[Federal Register: June 8, 1998 (Volume 63, Number 109)]
[Rules and Regulations]
[Page 31123-31129]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jn98-13]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 420

[HCFA-6144-FC]
RIN 0938-AH86

Medicare Program; Incentive Programs-Fraud and Abuse

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period establishes a program for
payment to individuals who provide information on Medicare fraud and
abuse or other sanctionable activities. This final rule implements
section 203(b) of the Health Insurance Portability and Accountability
Act of 1996.

DATES: Effective date: This final rule is effective July 8, 1998.
Comment period: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on August
7. 1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-6144-FC, P.O. Box 26688,
Baltimore, MD 21207-0488.
    If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 7500 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: Delilah Schmitt, (410) 786-4300.

SUPPLEMENTARY INFORMATION: Comments may also be submitted
electronically to

[[Page 31124]]

the following e-mail address: hcfa6144fc@hcfa.gov. E-mail comments must
include the full name and address of the sender and must be submitted
to the referenced address to be considered. All comments must be
incorporated in the e-mail message because we may not be able to access
attachments. Electronically submitted comments will be available for
public inspection at the Independence Avenue address below.
    Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-6144-FC. Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).

I. Rewards for Information Relating to Medicare Fraud and Abuse

A. Background

    Section 203(b)(1) of the Health Insurance Portability and
Accountability Act of 1996 (Public Law 104-191) instructs the Secretary
to establish a program to encourage individuals to report information
on individuals and entities that are engaged in or have engaged in acts
or omissions that constitute grounds for the imposition of a sanction
under section 1128, 1128A, or 1128B of the Social Security Act (the
Act) or who have otherwise engaged in sanctionable fraud and abuse
against the Medicare program under title XVIII of the Act. By
increasing the incentives for concerned citizens to report evidence of
suspected fraudulent behavior, Congress hopes to protect beneficiaries
and the Medicare Trust Funds.
    Section 203(b)(2) of Public Law 104-191 authorizes the Secretary to
pay a reward to individuals who provide information under the program
established under section 203(b)(1) if the information leads to the
recovery of at least $100 (excluding penalties under section 1128B of
the Act) by the Secretary or the Attorney General of the United States.
Public Law 104-191 requires the reward to come from the amounts
collected. The Statute also addresses a suggestion program. We are
still analyzing the most effective methods for implementing this
requirement and will address it in subsequent rulemaking.

