi- Initial costs of operation means any
care Appeals Council review, and judi- cost incurred in the first 60 months of
an operation or expansion that met
cial review of the organization deter-
any of the following requirements:
minations and fast-track appeals speci-

(1) Under generally accepted account-
fied in paragraph (a) of this section.
ing principles or under accounting
[75 FR 19803, Apr. 15, 2010] practices prescribed or permitted by
309
§ 417.920 42 CFR Ch. IV (10–1–17 Edition)
State regulatory authority, was not a § 417.920 Planning and initial develop-
capital cost. ment.
(2) Was required by State regulatory (a) Under section 1304 of the PHS
authority to meet reserves or tangible Act, grants and loan guarantees were
net equity requirements. awarded for projects for planning and
(3) Was for a payment made to reduce initial development of HMOs.
balance sheet liabilities existing at the (b) Planning projects included
beginning of the 60-month period, but projects for any of the following:
only if— (1) Establishment of an HMO.
(i) The payment had been approved in (2) Significant expansion of the
writing by the Secretary; and HMO’s enrollment or geographic area.
(ii) The total of these payments did (c) Initial development projects in-
not exceed 20 percent of the amount of cluded projects for any of the fol-
the loan. lowing:
(4) Was for a small capital expendi- (1) Establishment of an HMO.
ture, but only if— (2) Significant expansion of the
(i) The cost had been approved in HMO’s enrollment or geographic area.
writing by the Secretary; and (3) Expansion of the range or amount
(ii) The total of these costs did not of services furnished by the HMO.
exceed $200,000 in any 12-month period,
[58 FR 38076, July 15, 1993]
and $400,000 during the first 60 months
of operation or expansion. § 417.930 Initial costs of operation.
Nonprofit as applied to a private enti-
ty, means a private agency, institu- Under section 1305 of the PHS, loans
tion, or organization, no part of the net and loan guarantees were awarded for
earnings of which inures, or may law- initial costs of operation of HMOs.
fully inure, to the benefit of any pri- [58 FR 38077, July 15, 1993]
vate shareholder or individual.
Significant expansion means— § 417.931 [Reserved]
(1) A planned substantial increase in
the enrollment of the HMO, that re- § 417.934 Reserve requirement.
quires an increase in the number of (a) Timing. Unless the Secretary ap-
health professionals serving enrollees proved a longer period, an entity that
of the HMO or an expansion of the received a loan or loan guarantee under
physical capacity of the HMO’s total section 1305 of the PHS Act was re-
health facilities; or quired to establish a restricted reserve
(2) A planned expansion of the service account on the earlier of the following:
area beyond the current service area, (1) When the HMO’s revenues and
that would be made possible by the ad- costs of operation reached the break-
dition of health service delivery facili- even point.
ties and health professionals to serve (2) At the end of the 60-month period
enrollees at a new site or sites in areas following the Secretary’s endorsement
previously without service sites. of the loan or loan guarantee.
Small capital expenditure means ex- (b) Purpose and amount of reserve. The
penditures for— reserve had to be constituted so as to
(1) Equipment as defined in 45 CFR accumulate, no later than 12 years
75.2; or after endorsement of the loan or loan
(2) Alterations and renovations re- guarantee, an amount equal to 1 year’s
quired to change the interior arrange- principal and interest.
ments or other physical characteristics [59 FR 49842, Sept. 30, 1994]
of an existing facility or installed
equipment, so that it may be more ef- § 417.937 Loan and loan guarantee pro-
fectively used for its currently des- visions.
ignated purpose, or adapted to a (a) Disbursement of loan proceeds. The
changed use. principal amount of any loan made or
[58 FR 38076, July 15, 1993, as amended at 59 guaranteed by the Secretary under this
FR 49842, Sept. 30, 1994; 81 FR 3011, Jan. 20, subpart was disbursed to the entity in
2016] accordance with an agreement entered
310
into between the parties to the loan 418.2 Scope of part.

and approved by the Secretary. 418.3 Definitions.
(b) Length and maturity of loans. The
principal amount of each loan or loan Subpart B—Eligibility, Election and Duration
guarantee, together with interest of Benefits
thereon, is repayable over a period of 22 418.20 Eligibility requirements.
years, beginning on the date of en- 418.21 Duration of hospice care coverage—
dorsement of the loan, or loan guar- Election periods.
antee by the Secretary. The Secretary 418.22 Certification of terminal illness.
could approve a shorter repayment pe- 418.24 Election of hospice care.
riod if he or she determined that a re- 418.25 Admission to hospice care.
payment period of less than 22 years is 418.26 Discharge from hospice care.
418.28 Revoking the election of hospice care.
more appropriate to an entity’s total
418.30 Change of the designated hospice.
financial plan.
(c) Repayment. The principal amount Subpart C—Conditions of Participation:
of each loan or loan guarantee, to- Patient Care
gether with interest thereon is repay-
able in accordance with a repayment 418.52 Condition of participation: Patient’s
schedule that is agreed upon by the rights.
parties to the loan or loan guarantee 418.54 Condition of participation: Initial and
and approved by the Secretary before comprehensive assessment of the patient.
418.56 Condition of participation: Inter-
or at the time of endorsement of the disciplinary group, care planning, and co-
loan. Unless otherwise specifically au- ordination of services.
thorized by the Secretary, each loan 418.58 Condition of participation: Quality
made or guaranteed by the Secretary is assessment and performance improve-
repayable in substantially level comment.
bined installments of principal and in- 418.60 Condition of participation: Infection
terest to be paid at intervals not less control.
frequently than annually, sufficient in 418.62 Condition of participation: Licensed
amount to amortize the loan through professional services.
the final year of the life of the loan. CORE SERVICES
Principal repayment during the first 60
418.64 Condition of participation: Core serv-
months of operation could be deferred
ices.
with payment of interest only during 418.66 Condition of participation: Nursing
that period. The Secretary could set services waiver of requirement that sub-
rates of interest for each disbursement stantially all nursing services be rou-
at a rate comparable to the rate of in- tinely provided directly by a hospice.
terest prevailing on the date of dis-
NON-CORE SERVICES
bursement for marketable obligations
of the United States of comparable ma- 418.70 Condition of participation: Fur-
turities, adjusted to provide for appro- nishing of non-core services.
priate administrative charges. 418.72 Condition of participation: Physical
therapy, occupational therapy, and
[59 FR 49842, Sept. 30, 1994] speech-language pathology.
418.74 Waiver of requirement—Physical
§ 417.940 Civil action to enforce com- therapy, occupational therapy, speech-
pliance with assurances. language pathology and dietary coun-
The provisions of § 417.163(g) apply to seling.
418.76 Condition of participation: Hospice
entities that have outstanding loans or
aide and homemaker services.
loan guarantees administered under 418.78 Condition of participation: Volun-
this subpart. teers.
[59 FR 49843, Sept. 30, 1994]
Subpart D—Conditions of Participation:
Organizational Environment
PART 418—HOSPICE CARE
418.100 Condition of participation: Organiza-
Subpart A—General Provision and tion and administration of services.
Definitions 418.102 Condition of participation: Medical

director.
Sec. 418.104 Condition of participation: Clinical
418.1 Statutory basis. records.
311
§ 418.1 42 CFR Ch. IV (10–1–17 Edition)
418.106 Condition of participation: Drugs Subpart A—General Provision and
and biologicals, medical supplies, and du-
rable medical equipment.
Definitions
418.108 Condition of participation: Short- § 418.1 Statutory basis.
term inpatient care.
418.110 Condition of participation: Hospices This part implements section 1861(dd)
that provide inpatient care directly. of the Social Security Act (the Act).
418.112 Condition of participation: Hospices Section 1861(dd) of the Act specifies
that provide hospice care to residents of services covered as hospice care and
a SNF/NF or ICF/IID. the conditions that a hospice program
418.113 Condition of participation: Emer- must meet in order to participate in
gency preparedness. the Medicare program. Section 1861(dd)
418.114 Condition of participation: Per- also specifies limitations on coverage
sonnel qualifications. of, and payment for, inpatient hospice
418.116 Condition of participation: Compli- care. The following sections of the Act
ance with Federal, State, and local laws are also pertinent:
and regulations related to the health and (a) Sections 1812(a) (4) and (d) of the
safety of patients. Act specify eligibility requirements for
the individual and the benefit periods.
Subpart E [Reserved]
(b) Section 1813(a)(4) of the Act speci-
Subpart F—Covered Services fies coinsurance amounts.
(c) Sections 1814(a)(7) and 1814(i) of
418.200 Requirements for coverage. the Act contain conditions and limita-
418.202 Covered services. tions on coverage of, and payment for,
418.204 Special coverage requirements. hospice care.
418.205 Special requirements for hospice (d) Sections 1862(a) (1), (6) and (9) of
pre-election evaluation and counseling the Act establish limits on hospice cov-
services. erage.
Subpart G—Payment for Hospice Care [48 FR 56026, Dec. 16, 1983, as amended at 57
FR 36017, Aug. 12, 1992; 74 FR 39413, Aug. 6,
418.301 Basic rules. 2009]
418.302 Payment procedures for hospice
care. § 418.2 Scope of part.
418.304 Payment for physician and nurse Subpart A of this part sets forth the
practitioner services. statutory basis and scope and defines
418.306 Annual update of the payment rates terms used in this part. Subpart B
and adjustment for area wage dif- specifies the eligibility and election re-
ferences. quirements and the benefit periods.
418.307 Periodic interim payments. Subparts C and D specify the condi-
418.308 Limitation on the amount of hospice tions of participation for hospices. Sub-
payments. part E is reserved for future use. Sub-
418.309 Hospice aggregate cap. parts F and G specify coverage and
418.310 Reporting and recordkeeping repayment policy. Subpart H specifies
quirements.
coinsurance amounts applicable to hos-
418.311 Administrative appeals.
pice care.
418.312 Data submission requirements under
the hospice quality reporting program. [74 FR 39413, Aug. 6, 2009]
Subpart H—Coinsurance § 418.3 Definitions.

For purposes of this part—
418.400 Individual liability for coinsurance
Attending physician means a—
for hospice care.
418.402 Individual liability for services that
(1)(i) Doctor of medicine or osteop-
are not considered hospice care. athy legally authorized to practice
418.405 Effect of coinsurance liability on medicine and surgery by the State in
Medicare payment. which he or she performs that function
or action; or
AUTHORITY: Secs. 1102 and 1871 of the Social (ii) Nurse practitioner who meets the
Security Act (42 U.S.C. 1302 and 1395hh). training, education, and experience re-
SOURCE: 48 FR 56026, Dec. 16, 1983, unless quirements as described in § 410.75 (b) of
otherwise noted. this chapter.
312
(2) Is identified by the individual, at in providing hospice care as defined in

the time he or she elects to receive this section.
hospice care, as having the most sig- Hospice care means a comprehensive
nificant role in the determination and set of services described in 1861(dd)(1)
delivery of the individual’s medical of the Act, identified and coordinated
care. by an interdisciplinary group to pro-
Bereavement counseling means emo- vide for the physical, psychosocial,
tional, psychosocial, and spiritual sup- spiritual, and emotional needs of a ter-
port and services provided before and minally ill patient and/or family mem-
after the death of the patient to assist bers, as delineated in a specific patient
with issues related to grief, loss, and plan of care.
adjustment. Initial assessment means an evalua-
Cap period means the twelve-month tion of the patient’s physical, psycho-
period ending October 31 used in the social and emotional status related to
application of the cap on overall hos- the terminal illness and related condi-
pice reimbursement specified in tions to determine the patient’s imme-
§ 418.309. diate care and support needs.
Clinical note means a notation of a Licensed professional means a person
contact with the patient and/or the licensed to provide patient care serv-
family that is written and dated by any ices by the State in which services are
person providing services and that de- delivered.
scribes signs and symptoms, treat- Multiple location means a Medicare-
ments and medications administered, approved location from which the hos-
including the patient’s reaction and/or pice provides the same full range of
response, and any changes in physical, hospice care and services that is re-
emotional, psychosocial or spiritual quired of the hospice issued the certifi-
condition during a given period of cation number. A multiple location
time. must meet all of the conditions of par-
ticipation applicable to hospices.
Comprehensive assessment means a
Palliative care means patient and fam-
thorough evaluation of the patient’s
ily-centered care that optimizes qual-
physical, psychosocial, emotional and
ity of life by anticipating, preventing,
spiritual status related to the terminal
and treating suffering. Palliative care
illness and related conditions. This in-
throughout the continuum of illness
cludes a thorough evaluation of the
involves addressing physical, intellec-
caregiver’s and family’s willingness
tual, emotional, social, and spiritual
and capability to care for the patient.
needs and to facilitate patient auton-
Dietary counseling means education omy, access to information, and choice.
and interventions provided to the pa- Physician means an individual who
tient and family regarding appropriate meets the qualifications and conditions
nutritional intake as the patient’s con- as defined in section 1861(r) of the Act
dition progresses. Dietary counseling is and implemented at § 410.20 of this
provided by qualified individuals, chapter.
which may include a registered nurse, Physician designee means a doctor of
dietitian or nutritionist, when identi- medicine or osteopathy designated by
fied in the patient’s plan of care. the hospice who assumes the same re-
Employee means a person who: sponsibilities and obligations as the
(1) Works for the hospice and for medical director when the medical di-
whom the hospice is required to issue a rector is not available.
W–2 form on his or her behalf; Representative means an individual
(2) If the hospice is a subdivision of who has the authority under State law
an agency or organization, an em- (whether by statute or pursuant to an
ployee of the agency or organization appointment by the courts of the
who is assigned to the hospice; or State) to authorize or terminate med-
(3) Is a volunteer under the jurisdic- ical care or to elect or revoke the elec-
tion of the hospice. tion of hospice care on behalf of a ter-
Hospice means a public agency or pri- minally ill patient who is mentally or
vate organization or subdivision of ei- physically incapacitated. This may in-
ther of these that is primarily engaged clude a legal guardian.
313
§ 418.20 42 CFR Ch. IV (10–1–17 Edition)
Restraint means—(1) Any manual (3) An unlimited number of subse-

method, physical or mechanical device, quent 60-day periods.
material, or equipment that immo- (b) The periods of care are available
bilizes or reduces the ability of a pain the order listed and may be elected
tient to move his or her arms, legs, separately at different times.
body, or head freely, not including de-
vices, such as orthopedically prescribed [55 FR 50834, Dec. 11, 1990, as amended at 57
FR 36017, Aug. 12, 1992; 70 FR 70546, Nov. 22,
devices, surgical dressings or bandages,
2005]
protective helmets, or other methods
that involve the physical holding of a § 418.22 Certification of terminal ill-
patient for the purpose of conducting ness.
routine physical examinations or tests,
or to protect the patient from falling (a) Timing of certification—(1) General
out of bed, or to permit the patient to rule. The hospice must obtain written
participate in activities without the certification of terminal illness for
risk of physical harm (this does not in- each of the periods listed in § 418.21,
clude a physical escort); or even if a single election continues in
(2) A drug or medication when it is effect for an unlimited number of peri-
used as a restriction to manage the pa- ods, as provided in § 418.24(c).
tient’s behavior or restrict the pa- (2) Basic requirement. Except as pro-
tient’s freedom of movement and is not vided in paragraph (a)(3) of this sec-
a standard treatment or dosage for the tion, the hospice must obtain the writ-
patient’s condition. ten certification before it submits a
Seclusion means the involuntary con- claim for payment.
finement of a patient alone in a room (3) Exceptions. (i) If the hospice can-
or an area from which the patient is not obtain the written certification
physically prevented from leaving. within 2 calendar days, after a period
Terminally ill means that the indi- begins, it must obtain an oral certifi-
vidual has a medical prognosis that his cation within 2 calendar days and the
or her life expectancy is 6 months or written certification before it submits
less if the illness runs its normal a claim for payment.
course. (ii) Certifications may be completed
no more than 15 calendar days prior to
FR 4499, Feb. 12, 1987; 55 FR 50834, Dec. 11, the effective date of election.
1990; 70 FR 45144, Aug. 4, 2005; 72 FR 50227, (iii) Recertifications may be com-
Aug. 31, 2007; 73 FR 32204, June 5, 2008; 79 FR pleted no more than 15 calendar days
50509, Aug. 22, 2014] prior to the start of the subsequent
benefit period.
Subpart B—Eligibility, Election and (4) Face-to-face encounter. As of Janu-
Duration of Benefits ary 1, 2011, a hospice physician or hos-
pice nurse practitioner must have a
§ 418.20 Eligibility requirements. face-to-face encounter with each hos-
In order to be eligible to elect hospice patient whose total stay across all
pice care under Medicare, an individual hospices is anticipated to reach the 3rd
must be— benefit period. The face-to-face encoun-
(a) Entitled to Part A of Medicare; ter must occur prior to, but no more
and than 30 calendar days prior to, the 3rd
(b) Certified as being terminally ill in benefit period recertification, and
accordance with § 418.22. every benefit period recertification
thereafter, to gather clinical findings
§ 418.21 Duration of hospice care cov- to determine continued eligibility for
erage—Election periods. hospice care.
(a) Subject to the conditions set (b) Content of certification. Certifi-
forth in this part, an individual may cation will be based on the physician’s
elect to receive hospice care during one or medical director’s clinical judgment
or more of the following election peri- regarding the normal course of the in-
ods: dividual’s illness. The certification

(1) An initial 90-day period; must conform to the following require-
(2) A subsequent 90-day period; or ments:
314
(1) The certification must specify attest in writing that he or she had a
that the individual’s prognosis is for a face-to-face encounter with the pa-
life expectancy of 6 months or less if tient, including the date of that visit.
the terminal illness runs its normal The attestation of the nurse practi-
course. tioner or a non-certifying hospice phy-
(2) Clinical information and other sician shall state that the clinical find-
documentation that support the med- ings of that visit were provided to the
ical prognosis must accompany the cer- certifying physician for use in deter-
tification and must be filed in the med- mining continued eligibility for hos-
ical record with the written certifi- pice care.
cation as set forth in paragraph (d)(2) (5) All certifications and recertifi-
of this section. Initially, the clinical cations must be signed and dated by
information may be provided verbally, the physician(s), and must include the
and must be documented in the med- benefit period dates to which the cer-
ical record and included as part of the tification or recertification applies.
hospice’s eligibility assessment.
(c) Sources of certification. (1) For the
(3) The physician must include a brief
initial 90-day period, the hospice must
narrative explanation of the clinical
obtain written certification statements
findings that supports a life expectancy
(and oral certification statements if re-
of 6 months or less as part of the cer-
quired under paragraph (a)(3) of this
tification and recertification forms, or
as an addendum to the certification section) from—
and recertification forms. (i) The medical director of the hos-
(i) If the narrative is part of the cer- pice or the physician member of the
tification or recertification form, then hospice interdisciplinary group; and
the narrative must be located imme- (ii) The individual’s attending physi-
diately prior to the physician’s signa- cian, if the individual has an attending
ture. physician. The attending physician
(ii) If the narrative exists as an ad- must meet the definition of physician
dendum to the certification or recer- specified in § 410.20 of this subchapter.
tification form, in addition to the phy- (2) For subsequent periods, the only
sician’s signature on the certification requirement is certification by one of
or recertification form, the physician the physicians listed in paragraph
must also sign immediately following (c)(1)(i) of this section.
the narrative in the addendum. (d) Maintenance of records. Hospice
(iii) The narrative shall include a staff must—
statement directly above the physician (1) Make an appropriate entry in the
signature attesting that by signing, patient’s medical record as soon as
the physician confirms that he/she they receive an oral certification; and
composed the narrative based on his/ (2) File written certifications in the
her review of the patient’s medical medical record.
record or, if applicable, his/her exam-
ination of the patient. [55 FR 50834, Dec. 11, 1990, as amended at 57
(iv) The narrative must reflect the FR 36017, Aug. 12, 1992; 70 FR 45144, Aug. 4,
patient’s individual clinical cir- 2005; 70 FR 70547, Nov. 22, 2005; 74 FR 39413,
cumstances and cannot contain check Aug. 6, 2009; 75 FR 70463, Nov. 17, 2010; 76 FR
47331, Aug. 4, 2011]
boxes or standard language used for all
patients. § 418.24 Election of hospice care.
(v) The narrative associated with the
3rd benefit period recertification and (a) Filing an election statement. (1)
every subsequent recertification must General. An individual who meets the
include an explanation of why the clin- eligibility requirement of § 418.20 may
ical findings of the face-to-face encoun- file an election statement with a par-
ter support a life expectancy of 6 ticular hospice. If the individual is
months or less. physically or mentally incapacitated,
(4) The physician or nurse practi- his or her representative (as defined in
tioner who performs the face-to-face § 418.3) may file the election statement.
encounter with the patient described in (2) Notice of election. The hospice cho-
paragraph (a)(4) of this section must sen by the eligible individual (or his or
315
§ 418.24 42 CFR Ch. IV (10–1–17 Edition)
her representative) must file the No- has been given a full understanding of
tice of Election (NOE) with its Medi- the palliative rather than curative na-
care contractor within 5 calendar days ture of hospice care, as it relates to the
after the effective date of the election individual’s terminal illness.
statement. (3) Acknowledgement that certain
(3) Consequences of failure to submit a Medicare services, as set forth in para-
timely notice of election. When a hospice graph (d) of this section, are waived by
does not file the required Notice of the election.
Election for its Medicare patients (4) The effective date of the election,
within 5 calendar days after the effec- which may be the first day of hospice
tive date of election, Medicare will not care or a later date, but may be no ear-
cover and pay for days of hospice care lier than the date of the election state-
from the effective date of election to ment.
the date of filing of the notice of elec- (5) The signature of the individual or
tion. These days are a provider liabil- representative.
ity, and the provider may not bill the (c) Duration of election. An election to
beneficiary for them. receive hospice care will be considered
(4) Exception to the consequences for to continue through the initial election
filing the NOE late. CMS may waive the period and through the subsequent
consequences of failure to submit a election periods without a break in
timely-filed NOE specified in para- care as long as the individual—
graph (a)(2) of this section. CMS will (1) Remains in the care of a hospice;
determine if a circumstance encoun-
(2) Does not revoke the election; and
tered by a hospice is exceptional and
(3) Is not discharged from the hospice
qualifies for waiver of the consequence
under the provisions of § 418.26.
specified in paragraph (a)(3) of this sec-
tion. A hospice must fully document (d) Waiver of other benefits. For the
and furnish any requested documenta- duration of an election of hospice care,
tion to CMS for a determination of ex- an individual waives all rights to Medi-
ception. An exceptional circumstance care payments for the following serv-
may be due to, but is not limited to the ices:
following: (1) Hospice care provided by a hospice
(i) Fires, floods, earthquakes, or other than the hospice designated by
similar unusual events that inflict ex- the individual (unless provided under
tensive damage to the hospice’s ability arrangements made by the designated
to operate. hospice).
(ii) A CMS or Medicare contractor (2) Any Medicare services that are re-
systems issue that is beyond the con- lated to the treatment of the terminal
trol of the hospice. condition for which hospice care was
(iii) A newly Medicare-certified hos- elected or a related condition or that
pice that is notified of that certifi- are equivalent to hospice care except
cation after the Medicare certification for services—
date, or which is awaiting its user ID (i) Provided by the designated hos-
from its Medicare contractor. pice:
(iv) Other situations determined by (ii) Provided by another hospice
CMS to be beyond the control of the under arrangements made by the des-
hospice. ignated hospice; and
(b) Content of election statement. The (iii) Provided by the individual’s at-
election statement must include the tending physician if that physician is
following: not an employee of the designated hos-
(1) Identification of the particular pice or receiving compensation from
hospice and of the attending physician the hospice for those services.
that will provide care to the individual. (e) Re-election of hospice benefits. If an
The individual or representative must election has been revoked in accord-
acknowledge that the identified at- ance with § 418.28, the individual (or his
tending physician was his or her or her representative if the individual
choice. is mentally or physically incapaci-

(2) The individual’s or representa- tated) may at any time file an election,
tive’s acknowledgement that he or she in accordance with this section, for any
316
other election period that is still avail- persons in the patient’s home) behavior
able to the individual. is disruptive, abusive, or uncooperative
(f) Changing the attending physician. to the extent that delivery of care to
To change the designated attending the patient or the ability of the hospice
physician, the individual (or represent- to operate effectively is seriously im-
ative) must file a signed statement paired. The hospice must do the fol-
with the hospice that states that he or lowing before it seeks to discharge a
she is changing his or her attending patient for cause:
physician. (i) Advise the patient that a dis-
(1) The statement must identify the charge for cause is being considered;
new attending physician, and include (ii) Make a serious effort to resolve
the date the change is to be effective the problem(s) presented by the pa-
and the date signed by the individual tient’s behavior or situation;
(or representative). (iii) Ascertain that the patient’s pro-
(2) The individual (or representative) posed discharge is not due to the pa-
must acknowledge that the change in tient’s use of necessary hospice serv-
the attending physician is due to his or ices; and
her choice. (iv) Document the problem(s) and ef-
(3) The effective date of the change in forts made to resolve the problem(s)
attending physician cannot be before and enter this documentation into its
the date the statement is signed. medical records.
(b) Discharge order. Prior to dis-
FR 70547, Nov. 22, 2005; 79 FR 50509, Aug. 22,
charging a patient for any reason listed
2014] in paragraph (a) of this section, the
hospice must obtain a written physi-
§ 418.25 Admission to hospice care. cian’s discharge order from the hospice
(a) The hospice admits a patient only medical director. If a patient has an at-
on the recommendation of the medical tending physician involved in his or
director in consultation with, or with her care, this physician should be con-
input from, the patient’s attending sulted before discharge and his or her
physician (if any). review and decision included in the dis-
(b) In reaching a decision to certify charge note.
that the patient is terminally ill, the (c) Effect of discharge. An individual,
hospice medical director must consider upon discharge from the hospice during
at least the following information: a particular election period for reasons
(1) Diagnosis of the terminal condi- other than immediate transfer to an-
tion of the patient. other hospice—
(1) Is no longer covered under Medi-
(2) Other health conditions, whether
care for hospice care;
related or unrelated to the terminal
(2) Resumes Medicare coverage of the
condition.
benefits waived under § 418.24(d); and
(3) Current clinically relevant infor-
(3) May at any time elect to receive
mation supporting all diagnoses.
hospice care if he or she is again eligi-
[70 FR 70547, Nov. 22, 2005] ble to receive the benefit.
(d) Discharge planning. (1) The hospice
§ 418.26 Discharge from hospice care. must have in place a discharge plan-
(a) Reasons for discharge. A hospice ning process that takes into account
may discharge a patient if— the prospect that a patient’s condition
(1) The patient moves out of the hos- might stabilize or otherwise change
pice’s service area or transfers to an- such that the patient cannot continue
other hospice; to be certified as terminally ill.
(2) The hospice determines that the (2) The discharge planning process
patient is no longer terminally ill; or must include planning for any nec-
(3) The hospice determines, under a essary family counseling, patient edu-
policy set by the hospice for the pur- cation, or other services before the pa-
pose of addressing discharge for cause tient is discharged because he or she is
that meets the requirements of para- no longer terminally ill.

graphs (a)(3)(i) through (a)(3)(iv) of this (e) Filing a notice of termination of
section, that the patient’s (or other election. When the hospice election is
317
§ 418.28 42 CFR Ch. IV (10–1–17 Edition)
ended due to discharge, the hospice hospice from which hospice care will be
must file a notice of termination/rev- received.
ocation of election with its Medicare (b) The change of the designated hos-
contractor within 5 calendar days after pice is not a revocation of the election
the effective date of the discharge, un- for the period in which it is made.
less it has already filed a final claim (c) To change the designation of hos-
for that beneficiary. pice programs, the individual or rep-
[70 FR 70547, Nov. 22, 2005, as amended at 79 resentative must file, with the hospice
FR 50509, Aug. 22, 2014] from which care has been received and
with the newly designated hospice, a
§ 418.28 Revoking the election of hos- statement that includes the following
pice care. information:
(a) An individual or representative (1) The name of the hospice from
may revoke the individual’s election of which the individual has received care
hospice care at any time during an and the name of the hospice from
election period. which he or she plans to receive care.
(b) To revoke the election of hospice (2) The date the change is to be effec-
care, the individual or representative tive.
must file a statement with the hospice
that includes the following informa- Subpart C—Conditions of
tion:
(1) A signed statement that the indi-
Participation: Patient Care
vidual or representative revokes the in-
dividual’s election for Medicare cov- SOURCE: 73 FR 32204, June 5, 2008, unless
erage of hospice care for the remainder otherwise noted.
of that election period.
§ 418.52 Condition of participation: Pa-
(2) The date that the revocation is to tient’s rights.
be effective. (An individual or rep-
resentative may not designate an effec- The patient has the right to be in-
tive date earlier than the date that the formed of his or her rights, and the
revocation is made). hospice must protect and promote the
(c) An individual, upon revocation of exercise of these rights.
the election of Medicare coverage of (a) Standard: Notice of rights and re-
hospice care for a particular election sponsibilities. (1) During the initial as-
period— sessment visit in advance of furnishing
(1) Is no longer covered under Medi- care the hospice must provide the pa-
care for hospice care; tient or representative with verbal
(2) Resumes Medicare coverage of the (meaning spoken) and written notice of
benefits waived under § 418.24(e)(2); and the patient’s rights and responsibilities
(3) May at any time elect to receive in a language and manner that the pa-
hospice coverage for any other hospice tient understands.
election periods that he or she is eligi- (2) The hospice must comply with the
ble to receive. requirements of subpart I of part 489 of
(d) When the hospice election is this chapter regarding advance direc-
ended due to revocation, the hospice tives. The hospice must inform and dis-
must file a notice of termination/rev- tribute written information to the pa-
ocation of election with its Medicare tient concerning its policies on ad-
contractor within 5 calendar days after vance directives, including a descrip-
the effective date of the revocation, tion of applicable State law.
unless it has already filed a final claim (3) The hospice must obtain the pa-
for that beneficiary. tient’s or representative’s signature
[48 FR 56026, Dec. 16, 1983, as amended at 79 confirming that he or she has received
FR 50509, Aug. 22, 2014] a copy of the notice of rights and re-
sponsibilities.
§ 418.30 Change of the designated hos- (b) Standard: Exercise of rights and re-
pice. spect for property and person. (1) The pa-
(a) An individual or representative tient has the right:

may change, once in each election pe- (i) To exercise his or her rights as a
riod, the designation of the particular patient of the hospice;
318
(ii) To have his or her property and (1) Receive effective pain manage-
person treated with respect; ment and symptom control from the
(iii) To voice grievances regarding hospice for conditions related to the
treatment or care that is (or fails to terminal illness;
be) furnished and the lack of respect (2) Be involved in developing his or
for property by anyone who is fur- her hospice plan of care;
nishing services on behalf of the hos- (3) Refuse care or treatment;
pice; and (4) Choose his or her attending physi-
(iv) To not be subjected to discrimi- cian;
nation or reprisal for exercising his or (5) Have a confidential clinical
her rights. record. Access to or release of patient
(2) If a patient has been adjudged in- information and clinical records is per-
competent under state law by a court mitted in accordance with 45 CFR parts
of proper jurisdiction, the rights of the 160 and 164.
patient are exercised by the person ap- (6) Be free from mistreatment, ne-
pointed pursuant to state law to act on glect, or verbal, mental, sexual, and
the patient’s behalf. physical abuse, including injuries of
(3) If a state court has not adjudged a unknown source, and misappropriation
patient incompetent, any legal rep- of patient property;
resentative designated by the patient (7) Receive information about the
in accordance with state law may exer- services covered under the hospice ben-
cise the patient’s rights to the extent efit;
allowed by state law. (8) Receive information about the
(4) The hospice must: scope of services that the hospice will
(i) Ensure that all alleged violations provide and specific limitations on
involving mistreatment, neglect, or those services.
verbal, mental, sexual, and physical
abuse, including injuries of unknown § 418.54 Condition of participation:
source, and misappropriation of patient Initial and comprehensive assess-
property by anyone furnishing services ment of the patient.
on behalf of the hospice, are reported The hospice must conduct and docu-
immediately by hospice employees and ment in writing a patient-specific com-
contracted staff to the hospice admin- prehensive assessment that identifies
istrator; the patient’s need for hospice care and
(ii) Immediately investigate all al- services, and the patient’s need for
leged violations involving anyone fur- physical, psychosocial, emotional, and
nishing services on behalf of the hos- spiritual care. This assessment in-
pice and immediately take action to cludes all areas of hospice care related
prevent further potential violations to the palliation and management of
while the alleged violation is being the terminal illness and related condi-
verified. Investigations and/or docu- tions.
mentation of all alleged violations (a) Standard: Initial assessment. The
must be conducted in accordance with hospice registered nurse must complete
established procedures; an initial assessment within 48 hours
(iii) Take appropriate corrective ac- after the election of hospice care in ac-
tion in accordance with state law if the cordance with § 418.24 is complete (un-
alleged violation is verified by the hos- less the physician, patient, or rep-
pice administration or an outside body resentative requests that the initial as-
having jurisdiction, such as the State sessment be completed in less than 48
survey agency or local law enforcement hours.)
agency; and (b) Standard: Timeframe for completion
(iv) Ensure that verified violations of the comprehensive assessment. The
are reported to State and local bodies hospice interdisciplinary group, in con-
having jurisdiction (including to the sultation with the individual’s attend-
State survey and certification agency) ing physician (if any), must complete
within 5 working days of becoming the comprehensive assessment no later
aware of the violation. than 5 calendar days after the election

(c) Standard: Rights of the patient. The of hospice care in accordance with
patient has a right to the following: § 418.24.
319
§ 418.56 42 CFR Ch. IV (10–1–17 Edition)
(c) Standard: Content of the com- the patient’s progress toward desired
prehensive assessment. The comprehen- outcomes, as well as a reassessment of
sive assessment must identify the the patient’s response to care. The as-
physical, psychosocial, emotional, and sessment update must be accomplished
spiritual needs related to the terminal as frequently as the condition of the
illness that must be addressed in order patient requires, but no less frequently
to promote the hospice patient’s well- than every 15 days.
being, comfort, and dignity throughout (e) Standard: Patient outcome meas-
the dying process. The comprehensive ures. (1) The comprehensive assessment
assessment must take into consider- must include data elements that allow
ation the following factors: for measurement of outcomes. The hos-
(1) The nature and condition causing pice must measure and document data
admission (including the presence or in the same way for all patients. The
lack of objective data and subjective data elements must take into consider-
complaints). ation aspects of care related to hospice
(2) Complications and risk factors and palliation.
that affect care planning. (2) The data elements must be an in-
(3) Functional status, including the tegral part of the comprehensive as-
patient’s ability to understand and par- sessment and must be documented in a
ticipate in his or her own care. systematic and retrievable way for
(4) Imminence of death. each patient. The data elements for
(5) Severity of symptoms. each patient must be used in individual
(6) Drug profile. A review of all of the patient care planning and in the co-
patient’s prescription and over-the- ordination of services, and must be
counter drugs, herbal remedies and used in the aggregate for the hospice’s
other alternative treatments that quality assessment and performance
could affect drug therapy. This in- improvement program.
cludes, but is not limited to, identifica-
tion of the following: § 418.56 Condition of participation:
(i) Effectiveness of drug therapy. Interdisciplinary group, care plan-
(ii) Drug side effects. ning, and coordination of services.
(iii) Actual or potential drug inter- The hospice must designate an inter-
actions. disciplinary group or groups as speci-
(iv) Duplicate drug therapy. fied in paragraph (a) of this section
(v) Drug therapy currently associated which, in consultation with the pa-
with laboratory monitoring. tient’s attending physician, must pre-
(7) Bereavement. An initial bereave- pare a written plan of care for each pa-
ment assessment of the needs of the patient. The plan of care must specify the
tient’s family and other individuals fo- hospice care and services necessary to
cusing on the social, spiritual, and cul- meet the patient and family-specific
tural factors that may impact their needs identified in the comprehensive
ability to cope with the patient’s assessment as such needs relate to the
death. Information gathered from the terminal illness and related conditions.
initial bereavement assessment must (a) Standard: Approach to service deliv-
be incorporated into the plan of care ery. (1) The hospice must designate an
and considered in the bereavement plan interdisciplinary group or groups com-
of care. posed of individuals who work together
(8) The need for referrals and further to meet the physical, medical, psycho-
evaluation by appropriate health pro- social, emotional, and spiritual needs
fessionals. of the hospice patients and families
(d) Standard: Update of the comprehen- facing terminal illness and bereave-
sive assessment. The update of the comment. Interdisciplinary group members
prehensive assessment must be accom- must provide the care and services of-
plished by the hospice interdisciplinary fered by the hospice, and the group, in
group (in collaboration with the indi- its entirety, must supervise the care
vidual’s attending physician, if any) and services. The hospice must des-
and must consider changes that have ignate a registered nurse that is a
taken place since the initial assess- member of the interdisciplinary group
ment. It must include information on to provide coordination of care and to
320
ensure continuous assessment of each (4) Drugs and treatment necessary to

patient’s and family’s needs and imple- meet the needs of the patient.
mentation of the interdisciplinary plan (5) Medical supplies and appliances
of care. The interdisciplinary group necessary to meet the needs of the pa-
must include, but is not limited to, in- tient.
dividuals who are qualified and com- (6) The interdisciplinary group’s doc-
petent to practice in the following pro- umentation of the patient’s or rep-
fessional roles: resentative’s level of understanding,
(i) A doctor of medicine or osteop- involvement, and agreement with the
athy (who is an employee or under con- plan of care, in accordance with the
tract with the hospice). hospice’s own policies, in the clinical
(ii) A registered nurse. record.
(iii) A social worker. (d) Standard: Review of the plan of
(iv) A pastoral or other counselor. care. The hospice interdisciplinary
group (in collaboration with the indi-
(2) If the hospice has more than one
vidual’s attending physician, if any)
interdisciplinary group, it must iden-
must review, revise and document the
tify a specifically designated inter-
individualized plan as frequently as the
disciplinary group to establish policies
patient’s condition requires, but no
governing the day-to-day provision of
less frequently than every 15 calendar
hospice care and services.
days. A revised plan of care must in-
(b) Standard: Plan of care. All hospice clude information from the patient’s
care and services furnished to patients updated comprehensive assessment and
and their families must follow an indi- must note the patient’s progress to-
vidualized written plan of care estab- ward outcomes and goals specified in
lished by the hospice interdisciplinary the plan of care.
group in collaboration with the attend- (e) Standard: Coordination of services.
ing physician (if any), the patient or The hospice must develop and maintain
representative, and the primary care- a system of communication and inte-
giver in accordance with the patient’s gration, in accordance with the hos-
needs if any of them so desire. The hospice’s own policies and procedures, to—
pice must ensure that each patient and (1) Ensure that the interdisciplinary
the primary care giver(s) receive edu- group maintains responsibility for di-
cation and training provided by the recting, coordinating, and supervising
hospice as appropriate to their respon- the care and services provided.
sibilities for the care and services iden- (2) Ensure that the care and services
tified in the plan of care. are provided in accordance with the
(c) Standard: Content of the plan of plan of care.
care. The hospice must develop an indi- (3) Ensure that the care and services
vidualized written plan of care for each provided are based on all assessments
patient. The plan of care must reflect of the patient and family needs.
patient and family goals and interven- (4) Provide for and ensure the ongo-
tions based on the problems identified ing sharing of information between all
in the initial, comprehensive, and up- disciplines providing care and services
dated comprehensive assessments. The in all settings, whether the care and
plan of care must include all services services are provided directly or under
necessary for the palliation and man- arrangement.
agement of the terminal illness and re- (5) Provide for an ongoing sharing of
lated conditions, including the fol- information with other non-hospice
lowing: healthcare providers furnishing serv-
(1) Interventions to manage pain and ices unrelated to the terminal illness
symptoms. and related conditions.
(2) A detailed statement of the scope
and frequency of services necessary to § 418.58 Condition of participation:
meet the specific patient and family Quality assessment and perform-
needs. ance improvement.
(3) Measurable outcomes anticipated The hospice must develop, imple-

from implementing and coordinating ment, and maintain an effective, ongo-
the plan of care. ing, hospice-wide data-driven quality
321
§ 418.60 42 CFR Ch. IV (10–1–17 Edition)
assessment and performance improve- the hospice must measure its success
ment program. The hospice’s governing and track performance to ensure that
body must ensure that the program: improvements are sustained.
Reflects the complexity of its organiza- (d) Standard: Performance improvement
tion and services; involves all hospice projects. Beginning February 2, 2009
services (including those services fur- hospices must develop, implement, and
nished under contract or arrangement); evaluate performance improvement
focuses on indicators related to im- projects.
proved palliative outcomes; and takes (1) The number and scope of distinct
actions to demonstrate improvement performance improvement projects
in hospice performance. The hospice conducted annually, based on the needs
must maintain documentary evidence of the hospice’s population and inter-
of its quality assessment and perform- nal organizational needs, must reflect
ance improvement program and be able the scope, complexity, and past per-
to demonstrate its operation to CMS. formance of the hospice’s services and
(a) Standard: Program scope. (1) The operations.
program must at least be capable of (2) The hospice must document what
showing measurable improvement in performance improvement projects are
indicators related to improved pallia- being conducted, the reasons for con-
tive outcomes and hospice services. ducting these projects, and the measur-
(2) The hospice must measure, ana- able progress achieved on these
lyze, and track quality indicators, in- projects.
cluding adverse patient events, and (e) Standard: Executive responsibilities.
other aspects of performance that en- The hospice’s governing body is respon-
able the hospice to assess processes of sible for ensuring the following:
care, hospice services, and operations.
(1) That an ongoing program for qual-
(b) Standard: Program data. (1) The
ity improvement and patient safety is
program must use quality indicator
defined, implemented, and maintained,
data, including patient care, and other
and is evaluated annually.
relevant data, in the design of its pro-
gram. (2) That the hospice-wide quality as-
(2) The hospice must use the data col- sessment and performance improve-
lected to do the following: ment efforts address priorities for im-
(i) Monitor the effectiveness and proved quality of care and patient safe-
safety of services and quality of care. ty, and that all improvement actions
(ii) Identify opportunities and prior- are evaluated for effectiveness.
ities for improvement. (3) That one or more individual(s)
(3) The frequency and detail of the who are responsible for operating the
data collection must be approved by quality assessment and performance
the hospice’s governing body. improvement program are designated.
(c) Standard: Program activities. (1)
§ 418.60 Condition of participation: In-
The hospice’s performance improve- fection control.
ment activities must:
(i) Focus on high risk, high volume, The hospice must maintain and docu-
or problem-prone areas. ment an effective infection control pro-
(ii) Consider incidence, prevalence, gram that protects patients, families,
and severity of problems in those visitors, and hospice personnel by pre-
areas. venting and controlling infections and
(iii) Affect palliative outcomes, pa- communicable diseases.
tient safety, and quality of care. (a) Standard: Prevention. The hospice
(2) Performance improvement activi- must follow accepted standards of prac-
ties must track adverse patient events, tice to prevent the transmission of in-
analyze their causes, and implement fections and communicable diseases,
preventive actions and mechanisms including the use of standard pre-
that include feedback and learning cautions.
throughout the hospice. (b) Standard: Control. The hospice
(3) The hospice must take actions must maintain a coordinated agency-
aimed at performance improvement wide program for the surveillance,
and, after implementing those actions, identification, prevention, control, and
322
investigation of infectious and commu- in paragraph (a) of this section. A hos-

nicable diseases that— pice may use contracted staff, if nec-
(1) Is an integral part of the hospice’s essary, to supplement hospice employ-
quality assessment and performance ees in order to meet the needs of pa-
improvement program; and tients under extraordinary or other
(2) Includes the following: non-routine circumstances. A hospice
(i) A method of identifying infectious may also enter into a written arrange-
and communicable disease problems; ment with another Medicare certified
and hospice program for the provision of
(ii) A plan for implementing the ap- core services to supplement hospice
propriate actions that are expected to employee/staff to meet the needs of pa-
result in improvement and disease pre- tients. Circumstances under which a
vention. hospice may enter into a written ar-
(c) Standard: Education. The hospice rangement for the provision of core
must provide infection control edu- services include: Unanticipated periods
cation to employees, contracted proof high patient loads, staffing short-
viders, patients, and family members ages due to illness or other short-term
and other caregivers. temporary situations that interrupt
patient care; and temporary travel of a
§ 418.62 Condition of participation: Li- patient outside of the hospice’s service
censed professional services. area.
(a) Licensed professional services (a) Standard: Physician services. The
provided directly or under arrangement hospice medical director, physician
must be authorized, delivered, and su- employees, and contracted physician(s)
pervised only by health care profes- of the hospice, in conjunction with the
sionals who meet the appropriate patient’s attending physician, are re-
qualifications specified under § 418.114 sponsible for the palliation and man-
and who practice under the hospice’s agement of the terminal illness and
policies and procedures. conditions related to the terminal ill-
(b) Licensed professionals must ac- ness.
tively participate in the coordination (1) All physician employees and those
of all aspects of the patient’s hospice under contract, must function under
care, in accordance with current pro- the supervision of the hospice medical
fessional standards and practice, in- director.
cluding participating in ongoing inter- (2) All physician employees and those
disciplinary comprehensive assess- under contract shall meet this require-
ments, developing and evaluating the
ment by either providing the services
plan of care, and contributing to pa-
directly or through coordinating pa-
tient and family counseling and edu-
tient care with the attending physi-
cation; and
cian.
(c) Licensed professionals must par-
ticipate in the hospice’s quality assess- (3) If the attending physician is un-
ment and performance improvement available, the medical director, con-
program and hospice sponsored in-serv- tracted physician, and/or hospice phy-
ice training. sician employee is responsible for
meeting the medical needs of the pa-
CORE SERVICES tient.
(b) Standard: Nursing services. (1) The
§ 418.64 Condition of participation: hospice must provide nursing care and
Core services. services by or under the supervision of
A hospice must routinely provide a registered nurse. Nursing services
substantially all core services directly must ensure that the nursing needs of
by hospice employees. These services the patient are met as identified in the
must be provided in a manner con- patient’s initial assessment, com-
sistent with acceptable standards of prehensive assessment, and updated as-
practice. These services include nurs- sessments.
ing services, medical social services, (2) If State law permits registered
and counseling. The hospice may con- nurses to see, treat, and write orders
tract for physician services as specified for patients, then registered nurses
323
§ 418.66 42 CFR Ch. IV (10–1–17 Edition)
may provide services to beneficiaries (i) Provide an assessment of the pa-

receiving hospice care. tient’s and family’s spiritual needs.
(3) Highly specialized nursing serv- (ii) Provide spiritual counseling to
ices that are provided so infrequently meet these needs in accordance with
that the provision of such services by the patient’s and family’s acceptance
direct hospice employees would be im- of this service, and in a manner con-
practicable and prohibitively expen- sistent with patient and family beliefs
sive, may be provided under contract. and desires.
(c) Standard: Medical social services. (iii) Make all reasonable efforts to fa-
Medical social services must be pro- cilitate visits by local clergy, pastoral
vided by a qualified social worker, counselors, or other individuals who
under the direction of a physician. So- can support the patient’s spiritual
cial work services must be based on the needs to the best of its ability.
patient’s psychosocial assessment and (iv) Advise the patient and family of
the patient’s and family’s needs and ac- this service.
ceptance of these services.
§ 418.66 Condition of participation:
(d) Standard: Counseling services. Nursing services—Waiver of re-
Counseling services must be available quirement that substantially all
to the patient and family to assist the nursing services be routinely pro-
patient and family in minimizing the vided directly by a hospice.
stress and problems that arise from the
(a) CMS may waive the requirement
terminal illness, related conditions,
in § 418.64(b) that a hospice provide
and the dying process. Counseling serv-
nursing services directly, if the hospice
ices must include, but are not limited
is located in a non-urbanized area. The
to, the following:
location of a hospice that operates in
(1) Bereavement counseling. The hos- several areas is considered to be the lo-
pice must: cation of its central office. The hospice
(i) Have an organized program for the must provide evidence to CMS that it
provision of bereavement services fur- has made a good faith effort to hire a
nished under the supervision of a quali- sufficient number of nurses to provide
fied professional with experience or services. CMS may waive the require-
education in grief or loss counseling. ment that nursing services be fur-
(ii) Make bereavement services avail- nished by employees based on the fol-
able to the family and other individ- lowing criteria:
uals in the bereavement plan of care up (1) The location of the hospice’s cen-
to 1 year following the death of the pa- tral office is in a non-urbanized area as
tient. Bereavement counseling also ex- determined by the Bureau of the Cen-
tends to residents of a SNF/NF or ICF/ sus.
IID when appropriate and identified in (2) There is evidence that a hospice
the bereavement plan of care. was operational on or before January 1,
(iii) Ensure that bereavement serv- 1983 including the following:
ices reflect the needs of the bereaved. (i) Proof that the organization was
(iv) Develop a bereavement plan of established to provide hospice services
care that notes the kind of bereave- on or before January 1, 1983.
ment services to be offered and the fre- (ii) Evidence that hospice-type serv-
quency of service delivery. A special ices were furnished to patients on or
coverage provision for bereavement before January 1, 1983.
counseling is specified in § 418.204(c). (iii) Evidence that hospice care was a
(2) Dietary counseling. Dietary coun- discrete activity rather than an aspect
seling, when identified in the plan of of another type of provider’s patient
care, must be performed by a qualified care program on or before January 1,
individual, which include dietitians as 1983.
well as nurses and other individuals (3) By virtue of the following evi-
who are able to address and assure that dence that a hospice made a good faith
the dietary needs of the patient are effort to hire nurses:
met. (i) Copies of advertisements in local

(3) Spiritual counseling. The hospice newspapers that demonstrate recruit-
must: ment efforts.
324
(ii) Job descriptions for nurse em- guage pathology, and dietary coun-
ployees. seling services (as needed) available on
(iii) Evidence that salary and bene- a 24-hour basis. The hospice may also
fits are competitive for the area. seek a waiver of the requirement that
(iv) Evidence of any other recruiting it provide dietary counseling directly.
activities (for example, recruiting ef- The hospice must provide evidence that
forts at health fairs and contacts with it has made a good faith effort to meet
nurses at other providers in the area). the requirements for these services be-
(b) Any waiver request is deemed to fore it seeks a waiver. CMS may ap-
be granted unless it is denied within 60 prove a waiver application on the basis
days after it is received. of the following criteria:
(c) Waivers will remain effective for 1 (1) The hospice is located in a non-ur-
year at a time from the date of the re- banized area as determined by the Bu-
quest. reau of the Census.
(d) If a hospice wishes to receive a 1- (2) The hospice provides evidence
year extension, it must submit a re- that it had made a good faith effort to
quest to CMS before the expiration of make available physical therapy, occu-
the waiver period, and certify that the pational therapy, speech-language pa-
conditions under which it originally re- thology, and dietary counseling serv-
quested the initial waiver have not ices on a 24-hour basis and/or to hire a
changed since the initial waiver was dietary counselor to furnish services
granted. directly. This evidence must include
the following:
NON-CORE SERVICES
(i) Copies of advertisements in local
§ 418.70 Condition of participation: newspapers that demonstrate recruit-
Furnishing of non-core services. ment efforts.
(ii) Physical therapy, occupational
A hospice must ensure that the serv-
therapy, speech-language pathology,
ices described in § 418.72 through § 418.78
and dietary counselor job descriptions.
are provided directly by the hospice or
(iii) Evidence that salary and bene-
under arrangements made by the hos-
fits are competitive for the area.
pice as specified in § 418.100. These serv-
(iv) Evidence of any other recruiting
ices must be provided in a manner con-
activities (for example, recruiting ef-
sistent with current standards of prac-
forts at health fairs and contact discus-
tice.
sions with physical therapy, occupa-
§ 418.72 Condition of participation: tional therapy, speech-language pa-
Physical therapy, occupational thology, and dietary counseling service
therapy, and speech-language pa- providers in the area).
thology. (b) Any waiver request is deemed to
Physical therapy services, occupa- be granted unless it is denied within 60
tional therapy services, and speech-lan- days after it is received.
guage pathology services must be (c) An initial waiver will remain ef-
available, and when provided, offered fective for 1 year at a time from the
in a manner consistent with accepted date of the request.
standards of practice. (d) If a hospice wishes to receive a 1-
year extension, it must submit a re-
§ 418.74 Waiver of requirement—Phys- quest to CMS before the expiration of
ical therapy, occupational therapy, the waiver period and certify that con-
speech-language pathology, and die- ditions under which it originally re-
tary counseling. quested the waiver have not changed
(a) A hospice located in a non-urban- since the initial waiver was granted.
ized area may submit a written request
for a waiver of the requirement for pro- § 418.76 Condition of participation:
viding physical therapy, occupational Hospice aide and homemaker serv-
therapy, speech-language pathology, ices.
and dietary counseling services. The All hospice aide services must be pro-
hospice may seek a waiver of the re- vided by individuals who meet the per-
quirement that it make physical ther- sonnel requirements specified in para-
apy, occupational therapy, speech-lan- graph (a) of this section. Homemaker
325
§ 418.76 42 CFR Ch. IV (10–1–17 Edition)
services must be provided by individ- (3) A hospice aide training program

uals who meet the personnel require- must address each of the following sub-
ments specified in paragraph (j) of this ject areas:
section. (i) Communication skills, including
(a) Standard: Hospice aide qualifica- the ability to read, write, and verbally
tions. (1) A qualified hospice aide is a report clinical information to patients,
person who has successfully completed care givers, and other hospice staff.
one of the following: (ii) Observation, reporting, and docu-
(i) A training program and com- mentation of patient status and the
petency evaluation as specified in para- care or service furnished.
graphs (b) and (c) of this section re- (iii) Reading and recording tempera-
spectively. ture, pulse, and respiration.
(ii) A competency evaluation pro- (iv) Basic infection control proce-
gram that meets the requirements of dures.
paragraph (c) of this section. (v) Basic elements of body func-
tioning and changes in body function
(iii) A nurse aide training and com-
that must be reported to an aide’s su-
petency evaluation program approved
pervisor.
by the State as meeting the require-
(vi) Maintenance of a clean, safe, and
ments of § 483.151 through § 483.154 of
healthy environment.
this chapter, and is currently listed in
(vii) Recognizing emergencies and
good standing on the State nurse aide
the knowledge of emergency proce-
registry.
dures and their application.
(iv) A State licensure program that (viii) The physical, emotional, and
meets the requirements of paragraphs developmental needs of and ways to
(b) and (c) of this section. work with the populations served by
(2) A hospice aide is not considered to the hospice, including the need for re-
have completed a program, as specified spect for the patient, his or her pri-
in paragraph (a)(1) of this section, if, vacy, and his or her property.
since the individual’s most recent com- (ix) Appropriate and safe techniques
pletion of the program(s), there has in performing personal hygiene and
been a continuous period of 24 consecu- grooming tasks, including items on the
tive months during which none of the following basic checklist:
services furnished by the individual as (A) Bed bath.
described in § 409.40 of this chapter were (B) Sponge, tub, and shower bath.
for compensation. If there has been a (C) Hair shampoo (sink, tub, and
24-month lapse in furnishing services, bed).
the individual must complete another (D) Nail and skin care.
program, as specified in paragraph (E) Oral hygiene.
(a)(1) of this section, before providing (F) Toileting and elimination.
services. (x) Safe transfer techniques and am-
(b) Standard: Content and duration of bulation.
hospice aide classroom and supervised (xi) Normal range of motion and posi-
practical training. (1) Hospice aide train- tioning.
ing must include classroom and super- (xii) Adequate nutrition and fluid in-
vised practical training in a practicum take.
laboratory or other setting in which (xiii) Any other task that the hospice
the trainee demonstrates knowledge may choose to have an aide perform.
while performing tasks on an indi- The hospice is responsible for training
vidual under the direct supervision of a hospice aides, as needed, for skills not
registered nurse, or a licensed practical covered in the basic checklist, as de-
nurse, who is under the supervision of a scribed in paragraph (b)(3)(ix) of this
registered nurse. Classroom and super- section.
vised practical training combined must (4) The hospice must maintain docu-
total at least 75 hours. mentation that demonstrates that the
(2) A minimum of 16 hours of class- requirements of this standard are met.
room training must precede a min- (c) Standard: Competency evaluation.

imum of l6 hours of supervised prac- An individual may furnish hospice aide
tical training as part of the 75 hours. services on behalf of a hospice only
326
after that individual has successfully experience, at least 1 year of which

completed a competency evaluation must be in home care, or by other indi-
program as described in this section. viduals under the general supervision
(1) The competency evaluation must of a registered nurse.
address each of the subjects listed in (f) Standard: Eligible competency eval-
paragraph (b)(3) of this section. Subject uation organizations. A hospice aide
areas specified under paragraphs competency evaluation program as
(b)(3)(i), (b)(3)(iii), (b)(3)(ix), (b)(3)(x) specified in paragraph (c) of this sec-
and (b)(3)(xi) of this section must be tion may be offered by any organiza-
evaluated by observing an aide’s per- tion except by a home health agency
formance of the task with a patient. that, within the previous 2 years:
The remaining subject areas may be (1) Had been out of compliance with
evaluated through written examina- the requirements of § 484.36(a) and
tion, oral examination, or after obser- § 484.36 (b) of this chapter.
vation of a hospice aide with a patient. (2) Permitted an individual that does
(2) A hospice aide competency eval- not meet the definition of a ‘‘qualified
uation program may be offered by any home health aide’’ as specified in
organization, except as described in § 484.36(a) of this chapter to furnish
paragraph (f) of this section. home health aide services (with the ex-
(3) The competency evaluation must ception of licensed health professionals
be performed by a registered nurse in and volunteers).
consultation with other skilled profes- (3) Had been subjected to an extended
sionals, as appropriate. (or partial extended) survey as a result
(4) A hospice aide is not considered of having been found to have furnished
competent in any task for which he or substandard care (or for other reasons
she is evaluated as unsatisfactory. An at the discretion of CMS or the State).
aide must not perform that task with- (4) Had been assessed a civil mone-
out direct supervision by a registered tary penalty of $5,000 or more as an in-
nurse until after he or she has received termediate sanction.
training in the task for which he or she (5) Had been found by CMS to have
was evaluated as ‘‘unsatisfactory,’’ and compliance deficiencies that endan-
successfully completes a subsequent gered the health and safety of the
evaluation. A hospice aide is not con- home health agency’s patients and had
sidered to have successfully completed temporary management appointed to
a competency evaluation if the aide oversee the management of the home
has an ‘‘unsatisfactory’’ rating in more health agency.
than one of the required areas. (6) Had all or part of its Medicare
(5) The hospice must maintain docu- payments suspended.
mentation that demonstrates the re- (7) Had been found by CMS or the
quirements of this standard are being State under any Federal or State law
met. to have:
(d) Standard: In-service training. A (i) Had its participation in the Medi-
hospice aide must receive at least 12 care program terminated.
hours of in-service training during each (ii) Been assessed a penalty of $5,000
12-month period. In-service training or more for deficiencies in Federal or
may occur while an aide is furnishing State standards for home health agen-
care to a patient. cies.
(1) In-service training may be offered (iii) Been subjected to a suspension of
by any organization, and must be su- Medicare payments to which it other-
pervised by a registered nurse. wise would have been entitled.
(2) The hospice must maintain docu- (iv) Operated under temporary man-
mentation that demonstrates the re- agement that was appointed by a gov-
quirements of this standard are met. ernmental authority to oversee the op-
(e) Standard: Qualifications for instruc- eration of the home health agency and
tors conducting classroom and supervised to ensure the health and safety of the
practical training. Classroom and super- home health agency’s patients.
vised practical training must be per- (v) Been closed by CMS or the State,
formed by a registered nurse who pos- or had its patients transferred by the
sesses a minimum of 2 years nursing State.
327
§ 418.76 42 CFR Ch. IV (10–1–17 Edition)
(g) Standard: Hospice aide assignments then the hospice must conduct, and the
and duties. (1) Hospice aides are as- hospice aide must complete a com-
signed to a specific patient by a reg- petency evaluation in accordance with
istered nurse that is a member of the § 418.76(c).
interdisciplinary group. Written pa- (2) A registered nurse must make an
tient care instructions for a hospice annual on-site visit to the location
aide must be prepared by a registered where a patient is receiving care in
nurse who is responsible for the super- order to observe and assess each aide
vision of a hospice aide as specified while he or she is performing care.
under paragraph (h) of this section.
(3) The supervising nurse must assess
(2) A hospice aide provides services
an aide’s ability to demonstrate initial
that are:
(i) Ordered by the interdisciplinary and continued satisfactory perform-
group. ance in meeting outcome criteria that
(ii) Included in the plan of care. include, but is not limited to—
(iii) Permitted to be performed under (i) Following the patient’s plan of
State law by such hospice aide. care for completion of tasks assigned
(iv) Consistent with the hospice aide to the hospice aide by the registered
training. nurse.
(3) The duties of a hospice aide in- (ii) Creating successful interpersonal
clude the following: relationships with the patient and fam-
(i) The provision of hands-on personal ily.
care. (iii) Demonstrating competency with
(ii) The performance of simple proce- assigned tasks.
dures as an extension of therapy or (iv) Complying with infection control
nursing services. policies and procedures.
(iii) Assistance in ambulation or ex- (v) Reporting changes in the pa-
ercises.
tient’s condition.
(iv) Assistance in administering
medications that are ordinarily self-ad- (i) Standard: Individuals furnishing
ministered. Medicaid personal care aide-only services
(4) Hospice aides must report changes under a Medicaid personal care benefit.
in the patient’s medical, nursing, reha- An individual may furnish personal
bilitative, and social needs to a reg- care services, as defined in § 440.167 of
istered nurse, as the changes relate to this chapter, on behalf of a hospice
the plan of care and quality assessment agency.
and improvement activities. Hospice (1) Before the individual may furnish
aides must also complete appropriate personal care services, the individual
records in compliance with the hos- must be found competent by the State
pice’s policies and procedures. (if regulated by the State) to furnish
(h) Standard: Supervision of hospice those services. The individual only
aides. (1) A registered nurse must make needs to demonstrate competency in
an on-site visit to the patient’s home: the services the individual is required
(i) No less frequently than every 14 to furnish.
days to assess the quality of care and (2) Services under the Medicaid per-
services provided by the hospice aide sonal care benefit may be used to the
and to ensure that services ordered by extent that the hospice would rou-
the hospice interdisciplinary group tinely use the services of a hospice pa-
meet the patient’s needs. The hospice
tient’s family in implementing a pa-
aide does not have to be present during
tient’s plan of care.
this visit.
(ii) If an area of concern is noted by (3) The hospice must coordinate its
the supervising nurse, then the hospice hospice aide and homemaker services
must make an on-site visit to the loca- with the Medicaid personal care benefit
tion where the patient is receiving care to ensure the patient receives the hos-
in order to observe and assess the aide pice aide and homemaker services he
while he or she is performing care. or she needs.

(iii) If an area of concern is verified (j) Standard: Homemaker qualifications.
by the hospice during the on-site visit, A qualified homemaker is—
328
(1) An individual who meets the (2) The work time spent by volun-
standards in § 418.202(g) and has suc- teers occupying those positions.
cessfully completed hospice orienta- (3) Estimates of the dollar costs that
tion addressing the needs and concerns the hospice would have incurred if paid
of patients and families coping with a employees occupied the positions iden-
terminal illness; or tified in paragraph (d)(1) of this section
(2) A hospice aide as described in for the amount of time specified in
§ 418.76. paragraph (d)(2) of this section.
(k) Standard: Homemaker supervision (e) Standard: Level of activity. Volun-
and duties. (1) Homemaker services teers must provide day-to-day adminis-
must be coordinated and supervised by trative and/or direct patient care serv-
a member of the interdisciplinary ices in an amount that, at a minimum,
group. equals 5 percent of the total patient
(2) Instructions for homemaker du- care hours of all paid hospice employ-
ties must be prepared by a member of ees and contract staff. The hospice
the interdisciplinary group. must maintain records on the use of
(3) Homemakers must report all con- volunteers for patient care and admin-
cerns about the patient or family to istrative services, including the type of
the member of the interdisciplinary services and time worked.
group who is coordinating homemaker
services. Subpart D—Conditions of partici-
pation: Organizational Envi-
FR 39413, Aug. 6, 2009] ronment
EFFECTIVE DATE NOTE: At 82 FR 4578, Jan.
13, 2017, § 418.76 was amended in paragraph SOURCE: 73 FR 32204, June 5, 2008, unless
(f)(1) by removing ‘‘§ 484.36(a) and § 484.36(b)’’ otherwise noted.
and replacing it with ‘‘§ 484.80’’, and in para-
graph (f)(2) by removing ‘‘§ 484.36(a)’’ and re- § 418.100 Condition of Participation:
placing it with ‘‘§ 484.80(a)’’, effective July 13, Organization and administration of
2017. At 82 FR 31729, July 10, 2017, the effec- services.
tiveness was delayed until Jan. 13, 2018. The hospice must organize, manage,
and administer its resources to provide
§ 418.78 Conditions of participation— the hospice care and services to pa-
Volunteers.
tients, caregivers and families nec-
The hospice must use volunteers to essary for the palliation and manage-
the extent specified in paragraph (e) of ment of the terminal illness and re-
this section. These volunteers must be lated conditions.
used in defined roles and under the su- (a) Standard: Serving the hospice pa-
pervision of a designated hospice em- tient and family. The hospice must pro-
ployee. vide hospice care that—
(a) Standard: Training. The hospice (1) Optimizes comfort and dignity;
must maintain, document, and provide and
volunteer orientation and training that (2) Is consistent with patient and
is consistent with hospice industry family needs and goals, with patient
standards. needs and goals as priority.
(b) Standard: Role. Volunteers must (b) Standard: Governing body and ad-
be used in day-to-day administrative ministrator. A governing body (or des-
and/or direct patient care roles. ignated persons so functioning) as-
(c) Standard: Recruiting and retaining. sumes full legal authority and respon-
The hospice must document and dem- sibility for the management of the hos-
onstrate viable and ongoing efforts to pice, the provision of all hospice serv-
recruit and retain volunteers. ices, its fiscal operations, and contin-
(d) Standard: Cost saving. The hospice uous quality assessment and perform-
must document the cost savings ance improvement. A qualified admin-
achieved through the use of volunteers. istrator appointed by and reporting to
Documentation must include the fol- the governing body is responsible for
lowing: the day-to-day operation of the hos-

(1) The identification of each position pice. The administrator must be a hos-
that is occupied by a volunteer. pice employee and possess education
329
§ 418.102 42 CFR Ch. IV (10–1–17 Edition)
and experience required by the hos- (i) All hospice multiple locations
pice’s governing body. must be approved by Medicare before
(c) Standard: Services. (1) A hospice providing hospice care and services to
must be primarily engaged in providing Medicare patients.
the following care and services and (ii) The multiple location must be
must do so in a manner that is con- part of the hospice and must share ad-
sistent with accepted standards of ministration, supervision, and services
practice: with the hospice issued the certifi-
(i) Nursing services. cation number.
(ii) Medical social services. (iii) The lines of authority and pro-
(iii) Physician services. fessional and administrative control
must be clearly delineated in the hos-
(iv) Counseling services, including
pice’s organizational structure and in
spiritual counseling, dietary coun-
practice, and must be traced to the lo-
seling, and bereavement counseling.
cation which was issued the certifi-
(v) Hospice aide, volunteer, and
cation number.
homemaker services. (iv) The determination that a mul-
(vi) Physical therapy, occupational tiple location does or does not meet the
therapy, and speech-language pathol- definition of a multiple location, as set
ogy services. forth in this part, is an initial deter-
(vii) Short-term inpatient care. mination, as set forth in § 498.3.
(viii) Medical supplies (including (2) The hospice must continually
drugs and biologicals) and medical ap- monitor and manage all services pro-
pliances. vided at all of its locations to ensure
(2) Nursing services, physician serv- that services are delivered in a safe and
ices, and drugs and biologicals (as spec- effective manner and to ensure that
ified in § 418.106) must be made rou- each patient and family receives the
tinely available on a 24-hour basis 7 necessary care and services outlined in
days a week. Other covered services the plan of care, in accordance with the
must be available on a 24-hour basis requirements of this subpart and sub-
when reasonable and necessary to meet parts A and C of this section.
the needs of the patient and family. (g) Standard: Training. (1) A hospice
(d) Standard: Continuation of care. A must provide orientation about the
hospice may not discontinue or reduce hospice philosophy to all employees
care provided to a Medicare or Med- and contracted staff who have patient
icaid beneficiary because of the bene- and family contact.
ficiary’s inability to pay for that care. (2) A hospice must provide an initial
(e) Standard: Professional management orientation for each employee that ad-
responsibility. A hospice that has a writ- dresses the employee’s specific job du-
ten agreement with another agency, in- ties.
dividual, or organization to furnish any (3) A hospice must assess the skills
services under arrangement must re- and competence of all individuals fur-
tain administrative and financial man- nishing care, including volunteers fur-
agement, and oversight of staff and nishing services, and, as necessary,
services for all arranged services, to provide in-service training and edu-
ensure the provision of quality care. cation programs where required. The
Arranged services must be supported hospice must have written policies and
by written agreements that require procedures describing its method(s) of
that all services be— assessment of competency and main-
(1) Authorized by the hospice; tain a written description of the in-
(2) Furnished in a safe and effective service training provided during the
manner by qualified personnel; and previous 12 months.
(3) Delivered in accordance with the [73 FR 32204, June 5, 2008, as amended at 74
patient’s plan of care. FR 39413, Aug. 6, 2009]
(f) Standard: Hospice multiple locations.
If a hospice operates multiple loca- § 418.102 Condition of participation:
tions, it must meet the following re- Medical director.

quirements: The hospice must designate a physi-
(1) Medicare approval. cian to serve as medical director. The
330
medical director must be a doctor of The clinical record may be maintained

medicine or osteopathy who is an em- electronically.
ployee, or is under contract with the (a) Standard: Content. Each patient’s
hospice. When the medical director is record must include the following:
not available, a physician designated (1) The initial plan of care, updated
by the hospice assumes the same re- plans of care, initial assessment, com-
sponsibilities and obligations as the prehensive assessment, updated com-
medical director. prehensive assessments, and clinical
(a) Standard: Medical director contract. notes.
(1) A hospice may contract with either (2) Signed copies of the notice of pa-
of the following— tient rights in accordance with § 418.52
(i) A self-employed physician; or and election statement in accordance
(ii) A physician employed by a pro- with § 418.24.
fessional entity or physicians group. (3) Responses to medications, symp-
When contracting for medical director tom management, treatments, and
services, the contract must specify the services.
physician who assumes the medical di- (4) Outcome measure data elements,
rector responsibilities and obligations. as described in § 418.54(e) of this sub-
(b) Standard: Initial certification of ter- part.
minal illness. The medical director or (5) Physician certification and recer-
physician designee reviews the clinical tification of terminal illness as re-
information for each hospice patient quired in §§ 418.22 and 418.25 and de-
and provides written certification that scribed in §§ 418.102(b) and 418.102(c) re-
it is anticipated that the patient’s life spectively, if appropriate.
expectancy is 6 months or less if the (6) Any advance directives as de-
illness runs its normal course. The scribed in § 418.52(a)(2).
physician must consider the following (7) Physician orders.
when making this determination:
(b) Standard: Authentication. All en-
(1) The primary terminal condition; tries must be legible, clear, complete,
(2) Related diagnosis(es), if any; and appropriately authenticated and
(3) Current subjective and objective dated in accordance with hospice pol-
medical findings; icy and currently accepted standards of
(4) Current medication and treatment practice.
orders; and (c) Standard: Protection of information.
(5) Information about the medical The clinical record, its contents and
management of any of the patient’s the information contained therein
conditions unrelated to the terminal must be safeguarded against loss or un-
illness. authorized use. The hospice must be in
(c) Standard: Recertification of the compliance with the Department’s
termina terminal illness. Before the re- rules regarding personal health infor-
certification period for each patient, as mation as set out at 45 CFR parts 160
described in § 418.21(a), the medical di- and 164.
rector or physician designee must re- (d) Standard: Retention of records. Pa-
view the patient’s clinical information. tient clinical records must be retained
(d) Standard: Medical director responsi- for 6 years after the death or discharge
bility. The medical director or physi- of the patient, unless State law stipu-
cian designee has responsibility for the lates a longer period of time. If the
medical component of the hospice’s pa- hospice discontinues operation, hospice
tient care program. policies must provide for retention and
storage of clinical records. The hospice
§ 418.104 Condition of participation: must inform its State agency and its
Clinical records. CMS Regional office where such clin-
A clinical record containing past and ical records will be stored and how
current findings is maintained for each they may be accessed.
hospice patient. The clinical record (e) Standard: Discharge or transfer of
must contain correct clinical informa- care. (1) If the care of a patient is
tion that is available to the patient’s transferred to another Medicare/Med-
attending physician and hospice staff. icaid-certified facility, the hospice
331
§ 418.106 42 CFR Ch. IV (10–1–17 Edition)
must forward to the receiving facility, (2) A hospice that provides inpatient
a copy of— care directly in its own facility must
(i) The hospice discharge summary; provide pharmacy services under the
and direction of a qualified licensed phar-
(ii) The patient’s clinical record, if macist who is an employee of or under
requested. contract with the hospice. The pro-
(2) If a patient revokes the election of vided pharmacist services must include
hospice care, or is discharged from hos- evaluation of a patient’s response to
pice in accordance with § 418.26, the medication therapy, identification of
hospice must forward to the patient’s potential adverse drug reactions, and
attending physician, a copy of— recommended appropriate corrective
(i) The hospice discharge summary; action.
and
(b) Standard: Ordering of drugs. (1)
(ii) The patient’s clinical record, if
Only a physician as defined by section
requested.
1861(r)(1) of the Act, or a nurse practi-
(3) The hospice discharge summary as
required in paragraph (e)(1) and (e)(2) tioner in accordance with the plan of
of this section must include— care and State law, may order drugs
(i) A summary of the patient’s stay for the patient.
including treatments, symptoms and (2) If the drug order is verbal or given
pain management. by or through electronic trans-
(ii) The patient’s current plan of mission—
care. (i) It must be given only to a licensed
(iii) The patient’s latest physician or- nurse, nurse practitioner (where appro-
ders. and priate), pharmacist, or physician; and
(iv) Any other documentation that (ii) The individual receiving the
will assist in post-discharge continuity order must record and sign it imme-
of care or that is requested by the at- diately and have the prescribing person
tending physician or receiving facility. sign it in accordance with State and
(f) Standard: Retrieval of clinical Federal regulations.
records. The clinical record, whether (c) Standard: Dispensing of drugs and
hard copy or in electronic form, must biologicals. The hospice must—
be made readily available on request
(1) Obtain drugs and biologicals from
by an appropriate authority.
community or institutional phar-
§ 418.106 Condition of participation: macists or stock drugs and biologicals
Drugs and biologicals, medical sup- itself.
plies, and durable medical equip- (2) The hospice that provides inpa-
ment. tient care directly in its own facility
Medical supplies and appliances, as must:
described in § 410.36 of this chapter; du- (i) Have a written policy in place
rable medical equipment, as described that promotes dispensing accuracy;
in § 410.38 of this chapter; and drugs and and
biologicals related to the palliation (ii) Maintain current and accurate
and management of the terminal ill- records of the receipt and disposition of
ness and related conditions, as identi- all controlled drugs.
fied in the hospice plan of care, must (d) Standard: Administration of drugs
be provided by the hospice while the
and biologicals. (1) The interdisciplinary
patient is under hospice care.
group, as part of the review of the plan
(a) Standard: Managing drugs and
of care, must determine the ability of
biologicals. (1) The hospice must ensure
that the interdisciplinary group con- the patient and/or family to safely self-
fers with an individual with education administer drugs and biologicals to the
and training in drug management as patient in his or her home.
defined in hospice policies and proce- (2) Patients receiving care in a hos-
dures and State law, who is an em- pice that provides inpatient care di-
ployee of or under contract with the rectly in its own facility may only be
hospice to ensure that drugs and administered medications by the fol-
biologicals meet each patient’s needs. lowing individuals:
332
(i) A licensed nurse, physician, or (i) All drugs and biologicals must be
other health care professional in ac- stored in secure areas. All controlled
cordance with their scope of practice drugs listed in Schedules II, III, IV, and
and State law; V of the Comprehensive Drug Abuse
(ii) An employee who has completed Prevention and Control Act of 1976
a State-approved training program in must be stored in locked compartments
medication administration; and within such secure storage areas. Only
(iii) The patient, upon approval by personnel authorized to administer
the interdisciplinary group. controlled drugs as noted in paragraph
(e) Standard: Labeling, disposing, and (d)(2) of this section may have access
storing of drugs and biologicals—(1) La- to the locked compartments; and
beling. Drugs and biologicals must be
(ii) Discrepancies in the acquisition,
labeled in accordance with currently
accepted professional practice and storage, dispensing, administration,
must include appropriate usage and disposal, or return of controlled drugs
cautionary instructions, as well as an must be investigated immediately by
expiration date (if applicable). the pharmacist and hospice adminis-
(2) Disposing. (i) Safe use and disposal trator and where required reported to
of controlled drugs in the patient’s the appropriate State authority. A
home. The hospice must have written written account of the investigation
policies and procedures for the man- must be made available to State and
agement and disposal of controlled Federal officials if required by law or
drugs in the patient’s home. At the regulation.
time when controlled drugs are first or- (f) Standard: Use and maintenance of
dered the hospice must: equipment and supplies. (1) The hospice
(A) Provide a copy of the hospice must ensure that manufacturer rec-
written policies and procedures on the ommendations for performing routine
management and disposal of controlled and preventive maintenance on durable
drugs to the patient or patient rep- medical equipment are followed. The
resentative and family; equipment must be safe and work as in-
(B) Discuss the hospice policies and tended for use in the patient’s environ-
procedures for managing the safe use ment. Where a manufacturer rec-
and disposal of controlled drugs with
ommendation for a piece of equipment
the patient or representative and the
does not exist, the hospice must ensure
family in a language and manner that
that repair and routine maintenance
they understand to ensure that these
parties are educated regarding the safe policies are developed. The hospice
use and disposal of controlled drugs; may use persons under contract to en-
and sure the maintenance and repair of du-
(C) Document in the patient’s clin- rable medical equipment.
ical record that the written policies (2) The hospice must ensure that the
and procedures for managing con- patient, where appropriate, as well as
trolled drugs was provided and dis- the family and/or other caregiver(s),
cussed. receive instruction in the safe use of
(ii) Disposal of controlled drugs in durable medical equipment and sup-
hospices that provide inpatient care di- plies. The hospice may use persons
rectly. The hospice that provides inpa- under contract to ensure patient and
tient care directly in its own facility family instruction. The patient, fam-
must dispose of controlled drugs in ily, and/or caregiver must be able to
compliance with the hospice policy and demonstrate the appropriate use of du-
in accordance with State and Federal rable medical equipment to the satis-
requirements. The hospice must main- faction of the hospice staff.
tain current and accurate records of (3) Hospices may only contract for
the receipt and disposition of all con- durable medical equipment services
trolled drugs.
with a durable medical equipment sup-
(3) Storing. The hospice that provides
plier that meets the Medicare

inpatient care directly in its own facil-
ity must comply with the following ad- DMEPOS Supplier Quality and Accred-
ditional requirements— itation Standards at 42 CFR 424.57.
333
§ 418.108 42 CFR Ch. IV (10–1–17 Edition)
§ 418.108 Condition of participation: of all inpatient services furnished and

Short-term inpatient care. events regarding care that occurred at
Inpatient care must be available for the facility; that a copy of the dis-
pain control, symptom management, charge summary be provided to the
and respite purposes, and must be pro- hospice at the time of discharge; and
vided in a participating Medicare or that a copy of the inpatient clinical
Medicaid facility. record is available to the hospice at the
(a) Standard: Inpatient care for symp- time of discharge;
tom management and pain control. Inpa- (4) That the inpatient facility has
tient care for pain control and symp- identified an individual within the fa-
tom management must be provided in cility who is responsible for the imple-
one of the following: mentation of the provisions of the
(1) A Medicare-certified hospice that agreement;
meets the conditions of participation (5) That the hospice retains responsi-
for providing inpatient care directly as bility for ensuring that the training of
specified in § 418.110. personnel who will be providing the pa-
(2) A Medicare-certified hospital or a tient’s care in the inpatient facility
skilled nursing facility that also meets has been provided and that a descrip-
the standards specified in § 418.110(b) tion of the training and the names of
and (f) regarding 24-hour nursing serv- those giving the training are docu-
ices and patient areas. mented; and
(b) Standard: Inpatient care for respite (6) A method for verifying that the
purposes. (1) Inpatient care for respite requirements in paragraphs (c)(1)
purposes must be provided by one of through (c)(5) of this section are met.
the following: (d) Standard: Inpatient care limitation.
(i) A provider specified in paragraph The total number of inpatient days
(a) of this section. used by Medicare beneficiaries who
(ii) A Medicare or Medicaid-certified elected hospice coverage in a 12-month
nursing facility that also meets the period in a particular hospice may not
standards specified in § 418.110(f). exceed 20 percent of the total number
(2) The facility providing respite care of hospice days consumed in total by
must provide 24-hour nursing services this group of beneficiaries.
that meet the nursing needs of all pa- (e) Standard: Exemption from limita-
tients and are furnished in accordance tion. Before October 1, 1986, any hospice
with each patient’s plan of care. Each that began operation before January 1,
patient must receive all nursing serv- 1975, is not subject to the limitation
ices as prescribed and must be kept specified in paragraph (d) of this sec-
comfortable, clean, well-groomed, and tion.
protected from accident, injury, and in- [73 FR 32204, June 5, 2008, as amended at 74
fection. FR 39413, Aug. 6, 2009; 81 FR 26897, May 4,
(c) Standard: Inpatient care provided 2016]
under arrangements. If the hospice has
an arrangement with a facility to pro- § 418.110 Condition of participation:
vide for short-term inpatient care, the Hospices that provide inpatient
arrangement is described in a written care directly.
agreement, coordinated by the hospice, A hospice that provides inpatient
and at a minimum specifies— care directly in its own facility must
(1) That the hospice supplies the in- demonstrate compliance with all of the
patient provider a copy of the patient’s following standards:
plan of care and specifies the inpatient (a) Standard: Staffing. The hospice is
services to be furnished; responsible for ensuring that staffing
(2) That the inpatient provider has for all services reflects its volume of
established patient care policies con- patients, their acuity, and the level of
sistent with those of the hospice and intensity of services needed to ensure
agrees to abide by the palliative care that plan of care outcomes are
protocols and plan of care established achieved and negative outcomes are
by the hospice for its patients; avoided.

