State Operations Manual 
 
Chapter 3 - Additional Program Activities 
 
Table of Contents 
               (Rev. 202, 06-19-20) 
 
Transmittals for Chapter 3 
 
Adverse Actions 
3000 - Adverse Actions - General 
3000A - Applicability 
3000B - State Ombudsman Programs 
3000C - CMS Authority to Terminate Medicare and Medicaid Participation 
3001 - Initial Denials of Medicare Provider/Supplier Requests for Program Participation 
3001A - Authority for Adjudicating Denials 
3001B - Vacated Actions Which Are Not Denials 
3001C - Vacated Actions Which Are Denials 
3001D - RO Processing of Denials 
3005 - Basis for Terminating Provider Participation - Citations and Discussion 
3005A - Medicare Provider Agreements 
3005B - Termination of Coverage of Supplier Services Subject to Certification 
3005D - Cause for Termination 
3005E - Termination of Title XIX-Only NFs, ICFs/IID, Hospitals and Psychiatric 
Hospitals 
3005F - Termination Action Based Upon Onsite Survey by RO or Validation 
Survey of a Deemed Provider or Supplier by RO or SA 
3005G - Look Behind Authority of CMS 
3005G1 - Look-Behind Termination or Cancellation of ICF/IID 
Agreement by the Secretary 
3005G2 - Old Look-Behind Termination of a NF or ICF/IID by the 
Secretary 
3005G3 - SMA Disagrees With SA Determination 
3006 - Denial of Payments in Lieu of Termination of ICFs/IID 
3006A - Authority to Deny Payment for Any New Admissions for 
ICFs/IID 
3006B - Criteria for Imposing Denial of Payments for New Admissions 
3006C - Agency Procedures 
  3006D - Effect of Sanction on Status of Clients Admitted, Discharged, or 
on Temporary Leave and Readmitted Before or After Effective 
Date of Denial of Payment 
3006F - Duration of Denial of Payment and Subsequent Termination of an 
ICF/IID 
3006.1 - Sanctions for ICFs-IID - or Nonimmediate Jeopardy 
3006.1A - General 
3006.1B - Introduction 
3006.1C - Examples of Alternative Sanctions 
3006.1D - Alternatives to Termination in Nonimmediate Jeopardy 
Situations 
3006.2 - Directed Plan of Correction (DPoC) 
3006.2A - Purpose 
3006.2B - Basis for Imposition of a DPoC 
3006.2C - Elements of a DPoC 
3006.2D - Notice of Imposition of DPoC 
3006.3 - Directed In-Service Training 
3006.3A - Purpose 
3006.3B - Appropriate Resources for Directed In-Service Training 
Programs 
3006.3C - Further Responsibilities 
3006.3D - Notice of Imposition of Directed In-Service Training 
3006.4 - State Monitoring 
3006.4A - Purpose 
3006.4B - Qualifications 
3006.4C - When to Impose State Monitoring 
3006.4D - Frequency 
3006.4E - Duration 
3006.4F - Notice of Imposition of State Monitoring 
3006.4G - Payment for and Obligation of Funds by a State Monitor 
3006.5 - Achieving Continuous, Substantial Compliance 
3006.5A - Introduction 
3006.5B - Duration of a Sanction 
3006.5C - Achieving and Maintaining Substantial Compliance 
3006.6 - Criteria for Review of State Plans for Approval or Disapproval of 
Alternative Sanctions 
3006.6A - Introduction 
3006.6B - Alternative Remedies 
3008 - Services After Termination 
  3008.1 - Services After Termination of a Medicare Provider Agreement 
3008.2 - Services for which Federal Financial Participation (FFP) May Be 
Temporarily Continued After Termination of a Medicaid Provider 
Agreement or Nonrenewal or Cancellation of an ICF/IID Provider 
Agreement 
3008.3 - Relocating Patients Displaced by Termination or Closure 
3008.3A - General 
3008.3B - Relocation of Medicaid Patients 
3008.3C - Relocation Activities 
3010 - Termination Procedures - Immediate Jeopardy to Patient Health and Safety 
(Medicare) 
3010A - Substantial Noncompliance With Program Requirements Which Poses 
Immediate Jeopardy to Patient Health or Safety 
3010B - Processing of Immediate Jeopardy Terminations 
3012 - Termination Procedures  Substantial Noncompliance; No Immediate Jeopardy 
(Medicare) 
3012.1 - Termination of Psychiatric Hospitals 
3012.2 - Termination of Organ Procurement Organizations (OPO) 
3012.2A - Termination Procedures 
3012.2B - Reconsideration Procedures 
3012.2C - Appeal Procedures 
3012.3  Termination of Organ Transplant Programs 
3014 - RO Termination Action Based on Onsite Survey of Medicare Provider or Supplier 
(Excluding SNFs) Conducted by RO Staff 
3016 - Intervening Actions That Do Not Postpone or Delay Termination Timetable - 
(Includes Credible Allegations) 
3016A - Credible Allegation of Compliance 
3016B - Informal Hearings Do Not Interrupt Timetable 
3016C - Acceleration of Timetable 
3016D -Termination Development Coinciding With Change of Ownership 
(CHOW) Development 
3016E - Disagreement over Deficiencies 
3016.1 - Provider Undergoes Chow During Termination Proceedings 
3018 - Termination - SA Documentation Requirements 
3018A - Documentation to Support Proposed Termination 
3018A1 - Current Survey Report 
3018A2 - Previous Survey Reports 
3018B - Record of Contacts With Providers/Suppliers 
3018C - Notification to Provider/Supplier of Deficiencies and Recommendation 
of Termination 
  3020 - Additional SA Communications With Providers/Suppliers 
3022 - Notice of Termination (Medicare) 
3024 - RO Termination Processing Sequence - Noncompliance With CoPs or Conditions 
for Coverage (Excluding SNFs) 
3026 - Significance of Documentary Evidence in Determining Noncompliance 
3026A - Statement of Deficiencies 
3026B - Plan of Correction (PoC) 
3026C - Revisit Reports and Subsequent Statements of Deficiencies 
3026D - SA Certification (Completed Certification and Transmittal (Form CMS-
1539)) 
3026E - Survey Reports 
3026F - Documents of Collateral Evidence 
3026G - Notice of Termination 
3028 - Documentation Guide List - Termination for Noncompliance With 
1866(b)(2)(A) and (C) 
3028A - Documentation Appropriate to All Cases 
3028B - Additional Documentation - Charging for Covered Services and/or 
Refusing to Refund Incorrect Collections 
3028C - Additional Documentation - Failure to File Cost Reports 
3028D - Additional Documentation - Failure to Make Satisfactory Overpayment 
Arrangements 
3028E - Additional Documentation - Admission Policies and Practices 
3030 - Provider Agreement Terminations - Noncompliance with 1866(b)(2)(A) and (C) 
3030A - Cause for Termination 
3030B - Preparing Termination Cases 
3030C - Preliminary Notice to Provider 
3030D - Violation of 1866(b)(2)(A) and (C) 
3032 - Termination for Violations of 1866(a)(1)(E), (F), (G), and (H) 
3034 - Public Notice - Involuntary Termination 
3034A - For Providers 
3034B - For Suppliers 
3034C - For Hospitals, CAHs, and SNFs 
3034D - For HHAs and Hospices 
3034E - For Other Providers and Suppliers 
3036 - Billing for Public Notice of Termination or Withdrawal 
3036A - Advertising Order, SF-1143 
3038 - Rescinding or Postponing Effective Date of Termination 
3038A - Initial Action 
3038B - Criteria for Credible Allegation 
  3038C - Form of Public Notice of Termination Retraction for Providers 
3038D - Form of Public Notice of Termination Retraction for Suppliers 
3040 - Terminating Medicaid ICF/IID Eligibility Based on Look Behind Determination 
3040A - Termination Procedures 
3040A1 - Immediate Jeopardy 
3040A2 - No Immediate Threat to Patients Health and Safety 
3042 - Disallowance of FFP to State Because State Fails to Follow Correct Certification 
Procedures for Medicaid Providers 
3044 - Terminating Approval for Suppliers 
3046 - Voluntary Terminations 
3046A - General 
3046B - Decision by Provider or Supplier to Remain in the Medicare Program 
3046C - Notice to Public 
3046D - Effective Date of Voluntary Termination 
3047 - 3047 - Notice to MAC - Voluntary Termination 
3048 - Notice to Provider or Supplier - Voluntary Termination 
3048A - Voluntary Termination 
3048B - Close of Business 
3049 - Completing Certification and Transmittal (Form CMS-1539) 
3049A - Voluntary Terminations and Close of Business 
 
Reconsideration, Hearings, and Appeals 
3050 - Initial Determinations Versus Administrative Actions - Right to Review 
3052 - Nature of Reconsideration Determination - SA Procedures 
3052A - Right to Reconsideration of Initial Denial 
3052B - Request for Reconsideration 
3052C - Acknowledgment of Reconsideration Request 
3052D - Documentation of File 
3054 - Reconsideration - RO Procedures  Excluding SNFs and NFs 
3054A - Review 
3054B - RO Receipt of Request 
3054C - Acknowledgment or Reconsideration Request 
3054D - Reconsideration Determination 
3054E - RO Notice of Reconsidered Determination 
3054E1 - Denial Reversal (Approval) 
3054E2 - Denial Affirmed 
3054E3 - Acting Official for Reconsideration Denial Notices 
3058 - Hearing on 1910(b) Cancellation of Medicaid Eligibility 
  3060 - Appeals of Adverse Actions for Medicaid Non-State Operated NFs (Non-State 
Operated) and ICFs/IID (Not Applicable to Federal Terminations of Medicaid 
Facilities) 
3060A - Informal Reconsideration 
3060B - Evidentiary Hearing 
3060C - Informal Reconsideration (Applies to ICFs/IID for Denial of Payment for 
New Admissions Only) 
3060D - Judicial Review 
3060E - Impartial Decision Maker (Hearing Officer) 
 
Prospective Payment System (PPS) 
3100 - Hospitals and Hospital Units Excluded From the Inpatient Prospective Payment 
System (IPPS) - Introduction  
3102 - General Information on IPPS Exclusion Deemed Providers and Suppliers 
3104 - Criteria for PPS-Excluded Hospitals 
3104A - Psychiatric Hospitals 
3104B - Rehabilitation Hospitals 
3104C - Childrens Hospitals 
3104D - Long-Term Care Hospitals 
3104E - Hospital within Hospitals 
3106 - Criteria for Psychiatric and Rehabilitation Units 
3106A - General Criteria for Units 
3106B - Specific Criteria for Psychiatric Units 
3106C - Specific Criteria for Rehabilitation Units 
3108 - SA First-Time Verification Procedures for Hospitals and Units 
3108A - Rehabilitation Hospitals and Rehabilitation Units of Hospitals 
3108B - Psychiatric Units of Hospitals 
3110 - SA Reverification of PPS-Excluded Hospitals and Units 
3110A - Annual Reverification Process for Nonaccredited, PPS-Excluded, 
Rehabilitation Hospitals and Units 
3110B - Reverification Process for Rehabilitation Hospitals and/or Units 
Accredited by CARF Under CIRP or JCAHO 
3110C - Reverification Process for Psychiatric Units of Hospitals: 
3112 - RO Procedures for Exclusion from PPS for Hospitals and Units 
3112.1 - RO Procedures for First-Time Exclusion of Hospitals and Units 
3112.2 - RO Verifying Continued Compliance With Exclusion Criteria by 
Currently Excluded Hospitals or Units 
3112.2A - Self-Attestation Procedures for PPS-Excluded Hospitals and 
Units 
3112.2B - RO Verifying Exclusion Eligibility of Other Facilities 
  3112.3 - Role of FIs in Reverification of PPS Excluded Hospitals and Units 
 
Changes in Provider Status or Services 
3200 - Action Based on Changes in Provider Organization, Services, or Action of Other 
Approving Agencies 
3202 - Change in Size or Location of Participating SNF and/or NF 
3202A - Requirements for Distinct Part Certification 
3202A1 - Meet Distinct Part Certification 
3202A2 - Do Not Meet Distinct Part Certification 
3202B - Changes in Bed Size of Participating SNF and/or NF 
3202C - General Request Filing Requirements 
3202D - Exceptions 
3202E - Change in Designated Bed Location(s) 
3202F - RO or SA (as appropriate) Actions Upon Receipt of Written Request for 
Change in Bed Size/Location 
3202G - Evaluation 
3202H - Survey Considerations 
3206 - Existing ESRD Facility Relocation, Expansion, or Addition of New Service 
3210 - CHOW of Providers and Suppliers 
3210A - Existing PoC 
3210B - Compliance With Health and Safety Standards 
3210C - Compliance With Ownership and Financial Interest Disclosure 
Requirement 
3210D - Compliance With Civil Rights Requirements 
3210E - All Medicare Sanctions and Penalties 
3210.1 - Determining Ownership 
3210.1A - General 
3210.1B - SA Actions to be Taken Following CHOW 
3210.1C - Certification of Accredited Providers/Suppliers Which Change 
Ownership 
3210.1D - CHOW Situations 
3210.1E - CHOW Analysis General Rules 
3210.2 - RO Role in CHOW Determination 
3210.3 - CHOWS Involving Multi-Regional Chain Organizations 
3210.4 - Other Changes Related to CHOW - RO Procedures 
3210.4A - New Owner Requests Different Intermediary 
3210.4B - New Owner Sets Different Fiscal Reporting Period 
3210.4C - New Provider Number Must Be Issued 
3210.5 - New Owner Refuses to Accept Assignment of the Provider Agreement 
  3210.5A - New Owner Refuses to Accept Assignment of Previous 
Owners Provider Agreement 
3210.5B - Withdrawal After CHOW - Provider 
3210.5C - CHOW and Withdrawal - Supplier 
 
Expansion of Services 
3220 - Certifications of Additional Services 
3220A - Services in Compliance 
3220B - Services Not In Compliance (HHAs, RHCs, and ESRD Facilities) 
3222 - Specific Requirements for Expansion of Services 
3222A - HHAs Request to Provide OPT Services on Its Premises 
3222B - RHCs Request to Provide Visiting Nurse Services 
3224 - Addition of Sites to an Existing Provider 
 
Validation Surveys of Accredited Providers and Suppliers 
3240 - Validation Surveys - General  
3241  Objective of Validation Surveys 
3242 - Representative Sample Validation Surveys of Deemed Providers/Suppliers 
3243 - Substantial Allegation Validation Surveys of Deemed Providers/Suppliers 
3244 - SA Preparation for Validation Survey 
3246 - Provider/Supplier Authorization for Validation Survey 
3248  Provider/Supplier Refusal to Permit Validation Survey 
3252 - SA Forwarding Validation Survey Records to RO 
3254 - RO Actions Following Validation Survey 
3254A  Providers/Suppliers Found in Compliance Following Validation Survey 
3254B - Providers/Suppliers Found Not In Compliance With One or More 
Conditions Following Validation Survey and Noncompliance Constitutes 
Immediate Jeopardy 
3254C - Condition-level Deficiencies That Do Not Pose Immediate Jeopardy 
3254E - Plans of Correction 
3254F - Termination 
3254G - Compliance with All Conditions After Correction of Deficiencies 
3256 - RO Provision of Information to Accrediting Organizations 
3257 - Reinstatement to Accrediting Organization Jurisdiction 
3258  Termination of Accreditation 
 
Handling Public Inquiries 
3300 - Confidentiality and Disclosure of Records - Citations and Applicability 
3302 - Federal Freedom of Information Act (FOIA) 
3304 - Multi-Program Information in SA Files 
  3305 - Sharing State Licensure Information With Medicare Contractors 
3308 - Information That May Be Disclosed to Public 
3308A - Information Disclosable to Public Under CMS Rules That May Be 
Disclosed Directly by the SA 
3310 - Requests for Information About Nonparticipating Institutions 
3312 - Charges for Information 
3314 - Time Periods for Disclosure Other Than Nursing Homes 
3316 - Information Furnished to Original Source 
3318 - Disclosure of Information To and From Operating Components 
3319 - Monthly Quality Indicator Comparison Reports Policy 
3319A - Purpose 
3319B - Contents 
3319C - Differences From Facility Quality Indicator Profile Report 
3319D - Delivery of Report 
3319E - Release of Report 
3319F - Monthly Quality Indicator Comparison Report Guidelines 
3320 - Necessary Preclearance With RO Before Releasing Confidential Information 
Additional State Agency Responsibilities 
 
3330 - HHA Toll-Free Hotline and Investigative Unit 
3330A - HHA Hotline Function 
3330B - HHA Hotline Information 
3330C - Disclosure of Information 
3330D - Record Keeping Requirements 
3330E - Public Awareness 
3330F - Hotline Investigative Unit 
 
Response to Subpoenas Served On and Suits Against the State Agency 
3350 - Subpoena for Program Records 
3352 - Forthwith Subpoena 
3354 - Subpoena for SA Licensure Records 
3356 - Suit Against SA 
 
   
  Adverse Actions 
 
3000 - Adverse Actions - General 
(Rev. 1, 05-21-04) 
 
3000A - Applicability 
(Rev. 1, 05-21-04) 
 
The Regional Office (RO) and State survey agency (SA) follow the procedures in this 
part if an adverse action is likely to be initiated against Medicare participating providers 
and suppliers.  Because many Medicare providers and suppliers also participate in the 
Medicaid program and Federal procedures must also be followed when surveying and 
certifying providers that only participate in the Medicaid program, these procedures 
generally apply to both programs.  Exceptions for Medicaid are noted.  (See also Chapter 
7 for specifics pertaining to SNFs and NFs.) 
 
For Medicaid-only facilities, termination procedures are not State plan requirements.  
However, a State risks disallowance of Federal matching funds for failure to use Federal 
standards and the forms, methods, and procedures prescribed by CMS.  (See 
42 CFR 442.30.) 
 
3000B - State Ombudsman Programs 
(Rev. 1, 05-21-04) 
 
To coordinate with the State ombudsman network, the SA should establish procedures to: 
 
  Notify the State ombudsman of decisions to initiate proceedings to terminate, or 
nonrenew a provider agreement; 
 
  Notify the State ombudsman of voluntary terminations and planned terminations, 
including dates of closure; 
 
  Consider ombudsman information about situations in the facility and the 
credibility of the providers allegations of compliance; and 
 
  Share Statements of Deficiencies and Plans of Correction (PoCs). 
 
3000C - CMS Authority to Terminate Medicare and Medicaid 
Participation 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
1.  Noncompliance with Conditions of Participation (CoPs), Conditions for 
Coverage, or Requirements for SNFs - The RO is delegated authority to terminate 
Medicare participation of any certified provider or supplier because of 
  noncompliance with the applicable regulatory requirements, or Conditions of 
Participation (CoPs) or Conditions for Coverage (CfCs). 
 
2.  Violations of Medicare Provider Agreements or certified Supplier Approvals, 
Quality Improvement Organization (QIO) Sanctions, or Program Abuse - The 
Secretarys authority to terminate provider agreements or certified supplier 
approvals is delegated to the Associate Regional Administrator and may be 
redelegated to the RO Branch Chief, but other components may also be 
authorized to find that termination is in order.  Accordingly, the RO processes 
terminations on grounds other than noncompliance with the CoPs. See 3032. 
 
3.  Look Behind Cancellation of Medicaid Intermediate Care Facility/Individuals 
with Intellectual Disabilities (ICF/IID) Agreements - The ROs are authorized to 
cancel the approval of an ICF/IID to participate in the Medicaid program when 
the ICF/IID fails to comply substantially with the applicable CoPs.  (See 1910(b) 
of the Act.) 
 
4.  Termination of Nursing Facility (NF) Medicaid Agreements - The ROs are, under 
certain circumstances, authorized to terminate a NFs participation in the 
Medicaid program.  (See 1919(h) of the Act and Chapter 7 of the SOM.) 
 
3001  -  Initial  Denials  of  Medicare  Provider/Supplier  Requests  for 
Program Participation 
(Rev. 1, 05-21-04) 
 
Denials are made only when there has been an expression, written or otherwise, of 
interest in participating (or in expanding the scope of existing participation) and/or an 
initial survey is performed.  Because the RO makes the compliance decision for Medicare 
and approves an effective date of participation, the SA should not lead the 
provider/supplier to believe that the provider/supplier has been approved and can start to 
furnish services to Medicare beneficiaries. 
 
An initial denial is made when, after evaluating the evidence the adjudicating office (in 
this case the RO) finds that the requirements of law and regulation are not met.  The SA 
forwards recommendations for initial denials to the RO within 10 working days after the 
date of survey.  Formal written denial notices that explain the right to appeal are issued 
by the RO as soon as possible. 
 
3001A - Authority for Adjudicating Denials 
(Rev. 1, 05-21-04) 
 
The RO adjudicates all approvals or disapprovals for Medicare participation.  42 CFR 
498 addresses determination and appeal procedures.  Title 42 CFR Part 488 provides the 
basis for denying suppliers of services.  The statutory authority is implied in 1819, 
1832, 1861, and 1881 of the Act which authorize the Secretary to establish CoPs or CfCs. 
 
  3001B - Vacated Actions Which Are Not Denials 
(Rev. 1, 05-21-04) 
 
If the SA is contacted by a potential provider and it schedules a survey, but the survey is 
canceled after finding that the party is either no longer interested in participating or in 
meeting program requirements, the SA notifies the RO by Form CMS-1539, indicating 
the lack of interest.  The RO sends a written notice to the potential provider to document 
the reason why certification action was not completed.  Despite the lack of interest, if the 
potential provider operates a SNF, and the SA has sufficient information, the SA prepares 
a 1819(a)(1) (formerly 1861(j)(1)) certification, if indicated.  (See 2164.) 
 
3001C - Vacated Actions Which Are Denials 
(Rev. 1, 05-21-04) 
 
If a potential provider or supplier is surveyed and deficiencies are cited, the SA forwards 
Form CMS-1539 and related documentation to the RO, even when the request for 
participation is withdrawn.  The RO either notifies the provider or supplier of the failure 
to meet eligibility requirements or affirms the providers or suppliers request to 
withdraw. The SA uses Form CMS-1539 to transmit all certification forms and pertinent 
documents to the RO within 45 calendar days of the survey.  A 1819(a)(1) certification 
is included, if indicated. 
 
NOTE:  The RO, based on notification by the FI or carrier of their inability to verify 
environment data, may issue the provider or supplier a notice of Medicare denial of 
participation.  
 
3001D - RO Processing of Denials 
(Rev. 1, 05-21-04) 
 
The RO processes the denial and sends the provider or supplier a formal notice, with a 
copy to the SA, the State Medicaid Agency (SMA), and the intermediary, if applicable, 
documenting the basis for the action. 
 
The RO includes the following information in the formal notice: 
 
  The date of the notice; 
 
  The decision and reason for it (cite provisions of the law or regulations not met); 
 
  The right to request participation in the future; and 
 
  The procedures to follow for a formal reconsideration and a hearing before an 
administrative law judge (ALJ). 
 
A denial notice must be signed by the RO official delegated to adjudicate denials. 
 
  3005 - Basis for Terminating Provider Participation - Citations and 
Discussion 
(Rev. 1, 05-21-04) 
 
3005A - Medicare Provider Agreements 
(Rev. 1, 05-21-04) 
 
Provider agreements and agreements with clinics that provide Outpatient Physical 
Therapy (OPT) and Community Mental Health Centers (CMHCs) are terminated by the 
RO under the authority of 1866(b) of the Act.  (See 42 CFR 489.52-489.57.)  Medicare 
providers (as defined in 2002) must substantially meet each of the applicable CoPs or 
requirements for participation. 
 
3005B - Termination of Coverage of Supplier Services Subject to 
Certification 
(Rev. 1, 05-21-04) 
 
Sections 1832(a), 1861(g), (p), (s), and (aa) and 1881(b) of the Act authorize the 
Secretary to establish CfCs of supplier services and thus implicitly authorize 
determinations that the Conditions cease to be met.  Title 42 CFR 498.3(b) provides that 
the Secretary makes findings, setting forth pertinent facts and conclusions, and an initial 
determination as to whether a supplier meets the respective Conditions.  The 
determination can be a result of the written request by the supplier to start or expand 
services or to establish that it continues to meet respective CfCs.  An adverse 
determination may involve one or more areas of services offered by a supplier.  While 
these adverse determinations are not in the regulations as terminations, their effect on 
payment for the suppliers services is the same as when a provider agreement is 
terminated.  Procedures for certifying supplier noncompliance parallel those for 
certifying provider noncompliance. 
 
For example, the agreement into which an Ambulatory Surgical Center (ASC) or Rural 
Health Clinic (RHC) enters is a specific agreement related to those suppliers, not a 
provider agreement. 
 
3005D - Cause for Termination 
(Rev. 1, 05-21-04) 
 
The CMS may terminate Medicare provider participation if the provider does not comply 
with a CoP or Requirement for SNFs/NFs, or fails to provide an acceptable PoC for other 
requirements.  (See 42 CFR 489.53.) 
 
Certain causes for termination are unrelated to certification and have no impact on the 
SA.  The CMS may terminate provider participation if: 
 
  1.  The provider places restrictions on the persons it accepts for treatment, and fails 
either to exempt Medicare beneficiaries from the restrictions, or to apply the same 
restrictions to Medicare beneficiaries as to all other persons seeking care; 
 
2.  The provider refuses to permit examination of its records by or on behalf of CMS 
for verification of information it furnished as a basis for payment; 
 
3.  The provider has knowingly and willfully made false statements or 
representations of a material fact for use in a request for payment; 
 
4.  The provider has submitted, or caused to be submitted, requests for payment 
under Medicare, or amounts for items and services, substantially in excess of the 
costs incurred; 
 
5.  The provider has furnished items or services which CMS determined to be 
substantially in excess of the needs of individuals or of a quality that failed to 
meet professionally recognized standards; or 
 
6.  The provider fails to: 
 
  Permit photocopying of any records necessary to determine compliance; 
 
  Furnish information necessary for CMS to determine whether payments 
are or were due under Medicare and the amount due; 
 
  Furnish information on business transactions as required; 
 
  Disclose information on convicted principals; 
 
  Furnish ownership information;  
 
  Comply with civil rights requirements; or 
 
  Furnish notice of discharge rights. 
 
7.  A hospital or critical access hospital that has reason to believe it may have 
received an individual by another hospital in violation of 42 CFR 489.24 fails to 
report the incident. 
 
8.  A hospital fails to furnish inpatient services to TRICARE or CHAMPVA 
beneficiaries or to veterans. 
 
9.  A critical access hospital fails to maintain an annual average length of stay of 96 
hours or less. 
 
  The SA certifies provider compliance with Medicare requirements.  FIs generally are 
responsible for dealing with matters related to payment and coverage.  However, in the 
course of a survey, the SA may encounter information indicative of program abuse or 
failure to meet requirements described in the above list.  The SA communicates these 
areas of concern to the RO. 
 
3005E - Termination of Title XIX-Only NFs, ICFs/IID, Hospitals and 
Psychiatric Hospitals 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Under 42 CFR 431.54(f), the State Medicaid Agency may lock out, i.e., restrict the 
participation of a Medicaid provider for a reasonable period if it has found that the 
provider has abused the Medicaid program.  The SMA may take this action in response 
to, or independent of any SA or accrediting organization recommendation.  Note that the 
Medicaid program, unlike the Medicare program, does not distinguish between 
providers and suppliers and the term provider applies to both for Medicaid 
purposes.   
 
In order to determine that a provider has abused the Medicaid program, the SMA must 
find that in a significant number or proportion of cases the provider has: 
 
  Furnished services at a frequency or amount not medically necessary 
(431.54(f)(2)(i)); or 
 
  Furnished Medicaid services of a quality that does not meet professionally 
recognized standards of health care. (431.54(f)(2)(ii)). 
 
Additional conditions required before imposing any restriction on a provider are found in 
431.54(f). 
 