B. Provisions of this Final Rule

    This rule adds a new Subpart E, consisting of Secs. 420.400 through
420.405, to 42 CFR part 420 (``Program Integrity: Medicare). New
Subpart E includes provisions to implement section 203(b) of Public Law
104-191 and is entitled as ``Rewards for Information Relating to
Medicare Fraud and Abuse''.
    Section Sec. 420.400 sets forth the statutory basis and scope of
Subpart E.
    Section Sec. 420.405 sets forth our policies regarding, and
procedures for, rewarding individuals for furnishing information
relating to Medicare fraud and abuse. The statute contains no
provisions limiting or restricting our discretion in determining the
rewards to be granted under the program established under section
203(b). Therefore, in paragraph (a) of Sec. 420.405, we specify that
when HCFA exercises its discretion in determining that someone is
eligible for a reward and the reward amount, the reward will be granted
and the individual notified according to the procedures in
Sec. 420.405(d). Further, we specify that we may make a monetary reward
only for information that leads to a minimum recovery of $100 of
Medicare funds from individuals and entities that are engaging in, or
have engaged in, acts or omissions that constitute grounds for the
imposition of a sanction under section 1128, section 1128A, or section
1128B of the Act or that have otherwise engaged in fraud and abuse
against the Medicare program under title XVIII of the Act and for which
there is a sanction provided under law. This provision, which is
specifically mandated in the authorizing statute, ensures that a reward
is paid only if Medicare funds are recovered because of the commission
of certain specifically sanctionable offenses. These include the
defrauding of the Medicare program or the offering of or solicitation
of kickbacks for services payable by Medicare. Individuals who furnish
information concerning actions or omissions for which there are no
sanctions at law are not eligible to receive a reward under this
program even if the information leads to the recovery of Medicare
payments.
    Finally, in order to ensure that the program does not duplicate
other Government incentive programs, we also specify, in paragraph (a),
that we may pay rewards only in instances in which a reward is not
otherwise provided at law. That is, if the information furnished
qualifies the participant for a reward under another Government
program, the individual is not entitled to a reward under this program.
    Paragraph (b) of Sec. 420.405 specifies the information that would
be required in order for a participant to be eligible to receive a
reward. Section 203(b)(1) of Public Law 104-191 requires that the
reward program discourage the submission of information that is
frivolous or otherwise not relevant or material to the imposition of a
sanction. Such information will not be considered by the Secretary.
Therefore, we have developed criteria to ensure that only individuals
who provide information that directly contributes to the recovery of
Medicare funds from a fraudulent provider or supplier are considered
for a reward. Those criteria are discussed below.
    Paragraph (b)(1) of Sec. 420.405 specifies that, in order for an
individual to qualify for a reward, the information furnished by that
individual must relate to a specific situation, individual, or entity,
and must specify the time period of the alleged activities. This
provision is intended to discourage individuals from furnishing
information of a general nature and to ensure that information
submitted be of assistance in the investigation of a specific
sanctionable offense. To be of assistance in the development of an
investigation, information must relate to specific actions by a
specific individual or entity. Any information that is too general in
nature (for example, ``Medicare should look into home health agencies
in Smith County'') is of little or no use in targeting scarce
investigation resources and does not show that the individual has any
specific knowledge of wrongdoing on the part of a certain individual or
entity. An example of the kind of information that would meet the
requirements of this provision would be that a particular home health
agency is billing Medicare for visits not actually furnished.
    Paragraph (b)(2) of Sec. 420.405 specifies that we do not give a
reward for the submission of information relating to sanctionable
activities already known or suspected by the Government, its
contractors, or State or local law enforcement agencies. Accordingly,
information relating to an individual or entity that, at the time the
information is provided, is already the subject of a review or
investigation by us, our contractors, or the Office of Inspector
General (OIG), the Department of Justice, the Federal Bureau of
Investigation, or any other Federal, State, or local law enforcement
agency would not serve as the ``basis for the collection'' and could
not be compensated. Paragraph (c) of Sec. 420.405

[[Page 31125]]