(3) That the hospice patient’s inpa- (b) Standard: Twenty-four hour nursing
tient clinical record includes a record services. (1) The hospice facility must
334
provide 24-hour nursing services that able hardship upon a hospice facility,
meet the nursing needs of all patients but only if the waiver will not ad-
and are furnished in accordance with versely affect the health and safety of
each patient’s plan of care. Each pa- the patients.
tient must receive all nursing services (3) The provisions of the adopted edi-
as prescribed and must be kept com- tion of the Life Safety Code do not
fortable, clean, well-groomed, and pro- apply in a State if CMS finds that a
tected from accident, injury, and infec- fire and safety code imposed by State
tion. law adequately protects patients in
(2) If at least one patient in the hos- hospices.
pice facility is receiving general inpa- (4) A hospice may place alcohol-based
tient care, then each shift must include hand rub dispensers in its facility if the
a registered nurse who provides direct dispensers are installed in a manner
patient care. that adequately protects against access
(c) Standard: Physical environment. by vulnerable populations.
The hospice must maintain a safe phys- (5) When a sprinkler system is shut
ical environment free of hazards for pa- down for more than 10 hours, the hos-
tients, staff, and visitors. pice must:
(1) Safety management. The hospice (i) Evacuate the building or portion
must address real or potential threats of the building affected by the system
to the health and safety of the pa- outage until the system is back in
tients, others, and property. service, or
(2) Physical plant and equipment. The (ii) Establish a fire watch until the
hospice must develop procedures for system is back in service.
controlling the reliability and quality (6) Buildings must have an outside
of— window or outside door in every sleep-
(i) The routine storage and prompt ing room, and for any building con-
disposal of trash and medical waste; structed after July 5, 2016 the sill
(ii) Light, temperature, and ventila- height must not exceed 36 inches above
tion/air exchanges throughout the hos- the floor. Windows in atrium walls are
pice; considered outside windows for the pur-
(iii) Emergency gas and water supply; poses of this requirement.
and (e) Standard: Building Safety. Except
(iv) The scheduled and emergency as otherwise provided in this section,
maintenance and repair of all equip- the hospice must meet the applicable
ment. provisions and must proceed in accord-
(d) Standard: Fire protection. (1) Ex- ance with the Health Care Facilities
cept as otherwise provided in this sec- Code (NFPA 99 and Tentative Interim
tion— Amendments TIA 12–2, TIA 12–3, TIA
(i) The hospice must meet the appli- 12–4, TIA 12–5 and TIA 12–6).
cable provisions and must proceed in (1) Chapters 7, 8, 12, and 13 of the
accordance with the Life Safety Code adopted Health Care Facilities Code do
(NFPA 101 and Tentative Interim not apply to a hospice.
Amendments TIA 12–1, TIA 12–2, TIA (2) If application of the Health Care
12–3, and TIA 12–4.) Facilities Code required under para-
(ii) Notwithstanding paragraph graph (e) of this section would result in
(d)(1)(i) of this section, corridor doors unreasonable hardship for the hospice,
and doors to rooms containing flam- CMS may waive specific provisions of
mable or combustible materials must the Health Care Facilities Code, but
be provided with positive latching only if the waiver does not adversely
hardware. Roller latches are prohibited affect the health and safety of patients.
on such doors. (f) Standard: Patient areas. The hos-
(2) In consideration of a rec- pice must provide a home-like atmos-
ommendation by the State survey phere and ensure that patient areas are
agency or Accrediting Organization or designed to preserve the dignity, com-
at the discretion of the Secretary, may fort, and privacy of patients.
waive, for periods deemed appropriate, (1) The hospice must provide—
specific provisions of the Life Safety (i) Physical space for private patient
Code, which would result in unreason- and family visiting;
335
§ 418.110 42 CFR Ch. IV (10–1–17 Edition)
(ii) Accommodations for family mem- the temperature of the hot water used
bers to remain with the patient by patients.
throughout the night; and (j) Standard: Infection control. The
(iii) Physical space for family pri- hospice must maintain an infection
vacy after a patient’s death. control program that protects patients,
(2) The hospice must provide the op- staff and others by preventing and con-
portunity for patients to receive visi- trolling infections and communicable
tors at any hour, including infants and disease as stipulated in § 418.60.
small children. (k) Standard: Sanitary environment.
(g) Standard: Patient rooms. (1) The The hospice must provide a sanitary
hospice must ensure that patient environment by following current
rooms are designed and equipped for standards of practice, including nation-
nursing care, as well as the dignity, ally recognized infection control pre-
comfort, and privacy of patients. cautions, and avoid sources and trans-
(2) The hospice must accommodate a mission of infections and commu-
patient and family request for a single nicable diseases.
room whenever possible. (l) Standard: Linen. The hospice must
(3) Each patient’s room must— have available at all times a quantity
(i) Be at or above grade level; of clean linen in sufficient amounts for
(ii) Contain a suitable bed and other all patient uses. Linens must be han-
appropriate furniture for each patient; dled, stored, processed, and transported
(iii) Have closet space that provides in such a manner as to prevent the
security and privacy for clothing and spread of contaminants.
personal belongings; (m) Standard: Meal service and menu
(iv) Accommodate no more than two planning. The hospice must furnish
patients and their family members; meals to each patient that are—
(v) Provide at least 80 square feet for (1) Consistent with the patient’s plan
each residing patient in a double room of care, nutritional needs, and thera-
and at least 100 square feet for each pa- peutic diet;
tient residing in a single room; and (2) Palatable, attractive, and served
(vi) Be equipped with an easily-acti- at the proper temperature; and
vated, functioning device accessible to (3) Obtained, stored, prepared, dis-
the patient, that is used for calling for tributed, and served under sanitary
assistance. conditions.
(4) For a facility occupied by a Medi- (n) Standard: Restraint or seclusion.
care-participating hospice on Decem- All patients have the right to be free
ber 2, 2008, CMS may waive the space from physical or mental abuse, and
and occupancy requirements of para- corporal punishment. All patients have
graphs (g)(2)(iv) and (g)(2)(v) of this the right to be free from restraint or
section if it determines that— seclusion, of any form, imposed as a
(i) Imposition of the requirements means of coercion, discipline, conven-
would result in unreasonable hardship ience, or retaliation by staff. Restraint
on the hospice if strictly enforced; or or seclusion may only be imposed to
jeopardize its ability to continue to ensure the immediate physical safety
participate in the Medicare program; of the patient, a staff member, or oth-
and ers and must be discontinued at the
(ii) The waiver serves the needs of earliest possible time.
the patient and does not adversely af- (1) Restraint or seclusion may only
fect their health and safety. be used when less restrictive interven-
(h) Standard: Toilet and bathing facili- tions have been determined to be inef-
ties. Each patient room must be fective to protect the patient, a staff
equipped with, or conveniently located member, or others from harm.
near, toilet and bathing facilities. (2) The type or technique of restraint
(i) Standard: Plumbing facilities. The or seclusion used must be the least re-
hospice must— strictive intervention that will be ef-
(1) Have an adequate supply of hot fective to protect the patient, a staff
water at all times; and member, or others from harm.

(2) Have plumbing fixtures with con- (3) The use of restraint or seclusion
trol valves that automatically regulate must be—
336
(i) In accordance with a written section at an interval determined by

modification to the patient’s plan of hospice policy.
care; and (10) Physician, including attending
(ii) Implemented in accordance with physician, training requirements must
safe and appropriate restraint and se- be specified in hospice policy. At a
clusion techniques as determined by minimum, physicians and attending
hospice policy in accordance with physicians authorized to order re-
State law. straint or seclusion by hospice policy
(4) The use of restraint or seclusion in accordance with State law must
must be in accordance with the order have a working knowledge of hospice
of a physician authorized to order re- policy regarding the use of restraint or
straint or seclusion by hospice policy seclusion.
in accordance with State law. (11) When restraint or seclusion is
(5) Orders for the use of restraint or used for the management of violent or
seclusion must never be written as a self-destructive behavior that jeopard-
standing order or on an as needed basis izes the immediate physical safety of
(PRN). the patient, a staff member, or others,
(6) The medical director or physician the patient must be seen face-to-face
designee must be consulted as soon as within 1 hour after the initiation of the
possible if the attending physician did intervention—
not order the restraint or seclusion. (i) By a—
(7) Unless superseded by State law (A) Physician; or
that is more restrictive— (B) Registered nurse who has been
(i) Each order for restraint or seclu- trained in accordance with the require-
sion used for the management of vio- ments specified in paragraph (n) of this
lent or self-destructive behavior that section.
jeopardizes the immediate physical (ii) To evaluate—
safety of the patient, a staff member, (A) The patient’s immediate situa-
or others may only be renewed in action;
cordance with the following limits for (B) The patient’s reaction to the
up to a total of 24 hours: intervention;
(A) 4 hours for adults 18 years of age (C) The patient’s medical and behav-
or older; ioral condition; and
(B) 2 hours for children and adoles- (D) The need to continue or termi-
cents 9 to 17 years of age; or nate the restraint or seclusion.
(C) 1 hour for children under 9 years (12) States are free to have require-
of age; and ments by statute or regulation that are
After 24 hours, before writing a new more restrictive than those contained
order for the use of restraint or seclu- in paragraph (m)(11)(i) of this section.
sion for the management of violent or (13) If the face-to-face evaluation
self-destructive behavior, a physician specified in § 418.110(n)(11) is conducted
authorized to order restraint or seclu- by a trained registered nurse, the
sion by hospice policy in accordance trained registered nurse must consult
with State law must see and assess the the medical director or physician des-
patient. ignee as soon as possible after the com-
(ii) Each order for restraint used to pletion of the 1-hour face-to-face eval-
ensure the physical safety of the non- uation.
violent or non-self-destructive patient (14) All requirements specified under
may be renewed as authorized by hos- this paragraph are applicable to the si-
pice policy. multaneous use of restraint and seclu-
(8) Restraint or seclusion must be sion. Simultaneous restraint and seclu-
discontinued at the earliest possible sion use is only permitted if the pa-
time, regardless of the length of time tient is continually monitored—
identified in the order. (i) Face-to-face by an assigned,
(9) The condition of the patient who trained staff member; or
is restrained or secluded must be mon- (ii) By trained staff using both video
itored by a physician or trained staff and audio equipment. This monitoring

that have completed the training cri- must be in close proximity to the pa-
teria specified in paragraph (o) of this tient.
337
§ 418.110 42 CFR Ch. IV (10–1–17 Edition)
(15) When restraint or seclusion is (v) Clinical identification of specific

used, there must be documentation in behavioral changes that indicate that
the patient’s clinical record of the fol- restraint or seclusion is no longer nec-
lowing: essary.
(i) The 1-hour face-to-face medical (vi) Monitoring the physical and psy-
and behavioral evaluation if restraint chological well-being of the patient
or seclusion is used to manage violent who is restrained or secluded, including
or self-destructive behavior; but not limited to, respiratory and cir-
(ii) A description of the patient’s be- culatory status, skin integrity, vital
havior and the intervention used; signs, and any special requirements
(iii) Alternatives or other less re- specified by hospice policy associated
strictive interventions attempted (as with the 1-hour face-to-face evaluation.
applicable);
(vii) The use of first aid techniques
(iv) The patient’s condition or symp-
and certification in the use of
tom(s) that warranted the use of the
cardiopulmonary resuscitation, includ-
restraint or seclusion; and the pa-
ing required periodic recertification.
tient’s response to the intervention(s)
used, including the rationale for con- (3) Trainer requirements. Individuals
tinued use of the intervention. providing staff training must be quali-
(o) Standard: Restraint or seclusion fied as evidenced by education, train-
staff training requirements. The patient ing, and experience in techniques used
has the right to safe implementation of to address patients’ behaviors.
restraint or seclusion by trained staff. (4) Training documentation. The hos-
(1) Training intervals. All patient care pice must document in the staff per-
staff working in the hospice inpatient sonnel records that the training and
facility must be trained and able to demonstration of competency were suc-
demonstrate competency in the appli- cessfully completed.
cation of restraints, implementation of (p) Standard: Death reporting require-
seclusion, monitoring, assessment, and ments. Hospices must report deaths as-
providing care for a patient in re- sociated with the use of seclusion or re-
straint or seclusion— straint.
(i) Before performing any of the ac- (1) The hospice must report the fol-
tions specified in this paragraph; lowing information to CMS:
(ii) As part of orientation; and (i) Each unexpected death that oc-
(iii) Subsequently on a periodic basis curs while a patient is in restraint or
consistent with hospice policy. seclusion.
(2) Training content. The hospice must (ii) Each unexpected death that oc-
require appropriate staff to have edu- curs within 24 hours after the patient
cation, training, and demonstrated has been removed from restraint or se-
knowledge based on the specific needs
clusion.
of the patient population in at least
(iii) Each death known to the hospice
the following:
(i) Techniques to identify staff and that occurs within 1 week after re-
patient behaviors, events, and environ- straint or seclusion where it is reason-
mental factors that may trigger cir- able to assume that use of restraint or
cumstances that require the use of a placement in seclusion contributed di-
restraint or seclusion. rectly or indirectly to a patient’s
(ii) The use of nonphysical interven- death. ‘‘Reasonable to assume’’ in this
tion skills. context includes, but is not limited to,
(iii) Choosing the least restrictive deaths related to restrictions of move-
intervention based on an individualized ment for prolonged periods of time, or
assessment of the patient’s medical, or death related to chest compression, re-
behavioral status or condition. striction of breathing or asphyxiation.
(iv) The safe application and use of (2) Each death referenced in this
all types of restraint or seclusion used paragraph must be reported to CMS by
in the hospice, including training in telephone no later than the close of
how to recognize and respond to signs business the next business day fol-
of physical and psychological distress lowing knowledge of the patient’s
(for example, positional asphyxia). death.
338
(3) Staff must document in the pa- § 418.112 Condition of participation:

tient’s clinical record the date and Hospices that provide hospice care
time the death was reported to CMS. to residents of a SNF/NF or ICF/IID.
(q) The standards incorporated by In addition to meeting the conditions
reference in this section are approved of participation at § 418.10 through
for incorporation by reference by the § 418.116, a hospice that provides hos-
Director of the Office of the Federal pice care to residents of a SNF/NF or
Register in accordance with 5 U.S.C. ICF/IID must abide by the following ad-
552(a) and 1 CFR part 51. You may in- ditional standards.
spect a copy at the CMS Information (a) Standard: Resident eligibility, elec-
Resource Center, 7500 Security Boule- tion, and duration of benefits. Medicare
vard, Baltimore, MD or at the National patients receiving hospice services and
Archives and Records Administration residing in a SNF, NF, or ICF/IID are
subject to the Medicare hospice eligi-
(NARA). For information on the avail-
bility criteria set out at § 418.20
ability of this material at NARA, call
through § 418.30.
202–741–6030, or go to: http:// (b) Standard: Professional management.
www.archives.gov/federallregister/ The hospice must assume responsi-
codeloflfederallregulations/ bility for professional management of
ibrllocations.html. If any changes in the resident’s hospice services pro-
this edition of the Code are incor- vided, in accordance with the hospice
porated by reference, CMS will publish plan of care and the hospice conditions
a document in the FEDERAL REGISTER of participation, and make any ar-
to announce the changes. rangements necessary for hospice-re-
(1) National Fire Protection Associa- lated inpatient care in a participating
tion, 1 Batterymarch Park, Quincy, Medicare/Medicaid facility according
MA 02169, www.nfpa.org, 1.617.770.3000. to §§ 418.100 and 418.108.
(i) NFPA 99, Standards for Health (c) Standard: Written agreement. The
Care Facilities Code of the National hospice and SNF/NF or ICF/IID must
Fire Protection Association 99, 2012 have a written agreement that speci-
edition, issued August 11, 2011. fies the provision of hospice services in
(ii) TIA 12–2 to NFPA 99, issued Au- the facility. The agreement must be
signed by authorized representatives of
gust 11, 2011.
the hospice and the SNF/NF or ICF/IID
(iii) TIA 12–3 to NFPA 99, issued Au-
before the provision of hospice serv-
gust 9, 2012. ices. The written agreement must in-
(iv) TIA 12–4 to NFPA 99, issued clude at least the following:
March 7, 2013. (1) The manner in which the SNF/NF
(v) TIA 12–5 to NFPA 99, issued Au- or ICF/IID and the hospice are to com-
gust 1, 2013. municate with each other and docu-
(vi) TIA 12–6 to NFPA 99, issued ment such communications to ensure
March 3, 2014. that the needs of patients are ad-
(vii) NFPA 101, Life Safety Code, 2012 dressed and met 24 hours a day.
edition, issued August 11, 2011; (2) A provision that the SNF/NF or
(viii) TIA 12–1 to NFPA 101, issued ICF/IID immediately notifies the hos-
August 11, 2011. pice if—
(ix) TIA 12–2 to NFPA 101, issued Oc- (i) A significant change in a patient’s
physical, mental, social, or emotional
tober 30, 2012.
status occurs;
(x) TIA 12–3 to NFPA 101, issued Oc- (ii) Clinical complications appear
tober 22, 2013. that suggest a need to alter the plan of
(xi) TIA 12–4 to NFPA 101, issued Oc- care;
tober 22, 2013. (iii) A need to transfer a patient from
(2) [Reserved] the SNF/NF or ICF/IID, and the hospice
[73 FR 32204, June 5, 2008, as amended at 81 makes arrangements for, and remains
responsible for, any necessary contin-
FR 26879, May 4, 2016; 81 FR 64024, Sept. 16,

2016] uous care or inpatient care necessary
related to the terminal illness and re-
lated conditions; or
339
§ 418.112 42 CFR Ch. IV (10–1–17 Edition)
(iv) A patient dies. ICF/IID to provide bereavement serv-

(3) A provision stating that the hos- ices to SNF/NF or ICF/IID staff.
pice assumes responsibility for deter- (d) Standard: Hospice plan of care. In
mining the appropriate course of hos- accordance with § 418.56, a written hos-
pice care, including the determination pice plan of care must be established
to change the level of services pro- and maintained in consultation with
vided. SNF/NF or ICF/IID representatives. All
(4) An agreement that it is the SNF/ hospice care provided must be in ac-
NF or ICF/IID responsibility to con- cordance with this hospice plan of care.
tinue to furnish 24 hour room and (1) The hospice plan of care must
board care, meeting the personal care identify the care and services that are
and nursing needs that would have needed and specifically identify which
been provided by the primary caregiver provider is responsible for performing
at home at the same level of care pro- the respective functions that have been
vided before hospice care was elected. agreed upon and included in the hos-
(5) An agreement that it is the hospice plan of care.
pice’s responsibility to provide services (2) The hospice plan of care reflects
at the same level and to the same ex- the participation of the hospice, the
tent as those services would be pro- SNF/NF or ICF/IID, and the patient and
vided if the SNF/NF or ICF/IID resident family to the extent possible.
were in his or her own home. (3) Any changes in the hospice plan of
(6) A delineation of the hospice’s re- care must be discussed with the patient
sponsibilities, which include, but are or representative, and SNF/NF or ICF/
not limited to the following: Providing IID representatives, and must be ap-
medical direction and management of proved by the hospice before implemen-
the patient; nursing; counseling (in- tation.
cluding spiritual, dietary and bereave-
(e) Standard: Coordination of services.
ment); social work; provision of med-
The hospice must:
ical supplies, durable medical equip-
ment and drugs necessary for the (1) Designate a member of each inter-
palliation of pain and symptoms asso- disciplinary group that is responsible
ciated with the terminal illness and re- for a patient who is a resident of a
lated conditions; and all other hospice SNF/NF or ICF/IID. The designated
services that are necessary for the care interdisciplinary group member is re-
of the resident’s terminal illness and sponsible for:
related conditions. (i) Providing overall coordination of
(7) A provision that the hospice may the hospice care of the SNF/NF or ICF/
use the SNF/NF or ICF/IID nursing per- IID resident with SNF/NF or ICF/IID
sonnel where permitted by State law representatives; and
and as specified by the SNF/NF or ICF/ (ii) Communicating with SNF/NF or
IID to assist in the administration of ICF/IID representatives and other
prescribed therapies included in the health care providers participating in
plan of care only to the extent that the the provision of care for the terminal
hospice would routinely use the serv- illness and related conditions and other
ices of a hospice patient’s family in im- conditions to ensure quality of care for
plementing the plan of care. the patient and family.
(8) A provision stating that the hos- (2) Ensure that the hospice IDG com-
pice must report all alleged violations municates with the SNF/NF or ICF/IID
involving mistreatment, neglect, or medical director, the patient’s attend-
verbal, mental, sexual, and physical ing physician, and other physicians
abuse, including injuries of unknown participating in the provision of care
source, and misappropriation of patient to the patient as needed to coordinate
property by anyone unrelated to the the hospice care of the hospice patient
hospice to the SNF/NF or ICF/IID ad- with the medical care provided by
ministrator within 24 hours of the hos- other physicians.
pice becoming aware of the alleged vio- (3) Provide the SNF/NF or ICF/IID
lation. with the following information:

(9) A delineation of the responsibil- (i) The most recent hospice plan of
ities of the hospice and the SNF/NF or care specific to each patient;
340
(ii) Hospice election form and any ad- provide in an emergency; and con-
vance directives specific to each pa- tinuity of operations, including delega-
tient; tions of authority and succession
(iii) Physician certification and re- plans.
certification of the terminal illness (4) Include a process for cooperation
specific to each patient; and collaboration with local, tribal, re-
(iv) Names and contact information gional, State, or Federal emergency
for hospice personnel involved in hos- preparedness officials’ efforts to main-
pice care of each patient; tain an integrated response during a
(v) Instructions on how to access the disaster or emergency situation, in-
hospice’s 24-hour on-call system; cluding documentation of the hospice’s
(vi) Hospice medication information efforts to contact such officials and,
specific to each patient; and when applicable, of its participation in
(vii) Hospice physician and attending collaborative and cooperative planning
physician (if any) orders specific to efforts.
each patient. (b) Policies and procedures. The hos-
(f) Standard: Orientation and training pice must develop and implement
of staff. Hospice staff must assure ori- emergency preparedness policies and
entation of SNF/NF or ICF/IID staff procedures, based on the emergency
furnishing care to hospice patients in plan set forth in paragraph (a) of this
the hospice philosophy, including hos- section, risk assessment at paragraph
pice policies and procedures regarding (a)(1) of this section, and the commu-
methods of comfort, pain control, nication plan at paragraph (c) of this
symptom management, as well as prin- section. The policies and procedures
ciples about death and dying, indi- must be reviewed and updated at least
vidual responses to death, patient annually. At a minimum, the policies
rights, appropriate forms, and record and procedures must address the fol-
keeping requirements.
lowing:
§ 418.113 Condition of participation: (1) Procedures to follow up with on-
Emergency preparedness. duty staff and patients to determine
The hospice must comply with all ap- services that are needed, in the event
plicable Federal, State, and local emer- that there is an interruption in serv-
gency preparedness requirements. The ices during or due to an emergency.
hospice must establish and maintain The hospice must inform State and
an emergency preparedness program local officials of any on-duty staff or
that meets the requirements of this patients that they are unable to con-
section. The emergency preparedness tact.
program must include, but not be lim- (2) Procedures to inform State and
ited to, the following elements: local officials about hospice patients in
(a) Emergency plan. The hospice must need of evacuation from their resi-
develop and maintain an emergency dences at any time due to an emer-
preparedness plan that must be re- gency situation based on the patient’s
viewed, and updated at least annually. medical and psychiatric condition and
The plan must do the following: home environment.
(1) Be based on and include a docu- (3) A system of medical documenta-
mented, facility-based and community- tion that preserves patient informa-
based risk assessment, utilizing an all- tion, protects confidentiality of patient
hazards approach. information, and secures and main-
(2) Include strategies for addressing tains the availability of records.
emergency events identified by the (4) The use of hospice employees in
risk assessment, including the manage- an emergency and other emergency
ment of the consequences of power fail- staffing strategies, including the proc-
ures, natural disasters, and other emer- ess and role for integration of State
gencies that would affect the hospice’s and Federally designated health care
ability to provide care. professionals to address surge needs
(3) Address patient population, in- during an emergency.

cluding, but not limited to, the type of (5) The development of arrangements
services the hospice has the ability to with other hospices and other providers
341
§ 418.113 42 CFR Ch. IV (10–1–17 Edition)
to receive patients in the event of limi- communication plan must include all
tations or cessation of operations to of the following:
maintain the continuity of services to (1) Names and contact information
hospice patients. for the following:
(6) The following are additional re- (i) Hospice employees.
quirements for hospice-operated inpa- (ii) Entities providing services under
tient care facilities only. The policies arrangement.
and procedures must address the fol- (iii) Patients’ physicians.
lowing: (iv) Other hospices.
(i) A means to shelter in place for pa- (2) Contact information for the fol-
tients, hospice employees who remain lowing:
in the hospice. (i) Federal, State, tribal, regional,
(ii) Safe evacuation from the hospice, and local emergency preparedness
which includes consideration of care staff.
and treatment needs of evacuees; staff (ii) Other sources of assistance.
responsibilities; transportation; identi- (3) Primary and alternate means for
fication of evacuation location(s) and communicating with the following:
primary and alternate means of com- (i) Hospice’s employees.
munication with external sources of as- (ii) Federal, State, tribal, regional,
sistance. and local emergency management
(iii) The provision of subsistence agencies.
needs for hospice employees and pa- (4) A method for sharing information
tients, whether they evacuate or shel- and medical documentation for pa-
ter in place, include, but are not lim- tients under the hospice’s care, as nec-
ited to the following: essary, with other health care pro-
(A) Food, water, medical, and phar- viders to maintain the continuity of
maceutical supplies. care.
(5) A means, in the event of an evacu-
(B) Alternate sources of energy to
ation, to release patient information as
maintain the following:
permitted under 45 CFR 164.510(b)(1)(ii).
(1) Temperatures to protect patient
(6) A means of providing information
health and safety and for the safe and
about the general condition and loca-
sanitary storage of provisions.
tion of patients under the facility’s
(2) Emergency lighting. care as permitted under 45 CFR
(3) Fire detection, extinguishing, and 164.510(b)(4).
alarm systems. (7) A means of providing information
(C) Sewage and waste disposal. about the hospice’s inpatient occu-
(iv) The role of the hospice under a pancy, needs, and its ability to provide
waiver declared by the Secretary, in assistance, to the authority having ju-
accordance with section 1135 of the risdiction, the Incident Command Cen-
Act, in the provision of care and treat- ter, or designee.
ment at an alternate care site identi- (d) Training and testing. The hospice
fied by emergency management offi- must develop and maintain an emer-
cials. gency preparedness training and test-
(v) A system to track the location of ing program that is based on the emer-
hospice employees’ on-duty and shel- gency plan set forth in paragraph (a) of
tered patients in the hospice’s care this section, risk assessment at para-
during an emergency. If the on-duty graph (a)(1) of this section, policies and
employees or sheltered patients are re- procedures at paragraph (b) of this sec-
located during the emergency, the hos- tion, and the communication plan at
pice must document the specific name paragraph (c) of this section. The train-
and location of the receiving facility or ing and testing program must be re-
other location. viewed and updated at least annually.
(c) Communication plan. The hospice (1) Training program. The hospice
must develop and maintain an emer- must do all of the following:
gency preparedness communication (i) Initial training in emergency pre-
plan that complies with Federal, State, paredness policies and procedures to all
and local laws and must be reviewed new and existing hospice employees,
and updated at least annually. The and individuals providing services
342
under arrangement, consistent with preparedness program must do the fol-

their expected roles. lowing:
(ii) Demonstrate staff knowledge of (1) Demonstrate that each separately
emergency procedures. certified facility within the system ac-
(iii) Provide emergency preparedness tively participated in the development
training at least annually. of the unified and integrated emer-
(iv) Periodically review and rehearse gency preparedness program.
its emergency preparedness plan with (2) Be developed and maintained in a
hospice employees (including non- manner that takes into account each
employee staff), with special emphasis separately certified facility’s unique
placed on carrying out the procedures circumstances, patient populations,
necessary to protect patients and oth- and services offered.
ers. (3) Demonstrate that each separately
(v) Maintain documentation of all certified facility is capable of actively
emergency preparedness training. using the unified and integrated emer-
(2) Testing. The hospice must conduct gency preparedness program and is in
exercises to test the emergency plan at compliance with the program.
least annually. The hospice must do (4) Include a unified and integrated
the following: emergency plan that meets the require-
(i) Participate in a full-scale exercise ments of paragraphs (a)(2), (3), and (4)
that is community-based or when a of this section. The unified and inte-
community-based exercise is not acces- grated emergency plan must also be
sible, an individual, facility-based. If based on and include the following:
the hospice experiences an actual nat- (i) A documented community-based
ural or man-made emergency that re- risk assessment, utilizing an all-haz-
quires activation of the emergency ards approach.
plan, the hospital is exempt from en- (ii) A documented individual facility-
gaging in a community-based or indi- based risk assessment for each sepa-
vidual, facility-based full-scale exer- rately certified facility within the
cise for 1 year following the onset of health system, utilizing an all-hazards
the actual event. approach.
(ii) Conduct an additional exercise (5) Include integrated policies and
that may include, but is not limited to procedures that meet the requirements
the following: set forth in paragraph (b) of this sec-
(A) A second full-scale exercise that tion, a coordinated communication
is community-based or individual, fa- plan and training and testing programs
cility-based. that meet the requirements of para-
(B) A tabletop exercise that includes graphs (c) and (d) of this section, re-
a group discussion led by a facilitator, spectively.
using a narrated, clinically-relevant [81 FR 64024, Sept. 16, 2016]
emergency scenario, and a set of prob-
lem statements, directed messages, or § 418.114 Condition of participation:
prepared questions designed to chal- Personnel qualifications.
lenge an emergency plan. (a) General qualification requirements.
(iii) Analyze the hospice’s response to Except as specified in paragraph (c) of
and maintain documentation of all this section, all professionals who fur-
drills, tabletop exercises, and emer- nish services directly, under an indi-
gency events, and revise the hospice’s vidual contract, or under arrangements
emergency plan, as needed. with a hospice, must be legally author-
(e) Integrated healthcare systems. If a ized (licensed, certified or registered)
hospice is part of a healthcare system in accordance with applicable Federal,
consisting of multiple separately cer- State and local laws, and must act only
tified healthcare facilities that elects within the scope of his or her State li-
to have a unified and integrated emer- cense, or State certification, or reg-
gency preparedness program, the hos- istration. All personnel qualifications
pice may choose to participate in the must be kept current at all times.
healthcare system’s coordinated emer- (b) Personnel qualifications for certain

gency preparedness program. If elected, disciplines. The following qualifications
the unified and integrated emergency must be met:
343
§ 418.114 42 CFR Ch. IV (10–1–17 Edition)
(1) Physician. Physicians must meet by the National Board for Certification
the qualifications and conditions as de- in Occupational Therapy, Inc.
fined in section 1861(r) of the Act and (NBCOT).
implemented at § 410.20 of this chapter. (ii) On or before December 31, 2009—
(2) Hospice aide. Hospice aides must (A) Is licensed or otherwise regu-
meet the qualifications required by lated, if applicable, as an occupational
section 1891(a)(3) of the Act and imple- therapist by the State in which prac-
mented at § 418.76. ticing; or
(3) Social worker. A person who— (B) When licensure or other regula-
(i)(A) Has a Master of Social Work tion does not apply—
(MSW) degree from a school of social (1) Graduated after successful com-
work accredited by the Council on So- pletion of an occupational therapist
cial Work Education; or education program accredited by the
(B) Has a baccalaureate degree in so- accreditation Council for Occupational
cial work from an institution accred- therapy Education (ACOTE) of the
ited by the Council on Social Work American Occupational Therapy Asso-
Education; or a baccalaureate degree in ciation, Inc. (AOTA) or successor orga-
psychology, sociology, or other field re- nizations of ACOTE; and
lated to social work and is supervised (2) Is eligible to take, or has success-
by an MSW as described in paragraph fully completed the entry-level certifi-
(b)(3)(i)(A) of this section; and cation examination for occupational
(ii) Has 1 year of social work experi- therapists developed and administered
ence in a healthcare setting; or by the National Board for Certification
(iii) Has a baccalaureate degree from in Occupational Therapy, Inc.,
a school of social work accredited by (NBCOT).
the Council on Social Work Education, (iii) On or before January 1, 2008—
is employed by the hospice before De- (A) Graduated after successful com-
cember 2, 2008, and is not required to be pletion of an occupational therapy pro-
supervised by an MSW. gram accredited jointly by the com-
(4) Speech language pathologist. A per- mittee on Allied Health Education and
son who meets either of the following Accreditation of the American Medical
requirements: Association and the American Occupa-
(i) The education and experience re- tional Therapy Association; or
quirements for a Certificate of Clinical (B) Is eligible for the National Reg-
Competence in speech-language pathol- istration Examination of the American
ogy granted by the American Speech- Occupational Therapy Association or
Language-Hearing Association. the National Board for Certification in
(ii) The educational requirements for Occupational Therapy.
certification and is in the process of ac- (iv) On or before December 31, 1977—
cumulating the supervised experience (A) Had 2 years of appropriate experi-
required for certification. ence as an occupational therapist; and
(5) Occupational therapist. A person (B) Had achieved a satisfactory grade
who— on an occupational therapist pro-
(i)(A) Is licensed or otherwise regu- ficiency examination conducted, ap-
lated, if applicable, as an occupational proved, or sponsored by the U.S. Public
therapist by the State in which prac- Health Service.
ticing, unless licensure does not apply; (v) If educated outside the United
(B) Graduated after successful com- States—
pletion of an occupational therapist (A) Must meet both of the following:
education program accredited by the (1) Graduated after successful com-
Accreditation Council for Occupational pletion of an occupational therapist
Therapy Education (ACOTE) of the education program accredited as sub-
American Occupational Therapy Asso- stantially equivalent to occupational
ciation, Inc. (AOTA), or successor orga- therapist assistant entry level edu-
nizations of ACOTE; and cation in the United States by one of
(C) Is eligible to take, or has success- the following:
fully completed the entry-level certifi- (i) The Accreditation Council for Oc-
cation examination for occupational cupational Therapy Education
therapists developed and administered (ACOTE).
344
(ii) Successor organizations of (A) Completed certification require-

ACOTE. ments to practice as an occupational
(iii) The World Federation of Occupa- therapy assistant established by a
tional Therapists. credentialing organization approved by
(iv) A credentialing body approved by the American Occupational Therapy
the American Occupational Therapy Association; or
Association. (B) Completed the requirements to
(v) Successfully completed the entry practice as an occupational therapy as-
level certification examination for oc- sistant applicable in the State in which
cupational therapists developed and practicing.
administered by the National Board for (iv) On or before December 31, 1977—
Certification in Occupational Therapy, (A) Had 2 years of appropriate experi-
Inc. (NBCOT). ence as an occupational therapy assist-
(2) On or before December 31, 2009, is ant; and
licensed or otherwise regulated, if ap- (B) Had achieved a satisfactory grade
plicable, as an occupational therapist on an occupational therapy assistant
by the State in which practicing. proficiency examination conducted, ap-
(6) Occupational therapy assistant. A proved, or sponsored by the U.S. Public
person who Health Service.
(i) Meets all of the following: (v) If educated outside the United
(A) Is licensed or otherwise regu- States, on or after January 1, 2008—
lated, if applicable, as an occupational (A) Graduated after successful com-
therapy assistant by the State in which pletion of an occupational therapy as-
practicing, unless licensure does apply.
sistant education program that is ac-
(B) Graduated after successful com- credited as substantially equivalent to
pletion of an occupational therapy as- occupational therapist assistant entry
sistant education program accredited level education in the United States
by the Accreditation Council for Occu-
by—
pational Therapy Education (ACOTE)
(1) The Accreditation Council for Oc-
of the American Occupational Therapy
cupational Therapy Education
Association, Inc. (AOTA) or its suc-
cessor organizations. (ACOTE).
(C) Is eligible to take or successfully (2) Its successor organizations.
completed the entry-level certification (3) The World Federation of Occupa-
examination for occupational therapy tional Therapists.
assistants developed and administered (4) By a credentialing body approved
by the National Board for Certification by the American Occupational Therapy
in Occupational Therapy, Inc. Association; and
(NBCOT). (5) Successfully completed the entry
(ii) On or before December 31, 2009— level certification examination for oc-
(A) Is licensed or otherwise regulated cupational therapy assistants devel-
as an occupational therapy assistant, if oped and administered by the National
applicable, by the State in which prac- Board for Certification in Occupational
ticing; or any qualifications defined by Therapy, Inc. (NBCOT).
the State in which practicing, unless (7) Physical therapist. A person who is
licensure does not apply; or licensed, if applicable, by the State in
(B) Must meet both of the following: which practicing, unless licensure does
(1) Completed certification require- not apply and meets one of the fol-
ments to practice as an occupational lowing requirements:
therapy assistant established by a (i) Graduated after successful com-
credentialing organization approved by pletion of a physical therapist edu-
the American Occupational Therapy cation program approved by one of the
Association. following:
(2) After January 1, 2010, meets the (A) The Commission on Accreditation
requirements in paragraph (b)(6)(i) of in Physical Therapy Education
this section. (CAPTE).

(iii) After December 31, 1977 and on or (B) Successor organizations of
before December 31, 2007— CAPTE.
345
§ 418.114 42 CFR Ch. IV (10–1–17 Edition)
(C) An education program outside the (A) Was admitted to membership by

United States determined to be sub- the American Physical Therapy Asso-
stantially equivalent to physical thera- ciation;
pist entry level education in the United (B) Was admitted to registration by
States by a credentials evaluation or- the American Registry of Physical
ganization approved by the American Therapists; and
Physical Therapy Association or an or- (C) Graduated from a physical ther-
ganization identified in 8 CFR 212.15(e) apy curriculum in a 4-year college or
as it relates to physical therapists. university approved by a State depart-
(D) Passed an examination for phys- ment of education.
ical therapists approved by the State (vi) Before January 1, 1966 was li-
in which physical therapy services are censed or registered, and before Janu-
provided. ary 1, 1970, had 15 years of fulltime ex-
(ii) On or before December 31, 2009— perience in the treatment of illness or
(A) Graduated after successful com- injury through the practice of physical
pletion of a physical therapy cur- therapy in which services were ren-
riculum approved by the Commission dered under the order and direction of
on Accreditation in Physical Therapy attending and referring doctors of med-
Education (CAPTE); or icine or osteopathy.
(B) Meets both of the following: (vii) If trained outside the United
(1) Graduated after successful com- States before January 1, 2008, meets
pletion of an education program deter- the following requirements:
mined to be substantially equivalent to (A) Was graduated since 1928 from a
physical therapist entry level edu- physical therapy curriculum approved
cation in the United States by a cre- in the country in which the curriculum
dentials evaluation organization ap- was located and in which there is a
proved by the American Physical Ther- member organization of the World Con-
apy Association or identified in 8 CFR federation for Physical Therapy.
212.15(e) as it relates to physical thera- (B) Meets the requirements for mem-
pists. bership in a member organization of
(2) Passed an examination for phys- the World Confederation for Physical
ical therapists approved by the State Therapy.
in which physical therapy services are (8) Physical therapist assistant. A per-
provided. son who is licensed, registered or cer-
tified as a physical therapist assistant,
(iii) Before January 1, 2008—
if applicable, by the State in which
(A) Graduated from a physical ther-
practicing, unless licensure does not
apy curriculum approved by one of the
apply and meets one of the following
following:
requirements:
(1) The American Physical Therapy (i) Graduated from a physical thera-
Association. pist assistant curriculum approved by
(2) The Committee on Allied Health the Commission on Accreditation in
Education and Accreditation of the Physical Therapy Education of the
American Medical Association. American Physical Therapy Associa-
(3) The Council on Medical Education tion; or if educated outside the United
of the American Medical Association States or trained in the United States
and the American Physical Therapy military, graduated from an education
Association. program determined to be substan-
(iv) On or before December 31, 1977 tially equivalent to physical therapist
was licensed or qualified as a physical assistant entry level education in the
therapist and meets both of the fol- United States by a credentials evalua-
lowing: tion organization approved by the
(A) Has 2 years of appropriate experi- American Physical Therapy Associa-
ence as a physical therapist. tion or identified at 8 CFR 212.15(e);
(B) Has achieved a satisfactory grade and
on a proficiency examination con- (ii) Passed a national examination
ducted, approved, or sponsored by the for physical therapist assistants.

U.S. Public Health Service. (A) On or before December 31, 2009,
(v) Before January 1, 1966— meets one of the following:
346
(1) Is licensed, or otherwise regulated with all applicable Federal, State, and
in the State in which practicing. local laws and regulations related to
(2) In States where licensure or other the health and safety of patients. If
regulations do not apply, graduated be- State or local law provides for licens-
fore December 31, 2009, from a 2-year ing of hospices, the hospice must be li-
college-level program approved by the censed.
American Physical Therapy Associa- (a) Standard: Multiple locations. Every
tion and after January 1, 2010, meets hospice must comply with the require-
the requirements of paragraph (b)(8) of ments of § 420.206 of this chapter re-
this section. garding disclosure of ownership and
(3) Before January 1, 2008, where li- control information. All hospice mul-
censure or other regulation does not tiple locations must be approved by
apply, graduated from a 2-year college Medicare and licensed in accordance
level program approved by the Amer- with State licensure laws, if applicable,
ican Physical Therapy Association. before providing Medicare reimbursed
(4) On or before December 31, 1977, services.
was licensed or qualified as a physical (b) Standard: Laboratory services. (1) If
therapist assistant and has achieved a the hospice engages in laboratory test-
satisfactory grade on a proficiency ex- ing other than assisting a patient in
amination conducted, approved, or self-administering a test with an appli-
sponsored by the U.S. Public Health ance that has been approved for that
Service. purpose by the FDA, the hospice must
(c) Personnel qualifications when no be in compliance with all applicable re-
State licensing, certification or registra- quirements of part 493 of this chapter.
tion requirements exist. If no State li- (2) If the hospice chooses to refer
censing laws, certification or registra- specimens for laboratory testing to a
tion requirements exist for the profes- reference laboratory, the reference lab-
sion, the following requirements must oratory must be certified in the appro-
be met: priate specialties and subspecialties of
(1) Registered nurse. A graduate of a services in accordance with the appli-
school of professional nursing. cable requirements of part 493 of this
(2) Licensed practical nurse. A person chapter.
who has completed a practical nursing
program.
(d) Standard: Criminal background Subpart E [Reserved]
checks. (1) The hospice must obtain a
criminal background check on all hos- Subpart F—Covered Services
pice employees who have direct patient
contact or access to patient records. § 418.200 Requirements for coverage.
Hospice contracts must require that all To be covered, hospice services must
contracted entities obtain criminal meet the following requirements. They
background checks on contracted em- must be reasonable and necessary for
ployees who have direct patient con- the palliation and management of the
tact or access to patient records. terminal illness as well as related con-
(2) Criminal background checks must ditions. The individual must elect hos-
be obtained in accordance with State pice care in accordance with § 418.24. A
requirements. In the absence of State plan of care must be established and
requirements, criminal background periodically reviewed by the attending
checks must be obtained within three physician, the medical director, and
months of the date of employment for the interdisciplinary group of the hos-
all states that the individual has lived pice program as set forth in § 418.56.
or worked in the past 3 years. That plan of care must be established
before hospice care is provided. The
§ 418.116 Condition of participation: services provided must be consistent
Compliance with Federal, State,
and local laws and regulations re- with the plan of care. A certification
lated to the health and safety of pa- that the individual is terminally ill
tients. must be completed as set forth in sec-

The hospice and its staff must oper- tion § 418.22.
ate and furnish services in compliance [74 FR 39413, Aug. 6, 2009]
347
§ 418.202 42 CFR Ch. IV (10–1–17 Edition)
§ 418.202 Covered services. ness are covered. Appliances may in-

All services must be performed by ap- clude covered durable medical equip-
propriately qualified personnel, but it ment as described in § 410.38 of this
is the nature of the service, rather chapter as well as other self-help and
than the qualification of the person personal comfort items related to the
who provides it, that determines the palliation or management of the pa-
coverage category of the service. The tient’s terminal illness. Equipment is
following services are covered hospice provided by the hospice for use in the
services: patient’s home while he or she is under
(a) Nursing care provided by or under hospice care. Medical supplies include
the supervision of a registered nurse. those that are part of the written plan
(b) Medical social services provided of care and that are for palliation and
by a social worker under the direction management of the terminal or related
of a physician. conditions.
(c) Physicians’ services performed by (g) Home health or hospice aide services
a physician as defined in § 410.20 of this
furnished by qualified aides as designated
chapter except that the services of the
in § 418.76 and homemaker services. Home
hospice medical director or the physi-
cian member of the interdisciplinary health aides (also known as hospice
group must be performed by a doctor of aides) may provide personal care serv-
medicine or osteopathy. ices as defined in § 409.45(b) of this
(d) Counseling services provided to chapter. Aides may perform household
the terminally ill individual and the services to maintain a safe and sani-
family members or other persons car- tary environment in areas of the home
ing for the individual at home. Coun- used by the patient, such as changing
seling, including dietary counseling, bed linens or light cleaning and laun-
may be provided both for the purpose dering essential to the comfort and
of training the individual’s family or cleanliness of the patient. Aide serv-
other caregiver to provide care, and for ices must be provided under the gen-
the purpose of helping the individual eral supervision of a registered nurse.
and those caring for him or her to ad- Homemaker services may include as-
just to the individual’s approaching sistance in maintenance of a safe and
death. healthy environment and services to
(e) Short-term inpatient care pro-
enable the individual to carry out the
vided in a participating hospice inpa-
treatment plan.
tient unit, or a participating hospital
or SNF, that additionally meets the (h) Physical therapy, occupational
standards in § 418.202 (a) and (e) regard- therapy and speech-language pathology
ing staffing and patient areas. Services services in addition to the services de-
provided in an inpatient setting must scribed in § 409.33 (b) and (c) of this
conform to the written plan of care. In- chapter provided for purposes of symp-
patient care may be required for proce- tom control or to enable the patient to
dures necessary for pain control or maintain activities of daily living and
acute or chronic symptom manage- basic functional skills.
ment. (i) Effective April 1, 1998, any other
Inpatient care may also be furnished as service that is specified in the patient’s
a means of providing respite for the in- plan of care as reasonable and nec-
dividual’s family or other persons car- essary for the palliation and manage-
ing for the individual at home. Respite ment of the patient’s terminal illness
care must be furnished as specified in and related conditions and for which
§ 418.108(b). Payment for inpatient care payment may otherwise be made under
will be made at the rate appropriate to Medicare.
the level of care as specified in § 418.302.
(f) Medical appliances and supplies, in- [48 FR 56026, Dec. 16, 1983, as amended at 51
cluding drugs and biologicals. Only drugs FR 41351, Nov. 14, 1986; 55 FR 50835, Dec. 11,
as defined in section 1861(t) of the Act 1990; 59 FR 65498, Dec. 20, 1994; 70 FR 70547,
and which are used primarily for the Nov. 22, 2005; 73 FR 32220, June 5, 2008; 74 FR
39413, Aug. 6, 2009; 76 FR 47331, Aug. 4, 2011]
relief of pain and symptom control re-
lated to the individual’s terminal ill-
348
§ 418.204 Special coverage require- regarding hospice and other care op-
ments. tions. In addition, the services may in-
(a) Periods of crisis. Nursing care may clude advising the individual regarding
be covered on a continuous basis for as advanced care planning.
much as 24 hours a day during periods (3) Provision of pre-election hospice
of crisis as necessary to maintain an services. (i) The services must be fur-
individual at home. Either homemaker nished by a physician.
or home health aide (also known as (ii) The physician furnishing these
hospice aide) services or both may be services must be an employee or med-
covered on a 24-hour continuous basis ical director of the hospice billing for
during periods of crisis but care during this service.
these periods must be predominantly (iii) The services cannot be furnished
nursing care. A period of crisis is a pe-
by hospice personnel other than em-
riod in which the individual requires
ployed physicians, such as but not lim-
continuous care to achieve palliation
and management of acute medical ited to nurse practitioners, nurses, or
symptoms. social workers, physicians under con-
(b) Respite care. (1) Respite care is tractual arrangements with the hos-
short-term inpatient care provided to pice or by the beneficiary’s physician,
the individual only when necessary to if that physician is not an employee of
relieve the family members or other the hospice.
persons caring for the individual. (iv) If the beneficiary’s attending
(2) Respite care may be provided only physician is also the medical director
on an occasional basis and may not be or a physician employee of the hospice,
reimbursed for more than five consecu- the attending physician may not pro-
tive days at a time. vide nor may the hospice bill for this
(c) Bereavement counseling. Bereave- service because that physician already
ment counseling is a required hospice possesses the expertise necessary to
service but it is not reimbursable. furnish end-of-life evaluation and man-
[48 FR 56026, Dec. 16, 1983, as amended at 55 agement, and counseling services.
FR 50835, Dec. 11, 1990; 74 FR 39413, Aug. 6, (4) Documentation. (i) If the individ-
2009] ual’s physician initiates the request for
services of the hospice medical director
§ 418.205 Special requirements for hos-
pice pre-election evaluation and or physician, appropriate documenta-
counseling services. tion is required.
(a) Definition. As used in this section (ii) The request or referral must be in
the following definition applies. writing, and the hospice medical direc-
Terminal illness has the same meaning tor or physician employee is expected
as defined in § 418.3. to provide a written note on the pa-
(b) General. Effective January 1, 2005, tient’s medical record.
payment for hospice pre-election eval- (iii) The hospice agency employing
uation and counseling services as speci- the physician providing these services
fied in § 418.304(d) may be made to a is required to maintain a written
hospice on behalf of a Medicare bene- record of the services furnished.
ficiary if the requirements of this sec- (iv) If the services are initiated by
tion are met. the beneficiary, the hospice agency is
(1) The beneficiary. The beneficiary: required to maintain a record of the
(i) Has been diagnosed as having a services and documentation that com-
terminal illness as defined in § 418.3. munication between the hospice med-
(ii) Has not made a hospice election. ical director or physician and the bene-
(iii) Has not previously received hos-
ficiary’s physician occurs, with the
pice pre-election evaluation and con-
sultation services specified under this beneficiary’s permission, to the extent
section. necessary to ensure continuity of care.
(2) Services provided. The hospice pre- [69 FR 66425, Nov. 15, 2004]
election services include an evaluation

of an individual’s need for pain and
symptom management and counseling
349
§ 418.301 42 CFR Ch. IV (10–1–17 Edition)
Subpart G—Payment for Hospice only furnished during brief periods of

Care crisis as described in § 418.204(a) and
only as necessary to maintain the ter-
§ 418.301 Basic rules. minally ill patient at home.
(a) Medicare payment for covered (3) Inpatient respite care day. An inpa-
hospice care is made in accordance tient respite care day is a day on which
with the method set forth in § 418.302. the individual who has elected hospice
(b) Medicare reimbursement to a hos- care receives care in an approved facil-
pice in a cap period is limited to a cap ity on a short-term basis for respite.
amount specified in § 418.309. (4) General inpatient care day. A gen-
(c) The hospice may not charge a pa- eral inpatient care day is a day on
tient for services for which the patient which an individual who has elected
is entitled to have payment made hospice care receives general inpatient
under Medicare or for services for care in an inpatient facility for pain
which the patient would be entitled to control or acute or chronic symptom
payment, as described in § 489.21 of this management which cannot be managed
chapter. in other settings.
(c) The payment amounts for the cat-
[48 FR 56026, Dec. 16, 1983, as amended at 56 egories of hospice care are fixed pay-
FR 26919, June 12, 1991; 70 FR 70547, Nov. 22,
2005]
ment rates that are established by
CMS in accordance with the procedures
§ 418.302 Payment procedures for hos- described in § 418.306. Payment rates
pice care. are determined for the following cat-
(a) CMS establishes payment egories:
amounts for specific categories of cov- (1) Routine home care.
ered hospice care. (2) Continuous home care.
(b) Payment amounts are determined (3) Inpatient respite care.
within each of the following categories: (4) General inpatient care.
(1) Routine home care day. A routine (d)(1) The Medicare Administrative
home care day is a day on which an in- Contractor reimburses the hospice its
dividual who has elected to receive appropriate payment amount for each
hospice care is at home and is not re- day for which an eligible Medicare ben-
ceiving continuous care as defined in eficiary is under the hospice’s care.
paragraph (b)(2) of this section. (2) Effective December 8, 2003, if a
(i) Service intensity add-on. Routine hospice makes arrangements with an-
home care days that occur during the other hospice to provide services under
last 7 days of a hospice election ending the circumstances specified in section
with a patient discharged due to death 1861(dd)(5)(D) of the Act, the Medicare
are eligible for a service intensity add- Administrative Contractor reimburses
on payment. the hospice for which the beneficiary
(ii) The service intensity add-on pay- has made an election as described in
ment shall be equal to the continuous paragraph (d)(1) of this section.
home care hourly payment rate, as de- (e) The Medicare Administrative
scribed in paragraph (e)(4) of this sec- Contractor makes payment according
tion, multiplied by the amount of di- to the following procedures:
rect patient care actually provided by (1) Payment is made to the hospice
a RN and/or social worker, up to 4 for each day during which the bene-
hours total per day. ficiary is eligible and under the care of
(2) Continuous home care day. A con- the hospice, regardless of the amount
tinuous home care day is a day on of services furnished on any given day
which an individual who has elected to (except as set out in paragraph (b)(1)(i)
receive hospice care is not in an inpa- of this section).
tient facility and receives hospice care (2) Payment is made for only one of
consisting predominantly of nursing the categories of hospice care described
care on a continuous basis at home. in § 418.302(b) for any particular day.
Home health aide (also known as a hos- (3) On any day on which the bene-
pice aide) or homemaker services or ficiary is not an inpatient, the hospice

both may also be provided on a contin- is paid the routine home care rate, un-
uous basis. Continuous home care is less the patient receives continuous
350
care as defined in paragraph (b)(2) of furnished to Medicare patients. Only

this section for a period of at least 8 inpatient days that were provided and
hours. In that case, a portion of the billed as general inpatient or respite
continuous care day rate is paid in ac- days are counted as inpatient days
cordance with paragraph (e)(4) of this when computing the inpatient cap.
section. (3) If the number of days of inpatient
(4) The hospice payment on a contin- care furnished to Medicare patients is
uous care day varies depending on the equal to or less than 20 percent of the
number of hours of continuous services total days of hospice care to Medicare
provided. The continuous home care patients, no adjustment is necessary.
rate is divided by 24 to yield an hourly
Overall payments to a hospice are sub-
rate. The number of hours of contin-
ject to the cap amount specified in
uous care provided during a continuous
home care day is then multiplied by § 418.309.
the hourly rate to yield the continuous (4) If the number of days of inpatient
home care payment for that day. A care furnished to Medicare patients ex-
minimum of 8 hours of care must be ceeds 20 percent of the total days of
furnished on a particular day to qualify hospice care to Medicare patients, the
for the continuous home care rate. total payment for inpatient care is de-
(5) Subject to the limitations determined in accordance with the proce-
scribed in paragraph (f) of this section, dures specified in paragraph (f)(5) of
on any day on which the beneficiary is this section. That amount is compared
an inpatient in an approved facility for to actual payments for inpatient care,
inpatient care, the appropriate inpa- and any excess reimbursement must be
tient rate (general or respite) is paid refunded by the hospice. Overall pay-
depending on the category of care fur- ments to the hospice are subject to the
nished. The inpatient rate (general or cap amount specified in § 418.309.
respite) is paid for the date of admis- (5) If a hospice exceeds the number of
sion and all subsequent inpatient days, inpatient care days described in para-
except the day on which the patient is graph (f)(4), the total payment for inpa-
discharged. For the day of discharge, tient care is determined as follows:
the appropriate home care rate is paid
(i) Calculate the ratio of the max-
unless the patient dies as an inpatient.
In the case where the beneficiary is dis- imum number of allowable inpatient
charged deceased, the inpatient rate days to the actual number of inpatient
(general or respite) is paid for the dis- care days furnished by the hospice to
charge day. Payment for inpatient res- Medicare patients.
pite care is subject to the requirement (ii) Multiply this ratio by the total
that it may not be provided consecu- reimbursement for inpatient care made
tively for more than 5 days at a time. by the Medicare Administrative Con-
Payment for the sixth and any subse- tractor.
quent day of respite care is made at the (iii) Multiply the number of actual
routine home care rate. inpatient days in excess of the limita-
(f) Payment for inpatient care is lim- tion by the routine home care rate.
ited as follows: (iv) Add the amounts calculated in
(1) The total payment to the hospice paragraphs (f)(5)(ii) and (iii) of this sec-
for inpatient care (general or respite) tion.
is subject to a limitation that total in- (g) Payment for routine home care,
patient care days for Medicare patients continuous home care, general inpa-
not exceed 20 percent of the total days tient care and inpatient respite care is
for which these patients had elected
made on the basis of the geographic lo-
hospice care.
cation where the services are provided.
(2) At the end of a cap period, the
Medicare Administrative Contractor [48 FR 56026, Dec. 16, 1983, as amended at 56
calculates a limitation on payment for FR 26919, June 12, 1991; 70 FR 45145, Aug. 4,
inpatient care to ensure that Medicare 2005; 70 FR 70547, Nov. 22, 2005; 72 FR 50228,
payment is not made for days of inpa- Aug. 31, 2007; 74 FR 39414, Aug. 6, 2009; 80 FR
tient care in excess of 20 percent of the 47206, Aug. 6, 2015]
total number of days of hospice care
351
§ 418.304 42 CFR Ch. IV (10–1–17 Edition)
§ 418.304 Payment for physician and have elected the hospice benefit and
nurse practitioner services. who have selected a nurse practitioner
(a) The following services performed as their attending physician. This ap-
by hospice physicians and nurse practi- plies to nurse practitioners without re-
tioners are included in the rates de- gard to whether they are hospice em-
scribed in § 418.302: ployees.
(1) General supervisory services of (2) Nurse practitioners may bill and
the medical director. receive payment for services only if
(2) Participation in the establish- the—
ment of plans of care, supervision of (i) Nurse practitioner is the bene-
care and services, periodic review and ficiary’s attending physician as defined
updating of plans of care, and estab- in § 418.3;
lishment of governing policies by the (ii) Services are medically reasonable
physician member of the interdiscipli- and necessary;
nary group. (iii) Services are performed by a phy-
(b) For services not described in para- sician in the absence of the nurse prac-
graph (a) of this section, a specified titioner; and
Medicare contractor pays the hospice (iv) Services are not related to the
an amount equivalent to 100 percent of certification of terminal illness speci-
the physician fee schedule for those fied in § 418.22.
physician services furnished by hospice (3) Payment for nurse practitioner
employees or under arrangements with services are made at 85 percent of the
the hospice. Reimbursement for these physician fee schedule amount.
physician services is included in the [48 FR 56026, Dec. 16, 1983, as amended at 69
amount subject to the hospice payment FR 66426, Nov. 15, 2004; 70 FR 45145, Aug. 4,
limit described in § 418.309. Services 2005; 70 FR 70547, Nov. 22, 2005]
furnished voluntarily by physicians are
not reimbursable. § 418.306 Annual update of the pay-
(c) Services of the patient’s attending ment rates and adjustment for area
physician, if he or she is not an em- wage differences.
ployee of the hospice or providing serv- (a) Applicability. CMS establishes pay-
ices under arrangements with the hos- ment rates for each of the categories of
pice, are not considered hospice serv- hospice care described in § 418.302(b).
ices and are not included in the The rates are established using the
amount subject to the hospice payment methodology described in section
limit described in § 418.309. These serv- 1814(i)(1)(C) of the Act and in accord-
ices are paid by the carrier under the ance with section 1814(i)(6)(D) of the
procedures in subpart B, part 414 of this Act.
chapter. (b) Annual update of the payment
(d) Payment for hospice pre-election rates. The payment rates for routine
evaluation and counseling services. The home care and other services included
intermediary makes payment to the in hospice care are the payment rates
hospice for the services established in in effect under this paragraph during
§ 418.205. Payment for this service is set the previous fiscal year increased by
at an amount established under the the hospice payment update percentage
physician fee schedule, for an office or increase (as defined in
other outpatient visit for evaluation sections1814(i)(1)(C) of the Act), appli-
and management associated with pre- cable to discharges occurring in the fis-
senting problems of moderate severity cal year.
and requiring medical decision-making (1) For fiscal year 2014 and subse-
of low complexity other than the por- quent fiscal years, in accordance with
tion of the amount attributable to the section 1814(i)(5)(A)(i) of the Act, in the
practice expense component. Payment case of a Medicare-certified hospice
for this pre-election service does not that submits hospice quality data, as
count towards the hospice cap amount. specified by the Secretary, the pay-
(e)(1) Effective December 8, 2003, ment rates are equal to the rates for
Medicare pays for attending physician the previous fiscal year increased by
services provided by nurse practi- the applicable hospice payment update
tioners to Medicare beneficiaries who percentage increase.
352
(2) For fiscal year 2014 and subse- weekly period of service as described in
quent fiscal years, in accordance with § 413.64(h)(5) of this chapter. Under cer-
section 1814(i)(5)(A)(i) of the Act, in the tain circumstances that are described
case of a Medicare-certified hospice in § 413.64(g) of this chapter, a hospice
that does not submit hospice quality that is not receiving PIP may request
data, as specified by the Secretary, the an accelerated payment.
payment rates are equal to the rates
[59 FR 36713, July 19, 1994]
for the previous fiscal year increased
by the applicable hospice payment up-
§ 418.308 Limitation on the amount of
date percentage increase, minus 2 per- hospice payments.
centage points. Any reduction of the
percentage change will apply only to (a) Except as specified in paragraph
the fiscal year involved and will not be (b) of this section, the total Medicare
taken into account in computing the payment to a hospice for care furnished
payment amounts for a subsequent fis- during a cap period is limited by the
cal year. hospice cap amount specified in
(c) Adjustment for wage differences. § 418.309.
Each hospice’s labor market is deter- (b) Until October 1, 1986, payment to
mined based on definitions of Metro- a hospice that began operation before
politan Statistical Areas (MSAs) issued January 1, 1975 is not limited by the
by OMB. CMS will issue annually, in amount of the hospice cap specified in
the FEDERAL REGISTER, a hospice wage § 418.309.
index based on the most current avail- (c) The hospice must file its aggre-
able CMS hospital wage data, including gate cap determination notice with its
changes to the definition of MSAs. The Medicare contractor no later than 5
urban and rural area geographic classi- months after the end of the cap year
fications are defined in and remit any overpayment due at that
§ 412.64(b)(1)(ii)(A) through (C) of this time. Hospices shall file the aggregate
chapter. The payment rates established cap using data no earlier than 3
by CMS are adjusted by the Medicare months after the end of the cap period.
contractor to reflect local differences The Medicare contractor will notify
in wages according to the revised wage the hospice of the final determination
data. of program reimbursement in accord-
(d) Federal Register notices. CMS pub- ance with procedures similar to those
lishes as a notice in the FEDERAL REG- described in § 405.1803 of this chapter. If
ISTER any proposal to change the meth- a provider fails to file its self-deter-
odology for determining the payment mined cap determination with its
rates. Medicare contractor within 5 months
[56 FR 26919, June 12, 1991, as amended at 59 after the cap year, payments to the
FR 26960, May 25, 1994; 62 FR 42882, Aug. 8, hospice will be suspended in whole or
1997; 70 FR 70548, Nov. 22, 2005; 73 FR 46486, in part, until a self-determined cap de-
Aug. 8, 2008; 79 FR 50509, Aug. 22, 2014; 80 FR termination is filed with the Medicare
47207, Aug. 6, 2015] contractor, in accordance
§ 418.307 Periodic interim payments. with§ 405.371(e) of this chapter.
(d) Payments made to a hospice dur-
Subject to the provisions of § 413.64(h) ing a cap period that exceed the cap
of this chapter, a hospice may elect to amount are overpayments and must be
receive periodic interim payments refunded.
(PIP) effective with claims received on
or after July 1, 1987. Payment is made [48 FR 56026, Dec. 16, 1983; 48 FR 57282, Dec.
biweekly under the PIP method unless 29, 1983, as amended at 79 FR 50509, Aug. 22,
the hospice requests a longer fixed in- 2014; 80 FR 47207, Aug. 6, 2015]
terval (not to exceed one month) be-
tween payments. The biweekly interim § 418.309 Hospice aggregate cap.
payment amount is based on the total A hospice’s aggregate cap is cal-
estimated Medicare payments for the culated by multiplying the adjusted
reporting period (as described in cap amount (determined in paragraph

§§ 418.302–418.306). Each payment is (a) of this section) by the number of
made 2 weeks after the end of a bi- Medicare beneficiaries, as determined
353
§ 418.309 42 CFR Ch. IV (10–1–17 Edition)
by one of two methodologies for deter- data available at the time of the cal-
mining the number of Medicare bene- culation.
ficiaries for a given cap year described (2) In the case in which a beneficiary
in paragraphs (b) and (c) of this sec- received care from more than one hos-
tion. pice, each hospice includes in its num-
(a) Cap Amount. The cap amount was ber of Medicare beneficiaries only that
set at $6,500 in 1983 and is updated fraction which represents the portion
using one of two methodologies de- of a patient’s total days of care in all
scribed in paragraphs (a)(1) and (a)(2) of hospices and all years that was spent
this section. in that hospice in that cap year, using
(1) For accounting years that end on the best data available at the time of
or before September 30, 2016 and end on the calculation. The aggregate cap cal-
or after October 1, 2025, the cap amount culation for a given cap year may be
is adjusted for inflation by using the adjusted after the calculation for that
percentage change in the medical care year based on updated data.
expenditure category of the Consumer (c) Patient-by-patient proportional
Price Index (CPI) for urban consumers methodology defined. A hospice’s aggre-
that is published by the Bureau of gate cap is calculated by multiplying
Labor Statistics. This adjustment is the adjusted cap amount determined in
made using the change in the CPI from paragraph (a) of this section by the
March 1984 to the fifth month of the number of Medicare beneficiaries as de-
cap year. scribed in paragraphs (c)(1) and (2) of
this section. For the purposes of the
(2) For accounting years that end
patient-by-patient proportional meth-
after September 30, 2016, and before Oc-
odology—
tober 1, 2025, the cap amount is the cap
(1) A hospice includes in its number
amount for the preceding accounting
of Medicare beneficiaries only that
year updated by the percentage update
fraction which represents the portion
to payment rates for hospice care for
of a patient’s total days of care in all
services furnished during the fiscal
hospices and all years that was spent
year beginning on the October 1 pre-
in that hospice in that cap year, using
ceding the beginning of the accounting the best data available at the time of
year as determined pursuant to section the calculation. The total number of
1814(i)(1)(C) of the Act (including the Medicare beneficiaries for a given hos-
application of any productivity or pice’s cap year is determined by sum-
other adjustments to the hospice per- ming the whole or fractional share of
centage update). each Medicare beneficiary that re-
(b) Streamlined methodology defined. A ceived hospice care during the cap
hospice’s aggregate cap is calculated year, from that hospice.
by multiplying the adjusted cap (2) The aggregate cap calculation for
amount determined in paragraph (a) of a given cap year may be adjusted after
this section by the number of Medicare the calculation for that year based on
beneficiaries as determined in para- updated data.
graphs (b)(1) and (2) of this section. For (d) Application of methodologies. (1)
purposes of the streamlined method- For cap years ending October 31, 2011
ology calculation— and for prior cap years, a hospice’s ag-
(1) In the case in which a beneficiary gregate cap is calculated using the
received care from only one hospice, streamlined methodology described in
the hospice includes in its number of paragraph (b) of this section, subject to
Medicare beneficiaries those Medicare the following:
beneficiaries who have not previously (i) A hospice that has not received a
been included in the calculation of any cap determination for a cap year end-
hospice cap, and who have filed an elec- ing on or before October 31, 2011 as of
tion to receive hospice care in accord- October 1, 2011, may elect to have its
ance with § 418.24 during the period be- final cap determination for such cap
ginning on September 28 (34 days before years calculated using the patient-by-
the beginning of the cap year) and end- patient proportional methodology de-
ing on September 27 (35 days before the scribed in paragraph (c) of this section;
end of the cap year), using the best or
354
(ii) A hospice that has filed a timely past cap year determinations may be
appeal regarding the methodology used adjusted to prevent the over-counting
for determining the number of Medi- of beneficiaries, subject to existing re-
care beneficiaries in its cap calculation opening regulations.
for any cap year is deemed to have
elected that its cap determination for FR 47332, Aug. 4, 2011; 80 FR 47207, Aug. 6,
the challenged year, and all subsequent 2015]
cap years, be calculated using the pa-
tient-by-patient proportional method- § 418.310 Reporting and recordkeeping
ology described in paragraph (c) of this requirements.
section. Hospices must provide reports and
(2) For cap years ending October 31, keep records as the Secretary deter-
2012, and all subsequent cap years, a mines necessary to administer the pro-
hospice’s aggregate cap is calculated gram.
using the patient-by-patient propor-
tional methodology described in para- § 418.311 Administrative appeals.
graph (c) of this section, subject to the
A hospice that believes its payments
following:
have not been properly determined in
(i) A hospice that has had its cap cal-
accordance with these regulations may
culated using the patient-by-patient
request a review from the intermediary
proportional methodology for any cap
or the Provider Reimbursement Review
year(s) prior to the 2012 cap year is not
Board (PRRB) if the amount in con-
eligible to elect the streamlined meth-
troversy is at least $1,000 or $10,000, re-
odology, and must continue to have the
spectively. In such a case, the proce-
patient-by-patient proportional meth-
dure in 42 CFR part 405, subpart R, will
odology used to determine the number
be followed to the extent that it is ap-
of Medicare beneficiaries in a given cap
plicable. The PRRB, subject to review
year.
by the Secretary under § 405.1875 of this
(ii) A hospice that is eligible to make
chapter, shall have the authority to de-
a one-time election to have its cap cal-
termine the issues raised. The methods
culated using the streamlined method-
and standards for the calculation of the
ology must make that election no later
statutorily defined payment rates by
than 60 days after receipt of its 2012 cap
CMS are not subject to appeal.
determination. A hospice’s election to
have its cap calculated using the [74 FR 39414, Aug. 6, 2009, as amended at 78
streamlined methodology would re- FR 48281, Aug. 7, 2013]
main in effect unless:
(A) The hospice subsequently submits § 418.312 Data submission require-
a written election to change the meth- ments under the hospice quality re-
porting program.
odology used in its cap determination
to the patient-by-patient proportional (a) General rule. Except as provided in
methodology; or paragraph (g) of this section, Medicare-
(B) The hospice appeals the stream- certified hospices must submit to CMS
lined methodology used to determine data on measures selected under sec-
the number of Medicare beneficiaries tion 1814(i)(5)(C) of the Act in a form
used in the aggregate cap calculation. and manner, and at a time, specified by
(3) If a hospice that elected to have the Secretary.
its aggregate cap calculated using the (b) Submission of Hospice Quality Re-
streamlined methodology under para- porting Program data. Hospices are re-
graph (d)(2)(ii) of this section subse- quired to complete and submit an ad-
quently elects the patient-by-patient mission Hospice Item Set (HIS) and a
proportional methodology or appeals discharge HIS for each patient admis-
the streamlined methodology, under sion to hospice, regardless of payer or
paragraph (d)(2)(ii)(A) or (B) of this patient age. The HIS is a standardized
section, the hospice’s aggregate cap de- set of items intended to capture pa-
termination for that cap year and all tient-level data.
subsequent cap years is to be cal- (c) A hospice that receives notice of

culated using the patient-by-patient its CMS certification number before
proportional methodology. As such, November 1 of the calendar year before
355
§ 418.400 42 CFR Ch. IV (10–1–17 Edition)
the fiscal year for which a payment de- ing Program for a particular reporting
termination will be made must submit period. A hospice must submit a recon-
data for the calendar year. sideration request to CMS no later
(d) Medicare-certified hospices must than 30 days from the date identified
contract with CMS-approved vendors on the annual payment update notifi-
to collect the CAHPS® Hospice Survey cation provided to the hospice.
data on their behalf and submit the (2) Reconsideration request submis-
data to the Hospice CAHPS® Data Cen- sion requirements are available on the
ter. CMS Hospice Quality Reporting Web
(e) If the hospice’s total, annual, site on CMS.gov.
unique, survey-eligible, deceased pa- (3) A hospice that is dissatisfied with
tient count for the prior calendar year a decision made by CMS on its recon-
is less than 50 patients, the hospice is sideration request may file an appeal
eligible to be exempt from the CAHPS® with the Provider Reimbursement Re-
Hospice Survey reporting requirements view Board under part 405, subpart R of
in the current calendar year. In order this chapter.
to qualify for this exemption the hos- [79 FR 50510, Aug. 22, 2014]
pice must submit to CMS its total, an-
nual, unique, survey-eligible, deceased Subpart H—Coinsurance
patient count for the prior calendar
year. § 418.400 Individual liability for coin-
(f) Vendors that want to become surance for hospice care.
CMS-approved CAHPS® Hospice Survey An individual who has filed an elec-
vendors must meet the minimum busi- tion for hospice care in accordance
ness requirements. Survey vendors with § 418.24 is liable for the following
must have been in business for a min- coinsurance payments. Hospices may
imum of 4 years, have conducted sur- charge individuals the applicable coin-
veys in the approved survey mode for a surance amounts.
minimum of 3 years, and have con- (a) Drugs and biologicals. An indi-
ducted surveys of individual patients vidual is liable for a coinsurance pay-
for a minimum of 2 years. For Hospice ment for each palliative drug and bio-
CAHPS®, a ‘‘survey of individual pa- logical prescription furnished by the
tients’’ is defined as the collection of hospice while the individual is not an
data from at least 600 individual pa- inpatient. The amount of coinsurance
tients selected by statistical sampling for each prescription approximates 5
methods, and the data collected are percent of the cost of the drug or bio-
used for statistical purposes. Vendors logical to the hospice determined in ac-
may not use home-based or virtual cordance with the drug copayment
interviewers to conduct the CAHPS® schedule established by the hospice, ex-
Hospice Survey, nor may they conduct cept that the amount of coinsurance
any survey administration processes for each prescription may not exceed
(for example, mailings) from a resi- $5. The cost of the drug or biological
dence. may not exceed what a prudent buyer
(g) No organization, firm, or business would pay in similar circumstances.
that owns, operates, or provides staff- The drug copayment schedule must be
ing for a hospice is permitted to admin- reviewed for reasonableness and ap-
ister its own Hospice CAHPS® survey proved by the intermediary before it is
or administer the survey on behalf of used.
any other hospice in the capacity as a (b) Respite care. (1) The amount of co-
Hospice CAHPS® survey vendor. Such insurance for each respite care day is
organizations will not be approved by equal to 5 percent of the payment made
CMS as CAHPS® Hospice Survey ven- by CMS for a respite care day.
dors. (2) The amount of the individual’s co-
(h) Reconsiderations and appeals of insurance liability for respite care dur-
Hospice Quality Reporting Program deci- ing a hospice coinsurance period may
sions. (1) A hospice may request recon- not exceed the inpatient hospital de-
sideration of a decision by CMS that ductible applicable for the year in

the hospice has not met the require- which the hospice coinsurance period
ments of the Hospice Quality Report- began.
356
(3) The individual hospice coinsur- 419.2 Basis of payment.

ance period—
(i) Begins on the first day an election Subpart B—Categories of Hospitals and
filed in accordance with § 418.24 is in ef- Services Subject to and Excluded
fect for the beneficiary; and From the Hospital Outpatient Prospec-
tive Payment System
(ii) Ends with the close of the first
period of 14 consecutive days on each of 419.20 Hospitals subject to the hospital out-
which an election is not in effect for patient prospective payment system.
the beneficiary. 419.21 Hospital services subject to the out-
patient prospective payment system.
§ 418.402 Individual liability for serv- 419.22 Hospital services excluded from pay-
ices that are not considered hospice ment under the hospital outpatient pro-
care. spective payment system.
Medicare payment to the hospice dis- Subpart C—Basic Methodology for Deter-
charges an individual’s liability for mining Prospective Payment Rates for
payment for all services, other than Hospital Outpatient Services
the hospice coinsurance amounts de-
scribed in § 418.400, that are considered 419.30 Base expenditure target for calendar
covered hospice care (as described in year 1999.
§ 418.202). The individual is liable for 419.31 Ambulatory payment classification
the Medicare deductibles and coinsur- (APC) system and payment weights.
419.32 Calculation of prospective payment
ance payments and for the difference
rates for hospital outpatient services.
between the reasonable and actual
charge on unassigned claims on other Subpart D—Payments to Hospitals
covered services that are not consid-
ered hospice care. Examples of services 419.40 Payment concepts.
not considered hospice care include: 419.41 Calculation of national beneficiary
Services furnished before or after a copayment amounts and national Medi-
hospice election period; services of the care program payment amounts.
419.42 Hospital election to reduce copay-
individual’s attending physician, if the
ment.
attending physician is not an employee 419.43 Adjustments to national program
of or working under an arrangement payment and beneficiary copayment
with the hospice; or Medicare services amounts.
received for the treatment of an illness 419.44 Payment reductions for procedures.
or injury not related to the individual’s 419.45 Payment and copayment reduction
terminal condition. for devices replaced without cost or when
full or partial credit is received.
§ 418.405 Effect of coinsurance liability 419.46 Participation, data submission, and
on Medicare payment. validation requirements under the Hos-
pital Outpatient Quality Reporting
The Medicare payment rates estab- (OQR) Program.
lished by CMS in accordance with 419.48 Definition of excepted items and serv-
§ 418.306 are not reduced when the indi- ices.
vidual is liable for coinsurance pay-
ments. Instead, when establishing the Subpart E—Updates
payment rates, CMS offsets the esti-
419.50 Annual updates.
mated cost of services by an estimate
of average coinsurance amounts hos- Subpart F—Limitations on Review
pices collect.
419.60 Limitations on administrative and
[56 FR 26919, June 12, 1991] judicial review.
PART 419—PROSPECTIVE PAYMENT Subpart G—Transitional Pass-through

SYSTEM FOR HOSPITAL OUT- Payments
PATIENT DEPARTMENT SERVICES 419.62 Transitional pass-through payments:
General rules.
419.64 Transitional pass-through payments:
Subpart A—General Provisions