Medicaid-only NFs and ICFs/IIDs 
 
Medicaid regulations provide for terminations, and for ICFs/IID cancellations, but do not 
describe the implementing procedures.  Each SMA has procedures for terminating 
agreements with NFs and ICFs/IID when they are not in substantial compliance with 
program requirements.  In any Medicaid-only noncompliance situation, the SA initiates 
the action, prepares the necessary documents, and forwards them to the SMA, which has 
responsibility for the termination, nonrenewal, or cancellation of the agreement (see 
7300 for the exception regarding State operated NFs).  In this case, the SMA notifies 
CMS and the public of its action and affords the facility notice and opportunity for a 
hearing before an ALJ prior to termination. 
 
Medicaid-only Hospitals and Psychiatric Hospitals 
 
42 CFR 482.1(a)(5) notes generally that any hospital or psychiatric hospital that 
participates in Medicaid must meet the Medicare CoPs.  Medicaid regulations at 42 CFR 
  440.10 (hospitals) and 440.140 and 440.160 (psychiatric hospitals) require Medicaid-
participating hospitals and psychiatric hospitals to comply with the Medicare CoPs.  If a 
SA survey of a Medicaid-only hospital or psychiatric hospital finds substantial 
noncompliance, i.e., condition-level noncompliance, including immediate jeopardy, with 
the CoPs, the SA follows the standard SOM processes for requiring a plan of correction 
and conducting revisits.  If the hospital or psychiatric hospital fails to come into 
substantial compliance in a timely manner, the SA notifies the SMA, which takes 
appropriate action in accordance with Federal Medicaid regulations and State plan 
provisions. 
 
Likewise, in the case of a hospital or psychiatric hospital that participates in Medicaid 
based on accreditation by a CMS-approved Medicare hospital or Medicare psychiatric 
hospital accreditation program, the accrediting organization (AO) must notify both CMS 
and the SMA if the facilitys accreditation is terminated for any reason.  The SMA may 
in such cases request the SA to conduct a survey to determine the hospitals or 
psychiatric hospitals compliance with the CoPs, or may proceed directly to take 
appropriate action in accordance with Federal Medicaid regulations and State plan 
provisions. 
 
If the SMA decides to restrict the providers participation in Medicaid, the SMA is 
responsible for: 
 
  Giving notice to the provider and opportunity for appeal, in accordance with 
procedures established by the SMA (431.54(f)(1)); 
 
  Notifying CMS and the general public of the providers restriction and its 
duration (431.54(f)(3)); and 
 
  Ensuring that restrictions do not result in denying Medicaid recipient reasonable 
access to services of adequate quality (431.54(f)(4)).   
 
If the SMA restricts a Medicaid-only hospitals or psychiatric hospitals Medicaid 
participation, it gives notice to CMS via the SA.  The SA forwards the notice to the RO.  
The RO terminates the hospitals or psychiatric hospitals Medicaid-only CCN, unless the 
SMA notice contains a date certain when the providers participation in Medicaid will 
resume. 
 
3005F - Termination Action Based Upon Onsite Survey by RO, or 
Validation Survey of a Deemed Provider or Supplier by RO or SA 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
RO Conducts Survey: 
 
When substantial noncompliance, including immediate jeopardy to patient health and 
safety, is identified in the course of a survey conducted by RO staff, the RO initiates 
termination procedures.  Survey findings and factual development are the responsibility 
  of the RO.  However, the SA may be asked to assist in documenting or developing 
aspects of the termination.  The SA (and the SMA, if the provider/supplier also 
participates in Medicaid) is notified by the RO of the action taken. 
 
RO or SA Validation Survey of a Deemed Provider or Supplier 
 
Section 1864(c) of the Social Security Act provides that SAs conduct validation surveys 
of deemed providers and suppliers, at the direction of the CMS RO.  The RO may also 
choose to conduct the validation survey with RO surveyors, or with a mixture of SA and 
RO surveyors.  There are two types of validation surveys: 
 
  Full, standard surveys of a representative sample of deemed providers and 
suppliers, and 
  Focused substantial allegation, i.e., complaint investigation surveys. 
 
Representative Sample Validation Survey:  If the representative sample validation survey 
identifies either an immediate jeopardy or substantial, i.e., condition-level, 
noncompliance and the RO agrees with this finding, the RO initiates termination of the 
deemed provider or supplier, including an opportunity for the provider/supplier to make a 
timely correction of the deficient practices to avoid termination. 
 
Substantial Allegation Validation Survey: 
 
  If the survey identifies an immediate jeopardy and the RO agrees with this 
finding, the RO initiates termination of the deemed provider or supplier, 
including an opportunity for the provider/supplier to make a timely correction of 
the deficient practices to avoid termination. 
 
  If the survey identifies substantial, i.e., condition-level, noncompliance and the 
RO agrees with this finding, the RO may either: 
 
  initiate termination of the deemed provider or supplier, including an 
opportunity for the provider/supplier to make a timely correction of the 
deficient practices to avoid termination; or 
 
  Require the SA to conduct a full survey of the provider or supplier.  
Termination action would be initiated if the full survey identifies substantial 
noncompliance. 
 
See Chapter 5, Section 5110 for more details on post-survey procedures after a 
substantial allegation validation survey. 
 
3005G - Look Behind Authority of CMS 
(Rev. 1, 05-21-04) 
 
  3005G1 - Look-Behind Termination or Cancellation of ICF/IID 
Agreement by the Secretary 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
The CMS has authority under 1910(b) of the Act to terminate approval of an ICF/IID to 
participate in the Medicaid program when it determines that the facility fails to comply 
substantially with the CoPs, 42 CFR Part 483, Subpart I, or to submit an acceptable PoC. 
 
The cancellation is prospective, usually after the provider has had the opportunity for a 
formal hearing before an ALJ. 
 
If there is no immediate jeopardy to resident health and safety and CMS elects to 
terminate, the ICF/IID is afforded an opportunity for a pre-termination hearing before an 
ALJ.  If the effective date of termination is held in abeyance pending an ALJs ruling and 
the ICF/IID makes a credible allegation of compliance while the hearing is pending, it is 
up to the RO to determine whether it is in the recipients and the governments interest to 
resurvey the facility and dispose of the case based on the findings.  If a revisit is made 
and the ICF/IID failed to achieve compliance, adverse action continues based on the 
findings of the first Federal survey and the revisit.  If the ALJ affirms the CMS decision, 
the effective date of termination is set by the ALJ. 
 
If there is an immediate jeopardy to resident health and safety, CMS terminates or 
cancels approval of the ICF/IID and affords it the opportunity for a post-termination ALJ 
hearing. 
 
Following termination, ICFs/IID wanting readmission must request a survey from the 
RO.  The RO directs the SA to do a survey unless it feels that a Federal survey is 
necessary.  The CMS must be satisfied that the reasonable assurance provision is met 
before the State executes a Medicaid agreement with the ICF/IID. 
 
3005G2 - Old Look-Behind Termination of a NF or ICF/IID by the 
Secretary 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Under 42 CFR 442.30, a provider agreement of a SNF, NF, or ICF/IID is considered 
invalid for purposes of providing FFP to the State unless the State has followed proper 
survey and certification procedures.  For example, the SMA may have issued the provider 
agreement even though it had not certified the facility as being in compliance.  Other 
examples of procedural error include, but are not limited to: 
 
  The SA documents noncompliance yet certifies compliance; 
 
  The SA certifies compliance, but all cited deficiencies are not covered by an 
acceptable PoC; 
 
  The SA fails to survey against all applicable requirements; or 
   
  The SA fails to use federally approved survey and certification documents. 
 
When procedures are not followed by either the SA or SMA, CMS considers the provider 
agreement void from its inception, and the State is disallowed FFP for bills related to the 
facility for the period covered by that Medicaid agreement.  This type of adverse action, 
referred to as Old Look Behind, is covered in more detail in 3042. 
 
3005G3 - SMA Disagrees With SA Determination 
(Rev. 1, 05-21-04) 
 
With the exception of State-operated NFs, the SA surveys and certifies compliance of 
Medicaid facilities with health and safety requirements to the SMA.  The SMA is 
responsible for reviewing certifications to ensure that the SA has adhered to procedural 
requirements.  If the SMA disagrees with the SAs certification, it first contacts the SA to 
resolve the issue.  If the issue cannot be resolved, it contacts the RO.  To resolve the 
dispute, the RO conducts a Federal survey of the facility or take other action as 
necessary. 
 
3006 - Denial of Payments in Lieu of Termination of ICFs/IID 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
 
3006A - Authority to Deny Payment for Any New Admissions for 
ICFs/IID 
(Rev.92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Section 1902(i) of the Act and 42 CFR 442.118 provide the SMA with an alternative to 
terminating ICFs/IID that fail to meet program requirements.  This sanction is the one-
time denial of payment for new admissions for a period of up to 11 months after the 
month it was imposed, if the facilitys deficiencies do not present an immediate jeopardy 
to residents health and safety.  A decision is made at the end of 11 months whether to 
continue participation.  However, the 11-month period can be shortened if circumstances 
change and there is immediate jeopardy to health and safety before 11 months have 
passed.  Alternatively, the State might rescind the denial of payments in fewer than 11 
months if full compliance is achieved or if the ICF/IID has made significant, good-faith 
efforts and progress in achieving compliance. 
 
3006B - Criteria for Imposing Denial of Payments for New Admissions 
(Rev. 1, 05-21-04) 
 
The SMA retains the right to establish its own criteria for imposing this sanction.  
However, the SMA may not use this sanction if the facilitys deficiencies pose immediate 
jeopardy to the health and safety of its clients. 
 
  3006C - Agency Procedures 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Before denying payment for new admissions, the SMA must comply with the following 
requirements: 
 
  Provide the ICF/IID up to 60 calendar days to correct the cited deficiencies and 
comply with the CoP. 
 
  If at the end of the specified period the ICF/IID has not achieved compliance, give 
the facility notice of intent to deny admissions and the opportunity for an informal 
hearing. 
 
  If the ICF/IID requests a hearing and the decision of the hearing is to deny 
payment, the SMA must provide the facility and the public, at least 15 calendar 
days before the effective date of the sanction, a notice that includes the effective 
date of the sanction and the reasons for the denial of payment. 
 
3006D - Effect of Sanction on Status of Clients Admitted, Discharged, or 
on Temporary Leave and Readmitted Before or After Effective Date of 
Denial of Payment 
(Rev. 1, 05-21-04) 
 
The clients status on the effective date of the denial of payment is the controlling factor 
in determining whether readmitted clients are subject to the denial of payment.  
Guidelines are as follows: 
 
  Clients who were admitted and discharged before the effective date of the denial 
of payment are considered new admissions if they are readmitted on or after the 
effective date.  Therefore, they are subject to the denial of payment; 
 
  Clients admitted on or after the effective date of the denial of payment are 
considered new admissions.  If readmitted after being discharged, they continue to 
be considered new admissions, and are subject to the denial of payment; 
 
  Clients admitted before and discharged on or after the effective date of the denial 
of payment are considered new admissions if subsequently readmitted.  Therefore, 
they are subject to the denial of payment;  
 
  Clients admitted before the effective date of the denial of payment who take 
temporary leave before, on, or after the effective date of the denial of payment are 
not considered new admissions upon return and therefore, are not subject to the 
denial of payment; and 
 
    Clients admitted on or after the effective date of the denial of payment who take 
temporary leave are not considered new admissions, but continue to be subject to 
the denial of payment. 
 
NOTE:  The term temporary leave refers to clients who leave temporarily for 
any reason.  If clients were not subject to a denial of payment when they went on 
temporary leave, the term indicates that upon return they are not considered new 
admissions for the purposes of the denial of payment.  Therefore, the term 
temporary leave is used to justify a resumption of any interrupted payment upon 
re-entry into the facility. 
 
The term leave of absence is defined as any situation where the client is absent, 
but not discharged, for reasons other than admission to a hospital, SNF or NF, or 
distinct part of a SNF or NF.  The term leave of absence is used for the purpose 
of preventing duplicate payments during an absence by assuring that the absence 
is not due to a temporary alternate inpatient arrangement.  If the client is not on a 
leave of absence but is actually temporarily in an alternate inpatient situation, any 
ongoing payment to the facility will be interrupted as mentioned above.  
 
The client who is not subject to the denial of payment sanction and who goes on 
temporary leave, whether there is a leave of absence, will not be considered a new 
admission for the purposes of the denial of payment sanction, upon his/her return 
to the facility.  Any interrupted payment will be resumed.  In either situation, it is 
expected that the client will return to the facility following leave. 
 
3006F - Duration of Denial of Payment and Subsequent Termination of 
an ICF/IID 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
The denial of payment for new admissions will continue for eleven months unless, before 
the end of that period, the SMA finds that the ICF/IID has corrected the deficiencies or is 
making a good faith effort to achieve compliance with the CoPs or the deficiencies are 
such that it is necessary to terminate the facility. 
 
The SMA must terminate the facilitys provider agreement: 
 
  Upon finding that the ICF/IID has been unable to achieve compliance with the 
CoPs during the 11-month period that payments were denied for new admissions; 
and 
 
  Termination is effective the day following the last day of the denial of payment 
period. 
 
3006.1 - Sanctions for ICFs-IID - or Nonimmediate Jeopardy 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
  3006.1A - General 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
The Balanced Budget Act (BBA) of 1997 provided the statutory authority for States to 
establish and impose sanctions that are additional to the already existing alternative 
sanction of denial of payment for new admissions, and which are alternative to 
termination in cases where the ICF/IIDs deficiencies are not determined to pose 
immediate jeopardy to client health and safety.  This strategy recognizes that deficiencies 
take on greater or lesser significance depending on the specific circumstances and client 
outcomes in each facility, and that additional enforcement options should be available so 
that the enforcement consequence to the facility is effective, proportionate, and 
appropriate to the specifics of the noncompliance. 
 
3006.1B - Introduction 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Section 1902(i)(1)(B) of the Act, as revised by the BBA of 1997, provides that the State 
may establish alternative sanctions to use as enforcement remedies for deficiencies that 
do not constitute immediate jeopardy to client health and safety if the State can 
demonstrate to CMS satisfaction that its alternative sanctions are effective in deterring 
noncompliance and correcting deficiencies (see 3006.6).  One or more alternative 
sanctions may be imposed against private or State operated ICFs/IID instead of provider 
agreement termination, and may also be imposed instead of or in addition to the existing 
alternative sanction of denial of payment for new admissions.  Examples of sanctions that 
may be appropriate as alternative sanctions are listed in subsection C. 
 
3006.1C - Examples of Alternative Sanctions 
(Rev.92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
States should consider establishing the following alternative sanctions in their State plan 
for noncompliant ICFs/IID having nonimmediate jeopardy deficiencies:  
 
  Directed plan of correction; 
 
  Directed in-service training; and 
 
  State monitoring. 
 
States are not limited to establishing and using these alternative sanctions and may 
submit others for CMS approval.  When the State wants to use alternative sanctions, it 
must be authorized to do so under its State plan by CMS (see 3006.6).  In order to be 
approved, the State must provide specified information to indicate that the alternative 
sanction and its application is not inconsistent with applicable statutory and regulatory 
requirements, as well as demonstrate to CMS satisfaction that the alternative sanction is 
effective in deterring noncompliance and correcting deficiencies. Many States already 
have experience in imposing the three intermediate sanctions specified above against 
  nursing homes (SNF/NFs) that fail to meet participation requirements.  States also have 
experience in imposing remedies under their State licensure authority and may also wish 
to submit any of those to CMS for approval as alternative remedies for ICF/IID.  While 
we want States to have the three specified intermediate sanctions listed above available 
for ICF/IID enforcement purposes, States are free to submit others for CMS approval as 
well. 
 
3006.1D - Alternatives to Termination in Nonimmediate Jeopardy 
Situations 
(Rev. 1, 05-21-04) 
 
When the facility is found to have deficiencies that do not immediately jeopardize the 
health and safety of individuals served, the State may, in lieu of terminating the facilitys 
provider agreement:  
 
1.  Deny payment for all new Medicaid admissions to the facility after the effective 
date of the sanction; 
 
2.  Impose one or more of the alternative sanctions that CMS has approved; or  
 
3.  Do both (1) and (2) above. Deny payment for all new Medicaid admissions to the 
facility after the effective date of the sanction and impose one or more of the 
alternative sanctions that CMS has approved. 
 
3006.2 - Directed Plan of Correction (DPoC) 
(Rev. 1, 05-21-04) 
 
3006.2A - Purpose 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
A DPoC is a plan that the State develops to require an ICF/IID to take action within 
specified time frames.  The purpose of the DPoC is to achieve correction and continued 
compliance with the CoPs. 
 
A DPoC differs from a traditional PoC in that the State, not the facility, develops the 
PoC.  Achieving compliance is the providers responsibility, whether or not a DPoC was 
followed. If the facility fails to achieve substantial compliance after complying with the 
DPoC, the State may impose another alternative sanction (or sanctions) until the facility 
achieves substantial compliance or it is terminated from the Medicaid program. 
 
3006.2B - Basis for Imposition of a DPoC 
(Rev. 1, 05-21-04) 
 
Use of a DPoC should be dependent upon causal factors identified by the SA. For 
example, a DPoC may be an appropriate sanction when a facility has no system in place 
  for detecting abuse and neglect.  The DPoC would specify that the facility must develop a 
system and must have that system in place within a specified time frame. 
 
3006.2C - Elements of a DPoC 
(Rev. 1, 05-21-04) 
 
The DPoC includes all elements of a traditional plan of correction (see 3006.5.C), as 
well as when the corrective action must be accomplished, and how substantial 
compliance will be measured. 
 
3006.2D - Notice of Imposition of DPoC 
(Rev. 1, 05-21-04) 
 
A DPoC may be imposed 15 calendar days after the facility receives notice of this 
sanction.  The date the DPoC is imposed does not mean that all corrections must be 
completed by that date.  
 
3006.3 - Directed In-Service Training 
(Rev. 1, 05-21-04) 
 
3006.3A - Purpose 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Directed in-service training is a sanction that may be used when the SA concludes that 
education is likely to correct the deficiencies. This remedy requires the staff of the 
ICF/IID to attend in-service training program(s).  The purpose of the directed in-service 
training is to provide knowledge required to achieve compliance and remain in 
compliance with the CoPs. 
 
3006.3B - Appropriate Resources for Directed In-Service Training 
Programs 
(Rev.92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Facilities should use programs developed by well-established organizations of intellectual 
disabilities, developmental disabilities, mental health or health services education, such 
as special education departments in colleges or universities or schools of medicine, State 
departments/bureaus of mental health/ intellectual disabilities or developmental 
disabilities; Developmental Disabilities Councils; Federally funded State protection and 
advocacy agencies serving people with developmental disabilities; professional 
organizations with expertise in developmental disabilities, and a State may provide 
special consultative services for obtaining this type of training. The SA may also compile 
a list of resources that can provide directed in-service training and could make this list 
available to facilities and interested organizations. Facilities may request to use training 
resources internal to the organization, if the trainer was not directly involved with the 
area sanctioned.  Examples of directed in-service training topics include, but are not 
  limited to, client rights issues, behavior intervention, active treatment, health and safety, 
and outcome measures. 
 
3006.3C - Further Responsibilities 
(Rev. 1, 05-21-04) 
 
The facility bears the expense of the directed in-service training. After the training has 
been completed the SA will assess whether agency staff has demonstrated competency in 
the area(s) of deficiency and whether compliance has been achieved.  If the facility still 
has not achieved substantial compliance, the State may impose one or more additional 
sanctions. 
 
3006.3D - Notice of Imposition of Directed In-Service Training 
(Rev. 1, 05-21-04) 
 
Directed in-service training may be imposed 15 calendar days after the facility receives 
notice of this sanction. The SA will determine time frames for completion of the directed 
in-service training. 
 
3006.4 - State Monitoring 
(Rev. 1, 05-21-04) 
 
3006.4A - Purpose 
(Rev. 1, 05-21-04) 
 
A State monitor oversees the correction of cited deficiencies in the facility as a safeguard 
against further noncompliance when a situation with a potential for jeopardizing health 
and safety has occurred, but has not risen to the level of immediate jeopardy. 
 
3006.4B - Qualifications 
(Rev. 1, 05-21-04) 
 
The SA identifies state monitors as appropriate professionals to monitor cited 
deficiencies. A State monitor:  
 
  Is an employee or contractor of the SA; 
 
  Is not an employee, designee or contractor of the monitored facility; 
 
  Does not have an immediate family member who is a client of the facility; 
 
  Is not a person who has been terminated for cause by the facility; and 
 
  Is not a former contractor who had a contract canceled for cause by the facility. 
 
  3006.4C - When to Impose State Monitoring 
(Rev. 1, 05-21-04) 
 
When considering whether or not to impose State monitoring for current noncompliance, 
the State may want to consider whether: 
 
  The facility has a history of noncompliance which may suggest that it would 
benefit from external surveillance during corrections; 
 
  The facility has had numerous complaints; or  
 
  The State is concerned that the situation in the facility has the potential to worsen. 
 
States are not limited to considering only these factors and are free to consider any others 
that would assist them in making remedy determinations. 
 
3006.4D - Frequency 
(Rev. 1, 05-21-04) 
 
When State monitoring is imposed, the SA appoints a monitor or monitors. Monitoring 
may occur anytime in a facility; e.g., 24 hours a day, 7 days a week, if necessary or less 
often such as once a week to monitor specific areas. In all instances, monitors have 
complete access to all areas of the facility, as necessary, for performance of the 
monitoring activity. Factors used to decide how often a facility is monitored may include, 
but are not limited to, the following: 
 
  The nature and seriousness of the deficiency(ies) as specified by the SA; and 
 
  The timing and frequency of when the problems occurred; e.g., mealtimes, 
evening shifts, daily, etc. 
 
Monitors may be assigned to the facility at these specific times for a specified number of 
days, as determined by the SA, to ensure corrective action.  
 
3006.4E - Duration 
(Rev. 1, 05-21-04) 
 
The sanction is discontinued when the facilitys provider agreement is terminated or 
when the facility has demonstrated to the satisfaction of the SA that it is in substantial 
compliance with the Conditions of Participation.  
 
3006.4F - Notice of Imposition of State Monitoring  
(Rev. 1, 05-21-04) 
 
  Notice requirements for this sanction state that it may be imposed immediately. No notice 
is required because the sanction imposes no hardship or expense on the facility. 
 
3006.4G - Payment for and Obligation of Funds by a State Monitor 
(Rev. 1, 05-21-04) 
 
The facility will not be required to pay the salary of the State monitor; nor will the State 
monitor have managerial authority to obligate facility funds. 
 
3006.5 - Achieving Continuous, Substantial Compliance 
(Rev. 1, 05-21-04) 
 
3006.5A - Introduction 
(Rev. 1, 05-21-04) 
 
In order to safeguard the health, welfare and safety of individuals served within a facility, 
it is imperative that a facility not only attain substantial compliance in each area of 
identified deficiency(ies), but that it maintain/remain in continuous compliance. 
 
3006.5B - Duration of a Sanction 
(Rev. 1, 05-21-04) 
 
A sanction is discontinued when the facilitys provider agreement is terminated or when 
the facility has demonstrated to the satisfaction of the SA that it is in substantial 
compliance with the Conditions of Participation. 
 
3006.5C - Achieving and Maintaining Substantial Compliance 
(Rev. 1, 05-21-04) 
 
The facilities must establish policies and procedures to remedy deficient practices and to 
ensure that correction is lasting. Facilities must take the initiative and responsibility for 
monitoring their own performance continuously to sustain compliance. In order for a PoC 
to be acceptable, it must include the following elements: 
 
1.  Core Elements of PoC: 
 
a.  How the corrective action will be accomplished for individuals found to have 
been affected by the deficient practice; 
 
b.  How the facility will identify other individuals who have the potential to be 
affected by the same deficient practice, and how the facility will act to protect 
individuals in similar situations; 
 
c.  What measures will be put into place or systemic changes made to ensure that 
the deficient practice will not recur; 
 
  d.  How the facility will monitor its corrective actions/performance to ensure that 
the deficient practice is being corrected and will not recur, i.e. what program 
will be put into place to monitor the continued effectiveness of the systemic 
change to ensure that solutions are permanent; and  
 
e.  When corrective action must be accomplished.  
 
3006.6 - Criteria for Review of State Plans for Approval or Disapproval 
of Alternative Sanctions 
(Rev. 1, 05-21-04) 
 
3006.6A - Introduction 
(Rev. 1, 05-21-04) 
 
This section implements 1902(i)(1)(B) of the Act and provides guidance to the RO 
relative to reviewing for approval or disapproval, State plan amendments for alternative 
enforcement sanctions. 
 
3006.6B - Alternative Remedies 
(Rev. 1, 05-21-04) 
 
If a State wishes to establish alternative sanctions in addition to the already existing 
alternative sanction of denial of payment for new admissions, to be used in situations of 
nonimmediate jeopardy, the State plan should describe: 
 
  Timing and notice requirements; 
 
  When the remedy will be applied; 
 
  How the alternative remedy is effective in deterring noncompliance; and 
 
  Factors considered in selecting the remedy. 
 
3008 - Services After Termination 
(Rev. 1, 05-21-04) 
 
Payment may be made for a limited time for some patients after the effective dates of 
termination.  (See 3008.1 and 3008.2.) 
 
3008.1 - Services After Termination of a Medicare Provider Agreement 
(Rev. 1, 05-21-04) 
 
Effective the date the provider agreement is terminated, no payment will be made under 
the agreement.  (See 42 CFR 489.55.)  However, payment is available for up to 30 
  calendar days after the effective date of termination for beneficiaries admitted before the 
effective date of termination for: 
 
  Inpatient hospital services; 
 
  Psychiatric hospital services; and 
 
  SNF services. 
 
Also, payment is available for up to 30 calendar days for care furnished under a plan 
established before the effective date of termination for: 
 
  Home Health Agency (HHA) services; and 
 
  Hospice care. 
 
3008.2 - Services for which Federal Financial Participation (FFP) May 
Be Temporarily Continued After Termination of a Medicaid Provider 
Agreement or Nonrenewal or Cancellation of an ICF/IID Provider 
Agreement 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Federal Financial Participation  (FFP) may continue for up to 30 calendar days after the 
effective date of termination if the Medicaid beneficiaries were admitted to the entity 
before the effective date of termination and the State is making reasonable effort to 
transfer those beneficiaries to other facilities or to alternate care or to ensure that they are 
appropriately discharged. (See 42 CFR 441.11.)  Services for which FFP may be 
continued are: 
 
  Inpatient hospital services (for both dually-participating and Medicaid-only 
hospitals);  
 
  Inpatient hospital services for individuals age 65 or older in institutions for mental 
disease (IMD) (for both  dually-participating psychiatric hospitals and Medicaid-
only psychiatric hospitals which are IMDs); 
 
  NF services; 
 
  NF services for individuals age 65 or older in IMD; 
 
  Inpatient psychiatric services for individuals under age 21(for both dually-
participating and Medicaid-only psychiatric hospitals); and 
 
  ICF/IID services. 
 
  3008.3 - Relocating Patients Displaced by Termination or Closure 
(Rev. 1, 05-21-04) 
 
3008.3A - General 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
There are instances when patients in Medicare and Medicaid long-term care facilities 
need to be transferred to other facilities.  Specific actions, decisions, and events that 
require the relocation of patients include: 
 
  Voluntary or involuntary termination of provider agreement; 
 
  Expiration or renewal of an ICF/IID provider agreement ; 
 
  The providers inability to provide care and related services because of fire, 
natural disaster, loss of staff, or another reason beyond its control; 
 
  The providers voluntary termination of participation in Medicaid and/or 
Medicare; and 
 
  Closure of a facility. 
 