sets forth the criteria that an individual must meet in order to be
eligible for a reward. Paragraph (c)(1) provides that any person, other
than one excluded under paragraph (c)(2), is eligible to receive a
reward under the reward program if he or she submits the information in
the prescribed manner (discussed later in this preamble). Accordingly,
Medicare beneficiaries, Medicare providers, and any other individuals
may be eligible to receive awards under this reward program.
    Paragraph (c)(2) specifies who is ineligible to receive a reward
under the reward program. Specifically, paragraph (c)(2)(i) provides
that an individual who was or is an immediate family member of an
officer or employee of the Department of Health and Human Services
(HHS) or its contractors, the Social Security Administration, a State
Medicaid agency, the OIG, or the Department of Justice, the Federal
Bureau of Investigation, or any other Federal, State, or local law
enforcement agency at the time he or she came into possession of or
reported information leading to a recovery of Medicare funds is not
eligible to receive a reward. Paragraph (c)(2)(ii) specifies that any
other Federal or State employee or contractor or HHS grantee is not
eligible for a reward if he or she acquired the submitted information
in the course of his or her official duties.
    The purpose of the exclusion is to prevent Government employees,
contractors, or grantees from personally profiting from information
gained while doing public business. These individuals may, in the
course of performing their official duties, obtain information relating
to sanctionable offenses by individuals or entities providing services
under the Medicare program. As a responsibility of their position,
however, these individuals are obligated to take the necessary steps to
ensure that this information is reported to the appropriate
authorities. This exclusion also applies to former employees of the
specified organizations if the information in question was obtained
during their employment. Similarly, any other Federal, State, or local
government employee or contractor or HHS grantee is excluded from
receiving a reward under this reward program if the information was
obtained in the course of his or her official duties. As with the
previous exclusion, this exclusion is intended to prevent individuals
from personally profiting from information gained in the course of
conducting public business.
    Paragraph (c)(2)(iii) excludes any individual who illegally
obtained the information he or she submitted from receiving a reward
under this program. Paragraph (c)(2)(iv) excludes any participants in
the alleged sanctionable offense with respect to which payment would be
made from receiving a reward under this program. These exclusions are
intended to prevent those who have violated the law from profiting from
their actions at the expense of this program.
    Paragraph (d) of Sec. 420.405 sets forth reward notification
procedures. Paragraph (d)(1) specifies that, as a general rule, we
notify an individual of his or her eligibility to receive a reward, by
letter sent to the individual's last known address. Paragraph (d)(1)
further specifies that the notification is sent after Medicare funds
have been recovered and a participant has been determined eligible to
receive a reward. We add that it is the individual's responsibility to
provide all relevant information and to ensure that the reward program
is notified of any changes in that information.
    Paragraph (d)(2) provides that an individual has up to 1 year from
the date on the notification letter to claim his or her reward. This
paragraph also specifies that no interest is paid on rewards that are
not immediately claimed.
    Paragraph (d)(2) also specifies that, if the participant has become
incapacitated or died, an executor, administrator, or other legal
representative may claim the reward on behalf of the participant or
participant's estate. In order to protect participants from being
defrauded by individuals falsely claiming to be their legal
representatives, we add that the claimant must submit certified copies
of letters testamentary, letters of administration, or other similar
evidence to show his or her authority to claim the reward. Here, again,
we specify that the reward must be claimed within 1 year from the date
on which we mailed notification to the participant.
    We have set these 1-year limitations to minimize the administrative
burden associated with the reward program. We believe 1 year is a
reasonable period of time during which an individual may claim his or
her reward. In addition, the 1-year limitation protects the Government
from the administrative and fiscal burden that would be associated with
maintaining claims for a longer or indefinite period. Rewards not
claimed within 1 year from the date of the notification letter will not
be awarded.
    In paragraph (e) of Sec. 420.405, we establish the limits on
rewards and set forth the processes by which we determine whether we
will pay a reward and, if a reward is to be paid, the amount of the
reward. Paragraph (e)(1) specifies that, in determining whether we will
pay a reward, and the amount of the reward, we take into consideration
all relevant factors, including the significance of the information
furnished in relation to the ultimate resolution of the case and the
recovery of Medicare funds.
    To give participants a realistic expectation of potential reward
amounts, we establish general guidelines for the calculation of the
amount of any reward and a maximum potential reward amount. Since the
primary goal of this program is to preserve and protect the Medicare
Trust Funds, and because the funds used for rewards under the program
will come from recovered trust fund monies, it would be inappropriate
to grant excessive or overly-generous rewards. Therefore,
Sec. 420.405(e)(2) specifies that the amount of a reward represents
what we consider to be adequate compensation in the particular case,
not to exceed 10 percent of the overpayments recovered in the case, or
$1,000, whichever is less. We believe this approach provides adequate
compensation and notification to those individuals who provide
important information on sanctionable activities, while also
establishing an objective limit on Trust Fund disbursements.
    We anticipate that some commenters will object to this limit as
being too low. In response, we point out that persons with information
on individuals or entities purportedly defrauding the Medicare program
also have the option of initiating a ``qui tam'' action against the
fraudulent individual or entity in cooperation with the Government. (A
qui tam action is an action brought by a private individual, under a
statute that establishes a penalty for the commission or omission of a
certain act that is recoverable in a civil action. In a qui tam action,
an individual brings the civil action on behalf of him or herself and
the Government, State, or other entity. Part of any collected penalty
goes to the person who brings the civil action.)
    We determine reward amounts on a case by case basis. Section
420.405(e)(3) specifies that, if more than one participant provides
information that leads to the recovery of Medicare funds, we allocate
the overall reward (not to exceed 10 percent of the overpayments
recovered in that case or $1,000, whichever is less) among the total
number of participants. Again, this provision is intended to protect
the

[[Page 31126]]