Drugs and biologicals.
Sec. 419.66 Transitional pass-through payments:
419.1 Basis and scope. Medical devices.
357
§ 419.1 42 CFR Ch. IV (10–1–17 Edition)
Subpart H—Transitional Corridors payment rate for each service or proce-

dure for which payment is allowed
419.70 Transitional adjustment to limit de-
cline in payment.
under the hospital outpatient prospec-
tive payment system is determined ac-
AUTHORITY: Secs. 1102, 1833(t), and 1871 of cording to the methodology described
the Social Security Act (42 U.S.C. 1302,
in subpart C of this part. The manner
1395l(t), and 1395hh).
in which the Medicare payment
SOURCE: 65 FR 18542, Apr. 7, 2000, unless amount and the beneficiary copayment
otherwise noted. amount for each service or procedure
are determined is described in subpart
Subpart A—General Provisions D of this part.
(b) Determination of hospital outpatient
prospective payment rates: Packaged
(a) Basis. This part implements sec- costs. The prospective payment system
tion 1833(t) of the Act by establishing a establishes a national payment rate,
prospective payment system for serv- standardized for geographic wage dif-
ices furnished on or after July 1, 2000 ferences, that includes operating and
by hospital outpatient departments to capital-related costs that are integral,
Medicare beneficiaries who are reg- ancillary, supportive, dependent, or ad-
istered on hospital records as out- junctive to performing a procedure or
patients. furnishing a service on an outpatient
(b) Scope. This subpart describes the basis. In general, these packaged costs
basis of payment for outpatient hos- may include, but are not limited to,
pital services under the prospective the following items and services, the
payment system. Subpart B sets forth payment for which are packaged or
the categories of hospitals and services conditionally packaged into the pay-
that are subject to the outpatient hos- ment for the related procedures or
pital prospective payment system and services.
those categories of hospitals and serv- (1) Use of an operating suite, proce-
ices that are excluded from the out- dure room, or treatment room;
patient hospital prospective payment (2) Use of recovery room;
system. Subpart C sets forth the basic (3) Observation services;
methodology by which prospective pay-
(4) Anesthesia, certain drugs,
ment rates for hospital outpatient
biologicals, and other pharmaceuticals;
services are determined. Subpart D de-
medical and surgical supplies and
scribes Medicare payment amounts,
equipment; surgical dressings; and de-
beneficiary copayment amounts, and
vices used for external reduction of
methods of payment to hospitals under
fractures and dislocations;
the hospital outpatient prospective
payment system. Subpart E describes (5) Supplies and equipment for ad-
how the hospital outpatient prospec- ministering and monitoring anesthesia
tive payment system may be updated. or sedation;
Subpart F describes limitations on ad- (6) Intraocular lenses (IOLs);
ministrative and judicial review. Sub- (7) Ancillary services;
part G describes the transitional pay- (8) Capital-related costs;
ment adjustments that are made before (9) Implantable items used in connec-
2004 to limit declines in payment for tion with diagnostic X-ray tests, diag-
outpatient services. nostic laboratory tests, and other diag-
nostic tests;
§ 419.2 Basis of payment. (10) Durable medical equipment that
(a) Unit of payment. Under the hos- is implantable;
pital outpatient prospective payment (11) Implantable and insertable med-
system, predetermined amounts are ical items and devices, including, but
paid for designated services furnished not limited to, prosthetic devices
to Medicare beneficiaries. These serv- (other than dental) which replace all or
ices are identified by codes established part of an internal body organ (includ-
under the Centers for Medicare & Med- ing colostomy bags and supplies di-
icaid Services Common Procedure Cod- rectly related to colostomy care), in-
ing System (HCPCS). The prospective cluding replacement of these devices;
358
(12) Costs incurred to procure donor (8) Corneal tissue acquisition or pro-
tissue other than corneal tissue. curement costs for corneal transplant
(13) Image guidance, processing, su- procedures.
pervision, and interpretation services;
(14) Intraoperative items and serv- FR 59922, Nov. 30, 2001; 70 FR 47490, Aug. 12,
ices; 2005; 77 FR 68558, Nov. 15, 2012; 78 FR 75196,
(15) Drugs, biologicals, and radio- Dec. 10, 2013; 79 FR 67031, Nov. 10, 2014; 80 FR
pharmaceuticals that function as sup- 70606, Nov. 13, 2015]
plies when used in a diagnostic test or
procedure (including but not limited Subpart B—Categories of Hos-
to, diagnostic radiopharmaceuticals, pitals and Services Subject to
contrast agents, and pharmacologic
stress agents;
and Excluded From the Hos-
(16) Drugs and biologicals that func- pital Outpatient Prospective
tion as supplies when used in a surgical Payment System
procedure (including, but not limited
§ 419.20 Hospitals subject to the hos-
to, skin substitutes and similar prod-
pital outpatient prospective pay-
ucts that aid wound healing and ment system.
implantable biologicals);
(17) Certain clinical diagnostic lab- (a) Applicability. The hospital out-
oratory tests; and patient prospective payment system is
(18) Certain services described by applicable to any hospital partici-
add-on codes. pating in the Medicare program, except
(c) Determination of hospital outpatient those specified in paragraph (b) of this
prospective payment rates: Excluded costs. section, for services furnished on or
The following costs are excluded from after August 1, 2000.
the hospital outpatient prospective (b) Hospitals excluded from the out-
payment system. patient prospective payment system. (1)
(1) The costs of direct graduate med- Those services furnished by Maryland
ical education activities as described in hospitals that are paid under a cost
§§ 413.75 through 413.83 of this chapter. containment waiver in accordance with
(2) The costs of nursing and allied section 1814(b)(3) of the Act are ex-
health programs as described in § 413.85 cluded from the hospital outpatient
of this chapter. prospective payment system.
(3) The costs associated with interns (2) Critical access hospitals (CAHs)
and residents not in approved teaching are excluded from the hospital out-
programs as described in § 415.202 of patient prospective payment system.
this chapter. (3) A hospital located outside one of
(4) The costs of teaching physicians the 50 States, the District of Columbia,
attributable to Part B services for hos- and Puerto Rico is excluded from the
pitals that elect cost-based reimburse- hospital outpatient prospective pay-
ment for teaching physicians under ment system.
§ 415.160. (4) A hospital of the Indian Health
(5) The reasonable costs of anesthesia Service.
services furnished to hospital out-
patients by qualified nonphysician an- FR 59922, Nov. 30, 2001]
esthetists (certified registered nurse
anesthetists and anesthesiologists’ as- § 419.21 Hospital services subject to
sistants) employed by the hospital or the outpatient prospective payment
obtained under arrangements, for hos- system.
pitals that meet the requirements
Except for services described in
under § 412.113(c) of this chapter.
§ 419.22, effective for services furnished
(6) Bad debts for uncollectible
on or after July 1, 2000, payment is
deductibles and coinsurances as de-
made under the hospital outpatient

scribed in § 413.89(b) of this chapter.
prospective payment system for the
(7) Organ acquisition costs paid under
following:
Part B.
359
§ 419.22 42 CFR Ch. IV (10–1–17 Edition)
(a) Medicare Part B services fur- (c) Physician assistant services, as

nished to hospital outpatients des- defined in section 1861(s)(2)(K)(i) of the
ignated by the Secretary under this Act.
part. (d) Certified nurse-midwife services,
(b) Services designated by the Sec- as defined in section 1861(gg) of the
retary that are covered under Medicare Act.
Part B when furnished to hospital inpa- (e) Services of qualified psycholo-
tients who are either not entitled to gists, as defined in section 1861(ii) of
benefits under Part A or who have ex- the Act.
hausted their Part A benefits but are (f) Services of an anesthetist as de-
entitled to benefits under Part B of the fined in § 410.69 of this chapter.
program. (g) Clinical social worker services as
(c) Partial hospitalization services defined in section 1861(hh)(2) of the
furnished by community mental health Act.
centers (CMHCs). (h) Physical therapy services, speech-
(d) The following medical and other language pathology services, and occu-
health services furnished by a home pational therapy services described in
health agency (HHA) to patients who section 1833(a)(8) of the Act for which
are not under an HHA plan or treat- payment is made under the fee sched-
ment or by a hospice program fur- ule described in section 1834(k) of the
nishing services to patients outside the Act.
hospice benefit: (i) Ambulance services, as described
(1) Antigens. in section 1861(v)(1)(U) of the Act, or, if
(2) Splints and casts. applicable, the fee schedule established
(3) Hepatitis B vaccine. under section 1834(l).
(e)(1) Effective January 1, 2005 (j) Except as provided in § 419.2(b)(11),
through December 31, 2008, an initial prosthetic devices and orthotic devices.
preventive physical examination, as (k) Except as provided in § 419.2(b)(10),
defined in § 410.16 of this chapter, if the durable medical equipment supplied by
examination is performed no later than the hospital for the patient to take
6 months after the individual’s initial home.
Part B coverage date that begins on or (l) Except as provided in § 419.2(b)(17),
after January 1, 2005. clinical diagnostic laboratory tests.
(2) Effective January 1, 2009, an ini- (m)(1) Services provided on or before
tial preventive physical examination, December 31, 2010, for patients with
as defined in § 410.16 of this chapter, if ESRD that are paid under the ESRD
the examination is performed no later composite rate and drugs and supplies
than 12 months after the date of the in- furnished during dialysis but not in-
dividual’s initial enrollment in Part B. cluded in the composite rate.
(2) Renal dialysis services provided
FR 66813, Nov. 1, 2002; 69 FR 65863, Nov. 15,
on or after January 1, 2011, for patients
2004; 71 FR 68227, Nov. 24, 2006: 75 FR 72265, with ESRD that are paid under the
Nov. 24, 2010] ESRD benefit, as described in subpart
H of part 413 of this chapter.
§ 419.22 Hospital services excluded (n) Services and procedures that the
from payment under the hospital Secretary designates as requiring inpa-
outpatient prospective payment tient care.
system. (o) Hospital outpatient services fur-
The following services are not paid nished to SNF residents (as defined in
for under the hospital outpatient pro- § 411.15(p) of this chapter) as part of the
spective payment system (except when patient’s resident assessment or com-
packaged as a part of a bundled pay- prehensive care plan (and thus included
ment): under the SNF PPS) that are furnished
(a) Physician services that meet the by the hospital ‘‘under arrangements’’
requirements of § 415.102(a) of this chap- but billable only by the SNF, regard-
ter for payment on a fee schedule basis. less of whether or not the patient is in
(b) Nurse practitioner and clinical a Part A SNF stay.

nurse specialist services, as defined in (p) Services that are not covered by
section 1861(s)(2)(K)(ii) of the Act. Medicare by statute.
360
(q) Services that are not reasonable § 419.31 Ambulatory payment classi-
or necessary for the diagnosis or treat- fication (APC) system and payment
ment of an illness or disease. weights.
(r) Services defined in § 419.21(b) that (a) APC groups. (1) CMS classifies
are furnished to inpatients of hospitals outpatient services and procedures
that do not submit claims for out- that are comparable clinically and in
patient services under Medicare Part terms of resource use into APC groups.
B. Except as specified in paragraph (a)(2)
(s) Effective December 8, 2003, screen- of this section, items and services
ing mammography services and effec- within a group are not comparable
tive January 1, 2005, diagnostic mam- with respect to the use of resources if
mography services. the highest geometric mean cost for an
(t) Effective January 1, 2011, annual item or service within the group is
wellness visit providing personalized more than 2 times greater than the
prevention plan services as defined in lowest geometric mean cost for an item
§ 410.15 of this chapter. or service within the group.
(u) Outpatient diabetes self-manage- (2) CMS may make exceptions to the
ment training. requirements set forth in paragraph
(v) Effective January 1, 2017, items (a)(1) in unusual cases, such as low vol-
and services that do not meet the defi- ume items and services, but may not
nition of excepted items and services make such an exception in the case of
under § 419.48(a). a drug or biological that has been des-
[65 FR 18542, Apr. 7, 2000, as amended at 66 ignated as an orphan drug under sec-
FR 59922, Nov. 30, 2001; 69 FR 65863, Nov. 15, tion 526 of the Federal Food, Drug and
2004; 75 FR 72265, Nov. 24, 2010; 78 FR 50969, Cosmetic Act.
Aug. 19, 2013; 78 FR 75196, Dec. 10, 2013; 79 FR (3) The payment rate determined for
67031, Nov. 10, 2014; 81 FR 79879, Nov. 14, 2016; an APC group in accordance with
82 FR 35, Jan. 3, 2017] § 419.32, and the copayment amount and
program payment amount determined
Subpart C—Basic Methodology for for an APC group in accordance with
Determining Prospective Pay- subpart D of this part, apply to
ment Rates for Hospital Out- (b) APC weighting factors. (1) Using
patient Services hospital outpatient claims data from
calendar year 1996 and data from the
§ 419.30 Base expenditure target for most recent available hospital cost re-
calendar year 1999. ports, CMS determines the geometric
(a) CMS estimates the aggregate mean costs for the services and proce-
amount that would be payable for hos- dures within each APC group.
pital outpatient services in calendar (2) CMS assigns to each APC group
year 1999 by summing— an appropriate weighting factor to re-
(1) The total amounts that would be flect the relative geometric mean costs
payable from the Trust Fund for cov- for the services within the APC group
ered hospital outpatient services with- compared to the geometric mean costs
out regard to the outpatient prospec- for the services in all APC groups.
tive payment system described in this (c) Standardizing amounts. (1) CMS de-
part; and termines the portion of costs deter-
(2) The total amounts of coinsurance mined in paragraph (b)(1) of this sec-
that would be payable by beneficiaries tion that is labor-related. This is
to hospitals for covered hospital out- known as the ‘‘labor-related portion’’
patient services without regard to the of hospital outpatient costs.
outpatient prospective payment sys- (2) CMS standardizes the geometric
tem described in this part. mean costs determined in paragraph
(b) The estimated aggregate amount (b)(1) of this section by adjusting for
under paragraph (a) of this section is variations in hospital labor costs
determined as though the deductible across geographic areas.

required under section 1833(b) of the [65 FR 18542, Apr. 7, 2000, as amended at 77
Act did not apply. FR 68558, Nov. 15, 2012]
361
§ 419.32 42 CFR Ch. IV (10–1–17 Edition)
§ 419.32 Calculation of prospective centage increase applicable under sec-

payment rates for hospital out- tion 1886(b)(3)(B)(iii) of the Act.
patient services. (B) The percentage increase deter-
(a) Conversion factor for 1999. CMS cal- mined under paragraph (b)(1)(iv)(A) of
culates a conversion factor in such a this section is reduced by the following
manner that payment for hospital out- for the specific calendar year:
patient services furnished in 1999 would (1) For calendar year 2010, 0.25 per-
have equaled the base expenditure tar- centage point;
get calculated in § 419.30, taking into (2) For calendar year 2011, 0.25 per-
account APC group weights and esti- centage point; and
mated service frequencies and reduced (3) For calendar year 2012, a multi-
by the amounts that would be payable factor productivity adjustment (as de-
in 1999 as outlier payments under termined by CMS) and 0.1 percentage
§ 419.43(d) and transitional pass-through point.
payments under § 419.43(e). (4) For calendar year 2013, a multi-
(b) Conversion factor for calendar year factor productivity adjustment (as de-
2000 and subsequent years. (1) Subject to termined by CMS) and 0.1 percentage
paragraph (b)(2) of this section, the point.
conversion factor for a calendar year is (5) For calendar year 2014, a multi-
equal to the conversion factor cal- factor productivity adjustment (as de-
culated for the previous year adjusted termined by CMS) and 0.3 percentage
as follows: point.
(i) For calendar year 2000, by the hos- (6) For calendar year 2015, a multi-
pital inpatient market basket percent- factor productivity adjustment (as de-
age increase applicable under section termined by CMS) and 0.2 percentage
1886(b)(3)(B)(iii) of the Act reduced by point.
one percentage point. (7) For calendar year 2016, a multi-
(ii) For calendar year 2001— factor productivity adjustment (as de-
(A) For services furnished on or after termined by CMS), and 0.2 percentage
January 1, 2001 and before April 1, 2001, point.
by the hospital inpatient market bas- (8) For calendar year 2017, a multi-
ket percentage increase applicable productivity adjustment (as deter-
under section 1886(b)(3)(B)(iii) of the mined by CMS) and 0.75 percentage
Act reduced by one percentage point; point.
and (2) Beginning in calendar year 2000,
(B) For services furnished on or after CMS may substitute for the hospital
April 1, 2001 and before January 1, 2002, inpatient market basket percentage in
by the hospital inpatient market bas- paragraph (b) of this section a market
ket percentage increase applicable basket percentage increase that is de-
under section 1886(b)(3)(B)(iii) of the termined and applied to hospital out-
Act, and increased by a transitional patient services in the same manner
percentage allowance equal to 0.32 per- that the hospital inpatient market bas-
cent. ket percentage increase is determined
(iii) For the portion of calendar year and applied to inpatient hospital serv-
2002 that is affected by these rules, by ices.
the hospital inpatient market basket (c) Payment rates. The payment rate
percentage increase applicable under for services and procedures for which
section 1886(b)(3)(B)(iii) of the Act repayment is made under the hospital
duced by one percentage point, without outpatient prospective payment sys-
taking into account the transitional tem is the product of the conversion
percentage allowance referenced in factor calculated under paragraph (a)
§ 419.32(b)(ii)(B). or paragraph (b) of this section and the
(iv)(A) For calendar year 2003 and relative weight determined under
subsequent years, by the OPD fee § 419.31(b).
schedule increase factor, which, subject (d) Budget neutrality. (1) CMS adjusts
to the adjustments specified in para- the conversion factor as needed to en-

graph (b)(1)(iv)(B) of this section, is the sure that updates and adjustments
hospital inpatient market basket per- under § 419.50(a) are budget neutral.
362
(2) In determining adjustments for (c) Limitation of copayment amount to

2004 and 2005, CMS will not take into inpatient hospital deductible amount. The
account any additional expenditures copayment amount for a procedure per-
per section 1833(t)(14) of the Act that formed in a year cannot exceed the
would not have been made but for en- amount of the inpatient hospital de-
actment of section 621 of the Medicare ductible established under section
Prescription Drug, Improvement, and 1813(b) of the Act for that year.
Modernization Act of 2003. [66 FR 59922, Nov. 30, 2001]
FR 59922, Nov. 30, 2001; 67 FR 9568, Mar. 1, § 419.41 Calculation of national bene-
2002; 69 FR 832, Jan. 6, 2004; 75 FR 72265, Nov. ficiary copayment amounts and na-
24, 2010; 76 FR 74582, Nov. 30, 2011; 77 FR 68559, tional Medicare program payment
Nov. 15, 2012; 78 FR 75196, Dec. 10, 2013; 79 FR amounts.
67031, Nov. 10, 2014; 80 FR 70606, Nov. 13, 2015; (a) To calculate the unadjusted co-
81 FR 79879, Nov. 14, 2016]
payment amount for each APC group,
EFFECTIVE DATE NOTE: At 66 FR 59922, Nov. CMS—
30, 2001, § 419.32 was amended by revising (1) Standardizes 1996 hospital charges
paragraph (b)(1), effective Jan. 1, 2002. At 66 for the services within each APC group
FR 67494, Dec. 31, 2001, paragraph (b)(1)(iii) to offset variations in hospital labor
was delayed indefinitely.
costs across geographic areas;
(2) Identifies the median of the wage-
Subpart D—Payments to Hospitals neutralized 1996 charges for each APC
group; and
§ 419.40 Payment concepts. (3) Determines the value equal to 20
(a) In addition to the payment rate percent of the wage-neutralized 1996
described in § 419.32, for each APC median charge for each APC group and
group there is a predetermined bene- multiplies that value by an actuarial
ficiary copayment amount as described projection of increases in charges for
in § 419.41(a). The Medicare program hospital outpatient department serv-
payment amount for each APC group is ices during the period 1996 to 1999. The
calculated by applying the program result is the unadjusted beneficiary co-
payment percentage as described in payment amount for the APC group.
§ 419.41(b). (b) CMS calculates annually the pro-
(b) For purposes of this section— gram payment percentage for every
(1) Coinsurance percentage is cal- APC group on the basis of each group’s
culated as the difference between the unadjusted copayment amount and its
program payment percentage and 100 payment rate after the payment rate is
percent. The coinsurance percentage in adjusted in accordance with § 419.32.
any year is thus defined for each APC (c) To determine payment amounts
group as the greater of the following: due for a service paid under the hos-
the ratio of the APC group unadjusted pital outpatient prospective payment
copayment amount to the annual APC system, CMS makes the following cal-
group payment rate, or 20 percent. culations:
(2) Program payment percentage is (1) Makes the wage index adjustment
calculated as the lower of the fol- in accordance with § 419.43.
lowing: the ratio of the APC group pay- (2) Subtracts the amount of the ap-
ment rate minus the APC group plicable Part B deductible provided
unadjusted copayment amount, to the under § 410.160 of this chapter.
APC group payment rate, or 80 percent. (3) Multiplies the remainder by the
(3) Unadjusted copayment amount is program payment percentage for the
calculated as 20 percent of the wage-ad- group to determine the preliminary
justed national median of charges for Medicare program payment amount.
services within an APC group furnished (4) Subtracts the program payment
during 1996, updated to 1999 using an amount from the amount determined
actuarial projection of charge in- in paragraph (c)(2) of this section to de-
creases for hospital outpatient depart- termine the copayment amount.

ment services during the period 1996 to (i) The copayment amount for an
1999. APC cannot exceed the amount of the
363
§ 419.42 42 CFR Ch. IV (10–1–17 Edition)
inpatient hospital deductible, estab- for some, but not all, services within
lished in accordance with § 409.82 of this the same group.
chapter, for that year. For purposes of (b) A hospital must notify its fiscal
this paragraph (c)— intermediary of its election to reduce
(A) Effective for drugs and coinsurance no later than—
biologicals furnished on or after Janu- (1) June 1, 2000, for coinsurance elec-
ary 1, 2001, the copayment amount for tions for the period July 1, 2000 through
multiple APCs for a single drug or bio- December 31, 2000; or
logical furnished on the same day will (2) December 1 preceding the begin-
be aggregated and treated as the co- ning of each subsequent calendar year.
payment amount for one APC. (c) The hospital’s election must be
(B) Effective for drugs and properly documented. It must specifi-
biologicals furnished on or after July 1, cally identify the APCs to which it ap-
2001, the copayment amount for the plies and the copayment amount (with-
APC or APCs for a drug or biological in the limits identified below) that the
furnished on the same day will be ag- hospital has selected for each group.
gregated with the copayment amount (d) The election of reduced coinsur-
for the APC that reflects the adminis- ance remains in effect unchanged dur-
tration of the drug or biological fur- ing the year for which the election was
nished on that day and treated as the made.
copayment amount for one APC. (e) In electing reduced coinsurance, a
(ii) Effective for services furnished hospital may elect a copayment
from April 1, 2001 through December 31, amount that is less than that year’s
2001, the national unadjusted coinsur- wage-adjusted copayment amount for
ance rate for an APC cannot exceed 57 the group but not less than 20 percent
percent of the prospective payment of the APC payment rate as determined
rate for that APC. under § 419.32 or, in the case of pay-
(iii) The national unadjusted coinsur- ments calculated under § 419.43(h), not
ance rate for an APC cannot exceed 55 less than 20 percent of the APC pay-
percent in calendar years 2002 and 2003; ment rate as determined under
50 percent in calendar year 2004; 45 per- § 419.43(h).
cent in calendar year 2005; and 40 per- (f) The hospital may advertise and
cent in calendar year 2006 and there- otherwise disseminate information
after. concerning the reduced level of coin-
(iv) The copayment amount is com- surance that it has elected. All adver-
puted as if the adjustment under tisements and information furnished to
§§ 419.43(d) and (e) (and any adjustments Medicare beneficiaries must specify
made under § 419.43(f) in relation to that the coinsurance reductions adver-
these adjustments) and § 419.43(h) had tised apply only to the specified serv-
not been paid. ices of that hospital and that coinsur-
(5) Adds the amount by which the co- ance reductions are available only for
payment amount would have exceeded hospitals that choose to reduce coin-
the inpatient hospital deductible for surance for hospital outpatient serv-
that year to the preliminary Medicare ices and are not allowed in any other
program payment amount determined ambulatory settings or physician of-
in paragraph (c)(3) of this section to de- fices.
termine the final Medicare program
payment amount. [65 FR 18542, Apr. 7, 2000, as amended at 65
FR 67829, Nov. 13, 2000; 66 FR 59923, Nov. 30,
[65 FR 18542, Apr. 7, 2000, as amended at 65 2001; 73 FR 68814, Nov. 18, 2008]
FR 67829, Nov. 13, 2000; 66 FR 59923, Nov. 30,
2001; 73 FR 68814, Nov. 18, 2008] § 419.43 Adjustments to national pro-
gram payment and beneficiary co-
§ 419.42 Hospital election to reduce copayment amounts.
insurance. (a) General rule. CMS determines na-
(a) A hospital may elect to reduce co- tional prospective payment rates for
insurance for any or all APC groups on hospital outpatient department serv-
a calendar year basis. A hospital may ices and determines a wage adjustment
not elect to reduce copayment amounts factor to adjust the portion of the APC
364
payment and national beneficiary co- (3) Limit on aggregate outlier adjust-
payment amount attributable to labor- ments—(i) In general. The total of the
related costs for relative differences in additional payments made under this
labor and labor-related costs across ge- paragraph (d) for covered hospital out-
ographic regions in a budget neutral patient department services furnished
manner. in a year (as estimated by CMS before
(b) Labor-related portion of payment the beginning of the year) may not ex-
and copayment rates for hospital out- ceed the applicable percentage speci-
patient services. CMS determines the fied in paragraph (d)(3)(ii) of this sec-
portion of hospital outpatient costs at- tion of the total program payments
tributable to labor and labor-related (sum of both the Medicare and bene-
costs (known as the ‘‘labor-related por- ficiary payments to the hospital) esti-
tion’’ of hospital outpatient costs) in mated to be made under this part for
accordance with § 419.31(c)(1). all hospital outpatient services fur-
(c) Wage index factor. (1) CMS uses the nished in that year. If this paragraph is
hospital inpatient prospective payment first applied to less than a full year,
system wage index established in ac- the limit applies only to the portion of
cordance with Part 412 of this chapter the year.
to make the adjustment specified (ii) Applicable percentage. For pur-
under paragraph (a) of this section. poses of paragraph (d)(3)(i) of this sec-
(2) For services furnished beginning tion, the term ‘‘applicable percentage’’
January 1, 2011, the wage index factor means a percentage specified by CMS
provided for in paragraph (c)(1) of this up to (but not to exceed)—
section applicable to any hospital out- (A) For a year (or portion of a year)
patient department that is located in a before 2004, 2.5 percent; and
frontier State, as defined in § 412.64(m) (B) For 2004 and thereafter, 3.0 per-
of this chapter, may not be less than cent.
1.00. (4) Transitional authority. In applying
paragraph (d)(1) of this section for hos-
(3) The additional payments made
pital outpatient services furnished be-
under the provisions of paragraph (c)(2)
fore January 1, 2002, CMS may—
of this section are not implemented in
(i) Apply paragraph (d)(1) of this sec-
a budget neutral manner.
tion to a bill for these services related
(d) Outlier adjustment—(1) General to an outpatient encounter (rather
rule. Subject to paragraph (d)(4) of this than for a specific service or group of
section, CMS provides for an additional services) using hospital outpatient pay-
payment for a hospital outpatient serv- ment amounts and transitional pass-
ice (or group of services) not excluded through payments covered under the
under paragraph (f) of this section for bill; and
which a hospital’s charges, adjusted to (ii) Use an appropriate cost-to-charge
cost, exceed the following: ratio for the hospital or CMHC (as de-
(i) A fixed multiple of the sum of— termined by CMS), rather than for spe-
(A) The applicable Medicare hospital cific departments within the hospital.
outpatient payment amount deter- (5) Cost-to-charge ratios for calculating
mined under § 419.32(c), as adjusted charges adjusted to cost. For hospital
under § 419.43 (other than for adjust- outpatient services (or groups of serv-
ments under this paragraph (d) or para- ices) as defined in paragraph (d)(1) of
graph (e) of this section); and this section performed on or after Jan-
(B) Any transitional pass-through uary 1, 2009—
payment under § 419.66. (i) CMS may specify an alternative to
(ii) At the option of CMS, a fixed dol- the overall ancillary cost-to-charge
lar amount. ratio otherwise applicable under para-
(2) Amount of adjustment. The amount graph (d)(5)(ii) of this section. A hos-
of the additional payment under para- pital may also request that its Medi-
graph (d)(1) of this section is deter- care contractor use a different (higher
mined by CMS and approximates the or lower) cost-to-charge ratio based on
marginal cost of care beyond the appli- substantial evidence presented by the
cable cutoff point under paragraph hospital. Such a request must be ap-
(d)(1) of this section. proved by the CMS.
365
§ 419.43 42 CFR Ch. IV (10–1–17 Edition)
(ii) The overall ancillary cost-to- subject to a cap, applied at the indi-
charge ratio applied at the time a vidual CMHC level, so that each
claim is processed is based on either CMHC’s total outlier payments for the
the most recent settled cost report or calendar year do not exceed 8 percent
the most recent tentative settled cost of that CMHC’s total per diem pay-
report, whichever is from the latest ments for the calendar year. Total per
cost reporting period. diem payments are total Medicare per
(iii) The Medicare contractor may diem payments plus the total bene-
use a statewide average cost-to-charge ficiary share of those per diem pay-
ratio if it is unable to determine an ac- ments.
curate overall ancillary cost-to-charge
(e) Budget neutrality. CMS establishes
ratio for a hospital in one of the fol-
payment under paragraph (d) of this
lowing circumstances:
(A) A new hospital that has not yet section in a budget-neutral manner ex-
submitted its first Medicare cost re- cluding services and groups specified in
port. (For purposes of this paragraph, a paragraph (f) of this section.
new hospital is defined as an entity (f) Excluded services and groups. The
that has not accepted assignment of an following services or groups are ex-
existing hospital’s provider agreement cluded from qualification for the pay-
in accordance with § 489.18 of this chap- ment adjustment under paragraph
ter.) (d)(1) of this section:
(B) A hospital whose overall ancil- (1) Drugs and biologicals that are
lary cost-to-charge ratio is in excess of paid under a separate APC; and
3 standard deviations above the cor- (2) Items and services paid at charges
responding national geometric mean. adjusted to costs by application of a
This mean is recalculated annually by hospital-specific cost-to-charge ratio.
CMS and published in the annual no- (g) Payment adjustment for certain
tice of prospective payment rates rural hospitals—(1) General rule. CMS
issued in accordance with § 419.50(a). provides for additional payment for
(C) Any other hospital for whom ac-
covered hospital outpatient services
curate data to calculate an overall an-
not excluded under paragraph (g)(4) of
cillary cost-to-charge ratio are not
available to the Medicare contractor. this section, furnished on or after Jan-
(6) Reconciliation. For hospital out- uary 1, 2006, if the hospital—
patient services furnished during cost (i) Is a sole community hospital
reporting periods beginning on or after under § 412.92 of this chapter or is an es-
January 1, 2009— sential access community hospital
(i) Any reconciliation of outlier pay- under § 412.109 of this chapter; and
ments will be based on an overall ancil- (ii) Is located in a rural area as de-
lary cost-to-charge ratio calculated fined in § 412.64(b) of this chapter or is
based on a ratio of costs to charges treated as being located in a rural area
computed from the relevant cost report under § 412.103 of this chapter.
and charge data determined at the (2) Amount of adjustment. The amount
time the cost report coinciding with of the additional payment under para-
the service is settled. graph (g)(1) of this section is deter-
(ii) At the time of any reconciliation mined by CMS and is based on the dif-
under paragraph (d)(6)(i) of this sec- ference between costs incurred by hos-
tion, outlier payments may be adjusted pitals that meet the criteria in para-
to account for the time value of any graphs (g)(1)(i) and (g)(1)(ii) of this sec-
underpayments or overpayments. Any tion and costs incurred by hospitals lo-
adjustment will be based on a widely
cated in urban areas.
available index to be established in ad-
vance by CMS, and will be applied from (3) Budget neutrality. CMS establishes
the midpoint of the cost reporting pe- the payment adjustment under para-
riod to the date of reconciliation. graph (g)(2) of this section in a budget
(7) Community mental health center neutral manner, excluding services and
(CMHC) outlier payment cap. Outlier groups specified in paragraph (g)(4) of

payments made to CMHCs for services this section.
provided on or after January 1, 2017 are
366
(4) Excluded services and groups. The factor calculated under paragraph
following services or groups are ex- (h)(1) of this section divided by the con-
cluded from qualification for the pay- version factor specified under
ment adjustment in paragraph (g)(2) of § 419.32(b)(1).
this section: (i) Payment adjustment for certain can-
(i) Drugs and biologicals that are cer hospitals—(1) General rule. CMS pro-
paid under a separate APC; vides for a payment adjustment for
(ii) Devices paid under 419.66; and covered hospital outpatient depart-
(iii) Items and services paid at ment services furnished on or after
charges adjusted to costs by applica- January 1, 2012, by a hospital described
tion of a hospital-specific cost-to- in section 1886(d)(1)(B)(v) of the Act.
charge ratio.
(2) Amount of payment adjustment. The
(5) Copayment. The payment adjust-
amount of the payment adjustment
ment in paragraph (g)(2) of this section
under paragraph (i)(1) of this section is
is applied before calculating copay-
ment amounts. determined by the Secretary as fol-
(6) Outliers. The payment adjustment lows:
in paragraph (g)(2) of this section is ap- (i) If a hospital described in section
plied before calculating outlier pay- 1886(d)(1)(B)(v) of the Act has a pay-
ments. ment-to-cost ratio (PCR) before the
(h) Applicable adjustments to conver- cancer hospital payment adjustment
sion factor for CY 2009 and for subsequent (as determined by the Secretary at cost
calendar years—(1) General rule. For CY report settlement) that is less than the
2009 and for subsequent calendar years, weighted average PCR of other hos-
the applicable adjustment to the con- pitals furnishing services under section
version factor specified in 1833(t) of the Act (as determined by the
§ 419.32(b)(1)(iv) is reduced by 2.0 per- Secretary at the time of the applicable
centage points for any hospital that CY Hospital Outpatient Prospective
fails to meet the standards for report- Payment System/Ambulatory Surgical
ing of hospital outpatient quality Center final rule with comment period)
measures as established by the Sec- (referred to as the Target PCR), for
retary for the corresponding calendar covered hospital outpatient depart-
year. ment services, the aggregate payment
(2) Limitation. Any reduction to a hos- amount provided at cost report settle-
pital’s adjustment to its conversion ment to such hospital is equal to the
factor specified in § 419.32(b)(1)(iv) amount needed to make the hospital’s
which occurs as a result of paragraph PCR at cost report settlement (as de-
(h)(1) of this section will apply only to termined by the Secretary) equal to
the calendar year involved and will not the target PCR (as determined by the
be taken into account in computing Secretary).
that hospital’s applicable adjustment
(ii) If a hospital described in section
for a subsequent calendar year.
(3) Budget neutrality. For CY 2009 and 1886(d)(1)(B)(v) of the Act has a pay-
for each subsequent calendar year, ment-to-cost ratio (PCR) before the
CMS makes an adjustment to the con- cancer hospital payment adjustment
version factor, so that estimated aggre- (as determined by the Secretary at cost
gate payments under the OPPS for report settlement) that is greater than
such calendar year are not affected by the weighted average PCR of other hos-
any reductions to hospital adjustments pitals furnishing services under section
which occur as a result of paragraph 1833(t) of the Act (as determined by the
(h)(1) of this section. Secretary at the time of the applicable
(4) Beneficiary copayment. The bene- CY Hospital Outpatient Prospective
ficiary copayment for services to which Payment System/Ambulatory Surgical
the adjustment to the conversion fac- Center final rule with comment period)
tor specified under paragraph (h)(1) of (referred to as the Target PCR), for
this section applies is the product of covered hospital outpatient depart-
the national beneficiary copayment ment services, the aggregate payment

amount calculated under § 419.41 and amount provided at cost report settle-
the ratio of the adjusted conversion ment to such hospital is equal to zero.
367
§ 419.44 42 CFR Ch. IV (10–1–17 Edition)
(3) Budget neutrality. CMS establishes of greater than 40 percent), the device
the payment adjustment under para- offset portion of the device-intensive
graph (i)(1) of this section in a budget procedure payment is subtracted prior
neutral manner. to determining the program payment
and beneficiary copayment amounts
FR 47677, Aug. 3, 2000; 66 FR 55856, Nov. 2, identified in paragraph (b)(1)(ii) of this
2001; 69 FR 832, Jan. 6, 2004; 70 FR 68727, Nov. section.
10, 2005; 70 FR 76178, Dec. 23, 2005; 71 FR 68227, [65 FR 18542, Apr. 7, 2000, as amended at 72
Nov. 24, 2006; 72 FR 66932, Nov. 27, 2007; 73 FR FR 66933, Nov. 27, 2007; 80 FR 70606, Nov. 13,
68814, Nov. 18, 2008; 75 FR 72265, Nov. 24, 2010; 2015; 81 FR 79879, Nov. 14, 2016]
76 FR 74583, Nov. 30, 2011; 81 FR 79879, Nov. 14,
2016] § 419.45 Payment and copayment re-
duction for devices replaced with-
§ 419.44 Payment reductions for proce- out cost or when full or partial
dures. credit is received.
(a) Multiple surgical procedures. When (a) General rule. CMS reduces the
more than one surgical procedure for amount of payment for an implanted
which payment is made under the hos- device made under the hospital out-
pital outpatient prospective payment patient prospective payment system in
system is performed during a single accordance with § 419.66 for which CMS
surgical encounter, the Medicare pro- determines that a significant portion
gram payment amount and the bene- of the payment is attributable to the
ficiary copayment amount are based cost of an implanted device, when one
on— of the following situations occur:
(1) The full amounts for the proce- (1) The device is replaced without
dure with the highest APC payment cost to the provider or the beneficiary;
rate; and (2) The provider receives full credit
(2) One-half of the full program and
for the cost of a replaced device; or
the beneficiary payment amounts for (3) The provider receives partial cred-
all other covered procedures.
it for the cost of a replaced device but
(b) Interrupted procedures. (1) Subject
only where the amount of the device
to the provisions of paragraph (b)(2) of
credit is greater than or equal to 50
this section, when a procedure is termi-
percent of the cost of the new replace-
nated prior to completion due to ex-
ment device being implanted.
tenuating circumstances or cir-
(b) Amount of reduction to the APC
cumstances that threaten the well-
payment. (1) The amount of the reduc-
being of the patient, the Medicare pro-
tion to the APC payment made under
gram payment amount and the bene-
paragraphs (a)(1) and (a)(2) of this sec-
ficiary copayment amount are based
tion is calculated in the same manner
on—
(i) The full program and beneficiary as the offset amount that would be ap-
copayment amounts if the procedure plied if the device implanted during a
for which anesthesia is planned is dis- procedure assigned to the APC had
continued after the induction of anes- transitional pass-through status under
thesia or after the procedure is started; § 419.66.
(ii) One-half the full program and the (2) The amount of the reduction to
beneficiary copayment amounts if the the APC payment made under para-
procedure for which anesthesia is graph (a)(3) of this section is 50 percent
planned is discontinued after the pa- of the offset amount that would be ap-
tient is prepared and taken to the room plied if the device implanted during a
where the procedure is to be performed procedure assigned to the APC had
but before anesthesia is induced; or transitional pass-through status under
(iii) One-half of the full program and § 419.66.
beneficiary copayment amounts if a (c) Amount of beneficiary copayment.
procedure for which anesthesia is not The beneficiary copayment is cal-
planned is discontinued after the pa- culated based on the APC payment
tient is prepared and taken to the room after application of the reduction
where the procedure is to be performed. under paragraph (b) of this section.

(2) For all device-intensive proce- [71 FR 68228, Nov. 24, 2006, as amended at 72
dures (defined as having a device offset FR 66933, Nov. 27, 2007]
368
§ 419.46 Participation, data submis- site. The hospital may withdraw any
sion, and validation requirements time up to and including August 31 of
under the Hospital Outpatient the year prior to the affected annual
Quality Reporting (OQR) Program. payment updates. A withdrawn hos-
(a) Participation in the Hospital OQR pital will not be able to later sign up to
Program. To participate in the Hospital participate in that payment update, is
OQR Program, a hospital as defined in subject to a reduced annual payment
section 1886(d)(1)(B) of the Act and is update as specified under § 419.43(h),
paid under the OPPS must— and is required to submit a new partici-
(1) Register on the QualityNet Web pation form in order to participate in
site before beginning to report data; any future year of the Hospital OQR
(2) Identify and register a QualityNet Program.
security administrator as part of the (c) Submission of Hospital OQR Pro-
registration process under paragraph gram data. (1) General rule. Except as
(a)(1) of this section; and provided in paragraph (d) of this sec-
(3) Complete and submit an online tion, hospitals that participate in the
participation form available at the Hospital OQR Program must submit to
QualityNet.org Web site if this form CMS data on measures selected under
has not been previously completed, if a section 1833(t)(17)(C) of the Act in a
hospital has previously withdrawn, or form and manner, and at a time, speci-
if the hospital acquires a new CMS Cer- fied by CMS.
tification Number (CCN). For Hospital (2) Submission deadlines. Submission
OQR Program purposes, hospitals that deadlines by measure and by data type
share the same CCN are required to are posted on the QualityNet Web site.
complete a single online participation (3) Initial submission deadlines for a
form. Once a hospital has submitted a hospital that did not participate in the
participation form, it is considered to previous year’s Hospital OQR Program.
be an active Hospital OQR Program (i) If a hospital has a Medicare accept-
participant until such time as it sub- ance date before January 1 of the year
mits a withdrawal form to CMS or no prior to the affected annual payment
longer has an effective Medicare pro- update, the hospital must submit data
vider agreement. Deadlines for the par- beginning with encounters occurring
ticipation form are described in para- during the first calendar quarter of the
graphs (a)(3)(i) and (ii) of this section, year prior to the affected annual pay-
and are based on the date identified as ment update, in addition to submitting
a hospital’s Medicare acceptance date. a completed Hospital OQR Notice of
(i) If a hospital has a Medicare ac- Participation Form under paragraph
ceptance date before January 1 of the (a)(3)(i) of this section.
year prior to the affected annual pay- (ii) If a hospital has a Medicare ac-
ment update, the hospital must com- ceptance date on or after January 1 of
plete and submit to CMS a completed the year prior to the affected annual
Hospital OQR Notice of Participation payment update, the hospital must
Form by July 31 of the calendar year submit data for encounters beginning
prior to the affected annual payment with the first full quarter following
update. submission of the completed Hospital
(ii) If a hospital has a Medicare ac- OQR Notice of Participation Form
ceptance date on or after January 1 of under paragraph (a)(3)(ii) of this sec-
the year prior to the affected annual tion.
payment update, the hospital must (iii) Hospitals with a Medicare ac-
submit a completed participation form ceptance date before or after January 1
no later than 180 days from the date of the year prior to an affected annual
identified as its Medicare acceptance payment update must follow data sub-
date. mission deadlines as specified in para-
(b) Withdrawal from the Hospital OQR graph (c)(2) of this section.
Program. A participating hospital may (d) Exemption. CMS may grant an ex-
withdraw from the Hospital OQR Pro- tension or exemption of one or more
gram by submitting to CMS a with- data submission deadlines and require-

drawal form that can be found in the ments in the event of extraordinary
secure portion of the QualityNet Web circumstances beyond the control of
369
§ 419.46 42 CFR Ch. IV (10–1–17 Edition)
the hospital, such as when an act of na- (2) A reconsideration request must
ture affects an entire region or locale contain the following information:
or a systemic problem with one of (i) The hospital’s CMS Certification
CMS’ data collection systems directly Number (CCN);
or indirectly affects data submission. (ii) The name of the hospital;
CMS may grant an extension or exemp- (iii) The CMS-identified reason for
tion as follows: not meeting the requirements of the af-
(1) Upon request by the hospital. Spe- fected payment year’s Hospital OQR
cific requirements for submission of a Program as provided in any CMS noti-
request for an extension or exemption fication to the hospital;
are available on the QualityNet Web (iv) The hospital’s basis for request-
site. ing reconsideration. The hospital must
(2) At the discretion of CMS. CMS may identify its specific reason(s) for be-
grant extensions or exemptions to hos- lieving it should not be subject to the
pitals that have not requested them reduced annual payment update;
when CMS determines that an extraor- (v) The hospital-designated personnel
dinary circumstance has occurred. contact information, including name,
(e) Validation of Hospital OQR Program email address, telephone number, and
data. CMS may validate one or more mailing address (must include physical
measures selected under section mailing address, not just a post office
box);
1833(t)(17)(C) of the Act by reviewing
(vi) The hospital-designated person-
documentation of patient encounters
nel’s signature;
submitted by selected participating
(vii) A copy of all materials that the
hospitals.
hospital submitted to comply with the
(1) Upon written request by CMS or requirements of the affected Hospital
its contractor, a hospital must submit OQR Program payment determination
to CMS supporting medical record doc- year; and
umentation that the hospital used for (viii) If the hospital is requesting re-
purposes of data submission under the consideration on the basis that CMS
program. The specific sample that a determined it did not meet the affected
hospital must submit will be identified payment determination year’s valida-
in the written request. A hospital must tion requirement set forth in para-
submit the supporting medical record graph (e)(1) of this section, the hospital
documentation to CMS or its con- must provide a written justification for
tractor within 45 days of the date iden- each appealed data element classified
tified on the written request, in the during the validation process as a mis-
form and manner specified in the writ- match. Only data elements that affect
ten request. a hospital’s validation score are eligi-
(2) A hospital meets the validation ble to be reconsidered.
requirement with respect to a calendar (3) A hospital that is dissatisfied with
year if it achieves at least a 75-percent a decision made by CMS on its recon-
reliability score, as determined by sideration request may file an appeal
CMS. with the Provider Reimbursement Re-
(f) Reconsiderations and appeals of view Board under part 405, subpart R,
Hospital OQR Program decisions. (1) A of this chapter.
hospital may request reconsideration (g) Requirements for Outpatient and
of a decision by CMS that the hospital Ambulatory Surgery Consumer Assessment
has not met the requirements of the of Healthcare Providers and Systems
Hospital OQR Program for a particular (OAS CAHPS) Survey. OAS CAHPS is
calendar year. Except as provided in the Outpatient and Ambulatory Sur-
paragraph (d) of this section, a hospital gical Center Consumer Assessment of
must submit a reconsideration request Healthcare Providers and Systems Sur-
to CMS via the QualityNet Web site, no vey that measures patient experience
later than the first business day on or of care after a recent surgery or proce-
after March 17 of the affected payment dure at either a hospital outpatient de-
year as determined using the date the partment or an ambulatory surgical

request was mailed or submitted to center. Hospital outpatient depart-
CMS. ments must use an approved OAS
370
CAHPS survey vendor to administer Fee Schedule on or after January 1,

and submit OAS CAHPS data to CMS. 2017.
(1) [Reserved]
[81 FR 79880, Nov. 14, 2016; 82 FR 36, Jan. 3,
(2) CMS approves an application for 2017]
an entity to administer the OAS
CAHPS Survey as a vendor on behalf of
one or more hospital outpatient de- Subpart E—Updates
partments when the applicant has met § 419.50 Annual review.
the Minimum Survey Requirements
and Rules of Participation that can be (a) General rule. Not less often than
found on the official OAS CAHPS Web annually, CMS reviews and updates
site, and agrees to comply with the groups, relative payment weights, and
current survey administration proto- the wage and other adjustments to
cols that can be found on the official take into account changes in medical
OAS CAHPS Survey Web site. An enti- practice, changes in technology, the
ty must be an approved OAS CAHPS addition of new services, new cost data,
Survey vendor in order to administer and other relevant information and
and submit OAS CAHPS Survey data factors.
to CMS on behalf of one or more hos- (b) Consultation requirement. CMS will
pital outpatient departments. consult with an expert outside advisory
panel composed of an appropriate se-
[78 FR 75196, Dec. 10, 2013, as amended at 79 lection of representatives of providers
FR 67031, Nov. 10, 2014; 80 FR 70606, Nov. 13,
2015; 81 FR 79879, Nov. 14, 2016]
to review (and advise CMS concerning)
the clinical integrity of the groups and
§ 419.48 Definition of excepted items weights. The panel may use data col-
and services. lected or developed by entities and or-
(a) Excepted items and services are ganizations (other than the Depart-
items or services that are furnished on ment of Health and Human Services) in
or after January 1, 2017— conducting the review.
(1) By a dedicated emergency depart- (c) Effective dates. CMS conducts the
ment (as defined at § 489.24(b) of this first annual review under paragraph (a)
chapter); or of this section in 2001 for payments
(2) By an excepted off-campus pro- made in 2002.
vider-based department defined in
paragraph (b) of this section that has Subpart F—Limitations on Review
not impermissibly relocated or
changed ownership. § 419.60 Limitations on administrative
(b) For the purpose of this section, and judicial review.
‘‘excepted off-campus provider-based There can be no administrative or ju-
department’’ means a ‘‘department of a dicial review under sections 1869 and
provider’’ (as defined at § 413.65(a)(2) of 1878 of the Act or otherwise of the fol-
this chapter) that is located on the lowing:
campus (as defined in § 413.65(a)(2) of (a) The development of the APC sys-
this chapter) or within the distance de- tem, including—
scribed in such definition from a ‘‘re- (1) Establishment of the groups and
mote location of a hospital’’ (as defined relative payment weights;
in § 413.65(a)(2) of this chapter) that (2) Wage adjustment factors;
meets the requirements for provider- (3) Other adjustments; and
based status under § 413.65 of this chap- (4) Methods for controlling unneces-
ter. This definition also includes an off- sary increases in volume.
campus department of a provider that (b) The calculation of base amounts
was furnishing services prior to No- described in section 1833(t)(3) of the
vember 2, 2015 that were billed under Act.
the OPPS in accordance with timely (c) Periodic adjustments described in
filing limits. section 1833(t)(9) of the Act.
(c) Payment for items and services (d) The establishment of a separate
that do not meet the definition in para- conversion factor for hospitals de-
graph (a) of this section will generally scribed in section 1886(d)(1)(B)(v) of the
be made under the Medicare Physician Act.
371
§ 419.62 42 CFR Ch. IV (10–1–17 Edition)
(e) The determination of the fixed the estimated pass-through costs (be-
multiple, or a fixed dollar cutoff fore the incorporation and any pro rata
amount, the marginal cost of care, or reduction) for devices into the proce-
applicable percentage under § 419.43(d) dure APCs associated with these de-
or the determination of insignificance vices.
of cost, the duration of the additional
[66 FR 55856, 55865, Nov. 2, 2001; 67 FR 9568,
payments (consistent with subpart G of Mar. 1, 2002]
this part), the determination of initial
and new categories under § 419.66, the EFFECTIVE DATE NOTE: At 66 FR 55865, Nov.
portion of the Medicare hospital out- 2, 2001, § 419.62 was amended by adding para-
graph (d), effective Jan. 1, 2002. At 66 FR
patient fee schedule amount associated
67494, Dec. 31, 2001, the amendment was de-
with particular devices, drugs, or layed indefinitely.
biologicals, and the application of any
pro rata reduction under § 419.62(c). § 419.64 Transitional pass-through pay-
[65 FR 18542, Apr. 7, 2000, as amended at 66 ments: Drugs and biologicals.
FR 55856, Nov. 2, 2001] (a) Eligibility for pass-through pay-
ment. CMS makes a transitional pass-
Subpart G—Transitional Pass- through payment for the following
through Payments drugs and biologicals that are fur-
nished as part of an outpatient hospital
service:
otherwise noted. (1) Orphan drugs. A drug or biological
that is used for a rare disease or condi-
§ 419.62 Transitional pass-through pay- tion and has been designated as an or-
ments: General rules. phan drug under section 526 of the Fed-
(a) General. CMS provides for addi- eral Food, Drug and Cosmetic Act if
tional payments under §§ 419.64 and payment for the drug or biological as
419.66 for certain innovative medical an outpatient hospital service was
devices, drugs, and biologicals. being made on August 1, 2000.
(b) Budget neutrality. CMS establishes (2) Cancer therapy drugs and
the additional payments under §§ 419.64 biologicals. A drug or biological that is
and 419.66 in a budget neutral manner. used in cancer therapy, including, but
(c) Uniform prospective reduction of not limited to, a chemotherapeutic
pass-through payments. (1) If CMS esti- agent, an antiemetic, a hematopoietic
mates before the beginning of a cal- growth factor, a colony stimulating
endar year that the total amount of factor, a biological response modifier,
pass-through payments under §§ 419.64 and a bisphosphonate if payment for
and 419.66 for the year would exceed the the drug or biological as an outpatient
applicable percentage (as described in hospital service was being made on Au-
paragraph (c)(2) of this section) of the gust 1, 2000.
total amount of Medicare payments (3) Radiopharmaceutical drugs and bio-
under the outpatient prospective pay- logical products. A radiopharmaceutical
ment system. CMS will reduce, pro drug or biological product used in diag-
rata, the amount of each of the addi- nostic, monitoring, and therapeutic nu-
tional payments under §§ 419.64 and clear medicine services if payment for
419.66 for that year to ensure that the the drug or biological as an outpatient
applicable percentage is not exceeded. hospital service was being made on Au-
(2) The applicable percentages are as gust 1, 2000.
follows: (4) Other drugs and biologicals. A drug
(i) For a year before CY 2004, the ap- or biological that meets the following
plicable percentage is 2.5 percent. conditions:
(ii) For 2004 and subsequent years, (i) It was first payable as an out-
the applicable percentage is a percent- patient hospital service after December
age specified by CMS up to (but not to 31, 1996.
exceed) 2.0 percent. (ii) CMS has determined the cost of
(d) CY 2002 incorporated amount. For the drug or biological is not insignifi-
the portion of CY 2002 affected by these cant in relation to the amount payable
rules, CMS incorporated 75 percent of for the applicable APC (as calculated
372
under § 419.32(c)) as defined in para- amount determined under section

graph (b) of this section. 1842(o) of the Social Security Act,
(iii) A biological that is not sur- minus the portion of the APC payment
gically implanted or inserted into the amount that CMS determines is associ-
body. ated with the drug or biological.
(iv) A biological that is not a skin [65 FR 18542, Apr. 7, 2000, as amended at 69
substitute or similar product that aids FR 832, Jan. 6, 2004; 69 FR 65863, Nov. 15, 2004;
wound healing. 74 FR 60680, Nov. 20, 2009; 79 FR 67031, Nov. 10,
(b) Cost. CMS determines the cost of 2014]
a drug or biological to be not insignifi-
cant if it meets the following require- § 419.66 Transitional pass-through pay-
ments: ments: Medical devices.
(1) Services furnished before January 1, (a) General rule. CMS makes a pass-
2003. The expected reasonable cost of a through payment for a medical device
drug or biological must exceed 10 per- that meets the requirements in para-
cent of the applicable APC payment graph (b) of this section and that is de-
amount for the service related to the scribed by a category of devices estab-
drug or biological. lished by CMS under the criteria in
(2) Services furnished after December 31, paragraph (c) of this section.
2002. CMS considers the average cost of (b) Eligibility. A medical device must
a new drug or biological to be not in- meet the following requirements:
significant if it meets the following (1) If required by the FDA, the device
conditions: must have received FDA premarket ap-
(i) The estimated average reasonable proval or clearance (except for a device
cost of the drug or biological in the that has received an FDA investiga-
category exceeds 10 percent of the ap- tional device exemption (IDE) and has
plicable APC payment amount for the been classified as a Category B device
service related to the drug or biologi- by the FDA in accordance with
cal. §§ 405.203 through 405.207 and 405.211
(ii) The estimated average reasonable through 405.215 of this chapter), or
cost of the drug or biological exceeds meet another appropriate FDA exemp-
the cost of the drug or biological portion for premarket approval or clear-
tion of the APC payment amount for ance. Under this provision, the pass-
the related service by at least 25 per- through payment application for a
cent. medical device must be submitted
(iii) The difference between the esti- within 3 years from the date of the ini-
mated reasonable cost of the drug or tial FDA approval or clearance, if re-
biological and the estimated portion of quired, unless there is a documented,
the APC payment amount for the drug verifiable delay in U.S. market avail-
or biological exceeds 10 percent of the ability after FDA approval or clearance
APC payment amount for the related is granted, in which case CMS will con-
service. sider the pass-through payment appli-
(c) Limited period of payment. CMS cation if it is submitted within 3 years
limits the eligibility for a pass-through from the date of market availability.
payment under this section to a period (2) The device is determined to be
of at least 2 years, but not more than reasonable and necessary for the diag-
3 years, that begins as follows: nosis or treatment of an illness or in-
(1) For a drug or biological described jury or to improve the functioning of a
in paragraphs (a)(1) through (a)(3) of malformed body part (as required by
this section—August 1, 2000. section 1862(a)(1)(A) of the Act).
(2) For a drug or biological described (3) The device is an integral part of
in paragraph (a)(4) of this section—the the service furnished, is used for one
date that CMS makes its first pass- patient only, comes in contact with
through payment for the drug or bio- human tissue, and is surgically im-
logical. planted or inserted (either perma-
(d) Amount of pass-through payment. nently or temporarily) or applied in or
Subject to any reduction determined on a wound or other skin lesion.

under § 419.62(b), the pass-through pay- (4) The device is not any of the fol-
ment for a drug or biological equals the lowing:
373
§ 419.70 42 CFR Ch. IV (10–1–17 Edition)
(i) Equipment, an instrument, appa- subject to the cost requirements de-

ratus, implement, or item of this type scribed in paragraph (d) of this section,
for which depreciation and financing if payment for the device was being
expenses are recovered as depreciable made as an outpatient service on Au-
assets as defined in Chapter 1 of the gust 1, 2000:
Medicare Provider Reimbursement (1) A device of brachytherapy.
Manual (CMS Pub. 15–1). (2) A device of temperature-mon-
(ii) A material or supply furnished in- itored cryoablation.
cident to a service (for example, a su- (f) Identifying a category for a device.
ture, customized surgical kit, or clip, A device is described by a category, if
other than radiological site marker). it meets the following conditions:
(c) Criteria for establishing device cat- (1) Matches the long descriptor of the
egories. CMS uses the following criteria category code established by CMS.
to establish a category of devices under (2) Conforms to guidance issued by
this section: CMS relating to the definition of terms
(1) CMS determines that a device to and other information in conjunction
be included in the category is not ap- with the category descriptors and
propriately described by any of the ex- codes.
isting categories or by any category (g) Limited period of payment for de-
previously in effect, and was not being vices. CMS limits the eligibility of a
paid for as an outpatient service as of pass-through payment established
December 31, 1996. under this section to a period of at
(2) CMS determines that a device to least 2 years, but not more than 3
be included in the category has dem- years, beginning on the first date on
onstrated that it will substantially im- which pass-through payment is made.
prove the diagnosis or treatment of an (h) Amount of pass-through payment.
illness or injury or improve the func- Subject to any reduction determined
tioning of a malformed body part com- under § 419.62(b), the pass-through pay-
pared to the benefits of a device or de- ment for a device is the hospital’s
vices in a previously established cat- charge for the device, adjusted to the
egory or other available treatment. actual cost for the device, minus the
(3) Except for medical devices identi- amount included in the APC payment
fied in paragraph (e) of this section, amount for the device.
CMS determines the cost of the device
is not insignificant as described in [66 FR 55856, Nov. 2, 2001, as amended at 67
paragraph (d) of this section. FR 66813, Nov. 1, 2002; 70 FR 68728, Nov. 10,
(d) Cost criteria. CMS considers the 2005; 74 FR 60680, Nov. 20, 2009; 78 FR 75198,
average cost of a category of devices to Dec. 10, 2013; 79 FR 67031, Nov. 10, 2014; 80 FR
70606, Nov. 13, 2015; 81 FR 79880, Nov. 14, 2016]
be not insignificant if it meets the fol-
lowing conditions:
(1) The estimated average reasonable Subpart H—Transitional Corridors
cost of devices in the category exceeds
25 percent of the applicable APC pay- SOURCE: 65 FR 18542, Apr. 7, 2000, unless
ment amount for the service related to otherwise noted. Redesignated at 66 FR 55856,
the category of devices. Nov. 2, 2001.
(2) The estimated average reasonable
cost of the devices in the category ex- § 419.70 Transitional adjustments to
limit decline in payments.
ceeds the cost of the device-related
portion of the APC payment amount (a) Before 2002. Except as provided in
for the related service by at least 25 paragraph (d) of this section, for cov-
percent. ered hospital outpatient services fur-
(3) The difference between the esti- nished before January 1, 2002, for which
mated average reasonable cost of the the prospective payment system
devices in the category and the portion amount (as defined in paragraph (e) of
of the APC payment amount for the de- this section) is—
vice exceeds 10 percent of the APC pay- (1) At least 90 percent, but less than
ment amount for the related service. 100 percent, of the pre-BBA amount (as
(e) Devices exempt from cost criteria. defined in paragraph (f) of this sec-
The following medical devices are not tion), the amount of payment under
374
this part is increased by 80 percent of before January 1, 2006. For covered hos-
the amount of this difference; pital outpatient services furnished in a
(2) At least 80 percent, but less than calendar year before January 1, 2006,
90 percent, of the pre-BBA amount, the for which the prospective payment sys-
amount of payment under this part is tem amount is less than the pre-BBA
increased by the amount by which the amount, the amount of payment under
product of 0.71 and the pre-BBA this part is increased by the amount of
amount exceeds the product of 0.70 and that difference if the hospital—
the prospective payment system (i) Is located in a rural area as de-
amount; fined in § 412.64(b) of this chapter or is
(3) At least 70 percent, but less than treated as being located in a rural area
80 percent, of the pre-BBA amount, the under section 1886(d)(8)(E) of the Act;
amount of payment under this part is and
increased by the amount by which the (ii) Has 100 or fewer beds as defined in
product of 0.63 and the pre-BBA § 412.105(b) of this chapter.
amount, exceeds the product of 0.60 and (2) Temporary treatment for small rural
the PPS amount; or hospitals on or after January 1, 2006. For
(4) Less than 70 percent of the pre- covered hospital outpatient services
BBA amount, the amount of payment furnished in a calendar year from Jan-
under this part shall be increased by 21 uary 1, 2006 through December 31, 2012,
percent of the pre-BBA amount.
for which the prospective payment sys-
(b) For 2002. Except as provided in
tem amount is less than the pre-BBA
paragraph (d) of this section, for cov-
amount, the amount of payment under
ered hospital outpatient services fur-
this part is increased by 95 percent of
nished during 2002, for which the pro-
that difference for services furnished
spective payment system amount is—
during CY 2006, 90 percent of that dif-
(1) At least 90 percent, but less than
ference for services furnished during
100 percent, of the pre-BBA amount,
CY 2007, and 85 percent of that dif-
the amount of payment under this part
ference for services furnished during
is increased by 70 percent of the
CYs 2008, 2009, 2010, 2011, and 2012 if the
amount of this difference;
hospital—
(2) At least 80 percent, but less than
(i) Is located in a rural area as de-
90 percent, of the pre-BBA amount, the
fined in § 412.64(b) of this chapter or is
amount of payment under this part is
treated as being located in a rural area
increased by the amount by which the
under section 1886(d)(8)(E) of the Act;
product of 0.61 and the pre-BBA
amount exceeds the product of 0.60 and (ii) Has 100 or fewer beds as defined in
the prospective payment system § 412.105(b) of this chapter;
amount; or (iii) Is not a sole community hospital
(3) Less than 80 percent of the pre- as defined in § 412.92 of this chapter;
BBA amount, the amount of payment and
under this part is increased by 13 per- (iv) Is not an essential access com-
cent of the pre-BBA amount. munity hospital under § 412.109 of this
(c) For 2003. Except as provided in chapter.
paragraph (d) of this section, for cov- (3) Permanent treatment for cancer hos-
ered hospital outpatient services fur- pitals and children’s hospitals. In the
nished during 2003, for which the pro- case of a hospital described in § 412.23(d)
spective payment system amount is— or § 412.23(f) of this chapter for which
(1) At least 90 percent, but less than the prospective payment system
100 percent, of the pre-BBA amount, amount is less than the pre-BBA
the amount of payment under this part amount for covered hospital outpatient
is increased by 60 percent of the services, the amount of payment under
amount of this difference; or this part is increased by the amount of
(2) Less than 90 percent of the pre- this difference.
BBA amount, the amount of payment (4) Temporary treatment for sole com-
under this part is increased by 6 per- munity hospitals located in rural areas for
cent of the pre-BBA amount. covered hospital outpatient services fur-

(d) Hold harmless provisions—(1) Tem- nished during cost reporting periods be-
porary treatment for small rural hospitals ginning on or after January 1, 2004 and
375
§ 419.70 42 CFR Ch. IV (10–1–17 Edition)
before January 1, 2006. For covered hos- amount, the amount of payment under
pital outpatient services furnished dur- this part is increased by 85 percent of
ing cost reporting periods beginning on that difference if the hospital—
or after January 1, 2004, and continuing (A) Is a sole community hospital as
through December 31, 2005, for which defined in § 412.92 of this chapter or is
the prospective payment system an essential access community hospital
amount is less than the pre-BBA as described under § 412.109 of this chap-
amount, the amount of payment under ter; and
this part is increased by the amount of (B) Has 100 or fewer beds as defined in
that difference if the hospital— § 412.105(b) of this chapter, except as
(i) Is a sole community hospital, provided in paragraph (d)(7)(ii) of this
under § 412.92 of this chapter; and section.
(ii) Is located in a rural area as de- (ii) For covered hospital outpatient
fined in § 412.63(b) or § 412.64(b), as appli- services furnished on or after January
cable, of this chapter or is treated as 1, 2012 through February 29, 2012, the
being located in a rural area under sec- bed size limitation under paragraph
tion 1886(d)(8)(E) of the Act. (d)(7)(i)(B) of this section does not
(5) Temporary treatment for small sole apply.
community hospitals on or after January
(e) Prospective payment system amount
1, 2009 and through December 31, 2009.
defined. In this section, the term ‘‘pro-
For covered hospital outpatient serv-
spective payment system amount’’
ices furnished on or after January 1,
means, with respect to covered hospital
2009, and continuing through December
outpatient services, the amount pay-
31, 2009, for which the prospective pay-
ment system amount is less than the able under this part for these services
pre-BBA amount, the amount of pay- (determined without regard to this sec-
ment under this part is increased by 85 tion or any reduction in coinsurance
percent of that difference if the hos- elected under § 419.42), including
pital— amounts payable as copayment under
(i) Is a sole community hospital as § 419.41, coinsurance under section
defined in § 412.92 of this chapter or is 1866(a)(2)(A)(ii) of the Act, and the de-
an essential access community hospital ductible under section 1833(b) of the
as described under § 412.109 of this chap- Act.
ter; and (f) Pre-BBA amount defined—(1) Gen-
(ii) Has 100 or fewer beds as defined in eral rule. In this paragraph, the ‘‘pre-
§ 412.105(b) of this chapter. BBA amount’’ means, with respect to
(6) Temporary treatment for sole com- covered hospital outpatient services
munity hospitals on or after January 1, furnished by a hospital or a community
2010, and through December 31, 2011. For mental health center (CMHC) in a year,
covered hospital outpatient services an amount equal to the product of the
furnished on or after January 1, 2010, reasonable cost of the provider for
through December 31, 2011, for which these services for the portions of the
the prospective payment system provider’s cost reporting period (or pe-
amount is less than the pre-BBA riods) occurring in the year and the
amount, the amount of payment under base provider outpatient payment-to-
this part is increased by 85 percent of cost ratio for the provider (as defined
that difference if the hospital is a sole in paragraph (f)(2) of this section).
community hospital as defined in (2) Base payment-to-cost-ratio defined.
§ 412.92 of this chapter or is an essential For purposes of this paragraph, CMS
access community hospital as de- shall determine these ratios as if the
scribed under § 412.109 of this chapter. amendments to sections
(7) Temporary treatment of small sole 1833(i)(3)(B)(i)(II) and 1833(n)(1)(B)(i) of
community hospitals on or after January the Act made by section 4521 of the
1, 2012 through December 31, 2012. (i) For BBA, to require that the full amount
covered hospital outpatient services beneficiaries paid as coinsurance under
furnished on or after January 1, 2012 section 1862(a)(2)(A) of the Act are
through December 31, 2012, for which taken into account in determining
the prospective payment system Medicare Part B Trust Fund payment
amount is less than the pre-BBA to the hospital, were in effect in 1996.
376
The ‘‘base payment-to-cost ratio’’ for a 420.202 Determination of ownership or con-

hospital or CMHC means the ratio of— trol percentages.
(i) The provider’s payment under this 420.203 Disclosure of hiring of
part for covered outpatient services intermediary’s former employees.
furnished during one of the following 420.204 Principals convicted of a program-
related crime.
periods, including any payment for
420.205 Disclosure by providers and part B
these services through cost-sharing de-
suppliers of business transaction infor-
scribed in paragraph (e) of this section: mation.
(A) The cost reporting period ending 420.206 Disclosure of persons having owner-
in 1996; or ship, financial, or control interest.
(B) If the provider does not have a
cost reporting period ending in 1996, Subpart D—Access to Books, Documents,
the first cost reporting period ending and Records of Subcontractors
on or after January 1, 1997, and before
January 1, 2001; and 420.300 Basis, purpose, and scope.
(ii) The reasonable costs of these 420.301 Definitions.
services for the same cost reporting pe- 420.302 Requirement for access clause in
riod. contracts.
420.303 HHS criteria for requesting books,
(g) Interim payments. CMS makes pay-
documents, and records.
ments under this section to hospitals
420.304 Procedures for obtaining access to
and CMHCs on an interim basis, sub- books, documents, and records.
ject to retrospective adjustments based
on settled cost reports. Subpart E—Rewards for Information Relat-
(h) No effect on coinsurance. No paying to Medicare Fraud and Abuse,
ment made under this section affects and Establishment of a Program to
the unadjusted coinsurance amount or Collect Suggestions for Improving
the coinsurance amount described in Medicare Program Efficiency and to
§ 419.41. Reward Suggesters for Monetary Sav-
(i) Application without regard to budget ings
neutrality. The additional payments
made under this section— 420.400 Basis and scope.
(1) Are not considered an adjustment 420.405 Rewards for information relating to
under § 419.43(f); and Medicare fraud and abuse.
(2) Are not implemented in a budget 420.410 Establishment of a program to col-
neutral manner. lect suggestions for improving Medicare
program efficiency and to reward sug-
[65 FR 18542, Apr. 7, 2000, as amended at 65 gesters for monetary savings.
FR 67829, Nov. 13, 2000; 66 FR 59923, Nov. 30,
2001; 69 FR 832, Jan. 6, 2004; 69 FR 65863, Nov. AUTHORITY: Secs. 1102 and 1871 of the Social
15, 2004; 71 FR 68228, Nov. 24, 2006; 72 FR 66933, Security Act (42 U.S.C. 1302 and 1395hh).
Nov. 27, 2007; 73 FR 68814, Nov. 18, 2008; 74 FR SOURCE: 44 FR 31142, May 30, 1979, unless
60681, Nov. 20, 2009; 75 FR 72265, Nov. 24, 2010; otherwise noted.
76 FR 74583, Nov. 30, 2011; 77 FR 68559, Nov. 15,
2012]
PART 420—PROGRAM INTEGRITY: § 420.1 Scope and purpose.
MEDICARE
This part sets forth requirements for
Subpart A—General Provisions Medicare providers, intermediaries,
and carriers to disclose ownership and
Sec. control information. It also deals with
420.1 Scope and purpose. access to records pertaining to certain
420.3 Other related regulations.
contracts entered into by Medicare
Subpart B [Reserved] providers. These rules are aimed at
protecting the integrity of the Medi-
Subpart C—Disclosure of Ownership and care program. The statutory basis for
Control Information these requirements is explained in each

of the other subparts.
420.200 Purpose.
420.201 Definitions. [51 FR 34787, Sept. 30, 1986]
377
§ 420.3 42 CFR Ch. IV (10–1–17 Edition)
§ 420.3 Other related regulations. (2) A carrier or other agency or orga-

nization that is acting for one or more
(a) Appeals procedures. Part 498 of this
providers of services for purposes of
chapter sets forth the appeals proce-
part A and part B of Medicare; and
dures available to providers whose pro-
(3) A part B supplier, as defined in
vider agreements CMS terminates for
§ 400.202 of this chapter.
failure to comply with the disclosure of
Group of practitioners means two or
information requirements set forth in
more health care practitioners who
subpart C of this part.
practice their profession at a common
(b) Exclusion, termination, or suspen-
location (whether or not they share
sion. Part 1001 of this title sets forth
common facilities, common supporting
the rules applicable to exclusion, ter-
staff, or common equipment).
mination, or suspension from the Medi-
Indirect ownership interest means any
care program because of fraud or abuse
ownership interest in an entity that
or conviction of program-related
has an ownership interest in the dis-
crimes.
closing entity. The term includes an
[51 FR 34787, Sept. 30, 1986, as amended at 52 ownership interest in any entity that
FR 22454, June 12, 1987] has an indirect ownership interest in
the disclosing entity.
Subpart B [Reserved] Managing employee means a general
manager, business manager, adminis-
Subpart C—Disclosure of Owner- trator, director, or other individual
ship and Control Information that exercises operational or manage-
rial control over, or who directly or in-
§ 420.200 Purpose. directly conducts, the day-to-day oper-
ation of the institution, organization,
This subpart implements sections
or agency, either under contract or
1124, 1124A, 1126, and 1861(v)(1)(i) of the
through some other arrangement,
Social Security Act. It sets forth re-
whether or not the individual is a W–2
quirements for providers, Part B sup-
employee.
pliers, intermediaries, and carriers to
Other disclosing entity means any
disclose ownership and control infor-
other Medicare disclosing entity and
mation and the identities of managing
any entity that does not participate in
employees. It also sets forth require-
Medicare, but is required to disclose
ments for disclosure of information
certain ownership and control informa-
about a provider’s or Part B supplier’s
tion because of participation in any of
owners, those with a controlling inter-
the programs established under title V,
est, or managing employees convicted
XIX, or XX of the Act. This includes:
of criminal offenses against Medicare,
(1) An entity (other than an indi-
Medicaid, or the title V (Maternal and
vidual practitioner or group of practi-
Child Health Services) and title XX
tioners) that furnishes, or arranges for
(Social Services) programs.
the furnishing of, items or services for
[57 FR 27306, June 18, 1992, as amended at 60 which payment may be claimed by the
FR 50442, Sept. 29, 1995] entity under any plan or program es-
tablished under title V of the Social
§ 420.201 Definitions. Security Act or under an approved
As used in this subpart unless the State Medicaid plan;
context indicates otherwise: (2) An entity (other than an indi-
Agent means any person who has been vidual practitioner or group of practi-
delegated the authority to obligate or tioners) that furnishes, or arranges for
act on behalf of a provider. the furnishing of, health-related serv-
Disclosing entity means: ices for which payment may be claimed
(1) A provider of services, an inde- by the entity under an approved State
pendent clinical laboratory, a renal plan and services program under title
disease facility, a rural health clinic, a XX of the Act; or
Federally qualified health center, or a (3) A Medicaid fiscal agent.
health maintenance organization (as Ownership interest means the posses-

defined in section 1301(a) of the Public sion of equity in the capital, the stock,
Health Service Act); or the profits of the disclosing entity.
378
Person with an ownership or control in- is determined by multiplying the per-

terest means a person or corporation centages of ownership in each entity.
that— For example, if A owns 10 percent of
(1) Has an ownership interest total- the stock in a corporation that owns 80
ing 5 percent or more in a disclosing percent of the disclosing entity, A’s in-
entity; terest equates to an 8 percent indirect
(2) Has an indirect ownership interest ownership interest in the disclosing en-
equal to 5 percent or more in a dis- tity and must be reported. Conversely,
closing entity; if B owns 80 percent of the stock of a
(3) Has a combination of direct and corporation that owns 5 percent of the
indirect ownership interests equal to 5 stock of the disclosing entity, B’s in-
percent or more in a disclosing entity; terest equates to a 4 percent indirect
(4) Owns an interest of 5 percent or ownership interest in the disclosing en-
more in any mortgage, deed of trust, tity and need not be reported.
note, or other obligation secured by (b) Person with an ownership or control
the disclosing entity if that interest interest. In order to determine the per-
equals at least 5 percent of the value of centage of ownership interest in any
the property or assets of the disclosing mortgage, deed of trust, note, or other
entity; obligation, the percentage of interest
(5) Is an officer or director of a dis- owned in obligation is multiplied by
closing entity that is organized as a the percentage of the disclosing enti-
corporation; or ty’s assets used to secure the obliga-
(6) Is a partner in a disclosing entity tion. For example, if A owns 10 percent
that is organized as a partnership. of a note secured by 60 percent of the
Significant business transaction means provider’s assets, A’s interest in the
any business transaction or series of provider’s assets equates to 6 percent
transactions during any one fiscal
and must be reported. Conversely, if B
year, the total of which exceeds the
owns 40 percent of a note secured by 10
lesser of $25,000 and 5 percent of the
percent of the provider’s assets, B’s in-
total operating expenses of the pro-
terest in the provider’s assets equates
vider.
to 4 percent and need not be reported.
Subcontractor means—
(1) An individual, agency, or organi- § 420.203 Disclosure of hiring of
zation to which a disclosing entity has intermediary’s former employees.
contracted or delegated some of its
management functions or responsibil- A provider must notify the Secretary
ities of providing medical care to its promptly if it, or its home office (in
patients; or the case of a chain organization), em-
(2) An individual, agency, or organi- ploys or obtains the services of an indi-
zation with which an intermediary or vidual who, at any time during the
carrier has entered into a contract, year preceding such employment, was
agreement, purchase order or lease (or employed in a managerial, accounting,
leases of real property) to obtain space, auditing, or similar capacity by an
supplies, equipment, or services pro- agency or organization which currently
vided under the Medicare agreement. serves, or at any time during the pre-
Wholly owned supplier means a sup- ceding year, served as a Medicare fiscal
plier whose total ownership interest is intermediary or carrier for the pro-
held by a provider or by a person, per- vider. Similar capacity means the per-
sons, or other entity with an ownership formance of essentially the same work
or control interest in a provider. functions as those of a manager, ac-
countant, or auditor even though the
individual is not so designated by title.
FR 24982, June 12, 1992; 57 FR 27306, June 18,
1992; 57 FR 35760, Aug. 11, 1992; 71 FR 20775,
Apr. 21, 2006] § 420.204 Principals convicted of a pro-
gram-related crime.
§ 420.202 Determination of ownership (a) Information required. Prior to
or control percentages. CMS’s acceptance of a provider agree-

(a) Indirect ownership interest. The ment or issuance or reissuance of a
amount of indirect ownership interest supplier billing number, or at any time
379
§ 420.205 42 CFR Ch. IV (10–1–17 Edition)
upon written request by CMS, the pro- § 420.205 Disclosure by providers and
vider or part B supplier must furnish part B suppliers of business trans-
CMS with the identity of any person action information.
who: A provider or part B supplier must
(1) Has an ownership or control inter- submit to CMS, within 35 days after
est in the provider or part B supplier; the date of a written request, full and
(2) Is an agent or managing employee complete information on—
of the provider or part B supplier; or (a) The ownership of a subcontractor
(3) Is a person identified in paragraph with which the provider or part B sup-
(a)(1) or (a)(2) of this section and has plier has had, during the previous 12
been convicted of, or was an owner of, months, business transactions in an ag-
had a controlling interest in, or was a gregate amount in excess of $25,000;
managing employee of a corporation (b) Any significant business trans-
that has been convicted of a criminal actions between the provider or part B
offense, subjected to any civil mone- supplier and any wholly owned supplier
tary penalty, or excluded from the pro- or between the provider or part B sup-
grams for any activities related to in- plier and any subcontractor, during the
volvement in the Medicare, Medicaid, 5 year period ending on the date of the
title V or title XX social services pro- request;
gram, since the inception of those pro- (c) The names of managing employ-
grams. ees of the subcontractors;
(b) Refusal to enter into or renew agree- (d) The identity of any other entities
ment or to issue or reissue billing num- to which payment may be made by
bers. CMS may refuse to enter into or Medicare, which a person with an own-
renew an agreement with a provider of ership or control interest or a man-
services, or to issue or reissue a billing aging employee in the subcontractor
number to a part B supplier, if any per- has or has had an ownership or control
son who has an ownership or control interest in the 3-year period preceding
interest in the provider or supplier, or disclosure; and
who is an agent or managing employee, (e) Any penalties, assessments, or ex-
has been convicted of a criminal of- clusions under sections 1128, 1128A and
1128B of the Act incurred by the sub-
fense or subjected to any civil penalty
contractor, its owners, managing em-
or sanction related to the involvement
ployees or those with a controlling in-
of that person in Medicare, Medicaid,
terest in the subcontract.
title V or title XX social services pro-
grams. In making this decision, CMS [57 FR 27306, June 18, 1992]
considers the facts and circumstances
of the specific case, including the na- § 420.206 Disclosure of persons having
ture and severity of the crime, penalty ownership, financial, or control in-
terest.
or sanction and the extent to which it
adversely affected beneficiaries and the (a) Information that must be disclosed.
programs involved. CMS also considers A disclosing entity must submit the
whether it has been given reasonable following information in the manner
assurance that the person will not specified in paragraph (b) of this sec-
commit any further criminal or civil tion:
offense against the programs. (1) The name and address of each per-
(c) Notification of Inspector General. son with an ownership or control inter-
CMS promptly notifies the Inspector est in the entity or in any subcon-
General of the Department of the re- tractor in which the entity has direct
ceipt of any application or request for or indirect ownership interest totaling
participation, certification, re-certifi- 5 percent or more. In the case of a part
cation, or for a billing number that B supplier that is a joint venture, own-
identifies any person described in para- ership of 5 percent or more of any com-
graph (a)(3) of this section and the ac- pany participating in the joint venture
should be reported. Any physician who
tion taken on that application or re-

has been issued a Unique Physician
quest.
Identification Number by the Medicare
[57 FR 27306, June 18, 1992] program must provide this number.
380
(2) Whether any of the persons ty that fails to comply with paragraph
named, in compliance with paragraph (b) of this section.
(a)(1) of this section, is related to an- (2) CMS terminates any existing
other as spouse, parent, child, or sib- agreement or contract with, or with-
ling. draws a determination of eligibility for
(3) The name of any other disclosing or (in the case of a part B supplier) re-
entity in which any person with an vokes the billing number of, any dis-
ownership or control interest, or who is closing entity that fails to comply with
a managing employee in the reporting paragraph (b) of this section.
disclosing entity, has, or has had in the (d) Public disclosure. Information fur-
previous three-year period, an owner- nished to the Secretary under the pro-
ship or control interest or position as visions of this section shall be subject
managing employee, and the nature of to public disclosure as specified in 20
the relationship with the other dis- CFR part 422.
closing entity. If any of these other
disclosing entities has been convicted [44 FR 41642, July 17, 1979, as amended at 57
FR 27306, June 18, 1992]
of a criminal offense or received a civil
monetary or other administrative
sanction related to participation in Subpart D—Access to Books, Doc-
Medicare, Medicaid, title V (Maternal uments, and Records of Sub-
and Child Health) or title XX (Social contractors
Services) programs, such as penalties
assessments and exclusions under sec- SOURCE: 47 FR 58267, Dec. 30, 1982, unless
tions 1128, 1128A or 1128B of the Act, otherwise noted.
the disclosing entity must also provide
that information. § 420.300 Basis, purpose, and scope.
(b) Time and manner of disclosure. (1)
Any disclosing entity that is subject to This subpart implements section
periodic survey and certification of its 1861(v)(1)(I) of the Act, which requires,
compliance with Medicare standards for Medicare payment under certain
must supply the information specified provider contracts, access by the Sec-
in paragraph (a) of this section to the retary, upon written request, and the
State survey agency at the time it is Comptroller General, and their duly
surveyed. The survey agency will authorized representatives, to certain
promptly furnish the information to contracts for services and to books,
the Secretary. documents, and records necessary to
(2) Any disclosing entity that is not verify the costs of the services. The
subject to periodic survey and certifi- contracts affected are those between
cation must supply the information providers and their subcontractors, and
specified in paragraph (a) of this sec- between the subcontractors and organi-
tion to CMS before entering into a con- zations related to the subcontractor by
tract or agreement with Medicare or control or common ownership. It also
before being issued or reissued a billing specifies the criteria by which HHS
number as a part B supplier. will determine whether to request ac-
(3) A disclosing entity must furnish cess to books, documents, and records.
updated information to CMS at inter- § 420.301 Definitions.
vals between recertification, or re-en-
rollment, or contract renewals, within For purposes of this subpart—
35 days of a written request. In the case Books, documents, and records means
of a part B supplier, the supplier must all writings, recordings, transcriptions
report also within 35 days, on its own and tapes of any description necessary
initiative, any changes in the informa- to verify the nature and extent of the
tion it previously supplied. costs of the services provided by the
(c) Consequences of failure to disclose. subcontractor.
(1) CMS does not approve an agreement Common ownership means that an in-
or contract with, or make a determina- dividual or individuals possess signifi-
tion of eligibility for, or (in the case of cant ownership or equity in the sub-
a part B supplier) issue or reissue a contractor and the entity providing the
billing number to, any disclosing enti- services under the contract.
381
§ 420.302 42 CFR Ch. IV (10–1–17 Edition)
Contract for services means a contract (b) Requirement. Any contract meet-
through which a provider obtains the ing the conditions of paragraph (a) of
performance of an act or acts, as dis- this section must include a clause that
tinguished from supplies or equipment. allows the Comptroller General of the
It includes any contract for both goods United States, HHS, and their duly au-
and services to the extent the value or thorized representatives access to the
cost of the service component is $10,000 subcontractor’s contract, books, docu-
or more within a 12-month period. ments, and records until the expiration
Control means that an individual or of four years after the services are fur-
an organization has the power, directly nished under the contract or sub-
or indirectly, significantly to influence contract. The access must be provided
or direct the actions of policies of an for in accordance with the provisions of
organization. this subpart. The clause must also
Provider means a hospital, skilled allow similar access by HHS, the
nursing facility, home health agency, Comptroller General, and their duly
hospice or comprehensive outpatient authorized representatives to contracts
rehabilitation facility, or a related or- subject to section 1861(v)(l)(I)(ii) of the
ganization (as defined in § 413.17 of this Act between a subcontractor and orga-
chapter) of any of these providers. nizations related to the subcontractor
Related to the subcontractor means and to books, documents, and records.
that the subcontractor is, to a signifi- (c) Prohibition against Medicare reim-
cant extent, associated or affiliated bursement. If a contract subject to the
with, owns, or is owned by, or has con- requirements of this subpart does not
trol of or is controlled by, the organi- contain the clause required by para-
zation furnishing the services, facili- graph (b) of this section, CMS will not
ties, or supplies. reimburse the provider for the cost of
Subcontractor means any entity, in- the services furnished under the con-
cluding an individual or individuals, tract and will recoup any payments
that contracts with a provider to sup- previously made for services under the
ply a service, either to the provider or contract. However, in order to avoid
directly to a beneficiary, for which nonreimbursement or recoupment, pro-
Medicare reimburses the provider the viders will have until July 30, 1983, to
cost of the service. This includes orga- amend those contracts entered into or
nizations related to the subcontractor renewed after December 5, 1980, and be-
that have a contract with the subcon- fore January 31, 1983, that do not con-
tractor for which the cost or value is form to the requirements of paragraph
$10,000 or more in a 12-month period. (b) of this section.
[47 FR 58267, Dec. 30, 1982, as amended at 49 [47 FR 58267, Dec. 30, 1982, as amended at 49
FR 13703, Apr. 6, 1984; 51 FR 34833, Sept. 30, FR 13703, Apr. 6, 1984]
1986]
§ 420.303 HHS criteria for requesting
§ 420.302 Requirement for access books, documents, and records.
clause in contracts. HHS will generally request books,
(a) Applicability. This subpart applies documents, and records from a subcon-
to contracts— tractor only if one of the following sit-
(1) Between a provider and a subcon- uations exists and the question cannot
tractor and, where subject to section satisfactorily and efficiently be re-
1861(v)(l)(I)(ii) of the Act, between a solved without access to the books,
subcontractor and an organization re- documents, and records:
lated to the subcontractor; (a) HHS has reason to believe that
(2) Entered into or renewed after De- the costs claimed for services of the
cember 5, 1980; and subcontractor are excessive or inappro-
(3) For services the cost or value of priate.
which is $10,000 or more over a 12- (b) There is insufficient information
month period, including contracts for to judge the appropriateness of the
both goods and services in which the costs.