3008.3B - Relocation of Medicaid Patients 
(Rev. 1, 05-21-04) 
 
The SMA has the primary responsibility for relocating Medicaid patients and for ensuring 
their safe and orderly transfer from a facility that no longer participates in Medicaid to a 
participating facility.  This is because the State remains responsible for the care and 
services provided to Medicaid patients.  The States transfer policies must: 
 
  Consider the nature and severity of the facilitys failure to meet standards; 
 
  Consider the availability of alternative facilities; 
 
  Ensure that the situation is explained to the recipient and the recipient is permitted 
to exercise an informed choice as to whether he or she wishes to move and, if so, 
to which available facility. 
 
  Provide that qualified personnel will assess patients medical and psychological 
condition and needs, including the necessity to prepare the patient for transfer; 
 
  Provide for adequate and appropriate transportation on the day the patient is 
moved; and 
 
  Apprise the receiving facility of the patients condition and needs. 
   
3008.3C - Relocation Activities 
(Rev. 1, 05-21-04) 
 
The State should develop a long-term care patient relocation plan for the orderly transfer 
of patients. The plan should provide for: 
 
  Decisions to be made on relocation of patients on a case-by-case basis; 
 
  Independent current assessment of the patients need for institutional care and the 
level and type of care needed; 
 
  Procedures they will employ to ensure that the transferring facility maintains 
acceptable health care standards and takes necessary precautions to minimize fire 
hazards; 
 
  Description of the organization and staffing necessary to implement the plan; and 
 
  Necessary agreements and approvals for the transfer of the patient. 
 
The State plan should have a degree of flexibility that will enable it to be used for the 
relocation of any number of patients.  The frequency with which States will implement 
their patient relocation plans will vary considerably from State to State.  However, it 
should be developed as an ongoing, standard operating procedure that can be 
implemented quickly and efficiently.  The plan should be developed by the State 
Medicaid agency in conjunction with the SA. 
 
3010 - Termination Procedures - Immediate Jeopardy to Patient Health 
and Safety (Medicare) 
(Rev. 1, 05-21-04) 
 
(See 7307 - 7309 for SNFs/NFs.) 
 
3010A - Substantial Noncompliance With Program Requirements 
Which Poses Immediate Jeopardy to Patient Health or Safety 
(Rev. 1, 05-21-04) 
 
Immediate Jeopardy is interpreted as a crisis situation in which the health and safety of 
patients is at risk.  Generally, it is a deficient practice that indicates the operators 
inability to furnish safe care and services, although it may not have resulted in actual 
harm.  The threat of probable harm is real and important and could be perceived as 
something that will result in potentially severe temporary or permanent injury, disability, 
or death. Therefore, it must be perceived as something that is likely to occur in the very 
near future.  If the patients are not protected effectively from the threat, or if the threat is 
  not removed, there is a high probability that serious harm or injury could occur at any 
time or already has occurred and may occur again. 
 
A list of operational definitions of what can constitute an immediate jeopardy to patient 
health and safety is presented as a guide to be used by all surveyors.  (See Appendix Q.)  
Generally, the criteria applies to most providers and suppliers, although some criteria 
may apply to only certain types of providers or suppliers.  The operational definitions are 
not intended to be all-inclusive, nor are they intended to inhibit the professional judgment 
of the surveyors.  Surveyors may find that an immediate jeopardy does not exist when the 
definitions seem to apply or that such a threat does exist even though the definitions do 
not address the situation or condition observed by the surveyors. 
 
The key factor in the use of the immediate jeopardy termination authority is, as the name 
implies, limited to immediate and serious.  The threat must be present when you are 
onsite and must be of such magnitude as to seriously jeopardize a patients health and 
safety. There should be no other application of immediate jeopardy terminations. Do not 
use these procedures to enforce compliance quickly on more routine deficiencies. 
 
3010B - Processing of Immediate Jeopardy Terminations 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
When an immediate jeopardy to patient health or safety is documented, the SA and RO 
complete termination procedures within 23 calendar days.  Processing times given here 
are the maximum allowed.  Do not postpone or stop the procedure unless compliance is 
achieved and documented through onsite verification.  If there is a credible allegation that 
the threat or deficiency has been corrected, the SA conducts a revisit prior to termination 
if possible.   
 
Deemed Providers/Suppliers: 
 
See Chapter 5, Section 5110.2, for the procedures and timelines applicable when an SA 
validation survey identifies an immediate jeopardy in a deemed provider or supplier. 
 
Special Procedures for IJ in Psychiatric Hospital Surveys Conducted by CMS Contract 
Surveyors 
 
When a psychiatric hospital survey is conducted by CMS contract surveyors and they 
identify immediate jeopardy to patient health or safety, the RO will make the final 
determination as to whether or not there is an immediate jeopardy situation.   The CMS 
contract surveyors will notify the RO during survey if possible that immediate jeopardy 
to patient health or safety is identified.  On the last day of the survey, CMS contract 
surveyors contact the CMS Central Office (CO) and the applicable RO to certify 
noncompliance and that an immediate jeopardy exists.  The CMS contract surveyors 
discuss their findings with the provider and tell the providers that they are mailing the RO 
by overnight express mail completed Forms CMS-1537A and CMS-2567.  A copy is also 
mailed to CO for review.  The RO reviews the survey package (Forms CMS-1537A and 
  CMS-2567), and if it determines noncompliance, it mails Form CMS-2567 to the 
provider.  After doing so, the RO follows the 23 calendar day termination procedure as 
outlined below beginning with the fifth working day. 
 
All Other SA Surveys with IJ Findings:  23-Day Termination Procedures 
 
1.  Date of Survey - The date of the survey is the date on which the entire survey is 
completed, regardless of when the exit conference is held. 
 
2.  Second Working Day - No later than 2 working days following the survey date.  
The SA: 
 
  Telephones the RO that it is certifying noncompliance and that an 
immediate jeopardy exists; and 
 
  Notifies the provider/supplier (by overnight express mail, FAX or e-mail) 
of its deficiencies and informs the provider/supplier that it is 
recommending termination to the RO, which will issue a formal notice. 
The notice advises the provider/supplier of its right to due process, the 
expected schedule for termination action, and that the deficiency must be 
corrected and verified by the SA to halt the termination.  If the provider 
also participates in Medicaid, the SA notifies the SMA of its certification 
of noncompliance. 
 
3.  Third Working Day - The SA forwards all supporting documentation to the RO 
(e.g., statement of deficiencies, correspondence, contact reports, Form CMS-
1539).  The SA forwards the information by overnight mail to assure that the RO 
receives it in time to meet the 5-working-day deadline.  Upon receipt of the SA 
information, the RO reviews the documents and makes its determination of 
noncompliance. 
 
4.  Fifth Working Day - The provider/supplier and the public are then notified by the 
RO of the proposed termination action by the most expeditious means available.  
A press release to the radio and television stations serving the area in which the 
provider/supplier or institution is located is acceptable if a newspaper notice 
cannot be arranged in the time allotted.  Notice must be made at least 2 calendar 
days prior to the effective date of termination. (See 42 CFR 488.456(c).) 
 
5.  Tenth Working Day - If the SA only sent notification of the IJ deficiencies on the 
second working day to the provider/supplier and RO, and there are other, non-IJ 
deficiencies, (non-IJ condition and standard level), then the SA must write up 
another 2567 with the non-IJ deficiencies and forward copies to the 
provider/supplier, the RO and SMA within ten working days.  The SA retains a 
copy for its records. 
 
  6.  Twenty-Third Calendar Day - The termination takes effect unless compliance is 
achieved or threat is removed.  If the threat has been removed, but deficiencies 
still exist at the Condition level, the SA gives the provider/supplier up to 67 more 
calendar days, or 90 calendar days total (23 plus 67).  These dates are maximum 
times, and participation may be terminated earlier if processing allows.  However, 
the RO must adhere to both the provider/supplier and public notice timeframes. 
 
If the RO disagrees based upon its review of the documentation, the RO discusses the 
results of the review with the SA and solicits further evidence to support the SAs 
recommendation. The RO confers with the SA as to the appropriate action to be taken.  
Should the RO and the SA fail to agree that an immediate jeopardy exists, a revisit will 
be conducted by the RO and the SA together to ascertain whether or not immediate 
jeopardy to the patients health and safety exists or has been removed.  If the RO and SA 
agree that an immediate jeopardy exists, no revisit is necessary by the RO.   Under no 
circumstances should the RO reverse a SA recommendation that an immediate jeopardy 
has been removed or not removed unless the determination is made on the basis of an 
onsite determination by Federal surveyors. 
 
Medicaid agreements with facilities that concurrently participate in Medicare should be 
terminated on the same date the Medicare agreement is terminated.  For NFs that also 
participate as SNFs (i.e., dually-participating), the States timing of termination shall 
control if it does not occur later than six months after the last day of the survey when both 
CMS and the State find that a facility is not in substantial compliance and the facilitys 
participation should be terminated. (See 42 CFR 488.452.) 
 
For NFs, ICFs/IID, Medicaid-only hospitals and Medicaid-only psychiatric hospitals, 
where State law or the State Medicaid plan permits, Medicaid-only facilities with an 
immediate jeopardy situation should be terminated by the State Medicaid Agency within 
the above time limits. 
 
3012 - Termination Procedures  Substantial Noncompliance; No 
Immediate Jeopardy (Medicare) 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Deemed Providers/Suppliers: 
 
See Chapter 5, Section 5110.3, in the case of a substantial allegation validation survey, or 
Section 5110.4c, in the case of a representative sample validation survey for the 
procedures to follow when an SA validation survey identifies substantial noncompliance 
in a deemed provider or supplier. 
 
All Other Non-Long Term Care Providers/Suppliers 
 
(See 7310 - 7313 and 7400 for SNFs/NFs) 
 
  Failure to substantially meet one or more Conditions is a cause for termination of 
participation.  Substantially, for purposes of this section, is defined as meeting the 
applicable CoPs or CfCs.  Any provider/supplier that does not substantially meet the 
Conditions is considered to be limited in its capacity to furnish services at an adequate 
level or quality.  Compliance with Conditions; i.e., condition-level deficiencies, can never 
be certified based upon a PoC or acceptable progress since the law specifically requires 
that all CoPs or CfCs must be met. If there is not an immediate jeopardy to patient health 
or safety, the RO and the SA use the following schedule:  
 
1.  Date of Survey - The date of the survey is the date on which the entire survey is 
completed regardless of when the exit conference is held. 
 
2.  Tenth Working Day  On the 10th working day, the SA sends a warning letter and 
the Form CMS 2567 containing the deficiencies to the provider/supplier and the 
RO.  The SA informs the provider/supplier in writing that there is a determination 
of noncompliance and that it is recommending termination to be effective within 
90 calendar days from the date of the survey.  The recommended termination date 
is included in the letter.  The SA informs the provider/supplier that the 
termination process provides an opportunity to make corrections and achieve 
compliance.   This opportunity allows the provider/supplier ten calendar days to 
complete and return a plan of correction on the Form CMS 2567.  The SA should 
state in the letter that it will make a revisit within 45 calendar days of the survey if 
a credible allegation of compliance is received.  Termination takes effect as 
planned if compliance is not achieved.  This notice serves as a warning letter to 
the provider or supplier.  The SA allows the provider/supplier 10 calendar days to 
complete and return the plan of correction). 
 
3.  Forty-Fifth Calendar Day - If the facility has made a credible allegation of 
compliance (see 3016.A.), the SA conducts a revisit to determine whether 
compliance or acceptable progress has been achieved. Only 2 revisits are 
permitted; one within 45 calendar days and one between the 46th and 90th 
calendar days.  If a second credible allegation of compliance is made prior to the 
effective date of termination, the SA telephones the RO and submits 
documentation to support the second revisit (only the second revisit is subject to 
RO approval).  If the facility fails to make a credible allegation, no revisit is 
necessary. 
 
4.  Fifty-Fifth Calendar Day - If compliance has not been achieved, the SA certifies 
noncompliance.  The SA forwards the certification and supporting documentation 
to the RO.  The SA notifies the provider/supplier that termination is 
recommended and alerts the SMA if the provider/supplier is also participating in 
Medicaid.   
 
5.  Sixty-Fifth Calendar Day - Within 65 calendar days following the date of survey, 
the RO determines whether survey findings continue to support a determination of 
noncompliance. 
   
6.  Seventieth Calendar Day - The RO sends an official termination notice to the 
provider/supplier, the public, and the SMA if the provider/supplier also 
participates in Medicaid.  Notices must be made at least 15 calendar days before 
the effective date of termination. 
 
7.  Ninetieth Calendar Day - Termination takes effect if compliance is not achieved.  
It can take effect in fewer than 90 calendar days if required procedures are 
completed. 
 
NOTE: All timeframes are maximum.  The RO may terminate more quickly as long as 
the regulatory requirements for notification of the public and provider/supplier are 
satisfied. 
 
3012.1 - Termination of Psychiatric Hospitals 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Deemed Psychiatric Hospitals 
 
See Chapter 5, Section 5110.3 for the procedures to follow when a validation survey of a 
deemed status psychiatric hospital conducted by the SA identifies substantial 
noncompliance.  For validation surveys conducted by CMS  contract surveyors who 
assess compliance with the special psychiatric conditions (42 CFR 482.61 and 42 CFR 
482.62 - the B tags), whether as part of a representative sample survey where the SA 
surveys for compliance with the regular hospital conditions (the A tags), or as a 
substantial allegation survey focused solely on the B tags, contract surveyors send their 
survey findings within 10 working days from the last day of survey to the CMS RO, not 
to SAs, with a copy to CMS CO.  The CO reviews the survey findings for 
appropriateness and completeness of documentation and forwards them to the RO with 
COs recommendations for issuance of a determination of compliance or noncompliance.  
The RO makes the determination and notifies the hospital.  If any of the regular hospital 
conditions (the A tags) or either of the two special psychiatric conditions, the B tags) is 
found not in substantial compliance, the 90 calendar-day termination procedures begin 
the date of the ROs notice to the hospital with the survey report.  The procedures to be 
followed after the RO issues its notice are the same as in Chapter 5, Section 5110.3, 
except that in some cases revisits would be conducted by the contract surveyors in 
addition to or instead of the SA. 
 
Non-deemed Psychiatric Hospitals, Based on CMS Mental Health Surveyors Survey 
 
The termination process for psychiatric hospitals using CMS mental health surveyors is 
consistent with the 90 calendar-day timeframe for other providers.  However, due to the 
additional administrative process of sending the survey findings to the CO, day 1 of the 
90 day termination timeframe begins on the date the RO receives the psychiatric survey 
report form findings from CO.  The CMS mental health surveyors send the survey 
findings within 10 working days from the last day of survey to the CO, not to SAs and 
  ROs.  The CO reviews the survey findings for appropriateness and completeness of 
documentation and forwards them to the RO for final review and determination of 
compliance or noncompliance.  If either of the two special psychiatric conditions is not in 
compliance (42 CFR 482.61 and 42 CFR 482.62), the 90 calendar-day termination 
procedures begin the day the RO receives the survey report. 
 
Follow the termination procedures and timeframes below: 
 
  First Day - Date of RO receipt of the survey findings from CO. 
 
  First  Tenth Working Day - The RO reviews the survey report for adequacy of 
documentation to determine whether the documentation supports a finding of 
noncompliance with either psychiatric hospital requirement.  (See 42 CFR 482.61 
and 482.62.) 
 
The RO notifies the CO via telephone if it does not concur with the CMS mental health 
surveyors findings regarding noncompliance with the psychiatric hospital requirements.  
Note that day 1 of the termination procedures begins the day the RO receives the 
completed psychiatric hospital survey report, not the day the RO reviewed the report for 
concurrence or nonconcurrence with the findings. 
 
  Tenth Working Day - The RO notifies the provider of the cited deficiencies.  The 
RO informs the provider in writing that a determination of noncompliance has 
been made and that termination will be effective 90 calendar days from the ROs 
receipt of the survey report form (see Exhibit 180). Also the RO informs the 
provider that the termination process provides the opportunity to make 
corrections, and that if it reasonably believes that compliance has been achieved, 
it should notify the RO immediately.  Explain that a revisit will be made within 45 
calendar days from the ROs receipt of the survey report form if a credible 
allegation of compliance is received.  However, termination takes effect as 
planned if compliance is not achieved.  This notice serves as a warning notice to 
the hospital, and it contains the proposed termination date.  (The provider is to 
complete and return the POC to the RO within 10 calendar days.) 
 
  Forty-Fifth Calendar Day - If the provider makes a credible allegation of 
compliance, the RO notifies CO and requests a revisit using the CMS mental 
health surveyors.  The revisit to determine whether compliance has been achieved 
is to be conducted by the 45th calendar day.  If a provider has not alleged 
compliance by the 45th calendar day, it is not precluded from making an initial 
credible allegation between the 46th and 90th calendar day. 
 
  Fifty-Fifth Calendar Day - If a revisit has been made and compliance has not been 
achieved, the RO notifies the provider of the deficiencies that are not corrected 
and of any new deficiencies noted on the revisit. 
 
    Forty-Sixth - Ninetieth Calendar Day - If the provider makes a credible allegation 
of compliance, the RO notifies the CO to schedule a second revisit to be 
conducted before the ninetieth day to determine whether compliance has been 
achieved. 
 
  Seventieth Calendar Day - The RO sends an official termination notice to the 
hospital and a copy to the SMA if the provider also participates in the Medicaid 
program. 
 
  Seventy-Fifth Calendar Day - The RO publishes the public notice. 
 
Non-deemed Psychiatric Hospitals, Based on SA Surveys 
 
  The procedures in Section 3012 are followed. 
 
3012.2 - Termination of Organ Procurement Organizations (OPO) 
(Rev. 112, Issued: 04-11-14, Effective, 04-11-14, Implementation: 04-11-14) 
 
If an OPO voluntarily terminates its agreement, it must send a written notice to the CMS 
RO with the proposed effective date.  The CMS RO approves the proposed termination 
date or sets a different date no later than 6 months after the proposed effective date or sets 
a date less than 6 months after the proposed effective date if it determines that a different 
date would prevent a disruption of services to the service area.  When an OPO ceases 
organ procurement services in its service area, this will be considered a voluntary 
termination by the OPO. The CMS RO determines the effective date and notifies the 
OPO. 
 
OPOs are involuntarily terminated when they fail to meet the requirements of 
certification at 42 CFR 486.303, including one or more conditions for coverage (CfC) or 
when they are not in substantial compliance with and any other applicable Federal 
regulations or provisions of titles XI, XVIII, or XIX of the Social Security Act (the Act). 
 
The provider agreement between the OPO and the Secretary may be involuntarily 
terminated at anytime during the 4-year certification cycle or at the end of a cycle may 
not be renewed (re-certified) for another 4 year cycle. The CMS RO notifies CO, the 
FI/MAC and the Organ Procurement Transplantation Network (OPTN) that the OPO has 
been terminated and the effective date of the termination. The CMS RO follows the 
termination procedures detailed below. 
 
3012.2A - Termination Procedures 
(Rev. 112, Issued: 04-11-14, Effective, 04-11-14, Implementation: 04-11-14) 
 
1.  If the OPO is determined to be out of compliance with one or more CfCs, initiate 
termination of the provider agreement. CMS RO notifies the OPO of the pending 
termination date and the timeframes for submitting any additional information to 
support that appropriate corrections have been made and compliance achieved. 
   
2.  If the OPO achieves compliance, as determined through an onsite or desk review, 
send Model Letter:  Organ Procurement Organization Approval.  (See Exhibit 
172.) 
 
3. If the OPO fails to achieve compliance, send Model Letter:  Organ Procurement 
Organization Notice of Termination. (See Exhibit 173.) The letter informs the 
OPO of: 
a.  Reasons for the determination; 
 
b.  The effective date of the determination; 
 
c.  The deficiencies cited and the requirements not met;  
 
d.  The OPOs right to seek reconsideration; and 
 
e.  The timeframe for submitting additional data. 
 
4. Open the service area for competition. (See 2812.3 and Exhibit 175.) 
 
5.  Publish a public notice in the newspapers.   
 
6.  Send copies of the public notice with a cover letter to: 
 
a.  Association of Organ Procurement Organizations 
1364 Beverly Road, Suite 100 
McLean, VA 22101; 
 
b.  Current Organ Procurement and Transplantation Network (OPTN) 
 
The current OPTN is: 
UNOS 
Post Office Box 2484 
Richmond, VA 23225; 
 
c.  CMS Central Office 
 
d.  Hospitals that have a working relationship and agreements with the OPO; 
 
e.  Bordering OPOs; 
 
f.  Medicaid/Medicare State Agencies; and 
 
g.  FI/MAC of the terminated OPO. 
 
 
  3012.2B - Reconsideration Procedures 
(Rev. 112, Issued: 04-11-14, Effective, 04-11-14, Implementation: 04-11-14) 
 
The OPO may appeal the termination decision under 42 CFR 486.314.  
 
The CMS RO mails notice to the OPO of a termination initial determination.  The notice 
contains the reasons for the termination action, the effective date of the termination, and 
the OPOs right to seek reconsideration. If the OPO is dissatisfied with the termination 
action, it has 15 business days from receipt of the notice of the termination action to 
submit its request in writing to the appropriate CMS RO to seek reconsideration of that 
determination from CMS.  The request for reconsideration must state the issues or 
findings of fact with which the OPO disagrees and the reasons for the disagreement. 
 
An OPO must seek reconsideration before it is entitled to seek a hearing before a hearing 
officer.  If an OPO does not request reconsideration or its request is not made timely, the 
OPO has no right to further administrative review. 
 
The CMS RO will make a written reconsidered determination within 10 business days of 
receipt of the request for reconsideration, affirming, reversing, or modifying the initial 
determination.  
An OPO dissatisfied with the CMS reconsideration decision, must file a request for a 
hearing before a CMS hearing officer within 40 business days of receipt of the notice of 
the reconsideration determination.  If an OPO does not request a hearing or its request is 
not received timely, the OPO has no right to further administrative review. 
 
3012.2C - Appeal Procedures 
(Rev. 112, Issued: 04-11-14, Effective, 04-11-14, Implementation: 04-11-14) 
 
 If the OPO submits a request for a formal hearing, the CMS RO sends a complete 
administrative record that includes any additional materials submitted by the OPO, and a 
copy of the reconsideration decision and sends the supplemental administrative record to 
the CMS hearing officer. 
 
CMS will provide the hearing officer with:  
 
a)  A copy of the CMS OPO Database report ranking of all OPO(s) utilizing  the 
most recent data collection period, based upon compliance with the regulatory 
data requirements at 486.318 through 486.328. 
 
b)  Copies of all written correspondence between the OPO and the CMS RO 
relevant to the certification action under appeal;  
 
c)  All relevant e-mail correspondence between the OPO and the RO;  
 
d)  Any pertinent entries from a correspondence log if utilized; and 
 
  e)  Relevant Survey and Certification Memoranda and guidance. 
 
  
 
3012.3  Termination of Organ Transplant Programs 
(Rev. 190, Issued: 06-14-19, Effective: 06-14-19, Implementation: 06-14-19) 
 
Transplant programs with one or more condition-level deficiencies other than 482.80 
and 482.82 are placed on a 90 calendar-day termination track. 
However, if the program is found to be out of compliance with CoPs 482.80 or 
482.82 and submits a request for reconsideration based on mitigating factors, the 
program will be given 210 days to come into compliance with these conditions.   
The 90 day termination track is enforced if the program does not come back into 
compliance regardless of whether the program is also on a 210 day termination 
track. 
 
Please note that the termination of the transplant programs Medicare approval does 
not affect the associated hospitals provider agreement for participation as a 
Medicare-certified hospital.  However, condition level findings at the hospital CoPs, 
may affect the hospitals provider agreement if corrections are not made timely. 
HRSA and, if applicable the ESRD Network for a kidney program, are notified by the 
applicable RO of either a voluntary or involuntary termination of Medicare 
participation. 
 
The Heath Resources Administration (HRSA) (and if kidney program add ESRD 
Network) will be notified of this termination in order for them to provide assistance as 
indicated with potential recipient transfers to another Medicare-approved program. 
 
 
3014 - RO Termination Action Based on Onsite Survey of Medicare 
Provider or Supplier (Excluding SNFs) Conducted by RO Staff 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
When substantial noncompliance, including immediate jeopardy to patient health and 
safety, is determined by a survey team consisting of RO rather than SA surveyors, 
whether in the course of a Federal Look-behind survey, in response to a complaint, as 
part of the validation effort of a deemed provider or supplier, or to support other program 
needs, the RO initiates termination procedures as provided in 3010 or 3012. The RO 
notifies the SA and the SMA of the action being taken.  The RO completes the 
Certification and Transmittal, Form CMS-1539 in the Automated Survey Processing 
Environment (ASPEN) and ensures that the CMS National Data Base is updated to 
include the termination action.  (See Chapter 7 for SNFs and NFs.) 
 
  3016 - Intervening Actions That Do Not Postpone or Delay Termination 
Timetable - (Includes Credible Allegations) 
(Rev. 1, 05-21-04) 
 
3016A - Credible Allegation of Compliance 
(Rev. 1, 05-21-04) 
 
A credible allegation is a statement or documentation: 
 
  That is realistic in terms of the possibility of the corrective action being 
accomplished between the exit conference and the date of the allegation; and 
 
  That indicates resolution of the problems. 
 
If the provider/supplier makes an additional credible allegation that the deficiency(ies) is 
corrected following an earlier revisit or between the 46th and 90th calendar day prior to 
the effective date of termination, notify the RO by telephone.  The SA submits all 
evidence or documentation regarding the facilitys allegation and its recommendation 
regarding the facilitys alleged compliance.  The RO makes a determination whether a 
second revisit is appropriate. 
 
The SA conducts a second revisit if one is approved by the RO.  The SA forwards all 
supporting documentation, along with Form CMS-1539, certifying 
compliance/noncompliance to the RO immediately following the revisit. 
 
Only compliance can stop a termination action. 
 
3016B - Informal Hearings Do Not Interrupt Timetable 
(Rev. 1, 05-21-04) 
 
The process may not be postponed to accommodate informal hearings or meetings or to 
give the provider additional time to achieve compliance.  Such discussion may, however, 
be conducted within the procedural time limits in 3012, as deemed appropriate by the 
RO.  This 90 calendar-day procedure provides adequate time for the provider to achieve 
compliance if the decision by the RO is to wait the full time allowed and if the well being 
of patients is not jeopardized in the interim. 
 
3016C - Acceleration of Timetable 
(Rev. 1, 05-21-04) 
 
The SA switches from the 90-day procedures in 3012 to the accelerated procedures in 
3010 at any point when there is an immediate threat to patient health and safety.  
 
  3016D -Termination Development Coinciding With Change of 
Ownership (CHOW) Development 
(Rev. 1, 05-21-04) 
 
A CHOW does not affect completion of a termination action.  The SA does not postpone 
any required termination, nor does it solicit a PoC from the new owner.  Court appointed 
receivership is not a basis for cessation of the termination process.  Following 
termination, the new owner may, however, request approval for participation as a new 
provider, subject to reasonable assurance provisions (reasonable assurance only for 
Medicare).  (See 2016.) 
 
3016E - Disagreement over Deficiencies  
(Rev. 1, 05-21-04) 
 
(See also 7212 about Informal dispute Resolution for SNFs and NFs) 
 
A provider that disagrees with any SA finding regarding a cited deficiency or an 
acceptable PoC should be advised to annotate its position on the PoC, and should specify 
why the SAs citation is not correct.  This information does not interrupt the termination 
process, but is publicly disclosable and is included in the documentation considered 
during subsequent reconsideration and hearings. 
 
3016.1 - Provider Undergoes Chow During Termination Proceedings 
(Rev. 1, 05-21-04) 
 
If the SA learns that the provider is initiating a CHOW, it does not interrupt completion 
of its documentation of the certification of noncompliance.  The SA continues to 
document noncompliance of the previous owner.  The SA does not send a Form CMS-
1539 to report the change. 
 