Medicare Trust Funds to the greatest possible extent.
    In accordance with section 203(b)(2) of Public Law 104-191,
Sec. 420.405(e)(4) specifies that rewards are based solely on recovered
Medicare payments and not on amounts collected as penalties or fines.
Section 420.405(e)(5) specifies that rewards are awarded only after all
overpayments, fines, and penalties have been collected. It is important
for participants to understand that the investigation, development, and
prosecution or settlement of a fraud case is a complicated and lengthy
process. Given the material and human resource constraints, it is not
unusual for 3 to 5 years to elapse before fraudulently-obtained
Medicare funds are recovered and any applicable fines or penalties
collected. This means that, on average, a participant who provides
information that leads to a Medicare recovery from an individual or
entity that committed a sanctionable offense would have to wait several
years before receiving a reward under this program.
    Section 420.405(e)(6) specifies that no person may make any offer
or promise or otherwise bind us or HHS with respect to the payment of
any reward or the amount of the reward.
    Paragraph (f) of Sec. 420.405 describes the procedure individuals
must follow when submitting information in order to be eligible to
receive a reward under this program. Paragraph (f)(1) provides that an
individual may submit information to us on individuals and/or entities
allegedly engaging in, or that have allegedly engaged in, fraud and
abuse against the Medicare program by calling the Office of Inspector
General or the Medicare intermediary or carrier that has jurisdiction
over the suspected fraudulent provider or supplier.
    Paragraph (f)(2) of Sec. 420.405 adds that an individual interested
in receiving a reward must provide his or her name, address, telephone
number, and any other requested identifying information so that he or
she may be contacted, if necessary, for additional information and,
when applicable, for the payment of a reward upon resolution of the
case. An individual may elect to furnish information to the Office of
the Inspector General, or to the intermediary or carrier anonymously.
However, if an individual elects to do so, he or she would not be
eligible to receive a reward under this program.
    Section 420.405(g) specifies that we do not disclose the
participant's identity to any persons except as required by law.
Finally, Sec. 420.405(h) specifies that, if, after an award had been
accepted, the awardee is determined ineligible to receive a reward
under this program, the Government is not liable for the reward and the
awardee must refund all monies received. This provision is intended to
protect the Government from paying rewards to individuals it later
finds were not eligible to participate in the program. For example, the
Government would recover a reward granted to a participant who was
later found to have participated in the sanctionable offense with
respect to which payment was made.

II. Response to Comments

    Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.

III. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this rule as required by Executive
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). The RFA requires agencies
to analyze options for regulatory relief of small businesses. For
purposes of the RFA, small entities include small businesses, nonprofit
organizations, and governmental agencies. Most hospitals and most other
providers and suppliers are small entities, either by nonprofit status
or by having revenues of $5 million or less annually. Individuals are
not considered to be small entities.
    Section 1102(b) of the Social Security Act requires us to prepare a
regulatory impact analysis for any rule that may have a significant
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 603
of the RFA. For purposes of section 1102(b), we define a small rural
hospital as a hospital that is located outside a Metropolitan
Statistical Area and has fewer than 50 beds.

B. Summary of This Rule

    This rule establishes a payment system as a means of encouraging
individuals to report instances of suspected fraud and abuse or other
sanctionable activities under the Medicare program. The rule delineates
program parameters, information requirements, eligibility criteria,
establishes an upper limit for payments, defines proportionate
distribution in cases of multiple informants, and outlines the process
and time limitations for obtaining a reward.