service component is worth $10,000 or (c) There is a written accusation with
more over a 12-month period. suitable evidence against the provider
382
or subcontractor of kickbacks, bribes, (3) If the subcontractor believes, for

rebates, or other illegal activities. good cause, that the requested books,
(d) There is evidence of a possible documents, and records cannot be
nondisclosure of the existence of a re- made available as requested with the
lated organization. 30-day period under paragraph (b)(1) of
this section, the subcontractor may re-
§ 420.304 Procedures for obtaining ac- quest an extension of time within
cess to books, documents, and which to comply with the request from
records. the requesting organization. The re-
(a) Contents of the request. Requests questing organization may, at its dis-
for access will be in writing and con- cretion, grant the request for an exten-
tain the following elements: sion, in whole or in part, for good cause
(1) Reasonable identification of the shown.
books, documents, and records to (4) The subcontractor must make the
which access is being requested. books, documents, and records avail-
(2) Identification of the contract or able during its regular business hours
subcontract in which costs are being for inspection, audit, and reproduction.
questioned as excessive or inappro- (5) If HHS asks the subcontractor to
priate. reproduce books, documents, and
(3) The reason that the appropriate- records, HHS will pay the reasonable
ness of the costs or value of the serv- cost of reproduction. However, if the
ices of the subcontractor in question subcontractor reproduces books, docu-
cannot be adequately or efficiently de- ments, and records as a means of mak-
termined without access to the sub- ing them available, the subcontractor
contractor’s books and records. must bear the cost of the reproduction
(4) The authority in the statute and and no Medicare reimbursement will be
regulations for the access requested. made for that purpose.
(5) To the extent possible, the identi- (6) HHS reserves the right to examine
fication of those individuals who will the originals of any requested con-
be visiting the subcontractor to obtain tracts, books, documents, and records,
access to the books, documents, and if they exist.
records. (c) Refusal by subcontractor to furnish
(6) The time and date of the sched- access to records. If CMS determines
uled visit. that the books, documents, and records
(7) The name of the duly authorized are necessary for the reimbursement
representative of HHS to contact if determination and the subcontractor
there are any questions. refuses to make them available, HHS
(b) Subcontractor response to a request may initiate legal action against the
for access to books, documents, and subcontractor.
records. (1) The subcontractor will have
30 days from the date of a written re- Subpart E—Rewards for Informa-
quest for access to books, documents, tion Relating to Medicare
and records to make them available in Fraud and Abuse, and Estab-
accordance with the request. lishment of a Program to Col-
(2) If the subcontractor believes the
request is inadequate because it does
lect Suggestions for Improving
not fully meet one or more of the re- Medicare Program Efficiency
quired elements in paragraph (a) of this and to Reward Suggesters for
section, the subcontractor must advise Monetary Savings
the requesting organization of the ad-
ditional information needed. SOURCE: 63 FR 31128, June 8, 1998, unless
(i) The subcontractor must notify the otherwise noted.
requesting organization within 20 days
of the date of the request that it was § 420.400 Basis and scope.
improperly completed. This subpart implements sections
(ii) The subcontractor must make the 203(b) and (c) of Public Law 104–191,
books, documents, and records avail- which require the establishment of pro-
able within 20 days after the date of grams to encourage individuals to re-
the requesting organization’s response. port suspected cases of fraud and abuse
383
§ 420.405 42 CFR Ch. IV (10–1–17 Edition)
and submit suggestions on methods to submits the information in the manner

improve the efficiency of the Medicare set forth in paragraph (f) of this sec-
program. Sections 203(b) and (c) of Pub- tion.
lic Law 104–191 also provide the author- (2) Excluded individuals. (i) An indi-
ity for CMS to reward individuals for vidual who was, or is an immediate
reporting fraud and abuse and for sub- family member of, an officer or em-
mitting suggestions that could improve ployee of HHS or its contractors, the
the efficiency of the Medicare program. SSA, the OIG, a State Medicaid Agen-
This subpart sets forth procedures for cy, or the Department of Justice, the
rewarding individuals. Federal Bureau of Investigation, or any
[64 FR 66401, Nov. 26, 1999] other Federal, State, or local law en-
forcement agency at the time he or she
§ 420.405 Rewards for information re- came into possession of, or divulged,
lating to Medicare fraud and abuse. information leading to a recovery of
(a) General rule. CMS pays a mone- Medicare funds is not eligible to re-
tary reward for information that leads ceive a reward under this section.
to the recovery of at least $100 of Medi- (ii) Any other Federal or State em-
care funds from individuals and enti- ployee or contractor or an HHS grantee
ties that are engaging in, or have en- is not eligible for a reward under this
gaged in, acts or omissions that con- section if the information submitted
stitute grounds for the imposition of a came to his or her knowledge in the
sanction under section 1128, section course of his or her official duties.
1128A, or section 1128B of the Act or (iii) An individual who illegally ob-
that have otherwise engaged in tained the information he or she sub-
sanctionable fraud and abuse against mitted is excluded from receiving a re-
the Medicare program. The determina- ward under this section.
tion of whether an individual meets the (iv) An individual who participated in
criteria for an award, and the amount the sanctionable offense with respect
of the award, is at the discretion of to which payment would be made is ex-
CMS. CMS pays rewards only if a re- cluded from receiving a reward under
ward is not otherwise provided for by this section.
law. When CMS applies the criteria (d) Notification of eligibility—(1) Gen-
specified in paragraphs (b), (c), and (e) eral rule. After all Medicare funds have
of this section to determine the eligi- been recovered and CMS has deter-
bility and the amount of the reward, it mined a participant eligible to receive
notifies the beneficiary as specified in a reward under the provisions of this
paragraph (d) of this section. section, it notifies the informant of his
(b) Information eligible for reward. (1) or her eligibility, by mail, at the most
In order for an individual to be eligible recent address supplied by the indi-
to receive a reward, the information he vidual. It is the individual’s responsi-
or she supplied must relate to the ac- bility to ensure that the reward pro-
tivities of a specific individual or enti- gram has been notified of any change
ty and must specify the time period of in his or her address or other relevant
the alleged activities. personal information (for example,
(2) CMS does not give a reward for in- change of name, phone number).
formation relating to an individual or (2) Special circumstances. (i) If the in-
entity that, at the time the informa- dividual has relocated to an unknown
tion is provided, is already the subject address, the individual or his or her
of a review or investigation by CMS or legal representative may claim the re-
its contractors, or the OIG, the Depart- ward by contacting CMS within 1 year
ment of Justice, the Federal Bureau of from the date on which CMS first at-
Investigation, or any other Federal, tempted to notify the individual about
State, or local law enforcement agen- a reward. CMS does not consider the
cy. individual or his or her legal represent-
(c) Persons eligible to receive a reward— ative eligible for a reward more than 1
(1) General rule. Any person (other than year after the date on which it first at-
one excluded under paragraph (c)(2) of tempted to give notice. CMS does not
this section) is eligible to receive a repay interest on rewards that are not
ward under this section if the person immediately claimed.
384
(ii) If the individual has become inca- name, address, telephone number, and
pacitated or has died, an executor, ad- any other requested identifying infor-
ministrator, or other legal representa- mation so that he or she may be con-
tive may claim the reward on behalf of tacted, if necessary, for additional in-
the individual or the individual’s es- formation and, when applicable, for the
tate. The claimant must submit cer- payment of a reward upon resolution of
tified copies of the letters testa- the case.
mentary, letters of administration, or (g) Confidentiality. CMS does not re-
other similar evidence to show his or veal a participant’s identity to any
her authority to claim the reward. The person, except as required by law.
claim must be filed within 1 year from (h) Finding of ineligibility after reward
the date on which CMS first gave or at- is accepted. If, after a reward is accept-
tempted to give notice of the reward. ed, CMS finds that the awardee was in-
(e) Amount and payment of reward. (1) eligible to receive the reward, the Gov-
In determining whether it will pay a ernment is not liable for the reward
reward and, if so, the amount of the re- and the awardee must refund all mon-
ward, CMS takes into account all relies received.
evant factors, including the signifi-
cance of the information furnished in § 420.410 Establishment of a program
relation to the ultimate resolution of to collect suggestions for improving
the case and the recovery of Medicare Medicare program efficiency and to
reward suggesters for monetary
funds. savings.
(2) The amount of a reward rep-
resents what CMS considers to be ade- (a) Definitions. As used in this sec-
quate compensation in the particular tion, the following definitions apply:
case, not to exceed 10 percent of the Payment means a monetary award
overpayments recovered in the case or given to a suggester in recognition of,
$1,000, whichever is less. and as a reward for, a suggestion
(3) If more than one person is eligible adopted by CMS that improves the effi-
to receive a reward in a particular ciency of, and results in monetary sav-
case, CMS allocates the total reward ings to, the Medicare program.
amount (not to exceed 10 percent of the Savings means the monetary value of
overpayments recovered in that case or the net benefits the Medicare program
$1,000, whichever is less) among the derives from implementing the sugges-
participants. tion.
(4) CMS bases rewards only on recov- Suggester means an individual, a
ered Medicare payments and not on group of individuals, or a legal entity
amounts collected as penalties or fines. such as a corporation, partnership, or
(5) CMS makes payments as promptly professional association, not otherwise
as the circumstances of the case per- excluded under § 420.410(d), who submits
mit, but not until it has collected all a suggestion under this section.
Medicare overpayments, fines, and pen- Suggestion means an original idea
alties. submitted in writing.
(6) No person may make any offer or Suggestion program means the specific
promise or otherwise bind CMS or HHS procedures and requirements estab-
with respect to the payment of any re- lished by CMS for receiving sugges-
ward under this section or the amount tions from the suggester on methods to
of the reward. improve the efficiency of the Medicare
(f) Submission of information. (1) An in- program, evaluating the suggestions
dividual may submit information on and, if appropriate, paying a reward to
persons or entities engaging in, or that the suggester for adopted suggestions
have engaged in, fraud and abuse that result in improved efficiency and
against the Medicare program to the produce monetary savings to the Medi-
Office of the Inspector General, or to care program.
the Medicare intermediary or carrier (b) General rule. CMS may make pay-
that has jurisdiction over the sus- ment for adopted suggestions that in-
pected fraudulent provider or supplier. crease the efficiency of the Medicare

(2) A participant interested in receiv- program and result in monetary sav-
ing a reward must provide his or her ings. CMS only makes payment for
385
§ 420.410 42 CFR Ch. IV (10–1–17 Edition)
suggestions in instances in which a re- additional information and, where ap-

ward is not otherwise provided by law. plicable, to mail the reward.
The determination to adopt a sugges- (f) Evaluation process—(1) Relevant
tion, to reward the suggester, and the factors. CMS evaluates all suggestions
method of calculating a reward are at on the basis of the following factors:
the sole discretion of CMS. (i) Originality of suggestion.
(c) Eligibility. Except as specified in (ii) An estimate of potential mone-
paragraph (d) of this section, any indi- tary savings to the Medicare program.
vidual, group of individuals or legal en- (iii) The extent to which Medicare
tity, such as a corporation, partnership program efficiency would be improved
or professional association, is eligible if CMS adopts the suggestion.
to submit a suggestion and be consid- (iv) Accuracy of the information re-
ered for a reward under this suggestion flected in the suggestion.
program if the suggestion is submitted (v) Feasibility of implementation.
to CMS in the manner set forth in (vi) Nature and complexity of the
paragraph (e) of this section. suggestion.
(d) Exclusions. Medicare contractors,
(vii) Any other factors that appear to
their officers and employees, individ-
be relevant.
uals who work for Federal agencies
(2) Evaluation time limit. CMS con-
under a contract, employees of Feder-
cludes the evaluation process in a rea-
ally-sponsored research and demonstra-
sonable amount of time, not to exceed
tion projects, Federal officers and em-
2 years from the receipt date, taking
ployees, and immediate family mem-
into consideration the complexity of
bers of these individuals, are excluded
the suggestion, the number of possible
from receiving payment under the sug-
implementation strategies, and CMS’s
gestion program. If, after the suggester
current workload.
receives a reward payment, CMS deter-
mines that the suggester was ineligible (g) Basis for reward payment—(1) Gen-
to receive the reward, CMS is not liable eral rule. If CMS determines that it is
for the reward payment and the sug- appropriate to make a reward payment
gester must refund all monies received. for a suggestion adopted in whole or in
(e) Requirements for submitting sugges- part, that results in improved effi-
tions—(1) To be considered, the sugges- ciency and monetary savings to the
tion must be in writing, mailed to Medicare program, the payment is
CMS, and must include the following based on—
information: (i) The actual first-year net savings
(i) A description of an existing prob- to the Medicare program, or
lem or need; (ii) The average annual net savings
(ii) A suggested method for solving to the Medicare program expected to
the problem or filling the need; and be realized over a period of not more
(iii) If known, an estimate of the sav- than 3 years if—
ings potential that could result from (A) An improvement is expected to
implementing the suggestion. yield monetary savings for more than 1
(2) Suggestions must be mailed to: year and implementation involves sub-
Centers for Medicare & Medicaid Serv- stantial costs; or
ices Suggestion Program, 7500 Security (B) Monetary savings are negligible
Blvd., Baltimore, Maryland 21244–1850. in the first year but are expected to
(3) Any suggesters interested in re- substantially increase in subsequent
ceiving a reward must provide CMS years.
with the following information: An in- (2) Reward payment amount. CMS de-
dividual suggester must provide his or termines the amount of a reward pay-
her name, a group of suggesters must ment using the following formula:
provide the names of all the group (i) Net savings from $1,000 to $10,000—
members, and a legal entity must pro- 10 percent of the savings, with a min-
vide its name and the name of its rep- imum award amount of $100;
resentative. All suggesters must pro- (ii) Net savings of $10,001 to $100,000—
vide an address, telephone number, and $1,000 for the first $10,000 of savings,
any other identifying information that plus 3 percent of the net savings over
CMS needs to contact the suggester for $10,000;
386
(iii) Net savings of more than reason, are delayed or are not imme-
$100,000—$3,700 for the first $100,000 of diately claimed.
savings, plus 0.5 percent of savings over (k) Incapacitated or deceased suggester.
$100,000, with a maximum award If the suggester is incapacitated or has
amount of $25,000. died, an executor, administrator, or
(h) Adoption of suggestion and issuance other legal representative may claim
of reward payment—(1) Adoption. Upon the reward on behalf of the suggester
completing its evaluation, CMS decides or the suggester’s estate. The claimant
whether to adopt a suggestion. If CMS must submit certified copies of the let-
receives the same or an overlapping ters testamentary, letters of adminis-
suggestion from two or more unrelated tration, or other similar evidence to
parties, CMS will consider a reward CMS showing his or her authority to
only for the suggestion CMS received claim the reward. The claim must be
first, if the suggestion or overlapping filed within 1 year from the date on
part of the suggestion are identical, which CMS first attempted to pay the
and CMS has adopted that part. If the reward to the individual who submitted
suggestions are not identical, CMS will the suggestion.
consider rewarding the suggestion re- (l) Maintenance of records—(1) CMS re-
ceived first, if it is feasible and CMS is tains records related to the administra-
able to adopt and implement the sug- tion of the suggestion program in ac-
gestion. If the first suggestion cannot cordance with 36 CFR part 1228 (the
be implemented, CMS may consider re- regulations for the National Archives
warding the suggestion received next, and Records Administration).
even if it is similar, provided CMS can (2) CMS does not disclose informa-
adopt and implement the suggestion. tion submitted under the suggestion
(2) Issuance of reward payment. After program, except as required by law.
the reward payment amount is deter- [64 FR 66401, Nov. 26, 1999]
mined, as described in paragraph (g) of
this section, CMS mails payment to PART 421—MEDICARE
the suggester (or to the legal rep-
CONTRACTING
resentatives referenced in paragraph
(k) of this section) only after the sug-
Subpart A—Scope, Definitions, and
gestion has been in operation for 1
General Provisions
year.
(i) Group suggestions. When CMS Sec.
deems that a reward payment is appro- 421.1 Basis, applicability, and scope.
priate for a suggestion submitted by a 421.3 Definitions.
group of individuals, CMS pays an 421.5 General provisions.
equal share of the reward to each of the
Subpart B—Intermediaries
individuals identified in the group. If
an organization such as a corporation, 421.100 Intermediary functions.
partnership, or professional association 421.103 Payment to providers.
submits a suggestion, CMS makes a 421.104 Assignment of providers of services
single reward payment to that organi- to intermediaries during transition to
zation. Medicare Administrative Contractors
(MACs).
(j) Change in name or address. It is the 421.110 Requirements for approval of an
suggester’s responsibility to notify agreement.
CMS of any change of address or other 421.112 Considerations relating to the effec-
relevant information. If the suggester tive and efficient administration of the
fails to update CMS on any change in program.
this information, and the reward pay- 421.114 Assignment and reassignment of
ment mailed to the suggester is re- providers by CMS.
421.120 Performance criteria.
turned to CMS, the suggester must
421.122 Performance standards.
claim the reward payment by con- 421.124 Intermediary’s failure to perform ef-
tacting CMS within 1 year from the ficiently and effectively.
date CMS first mailed the reward pay- 421.126 Termination of agreements.
ment to the suggester. CMS does not 421.128 Intermediary’s opportunity for hear-
pay interest on rewards that, for any ing and right to judicial review.
387
§ 421.1 42 CFR Ch. IV (10–1–17 Edition)
Subpart C—Carriers intermediaries that received awards

under sections 1816 or 1842 of the Act
421.200 Carrier functions.
421.201 Performance criteria and standards.
prior to October 1, 2005, contracts with
421.202 Requirements and conditions. Part B (Supplementary Medical Insur-
421.203 Carrier’s failure to perform effi- ance) carriers that received awards
ciently and effectively. under sections 1816 or 1842 of the Act
421.205 Termination by the Secretary. prior to October 1, 2005, and contracts
421.210 Designations of regional carriers to with Medicare integrity program con-
process claims for durable medical equip- tractors that perform program integ-
ment, prosthetics, orthotics and supplies.
421.212 Railroad Retirement Board con- rity functions.
tracts. (c) Scope. The scope of this part—
421.214 Advance payments to suppliers fur- (1) Specifies that CMS may perform
nishing items or services under Part B. certain functions directly or by con-
tract.
Subpart D—Medicare Integrity Program (2) Specifies criteria and standards
Contractors CMS uses in evaluating the perform-
421.300 Basis, applicability, and scope. ance of fiscal intermediaries’ successor
421.302 Eligibility requirements for Medi- entities and in assigning or reassigning
care integrity program contractors. a provider or providers to particular
421.304 Medicare integrity program con- fiscal intermediaries.
tractor functions. (3) Provides the opportunity for a
421.306 Awarding of a contract. hearing for fiscal intermediaries and
421.308 Renewal of a contract.
421.310 Conflict of interest requirements.
carriers affected by certain adverse ac-
421.312 Conflict of interest resolution. tions.
421.316 Limitation on Medicare integrity (4) Provides adversely affected fiscal
program contractor liability. intermediaries an opportunity for judi-
cial review of certain hearing deci-
Subpart E—Medicare Administrative sions.
Contractors (MACs) (5) Sets forth requirements related to
421.400 Statutory basis and scope. contracts with Medicare integrity pro-
421.401 Definitions. gram contractors.
421.404 Assignment of providers and sup- [72 FR 48886, Aug. 24, 2007]
pliers to MACs.
§ 421.3 Definitions.
Subpart F [Reserved]
As used in this part—
AUTHORITY: Secs. 1102 and 1871 of the Social Intermediary means an entity that
Security Act (42 U.S.C. 1302 and 1395hh). has a contract with CMS (under statu-
SOURCE: 45 FR 42179, June 23, 1980, unless tory provisions in effect prior to Octo-
otherwise noted. ber 1, 2005) to determine and make
Medicare payments for Part A or Part
B benefits payable on a cost basis (or
Subpart A—Scope, Definitions, under the prospective payment system
and General Provisions for hospitals) and to perform other re-
§ 421.1 Basis, applicability, and scope. lated functions. For purposes of apply-
ing the performance criteria in § 421.120
(a) Basis. This part is based on the and the performance standards in
provisions of the following sections of § 421.122 and any adverse action result-
the Act: ing from that application, the term
Section 1124—Requirements for dis- ‘‘intermediary’’ also means a Blue
closure of certain information. Cross plan that has entered into a sub-
Sections 1816 and 1842—Provisions re- contract approved by CMS with the
lating to the administration of Parts A Blue Cross and Blue Shield Association
and B. to perform intermediary functions.
Section 1893—Requirements for pro-
tecting the integrity of the Medicare [71 FR 68228, Nov. 24, 2006]
program.
(b) Applicability. The provisions of § 421.5 General provisions.

this part apply to agreements with (a) Competitive bidding not required for
Part A (Hospital Insurance) fiscal carriers. CMS may enter into contracts
388
with carriers, or with intermediaries to (b) Additional functions. The contract

act as carriers in certain cir- may include any or all of the following
cumstances, without regard to section functions:
3709 of the U.S. Revised Statutes or any (1) Any or all of the program integ-
other provision of law that requires rity functions described in § 421.304,
competitive bidding. provided the intermediary is con-
(b) Indemnification of intermediaries tinuing those functions under an agree-
and carriers. Intermediaries and car- ment entered into under section 1816 of
riers act on behalf of CMS in carrying the Act that was in effect on August 21,
out certain administrative responsibil- 1996, and they do not duplicate work
ities that the law imposes. Accord- being performed under a Medicare in-
ingly, their agreements and contracts tegrity program contract.
contain clauses providing for indem- (2) Undertaking to adjust incorrect
nification with respect to actions payments and recover overpayments
taken on behalf of CMS and CMS is the when it is determined that an overpay-
real party of interest in any litigation ment was made.
involving the administration of the (3) Furnishing to CMS timely infor-
program. mation and reports that CMS requests
(c) Use of intermediaries to perform car- in order to carry out its responsibil-
rier functions. CMS may contract with ities in the administration of the Medi-
an intermediary to perform carrier care program.
functions with respect to services for
(4) Establishing and maintaining pro-
which Part B payment is made to a
cedures as approved by CMS for the re-
provider.
determination of payment determina-
(d) Nonrenewal of agreement or con-
tions.
tract. Notwithstanding any of the pro-
visions of this part, CMS has the au- (5) Maintaining records and making
thority not to renew an agreement or available to CMS the records necessary
contract when its term expires. for verification of payments and for
(e) Intermediary availability in an area. other related purposes.
For more effective and efficient admin- (6) Upon inquiry, assisting individ-
istration of the program, CMS retains uals for matters pertaining to an inter-
the right to expand or diminish the mediary agreement.
geographical area in which an inter- (7) Serving as a channel of commu-
mediary is available to serve providers. nication to and from CMS of informa-
(f) Provision for automatic renewal. tion, instructions, and other material
Agreements and contracts under this as necessary for the effective and effi-
part may contain automatic renewal cient performance of an intermediary
clauses for continuation from term to agreement.
term unless either party gives notice, (8) Undertaking other functions as
within timeframes specified in the mutually agreed to by CMS and the
agreement or contract, of its intention intermediary.
not to renew. (c) Dual intermediary responsibilities.
Regarding the responsibility for serv-
FR 4026, Jan. 27, 1989] ice to provider-based HHAs and pro-
vider-based hospices, where the HHA or
the hospice and its parent provider will
Subpart B—Intermediaries be served by different intermediaries,
§ 421.100 Intermediary functions. the designated regional intermediary
will process bills, make coverage deter-
An agreement between CMS and an minations, and make payments to the
intermediary specifies the functions to HHAs and the hospices. The inter-
be performed by the intermediary. mediary or Medicare integrity program
(a) Mandatory functions. The contract
contractor serving the parent provider
must include the following functions:
will perform all fiscal functions, in-
(1) Determining the amount of pay-
cluding audits and settlement of the
ments to be made to providers for cov-
Medicare cost reports and the HHA and

ered services furnished to Medicare
hospice supplement worksheets.
beneficiaries.
(2) Making the payments. [72 FR 48886, Aug. 24, 2007]
389
§ 421.103 42 CFR Ch. IV (10–1–17 Edition)
§ 421.103 Payment to providers. the newly assigned intermediary of as-

signment or reassignment decisions.
Providers are assigned to inter-
mediaries in accordance with § 421.104. [71 FR 68228, Nov. 24, 2006]
As the Medicare Administrative Con-
tractors (MACs) are implemented, pro- § 421.110 Requirements for approval of
viders are reassigned from inter- an agreement.
mediaries to MACs in accordance with Before entering into or renewing an
§ 412.404 of this chapter. intermediary agreement, CMS will—
[71 FR 68228, Nov. 24, 2006] (a) Determine that to do so is con-
sistent with the effective and efficient
§ 421.104 Assignment of providers of administration of the Medicare pro-
services to intermediaries during gram;
transition to Medicare Administra- (b) Review the performance of the
tive Contractors (MACs). intermediary as measured by the cri-
(a) Beginning October 1, 2005, CMS teria (§ 421.120) and standards (§ 421.122);
assigns providers of services and other and
entities that may bill Part A benefits (c) Determine that the intermediary
to intermediaries in a manner that will or prospective intermediary—
best support the transition to Medicare (1) Is willing and able to assist pro-
Administrative Contractors (MACs) viders in the application of safeguards
under section 1874A of the Act in ac- against unnecessary utilization of serv-
cordance with subpart E of this part. ices;
(b) These providers of services and (2) Meets all solvency and financial
other entities must continue to bill the responsibility requirements imposed by
intermediary that they were billing the statutes and regulatory authorities
prior to October 1, 2005, until one of the of the State or States in which it, or
following events occurs: any subcontractor performing some or
(1) The intermediary’s agreement all of its functions, would serve;
with CMS ends, and the provider or en- (3) Has the overall resources and ex-
tity is directed by CMS to bill another perience to administer its responsibil-
CMS contractor. ities under the Medicare program and
(2) The provider or entity is assigned has an existing operational, statistical,
to a MAC that has begun to administer and recordkeeping capacity to carry
claims within the geographic locale of out the additional program responsibil-
the provider or entity. ities it proposes to assume. CMS will
(3) CMS directs the provider or entity presume that an intermediary or pro-
to begin billing another CMS con- spective intermediary meets this re-
tractor in order to support the imple- quirement if it has at least 5 years ex-
mentation of MACs under section 1874A perience in paying for or reimbursing
of the Act and subpart E of this part. the cost of health services;
(c) New providers of services and new (4) Will serve a sufficient number of
entities will be assigned to the inter- providers to permit a finding of effec-
mediary serving their geographic lo- tive and efficient administration.
cale if no MAC has begun to administer Under this criterion no intermediary or
Medicare claims in the locale. These prospective intermediary shall be
providers or entities must continue to found to be not efficient or effective
bill the intermediary until one of the solely on the grounds that it serves
events in paragraph (b) of this section only providers located in a single
occurs. State;
(d) Providers or entities will only be (5) Has acted in good faith to achieve
granted exceptions to the provisions of effective cooperation with the pro-
paragraphs (b) or (c) of this section if viders it will service and with the phy-
CMS deems the exception to be in the sicians and medical societies in the
compelling interest of the Medicare area;
program. (6) Has established a record of integ-

(e) CMS will notify the provider or rity and satisfactory service to the
entity, the outgoing intermediary, and public; and
390
(7) Has an affirmative equal employ- § 421.114 Assignment and reassign-

ment opportunity program that comment of providers by CMS.
plies with the fair employment provi- CMS may assign or reassign any pro-
sions of the Civil Rights Act of 1964 and vider to any intermediary if it deter-
Executive Order 11246, as amended. mines that the assignment or reassign-
ment will be in the best interests of the
§ 421.112 Considerations relating to
the effective and efficient adminis- Medicare program.
tration of the program. [71 FR 68229, Nov. 24, 2006]
(a) In order to accomplish the most
effective and efficient administration § 421.120 Performance criteria.
of the Medicare program, the Secretary (a) Application of performance criteria.
may make determinations with respect As part of the intermediary evalua-
to the termination of an intermediary tions authorized by section 1816(f) of
agreement, and CMS may make deter- the Act, CMS periodically assesses the
minations with respect to renewal of performance of intermediaries in their
an intermediary agreement under Medicare operations using performance
§ 421.110. criteria. The criteria measure and
(b) When taking the actions specified evaluate intermediary performance of
in paragraph (a) of this section, the functional responsibilities such as—
Secretary or CMS will consider the (1) Correct coverage and payment de-
performance of the individual inter- terminations;
mediary in its Medicare operations (2) Responsiveness to beneficiary con-
using the factors contained in the per- cerns; and
formance criteria specified in § 421.120 (3) Proper management of adminis-
and the performance standards speci- trative funds.
fied in § 421.122. (b) Basis for criteria. CMS will base
(c) In addition, when taking the ac- the performance criteria on—
tions listed in paragraph (a) of this sec- (1) Nationwide intermediary experi-
tion, the Secretary or CMS may con- ence;
sider factors relating to— (2) Changes in intermediary oper-
(1) Consistency in the administration ations due to fiscal constraints; and
of program policy; (3) HFCA’s objectives in achieving
(2) Development of intermediary ex- better performance.
pertise in difficult areas of program ad- (c) Publication of criteria. The develop-
ministration; ment and revision of criteria for evalu-
(3) Individual capacity of available ating intermediary performance is a
intermediaries to serve providers as it continuing process. Therefore, before
is affected by such considerations as— the beginning of each evaluation pe-
(i) Program emphasis on the number riod, CMS will publish the performance
or type of providers to be served; or criteria as a notice in the FEDERAL
(ii) Changes in data processing tech- REGISTER.
nology;
[48 FR 7178, Feb. 18, 1983]
(4) Overdependence of the program on
the capacity of an intermediary to an § 421.122 Performance standards.
extent that services could be inter-
rupted; (a) Development of standards. In addi-
(5) Economy in the delivery of inter- tion to the performance criteria
mediary services; (§ 421.120), CMS develops detailed per-
formance standards for use in evalu-
(6) Timeliness in the delivery of
ating intermediary performance which
intermediary services;
may be based on historical perform-
(7) Duplication in the availability of
ance, application of acceptable statis-
intermediaries;
tical measures of variation to nation-
(8) Conflict of interest between an wide intermediary experience during a
intermediary and provider; and base period, or changing program em-
(9) Any additional pertinent factors. phases or requirements. These stand-

[45 FR 42179, June 23, 1980, as amended at 59 ards are also developed considering
FR 682, Jan. 6, 1994; 71 FR 68229, Nov. 24, 2006] intermediary experience and evaluate
391
§ 421.124 42 CFR Ch. IV (10–1–17 Edition)
the specific requirements of each func- contractual requirements exceeds the

tional responsibility or criterion. amount which CMS finds to be reason-
(b) Factors beyond intermediary’s con- able and adequate to meet the cost
trol. To identify measurable factors which must be incurred by an effi-
that significantly affect an ciently and economically operated
intermediary’s performance, but that intermediary, those high costs may
are not within the intermediary’s con- also be grounds for adverse action.
trol, CMS will—
(1) Study the performance of inter- [59 FR 682, Jan. 6, 1994]
mediaries during the base period, and
(2) Consider the noncontrollable fac- § 421.126 Termination of agreements.
tors in developing performance stand- (a) Termination by intermediary. An
ards. intermediary may terminate its agree-
(c) Publication of standards. The de- ment at any time by—
velopment and revision of standards for
(1) Giving written notice of its inten-
evaluating intermediary performance
tion to CMS and to the providers it
is a continuing process. Therefore, be-
fore the beginning of each evaluation services at least 180 days before its in-
period, which usually coincides with tended termination date; and
the Federal fiscal year period of Octo- (2) Giving public notice of its inten-
ber 1–September 30, CMS publishes the tion by publishing a statement of the
performance standards as part of the effective date of termination at least 60
FEDERAL REGISTER notice describing days before that date. Publication
the performance criteria issued under must be in a newspaper of general cir-
§ 421.120(c). CMS may not necessarily culation in each community served by
publish the criteria and standards the intermediary.
every year. CMS interprets the statu- (b) Termination by the Secretary, and
tory phrase ‘‘before the beginning of right of appeal. (1) The Secretary may
each evaluation period’’ as allowing terminate an agreement if—
publication of the criteria and stand- (i) The intermediary fails to comply
ards after the Federal fiscal year be- with the requirements of this subpart;
gins, as long as the evaluation period
(ii) The intermediary fails to meet
of the intermediaries for the new cri-
teria and standards begins after the the criteria or standards specified in
publication of the notice. §§ 421.120 and 421.122; or
(iii) CMS has reassigned, under
[59 FR 682, Jan. 6, 1994] § 421.114 or § 421.116, all of the providers
§ 421.124 Intermediary’s failure to per- assigned to the intermediary.
form efficiently and effectively. (2) If the Secretary decides to termi-
nate an agreement, he or she will offer
(a) Failure by an intermediary to
meet, or to demonstrate the capacity the intermediary an opportunity for a
to meet, the criteria or standards spec- hearing, in accordance with § 421.128.
ified in §§ 421.120 and 421.122 may be (3) If the intermediary does not re-
grounds for adverse action by the Sec- quest a hearing, or if the hearing deci-
retary or by CMS, such as reassign- sion affirms the Secretary’s decision,
ment of providers, offer of a short-term the Secretary will provide reasonable
agreement, termination of a contract, notice of the effective date of termi-
or non-renewal of a contract. If an nation to—
intermediary meets all criteria and (i) The intermediary;
standards in its overall performance, (ii) The providers served by the inter-
but does not meet them with respect to mediary; and
a specific provider or class of providers, (iii) The general public.
CMS may reassign that provider or (4) The providers served by the inter-
class of providers to another intermediary will be given the opportunity
mediary in accordance with § 421.114. to nominate another intermediary, in
(b) In addition, notwithstanding
accordance with § 421.104.

whether an intermediary meets the cri-
teria and standards, if the cost in-
curred by the intermediary to meet its
392
§ 421.128 Intermediary’s opportunity (1) The carrier is continuing those

for hearing and right to judicial re- functions under a contract entered into
view. under section 1842 of the Act that was
(a) Basis for appeal. An intermediary in effect on August 21, 1996.
adversely affected by any of the fol- (2) The functions do not duplicate
lowing actions shall be granted an op- work being performed under a Medi-
portunity for a hearing: care integrity program contract, ex-
(1) Assignment or reassignment of cept that the function related to devel-
providers to another intermediary. oping and maintaining a list of DME
(2) Designation of a national or re- may be performed under both a carrier
gional intermediary to serve a class of contract and a Medicare integrity pro-
providers. gram contract.
(3) Termination of the agreement. (b) Receiving, disbursing, and ac-
(b) Request for hearing. The inter- counting for funds in making payments
mediary shall file the request with for services furnished to eligible indi-
CMS within 20 days from the date on viduals within the jurisdiction of the
the notice of intended action. carrier.
(c) Hearing procedures. The hearing (c) Determining the amount of pay-
officer shall be a representative of the ment for services furnished to an eligi-
Secretary and not otherwise a party to ble individual.
the initial administrative decision. The (d) Undertaking to adjust incorrect
intermediary may be represented by payments and recover overpayments
counsel and may present evidence and when it is determined that an overpay-
examine witnesses. A complete record- ment was made.
ing of the proceedings at the hearing (e) Furnishing to CMS timely infor-
will be made and transcribed. mation and reports that CMS requests
(d) Judicial review. An adverse hearing in order to carry out its responsibil-
decision concerning action under para- ities in the administration of the Medi-
graph (a)(1) or (a)(2) of this section is care program.
subject to judicial review in accord- (f) Maintaining records and making
ance with 5 U.S.C. chapter 7.
available to CMS the records necessary
(e) As specified in § 421.118, contracts
for verification of payments and for
awarded under the experimental au-
other related purposes.
thority of CMS are not subject to the
(g) Establishing and maintaining pro-
provisions of this section.
(f) Exception. An intermediary ad- cedures under which an individual en-
versely affected by the designation of a rolled under Part B is granted an op-
regional intermediary or an alternative portunity for a redetermination.
regional intermediary for HHAs, or an (h) Upon inquiry, assisting individ-
intermediary for hospices, under uals with matters pertaining to a car-
§ 421.117 of this subpart is not entitled rier contract.
to a hearing or judicial review con- (i) Serving as a channel of commu-
cerning adverse effects caused by the nication to and from CMS of informa-
designation of an intermediary. tion, instructions, and other material
as necessary for the effective and effi-
[45 FR 42179, June 23, 1980, as amended at 47 cient performance of a carrier con-
FR 38540, Sept. 1, 1982; 49 FR 3660, Jan. 30,
1984; 53 FR 17945, May 19, 1988]
tract.
(j) Undertaking other functions as
mutually agreed to by CMS and the
Subpart C—Carriers carrier.
§ 421.200 Carrier functions. [72 FR 48886, Aug. 24, 2007]
A contract between CMS and a car-
rier specifies the functions to be per- § 421.201 Performance criteria and
formed by the carrier. The contract standards.
may include any or all of the following (a) Application of performance criteria
functions: and standards. As part of the carrier
(a) Any or all of the program integ- evaluations mandated by section

rity functions described in § 421.304 pro- 1842(b)(2) of the Act, CMS periodically
vided the following conditions are met: assesses the performance of carriers in
393
§ 421.202 42 CFR Ch. IV (10–1–17 Edition)
their Medicare operations using per- regional carriers under § 421.210 of this
formance criteria and standards. subpart.
(1) The criteria measure and evaluate [45 FR 42179, June 23, 1980, as amended at 57
carrier performance of functional re- FR 27307, June 18, 1992]
sponsibilities such as—
(i) Accurate and timely payment de- § 421.203 Carrier’s failure to perform
terminations; efficiently and effectively.
(ii) Responsiveness to beneficiary, (a) Failure by a carrier to meet, or
physician, and supplier concerns; and demonstrate the capacity to meet, the
(iii) Proper management of adminis- criteria and standards specified in
trative funds. § 421.201 may be grounds for adverse ac-
tion by the Secretary, such as contract
(2) The standards evaluate the spe-
termination or non-renewal.
cific requirements of each functional
(b) Notwithstanding whether or not a
responsibility or criterion. carrier meets the criteria and stand-
(b) Basis for criteria and standards. ards specified in § 421.201, if the cost in-
CMS bases the performance criteria curred by the carrier to meet its con-
and standards on— tractual requirements exceeds the
(1) Nationwide carrier experience; amount that CMS finds to be reason-
(2) Changes in carrier operations due able and adequate to meet the cost
to fiscal constraints; and which must be incurred by an effi-
(3) CMS’s objectives in achieving bet- ciently and economically operated car-
ter performance. rier, those high costs may also be
(c) Publication of criteria and stand- grounds for adverse action.
ards. Before the beginning of each eval- [59 FR 682, Jan. 6, 1994]
uation period, which usually coincides
with the Federal fiscal year period of § 421.205 Termination by the Sec-
October 1–September 30, CMS publishes retary.
the performance criteria and standards (a) Cause for termination. The Sec-
as a notice in the FEDERAL REGISTER. retary may terminate a contract with
CMS may not necessarily publish the a carrier at any time if he or she deter-
criteria and standards every year. CMS mines that the carrier has failed sub-
interprets the statutory phrase ‘‘before stantially to carry out any material
the beginning of each evaluation pe- terms of the contract or has performed
riod’’ as allowing publication of the its function in a manner inconsistent
criteria and standards after the Fed- with the effective and efficient admin-
eral fiscal year begins, as long as the istration of the Medicare Part B pro-
gram.
evaluation period of the carriers for
(b) Notice and opportunity for hearing.
the new criteria and standards begins
Upon notification of the Secretary’s in-
after the publication of the notice.
tent to terminate the contract, the
[59 FR 682, Jan. 6, 1994] carrier may request a hearing within 20
days after the date on the notice of in-
§ 421.202 Requirements and condi- tent to terminate.
tions. (c) Hearing procedures. The hearing
Before entering into or renewing a procedures will be those specified in
carrier contract, CMS determines that § 421.128(c).
the carrier— § 421.210 Designations of regional car-
(a) Has the capacity to perform its riers to process claims for durable
contractual responsibilities effectively medical equipment, prosthetics,
and efficiently; orthotics and supplies.
(b) Has the financial responsibility (a) Basis. This section is based on sec-
and legal authority necessary to carry tions 1834(a)(12) and 1834(h) of the Act,
out its responsibilities; and which authorize the Secretary to des-
(c) Will be able to meet any other re- ignate one carrier for one or more en-
quirements CMS considers pertinent, tire regions to process claims for dura-
and, if designated a regional DMEPOS ble medical equipment, prosthetic de-
carrier, any special requirements for vices, prosthetics, orthotics, and other
394
supplies (DMEPOS). This authority has South Dakota, Nebraska, Kansas, Iowa,
been delegated to CMS. and Missouri.
(b) Types of claims. Claims for the fol- (2) CMS has the option to modify the
lowing, except for items incident to a number and boundaries of the regions
physician’s professional service as de- established in paragraph (c)(1) of this
fined in § 410.26, incident to a physi- section based on appropriate criteria
cian’s service in a rural health clinic as and considerations, including the effect
defined in § 405.2413, or bundled into of the change on beneficiaries and
payment to a provider, ambulatory DMEPOS suppliers. To announce
surgical center, or other facility, are changes, CMS publishes a notice in the
processed by the designated carrier for FEDERAL REGISTER that delineates the
its designated region and not by other regional boundary or boundaries
carriers— changed, the States and territories af-
(1) Durable medical equipment (and fected, and supporting criteria or con-
related supplies) as defined in section siderations.
1861(n) of the Act; (d) Criteria for designating regional car-
(2) Prosthetic devices (and related riers. CMS designates regional carriers
supplies) as described in section to achieve a greater degree of effective-
1861(s)(8) of the Act, (including intra- ness and efficiency in the administra-
ocular lenses and parenteral and en- tion of the Medicare program. In mak-
teral nutrients, supplies, and equip- ing this designation, CMS will award
ment, when furnished under the pros- regional carrier contracts in accord-
thetic device benefit); ance with applicable law and will con-
(3) Orthotics and prosthetics (and re- sider some or all of the following cri-
lated supplies) as described in section teria—
1861(s)(9);
(1) Timeliness of claim processing;
(4) Home dialysis supplies and equip-
(2) Cost per claim;
ment as described in section
1861(s)(2)(F); (3) Claim processing quality;
(5) Surgical dressings and other de- (4) Experience in claim processing,
vices as described in section 1861(s)(5); and in establishing local medical re-
(6) Immunosuppressive drugs as de- view policy; and
scribed in section 1861(s)(2)(J); and (5) Other criteria that CMS believes
(7) Other items or services which are to be pertinent.
designated by CMS. (e) Carrier designation. (1) Each car-
(c) Region designation. (1) The bound- rier designated a regional carrier must
aries of the initial four regions for process claims for items listed in para-
processing claims described in paragraph (b) of this section for bene-
graph (b) of this section contain the ficiaries whose permanent residence is
following States and territories: within that carrier’s region as des-
(i) Region A: Maine, New Hampshire, ignated under paragraph (c) of this sec-
Vermont, Massachusetts, Connecticut, tion. When processing the claims, the
Rhode Island, New York, New Jersey, carrier must use the payment rates ap-
Pennsylvania, and Delaware. plicable for the State of residence of
(ii) Region B: Maryland, the District the beneficiary, including a qualified
of Columbia, Virginia, West Virginia, Railroad Retirement beneficiary. A
Ohio, Michigan, Indiana, Illinois, Wis- beneficiary’s permanent residence is
consin, and Minnesota. the address at which he or she intends
(iii) Region C: North Carolina, South to spend 6 months or more of the cal-
Carolina, Kentucky, Tennessee, Geor- endar year.
gia, Florida, Alabama, Mississippi, (2) CMS notifies affected Medicare
Louisiana, Texas, Arkansas, Okla- beneficiaries and suppliers when it des-
homa, New Mexico, Colorado, Puerto ignates a regional carrier (in accord-
Rico, and the Virgin Islands. ance with paragraph (d) of this section)
(iv) Region D: Alaska, Hawaii, Amer- to process DMEPOS claims (as defined
ican Samoa, Guam, the Northern Mar- in paragraph (b) of this section) for all
iana Islands, California, Nevada, Ari- Medicare beneficiaries residing in their

zona, Washington, Oregon, Montana, respective regions (as designated under
Idaho, Utah, Wyoming, North Dakota, paragraph (c) of this section).
395
§ 421.212 42 CFR Ch. IV (10–1–17 Edition)
(3) CMS may contract for the per- (4) Does not apply to claims for Part
formance of National Supplier Clear- B services furnished by suppliers that
inghouse functions through a contract have in effect provider agreements
amendment to one of the DME regional under section 1866 of the Act and part
carrier contracts or through a contract 489 of this chapter, and are paid by
amendment to any Medicare carrier intermediaries.
contract under § 421.200. (b) Definition. As used in this section,
(4) CMS periodically recompetes the advance payment means a conditional
contracts for the DME regional car- partial payment made by the carrier in
riers. CMS also periodically recom- response to a claim that it is unable to
petes the National Supplier Clearing- process within established time limits.
house function. (c) When advance payments may be
(f) Collecting information of ownership. made. An advance payment may be
Carriers designated as regional claims made if all of the following conditions
processors must obtain from each sup- are met:
plier of items listed in paragraph (b) of (1) The carrier is unable to process
this section information concerning the claim timely.
ownership and control as required by (2) CMS determines that the prompt
section 1124A of the Act and part 420 of payment interest provision specified in
this chapter, and certifications that section 1842(c) of the Act is insufficient
supplier standards are met as required to make a claimant whole.
by part 424 of this chapter. (3) CMS approves, in writing to the
carrier, the making of an advance pay-
ment by the carrier.
FR 60796, Nov. 18, 1993; 70 FR 9239, Feb. 25,
2005] (d) When advance payments are not
made. Advance payments are not made
§ 421.212 Railroad Retirement Board to any supplier that meets any of the
contracts. following conditions:
(1) Is delinquent in repaying a Medi-
In accordance with this subpart C,
care overpayment.
the Railroad Retirement Board con-
(2) Has been advised of being under
tracts with DMEPOS regional carriers
active medical review or program in-
designated by CMS, as set forth in
tegrity investigation.
§ 421.210(e)(2), for processing claims for
(3) Has not submitted any claims.
Medicare-eligible Railroad Retirement
(4) Has not accepted claims’ assign-
beneficiaries, for the same contract pe-
ments within the most recent 180-day
riod as the contracts entered into be-
period preceding the system malfunc-
tween CMS and the DMEPOS regional
tion.
carriers.
(e) Requirements for suppliers. (1) Ex-
[58 FR 60797, Nov. 18, 1993] cept as provided for in paragraph (g)(1)
of this section, a supplier must request,
§ 421.214 Advance payments to sup- in writing to the carrier, an advance
pliers furnishing items or services payment for Part B services it fur-
under Part B.
nished.
(a) Scope and applicability. This sec- (2) A supplier must accept an advance
tion provides for the following: payment as a conditional payment sub-
(1) Sets forth requirements and project to adjustment, recoupment, or
cedures for the issuance and recovery both, based on an eventual determina-
of advance payments to suppliers of tion of the actual amount due on the
Part B services and the rights and re- claim and subject to the provisions of
sponsibilities of suppliers under the this section.
payment and recovery process. (f) Requirements for carriers. (1) A car-
(2) Does not limit CMS’s right to re- rier must notify a supplier as soon as it
cover unadjusted advance payment bal- is determined that payment will not be
ances. made in a timely manner, and an ad-
(3) Does not affect suppliers’ appeal vance payment option is to be offered
rights under part 405, subpart H of this to the supplier.

chapter relating to substantive deter- (i) A carrier must calculate an ad-
minations on suppliers’ claims. vance payment for a particular claim
396
at no more than 80 percent of the an- carrier to the supplier, converting any
ticipated payment for that claim based unpaid balances of advance payments
upon the historical assigned claims to overpayments. Overpayments are re-
payment data for claims paid the sup- covered in accordance with part 401,
plier. subpart F of this chapter concerning
(ii) ‘‘Historical data’’ are defined as a claims collection and compromise and
representative 90-day assigned claims part 405, subpart C of this chapter con-
payment trend within the most recent cerning recovery of overpayments.
180-day experience before the system (h) Prompt payment interest. An ad-
malfunction. vance payment is a ‘‘payment’’ under
(iii) Based on this amount and the section 1842(c)(2)(C) of the Act for pur-
number of claims pending for the sup- poses of meeting the time limit for the
plier, the carrier must determine and payment of clean claims, to the extent
issue advance payments. of the advance payment.
(iv) If historical data are not avail- (i) Notice, review, and appeal rights. (1)
able or if backlogged claims cannot be The decision to advance payments and
identified, the carrier must determine the determination of the amount of
and issue advance payments based on any advance payment are committed
some other methodology approved by to CMS’s discretion and are not subject
CMS. to review or appeal.
(v) Advance payments can be made (2) The carrier must notify the sup-
no more frequently than once every 2 plier receiving an advance payment
weeks to a supplier. about the amounts advanced and re-
(2) Generally, a supplier will not recouped and how any Medicare payment
ceive advance payments for more as- amounts have been adjusted.
signed claims than were paid, on a (3) The supplier may request an ad-
daily average, for the 90-day period be- ministrative review from the carrier if
fore the system malfunction. it believes the carrier’s reconciliation
(3) A carrier must recover an advance of the amounts advanced and recouped
payment by applying it against the is incorrectly computed. If a review is
amount due on the claim on which the requested, the carrier must provide a
advance was made. If the advance pay- written explanation of the adjust-
ment exceeds the Medicare payment ments.
amount, the carrier must apply the (4) The review and explanation de-
unadjusted balance of the advance pay- scribed in paragraph (i)(3) of this sec-
ment against future Medicare pay- tion is separate from a supplier’s right
ments due the supplier. to appeal the amount and computation
(4) In accordance with CMS instruc- of benefits paid on the claim, as pro-
tions, a carrier must maintain a finan- vided at part 405, subpart H of this
cial system of data in accordance with chapter. The carrier’s reconciliation of
the Statement of Federal Financial Ac- amounts advanced and recouped is not
counting Standards for tracking each an initial determination as defined at
advance payment and its recoupment. § 405.803 of this chapter, and any writ-
(g) Requirements for CMS. (1) In ac- ten explanation of a reconciliation is
cordance with the provisions of this not subject to further administrative
section, CMS may determine that cir- review.
cumstances warrant the issuance of ad-
[61 FR 49275, Sept. 19, 1996]
vance payments to all affected sup-
pliers furnishing Part B services. CMS
may waive the requirement in para- Subpart D—Medicare Integrity
graph (e)(1) of this section as part of Program Contractors
that determination.
(2) If adjusting Medicare payments SOURCE: 72 FR 48886, Aug. 24, 2007, unless
fails to recover an advance payment, otherwise noted.
CMS may authorize the use of any
other recoupment method available § 421.300 Basis, applicability, and
(for example, lump sum repayment or scope.

an extended repayment schedule) in- (a) Basis. This subpart implements
cluding, upon written notice from the section 1893 of the Act, which requires
397
§ 421.302 42 CFR Ch. IV (10–1–17 Edition)
CMS to protect the integrity of the and deterrence of potential fraud and
Medicare program by entering into abuse of the Medicare program.
contracts with eligible entities to (3) Complies with conflict of interest
carry out Medicare integrity program provisions in 48 CFR chapters 1 and 3,
functions. The provisions of this sub- and is not excluded under the conflict
part are based on section 1893 of the of interest provision at § 421.310.
Act (and, where applicable, section (4) Maintains an appropriate written
1874A of the Act) and the acquisition code of conduct and compliance poli-
regulations set forth at 48 CFR chap- cies that include, but are not limited
ters 1 and 3.
to, an enforced policy on employee con-
(b) Applicability. This subpart applies flicts of interest.
to entities that seek to compete or re-
(5) Meets other requirements that
ceive award of a contract under section
CMS establishes.
1893 of the Act, including entities that
perform functions under this subpart (b) A MAC as described in section
emanating from the processing of 1874A of the Act may perform any or
claims for individuals entitled to bene- all of the functions described in
fits as qualified railroad retirement § 421.304, except that the functions may
beneficiaries. not duplicate work being performed
(c) Scope. The scope of this subpart under a Medicare integrity program
follows: contract.
(1) Defines the types of entities eligi- (c) If a MAC performs any or all func-
ble to become Medicare integrity pro- tions described in § 421.304, CMS may
gram contractors. require the MAC to comply with any or
(2) Identifies the program integrity all of the requirements of paragraph (a)
functions a Medicare integrity proof this section as a condition of its con-
gram contractor performs. tract.
(3) Describes procedures for awarding
and renewing contracts. § 421.304 Medicare integrity program
(4) Establishes procedures for identi- contractor functions.
fying, evaluating, and resolving organi- The contract between CMS and a
zational conflicts of interest. Medicare integrity program contractor
(5) Prescribes responsibilities. specifies the functions the contractor
(6) Sets forth limitations on con- performs. The contract may include
tractor liability. any or all of the following functions:
(a) Conducting medical reviews, utili-
§ 421.302 Eligibility requirements for zation reviews, and reviews of potential
Medicare integrity program con- fraud related to the activities of pro-
tractors.
viders of services and other individuals
(a) CMS may enter into a contract and entities (including entities con-
with an entity to perform the functions tracting with CMS under parts 417 and
described in § 421.304 if the entity meets 422 of this chapter) furnishing services
the following conditions: for which Medicare payment may be
(1) Demonstrates the ability to per- made either directly or indirectly.
form the Medicare integrity program (b) Auditing, settling and deter-
contractor functions described in mining cost report payments for pro-
§ 421.304. For purposes of developing and viders of services, or other individuals
periodically updating a list of DME
or entities (including entities con-
under § 421.304(e), an entity is deemed
tracting with CMS under parts 417 and
to be eligible to enter into a contract
under the Medicare integrity program 422 of this chapter), as necessary to
to perform the function if the entity is help ensure proper Medicare payment.
a carrier with a contract in effect (c) Determining whether a payment
under section 1842 of the Act. is authorized under title XVIII, as spec-
(2) Agrees to cooperate with the OIG, ified in section 1862(b) of the Act, and
the DOJ, and other law enforcement recovering mistaken and conditional
agencies, as appropriate, including payments under section 1862(b) of the
making referrals, in the investigation Act.
398
(d) Educating providers, suppliers, § 421.308 Renewal of a contract.

beneficiaries, and other persons regard- (a) General. (1) CMS specifies an ini-
ing payment integrity and benefit tial contract term in the Medicare in-
quality assurance issues. tegrity program contract.
(e) Developing, and periodically up- (2) Contracts under this subpart may
dating, a list of items of DME that are contain renewal clauses.
frequently subject to unnecessary utili- (3) CMS may, but is not required to,
zation throughout the contractor’s en- renew the Medicare integrity program
tire service area or a portion of the contract, without regard to any provi-
area, in accordance with section sion of law requiring competition, as it
1834(a)(15)(A) of the Act. determines to be appropriate, by giving
the contractor notice, within time-
§ 421.306 Awarding of a contract. frames specified in the contract, of its
intent to do so.
(a) CMS awards and administers
(b) Conditions for renewal of contract.
Medicare integrity program contracts CMS may renew a Medicare integrity
in accordance with acquisition regula- program contract if all of the following
tions set forth at 48 CFR chapters 1 and conditions are met:
3, this subpart, all other applicable (1) The Medicare integrity program
laws, and all applicable regulations. contractor continues to meet the re-
These requirements for awarding Medi- quirements established in this subpart.
care integrity program contracts are (2) The Medicare integrity program
used as follows: contractor meets or exceeds the per-
(1) When entering into new contracts. formance requirements established in
(2) When entering into contracts that its current contract.
may result in the elimination of re- (3) It is in the best interest of the
sponsibilities of an individual fiscal government.
intermediary or carrier under section (c) Nonrenewal of a contract. If CMS
1816(l) or section 1842(c) of the Act, re- does not renew a contract, the contract
spectively. ends in accordance with its terms.
(3) At any other time CMS considers § 421.310 Conflict of interest require-
appropriate. ments.
(b) CMS may award an entity a Medi- Offerors for MIP contracts and MIP
care integrity program contract by contractors are subject to the fol-
transfer if all of the following condi- lowing:
tions apply: (a) The conflict of interest standards
(1) Through approval of a novation and requirements of the Federal Acqui-
agreement in accordance with the re- sition Regulation (FAR) organizational
quirements of the Federal Acquisition conflict of interest guidance specified
Regulation (FAR), CMS recognizes the under 48 CFR subpart 9.5.
entity as the successor in interest to a (b) The standards and requirements
fiscal intermediary agreement or car- as are contained in each individual
rier contract under which the fiscal contract awarded to perform section
intermediary or carrier was performing 1893 of the Act functions.
activities described in section 1893(b) of
§ 421.312 Conflict of interest resolu-
the Act on August 21, 1996. tion.
(2) The fiscal intermediary or carrier
(a) Review Board. CMS may establish
continued to perform Medicare integ-
and convene a Conflicts of Interest Re-
rity program activities until transfer-
view Board to assist the contracting of-
ring the resources to the entity.
ficer in resolving organizational con-
(c) An entity is eligible to be awarded flicts of interest.
a Medicare integrity program contract (b) Resolution—(1) Pre-award conflicts.
only if it meets the eligibility require- Resolution of an organizational con-
ments specified in § 421.302; 48 CFR flict of interest is a determination by
chapters 1 and 3; and other applicable the contracting officer that one of the
laws and regulations. following has occurred:
(i) The conflict is mitigated.
399
§ 421.316 42 CFR Ch. IV (10–1–17 Edition)
(ii) The conflict precludes award of a (2) The funds are available.
contract to the offeror. (3) The expenses are otherwise allow-
(iii) It is in the best interest of the able under the terms of the contract.
government to award a contract to the
offeror (in accordance with 48 CFR sub- Subpart E—Medicare
part 9.503) even though a conflict of in- Administrative Contractors (MACs)
terest exists.
(2) Post-award conflicts. Resolution of
an organizational conflict of interest is otherwise noted.
a determination by the contracting of-
ficer that one of the following has oc- § 421.400 Statutory basis and scope.
curred: (a) Statutory basis. This subpart im-
(i) The conflict is mitigated. plements section 1874A of the Act,
(ii) The conflict requires that CMS which provides for the transition of the
modify an existing contract. claims processing functions and oper-
(iii) The conflict requires that CMS ations for both Medicare Part A and
terminate or not renew an existing Part B intermediaries and carriers to
contract. Medicare Administrative Contractors
(iv) It is in the best interest of the (MACs). The transition will occur be-
government to continue the contract tween October 1, 2005, and October 1,
even though a conflict of interest ex- 2011. MACs will be fully operational in
ists. distinct, nonoverlapping geographic ju-
risdictions by October 1, 2011.
§ 421.316 Limitation on Medicare in-
tegrity program contractor liability. (b) Scope. This subpart specifies the
requirements under which providers
(a) A MIP contractor, a person or an and suppliers will be assigned to MACs.
entity employed by, or having a fidu-
ciary relationship with, or who fur- § 421.401 Definitions.
nishes professional services to a MIP For purposes of this subpart—
contractor is not in violation of any Appropriate MAC means a MAC that
criminal law or civilly liable under any has a contract under section 1874A of
law of the United States or of any the Act to perform a particular Medi-
State (or political subdivision thereof) care administrative function in rela-
by reason of the performance of any tion to:
duty, function, or activity required or (1) A particular individual entitled to
authorized under this subpart or under benefits under Part A or enrolled under
a valid contract entered into under this Part B, or both;
subpart, provided due care was exer- (2) A specific provider of services or
cised in that performance and the con- supplier; or
tractor has a contract with CMS under (3) A class of providers of services or
this subpart. suppliers.
(b) CMS pays a contractor, a person Medicare Administrative Contractor
or an entity described in paragraph (a) (MAC) means an agency, organization,
of this section, or anyone who fur- or other person with a contract under
nishes legal counsel or services to a section 1874A of the Act.
contractor or person, a sum equal to
the reasonable amount of the expenses, § 421.404 Assignment of providers and
as determined by CMS, incurred in con- suppliers to MACs.
nection with the defense of a suit, ac- (a) Definitions. As used in this sec-
tion, or proceeding, if the following tion—
conditions are met: Chain provider means a group of two
(1) The suit, action, or proceeding or more providers under common own-
was brought against the contractor, ership or control.
such person or entity by a third party Common control exists when an indi-
and relates to the contractor’s, per- vidual, a group of individuals, or an or-
son’s or entity’s performance of any ganization has the power, directly or
duty, function, or activity under a con- indirectly, to significantly influence or

tract entered into with CMS under this direct the actions or policies of the
subpart. group of suppliers or eligible providers.
400
Common ownership exists when an in- vider may enroll with and bill on be-
dividual, a group of individuals, or an half of the eligible providers under its
organization possesses significant eq- common ownership or common control
uity in the group of suppliers or eligi- to the MAC contracted by CMS to ad-
ble providers. minister claims for the Medicare ben-
Durable medical equipment, prosthetics, efit category applicable to the eligible
orthotics, and supplies (DMEPOS) means providers’covered services for the geo-
the types of services specified in graphic locale in which the qualified
§ 421.210(b). chain provider’s home office is phys-
Eligible provider means a hospital, ically located.
skilled nursing facility, or critical ac- (3) As MAC contractors become avail-
cess hospital that meets the definition able, qualified chain providers, granted
of a provider under § 400.202 of this approval by CMS to enroll with and bill
chapter. a single intermediary on behalf of their
Home office means the entity that eligible member providers prior to Oc-
provides centralized management and tober 1, 2005, will be assigned at an ap-
administrative services to the indi- propriate time to the MAC contracted
vidual providers or suppliers under by CMS to administer claims for the
common ownership and common con- applicable Medicare benefit category
trol, such as centralized accounting, for the geographic locale in which the
purchasing, personnel services, man- chain provider’s home office is phys-
agement direction and control, and ically located. The qualified chain pro-
other similar services. vider will not need to request an excep-
Ineligible provider means a provider tion to the requirement of paragraph
under § 400.202 of this chapter that is (b)(1) of this section in order for this
not an eligible provider. assignment to take effect.
Medicare benefit category means a cat- (4) CMS may grant an exception to
egory of covered benefits under Part A the requirement of paragraph (b)(1) of
or Part B of the Medicare program (for this section to eligible providers that
example, inpatient hospital services, are not under the common ownership
post-hospital extended care services, or common control of a qualified chain
and physicians’services). provider, as well as ineligible pro-
Provider has the same meaning as viders, only if CMS finds the exception
specified under § 400.202 of this chapter. will support the implementation of
Qualified chain provider means a MACs or will serve some other compel-
chain provider comprised of— ling interest of the Medicare program.
(1) 10 or more eligible providers col- (c) Assignment of suppliers to MACs. (1)
lectively totaling 500 or more certified Suppliers, including physicians and
beds; or other practitioners, but excluding sup-
(2) 5 or more eligible providers collec- pliers of DMEPOS, enroll with and re-
tively totaling 300 or more certified ceive Medicare payment and other
beds, with eligible providers in 3 or Medicare services from the MAC con-
more contiguous States. tracted by CMS to administer claims
Supplier has the same meaning as for the Medicare benefit category ap-
specified in § 400.202 of this chapter. plicable to the supplier’s covered serv-
(b) Assignment of providers to MACs. ices for the geographic locale in which
(1) Providers enroll with and receive the supplier furnished such services.
Medicare payment and other Medicare (2) Suppliers of DMEPOS receive
services from the MAC contracted by Medicare payment and other Medicare
CMS to administer claims for the services from the MAC assigned to ad-
Medicare benefit category applicable to minister claims for DMEPOS for the
the provider’s covered services for the regional area in which the beneficiary
geographic locale in which the provider receiving the DMEPOS resides. The
is physically located. terms of §§ 421.210 and 421.212 continue
(2) Qualified chain providers may re- to apply to suppliers of DMEPOS.
quest and receive an exception from (3) CMS may allow a group of ESRD
the requirement of paragraph (b)(1) of suppliers under common ownership and

this section from CMS. Upon common control to enroll with the
CMS’approval, a qualified chain pro- MAC contracted by CMS to administer
401
ESRD claims for the geographic locale 422.107 Special needs plans and dual-eligi-
in which the group’s home office is lo- bles: Contract with State Medicaid Agen-
cated only if— cy.
(i) The group of ESRD suppliers re- 422.108 Medicare secondary payer (MSP)
quests such privileges; and procedures.
(ii) CMS finds the exception will sup- 422.109 Effect of national coverage deter-
minations (NCDs) and legislative
port the implementation of MACs or
changes in benefits.
will serve some other compelling inter-
422.110 Discrimination against beneficiaries
est of the Medicare program. prohibited.
422.111 Disclosure requirements.
Subpart F [Reserved] 422.112 Access to services.
422.113 Special rules for ambulance services,
PART 422—MEDICARE ADVANTAGE emergency and urgently needed services,
PROGRAM and maintenance and post-stabilization
care services.
422.114 Access to services under an MA pri-
vate fee-for-service plan.
Sec. 422.118 Confidentiality and accuracy of en-
422.1 Basis and scope. rollee records.
422.2 Definitions. 422.128 Information on advance directives.
422.4 Types of MA plans. 422.132 Protection against liability and loss
422.6 Cost-sharing in enrollment-related of benefits.
costs. 422.133 Return to home skilled nursing fa-
cility.
Subpart B—Eligibility, Election, and 422.134 Reward and incentive programs.
Enrollment
422.50 Eligibility to elect an MA plan.
Subpart D—Quality Improvement
422.52 Eligibility to elect an MA plan for 422.152 Quality improvement program.
special needs individuals.
422.153 Use of quality improvement organi-
422.53 Eligibility to elect an MA plan for
zation review information.
senior housing facility residents.
422.54 Continuation of enrollment for MA 422.156 Compliance deemed on the basis of
local plans. accreditation.
422.56 Limitations on enrollment in an MA 422.157 Accreditation organizations.
MSA plan. 422.158 Procedures for approval of accredita-
422.57 Limited enrollment under MA RFB tion as a basis for deeming compliance.
plans.
422.60 Election process Subpart E—Relationships With Providers
422.62 Election of coverage under an MA
plan. 422.200 Basis and scope.
422.64 Information about the MA program. 422.202 Participation procedures.
422.66 Coordination of enrollment and 422.204 Provider selection and credentialing.
disenrollment through MA organizations. 422.205 Provider antidiscrimination rules.
422.68 Effective dates of coverage and 422.206 Interference with health care profes-
change of coverage. sionals’ advice to enrollees prohibited.
422.74 Disenrollment by the MA organiza- 422.208 Physician incentive plans: require-
tion. ments and limitations.
422.210 Assurances to CMS.
Subpart C—Benefits and Beneficiary
422.212 Limitations on provider indem-
Protections
nification.
422.100 General requirements. 422.214 Special rules for services furnished
422.101 Requirements relating to basic bene- by noncontract providers.
fits. 422.216 Special rules for MA private fee-for-
422.102 Supplemental benefits. service plans.
422.103 Benefits under an MA MSA plan. 422.220 Exclusion of services furnished
422.104 Special rules on supplemental bene- under a private contract.
fits for MA MSA plans. 422.222 Enrollment of MA organization net-
422.105 Special rules for self-referral and work providers and suppliers; first-tier,
point of service option. downstream, and related entities (FDRs);

422.106 Coordination of benefits with em-
cost HMO or CMP, and demonstration
ployer or union group health plans and
and pilot programs.
Medicaid.
402
422.224 Payment to providers or suppliers 422.384 Financial plan requirement.
excluded or revoked. 422.386 Liquidity.
422.388 Deposits.
Subpart F—Submission of Bids, Premiums, 422.390 Guarantees.
and Related Information and Plan Ap-
proval Subpart I—Organization Compliance With
State Law and Preemption by Federal Law
422.252 Terminology. 422.400 State licensure requirement.
422.254 Submission of bids. 422.402 Federal preemption of State law.
422.256 Review, negotiation, and approval of 422.404 State premium taxes prohibited.
bids.
422.258 Calculation of benchmarks. Subpart J—Special Rules for MA Regional
422.260 Appeals of quality bonus payment Plans
determinations.
422.262 Beneficiary premiums. 422.451 Moratorium on new local preferred
422.264 Calculation of savings. provider organization plans.
422.266 Beneficiary rebates. 422.455 Special rules for MA Regional plans.
422.270 Incorrect collections of premiums 422.458 Risk sharing with regional MA orga-
and cost sharing. nizations for 2006 and 2007.
422.272 Release of MA bid pricing data.
Subpart K—Application Procedures and
Subpart G—Payments to Medicare Contracts for Medicare Advantage Or-
Advantage Organizations ganizations
422.300 Basis and scope. 422.500 Scope and definitions.
422.304 Monthly payments. 422.501 Application requirements.
422.306 Annual MA capitation rates.
422.502 Evaluation and determination proce-
422.308 Adjustments to capitation rates,
dures.
benchmarks, bids, and payments.
422.503 General provisions.
422.310 Risk adjustment data.
422.504 Contract provisions.
422.311 RADV audit dispute and appeal proc-
422.505 Effective date and term of contract.
esses.
422.314 Special rules for beneficiaries en- 422.506 Nonrenewal of contract.
rolled in MA MSA plans. 422.508 Modification or termination of con-
422.316 Special rules for payments to Feder- tract by mutual consent.
ally qualified health centers. 422.510 Termination of contract by CMS.
422.318 Special rules for coverage that be- 422.512 Termination of contract by the MA
gins or ends during an inpatient hospital organization.
stay. 422.514 Minimum enrollment requirements.
422.320 Special rules for hospice care. 422.516 Validation of Part C reporting re-
422.322 Source of payment and effect of MA quirements.
plan election on payment. 422.520 Prompt payment by MA organiza-
422.324 Payments to MA organizations for tion.
graduate medical education costs. 422.521 Effective date of new significant reg-
422.326 Reporting and returning of overpay- ulatory requirements.
ments. 422.524 Special rules for RFB societies.
422.330 CMS-identified overpayments associ- 422.527 Agreements with Federally qualified
ated with payment data submitted by health centers.
MA organizations.
Subpart L—Effect of Change of Ownership
Subpart H—Provider-Sponsored or Leasing of Facilities During Term of
Organizations Contract
422.350 Basis, scope, and definitions. 422.550 General provisions.
422.352 Basic requirements. 422.552 Novation agreement requirements.
422.354 Requirements for affiliated pro- 422.553 Effect of leasing of an MA organiza-
viders. tion’s facilities.
422.356 Determining substantial financial
risk and majority financial interest. Subpart M—Grievances, Organization
422.370 Waiver of State licensure. Determinations and Appeals
422.372 Basis for waiver of State licensure.
422.374 Waiver request and approval process. 422.560 Basis and scope.
422.376 Conditions of the waiver.

422.378 Relationship to State law. 422.562 General provisions.
422.380 Solvency standards. 422.564 Grievance procedures.
422.382 Minimum net worth amount. 422.566 Organization determinations.
403
422.568 Standard timeframes and notice re- 422.674 Authority of representatives.
quirements for organization determina- 422.676 Conduct of hearing.
tions. 422.678 Evidence.
422.570 Expediting certain organization de- 422.680 Witnesses.
terminations. 422.682 Witness lists and documents.
422.572 Timeframes and notice requirements 422.684 Prehearing and summary judgment.
for expedited organization determina- 422.686 Record of hearing.
tions. 422.688 Authority of hearing officer.
422.574 Parties to the organization deter- 422.690 Notice and effect of hearing decision.
mination. 422.692 Review by the Administrator.
422.576 Effect of an organization determina- 422.694 Effect of Administrator’s decision.
tion. 422.696 Reopening of a contract determina-
422.578 Right to a reconsideration. tion or decision of a hearing officer or
422.580 Reconsideration defined. the Administrator.
422.582 Request for a standard reconsider-
ation. Subpart O—Intermediate Sanctions
422.584 Expediting certain reconsiderations.
422.586 Opportunity to submit evidence. 422.750 Types of intermediate sanctions and
422.590 Timeframes and responsibility for civil money penalties.
reconsiderations. 422.752 Basis for imposing intermediate
422.592 Reconsideration by an independent sanctions and civil money penalties.
entity. 422.756 Procedures for imposing inter-
422.594 Notice of reconsidered determina- mediate sanctions and civil money pen-
tion by the independent entity. alties.
422.596 Effect of a reconsidered determina- 422.758 Collection of civil money penalties
tion. imposed by CMS.
422.600 Right to a hearing. 422.760 Determinations regarding the
422.602 Request for an ALJ hearing. amount of civil money penalties and as-
422.608 Medicare Appeals Council (Council) sessment imposed by CMS.
review. 422.762 Settlement of penalties.
422.612 Judicial review. 422.764 Other applicable provisions.
422.616 Reopening and revising determina-
tions and decisions. Subparts P–S [Reserved]
422.618 How an MA organization must effec-
tuate standard reconsidered determina- Subpart T—Appeal Procedures for Civil
tions or decisions. Money Penalties
422.619 How an MA organization must effec-
tuate expedited reconsidered determina- 422.1000 Basis and scope.
tions. 422.1002 Definitions.
422.620 Notifying enrollees of hospital dis- 422.1004 Scope and applicability.
charge appeal rights. 422.1006 Appeal rights.
422.622 Requesting immediate QIO review of 422.1008 Appointment of representatives.
the decision to discharge from the inpa- 422.1010 Authority of representatives.
tient hospital. 422.1012 Fees for services of representatives.
422.624 Notifying enrollees of termination of 422.1014 Charge for transcripts.
provider services. 422.1016 Filing of briefs with the Adminis-
422.626 Fast-track appeals of service termi- trative Law Judge or Departmental Ap-
nations to independent review entities peals Board, and opportunity for rebut-
(IREs). tal.
422.1018 Notice and effect of initial deter-
Subpart N—Medicare Contract minations.
Determinations and Appeals 422.1020 Request for hearing.
422.1022 Parties to the hearing.
422.641 Contract determinations. 422.1024 Designation of hearing official.
422.644 Notice of contract determination. 422.1026 Disqualification of Administrative
422.646 Effect of contract determination. Law Judge.
422.660 Right to a hearing, burden of proof, 422.1028 Prehearing conference.
standard of proof, and standards of re- 422.1030 Notice of prehearing conference.
view. 422.1032 Conduct of prehearing conference.
422.662 Request for hearing. 422.1034 Record, order, and effect of pre-
422.664 Postponement of effective date of a hearing conference.
contract determination when a request 422.1036 Time and place of hearing.
for a hearing is filed timely. 422.1038 Change in time and place of hear-
422.666 Designation of hearing officer. ing.

422.668 Disqualification of hearing officer. 422.1040 Joint hearings.
422.670 Time and place of hearing. 422.1042 Hearing on new issues.
422.672 Appointment of representatives. 422.1044 Subpoenas.
404
422.1046 Conduct of hearing. Subpart X—Requirement for a Minimum
422.1048 Evidence. Medical Loss Ratio
422.1050 Witnesses.
422.1052 Oral and written summation. 422.2400 Basis and scope.
422.1054 Record of hearing. 422.2401 Definitions.
422.2410 General requirements.
422.1056 Waiver of right to appear and
422.2420 Calculation of the medical loss
present evidence.
ratio.
422.1058 Dismissal of request for hearing. 422.2430 Activities that improve health care
422.1060 Dismissal for abandonment. quality.
422.1062 Dismissal for cause. 422.2440 Credibility adjustment.
422.1064 Notice and effect of dismissal and 422.2450 [Reserved]
right to request review. 422.2460 Reporting requirements.
422.1066 Vacating a dismissal of request for 422.2470 Remittance to CMS if the applica-
hearing. ble MLR requirement is not met.
422.1068 Administrative Law Judge’s deci- 422.2480 MLR review and non-compliance.
sion. 422.2490 Release of Part C MLR data.
422.1070 Removal of hearing to Depart-
mental Appeals Board. Subpart Y [Reserved]
422.1072 Remand by the Administrative Law
Judge. Subpart Z—Part C Recovery Audit
422.1074 Right to request Departmental Ap- Contractor Appeals Process
peals Board review of Administrative
422.2600 Payment appeals.
Law Judge’s decision or dismissal.
422.2605 Request for reconsideration.
422.1076 Request for Departmental Appeals 422.2610 Hearing official review.
Board review. 422.2615 Review by the Administrator.
422.1078 Departmental Appeals Board action
on request for review. AUTHORITY: Secs. 1102 and 1871 of the Social
422.1080 Procedures before the Depart- Security Act (42 U.S.C. 1302 and 1395hh).
mental Appeals Board on review. SOURCE: 63 FR 18134, Apr. 14, 1998, unless
422.1082 Evidence admissible on review. otherwise noted.
422.1084 Decision or remand by the Depart-
EDITORIAL NOTE: Nomenclature changes to
mental Appeals Board.
part 422 appear at 70 FR 4741, Jan. 28, 2005.
422.1086 Effect of Departmental Appeals
Board Decision.
422.1088 Extension of time for seeking judi- Subpart A—General Provisions
cial review.
422.1090 Basis, timing, and authority for re- SOURCE: 63 FR 35068, June 26, 1998, unless
opening an Administrative Law Judge or otherwise noted.
Board decision.
422.1092 Revision of reopened decision. § 422.1 Basis and scope.
422.1094 Notice and effect of revised deci-
(a) Basis. This part is based on the in-
sion.
dicated provisions of the following:
Subpart U [Reserved] (1) The following provisions of the
Act:
Subpart V—Medicare Advantage (i) 1106—Disclosure of information in
Marketing Requirements possession of agency.
(ii) 1128J(d)—Reporting and Return-
422.2260 Definitions concerning marketing ing of Overpayments.
materials. (iii) 1851—Eligibility, election, and
422.2262 Review and distribution of mar- enrollment.
keting materials.
(iv) 1852—Benefits and beneficiary
422.2264 Guidelines for CMS review.
protections.
422.2266 [Reserved]
(v) 1853—Payments to Medicare Ad-
422.2268 Standards for MA organization
marketing.
vantage (MA) organizations.
422.2272 Licensing of marketing representa-
(vi) 1854—Premiums.
tives and confirmation of marketing re- (vii) 1855—Organization, licensure,
sources. and solvency of MA organizations.
422.2274 Broker and agent requirements. (viii) 1856—Standards.
422.2276 Employer group retiree marketing. (ix) 1857—Contract requirements.