3018 - Termination - SA Documentation Requirements 
(Rev. 1, 05-21-04) 
 
3018A - Documentation to Support Proposed Termination 
(Rev. 1, 05-21-04) 
 
All documents to support a proposed termination must be complete, accurate, and logical 
in sequence.  Each document must be dated and signed by the preparer or indicate the 
date of receipt in the SA.  The documentation must be supported by a complete current 
survey report or, in the case of an HHA, required CMS forms. 
 
  3018A1 - Current Survey Report 
(Rev. 1, 05-21-04) 
 
The SA reviews the current survey report or required forms to ensure that all items are 
properly completed.  If there are any changes or erasures, the SA initials the item and 
explains the basis for the modification in the explanatory remarks column. 
 
The SA includes the following information in the explanatory remarks column for each 
item not met: 
 
  A description of the deficiency; 
 
  Whether the deficiency existed during the previous survey and whether 
compliance was achieved, and then not sustained; and 
 
  Current PoCs, if any. 
 
In addition, the SA includes with the package an estimate of whether there is a prospect 
of compliance with all eligibility requirements within the time limits and the basis for this 
opinion. 
 
3018A2 - Previous Survey Reports 
(Rev. 1, 05-21-04) 
 
The SA reviews previous survey reports for consistency.  If a deficiency is reported on 
the current survey report that has obviously existed for some time, explain why it was not 
reported previously; e.g., serious structural defects, inadequate fire escapes. 
 
The SA explains any conclusions that might be questioned, especially if certain 
requirements are being weighed heavily.  For example: 
 
  The majority of standards are not met, yet the Condition is found in 
compliance; or 
 
  A Condition is found not in compliance based upon the relationship of standards 
or other deficiencies not being met. 
 
3018B - Record of Contacts With Providers/Suppliers 
(Rev. 1, 05-21-04) 
 
The SA includes in documentation copies of communications and written reports of oral 
communications with providers/suppliers including the date of contact, the person 
involved, the purpose, and the content of the communication.  Also, the SA includes 
reports of investigations of complaints. 
 
  3018C - Notification to Provider/Supplier of Deficiencies and 
Recommendation of Termination 
(Rev. 1, 05-21-04) 
 
The SA includes in the file a copy of the letter notifying the provider/supplier of the 
deficiencies found on the survey and advising that failure to correct will result in a 
recommendation for termination and includes copies of any other SA notices to the 
provider/supplier. 
 
3020 - Additional SA Communications With Providers/Suppliers 
(Rev. 1, 05-21-04) 
 
After the SA forwards the certification of noncompliance, it clears any further 
communications to the provider/supplier with the RO.  Unrecorded visits, surveys, or 
correctional allegations that were not reported before final termination action could cause 
embarrassment or even result in failure to sustain the termination action.  Even after final 
termination action, any additional contacts may be pertinent to proper handling of the 
case.  The SA notifies the RO of any such contacts. 
 
3022 - Notice of Termination (Medicare) 
(Rev. 1, 05-21-04) 
 
The RO notifies the provider/supplier of its termination by letter at least 15 calendar days 
before the effective date of the termination.  In the case of a hospital with an emergency 
department having deficiencies that pose an immediate jeopardy to the health or safety of 
individuals who present themselves to the hospital for emergency services, CMS gives 
the hospital a preliminary notice that its provider agreement will be terminated in 23 
calendar days if it does not correct the identified deficiencies or refute the finding.  CMS 
gives a final notice of termination, and concurrent notice to the public, at least 2, but not 
more than 4, calendar days before the effective date of termination of the provider 
agreement.  For skilled nursing facilities (SNFs) and nursing facilities (NFs), CMS gives 
notice of termination, and concurrent notice to the public, at least 2 calendar days, one of 
which must be a working day, before the effective date of termination of the provider 
agreement, for a facility with immediate jeopardy circumstances, and at least 15 calendar 
days before the effective date of termination for a facility with nonimmediate jeopardy 
deficiencies.  (42 CFR 488.456).  The notice states the reasons for, and the effective date 
of, the termination and explains the extent to which services may continue after that date.  
The notice also contains information regarding the providers/suppliers right to appeal 
the termination.  (See 42 CFR 489.53)  The only suppliers requiring public termination 
notices are RHCs (42 CFR 405.2404), ASCs (42 CFR 416.35), and FQHCs (42 CFR 
405.2442).  Public notices for other suppliers are optional at the discretion of the RO. 
 
3024 - RO Termination Processing Sequence - Noncompliance With 
CoPs or Conditions for Coverage (Excluding SNFs) 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
   
Upon receipt of the SAs unfavorable certification, the RO: 
 
A.  Establishes controls for processing the termination; 
 
B.  Performs an initial documentary review to make certain that copies of all pertinent 
surveys, statements of deficiencies, plans of correction (if submitted by the 
provider), and other necessary documents are included and that all relevant issues 
are resolved. When unable to determine the relationship of cited deficiencies to 
the quality of services or the health and safety of patients, the RO requests further 
SA development. If necessary, the RO retains the file and phones the SA for the 
additional documentation needed; 
 
C.  Does a substantive review, resolves all substantive discrepancies and disputes, 
assesses the severity of the providers/suppliers noncompliance, and makes its 
determination.  The RO consults with LSC specialists in the RO, if necessary.  
See discussion in 3026 concerning how to treat key documents in making your 
determination; 
 
D.  Prepares the Termination Notice (Exhibits 181 and 182) and Newspaper Notice 
(Exhibit 183) and any supplemental press releases, if planned.  The RO forwards 
a copy of its notice to the SMA, if appropriate; and 
 
E.  Inserts the effective date of termination in the notice and makes the necessary 
arrangements for public notice.  To give both the provider and the public 
sufficient advance notice of termination of a providers agreement (at least 2 
calendar days if there is immediate jeopardy or at least 15 calendar days if there is 
no immediate jeopardy), the RO determines the effective date of termination as 
follows: 
 
  Allows sufficient time for delivery of the notice to the provider, depending on 
the providers location and the method of notification, i.e., letter, overnight 
mail, or electronic means. 
  Determines the time needed for actual public notice by contacting the local 
newspaper or radio and television stations to determine their deadlines.  (See 
3034); 
 
  Allows for receipt of the notice by the provider prior to publication of the 
public notice and assures that the public receives at least 2 calendar days if 
immediate jeopardy exists, otherwise 15 calendar days notice prior to the date 
of termination; 
 
  Mails the termination notice to the provider (return receipt requested); and 
 
  Notifies the SMA of action taken against Medicaid ICFs/IID and the effective 
dates if termination action is taken pursuant to 3000.C.3.  When the 
  termination action is taken, the RO mails the informational copies to the 
following offices: 
 
o  Division of Medicare; 
 
o  Division of Medicaid;  
 
o  CO; 
 
o  Intermediary; 
 
o  SA; 
 
o  SMA; 
 
o  Regional Director, Department of Health and Human Services 
(DHHS); and 
 
o  State Ombudsman. 
 
3026 - Significance of Documentary Evidence in Determining 
Noncompliance 
(Rev. 1, 05-21-04) 
 
The RO uses the following documentation in determining compliance with the Medicare 
Federal CoPs or CFCs or Requirements of Participation. 
 
3026A - Statement of Deficiencies 
(Rev. 1, 05-21-04) 
 
This statement constitutes evidence that the provider/supplier was notified of the specific 
deficiencies. These deficiencies are to be written as required by the Principles of 
Documentation. This assures that the statement provides accurate descriptions of the 
deficiencies and interpretations of Federal Medicare requirements that are not met.  
Otherwise, it might be alleged at a hearing that the termination action was based on error. 
 
3026B - Plan of Correction (PoC) 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
When a PoC has been found to be unacceptable by the SA or RO, the PoC presents 
evidence that the provider or supplier is unable or unwilling to achieve compliance in a 
reasonable amount of time.   
 
If a provider or supplier disagrees with a SA or RO finding of a cited deficiency, the 
provider or supplier may, in lieu of submitting a PoC, state on Form CMS-2567 the 
factual basis for disagreeing that a deficiency occurred.  Whenever possible, the provider 
  or supplier must reference the specific regulatory provision involved in the disputed issue 
and what factual evidence was available at the time of the survey to demonstrate 
compliance.   It is not acceptable for the provider or supplier to provide evidence of 
corrective actions taken after the survey started as a basis for removal of a deficiency 
citation.  It also is not acceptable for the provider or supplier to base its disagreement on a 
different interpretation of the regulatory requirements than that found in CMS guidance.   
 
The original termination date is not changed by the providers or suppliers disagreement 
with one or more of the deficiency citations.  The RO reviews all of the documentation, 
including the survey findings and the documentation presented by the provider/supplier 
before making a determination.  (If the RO determines that a deficiency did not exist, it is 
removed from Form CMS-2567.) 
 
3026C - Revisit Reports and Subsequent Statements of Deficiencies 
(Rev. 1, 05-21-04) 
 
This is the SAs report of any revisit that was made to the provider/supplier following the 
survey that found the provider/supplier out of compliance. 
 
3026D - SA Certification (Completed Certification and Transmittal 
(Form CMS-1539)) 
(Rev. 1, 05-21-04) 
 
This is the SAs certification as to whether the Medicare health and safety requirements 
were met at the time of survey.  It also indicates that the SA completed the required 
actions and decisions. 
 
3026E - Survey Reports 
(Rev. 1, 05-21-04) 
 
Survey reports are the surveyors written records of findings during surveys that are 
primary evidence for the ROs determination. 
 
3026F - Documents of Collateral Evidence 
(Rev. 1, 05-21-04) 
 
When obtainable, the RO adds such items as copies of pertinent provider records, 
correspondence, and State licensure information to the termination file to resolve or 
forestall conflicts of factual information elsewhere in the file and to support the adverse 
findings in the determination.  Documentation can include verified complaint 
information. 
 
  3026G - Notice of Termination 
(Rev. 1, 05-21-04) 
 
An adjudicative determination is consummated in an official notice of determination 
given to the parties whose rights are at issue.  The determination becomes official when 
the notice (the formal termination letter) is mailed.  It is essential that the notice be 
correct, not only in its procedural rendition, but also in the substance of the decision 
reported, since the receiving entity, as well as appellate authorities and courts, will treat it 
as the official determination. 
 
3028 - Documentation Guide List - Termination for Noncompliance 
With 1866(b)(2)(A) and (C) 
(Rev. 1, 05-21-04) 
 
3028A - Documentation Appropriate to All Cases 
(Rev. 1, 05-21-04) 
 
The RO uses the following to document recommendations for termination of a provider 
agreement pursuant to 1866(b)(2)(A) and (C) of the Act: 
 
  Copy of the letter to the provider advising it of the recommendation for 
termination (include the certified mail return receipt); 
 
  Copy of Health Insurance Benefits Agreement, Form CMS-1561, filed by the 
provider and accepted for filing in the RO; 
 
  Copy of the Letter of Acceptance of Agreement forwarded to the provider; 
 
  All pertinent beneficiary complaints received; 
 
  All pertinent violation reports made by the intermediary, Social Security office, 
etc.; 
 
  Detailed reports of all pertinent intermediary efforts (i.e., dates, topic, reactions, 
results) and copies of related correspondence from the intermediary to the 
provider, including copies of any pertinent provider letters that may have been 
issued by the intermediary to the provider; 
 
  Intermediary report on the current payment status of the provider, e.g., suspended, 
reduced, in current payment status.  If the recommendation is based on failure to 
file annual cost reports, this item may be included as part of 3028.C; 
 
  Detailed reports of all pertinent RO efforts (i.e., dates, topics, results, etc.) and 
copies of related correspondence from the RO to the provider; and 
 
    All pertinent letters (or detailed records of visits or phone calls) received by the 
intermediary or by the RO from the provider. 
 
3028B - Additional Documentation - Charging for Covered Services 
and/or Refusing to Refund Incorrect Collections 
(Rev. 188, Issued: 04-26-19, Effective: 04-26-19, Implementation: 04-26-19) 
 
The term Medicare beneficiary identifier (Mbi) is a general term describing a 
beneficiary's Medicare identification number. For purposes of this manual, Medicare 
beneficiary identifier references both the Health Insurance Claim Number (HICN) and 
the Medicare Beneficiary Identifier (MBI) during the new Medicare card transition 
period and after for certain business areas that will continue to use the HICN as part of 
their processes. 
 
Additional documentation for the RO to use in making a determination of noncompliance 
includes: 
 
  Name, address, Medicare beneficiary identifier, and dates of stay of any involved 
Medicare beneficiary known to have been furnished covered services by the 
provider; 
 
  Where the services in question were furnished in a SNF, information relating to 
the beneficiarys prior qualifying hospital stay, including if appropriate, copies of 
the Medicare billing submitted for the period of hospitalization; 
 
  Copies of any bills, receipts, letters, that were received by the beneficiary from 
the provider requesting payment, including, if available, a description of the 
services furnished to assure that payment was requested for covered services; 
 
  Copies of any checks, money orders, receipts, etc., which show payment to the 
provider by the beneficiary; 
 
  Copies of any materials available which would show the payment conditions 
under which the beneficiary was furnished services, e.g., a contract of admittance; 
 
  Copies of all pertinent request for payment forms that may have been filed by 
the provider for services furnished to the beneficiary during the period in 
question.  If requests for payment were filed and the provider received program 
payment, the RO secures a written statement from the intermediary that shows 
that program payment (and the amount) was made to the provider on behalf of the 
beneficiary.  For those cases where program payment has not been made 
(including cases where the provider has not filed a request for payment), secure a 
written opinion from the intermediary (based on available medical records and/or 
billings) as to the probability for making program payment; 
 
    Copies of any requests by the beneficiary for the return of amounts paid to the 
provider for covered services, including any reply by the provider; and 
 
  Authorization for the United States to act on behalf of the beneficiary.  If the 
beneficiary has instituted any legal action to recover amounts paid to the provider, 
the RO does not secure the authorization.  Use the following format: 
 
Authorization 
 
I hereby request that the United States act on my behalf to recover from (name of 
provider) amounts which I paid to said (hospital, nursing home, etc.) for services 
covered under title XVIII of the Social Security Act, popularly known as Medicare. 
 
I hereby affirm that I am an eligible Medicare beneficiary and that as such I was a 
patient at said (hospital, etc.) from                 to ____(insert dates) and that I paid 
said (hospital, etc.) $           (insert amount paid) for services rendered during this 
period. 
 
Signed                               
 
Medicare beneficiary identifier                         
 
All of the information listed above should be obtained by the Division of Medicare as 
part of its responsibility in monitoring Medicare fiscal intermediaries.  
 
3028C - Additional Documentation - Failure to File Cost Reports 
(Rev. 1, 05-21-04) 
 
The RO provides a listing of all pertinent health insurance checks, including check 
number, date, amount, disposition, drawn payable to the provider by the intermediary.  
(This information is to be shown under an intermediary letterhead and signed by a 
responsible person.)  The RO includes a breakdown to show separately the period (from         
to      ) that related to these payments, including any offset against payments which may 
be due the provider, the total payment for the period involved, and the method of 
payment, e.g., periodic interim payments. 
 
The RO reviews the data and material received from the intermediary and the additional 
documentation listed here and in subsection A, above, to avoid a duplication of 
development and documentation.  If the case file shows that the provider has also failed 
to make satisfactory refund of overpayments, see subsection D. 
 
3028D - Additional Documentation - Failure to Make Satisfactory 
Overpayment Arrangements 
(Rev. 1, 05-21-04) 
 
  The RO reviews the data and material received from the intermediary and the 
documentation listed in subsection A to avoid a duplication of development and 
documentation.  If the case file shows that the provider has also failed to file a cost 
report, see subsection C. 
 
Section 1866(b)(2)(A) of the Act provides the authority to terminate the agreement of a 
provider that has failed to refund a substantial overpayment.  For this purpose, when a 
provider has failed to make satisfactory arrangements for repayment, the sum of $1,000 
or more may be viewed as a substantial overpayment.  However, when considering 
termination of an agreement, the RO takes into consideration the full circumstances of the 
particular case. 
 
3028E - Additional Documentation - Admission Policies and Practices 
(Rev. 1, 05-21-04) 
 
As provided in 42 CFR 489.53(a)(2), participation of a provider that voluntarily files an 
agreement to participate in the Medicare program, contemplates that the provider accepts 
beneficiaries for care and treatment.  If a participating provider has any restrictions on the 
types of services it makes available and/or the type of health conditions that it accepts, or 
has any other criteria relating to the acceptance of persons for care and treatment, it is 
expected that such restrictions or criteria, if made applicable to Medicare beneficiaries, 
are applied in the same manner to all other persons seeking care and treatment.  A 
providers admission policies and practices that are inconsistent with the provider 
agreement objectives set forth in this paragraph may be the basis for termination of 
participation by the Secretary pursuant to 1866(b)(2)(A) of the Act and 42 CFR 
489.53(a)(2). 
 
The amount of documentation for a providers failure to meet the above requirements is 
dictated by the circumstances of the particular case.  Thus, the RO attempts to secure 
from all available sources (e.g., beneficiaries, providers, and intermediaries) any 
information that would be useful in making the determination. 
 
3030 - Provider Agreement Terminations - Noncompliance with 
1866(b)(2)(A) and (C) 
(Rev. 1, 05-21-04) 
 
3030A - Cause for Termination  
(Rev. 1, 05-21-04) 
 
Under the provisions of 1866(b)(2)(A) and (C) of the Act (also 42 CFR 489.53), the 
Secretary may terminate an agreement with a provider of services if it is determined that 
the provider: 
 
  Is not complying substantially with the terms of the agreement, the provisions of 
title XVIII, or regulations promulgated thereunder;  
 
    Has failed to supply information necessary to determine whether payments are or 
were due and the amounts of such payments;  
 
  Refuses to permit examination of fiscal and other records (including medical 
records) necessary for the verification of information furnished as a basis for 
claiming payment under the Medicare program; or 
 
  Refuses to permit photocopying of any records or other information necessary to 
determine or verify compliance with participation requirements. 
 
3030B - Preparing Termination Cases 
(Rev. 1, 05-21-04) 
 
The RO apprises the provider of its obligations and the consequences of continued 
violation before considering the need for terminating the agreement.  Contacts with the 
provider may be made through the intermediary or by the RO staff, at the ROs 
discretion. In corresponding with the provider, the RO uses certified mail with a return 
receipt requested. 
 
The RO bases termination on documentation that supports a finding that the provider is 
not complying with the terms of the agreement or the provisions of title XVIII and 
implementing regulations. 
 
3030C - Preliminary Notice to Provider 
(Rev. 1, 05-21-04) 
 
The RO notifies the provider by letter that the findings and recommendations are being 
considered and that, if the findings are affirmed, the provider will receive official notice 
of termination of participation and the effective date on which the agreement is to be 
terminated.   The RO advises the provider that when the official notice is released, it may 
be changed only if the determination is reversed upon appeal.  Also the RO advises the 
provider to contact your office if it has taken steps to correct the violation or has definite 
plans for doing so. 
 
3030D - Violation of 1866(b)(2)(A) and (C) 
(Rev. 1, 05-21-04) 
 
The RO notifies the provider that notice will be placed in the local newspaper(s) advising 
the public in accordance with the provisions of title XVIII.  The RO explains the effect of 
the termination with respect to services furnished on or after the termination date, and 
advises the provider of the right to a hearing and the manner of filing for it.  After the 
official notice of termination of participation is released to the provider, the RO proceeds 
with publication of the public notice.  (See 3034 and 3036.) 
 
On the day before the public notice is published, the RO calls the intermediary and 
advises them of the termination.  The RO cautions the intermediary not to divulge this 
  information before the notice is published.  Following publication, the RO formally 
notifies the SA. 
 
3032 - Termination for Violations of 1866(a)(1)(E), (F), (G), and (H) 
(Rev. 1, 05-21-04) 
 
Under the provisions of 1866(a)(1)(E), (F), (G), and (H) of the Act, the Secretary may 
terminate an agreement with a provider of services if it is determined that the provider: 
 
  Failed to release data upon request to an organization having a QIO contract with 
the Secretary under Part B of title XI; 
 
  Failed to maintain an agreement with the organization having a QIO contract with 
the Secretary under Part B of title XI; 
 
  Has charged an individual for inpatient hospital services for which the individual 
was entitled to have payment made under Part A, pursuant to 1886(b) and (d); 
or 
 
  Failed to furnish all services (except for physician services as defined in 
1862(a)(14) and 1861(w)(1) of the Act) and items for which payment is made 
under 1866(a)(1)(G) of the Act. 
 
3034 - Public Notice - Involuntary Termination 
(Rev. 1, 05-21-04) 
 
The RO arranges to publish a notice in the local newspaper(s) announcing the termination 
and the reasons for termination of providers.  Public notices are not required for 
suppliers, except in the case of RHCs (42 CFR 405.2404(d)), Ambulatory Surgical 
Centers (ASCs) (42 CFR 416.35(d)), and Federally Qualified Health Centers (FQHCs) 
(42 CFR 405.2442).  The RO may place public notices for the termination of other 
suppliers at its discretion.  
 
3034A - For Providers 
(Rev. 1, 05-21-04) 
 
MEDICARE NOTICE TO THE PUBLIC: 
 
Notice is hereby given that the agreement between the (facility/address), 
and the Secretary of Health and Human Services, as a provider of services 
in the Health Insurance for the Aged and Disabled Program (Medicare) is 
to be terminated at the close of (date of termination). 
 
  3034B - For Suppliers 
(Rev. 1, 05-21-04) 
 
MEDICARE NOTICE TO THE PUBLIC: 
 
Notice is hereby given that effective at the close of (date of termination) 
the (name and address of facility) is no longer approved for participation 
in the Medicare program as a supplier of (type of services). 
 
The RO inserts the reasons for termination in the format of the following example: 
 
The (name of provider) does not comply with the Medicare (Condition of 
Participation/Requirements of Participation/Condition for Coverage) 
pertaining to (Condition(s) or Requirement(s) (for SNFs) out of 
compliance). 
 
Add one of the paragraphs below, depending on the type of provider being terminated: 
 
3034C - For Hospitals, CAHs, and SNFs 
(Rev. 1, 05-21-04) 
 
The Medicare program will not make payment for inpatient hospital 
services (or skilled nursing facility services) furnished to patients who are 
admitted after the close of (date of termination).  For patients admitted on 
(date of termination), or earlier, payment may continue for up to 30 
calendar days of inpatient hospital services (or skilled nursing facility 
services) furnished after (date of termination). 
 
3034D - For HHAs and Hospices 
(Rev. 1, 05-21-04) 
 
The Medicare program will not make payment for (home health) (hospice) 
services furnished to patients whose plan of treatment was established 
after the close of (date of termination).  For patients whose plan of 
treatment was established before (date of termination), payment may be 
made for up to 30 calendar days after date of termination. 
 
3034E - For Other Providers and Suppliers 
(Rev. 1, 05-21-04) 
 
The Medicare program will not make payment for (type of facility) 
services furnished to patients after the close of (date of termination). 
 
Arrange for publication of notice at least 15 calendar days before the effective 
date of termination (2 calendar days if immediate jeopardy), but not before the 
provider or supplier receives notice of termination.  The notice advises the 
  provider/supplier of its right to due process, the expected schedule for 
termination action, and that the deficiency must be corrected and verified by the 
SA to halt the termination. 
 
In addition to preparation of legal advertisements, the RO may decide to develop and 
distribute a press release (via radio/television) on the termination (or other action). 
 
3036 - Billing for Public Notice of Termination or Withdrawal 
(Rev. 1, 05-21-04) 
 
3036A - Advertising Order, SF-1143 
(Rev. 1, 05-21-04) 
 
Before arranging for publication of the termination notice, the RO/ARA obtains 
authorization from the RA via the Advertising Order, SF-1143 (Exhibit 184).  The RO 
prepares an original and three copies, completing the front portion as shown in the 
exhibit.  The RO attaches a copy of the text of the public notice to the original and to 
each copy of the SF-1143.  After the RA signs the form (and retains one copy) the RO: 
 
  Types in the RO address in the bottom portion of the front of the SF-1143; 
 
  Sends the original and one copy to the newspaper.  Informs the publisher that one 
of the following options should be used in claiming payment: 
 
o  The back of the original SF-1143 may be completed with either a copy of 
the advertisement attached or a certification made in the space provided on 
the form; or 
 
o  Any billing form may be submitted to the RA with a copy of the 
advertisement or a certification attached to the original SF-1143; and 
 
  Following publication of the public notice and upon receipt of the SF-1143 and 
attachments from the publisher, issues payment using funds available for this 
purpose. 
 
3038 - Rescinding or Postponing Effective Date of Termination 
(Rev. 1, 05-21-04) 
 
3038A - Initial Action 
(Rev. 1, 05-21-04) 
 
The RO stops the processing of an involuntary termination if it is positively ascertained 
that the provider now complies with all requirements and that termination is no longer 
appropriate.  The RO does not postpone a termination action for: 
 
  Meetings or visits with the provider; 
   
  CHOWs; 
 
  Court appointed receivership; or 
 
  Any other cause not explicitly required by statute, regulation, Federal court order, 
or procedures stated elsewhere in this chapter. 
 
When credible evidence that the cause for the termination has been removed is received 
in time to halt publication of the public notice, the RO immediately contacts the 
newspaper to stop the scheduled notice and suspends the termination action pending RO 
and SA verification.  If the termination action is later revived, the RO again makes 
arrangements for public notice. 
 
When the RO receives credible evidence that the cause for the termination has been 
removed before the effective date of termination, it requests that the SA make a revisit as 
soon as possible or it conducts a Federal survey.  The SA should make the revisit when: 
 
  The SA conducted the initial survey; or  
 
  Due to travel considerations, scheduling problems, or scarcity of resources, the 
RO has requested the SA to conduct the revisit, even though the RO conducted 
the initial survey. 
 
The RO does not use allegations of compliance in the absence of credible evidence of 
compliance as the basis for postponing the effective date of termination. 
 
3038B - Criteria for Credible Allegation 
(Rev. 1, 05-21-04) 
 
A credible allegation must meet the following criteria: 
 
  The alleged corrective action should be detailed and must have removed the 
deficiency; and 
 
  The corrective action was of the kind that could have been accomplished between 
the survey date and the date of the allegation. 
 
If the Medicare facility makes additional credible allegations of compliance following an 
earlier SA revisit, or between the 46th and 90th calendar day prior to the effective date of 
termination, the SA will contact the RO for a determination as to whether a revisit will be 
made.  Only two revisits are permitted, one before the 45-day period and one between the 
46th and 90th day.  The RO bases its determination on the validity and reasonableness of 
the evidence or documentation provided by the facility prior to conducting a revisit.  
Except in the case of SNFs and NFs, the SA can conduct a second or late revisit only 
after RO approval. (See 7317 for revisit policies for nursing homes.) 
   
3038C - Form of Public Notice of Termination Retraction for Providers  
(Rev. 1, 05-21-04) 
 
Notice is hereby given that (name and address of facility) has achieved compliance with 
the Medicare Conditions of Participation/Requirements for Participation pertaining to 
(CoPs or Requirements).  As a result, the Secretary of Health and Human Services is 
continuing the agreement with (the facility) in the Medicare program. 
 
3038D - Form of Public Notice of Termination Retraction for Suppliers 
(Rev. 1, 05-21-04) 
 
(Optional at discretion of RO for suppliers other than RHCs, ASCs, and FQHCs.)  
 
Notice is hereby given that (name and address of facility) has achieved compliance with 
the Medicare Conditions for Coverage pertaining to (Conditions of Coverage).  As a 
result (the facility) will continue to participate in the Medicare program as a supplier of 
(type of supplier services). 
 