C. Discussion of Impact

    This rule is expected to affect beneficiaries, their personal
representatives, providers, physicians, other suppliers, and managed
care plans. (We have separate authority to impose intermediate
sanctions against managed care plans participating in the Medicare
program. The law also permits the Office of Inspector General to impose
civil money penalties on the health maintenance organization or
competitive medical plan as set forth in 42 CFR part 1003.) Taxpayers
and the trust fund could also be impacted by this rule.
    Beneficiaries as a group are expected to be impacted by this
regulation in a variety of ways. First, beneficiaries are often the
first to recognize and question provider practices. This regulation
encourages these individuals to share such information with the agency
by (1) providing a clearly defined process for submitting information
to the appropriate source and (2) offering a monetary incentive to
support the effort. Secondly, this group would benefit from fraud
reduction through greater confidence in the program and its continued
financial viability. Some beneficiaries may or may not be motivated by
a reward system to report fraudulent provider activity because of a
perceived potential for breaching the provider/patient relationship.
    Notwithstanding some minimal hesitancy in reporting fraud,
beneficiaries are already one of our strongest allies in quickly
detecting and providing us with a great many leads about instances of
fraud and abuse in the Medicare program. Beneficiaries are asked to
review the Explanation of Medicare Benefits form, which lists services
and charges and is sent to each beneficiary when a service is
furnished, and report any discrepancies concerning those services to
the Medicare contractor serving their area. Medicare contractors
estimate that of the 130,000 calls they receive yearly concerning
potential fraud and abuse, 94,000 are from beneficiaries, many of whom
call to question the propriety of claims made on their behalf. We
estimate that there will be a 5 or 10 percent increase in the

[[Page 31127]]

volume of calls received as a result of this monetary reward incentive
program. We support this activity by regularly advising beneficiaries
and their representatives about opportunities to preserve trust fund
dollars and how they can help combat fraud and abuse.
    Fraud, waste, and abuse in medical care encompass a wide range of
practices, limited only by the scope of human imagination. To the
fraudulent provider of health care services, fee-for-service
reimbursement provides the opportunity for: (1) Billing for services
not provided; (2) billing for a more expensive service than was
actually provided; (3) providing and billing for unnecessary services;
(4) paying kickbacks for referrals, including self-referrals; and (5)
duplicate billing. Two fraudulent schemes involving falsifying records
and overcharging include ``upcoding'' and ``unbundling.'' Upcoding
involves switching primary and secondary diagnoses to substitute more
costly procedures and services than were actually administered to the
patient. Unbundling involves improperly separately billing for
procedures that should be billed for under one code.
    Under managed care, fraudulent and abusive practices may include:
(1) Enrolling beneficiaries without their active consent; (2) engaging
in deceptive marketing practices to entice enrollment; (3) denying
medically necessary services; and (4) failure to disclose appeal
rights.
    We believe the exact amount of improper billing and health care
fraud are difficult to quantify because of their hidden nature.
However, a Government Accounting Office (GAO) report on Medicare (GAO/
HR-91-10, February 1997) suggests that by reducing unnecessary or
inappropriate payments, the Federal Government would realize large
savings and help dampen the growth in Medicare costs. In this report,
the GAO states that estimates of the costs of fraud and abuse, ranging
from 3 to 10 percent, have been cited for health expenditures
nationwide, ``so applying this range to Medicare suggests that such
losses in fiscal year 1996 could range from $6 billion to as much as
$20 billion.'' Program savings would be offset by the amount of
incentives awarded under this rule. The total amount of awards made in
any year is unknown but is expected to be nominal.
    Overall, we expect that providers and suppliers will benefit
qualitatively from this rule. Not only do many providers and suppliers
perceive that their reputations are tarnished by the few dishonest
providers and suppliers that take advantage of the Medicare program,
but some providers may have ideas that could minimize the impact of
this adverse behavior. The media often focus on the most egregious
cases of Medicare fraud and abuse, leaving the public with the
misperception that physicians and other health care practitioners
routinely make improper claims. This rule encourages individuals to
report instances of suspected fraud and abuse. As the number of
dishonest providers and suppliers and improper claims diminishes,
ethical providers and suppliers will benefit.
    This rule could be considered to have a negative impact on any
provider or supplier that routinely submits questionable claims and
those that have been receiving inappropriate payments, including
managed care plans. Since one objective of this rule is to eliminate
improper payments, we will not analyze the effect the rule may have on
unscrupulous providers or suppliers. We do not believe that this rule
will reduce a provider's or supplier's legitimate income from Medicare.
    The reporting of instances of suspected fraud and abuse or other
sanctionable activities is not expected to impose a paperwork burden on
individuals participating in this award program. Beneficiaries and
other participating entities are expected to rely upon existing record
collection, record keeping, review and reporting processes similar to
those already in use.