(x) 1858—Special rules for MA Re-
Subpart W [Reserved] gional Plans.
405
§ 422.2 42 CFR Ch. IV (10–1–17 Edition)
(xi) 1859—Definitions; enrollment re- prove the health status of enrollees, for
striction for certain MA plans. which the MA organization incurs a
(2) 8 U.S.C. 1611—Aliens who are not cost or liability under an MA plan (not
qualified aliens ineligible for Federal solely an administrative processing
public benefits. cost). Benefits are submitted and ap-
(b) Scope. This part establishes stand- proved through the annual bidding
ards and sets forth the requirements, process.
limitations, and procedures for Medi- Coinsurance is a fixed percentage of
care services furnished, or paid for, by the total amount paid for a health care
Medicare Advantage organizations service that can be charged to an MA
through Medicare Advantage plans. enrollee on a per-service basis.
[63 FR 35068, June 26, 1998, as amended at 70 Copayment is a fixed amount that can
FR 4714, Jan. 28, 2005; 80 FR 7958, Feb. 12, be charged to an MA plan enrollee on a
2015; 81 FR 80556, Nov. 15, 2016] per-service basis.
Cost-sharing includes deductibles, co-
§ 422.2 Definitions. insurance, and copayments.
As used in this part— Downstream entity means any party
Arrangement means a written agree- that enters into a written arrange-
ment between an MA organization and ment, acceptable to CMS, with persons
a provider or provider network, under or entities involved with the MA ben-
which— efit, below the level of the arrange-
(1) The provider or provider network ment between an MA organization (or
agrees to furnish for a specific MA applicant) and a first tier entity. These
plan(s) specified services to the organi- written arrangements continue down
zation’s MA enrollees; to the level of the ultimate provider of
(2) The organization retains respon- both health and administrative serv-
sibilities for the services; and ices.
(3) Medicare payment to the organi- First tier entity means any party that
zation discharges the enrollee’s obliga- enters into a written arrangement, ac-
tion to pay for the services. ceptable to CMS, with an MA organiza-
Attestation process means a CMS-de- tion or applicant to provide adminis-
veloped RADV audit-related process trative services or health care services
that is part of the medical record re- for a Medicare eligible individual under
view process that enables MA organiza- the MA program.
tions undergoing RADV audit to sub- Fiscally sound operation means an op-
mit CMS-generated attestations for el- eration which at least maintains a
igible medical records with missing or positive net worth (total assets exceed
illegible signatures or credentials. The total liabilities).
purpose of the CMS-generated attesta- Fully integrated dual eligible special
tions is to cure signature and creden- needs plan means a CMS approved MA–
tial issues. CMS-generated attestations PD dual eligible special needs plan
do not provide an opportunity for a that—
provider or supplier to replace a med- (1) Enrolls special needs individuals
ical record or for a provider or supplier entitled to medical assistance under a
to attest that a beneficiary has the Medicaid State plan, as defined in sec-
medical condition tion 1859(b)(6)(B)(ii) of the Act and
Balance billing generally refers to an § 422.2;
amount billed by a provider that rep- (2) Provides dual eligible bene-
resents the difference between the ficiaries access to Medicare and Med-
amount the provider charges an indi- icaid benefits under a single managed
vidual for a service and the sum of the care organization;
amount the individual’s health insurer (3) Has a capitated contract with a
(for example, the original Medicare State Medicaid agency that includes
program) will pay for the service plus coverage of specified primary, acute,
any cost-sharing by the individual. and long-term care benefits and serv-
Basic benefits means all Medicare-cov- ices, consistent with State policy;
ered benefits (except hospice services). (4) Coordinates the delivery of cov-
Benefits means health care services ered Medicare and Medicaid health and
that are intended to maintain or im- long-term care services using aligned
406
care management and specialty care ranging, or paying for comprehensive

network methods for high-risk bene- health services under an MA contract.
ficiaries; and MA stands for Medicare Advantage.
(5) Employs policies and procedures MA local area is defined in § 422.252.
approved by CMS and the State to co- MA local plan means an MA plan that
ordinate or integrate member mate- is not an MA regional plan.
rials, enrollment, communications, MA-Prescription drug (PD) plan means
grievance and appeals, and quality im- an MA plan that provides qualified pre-
provement. scription drug coverage under Part D
Hierarchical condition categories (HCC) of the Social Security Act.
means disease groupings consisting of MA regional plan means a coordinated
disease codes (currently ICD–9–CM care plan structured as a preferred pro-
codes) that predict average healthcare vider organization (PPO) that serves
spending. HCCs represent the disease one or more entire regions. An MA re-
component of the enrollee risk score gional plan must have a network of
that are applied to MA payments. contracting providers that have agreed
Institutionalized means for the pur- to a specific reimbursement for the
pose of defining a special needs indi- plan’s covered services and must pay
vidual, an MA eligible individual who for all covered services whether pro-
continuously resides or is expected to vided in or out of the network.
MA eligible individual means an indi-
continuously reside for 90 days or
vidual who meets the requirements of
longer in a long-term care facility
§ 422.50.
which is a skilled nursing facility
MA organization means a public or
(SNF) nursing facility (NF); SNF/NF;
private entity organized and licensed
an intermediate care facility for indi-
by a State as a risk-bearing entity
viduals with intellectual disabilities
(with the exception of provider-spon-
(ICF/IID); or an inpatient psychiatric
sored organizations receiving waivers)
facility.
that is certified by CMS as meeting the
Institutionalized-equivalent means for MA contract requirements.
the purpose of defining a special needs MA plan means health benefits cov-
individual, an MA eligible individual erage offered under a policy or contract
who is living in the community but re- by an MA organization that includes a
quires an institutional level of care. specific set of health benefits offered at
The determination that the individual a uniform premium and uniform level
requires an institutional level of care of cost-sharing to all Medicare bene-
(LOC) must be made by— ficiaries residing in the service area of
(1) The use of a State assessment tool the MA plan (or in individual segments
from the State in which the individual of a service area, under § 422.304(b)(2)).
resides; and MA plan enrollee is an MA eligible in-
(2) An assessment conducted by an dividual who has elected an MA plan
impartial entity and having the req- offered by an MA organization.
uisite knowledge and experience to ac- Mandatory supplemental benefits
curately identify whether the bene- means health care services not covered
ficiary meets the institutional LOC by Medicare that an MA enrollee must
criteria. In States and territories that accept or purchase as part of an MA
do not have an existing institutional plan. The benefits may include reduc-
level of care assessment tool, the indi- tions in cost sharing for benefits under
vidual must be assessed using the same the original Medicare fee for service
methodology that State uses to deter- program and are paid for in the form of
mine institutional level of care for premiums and cost sharing, or by an
Medicaid nursing home eligibility. application of the beneficiary rebate
Licensed by the State as a risk-bearing rule in section 1854(b)(1)(C)(ii)(I) of the
entity means the entity is licensed or Act, or both.
otherwise authorized by the State to MSA stands for medical savings ac-
assume risk for offering health insur- count.
ance or health benefits coverage, such MSA trustee means a person or busi-
that the entity is authorized to accept ness with which an enrollee establishes
prepaid capitation for providing, ar- an MA MSA. A trustee may be a bank,
407
§ 422.2 42 CFR Ch. IV (10–1–17 Edition)
an insurance company, or any other State and is licensed or certified to de-

entity that— liver those services if such licensing or
(1) Is approved by the Internal Rev- certification is required by State law
enue Service to be a trustee or custo- or regulation.
dian of an individual retirement ac- Provider network means the providers
count (IRA); and with which an MA organization con-
(2) Meets the requirements of tracts or makes arrangements to fur-
§ 422.262(b). nish covered health care services to
National coverage determination (NCD) Medicare enrollees under an MA co-
means a national policy determination ordinated care plan or network PFFS
regarding the coverage status of a par-
plan.
ticular service that CMS makes under
section 1862(a)(1) of the Act, and pub- RADV appeal process means an admin-
lishes as a FEDERAL REGISTER notice or istrative process that enables MA orga-
CMS ruling. (The term does not include nizations that have undergone RADV
coverage changes mandated by stat- audit to appeal the Secretary’s medical
ute.) record review determinations and the
Optional supplemental benefits are Secretary’s calculation of an MA orga-
health services not covered by Medi- nization’s RADV payment error.
care that are purchased at the option Related entity means any entity that
of the MA enrollee and paid for in full, is related to the MA organization by
directly by (or on behalf of) the Medi- common ownership or control and
care enrollee, in the form of premiums (1) Performs some of the MA organi-
or cost-sharing. These services may be zation’s management functions under
grouped or offered individually. contract or delegation;
Original Medicare means health insur- (2) Furnishes services to Medicare en-
ance available under Medicare Part A rollees under an oral or written agree-
and Part B through the traditional fee- ment; or
for service payment system.
(3) Leases real property or sells mate-
Point of service (POS) means a benefit
rials to the MA organization at a cost
option that an MA HMO plan can offer
of more than $2,500 during a contract
to its Medicare enrollees as a manda-
tory supplemental, or optional supple- period.
mental benefit. Under the POS benefit Religious Fraternal benefit (RFB) soci-
option, the HMO plan allows members ety means an organization that—
the option of receiving specified serv- (1) Is described in section 501(c)(8) of
ices outside of the HMO plan’s provider the Internal Revenue Code of 1986 and
network. In return for this flexibility, is exempt from taxation under section
members typically have higher cost- 501(a) of that Act; and
sharing requirements for services re- (2) Is affiliated with, carries out the
ceived and, when offered as a manda- tenets of, and shares a religious bond
tory or optional supplemental benefit, with, a church or convention or asso-
may also be charged a premium for the ciation of churches or an affiliated
POS benefit option. group of churches.
Prescription drug plan (PDP). PDP has RFB plan means an MA plan that is
the definition set forth in § 423.4 of this offered by an RFB society.
chapter. Risk adjustment data validation
Prescription drug plan (PDP) sponsor.
(RADV) audit means a payment audit of
A prescription drug plan sponsor has
a MA organization administered by the
the definition set forth in § 423.4 of this
chapter. Secretary that ensures the integrity
Provider means— and accuracy of risk adjustment pay-
(1) Any individual who is engaged in ment data.
the delivery of health care services in a Senior housing facility plan means an
State and is licensed or certified by the MA coordinated care plan that—
State to engage in that activity in the (1) Restricts enrollment to individ-
State; and uals who reside in a continuing care re-

(2) Any entity that is engaged in the tirement community as defined in
delivery of health care services in a § 422.133(b)(2);
408
(2) Provides primary care services on- individual who has one or more co-mor-
site and has a ratio of accessible physi- bid and medically complex chronic con-
cians to beneficiaries that CMS deter- ditions that are substantially disabling
mines is adequate consistent with pre- or life-threatening, has a high risk of
vailing patterns of community health hospitalization or other significant ad-
care referenced at § 422.112(a)(10); verse health outcomes, and requires
(3) Provides transportation services specialized delivery systems across do-
for beneficiaries to specialty providers mains of care.
outside of the facility; and Special needs individual means an MA
(4) Was participating as of December eligible individual who is institutional-
31, 2009 in a demonstration established ized, as defined above, is entitled to
by CMS for not less than 1 year. medical assistance under a State plan
Service area means a geographic area under title XIX, or has a severe or dis-
that for local MA plans is a county or abling chronic condition(s) and would
multiple counties, and for MA regional benefit from enrollment in a special-
plans is a region approved by CMS ized MA plan.
within which an MA-eligible individual Specialized MA Plans for Special Needs
may enroll in a particular MA plan of- Individuals means an MA coordinated
fered by an MA organization. Facilities care plan that exclusively enrolls spe-
in which individuals are incarcerated cial needs individuals as set forth in
are not included in the service area of § 422.4(a)(1)(iv) and that provides Part D
an MA plan. Each MA plan must be benefits under part 423 of this chapter
available to all MA-eligible individuals to all enrollees; and which has been
within the plan’s service area. In decid- designated by CMS as meeting the re-
ing whether to approve an MA plan’s quirements of an MA SNP as deter-
proposed service area, CMS considers mined on a case-by-case basis using
the following criteria: criteria that include the appropriate-
(1) For local MA plans:
ness of the target population, the exist-
(i) Whether the area meets the
ence of clinical programs or special ex-
‘‘county integrity rule’’ that a service
pertise to serve the target population,
area generally consists of a full county
and whether the proposal discriminates
or counties.
against sicker members of the target
(ii) However, CMS may approve a
population.
service area that includes only a por-
tion of a county if it determines that [63 FR 35068, June 26, 1998, as amended at 65
the ‘‘partial county’’ area is necessary, FR 40314, June 29, 2000; 68 FR 50855, Aug. 22,
nondiscriminatory, and in the best in- 2003; 70 FR 4714, Jan. 28, 2005; 70 FR 52026,
terests of the beneficiaries. CMS may Sept. 1, 2005; 70 FR 76197, Dec. 23, 2005; 72 FR
also consider the extent to which the 68722, Dec. 5, 2007; 74 FR 1540, Jan. 12, 2009; 75
FR 19803, Apr. 15, 2010; 76 FR 21561, Apr. 15,
proposed service area mirrors service 2011; 79 FR 29955, May 23, 2014]
areas of existing commercial health
care plans or MA plans offered by the § 422.4 Types of MA plans.
organization.
(2) For all MA coordinated care (a) General rule. An MA plan may be
plans, whether the contracting pro- a coordinated care plan, a combination
vider network meets the access and of an MA MSA plan and a contribution
availability standards set forth in into an MA MSA established in accord-
§ 422.112. Although not all contracting ance with § 422.262, or an MA private
providers must be located within the fee-for-service plan.
plan’s service area, CMS must deter- (1) A coordinated care plan. A coordi-
mine that all services covered under nated care plan is a plan that includes
the plan are accessible from the service a network of providers that are under
area. contract or arrangement with the orga-
(3) For MA regional plans, whether nization to deliver the benefit package
the service area consists of the entire approved by CMS.
region. (i) The network is approved by CMS
Severe or disabling chronic condition to ensure that all applicable require-

means for the purpose of defining a spe- ments are met, including access and
cial needs individual, an MA eligible availability, service area, and quality.
409
§ 422.4 42 CFR Ch. IV (10–1–17 Edition)
(ii) Coordinated care plans may in- rollee voluntarily notifies the PPO
clude mechanisms to control utiliza- plan prior to receiving plan-covered
tion, such as referrals from a gate- services from an out-of-network pro-
keeper for an enrollee to receive serv- vider.
ices within the plan, and financial ar- (vi) In accordance with § 422.370, CMS
rangements that offer incentives to does not waive the State licensure re-
providers to furnish high quality and quirement for organizations seeking to
cost-effective care. offer a PSO.
(iii) Coordinated care plans include (2) A combination of an MA MSA plan
plans offered by any of the following: and a contribution into the MA MSA es-
(A) Health maintenance organiza- tablished in accordance with § 422.262. (i)
tions (HMOs); MA MSA plan means a plan that—
(B) Provider-sponsored organizations (A) Pays at least for the services de-
(PSOs), subject to paragraph (a)(1)(vi) scribed in § 422.101, after the enrollee
of this section. has incurred countable expenses (as
(C) Regional or local preferred pro- specified in the plan) equal in amount
vider organizations (PPOs) as specified to the annual deductible specified in
in paragraph (a)(1)(v) of this section. § 422.103(d);
(D) Other network plans (except (B) Does not permit prior notifica-
PFFS plans). tion—that is, a reduction in the plan’s
(iv) A specialized MA plan for special standard cost-sharing levels when the
needs individuals (SNP) includes any provider from whom an enrollee is re-
type of coordinated care plan that ceiving plan-covered services volun-
meets CMS’s SNP requirements and ex- tarily notifies the plan prior to fur-
clusively enrolls special needs individ- nishing those services, or the enrollee
uals as defined by § 422.2 of this sub- voluntarily notifies the MSA plan prior
part. All MA plans wishing to offer a to receiving plan-covered services from
SNP will be required to be approved by a provider; and
the National Commission on Quality (C) Meets all other applicable re-
Assurance (NCQA) effective January 1, quirements of this part.
2012. This approval process applies to (ii) MA MSA means a trust or custo-
existing SNPs as well as new SNPs dial account—
joining the program. All SNPs must (A) That is established in conjunc-
submit their model of care (MOC) to tion with an MSA plan for the purpose
CMS for NCQA evaluation and approval of paying the qualified expenses of the
as per CMS guidance. account holder; and
(v) A PPO plan is a plan that— (B) Into which no deposits are made
(A) Has a network of providers that other than contributions by CMS under
have agreed to a contractually speci- the MA program, or a trustee-to-trust-
fied reimbursement for covered bene- ee transfer or rollover from another
fits with the organization offering the MA MSA of the same account holder,
plan; in accordance with the requirements of
(B) Provides for reimbursement for sections 138 and 220 of the Internal
all covered benefits regardless of Revenue Code.
whether the benefits are provided with- (3) MA private fee-for-service plan. An
in the network of providers; MA private fee-for-service plan is an
(C) Only for purposes of quality as- MA plan that—
surance requirements in § 422.152(e), is (i) Pays providers of services at a
offered by an organization that is not rate determined by the plan on a fee-
licensed or organized under State law for-service basis without placing the
as an HMO; and provider at financial risk;
(D) Does not permit prior notifica- (ii) Subject to paragraphs (a)(3)(ii)(A)
tion for out-of-network services—that and (B) of this section, does not vary
is, a reduction in the plan’s standard the rates for a provider based on the
cost-sharing levels when the out-of- utilization of that provider’s services;
network provider from whom an en- and
rollee is receiving plan-covered serv- (A) May vary the rates for a provider
ices voluntarily notifies the plan prior based on the specialty of the provider,
to furnishing those services, or the en- the location of the provider, or other
410
factors related to the provider that are D coverage meeting the requirements
not related to utilization and do not in § 423.104 in that plan.
violate § 422.205 of this part.
(B) May increase the rates for a pro- FR 40315, June 29, 2000; 70 FR 4714, Jan. 28,
vider based on increased utilization of 2005; 70 FR 52026, Sept. 1, 2005; 73 FR 54248,
specified preventive or screening serv- Sept. 18, 2008; 74 FR 1541, Jan. 12, 2009; 75 FR
ices. 19804, Apr. 15, 2010; 76 FR 21561, Apr. 15, 2011]
(iii) Does not restrict enrollees’
choices among providers that are law- § 422.6 Cost-sharing in enrollment-re-
lated costs.
fully authorized to provide services and
agree to accept the plan’s terms and (a) Basis and scope. This section im-
conditions of payment. plements that portion of section 1857 of
(iv) Does not permit prior notifica- the Act that pertains to cost-sharing in
tion—that is, a reduction in the plan’s enrollment-related costs. It sets forth
standard cost-sharing levels when the the procedures that CMS follows to de-
provider from whom an enrollee is re- termine the aggregate annual ‘‘user
fee’’ to be contributed by MA organiza-
ceiving plan-covered services volun-
tions and PDP sponsors under Medicare
tarily notifies the plan prior to fur-
Part D and to assess the required user
nishing those services, or the enrollee fees for each MA plan offered by MA or-
voluntarily notifies the PFFS plan ganizations and PDP sponsors.
prior to receiving plan-covered services (b) Purpose of assessment. Section
from a provider. 1857(e)(2) of the Act authorizes CMS to
(b) Multiple plans. Under its contract, charge and collect from each MA plan
an MA organization may offer multiple offered by an MA organization its pro
plans, regardless of type, provided that rata share of fees for administering
the MA organization is licensed or ap- section 1851 of the Act (relating to dis-
proved under State law to provide semination of enrollment information),
those types of plans (or, in the case of and section 4360 of the Omnibus Budget
a PSO plan, has received from CMS a Reconciliation Act of 1990 (relating to
waiver of the State licensing require- the health insurance counseling and as-
ment). If an MA organization has re- sistance program) and section 1860D–
ceived a waiver for the licensing re- 1(c) of the Act (relating to dissemina-
quirement to offer a PSO plan, that tion of enrollment information for the
waiver does not apply to the licensing drug benefit).
requirement for any other type of MA (c) Applicability. The fee assessment
plan. also applies to those demonstrations
(c) Rule for MA Plans’ Part D coverage. for which enrollment is effected or co-
(1) Coordinated care plans. In order to ordinated under section 1851 of the Act.
offer an MA coordinated care plan in (d) Collection of fees—(1) Timing of col-
an area, the MA organization offering lection. CMS collects the fees over 9
the coordinated care plan must offer consecutive months beginning with
qualified Part D coverage meeting the January of each fiscal year.
requirements in § 423.104 of this chapter (2) Amount to be collected. The aggre-
in that plan or in another MA plan in gate amount of fees for a fiscal year is
the same area. the lesser of—
(2) MSAs. MA organizations offering (i) The estimated costs to be incurred
by CMS in that fiscal year to carry out
MSA plans are not permitted to offer
the activities described in paragraph
prescription drug coverage, other than
(b) of this section; or
that required under Parts A and B of
(ii) For fiscal year 2006 and each suc-
Title XVIII of the Act.
ceeding year, the applicable portion (as
(3) Private Fee-For-Service. MA organi- defined in paragraph (e) of this section)
zations offering private fee-for-service of $200 million.’’
plans can choose to offer qualified Part (e) Applicable portion. In this section,
the term ‘‘applicable portion’’ with re-

spect to an MA plan means, for a fiscal
year, CMS’s estimate of Medicare Part
411
§ 422.50 42 CFR Ch. IV (10–1–17 Edition)
C and D expenditures for those MA or- of September, CMS discontinues as-

ganizations as a percentage of all ex- sessment.
penditures under title XVIII and with (5) If there are delays in determining
respect to PDP sponsors, the applicable the amount of the annual aggregate
portion is CMS’s estimate of Medicare fees specified in paragraph (d)(2) of this
Part D prescription drug expenditures section, or the fee percentage rate
for those PDP sponsors as a percentage specified in paragraph (f)(2), CMS may
of all expenditures under title XVIII. adjust the assessment time period and
(f) Assessment methodology. (1) The the fee percentage amount.
amount of the applicable portion of the
[65 FR 40315, June 29, 2000. Redesignated and
user fee each MA organization and PDP amended at 70 FR 4715, Jan. 28, 2005; 70 FR
sponsor must pay is assessed as a per- 52026, Sept. 1, 2005]
centage of the total Medicare pay-
ments to each organization. CMS de-
termines the annual assessment per-
Subpart B—Eligibility, Election, and
centage rate separately for MA organi- Enrollment
zations and for PDPs using the fol-
lowing formula: SOURCE: 63 FR 35071, June 26, 1998, unless
(i) The assessment formula for MA otherwise noted.
organizations (including MA-PD plans):
§ 422.50 Eligibility to elect an MA plan.
C divided by A times B where—
A is the total estimated January For this subpart, all references to an
payments to all MA organizations sub- MA plan include MA-PD and both MA
ject to the assessment; local and MA regional plans, as defined
B is the 9-month (January through in § 422.2 unless specifically noted oth-
September) assessment period; and erwise.
C is the total fiscal year MA organi- (a) An individual is eligible to elect
zation user fee assessment amount de- an MA plan if he or she meets all of the
termined in accordance with paragraph following:;
(d)(2) of this section. (1) Is entitled to Medicare under Part
(ii) The assessment formula for A and enrolled in Part B (except that
PDPs: C divided by A times B where— an individual entitled only to Part B
A is the total estimated January pay- and who was enrolled in an HMO or
ments to all PDP sponsors subject to CMP with a risk contract under part
the assessment; B is the 9-month (Jan- 417 of this chapter on December 31, 1998
uary through September) assessment may continue to be enrolled in the MA
period; and C is the total fiscal year organization as an MA plan enrollee).
PDP sponsor’s user fee assessment (2) Has not been medically deter-
amount determined in accordance with mined to have end-stage renal disease,
paragraph (d)(2) of this section. except that—
(2) CMS determines each MA organi- (i) An individual who develops end-
zation’s and PDP sponsor’s pro rata stage renal disease while enrolled in an
share of the annual fee on the basis of MA plan or in a health plan offered by
the organization’s calculated monthly the MA organization is eligible to elect
payment amount during the 9 consecu- an MA plan offered by that organiza-
tive months beginning with January. tion;
CMS calculates each organization’s (ii) An individual with end-stage
monthly pro rata share by multiplying renal disease whose enrollment in an
the established percentage rate by the MA plan was terminated or discon-
total monthly calculated Medicare tinued after December 31, 1998, because
payment amount to the organization CMS or the MA organization termi-
as recorded in CMS’s payment system nated the MA organization’s contract
on the first day of the month. for the plan or discontinued the plan in
(3) CMS deducts the organization’s the area in which the individual re-
fee from the amount of Federal funds sides, is eligible to elect another MA
otherwise payable to the MA organiza- plan. If the plan so elected is later ter-
tion or PDP sponsor for that month. minated or discontinued in the area in
(4) If assessments reach the amount which the individual resides, he or she
authorized for the year before the end may elect another MA plan; and
412
(iii) An individual with end-stage § 422.52 Eligibility to elect an MA plan

renal disease may elect an MA special for special needs individuals.
needs plan as defined in § 422.2, as long (a) General rule. In order to elect a
as that plan has opted to enroll ESRD specialized MA plan for a special needs
individuals. individual (Special Needs MA plan, or
(3) Meets either of the following resi- SNP), the individual must meet the eli-
dency requirements: gibility requirements specified in this
(i) Resides in the service area of the section.
MA plan. (b) Basic eligibility requirements. Ex-
(ii) Resides outside of the service cept as provided in paragraph (c) of
area of the MA plan and is enrolled in this section, to be eligible to elect an
a health plan offered by the MA organi- SNP, an individual must:
zation during the month immediately (1) Meet the definition of a special
preceding the month in which the indi- needs individual, as defined at § 422.2;
vidual is entitled to both Medicare (2) Meet the eligibility requirements
Part A and Part B, provided that an for that specific SNP; and
MA organization chooses to offer this (3) Be eligible to elect an MA plan
option and that CMS determines that under § 422.50.
all applicable MA access requirements (c) Exception to § 422.50. CMS may
of § 422.112 are met for that individual waive § 422.50(a)(2) concerning the ex-
through the MA plan’s established pro- clusion of persons with ESRD.
vider network. The MA organization (d) Deeming continued eligibility. If an
must furnish the same benefits to these SNP determines that the enrollee no
enrollees as to enrollees who reside in longer meets the eligibility criteria,
the service area; but can reasonably be expected to
(4) Has been a member of an Em- again meet that criteria within a 6-
ployer Group Health Plan (EGHP) that month period, the enrollee is deemed
includes the elected MA plan, even if to continue to be eligible for the MA
the individual lives outside of the MA plan for a period of not less than 30
plan service area, provided that an MA days but not to exceed 6 months.
organization chooses to offer this op- (e) Restricting enrollment. An SNP
tion and that CMS determines that all must restrict future enrollment to only
applicable MA access requirements at special needs individuals as established
§ 422.112 are met for that individual under § 422.2.
through the MA plan’s established pro- (f) Establishing eligibility for enroll-
vider network. The MA organization ment. A SNP must employ a process ap-
must furnish the same benefits to all proved by CMS to verify the eligibility
enrollees, regardless of whether they of each individual enrolling in the
reside in the service area. SNP.
(5) Completes and signs an election [70 FR 4716, Jan. 28, 2005, as amended at 74
form or completes another CMS-ap- FR 1541, Jan. 12, 2009]
proved election method offered by the
MA organization and provides informa- § 422.53 Eligibility to elect an MA plan
tion required for enrollment. for senior housing facility resi-
(6) Agrees to abide by the rules of the dents.
MA organization after they are dis- (a) Basic eligibility requirements. To be
closed to him or her in connection with eligible to elect an MA senior housing
the election process. facility plan, the individual must meet
(7) Is a United States citizen or is both of the following:
lawfully present in the United States (1) Be a resident of an MA senior
as determined in 8 CFR 1.3. housing facility defined in § 422.2.
(b) An MA eligible individual may (2) Be eligible to elect an MA plan
not be enrolled in more than one MA under § 422.50.
plan at any given time. (b) Restricting enrollment. An MA sen-
ior housing facility plan must restrict
[63 FR 35071, June 26, 1998; 63 FR 52611, Oct.
enrollment to only those individuals
1, 1998, as amended at 65 FR 40316, June 29,

2000; 68 FR 50855, Aug. 22, 2003; 70 FR 4715, who reside in a continuing care retire-
Jan. 28, 2005; 70 FR 52026, Sept. 1, 2005; 80 FR ment community as defined at
7958, Feb. 12, 2015] § 422.133(b)(2).
413
§ 422.54 42 CFR Ch. IV (10–1–17 Edition)
(c) Establishing eligibility for enroll- vide or arrange for the Medicare-cov-
ment. An MA senior housing facility ered benefits as described in § 422.101(a).
plan must verify the eligibility of each (2) Reasonable access. The MA organi-
individual enrolling in its plan using a zation must ensure reasonable access
CMS approved process. in the continuation area—
[76 FR 21561, Apr. 15, 2011]
(i) Through contracts with providers,
or through direct payment of claims
§ 422.54 Continuation of enrollment that satisfy the requirements in
for MA local plans. § 422.100(b)(2), to other providers who
(a) Definition. Continuation area meet the requirement in subpart E of
means an additional area (outside the this part; and
service area) within which the MA or- (ii) By ensuring that the access re-
ganization offering a local plan fur- quirements of § 422.112 are met.
nishes or arranges to furnish services (3) Reasonable cost sharing. For serv-
to its continuation-of-enrollment en- ices furnished in the continuation area,
rollees. Enrollees must reside in a con- an enrollee’s cost-sharing liability is
tinuation area on a permanent basis. A limited to the cost-sharing amounts re-
continuation area does not expand the quired in the MA local plan’s service
service area of any MA local plan. area (in which the enrollee no longer
(b) Basic rule. An MA organization resides).
may offer a continuation of enrollment (4) Protection of enrollee rights. An MA
option to MA local plan enrollees when organization that offers a continuation
they no longer reside in the service of enrollment option must convey all
area of a plan and permanently move enrollee rights conferred under this
into the geographic area designated by rule, with the understanding that—
the MA organization as a continuation (i) The ultimate responsibility for all
area. The intent to no longer reside in appeals and grievance requirements re-
an area and permanently live in an- main with the organization that is re-
other area is verified through docu- ceiving payment from CMS; and
mentation that establishes residency, (ii) Organizations that require enroll-
such as a driver’s license or voter reg- ees to give advance notice of intent to
istration card. use the continuation of enrollment op-
(c) General requirements. (1) An MA or- tion, must stipulate the notification
ganization that wishes to offer a con- process in the marketing materials.
tinuation of enrollment option must (e) Capitation payments. CMS’s capita-
meet the following requirements: tion payments to all MA organizations,
(i) Obtain CMS’s approval of the con- for all Medicare enrollees, are based on
tinuation area, the marketing mate- rates established on the basis of the en-
rials that describe the option, and the rollee’s permanent residence, regard-
MA organization’s assurances of access less of where he or she receives serv-
to services. ices.
(ii) Describe the option(s) in the [63 FR 35071, June 26, 1998; 63 FR 52611, Oct.
member materials it offers and make 1, 1998, as amended at 65 FR 40316, June 29,
the option available to all MA local 2000; 70 FR 4716, Jan. 28, 2005]
plan enrollees residing in the continu-
ation area. § 422.56 Enrollment in an MA MSA
(2) An enrollee who moves out of the plan.
service area and into the geographic (a) General. An individual is not eligi-
area designated as the continuation ble to elect an MA MSA plan unless the
area has the choice of continuing en- individual provides assurances that are
rollment or disenrolling from the MA satisfactory to CMS that he or she will
local plan. The enrollee must make the reside in the United States for at least
choice of continuing enrollment in a 183 days during the year for which the
manner specified by CMS. If no choice election is effective.
is made, the enrollee must be (b) Individuals eligible for or covered
disenrolled from the plan. under other health benefits program. Un-
(d) Specific requirements—(1) Continu- less otherwise provided by the Sec-

ation of enrollment benefits. The MA or- retary, an individual who is enrolled in
ganization must, at a minimum, pro- a Federal Employee Health Benefit
414
plan under 5 U.S.C. chapter 89, or is eli- and (a)(5) if their MA plans are open to
gible for health care benefits through new enrollees.
the Veteran’s Administration under 10 (b) Capacity to accept new enrollees. (1)
U.S.C. chapter 55 or the Department of MA organizations may submit informa-
Defense under 38 U.S.C. chapter 17, tion on enrollment capacity of plans.
may not enroll in an MA MSA plan. (2) If CMS determines that an MA
(c) Individuals eligible for Medicare plan offered by an MA organization has
cost-sharing under Medicaid State plans. a capacity limit, and the number of MA
An individual who is entitled to cov- eligible individuals who elect to enroll
erage of Medicare cost-sharing under a in that plan exceeds the limit, the MA
State plan under title XIX of the Act is organization offering the plan may
not eligible to enroll in an MA MSA limit enrollment in the plan under this
plan. part, but only if it provides priority in
(d) Other limitations. An individual acceptance as follows:
who receives health benefits that cover (i) First, for individuals who elected
all or part of the annual deductible the plan prior to the CMS determina-
under the MA MSA plan may not enroll tion that capacity has been exceeded,
in an MA MSA plan. Examples of this elections will be processed in chrono-
type of coverage include, but are not logical order by date of receipt of their
limited to, primary health care cov- election forms.
erage other than Medicare, current (ii) Then for other individuals in a
coverage under the Medicare hospice manner that does not discriminate on
benefit, supplemental insurance poli- the basis of any factor related to
cies not specifically permitted under health as described in § 422.110.
§ 422.104, and retirement health bene-
(3) CMS considers enrollment limit
fits.
requests for an MA plan service area,
[63 FR 35071, June 26, 1998; 63 FR 52612, Oct. or a portion of the plan service area,
1, 1998, as amended at 70 FR 4716, Jan. 28, only if the health and safety of bene-
2005] ficiaries is at risk, such as if the pro-
vider network is not available to serve
§ 422.57 Limited enrollment under MA the enrollees in all or a portion of the
RFB plans.
service area.
An RFB society that offers an MA (c) Election forms and other election
RFB plan may offer that plan only to mechanisms. (1) The election must com-
members of the church, or convention ply with CMS instructions regarding
or group of churches with which the so- content and format and be approved by
ciety is affiliated. CMS as described in § 422.2262. The elec-
tion must be completed by the MA eli-
§ 422.60 Election process. gible individual (or the individual who
(a) Acceptance of enrollees: General will soon become eligible to elect an
rule. (1) Except for the limitations on MA plan) and include authorization for
enrollment in an MA MSA plan pro- disclosure and exchange of necessary
vided by § 422.62(d)(1) and except as information between the U.S. Depart-
specified in paragraph (a)(2) of this sec- ment of Health and Human Services
tion, each MA organization must ac- and its designees and the MA organiza-
cept without restriction (except for an tion. Persons who assist beneficiaries
MA RFB plan as provided by § 422.57) in completing forms must sign the
individuals who are eligible to elect an form, or through other approved mech-
MA plan that the MA organization of- anisms, indicate their relationship to
fers and who elect an MA plan during the beneficiary.
initial coverage election periods under (2) The MA organization must file
§ 422.62(a)(1), annual election periods and retain election forms for the period
under § 422.62(a)(2), and under the cir- specified in CMS instructions.
cumstances described in § 422.62(b)(1) (d) When an election is considered to
through (b)(4). have been made. An election in an MA
(2) MA organizations must accept plan is considered to have been made

elections during the open enrollment on the date the completed election is
periods specified in § 422.62(a)(3), (a)(4), received by the MA organization.
415
§ 422.62 42 CFR Ch. IV (10–1–17 Edition)
(e) Handling of elections. The MA or- bers, CMS may implement passive en-
ganization must have an effective sys- rollment procedures.
tem for receiving, controlling, and (1) Passive enrollment procedures. Indi-
processing elections. The system must viduals will be considered to have
meet the following conditions and re- elected the plan selected by CMS un-
quirements: less they—
(1) Each election is dated as of the (i) Decline the plan selected by CMS,
day it is received in a manner accept- in a form and manner determined by
able to CMS. CMS, or
(2) Elections are processed in chrono- (ii) Request enrollment in another
logical order, by date of receipt. plan.
(3) The MA organization gives the (2) Beneficiary notification. The orga-
beneficiary prompt notice of accept- nization that receives the enrollment
ance or denial in a format specified by must provide notification that de-
CMS. scribes the costs and benefits of the
(4) If the MA plan is enrolled to ca- plan and the process for accessing care
pacity, it explains the procedures that under the plan and clearly explains the
will be followed when vacancies occur. beneficiary’s ability to decline the en-
(5) Upon receipt of the election, or for rollment or choose another plan. Such
an individual who was accepted for fu- notification must be provided to all po-
ture enrollment from the date a va- tential enrollees prior to the enroll-
cancy occurs, the MA organization ment effective date (or as soon as pos-
transmits, within the timeframes spec- sible after the effective date if prior
ified by CMS, the information nec- notice is not practical), in a form and
essary for CMS to add the beneficiary manner determined by CMS.
to its records as an enrollee of the MA (3) Special election period. All individ-
organization. uals will be provided with a special
(f) Exception for employer group health election period, as described in
plans. (1) In cases in which an MA orga- § 422.62(b)(4).
nization has both a Medicare contract
and a contract with an employer group [63 FR 35071, June 26, 1998; 63 FR 52612, Oct.
health plan, and in which the MA orga- 1, 1998; 63 FR 54526, Oct. 9, 1998; 64 FR 7980,
nization arranges for the employer to Feb. 17, 1999; 65 FR 40316, June 29, 2000; 70 FR
process elections for Medicare-entitled 4716, Jan. 28, 2005; 70 FR 52026, Sept. 1, 2005;
74 FR 1541, Jan. 12, 2009; 77 FR 22166, Apr. 12,
group members who wish to enroll
2012]
under the Medicare contract, the effec-
tive date of the election may be retro- § 422.62 Election of coverage under an
active. Consistent with § 422.308(f)(2), MA plan.
payment adjustments based on a retro-
active effective date may be made for (a) General: Coverage election periods—
up to a 90-day period. (1) Initial coverage election period for
(2) In order to obtain the effective MA. The initial coverage election pe-
date described in paragraph (f)(1) of riod is the period during which a newly
this section, the beneficiary must cer- MA-eligible individual may make an
tify that, at the time of enrollment in initial election. This period begins 3
the MA organization, he or she re- months before the month the indi-
ceived the disclosure statement speci- vidual is first entitled to both Part A
fied in § 422.111. and Part B and ends on the later of—
(3) Upon receipt of the election from (i) The last day of the month pre-
the employer, the MA organization ceding the month of entitlement; or
must submit the enrollment within (ii) If after May 15, 2006, the last day
timeframes specified by CMS. of the individual’s Part B initial enroll-
(g) Passive enrollment by CMS. In situ- ment period.
ations involving either immediate ter- (2) Annual coordinated election period.
minations as provided in § 422.510(a)(5) (i) For 2002 through 2010, except for
or other situations in which CMS de- 2006, the annual coordinated election
termines that remaining enrolled in a period for the following calendar year
plan poses potential harm to the mem- is November 15 through December 31.
416
(ii) For 2006, the annual coordinated and Part B and ends on the last day of
election period begins on November 15, the 6th month of the entitlement, or on
2005 and ends on May 15, 2006. December 31, whichever is earlier, sub-
(iii) Beginning in 2011, the annual co- ject to the limitations in paragraphs
ordinated election period for the fol- (a)(4)(i)(A) and (a)(4)(i)(B) of this sec-
lowing calendar year is October 15 tion.
through December 7. (iii) The limitation to one election or
(iv) During the annual coordinated change in paragraphs (a)(4)(i) and
election period, an individual eligible (a)(4)(ii) of this section does not apply
to enroll in an MA plan may change his to elections or changes made during
or her election from an MA plan to the annual coordinated election period
Original Medicare or to a different MA specified in paragraph (a)(2) of this sec-
plan, or from Original Medicare to an tion or during a special election period
MA plan. If an individual changes his specified in paragraph (b) of this sec-
or her election to Original Medicare, he tion.
or she may also elect a PDP. (5) Open enrollment and disenrollment
(3) Open enrollment and disenrollment from 2007 through 2010. (i) Open enroll-
opportunities through 2005. Through ment period. For 2007 through 2010, ex-
2005, the number of elections or cept as provided in paragraphs
changes that an MA eligible individual (a)(5)(ii), (iii), and (a)(6) of this section,
may make is not limited (except as an individual who is not enrolled in an
provided for in paragraph (d) of this MA plan but is eligible to elect an MA
section for MA MSA plans). Subject to plan may make an election into an MA
the MA plan being open to enrollees as plan once during the first 3 months of
provided under § 422.60(a)(2), an indi- the year.
vidual eligible to elect an MA plan may (ii) Newly eligible MA individual. An
change his or her election from an MA individual who becomes MA eligible in
plan to original Medicare or to a dif- 2007 through 2010 may elect an MA plan
ferent MA plan, or from original Medi- or change his or her election once dur-
care to an MA plan. ing the period that begins the month
(4) Open enrollment and disenrollment the individual is entitled to both Part
during 2006. (i) Except as provided in A and Part B and ends on the last day
paragraphs (a)(4)(ii), (a)(4)(iii), and of the third month of the entitlement,
(a)(6) of this section, an individual who or on December 31, whichever is ear-
is not enrolled in an MA plan, but who lier, subject to the limitations in para-
is eligible to elect an MA plan in 2006, graphs (a)(5)(i)(A) and (a)(5)(i)(B) of
may elect an MA plan only once during this section.
the first 6 months of the year. (iii) Single election limitation. The lim-
(A) An individual who is enrolled in itation to one election or change in
an MA-PD plan may elect another MA- paragraphs (a)(5)(i) and (a)(5)(ii) of this
PD plan or original Medicare and cov- section does not apply to elections or
erage under a PDP. Such an individual changes made during the annual co-
may not elect an MA plan that does ordinated election period specified in
not provide qualified prescription drug paragraph (a)(2) of this section, or dur-
coverage. ing a special election period specified
(B) An individual who is enrolled in in paragraph (b) of this section.
an MA plan that does not provide (6) Open enrollment period for institu-
qualified prescription drug coverage tionalized individuals. After 2005, an in-
may elect another MA plan that does dividual who is eligible to elect an MA
not provide that coverage or original plan and who is institutionalized, as
Medicare. Such an individual may not defined by CMS, is not limited (except
elect an MA-PD plan or coverage under as provided for in paragraph (d) of this
a PDP. section for MA MSA plans) in the num-
(ii) Newly eligible MA individual. An ber of elections or changes he or she
individual who becomes MA eligible may make. Subject to the MA plan
during 2006 may elect an MA plan or being open to enrollees as provided
change his or her election once during under § 422.60(a)(2), an MA eligible in-
the period that begins the month the stitutionalized individual may at any
individual is entitled to both Part A time elect an MA plan or change his or
417
§ 422.62 42 CFR Ch. IV (10–1–17 Edition)
her election from an MA plan to origi- (B) Failure to provide medical serv-
nal Medicare, to a different MA plan, ices in accordance with applicable
or from original Medicare to an MA quality standards; or
plan. (ii) The organization (or its agent,
(7) Annual 45-day period for representative, or plan provider) mate-
disenrollment from MA plans to Original rially misrepresented the plan’s provi-
Medicare. For 2011 and subsequent sions in marketing the plan to the indi-
years, at any time from January 1 vidual.
through February 14, an individual who (4) The individual meets such other
is enrolled in an MA plan may elect exceptional conditions as CMS may
Original Medicare once during this 45- provide.
day period. An individual who chooses (c) Special election period for individual
to exercise this election may also age 65. Effective January 1, 2002, an MA
make a coordinating election to enroll eligible individual who elects an MA
in a PDP as specified in § 423.38(d). plan during the initial enrollment pe-
(b) Special election periods. An indi- riod, as defined under section 1837(d) of
vidual may at any time (that is, not the Act, that surrounds his or her 65th
limited to the annual coordinated elec- birthday (this period begins 3 months
tion period) discontinue the election of before and ends 3 months after the
an MA plan offered by an MA organiza- month of the individual’s 65th birth-
tion and change his or her election, in day) may discontinue the election of
the form and manner specified by CMS, that plan and elect coverage under
from an MA plan to original Medicare original Medicare at any time during
or to a different MA plan under any of the 12-month period that begins on the
the following circumstances: effective date of enrollment in the MA
(1) CMS or the organization has ter- plan.
minated the organization’s contract for (d) Special rules for MA MSA plans—(1)
the plan, discontinued the plan in the Enrollment. An individual may enroll in
area in which the individual resides, or an MA MSA plan only during an initial
the organization has notified the indi- coverage election period or annual co-
vidual of the impending termination of ordinated election period described in
the plan, or the impending discontinu- paragraphs (a)(1) and (a)(2) of this sec-
ation of the plan in the area in which tion.
the individual resides. (2) Disenrollment. (i) Except as pro-
(2) The individual is not eligible to vided in paragraph (d)(2)(ii) of this sec-
remain enrolled in the plan because of tion, an individual may disenroll from
a change in his or her place of resi- an MA MSA plan only during—
dence to a location out of the service (A) An annual election period; or
area or continuation area or other (B) The special election period de-
change in circumstances as determined scribed in paragraph (b) of this section.
by CMS but not including terminations (ii) Exception. An individual who
resulting from a failure to make time- elects an MA MSA plan during an an-
ly payment of an MA monthly or sup- nual election period and has never be-
plemental beneficiary premium, or fore elected an MA MSA plan may re-
from disruptive behavior. voke that election, no later than De-
(3) The individual demonstrates to cember 15 of that same year, by sub-
CMS, in accordance with guidelines mitting to the organization that offers
issued by CMS, that— the MA MSA plan a signed and dated
(i) The organization offering the plan request in the form and manner pre-
substantially violated a material pro- scribed by CMS or by filing the appro-
vision of its contract under this part in priate disenrollment form through
relation to the individual, including, other mechanisms as determined by
but not limited to the following: CMS.
(A) Failure to provide the beneficiary [63 FR 35071, June 26, 1998; 63 FR 52612, Oct.
on a timely basis medically necessary 1, 1998, as amended at 65 FR 40317, June 29,

services for which benefits are avail- 2000; 70 FR 4717, Jan. 28, 2005; 76 FR 21561,
able under the plan. Apr. 15, 2011]
418
§ 422.64 Information about the MA pro- (B) Until that date, neither the MA
gram. organization nor CMS pays for services
Each MA organization must provide, not provided or arranged for by the MA
on an annual basis, and in a format and plan in which the enrollee is enrolled;
using standard terminology that may and
be specified by CMS, the information (iv) File and retain disenrollment re-
necessary to enable CMS to provide to quests for the period specified in CMS
current and potential beneficiaries the instructions.
information they need to make in- (4) Effect of failure to submit
formed decisions with respect to the disenrollment notice to CMS promptly. If
available choices for Medicare cov- the MA organization fails to submit
erage. the correct and complete notice re-
[65 FR 40317, June 29, 2000] quired in paragraph (b)(3)(i) of this sec-
tion, the MA organization must reim-
§ 422.66 Coordination of enrollment burse CMS for any capitation pay-
and disenrollment through MA or- ments received after the month in
ganizations. which payment would have ceased if
(a) Enrollment. An individual who the requirement had been met timely.
wishes to elect an MA plan offered by (5) Retroactive disenrollment. CMS may
an MA organization may make or grant retroactive disenrollment in the
change his or her election during the following cases:
election periods specified in § 422.62 by (i) There never was a legally valid en-
filing the appropriate election form rollment.
with the organization or through other (ii) A valid request for disenrollment
mechanisms as determined by CMS. was properly made but not processed or
(b) Disenrollment—(1) Basic rule. An acted upon.
individual who wishes to disenroll from (c) Election by default: Initial coverage
an MA plan may change his or her elec- election period. An individual who fails
tion during the election periods speci- to make an election during the initial
fied in § 422.62 in either of the following coverage election period is deemed to
manners:
have elected original Medicare.
(i) Elect a different MA plan by filing
the appropriate election with the MA (d) Conversion of enrollment (seamless
organization. continuation of coverage)—(1) Basic rule.
(ii) Submit a request for An MA plan offered by an MA organiza-
disenrollment to the MA organization tion must accept any individual (re-
in the form and manner prescribed by gardless of whether the individual has
CMS or file the appropriate end-stage renal disease) who is enrolled
disenrollment request through other in a health plan offered by the MA or-
mechanisms as determined by CMS. ganization during the month imme-
(2) When a disenrollment request is con- diately preceding the month in which
sidered to have been made. A he or she is entitled to both Part A and
disenrollment request is considered to Part B, and who meets the eligibility
have been made on the date the requirements at § 422.50.
disenrollment request is received by (2) Reserved vacancies. Subject to
the MA organization. CMS’s approval, an MA organization
(3) Responsibilities of the MA organiza- may set aside a reasonable number of
tion. The MA organization must— vacancies in order to accommodate en-
(i) Submit a disenrollment notice to rollment of conversions. Any set aside
CMS within timeframes specified by vacancies that are not filled within a
CMS; reasonable time must be made avail-
(ii) Provide enrollee with notice of able to other MA eligible individuals.
disenrollment in a format specified by (3) Effective date of conversion. If an
CMS; and individual chooses to remain enrolled
(iii) In the case of a plan where lock- with the MA organization as an MA en-
in applies, include in the notice a rollee, the individual’s conversion to
statement explaining that he or she— an MA enrollee is effective the month

(A) Remains enrolled until the effec- in which he or she is entitled to both
tive date of disenrollment; and Part A and Part B in accordance with
419
§ 422.68 42 CFR Ch. IV (10–1–17 Edition)
the requirements in paragraph (d)(5) of health plan, and in which the MA orga-
this section. nization arranges for the employer to
(4) Prohibition against disenrollment. process election forms for Medicare-en-
The MA organization may disenroll an titled group members who wish to
individual who is converting under the disenroll from the Medicare contract,
provisions of paragraph (a) of this sec- the effective date of the election may
tion only under the conditions speci- be retroactive. Consistent with
fied in § 422.74. § 422.308(f)(2), payment adjustments
(5) Election. The individual who is based on a retroactive effective date
converting must complete an election may be made for up to a 90-day period.
as described in § 422.60(c)(1) unless oth- (2) Upon receipt of the election from
erwise provided in a form and manner the employer, the MA organization
approved by CMS. must submit a disenrollment notice to
(6) Submittal of information to CMS. CMS within timeframes specified by
The MA organization must transmit CMS.
the information necessary for CMS to [63 FR 35071, June 26, 1998; 63 FR 52612, Oct.
add the individual to its records as 1, 1998, as amended at 65 FR 40317, June 29,
specified in § 422.60(e)(6). 2000; 70 FR 4718, Jan. 28, 2005; 70 FR 52026,
(e) Maintenance of enrollment. (1) An Sept. 1, 2005]
individual who has made an election
under this section is considered to have § 422.68 Effective dates of coverage
continued to have made that election and change of coverage.
until either of the following, which (a) Initial coverage election period. An
ever occurs first: election made during an initial cov-
(i) The individual changes the elec- erage election period as described in
tion under this section. § 422.62(a)(1) is effective as of the first
(ii) The elected MA plan is discon- day of the month of entitlement to
tinued or no longer serves the area in both Part A and Part B.
which the individual resides, as pro- (b) Annual coordinated election periods.
vided under § 422.74(b)(3), or the organi- For an election or change of election
zation does not offer or the individual made during the annual coordinated
does not elect the option of continuing election period as described in
enrollment, as provided under § 422.54. § 422.62(a)(2)(i), coverage is effective as
(2) An individual enrolled in an MA of the first day of the following cal-
plan that becomes an MA-PD plan on endar year except that for the annual
January 1, 2006, will be deemed to have coordinated election period described
elected to enroll in that MA-PD plan. in § 422.62(a)(2)(ii), elections made after
(3) An individual enrolled in an MA December 31, 2005 through May 15, 2006
plan that, as of December 31, 2005, of- are effective as of the first day of the
fers any prescription drug coverage first calendar month following the
will be deemed to have elected an MA- month in which the election is made.
PD plan offered by the same organiza- (c) Open enrollment periods. For an
tion as of January 1, 2006. election, or change in election, made
(4) An individual who has elected an during an open enrollment period, as
MA plan that does not provide pre- described in § 422.62(a)(3) through (a)(6),
scription drug coverage will not be coverage is effective as of the first day
deemed to have elected an MA-PD plan of the first calendar month following
and will remain enrolled in the MA the month in which the election is
plan as provided in paragraph (e)(1) of made.
this section. (d) Special election periods. For an
(5) An individual enrolled in an MA- election or change of election made
PD plan as of December 31 of a year is during a special election period as de-
deemed to have elected to remain en- scribed in § 422.62(b), the effective date
rolled in that plan on January 1 of the of coverage shall be determined by
following year. CMS, to the extent practicable, in a
(f) Exception for employer group health manner consistent with protecting the
plans. (1) In cases when an MA organi- continuity of health benefits coverage.

zation has both a Medicare contract (e) Special election period for individual
and a contract with an employer group age 65. For an election of coverage
420
under original Medicare made during a enrollment has not been offered or
special election period for an indi- elected under § 422.54.
vidual age 65 as described in § 422.62(c), (ii) The individual loses entitlement
coverage is effective as of the first day to Part A or Part B benefits as de-
of the first calendar month following scribed in paragraph (d)(5) of this sec-
the month in which the election is tion.
made. (iii) Death of the individual as de-
(f) Annual 45-day period for scribed in paragraph (d)(6) of this sec-
disenrollment from MA plans to Original tion.
Medicare. Beginning in 2011, an election (iv) Individuals enrolled in a special-
made from January 1 through Feb- ized MA plan for special needs individ-
ruary 14 to disenroll from an MA plan uals that exclusively serves and enrolls
to Original Medicare, as described in special needs individuals who no longer
§ 422.62(a)(7), is effective the first day of meet the special needs status of that
the first month following the month in plan (or deemed continued eligibility,
which the election is made. if applicable).
(v) The individual is not lawfully
FR 40317, June 29, 2000; 67 FR 13288, Mar. 22, present in the United States.
2002; 70 FR 4718, Jan. 28, 2005; 76 FR 21562, (3) Plan termination or reduction of
Apr. 15, 2011] area where plan is available—(i) General
rule. An MA organization that has its
§ 422.74 Disenrollment by the MA orga- contract for an MA plan terminated,
nization. that terminates an MA plan, or that
(a) General rule. Except as provided in discontinues offering the plan in any
paragraphs (b) through (d) of this sec- portion of the area where the plan had
tion, an MA organization may not— previously been available, must
(1) Disenroll an individual from any disenroll affected enrollees in accord-
MA plan it offers; or ance with the procedures for
(2) Orally or in writing, or by any ac- disenrollment set forth at paragraph
tion or inaction, request or encourage (d)(7) of this section, unless the excep-
an individual to disenroll. tion in paragraph (b)(3)(ii) of this sec-
(b) Basis for disenrollment—(1) Op- tion applies.
tional disenrollment. An MA organiza- (ii) Exception. When an MA organiza-
tion may disenroll an individual from tion discontinues offering an MA plan
an MA plan it offers in any of the fol- in a portion of its service area, the MA
lowing circumstances: organization may elect to offer enroll-
(i) Any monthly basic and supple- ees residing in all or portions of the af-
mentary beneficiary premiums are not fected area the option to continue en-
paid on a timely basis, subject to the rollment in an MA plan offered by the
grace period for late payment estab- organization, provided that there is no
lished under paragraph (d)(1) of this other MA plan offered in the affected
section. area at the time of the organization’s
(ii) The individual has engaged in dis- election. The organization may require
ruptive behavior specified at paragraph an enrollee who chooses to continue
(d)(2) of this section. enrollment to agree to receive the full
(iii) The individual provides fraudu- range of basic benefits (excluding
lent information on his or her election emergency and urgently needed care)
form or permits abuse of his or her en- exclusively through facilities des-
rollment card as specified in paragraph ignated by the organization within the
(d)(3) of this section. plan service area.
(2) Required disenrollment. An MA or- (c) Notice requirement. If the
ganization must disenroll an individual disenrollment is for any of the reasons
from an MA plan it offers in any of the specified in paragraphs (b)(1), (b)(2)(i),
following circumstances: or (b)(3) of this section (that is, other
(i) The individual no longer resides in than death or loss of entitlement to
the MA plan’s service area as specified Part A or Part B) the MA organization
under paragraph (d)(4) of this section, must give the individual a written no-
is no longer eligible under tice of the disenrollment with an expla-
§ 422.50(a)(3)(ii), and optional continued nation of why the MA organization is
421
§ 422.74 42 CFR Ch. IV (10–1–17 Edition)
planning to disenroll the individual. party to which CMS has assigned this
Notices for reasons specified in para- responsibility, such as an MA organiza-
graphs (b)(1) through (b)(2)(i) must— tion) may reinstate enrollment in the
(1) Be provided to the individual be- MA plan, without interruption of cov-
fore submission of the disenrollment to erage, if the individual—
CMS; and (A) Shows good cause for failure to
(2) Include an explanation of the indi- pay within the initial grace period; and
vidual’s right to a hearing under the (B) Pays all overdue premiums with-
MA organization’s grievance proce- in 3 calendar months after the
dures. disenrollment date; and
(d) Process for disenrollment. (1) Except (C) Establishes by a credible state-
as specified in paragraph (d)(1)(iv) of ment that failure to pay premiums
this section, an MA organization may within the initial grace period was due
disenroll an individual from the MA to circumstances for which the indi-
plan for failure to pay basic and supple- vidual had no control, or which the in-
mentary premiums under the following dividual could not reasonably have
circumstances: been expected to foresee.
(i) The MA organization can dem-
(vi) No extension of grace period. A
onstrate to CMS that it made reason-
beneficiary’s enrollment in the MA
able efforts to collect the unpaid pre-
plan may not be reinstated if the only
mium amount, including:
basis for such reinstatement is a
(A) Alerting the individual that the
change in the individual’s cir-
premiums are delinquent;
cumstances subsequent to the involun-
(B) Providing the individual with a
grace period, that is, an opportunity to tary disenrollment for non-payment of
pay past due premiums in full. The premiums.
length of the grace period must— (2) Disruptive behavior—(i) Definition
(1) Be at least 2 months; and of disruptive behavior. An MA plan en-
(2) Begin on the first day of the rollee is disruptive if his or her behav-
month for which the premium is un- ior substantially impairs the plan’s
paid or the first day of the month fol- ability to arrange for or provide serv-
lowing the date on which premium pay- ices to the individual or other plan
ment is requested, whichever is later. members. An individual cannot be con-
(C) Advising the individual that fail- sidered disruptive if such behavior is
ure to pay the premiums by the end of related to the use of medical services
the grace period will result in termi- or compliance (or noncompliance) with
nation of MA coverage. medical advice or treatment.
(ii) The MA organization provides the (ii) Basis of disenrollment for disruptive
enrollee with notice of disenrollment behavior. An organization may
that meets the requirements set forth disenroll an individual whose behavior
in paragraph (c) of this section. is disruptive as defined in 422.74(d)(2)(i)
(iii) If the enrollee fails to pay the only after it meets the requirements
premium for optional supplemental described in this section and CMS has
benefits but pays the basic premium reviewed and approved the request.
and any mandatory supplemental pre- (iii) Effort to resolve the problem. The
mium, the MA organization has the op- MA organization must make a serious
tion to discontinue the optional supple- effort to resolve the problems pre-
mental benefits and retain the indi- sented by the individual, including pro-
vidual as an MA enrollee. viding reasonable accommodations, as
(iv) An MA organization may not determined by CMS, for individuals
disenroll an individual who had month- with mental or cognitive conditions,
ly premiums withheld per § 422.262(f)(1) including mental illness and develop-
and (g) of this part, or who is in pre- mental disabilities. In addition, the
mium withhold status, as defined by MA organization must inform the indi-
CMS. vidual of the right to use the organiza-
(v) Extension of grace period for good tion’s grievance procedures. The bene-
cause and reinstatement. When an indi- ficiary has a right to submit any infor-
vidual is disenrolled for failure to pay mation or explanation that he or she
the plan premium, CMS (or a third may wish to the MA organization.
422
(iv) Documentation. The MA organiza- (B) Intentionally permits others to

tion must document the enrollee’s be- use his or her enrollment card to ob-
havior, its own efforts to resolve any tain services under the MA plan.
problems, as described in paragraph (ii) Notice of disenrollment. The MA or-
(iii), and any extenuating cir- ganization must give the individual a
cumstances. The MA organization may written notice of the disenrollment
request from CMS the ability to de- that meets the requirements set forth
cline future enrollment by the indi- in paragraph (c) of this section.
vidual. The MA organization must sub- (iii) Report to CMS. The MA organiza-
mit this information and any docu- tion must report to CMS any
mentation received by the beneficiary disenrollment based on fraud or abuse
to CMS. by the individual.
(v) CMS review of the proposed (4) Individual no longer resides in the
disenrollment. CMS will review the in- MA plan’s service area—(i) Basis for
formation submitted by the MA organi- disenrollment. Unless continuation of
zation and any information submitted enrollment is elected under § 422.54, the
by the beneficiary (which the MA orga- MA organization must disenroll an in-
nization must forward to CMS) to de- dividual if the MA organization estab-
termine if the MA organization has ful- lishes, on the basis of a written state-
filled the requirements to request ment from the individual or other evi-
disenrollment for disruptive behavior. dence acceptable to CMS, that the indi-
If the organization has fulfilled the vidual has permanently moved—
necessary requirements, CMS will re- (A) Out of the MA plan’s service area
view the information and make a deci- or is incarcerated as specified in para-
sion to approve or deny the request for graph (d)(4)(v) of this section.
disenrollment, including conditions on (B) From the residence in which the
future enrollment, within 20 working individual resided at the time of enroll-
days. During the review, CMS will en- ment in the MA plan to an area outside
sure that staff with appropriate clin- the MA plan’s service area, for those
ical or medical expertise review the individuals who enrolled in the MA
case before making the final decision. plan under the eligibility requirements
The MA organization will be required at § 422.50(a)(3)(ii) or (a)(4).
to provide a reasonable accommoda- (ii) Special rule. If the individual has
tion, as determined by CMS, for the in- not moved from the MA plan’s service
dividual in such exceptional cir- area (or residence, as described in para-
cumstances that CMS deems necessary. graph (d)(4)(i)(B) of this section), but
CMS will notify the MA organization has left the service area (or residence)
within 5 working days after making its for more than 6 months, the MA orga-
decision. nization must disenroll the individual
(vi) Effective date of disenrollment. If from the plan, unless the exception in
CMS permits an MA organization to paragraph (d)(4)(iii) of this section ap-
disenroll an individual for disruptive plies.
behavior, the termination is effective (iii) Exception. If the MA plan offers a
the first day of the calendar month visitor/traveler benefit when the indi-
after the month in which the MA orga- vidual is out of the service area but
nization gives the individual notice of within the United States (as defined in
the disenrollment that meets the re- § 400.200 of this chapter) for a period of
quirements set forth in paragraph (c) of consecutive days longer than 6 months
this section, unless otherwise deter- but less than 12 months, the MA orga-
mined by CMS. nization may elect to offer to the indi-
(3) Individual commits fraud or permits vidual the option of remaining enrolled
abuse of enrollment card—(i) Basis for in the MA plan if—
disenrollment. An MA organization may (A) The individual is disenrolled on
disenroll the individual from an MA the first day of the 13th month after
plan if the individual— the individual left the service area (or
(A) Knowingly provides, on the elec- residence, if paragraph (d)(4)(i)(B) of
tion form, fraudulent information that this section applies);

materially affects the individual’s eli- (B) The individual understands and
gibility to enroll in the MA plan; or accepts any restrictions imposed by
423
§ 422.74 42 CFR Ch. IV (10–1–17 Edition)
the MA plan on obtaining these serv- (6) Death of the individual. If the indi-
ices while absent from the MA plan’s vidual dies, disenrollment is effective
service area for the extended period, the first day of the calendar month fol-
consistent with paragraph (d)(4)(i)(C) of lowing the month of death.
the section; (7) Plan termination or area reduction.
(C) The MA organization makes this (i) When an MA organization has its
visitor/traveler option available to all contract for an MA plan terminated,
Medicare enrollees who are absent for terminates an MA plan, or discontinues
an extended period from the MA plan’s offering the plan in any portion of the
service area. MA organizations may area where the plan had previously
limit this visitor/traveler option to en-
been available, the MA organization
rollees who travel to certain areas, as
must give each affected MA plan en-
defined by the MA organization, and
who receive services from qualified rollee a written notice of the effective
providers who directly provide, arrange date of the plan termination or area re-
for, or pay for health care; and duction and a description of alter-
(D) The MA organization furnishes natives for obtaining benefits under
all Medicare Parts A and B services the MA program.
and all mandatory and optional supple- (ii) The notice must be sent before
mental benefits at the same cost shar- the effective date of the plan termi-
ing levels as apply within the plan’s nation or area reduction, and in the
service area; and timeframes specified in § 422.506(a)(2).
(E) The MA organization furnishes (8) Enrollee is not lawfully present in
the services in paragraph (d)(4)(iii)(D) the United States. Disenrollment is ef-
of this section consistent with Medi- fective the first day of the month fol-
care access and availability require- lowing notice by CMS that the indi-
ments at § 422.112 of this part. vidual is ineligible in accordance with
(iv) Notice of disenrollment. The MA § 417.422(h) of this chapter.
organization must give the individual a (e) Consequences of disenrollment—(1)
written notice of the disenrollment Disenrollment for non-payment of pre-
that meets the requirements set forth
miums, disruptive behavior, fraud or
in paragraph (c) of this section.
abuse, loss of Part A or Part B. An indi-
(v) Incarceration. (A) The MA organi-
zation must disenroll an individual if vidual who is disenrolled under para-
the MA organization establishes, on graph (b)(1)(i), (b)(1)(ii), (b)(1)(iii), or
the basis of evidence acceptable to paragraph (b)(2)(ii) of this section is
CMS, that the individual is incarcer- deemed to have elected original Medi-
ated and does not reside in the service care.
area of the MA plan as specified at (2) Disenrollment based on plan termi-
§ 422.2 or when notified of the incarcer- nation, area reduction, or individual
ation by CMS as specified in paragraph moves out of area. (i) An individual who
(d)(4)(v)(B) of this section. is disenrolled under paragraph (b)(2)(i)
(B) Notification by CMS of incarcer- or (b)(3) of this section has a special
ation. When CMS notifies the MA orga- election period in which to make a new
nization of the disenrollment due to election as provided in § 422.62(b)(1) and
the individual being incarcerated and (b)(2).
not residing in the service area of the (ii) An individual who fails to make
MA plan as per § 422.2, disenrollment is an election during the special election
effective the first of the month fol- period is deemed to have elected origi-
lowing the start of incarceration, un- nal Medicare.
less otherwise specified by CMS.
(5) Loss of entitlement to Part A or Part [63 FR 35071, June 26, 1998; 63 FR 52612, Oct.
B benefits. If an individual is no longer 1, 1998, as amended at 65 FR 40318, June 29,
entitled to Part A or Part B benefits, 2000; 68 FR 50855, Aug. 22, 2003; 70 FR 4718,
CMS notifies the MA organization that Jan. 28, 2005; 74 FR 1541, Jan. 12, 2009; 75 FR
the disenrollment is effective the first 19804, Apr. 15, 2010; 76 FR 21562, Apr. 15, 2011;
79 FR 29955, May 23, 2014; 80 FR 7959, Feb. 12,

day of the calendar month following
2015]
the last month of entitlement to Part
A or Part B benefits.
424
Subpart C—Benefits and (c) Types of benefits. An MA plan in-

Beneficiary Protections cludes at a minimum basic benefits,
and also may include mandatory and
optional supplemental benefits.
SOURCE: 63 FR 35077, June 26, 1998, unless
otherwise noted.
(1) Basic benefits are all Medicare-
covered services, except hospice serv-
§ 422.100 General requirements. ices.
(2) Supplemental benefits, which con-
(a) Basic rule. Subject to the condi-
sist of—
tions and limitations set forth in this
(i) Mandatory supplemental benefits
subpart, an MA organization offering
an MA plan must provide enrollees in are services not covered by Medicare
that plan with coverage of the basic that an MA enrollee must purchase as
benefits described in paragraph (c) of part of an MA plan that are paid for in
this section (and, to the extent applica- full, directly by (or on behalf of) Medi-
ble, the benefits described in § 422.102) care enrollees, in the form of premiums
by furnishing the benefits directly or or cost-sharing.
through arrangements, or by paying (ii) Optional supplemental benefits
for the benefits. CMS reviews these are health services not covered by
benefits subject to the requirements of Medicare that are purchased at the op-
§ 422.100(g) and the requirements in sub- tion of the MA enrollee and paid for in
part G of this part. full, directly by (or on behalf of) the
(b) Services of noncontracting providers Medicare enrollee, in the form of pre-
and suppliers. (1) An MA organization miums or cost-sharing. These services
must make timely and reasonable pay- may be grouped or offered individually.
ment to or on behalf of the plan en- (d) Availability and structure of plans.
rollee for the following services ob- An MA organization offering an MA
tained from a provider or supplier that plan must offer it—
does not contract with the MA organi- (1) To all Medicare beneficiaries re-
zation to provide services covered by siding in the service area of the MA
the MA plan: plan;
(i) Ambulance services dispatched (2) At a uniform premium, with uni-
through 911 or its local equivalent as form benefits and level of cost-sharing
provided in § 422.113. throughout the plan’s service area, or
(ii) Emergency and urgently needed segment of service area as provided in
services as provided in § 422.113. § 422.262(c)(2).
(iii) Maintenance and post-stabiliza- (e) Multiple plans in one service area.
tion care services as provided in An MA organization may offer more
§ 422.113. than one MA plan in the same service
(iv) Renal dialysis services provided area subject to the conditions and limi-
while the enrollee was temporarily out- tations set forth in this subpart for
side the plan’s service area. each MA plan.
(v) Services for which coverage has (f) CMS review and approval of MA
been denied by the MA organization benefits and associated cost sharing. CMS
and found (upon appeal under subpart reviews and approves MA benefits and
M of this part) to be services the en- associated cost sharing using written
rollee was entitled to have furnished, policy guidelines and requirements in
or paid for, by the MA organization. this part and other CMS instructions
(2) An MA plan (and an MA MSA to ensure all of the following:
plan, after the annual deductible in (1) Medicare-covered services meet
§ 422.103(d) has been met) offered by an CMS fee-for-service guidelines.
MA organization satisfies paragraph (a) (2) MA organizations are not design-
of this section with respect to benefits ing benefits to discriminate against
for services furnished by a noncon- beneficiaries, promote discrimination,
tracting provider if that MA plan pro- discourage enrollment or encourage
vides payment in an amount the pro- disenrollment, steer subsets of Medi-
vider would have received under origi- care beneficiaries to particular MA
nal Medicare (including balance billing plans, or inhibit access to services. and
permitted under Medicare Part A and (3) Benefit design meets other MA
Part B). program requirements.
425
§ 422.100 42 CFR Ch. IV (10–1–17 Edition)
(4) Except as provided in paragraph and radiation therapy integral to the

(f)(5), MA local plans (as defined in treatment regimen.
§ 422.2) must have an out-of pocket (2) Renal dialysis services as defined
maximum for Medicare Parts A and B at section 1881(b)(14)(B) of the Act.
services that is no greater than the an- (3) Skilled nursing care defined as
nual limit set by CMS. services provided during a covered stay
(5) With respect to a local PPO plan, in a skilled nursing facility during the
the limit specified under paragraph period for which cost sharing would
(f)(4) applies only to use of network apply under Original Medicare.
providers. Such local PPO plans must (k) Cost sharing for in-network preven-
include a total catastrophic limit on tive services. MA organizations may not
beneficiary out-of-pocket expenditures charge deductibles, copayments, or co-
for both in-network and out-of-network insurance for in-network Medicare-cov-
Parts A and B services that is— ered preventive services (as defined in
(i) Consistent with the requirements § 410.152(l)).
applicable to MA regional plans at (l) Coverage of DME. MA organiza-
§ 422.101(d)(3) of this part; and tions—
(ii) Not greater than the annual limit (1) Must cover and ensure enrollees
set by CMS. have access to all categories of DME
(6) Cost sharing for Medicare Part A covered under Part B; and
and B services specified by CMS does (2) May, within specific categories of
not exceed levels annually determined DME, limit coverage to certain DME
by CMS to be discriminatory for such brands, items, and supplies of preferred
services. manufacturers provided the MA organi-
(g) Benefits affecting screening mam- zation ensures all of the following:
mography, influenza vaccine, and (i) Its contracts with DME suppliers
pneumoccal vaccine. (1) Enrollees of MA ensure that enrollees have access to all
organizations may directly access DME brands, items, and supplies of pre-
(through self-referral) screening mam- ferred manufacturers.
mography and influenza vaccine. (ii) Its enrollees have access to all
(2) MA organizations may not impose medically-necessary DME brands,
cost-sharing for influenza vaccine and items, and supplies of non-preferred
pneumococcal vaccine on their MA manufacturers.
plan enrollees. (iii) At the enrollees’ request, it pro-
(h) Requirements relating to Medicare vides for an appropriate transition
conditions of participation. Basic bene- process for new enrollees during the
fits must be furnished through pro- first 90 days of their coverage under its
viders meeting the requirements in MA plan, during which time the MA or-
§ 422.204(b)(3). ganization will do the following:
(i) Provider networks. The MA plans (A) Ensure the provision of a transi-
offered by an MA organization may tion supply of DME brands, items, and
share a provider network as long as supplies of non-preferred manufactur-
each MA plan independently meets the ers.
access and availability standards de- (B) Provide for the repair of DME
scribed at § 422.112, as determined by brands, items, and supplies of non-pre-
CMS. ferred manufacturers.
(j) Services for which cost sharing may (iv) It makes no negative changes to
not exceed cost sharing under Original its DME brands, items, and supplies of
Medicare. On an annual basis, CMS will preferred manufacturers during the
evaluate whether there are service cat- plan year.
egories for which MA plans’ in-network (v) It treats denials of DME brands,
cost sharing may not exceed that re- items, and supplies of non-preferred
quired under Original Medicare and manufacturers as organization deter-
specify in regulation which services are minations subject to § 422.566.
subject to that cost sharing limit. The (vi) It discloses DME coverage limi-
following services are subject to this tations and beneficiary appeal rights in
limit on cost sharing: the case of a denial of a DME brand,

(1) Chemotherapy administration item, or supply of a non-preferred man-
services to include chemotherapy drugs ufacturer as part of the description of
426
benefits required under § 422.111(b)(2) (iii) Thirty days have elapsed since
and § 422.111(h). the declaration of the public health
(vii) It provides full coverage, with- emergency or state of disaster and no
out limitation on brand and manufac- end date was identified in paragraph
turer, to all DME categories or subcat- (m)(3)(i) or (ii) of this section.
egories annually determined by CMS to (4) MA plans unable to operate. An MA
require full coverage. plan that cannot resume normal oper-
(m) Special requirements during a dis- ations by the end of the public health
aster or emergency. (1) When a state of emergency or state of disaster must
disaster is declared as described in notify CMS.
paragraph (m)(2) of this section, an MA (5) Disclosure. In addition to other re-
organization offering an MA plan must, quirements of annual disclosure under
until one of the conditions described in § 422.111, an organization must do all of
paragraph (m)(3) of this section occurs, the following:
ensure access to benefits in the fol- (i) Indicate the terms and conditions
lowing manner: of payment during the public health
(i) Cover Medicare Parts A and B emergency or disaster for non-con-
services and supplemental Part C plan tracted providers furnishing benefits to
benefits furnished at non-contracted plan enrollees residing in the state-of-
facilities subject to § 422.204(b)(3). disaster area.
(ii) Waive, in full, requirements for (ii) Annually notify enrollees of the
gatekeeper referrals where applicable. information listed in paragraphs (m)(1)
(iii) Provide the same cost-sharing through (3) and (m)(5) of this section.
for the enrollee as if the service or ben- (iii) Provide the information de-
efit had been furnished at a plan-con- scribed in paragraphs (m)(1), (2), (3),
tracted facility. and (4)(i) of this section on its Web
(iv) Make changes that benefit the site.
enrollee effective immediately without [65 FR 40319, June 29, 2000, as amended at 67
the 30-day notification requirement at FR 13288, Mar. 22, 2002; 70 FR 4719, Jan. 28,
§ 422.111(d)(3). 2005; 70 FR 52026, Sept. 1, 2005; 75 FR 19804,
(2) Declarations of disasters. A declara- Apr. 15, 2010; 76 FR 21562, Apr. 15, 2011; 77 FR
tion of disaster will identify the geo- 22166, Apr. 12, 2012; 80 FR 7959, Feb. 12, 2015]
graphic area affected by the event and
may be made as one of the following: § 422.101 Requirements relating to
(i) Presidential declaration of a dis- basic benefits.
aster or emergency under the either of Except as specified in § 422.318 (for en-
the following: titlement that begins or ends during a
(A) Stafford Act. hospital stay) and § 422.320 (with re-
(B) National Emergencies Act. spect to hospice care), each MA organi-
(ii)(A) Secretarial declaration of a zation must meet the following re-
public health emergency under section quirements:
319 of the Public Health Service Act. (a) Provide coverage of, by fur-
(B) If the President has declared a nishing, arranging for, or making pay-
disaster as described in paragraph ment for, all services that are covered
(m)(2)(i) or (ii) of this section, then the by Part A and Part B of Medicare (if
Secretary may also authorize waivers the enrollee is entitled to benefits
or modifications under section 1135 of under both parts) or by Medicare Part
the Act. B (if entitled only under Part B) and
(iii) Declaration by the Governor of a that are available to beneficiaries re-
State or Protectorate. siding in the plan’s service area. Serv-
(3) End of the disaster. The public ices may be provided outside of the
health emergency or state of disaster service area of the plan if the services
ends when any of the following occur: are accessible and available to enroll-
(i) The source that declared the pub- ees.
lic health emergency or state of dis- (b) Comply with—
aster declares an end. (1) CMS’s national coverage deter-
(ii) The CMS declares an end of the minations;

public health emergency or state of (2) General coverage guidelines in-
disaster. cluded in original Medicare manuals
427
§ 422.101 42 CFR Ch. IV (10–1–17 Edition)
and instructions unless superseded by regional plan and is not subject to CMS
regulations in this part or related in- pre-approval.
structions; and (5) If an MA organization offering an
(3) Written coverage decisions of MA local plan elects to exercise the op-
local Medicare contractors with juris- tion in paragraph (b)(3) of this section
diction for claims in the geographic related to a local MA plan, or if an MA
area in which services are covered organization offering an MA regional
under the MA plan. If an MA plan cov- plan elects to exercise the option in
ers geographic areas encompassing paragraph (b)(4) of this section related
more than one local coverage policy to an MA regional plan, then the MA
area, the MA organization offering organization must make information
such an MA plan may elect to apply to on the selected local coverage policy
plan enrollees in all areas uniformly readily available, including through
the coverage policy that is the most the Internet, to enrollees and health
beneficial to MA enrollees. MA organi- care providers.
zations that elect this option must no- (c) MA organizations may elect to
tify CMS before selecting the area that furnish, as part of their Medicare cov-
has local coverage policies that are ered benefits, coverage of posthospital
most beneficial to enrollees as follows: SNF care as described in subparts C
(i) An MA organization electing to and D of this part, in the absence of the
adopt a uniform local coverage policy prior qualifying hospital stay that
for a plan or plans must notify CMS at would otherwise be required for cov-
least 60 days before the date specified erage of this care.
in § 422.254(a)(1), which is 60 days before (d) Special cost-sharing rules for MA re-
the date bid amounts are due for the gional plans. In addition to the require-
subsequent year. Such notice must ments in paragraph (a) through para-
identify the plan or plans and service graph (c) of this section, MA regional
area or services areas to which the uni- plans must provide for the following:
form local coverage policy or policies (1) Single deductible. MA regional and
will apply, the competing local cov- local PPO plans, to the extent they
erage policies involved, and a justifica- apply a deductible as follows:
tion explaining why the selected local (i) Must have a single deductible re-
coverage policy or policies are most lated to all in-network and out-of-net-
beneficial to MA enrollees. work Medicare Part A and Part B serv-
(ii) CMS will review notices provided ices.
under paragraph (b)(3)(i) of this sec- (ii) May specify separate deductible
tion, evaluate the selected local cov- amounts for specific in-network Medi-
erage policy or policies based on such care Part A and Part B services, to the
factors as cost, access, geographic dis- extent these deductible amounts apply
tribution of enrollees, and health sta- to the single deductible amount speci-
tus of enrollees, and notify the MA or- fied in paragraph (d)(1)(i) of this sec-
ganization of its approval or denial of tion.
the selected uniform local coverage (iii) May waive other plan-covered
policy or policies. items and services from the single de-
(4) Instead of applying rules in para- ductible described in paragraph (d)(1)(i)
graph (b)(3)(ii) of this section, and to of this section.
the extent it exercises this option, an (iv) Must waive all Medicare-covered
organization offering an MA regional preventive services (as defined in
plan in an MA region that covers more § 410.152(l)) from the single deductible
than one local coverage policy area described paragraph (d)(1)(i) of this sec-
must uniformly apply all of the local tion.
coverage policy determinations that (2) Catastrophic limit. MA regional
apply in the selected local coverage plans are required to establish a cata-
policy area in that MA region to all strophic limit on beneficiary out-of-
parts of that same MA region. The se- pocket expenditures for in-network
lection of the single local coverage pol- benefits under the Original Medicare
icy area’s local coverage policy deter- fee-for-service program (Part A and
minations to apply throughout the MA Part B benefits) that is no greater than
region is at the discretion of the MA the annual limit set by CMS.
428
(3) Total catastrophic limit. MA re- sive risk assessment tool that CMS will
gional plans are required to establish a review during oversight activities.
total catastrophic limit on beneficiary (ii) Develop and implement a com-
out-of-pocket expenditures for in-net- prehensive individualized plan of care
work and out-of-network benefits through an interdisciplinary care team
under the Original Medicare fee-for- in consultation with the beneficiary, as
service program. This total out-of- feasible, identifying goals and objec-
pocket catastrophic limit, which would tives including measurable outcomes
apply to both in-network and out-of- as well as specific services and benefits
network benefits under Original Medi- to be provided.
care, may be higher than the in-net-
(iii) Use an interdisciplinary team in
work catastrophic limit in paragraph
(d)(2) of this section, but may not in- the management of care.
crease the limit described in paragraph (2) MA organizations offering SNPs
(d)(2) of this section and may be no must also develop and implement the
greater than the annual limit set by following model of care components to
CMS. assure an effective management struc-
(4) Tracking of deductible and cata- ture:
strophic limits and notification. MA re- (i) Target one of the three SNP popu-
gional plans are required to track the lations defined in § 422.2 of this part.
deductible (if any) and catastrophic (ii) Have appropriate staff (employed,
limits in paragraphs (d)(1) through contracted, or non-contracted) trained
(d)(3) of this section based on incurred on the SNP plan model of care to co-
out-of-pocket beneficiary costs for ordinate and/or deliver all services and
original Medicare covered services, and benefits.
are also required to notify members (iii) Coordinate the delivery of care
and health care providers when the de- across healthcare settings, providers,
ductible (if any) or a limit has been and services to assure continuity of
reached.
care.
(e) Other rules for MA regional plans.
(1) MA regional plans are required to (iv) Coordinate the delivery of spe-
provide reimbursement for all covered cialized benefits and services that meet
benefits, regardless of whether those the needs of the most vulnerable bene-
benefits are provided within or outside ficiaries among the three target special
of the network of contracted providers. needs populations as defined in § 422.2
(2) In applying the actuarially equiv- of this part, including frail/disabled
alent level of cost-sharing with respect beneficiaries and beneficiaries near the
to MA bids related to benefits under end of life.
the original Medicare program option (v) Coordinate communication
as set forth at § 422.256(b)(3), only the among plan personnel, providers, and
catastrophic limit on out-of-pocket ex- beneficiaries.
penses for in-network benefits in para- (vi) All MAOs wishing to offer or con-
graph (d)(2) of this section will be tinue to offer a SNP will be required to
taken into account. be approved by the National Com-
(f) Special needs plan model of care. (1) mittee for Quality Assurance (NCQA)
MA organizations offering special effective January 1, 2012 and subse-
needs plans (SNP) must implement an quent years. All SNPs must submit
evidence-based model of care with ap- their model of care (MOC) to CMS for
propriate networks of providers and NCQA evaluation and approval in ac-
specialists designed to meet the spe-
cordance with CMS guidance.
cialized needs of the plan’s targeted en-
rollees. The MA organization must, [65 FR 40319, June 29, 2000, as amended at 68
with respect to each individual en- FR 50856, Aug. 22, 2003; 70 FR 4720, Jan. 28,
rolled— 2005; 70 FR 52026, Sept. 1, 2005; 70 FR 76197,
(i) Conduct a comprehensive initial Dec. 23, 2005; 73 FR 54248, Sept. 18, 2008; 74 FR
health risk assessment of the individ- 1541, Jan. 12, 2009; 76 FR 21562, Apr. 15, 2011;
ual’s physical, psychosocial, and func- 76 FR 54634, Sept. 1, 2011; 77 FR 22167, Apr. 12,
tional needs as well as annual health 2012]
risk reassessment, using a comprehen-
429
§ 422.102 42 CFR Ch. IV (10–1–17 Edition)
§ 422.102 Supplemental benefits. (1) Operated in the MA contract year