3040  -  Terminating  Medicaid  ICF/IID  Eligibility  Based  on  Look 
Behind Determination 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Section 1910(b)(1) of the Act authorizes CMS to terminate approval of a Medicaid 
ICF/IIDs eligibility to participate in the Medicaid program when CMS determines that 
the provider does not substantially meet the CoPs for ICFs/IID (42 CFR Part 483).  The 
Act uses the terms cancel and terminate interchangeably.  The adjudicative 
procedures are similar to those followed for terminating a 1866 provider agreement 
under 3010 and 3012.  Except in the case of immediate jeopardy situations, termination 
usually becomes effective after the provider has had an evidentiary hearing before an 
Administrative Law Judge (ALJ) and the ALJ has upheld the termination. 
 
3040A - Termination Procedures 
(Rev. 1, 05-21-04) 
 
3040A1 - Immediate Jeopardy 
(Rev. 1, 05-21-04) 
 
At the exit conference, the RO team leader should explain the findings to facility 
management as well as which findings apparently constitute an immediate jeopardy to 
client health and safety. (See Appendix Q for examples.)  The RO survey team leader 
explains that if his/her supervisor agrees with the seriousness of the teams onsite survey 
findings, the RO will notify the facility by electronic facsimile, telegram, or overnight 
express mail of the determination to cancel/terminate the facilitys program participation 
unless the immediate threat is eliminated.  The RO allows no more than two working 
  days following the exit conference to determine whether circumstances found in the 
facility pose an immediate jeopardy to client health and safety and to notify the facility of 
your determination.  The RO notifies the facility and SMA by electronic facsimile, 
telegram (Exhibit 185), or other expeditious means, that as a result of the finding that an 
immediate jeopardy to client health and safety exists, the RO is initiating termination 
proceedings pursuant to 1910(b)(1).  The RO telephones the SA to inform them of its 
determination.  The RO gives the facility no more than 5 working days from the date of 
the notification to eliminate the threat and to notify it of the remedial action taken.  Also, 
the RO should state that if the facility does not notify the RO that the threat has been 
removed or compliance has been achieved by the time specified, it will assume the 
condition still exists and termination occurs on the proposed effective date.  
 
If the threat is removed but deficiencies still exist at the Condition level, the RO uses the 
procedures for no immediate threat and gives the provider 90 calendar days from the date 
of survey to correct the deficiencies. 
 
Following CMS termination based on immediate jeopardy, CMS grants up to 30 calendar 
days of Federal Financial Participation (FFP) for purposes of relocating patients after the 
effective date of termination.  If an appeal is filed by the facility, the ALJ hearing is 
afforded after the effective date of termination and does not forestall termination from 
taking effect. 
 
3040A2 - No Immediate Threat to Patients Health and Safety 
(Rev.92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
If the ICF/IID is not in compliance with one or more of the CoPs, the RO completes the 
actions within the time limits prescribed. 
 
a.  Tenth Working Day - The RO notifies the provider in writing of its deficiencies 
and that termination action is being initiated.  Included in the notices is the 
providers right to appeal this action, along with the effective date of termination.  
If the provider makes a credible allegation of compliance prior to the effective 
date of termination, the RO conducts a revisit.  (See 3038.B.) 
b.  Seventieth Calendar Day - The RO completes all related documentation and 
notifies the facility, the SMA, and the SA. 
 
c.  Ninetieth Calendar Day - If compliance has not been achieved, the RO terminates 
participation. 
 
If an appeal is filed by the facility, termination must be delayed pending the hearing and 
decision by the ALJ (see 42 CFR 498.5(j).  The provider agreement remains in effect and 
FFP continues pending the appeal decision.  If the facility makes a credible allegation of 
compliance during the appeal period, it is the ROs decision whether or not it is in the 
recipients and the Federal Governments best interests to conduct a revisit and dispose of 
the case based on the findings.  If a revisit is made and the facility failed to achieve 
compliance, adverse action continues based on the findings of the first Federal survey and 
  the findings of the revisit.  If at the time of the revisit the provider is in compliance with 
the requirements forming the basis for the original termination, but has new deficiencies 
that are also grounds for termination, the RO initiates a new termination process 
commencing with the revisit. 
 
If the ALJ sustains the termination action, the effective date of termination and cessation 
of FFP is set by the ALJ.  Further appeal by the facility to the DAB does not cause the 
provider agreement to be extended, i.e., payment does not continue pending a decision by 
the DAB.  
 
Whenever possible, the RO conducts the termination notification and decision-making 
process in the 90-day timeframe used for Medicare terminations.  However, there are 
circumstances that require that the RO give a facility extra time.  For example, with 
State-owned facilities, it sometimes takes longer to get a PoC because of the need for 
action by other parts of State government, thus requiring additional processing time.  
Keep these situations to an absolute minimum.  In addition, an ALJ hearing may not be 
scheduled within the usual 90-day termination timeframe.  
 
The reasonable assurance provisions apply to ICFs/IID terminated by CMS. 
 
3042 - Disallowance of FFP to State Because State Fails to Follow Correct 
Certification Procedures for Medicaid Providers 
(Rev. 1, 05-21-04) 
 
This process applies when a SA or SMA has failed to properly apply Federal 
requirements or procedures in surveying or certifying a facility or in entering into a 
provider agreement, as described in 42 CFR 442.30 and 431.610(g). 
 
The look behind regulation (42 CFR 442.30) referred to as old look behind provides 
a mechanism for testing the validity of a provider agreement for FFP purposes.  If 
certification procedures are not followed, CMS does not accept the provider agreement 
between the State and the facility as evidence that the facility was properly certified.  
Whether a facility actually meets participation requirements is not the issue.  The issue is 
that the State failed to adhere to Federal requirements in certifying and issuing an 
agreement to a facility.  Therefore, CMS will discontinue FFP to the State for the facility, 
even though payments were made prior to the RO determination.  When the RO invokes 
this aspect of look behind, it advises the SA and the SMA that the provider agreement 
cannot be accepted, and, for FFP purposes, the agreement is void from its inception. 
 
If the SA failed to adhere to certification procedures, the RO requests additional 
information. The RO advises the agency that in the absence of a satisfactory response, the 
provider agreement is invalid for FFP purposes that will result in a disallowance of FFP 
for the period in question.  The RO requests an explanation or evidence that would 
contravene a finding that Federal requirements were not followed.  The nature of the 
issue (i.e., a defect in the survey versus a defect in the issuance of the provider 
  agreement) determines whether the RO notifies the SA or the SMA.  Whichever agency 
is notified, the RO sends copies of all correspondence to both agencies. 
 
If unable to correct the difficulty through contact with the State, the RO contacts the 
Division of Medicaid regarding the problem.  The RO recommends the disallowance of 
FFP for the State under the current provider agreement.  A sample memorandum to the 
Medicaid Division is in Exhibit 186. 
 
3044 - Terminating Approval for Suppliers 
(Rev. 1, 05-21-04) 
 
If the SA certifies that a supplier is no longer in compliance with the Conditions for 
Coverage, the RO notifies the supplier of the certification and processes the termination.  
(See Exhibit 187.) 
 
In supplier terminations, although there may not be a provider agreement to terminate and 
the Act does not use the term, terminate, formal adjudicative disapproval is clearly 
implied in the Act.  Unless otherwise noted, procedures for provider terminations are 
equally applicable to certified suppliers. SMAs are notified of supplier terminations.  If 
the SMA continues making payments to Medicaid suppliers, FFP is disallowed.  (See 
Chapter 6 for laboratories.) 
 
The termination of coverage is effective following at least a 2 calendar-day notice if 
immediate jeopardy is present, otherwise it is at least a 15 calendar-day notice to the 
supplier (42 CFR 489.53(c)). 
 
The RO notifies the carrier and the Divisions of Medicare and Medicaid of a supplier 
termination action and the effective date. 
 
Public notification is optional for suppliers other than RHCs, ASCs, FQHCs, and OPOs 
(42 CFR 486.325(e)). Public notification, when undertaken, should be given in 
accordance with 3034. 
 
3046 - Voluntary Terminations 
(Rev. 1, 05-21-04) 
 
3046A - General 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
Under the provisions of 1866(b)(1) of the Act, a provider of services may terminate its 
agreement by filing a written notice of its intention.  If a Medicare provider/supplier 
notifies the SA of its desire to terminate its Medicare participation or if it ceases 
operations which is considered as voluntarily terminating its agreement, the SA notifies 
the MAC via the Form CMS-1539.  The MAC accepts the proposed termination date, 
which must be the first day of the month, or sets a different date after communication with 
  the provider per 42 CFR 489.52(b)(1).  However, the termination date must not be more 
than 6 months from the date the notice is filed. 
 
The following are possible reasons for voluntary termination: 
 
1 - Provider or Supplier Is Unable or Unwilling to Correct Deficiencies to Continue 
to Meet CoPs, Conditions for Coverage, or Participation Requirements for SNFs 
 
In many cases, the facilities have cited as a reason for seeking termination an inability to 
continue to meet the Conditions of Participation or Coverage or Requirements for 
participation for SNFs. 
 
2 - Provider Dissatisfied With Reimbursement 
 
If a provider is voluntarily terminating because of disagreement with the reimbursement 
formula, the SA indicates this on Form CMS-1539. 
 
3 - CHOW 
 
If, after a CHOW, the successor does not wish to participate, the date of termination is 
usually the date the previous owner ceased doing business.  However, coverage of 
beneficiary services extends until it is learned that the successor will not continue 
operations under a provider agreement.  Payment can continue for up to 30 calendar days 
after a provider is terminated for hospitals, SNFs, HHAs and hospice beneficiaries who 
were admitted before the effective date of termination (42 CFR 489.55). (See 3008.) 
 
4 - Close of Business 
 
The provider permanently ceased all business (Medicare and non-Medicare operations). 
 
3046B - Decision by Provider or Supplier to Remain in the Medicare 
Program 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
If a provider or supplier changes its mind after requesting termination, the SA or MAC 
secures a written statement to document the provider/supplier file to prevent any future 
misunderstanding.  If the voluntary termination has not already taken place, the MAC 
sends a letter to the provider rescinding its voluntary termination.  Copies are sent to the 
SA, SMA, and RO.  If the providers or suppliers request is received after the effective 
date of the voluntary termination, the MAC treats the request as an initial request to 
participate in the Medicare program.  
 
   
 
3046C - Notice to Public 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20)  
 
In voluntary termination cases, the provider or supplier is obligated to notify the public of 
the effective termination date. An exception to the requirement for public notice is made 
when the MAC or SA receives retroactive notice of the close of a business. If the MAC 
learns that the provider does not intend to comply with the requirement for a public 
notice, where required, the MAC should assume the responsibility. The required public 
notice should be published on the CMS website as soon as possible after the provider 
receives the MACs termination letter, and, if time permits, not less than 15 calendar days 
before the effective termination date. When a supplier of services is voluntarily 
terminating program participation, public notice by either the supplier or the MAC or 
ROs office is optional. However, such a notice is to be published for RHCs, ASCs, and 
FQHCs. 
 
3046D - Effective Date of Voluntary Termination 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
The effective date of termination is the date business ceased (if there is closure) and 
should allow sufficient lead-time to notify CMS components and to give the public notice 
of the termination. If the providers request does not specify an acceptable termination 
date, CMS sets the date (42 CFR 489.52(b)).  This date cannot be more than 6 months 
after the providers request is dated.  If a retroactive termination date is requested, CMS 
honors it, provided there were no Medicare beneficiaries receiving services from the 
facility on or after the requested termination date. 
 
In setting an effective termination date that is less than 6 months in the future, the RO 
must be assured that it would not unduly disrupt the services to the community or 
otherwise interfere with the effective and efficient administration of the health insurance 
program.  In making this determination, CMS considers the availability of other facilities 
in the area.  In the case of a closure, the effective date is the actual date of closing. 
 
3047 - Notice to MAC - Voluntary Termination 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
The SA notifies the MAC when it receives notice that a provider or supplier wants to 
terminate its participation.  The SA completes a CMS Form-1539 and sends the form 
along with the letter to the MAC. This permits the MAC to make preliminary 
arrangements for final cost reports and final settlement, and to adjust any outstanding 
payments to avoid overpayments in accordance with the MAC instructions.   
 
3048 - Notice to Provider or Supplier - Voluntary Termination 
(Rev. 1, 05-21-04) 
   
 
3048A - Voluntary Termination 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
The MAC will notify the provider or supplier of approval of voluntary termination.  The 
MAC sends copies of the letter to the SA, RO, and AO.   
 
For Medicaid-only certified facilities or dually-certified Medicare and Medicaid 
facilities, the SA will send notification to the RO and SMA.   
 
3048B - Close of Business 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
The RO sends a letter modeled after Exhibit 190 to the provider with copies to the SA, 
MAC, and, if appropriate, the SMA.  If a supplier is closing, the RO notifies the MAC and 
sends a letter modeled after Exhibit 191. 
 
3049 - Completing Certification and Transmittal (Form CMS-1539) 
(Rev. 1, 05-21-04) 
 
3049A - Voluntary Terminations and Close of Business 
(Rev. 202, Issued: 06-19-20, Effective: 06-19-20, Implementation: 07-27-20) 
 
In the upper left-hand corner The SA enters VOLUNTARY TERMINATION--CODE 
2. 
 
The SA completes items 1, 3, 7, 26, 28, 29, 30 (signature of SA official delegated to sign), 
and 32. 
 
Reconsideration, Hearings, and Appeals 
 
3050 - Initial Determinations Versus Administrative Actions - Right to 
Review 
(Rev. 1, 05-21-04) 
 
Only initial determinations are subject to reconsideration, hearing, or appeal.  In general, 
an initial determination is a decision with respect to the following matters: 
 
  Whether a provider or prospective provider meets or does not meet the Medicare 
requirements as a provider of services;  
 
  Whether a supplier or prospective supplier meets or does not meet the appropriate 
Conditions for Coverage of its services;   
 
    Whether the termination of a provider agreement or benefits agreement is in 
accordance with 42 CFR 489.53, the termination of a RHC agreement is in 
accordance with 42 CFR 405.2404, the termination of a FQHC agreement is in 
accordance with 42 CFR 405.2442, or the termination of an ASC is in accordance 
with 42 CFR 416.35;  
 
  Whether a hospital meets or does not meet or continues to meet the requirements 
to qualify as an emergency services hospital;  
 
  Whether the services of a supplier meet or continue to meet the Conditions for 
Coverage; or 
 
  The effective date of the provider agreement between CMS and a provider of 
services, or the effective date CMS approved for a supplier of services. 
 
3052 - Nature of Reconsideration Determination - SA Procedures 
(Rev. 1, 05-21-04) 
 
3052A - Right to Reconsideration of Initial Denial 
(Rev. 1, 05-21-04) 
 
Reconsideration is granted administratively, not statutorily, pursuant to regulations 
42 CFR 498.22 through 498.25.  Any prospective provider or supplier dissatisfied with an 
initial determination that does not qualify as a Medicare provider may submit a request 
that the Secretary reconsider the decision within 60 calendar days from receipt of the 
notice of initial determination. 
 
Reconsideration is a review of the determination.  This review results in affirmation or 
reversal or the determination.  Further appeal rights include hearing before an ALJ and 
review by the DAB. 
 
3052B - Request for Reconsideration 
(Rev. 1, 05-21-04) 
 
A request for reconsideration is any written expression of dissatisfaction with the initial 
decision.  The request may be in the form of a letter or statement that explains the issues, 
or the findings of fact with which the affected party disagrees, and the reasons for the 
disagreement.  The reconsideration request may be signed by any responsible official of 
the provider or by an attorney on behalf of the provider.  The SA officially dates or date-
stamps any request the day of receipt in the SA. 
 
3052C - Acknowledgment of Reconsideration Request 
(Rev. 1, 05-21-04) 
 
The SA acknowledges the request promptly and forwards a copy of the request and 
acknowledgment letter to the RO immediately.  The RO will advise if additional 
  development is required.  Also, the SA forwards any subsequent information received 
that would affect the reconsideration or hearing.  If an attorney files the request, the SA 
sends a copy of the acknowledgment to the provider.  Most cases require SA 
redevelopment, particularly if there are questions about the providers efforts and plans to 
correct previously cited deficiencies.  If requesting additional evidence from the entity, 
stipulate in the acknowledgment a reasonable deadline for submittal. 
 
3052D - Documentation of File 
(Rev. 1, 05-21-04) 
 
A reconsideration review is not complete unless the file contains adequate documentation 
to fully explain every statutory deficiency and finding of noncompliance with program 
requirements.  The SA sends the RO all reports of on-site visits and telephone contacts 
with the provider, as well as any pertinent information available form the licensing 
agency. 
 
3054 - Reconsideration - RO Procedures  Excluding SNFs and NFs 
(Rev. 1, 05-21-04) 
 
3054A - Review 
(Rev. 1, 05-21-04) 
 
A  reconsideration is a thorough, independent review of the prior decision and entire 
body of evidence, including any new information developed.  If the provider/supplier has 
made corrections since the survey on which the original determination was based and the 
SA can verify this, the provider/supplier may no longer wish to pursue its 
recommendation request.  For initial certifications only, the potential provider/supplier 
may withdraw its reconsideration request, ask for another initial certification (as long as 
the timeframe for the Form CMS-855 application has not expired) and accept 
certification based on the date of compliance with all Medicare conditions. 
 
A reconsideration review is not complete unless and until every adverse finding (i.e., 
does not meet one or more statutory requirement, is not in substantial compliance with 
one or more CoPs) is adequately documented. 
 
The reconsideration process for nursing homes was eliminated in 1995 when Informal 
Dispute Resolution (IDR) was formalized as part of the appeals process for SNFs and 
NFs.  IDR duplicates in every pertinent way the reconsideration element of this process 
sine it provides the opportunity for nursing home providers to conduct survey findings 
information (see 7212). 
 
3054B - RO Receipt of Request 
(Rev. 1, 05-21-04) 
 
A provider or supplier of services which has been denied participation may file a request 
for reconsideration in any manner through any CMS RO, SA, or intermediary.  The 
  request may be in the form of a letter or statement and may be signed by any responsible 
official of the provider/supplier, or by an attorney on behalf of the provider.  The RO 
officially dates or date-stamps any request the day of receipt in the RO.  The request for 
reconsideration must state the issues or the findings of fact with which the affected party 
disagrees, and the reasons for disagreement. 
 
3054C - Acknowledgment or Reconsideration Request 
(Rev. 1, 05-21-04) 
 
The RO acknowledges reconsideration requests within 3 working days of receipt.  If an 
attorney filed the request, the RO sends a copy of the acknowledgment to the 
provider/supplier.  If there is an offer to submit additional evidence or if the RO requests 
additional information, a reasonable deadline for its submittal is provided in the 
acknowledgment.  The RO informs the provider/supplier that the SA may be in touch to 
obtain additional information. The RO informs the SA that the provider/supplier has 
requested reconsideration. 
 
3054D - Reconsideration Determination 
(Rev. 1, 05-21-04) 
 
The RO completes a Certification and Transmittal, Form CMS-1539, except for Items 17 
and 18 if the original determination is reversed.  The RO marks the top of all copies of 
the form Reconsideration - (Affirmed) or (Reversed) and distribute the copies as in an 
initial decision.  The RO does not need to complete Form CMS-1539 if the SA has made 
a revisit and the certification is based on the revisit.  The SA in this case will complete 
Form CMS-1539.  If OCR clearance has not yet been received, the RO advises OCR that 
a previously denied provider/supplier has now been approved so that they may complete 
the clearance process.  The cover letter should request immediate return of the forms and 
point out that a final determination has not been made on the request for reconsideration.  
If any title VI forms are needed, they are sent with the agreement forms. 
 
3054E - RO Notice of Reconsidered Determination 
(Rev. 1, 05-21-04) 
 
3054E1 - Denial Reversal (Approval) 
(Rev. 1, 05-21-04) 
 
The RO confirms civil rights compliance before revising a denial of a provider on 
reconsideration.  If the provider is not in compliance, see 2010. 
 
After confirming that documentation is in order, the RO assigns a provider identification 
number and completes a Certification and Transmittal, Form CMS-1539, marking item 
30, Reconsideration Reversed. 
 
  The RO issues a notice of acceptance as in a routine initial approval, enclosing the 
countersigned provider agreement.  The notice of acceptance should reflect that the 
determination was reconsidered. 
 
The RO notifies the SA of the revised decision and sends a Provider Tie-In Notice, Form 
CMS-2007, to the intermediary. 
 
3054E2 - Denial Affirmed 
(Rev. 1, 05-21-04) 
 
With the notice of decision, the RO includes a listing of each CoP, Condition for 
Coverage, or Requirement for SNFs with which the provider/supplier is not in 
compliance (for SNFs, substantial compliance).  The RO includes a detailed explanation 
of why the deficiencies result in a determination and decision that the provider/supplier is 
not in compliance (substantial compliance for SNFs), the providers efforts and plans to 
correct deficiencies notwithstanding.  The notice advises the provider/supplier of its 
rights to a hearing if it files a request within 60 calendar days of the date of receipt of the 
reconsideration decision of denial.  The RO advises the provider/supplier to send the 
hearing request to it, Attn.: ARA, CMS.  The RO forward all requests for hearings to the 
DAB for further action.  The RO keeps a copy of the notice in the provider file and sends 
a copy to the SA.  The RO acknowledges the receipt of the provider/suppliers request for 
hearing in writing (see Exhibit 192). 
 
3054E3 - Acting Official for Reconsideration Denial Notices 
(Rev. 1, 05-21-04) 
 
If a reconsideration request is denied, the reviewer who was assigned the initial 
determination should not sign the denial notices at the reconsideration level. 
 
  Initial Denial NOT Signed By ARA - If the ARA did not sign the initial denial 
notice he/she should sign the reconsideration denial notice. 
 
  Initial Denial Signed By ARA - If the ARA signed the original notification of 
denial, forward the file and formal recommendation to the RA.  The notice of 
reconsideration denial is released over the RAs signature.  The RO notifies all 
interested components and prepares and transmits the required Form CMS-1539. 
 
  Problem Cases Needing CO Review  - If the reconsideration action presents 
policy issues or problems that in the ROs judgment need resolution, send the case 
to the CO with a statement of the problem and request guidance. 
 
The RO prepares and transmits Form CMS-1539 and adjudicative notices to the SMA, 
SA, and intermediary. 
 
3058 - Hearing on 1910(b) Cancellation of Medicaid Eligibility 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
   
If a hearing is requested on a termination of an ICF/IIDs Medicaid participation by 
CMS, send the providers request for a hearing to the DAB. 
 
3060 - Appeals of Adverse Actions for Medicaid Non-State Operated 
NFs (Non-State Operated) and ICFs/IID (Not Applicable to Federal 
Terminations of Medicaid Facilities) 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
Denials, terminations, cancellations, and denials of payment for new admissions and 
other adverse actions to facilities participating in Medicaid-only are State administrative 
actions and decisions. 
State appeal procedures must be made available to facilities in cases of nonrenewal, 
denial, cancellation, or termination of the provider agreement.  It is up to the State to 
designate the office or official having authority to hear and decide Medicaid appeals.  
Although the State retains considerable flexibility in developing its own appeal 
procedures, the procedures for an ICF/IID must at a minimum provide for an evidentiary 
hearing either before or within 120 calendar days after the effective date of the adverse 
action.  The State must also provide an informal reconsideration prior to taking adverse 
action if it elects to provide a full evidentiary hearing after the effective date of the 
adverse action for an ICF/IID (42 CFR 431.150 through 431.154). 
 
If a NF requests a hearing on a denial or termination of its provider agreement, the 
request does not delay the adverse action and the hearing need not be completed before 
the effective date of the action.  However, a NF is entitled to a hearing before a CMP is 
collected (see 7526). 
 
NOTE - In the procedures for denial of payment for new admissions for ICFs/IID (see 
3060.C), a post-termination hearing is not a permitted option.  The State must provide 
an informal hearing before the effective date of the denial of payments for new 
admissions.  Consequently, reconsideration is not appropriate for these appeals. 
 
3060A - Informal Reconsideration 
(Rev. 1, 05-21-04) 
 
The State may develop and implement its own reconsideration proceedings.  However, 
the process must include: 
 
  Timely notice of the reason for the action; 
 
  A reasonable opportunity for the provider/supplier to refute those reasons in 
writing; and 
 
  A written decision prior to the effective date of the adverse action. 
 
  3060B - Evidentiary Hearing 
(Rev. 1, 05-21-04) 
 
The evidentiary hearing must include: 
 
  Timely written notice to the provider/supplier of the findings upon which the 
termination or denial is based, and disclosure of the evidence on which the 
decision is taken; 
 
  An opportunity for the provider/supplier to appear before an impartial decision 
maker to refute the basis for the decision; 
 
  An opportunity for the provider/supplier to be represented by counsel or another 
representative; 
 
  An opportunity for the provider/supplier or its representatives to be heard in 
person, to call witnesses, and to present documentary evidence; 
 
  An opportunity for the provider/supplier to cross-examine witnesses; and 
 
  A written decision by an impartial decision-maker, setting forth the reasons for 
the decision and the evidence on which the decision is based. 
 
3060C - Informal Reconsideration (Applies to ICFs/IID for Denial of 
Payment for New Admissions Only) 
(Rev. 92, Issued, 11-22-13, Effective: 11-22-13, Implementation: 11-22-13) 
 
The informal hearing process must include: 
 
  Timely notice of the reason for the action; 
 
  A reasonable opportunity for the provider/supplier to present in writing or in 
person reasons for its disagreement; 
 
  An opportunity for the provider/supplier or its representatives to be heard in 
person and to present documentation; and 
 
  A written decision by an impartial decision maker, prior to the effective date of 
the denial of payment, setting forth the reasons for the determination. An 
evidentiary hearing does not follow the informal hearing. 
 
  3060D - Judicial Review 
(Rev. 1, 05-21-04) 
 
Federal regulations do not provide for judicial review of these appeals proceedings.  State 
law governs judicial review. 
 
3060E - Impartial Decision Maker (Hearing Officer) 
(Rev. 1, 05-21-04) 
 
The State has flexibility in selecting individuals to conduct the reconsideration and 
hearing proceedings.  However, in both proceedings, certain individuals should be 
excluded from serving as decision-makers. 
 
In reconsideration proceedings, the SA, as well as other persons directly involved in 
gathering and providing evidence upon which the adverse action is based, is ineligible to 
make decisions.  (One person should not be both witness and judge.)  However, the 
person who made the original determination based on the surveyors findings is not 
ineligible to decide the reconsideration.  If the decision is originally made at the highest 
level, the appeal decision should also be made there.  However, if a regional supervisor 
makes the original decision, have someone higher in authority review the appeal. 
 
In administrative hearings, all persons directly involved in either the survey or the 
reconsideration process are ineligible for reasons of impartiality. 
 
 
  Prospective Payment System (PPS) 
 
3100 - Hospitals and Hospital Units Excluded From the Inpatient 
Prospective Payment System (IPPS) - Introduction  
(Rev. 198, Issued: 01-17-20, Effective: 01-17-20, Implementation: 01-17-20) 
 
The IPPS determines Medicare payment for operating costs and capital-related costs of 
inpatient hospital services provided in short-term acute care hospitals.  Certain hospitals 
and special hospital units may be excluded from this system and paid at a different 
Medicare reimbursement rate.  These IPPS-excluded hospitals and units have their own 
specific reimbursement criteria.  Title 42 CFR 412.20 through 412.29 describes the 
criteria under which these hospitals and units are excluded from IPPS. 
 
3102 - General Information on IPPS Exclusion Deemed Providers and 
Suppliers 
(Rev. 198, Issued: 01-17-20, Effective: 01-17-20, Implementation: 01-17-20) 
 
The following providers and units are excluded from the Inpatient Prospective Payment 
System (IPPS): 
 
  Psychiatric hospitals; 
 
  Rehabilitation hospitals; 
 
  Childrens hospitals; 
 
  Long-term care hospitals;  
 
  Psychiatric and rehabilitation units of  hospitals;  
 
  Cancer hospitals; and  
 
  CAHs. 
 