D. Conclusion

    We conclude that money would be saved, and the solvency of the
Trust Funds extended as a result of this rule. The growing complexity
of the Medicare program easily lends itself to objective critiques by
those who are most affected by the myriad of Medicare statutes,
provisions, and guidelines. In addition, the dynamic nature of fraud
and abuse, as illustrated by the fact that wrongdoers continue to find
ways to evade safeguards, supports the need for constant vigilance and
increasingly sophisticated ways to protect against ``gaming'' of the
system.
    Based on the above analysis, we have determined, and certify, that
this rule will not have a significant economic impact on a substantial
number of small entities. We also have determined, and certify, that
this rule will not have a significant impact on the operations of a
substantial number of small rural hospitals. In accordance with the
provisions of Executive Order 12866, this rule was not reviewed by the
Office of Management and Budget.

E. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
    Publishing this rule expeditiously to supplement activities that
identify and curtail fraud and abuse activities that reduce the
monetary drain on the Medicare trust fund is in the public interest.
Specifically, we anticipate that the implementation of this rule will
encourage individuals to report potentially fraudulent and abusive
activities and we anticipate that such reports will facilitate
expeditious recovery of money owed to the Medicare trust funds. Further
delaying implementation of this program in order to give the public an
opportunity to comment would deprive individuals of the financial
incentives that Congress intended to provide to individuals who come
forward with relevant information. Additional delay following the
publication of a proposed rule may cause some individuals to withhold
information necessary to support the Government's efforts until final
rules are effective. Because the delay may make it more difficult to
successfully complete investigation of those cases, waiving notice and
comment clearly is within the public interest.
    Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule with comment period. We are
providing a 60-day comment period for public comment.

List of Subjects in 42 CFR Part 420

    Fraud, Health facilities, Health professions, Incentive programs,
Medicare.

    For the reasons set forth in the preamble, 42 CFR part 420 is
amended as set forth below:

PART 420--PROGRAM INTEGRITY: MEDICARE

    1. The authority citation for part 420 continues to read as
follows:

[[Page 31128]]

    Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

    2. A new subpart E is added to part 420 to read as follows:

Subpart E--Rewards for Information Relating to Medicare Fraud and Abuse

Sec.
420.400  Basis and scope.
420.405  Rewards for information relating to Medicare fraud and
abuse.

Subpart E--Rewards for Information Relating to Medicare Fraud and
Abuse

Sec. 420.400  Basis and scope.

    This subpart implements section 203 (b) of Public Law 104-191,
which requires the establishment of a program to encourage individuals
to report suspected cases of fraud and abuse. Sections 203 (b) of
Public Law 104-191 also provides the authority for HCFA to reward
individuals for reporting fraud and abuse. This subpart sets forth
procedures for rewarding individuals.

Sec. 420.405  Rewards for information relating to Medicare fraud and
abuse.