(a) Mandatory supplemental benefits. prior to the MA contract year for
(1) Subject to CMS approval, an MA or- which it is submitting its bid; and
ganization may require Medicare en- (2) Offers its enrollees such benefits
rollees of an MA plan (other than an without cost-sharing or additional pre-
MSA plan) to accept or pay for services mium charges.
in addition to Medicare-covered serv- [65 FR 40320, June 29, 2000, as amended at 70
ices described in § 422.101. FR 4720, Jan. 28, 2005; 77 FR 22167, Apr. 12,
(2) If the MA organization imposes 2012]
mandatory supplemental benefits, it
must impose them on all Medicare § 422.103 Benefits under an MA MSA
plan.
beneficiaries enrolled in the MA plan.
(3) CMS approves mandatory supple- (a) General rule. An MA organization
mental benefits if the benefits are de- offering an MA MSA plan must make
signed in accordance with CMS’ guide- available to an enrollee, or provide re-
lines and requirements as stated in this imbursement for, at least the services
part and other written instructions. described in § 422.101 after the enrollee
(4) Beginning in 2006, an MA plan incurs countable expenses equal to the
may reduce cost sharing below the ac- amount of the plan’s annual deduct-
tuarial value specified in section ible.
1854(e)(4)(A) of the Act only as a man- (b) Countable expenses. An MA organi-
datory supplemental benefit. zation offering an MA MSA plan must
(b) Optional supplemental benefits. Ex- count toward the annual deductible at
cept as provided in § 422.104 in the case least all amounts that would be paid
of MSA plans, each MA organization for the particular service under origi-
may offer (for election by the enrollee nal Medicare, including amounts that
and without regard to health status) would be paid by the enrollee as
services that are not included in the deductibles or coinsurance.
basic benefits as described in § 422.100(c) (c) Services after the deductible. For
and any mandatory supplemental bene- services received by the enrollee after
fits described in paragraph (a) of this the annual deductible is satisfied, an
section. Optional supplemental bene- MA organization offering an MA MSA
fits are purchased at the discretion of plan must pay, at a minimum, the less-
the enrollee and must be offered to all er of the following amounts:
Medicare beneficiaries enrolled in the (1) 100 percent of the expense of the
MA plan. services.
(c) Payment for supplemental services. (2) 100 percent of the amounts that
All supplemental benefits are paid for would have been paid for the services
in full, directly by (or on behalf of) the under original Medicare, including
enrollee of the MA plan. amounts that would be paid by the en-
(d) Marketing of supplemental benefits. rollee as deductibles and coinsurance.
MA organizations may offer enrollees a (d) Annual deductible. The annual de-
group of services as one optional sup- ductible for an MA MSA plan—
plemental benefit, offer services indi- (1) For contract year 1999, may not
vidually, or offer a combination of exceed $6,000; and
groups and individual services. (2) For subsequent contract years
(e) Supplemental benefits for certain may not exceed the deductible for the
dual eligible special needs plans. Subject preceding contract year, increased by
to CMS approval, dual eligible special the national per capita growth percent-
needs plans that meet a high standard age determined under § 422.306(a)(2).
of integration and minimum perform- (3) Is pro-rated for enrollments occur-
ance and quality-based standards may ring during a beneficiary’s initial cov-
offer additional supplemental benefits, erage election period as described at
consistent with the requirements of § 422.62(a)(1) of this part or during any
this part, where CMS finds that the of- other enrollments occurring after Jan-
fering of such benefits could better in- uary 1.
tegrate care for the dual eligible popu- (e) All MA organizations offering
lation provided that the special needs MSA plans must provide enrollees with
plan— available information on the cost and
430
quality of services in their service tional choice in obtaining specified

area, and submit to CMS for approval a health care services. The organization
proposed approach to providing such may offer a POS option—
information. (1) Before January 1, 2006, under a co-
[63 FR 35077, June 26, 1998, as amended at 70 ordinated care plan as an additional
FR 4720, Jan. 28, 2005; 70 FR 52026, Sept. 1, benefit as described in section
2005; 74 FR 1541, Jan. 12, 2009; 75 FR 19805, 1854(f)(1)(A) of the Act;
Apr. 15, 2010] (2) Under an HMO plan as a manda-
§ 422.104 Special rules on supple- tory supplemental benefit as described
mental benefits for MA MSA plans. in § 422.102(a); or
(3) Under an HMO plan as an optional
(a) An MA organization offering an
supplemental benefit as described in
MA MSA plan may not provide supple-
mental benefits that cover expenses § 422.102(b).
that count towards the deductible spec- (c) Ensuring availability and continuity
ified in § 422.103(d). of care. An MA HMO plan that includes
(b) In applying the limitation of a POS benefit must continue to provide
paragraph (a) of this section, the fol- all benefits and ensure access as re-
lowing kinds of policies are not consid- quired under this subpart.
ered as covering the deductible: (d) Enrollee information and disclosure.
(1) A policy that provides coverage The disclosure requirements specified
(whether through insurance or other- in § 422.111 apply in addition to the fol-
wise) for accidents, disability, dental lowing requirements:
care, vision care, or long-term care. (1) Written rules. MA organizations
(2) A policy of insurance in which must maintain written rules on how to
substantially all of the coverage re- obtain health benefits through the POS
lates to liabilities incurred under benefit.
workers’ compensation laws, tort li- (2) Evidence of coverage document. The
abilities, liabilities relating to use or
MA organization must provide to bene-
ownership of property, and any other
ficiaries enrolling in a plan with a POS
similar liabilities that CMS may speci-
benefit an ‘‘evidence of coverage’’ doc-
fy by regulation.
(3) A policy of insurance that pro- ument, or otherwise provide written
vides coverage for a specified disease or documentation, that specifies all costs
illness or pays a fixed amount per day and possible financial risks to the en-
(or other period) of hospitalization. rollee, including—
(i) Any premiums and cost-sharing
§ 422.105 Special rules for self-referral for which the enrollee is responsible;
and point of service option. (ii) Annual limits on benefits and on
(a) Self-referral. When an MA plan out-of-pocket expenditures;
member receives an item or service of (iii) Potential financial responsi-
the plan that is covered upon referral bility for services for which the plan
or pre-authorization from a contracted denies payment because they were not
provider of that plan, the member can- covered under the POS benefit, or ex-
not be financially liable for more than ceeded the dollar limit for the benefit;
the normal in-plan cost sharing, if the and
member correctly identified himself or (iv) The annual maximum out-of-
herself as a member of that plan to the
pocket expense an enrollee could incur.
contracted provider before receiving
the covered item or service, unless the (e) Prompt payment. Health benefits
contracted provider can show that the payable under the POS benefit are sub-
enrollee was notified prior to receiving ject to the prompt payment require-
the item or service that the item or ments in § 422.520.
service is covered only if further action (f) POS-related data. An MA organiza-
is taken by the enrollee. tion that offers a POS benefit through
(b) Point of service option. As a general an HMO plan must report enrollee uti-
rule, a POS benefit is an option that an lization data at the plan level by both
MA organization may offer in an HMO
plan to provide enrollees with addi-
431
§ 422.106 42 CFR Ch. IV (10–1–17 Edition)
plan contracting providers (in-net- (2) Payment of a portion or all of

work) and by non-contracting pro- other cost-sharing amounts approved
viders (out-of-network) including en- for the MA plan.
rollee use of the POS benefit, in the (3) Other employer-sponsored bene-
form and manner prescribed by CMS. fits that may require additional pre-
mium and cost-sharing, or other bene-
FR 40320, June 29, 2000; 70 FR 4721, Jan. 28,
fits provided by the organization under
2005; 75 FR 19805, Apr. 15, 2010] a contract with the State Medicaid
agency.
§ 422.106 Coordination of benefits with (c) Waiver or modification of contracts
employer or union group health with MA organizations. (1) MA organiza-
plans and Medicaid. tions may request, in writing, from
(a) General rule. If an MA organiza- CMS, a waiver or modification of those
tion contracts with an employer, labor requirements in this part that hinder
organization, or the trustees of a fund the design of, the offering of, or the en-
established by one or more employers rollment in, MA plans under contracts
between MA organizations and employ-
or labor organizations that cover en-
ers, labor organizations, or the trustees
rollees in an MA plan, or contracts
of funds established by one or more em-
with a State Medicaid agency to pro-
ployers or labor organizations to fur-
vide Medicaid benefits to individuals
nish benefits to the entity’s employees,
who are eligible for both Medicare and
former employees, or members or
Medicaid, and who are enrolled in an
former members of the labor organiza-
MA plan, the enrollees must be pro-
tions.
vided the same benefits as all other en-
(2) Approved waivers or modifications
rollees in the MA plan, with the em-
under this paragraph granted to any
ployer, labor organization, fund trust-
MA organization may be used by any
ees, or Medicaid benefits
other similarly situated MA organiza-
supplementing the MA plan benefits.
tion in developing its bid.
Jurisdiction regulating benefits under
these circumstances is as follows: (d) Employer sponsored MA plans for
plan years beginning on or after January
(1) All requirements of this part that
1, 2006. (1) CMS may waive or modify
apply to the MA program apply to the
any requirement in this part or Part D
MA plan coverage and benefits pro-
that hinders the design of, the offering
vided to enrollees eligible for benefits
of, or the enrollment in, an employer-
under an employer, labor organization,
sponsored group MA plan (including an
trustees of a fund established by one or MA–PD plan) offered by one or more
more employers or labor organizations, employers, labor organizations, or the
or Medicaid contract. trustees of a fund established by one or
(2) Employer benefits that com- more employers or labor organizations
plement an MA plan, which are not (or combination thereof), or that is of-
part of the MA plan, are not subject to fered, sponsored or administered by an
review or approval by CMS. entity on behalf of one or more em-
(3) Medicaid benefits are not re- ployers or labor organizations, to fur-
viewed under this part, but are subject nish benefits to the employers’ employ-
to appropriate CMS review under the ees, former employees (or combination
Medicaid program. MA plan benefits thereof) or members or former mem-
provided to individuals entitled to bers (or combination thereof) of the
Medicaid benefits provided by the MA labor organizations. Any entity seek-
organization under a contract with the ing to offer, sponsor, or administer
State Medicaid agency are subject to such an MA plan described in this para-
MA rules and requirements. graph may request, in writing, from
(b) Examples. Permissible employer, CMS, a waiver or modification of re-
labor organization, benefit fund trust- quirements in this part that hinder the
ee, or Medicaid plan benefits include design of, the offering of, or the enroll-
the following: ment in, such MA plan.

(1) Payment of a portion or all of the (2) An MA plan described in this
MA basic and supplemental premiums. paragraph may restrict the enrollment
432
of individuals in that plan to individ- Revenue Service Notice 2002–45, 2002–28

uals who are beneficiaries and partici- I.R.B. 93.
pants in that plan. (B) A health Flexible Spending Ar-
(3) Approved waivers or modifications rangement (FSA) as defined in Internal
under this paragraph granted to any Revenue Code (Code) section 106(c)(2).
MA plan may be used by any other (C) A health savings account (HSA)
similarly situated MA plan in devel- as defined in Code section 223.
oping its bid. (D) An Archer MSA as defined in
(4) An employer-sponsored group MA Code section 220, to the extent they are
plan means MA coverage offered to re- subject to ERISA as employee welfare
tirees who are Medicare eligible indi- benefit plans providing medical care
viduals under employment-based re- (or would be subject to ERISA but for
tiree health coverage, as defined in the exclusion in ERISA section 4(b), 29
paragraph (d)(5) of this section, ap- U.S.C.1003(b), for governmental plans
proved by CMS as an MA plan. or church plans).
(5) Employment-based retiree cov- [65 FR 40320, June 29, 2000, as amended at 68
erage means coverage of health care FR 50856, Aug. 22, 2003; 70 FR 4721, Jan. 28,
costs under a group health plan, as de- 2005; 76 FR 21562, Apr. 15, 2011]
fined in paragraph (d)(6) of this section,
based on an individual’s status as a re- § 422.107 Special needs plans and dual-
tired participant in the plan, or as the eligibles: Contract with State Med-
spouse or dependent of a retired partic- icaid Agency.
ipant. The term includes coverage pro- (a) Definition. For the purpose of this
vided by voluntary insurance coverage, section, a contract with a State Med-
or coverage as a result of a statutory icaid agency means a formal written
or contractual obligation. agreement between an MA organiza-
(6) Group health plans include plans tion and the State Medicaid agency
as defined in section 607(1) of ERISA, documenting each entity’s roles and re-
(29 U.S.C. 1167(1)). They also include sponsibilities with regard to dual-eligi-
the following plans: ble individuals.
(i) A Federal or State governmental (b) General rule. MA organizations
plan, which is a plan providing medical seeking to offer a special needs plan
care that is established or maintained serving beneficiaries eligible for both
for its employees by the Government of Medicare and Medicaid (dual-eligible)
the United States, by the government must have a contract with the State
of any State or political subdivision of Medicaid agency. The MA organization
a State (including a county or local retains responsibility under the con-
government), or by any agency or in- tract for providing benefits, or arrang-
strumentality or any of the foregoing, ing for benefits to be provided, for indi-
including a health benefits plan offered viduals entitled to receive medical as-
under 5 U.S.C. 89 (the Federal Em- sistance under title XIX. Such benefits
ployee Health Benefit Plan (FEHBP)). may include long-term care services
(ii) A collectively bargained plan, consistent with State policy.
which is a plan providing medical care (c) Minimum contract requirements. At
that is established or maintained under a minimum, the contract must docu-
or by one or more collective bargaining ment—
agreements. (1) The MA organization’s responsi-
(iii) A church plan, which is a plan bility, including financial obligations,
providing medical care that is estab- to provide or arrange for Medicaid ben-
lished and maintained for its employ- efits.
ees or their beneficiaries by a church (2) The category(ies) of eligibility for
or by a convention or association of dual-eligible beneficiaries to be en-
churches that is exempt from tax under rolled under the SNP, as described
section 501 of the Internal Revenue under the Statute at sections 1902(a),
Code of 1986 (26 U.S.C. 501). 1902(f), 1902(p), and 1905.
(iv) Any of the following plans: (3) The Medicaid benefits covered
(A) An account-based medical plan under the SNP.

such as a Health Reimbursement Ar- (4) The cost-sharing protections cov-
rangement (HRA) as defined in Internal ered under the SNP.
433
§ 422.108 42 CFR Ch. IV (10–1–17 Edition)
(5) The identification and sharing of from an MA organization covered serv-

information on Medicaid provider par- ices that are also covered under State
ticipation. or Federal workers’ compensation, any
(6) The verification of enrollee’s eli- no-fault insurance, or any liability in-
gibility for both Medicare and Med- surance policy or plan, including a self-
icaid. insured plan, the MA organization may
(7) The service area covered by the bill, or authorize a provider to bill any
SNP. of the following—
(8) The contract period for the SNP. (1) The insurance carrier, the em-
(d) Date of Compliance. (1) Effective ployer, or any other entity that is lia-
January 1, 2010— ble for payment for the services under
(i) MA organizations offering a new section 1862(b) of the Act and part 411
dual-eligible SNP must have a State of this chapter.
Medicaid agency contract. (2) The Medicare enrollee, to the ex-
(ii) Existing dual-eligible SNPs that tent that he or she has been paid by the
do not have a State Medicaid agency
carrier, employer, or entity for covered
contract—
medical expenses.
(A) May continue to operate through
the 2012 contract year provided they (e) Collecting from group health plans
meet all other statutory and regu- (GHPs) and large group health plans
latory requirements. (LGHPs). An MA organization may bill
(B) May not expand their service a GHP or LGHP for services it fur-
areas during contract years 2010 nishes to a Medicare enrollee who is
through 2012. also covered under the GHP or LGHP
(2) [Reserved] and may bill the Medicare enrollee to
the extent that he or she has been paid
[73 FR 54248, Sept. 18, 2008, as amended at 76 by the GHP or LGHP.
FR 21563, Apr. 15, 2011]
(f) MSP rules and State laws. Con-
§ 422.108 Medicare secondary payer sistent with § 422.402 concerning the
(MSP) procedures. Federal preemption of State law, the
rules established under this section su-
(a) Basic rule. CMS does not pay for
persede any State laws, regulations,
services to the extent that Medicare is
contract requirements, or other stand-
not the primary payer under section
ards that would otherwise apply to MA
1862(b) of the Act and part 411 of this
plans. A State cannot take away an
chapter.
MA organization’s right under Federal
(b) Responsibilities of the MA organiza-
law and the MSP regulations to bill, or
tion. The MA organization must, for
to authorize providers and suppliers to
each MA plan—
bill, for services for which Medicare is
(1) Identify payers that are primary
not the primary payer. The MA organi-
to Medicare under section 1862(b) of the
zation will exercise the same rights to
Act and part 411 of this chapter;
recover from a primary plan, entity, or
(2) Identify the amounts payable by
individual that the Secretary exercises
those payers; and
under the MSP regulations in subparts
(3) Coordinate its benefits to Medi-
B through D of part 411 of this chapter.
care enrollees with the benefits of the
primary payers, including reporting, on [63 FR 35077, June 26, 1998, as amended at 65
an ongoing basis, information obtained FR 40320, June 29, 2000; 70 FR 4721, Jan. 28,
related to requirements in paragraphs 2005; 75 FR 19805, Apr. 15, 2010]
(b)(1) and (b)(2) of this section in ac-
cordance with CMS instructions. § 422.109 Effect of national coverage
(c) Collecting from other entities. The determinations (NCDs) and legisla-
tive changes in benefits.
MA organization may bill, or authorize
a provider to bill, other individuals or (a) Definitions. The term significant
entities for covered Medicare services cost, as it relates to a particular NCD
for which Medicare is not the primary or legislative change in benefits, means
payer, as specified in paragraphs (d) either of the following:
and (e) of this section. (1) The average cost of furnishing a

(d) Collecting from other insurers or the single service exceeds a cost threshold
enrollee. If a Medicare enrollee receives that—
434
(i) For calendar years 1998 and 1999, is (i) Services necessary to diagnose a
$100,000; and condition covered by the NCD or legis-
(ii) For calendar year 2000 and subse- lative changes in benefits;
quent calendar years, is the preceding (ii) Most services furnished as follow-
year’s dollar threshold adjusted to re- up care to the NCD service or legisla-
flect the national per capita growth tive change in benefits;
percentage described in § 422.308(a). (iii) Any service that is already a
(2) The estimated cost of Medicare Medicare-covered service and included
services furnished as a result of a par- in the annual MA capitation rate or
previously adjusted payments; and
ticular NCD or legislative change in
(iv) Any services, including the costs
benefits represents at least 0.1 percent
of the NCD service or legislative
of the national average per capita change in benefits, to the extent the
costs. MA organization is already obligated
(b) General rule. If CMS determines to cover it as a supplemental benefit
and announces that an individual NCD under § 422.102.
or legislative change in benefits meets (3) Costs for significant cost NCD
the criteria for significant cost de- services or legislative changes in bene-
scribed in paragraph (a) of this section, fits for which CMS fiscal inter-
a MA organization is not required to mediaries and carriers will make pay-
assume risk for the costs of that serv- ment are those Medicare costs not list-
ice or benefit until the contract year ed in paragraphs (c)(2)(i) through
for which payments are appropriately (c)(2)(iv) of this section.
adjusted to take into account the cost (4) Beneficiaries are liable for any ap-
of the NCD service or legislative plicable coinsurance amounts.
change in benefits. If CMS determines (d) After payment adjustments become
that an NCD or legislative change in effective. For the contract year in
benefits does not meet the ‘‘significant which payment adjustments that take
cost’’ threshold described in § 422.109(a), into account the significant cost of the
the MA organization is required to pro- NCD service or legislative change in
vide coverage for the NCD or legisla- benefits are in effect, the service or
tive change in benefits and assume risk benefit is included in the MA organiza-
for the costs of that service or benefit tion’s contract with CMS, and is a cov-
as of the effective date stated in the ered benefit under the contract. Sub-
NCD or specified in the legislation. ject to all applicable rules under this
part, the MA organization must fur-
(c) Before payment adjustments become
nish, arrange, or pay for the NCD serv-
effective. Before the contract year that
ice or legislative change in benefits.
payment adjustments that take into MA organizations may establish sepa-
account the significant cost of the NCD rate plan rules for these services and
service or legislative change in benefits benefits, subject to CMS review and ap-
become effective, the service or benefit proval. CMS may, at its discretion,
is not included in the MA organiza- issue overriding instructions limiting
tion’s contract with CMS, and is not a or revising the MA plan rules, depend-
covered benefit under the contract. The ing on the specific NCD or legislative
following rules apply to these services change in benefits. For these services
or benefits: or benefits, the Medicare enrollee will
(1) Medicare payment for the service be responsible for MA plan cost shar-
or benefit is made directly by the fiscal ing, as approved by CMS or unless oth-
intermediary and carrier to the pro- erwise instructed by CMS.
vider furnishing the service or benefit
in accordance with original Medicare FR 4721, Jan. 28, 2005; 70 FR 52026, Sept. 1,
payment rules, methods, and require- 2005]
ments.
(2) Costs for NCD services or legisla- § 422.110 Discrimination against bene-
tive changes in benefits for which CMS ficiaries prohibited.
intermediaries and carriers will not (a) General prohibition. Except as pro-
make payment and are the responsi- vided in paragraph (b) of this section,
bility of the MA organization are— an MA organization may not deny,
435
§ 422.111 42 CFR Ch. IV (10–1–17 Edition)
limit, or condition the coverage or fur- (1) Service area. The MA plan’s service
nishing of benefits to individuals eligi- area and any enrollment continuation
ble to enroll in an MA plan offered by area.
the organization on the basis of any (2) Benefits. The benefits offered
factor that is related to health status, under a plan, including applicable con-
including, but not limited to the fol- ditions and limitations, premiums and
lowing: cost-sharing (such as copayments,
(1) Medical condition, including men- deductibles, and coinsurance) and any
tal as well as physical illness. other conditions associated with re-
(2) Claims experience. ceipt or use of benefits; and to the ex-
(3) Receipt of health care. tent it offers Part D as an MA-PD plan,
(4) Medical history. the information in § 423.128 of this
(5) Genetic information. chapter; and for purposes of
(6) Evidence of insurability, includ- comparison-
ing conditions arising out of acts of do- (i) The benefits offered under original
mestic violence. Medicare, including the content speci-
(7) Disability. fied in paragraph (f)(1) of this section;
(b) Exception. An MA organization (ii) For an MA MSA plan, the bene-
may not enroll an individual who has fits under other types of MA plans; and
been medically determined to have (iii) For a Special Needs Plan for
end-stage renal disease. However, an dual-eligible individuals, prior to en-
enrollee who develops end-stage renal rollment, for each prospective enrollee,
disease while enrolled in a particular a comprehensive written statement de-
MA organization may not be scribing cost sharing protections and
disenrolled for that reason. An indi- benefits that the individual is entitled
vidual who is an enrollee of a par-
to under title XVIII and the State Med-
ticular MA organization, and who re-
icaid program under title XIX.
sides in the MA plan service area at the
time he or she first becomes MA eligi- (iv) The availability of the Medicare
ble, or, an individual enrolled by an hospice option and any approved hos-
MA organization that allows those who pices in the service area, including
reside outside its MA service area to those the MA organization owns, con-
enroll in an MA plan as set forth at trols, or has a financial interest in.
§ 422.50(a)(3)(ii), then that individual is (3) Access. (i) The number, mix, and
considered to be ‘‘enrolled’’ in the MA distribution (addresses) of providers
organization for purposes of the pre- from whom enrollees may reasonably
ceding sentence. be expected to obtain services; any out-
of network coverage; any point-of-serv-
[63 FR 35077, June 26, 1998; 63 FR 52612, Oct. ice option, including the supplemental
1, 1998; 64 FR 7980, Feb. 17, 1999, as amended
at 65 FR 40321, June 29, 2000; 70 FR 4721, Jan.
premium for that option; and how the
28, 2005] MA organization meets the require-
ments of §§ 422.112 and 422.114 for access
§ 422.111 Disclosure requirements. to services offered under the plan.
(a) Detailed description. An MA orga- (ii) The process MA regional plan en-
nization must disclose the information rollees should follow to secure in-net-
specified in paragraph (b) of this sec- work cost sharing when covered serv-
tion— ices are not readily available from con-
(1) To each enrollee electing an MA tracted network providers.
plan it offers; (4) Out-of-area coverage provided
(2) In clear, accurate, and standard- under the plan, including coverage pro-
ized form; and vided to individuals eligible to enroll
(3) At the time of enrollment and at in the plan under § 422.50(a)(3)(ii).
least annually thereafter, 15 days be- (5) Emergency coverage. Coverage of
fore the annual coordinated election emergency services, including—
period. (i) Explanation of what constitutes
(b) Content of plan description. The de- an emergency, referencing the defini-
scription must include the following tions of emergency services and emer-
information: gency medical condition at § 422.113;
436
(ii) The appropriate use of emergency (2) The procedures the organization
services, stating that prior authoriza- uses to control utilization of services
tion cannot be required; and expenditures.
(iii) The process and procedures for (3) The number of disputes, and the
obtaining emergency services, includ- disposition in the aggregate, in a man-
ing use of the 911 telephone system or ner and form described by the Sec-
its local equivalent; and retary. Such disputes shall be cat-
(iv) The locations where emergency egorized as
care can be obtained and other loca- (i) Grievances according to § 422.564;
tions at which contracting physicians and
and hospitals provide emergency serv- (ii) Appeals according to § 422.578 et.
ices and post-stabilization care in- seq.
cluded in the MA plan. (4) A summary description of the
(6) Supplemental benefits. Any manda- method of compensation for physi-
tory or optional supplemental benefits cians.
and the premium for those benefits. (5) Financial condition of the MA or-
(7) Prior authorization and review ganization, including the most recently
rules. Prior authorization rules and audited information regarding, at
other review requirements that must least, a description of the financial
be met in order to ensure payment for condition of the MA organization offer-
the services. The MA organization ing the plan.
must instruct enrollees that, in cases (d) Changes in rules. If an MA organi-
where noncontracting providers submit zation intends to change its rules for
a bill directly to the enrollee, the en- an MA plan, it must:
rollee should not pay the bill, but sub- (1) Submit the changes for CMS re-
mit it to the MA organization for proc- view under procedures of subpart V of
essing and determination of enrollee li- this part.
ability, if any. (2) For changes that take effect on
(8) Grievance and appeals procedures. January 1, notify all enrollees at least
All grievance and appeals rights and 15 days before the beginning of the An-
procedures. nual Coordinated Election Period de-
fined in section 1851(e)(3)(B) of the Act.
(9) Quality improvement program. A de-
scription of the quality improvement (3) For all other changes, notify all
enrollees at least 30 days before the in-
program required under § 422.152.
tended effective date of the changes.
(10) Disenrollment rights and respon-
(e) Changes to provider network. The
sibilities.
MA organization must make a good
(11) Catastrophic caps and single de- faith effort to provide written notice of
ductible. MA organizations sponsoring a termination of a contracted provider
MA regional plans are required to pro- at least 30 calendar days before the ter-
vide enrollees a description of the cata- mination effective date to all enrollees
strophic stop-loss coverage and single who are patients seen on a regular
deductible (if any) applicable under the basis by the provider whose contract is
plan. terminating, irrespective of whether
(12) Claims information. CMS may re- the termination was for cause or with-
quire an MA organization to furnish di- out cause. When a contract termi-
rectly to enrollees, in the manner spec- nation involves a primary care profes-
ified by CMS and in a form easily un- sional, all enrollees who are patients of
derstandable to such enrollees, a writ- that primary care professional must be
ten explanation of benefits, when bene- notified.
fits are provided under this part. (f) Disclosable information—(1) Benefits
(c) Disclosure upon request. Upon re- under original Medicare. (i) Covered
quest of an individual eligible to elect services.
an MA plan, an MA organization must (ii) Beneficiary cost-sharing, such as
provide to the individual the following deductibles, coinsurance, and copay-
information: ment amounts.

(1) The information required in para- (iii) Any beneficiary liability for bal-
graph (f) of this section. ance billing.
437
§ 422.111 42 CFR Ch. IV (10–1–17 Edition)
(2) Enrollment procedures. Information (v) The recent record of plan compli-
and instructions on how to exercise ance with the requirements of this
election options under this subpart. part, as determined by the Secretary.
(3) Rights. A general description of (vi) Other performance indicators.
procedural rights (including grievance (9) Supplemental benefits. Whether the
and appeals procedures) under original plan offers mandatory and optional
Medicare and the MA program and the supplemental benefits, including any
right to be protected against discrimi- reductions in cost sharing offered as a
nation based on factors related to mandatory supplemental benefit as
health status in accordance with permitted under section 1852(a)(3) of
§ 422.110. the Act (and implementing regulations
(4) Potential for contract termination. at § 422.102) and the terms, conditions,
The fact that an MA organization may and premiums for those benefits.
terminate or refuse to renew its con- (10) The names, addresses, and phone
tract, or reduce the service area in-
numbers of contracted providers from
cluded in its contract, and the effect
whom the enrollee may obtain in-net-
that any of those actions may have on
work coverage in other parts of the
individuals enrolled in that organiza-
service area.
tion’s MA plan.
(11) If an MA organization exercises
(5) Benefits. (i) Covered services be-
yond those provided under original the option in § 422.101(b)(3) or (b)(4) re-
Medicare. lated to an MA plan, then it must
(ii) Any beneficiary cost-sharing. make the local coverage determination
that applies to members of that plan
(iii) Any maximum limitations on
readily available to providers, includ-
out-of-pocket expenses.
ing through a web site on the Internet.
(iv) In the case of an MA MSA plan,
the amount of the annual MSA deposit. (g) CMS may require an MA organiza-
tion to disclose to its enrollees or po-
(v) The extent to which an enrollee
may obtain benefits through out-of- tential enrollees, the MA organiza-
network health care providers. tion’s performance and contract com-
(vi) The types of providers that par- pliance deficiencies in a manner speci-
ticipate in the plan’s network and the fied by CMS.
extent to which an enrollee may select (h) Provision of specific information.
among those providers. Each MA organization must have
(vii) The coverage of emergency and mechanisms for providing specific in-
urgently needed services. formation on a timely basis to current
(6) Premiums. (i) The MA monthly and prospective enrollees upon request.
basic beneficiary premiums. These mechanisms must include all of
(ii) The MA monthly supplemental the following:
beneficiary premium. (1) A toll-free customer service call
(iii) The reduction in Part B pre- center that meets all of the following:
miums, if any. (i) Is open during usual business
(7) The plan’s service area. hours.
(8) Quality and performance indicators (ii) Provides customer telephone
for benefits under a plan to the extent service in accordance with standard
they are available as follows (and how business practices.
they compare with indicators under (iii) Provides interpreters for non-
original Medicare): English speaking and limited English
(i) Disenrollment rates for Medicare proficient (LEP) individuals.
enrollees for the 2 previous years, ex- (2) An Internet Web site that in-
cluding disenrollment due to death or cludes, at a minimum the following:
moving outside the plan’s service area, (i) The information required in para-
calculated according to CMS guide- graph (b) of this section.
lines. (ii) Copies of its evidence of coverage,
(ii) Medicare enrollee satisfaction. summary of benefits, and information

(iii) Health outcomes. (names, addresses, phone numbers, and
(iv) Plan-level appeal data. specialty) on the network of contracted
438
providers. Such posting does not re- for purposes of making the needed re-
lieve the MA organization of its referral or make other arrangements to
sponsibility under § 422.111(a) to provide ensure access to medically necessary
hard copies to enrollees. specialty care.
(3) The provision of information in (3) Specialty care. Provide or arrange
writing, upon request. for necessary specialty care, and in
(i) Provision of information required for particular give women enrollees the
access to covered services. MA plans option of direct access to a women’s
must issue and reissue (as appropriate) health specialist within the network
member identification cards that en- for women’s routine and preventive
rollees may use to access covered serv- health care services provided as basic
ices under the plan. The cards must benefits (as defined in § 422.2). The MA
comply with standards established by organization arranges for specialty
CMS. care outside of the plan provider net-
work when network providers are un-
FR 7980, Feb. 17, 1999; 65 FR 40321, June 29,
available or inadequate to meet an en-
2000; 68 FR 50857, Aug. 22, 2003; 70 FR 4722, rollee’s medical needs.
Jan. 28, 2005; 70 FR 52026, Sept. 1, 2005; 73 FR (4) Service area expansion. If seeking a
54220, 54249, Sept. 18, 2008; 75 FR 19805, Apr. service area expansion for an MA plan,
15, 2010; 76 FR 21563, Apr. 15, 2011; 77 FR 22167, demonstrate that the number and type
Apr. 12, 2012; 80 FR 7959, Feb. 12, 2015] of providers available to plan enrollees
are sufficient to meet projected needs
§ 422.112 Access to services. of the population to be served.
(a) Rules for coordinated care plans. An (5) Credentialed providers. Dem-
MA organization that offers an MA co- onstrate to CMS that its providers in
ordinated care plan may specify the an MA plan are credentialed through
networks of providers from whom en- the process set forth at § 422.204(a).
rollees may obtain services if the MA (6) Written standards. Establish writ-
organization ensures that all covered ten standards for the following:
services, including supplemental serv- (i) Timeliness of access to care and
ices contracted for by (or on behalf of) member services that meet or exceed
the Medicare enrollee, are available standards established by CMS. Timely
and accessible under the plan. To ac- access to care and member services
complish this, the MA organization within a plan’s provider network must
must meet the following requirements: be continuously monitored to ensure
(1) Provider network. (i) Maintain and compliance with these standards, and
monitor a network of appropriate pro- the MA organization must take correc-
viders that is supported by written tive action as necessary.
agreements and is sufficient to provide (ii) Policies and procedures (coverage
adequate access to covered services to rules, practice guidelines, payment
meet the needs of the population policies, and utilization management)
served. These providers are typically that allow for individual medical ne-
used in the network as primary care cessity determinations.
providers (PCPs), specialists, hospitals, (iii) Provider consideration of bene-
skilled nursing facilities, home health ficiary input into the provider’s pro-
agencies, ambulatory clinics, and other posed treatment plan.
providers. (7) Hours of operation. Ensure that—
(ii) Exception: MA regional plans, (i) The hours of operation of its MA
upon CMS pre-approval, can use meth- plan providers are convenient to the
ods other than written agreements to population served under the plan and
establish that access requirements are do not discriminate against Medicare
met. enrollees; and
(2) PCP panel. Establish a panel of (ii) Plan services are available 24
PCPs from which the enrollee may se- hours a day, 7 days a week, when medi-
lect a PCP. If an MA organization re- cally necessary.
quires its enrollees to obtain a referral (8) Cultural considerations. Ensure
in most situations before receiving that services are provided in a cul-

services from a specialist, the MA or- turally competent manner to all en-
ganization must either assign a PCP rollees, including those with limited
439
§ 422.112 42 CFR Ch. IV (10–1–17 Edition)
English proficiency or reading skills, (2) Offering to provide each enrollee

and diverse cultural and ethnic back- with an ongoing source of primary care
grounds. and providing a primary care source to
(9) Ambulance services, emergency and each enrollee who accepts the offer;
urgently needed services, and post-sta- (3) Programs for coordination of plan
bilization care services coverage. Provide services with community and social
coverage for ambulance services, emer- services generally available through
gency and urgently needed services, contracting or noncontracting pro-
and post-stabilization care services in viders in the area served by the MA
accordance with § 422.113. plan, including nursing home and com-
(10) Prevailing patterns of community
munity-based services; and
health care delivery. MA plans that
meet Medicare access and availability (4) Procedures to ensure that the MA
requirements through direct con- organization and its provider network
tracting network providers must do so have the information required for ef-
consistent with the prevailing commu- fective and continuous patient care and
nity pattern of health care delivery in quality review, including procedures to
the areas where the network is being ensure that—
offered. Factors making up community (i) The MA organization makes a
patterns of health care delivery that ‘‘best-effort’’ attempt to conduct an
CMS will use as a benchmark in evalu- initial assessment of each enrollee’s
ating a proposed MA plan health care health care needs, including following
delivery network include, but are not up on unsuccessful attempts to contact
limited to the following: an enrollee, within 90 days of the effec-
(i) The number and geographical dis- tive date of enrollment;
tribution of eligible health care pro- (ii) Each provider, supplier, and prac-
viders available to potentially contract titioner furnishing services to enroll-
with an MAO to furnish plan covered ees maintains an enrollee health record
services within the proposed service in accordance with standards estab-
area of the MA plans. lished by the MA organization, taking
(ii) The prevailing market conditions
into account professional standards;
in the service area of the MA plan. Spe-
and
cifically, the number and distribution
of health care providers contracting (iii) There is appropriate and con-
with other health care plans (both fidential exchange of information
commercial and Medicare) operating in among provider network components.
the service area of the plan. (5) Procedures to ensure that enroll-
(iii) Whether the service area is com- ees are informed of specific health care
prised of rural or urban areas or some needs that require follow-up and re-
combination of the two. ceive, as appropriate, training in self-
(iv) Whether the MA plan’s proposed care and other measures they may take
provider network meet Medicare time to promote their own health; and
and distance standards for member ac- (6) Systems to address barriers to en-
cess to health care providers including rollee compliance with prescribed
specialties. treatments or regimens.
(v) Other factors that CMS deter- (7) With respect to drugs for which
mines are relevant in setting a stand- payment as so prescribed and dispensed
ard for an acceptable health care deliv- or administered to an individual may
ery network in a particular service be available under Part A or Part B, or
area. under Part D, MA–PD plans must co-
(b) Continuity of care. MA organiza-
ordinate all benefits administered by
tions offering coordinated care plans
the plan and—
must ensure continuity of care and in-
tegration of services through arrange- (i) Establish and maintain a process
ments with contracted providers that to ensure timely and accurate point-of-
include— sale transactions; and
(1) Policies that specify under what (ii) Issue the determination and au-
circumstances services are coordinated thorize or provide the benefit under
and the methods for coordination; Part A or Part B or as a benefit under
440
Part D as expeditiously as the enroll- in which claims are received, as lim-

ee’s health condition requires, in ac- ited by the amounts specified in sec-
cordance with the requirements of sub- tion 1858(h)(3) of the Act.
part M of this part and subpart M of (7) If CMS determines the require-
part 423 of this chapter, as appropriate, ments in paragraphs (c)(1) through
when a party requests a coverage de- (c)(4) of this section have been met,
termination. (and if they continue to be met upon
(c) Essential hospital. An MA regional annual renewal of the CMS contract
plan may seek, upon application to with the MA organization offering the
CMS, to designate a noncontracting MA regional plan), then the hospital
hospital as an essential hospital as de- designated by the MA regional plan in
fined in section 1858(h) of the Act under paragraph (c)(1) of this section shall be
the following conditions:
‘‘deemed’’ to be a network hospital to
(1) The hospital that the MA regional
that MA regional plan based on the ex-
plan seeks to designate as essential is a
ception in paragraph (a)(1)(ii) of this
general acute care hospital identified
section and normal in-network inpa-
as a ‘‘subsection(d)’’ hospital as defined
in section 1886(d)(1)(B) of the Act. tient hospital cost sharing levels (in-
(2) The MA regional plan provides cluding the catastrophic limit de-
convincing evidence to CMS that the scribed in § 422.101(d)(2)) shall apply to
MA regional plan needs to contract all plan members accessing covered in-
with the hospital as a condition of patient hospital services in that hos-
meeting access requirements under pital.
this section. [64 FR 7980, Feb. 17, 1999, as amended at 65
(3) The MA regional plan must estab- FR 40321, June 29, 2000; 70 FR 4722, Jan. 28,
lish that it made a ‘‘good faith’’ effort 2005; 70 FR 76197, Dec. 23, 2005; 75 FR 19805,
to contract with the hospital to be des- Apr. 15, 2010; 76 FR 21563, Apr. 15, 2011; 80 FR
ignated as an essential hospital and 7959, Feb. 12, 2015]
that the hospital refused to contract
with it despite its ‘‘good faith’’ effort. § 422.113 Special rules for ambulance
A ‘‘good faith’’ effort to contract will services, emergency and urgently
be established to the extent that the needed services, and maintenance
MA regional plan can show it has of- and post-stabilization care services.
fered the hospital a contract providing (a) Ambulance services. The MA orga-
for the payment of rates in an amount nization is financially responsible for
no less than the amount the hospital ambulance services, including ambu-
would have received had payment been lance services dispatched through 911
made under section 1886(d) of the Act. or its local equivalent, where other
(4) The MA regional plan must estab- means of transportation would endan-
lish that there are no competing Medi- ger the beneficiary’s health.
care participating hospitals in the area (b) Emergency and urgently needed
to which MA regional plan enrollees services—(1) Definitions. (i) Emergency
could reasonably be referred for inpa- medical condition means a medical con-
tient hospital services. dition manifesting itself by acute
(5) The hospital that is an essential
symptoms of sufficient severity (in-
hospital under this paragraph provides
cluding severe pain) such that a pru-
convincing evidence to CMS that the
dent layperson, with an average knowl-
amounts normally payable under sec-
edge of health and medicine, could rea-
tion 1886 of the Act (and which the MA
regional plan has agreed to pay) will be sonably expect the absence of imme-
less than the hospital’s actual costs of diate medical attention to result in—
providing care to the MA regional (A) Serious jeopardy to the health of
plan’s enrollee. the individual or, in the case of a preg-
(6) If CMS determines the require- nant woman, the health of the woman
ments in paragraphs (c)(1) through or her unborn child;
(c)(5) of this section have been met, it (B) Serious impairment to bodily
will make payment to the essential functions; or

hospital in accordance with section (C) Serious dysfunction of any bodily
1858(h)(2) of the Act based on the order organ or part.
441
§ 422.113 42 CFR Ch. IV (10–1–17 Edition)
(ii) Emergency services means covered or she obtained the services through
inpatient and outpatient services that the MA organization, whichever is less.
are— (3) Stabilized condition. The physician
(A) Furnished by a provider qualified treating the enrollee must decide when
to furnish emergency services; and the enrollee may be considered sta-
(B) Needed to evaluate or stabilize an bilized for transfer or discharge, and
emergency medical condition. that decision is binding on the MA or-
(iii) Urgently needed services means ganization.
covered services that are not emer- (c) Maintenance care and post-sta-
gency services as defined in this sec- bilization care services (hereafter to-
tion, provided when an enrollee is tem- gether referred to as ‘‘post-stabiliza-
porarily absent from the MA plan’s tion care services’’).
service (or, if applicable, continuation) (1) Definition. Post-stabilization care
area (or provided when the enrollee is services means covered services, related
in the service or continuation area but to an emergency medical condition,
the organization’s provider network is that are provided after an enrollee is
temporarily unavailable or inacces- stabilized in order to maintain the sta-
sible) when the services are medically bilized condition, or, under the cir-
necessary and immediately required— cumstances described in paragraph
(A) As a result of an unforeseen ill- (c)(2)(iii) of this section, to improve or
ness, injury, or condition; and resolve the enrollee’s condition.
(B) It was not reasonable given the (2) MA organization financial responsi-
circumstances to obtain the services bility. The MA organization—
through the organization offering the (i) Is financially responsible (con-
MA plan. sistent with § 422.214) for post-stabiliza-
(2) MA organization financial responsi- tion care services obtained within or
bility. The MA organization is finan- outside the MA organization that are
cially responsible for emergency and pre-approved by a plan provider or
urgently needed services— other MA organization representative;
(i) Regardless of whether the services (ii) Is financially responsible for
are obtained within or outside the MA post-stabilization care services ob-
organization; tained within or outside the MA orga-
(ii) Regardless of whether there is nization that are not pre-approved by a
prior authorization for the services. plan provider or other MA organization
(A) Instructions to seek prior author- representative, but administered to
ization for emergency or urgently maintain the enrollee’s stabilized con-
needed services may not be included in dition within 1 hour of a request to the
any materials furnished to enrollees MA organization for pre-approval of
(including wallet card instructions), further post-stabilization care services;
and enrollees must be informed of their (iii) Is financially responsible for
right to call 911. post-stabilization care services ob-
(B) Instruction to seek prior author- tained within or outside the MA orga-
ization before the enrollee has been nization that are not pre-approved by a
stabilized may not be included in any plan provider or other MA organization
materials furnished to providers (in- representative, but administered to
cluding contracts with providers); maintain, improve, or resolve the en-
(iii) In accordance with the prudent rollee’s stabilized condition if—
layperson definition of emergency med- (A) The MA organization does not re-
ical condition regardless of final diag- spond to a request for pre-approval
nosis; within 1 hour;
(iv) For which a plan provider or (B) The MA organization cannot be
other MA organization representative contacted; or
instructs an enrollee to seek emer- (C) The MA organization representa-
gency services within or outside the tive and the treating physician cannot
plan; and reach an agreement concerning the en-
(v) With a limit on charges to enroll- rollee’s care and a plan physician is not
ees for emergency department services available for consultation. In this situ-
that CMS will determine annually, or ation, the MA organization must give
what it would charge the enrollee if he the treating physician the opportunity
442
to consult with a plan physician and (A) For plan year 2010 and subsequent
the treating physician may continue plan years, contracts or agreements
with care of the patient until a plan with a sufficient number and range of
physician is reached or one of the cri- providers to meet the access standards
teria in § 422.113(c)(3) is met; and described in section 1852(d)(1) of the
(iv) Must limit charges to enrollees Act.
for post-stabilization care services to (B) [Reserved]
an amount no greater than what the (iii) A combination of paragraphs
organization would charge the enrollee (a)(2)(i) and (a)(2)(ii) of this section.
if he or she had obtained the services (3) For plan year 2011 and subsequent
through the MA organization. For pur- plan years, an MA organization that of-
poses of cost sharing, post-stabilization fers an MA private fee-for-service plan
care services begin upon inpatient ad- (other than a plan described in section
mission. 1857(i)(1) or (2) of the Act) that is oper-
(3) End of MA organization’s financial ating in a network area (as defined in
responsibility. The MA organization’s fi- paragraph (a)(3)(i) of this section)
nancial responsibility for post-sta- meets the requirement in paragraph
bilization care services it has not pre- (a)(1) of this section only if the MA or-
approved ends when— ganization has contracts or agreements
(i) A plan physician with privileges with providers in accordance with
at the treating hospital assumes re- paragraph (a)(2)(ii)(A) of this section.
sponsibility for the enrollee’s care; (i) Network area is defined, for a
(ii) A plan physician assumes respon- given plan year, as the area that the
sibility for the enrollee’s care through Secretary identifies in the announce-
transfer; ment of the risk and other factors to be
(iii) An MA organization representa- used in adjusting MA capitation rates
tive and the treating physician reach for each MA payment area for the pre-
an agreement concerning the enrollee’s vious plan year as having at least 2
care; or network-based plans (as defined in
(iv) The enrollee is discharged. paragraph (a)(3)(ii) of this section) with
[65 FR 40322, June 29, 2000, as amended at 70 enrollment as of the first day of the
FR 4723, Jan. 28, 2005; 76 FR 21563, Apr. 15, year in which the announcement is
2011; 80 FR 7959, Feb. 12, 2015] made.
(ii) Network-based plan is defined as
§ 422.114 Access to services under an a coordinated care plan as described in
MA private fee-for-service plan. § 422.4(a)(1)(ii), a network-based MSA
(a) Sufficient access. (1) An MA organi- plan, or a section 1876 reasonable cost
zation that offers an MA private fee- plan. A network-based plan excludes a
for-service plan must demonstrate to MA regional plan that meets access re-
CMS that it has sufficient number and quirements substantially through the
range of providers willing to furnish authority of § 422.112(a)(1)(ii) instead of
services under the plan. written contracts.
(2) Subject to paragraphs (a)(3) and (4) For plan year 2011 and subsequent
(a)(4) of this section, CMS finds that an plan years, an MA organization that of-
MA organization meets the require- fers an MA private fee-for-service plan
ment in paragraph (a)(1) of this section that is described in section 1857(i)(1) or
if, with respect to a particular cat- (2) of the Act meets the requirement in
egory of health care providers, the MA paragraph (a)(1) of this section only if
organization has— the MA organization has contracts or
(i) Payment rates that are not less agreements with providers in accord-
than the rates that apply under origi- ance with paragraph (a)(2)(ii)(A) of this
nal Medicare for the provider in ques- section.
tion; (b) Freedom of choice. MA fee-for-serv-
(ii) Subject to paragraph (A) of sec- ice plans must permit enrollees to ob-
tion (a)(2)(ii), contracts or agreements tain services from any entity that is
with a sufficient number and range of authorized to provide services under
providers to furnish the services cov- Medicare Part A and Part B and agrees
ered under the MA private fee-for-serv- to provide services under the terms of
ice plan; or the plan.
443
§ 422.118 42 CFR Ch. IV (10–1–17 Edition)
(c) Contracted network. Private fee- (b) An MA organization must main-

for-service plans that meet network tain written policies and procedures
adequacy requirements for a category concerning advance directives with re-
of health care professional or provider spect to all adult individuals receiving
by meeting the requirements in para- medical care by or through the MA or-
graph (a)(2)(ii) of this section may pro- ganization.
vide for a higher beneficiary copay- (1) An MA organization must provide
ment in the case of health care profes- written information to those individ-
sionals or providers of that same cat- uals with respect to the following:
egory who do not have contracts or (i) Their rights under the law of the
agreements to provide covered services State in which the organization fur-
under the terms of the plan. nishes services (whether statutory or
recognized by the courts of the State)
FR 4723, Jan. 28, 2005; 73 FR 54249, Sept. 18, to make decisions concerning their
2008] medical care, including the right to ac-
cept or refuse medical or surgical
§ 422.118 Confidentiality and accuracy treatment and the right to formulate
of enrollee records. advance directives. Providers may con-
For any medical records or other tract with other entities to furnish this
health and enrollment information it information but remain legally respon-
maintains with respect to enrollees, an sible for ensuring that the require-
MA organization must establish proce- ments of this section are met. The in-
dures to do the following: formation must reflect changes in
(a) Abide by all Federal and State State law as soon as possible, but no
laws regarding confidentiality and dis- later than 90 days after the effective
closure of medical records, or other date of the State law.
health and enrollment information. (ii) The MA organization’s written
The MA organization must safeguard policies respecting the implementation
the privacy of any information that of those rights, including a clear and
identifies a particular enrollee and precise statement of limitation if the
have procedures that specify— MA organization cannot implement an
(1) For what purposes the informa- advance directive as a matter of con-
tion will be used within the organiza- science. At a minimum, this statement
tion; and must do the following:
(2) To whom and for what purposes it (A) Clarify any differences between
will disclose the information outside institution-wide conscientious objec-
the organization. tions and those that may be raised by
individual physicians.
(b) Ensure that medical information
(B) Identify the state legal authority
is released only in accordance with ap-
permitting such objection.
plicable Federal or State law, or pursu-
(C) Describe the range of medical
ant to court orders or subpoenas.
conditions or procedures affected by
(c) Maintain the records and informa-
the conscience objection.
tion in an accurate and timely manner.
(D) Provide the information specified
(d) Ensure timely access by enrollees
in paragraph (a)(1) of this section to
to the records and information that
each enrollee at the time of initial en-
pertain to them.
rollment. If an enrollee is incapaci-
[65 FR 40323, June 29, 2000] tated at the time of initial enrollment
and is unable to receive information
§ 422.128 Information on advance di- (due to the incapacitating condition or
rectives. a mental disorder) or articulate wheth-
(a) Each MA organization must main- er or not he or she has executed an ad-
tain written policies and procedures vance directive, the MA organization
that meet the requirements for ad- may give advance directive informa-
vance directives, as set forth in subpart tion to the enrollee’s family or surro-
I of part 489 of this chapter. For pur- gate in the same manner that it issues
poses of this part, advance directive has other materials about policies and pro-
the meaning given the term in § 489.100 cedures to the family of the incapaci-
of this chapter. tated enrollee or to a surrogate or
444
other concerned persons in accordance tive requirements may be filed with

with State law. The MA organization is the State survey and certification
not relieved of its obligation to provide agency.
this information to the enrollee once
he or she is no longer incapacitated or § 422.132 Protection against liability
unable to receive such information. and loss of benefits.
Follow-up procedures must be in place Enrollees of MA organizations are en-
to ensure that the information is given titled to the protections specified in
to the individual directly at the appro- § 422.504(g).
priate time.
(E) Document in a prominent part of [63 FR 35077, June 26, 1998, as amended at 70
FR 52026, Sept. 1, 2005]
the individual’s current medical record
whether or not the individual has exe- § 422.133 Return to home skilled nurs-
cuted an advance directive. ing facility.
(F) Not condition the provision of
care or otherwise discriminate against (a) General rule. MA plans must pro-
an individual based on whether or not vide coverage of posthospital extended
the individual has executed an advance care services to Medicare enrollees
directive. through a home skilled nursing facility
(G) Ensure compliance with require- if the enrollee elects to receive the cov-
ments of State law (whether statutory erage through the home skilled nursing
or recognized by the courts of the facility, and if the home skilled nurs-
State) regarding advance directives. ing facility either has a contract with
(H) Provide for education of staff the MA organization or agrees to ac-
concerning its policies and procedures cept substantially similar payment
on advance directives. under the same terms and conditions
(I) Provide for community education that apply to similar skilled nursing
regarding advance directives that may facilities that contract with the MA or-
include material required in paragraph ganization.
(a)(1)(i) of this section, either directly (b) Definitions. In this subpart, home
or in concert with other providers or skilled nursing facility means—
entities. Separate community edu- (1) The skilled nursing facility in
cation materials may be developed and which the enrollee resided at the time
used, at the discretion of the MA orga- of admission to the hospital preceding
nization. The same written materials the receipt of posthospital extended
are not required for all settings, but care services;
the material should define what con- (2) A skilled nursing facility that is
stitutes an advance directive, empha- providing posthospital extended care
sizing that an advance directive is de- services through a continuing care re-
signed to enhance an incapacitated in- tirement community in which the MA
dividual’s control over medical treat- plan enrollee was a resident at the
ment, and describe applicable State time of admission to the hospital. A
law concerning advance directives. An continuing care retirement community
MA organization must be able to docu- is an arrangement under which housing
ment its community education efforts. and health-related services are pro-
(2) The MA organization— vided (or arranged) through an organi-
(i) Is not required to provide care zation for the enrollee under an agree-
that conflicts with an advance direc- ment that is effective for the life of the
tive; and enrollee or for a specified period; or
(ii) Is not required to implement an (3) The skilled nursing facility in
advance directive if, as a matter of which the spouse of the enrollee is re-
conscience, the MA organization can- siding at the time of discharge from
not implement an advance directive the hospital.
and State law allows any health care (4) If an MA organization elects to
provider or any agent of the provider furnish SNF care in the absence of a
to conscientiously object. prior qualifying hospital stay under
(3) The MA organization must inform § 422.101(c), then that SNF care is also
individuals that complaints concerning subject to the home skilled nursing fa-
noncompliance with the advance direc- cility rules in this section. In applying
445
§ 422.134 42 CFR Ch. IV (10–1–17 Edition)
the provisions of this section to cov- (2) Must be designed so that all en-
erage under this paragraph, references rollees are able to earn rewards; and
to a hospitalization, or discharge from (3) Are subject to sanctions at
a hospital, are deemed to refer to wher- § 422.752(a)(4).
ever the enrollee resides immediately (c) Requirements. (1) A rewards and in-
before admission for extended care centives program must —
services. (i) Be offered in connection with the
(c) Coverage no less favorable. The entire service or activity;
posthospital extended care scope of (ii) Be offered to all eligible members
services, cost-sharing, and access to without discrimination;
coverage provided by the home skilled
(iii) Have a monetary cap as deter-
nursing facility must be no less favor-
mined by CMS of a value that may be
able to the enrollee than posthospital
expected to impact enrollee behavior
extended care services coverage that
but not exceed the value of the health
would be provided to the enrollee by a
skilled nursing facility that would be related service or activity itself; and
otherwise covered under the MA plan. (iv) Otherwise comply with all rel-
(d) Exceptions. The requirement to evant fraud and abuse laws, including,
allow an MA plan enrollee to elect to when applicable, the anti-kickback
return to the home skilled nursing fa- statute and civil money penalty pro-
cility for posthospital extended care hibiting inducements to beneficiaries.
services after discharge from the hos- (2) Reward and incentive items may
pital does not do the following: not—
(1) Require coverage through a (i) Be offered in the form of cash or
skilled nursing facility that is not oth- other monetary rebates; or
erwise qualified to provide benefits (ii) Be used to target potential en-
under Part A for Medicare beneficiaries rollees.
not enrolled in the MA plan. (3) The MA organization must make
(2) Prevent a skilled nursing facility information available to CMS upon re-
from refusing to accept, or imposing quest about the form and manner of
conditions on the acceptance of, an en- any rewards and incentives programs it
rollee for the receipt of posthospital offers and any evaluations of the effec-
extended care services. tiveness of such programs.
[68 FR 50857, Aug. 22, 2003, as amended at 70 [79 FR 29956, May 23, 2014]
FR 4723, Jan. 28, 2005]
§ 422.134 Reward and incentive pro- Subpart D—Quality Improvement

grams.
(a) General rule. The MA organization SOURCE: 63 FR 35082, June 26, 1998, unless
otherwise noted.
may create one or more programs con-
sistent with the standards of this sec- § 422.152 Quality improvement pro-
tion that provide rewards and incen- gram.
tives to enrollees in connection with
participation in activities that focus (a) General rule. Each MA organiza-
on promoting improved health, pre- tion that offers one or more MA plan
venting injuries and illness, and pro- must have, for each plan, an ongoing
moting efficient use of health care re- quality improvement program that
sources. meets applicable requirements of this
(b) Non-discrimination. Reward and in- section for the service it furnishes to
centive programs— its MA enrollees. As part of its ongoing
(1) Must not discriminate against en- quality improvement program, a plan
rollees based on race, national origin, must do all of the following:
including limited English proficiency, (1) Create a quality improvement
gender, disability, chronic disease, program plan that sufficiently outlines
whether a person resides or receives the elements of the plan’s quality im-
services in an institutional setting, provement program.

frailty, health status or other prohib- (2) Have a chronic care improvement
ited basis; program that meets the requirements
446
of paragraph (c) of this section con- quirements specified in paragraphs

cerning elements of a chronic care pro- (b)(1) through (b)(3) of this section.
gram and addresses populations identi- (5) All coordinated care contracts (in-
fied by CMS based on a review of cur- cluding local and regional PPOs, con-
rent quality performance. tracts with exclusively SNP benefit
(3) Conduct quality improvement packages, private fee-for-service con-
projects that can be expected to have a tracts, and MSA contracts), and all
favorable effect on health outcomes cost contracts under section 1876 of the
and enrollee satisfaction, meet the re- Act, with 600 or more enrollees in July
quirements of paragraph (d) of this sec- of the prior year, must contract with
tion, and address areas identified by approved Medicare Consumer Assess-
CMS. ment of Healthcare Providers and Sys-
(4) Encourage its providers to partici- tems (CAHPS) survey vendors to con-
pate in CMS and HHS quality improve- duct the Medicare CAHPS satisfaction
ment initiatives. survey of Medicare plan enrollees in
(b) Requirements for MA coordinated accordance with CMS specifications
care plans (except for regional MA plans) and submit the survey data to CMS.
and including local PPO plans that are (c) Chronic care improvement program
offered by organizations that are licensed requirements. (1) Develop criteria for a
or organized under State law as HMOs. chronic care improvement program.
An MA coordinated care plan’s (except These criteria must include the fol-
for regional PPO plans and local PPO lowing:
plans as defined in paragraph (e) of this (i) Methods for identifying MA en-
section) quality improvement program rollees with multiple or sufficiently se-
must— vere chronic conditions that would
benefit from participating in a chronic
(1) In processing requests for initial
care improvement program.
or continued authorization of services,
(ii) Mechanisms for monitoring MA
follow written policies and procedures
enrollees that are participating in the
that reflect current standards of med-
chronic improvement program and
ical practice.
evaluating participant outcomes such
(2) Have in effect mechanisms to de- as changes in health status.
tect both underutilization and over- (iii) Performance assessments that
utilization of services. use quality indicators that are objec-
(3) Measure and report performance. tive, clearly and unambiguously de-
The organization offering the plan fined, and based on current clinical
must do the following: knowledge or research.
(i) Measure performance under the (iv) Systematic and ongoing follow-
plan, using the measurement tools re- up on the effect of the program.
quired by CMS, and report its perform- (2) The organization must report the
ance to CMS. The standard measures status and results of each program to
may be specified in uniform data col- CMS as requested.
lection and reporting instruments re- (d) Quality improvement projects. (1)
quired by CMS. Quality improvement projects are an
(ii) Collect, analyze, and report qual- organization’s initiatives that focus on
ity performance data identified by specified clinical and nonclinical areas
CMS that are of the same type as those and that involve the following:
under paragraph (b)(3)(i) of this sec- (i) Measurement of performance.
tion. (ii) System interventions, including
(iii) Make available to CMS informa- the establishment or alteration of
tion on quality and outcomes measures practice guidelines.
that will enable beneficiaries to com- (iii) Improving performance.
pare health coverage options and select (iv) Systematic and periodic follow-
among them, as provided in § 422.64. up on the effect of the interventions.
(4) Special rule for MA local PPO- (2) For each project, the organization
type plans that are offered by an orga- must assess performance under the
nization that is licensed or organized plan using quality indicators that are—
under State law as a health mainte- (i) Objective, clearly and unambig-
nance organization must meet the re- uously defined, and based on current
447
§ 422.152 42 CFR Ch. IV (10–1–17 Edition)
clinical knowledge or health services (B) Have mechanisms to evaluate uti-

research; and lization of services and to inform en-
(ii) Capable of measuring outcomes rollees and providers of services of the
such as changes in health status, func- results of the evaluation.
tional status and enrollee satisfaction, (f) Requirements for all types of plans—
or valid proxies of those outcomes. (1) Health information. For all types of
(3) Performance assessment on the plans that it offers, an organization
selected indicators must be based on must—
systematic ongoing collection and (i) Maintain a health information
analysis of valid and reliable data. system that collects, analyzes, and in-
(4) Interventions must achieve de- tegrates the data necessary to imple-
monstrable improvement. ment its quality improvement pro-
(5) The organization must report the gram;
status and results of each project to (ii) Ensure that the information it re-
CMS as requested. ceives from providers of services is reli-
(e) Requirements for MA regional plans able and complete; and
and MA local plans that are PPO plans (iii) Make all collected information
as defined in this section—(1) Definition available to CMS.
of local preferred provider organization (2) Program review. For each plan,
plan. For purposes of this section, the there must be in effect a process for
term local preferred provider organiza- formal evaluation, at least annually, of
tion (PPO) plan means an MA plan the impact and effectiveness of its
that— quality improvement program.
(i) Has a network of providers that (3) Remedial action. For each plan, the
have agreed to a contractually speci- organization must correct all problems
fied reimbursement for covered bene- that come to its attention through in-
fits with the organization offering the ternal surveillance, complaints, or
plan; other mechanisms.
(ii) Provides for reimbursement for (g) Special requirements for specialized
all covered benefits regardless of MA plans for special needs individuals.
whether the benefits are provided with- All special needs plans (SNPs) must be
in the network of providers; and approved by the National Committee
(iii) Is offered by an organization for Quality Assurance (NCQA) effective
that is not licensed or organized under January 1, 2012 and subsequent years.
State law as a health maintenance or- SNPs must submit their model of care
ganization. (MOC), as defined under § 422.101(f), to
(2) MA organizations offering an MA CMS for NCQA evaluation and ap-
regional plan or local PPO plan as de- proval, in accordance with CMS guid-
fined in this section must: ance. In addition to the requirements
(i) Measure performance under the under paragraphs (a) and (f) of this sec-
plan using standard measures required tion, a SNP must conduct a quality im-
by CMS and report its performance to provement program that does the fol-
CMS. The standard measures may be lowing:
specified in uniform data collection (1) Provides for the collection, anal-
and reporting instruments required by ysis, and reporting of data that meas-
CMS. ures health outcomes and indices of
(ii) Collect, analyze, and report qual- quality pertaining to its targeted spe-
ity performance data identified by cial needs population (that is, dual-eli-
CMS that are of the same type as those gible, institutionalized, or chronic con-
described under paragraph (e)(2)(i) of dition) at the plan level.
this section. (2) Measures the effectiveness of its
(iii) Evaluate the continuity and co- model of care through the collection,
ordination of care furnished to enroll- aggregation, analysis, and reporting of
ees. data that demonstrate the following:
(iv) If the organization uses written (i) Access to care as evidenced by
protocols for utilization review, the or- measures from the care coordination
ganization must— domain (for example, service and ben-

(A) Base those protocols on current efit utilization rates, or timeliness of
standards of medical practice; and referrals or treatment).
448
(ii) Improvement in beneficiary savings account plans. MA PFFS and

health status as evidenced by measures MSA plans are subject to the require-
from functional, psychosocial, or clin- ment that may not exceed the require-
ical domains (for example, quality of ment specified in § 422.152(e).
life indicators, depression scales, or
chronic disease outcomes).
FR 52026, Sept. 1, 2005; 73 FR 54249, Sept. 18,
(iii) Staff implementation of the SNP 2008; 75 FR 19805, Apr. 15, 2010; 76 FR 21564,
model of care as evidenced by measures Apr. 15, 2011; 80 FR 7959, Feb. 12, 2015]
of care structure and process from the
continuity of care domain (for exam- § 422.153 Use of quality improvement
ple, National Committee for Quality organization review information.
Assurance accreditation measures or
CMS will acquire from quality im-
medication reconciliation associated
provement organizations (QIOs) as de-
with care setting transitions indica-
fined in part 475 of this chapter data
tors).
collected under section
(iv) Comprehensive health risk as-
1886(b)(3)(B)(viii) of the Act and subject
sessment as evidenced by measures
to the requirements in § 480.140(g). CMS
from the care coordination domain (for
will acquire this information, as need-
example, accuracy of acuity stratifica-
ed, and may use it for the following
tion, safety indicators, or timeliness of
functions:
initial assessments or annual reassess-
ments). (a) Enable beneficiaries to compare
(v) Implementation of an individual- health coverage options and select
ized plan of care as evidenced by meas- among them.
ures from functional, psychosocial, or (b) Evaluate plan performance.
clinical domains (for example, rate of (c) Ensure compliance with plan re-
participation by IDT members and quirements under this part.
beneficiaries in care planning). (d) Develop payment models.
(vi) A provider network having tar- (e) Other purposes related to MA
geted clinical expertise as evidenced by plans as specified by CMS.
measures from medication manage-
[76 FR 26546, May 6, 2011]
ment, disease management, or behav-
ioral health domains. § 422.156 Compliance deemed on the
(vii) Delivery of services across the basis of accreditation.
continuum of care.
(viii) Delivery of extra services and (a) General rule. An MA organization
benefits that meet the specialized is deemed to meet all of the require-
needs of the most vulnerable bene- ments of any of the areas described in
ficiaries as evidenced by measures from paragraph (b) of this section if—
the psychosocial, functional, and end- (1) The MA organization is fully ac-
of-life domains. credited (and periodically reaccredited)
(ix) Use of evidence-based practices for the standards related to the appli-
and nationally recognized clinical pro- cable area under paragraph (b) of this
tocols. section by a private, national accredi-
(x) Use of integrated systems of com- tation organization approved by CMS;
munication as evidenced by measures and
from the care coordination domain (for (2) The accreditation organization
example, call center utilization rates, used the standards approved by CMS
rates of beneficiary involvement in for the purposes of assessing the MA
care plan development, etc.). organization’s compliance with Medi-
(3) Makes available to CMS informa- care requirements.
tion on quality and outcomes measures (b) Deemable requirements. The re-
that will— quirements relating to the following
(i) Enable beneficiaries to compare areas are deemable:
health coverage options; and (1) Quality improvement. The deeming
(ii) Enable CMS to monitor the plan’s process should focus on evaluating and
model of care performance. assessing the overall quality improve-