Certain kinds of Medicare-participating hospitals are paid under special provisions and 
are never subject to the IPPS.  These hospitals need not be evaluated for compliance with 
the IPPS exclusion criteria: 
 
  Hospitals paid under State cost control systems approved by CMS; 
  Hospitals paid under demonstration projects approved by CMS; 
 
As of the cost reporting period beginning on or after October 1, 2019, an IPPS-excluded 
hospital is no longer precluded from having an IPPS-excluded psychiatric and/or 
rehabilitation unit. For the purposes of payment, services furnished by a unit are 
  considered to be inpatient hospital services provided by the unit and not inpatient hospital 
services provided by the hospital operating the unit. 
 
Although an IPPS-excluded hospital may have an IPPS-excluded unit, the excluded 
hospital may not have an IPPS-excluded unit of the same type (psychiatric or 
rehabilitation) as the hospital (for example, an Inpatient Rehabilitation Facility (IRF) may 
not have an IRF unit). 
Note that a co-located, separately certified hospital or a separately certified hospital-
within a hospital (HwH) is not a component of the hospital with which it shares a 
campus.  For example, if a separately certified Medicare-participating short-term acute 
care IPPS hospital is located in the same building as a psychiatric hospital, it is not 
considered part of the psychiatric hospital and is not excluded from the IPPS based on the 
exclusion of the psychiatric hospital.   
It is important to note that payment rules, such as the HwH (42 CFR 412.22(e)) or 
satellite facility (412.22(h)) rules, never waive or supersede the requirement that all 
hospitals must comply with the hospital conditions of participation (CoPs). All hospitals, 
regardless of payment status, must always demonstrate separate and independent 
compliance with the hospital CoPs, even when an entire hospital or a part of a hospital is 
located in a building also used by another hospital, or in one or more entire buildings 
located on the same campus as buildings used by another hospital.   
An IPPS-excluded hospital operating an IPPS-excluded unit must continue to be in 
compliance with other Medicare regulations and CoPs applicable to the hospital and unit. 
An IPPS-excluded unit within a hospital is part of the hospital. Noncompliance with any 
of the hospital CoPs at 42 CFR 482.1 through 482.58 in any part of the certified hospital 
is noncompliance for the entire Medicare-certified hospital. Therefore, noncompliance 
with the hospital CoPs in an IPPS-excluded unit is noncompliance for the entire certified 
hospital (see 83 FR at 41514).  
 
3104 - Criteria for PPS-Excluded Hospitals 
(Rev. 1, 05-21-04) 
 
3104A - Psychiatric Hospitals 
(Rev. 1, 05-21-04) 
 
A hospital certified as a psychiatric hospital under existing requirements is excluded. 
 
3104B - Rehabilitation Hospitals 
(Rev. 1, 05-21-04) 
 
A hospital is an excluded rehabilitation hospital if: 
 
  It has in effect a provider agreement to participate as a hospital; 
 
    During its most recent 12-month cost reporting period it treated an inpatient 
population of which at least 75 percent required intensive rehabilitative services 
for one or more of the following conditions: 
 
o  Stroke; 
 
o  Spinal cord injury; 
 
o  Congenital deformity; 
 
o  Amputation; 
 
o  Major multiple trauma; 
 
o  Fracture of femur (hip fracture); 
 
o  Brain injury; 
 
o  Polyarthritis, including rheumatoid arthritis; 
 
o  Neurological disorders, including multiple sclerosis, motor neuron 
diseases, polyneuropathy, muscular dystrophy, and Parkinsons disease; or 
 
o  Burns. 
 
  It has in effect a preadmission screening procedure under which each prospective 
patients condition and medical history are reviewed to determine whether the 
patient is likely to benefit significantly from an intensive inpatient hospital 
rehabilitation program or assessment; 
 
  It ensures that patients receive close medical supervision, rehabilitation nursing, 
physical therapy, and occupational therapy plus, as needed, speech therapy, social 
services or psychological services, and orthotic and prosthetic services; 
 
  It has for each inpatient, a plan of treatment that is established, reviewed, and 
revised as needed by a physician in consultation with other professional personnel 
who provide services to the patient; 
 
  It uses a coordinated multidisciplinary team approach in the rehabilitation of each 
inpatient, as documented by periodic clinical entries to the patients medical 
record noting the patients status in relationship to goal attainment, and team 
conferences are held at least every two weeks to determine the appropriateness of 
treatment; and 
 
    It has a director of rehabilitation who: 
 
o  Provides services to the hospital and its inpatients on a full-time basis; 
 
o  Is a Doctor of Medicine or Osteopathy licensed under State law to practice 
medicine or surgery; and 
 
o  Has had, after completing a 1-year hospital internship, at least two years of 
training in the medical management of inpatients requiring rehabilitation 
services. 
 
The inpatient population percent rule is applied to the 12-month cost reporting period 
immediately preceding the cost reporting period for which exclusion is sought.  The cost 
reporting period need not be complete when this evaluation takes place.  The RO requests 
the servicing intermediary to make the determination concerning the inpatient population 
percent rule. 
 
Alternative:  A hospital that seeks exclusion as a rehabilitation hospital for the first full 
l2-month cost reporting period that occurs after it becomes a Medicare participating 
hospital could not possibly meet the usual rule above, so a first-time exception to the rule 
is provided the hospital if it provides a written certification that the inpatient population it 
intends to serve will meet the inpatient population percent rule. 
 
The written certification described above is effective for any cost reporting period of not 
less than one month and not more than 11 months occurring between the dates the 
hospital began participating in Medicare and the start of the hospitals regular 12-month 
cost reporting period.  This exception is available only once, when the facility first gains 
excluded status. 
 
If a new rehabilitation hospital is excluded from PPS for a cost reporting period, but the 
inpatient population treated in the hospital during the period does not actually meet the 
inpatient population percent rule, a retroactive adjustment of payments to the hospital for 
the period is needed.  Where this occurs, the FI advises the RO of the identity of the 
hospital and of the dates of the cost reporting period involved. 
 
3104C - Childrens Hospitals 
(Rev. 1, 05-21-04) 
 
A hospital is an excluded childrens hospital if it has in effect an agreement to participate 
as a hospital, and more than 50 percent of its inpatients are individuals under the age of 
18.  The servicing intermediary verifies compliance. 
 
 
 
 
  3104D - Long-Term Care Hospitals 
(Rev. 198, Issued: 01-17-20, Effective: 01-17-20, Implementation: 01-17-20) 
 
A hospital is an IPPS-excluded long-term care hospital (LTCH) if it has in effect a 
provider agreement to participate as a hospital and the average inpatient length of stay is 
greater than 25 days.  The average length of stay, for this purpose, is determined by 
dividing the total number of inpatient days for Medicare patients not paid at the site 
neutral rate or under a Medicare Advantage plan (excluding leave of absence or pass 
days) by the total number of Medicare discharges for the cost period not paid at the site 
neutral rate or under a Medicare Advantage plan.  The servicing MAC verifies whether 
rehabilitation hospitals meet this length of stay criterion as LTCHs, and are, therefore, 
eligible for a LTCH exclusion and do not have to meet the special criteria otherwise 
established for these categories of facilities.  The servicing MAC verifies length of stay 
for all LTCHs. 
 
If an LTCH also has an IPPS-excluded psychiatric and/or rehabilitation unit, the days and 
discharges from those excluded units are not included in the calculation of an LTCHs 
average length of stay (83 FR 41515). Patients in IPPS-excluded units in an LTCH are 
not paid under the LTCH PPS.  
Long-term care hospitals that occupy space in a building also used by another hospital, or 
in one or more buildings located on the same campus as buildings used by another 
hospital (i.e., the host facility), must meet additional hospital-within-a-hospital or 
satellite criteria. 
 
NOTE:  Section 15008(a) of the 21st Century Cures Act (Pub. L. 114-255) removed the 
LTCH category under section 1886(d)(1)(B)(iv)(II) of the Social Security Act 
(implemented in the regulations at 42 CFR 412.23(e)(2)(ii)) and created a new category 
of IPPS-excluded hospital at section 1886(d)(1)(B)(vi) of the Act (implemented in the 
regulations at 42 CFR 412.22(i)), which is referred to as extended neoplastic disease care 
hospitals, effective January 1, 2015.  Although this category of hospitals have LTCH 
CCNs, they are not required to meet other LTCH specific requirements.  
 
3104E - Hospital within Hospitals 
(Rev. 198, Issued: 01-17-20, Effective: 01-17-20, Implementation: 01-17-20) 
 
A IPPS-excluded hospital that occupies space in a building also used by another hospital 
which is not excluded from the IPPS, or in one or more entire buildings located on the 
same campus as buildings used by another hospital which is not excluded from the IPPS, 
must meet the criteria at 42 CFR 412.22(e) in order to maintain its IPPS-excluded status 
as follows: 
 
 The hospital has a governing body that is separate from the governing body 
occupying space in the same building or campus, and the governing body is not 
controlled by the host facility or any third entity that controls both hospitals;  
 
  NOTE:  For purposes of this section, control exists if an individual or an organization 
has the power, directly or indirectly, significantly to influence or direct the actions or 
policies of an organization or institution. 
 
 The hospital has a chief medical officer who reports directly to the governing body 
and who is responsible for all medical staff activities of the hospital, and is not 
employed or under contract with the host facility or any third party that controls 
both hospitals; 
 
 The hospital has a separate medical staff from the medical staff of the host facility, 
reports directly to the hospitals governing body, and adopts and enforces bylaws 
governing medical care provided in the hospital and medical staff activities, 
including the granting of privileges to individual practitioners; 
 
 The hospital has a single chief executive officer through whom all administrative 
authority flows and who exercises control and surveillance over all administrative 
activities at the hospital, and who is not employed by or under contract to the host 
facility or any third party who controls both hospitals; and 
 
If a State hospital that is occupying space in the same building or on the same campus as 
another State hospital cannot meet the separate governing body criterion solely because 
its governing body is under the control of the State hospital with which it shares a 
building or a campus, or is under the control of a third entity that also controls the State 
hospital with which it shares a building or a campus, the State hospital can nevertheless 
qualify for an exclusion if it meets the other applicable criteria in 412.22(e) and the 
following: 
 
 Both State hospitals occupy space in the same building or on the same campus and 
have been continuously owned and operated by the State since October 1, 1995; 
 
 Is required by State law to be subject to the governing authority of the State hospital 
with which it shares space or the governing authority of a third entity that controls 
both hospitals; and 
 
 Was excluded from the IPPS before October 1, 1995, and continues to be excluded 
from the inpatient prospective payment system through September 30, 2008. 
 
If a hospital was excluded from the IPPS on or before September 30, 1995, and at that 
time occupied space in a building also used by another hospital, or in one or more 
buildings located on the same campus as buildings used by another hospital, it is not 
required to meet 412.22(e)(1)(i)-(iv) in order to maintain its IPPS-excluded status so 
long as it operates under the same terms and conditions in effect on September 30, 2003.  
For cost reporting periods beginning on or after October 1, 2006, a hospital may decrease 
its number of beds and remain excused from the separateness and control requirements as 
long as it does not increase its beds above the number it had on September 30, 2003. 
  Effective January 1, 2020 a grandfathered Childrens HwH may increase beds without 
losing its grandfathered status. 
 
The SA notifies the CMS RO as soon as it becomes aware of any LTCH planning to 
operate as a HwH and notifies the facility immediately that it must demonstrate 
compliance with the special HwH criteria. The SA will review documentation for 
hospitals that intend to operate as HwH in order to make an initial recommendation to the 
ROs regarding a hospitals compliance or noncompliance with the above criteria (See 
3104.D).  Final determinations will be made on a case-by-case basis by the RO using 
whatever procedure it deems appropriate.  In some instances, it may be necessary to 
authorize a SA onsite inspection of the hospital by the State agency to collect additional 
information.  The hospital must submit a completed Form CMS-855 to notify the MAC 
of its intent to be a HwH. 
 
3106 - Criteria for Psychiatric and Rehabilitation Units 
(Rev. 1, 05-21-04) 
 
A PPS-excluded psychiatric unit must meet both the general criteria for units and the 
specific criteria for psychiatric units below.  A PPS-excluded rehabilitation unit must also 
meet the general criteria for units and the specific criteria for rehabilitation units below. 
 
3106A - General Criteria for Units 
(Rev. 1, 05-21-04) 
 
  The unit is a part of an institution that: 
 
o  Has in effect a provider agreement to participate as a hospital; 
 
o  Is not excluded in its entirety from PPS; and 
 
o  Has enough beds not excluded from PPS to permit the provision of 
adequate cost information. 
 
  The unit has written admission criteria applied uniformly to both Medicare and 
non-Medicare patients; 
 
The unit has admission and discharge records that are identified separately from those of 
the hospital in which it is located, and that are readily retrievable.  The medical records of 
the units patients need not be physically separate from the records of patients in the 
acute care portion of the hospital. It is not necessary to create a second medical record 
when a patient is moved from the acute care portion of the hospital to the excluded unit 
or vice versa.  The record, however, must indicate, for Medicare purposes, the dates of 
admission and discharge from the excluded unit.  The units policies provide that 
necessary clinical information accompany a patient upon transfer from the hospital to the 
unit; 
 
    If State law provides special licensing requirements for psychiatric or 
rehabilitation units, the unit is licensed in accordance with the applicable 
requirements; 
 
  The hospitals UR plan includes specific standards for the type of care offered by 
the unit; 
 
  The beds assigned to the unit are physically separate from (not commingled with) 
beds not included in the unit; 
 
The unit must also meet the accounting requirements set forth in 2803.B.1.g through j 
of the Provider Reimbursement Manual.  These include requirements that: 
 
  The unit is treated as a separate cost center for cost finding and apportionment 
purposes; 
 
  The hospitals accounting system properly allocates costs attributable to the unit 
and maintains statistical data that are adequate to support the basis of allocation of 
shared costs;  
 
  The cost report for the hospital includes the costs of the unit in the same fiscal 
period and uses a single method of cost apportionment; 
 
  As of the first day of the first reporting period for which all other exclusion 
requirements are met, the unit is fully equipped and staffed, and capable of 
providing inpatient psychiatric or rehabilitation care, regardless of whether there 
are any inpatients in the unit on that date; and 
 
  Each hospital may have only one unit of each type (psychiatric or rehabilitation) 
excluded from PPS. 
 
3106B - Specific Criteria for Psychiatric Units 
(Rev. 121, Issued: 09-19-14, Effective: 09-19-14, Implementation; Upon 
Implementation of ICD-10) 
 
An SA onsite verification or reverification survey for PPS exclusion of a psychiatric unit 
is required for a hospital filing a first-time request for PPS exclusion for its psychiatric 
unit, a psychiatric unit that has been selected as part of a sample for an annual validation 
survey, and/or a complaint against a psychiatric unit.  For cost reporting periods 
following the first cost reporting period, the hospital is to self-attest that its psychiatric 
unit is in compliance with the requirements at 42 CFR 412.27. 
 
3106B1 - Patient Criteria 
 
  The unit admits only patients requiring admission for active treatment, of an intensity that 
can be provided only in an inpatient hospital setting.  The psychiatric principal diagnosis 
must be one contained in  
 
  the Fourth Edition of the American Psychiatric Association Diagnostic and 
Statistical Manual; 
 
  Chapter 5 (Mental Disorders) of the International Classification of Diseases, 
Ninth Revision, Clinical Modification (ICD-9-CM); or 
 
Chapter 5 (Mental and Behavioral Disorders) of the International Classification of 
Diseases, Tenth Revision, Clinical Modification (ICD-10-CM.), upon 
implementation of ICD-10. 
 
3106B2 - Services Provided 
 
The unit furnishes, through the use of qualified personnel, psychological, social work, 
psychiatric nursing, occupational and recreational therapy services; and 
 
3106B3 - Medical Records 
 
The unit maintains medical records that permit determination of the degree and intensity 
of treatment provided to individuals who are furnished services in the unit, and that meet 
the following requirements: 
 
a.   Development of Assessment/Diagnostic Data 
 
The medical record stresses psychiatric findings in the history, physical 
examination findings and treatment plan.  It also includes the doctors orders for 
the psychiatric condition for which the patient is treated. 
 
  The identification data includes the inpatients legal status (i.e., court 
commitment or voluntary admission); 
 
  A provisional or admitting diagnosis is made at the time of admission.  
The record also includes the diagnoses of intercurrent diseases as well as 
psychiatric diagnoses; 
 
  The reasons for admission are clearly documented as stated by the patient 
or others significantly involved, or both; 
 
  The social service record, including reports of interviews with patients, 
family members, and others provides an assessment of home plans and 
family attitudes, community resource contacts and a social history; and 
 
    When indicated, a complete neurological examination is recorded at the 
time of the admission physical examination. 
 
b.   Psychiatric Evaluation 
 
Each patient receives a psychiatric evaluation that: 
 
  Is completed within 60 hours of admission; 
 
  Includes a medical history; 
 
  Contains a record of mental status; 
 
  Notes the onset of illness and the circumstances leading to admission; 
 
  Describes attitudes and behavior; 
 
  Estimates intellectual functioning, memory functioning, and orientation; 
and 
 
  Includes an inventory of the patients assets in descriptive, not 
interpretive, fashion. 
 
c.   Treatment Plan 
 
  Each patient has a comprehensive treatment plan based on an inventory of 
his/her strengths and disabilities; and 
 
  The written plan includes: 
 
o  A substantiated diagnosis;  
 
o  Short-term and long-term goals; 
 
o  The specific treatment modalities; 
 
o  The responsibilities of each member of the treatment team; and  
 
o  Documentation that justifies the diagnosis and treatment and all 
active therapeutic efforts. 
 
d.   Progress Notes 
 
Physician progress notes must be documented by a Doctor of Medicine or Osteopathy 
responsible for the care of the patient, a nurse, a social worker and, when appropriate, 
others significantly involved in active treatment modalities.  Progress notes 
  frequency is based on the condition of the patient, but they must be recorded at least 
weekly for the first 2 months, and at least monthly thereafter. They should contain 
recommendations for revisions in the treatment plan as indicated, as well as a precise 
assessment of the inpatients progress in accordance with the original or revised 
treatment plan. 
 
e.   Discharge Planning and Discharge Summary 
 
The record of each discharged patient has a discharge summary that must include a 
recapitulation of the patients hospitalization in the unit, recommendations from 
appropriate services concerning follow-up or aftercare, and a brief summary of the 
patients condition on discharge. 
 
3106B4 - Staffing 
 
The unit meets special staff requirements and has adequate numbers of qualified 
professional and supportive staff to evaluate inpatients, formulate written, individualized 
comprehensive treatment plans, provide active treatment measures, and engage in 
discharge planning, as follows: 
 
a.   Personnel 
 
The unit employs or undertakes to provide adequate numbers of qualified 
professional, technical, and consultative personnel to:  
 
  Evaluate patients; 
 
  Formulate written individualized comprehensive treatment plans; 
 
  Provide active treatment measures; and 
 
  Engage in discharge planning. 
 
b.  Director of Inpatient Psychiatric Services and Medical Staff 
 
The number and qualifications of Doctors of Medicine and Osteopathy are adequate 
to provide essential psychiatric services. 
 
Inpatient psychiatric services are under the supervision of a clinical director, service 
chief, or equivalent who is qualified to provide the leadership required for an 
intensive treatment program and who: 
 
  Meets the training and experience requirements for examination by the 
American Board of Psychiatry and Neurology or the American Osteopathic 
Board of Neurology and Psychiatry, and 
 
    Monitors and evaluates the quality and appropriateness of services and 
treatment provided by the medical staff. 
 
In verifying the training and experience requirements of the clinical director, the SA 
follows the Hospital Interpretive Guidelines and survey procedures specified in 
Appendix A.  (See 42 CFR 482.62(b)(1).)  A director is qualified to take the 
examination for board certification upon successful completion of a psychiatric 
residency program approved by either of the two boards. 
 
c.  Nursing Services 
 
The unit has a qualified director of psychiatric nursing services.  There are also 
adequate numbers of RNs, LPNs, and mental health workers to provide care 
necessary under each patients active treatment program and to maintain progress 
notes on each patient. 
 
The director of psychiatric nursing services is an RN who has a masters degree in 
psychiatric or mental health nursing, or its equivalent, from a school of nursing 
accredited by the National League for Nursing, or is qualified by education and 
experience in the care of the mentally ill.  The director demonstrates competence to 
participate in interdisciplinary formulation of individual treatment plans; to give 
skilled nursing care and therapy; and to direct, monitor, and evaluate the nursing care 
furnished. 
 
The staffing pattern ensures the availability of a registered nurse 24 hours each day.  
There are adequate numbers of registered nurses, licensed practical nurses, and 
mental health workers to provide the nursing care necessary under each inpatients 
active treatment program. 
 
d.   Psychological Services 
 
The unit provides or has available psychological services to meet the needs of the 
patients.  The services are furnished in accordance with accepted standards of practice 
and established policies and procedures. 
 
e.   Social Services 
 
There is a director of social services who monitors and evaluates the quality and 
appropriateness of social services furnished.  The services are furnished in accordance 
with accepted standards of practice and established policies and procedures. 
 
Social service staff responsibilities include, but are not limited to, participating in 
discharge planning, arranging for follow-up care, and developing mechanisms for 
exchange of appropriate information with sources outside the hospital. 
 
f.   Therapeutic Activities 
   
The unit provides a therapeutic activities program.  The program is appropriate to the 
needs and interest of patients and is directed toward restoring and maintaining 
optimal levels of physical and psychosocial functioning.  The number of qualified 
therapists, support personnel, and consultants are adequate to provide comprehensive 
therapeutic activities consistent with each patients active treatment program. 
 
3106C - Specific Criteria for Rehabilitation Units 
(Rev. 1, 05-21-04) 
 
An SA onsite verification or reverification survey for PPS exclusion for a rehabilitation 
unit is to be performed for a hospitals first-time request for PPS exclusion for its 
rehabilitation unit, a rehabilitation unit that is selected as part of a sample for an annual 
validation compliance survey, and/or a complaint against a rehabilitation unit.  For cost 
reporting periods following the first cost reporting period, the hospital will self-attest that 
its rehabilitation unit is in compliance with the requirements in 42 CFR 412.29. 
 
The unit meets the requirement in 3104.B, except as provided below, with respect to 
patients treated in the unit during the hospitals most recent 12-month cost reporting 
period, i.e., the period immediately preceding the period for which the exclusion would 
be effective. This finding is based on the medical conditions of all (i.e., Medicare and 
non-Medicare) patients who occupy the beds assigned to the physically separate unit.  
The medical condition of all patients treated in the unit is considered. 
 
If a hospital has not previously sought exclusion for any rehabilitation unit, and has both 
increased its bed capacity under Medicare certification and obtained approval for added 
bed capacity under State licensure, it may identify the new beds as a new rehabilitation 
unit for the first full 12-month cost-reporting period during which the unit is in service.  
For purposes of these provisions, new beds are defined as ones for which the hospital 
has obtained approval by increasing its bed capacity under both State licensure and 
Medicare certification.  Note that there is no net increase if the hospital adds 20 new beds 
and deletes 20 beds previously licensed and certified for conversion.  A unit that is 
comprised of some beds that were previously licensed and certified, and some new beds, 
will be recognized as a new rehabilitation unit only if over half of the beds are new.  Beds 
are considered new only for the first full 12-month cost reporting period in which a 
hospital seeks exclusion of a new rehabilitation unit.  The hospital may provide written 
certification that the inpatient population it intends the unit to serve meets the 75 percent 
rule instead of showing that it has treated such a population during its most recent 12-
month cost reporting period. 
 
The hospital that has an excluded rehabilitation unit must obtain approval for added bed 
capacity under State licensure requirements.  If the hospital seeks to add the new beds to 
its existing excluded unit for the first full 12-month cost reporting period during which 
the new beds are used to furnish inpatient care, it must provide written certification that 
the new beds are intended to meet the inpatient population percent rule (see 3104.B) 
  instead of showing that those beds were used to treat such a population during the units 
most recent 12-month cost reporting period. 
 
The written certification described above is effective for any cost reporting period of not 
less than one month and not more than 11 months occurring between the dates the 
hospital began participating in Medicare and the start of the hospitals regular 12-month 
cost reporting period.  For purposes of this exclusion, a hospital that has undergone a 
change of ownership or leasing (see 3210) is not considered to have participated 
previously in the Medicare program. 
 
If a hospital has a new rehabilitation unit excluded from PPS for a cost reporting period, 
or expands an existing PPS-excluded rehabilitation unit through the addition of new beds 
as defined above, but the inpatient population treated in the new unit of added beds 
during the period does not actually meet the inpatient population percent rule, a 
retroactive adjustment of payments to the hospital for the period is needed.  Where this 
occurs, the FI advises the RO of the identity of the hospital and the dates of the cost 
reporting period involved. 
 
If a hospital that has not previously participated in the Medicare program seeks exclusion 
of a rehabilitation unit, it may designate certain beds as a new rehabilitation unit for the 
first full 12-month cost reporting period that occurs after it becomes a Medicare 
participating hospital.  The written certification described above also is effective for any 
cost reporting period of not less than one month and not more than 11 months occurring 
between the dates the hospital began participating in Medicare and the start of the 
hospitals regular 12-month cost reporting period.  For purposes of this exclusion, a 
hospital that has undergone a change of ownership or leasing (see 3210) is not 
considered to have participated previously in the Medicare program. 
 
  The unit meets the requirements for a rehabilitation hospital in 3104.  (The 
intermediary verifies the 75 percent rule.) 
 
  The unit has a director of rehabilitation who: 
 
o  Is a Doctor of Medicine or Osteopathy licensed under State law to practice 
medicine or surgery; 
 
o  Has had, after completing a 1-year hospital internship, at least two years of 
training or experience in the medical management of inpatients requiring 
rehabilitation services; and 
 
o  Provides services to the unit and its inpatients for at least 20 hours per 
week. 
 
If the rehabilitation unit serves both inpatients and outpatients through a single, integrated 
unit, the time spent by the director in performing administrative duties for the entire unit 
counts toward the time requirement.  The SA does not prorate this administrative time 
  between inpatients and outpatients.  However, time devoted to performing direct patient 
care can count toward the time requirement only if furnished to inpatients of the unit. 
 
3108 - SA First-Time Verification Procedures for Hospitals and Units 
(Rev. 1, 05-21-04) 
 
At the time the SA is requested to verify PPS exclusion of a rehabilitation hospital, or a 
psychiatric or rehabilitation unit of a hospital for the first time, it completes the 
appropriate part of the Criteria Worksheet, Form CMS-437, 437A, or 437B (Exhibit 73).  
The SA verifies that the criteria specified below are met for exclusions of hospitals and 
units of hospitals.  In addition, the RO may instruct the SA to verify some or all of the 
general criteria for units given in 3106.A. 
 
3108A - Rehabilitation Hospitals and Rehabilitation Units of Hospitals 
(Rev. 1, 05-21-04) 
 
1.  Rehabilitation Hospitals - The SA verifies that the criteria in 3104.B are met.  
(The intermediary verifies the 75 percent rule.) 
 
2.  Rehabilitation Units - The SA verifies that the criteria in 3106.C are met.  (The 
intermediary verifies the 75 percent rule.) 
 
3.  Criteria Presumed Met by Accredited Rehabilitation Hospitals and Units - A 
rehabilitation hospital or unit may be presumed to meet the criteria in 3104.B or 
3106.C (excluding the 75 percent rule and the director requirement) if it is 
accredited by: 
 
  Commission on Accreditation of Rehabilitation Facilities (CARF), 
surveyed under the Comprehensive Inpatient Rehabilitation (CIRP) 
Program; or 
 
  Joint Commission on Accreditation of Healthcare Organizations 
(JCAHO).  Hospitals/units surveyed under the Joint Commission 
Comprehensive Physical Rehabilitation Program or Unit includes the 
provisions of standard RH.3 in the Joint Commission Accreditation 
Manual for Hospitals. 
 