    (a) General rule. HCFA pays a monetary reward for information that
leads to the recovery of at least $100 of Medicare funds from
individuals and entities that are engaging in, or have engaged in, acts
or omissions that constitute grounds for the imposition of a sanction
under section 1128, section 1128A, or section 1128B of the Act or that
have otherwise engaged in sanctionable fraud and abuse against the
Medicare program. The determination of whether an individual meets the
criteria for an award, and the amount of the award, is at the
discretion of HCFA. HCFA pays rewards only if a reward is not otherwise
provided for by law. When HCFA applies the criteria specified in
paragraphs (b), (c), and (e) of this section to determine the
eligibility and the amount of the reward, it notifies the recipient as
specified in paragraph (d) of this section.
    (b) Information eligible for reward. (1) In order for an individual
to be eligible to receive a reward, the information he or she supplied
must relate to the activities of a specific individual or entity and
must specify the time period of the alleged activities.
    (2) HCFA does not give a reward for information relating to an
individual or entity that, at the time the information is provided, is
already the subject of a review or investigation by HCFA or its
contractors, or the OIG, the Department of Justice, the Federal Bureau
of Investigation, or any other Federal, State, or local law enforcement
agency.
    (c) Persons eligible to receive a reward--(1) General rule. Any
person (other than one excluded under paragraph (c)(2) of this section)
is eligible to receive a reward under this section if the person
submits the information in the manner set forth in paragraph (f) of
this section.
    (2) Excluded individuals. (i) An individual who was, or is an
immediate family member of, an officer or employee of HHS or its
contractors, the SSA, the OIG, a State Medicaid Agency, or the
Department of Justice, the Federal Bureau of Investigation, or any
other Federal, State, or local law enforcement agency at the time he or
she came into possession of, or divulged, information leading to a
recovery of Medicare funds is not eligible to receive a reward under
this section.
    (ii) Any other Federal or State employee or contractor or an HHS
grantee is not eligible for a reward under this section if the
information submitted came to his or her knowledge in the course of his
or her official duties.
    (iii) An individual who illegally obtained the information he or
she submitted is excluded from receiving a reward under this section.
    (iv) An individual who participated in the sanctionable offense
with respect to which payment would be made is excluded from receiving
a reward under this section.
    (d) Notification of eligibility--(1) General rule. After all
Medicare funds have been recovered and HCFA has determined a
participant eligible to receive a reward under the provisions of this
section, it notifies the informant of his or her eligibility, by mail,
at the most recent address supplied by the individual. It is the
individual's responsibility to ensure that the reward program has been
notified of any change in his or her address or other relevant personal
information (for example, change of name, phone number).
    (2) Special circumstances. (i) If the individual has relocated to
an unknown address, the individual or his or her legal representative
may claim the reward by contacting HCFA within 1 year from the date on
which HCFA first attempted to notify the individual about a reward.
HCFA does not consider the individual or his or her legal
representative eligible for a reward more than 1 year after the date on
which it first attempted to give notice. HCFA does not pay interest on
rewards that are not immediately claimed.
    (ii) If the individual has become incapacitated or has died, an
executor, administrator, or other legal representative may claim the
reward on behalf of the individual or the individual's estate. The
claimant must submit certified copies of the letters testamentary,
letters of administration, or other similar evidence to show his or her
authority to claim the reward. The claim must be filed within 1 year
from the date on which HCFA first gave or attempted to give notice of
the reward.
    (e) Amount and payment of reward. (1) In determining whether it
will pay a reward and, if so, the amount of the reward, HCFA takes into
account all relevant factors, including the significance of the
information furnished in relation to the ultimate resolution of the
case and the recovery of Medicare funds.
    (2) The amount of a reward represents what HCFA considers to be
adequate compensation in the particular case, not to exceed 10 percent
of the overpayments recovered in the case or $1,000, whichever is less.
    (3) If more than one person is eligible to receive a reward in a
particular case, HCFA allocates the total reward amount (not to exceed
10 percent of the overpayments recovered in that case or $1,000,
whichever is less) among the participants.
    (4) HCFA bases rewards only on recovered Medicare payments and not
on amounts collected as penalties or fines.
    (5) HCFA makes payments as promptly as the circumstances of the
case permit, but not until it has collected all Medicare overpayments,
fines, and penalties.
    (6) No person may make any offer or promise or otherwise bind HCFA
or HHS with respect to the payment of any reward under this section or
the amount of the reward.
    (f) Submission of information. (1) An individual may submit
information on persons or entities engaging in, or that have engaged
in, fraud and abuse against the Medicare program to the Office of the
Inspector General, or to the Medicare intermediary or carrier that has
jurisdiction over the suspected fraudulent provider or supplier.
    (2) A participant interested in receiving a reward must provide his
or her name, address, telephone number, and any other requested
identifying information so that he or she may be contacted, if
necessary, for additional information and, when applicable, for the
payment of a reward upon resolution of the case.
    (g) Confidentiality. HCFA does not reveal a participant's identity
to any person, except as required by law.
    (h) Finding of ineligibility after reward is accepted. If, after a
reward is accepted, HCFA finds that the awardee was ineligible to
receive the reward, the

[[Page 31129]]

Government is not liable for the reward and the awardee must refund all
monies received.

(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)

    Dated: April 4, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: June 2, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-15155 Filed 6-3-98; 1:19 pm]
BILLING CODE 4120-01-P