(h) Requirements for MA private-fee- ment (QI) program. However, the qual-
for-service plans and Medicare medical ity improvement projects (QIPs) and
449
§ 422.157 42 CFR Ch. IV (10–1–17 Edition)
the chronic care improvement pro- alties, and terminate a contract with
grams (CCIPs) will be excluded from an MA organization.
the deeming process.
(2) Antidiscrimination. FR 40323, June 29, 2000; 65 FR 59749, Oct. 6,
(3) Access to services. 2000; 70 FR 4724, Jan. 28, 2005; 75 FR 19806,
(4) Confidentiality and accuracy of Apr. 15, 2010; 76 FR 21564, Apr. 15, 2011]
enrollee records.
(5) Information on advance direc- § 422.157 Accreditation organizations.
tives. (a) Conditions for approval. CMS may
(6) Provider participation rules. approve an accreditation organization
(7) The requirements listed in § 423.165 with respect to a given standard under
(b)(1) through (3) of this chapter for MA this part if it meets the following con-
organizations that offer prescription ditions:
drug benefit programs. (1) In accrediting MA organizations,
(c) Effective date of deemed status. The it applies and enforces standards that
date on which the organization is are at least as stringent as Medicare
deemed to meet the applicable require- requirements with respect to the
ments is the later of the following: standard or standards in question.
(1) The date on which the accredita- (2) It complies with the application
tion organization is approved by CMS. and reapplication procedures set forth
in § 422.158.
(2) The date the MA organization is
accredited by the accreditation organi- (3) It ensures that:
zation. (i) Any individual associated with it,
who is also associated with an entity it
(d) Obligations of deemed MA organiza-
accredits, does not influence the ac-
tions. An MA organization deemed to
creditation decision concerning that
meet Medicare requirements must—
entity.
(1) Submit to surveys by CMS to vali-
(ii) The majority of the membership
date its accreditation organization’s
of its governing body is not comprised
accreditation process; and of managed care organizations or their
(2) Authorize its accreditation orga- representatives.
nization to release to CMS a copy of its (iii) Its governing body has a broad
most recent accreditation survey, to- and balanced representation of inter-
gether with any survey-related infor- ests and acts without bias.
mation that CMS may require (includ- (b) Notice and comment—(1) Proposed
ing corrective action plans and sum- notice. CMS publishes a notice in the
maries of unmet CMS requirements). FEDERAL REGISTER whenever it is con-
(e) Removal of deemed status. CMS re- sidering granting an accreditation or-
moves part or all of an MA organiza- ganization’s application for approval.
tion’s deemed status for any of the fol- The notice—
lowing reasons: (i) Announces CMS’s receipt of the
(1) CMS determines, on the basis of accreditation organization’s applica-
its own investigation, that the MA or- tion for approval;
ganization does not meet the Medicare (ii) Describes the criteria CMS will
requirements for which deemed status use in evaluating the application; and
was granted. (iii) Provides at least a 30-day com-
(2) CMS withdraws its approval of the ment period.
accreditation organization that accred- (2) Final notice. (i) After reviewing
ited the MA organization. public comments, CMS publishes a
(3) The MA organization fails to meet final FEDERAL REGISTER notice indi-
the requirements of paragraph (d) of cating whether it has granted the ac-
this section. creditation organization’s request for
(f) Authority. Nothing in this subpart approval.
limits CMS’ authority under subparts (ii) If CMS grants the request, the
K and O of this part, including but not final notice specifies the effective date
limited to, the ability to impose inter- and the term of the approval, which
mediate sanctions, civil money pen- may not exceed 6 years.
450
(c) Ongoing responsibilities of an ap- (6) Provide, on an annual basis, sum-

proved accreditation organization. An ac- mary data specified by CMS that relate
creditation organization approved by to the past year’s accreditation activi-
CMS must undertake the following ac- ties and trends.
tivities on an ongoing basis: (d) Continuing Federal oversight of ap-
(1) Provide to CMS in written form proved accreditation organizations. This
and on a monthly basis all of the fol- paragraph establishes specific criteria
lowing: and procedures for continuing over-
(i) Copies of all accreditation sur- sight and for withdrawing approval of
veys, together with any survey-related an accreditation organization.
information that CMS may require (in- (1) Equivalency review. CMS compares
cluding corrective action plans and
the accreditation organization’s stand-
summaries of unmet CMS require-
ards and its application and enforce-
ments).
ment of those standards to the com-
(ii) Notice of all accreditation deci-
parable CMS requirements and proc-
sions.
esses when—
(iii) Notice of all complaints related
to deemed MA organizations. (i) CMS imposes new requirements or
(iv) Information about any MA orga- changes its survey process;
nization against which the accrediting (ii) An accreditation organization
organization has taken remedial or ad- proposes to adopt new standards or
verse action, including revocation, changes in its survey process; or
withdrawal or revision of the MA orga- (iii) The term of an accreditation or-
nization’s accreditation. (The accredi- ganization’s approval expires.
tation organization must provide this (2) Validation review. CMS or its agent
information within 30 days of taking may conduct a survey of an accredited
the remedial or adverse action.) organization, examine the results of
(v) Notice of any proposed changes in the accreditation organization’s own
its accreditation standards or require- survey, or attend the accreditation or-
ments or survey process. If the organi- ganization’s survey, in order to vali-
zation implements the changes before date the organization’s accreditation
or without CMS approval, CMS may process. At the conclusion of the re-
withdraw its approval of the accredita- view, CMS identifies any accreditation
tion organization. programs for which validation survey
(2) Within 30 days of a change in CMS results—
requirements, submit to CMS— (i) Indicate a 20 percent rate of dis-
(i) An acknowledgment of CMS’s no- parity between certification by the ac-
tification of the change; creditation organization and certifi-
(ii) A revised cross-walk reflecting cation by CMS or its agent on stand-
the new requirements; and ards that do not constitute immediate
(iii) An explanation of how the ac- jeopardy to patient health and safety if
creditation organization plans to alter unmet;
its standards to conform to CMS’s new
(ii) Indicate any disparity between
requirements, within the time-frames
certification by the accreditation orga-
specified in the notification of change
it receives from CMS. nization and certification by CMS or
(3) Permit its surveyors to serve as its agent on standards that constitute
witnesses if CMS takes an adverse ac- immediate jeopardy to patient health
tion based on accreditation findings. and safety if unmet; or
(4) Within 3 days of identifying, in an (iii) Indicate that, irrespective of the
accredited MA organization, a defi- rate of disparity, there are widespread
ciency that poses immediate jeopardy or systematic problems in an organiza-
to the organization’s enrollees or to tion’s accreditation process such that
the general public, give CMS written accreditation no longer provides assur-
notice of the deficiency. ance that the Medicare requirements
(5) Within 10 days of CMS’s notice of are met or exceeded.
withdrawal of approval, give written (3) Onsite observation. CMS may con-
notice of the withdrawal to all accred- duct an onsite inspection of the accred-
ited MA organizations. itation organization’s operations and
451
§ 422.158 42 CFR Ch. IV (10–1–17 Edition)
offices to verify the organization’s rep- mation and materials requested by

resentations and assess the organiza- CMS.)
tion’s compliance with its own policies (1) The types of MA plans that it
and procedures. The onsite inspection would review as part of its accredita-
may include, but is not limited to, re- tion process.
viewing documents, auditing meetings (2) A detailed comparison of the orga-
concerning the accreditation process, nization’s accreditation requirements
evaluating survey results or the ac- and standards with the Medicare re-
creditation status decision making quirements (for example, a crosswalk).
process, and interviewing the organiza- (3) Detailed information about the
tion’s staff. organization’s survey process, includ-
(4) Notice of intent to withdraw ap- ing—
proval. If an equivalency review, vali- (i) Frequency of surveys and whether
dation review, onsite observation, or surveys are announced or unan-
CMS’s daily experience with the ac- nounced.
creditation organization suggests that (ii) Copies of survey forms, and guide-
the accreditation organization is not lines and instructions to surveyors.
meeting the requirements of this sub- (iii) Descriptions of—
part, CMS gives the organization writ- (A) The survey review process and
ten notice of its intent to withdraw ap- the accreditation status decision mak-
proval. ing process;
(5) Withdrawal of approval. CMS may (B) The procedures used to notify ac-
withdraw its approval of an accredita- credited MA organizations of defi-
tion organization at any time if CMS ciencies and to monitor the correction
determines that— of those deficiencies; and
(C) The procedures used to enforce
(i) Deeming based on accreditation
compliance with accreditation require-
no longer guarantees that the MA or-
ments.
ganization meets the MA requirements,
(4) Detailed information about the in-
and failure to meet those requirements
dividuals who perform surveys for the
could jeopardize the health or safety of
accreditation organization, including—
Medicare enrollees and constitute a
(i) The size and composition of ac-
significant hazard to the public health;
creditation survey teams for each type
or
of plan reviewed as part of the accredi-
(ii) The accreditation organization
tation process;
has failed to meet its obligations under
(ii) The education and experience re-
this section or under § 422.156 or
quirements surveyors must meet;
§ 422.158.
(iii) The content and frequency of the
(6) Reconsideration of withdrawal of in-service training provided to survey
approval. An accreditation organization personnel;
dissatisfied with a determination to (iv) The evaluation systems used to
withdraw CMS approval may request a monitor the performance of individual
reconsideration of that determination surveyors and survey teams; and
in accordance with subpart D of part (v) The organization’s policies and
488 of this chapter. practice with respect to the participa-
[63 FR 35082, June 26, 1998, as amended at 65 tion, in surveys or in the accreditation
FR 40323, June 29, 2000; 65 FR 59749, Oct. 6, decision process by an individual who
2000] is professionally or financially affili-
ated with the entity being surveyed.
§ 422.158 Procedures for approval of (5) A description of the organization’s
accreditation as a basis for deeming data management and analysis system
compliance. with respect to its surveys and accredi-
(a) Required information and materials. tation decisions, including the kinds of
A private, national accreditation orga- reports, tables, and other displays gen-
nization applying for approval must erated by that system.
furnish to CMS all of the following in- (6) A description of the organization’s
formation and materials. (When re- procedures for responding to and inves-
applying for approval, the organization tigating complaints against accredited
need furnish only the particular infor- organizations, including policies and
452
procedures regarding coordination of ganization to provide the additional in-

these activities with appropriate li- formation.
censing bodies and ombudsmen pro- (d) Onsite visit. CMS may visit the ac-
grams. creditation organization’s offices to
(7) A description of the organization’s verify representations made by the or-
policies and procedures with respect to ganization in its application, includ-
the withholding or removal of accredi- ing, but not limited to, review of docu-
tation for failure to meet the accredi- ments, and interviews with the organi-
tation organization’s standards or re- zation’s staff.
quirements, and other actions the or- (e) Notice of determination. CMS gives
ganization takes in response to non- the accreditation organization, within
compliance with its standards and re- 210 days of receipt of its completed ap-
quirements. plication, a formal notice that—
(8) A description of all types (for ex- (1) States whether the request for ap-
ample, full, partial) and categories (for proval has been granted or denied;
example, provisional, conditional, tem- (2) Gives the rationale for any denial;
porary) of accreditation offered by the and
organization, the duration of each type (3) Describes the reconsideration and
and category of accreditation and a reapplication procedures.
statement identifying the types and (f) Withdrawal. An accreditation or-
categories that would serve as a basis ganization may withdraw its applica-
for accreditation if CMS approves the tion for approval at any time before it
accreditation organization. receives the formal notice specified in
(9) A list of all currently accredited paragraph (e) of this section.
MA organizations and the type, cat- (g) Reconsideration of adverse deter-
egory, and expiration date of the ac- mination. An accreditation organiza-
creditation held by each of them. tion that has received notice of denial
(10) A list of all full and partial ac- of its request for approval may request
creditation surveys scheduled to be reconsideration in accordance with
performed by the accreditation organi- subpart D of part 488 of this chapter.
zation as requested by CMS. (h) Request for approval following de-
(11) The name and address of each nial. (1) Except as provided in para-
person with an ownership or control in- graph (h)(2) of this section, an accredi-
tation organization that has received
terest in the accreditation organiza-
notice of denial of its request for ap-
tion.
proval may submit a new request if it—
(b) Required supporting documentation.
(i) Has revised its accreditation pro-
A private, national accreditation orga-
gram to correct the deficiencies on
nization applying or reapplying for ap-
which the denial was based;
proval must also submit the following
(ii) Can demonstrate that the MA or-
supporting documentation: ganizations that it has accredited meet
(1) A written presentation that dem- or exceed applicable Medicare require-
onstrates its ability to furnish CMS ments; and
with electronic data in CMS compat- (iii) Resubmits the application in its
ible format. entirety.
(2) A resource analysis that dem- (2) An accreditation organization
onstrates that its staffing, funding, and that has requested reconsideration of
other resources are adequate to per- CMS’s denial of its request for approval
form the required surveys and related may not submit a new request until
activities. the reconsideration is administratively
(3) A statement acknowledging that, final.
as a condition for approval, it agrees to
comply with the ongoing responsibility [63 FR 35082, June 26, 1998, as amended at 65
requirements of § 422.157(c). FR 40324, June 29, 2000]
(c) Additional information. If CMS de-
termines that it needs additional infor- Subpart E—Relationships With
mation for a determination to grant or Providers
deny the accreditation organization’s

request for approval, it notifies the or- SOURCE: 63 FR 35085, June 26, 1998, unless
ganization and allows time for the or- otherwise noted.
453
§ 422.200 42 CFR Ch. IV (10–1–17 Edition)
§ 422.200 Basis and scope. (ii) Consider the needs of the enrolled
This subpart is based on sections population;
1852(a)(1), (a)(2), (b)(2), (c)(2)(D), (j), and (iii) Are developed in consultation
(k) of the Act; section 1859(b)(2)(A) of with contracting physicians; and
the Act; and the general authority (iv) Are reviewed and updated peri-
under 1856(b) of the Act requiring the odically.
establishment of standards. It sets (2) The guidelines are communicated
forth the requirements and standards to providers and, as appropriate, to en-
for the MA organization’s relationships rollees.
with providers including physicians, (3) Decisions with respect to utiliza-
other health care professionals, insti- tion management, enrollee education,
tutional providers and suppliers, under coverage of services, and other areas in
contracts or arrangements or deemed which the guidelines apply are con-
contracts under MA private fee-for-
sistent with the guidelines.
service plans. This subpart also con-
tains some requirements that apply to (c) Subcontracted groups. An MA orga-
noncontracting providers. nization that operates an MA plan
through subcontracted physician
§ 422.202 Participation procedures. groups must provide that the participa-
(a) Notice and appeal rights. An MA tion procedures in this section apply
organization that operates a coordi- equally to physicians within those sub-
nated care plan or network MSA plan contracted groups.
must provide for the participation of (d) Suspension or termination of con-
individual physicians, and the manage- tract. An MA organization that oper-
ment and members of groups of physi- ates a coordinated care plan or net-
cians, through reasonable procedures work MSA plan providing benefits
that include the following: through contracting providers must
(1) Written notice of rules of partici- meet the following requirements:
pation including terms of payment, (1) Notice to physician. An MA organi-
credentialing, and other rules directly zation that suspends or terminates an
related to participation decisions. agreement under which the physician
(2) Written notice of material
provides services to MA plan enrollees
changes in participation rules before
must give the affected individual writ-
the changes are put into effect.
(3) Written notice of participation de- ten notice of the following:
cisions that are adverse to physicians. (i) The reasons for the action, includ-
(4) A process for appealing adverse ing, if relevant, the standards and
participation procedures, including the profiling data used to evaluate the phy-
right of physicians to present informa- sician and the numbers and mix of phy-
tion and their views on the decision. In sicians needed by the MA organization.
the case of termination or suspension (ii) The affected physician’s right to
of a provider contract by the MA orga- appeal the action and the process and
nization, this process must conform to timing for requesting a hearing.
the rules in § 422.202(d). (2) Composition of hearing panel. The
(b) Consultation. The MA organization MA organization must ensure that the
must establish a formal mechanism to majority of the hearing panel members
consult with the physicians who have are peers of the affected physician.
agreed to provide services under the (3) Notice to licensing or disciplinary
MA plan offered by the organization,
bodies. An MA organization that sus-
regarding the organization’s medical
pends or terminates a contract with a
policy, quality improvement programs
and medical management procedures physician because of deficiencies in the
and ensure that the following stand- quality of care must give written no-
ards are met: tice of that action to licensing or dis-
(1) Practice guidelines and utiliza- ciplinary bodies or to other appropriate
tion management guidelines— authorities.
(i) Are based on reasonable medical (4) Timeframes. An MA organization

evidence or a consensus of health care and a contracting provider must pro-
professionals in the particular field; vide at least 60 days written notice to
454
each other before terminating the con- rectness and completeness of the new
tract without cause. information; and
(iii) A process for consulting with
[64 FR 7981, Feb. 17, 1999, as amended at 65
contracting health care professionals
FR 40324, June 29, 2000; 68 FR 50857, Aug. 22,
2003; 70 FR 4724, Jan. 28, 2005] with respect to criteria for
credentialing and recredentialing.
§ 422.204 Provider selection and (3) Specifies that basic benefits must
credentialing. be provided through, or payments must
be made to, providers and suppliers
(a) General rule. An MA organization that meet applicable requirements of
must have written policies and proce- title XVIII and part A of title XI of the
dures for the selection and evaluation Act. In the case of providers meeting
of providers. These policies must con- the definition of ‘‘provider of services’’
form with the credential and in section 1861(u) of the Act, basic ben-
recredentialing requirements set forth efits may only be provided through
in paragraph (b) of this section and these providers if they have a provider
with the antidiscrimination provisions agreement with CMS permitting them
set forth in § 422.205. to provide services under original
(b) Basic requirements. An MA organi- Medicare.
zation must follow a documented proc- (4) Ensures compliance with the re-
ess with respect to providers and sup- quirements at § 422.752(a)(8) that pro-
pliers who have signed contracts or hibit employment or contracts with in-
participation agreements that— dividuals (or with an entity that em-
(1) For providers (other than physi- ploys or contracts with such an indi-
cians and other health care profes- vidual) excluded from participation
sionals) requires determination, and under Medicare and with the require-
redetermination at specified intervals, ments at § 422.220 regarding physicians
that each provider is— and practitioners who opt out of Medi-
(i) Licensed to operate in the State, care.
and in compliance with any other ap- (5) Ensures compliance with the pro-
plicable State or Federal requirements; vider and supplier enrollment require-
and ments at § 422.222.
(ii) Reviewed and approved by an ac-
crediting body, or meets the standards FR 47413, Sept. 12, 2001; 70 FR 4724, Jan. 28,
established by the organization itself; 2005; 81 FR 80556, Nov. 15, 2016]
(2) For physicians and other health
care professionals, including members § 422.205 Provider antidiscrimination
of physician groups, covers— rules.
(i) Initial credentialing that includes (a) General rule. Consistent with the
written application, verification of li- requirements of this section, the poli-
censure or certification from primary cies and procedures concerning pro-
sources, disciplinary status, eligibility vider selection and credentialing estab-
for payment under Medicare, and site lished under § 422.204, and with the re-
visits as appropriate. The application quirement under § 422.100(c) that all
must be signed and dated and include Medicare-covered services be available
an attestation by the applicant of the to MA plan enrollees, an MA organiza-
correctness and completeness of the ap- tion may select the practitioners that
plication and other information sub- participate in its plan provider net-
mitted in support of the application; works. In selecting these practitioners,
(ii) Recredentialing at least every 3 an MA organization may not discrimi-
years that updates information ob- nate, in terms of participation, reim-
tained during initial credentialing, bursement, or indemnification, against
considers performance indicators such any health care professional who is
as those collected through quality im- acting within the scope of his or her li-
provement programs, utilization man- cense or certification under State law,
agement systems, handling of griev- solely on the basis of the license or cer-
ances and appeals, enrollee satisfaction tification. If an MA organization de-

surveys, and other plan activities, and clines to include a given provider or
that includes an attestation of the cor- group of providers in its network, it
455
§ 422.206 42 CFR Ch. IV (10–1–17 Edition)
must furnish written notice to the ef- (b) Conscience protection. The general
fected provider(s) of the reason for the rule in paragraph (a) of this section
decision. does not require the MA plan to cover,
(b) Construction. The prohibition in furnish, or pay for a particular coun-
paragraph (a)(1) of this section does not seling or referral service if the MA or-
preclude any of the following by the ganization that offers the plan—
MA organization: (1) Objects to the provision of that
(1) Refusal to grant participation to service on moral or religious grounds;
health care professionals in excess of and
the number necessary to meet the (2) Through appropriate written
needs of the plan’s enrollees (except for means, makes available information on
MA private-fee-for-service plans, which these policies as follows:
may not refuse to contract on this (i) To CMS, with its application for a
basis). Medicare contract, within 10 days of
(2) Use of different reimbursement submitting its bid proposal or, for pol-
amounts for different specialties or for icy changes, in accordance with § 422.80
different practitioners in the same spe- (concerning approval of marketing ma-
cialty. terials and election forms) and with
(3) Implementation of measures de- § 422.111.
signed to maintain quality and control (ii) To prospective enrollees, before
costs consistent with its responsibil- or during enrollment.
ities. (iii) With respect to current enroll-
[65 FR 40324, June 29, 2000] ees, the organization is eligible for the
exception provided in paragraph (b)(1)
§ 422.206 Interference with health care of this section if it provides notice of
professionals’ advice to enrollees such change within 90 days after adopt-
prohibited. ing the policy at issue; however, under
(a) General rule. (1) An MA organiza- § 422.111(d), notice of such a change
tion may not prohibit or otherwise re- must be given in advance.
strict a health care professional, acting (c) Construction. Nothing in para-
within the lawful scope of practice, graph (b) of this section may be con-
from advising, or advocating on behalf strued to affect disclosure require-
of, an individual who is a patient and ments under State law or under the
enrolled under an MA plan about— Employee Retirement Income Security
(i) The patient’s health status, med- Act of 1974.
ical care, or treatment options (includ- (d) Sanctions. An MA organization
ing any alternative treatments that that violates the prohibition of para-
may be self-administered), including graph (a) of this section or the condi-
the provision of sufficient information tions in paragraph (b) of this section is
to the individual to provide an oppor- subject to intermediate sanctions
tunity to decide among all relevant under subpart O of this part.
treatment options; [63 FR 35085, June 26, 1998, as amended at 65
(ii) The risks, benefits, and con- FR 40325, June 29, 2000; 70 FR 52026, Sept. 1,
sequences of treatment or non-treat- 2005]
ment; or
(iii) The opportunity for the indi- § 422.208 Physician incentive plans: re-
vidual to refuse treatment and to ex- quirements and limitations.
press preferences about future treat- (a) Definitions. In this subpart, the
ment decisions. following definitions apply:
(2) Health care professionals must Bonus means a payment made to a
provide information regarding treat- physician or physician group beyond
ment options in a culturally-com- any salary, fee-for-service payments,
petent manner, including the option of capitation, or returned withhold.
no treatment. Health care profes- Capitation means a set dollar pay-
sionals must ensure that individuals ment per patient per unit of time (usu-
with disabilities have effective commu- ally per month) paid to a physician or
nications with participants throughout physician group to cover a specified set

the health system in making decisions of services and administrative costs
regarding treatment options. without regard to the actual number of
456
services provided. The services covered (b) Applicability. The requirements in

may include the physician’s own serv- this section apply to an MA organiza-
ices, referral services, or all medical tion and any of its subcontracting ar-
services. rangements that utilize a physician in-
Physician group means a partnership, centive plan in their payment arrange-
association, corporation, individual ments with individual physicians or
practice association, or other group of physician groups. Subcontracting ar-
physicians that distributes income rangements may include an inter-
from the practice among members. An mediate entity, which includes but is
individual practice association is de- not limited to, an individual practice
fined as a physician group for this sec- association that contracts with one or
tion only if it is composed of individual more physician groups or any other or-
physicians and has no subcontracts ganized group such as those specified in
with physician groups. § 422.4.
Physician incentive plan means any (c) Basic requirements. Any physician
compensation arrangement to pay a incentive plan operated by an MA orga-
physician or physician group that may nization must meet the following re-
directly or indirectly have the effect of quirements:
reducing or limiting the services pro- (1) The MA organization makes no
vided to any plan enrollee. specific payment, directly or indi-
Potential payments means the max- rectly, to a physician or physician
imum payments possible to physicians group as an inducement to reduce or
or physician groups including pay- limit medically necessary services fur-
ments for services they furnish di- nished to any particular enrollee. Indi-
rectly, and additional payments based rect payments may include offerings of
on use and costs of referral services, monetary value (such as stock options
such as withholds, bonuses, capitation, or waivers of debt) measured in the
or any other compensation to the phy- present or future.
sician or physician group. Bonuses and (2) If the physician incentive plan
other compensation that are not based places a physician or physician group
on use of referrals, such as quality of at substantial financial risk (as deter-
care furnished, patient satisfaction or mined under paragraph (d) of this sec-
committee participation, are not con- tion) for services that the physician or
sidered payments in the determination physician group does not furnish itself,
of substantial financial risk. the MA organization must assure that
Referral services means any specialty, all physicians and physician groups at
inpatient, outpatient, or laboratory substantial financial risk have either
services that a physician or physician aggregate or per-patient stop-loss pro-
group orders or arranges, but does not tection in accordance with paragraph
furnish directly. (f) of this section.
Risk threshold means the maximum (3) For all physician incentive plans,
risk, if the risk is based on referral the MA organization provides to CMS
services, to which a physician or physi- the information specified in § 422.210.
cian group may be exposed under a (d) Determination of substantial finan-
physician incentive plan without being cial risk—(1) Basis. Substantial finan-
at substantial financial risk. This is cial risk occurs when risk is based on
set at 25 percent risk. the use or costs of referral services,
Substantial financial risk, for purposes and that risk exceeds the risk thresh-
of this section, means risk for referral old. Payments based on other factors,
services that exceeds the risk thresh- such as quality of care furnished, are
old. not considered in this determination.
Withhold means a percentage of pay- (2) Risk threshold. The risk threshold
ments or set dollar amounts deducted is 25 percent of potential payments.
from a physician’s service fee, capita- (3) Arrangements that cause substantial
tion, or salary payment, and that may financial risk. The following incentive
or may not be returned to the physi- arrangements cause substantial finan-

cian, depending on specific predeter- cial risk within the meaning of this
mined factors. section, if the physician’s or physician
457
§ 422.208 42 CFR Ch. IV (10–1–17 Edition)
group’s patient panel size is not great- more than 25 percent of potential pay-
er than 25,000 patients, as shown in the ments.
table at paragraph (f)(2)(iii) of this sec- (e) Prohibition for private MA fee-for-
tion: service plans. An MA fee-for-service
(i) Withholds greater than 25 percent plan may not operate a physician in-
of potential payments. centive plan.
(ii) Withholds less than 25 percent of (f) Stop-loss protection requirements—
potential payments if the physician or (1) Basic rule. The MA organization
physician group is potentially liable must assure that all physicians and
for amounts exceeding 25 percent of po- physician groups at substantial finan-
tential payments. cial risk have either aggregate or per-
(iii) Bonuses that are greater than 33 patient stop-loss protection in accord-
percent of potential payments minus ance with the following requirements:
the bonus. (2) Specific requirements. (i) Aggregate
stop-loss protection must cover 90 per-
(iv) Withholds plus bonuses if the
cent of the costs of referral services
withholds plus bonuses equal more
that exceed 25 percent of potential pay-
than 25 percent of potential payments.
ments.
The threshold bonus percentage for a
(ii) For per-patient stop-loss protec-
particular withhold percentage may be
tion if the stop-loss protection pro-
calculated using the formula—With-
vided is on a per-patient basis, the
hold % = ¥0.75 (Bonus %) + 25%.
stop-loss limit (deductible) per patient
(v) Capitation arrangements, if— must be determined based on the size
(A) The difference between the max- of the patient panel and may be a com-
imum potential payments and the min- bined policy or consist of separate poli-
imum potential payments is more than cies for professional services and insti-
25 percent of the maximum potential tutional services. In determining pa-
payments; tient panel size, the patients may be
(B) The maximum and minimum po- pooled in accordance with paragraph
tential payments are not clearly ex- (g) of this section.
plained in the contract with the physi- (iii) Stop-loss protection must cover
cian or physician group. 90 percent of the costs of referral serv-
(vi) Any other incentive arrange- ices that exceed the per patient deduct-
ments that have the potential to hold a ible limit. The per-patient stop-loss de-
physician or physician group liable for ductible limits are as follows:
Single combined Separate institu- Separate profes-
Panel size deductible tional deductible sional deductible
1–1,000 ............................................................................................ $6,000 $10,000 $3,000

1,001–5,000 ..................................................................................... 30,000 40,000 10,000
5,001–8,000 ..................................................................................... 40,000 60,000 15,000
8,001–10,000 ................................................................................... 75,000 100,000 20,000
10,001–25,000 ................................................................................. 150,000 200,000 25,000
>25,000 ........................................................................................... (1) (1) (1)
1 None.
(g) Pooling of patients. Any entity (2) The physician or physician group
that meets the pooling conditions of is at risk for referral services with re-
this section may pool commercial, spect to each of the categories of pa-
Medicare, and Medicaid enrollees or tients being pooled.
the enrollees of several MA organiza- (3) The terms of the compensation ar-
tions with which a physician or physi- rangements permit the physician or
cian group has contracts. The condi- physician group to spread the risk
tions for pooling are as follows: across the categories of patients being
(1) It is otherwise consistent with the pooled.
relevant contracts governing the com- (4) The distribution of payments to
pensation arrangements for the physi- physicians from the risk pool is not
cian or physician group. calculated separately by patient cat-
egory.
458
(5) The terms of the risk borne by the ices furnished to a beneficiary enrolled
physician or physician group are com- in an MA coordinated care plan, an
parable for all categories of patients MSA plan, or an MA private fee-for-
being pooled. service plan must accept, as payment
(h) Sanctions. An MA organization in full, the amounts that the provider
that fails to comply with the require- could collect if the beneficiary were en-
ments of this section is subject to in- rolled in original Medicare.
termediate sanctions under subpart O (2) Any statutory provisions (includ-
of this part. ing penalty provisions) that apply to
[63 FR 35085, June 26, 1998, as amended at 65 payment for services furnished to a
FR 40325, June 29, 2000; 70 FR 4724, Jan. 28, beneficiary not enrolled in an MA plan
2005; 70 FR 52026, Sept. 1, 2005] also apply to the payment described in
§ 422.210 Assurances to CMS. paragraph (a)(1) of this section.
(b) Services furnished by section
(a) Assurances to CMS. Each organi- 1861(u) providers of service. Any pro-
zation will provide assurance satisfac-
vider of services as defined in section
tory to the Secretary that the require-
1861(u) of the Act that does not have in
ments of § 422.208 are met.
(b) Disclosure to Medicare Bene- effect a contract establishing payment
ficiaries. Each MA organization must amounts for services furnished to a
provide the following information to beneficiary enrolled in an MA coordi-
any Medicare beneficiary who requests nated care plan, an MSA plan, or an
it: MA private fee-for-service plan must
(1) Whether the MA organization uses accept, as payment in full, the
a physician incentive plan that affects amounts (less any payments under
the use of referral services. §§ 412.105(g) and 413.76 of this chapter)
(2) The type of incentive arrange- that it could collect if the beneficiary
ment. were enrolled in original Medicare.
(3) Whether stop-loss protection is (Section 412.105(g) concerns indirect
provided. medical education payment to hos-
[70 FR 52026, Sept. 1, 2005] pitals for managed care enrollees. Sec-
tion 413.76 concerns calculating pay-
§ 422.212 Limitations on provider in- ment for direct medical education
demnification. costs.)
An MA organization may not con- (c) Deemed request for Medicare pay-
tract or otherwise provide, directly or ment rate. A noncontract section 1861(u)
indirectly, for any of the following in- of the Act provider of services that fur-
dividuals, organizations, or entities to nishes services to MA enrollees and
indemnify the organization against any submits the same information that it
civil liability for damage caused to an would submit for payment under Origi-
enrollee as a result of the MA organiza- nal Medicare is deemed to be seeking
tion’s denial of medically necessary to be paid the amount it would be paid
care: under Original Medicare unless the pro-
(a) A physician or health care profes- vider expressly notifies the MA organi-
sional. zation in writing that it is billing an
(b) Provider of services. amount less than such amount.
(c) Other entity providing health care
(d) Regional PPO payments in non-net-
services.
work areas. An MA Regional PPO must
(d) Group of such professionals, pro-
pay non-contract providers the Origi-
viders, or entities.
nal Medicare payment rate in those
§ 422.214 Special rules for services fur- portions of its service area where it is
nished by noncontract providers. providing access to services by non-
(a) Services furnished by non-section network means under § 422.111(b)(3)(ii)
1861(u) providers. (1) Any provider of this part.
(other than a provider of services as de- [63 FR 35085, June 26, 1998, as amended at 65
fined in section 1861(u) of the Act) that FR 40325, June 29, 2000; 70 FR 4724, Jan. 28,
does not have in effect a contract es- 2005; 70 FR 47490, Aug. 12, 2005; 76 FR 21564,
tablishing payment amounts for serv- Apr. 15, 2011]
459
§ 422.216 42 CFR Ch. IV (10–1–17 Edition)
§ 422.216 Special rules for MA private same for ‘‘deemed’’ contract providers
fee-for-service plans. as for those that have signed contracts
(a) Payment to providers—(1) Payment in effect, unless access requirements
rate. (i) The MA organization must es- with respect to a particular category of
tablish payment rates for plan covered health care providers are met solely
items and services that apply to through § 422.114(a)(2)(ii) and the MA
deemed providers. The MA organiza- organization imposes higher bene-
tion may vary payment rates for pro- ficiary copayments as permitted under
viders in accordance with § 422.4(a)(3). § 422.114(c).
(ii) Providers must be reimbursed on (iv) The MA organization is subject
a fee-for-service basis. to intermediate sanctions under
(iii) The MA organization must make § 422.752(a)(7), under the rules in sub-
information on its payment rates part O of this part, if it fails to enforce
available to providers that furnish the limit specified in paragraph (b)(1)(i)
services that may be covered under the of this section.
MA private fee-for-service plan. (2) Noncontract providers. A noncon-
(2) Noncontract providers. The organi- tract provider may not collect from an
zation pays for services of noncontract enrollee more than the cost-sharing es-
providers in accordance with tablished by the MA private fee-for-
§ 422.100(b)(2). service plan as specified in
(3) Services furnished by providers of § 422.256(b)(3), unless the provider has
service. Any provider of services as de- opted out of Medicare as described in
fined in section 1861(u) of the Act that part 405, subpart D of this chapter.
does not have in effect a contract es- (c) Enforcement of limit—(1) Contract
tablishing payment amounts for serv- providers. An MA organization that of-
ices furnished to a beneficiary enrolled fers an MA fee-for-service plan must
in an MA private fee-for-service plan enforce the limit specified in paragraph
must receive, and accept as payment in (b)(1) of this section.
full, at least the amount (less any pay- (2) Noncontract providers. An MA orga-
ments under §§ 412.105(g) and 413.76 of nization that offers an MA private fee-
this chapter) that it could collect if the for-service plan must monitor the
beneficiary were enrolled in original amount collected by noncontract pro-
Medicare. viders to ensure that those amounts do
(b) Charges to enrollees—(1) Contract not exceed the amounts permitted to
providers (i) Contract providers and be collected under paragraph (b)(2) of
‘‘deemed’’ contract providers may this section, unless the provider has
charge enrollees no more than the cost- opted out of Medicare as described in
sharing and, subject to the limit in part 405, subpart D of this chapter. The
paragraph (b)(1)(ii) of this section, bal- MA organization must develop and doc-
ance billing amounts that are per- ument violations specified in instruc-
mitted under the plan, and these tions and must forward documented
amounts must be the same for cases to CMS.
‘‘deemed’’ contract providers as for (d) Information on enrollee liability—(1)
those that have signed contracts in ef- General information. An MA organiza-
fect, unless access requirements with tion that offers an MA private fee-for-
respect to a particular category of service plan must provide to plan en-
health care providers are met solely rollees, an appropriate explanation of
through § 422.114(a)(2)(ii) and the MA benefits consistent with the require-
organization imposes higher bene- ments of § 422.111(b)(12).
ficiary copayments as permitted under (2) Advance notice for hospital services.
§ 422.114(c). In its terms and conditions of payment
(ii) The organization may permit bal- to hospitals, the MA organization must
ance billing no greater than 15 percent require the hospital, if it imposes bal-
of the payment rate established under ance billing, to provide to the enrollee,
paragraph (a)(1) of this section. before furnishing any services for
(iii) The MA organization must speci- which balance billing could amount to
fy the amount of cost-sharing and bal- not less than $500—

ance billing in its contracts with pro- (i) Notice that balance billing is per-
viders and these amounts must be the mitted for those services;
460
(ii) A good faith estimate of the like- (h) Information on payment terms and
ly amount of balance billing, based on conditions. Information on payment
the enrollees presenting condition; and terms and conditions was made avail-
(iii) The amount of any deductible, able through either of the following
coinsurance, and copayment that may methods:
be due in addition to the balance bill- (1) The MA organization used postal
ing amount. service, electronic mail, FAX, or tele-
(e) Coverage determinations. The MA phone to communicate the information
organization must make coverage de- to one of the following:
terminations in accordance with sub- (i) The provider.
part M of this part. (ii) The employer or billing agent of
(f) Rules describing deemed contract the provider.
providers. Any provider furnishing
(iii) A partnership of which the pro-
health services, except for emergency
vider is a member.
services furnished in a hospital pursu-
ant to § 489.24 of this chapter, to an en- (iv) Any party to which the provider
rollee in an MA private fee-for-service makes assignment or reassigns bene-
plan, and who has not previously en- fits.
tered into a contract or agreement to (2) The MA organization has in effect
furnish services under the plan, is a procedure under which—
treated as having a contract in effect (i) Any provider furnishing services
and is subject to the limitations of this to an enrollee in an MA private fee-for-
section that apply to contract pro- service plan, and who has not pre-
viders if the following conditions are viously entered into a contract or
met: agreement to furnish services under
(1) The services are covered under the the plan, can receive instructions on
plan and are furnished— how to request the payment informa-
(i) To an enrollee of an MA fee-for- tion;
service plan; and (ii) The organization responds to the
(ii) Provided by a provider including request before the entity furnishes the
a provider of services (as defined in sec- service; and
tion 1861(u) of the Act) that does not (iii) The information the organiza-
have in effect a signed contract with tion provides includes the following:
the MA organization. (A) Billing procedures.
(2) Before furnishing the services, the (B) The amount the organization will
provider—
pay towards the service.
(i) Was informed of the individual’s
(C) The amount the provider is per-
enrollment in the plan; and
mitted to collect from the enrollee.
(ii) Was informed (or given a reason-
(D) The information described in
able opportunity to obtain informa-
tion) about the terms and conditions of § 422.202(a)(1).
payment under the plan, including the (3) Announcements in newspapers,
information described in § 422.202(a)(1). journals, or magazines or on radio or
(3) The information was provided in a television are not considered commu-
manner that was reasonably designed nication of the terms and conditions of
to effect informed agreement and met payment.
the requirements of paragraphs (g) and (i) Provider credential requirements.
(h) of this section. Contracts with providers must provide
(g) Enrollment information. Enroll- that, in order to be paid to provide
ment information was provided by one services to plan enrollees, providers
of the following methods or a similar must meet the requirements specified
method: in §§ 422.204(b)(1)(i) and (b)(3).
(1) Presentation of an enrollment
card or other document attesting to FR 40325, June 29, 2000; 70 FR 52056, Sept. 1,
enrollment. 2005; 70 FR 47490, Aug. 12, 2005; 70 FR 76197,
(2) Notice of enrollment from CMS, a Dec. 23, 2005; 73 FR 54250, Sept. 18, 2008; 77 FR
Medicare intermediary or carrier, or 22167, Apr. 12, 2012]
the MA organization itself.
461
§ 422.220 42 CFR Ch. IV (10–1–17 Edition)
§ 422.220 Exclusion of services fur- § 422.224 Payment to providers or sup-

nished under a private contract. pliers excluded or revoked.
An MA organization may not pay, di- (a) An MA organization may not pay,
rectly or indirectly, on any basis, for directly or indirectly, on any basis, for
services (other than emergency or ur- items or services (other than emer-
gently needed services as defined in gency and urgently needed services as
§ 422.2) furnished to a Medicare enrollee defined in § 422.113) furnished to a Medi-
by a physician (as defined in section care enrollee by any individual or enti-
1861(r)(1) of the Act) or other practi- ty that is excluded by the Office of the
tioner (as defined in section Inspector General (OIG) or is revoked
1842(b)(18)(C) of the Act) who has filed from the Medicare program except as
with the Medicare carrier an affidavit provided.
promising to furnish Medicare-covered (b) If an MA organization receives a
services to Medicare beneficiaries only request for payment by, or on behalf of,
through private contracts under sec- an individual or entity that is excluded
tion 1802(b) of the Act with the bene- by the OIG or is revoked in the Medi-
ficiaries. An MA organization must pay care program, the MA organization
for emergency or urgently needed serv- must notify the enrollee and the ex-
ices furnished by a physician or practi- cluded or revoked individual or entity
tioner who has not signed a private in writing, as directed by contract or
contract with the beneficiary. other direction provided by CMS, that
payments will not be made. Payment
§ 422.222 Enrollment of MA organiza- may not be made to, or on behalf of, an
tion network providers and sup- individual or entity that is excluded by
pliers; first-tier, downstream, and the OIG or is revoked in the Medicare
related entities (FDRs); cost HMO program.
or CMP, and demonstration and
pilot programs. [81 FR 80556, Nov. 15, 2016]
(a) Providers or suppliers that are
types of individuals or entities that Subpart F—Submission of Bids,
can enroll in Medicare in accordance Premiums, and Related Infor-
with section 1861 of the Act, must be mation and Plan Approval
enrolled in Medicare and be in an ap-
proved status in Medicare in order to SOURCE: 70 FR 4725, Jan. 28, 2005, unless
provide health care items or services to otherwise noted.
a Medicare enrollee who receives his or
her Medicare benefit through an MA § 422.250 Basis and scope.
organization. This requirement applies This subpart is based largely on sec-
to all of the following providers and tion 1854 of the Act, but also includes
suppliers: provisions from sections 1853 and 1858
(1) Network providers and suppliers. of the Act, and is also based on section
(2) First-tier, downstream, and re- 1106 of the Act. It sets forth the re-
lated entities (FDR). quirements for the Medicare Advan-
(3) Providers and suppliers in Cost tage bidding payment methodology, in-
HMOs or CMPs, as defined in 42 CFR cluding CMS’ calculation of bench-
part 417. marks, submission of plan bids by
(4) Providers and suppliers partici- Medicare Advantage (MA) organiza-
pating in demonstration programs. tions, establishment of beneficiary pre-
(5) Providers and suppliers in pilot miums and rebates through comparison
programs. of plan bids and benchmarks, negotia-
(6) Locum tenens suppliers. tion and approval of bids by CMS, and
(7) Incident-to suppliers. the release of MA bid submission data.
(b) MA organizations that do not en- [81 FR 80556, Nov. 15, 2016]
sure that providers and suppliers com-
ply with paragraph (a) of this section, § 422.252 Terminology.
may be subject to sanctions under

Annual MA capitation rate means a
§ 422.750 and termination under § 422.510.
county payment rate for an MA local
[81 FR 80556, Nov. 15, 2016] area (county) for a calendar year. The
462
terms ‘‘per capita rate’’ and ‘‘capita- (2) The amount for coverage of basic
tion rate’’ are used interchangeably to prescription drug benefits under Part D
refer to the annual MA capitation rate. (if any); and
Low enrollment contract means a con- (3) The amount for provision of sup-
tract that could not undertake plemental health care benefits (if any).
Healthcare Effectiveness Data and In- New MA plan means a MA contract
formation Set (HEDIS) and Health Out- offered by a parent organization that
come Survey (HOS) data collections be- has not had another MA contract in
cause of a lack of a sufficient number the previous 3 years.
of enrollees to reliably measure the Plan basic cost sharing means cost
performance of the health plan. sharing that would be charged by a
MA local area means a payment area plan for benefits under the original
consisting of county or equivalent area Medicare FFS program option before
specified by CMS. any reductions resulting from manda-
MA monthly basic beneficiary premium tory supplemental benefits.
means the premium amount an MA Unadjusted MA area-specific non-drug
plan (except an MSA plan) charges an monthly benchmark amount means, for
enrollee for benefits under the original local MA plans serving one county, the
Medicare fee-for-service program op- county capitation rate CMS publishes
tion (if any), and is calculated as de- annually that reflects the nationally
scribed at § 422.262. average risk profile for the risk factors
MA monthly MSA premium means the CMS applies to payment calculations
amount of the plan premium for cov- as set forth at § 422.308(c) of this part,
erage of benefits under the original (that is, a standardized benchmark).
Medicare program through an MSA For local MA plans serving multiple
plan, as set forth at § 422.254(e). counties it is the weighted average of
MA monthly prescription drug bene- county rates in a plan’s service area,
ficiary premium is the MA-PD plan base weighted by the plan’s projected enroll-
beneficiary premium, defined at sec- ment per county. The rules for deter-
tion 1860D–13(a)(2) of the Act, as ad- mining county capitation rates are spe-
justed to reflect the difference between cific to a time period, as set forth at
the plan’s bid and the national average § 422.258(a). Effective 2012, the MA area-
bid (as described in § 422.256(c)) less the specific non-drug monthly benchmark
amount of rebate the MA-PD plan amount is called the blended bench-
elects to apply, as described at mark amount, and is determined ac-
§ 422.266(b)(2). cording to the rules set forth under
MA monthly supplemental beneficiary § 422.258(d) of this part.
premium is the portion of the plan bid Unadjusted MA region-specific non-
attributable to mandatory and/or op- drug monthly benchmark amount means,
tional supplemental health care bene- for MA regional plans, the amount de-
fits described under § 422.102, less the scribed at § 422.258(b).
amount of beneficiary rebate the plan Unadjusted MA statutory non-drug
elects to apply to a mandatory supple- monthly bid amount means a plan’s esti-
mental benefit, as described at mate of its average monthly required
§ 422.266(b)(1). revenue to provide coverage of original
MA-PD plan means an MA local or re- Medicare benefits to an MA eligible
gional plan that provides prescription beneficiary with a nationally average
drug coverage under Part D of Title risk profile for the risk factors CMS
XVIII of the Social Security Act. applies to payment calculations as set
Monthly aggregate bid amount means forth at § 422.308(c).
the total monthly plan bid amount for [63 FR 35085, June 26, 1998, as amended at 70
coverage of an MA eligible beneficiary FR 52026, Sept. 1, 2005; 76 FR 21564, Apr. 15,
with a nationally average risk profile 2011]
for the factors described in § 422.308(c),
and this amount is comprised of the § 422.254 Submission of bids.
following: (a) General rules. (1) Not later than
(1) The unadjusted MA statutory the first Monday in June, each MA or-
non-drug monthly bid amount for cov- ganization must submit to CMS an ag-
erage of original Medicare benefits; gregate monthly bid amount for each
463
§ 422.254 42 CFR Ch. IV (10–1–17 Edition)
MA plan (other than an MSA plan) the (3) Each bid submission must contain
organization intends to offer in the up- all estimated revenue required by the
coming year in the service area (or seg- plan, including administrative costs
ment of such an area if permitted and return on investment.
under § 422.262(c)(2)) that meets the re- (4) The bid amount is for plan pay-
quirements in paragraph (b) of this sec- ments only but must be based on plan
tion. With each bid submitted, the MA assumptions about the amount of rev-
organization must provide the informa- enue required from enrollee cost-shar-
tion required in paragraph (c) of this ing. The estimate of plan cost-sharing
section and, for plans with rebates as for the unadjusted MA statutory non-
described at § 422.266(a), the MA organi- drug monthly bid amount for coverage
zation must provide the information of original Medicare benefits must re-
required in paragraph (d) of this sec- flect the requirement that the level of
tion. cost sharing MA plans charge to enroll-
(2) CMS has the authority to deter- ees must be actuarially equivalent to
mine whether and when it is appro- the level of cost sharing (deductible,
priate to apply the bidding method- copayments, or coinsurance) charged
ology described in this section to to beneficiaries under the original
ESRD MA enrollees. Medicare program option. The actuari-
(3) If the bid submission described in ally equivalent level of cost sharing re-
paragraphs (a)(1) and (2) of this section flected in a regional plan’s unadjusted
is not complete, timely, or accurate, MA statutory non-drug monthly bid
CMS has the authority to impose sanc- amount does not include cost sharing
tions under subpart O of this part or for out-of-network Medicare benefits,
may choose not to renew the contract. as described at § 422.101(d).
(4) Substantial differences between bids. (5) Actuarial valuation. The bid must
An MA organization’s bid submissions be prepared in accordance with CMS
must reflect differences in benefit actuarial guidelines based on generally
packages or plan costs that CMS deter- accepted actuarial principles.
mines to represent substantial dif- (i) A qualified actuary must certify
ferences relative to a sponsor’s other the plan’s actuarial valuation (which
bid submissions. may be prepared by others under his or
(5) CMS may decline to accept any or her direction or review).
every otherwise qualified bid sub-
(ii) To be deemed a qualified actuary,
mitted by an MA organization or po-
the actuary must be a member of the
tential MA organization.
American Academy of Actuaries.
(b) Bid requirements. (1) The monthly
(iii) Applicants may use qualified
aggregate bid amount submitted by an
outside actuaries to prepare their bids.
MA organization for each plan is the
organization’s estimate of the revenue (c) Information required for coordinated
required for the following categories care plans and MA private fee-for-service
for providing coverage to an MA eligi- plans. MA organizations’ submission of
ble beneficiary with a national average bids for coordinated care plans, includ-
risk profile for the factors described in ing regional MA plans and specialized
§ 422.308(c): MA plans for special needs bene-
(i) The unadjusted MA statutory non- ficiaries (described at § 422.4(a)(1)(iv)),
drug monthly bid amount, which is the and for MA private fee-for-service
MA plan’s estimated average monthly plans must include the following infor-
required revenue for providing benefits mation:
under the original Medicare fee-for- (1) The plan type for each plan.
service program option (as defined in (2) The monthly aggregate bid
§ 422.252). amount for the provision of all items
(ii) The amount to provide basic pre- and services under the plan, as defined
scription drug coverage, if any (defined in § 422.252 and discussed in paragraph
at section 1860D–2(a)(3) of the Act). (a) of this section.
(iii) The amount to provide supple- (3) The proportions of the bid amount
mental health care benefits, if any. attributable to-

(2) Each bid is for a uniform benefit (i) The provision of benefits under
package for the service area. the original Medicare fee-for-service
464
program option (as defined at will distribute the beneficiary rebate

§ 422.100(c)); among the options described at
(ii) The provision of basic prescrip- § 422.266(b).
tion drug coverage (as defined at sec- (e) Information required for MSA plans.
tion 1860D–2(a)(3) of the Act; and MA organizations intending to offer
(iii) The provision of supplemental MA MSA plans must submit—
health care benefits (as defined (1) The enrollment capacity (if any)
§ 422.102). for the plan;
(4) The projected number of enrollees (2) The amount of the MSA monthly
in each MA local area used in calcula- premium for basic benefits under the
tion of the bid amount, and the enroll- original Medicare fee-for-service pro-
ment capacity, if any, for the plan. gram option;
(5) The actuarial basis for deter- (3) The amount of the plan deduct-
mining the amount under paragraph ible; and
(c)(2) of this section, the proportions (4) The amount of the beneficiary
under paragraph (c)(3) of this section, supplemental premium, if any.
the amount under paragraph (b)(4) of (f) Separate bids must be submitted
this section, and additional informa- for Part A and Part B enrollees and
tion as CMS may require to verify ac- Part B-only enrollees for each MA plan
tuarial bases and the projected number offered.
of enrollees.
(6) A description of deductibles, coin- [63 FR 35085, June 26, 1998, as amended at 70
surance, and copayments applicable FR 52026, Sept. 1, 2005; 75 FR 19806, Apr. 15,
under the plan and the actuarial value 2010; 76 FR 21564, Apr. 15, 2011]
of the deductibles, coinsurance, and co-
§ 422.256 Review, negotiation, and ap-
payments. proval of bids.
(7) For qualified prescription drug
coverage, the information required (a) Authority. Subject to paragraphs
under section 1860D–11(b) of the Act (a)(2), (d), and (e) of this section, CMS
with respect to coverage. has the authority to review the aggre-
(8) For the purposes of calculation of gate bid amounts submitted under
risk corridors under § 422.458, MA orga- § 422.252 and conduct negotiations with
nizations offering regional MA plans in MA organizations regarding these bids
2006 and/or 2007 must submit the fol- (including the supplemental benefits)
lowing information developed using the and the proportions of the aggregate
appropriate actuarial bases. bid attributable to basic benefits, sup-
(i) Projected allowable costs (defined plemental benefits, and prescription
in § 422.458(a)). drug benefits and may decline to ap-
(ii) The portion of projected allow- prove a bid if the plan sponsor proposes
able costs attributable to administra- significant increases in cost sharing or
tive expenses incurred in providing decreases in benefits offered under the
these benefits. plan.
(iii) The total projected costs for pro- (1) When negotiating bid amounts
viding rebatable integrated benefits (as and proportions, CMS has authority
defined in § 422.458(a)) and the portion similar to that provided the Director of
of costs that is attributable to admin- the Office of Personnel Management
istrative expenses. for negotiating health benefits plans
(9) For regional plans, as determined under 5 U.S.C. chapter 89.
by CMS, the relative cost factors for (2) Noninterference. (i) In carrying out
the counties in a plan’s service area, Parts C and D under this title, CMS
for the purposes of adjusting payment may not require any MA organization
under § 422.308(d) for intra-area vari- to contract with a particular hospital,
ations in an MA organization’s local physician, or other entity or individual
payment rates. to furnish items and services.
(d) Beneficiary rebate information. In (ii) CMS may not require a particular
the case of a plan required to provide a price structure for payment under such
monthly rebate under § 422.266 for a a contract, with the exception of pay-
year, the MA organization offering the ments to Federally qualified health
plan must inform CMS how the plan centers as set forth at § 422.316.
465
§ 422.258 42 CFR Ch. IV (10–1–17 Edition)
(b) Standards of bid review. Subject to finds that the benefit package or plan
paragraphs (d) and (e) of this section, costs represented by that bid are sub-
CMS can only accept bid amounts or stantially different, as provided under
proportions described in paragraph (a) paragraph (b)(4)(i) of this section, from
of this section if CMS determines the any benefit package and plan costs rep-
following standards have been met: resented by another bid submitted by
(1) The bid amount and proportions the same MA organization (or parent
are supported by the actuarial bases organization to that MA organization).
provided by MA organizations under (c) Negotiation process. The negotia-
§ 422.254. tion process may include the resubmis-
(2) The bid amount and proportions sion of information to allow MA orga-
reasonably and equitably reflects the nizations to modify their initial bid
plan’s estimated revenue requirements submissions to account for the out-
for providing the benefits under that come of CMS’ regional benchmark cal-
plan, as the term revenue requirements culations required under § 422.258(c) and
is used for purposes of section 1302(8) of the outcome of CMS’ calculation of the
the Public Health Service Act. national average monthly bid amount
(3) Limitation on enrollee cost sharing. required under section 1860D–13(a)(4) of
For coordinated care plans (including the Act.
regional MA plans and specialized MA (d) Exception for private fee-for-service
plans) and private fee-for-service plans: plans. For private fee-for-service plans
(i) The actuarial value of plan basic defined at § 422.4(a)(3), CMS will not re-
cost sharing, reduced by any supple- view, negotiate, or approve the bid
mental benefits, may not exceed— amount, proportions of the bid, or the
(ii) The actuarial value of amounts of the basic beneficiary pre-
deductibles, coinsurance, and copay- mium and supplemental premium.
ments that would be applicable for the (e) Exception for MSA plans. CMS does
benefits to individuals entitled to bene- not review, negotiate, or approve
fits under Part A and enrolled under amounts submitted with respect to MA
Part B in the plan’s service area with a MSA plans, except to determine that
national average risk profile for the the deductible does not exceed the stat-
factors described in § 422.308(c) if they utory maximum, defined at § 422.103(d).
were not members of an MA organiza-
tion for the year, except that cost shar- [63 FR 35085, June 26, 1998, as amended at 70
ing for non-network Medicare services FR 52026, Sept. 1, 2005; 70 FR 76198, Dec. 23,
2005; 75 FR 19806, Apr. 15, 2010; 76 FR 21564,
in a regional MA plan is not counted Apr. 15, 2011]
under the amount described in para-
graph (b)(2)(i) of this section. § 422.258 Calculation of benchmarks.
(4) Substantial differences between
bids—(i) General. CMS approves a bid (a) The term ‘‘MA area-specific non-
only if it finds that the benefit package drug monthly benchmark amount’’
and plan costs represented by that bid means, for a month in a year:
are substantially different from the (1) For MA local plans with service
MA organization’s other bid submis- areas entirely within a single MA local
sions. In order to be considered ‘‘sub- area:
stantially different,’’ as provided under (i) For years before 2007, one-twelfth
§ 422.254(a)(4) of this subpart, each bid of the annual MA capitation rate (de-
must be significantly different from scribed at § 422.306) for the area, ad-
other plans of its plan type with re- justed as appropriate for the purpose of
spect to premiums, benefits, or cost- risk adjustment.
sharing structure. (ii) For years 2007 through 2010, one-
(ii) Transition period for MA organi- twelfth of the applicable amount deter-
zations with new acquisitions. After a mined under section 1853(k)(1) of the
2-year transition period, CMS approves Act for the area for the year, adjusted
a bid offered by an MA organization (or as appropriate for the purpose of risk
by a parent organization to that MA adjustment.
organization) that recently purchased (iii) For 2011, one-twelfth of the ap-
(or otherwise acquired or merged with) plicable amount determined under
another MA organization only if it 1853(k)(1) for the area for 2010.
466
(iv) Beginning with 2012, one-twelfth number of MA eligible individuals in

of the blended benchmark amount de- the county divided by the number of
scribed in paragraph (d) of this section, MA eligible individuals in the region),
subject to paragraph (d)(8) of this sec- and then adding all the enrollment-
tion and adjusted as appropriate for weighted county rates to a sum for the
the purpose of risk adjustment. region.
(2) For MA local plans with service (ii) CMS then multiplies the
areas including more than one MA unadjusted region-specific non-drug
local area, an amount equal to the amount from paragraph (c)(3)(i) of this
weighted average of amounts described section by the statutory market share
in paragraph (a)(1) of this section for to determine the statutory component
the year for each local area (county) in of the regional benchmark.
the plan’s service area, using as (4) Plan-bid component of the region-
weights the projected number of enroll- specific benchmark. For each regional
ees in each MA local area that the plan plan offered in a region, CMS will mul-
used to calculate the bid amount, and tiply the plan’s unadjusted region-spe-
adjusted as appropriate for the purpose cific non-drug bid amount by the plan’s
of risk adjustment. share of enrollment (as determined
(b) For MA regional plans, the term under paragraph (c)(5) of this section)
‘‘MA region-specific non-drug monthly and then sum these products across all
benchmark amount’’ is: plans offered in the region. CMS then
(1) The sum of two components: the multiples this by 1 minus the statutory
statutory component (based on a market share to determine the plan-bid
weighted average of local benchmarks component of the regional benchmark.
in the region, as described in paragraph
(5) Plan’s share of enrollment. CMS
(c)(3) of this section; and the plan bid
will calculate the plan’s share of MA
component (based on a weighted aver-
enrollment in the region as follows:
age of regional plan bids in the region
as described in paragraph (c)(4) of this (i) In the first year that any MA re-
section). gional plan is being offered in an MA
(2) Announced before November 15 of region, and more than one MA regional
each year, but after CMS has received plan is being offered, CMS will deter-
the plan bids. mine each regional plan’s share of en-
(c) Calculation of MA regional non- rollment based on one of two possible
drug benchmark amount. CMS calculates approaches. CMS may base this factor
the monthly regional non-drug bench- on equal division among plans, so that
mark amount for each MA region as each plan’s share will be 1 divided by
follows: the number of plans offered. Alter-
(1) Reference month. For all calcula- natively, CMS may base this factor on
tions that follow, CMS will determine each regional plan’s estimate of pro-
the number of MA eligible individuals jected enrollment. Plan enrollment
in each local area, in each region, and projections are subject to review and
nationally as of the reference month, adjustment by CMS to assure reason-
which is a month in the previous cal- ableness.
endar year CMS identifies. (ii) If two or more regional plans are
(2) Statutory market share. CMS will offered in a region and were offered in
determine the statutory national mar- the reference month: The plan’s share
ket share percentage as the proportion of enrollment will be the number of MA
of the MA eligible individuals nation- eligible individuals enrolled in the plan
ally who were not enrolled in an MA divided by the number of MA eligible
plan. individuals enrolled in all of the plans
(3) Statutory component of the region- in the region, as of the reference
specific benchmark. (i) CMS calculates month.
the unadjusted region-specific non- (iii) If a single regional plan is being
drug amount by multiplying the offered in the region: The plan’s share
amount determined under paragraph of enrollment is equal to 1.
(a) of this section for the year by the (d) Determination of the blended bench-
county’s share of the MA eligible indi- mark amount—(1) General rules. For the
viduals residing in the region (the purpose of paragraphs (a) and (b) of
467
§ 422.258 42 CFR Ch. IV (10–1–17 Edition)
this section, the term blended bench- (4) Base payment amount. The base
mark amount for an area for a year payment amount is as follows:
means the sum of two components: the (i) For 2012, the average FFS expendi-
applicable amount determined under ture amount specified in § 422.306(b)(2),
section 1853(k)(1) of the Act and the determined for 2012.
specified amount determined under (ii) For subsequent years, the average
section 1853(n)(2) of Act. The weights FFS expenditure amount specified in
for each component are based on the § 422.306(b)(2).
phase-in period assigned each area, as (5) Applicable percentage. Subject to
described in paragraphs (d)(8) and (d)(9) paragraph (d)(7) of this section, the ap-
of this section. At the conclusion of an plicable percentage is one of four val-
area’s phase-in period, the blended ues assigned to an area based on Sec-
benchmark for an area for a year retary’s determination of the quartile
equals the section 1853(n)(2) of the Act ranking of the area’s average FFS ex-
specified amount described in para- penditure amount (described at
graph (d)(2) of this section. The blended § 422.306(b)(2) and adjusted as required
benchmark amount for an area for a at § 422.306(c)), relative to this amount
year (which takes into account para- for all areas.
graph (d)(8) of this section), cannot ex- (i) For the 50 States or the District of
ceed the applicable amount described Columbia, a county with an average
in paragraph (d)(2) of this section that FFS expenditure amount adjusted
would be in effect but for the applica- under § 422.306(c) that falls in the—
tion of this paragraph.
(A) Highest quartile of such rates for
(2) Applicable amount. For the purpose
all areas for the previous year receives
of paragraphs (a) and (b) of this sec-
an applicable percentage of 95 percent;
tion, the applicable amount deter-
(B) Second highest quartile of such
mined under section 1853(k)(1) of the
rates for all areas for the previous year
Act for a year is—
receives an applicable percentage of 100
(i) In a rebasing year (described at
percent;
§ 422.306(b)(2), an amount equal to the
greater of the average FFS expenditure (C) Third highest quartile of such
amount at § 422.306(b)(2) for an area for rates for all areas for the previous year
a year and the minimum percentage in- receives an applicable percentage of
crease rate at § 422.306(a) for an area for 107.5 percent; or
a year. (D) Lowest quartile of such rates for
(ii) In a year when the amounts at all areas for the previous year receives
§ 422.306(b)(2) are not rebased, the min- an applicable percentage of 115 percent.
imum percentage increase rate at (ii) To determine the applicable per-
§ 422.306(a) for the area for the year. centages for a territory, the Secretary
(iii) In no case the blended bench- ranks such areas for a year based on
mark amount for an area for a year, the level of the area’s § 422.306(b)(2)
determined taking into account para- amount adjusted under § 422.306(c), rel-
graph (d)(8) of this section, be greater ative to the quartile rankings com-
than the applicable amount at para- puted under paragraph (d)(5)(i) of this
graph (d)(2) of this section for an area section.
for a year. (6) Additional rules for determining the
(iv) Paragraph (d) of this section does applicable percentage. (i) In a contract
not apply to the PACE program under year when the average FFS expendi-
section 1894 of Act. ture amounts from the previous year
(3) Specified amount. For the purpose were rebased (according to the periodic
of paragraphs (a) and (b) of this sec- rebasing requirement at § 422.306(b)(2)),
tion, the specified amount under sec- the Secretary must determine an
tion 1853(n)(2) of the Act is the product area’s applicable percentage based on a
of the base payment amount for an quartile ranking of the previous year’s
area for a year (adjusted as required rebased FFS amounts adjusted under
under § 422.306(c)) multiplied by the ap- § 422.306(c).
plicable percentage described in para- (ii) If, for a year after 2012, there is a
graph (d)(5) of this section for an area change in the quartile in which an area
for a year. is ranked compared to the previous
468
year’s ranking, the applicable percentage described at paragraph (d)(7)(i) of

age for the area in the year must be this section must be doubled for the
the average of the applicable percent- qualifying county.
age for the previous year and the appli- (iii) MA organizations that fail to re-
cable percentage that would otherwise port data as required by the Secretary
apply for the area for the year in the must be counted as having a rating of
absence of this transitional provision. fewer than 3.5 stars at the plan or con-
(7) Increases to the applicable percent- tract level, as determined by the Sec-
age for quality. Beginning with 2012, the retary.
blended benchmark under paragraphs (iv) Application of applicable percent-
(a) and (b) of this section will reflect age increases to low enrollment contracts.
the level of quality rating at the plan (A) For 2012, for an MA plan that the
or contract level, as determined by the Secretary determines is unable to have
Secretary. The quality rating for a a quality rating because of low enroll-
plan is determined by the Secretary ac- ment, the Secretary treats this plan as
cording to a 5-star rating system a qualifying plan under paragraph
(based on the data collected under sec- (d)(7)(i) of this section.
tion 1852(e) of the Act). Specifically, (B) For 2013 and subsequent years,
the applicable percentage under para- the Secretary develops a methodology
graph (d)(5) of this section must be in- to apply to MA plans with low enroll-
creased according to criteria in para-
ment (as defined by the Secretary) to
graphs (d)(7)(i) through (v) of this sec-
determine whether a low enrollment
tion if the plan or contract is deter-
contract is a qualifying plan.
mined to be a qualifying plan or a
(v) Application of increases in applica-
qualifying plan in a qualifying county
ble percentage to new MA plans. A new
for the year.
MA plan (as defined at § 422.252) that
(i) Qualifying plan. Beginning with
meets criteria specified by the Sec-
2012, a qualifying plan means a plan
retary must be treated as a qualifying
that had a quality rating of 4 stars or
plan under paragraph (d)(7)(i) of this
higher based on the most recent data
section, except that the applicable per-
available for such year. For a quali-
centage must be increased as follows:
fying plan, the applicable percentage
at paragraph (d)(5) of this section must (A) For 2012, by 1.5 percentage points.
be increased as follows: (B) For 2013, by 2.5 percentage points.
(A) For 2012, by 1.5 percentage points. (C) For 2014 and subsequent years, by
(B) For 2013, by 3.0 percentage points. 3.5 percentage points.
(C) For 2014 and subsequent years, by (8) Determination of phase-in period for
5.0 percentage points. the blended benchmark amount. For 2012
(ii) Qualifying county. (A) A qualifying through 2016, the blended benchmark
county means a county that meets the amount for an area for a year depends
following three criteria: on the phase-in period assigned to that
(1) Has an MA capitation rate that, area. The Secretary assigns one of
in 2004, was based on the amount speci- three phase-in periods to each area: 2-
fied in section 1853(c)(1)(B) of the Act year, 4 year, or 6 year. The phase-in pe-
for a Metropolitan Statistical Area riod assigned to an area is based on the
with a population of more than 250,000. size of the difference between the 2010
(2) Of the MA-eligible individuals re- applicable amount at paragraph (d)(2)
siding in the county, at least 25 percent of this section and the projected 2010
of such individuals were enrolled in MA benchmark amount defined at para-
plans as of December 2009. graph (d)(8)(i) of this section.
(3) Has per capita fee-for-service (i) The projected 2010 benchmark
spending that is lower than the na- amount is calculated once for the pur-
tional monthly per capita cost for ex- pose of determining the phase-in period
penditures for individuals enrolled for an area. It is equal to one-half of
under the Original Medicare fee-for- the 2010 applicable amount at para-
service program for the year. graph (d)(2) of this section and one-half
(B) Beginning with 2012, for a quali- of the specified amount at paragraph
fying plan serving a qualifying county, (d)(3) modified to apply to 2010 (as de-
the increase to the applicable percent- scribed in (d)(8)(ii) of this section).
469
§ 422.260 42 CFR Ch. IV (10–1–17 Edition)
(ii) To assign a phase-in period to an amount at paragraph (d)(2) of this sec-

area, the specified amount is modified tion in the following proportions:
as if it applies to 2010, and is the prod- (A) For 2012, three-fourths of the ap-
uct of— plicable amount for the area for the
(A) The 2010 base payment amount year and one-fourth of the specified
adjusted as required under § 422.306(c) of amount for the area and year.
this part; and (B) For 2013, one-half of the applica-
(B) The applicable percentage deter- ble amount for the area for the year
mined as if the reference to the ‘‘pre- and one-half of the specified amount
vious year’’ at paragraph (d)(5) of this for the area and year.
section were deemed a reference to 2010 (C) For 2014, one-fourth of the appli-
and increased as follows: cable amount for the area for the year
(1) The increase at paragraph (d)(7)(i) and three-fourths of the specified
of this section for a qualifying plan in amount for the area and year.
the area is applied as if the reference to (D) For 2015 and subsequent years,
a qualifying plan for 2012 were deemed the blended benchmark equals the
a reference for 2010; and specified amount for the area and year.
(iii) Weighting for the 6-year phase-in.
(2) The increase at paragraph
The blended benchmark is the sum of
(d)(7)(ii) of this section is applied as if
the applicable amount at paragraph
the determination of a qualifying coun-
(d)(2) and the specified amount at para-
ty were made for 2010.
graph (d)(3) of this section in the fol-
(iii) Two-year phase-in. An area is as- lowing proportions:
signed the 2-year phase-in period if the (A) For 2012, five-sixths of the appli-
difference between the applicable cable amount for the area and year and
amount at paragraph (d)(2) of this sec- one-sixth of the specified amount for
tion and the projected 2010 benchmark the area and year.
amount at paragraph (d)(8)(i) of this (B) For 2013, two-thirds of the appli-
section is less than $30. cable amount for the area and year and
(iv) Four-year phase-in. An area is as- one-third of the specified amount for
signed the 4-year phase-in period if the the area and year.
difference between the applicable (C) For 2014, one-half of the applica-
amount at paragraph (d)(2) of this sec- ble amount for the area and year and
tion and the projected 2010 benchmark one-half of the specified amount for the
amount at paragraph (d)(8)(i) of this area and for year.
section is at least $30 but less than $50. (D) For 2015, one-third of the applica-
(v) Six-year phase-in. An area is as- ble amount for the area and year and
signed the 6-year phase-in period if the two-thirds of the specified amount for
difference between the applicable the area and for year.
amount at paragraph (d)(2) of this sec- (E) For 2016, one-sixth of the applica-
tion and the projected 2010 benchmark ble amount for the area and year and
amount at paragraph (d)(8)(i) of this five-sixths of the specified amount for
section is at least $50. the area and for year.
(9) Impact of phase-in period on cal- (F) For 2017 and subsequent years,
culation of the blended benchmark the blended benchmark equals the
amount—(i) Weighting for the 2-year specified amount for the area and
phase-in. (A) For 2012, the blended year.≤[70 FR 4725, Jan. 28, 2005, as
benchmark is the sum of one-half of amended at 76 FR 21564, Apr. 15, 2011]
the applicable amount at paragraph
(d)(2) of this section and one-half of the § 422.260 Appeals of quality bonus pay-
specified amount at paragraph (d)(3) of ment determinations.
this section. (a) Scope. The provisions of this sec-
(B) For 2013 and subsequent years, tion pertain to the administrative re-
the blended benchmark equals the view process to appeal quality bonus
specified amount. payment status determinations based
(ii) Weighting for the 4-year phase-in. on section 1853(o) of the Act.
The blended benchmark is the sum of (b) Definitions. The following defini-
the applicable amount at paragraph tions apply to this section:
(d)(2) of this section and the specified Quality bonus payment (QBP) means—
470
(i) Enhanced CMS payments to MA tion’s qualification for a QBP or a

organizations based on the organiza- higher QBP.
tion’s demonstrated quality of its (ii) The MA organization may not re-
Medicare contract operations; or quest an informal hearing of its QBP
(ii) Increased beneficiary rebate re- status unless it has already requested
tention allowances based on the orga- and received a reconsideration decision
nization’s demonstrated quality of its in accordance with paragraph (c)(1) of
Medicare contract operations. this section.
Quality bonus payment (QBP) deter- (iii) The informal hearing request
mination methodology means the for- must pertain only to the measure(s)
mula CMS adopts for evaluating and value(s) in question that precip-
whether MA organizations qualify for a itated the request for reconsideration.
QBP. (iv) The informal hearing is con-
Quality bonus payment (QBP) status ducted by a CMS hearing officer on the
means a MA organization’s standing record. The hearing officer receives no
with respect to its qualification to— testimony, but may accept written
(i) Receive a quality bonus payment, statements with exhibits from each
as determined by CMS; or party in support of their position in
(ii) Retain a portion of its bene- the matter.
ficiary rebates based on its quality rat- (v) The MA organization must pro-
ing, as determined by CMS. vide clear and convincing evidence that
(c) Administrative review process for CMS’ calculations of the measure(s)
QBP status appeals. (1) Reconsideration and value(s) in question were incorrect.
request. An MA organization may re- (vi) The hearing officer issues the de-
quest reconsideration of its QBP sta- cision by electronic mail to the MA or-
tus. ganization.
(i) The MA organization requesting (vii) The hearing officer’s decision is
reconsideration of its QBP status must final and binding.
do so by providing written notice to (3) Limits to requesting an administra-
CMS within 10 business days of the re- tive review. (i) CMS may limit the
lease of its QBP status. The request measures or bases for which a contract
must specify the given measure(s) in may request an administrative review
question and the basis for reconsider- of its QBP status.
ation such as a calculation error or in- (ii) An administrative review cannot
correct data was used to determine the be requested for the following: the
QBP status. The error could impact an methodology for calculating the star
individual measure’s value or the over- ratings (including the calculation of
all star rating. the overall star ratings); cut-off points
(ii) The reconsideration official’s de- for determining measure thresholds;
cision is final and binding unless a re- the set of measures included in the star
quest for an informal hearing is filed in rating system; and the methodology
accordance with paragraph (2) of this for determining QBP determinations
section. for low enrollment contracts and new
(2) Informal hearing request. An MA MA plans.
organization may request an informal (4) Designation of a hearing officer.
hearing on the record following the re- CMS designates a hearing officer to
consideration official’s decision regard- conduct the appeal of the QBP status.
ing its QBP status. The officer must be an individual who
(i) The MA organization seeking an did not directly participate in the ini-
appeal of the reconsideration official’s tial QBP determination.
decision regarding its QBP status must (d) Reopening of QBP determinations.
do so by providing written notice to CMS may, on its own initiative, revise
CMS within 10 business days of the an MA organization’s QBP status at
issuance of the reconsideration deci- any time after the initial release of the
sion. The notice must specify the er- QBP determinations through April 1 of
rors the MA organization asserts that each year. CMS may take this action
CMS made in making the QBP deter- on the basis of any credible informa-
mination and how correction of those tion, including the information pro-
errors could result in the organiza- vided during the administrative review
471
§ 422.262 42 CFR Ch. IV (10–1–17 Edition)
process that demonstrates that the ini- (if any) among individuals enrolled in
tial QBP determination was incorrect. an MA plan (or segment of the plan).
[76 FR 21566, Apr. 15, 2011]
(2) Segmented service area option. An
MA organization may apply the uni-
§ 422.262 Beneficiary premiums. formity requirements in paragraph
(c)(1) of this section to segments of an
(a) Determination of MA monthly basic
MA local plan service area (rather than
beneficiary premium. (1) For an MA plan
to the entire service area) as long as
with an unadjusted statutory non-drug
such a segment is composed of one or
bid amount that is less than the rel-
evant unadjusted non-drug benchmark more MA payment areas. The informa-
amount, the basic beneficiary premium tion specified under § 422.254 is sub-
is zero. mitted separately for each segment.
(2) For an MA plan with an This provision does not apply to MA re-
unadjusted statutory non-drug bid gional plans.
amount that is equal to or greater than (d) Monetary inducement prohibited.
the relevant unadjusted non-drug An MA organization may not provide
benchmark amount, the basic bene- for cash or other monetary rebates as
ficiary premium is the amount by an inducement for enrollment or for
which (if any) the bid amount exceeds any other reason or purpose.
the benchmark amount. All approved (e) Timing of payments. The MA orga-
basic premiums must be charged; they nization must permit payments of MA
cannot be waived. monthly basic and supplemental bene-
(b) Consolidated monthly premiums. Ex- ficiary premiums and monthly pre-
cept as specified in paragraph (b)(2) of scription drug beneficiary premiums on
this section, MA organizations must a monthly basis and may not termi-
charge enrollees a consolidated month- nate coverage for failure to make time-
ly MA premium. ly payments except as provided in
(1) The consolidated monthly pre- § 422.74(b).
mium for an MA plan (other than a (f) Beneficiary payment options. An
MSA plan) is the sum of the MA MA organization must permit each en-
monthly basic beneficiary premium (if rollee, at the enrollee’s option, to
any), the MA monthly supplementary make payment of premiums (if any)
beneficiary premium (if any), and the under this part to the organization
MA monthly prescription drug bene- through-
ficiary premium (if any). (1) Withholding from the enrollee’s
(2) Special rule for MSA plans. For an Social Security benefit payments, or
individual enrolled in an MSA plan of- benefit payments by the Railroad Re-
fered by an MA organization, the tirement Board or the Office of Per-
monthly beneficiary premium is the sonnel Management, in the manner
supplemental premium (if any). that the Part B premium is withheld;
(c) Uniformity of premiums—(1) General (2) An electronic funds transfer
rule. Except as permitted for supple- mechanism (such as automatic charges
mental premiums pursuant to of an account at a financial institution
§ 422.106(d), for MA contracts with em- or a credit or debit card account);
ployers and labor organizations, the (3) According to other means that
MA monthly bid amount submitted CMS may specify, including payment
under § 422.254, the MA monthly basic by an employer or under employment-
beneficiary premium, the MA monthly based retiree health coverage on behalf
supplemental beneficiary premium, the of an employee, former employee (or
MA monthly prescription drug pre- dependent), or by other third parties
mium, and the monthly MSA premium such as a State.
of an MA organization may not vary (i) Regarding the option in paragraph
among individuals enrolled in an MA (f)(1) of this section, MA organizations
plan (or segment of the plan as pro- may not impose a charge on bene-
vided for local MA plans under para- ficiaries for the election of this option.
graph (c)(2) of this section). In addi- (ii) An enrollee may opt to make a
tion, the MA organization cannot vary direct payment of premium to the plan.
the level of cost-sharing charged for (g) Prohibition on improper billing of
basic benefits or supplemental benefits premiums. MA organizations shall not
472
bill an enrollee for a premium payment drug monthly benchmark amount (de-
period if the enrollee has had the prescribed in paragraph (a)(2) of this sec-
mium for that period withheld from his tion). Plans with bids equal to or great-
or her Social Security, Railroad Re- er than plan benchmarks will have zero
tirement Board or Office of Personnel savings.
Management check. (c) Risk adjustment factors for deter-
(h) Retroactive collection of premiums. mination of savings for local plans. CMS
In circumstances where retroactive will publish the first Monday in April
collection of premium amounts is nec- before the upcoming calendar year the
essary and the enrollee is without fault risk adjustment factors described in
in creating the premium arrearage, the paragraph (c)(1) or (c)(2) of this section
Medicare Advantage organization shall determined for the purpose of calcu-
offer the enrollee the option of pay- lating savings amounts for MA local
ment either by lump sum, by equal plans.
monthly installment spread out over at
(1) For the purpose of calculating
least the same period for which the
savings for MA local plans CMS has the
premiums were due, or through other
authority to apply risk adjustment fac-
arrangements mutually acceptable to
tors that are plan-specific average risk
the enrollee and the Medicare Advan-
tage organization. For monthly install- adjustment factors, Statewide average
ments, for example, if 7 months of pre- risk adjustment factors, or factors de-
miums are due, the member would have termined on a basis other than plan-
at least 7 months to repay. specific factors or Statewide average
factors.
[63 FR 18134, Apr. 14, 1998, as amended at 74 (2) In the event that CMS applies
FR 1541, Jan. 12, 2009]
Statewide average risk adjustment fac-
§ 422.264 Calculation of savings. tors, the statewide factor for each
State is the average of the risk factors
(a) Computation of risk adjusted bids calculated under § 422.308(c), based on
and benchmarks. (1) The risk adjusted all enrollees in MA local plans in that
MA statutory non-drug monthly bid
State in the previous year. In the case
amount is the unadjusted plan bid
of a State in which no local MA plan
amount for coverage of original Medi-
was offered in the previous year, CMS
care benefits (defined at § 422.254), ad-
will estimate an average and may base
justed using the factors described in
this average on average risk adjust-
paragraph (c) of this section for local
ment factors applied to comparable
plans and paragraph (e) of this section
States or applied on a national basis.
for regional plans.
(2) The risk adjusted MA area-specific (d) Computation of savings for MA re-
non-drug monthly benchmark amount is gional plans. The average per capita
the unadjusted benchmark amount for monthly savings for an MA regional
coverage of original Medicare benefits plan and year is 100 percent of the dif-
by a local MA plan (defined at § 422.258), ference between the plan’s risk-ad-
adjusted using the factors described in justed statutory non-drug monthly bid
paragraph (c) of this section. amount (described in paragraph (a)(1)
(3) The risk adjusted MA region-specific of this section) and the plan’s risk-ad-
non-drug monthly benchmark amount is justed region-specific non-drug month-
the unadjusted benchmark for coverage ly benchmark amount (described in
of original Medicare benefits amount paragraph (a)(3) of this section), using
by a regional MA plan (defined at the risk adjustment factors described
§ 422.258) adjusted using the factors de- in paragraph (e) of this section. Plans
scribed in paragraph (e) of this section. with bids equal to or greater than plan
(b) Computation of savings for MA local benchmarks will have zero savings.
plans. The average per capita monthly (e) Risk adjustment factors for deter-
savings for an MA local plan is 100 per- mination of savings for regional plans.
cent of the difference between the CMS will publish the first Monday in
plan’s risk-adjusted statutory non-drug April before the upcoming calendar
monthly bid amount (described in para- year the risk adjustment factors de-
graph (a)(1) of this section) and the scribed in paragraph (e)(1)and (e)(2) of
plan’s risk-adjusted area-specific non- this section determined for the purpose
473
§ 422.266 42 CFR Ch. IV (10–1–17 Edition)
of calculating savings amounts for MA new proportion assigned the plan under
regional plans. paragraph (a)(2)(ii) of this section,
(1) For the purpose of calculating based on the quality rating specified in
savings for MA regional plans, CMS has § 422.258(d)(7).
the authority to apply risk adjustment (B) For 2013. One-third of the old pro-
factors that are plan-specific average portion of 75 percent of the average per
risk adjustment factors, Region-wide capita savings; and two-thirds of the
average risk adjustment factors, or fac- new proportion assigned the plan under
tors determined on a basis other than paragraph (d)(2)(ii) of this section,
MA regions. based on the quality rating at
(2) In the event that CMS applies re- § 422.258(d)(7).
gion-wide average risk adjustment fac- (ii) Final applicable rebate percentage.
tors, the region-wide factor for each For 2014 and subsequent years, and sub-
MA region is the average of the risk ject to paragraphs (a)(2)(iii) and (iv) of
factors calculated under § 422.308(c), this section, the final applicable rebate
based on all enrollees in MA regional percentage is as follows:
plans in that region in the previous (A) In the case of a plan with a qual-
year. In the case of a region in which ity rating under such system of at
no regional plan was offered in the pre- least 4.5 stars, 70 percent of the average
vious year, CMS will estimate an aver- per capita savings;
age and may base this average on aver- (B) In the case of a plan with a qual-
age risk adjustment factors applied to ity rating under such system of at
comparable regions or applied on a na- least 3.5 stars and less than 4.5 stars, 65
tional basis. percent of the average per capita sav-
ings.
§ 422.266 Beneficiary rebates. (C) In the case of a plan with a qual-
(a) Calculation of rebate. (1) For 2006 ity rating under such system of less
through 2011, an MA organization must than 3.5 stars, 50 percent of the average
provide to the enrollee a monthly re- per capita savings.
bate equal to 75 percent of the average (iii) Treatment of low enrollment con-
per capita savings (if any) described in tracts. For 2012, in the case of a plan de-
§ 422.264(b) for MA local plans and scribed at § 422.258(d)(7)(iv), the plan
§ 422.264(d) for MA regional plans. must be treated as having a rating of
(2) For 2012 and subsequent years, an 4.5 stars for the purpose of determining
MA organization must provide to the the beneficiary rebate amount.
enrollee a monthly rebate equal to a (iv) Treatment of new MA plans. For
specified percentage of the average per 2012 or a subsequent year, a new MA
capita savings (if any) at § 422.264(b) for plan defined at § 422.252 that meets the
MA local plans and § 422.264(d) for MA criteria specified by the Secretary for
regional plans. For 2012 and 2013, this purposes of § 422.258(d)(7)(v) must be
percentage is based on a combination treated as a qualifying plan under
of the (a)(1) rule of 75 percent and the § 422.258(d)(7)(i), except that plan must
(a)(2)(ii) rules that set the percentage be treated as having a rating of 3.5
based on the plan’s quality rating stars for purposes of determining the
under a 5 star rating system, as deter- beneficiary rebate amount.
mined by the Secretary under (b) Form of rebate. The rebate re-
§ 422.258(d)(7). For 2014 and subsequent quired under this paragraph must be
years, this percentage is determined provided by crediting the rebate
based only on the paragraph (a)(2)(ii) of amount to one or more of the fol-
this section. lowing:
(i) Applicable rebate percentage for 2012 (1) Supplemental health care benefits.
and 2013. Subject to paragraphs MA organizations may apply all or
(a)(2)(iii) and (iv) of this section, the some portion of the rebate for a plan
transitional applicable rebate percent- toward payment for non-drug supple-
age is, for a year, the sum of two mental health care benefits for enroll-
amounts as follows: ees as described in § 422.102, which may
(A) For 2012. Two-thirds of the old include the reduction of cost sharing
proportion of 75 percent of the average for benefits under original Medicare
per capita savings; and one-third of the and additional health care benefits
474
that are not benefits under original titled to Medicare benefits but was
Medicare. MA organizations also may later found not to be entitled.
apply all or some portion of the rebate (2) Other amounts due are amounts
for a plan toward payment for supple- due for services that were—
mental drug coverage described at (i) Emergency, urgently needed serv-
§ 423.104(f)(1)(ii), which may include re- ices, or other services obtained outside
duction in cost sharing and coverage of the MA plan; or
drugs not covered under Part D. The (ii) Initially denied but, upon appeal,
rebate, or portion of rebate, applied to- found to be services the enrollee was
ward supplemental benefits may only entitled to have furnished by the MA
be applied to a mandatory supple- organization.
mental benefit, and cannot be used to (b) Basic commitments. An MA organi-
fund an optional supplemental benefit. zation must agree to refund all
(2) Payment of premium for prescription amounts incorrectly collected from its
drug coverage. MA organizations that Medicare enrollees, or from others on
offer a prescription drug benefit may behalf of the enrollees, and to pay any
credit some or all of the rebate toward other amounts due the enrollees or
reduction of the MA monthly prescrip- others on their behalf.
tion drug beneficiary premium. (c) Refund methods—(1) Lump-sum
(3) Payment toward Part B premium. payment. The MA organization must
MA organizations may credit some or use lump-sum payments for the fol-
all of the rebate toward reduction of lowing:
the Medicare Part B premium (deter- (i) Amounts incorrectly collected
mined without regard to the applica- that were not collected as premiums.
tion of subsections (b), (h), and (i) of (ii) Other amounts due.
section 1839 of the Act). (iii) All amounts due if the MA orga-
(c) Disclosure relating to rebates. MA nization is going out of business or ter-
organizations must disclose to CMS in- minating its MA contract for an MA
formation on the amount of the rebate plan(s).
provided, as required at § 422.254(d). MA (2) Premium adjustment or lump-sum
organizations must distinguish, for payment, or both. If the amounts incor-
each MA plan, the amount of rebate ap- rectly collected were in the form of
plied to enhance original Medicare ben- premiums, or included premiums as
efits from the amount of rebate applied well as other charges, the MA organiza-
to enhance Part D benefits.≤[70 FR tion may refund by adjustment of fu-
4725, Jan. 28, 2005, as amended at 76 FR ture premiums or by a combination of
21567, Apr. 15, 2011] premium adjustment and lump-sum
payments.
§ 422.270 Incorrect collections of pre- (3) Refund when enrollee has died or
miums and cost-sharing. cannot be located. If an enrollee has died
(a) Definitions. As used in this or cannot be located after reasonable
section- effort, the MA organization must make
(1) Amounts incorrectly collected- the refund in accordance with State
(i) Means amounts that- law.
(A) Exceed the limits approved under (d) Reduction by CMS. If the MA orga-
§ 422.262; nization does not make the refund re-
(B) In the case of an MA private fee- quired under this section by the end of
for-service plan, exceed the MA month- the contract period following the con-
ly basic beneficiary premium or the tract period during which an amount
MA monthly supplemental premium was determined to be due to an en-
submitted under § 422.262; and rollee, CMS will reduce the premium
(C) In the case of an MA MSA plan, the MA organization is allowed to
exceed the MA monthly beneficiary charge an MA plan enrollee by the
supplemental premium submitted amounts incorrectly collected or other-
under § 422.262, or exceed permissible wise due. In addition, the MA organiza-
cost sharing amounts after the deduct- tion would be subject to sanction under
ible has been met per § 422.103; and subpart O of this part for failure to re-
(ii) Includes amounts collected from fund amounts incorrectly collected
an enrollee who was believed to be en- from MA plan enrollees.
475
§ 422.272 42 CFR Ch. IV (10–1–17 Edition)
§ 422.272 Release of MA bid pricing Subpart G—Payments to Medi-

data. care Advantage Organiza-
(a) Terminology. For purposes of this tions
section, the term ‘‘MA bid pricing
data’’ means the following information SOURCE: 70 FR 4729, Jan. 28, 2005, unless
that MA organizations must submit for otherwise noted.
each MA plan bid for the annual bid
submission: § 422.300 Basis and scope.
(1) The pricing-related information This subpart is based on sections
described at § 422.254(a)(1); and 1106, 1128J(d), 1853, 1854, and 1858 of the
(2) The information required for MSA Act. It sets forth the rules for making
plans, described at § 422.254(e). payments to Medicare Advantage (MA)
(b) Release of MA bid pricing data. organizations offering local and re-
gional MA plans, including calculation
Subject to paragraph (c) of this section
of MA capitation rates and bench-
and to the annual timing identified in
marks, conditions under which pay-
paragraph (d) of this section, CMS will ment is based on plan bids, adjust-
release to the public MA bid pricing ments to capitation rates (including
data for MA plan bids accepted or ap- risk adjustment), collection of risk ad-
proved by CMS for a contract year justment data, conditions for use and
under § 422.256. The annual release will disclosure of risk adjustment data, and
contain MA bid pricing data from the other payment rules. See § 422.458 in
final list of MA plan bids accepted or subpart J for rules on risk sharing pay-
approved by CMS for a contract year ments to MA regional organizations.
that is at least 5 years prior to the up-
[79 FR 50358, Aug. 22, 2014]
coming calendar year.
(c) Exclusions from release of MA bid § 422.304 Monthly payments.
pricing data. For the purpose of this (a) General rules. Except as provided
section, the following information is in paragraph (b) of this section, CMS
excluded from the data released under makes advance monthly payments of
paragraph (b) of this section: the amounts determined under para-
(1) For an MA plan bid that includes graphs (a)(1) and (a)(2) of this section
Part D benefits, the information de- for coverage of original fee-for-service
scribed at § 422.254(b)(1)(ii), (c)(3)(ii), benefits for an individual in an MA
and (c)(7). payment area for a month.
(2) Additional information that CMS (1) Payment of bid for plans with bids
requires to verify the actuarial bases of below benchmark. For MA plans that
the bids for MA plans for the annual have average per capita monthly sav-
bid submission, as follows: ings (as described at § 422.264(b) for
(i) Narrative information on base pe- local plans and § 422.264(d) for regional
riod factors, manual rates, cost-sharing plans), CMS pays:
methodology, optional supplement ben- (i) The unadjusted MA statutory non-
drug monthly bid amount defined in
efits, and other required narratives.
§ 422.252, risk-adjusted as described at
(ii) Supporting documentation.
§ 422.308(c) and adjusted (if applicable)
(3) Any information that could be for variations in rates within the plan’s
used to identify Medicare beneficiaries service area (described at § 422.258(a)(2))
or other individuals. and for the effects of risk adjustment
(4) Bid review correspondence and re- on beneficiary premiums under
ports. § 422.262; and
(d) Timing of data release. CMS will re- (ii) The amount (if any) of the rebate
lease MA bid pricing data as provided described in paragraph (a)(3) of this
in paragraph (b) of this section on an section.
annual basis after the first Monday in (2) Payment of benchmark for plans
October. with bids at or above benchmark. For MA
plans that do not have average per cap-