Nevertheless, in either case, the SA verifies that the criterion for full-time director for 
rehabilitation hospitals or the 20-hour per week criterion for the rehabilitation unit is met. 
The SA reviews appropriate documentation submitted by the facility (e.g., payroll 
records, duty rosters, staff appointment notice specifying either full-time or part-time 
appointment of at least 20 hours per week). 
 
3108B - Psychiatric Units of Hospitals 
(Rev. 1, 05-21-04) 
 
  The SA verifies that the criteria in 3106 are met. 
 
The SA schedules an onsite verification visit at least 90 days prior to the end of the 
hospitals cost reporting period.  The SA records the survey findings using the applicable 
section of the Criteria Worksheet, Form CMS-437 and transmits the worksheet to the RO 
at least 60 days prior to the end of the hospitals cost reporting period for inclusion with 
other information necessary for determining exclusion from PPS. 
 
For a first-time verification survey, the SA verifies compliance with 42 CFR 412.27(a), 
(b), and (c) by reviewing at least one patient record.  If there are no patients in the unit at 
the time of the survey, the SA reviews patient records (at least one) for patients treated in 
the unit within 6 months of the date of the survey.  If the psychiatric unit has not treated 
any patients during the 6 month period prior to the survey (i.e., there are no closed or 
active patient records available for review), the unit cannot demonstrate compliance with 
42 CFR 412.27(a), (b), and (c), and the SA survey should be rescheduled to a later date 
when records will be available.  
 
Hospitals/units that do not meet all exclusion criteria at the time of the SA onsite 
verification may still be eligible for exclusion.  They must provide strong evidence 
documenting compliance with exclusion requirements at least 15 days prior to the 
beginning of the cost reporting period.  If necessary, the SA contacts the hospital/unit 
again to confirm their compliance.  However, a second onsite visit generally is not 
required to confirm evidence submitted subsequent to onsite verification.  For example, if 
a rehabilitation hospital has a part-time director and is able to furnish proof that a full-
time director will be employed prior to the start of the cost reporting period, no revisit is 
necessary. 
 
3110 - SA Reverification of PPS-Excluded Hospitals and Units 
(Rev. 1, 05-21-04) 
 
3110A - Annual Reverification Process for Nonaccredited, PPS-
Excluded, Rehabilitation Hospitals and Units 
(Rev. 1, 05-21-04) 
 
  120 days before the beginning of the next cost reporting period, the SA notifies 
the excluded hospital or unit (Exhibit 126) that it must self-attest to compliance 
with the appropriate requirements in 42 CFR 412.23(b), 412.25, and/or 412.29. 
 
  The SA includes a copy of the attestation statement (Exhibit 127) and the 
appropriate hospital or unit criteria worksheet (Form CMS-437A or 437B, 
Exhibit 73); 
 
  The hospital/unit is to return the completed/signed worksheet and signed 
attestation statement to the SA office no later than 90 days before the beginning of 
its next cost reporting period; 
 
    The SA transmits the completed attestation statement and worksheet, along with 
its recommendation for reverification, to the RO at least 60 days prior to the end 
of the hospitals cost reporting period for inclusion with other information 
necessary for determining exclusion from PPS. 
 
3110B - Reverification Process for Rehabilitation Hospitals and/or Units 
Accredited by CARF Under CIRP or JCAHO 
(Rev. 1, 05-21-04) 
 
Accredited rehabilitation hospitals or units may be presumed to meet the criteria in 
3104.B or 3106.C, excluding the 75 percent rule (verified by the intermediary and the 
director requirement (42 CFR 412.23(b)(5) or 412.29(f)(1), as appropriate).  Accredited 
rehabilitation hospitals/units self-attest to compliance with the director requirement on 
Form CMS-437A or Form CMS-437B using the same procedure and processing 
timeframes as used for nonaccredited hospitals/units. 
 
3110C - Reverification Process for Psychiatric Units of Hospitals:  
(Rev. 1, 05-21-04) 
 
  The SA uses the same process and timeframes as those used for nonaccredited 
rehabilitation hospitals and units to determine if the unit meets the specific criteria 
for psychiatric units in 3106; and 
 
  The SA provides the psychiatric unit with the criteria worksheet for psychiatric 
units, Form CMS-437 (Exhibit 73), along with Exhibit 126 and the attestation 
statement (Exhibit 127). 
 
Hospitals/units that do not self-attest to meeting all exclusion criteria at the time of the 
annual self-attestation may still be eligible for exclusion.  They must provide strong 
verifiable evidence documenting compliance with exclusion requirements at least 15 days 
prior to the beginning of the cost reporting period.  If necessary, the SA contacts the 
hospital/unit again to confirm compliance. A SA onsite visit generally is not required to 
confirm evidence submitted subsequent to self-attestation. 
 
3112 - RO Procedures for Exclusion from PPS for Hospitals and Units 
(Rev. 1, 05-21-04) 
 
For initial exclusion from PPS, hospitals (except those now certified as psychiatric 
hospitals) and hospital units that meet the criteria of this section have been instructed in 
the Provider Reimbursement Manual to notify the RO of their eligibility for exclusion.  
Notification should be in writing and include the following: name of hospital, type of 
hospital/units, address, current provider identification number, name of contact person, 
FI, and a statement that the hospital/units(s) meets the criteria for exclusion.  Notification 
should be made, where possible, no later than 5 months before the date the hospital 
becomes subject to PPS. 
 
  Hospitals and units that have already been excluded from PPS need not reapply for 
exclusion.  These facilities will be reevaluated based on the criteria described in 3112.2 
to determine if they still meet the PPS exclusion criteria. 
 
If the RO does not receive notification of a hospital/unit meeting the criteria of this 
section but has knowledge that it should be excluded, the RO identifies the hospital/unit 
for exclusion. 
 
Except for currently certified psychiatric hospitals, the RO notifies the hospital and the 
FI, in writing, 45 days prior to the start of the cost reporting period, of the excluded status 
of the hospital or unit(s) and of any new provider number(s).  The RO coordinates these 
activities very closely with the servicing intermediary of the hospital.  Prior to making a 
decision on hospital/unit exclusion, the RO determines whether the hospital/unit meets all 
exclusion criteria including those criteria that are the responsibility of the servicing 
intermediary. 
 
PPS excluded or nonexcluded status for a hospital or hospital unit remains in effect for 
the entire cost-reporting period for which the determination is made.  If a change in 
meeting applicable criteria occurs during a cost reporting period or the hospital requests 
exclusion after the start of its cost reporting period, the status already determined for that 
period will remain for the duration of the period.  However, any change in status resulting 
from the beginning or end of a hospitals participation in an approved demonstration 
project or State reimbursement control program will be effective on the date the change 
occurs, whether or not the date coincides with the start of a cost reporting period.  A 
hospital may increase or decrease the space (square footage or number of beds) assigned 
to an excluded unit only at the start of the hospitals next cost reporting period. 
 
3112.1 - RO Procedures for First-Time Exclusion of Hospitals and Units 
(Rev. 1, 05-21-04) 
 
When considering a hospital or hospital unit for exclusion for the first time, the RO has 
the SA and or the intermediary verify the facilitys compliance with exclusion criteria, as 
follows: 
 
  Psychiatric Hospitals - The RO verifies through a review of records that the 
hospital currently participates in Medicare as a psychiatric hospital, and that the 
hospitals provider number identifies it as a psychiatric hospital.  The hospital is 
not required to make a separate request for exclusion. 
 
  Rehabilitation Hospitals - The RO has the SA verify that the exclusion criteria in 
3104 are met.  As noted in 3108, a rehabilitation hospital may be presumed to 
meet certain criteria based on accreditation by the Commission on Accreditation 
of Rehabilitation Facilities (CARF) or by the Joint Commission on Accreditation 
of Healthcare Organizations (JCAHO). However, the SA should verify 
compliance with the medical director requirement, and the intermediary should 
verify compliance with the 75 percent rule for hospitals other than new hospitals. 
   
  Childrens Hospitals - The RO has the intermediary verify that the hospital has in 
effect an agreement to participate as a hospital and that a majority of the hospitals 
inpatients are individuals under the age of 18.  The determination is to be based 
on the hospitals most recently filed cost report, unless there is an indication that 
the age of the patient population has changed since the close of the period covered 
by the report.  If the age of the patient population has changed since that period, 
the RO has the intermediary determine whether the age criterion is met by the 
patient population treated during the prior 6-month period.  The intermediary may 
base the determination either on its knowledge of the provider or on a separate 
contact that results in an actual review of a sample of patient records. 
 
  Long-term Care Hospitals - The RO has the intermediary verify that the hospital 
has in effect an agreement to participate as a hospital and that the average length 
of inpatient stay is greater than 25 days.  The average length of inpatient stay is 
to be computed by dividing the number of total inpatient days (less leave or pass 
days) by the number of total discharges for the hospitals most recent complete 
cost reporting period.  However, if a change in the hospitals average length of 
stay is indicated, the hospitals average length of stay is to be computed by the 
same method for the immediately preceding 6-month period.  Rehabilitation 
hospitals meeting the length-of-stay criterion for exclusion as a long-term 
hospital are to be excluded as long-term hospitals, and should not be evaluated 
for exclusion under the rehabilitation hospital criteria.  (See 3104).  
 
  Psychiatric Distinct-Part Units - The RO has the intermediary verify that the 
general criteria for exclusion for units in 3106 are met.  The RO has the SA 
verify that the specific criteria for psychiatric units in 3106 are met. 
 
  Rehabilitation Distinct-Part Units - The RO has the intermediary verify that the 
general criteria for units in 3106 are met.  The RO has the SA verify that the 
exclusion criteria in 3104 are met.  As noted in 3108, a rehabilitation hospital 
may be presumed to meet certain criteria based on accreditation by CARF or by 
JCAHO.  However, the SA should verify compliance with the medical direction 
requirement and the intermediary should verify compliance with the 75 percent 
rule for rehabilitation distinct-part hospital units other than new units. 
 
  Cancer Hospitals - The RO contacts the Center for Medicare Management to 
obtain a listing of the hospitals that have been designated as cancer hospitals. 
 
3112.2 - RO Verifying Continued Compliance With Exclusion Criteria 
by Currently Excluded Hospitals or Units 
(Rev. 1, 05-21-04) 
 
  3112.2A - Self-Attestation Procedures for PPS-Excluded Hospitals and 
Units 
(Rev. 1, 05-21-04) 
 
1.  Rehabilitation Hospitals/Units and Psychiatric Units - Annual verification surveys 
for all previously excluded rehabilitation hospitals and units, and psychiatric units 
are no longer required.  The new procedures is as follows: 
 
o  At least 120 days prior to the beginning of the next cost reporting period, 
SAs provide (see Exhibit 126) excluded rehabilitation hospitals/units and 
psychiatric units with the attestation statement (Exhibit 127) and the 
appropriate Criteria Worksheet, Form CMS-437, 437A, or 437B; 
 
o  Hospital/unit officials complete and sign the attestation statement and the 
appropriate Worksheet and return them to the SA no later than 90 days 
before the beginning of the next cost reporting period; and 
 
o  After receiving the hospital/units self-attestation materials from the SA, 
the RO notifies the hospital/unit (see Exhibit 193) that recertification has 
been approved. 
 
  Previously excluded hospitals/units are required to report any change in 
operations (e.g., expansion or downsizing) to the appropriate CMS RO and to 
provide the SA with a copy of the report within 10 days after the change occurs; 
 
  The SA conducts annual validation compliance surveys at excluded 
hospitals/units; 
 
  SAs continue to conduct complaint surveys at excluded hospitals/units; 
 
  SAs continue to conduct first-time verification surveys in connection with a 
hospital/units first exclusion from PPS; and 
 
  FIs continue to verify, on an annual basis, compliance with the 75 percent rule  
(see 42 CFR 412.23 through 412.30) for rehabilitation hospitals and units. 
 
3112.2B - RO Verifying Exclusion Eligibility of Other Facilities 
(Rev. 1, 05-21-04) 
 
1.  Currently Certified Psychiatric Hospital - A hospital currently participating in 
Medicare and identified by its provider number as a psychiatric hospital is 
excluded from PPS and is not required to make any special requests for exclusion. 
 
2.  Childrens Hospital - A hospital is an excluded childrens hospital if it has in 
effect an agreement to participate as a hospital, and if the majority of its inpatients 
are individuals under the age of 18.  The determination is based on the hospitals 
  most recently filed cost report.  If there is an indication that the age of the patient 
population has changed since the close of the period covered by the report, the 
RO uses data for the prior 6-month period, asking the servicing intermediary to 
verify whether the age criterion has been met (i.e., whether the majority of the 
hospitals inpatients are individuals under the age of 18).  This may be based on 
the intermediarys knowledge of the provider, or based on a separate contact. 
 
3.  Long-term Hospitals - A hospital is an excluded long-term hospital if it has in 
effect an agreement to participate as a hospital and if the average inpatient length 
of stay is greater than 25 days.  The RO bases its determination on the hospitals 
most recently filed cost report.  If there is an indication that the length of stay has 
changed since the close of the period covered by the report, use data for the prior 
6-month period, asking the servicing intermediary to verify whether the length of 
stay criterion has been met (i.e., whether the average length of stay is in excess of 
25 days).  Rehabilitation hospitals meeting the length of stay criterion as a long-
term hospital are eligible for a long-term hospital exclusion from PPS and do not 
have to meet the special criteria established for these categories of facilities. 
 
4.  The hospital-within-hospital criteria described in 3112.1 apply to all long-term 
hospitals with cost reporting periods beginning on or after October 1, 1995.  If the 
RO becomes aware of any long-term hospital operated in a building or campus 
occupied by another hospital, the hospital must be in compliance with the criteria. 
 
5.  Cancer Hospitals - The RO verifies through contact with the Center for Medicare 
Management, that the hospital continues to be designated as a cancer hospital. 
 
3112.3 - Role of FIs in Reverification of PPS Excluded Hospitals and 
Units 
(Rev. 1, 05-21-04) 
 
The FIs are to verify the following: 
 
  Rehabilitation Hospitals and Units - 75 percent rule applied to diagnoses. 
 
  Childrens Hospitals - Age criterion. 
 
  Long-Term Hospitals - Length of stay criterion. 
 
  All Distinct Part Units - Unit is a separate cost center for cost finding and 
apportionment, meeting requirements of Provider Reimbursement Manual 2803. 
 
Changes in Provider Status or Services 
 
  3200 - Action Based on Changes in Provider Organization, Services, or 
Action of Other Approving Agencies 
(Rev. 1, 05-21-04) 
 
Notification that an entity has undergone organizational changes, added or relocated 
units, or received an accreditation may require a change in SA scheduling.  
 
3202 - Change in Size or Location of Participating SNF and/or NF 
(Rev. 1, 05-21-04) 
 
Under 1866 of the Social Security Act (the Act), the Secretary has the authority to enter 
into an agreement with an institution or an institutional complex to provide covered 
services to our beneficiaries.  The provider agreement requires compliance with the 
requirements the Secretary deems necessary for participation in the Medicare or 
Medicaid program.  See 1866(b)(2) and 1902 (a)(27) of the Act.  On the effective date 
of the provider agreement, the institution or institutional complex is deemed to have met 
the requirements for participation based upon a survey of the institution or institutional 
complex as it was configured (i.e., bed size/bed location configuration) on the date(s) of 
the survey.  The CMS authority to regulate bed size changes in a SNF or a NF is based 
on the authority to ensure compliance with the provider agreement under 1866 of the 
Act and to further ensure that the configuration that has been approved for the institution 
or institutional complex does not so drastically change from that of the original certified 
configuration so as to endanger resident health and safety or otherwise change in a 
material fashion the identity of the entity that CMS originally certified for program 
participation.  
 
An institution or institutional complex may choose to participate in the Medicare and/or 
Medicaid programs either in its entirety (i.e., fully participating), or a portion thereof (i.e., 
a distinct part), but not both.  If only a portion of an institution or institutional complex 
actually participates in either program it is classified as a distinct part and must meet the 
criteria found in 2762.  For example, an institution has 4 wings that consist of 25 beds 
each.  Three contiguous wings that contain 75 beds are dually participating (i.e., 
participating in Medicare and Medicaid).  The fourth wing is only certified to participate 
in Medicare.  It consists of 25 beds.  Therefore, in this instance the institution is fully 
participating for purposes of Medicare (i.e., 100 beds) and a distinct part for purposes of 
Medicaid (i.e., 75 beds).  The policies on bed size changes and changes in designated bed 
locations that are included in this section apply, regardless of whether an institution is 
fully participating (i.e., all beds within the institution or institutional complex are 
certified to participate in the Medicare and/or Medicaid program) or participating as or 
with a distinct part.  
 
A SNF or NF may be: 
 
  An entire institution for skilled nursing or rehabilitative care, such as a nursing 
home; or 
 
    A distinct part of an institution such as, a hospital, personal care home, 
assisted living facility, board and care home, domiciliary care facility, 
rest home, continuing care retirement community or nursing home. 
 
An institution that is primarily for the care and treatment of mental diseases cannot be a 
SNF or NF. 
 
3202A - Requirements for Distinct Part Certification 
(Rev. 1, 05-21-04) 
 
If the institution or institutional complex is participating as a distinct part SNF and/or NF, 
for a change to be approved, the requested change in bed size must conform to the 
requirements to be classified as a distinct part.  The term distinct part refers to a portion 
of an institution or institutional complex (e.g., a nursing home or a hospital) that is 
certified to provide SNF and/or NF services.  A distinct part must be physically 
distinguishable from the larger institution and fiscally separate for cost reporting 
purposes.  
 
An institution or institutional complex can only be certified with one distinct part SNF 
and/or one distinct part NF.  A hospital-based SNF is by definition a distinct part.  
Multiple certifications within the same institution or institutional complex are strictly 
prohibited. 
 
The distinct part must consist of all beds within the designated area.  The distinct part can 
be a wing, separate building, a floor, a hallway, or one side of a corridor.  The beds in the 
certified distinct part area must be physically separate from (that is, not commingled 
with) the beds of the institution or institutional complex in which it is located.  However, 
the distinct part need not be confined to a single location within the institution or 
institutional complexs physical plant.  It may, for example, consist of several floors or 
wards in a single building or floors or wards that are located throughout several different 
buildings within the institutional complex.  In each case, however, all residents of the 
distinct part would have to be located in units that are physically separate from those 
units housing other patients of the institution or institutional complex. 
 
Where an institution or institutional complex owns and operates a distinct part SNF 
and/or NF, that distinct part SNF and/or NF is a single distinct part even if it is operated 
at various locations throughout the institution or institutional complex.  The aggregate of 
the SNF and/or NF locations represents a single distinct part subprovider, not multiple 
subproviders, and must be assigned a single provider number.  
 
  Illustration I - Floor Plan of Nursing Facility 
 
 
 
 
 
Illustration I, above, is an illustration of a floor plan of a nursing facility followed below 
by examples that meet the requirements for a distinct part, as well as examples that do not 
meet the requirements for a distinct part.  The purpose of the Illustration is to assist the 
State and the RO in ensuring proper distinct part certification. 
 
3202A1 - Meet Distinct Part Certification 
(Rev. 1, 05-21-04) 
 
An institution or institutional complex can select any one of the following examples 
discussed in the context of Illustration I above that meets the requirements for distinct 
part certification. 
 
  All rooms numbered 1 through 12 in wing 1 and all rooms numbered 1 through 12 
in wing 2 constitute a distinct part.  This option is approvable because it 
constitutes all beds in each wing. 
 
  All rooms numbered 1 through 12 in wing 5.  This option is approvable because it 
includes all beds in the wing. 
 
  Room numbers 1 through 6 in wing 4 constitute a distinct part.  This option is 
approvable because it includes all beds that constitute a single side of the corridor. 
 
    Room numbers 7 through 12 in wing 2 and all rooms 1 through 12 in wing 1 
constitute a distinct part. This option is approvable because it includes all beds in 
wing 1 and all beds that constitute a single side of the corridor in wing 2. 
 
3202A2 - Do Not Meet Distinct Part Certification 
(Rev. 1, 05-21-04) 
 
Neither of the examples discussed below, in the context of Illustration I, meet the 
requirements for distinct part certification. 
 
  Room numbers 1 through 12 in wing 1 and rooms 3, 4, and 5 in wing 6 do not 
constitute a distinct part.  This option is not approvable because of the inclusion 
of the three rooms in wing 6. 
 
  Room number 2 in wing 1, room numbers 5 and 7 in wing 6, and room numbers 
4, 5, 6, 10, 11, and 12 in wing 4.  This option is not approvable because the 
distinct part area must be physically separate from (that is, not commingled with) 
the beds of the institution or institutional complex in which it is located. 
 
3202B - Changes in Bed Size of Participating SNF and/or NF 
(Rev. 1, 05-21-04) 
 
When an institution or institutional complex not previously certified as or with a SNF 
and/or NF establishes a SNF and/or NF, it must be initially certified and periodically 
recertified.  If an institution or institutional complex has an existing SNF and/or NF 
agreement, it may elect to change the number of beds that are certified to participate in 
the Medicare or Medicaid program up to two times per cost reporting year in accordance 
with the requirements set out below.  Where a change in the size of a SNF also impacts 
the size of a NF, or vice versa, this represents one change for the SNF and one change for 
the NF.  An institution or institutional complex that is participating in the Medicare 
program can find these same requirements in 2337 of the Provider Reimbursement 
Manual, Part I.  An institution or institutional complex may only change the bed size of 
its SNF and/or its NF once on the first day of the beginning of its cost reporting year and 
again on the first day of a single cost reporting quarter within that same cost reporting 
year in order to effect one of the following combinations: 
 
  An increase in its bed size on the first day of the beginning of its cost reporting 
year and an increase in its bed size on the on the first day of a single cost 
reporting quarter that falls within the same cost reporting year; or 
 
  An increase in its bed size on the first day of the beginning of its cost reporting 
year and a decrease in its bed size on the first day of a single cost reporting 
quarter that falls within the same cost reporting year; or 
 
    A decrease in its bed size on the first day of the beginning of its cost reporting 
year and an increase in its bed size on the first day of a single cost reporting 
quarter that falls within the same cost reporting year. 
 
At no time can the RO or the SA approve two decreases in the bed size of an institution 
within the same cost-reporting year. 
 
The institution or institutional complex may submit only ONE change in bed size at a 
time.  Furthermore, an institution cannot request a change in its bed size just because it 
undergoes a change of ownership (CHOW) or because it has been approved to change its 
cost reporting year.  In either of these circumstances, it is still bound by the filing 
requirements found in subsection C.  
 
A request for a change in the number of certified beds cannot be approved on a 
retroactive basis.  All changes are made on a prospective basis only in accordance with 
the effective date indicated above.  The institution requesting a change in bed size must 
submit a written request to the RO or SA (as appropriate) in conformance with the 
requirements found in subsection C.  An institution or institutional complex can not self-
designate the effective date of a change in bed size. 
 
3202C - General Request Filing Requirements 
(Rev. 1, 05-21-04) 
 
An institution or institutional complex seeking a change in the number of Medicare 
and/or Medicaid certified beds must:  
 
  Submit a written request to the RO or SA (as appropriate) for the change 45 
calendar days before: 
 
o  The first day of its cost reporting year to effect a change on the first day of 
its cost reporting year; or 
 
o  The first day of a single cost reporting quarter within the same cost 
reporting year at which time it seeks to change its bed size to effect a 
change on the first day of the designated cost reporting quarter. 
 
  Submit floor plans identifying all areas of the institution or institutional complex 
with the current certified bed configuration and the proposed certified bed 
configuration in order for the RO or SA to determine that the proposed change is 
in fact, in conformance with the rules for full participation or distinct part 
certification, whichever applies. 
 
  Include a reference to the cost-reporting year of the institution or institutional 
complex.  If there has been a change in the cost-reporting year originally selected 
by the institution or institutional complex at the time of its initial certification, 
  submit a copy of the letter submitted to the fiscal intermediary and the fiscal 
intermediarys response to the request. 
 
3202D - Exceptions 
(Rev. 1, 05-21-04) 
 
There are certain situations (described below) that we believe warrant an exception to the 
above policy.  Therefore, even if the institution or institutional complex has been 
approved for a change in bed size in accordance with the policies articulated above, the 
institution or institutional complex may be granted a change in bed size on the basis of 
one of these situations.  To request a change in bed size based on one of these situations, 
the institution or institutional complex must file a written request with the RO or SA (as 
appropriate) 45 calendar days before the first day of its next cost reporting quarter, at 
which time the request will be effective if approved, along with floor plans identifying all 
areas of the institution or institutional complex with the current certified bed 
configuration and the proposed certified bed configuration.  An exception may be granted 
based only on one of the following situations:  
 
3202D1 - Life Safety Code (LSC) Requirements 
 
An exception may be granted if the request is to reduce the size of the SNF or NF to 
avoid being out of compliance with LSC requirements (e.g., sprinkler installation).  The 
proposed bed configuration must be separated from the rest of the institution or 
institutional complex by a 2-hour firewall, so that there is no danger of the fire spreading 
there from other parts not meeting safety requirements. In this case, the proposed 
reduction in the size of the SNF or NF may be established with an effective date that is 
requested by the institution or institutional complex, but not earlier than the date that the 
separation can be documented.  A full survey by the fire authority must be performed if 
the reason for the request is to limit noncompliance with LSC requirements. 
 
3202D2 - Elimination of Distinct Part 
 
An exception may be granted if an institution or institutional complex concludes that it 
wants to become fully participating (i.e., all beds within the institution or institutional 
complex are certified to participate in the Medicare and/or Medicaid program).  If the 
institution or institutional complex decides to become fully certified to participate in the 
Medicare and/or Medicaid program, it cannot return to distinct part certification until, at 
the earliest, the beginning of its next cost reporting year. 
 
3202D3  -  Enlargement  through  Construction,  Purchase  or  Lease  of 
Additional Space 
 
An exception may be granted if the institution or institutional complex requests to 
increase the size of its SNF or NF to include space acquired through new construction, 
purchase or lease (e.g., constructing a new wing, purchasing an adjacent building or 
leasing a floor in a hospital). 
   
3202E - Change in Designated Bed Location(s) 
(Rev. 1, 05-21-04) 
 
An institution or institutional complex may request to change its designated bed 
locations, as long as there is no change in the number of beds certified to participate in 
the Medicare and/or Medicaid program, by submitting a written request to the SA or the 
RO 30 calendar days in advance of such a change. In addition, the institution or 
institutional complex must submit floor plans identifying all areas of the institution or 
institutional complex with the current certified bed configuration and the proposed 
certified bed configuration in order for the RO or SA to determine that the proposed 
change is in fact, in conformance with the rules for full certification or distinct part 
certification, whichever applies. The institution or institutional complex must adhere to 
the notification requirements found in 42 CFR 483.10(b)(11)(ii)(A) and the residents 
rights requirements found in 42 CFR 483.10(o).  The RO or SA must approve the request 
before the institution or institutional complex makes the change.  No changes are made 
on a retroactive basis. 
 