[81 FR 80556, Nov. 15, 2016] ita monthly savings (as described at
§ 422.264(b) for local plans and
476
§ 422.264(d) for regional plans), CMS the same manner as similar reductions
pays the unadjusted MA area-specific are used in original Medicare.
non-drug monthly benchmark amount (2) MSA enrollees. In the case of an
specified at § 422.258, risk-adjusted as MSA plan, CMS pays the unadjusted
described at § 422.308(c) and adjusted (if MA area-specific non-drug monthly
applicable) for variations in rates with- benchmark amount for the service
in the plan’s service area (described at area, determined in accordance with
§ 422.258(a)(2)) and for the effects of risk § 422.314(c) and subject to risk adjust-
adjustment on beneficiary premiums ment as set forth at § 422.308(c), less 1⁄12
under § 422.262. of the annual lump sum amount (if
(3) Payment of rebate for plans with any) CMS deposits to the enrollee’s MA
bids below benchmarks. The rebate MSA.
amount under paragraph (a)(1)(ii) of (3) RFB plan enrollees. For RFB plan
this section is the amount of the enrollees, CMS adjusts the capitation
monthly rebate computed under payments otherwise determined under
§ 422.266(a) for that plan, less the this subpart to ensure that the pay-
amount (if any) applied to reduce the ment level is appropriate for the actu-
Part B premium, as provided under arial characteristics and experience of
§ 422.266(b)(3)). these enrollees. That adjustment can
(b) Separate payment for Federal drug be made on an individual or organiza-
subsidies. In the case of an enrollee in tion basis.
an MA-PD plan, defined at § 422.252, the (d) Payment areas—(1) General rule.
MA organization offering such a plan Except as provided in paragraph (e) of
also receives- this section—
(1) Direct and reinsurance subsidy
(i) An MA payment area for an MA
payments for qualified prescription
local plan is an MA local area defined
drug coverage, described at section
at § 422.252.
1860D–15(a) and (b) of the Act (other
(ii) An MA payment area for an MA
than payments for fallback prescrip-
regional plan is an MA region, defined
tion drug plans described at section
at § 422.455(b)(1).
1860D–11(g)(5) of the Act); and
(2) Reimbursement for premium and (2) Special rule for ESRD enrollees. For
cost sharing reductions for low-income ESRD enrollees, the MA payment area
individuals, described at section 1860D– is a State or other geographic area
14 of the Act. specified by CMS.
(c) Special rules—(1) Enrollees with (e) Geographic adjustment of payment
end-stage renal disease. (i) For enrollees areas for MA local plans—(1) Termi-
determined to have end-stage renal dis- nology. ‘‘Metropolitan Statistical
ease (ESRD), CMS establishes special Area’’ and ‘‘Metropolitan Division’’
rates that are actuarially equivalent to mean any areas so designated by the
rates in effect before the enactment of Office of Management and Budget in
the Medicare Prescription Drug, Im- the Executive Office of the President.
provement, and Modernization Act of (2) State request. A State’s chief exec-
2003. utive may request, no later than Feb-
(ii) CMS publishes annual changes in ruary 1 of any year, a geographic ad-
these capitation rates no later than the justment of the State’s payment areas
first Monday in April each year, as pro- for MA local plans for the following
vided in § 422.312. calendar year. The chief executive may
(iii) CMS applies appropriate adjust- request any of the following adjust-
ments when establishing the rates, in- ments to the payment area specified in
cluding risk adjustment factors. paragraph (c)(1)(i) of this section:
(iv) CMS reduces the payment rate (i) A single statewide MA payment
for each renal dialysis treatment by area.
the same amount that CMS is author- (ii) A metropolitan-based system in
ized to reduce the amount of each com- which all non-metropolitan areas with-
posite rate payment for each treatment in the State constitute a single pay-
as set forth in section 1881(b)(7) of the ment area and any of the following
Act. These funds are to be used to help constitutes a separate MA payment
pay for the ESRD network program in area:
477
§ 422.306 42 CFR Ch. IV (10–1–17 Edition)
(A) All portions of each single Metro- the preceding year increased by the na-
politan Statistical Area within the tional per capita MA growth percent-
State. age (defined at § 422.308(a)) for the year,
(B) All portions of each Metropolitan but not taking into account any ad-
Statistical Area within each Metro- justment under § 422.308(b) for a year
politan Division within the State. before 2004.
(iii) A consolidation of noncontig- (b) Greater of the minimum percentage
uous counties. increase rate or local area fee-for-service
(3) CMS response. In response to the costs. The annual capitation rate for
request, CMS makes the payment ad- each MA local area is the greater of—
justment requested by the chief execu- (1) The minimum percentage increase
tive. This adjustment cannot be re- rate under paragraph (a) of this sec-
quested or made for payments to re- tion; or
gional MA plans. (2) The amount determined, no less
(4) Budget neutrality adjustment for
frequently than every 3 years, to be the
geographically adjusted payment areas. If
adjusted average per capita cost for the
CMS adjusts a State’s payment areas
MA local area, as determined under
in accordance with paragraph (d)(2) of
section 1876(a)(4) of the Act, based on
this section, CMS at that time, and
100 percent of fee-for-service costs for
each year thereafter, adjusts the capi-
individuals who are not enrolled in an
tation rates so that the aggregate
MA plan for the year, with the fol-
Medicare payments do not exceed the
lowing adjustments:
aggregate Medicare payments that
would have been made to all the (i) Adjusted as appropriate for the
State’s payments areas, absent the ge- purpose of risk adjustment;
ographic adjustment. (ii) Adjusted to exclude costs attrib-
(f) Separate payment for meaningful use utable to payments under section
of certified EHRs. In the case of quali- 1886(h) of the Act for the costs of direct
fying MA organizations, as defined in graduate medical education;
§ 495.200 of this chapter, entitled to MA (iii) Adjusted to include CMS’ esti-
EHR incentive payments per § 495.220 of mate of the amount of additional per
this chapter, such payments are made capita payments that would have been
in accordance with sections 1853(l) and made in the MA local area if individ-
(m) of the Act and subpart C of part 495 uals entitled to benefits under this
of this chapter. title had not received services from fa-
cilities of the Department of Defense
FR 44564, July 28, 2010]
or the Department of Veterans Affairs;
and
§ 422.306 Annual MA capitation rates. (iv) Adjusted to exclude costs attrib-
Subject to adjustments at §§ 422.308(b) utable to payments under sections
and 422.308(g), the annual capitation 1848(o) and 1886(n) of the Act of Medi-
rate for each MA local area is deter- care FFS incentive payments for
mined under paragraph (a) of this sec- meaningful use of electronic health
tion for 2005 and each succeeding year, records.
except for years when CMS announces (c) Phase-out of the indirect costs of
under § 422.312(b) that the annual capi- medical education from MA capitation
tation rates will be determined under rates. Beginning with 2010, after the an-
paragraph (b) of this section, and is nual capitation rate for each MA local
then adjusted to exclude the applicable area is determined under paragraph (a)
phase-in percentage of the standardized or (b), the amount is adjusted in ac-
costs for payments under section cordance with section 1853(k)(4) of the
1886(d)(5)(B) of the Act in the area for Act to exclude from such amount the
the year under paragraph (c) of this phase-in percentage for the year of the
section. estimated costs for payments under
(a) Minimum percentage increase rate. section 1886(d)(5)(B) of the Act in the
The annual capitation rate for each area for the year.
MA local area is equal to the minimum [70 FR 4729, Jan. 28, 2005, as amended at 73
percentage increase rate, which is the FR 54250, Sept. 18, 2008; 75 FR 19806, Apr. 15,
annual capitation rate for the area for 2010; 75 FR 44564, July 28, 2010]
478
§ 422.308 Adjustments to capitation (A) 100 percent of payments for ESRD

rates, benchmarks, bids, and pay- MA enrollees in 2005 and succeeding
ments. years.
CMS performs the following calcula- (B) 75 percent of payments for aged
tions and adjustments to determine and disabled enrollees in 2006.
rates and payments: (C) 100 percent of payments for aged
(a) National per capita growth percent- and disabled enrollees in 2007 and suc-
age. (1) The national per capita growth ceeding years.
percentage for a year, applied under (3) Uniform application. Except as pro-
§ 422.306, is CMS’ estimate of the rate of vided for MA RFB plans under
growth in per capita expenditures § 422.304(c)(3), CMS applies this adjust-
under this title for an individual enti- ment factor to all types of plans.
tled to benefits under Part A and en- (4) Authority to apply frailty adjust-
rolled under Part B. CMS may make ment under PACE payment rules for cer-
separate estimates for aged enrollees, tain specialized MA plans for special
disabled enrollees, and enrollees who needs individuals. (i) Application of pay-
have ESRD. ment rules. For plan year 2011 and sub-
(2) The amount calculated in para- sequent plan years, in the case of a
graph (a)(1) of this section must ex- plan described in paragraph (c)(4)(ii) of
clude expenditures attributable to sec- this section, the Secretary may apply
tions 1848(a)(7) and (o) and sections the payment rules under section 1894(d)
1886(b)(3)(B)(ix) and (n) of the Act.
of the Act (other than paragraph (3) of
(b) Adjustment for over or under projec- that section) rather than the payment
tion of national per capita growth per-
rules that would otherwise apply under
centages. CMS will adjust the minimum
this part, but only to the extent nec-
percentage increase rate at
§ 422.306(a)(2) and the adjusted average essary to reflect the costs of treating
per capita cost rate at § 422.306(b)(2) for high concentrations of frail individ-
the previous year to reflect any dif- uals.
ferences between the projected na- (ii) Plan described. A plan described in
tional per capita growth percentages this paragraph is a fully integrated
for that year and previous years, and dual-eligible special needs plan, as de-
the current estimates of those percent- fined at § 422.2, and has a similar aver-
ages for those years. CMS will not age level of frailty (as determined by
make this adjustment for years before the Secretary) as the PACE program.
2004. (5) Application of coding adjustment. (i)
(c) Risk adjustment—(1) General rule. In applying the adjustment under para-
CMS will adjust the payment amounts graph (c)(1) of this section for health
under § 422.304(a)(1), (a)(2), and (a)(3) for status to payment amounts, the Sec-
age, gender, disability status, institu- retary ensures that such adjustment
tional status, and other factors CMS reflects changes in treatment and cod-
determines to be appropriate, including ing practices in the fee-for-service sec-
health status, in order to ensure actu- tor and reflects differences in coding
arial equivalence. CMS may add to, patterns between MA plans and pro-
modify, or substitute for risk adjust- viders under Part A and B to the extent
ment factors if those changes will im- that the Secretary has identified such
prove the determination of actuarial differences.
equivalence.
(ii) In order to ensure payment accu-
(2) Risk adjustment: Health status—(i)
racy, the Secretary annually conducts
Data collection. To adjust for health
an analysis of the differences described
status, CMS applies a risk factor based
on data obtained in accordance with in paragraph (c)(5)(i) of this section.
§ 422.310. (A) The Secretary completes such
(ii) Implementation. CMS applies a analysis by a date necessary to ensure
risk factor that incorporates inpatient that the results of such analysis are in-
hospital and ambulatory risk adjust- corporated on a timely basis into the
ment data. This factor is phased as fol- risk scores for 2008 and subsequent
lows: years.
479
§ 422.308 42 CFR Ch. IV (10–1–17 Edition)
(B) In conducting such analysis, the in paragraph (c)(6)(iii)(A) of this sec-

Secretary uses data submitted with re- tion.
spect to 2004 and subsequent years, as (iv) Publication of evaluation and revi-
available and updated as appropriate. sions. The Secretary publishes, as part
(iii) In calculating each year’s ad- of an announcement under section
justment, the adjustment factor is as 1853(b) of the Act, a description of any
follows: evaluation conducted under paragraph
(A) For 2014, not less than the adjust- (c)(6)(iii) of this section during the pre-
ment factor applied for 2010, plus 1.3 ceding year and any revisions made
percentage points. under paragraph (c)(6)(iii) of this sec-
(B) For each of the years 2015 through tion as a result of such evaluation.
2018, not less than the adjustment fac- (d) Adjustment for intra-area vari-
tor applied for the previous year, plus ations. CMS makes the following ad-
0.25 percentage points. justments to payments.
(1) Intra-regional variations. For pay-
(C) For 2019 and each subsequent
ments for an MA regional plan for an
year, not less than 5.7 percent.
MA region, CMS will adjust the pay-
(iv) Such adjustment is applied to ment amount specified at § 422.304(a)(1)
risk scores until the Secretary imple- and (a)(2) to take into account vari-
ments risk adjustment using MA diag- ations in local payment rates among
nostic, cost, and use data. the different MA local areas included
(6) Improvements to risk adjustment for in the region.
special needs individuals with chronic (2) Intra-service area variations. For
health conditions—(i) General rule. For payments to an MA local plan with a
2011 and subsequent years, for purposes service area covering more than one
of the adjustment under paragraph MA local area (county), CMS will ad-
(c)(1) of this section with respect to in- just the payment amount specified in
dividuals described in paragraph § 422.304(a)(1) and (a)(2) to take into ac-
(c)(6)(ii) of the section, the Secretary count variations in local payment
uses a risk score that reflects the rates among the different MA local
known underlying risk profile and areas included in the plan’s service
chronic health status of similar indi- area.
viduals. Such risk score is used instead (e) Adjustment relating to risk adjust-
of the default risk score for new enrollment: the government premium adjust-
ees in MA plans that are not special- ment. CMS will adjust payments to an
ized MA plans for special needs individ- MA plan as necessary to ensure that
uals (as defined in section 1859(b)(6) of the sum of CMS’ monthly payment
the Act). made under § 422.304(a) and the plan’s
(ii) Individuals described. An indi- monthly basic beneficiary premium
vidual described in this clause is a spe- equals the unadjusted MA statutory
cial needs individual described in sec- non-drug bid amount, adjusted for risk
tion 1859(b)(6)(B)(iii) of the Act who en- and for intra-area or intra-regional
rolls in a specialized MA plan for spe- payment variation.
cial needs individuals on or after Janu- (f) Adjustment of payments to reflect
ary 1, 2011. number of Medicare enrollees—(1) General
(iii) Evaluation. For 2011 and periodi- rule. CMS adjusts payments retro-
cally thereafter, the Secretary evalu- actively to take into account any dif-
ates and revises the risk adjustment ference between the actual number of
system under this paragraph in order Medicare enrollees and the number on
to, as accurately as possible, account which it based an advance monthly
for— payment.
(A) Higher medical and care coordi- (2) Special rules for certain enrollees. (i)
nation costs associated with frailty, in- Subject to paragraph (f)(2)(ii) of this
dividuals with multiple, comorbid section, CMS may make adjustments,
chronic conditions, and individuals for a period (not to exceed 90 days) that
with a diagnosis of mental illness; and begins when a beneficiary elects a
(B) Costs that may be associated group health plan (as defined in
with higher concentrations of bene- § 411.1010) offered by an MA organiza-
ficiaries with the conditions specified tion, and ends when the beneficiary is
480
enrolled in an MA plan offered by the the data necessary to characterize the

MA organization. context and purposes of each item and
(ii) CMS does not make an adjust- service provided to a Medicare enrollee
ment unless the beneficiary certifies by a provider, supplier, physician, or
that, at the time of enrollment under other practitioner. CMS may also col-
the MA plan, he or she received from lect data necessary to characterize the
the organization the disclosure state- functional limitations of enrollees of
ment specified in § 422.111. each MA organization.
(g) Adjustment for national coverage (c) Sources and extent of data. (1) To
determination (NCD) services and legisla- the extent required by CMS, risk ad-
tive changes in benefits. If CMS deter- justment data must account for the
mines that the cost of furnishing an following:
NCD service or legislative change in
(i) Items and services covered under
benefits is significant, as defined in
the original Medicare program.
§ 422.109, CMS will adjust capitation
(ii) Medicare covered items and serv-
rates, or make other payment adjust-
ices for which Medicare is not the pri-
ments, to account for the cost of the
mary payer.
service or legislative change in bene-
fits. Until the new capitation rates are (iii) Other additional or supplemental
in effect, the MA organization will be benefits that the MA organization may
paid for the significant cost NCD serv- provide.
ice or legislative change in benefits on (2) The data must account separately
a fee-for-service basis as provided for each provider, supplier, physician,
under § 422.109(b). or other practitioner that would be
(h) Adjustments to payments to regional permitted to bill separately under the
MA plans for purposes of risk corridor original Medicare program, even if
payments. For the purpose of calcula- they participate jointly in the same
tion of risk corridors under § 422.458, service.
MA organizations offering regional MA (d) Other data requirements. (1) MA or-
plans in 2006 and/or 2007 must submit, ganizations must submit data that con-
after the end of a contract year and be- form to CMS’ requirements for data
fore a date CMS specifies, the following equivalent to Medicare fee-for-service
information: data, when appropriate, and to all rel-
(1) Actual allowable costs (defined in evant national standards. CMS may
§ 422.458(a)) for the previous contract specify abbreviated formats for data
year. submission required of MA organiza-
(2) The portion of the costs attrib- tions.
utable to administrative expenses in- (2) The data must be submitted elec-
curred in providing these benefits. tronically to the appropriate CMS con-
(3) The total costs for providing tractor.
rebatable integrated benefits (as de- (3) MA organizations must obtain the
fined in § 422.458(a)) and the portion of risk adjustment data required by CMS
the costs that is attributable to admin- from the provider, supplier, physician,
istrative expenses in addition to the or other practitioner that furnished
administrative expenses described in the item or service.
paragraph (h)(2) of this section. (4) MA organizations may include in
[70 FR 4729, Jan. 28, 2005, as amended at 75 their contracts with providers, sup-
FR 44564, July 28, 2010; 76 FR 21567, Apr. 15, pliers, physicians, and other practi-
2011] tioners, provisions that require submis-
sion of complete and accurate risk ad-
§ 422.310 Risk adjustment data. justment data as required by CMS.
(a) Definition of risk adjustment data. These provisions may include financial
Risk adjustment data are all data that penalties for failure to submit com-
are used in the development and appli- plete data.
cation of a risk adjustment payment (e) Validation of risk adjustment data.
model. MA organizations and their providers
(b) Data collection: Basic rule. Each and practitioners will be required to
MA organization must submit to CMS submit a sample of medical records for
(in accordance with CMS instructions) the validation of risk adjustment data,
481
§ 422.310 42 CFR Ch. IV (10–1–17 Edition)
as required by CMS. There may be pen- and (f)(2)(iv) of this section will be re-
alties for submission of false data. leased without the redaction or aggre-
(f) Use and release of data—(1) CMS use gation described in paragraphs
of data. CMS may use the data de- (f)(2)(iii) and (f)(2)(iv) of this section,
scribed in paragraphs (a) through (d) of respectively.
this section for the following purposes: (3) Risk adjustment data will not be-
(i) To determine the risk adjustment come available for release under this
factors used to adjust payments, as re- paragraph (f) unless—
quired under §§ 422.304(a) and (c); (i) The risk adjustment reconcili-
(ii) To update risk adjustment mod- ation for the applicable payment year
els; has been completed;
(iii) To calculate Medicare DSH per- (ii) CMS determines that data release
centages; is necessary under paragraph (f)(1)(vi)
(iv) To conduct quality review and of this section for emergency prepared-
improvement activities; ness purposes before reconciliation; or
(v) For Medicare coverage purposes;
(iii) CMS determines that extraor-
(vi) To conduct evaluations and other
dinary circumstances exist to release
analysis to support the Medicare pro-
the data before reconciliation.
gram (including demonstrations) and
to support public health initiatives and (g) Deadlines for submission of risk ad-
other health care-related research; justment data. Risk adjustment factors
(vii) For activities to support the ad- for each payment year are based on
ministration of the Medicare program; risk adjustment data submitted for
(viii) For activities conducted to sup- items and services furnished during the
port program integrity; and 12-month period before the payment
(ix) For purposes authorized by other year that is specified by CMS. As deter-
applicable laws. mined by CMS, this 12-month period
(2) CMS release of data. Regarding may include a 6-month data lag that
data described in paragraphs (a) may be changed or eliminated as ap-
through (d) of this section, CMS may propriate. CMS may adjust these dead-
release the minimum data it deter- lines, as appropriate.
mines is necessary for one or more of (1) The annual deadline for risk ad-
the purposes listed in paragraph (f)(1) justment data submission is the first
of this section to other HHS agencies, Friday in September for risk adjust-
other Federal executive branch agen- ment data reflecting items and services
cies, States, and external entities in furnished during the 12-month period
accordance with the following: ending the prior June 30, and the first
(i) Applicable Federal laws; Friday in March for data reflecting
(ii) CMS data sharing procedures; services furnished during the 12-month
(iii) Subject to the protection of ben- period ending the prior December 31.
eficiary identifier elements and bene- (2) After the payment year is com-
ficiary confidentiality, including— pleted, CMS recalculates the risk fac-
(A) A prohibition against public dis- tors for affected individuals to deter-
closure of beneficiary identifying infor- mine if adjustments to payments are
mation; necessary.
(B) Release of beneficiary identifying (i) Prior to calculation of final risk
information to other HHS agencies, factors for a payment year, CMS allows
other Federal executive branch agen- a reconciliation process to account for
cies, and States only when such infor- risk adjustment data submitted after
mation is needed; and the March deadline until the final risk
(C) Release of beneficiary identifying adjustment data submission deadline
information to external entities only in the year following the payment
to the extent needed to link datasets. year.
(iv) Subject to the aggregation of (ii) After the final risk adjustment
dollar amounts reported for the associ- data submission deadline, which is a
ated encounter to protect commer- date announced by CMS that is no ear-
cially sensitive data. lier than January 31 of the year fol-

(v) Risk adjustment data other than lowing the payment year, an MA orga-
data described in paragraphs (f)(2)(iii) nization can submit data to correct
482
overpayments but cannot submit diag- (B) RADV appeals procedures and re-
noses for additional payment. quirements.
(3) Submission of corrected risk ad- (ii) Failure to follow RADV rules. Fail-
justment data in accordance with over- ure to follow the Secretary’s RADV
payments after the final risk adjust- audit procedures and requirements and
ment data submission deadline, as de- the Secretary’s RADV appeals proce-
scribed in paragraph (g)(2) of this sec- dures and requirements will render the
tion, must be made as provided in MA organization’s request for appeal
§ 422.326. invalid.
(iii) RADV appeal rules. The MA orga-
nization’s written request for medical
FR 29956, May 23, 2014; 79 FR 50358, Aug. 22,
2014; 80 FR 7960, Feb. 12, 2015] record review determination appeal
must specify the following:
§ 422.311 RADV audit dispute and ap- (A) The audited HCC(s) that the Sec-
peal processes. retary identified as being in error.
(B) A justification in support of the
(a) Risk adjustment data validation
audited HCC selected for appeal.
(RADV) audits. In accordance with
(iv) Number of medical records eligible
§ 422.2 and § 422.310(e), the Secretary an-
for appeal. For each audited HCC, MA
nually conducts RADV audits to ensure
organizations may appeal one medical
risk adjusted payment integrity and
record that has undergone RADV re-
accuracy.
view. If an attestation was submitted
(b) RADV audit results. (1) MA organi-
to cure a signature or credential-re-
zations that undergo RADV audits will
lated error, the attestation may be in-
be issued an audit report post medical
cluded in the HCC appeal.
record review that describes the results
(v) Selection of medical record for ap-
of the RADV audit as follows:
peal. The MA organization must select
(i) Detailed enrollee-level informa- the medical record that undergoes ap-
tion relating to confirmed enrollee peal.
HCC discrepancies. (vi) Written request for RADV payment
(ii) The contract-level RADV pay- error calculation appeal. The written re-
ment error estimate in dollars. quest for RADV payment error calcula-
(iii) The contract-level payment ad- tion appeal must clearly specify the
justment amount to be made in dollars. following:
(iv) An approximate timeframe for (A) The MA organization’s own
the payment adjustment. RADV payment error calculation.
(v) A description of the MA organiza- (B) Where the Secretary’s RADV pay-
tion’s RADV audit appeal rights. ment error calculation was erroneous.
(2) Compliance date. The compliance (3) Issues ineligible for RADV appeals.
date for meeting RADV medical record (i) MA organizations’ request for ap-
submission requirements for the vali- peal may not include HCCs, medical
dation of risk adjustment data is the records or other documents beyond the
due date when MA organizations se- audited HCC, RADV-reviewed medical
lected for RADV audit must submit record, and any accompanying attesta-
medical records to the Secretary. tion that the MA organization chooses
(c) RADV audit appeals—(1) Appeal for appeal.
rights. MA organizations that do not (ii) MA organizations may not appeal
agree with their RADV audit results the Secretary’s medical record review
may appeal. determination methodology or RADV
(2) Issues eligible for RADV appeals—(i) payment error calculation method-
General rules. MA organizations may ology.
appeal RADV medical record review de- (iii) As part of the RADV payment
terminations and the Secretary’s error calculation appeal— MA organi-
RADV payment error calculation. In zations may not appeal RADV medical
order to be eligible for RADV appeal, record review-related errors.
MA organizations must adhere to the (iv) MA organizations may not appeal
following: RADV errors that result from an MA

(A) Established RADV audit proce- organization’s failure to submit a med-
dures and requirements. ical record.
483
§ 422.311 42 CFR Ch. IV (10–1–17 Edition)
(4) Burden of proof. The MA organiza- (6) Reconsideration stage—(i) Written

tion bears the burden of proof by a pre- request for medical record review recon-
ponderance of the evidence in dem- sideration. A MA organization’s written
onstrating that the Secretary’s med- request for medical record review de-
ical record review determination(s) or termination reconsideration must
payment error calculation was incor- specify the following:
rect. (A) The audited HCC that the Sec-
(5) Manner and timing of a request for retary identified as being in error that
RADV appeal. (i) At the time the Sec- the MA organization wishes to appeal.
retary issues its RADV audit report,
(B) A justification in support of the
the Secretary notifies audited MA or-
audited HCC chosen for appeal.
ganizations of the following:
(A) That they may appeal RADV HCC (ii) Written request for payment error
errors that are eligible for medical calculation. The MA organization’s
record review determination appeal. written request for payment error cal-
(B) That they may appeal the Sec- culation reconsideration—
retary’s RADV payment error calcula- (A) Must include the MA organiza-
tion. tion’s own RADV payment error cal-
(ii) MA organizations have 60 days culation that clearly specifies where
from date of issuance of the RADV the Secretary’s RADV payment error
audit report to file a written request calculation was erroneous; and
with CMS for RADV appeal. This re- (B) May include additional documen-
quest for RADV appeal must specify tary evidence pertaining to the cal-
one of the following: culation of the payment error that the
(A) Whether the MA organization re- MA organization wishes the reconsider-
quests medical record review deter- ation official to consider.
mination appeal, the issues with which (iii) Conduct of the reconsideration. (A)
the MA organization disagrees, and the For medical record review determina-
reasons for the disagreements.
tion reconsideration, a medical record
(B) Whether the MA organization re-
review professional who was not in-
quests RADV payment error calcula-
tion appeal, the issues with which the volved in the initial medical record re-
MA organization disagrees, and the view determination of the disputed au-
reasons for the disagreements. dited HCCs does the following:
(C) Whether the MA organization re- (1) Reviews the medical record and
quests both medical record review de- accompanying dispute justification.
termination appeal and RADV pay- (2) Reconsiders the initial audited
ment error calculation appeal, the medical record review determination.
issues with which the MA organization (B) For payment error calculation re-
disagrees, and the reasons for the dis- consideration, CMS ensures that a
agreements. third party not involved in the initial
(iii) For MA organizations that ap- RADV payment error calculation does
peal both medical record review deter- the following:
mination appeal and RADV payment (1) Reviews the Secretary’s RADV
error calculation appeal: payment error calculation.
(A) The Secretary adjudicates the re- (2) Reviews the MA organization’s
quest for RADV payment error calcula- RADV payment error calculation;
tion following conclusion of reconsider-
(3) Recalculates the payment error in
ation of the MA organization’s request
for medical record review determina- accordance with CMS’s RADV payment
tion appeal. error calculation procedures.
(B) An MA organization’s request for (iv) Effect of the reconsideration offi-
appeal of its RADV payment error cal- cial’s decision. (A) The reconsideration
culation will not be adjudicated until official issues a written reconsider-
appeals of RADV medical record review ation decision to the MA organization.
determinations filed by the MA organi- (B) The reconsideration official’s de-
zation have been completed and the decision is final unless the MA organiza-
cisions are final for that stage of ap- tion disagrees with the reconsideration
peal. official’s decision.
484
(C) If the MA organization disagrees must notify that officer in writing at

with the reconsideration official’s deci- the earliest opportunity.
sion, they may request a hearing in ac- (C) The hearing officer must consider
cordance with paragraph (c)(7) of this the objections, and may, at his or her
section. discretion, either proceed with the
(7) Hearing stage—(i) Errors eligible for hearing or withdraw.
hearing. At the time the reconsider- (D) If the hearing officer withdraws,
ation official issues his or her reconsid- another hearing officer conducts the
eration determination to the MA orga- hearing.
nization, the reconsideration official (E) If the hearing officer does not
notifies the MA organization of any withdraw, the objecting party may,
RADV HCC errors or payment error- after the hearing, present objections
calculations that are eligible for RADV and request that the officer’s decision
hearing. be revised or a new hearing be held be-
(ii) General hearing rules. A MA orga- fore another hearing officer. The objec-
nization that requests a RADV hearing tions must be submitted in writing to
must do so in writing in accordance the Secretary.
with procedures established by CMS. (vi) Hearing Officer review. The hear-
(iii) Written request for hearing. The ing officer reviews the following:
written request for a hearing must be (A) For a medical record review de-
filed with the Hearing Officer within 60 termination appeal, the hearing officer
days of the date the MA organization reviews all of the following:
receives the reconsideration officer’s (1) The RADV-reviewed medical
written reconsideration decision. record and any accompanying attesta-
(A) If the MA organization appeals tion that the MA organization selected
medical record review reconsideration for review.
determination, the written request for (2) The reconsideration official’s
RADV hearing must— written determination.
(1) Include a copy of the written deci- (3) The written brief submitted by
sion of the reconsideration official; the MA organization or the Secretary
(2) Specify the audited HCCs that the in response to the reconsideration offi-
reconsideration official confirmed as cial’s determination.
being in error; and (B) For a payment error calculation
(3) Specify a justification why the appeal, the hearing officer reviews all
MA organization disputes the reconsid- of the following:
eration official’s determination. (1) The reconsideration official’s
(B) If the MA organization appeals written determination.
the RADV payment error calculation (2) Briefs addressing the reconsider-
reconsideration determination, the ation decision.
written request for RADV hearing (vii) Hearing procedures—(A) Authority
must include the following: of the Hearing Officer. The hearing offi-
(1) A copy of the written decision of cer has full power to make rules and
the reconsideration official. establish procedures, consistent with
(2) The MA organization’s own RADV the law, regulations, and the Secretary
payment error calculation that clearly rulings. These powers include the au-
specifies where the Secretary’s pay- thority to dismiss the appeal with prej-
ment error calculation was erroneous. udice and take any other action which
(iv) Designation of hearing officer. A the hearing officer considers appro-
hearing officer will conduct the RADV priate, including for failure to comply
hearing. with such rules and procedures.
(v) Disqualification of the hearing offi- (B) The hearing is on the record. (1) Ex-
cer. (A) A hearing officer may not con- cept as specified in paragraph
duct a hearing in a case in which he or (c)(viii)(B)(2) of this section, the hear-
she is prejudiced or partial to any ing officer is limited to the review of
party or has any interest in the matter the record.
pending for decision. (2)(i) Subject to the hearing officer’s

(B) A party to the hearing who ob- full discretion, the parties may request
jects to the designated hearing officer a live or telephonic hearing regarding
485
§ 422.312 42 CFR Ch. IV (10–1–17 Edition)
some or all of the disputed medical sion and requests review by the CMS
records. Administrator must do so within 60
(ii) The hearing officer may, on his or days of receipt of the hearing officer’s
her own-motion, schedule a live or tel- decision.
ephonic hearing. (iii) After receiving a request for re-
(3) The record is comprised of the fol- view, the CMS Administrator has the
lowing: discretion to elect to review the hear-
(i) Written decisions described at para- ing officer’s decision or to decline to
graphs (c)(6)(iv) and (7)(vi) of this sec- review the hearing officer’s decision.
tion. (iv) If the CMS Administrator elects
(ii) Written briefs from the MA orga- to review the hearing decision—
nization explaining why they believe (A) The CMS Administrator acknowl-
the reconsideration official’s deter- edges the decision to review the hear-
mination was incorrect. ing decision in writing and notifies
(iii) The Secretary’s optional brief CMS and the MA organization of their
that responds to the MA organization’s right to submit comments within 15
brief— days of the date of the notification;
(4) The hearing officer neither re- and
ceives testimony nor accepts any new (B) The CMS Administrator is lim-
evidence that is not part of the record. ited to the review of the record. The
(5) Either the MA organization or the record is comprised of the following:
Secretary may ask the hearing officer (1) The record is comprised of docu-
to rule on a motion for summary judg- ments described at paragraph
ment. (c)(7)(vii)(B)(3) of this section.
(viii) Hearing Officer decision. The (2) The hearing record.
hearing officer decides whether to up- (3) Written arguments from the MA
hold or overturn the reconsideration organization or CMS explaining why ei-
official’s decision, and sends a written ther or both parties believe the hearing
determination to CMS and the MA or- officer’s determination was correct or
ganization, explaining the basis for the incorrect.
decision. (C) The CMS Administrator reviews
(ix) Computations based on hearing de- the record and determines whether the
cision. (A) Once the hearing officer’s de- hearing officer’s determination should
cision is considered final in accordance be upheld, reversed, or modified.
with paragraph (c)(7)(x) of this section, (v) The CMS Administrator renders
a third party not involved in the initial his or her final decision in writing to
RADV payment error calculation recal- the parties within 60 days of acknowl-
culates the MA organization’s RADV edging his or her decision to review the
payment error and issues a new RADV hearing officer’s decision.
audit report to the appellant MA orga- (vi) The decision of the hearing offi-
nization and CMS. cer is final if the CMS Administrator—
(B) For MA organizations appealing (A) Declines to review the hearing of-
the RADV error calculation only, a ficer’s decision; or
third party not involved in the initial (B) Does not make a decision within
RADV payment error calculation recal- 60 days.
culates the MA organization’s RADV [75 FR 19806, Apr. 15, 2010; 75 FR 32859, June
payment error and issues a new RADV 10, 2010; 79 FR 29956, May 23, 2014]
audit report to the appellant MA orga-
nization and CMS. § 422.312 Announcement of annual
(x) Effect of the Hearing Officer’s deci- capitation rate, benchmarks, and
sion. The hearing officer’s decision is methodology changes.
final unless the decision is reversed or (a) Capitation rates—(1) Initial an-
modified by the CMS Administrator. nouncement. Not later than the first
(8) CMS Administrator review stage. (i) Monday in April each year, CMS an-
A request for CMS Administrator re- nounces to MA organizations and other
view must be made in writing and filed interested parties the following infor-
with the CMS Administrator. mation for each MA payment area for
(ii) CMS or a MA organization that the following calendar year:
has received a hearing officer’s deci- (i) The annual MA capitation rate.
486
(ii) The risk and other factors to be (c) Deposit in the MA MSA. (1) The
used in adjusting those rates under payment is calculated as follows:
§ 422.308 for payments for months in (i) The monthly MA MSA premium is
that year. compared with 1⁄12 of the annual capita-
(2) CMS includes in the announce- tion rate applied under this section for
ment an explanation of assumptions the.
used and a description of the risk and (ii) If the monthly MA MSA premium
other factors. is less than 1⁄12 of the annual capitation
(3) Regional benchmark announcement. rate applied under this section for the
Before the beginning of each annual, area, the difference is the amount to be
coordinated election period under deposited in the MA MSA for each
§ 422.62(a)(2), CMS will announce to MA month for which the beneficiary is en-
organizations and other interested par-
rolled in the MSA plan.
ties the MA region-specific non-drug
monthly benchmark amount for the (2) CMS deposits the full amount to
year involved for each MA region and which a beneficiary is entitled under
each MA regional plan for which a bid paragraph (c)(1)(ii) of this section for
was submitted under § 422.256. the calendar year, beginning with the
(b) Advance notice of changes in meth- month in which MA MSA coverage be-
odology. (1) No later than 45 days before gins.
making the announcement under para- (3) If the beneficiary’s coverage under
graph (a)(1) of this section, CMS noti- the MA MSA plan ends before the end
fies MA organizations of changes it of the calendar year, CMS recovers the
proposes to make in the factors and the amount that corresponds to the re-
methodology it used in the previous de- maining months of that year.
termination of capitation rates.
(2) The MA organizations have 15 FR 52027, Sept. 1, 2005]
days to comment on the proposed
changes. § 422.316 Special rules for payments to
Federally qualified health centers.
§ 422.314 Special rules for bene-
ficiaries enrolled in MA MSA plans. If an enrollee in an MA plan receives
a service from a Federally qualified
(a) Establishment and designation of
health center (FQHC) that has a writ-
medical savings account (MSA). A bene-
ten agreement with the MA organiza-
ficiary who elects coverage under an
MA MSA plan— tion offering the plan concerning the
(1) Must establish an MA MSA with a provision of this service (including the
trustee that meets the requirements of agreement required under section
paragraph (b) of this section; and 1857(e)(3) of the Act and as codified in
(2) If he or she has more than one MA § 422.527)—
MSA, designate the particular account (a) CMS will pay the amount deter-
to which payments under the MA MSA mined under section 1833(a)(3)(B) of the
plan are to be made. Act directly to the FQHC at a min-
(b) Requirements for MSA trustees. An imum on a quarterly basis, less the
entity that acts as a trustee for an MA amount the FQHC would receive for
MSA must— the MA enrollee from the MA organiza-
(1) Register with CMS; tion (which includes the cost sharing
(2) Certify that it is a licensed bank, amount the FQHC may charge an en-
insurance company, or other entity rollee, as established in the contract
qualified, under sections 408(a)(2) or between the FQHC and the MA organi-
408(h) of the Internal Revenue Code of zation); and
1986, to act as a trustee of individual (b) CMS will not reduce the amount
retirement accounts; of the monthly payments under this
(3) Agree to comply with the MA section as a result of the application of
MSA provisions of section 138 of the In- paragraph (a) of this section.
ternal Revenue Code of 1986; and

(4) Provide any other information
FR 76198, Dec. 23, 2005]
that CMS may require.
487
§ 422.318 42 CFR Ch. IV (10–1–17 Edition)
§ 422.318 Special rules for coverage this part must inform each Medicare
that begins or ends during an inpa- enrollee eligible to select hospice care
tient hospital stay. under § 418.24 of this chapter about the
(a) Applicability. This section applies availability of hospice care (in a man-
to inpatient services in a ‘‘subsection ner that objectively presents all avail-
(d) hospital’’ as defined in section able hospice providers, including a
1886(d)(1)(B) of the Act, a psychiatric statement of any ownership interest in
hospital described in section a hospice held by the MA organization
1886(d)(1)(B)(i) of the act, a rehabilita- or a related entity) if—
tion hospital described in section (1) A Medicare hospice program is lo-
1886(d)(1)(B)(ii) of the Act, a distinct cated within the plan’s service area; or
part rehabilitation unit described in (2) It is common practice to refer pa-
the matter following clause (v) of sec- tients to hospice programs outside that
tion 1886(d)(1)(B) of the Act, or a long-
area.
term care hospital (described in section
1886(d)(1)(B)(iv)). (b) Enrollment status. Unless the en-
(b) Coverage that begins during an in- rollee disenrolls from the MA plan, a
patient stay. If coverage under an MA beneficiary electing hospice continues
plan offered by an MA organization be- his or her enrollment in the MA plan
gins while the beneficiary is an inpa- and is entitled to receive, through the
tient in one of the facilities described MA plan, any benefits other than those
in paragraph (a) of this section— that are the responsibility of the Medi-
(1) Payment for inpatient services care hospice.
until the date of the beneficiary’s dis- (c) Payment. (1) No payment is made
charge is made by the previous MA or- to an MA organization on behalf of a
ganization or original Medicare, as ap- Medicare enrollee who has elected hos-
propriate; pice care under § 418.24 of this chapter,
(2) The MA organization offering the except for the portion of the payment
newly-elected MA plan is not respon- attributable to the beneficiary rebate
sible for the inpatient services until for the MA plan, described in
the date after the beneficiary’s dis- § 422.266(b)(1) plus the amount of the
charge; and monthly prescription drug payment de-
(3) The MA organization offering the
scribed in § 423.315 (if any). This no-pay-
newly-elected MA plan is paid the full
ment rule is effective from the first
amount otherwise payable under this
day of the month following the month
subpart.
(c) Coverage that ends during an inpa- of election to receive hospice care,
tient stay. If coverage under an MA plan until the first day of the month fol-
offered by an MA organization ends lowing the month in which the election
while the beneficiary is an inpatient in is terminated.
one of the facilities described in para- (2) During the time the hospice elec-
graph (a) of this section— tion is in effect, CMS’ monthly capita-
(1) The MA organization is respon- tion payment to the MA organization
sible for the inpatient services until is reduced to the sum of—
the date of the beneficiary’s discharge; (i) An amount equal to the bene-
(2) Payment for those services during ficiary rebate for the MA plan, as de-
the remainder of the stay is not made scribed in § 422.304(a)(3) or to zero for
by original Medicare or by any suc- plans with no beneficiary rebate, de-
ceeding MA organization offering a scribed at § 422.304(a)(2); and
newly-elected MA plan; and (ii) The amount of the monthly pre-
(3) The MA organization that no scription drug payment described in
longer provides coverage receives no
§ 423.315 (if any).
payment for the beneficiary for the pe-
(3) In addition, CMS pays through the
riod after coverage ends.
original Medicare program (subject to
§ 422.320 Special rules for hospice the usual rules of payment)—
care. (i) The hospice program for hospice

(a) Information. An MA organization care furnished to the Medicare en-
that has a contract under subpart K of rollee; and
488
(ii) The MA organization, provider, or only the MA organization is entitled to

supplier for other Medicare-covered receive payment from CMS under title
services to the enrollee. XVIII of the Act for items and services
furnished to the individual.
FR 52027, Sept. 1, 2005] [70 FR 4729, Jan. 28, 2005, as amended at 70
FR 52027, Sept. 1, 2005; 75 FR 44654, July 28,
§ 422.322 Source of payment and effect 2010]
of MA plan election on payment.
(a) Source of payments. (1) Payments § 422.324 Payments to MA organiza-
under this subpart for original fee-for- tions for graduate medical edu-
service benefits to MA organizations or cation costs.
MA MSAs are made from the Federal (a) MA organizations may receive di-
Hospital Insurance Trust Fund or the rect graduate medical education pay-
Supplementary Medical Insurance ments for the time that residents spend
Trust Fund. CMS determines the pro- in non-hospital provider settings such
portions to reflect the relative weight as freestanding clinics, nursing homes,
that benefits under Part A, and bene- and physicians’ offices in connection
fits under Part B represents of the ac- with approved programs.
tuarial value of the total benefits (b) MA organizations may receive di-
under title XVIII of the Act. rect graduate medical education pay-
(2) Payments to MA-PD organiza- ments if all of the following conditions
tions for statutory drug benefits pro- are met:
vided under this title are made from (1) The resident spends his or her
the Medicare Prescription Drug Ac- time assigned to patient care activi-
count in the Federal Supplementary ties.
Medical Insurance Trust Fund.
(2) The MA organization incurs ‘‘all
(3) Payments under subpart C of part
or substantially all’’ of the costs for
495 of this chapter for meaningful use
the training program in the non-hos-
of certified EHR technology are made
pital setting as defined in § 413.86(b) of
from the Federal Hospital Insurance
this chapter.
Trust Fund or the Supplementary Med-
(3) There is a written agreement be-
ical Insurance Trust Fund. In applying
tween the MA organization and the
section 1848(o) of the Act under sec-
non-hospital site that indicates the MA
tions 1853(l) and 1886(n)(2)of the Act
organization will incur the costs of the
under section 1853(m) of the Act, CMS
resident’s salary and fringe benefits
determines the amount to the extent
and provide reasonable compensation
feasible and practical to be similar to
to the non-hospital site for teaching
the estimated amount in the aggregate
activities.
that would be payable for services fur-
nished by professionals and hospitals (c) An MA organization’s allowable
under Parts B and A, respectively, direct graduate medical education
under title XVIII of the Act. costs, subject to the redistribution and
(b) Payments to the MA organization. community support principles specified
Subject to §§ 412.105(g), 413.86(d), and in § 413.85(c) of this chapter, consist
495.204 of this chapter and §§ 422.109, of—
422.316, and 422.320, CMS’ payments (1) Residents’ salaries and fringe ben-
under a contract with an MA organiza- efits (including travel and lodging
tion (described in § 422.304) with respect where applicable); and
to an individual electing an MA plan (2) Reasonable compensation to the
offered by the organization are instead non-hospital site for teaching activi-
of the amounts which (in the absence ties related to the training of medical
of the contract) would otherwise be residents.
payable under original Medicare for (d) The direct graduate medical edu-
items and services furnished to the in- cation payment is equal to the product
dividual. of—
(c) Only the MA organization entitled (1) The lower of—
to payment. Subject to §§ 422.314, 422.316, (i) The MA organization’s allowable

422.318, 422.320, and 422.520 and sections costs per resident as defined in para-
1886(d)(11) and 1886(h)(3)(D) of the Act, graph (c) of this section; or
489
§ 422.326 42 CFR Ch. IV (10–1–17 Edition)
(ii) The national average per resident (2) Returning. An MA organization

amount; and must return identified overpayments in
(2) Medicare’s share, which is equal a manner specified by CMS.
to the ratio of the number of Medicare (e) Enforcement. Any overpayment re-
beneficiaries enrolled to the total num- tained by an MA organization is an ob-
ber of individuals enrolled in the MA ligation under 31 U.S.C. 3729(b)(3) if not
organization. reported and returned in accordance
(e) Direct graduate medical edu- with paragraph (d) of this section.
cation payments made to MA organiza- (f) Look-back period. An MA organiza-
tions under this section are made from tion must report and return any over-
the Federal Supplementary Medical In- payment identified for the 6 most re-
surance Trust Fund. cent completed payment years.
§ 422.326 Reporting and returning of [79 FR 29958, May 23, 2014]
overpayments.
§ 422.330 CMS-identified overpayments
(a) Terminology. For purposes of this associated with payment data sub-
section— mitted by MA organizations.
Applicable reconciliation occurs on the
(a) Definitions. For purposes of this
date of the annual final deadline for
risk adjustment data submission de- section—
scribed at § 422.310(g), which is an- Applicable reconciliation date occurs
nounced by CMS each year. on the date of the annual final deadline
Funds means any payment that an for risk adjustment data submission
MA organization has received that is described at § 422.310(g)(2)(ii).
based on data submitted by the MA or- Erroneous payment data means pay-
ganization to CMS for payment pur- ment data that should not have been
poses, including § 422.308(f) and § 422.310. submitted either because the data sub-
Overpayment means any funds that an mitted are inaccurate or because the
MA organization has received or re- data are inconsistent with Medicare
tained under title XVIII of the Act to Part C requirements.
which the MA organization, after appli- Payment data means data submitted
cable reconciliation, is not entitled by an MA organization to CMS and
under such title. used for payment purposes, including
(b) General rule. If an MA organiza- enrollment data and data submitted
tion has identified that it has received under § 422.310.
an overpayment, the MA organization (b) Request to correct payment data. (1)
must report and return that overpay- When CMS identifies erroneous pay-
ment in the form and manner set forth ment data submitted by an MA organi-
in this section. zation (other than an error identified
(c) Identified overpayment. The MA or- through the process described in
ganization has identified an overpay- § 422.311), CMS may send a data correc-
ment when the MA organization has tion notice to the MA organization re-
determined, or should have determined questing that the MA organization cor-
through the exercise of reasonable dili- rect the payment data.
gence, that the MA organization has (2) The notice will include or make
received an overpayment. reference to the specific payment data
(d) Reporting and returning of an over- that need to be corrected, the reason
payment. An MA organization must re- why CMS believes that the payment
port and return any overpayment it re- data are erroneous, and the timeframe
ceived no later than 60 days after the for correcting the payment data.
date on which it identified it received (c) Payment offset. (1) If the MA orga-
an overpayment, unless otherwise di- nization fails to submit the corrected
rected by CMS for purposes of § 422.311. payment data within the timeframe as
(1) Reporting. An MA organization requested in accordance with para-
must notify CMS, of the amount and graph (b) of this section, CMS will con-
reason for the overpayment, using a duct a payment offset against pay-
notification process determined by ments made to the MA organization
CMS. if—
490
(i) The payment error affects pay- offset and any additional documentary
ments for any of the 6 most recently evidence timely submitted by the MA
completed payment years; and organization.
(ii) The payment error for a par- (iv) Reconsideration decision. The CMS
ticular payment year is identified after reconsideration official informs the
the applicable reconciliation date for MA organization of its decision on the
that payment year. reconsideration request.
(2) CMS will calculate the payment (v) Effect of reconsideration decision.
offset amount using the correct pay- The decision of the CMS reconsider-
ment data and a payment algorithm ation official is final and binding un-
that applies the payment rules for the less a timely request for an informal
applicable year. hearing is filed in accordance with
(d) Payment offset notification. CMS paragraph (e)(2) of this section.
will issue a payment offset notice to (2) Informal hearing. An MA organiza-
the MA organization that includes at tion dissatisfied with CMS’ reconsider-
least the following: ation decision made under paragraph
(1) The dollar amount of the offset (e)(1) of this section is entitled to an
from plan payments. informal hearing as provided for under
(2) An explanation of how the erro- paragraphs (e)(2)(i) through (e)(2)(v) of
neous data were identified and used to this section.
calculate the payment offset amount.
(i) Manner and timing for request. A re-
(3) An explanation that, if the MA or-
quest for an informal hearing must be
ganization disagrees with the payment
made in writing and filed with CMS
offset, it may request an appeal within
within 30 days of the date of CMS’ re-
30 days of issuance of the payment off-
consideration decision.
set notification.
(ii) Content of request. The request for
(e) Appeals process. If an MA organiza-
an informal hearing must include a
tion does not agree with the payment
copy of the reconsideration decision
offset described in paragraph (c) of this
and must specify the findings or issues
section, it may appeal under the fol-
in the decision with which the MA or-
lowing three-level appeal process:
ganization disagrees and the reasons
(1) Reconsideration. An MA organiza-
for its disagreement.
tion may request reconsideration of
the payment offset described in para- (iii) Informal hearing procedures. The
graph (c) of this section, according to informal hearing will be conducted in
the following process: accordance with the following:
(i) Manner and timing of request. A (A) CMS provides written notice of
written request for reconsideration the time and place of the informal
must be filed within 30 days from the hearing at least 30 days before the
date that CMS issued the payment off- scheduled date.
set notice to the MA organization. (B) The informal hearing is con-
(ii) Content of request. The written re- ducted by a CMS hearing officer who
quest for reconsideration must specify neither receives testimony nor accepts
the findings or issues with which the any new evidence that was not timely
MA organization disagrees and the rea- presented with the reconsideration re-
sons for its disagreement. As part of its quest. The CMS hearing officer is lim-
request for reconsideration, the MA or- ited to the review of the record that
ganization may include any additional was before the CMS reconsideration of-
documentary evidence in support of its ficial when CMS made its reconsider-
position. Any additional evidence must ation determination.
be submitted with the request for re- (C) The CMS hearing officer will re-
consideration. Additional information view the proceeding before the CMS re-
submitted after this time will be reconsideration official on the record
jected as untimely. made before the CMS reconsideration
(iii) Conduct of reconsideration. In official using the clearly erroneous
conducting the reconsideration, the standard of review.
CMS reconsideration official reviews (iv) Decision of the CMS hearing offi-
the underlying data that were used to cer. The CMS hearing officer decides
determine the amount of the payment the case and sends a written decision
491
§ 422.350 42 CFR Ch. IV (10–1–17 Edition)
to the MA organization explaining the offsets under paragraph (c) of this sec-
basis for the decision. tion.
(v) Effect of hearing officer’s decision. [79 FR 67031, Nov. 10, 2014]
The hearing officer’s decision is final
and binding, unless the decision is re-
versed or modified by the Adminis- Subpart H—Provider-Sponsored
trator in accordance with paragraph Organizations
(e)(3) of this section.
(3) Review by the Administrator. The EDITORIAL NOTE: Nomenclature changes to
Administrator review will be conducted subpart H of part 422 appear at 63 FR 35098,
in the following manner: 35099, June 26, 1998.
(i) An MA organization that has re-
§ 422.350 Basis, scope, and definitions.
ceived a hearing officer’s decision may
request review by the Administrator (a) Basis and scope. This subpart is
within 30 days of the date of issuance based on sections 1851 and 1855 of the
of the hearing officer’s decision under Act which, in part,—
paragraph (e)(2)(iv) of this section. The (1) Authorize provider sponsored or-
MA organization may submit written ganizations, (PSOs), to contract as a
arguments to the Administrator for re- MA plan;
view. (2) Require that a PSO meet certain
(ii) After receiving a request for re- qualifying requirements; and
view, the Administrator has the discre- (3) Provide for waiver of State licen-
tion to elect to review the hearing offi- sure for PSOs under specified condi-
cer’s determination in accordance with tions.
paragraph (e)(3)(iv) of this section or to (b) Definitions. As used in this subpart
decline to review the hearing officer’s (unless otherwise specified)—
decision. Capitation payment means a fixed per
(iii) If the Administrator declines to enrollee per month amount paid for
review the hearing officer’s decision, contracted services without regard to
the hearing officer’s decision is final the type, cost, or frequency of services
and binding. furnished.
(iv) If the Administrator elects to re- Cash equivalent means those assets
view the hearing officer’s decision, the excluding accounts receivable that can
Administrator will review the hearing be exchanged on an equivalent basis as
officer’s decision, as well as any infor- cash, or converted into cash within 90
mation included in the record of the days from their presentation for ex-
hearing officer’s decision and any writ- change.
ten argument submitted by the MA or- Control means that an individual,
ganization, and determine whether to group of individuals, or entity has the
uphold, reverse, or modify the hearing power, directly or indirectly, to direct
officer’s decision. or influence significantly the actions
(v) The Administrator’s determina- or policies of an organization or insti-
tion is final and binding. tution.
(f) Matters subject to appeal and burden Current ratio means total current as-
of proof. (1) The MA organization’s ap- sets divided by total current liabilities.
peal is limited to CMS’ finding that the Deferred acquisition costs are those
payment data submitted by the MA or- costs incurred in starting or pur-
ganization are erroneous. chasing a business. These costs are cap-
(2) The MA organization bears the italized as intangible assets and carried
burden of proof by a preponderance of on the balance sheet as deferred
the evidence in demonstrating that charges since they benefit the business
CMS’ finding that the payment data for periods after the period in which
were erroneous was incorrect or other- the costs were incurred.
wise inconsistent with applicable pro- Engaged in the delivery of health care
gram requirements. services means—
(g) Applicability of appeals process. The (1) For an individual, that the indi-
appeals process under paragraph (e) of vidual directly furnishes health care
this section applies only to payment services, or
492
(2) For an entity, that the entity is membership, or a person who has oth-
organized and operated primarily for erwise demonstrated competency in
the purpose of furnishing health care the field of actuarial determination
services directly or through its pro- and is satisfactory to CMS.
vider members or entities. Statutory accounting practices means
Generally accepted accounting prin- those accounting principles or prac-
ciples (GAAP) means broad rules adopt- tices prescribed or permitted by the
ed by the accounting profession as domiciliary State insurance depart-
guides in measuring, recording, and re- ment in the State that PSO operates.
porting the financial affairs and activi- Subordinated debt means an obliga-
ties of a business to its owners, credi- tion that is owed by an organization,
tors and other interested parties. that the creditor of the obligation, by
Guarantor means an entity that— law, agreement, or otherwise, has a
(1) Has been approved by CMS as lower repayment rank in the hierarchy
meeting the requirements to be a guar- of creditors than another creditor. The
antor; and creditor would be entitled to repay-
(2) Obligates its resources to a PSO ment only after all higher ranking
to enable the PSO to meet the solvency creditors’ claims have been satisfied. A
requirements required to contract with debt is fully subordinated if it has a
CMS as an MA organization. lower repayment rank than all other
Health care delivery assets (HCDAs) classes of creditors.
means any tangible assets that are Subordinated liability means claims li-
part of a PSO’s operation, including abilities otherwise due to providers
hospitals and other medical facilities that are retained by the PSO to meet
and their ancillary equipment, and net worth requirements and are fully
such property as may be reasonably re- subordinated to all other creditors.
quired for the PSO’s principal office or Uncovered expenditures means those
for such other purposes as the PSO expenditures for health care services
may need for transacting its business. that are the obligation of an organiza-
Insolvency means a condition in tion, for which an enrollee may also be
which the liabilities of the debtor ex- liable in the event of the organization’s
ceed the fair valuation of its assets. insolvency and for which no alter-
Net worth means the excess of total native arrangements have been made
assets over total liabilities, excluding that are acceptable to CMS. They in-
fully subordinated debt or subordinated clude expenditures for health care serv-
liabilities. ices for which the organization is at
Provider-sponsored organization (PSO) risk, such as out-of-area services, refer-
means a public or private entity that— ral services and hospital services. How-
(1) Is established or organized, and ever, they do not include expenditures
operated, by a provider or group of af- for services when a provider has agreed
filiated providers; not to bill the enrollee.
(2) Provides a substantial proportion
(as defined in § 422.352) of the health [63 FR 18134, Apr. 14, 1998, as amended at 63
care services under the MA contract di- FR 25376, May 7, 1998; 63 FR 35098, June 26,
1998]
rectly through the provider or affili-
ated group of providers; and § 422.352 Basic requirements.
(3) When it is a group, is composed of
affiliated providers who— (a) General rule. An organization is
(i) Share, directly or indirectly, sub- considered a PSO for purposes of a MA
stantial financial risk, as determined contract if the organization—
under § 422.356, for the provision of (1) Has obtained a waiver of State li-
services that are the obligation of the censure as provided for under § 422.370;
PSO under the MA contract; and (2) Meets the definition of a PSO set
(ii) Have at least a majority financial forth in § 422.350 and other applicable
interest in the PSO. requirements of this subpart; and
Qualified actuary means a member in (3) Is effectively controlled by the
good standing of the American Acad- provider or, in the case of a group, by
emy of Actuaries or a person recog- one or more of the affiliated providers
nized by the Academy as qualified for that established and operate the PSO.
493
§ 422.354 42 CFR Ch. IV (10–1–17 Edition)
(b) Provision of services. A PSO must (b) Each affiliated provider of the
demonstrate to CMS’s satisfaction that PSO shares, directly or indirectly, sub-
it is capable of delivering to Medicare stantial financial risk for the fur-
enrollees the range of services required nishing of services the PSO is obligated
under a contract with CMS. Each PSO to provide under the contract.
must deliver a substantial proportion (c) Affiliated providers, as a whole or
of those services directly through the in part, have at least a majority finan-
provider or the affiliated providers re- cial interest in the PSO.
sponsible for operating the PSO. Sub- (d) For purposes of paragraph(a)(1) of
stantial proportion means—
this section, control is presumed to
(1) For a non-rural PSO, not less than
exist if one party, directly or indi-
70% of Medicare services covered under
the contract. rectly, owns, controls, or holds the
(2) For a rural PSO, not less than 60% power to vote, or proxies for, not less
of Medicare services covered under the than 51 percent of the voting rights or
contract. governance right of another.
(c) Rural PSO. To qualify as a rural [63 FR 18134, Apr. 14, 1998, as amended at 63
PSO, a PSO must— FR 35098, June 26, 1998]
(1) Demonstrate to CMS that—
(i) It has available in the rural area, § 422.356 Determining substantial fi-
as defined in § 412.62(f) of this chapter, nancial risk and majority financial
routine services including but not lim- interest.
ited to primary care, routine specialty (a) Determining substantial financial
care, and emergency services; and
risk. The PSO must demonstrate to
(ii) The level of use of providers out-
CMS’s satisfaction that it apportions a
side the rural area is consistent with
general referral patterns for the area; significant part of the financial risk of
and the PSO enterprise under the MA con-
(2) Enroll Medicare beneficiaries, the tract to each affiliated provider. The
majority of which reside in the rural PSO must demonstrate that the finan-
area the PSO serves. cial arrangements among its affiliated
providers constitute ‘‘substantial’’ risk
in the PSO for each affiliated provider.
FR 35098, June 26, 1998; 65 FR 40327, June 29,
2000] The following mechanisms may con-
stitute risk-sharing arrangements, and
§ 422.354 Requirements for affiliated may have to be used in combination to
providers. demonstrate substantial financial risk
A PSO that consists of two or more in the PSO enterprise.
providers must demonstrate to CMS’S (1) Agreement by a provider to accept
satisfaction that it meets the following capitation payment for each Medicare
requirements: enrollee.
(a) The providers are affiliated. For (2) Agreement by a provider to accept
purposes of this subpart, providers are as payment a predetermined percent-
affiliated if, through contract, owner- age of the PSO premium or the PSO’s
ship, or otherwise— revenue.
(1) One provider, directly or indi- (3) The PSO’s use of significant finan-
rectly, controls, is controlled by, or is cial incentives for its affiliated pro-
under common control with another;
viders, with the aim of achieving utili-
(2) Each provider is part of a lawful
zation management and cost contain-
combination under which each shares
ment goals. Permissible methods in-
substantial financial risk in connec-
tion with the PSO’s operations; clude the following:
(3) Both, or all, providers are part of (i) Affiliated providers agree to a
a controlled group of corporations withholding of a significant amount of
under section 1563 of the Internal Rev- the compensation due them, to be used
enue Code of 1986; or for any of the following:
(4) Both, or all, providers are part of (A) To cover losses of the PSO.
an affiliated service group under sec- (B) To cover losses of other affiliated
tion 414 of that Code. providers.
494
(C) To be returned to the affiliated of the date the State received a sub-
provider if the PSO meets its utiliza- stantially complete application.
tion management or cost containment (2) Denial of application based on dis-
goals for the specified time period. criminatory treatment. The State has—
(D) To be distributed among affili- (i) Denied the license application on
ated providers if the PSO meets its uti- the basis of material requirements,
lization management or cost-contain- procedures, or standards (other than
ment goals for the specified time pe- solvency requirements) not generally
riod. applied by the State to other entities
(ii) Affiliated providers agree to engaged in a substantially similar busi-
preestablished cost or utilization tar- ness; or
gets for the PSO and to subsequent sig- (ii) Required, as a condition of licen-
nificant financial rewards and pen- sure that the organization offer any
alties (which may include a reduction product or plan other than an MA plan.
in payments to the provider) based on (3) Denial of application based on dif-
the PSO’s performance in meeting the ferent solvency requirements. (i) The
targets. State has denied the application, in
(4) Other mechanisms that dem- whole or in part, on the basis of the or-
onstrate significant shared financial ganization’s failure to meet solvency
risk. requirements that are different from
(b) Determining majority financial in- those set forth in §§ 422.380 through
terest. Majority financial interest 422.390; or
means maintaining effective control of (ii) CMS determines that the State
the PSO. has imposed, as a condition of licen-
[63 FR 18134, Apr. 14, 1998, as amended at 63 sure, any documentation or informa-
FR 35098, June 26, 1998] tion requirements relating to solvency
or other material requirements, proce-
§ 422.370 Waiver of State licensure. dures, or standards relating to sol-
For an organization that seeks to vency that are different from the re-
contract to offer an MA plan under this quirements, procedures, or standards
subpart, CMS may waive the State li- set forth by CMS to implement, mon-
censure requirement of section itor, and enforce §§ 422.380 through
1855(a)(1) of the Act if— 422.390.
(a) The organization requests a waiv- (4) State declines to accept licensure ap-
er no later than November 1, 2002; and plication. The appropriate State licens-
(b) CMS determines there is a basis ing authority has given the organiza-
for a waiver under § 422.372. tion written notice that it will not ac-
cept its licensure application.
[63 FR 25376, May 7, 1998, as amended at 63
FR 35098, June 26, 1998] [63 FR 35098, June 26, 1998]
§ 422.372 Basis for waiver of State li- § 422.374 Waiver request and approval
censure. process.
(a) General rule. Subject to this sec- (a) Substantially complete waiver re-
tion and to paragraphs (a) and (e) of quest. The organization must submit a
§ 422.374, CMS may waive the State li- substantially complete waiver request
censure requirement if the organiza- that clearly demonstrates and docu-
tion has applied (except as provided in ments its eligibility for a waiver under
paragraph (b)(4) of this section) for the § 422.372.
most closely appropriate State license (b) CMS gives the organization writ-
or authority to conduct business as an ten notice of granting or denial of
MA plan. waiver within 60 days of receipt of a
(b) Basis for waiver of State licensure. substantially complete waiver request.
Any of the following may constitute a (c) Subsequent waiver requests. An or-
basis for CMS’s waiver of State licen- ganization that has had a waiver re-
sure. quest denied, may submit subsequent
(1) Failure to act timely on application. waiver requests until November 1, 2002.
The State failed to complete action on (d) Effective date. A waiver granted
the licensing application within 90 days under § 422.370 will be effective on the
495
§ 422.376 42 CFR Ch. IV (10–1–17 Edition)
effective date of the organization’s MA (ii) Generally apply to other MA or-

contract. ganizations and plans in the State; and
(e) Consistency in application. CMS re- (iii) Are consistent with the stand-
serves the right to revoke waiver eligi- ards established under this part.
bility if it subsequently determines (2) The standards specified in para-
that the organization’s MA application graph (b)(1) of this section do not in-
is significantly different from the ap- clude any standard preempted under
plication submitted by the organiza- section 1856(b)(3)(B) of the Act.
tion to the State licensing authority. (c) Incorporation into contract. In con-
[63 FR 25377, May 7, 1998, as amended at 63 tracting with an organization that has
FR 35098, June 26, 1998] a waiver of State licensure, CMS incor-
porates into the contract the require-
§ 422.376 Conditions of the waiver. ments specified in paragraph (b) of this
A waiver granted under this section section.
is subject to the following conditions: (d) Enforcement. CMS may enter into
(a) Limitation to State. The waiver is an agreement with a State for the
effective only for the particular State State to monitor and enforce compli-
for which it is granted and does not ance with the requirements specified in
apply to any other State. For each paragraph (b) of this section by an or-
State in which the organization wishes ganization that has obtained a waiver
to operate without a State license, it under this subpart.
must submit a waiver request and re-
[63 FR 25377, May 7, 1998]
ceive a waiver.
(b) Limitation to 36-month period. The § 422.380 Solvency standards.
waiver is effective for 36 months or
through the end of the calendar year in General rule. A PSO or the legal enti-
which the 36 month period ends unless ty of which the PSO is a component
it is revoked based on paragraph (c) of that has been granted a waiver under
this section. § 422.370 must have a fiscally sound op-
(c) Mid-period revocation. During the eration that meets the requirements of
waiver period (set forth in paragraph §§ 422.382 through 422.390.
(b) of this section), the waiver is auto- [63 FR 25377, May 7, 1998]
matically revoked upon—
(1) Termination of the MA contract; § 422.382 Minimum net worth amount.
(2) The organization’s compliance (a) At the time an organization ap-
with the State licensure requirement plies to contract with CMS as a PSO
of section 1855(a)(1) of the Act; or under this part, the organization must
(3) The organization’s failure to com- have a minimum net worth amount, as
ply with § 422.378. determined under paragraph (c) of this
[63 FR 25377, May 7, 1998] section, of:
(1) At least $1,500,000, except as pro-
§ 422.378 Relationship to State law. vided in paragraph (a)(2) of this sec-
(a) Preemption of State law. Any provi- tion.
sions of State law that relate to the li- (2) No less than $1,000,000 based on
censing of the organization and that evidence from the organization’s finan-
prohibit the organization from pro- cial plan (under § 422.384) dem-
viding coverage under a contract as onstrating to CMS’s satisfaction that
specified in this subpart, are super- the organization has available to it an
seded. administrative infrastructure that
(b) Consumer protection and quality CMS considers appropriate to reduce,
standards. (1) A waiver of State licen- control or eliminate start-up adminis-
sure granted under this subpart is con- trative costs.
ditioned upon the organization’s com- (b) After the effective date of a PSO’s
pliance with all State consumer pro- MA contract, a PSO must maintain a
tection and quality standards that— minimum net worth amount equal to
(i) Would apply to the organization if the greater of—
it were licensed under State law; (1) One million dollars;
496
(2) Two percent of annual premium $1,000,000 of the minimum net worth
revenues as reported on the most re- amount is met through cash or cash
cent annual financial statement filed equivalents, or if CMS has used its dis-
with CMS for up to and including the cretion under paragraph (a)(2) of this
first $150,000,000 of annual premiums section.
and 1 percent of annual premium reve- (ii) From the effective date of the con-
nues on premiums in excess of tract. (A) Up to 20 percent of the min-
$150,000,000; imum net worth amount if the greater
(3) An amount equal to the sum of of $1,000,000 or 67 percent of the min-
three months of uncovered health care imum net worth amount is met by cash
expenditures as reported on the most or cash equivalents; or
recent financial statement filed with (B) Up to ten percent of the min-
CMS; or imum net worth amount if the greater
(4) Using the most recent financial of $1,000,000 or 67 percent of the min-
statement filed with CMS, an amount imum net worth amount is not met by
equal to the sum of— cash or cash equivalents.
(i) Eight percent of annual health (3) Health care delivery assets. Subject
care expenditures paid on a non- to the other provisions of this section,
capitated basis to non-affiliated pro- a PSO may apply 100 percent of the
viders; and GAAP depreciated value of health care
(ii) Four percent of annual health delivery assets (HCDAs) to satisfy the
care expenditures paid on a capitated minimum net worth amount.
basis to non-affiliated providers plus (4) Other assets. A PSO may apply
annual health care expenditures paid other assets not used in the delivery of
on a non-capitated basis to affiliated health care provided that those assets
providers. are valued according to statutory ac-
(iii) Annual health care expenditures counting practices (SAP) as defined by
that are paid on a capitated basis to af- the State.
filiated providers are not included in (5) Subordinated debts and subordi-
the calculation of the net worth re- nated liabilities. Fully subordinated
quirement (regardless of downstream debt and subordinated liabilities are
arrangements from the affiliated pro- excluded from the minimum net worth
vider) under paragraphs (a) and (b)(4) of amount calculation.
this section. (6) Deferred acquisition costs. Deferred
(c) Calculation of the minimum net acquisition costs are excluded from the
worth amount—(1) Cash requirement. (i) calculation of the minimum net worth
At the time of application, the organi- amount.
zation must maintain at least $750,000 [63 FR 25377, May 7, 1998, as amended at 64
of the minimum net worth amount in FR 71678, Dec. 22, 1999]
cash or cash equivalents.
(ii) After the effective date of a § 422.384 Financial plan requirement.
PSO’s MA contract, a PSO must main- (a) General rule. At the time of appli-
tain the greater of $750,000 or 40 percent cation, an organization must submit a
of the minimum net worth amount in financial plan acceptable to CMS.
cash or cash equivalents. (b) Content of plan. A financial plan
(2) Intangible assets. An organization must include—
may include intangible assets, the (1) A detailed marketing plan;
value of which is based on Generally (2) Statements of revenue and ex-
Accepted Accounting Principles pense on an accrual basis;
(GAAP), in the minimum net worth (3) Cash-flow statements;
amount calculation subject to the fol- (4) Balance sheets;
lowing limitations— (5) Detailed justifications and as-
(i) At the time of application. (A) Up to sumptions in support of the financial
20 percent of the minimum net worth plan including, where appropriate, cer-
amount, provided at least $1,000,000 of tification of reserves and actuarial li-
the minimum net worth amount is met abilities by a qualified actuary; and
through cash or cash equivalents; or (6) If applicable, statements of the

(B) Up to 10 percent of the minimum availability of financial resources to
net worth amount, if less than meet projected losses.
497
§ 422.386 42 CFR Ch. IV (10–1–17 Edition)
(c) Period covered by the plan. A finan- the financial condition of the guar-
cial plan must— antor and the accuracy of the financial
(1) Cover the first 12 months after the plan.
estimated effective date of a PSO’s MA (f) Letters of credit. Letters of credit
contract; or are an acceptable resource to fund pro-
(2) If the PSO is projecting losses, jected losses, provided they are irrev-
cover 12 months beyond the end of the ocable, unconditional, and satisfactory
period for which losses are projected. to CMS. They must be capable of being
(d) Funding for projected losses. Except promptly paid upon presentation of a
for the use of guarantees, LOC, and sight draft under the letters of credt
other means as provided in § 422.384(e), without further reference to any other
(f) and (g), an organization must have agreement, document, or entity.
the resources for meeting projected (g) Other means. If satisfactory to
losses on its balance sheet in cash or a CMS, and for periods beginning one
form that is convertible to cash in a year after the effective date of a PSO’s
timely manner, in accordance with the MA contract, a PSO may use the fol-
PSO’s financial plan. lowing to fund projected losses—
(e) Guarantees and projected losses. (1) Lines of credit from regulated fi-
Guarantees will be an acceptable re- nancial institutions;
source to fund projected losses, pro- (2) Legally binding agreements for
vided that a PSO— capital contributions; or
(1) Meets CMS’s requirements for (3) Legally binding agreements of a
guarantors and guarantee documents similar quality and reliability as per-
as specified in § 422.390; and mitted in paragraphs (g)(1) and (2) of
(2) Obtains from the guarantor cash this section.
or cash equivalents to fund the pro- (h) Application of guarantees, Letters of
jected losses timely, as follows— credit or other means of funding projected
(i) Prior to the effective date of a losses. Notwithstanding any other pro-
PSO’s MA contract, the amount of the vision of this section, a PSO may use
projected losses for the first two quar- guarantees, letters of credit and, begin-
ters; ning one year after the effective date
(ii) During the first quarter and prior of a PSO’s MA contract, other means of
to the beginning of the second quarter funding projected losses, but only in a
of a PSO’s MA contract, the amount of combination or sequence that CMS
projected losses through the end of the considers appropriate.
third quarter; and [63 FR 25378, May 7, 1998, as amended at 63
(iii) During the second quarter and FR 35098, June 26, 1998; 64 FR 71678, Dec. 22,
prior to the beginning of the third 1999]
quarter of a PSO’s MA contract, the
amount of projected losses through the § 422.386 Liquidity.
end of the fourth quarter. (a) A PSO must have sufficient cash
(3) If the guarantor complies with the flow to meet its financial obligations
requirements in paragraph (e)(2) of this as they become due and payable.
section, the PSO, in the third quarter, (b) To determine whether the PSO
may notify CMS of its intent to reduce meets the requirement in paragraph (a)
the period of advance funding of proof this section, CMS will examine the
jected losses. CMS will notify the PSO following—
within 60 days of receiving the PSO’s (1) The PSO’s timeliness in meeting
request if the requested reduction in current obligations;
the period of advance funding will not (2) The extent to which the PSO’s
be accepted. current ratio of assets to liabilities is
(4) If the guarantee requirements in maintained at 1:1 including whether
paragraph (e)(2) of this section are not there is a declining trend in the cur-
met, CMS may take appropriate ac- rent ratio over time; and
tion, such as requiring funding of pro- (3) The availability of outside finan-
jected losses through means other than cial resources to the PSO.
a guarantee. CMS retains discretion to (c) If CMS determines that a PSO

require other methods or timing of fails to meet the requirement in para-
funding, considering factors such as graph (b)(1) of this section, CMS will
498
require the PSO to initiate corrective (4) If a PSO is not otherwise required
action and pay all overdue obligations. to file a quarterly report, it must file a
(d) If CMS determines that a PSO report within 45 days of the end of the
fails to meet the requirement of para- calendar quarter with information suf-
graph (b)(2) of this section, CMS may ficient to demonstrate compliance with
require the PSO to initiate corrective this section.
action to— (5) The deposit required under this
(1) Change the distribution of its as- section is restricted and in trust for
sets; CMS’s use to protect the interests of
(2) Reduce its liabilities; or the PSO’s Medicare enrollees and to
(3) Make alternative a

CFR 2017 Title42a Vol3

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CFR 2017 Title42a Vol3

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Title 42

Revised as of October 1, 2017

Containing a codification of documents

Published by the Office of the Federal Register

Legal Status and Use of Seals and Logos

Use of ISBN Prefix

U.S. GOVERNMENT PUBLISHING OFFICE

U.S. Superintendent of Documents • Washington, DC 20402–0001

Phone: toll-free (866) 512-1800; DC area (202) 512-1800

Chapter IV—Centers for Medicare & Medicaid Services, Depart-

Table of CFR Titles and Chapters ....................................................... 923

Alphabetical List of Agencies Appearing in the CFR ......................... 943

List of CFR Sections Affected ............................................................. 953

To cite the regulations in

CHAPTER IV—Centers for Medicare & Medicaid Services, De-

SUBCHAPTER B—MEDICARE PROGRAM (CONTINUED)

414.61 Payment for anesthesia services fur- Subpart E—Determination of Reasonable

quality performance category. 1834A—Improving policies for clinical diag-

fined in § 400.202 of this chapter. than admitted as an inpatient, pro-

(1) Services described in § 419.21(a) of § 414.20 Formula for computing fee

centages to the estimated average al-

§ 414.28 Conversion factors.

component (the interpretation)). nuclear medicine services. For all physi-

(iii) A physician will be deemed to § 414.52 Payment for physician assist-

(b) Teaching hospitals. Services fur- tions:

(2) Is not receiving services in an

gency department or initial inpatient ment to physicians, practitioners, and

(e) Sanctions. A distant site practi- an additional 5 percent payment above

(d) Physicians, as defined in section terly basis in an amount equal to 10

as described in paragraph (b)(1) of this accreditation functions specified in

CMS-approved accreditation organiza- the accreditation organization’s knowl-

(14) A statement acknowledging that, and afforded an opportunity to provide

approval or denial of the accreditation must permit its surveyors to serve as

(4) Within 2 business days of identi- creditation organization and findings

cate— siders any determination to deny, re-

if the accreditation organization files a the production of witnesses, papers, or

Civil Procedure. and other nursing facility E/M services;

under, or is based on, the Medicare to participate in educational and self-

cent. scribed in paragraphs (c)(3)(iii) and (iv)

process, which would allow us to deter- ing mechanisms:

program year. group practice must report 1–8 meas-

measures covering at least 2 of the Na- payment adjustment for a particular

TIN/NPI combination, or a group prac- (A) If an eligible professional re-sub-

1 to 3 National Quality Strategy do- 12-month 2016 PQRS payment adjust-

with a 0 percent performance rate An eligible professional must report on

reporting period. ficiaries in the order in which they ap-

the pool of eligible assigned bene- plicability Validation process, which

ment adjustment. A group practice who

measures. Of the additional measures measures apply to the eligible profes-

tice must report on at least 1 measure tified survey vendor in addition to a

individual eligible professional who sional or group practice who wishes to

by meeting the requirements specified tion, there is no administrative or judi-

plies. (i) A physician.

(iii) A physical or occupational ther- gible professional (or to an employer or

6-month reporting period specified in ing period, on the eligible profes-

identified by CMS to— (i) If an eligible professional, as iden-

standable format, a list of the names of criteria only developed or endorsed by

to assist ordering professionals and fur- (c) Qualified provider-led entity. To be

(2) Process to specify qualified CDSMs. (h) Identification of non-adherence to

(including an institution used as the cluding information on the payment

formation on the payment determined tion.

amounts. gram instructions.

schedule amount for rental of other national limited payment amount as