3202F - RO or SA (as appropriate) Actions Upon Receipt of Written 
Request for Change in Bed Size/Location 
(Rev. 1, 05-21-04) 
 
The RO or the SA must take the following actions when reviewing a request for a change 
in bed size: 
 
  Date stamp the letter from the institution requesting a change in bed size with the 
date it was received by the RO or SA; 
 
  Verify the cost-reporting year selected by the institution or institutional complex 
using the OSCAR/ASPEN system.  The cost-reporting year of the provider must 
match what is contained in OSCAR/ASPEN.  If the reported cost reporting year is 
different than that found in OSCAR/ASPEN it would be as a consequence of a 
change in cost reporting year (for Medicare) which must be approved by the fiscal 
intermediary in accordance with the requirements found in 42 CFR 413.34(f).  
Absent such a change, the institution or institutional complex must adhere to the 
cost reporting year selected at its initial certification; 
 
  Document information as required under 2764; 
 
  Complete the Form CMS-1539 reflecting the change in bed size/designated bed 
location(s) if the request is approved;  
 
  Notify the institution or institutional complex in writing of the RO or SA decision 
to either approve or disapprove the request prior to the effective date of the 
change.  If approved the letter must include the effective date of the change in bed 
  size and/or designated bed locations, the total number of beds certified and the 
designated bed locations.  If disapproved the letter must explain the 
requirement(s) not met; 
 
  Send a copy of the letter notifying the institution or institutional complex of the 
RO or SA decision to approve or disapprove the request to the appropriate fiscal 
intermediary; 
 
  Update the OSCAR/ASPEN system. 
 
Usually, advancing the scheduled SA standard survey to recertify the changed 
configuration is unnecessary. A telephone contact often resolves most questions, such as 
changing bylaws, staffing, or other issues regarding the capacity of the institution or 
institutional complex to furnish the level of care contemplated in the long term care 
requirements.  The SA must advance the survey schedule and perform a survey if; 
 
  There is reason to question whether the institution remains in compliance with the 
long term care requirements (e.g., the proposed relocation site is unsuitable);  
 
  Information suggests that as a part of the change, a different governing body or 
managing personnel directs the distinct part.  (See 3210.); or 
 
  The area within the physical plant to be certified has not been subjected to a life 
safety code survey. 
 
3202G - Evaluation 
(Rev. 1, 05-21-04) 
 
The SA bases its evaluation of the proposed certified area upon the following guidelines. 
 
3202G1 - Shared Facilities and Services 
 
Rarely is a distinct part SNF or NF so completely self-contained that it independently 
meets all of the long-term care requirements.  Therefore, to the extent necessary, the SA 
evaluates services, facilities, and activities located outside the distinct part that are used 
by the distinct parts residents.  This evaluation is not an assessment of whether the 
distinct part meets the requirements to be considered provider-based for purposes of 
Medicare reimbursement. 
 
Often, the distinct part will share central supporting services such as dietary, 
housekeeping, and plant maintenance with the rest of the institution or institutional 
complex.  Depending on the size and type of the institution or institutional complex, the 
distinct part may also have shared administration and supervisory, medical, and 
therapeutic services. 
 
  The primary consideration in the evaluation of shared services is whether the sharing can 
be done without sacrificing the quality of care rendered to distinct part residents or 
endangering their health and safety.  The distinct part must demonstrate a capacity to 
provide all of the services, facilities, and supervision required by the long term care 
requirements.  For this reason, the SA may need to consider the total staff of an 
institution or institutional complex, particularly with respect to the amount of shared 
responsibilities. 
 
3202G2 - Effect of Hospital Accreditation or Certification on SNF or NF 
 
Make no assumption regarding a distinct part SNF or NFs compliance with long term 
care requirements on the basis of the institutional or institutional complexs accreditation 
by the Joint Commission on Accreditation of Healthcare Organizations or AOA or the 
institution or institutional complexs Medicare participation.  Survey and evaluate the 
institution or institutional complex to determine its compliance with all of the long-term 
care requirements. 
 
3202G3 - SNF or NF as Distinct Part of a Psychiatric Hospital 
 
The guidelines for the identification of a distinct part SNF or NF, regardless of the type 
of institution or institutional complex in which it is located, are generally applicable.  
However, there are special factors to consider when an institutional complex is certified 
to participate as a psychiatric hospital. 
 
A SNF or NF cannot be certified if it is primarily for the care and treatment of mental 
diseases.  In the context of a psychiatric hospital, for example, the presumption is that in 
most cases a SNF or NF distinct part of such a hospital is designed primarily for the care 
and treatment of patients with mental diseases.  A distinct part SNF or NF cannot be 
established unless the psychiatric hospital either has a separate medical-surgical unit that 
is participating as a distinct part general hospital or has an arrangement with a community 
hospital for transfer to the hospital and back to the distinct part for post-hospital 
convalescence when a beneficiary requires medical-surgical services.  In determining 
whether a distinct part SNF or NF is primarily for the care and treatment of mental 
diseases, the SA must look at the primary purposes for the units existence, in 
combination with the requirements discussed above.  A psychiatric hospital can have 
such a unit or section certified as a distinct part SNF or NF, only if the primary purpose 
of the unit is to provide medical services and the hospital meets one of the requirements 
discussed in the last sentence of the preceding paragraph. 
 
In addition, a distinct part SNF or NF of a psychiatric hospital would also have to be 
licensed pursuant to the State or local law which provides for licensing of institutions of a 
type which qualify as SNFs, i.e., the distinct part would have to be licensed as a nursing 
home. 
 
   
3202H - Survey Considerations 
(Rev. 1, 05-21-04) 
 
Although an immediate survey is not mandatory, the SA must complete Form CMS-1539 
promptly to report the change in size and location of the SNF or NF.  Furthermore, the 
SA completes a spell of illness certification for any components of the institution or 
institutional complex that are being removed from inclusion in the SNF or NF.  (See 
2164.)  If, in order to process this certification, the SA finds that survey is necessary, it 
may perform a full standard survey. 
 
3206 - Existing ESRD Facility Relocation, Expansion, or Addition of New 
Service 
(Rev. 1, 05-21-04) 
 
Enrollment with the FI and a new application is required when an ESRD facility 
relocates, expands, or adds a new service.  An ESRD facility may relocate in order to 
expand because public transportation will make it more accessible to its patient 
population or because it wishes to add new services (see 2274). 
 
3210 - CHOW of Providers and Suppliers 
(Rev. 1, 05-21-04) 
 
Regulations covering CHOWs are at 42 CFR 489.18(ff). 
 
The initial development of facts concerning a CHOW is made by the FI via the 855 
process (see 2005.E).  The FI sends the SA its recommendations and a final 855.   After 
the SA concludes its fact-finding, it forwards the findings, with supporting 
documentation, to the RO with its recommendations for determination. 
 
When a provider undergoes a CHOW, the provider agreement is automatically assigned 
to the new owner unless the new owner rejects assignment of the provider agreement.  If 
the new owner rejects this assignment, the provider organization will not be able to 
participate in the Medicare program without going through the same process as any new 
provider, i.e., enrolling with the FI, applying for participation, undergoing Office of Civil 
Rights (OCR) clearance and an initial survey, having an effective date of participation 
assigned based upon regulation, etc.  Automatic assignment of the existing provider 
agreement to the new owner means the new owner is subject to all the terms and 
conditions under which the existing agreement was issued.  Terms and conditions 
include, but are not limited to: 
 
  3210A - Existing PoC 
(Rev. 1, 05-21-04) 
 
The new owner must meet the timeframes for correcting deficiencies cited in the existing 
PoC.  A CHOW is not a basis for extending the time given for correction.  Documented 
evidence of effort and progress, and the absence of jeopardy to patient health and safety 
remain the only acceptable reasons for giving additional time for correction of 
deficiencies. 
 
3210B - Compliance With Health and Safety Standards 
(Rev. 1, 05-21-04) 
 
Assignment of an existing provider agreement assumes that a CHOW will have no 
adverse effect on patient health and safety.  Consequently, a survey may not be required.  
If, however, there is any indication that patient care has deteriorated following a CHOW, 
the State must conduct a survey.  If such a survey indicates noncompliance, the RO 
applies the enforcement action that is applicable to the provider/supplier type and 
appropriate to the level of noncompliance.  
 
3210C - Compliance With Ownership and Financial Interest Disclosure 
Requirement 
(Rev. 1, 05-21-04) 
 
Follow the guidance provided in 2005.F concerning enrollment and completion of the 
Form CMS-855. 
 
3210D - Compliance With Civil Rights Requirements 
(Rev. 1, 05-21-04) 
 
The RO notifies the OCR-RO of CHOWs of providers.  Assignment of the existing 
provider agreement is not withheld pending civil rights clearance, and a new agreement 
can be issued before clearance by the OCR-RO is obtained.  However, under these 
circumstances, a restricted provider agreement is issued with a contingency clause that 
states that if OCR clearance is not obtained, any payments made during the period will be 
recouped from the facility as of the effective date of the CHOW. 
 
3210E - All Medicare Sanctions and Penalties 
(Rev. 1, 05-21-04) 
 
Medicare sanctions and penalties are assigned to the new owner with the following 
exceptions: 
 
  1 - NATCEP 
 
The restrictions preclude a State from approving (and requiring a State to withdraw from) 
Nurse Aide Training and Competency Evaluation Programs (NATCEPs/CEPs) offered 
by or in facilities that, within the previous two years, have been found to be out of 
compliance with certain CoPs.  If there is a CHOW before such a 2-year restriction has 
run its course, whatever remains of the 2-year period will not be transferred to the new 
owner. 
 
2 - Money Owed in Fraud Cases 
 
The new owner is not responsible for money owed the Federal Government due to a 
determination that the previous owner is personally guilty of fraud.  (However, if a 
determination of fraud is made against the corporation, and if the corporation is 
purchased and not incorporated as a new and separate corporation by the new owner, the 
new owner is subject to all Medicare penalties, sanctions, and liabilities.) 
 
3210.1 - Determining Ownership 
(Rev. 1, 05-21-04) 
 
3210.1A - General 
(Rev. 1, 05-21-04) 
 
For certification and provider agreement purposes, the authorized official is an individual 
(such as independent practitioner or sole proprietor) or an appointed official (including, 
but not limited to, an officer, director, manager, general partner, limited partner, etc.) of a 
legal entity such as a corporation or general partnership who is directly responsible for 
the business enterprise and has been granted the legal authority to enroll it in Medicare, to 
make changes and/or updates to its status in the Medicare program, and to commit it to 
fully abide by the laws, regulations and applicable program memoranda and manual 
issuances of the Medicare program.  This party is legally responsible for decisions and 
liabilities in a business management sense.  The same party also bears the final 
responsibility for operational decisions made in the capacity of a governing body and 
for the consequences of those decisions. 
 
Whether the owning party owns the provider enterprise premises or rents or leases them 
from a landlord or lessor is immaterial.  Of course, if the owner enters into an agreement 
that allows the landlord to make or participate in decisions about the ongoing operation 
of the enterprise, this indicates that the owner has entered into either a partnership 
agreement or a management agency agreement instead of a property lease.  A new 
partnership agreement constitutes a CHOW. 
 
To determine ownership of any provider enterprise or organization, the SA determines 
which party (whether an individual or legal entity such as a partnership or corporation) 
has immediate authority for making final decisions regarding the operation of the 
  enterprise and bears the legal responsibility for the consequences of the enterprises 
operations.   
 
CHOW processing is necessary for program participants that have Health Benefit 
Agreements or Provider Agreements in the Medicare program (hospital, SNF, HHA, 
hospice, CORF, OPT/SP providers and CMHC) because it must be determined who the 
responsible party is under the agreement.  For the same reason, CHOW processing is 
necessary for supplier participants that have category-specific agreements with the 
Secretary (RHC, ASC, and FQHCs) or that must file cost reports (e.g., ESRD facilities).  
Somewhat less extensive CHOW processing is necessary for the remaining supplier types 
without agreements or cost report requirements (e.g., PXR) to ensure compliance with the 
statutory requirement for ownership disclosure and to ensure that the program has 
current, accurate records regarding participants. 
 
3210.1B - SA Actions to be Taken Following CHOW 
(Rev. 1, 05-21-04) 
 
3210.1B1 - All Cases 
(Rev. 1, 05-21-04) 
 
The SA mails a set of initial certification forms to the new owner as soon as possible.  
(See Exhibit 63.)  The SA sends Form CMS-1561 to the new owner for signature with a 
footnote that lists the original provider number, the name of the previous owner (the 
owner of record before the change of ownership), and his or her address, and it is placed 
in the empty space provided after the blocks furnished for the successors signature, title, 
and date.  This serves to convey to each new owner at the outset that he or she is being 
assigned the previous owners provider agreement subject to all  the conditions specified 
in [the] agreement and 42 CFR Part 489, to include existing plans of correction....  This 
is important, because some providers have professed ignorance that they have been 
assigned the previous owners provider agreements, subject to the same terms and 
conditions that applied to the previous owners.  This was a central point in the U.S. v. 
Vernon Home Health, Inc. case.  Under 42 CFR 489.18(d) and early on any purchase of 
assets that involve the assignment of the provider agreement is subject to the relevant 
statutory and regulatory conditions. The new owners or prospective new owners must be 
clearly informed of their rights and responsibilities under the applicable Federal statutes 
and regulations, and it must be done as early in the process as possible to enable these 
individuals to make informed decisions. 
 
Whenever an owner is contemplating or negotiating the sale of a provider, he or she 
notifies the SA, FI or the RO, as required in 42 CFR 489.18(b).  The SA or the RO asks 
the prospective new owner if he or she intends to participate in the Medicare program, 
and if so, whether he or she intends to do so by accepting assignment of the previous 
owners provider agreement or by applying for a new provider agreement.  This will 
prevent the confusion we have seen in the past and reduce the litigation.  The new owner 
should be made aware that if the agreement is assigned to the new owner, the new owner 
is responsible for the former owners liabilities, including any Medicare payments.  Also, 
  assignment of the agreement, in some cases, would result n the new owner receiving a 
Medicare underpayment.  If the new owner states that assignment of the former owners 
provider agreement is not going to be accepted, but the new owner intends to continue the 
entitys Medicare participation, inform the provider that there will be a break in the 
continuity of Medicare payment because CMS requires all new applicants to undergo a 
survey.  If the new owner still does not wish to accept assignment, following a CHOW, 
the entity must enroll in the Medicare program as a new provider in accordance with the 
instructions found in 2005, and undergo the survey and certification process. 
 
Sometimes the RO is unaware that a change of ownership has taken place until after the 
fact; sometimes months after the sales agreement has been consummated.  In these cases, 
there is nothing that can be done except to ensure that the new owner understands the 
consequences of becoming a Medicare provider and accepting assignment of the previous 
owners provider agreement. Regardless of when the new owner is advised of the 
automatic assignment of the previous owners provider agreement (if the 
provider/supplier explicitly refuses to accept assignment, notify the RO immediately 
because payments may have already been made under the old provider agreement) the 
SA uses the footnote and has the new owner sign under the set of blocks on Form CMS-
1561 labeled Accepted for the Successor Provider of Services by.  This is an important 
step because it documents the fact that the new owner realizes that there is an assignment 
of the agreement.  The SA informs the new owner of the requirement to submit the 
documents to its office no later than 2 working days after the consummation of the 
CHOW transaction, or, if the transaction occurred more than 2 calendar days ago, as soon 
as possible.  The SA may accept the documents prior to the consummation of the CHOW 
transaction.  However, because some CHOW transactions never are consummated, these 
documents should not be forwarded until the transaction has been completed.  Similarly, 
the SA can only complete its processing after the CHOW date. 
 
If the new owner indicates a desire not to participate in the program, the SA alerts the RO 
immediately by telephone and, if Medicaid is involved, the SMA.  The SA obtains a 
written notice regarding the owners desire not to participate, and forwards it to the RO or 
to the SMA as appropriate.  
 
A CHOW, per se, does not require a special survey.  However, if new locations are added 
or different types of services will provided, we recommend that the SA may conduct a 
survey.  If there is any reason to believe that the quality of services has deteriorated 
following the CHOW then the state must conduct a survey. 
 
For portable x-ray suppliers, the SA obtains a copy of Form CMS-855B, and a statement 
from the new owner informing it of the CHOW effective date.  Because there is no 
agreement to transfer in these cases and no cost report to be filed by the outgoing owner, 
it is not critical that the SA establish the CHOW date with the certainty required for 
providers and suppliers with Medicare agreements and/or cost reporting requirements. 
 
For all providers, and suppliers with category-specific agreements (for example, RHC 
and ASC), and ESRD facilities, the SA obtains applicable Request to Establish Eligibility 
  form, an Expression of Fiscal Intermediary Preference, and documentation that proves a 
CHOW took place as well as exactly when it took place.  The SA has all facilities 
complete an Expression of Fiscal Intermediary Preference form in every case to alert it to 
the instances in which the new owner is part of a CMS-recognized chain organization that 
uses a FI not commonly used in its State.  Multi-regional chain operations due to their 
complexity are to be referred to the RO for adjudication in accordance with 3210.3. The 
SA includes on the Fiscal Intermediary Preference form a blank to be completed by the 
new owner indicating the ending date of the fiscal year that the new owner intends to use 
for purposes of Medicare and/or Medicaid reimbursement.  The cost reporting year 
initially selected by the new owner must be used for cost reporting purposes and cannot 
be changed by the RO or SA.  If the new owner decides that it wants to change its cost 
reporting year, it must do so in accordance with the requirements found in 42 CFR 
413.24(f)(3).  These requirements specify that the provider must submit a written request 
to their FI 120 calendar days before the close of the new reporting period requested by 
the provider and that a finding of good cause is made by the intermediary.  Good cause 
would not be found if the FI determines the change would affect the initial date a hospital 
would be subject to the rate of increase ceiling or be paid under the prospective payment 
system. 
 
For providers and suppliers with category-specific agreements, the SA obtains two signed 
originals of the applicable Medicare agreement form. 
 
For providers, the SA obtains the applicable form required by OCR (HHS-441) and the 
appropriate attachments.  See Exhibit 63 for a full listing of documents for the SA to 
submit to the RO. 
 
3210.1B 2 - CHOW during Termination Development 
(Rev. 1, 05-21-04) 
 
The SA apprises the provider/supplier that termination actions already in process will not 
be postponed and the termination will only be avoided if compliance is attained.  The SA 
notifies the RO by telephone of the CHOW and proceed to obtain and process the usual 
CHOW documents. 
 
3210.1B 3 - CHOW during Reasonable Assurance Period 
(Rev. 1, 05-21-04) 
 
Following termination, a new owner may request approval for reentry, subject to 
operation of the facility for a certain period of time without recurrence of the deficiencies 
that were the basis for termination.  The reentry may be through the SA survey process or 
through an accrediting organization recognized by CMS where appropriate under the 
regulations.   The RO makes the determination as to whether the institution is eligible for 
readmission based on demonstrated compliance over a specified period of time.  This 
reasonable assurance period will not be altered because a new owner takes over the 
provider organization or because the provider organization becomes accredited.  If the 
  new owner wishes to proceed with reentry, the SA notifies the RO by telephone and 
obtains and processes the usual CHOW documents (see 2016). 
 
3210.1B 4 - Transfer Agreement Required of New Owner 
(Rev. 1, 05-21-04) 
 
For SNFs and NFs, a new owner will have to negotiate and submit a hospital transfer 
agreement relating to the new owning entity. 
 
3210.1B 5  Relocation of Provider/Supplier Concurrent with CHOW 
(Rev. 1, 05-21-04) 
 
A new owner may propose to relocate the provider/supplier concurrent with the CHOW.  
If the relocation is to a site in a different geographic area serving different clients than 
previously served and employing different personnel to serve those clients, do not assign 
the agreement to the new owner.  The provider/supplier must be treated as a new 
applicant to the Medicare program, rather than as an address change of an existing 
provider. 
 
3210.1C - Certification of Accredited Providers/Suppliers Which 
Change Ownership 
(Rev. 1, 05-21-04) 
 
While accreditation by a national accreditation body is not transferable to a new entity, 
accreditation does not automatically lapse when ownership changes.  In the case of a 
provider or supplier that has been accredited by a national accreditation body, the 
provider/supplier must notify the accreditation body within 30 calendar days of the 
CHOW. Accreditation is continued until the accreditation body has determined whether a 
resurvey is necessary. 
 
If an accredited provider/supplier is involved in a CHOW, the SA does not resurvey the 
provider/supplier.  The SA secures the usual CHOW documents and forwards them to the 
RO. 
 
If a participating provider/supplier that has been accredited by a national accreditation 
organization merges with a nonaccredited participating or nonparticipating 
provider/supplier, the accreditation organization may extend its accreditation to the 
nonaccredited provider/supplier as if it were deemed to meet the Medicare conditions.  A 
CMS approved accreditation organization may extend its accreditation in a hospital it 
currently accredits.  This could be a hospital that has undergone a change of ownership or 
a hospital that has expanded by acquiring another hospital or by establishing additional 
facilities.  The JCAHO hospital accreditation program and all other CMS approved 
accreditation organizations have agreed to conduct surveys within 6 months the date of 
the extension agreement with the provider.  The extension of the accreditation by the 
accreditation organization will serve in lieu of conducting a survey at this time. 
 
  3210.1D - CHOW Situations 
(Rev. 1, 05-21-04) 
 
Although 42 CFR 489.18 addresses only sole proprietorships, partnerships, corporations, 
and lease arrangements as CHOWs (as defined below) this does not preclude other 
transactions that constitute a CHOW (e.g. the creation of a Limited Liability Company).  
You should consult with your regional attorney when these other transactions are 
involved to determine if a CHOW has taken place.  However, it is important for providers 
to understand that transactions that are considered a CHOW for purposes of certification 
may be treated differently for purposes of reimbursement under the program. 
 
1 - Sole Proprietorship 
 
If a provider of services is an entity owned by a single individual, a transfer of title to the 
enterprise to another person or firm, whether or not including transfer of title to the real 
estate, constitutes a CHOW.  It is also a CHOW if the former owner becomes one of the 
members of a partnership or corporation succeeding him as the new owner. 
 
2 - Partnership 
 
In a partnership, the removal, addition, or substitution of an individual as a partner in the 
entity, in the absence of an express statement to the contrary (as permitted by State law) 
dissolves the old partnership and creates a new partnership and is a CHOW.  State laws 
may vary regarding exceptions to this rule.  If the surviving partners raise a question, the 
SA submits the facts without delay to the RO for a decision (or to the appropriate State 
authorities in a Medicaid-only case). 
 
3 - Corporation 
 
In an incorporated provider entity, the corporation is the owner.  The governing body of 
the corporation is the group having direct legal responsibility under State law for 
operation of the corporations entity, whether that body is a board of trustees, a board of 
directors, the entire membership of the corporation, or is known by some other name.  
Even though one or more members of this governing body changes, and regardless of 
whether ownership of the corporation stock is transferred, there would not be a CHOW as 
long as the same corporation continues to be the legal entity responsible for operation of 
the provider organization. 
 
A merger of one or more corporations with the Medicare-participating provider 
corporation surviving (i.e., a merger into the participating corporation) is not 
recognized as a CHOW of the surviving corporation.  Also: 
 
  If the corporation that survives is not the former owner of the provider entity, 
there is a CHOW; and 
 
    Consolidation or merger of two or more corporations that results in the creation of 
a new corporate entity having ownership control over a provider organization 
constitutes a CHOW. The SA may need to refer to a corporations bylaws (on 
record with the State government) or board meeting minutes as it researches 
difficult cases. 
 
4 - Leasing 
 
When all or part of a participating provider facility is leased, it constitutes a CHOW.  If 
only part of the provider is leased, the original provider agreement remains in effect only 
with respect to the unleased portion.  The lease of part of the facility constitutes a change 
of ownership.  The SA does a survey and prepares a certification covering the leased 
portion as a new provider. 
 
When a new lease arrangement goes into effect at a participating facility, the SA obtains 
documents that indicate which individual or entity has first level authority over, and 
responsibility for, the provider located within the leased premises.  
 
5 - Management Firm Operating Institution for Owners 
 
A firm that contracts with the owners to manage an enterprise, subject to the owners 
general approval of operating decisions, is an agent of the owners rather than a partner or 
successor.  If management in that sense is turned over to a management firm, this would 
not constitute a CHOW even though the management firm may appear to have wide 
latitude in making decisions, and even though its fee may be based on the net revenue or 
profit the facility receives from furnishing services.  
 
The only case in which operation under a management agreement would constitute a 
CHOW is when the owner has relinquished all authority and responsibility for the 
provider organization.  In questionable cases, the SA obtains and submits the 
management agreement to the RO along with its analysis and recommendation.  
 
If a provider enterprise has been placed in the hands of a management firm and there is 
cause to suspect a problem in regard to patient care, the SA schedules and performs a 
survey. 
 
6  Franchise 
 
If an entity states it is a franchisee of another entity which is the owner of the provider, 
do not enter into an agreement with either party or process a CHOW until you establish 
which entity is the provider which CMS will hold legally responsible for complying with 
the provisions of 1866 of the Act and applicable regulations.  Please note that under 
42 CFR 389.11 (see also 2781) if a provider wishes to participate in the Medicare 
program it must have an authorized official sign the provider agreement and submit a 
written statement indicating whether the provider has ever been adjudged insolvent or 
bankrupt or has such action pending. 
   
3210.1E - CHOW Analysis General Rules 
(Rev. 1, 05-21-04) 
 
  A State licensing decision based upon a CHOW analysis conducted under the 
States criteria is not necessarily relevant to a Medicare CHOW determination.  
The Medicare determination must be made based exclusively on Medicare 
regulations and policies; 
 
  There can be no CHOW, i.e., transfer of Medicare participation, assignment of the 
provider agreement, and provider number, if there is no functioning provider 
enterprise in existence.  If a provider ceases operations, it no longer meets the 
definition of any provider type and no longer has a right to a provider agreement 
or identification number; 
 
  As a rule, when a provider organization is sold, the Medicare provider number 
stays with it.  A buyer is assigned the provider number and the provider 
agreement if the buyer purchases a participating provider organization.  A 
provider number cannot be sold.  A provider identification number is not the 
property of any individual or legal entity.  The number is issued by the 
Medicare program and is under the control of the Secretary of DHHS, subject to 
law, regulation, and program policy; 
 
  To understand whether a CHOW took place in complex situations such as 
corporate reorganizations, it is often helpful to construct a simple before and 
after ownership diagram of the legal relationships among the owning entities and 
providers involved. The two-part diagram visually displays the ownership 
relationships as they appeared before and after the date of a possible CHOW; 
 
  In general, a CHOW recognized by the Medicare program is considered to have 
taken place at 12:01 a.m. on the date specified (i.e., in the first minute of the 24-
hour day).  Legal responsibility and the right to payment changes over when the 
clock moves past midnight into the CHOW effective date; 
 
  In general, the key date regarding a newly formed corporation is not the 
incorporation date (the date the corporation came into legal existence), but the 
date a provider was conveyed to the new corporation.  Sometimes a new 
corporation becomes legally responsible for a provider the moment the 
corporation comes into existence, but there must be documented evidence that this 
is the case.  It cannot be assumed; 
 
  It is not possible to know beforehand whether a CHOW will take place on a 
planned CHOW date.  In every case, one must wait until after a proposed CHOW 
date to determine whether the planned CHOW event actually occurred.  This 
means it is impossible to process a CHOW prior to the effective date; and 
 
    The mere sale of any number of shares of an owning corporation does not 
constitute a Medicare CHOW because the responsible legal entity, the 
corporation, remains in place.  For corporations that do not issue stock but are 
controlled by a member or members (which can be individuals, partnerships, 
or other corporations), the same principle holds true: a change in the individuals 
or entities controlling or owning the corporation is not relevant for CHOW 
purposes. 
 
3210.2 - RO Role in CHOW Determination 
(Rev. 1, 05-21-04) 
 
The RO reviews the SAs recommendation and, if it concurs that a CHOW has taken 
place, it annotates the certification file to reflect the change and: 
 
  For providers and suppliers that require agreements, the RO issues a notice letter 
to the provider/supplier that recognizes the CHOW date.  The RO sends copies of 
the letter to the SA, the SMA, the OCR-RO, and the FI(s).  It is not necessary to 
acknowledge CHOWs that have taken place at the remaining supplier types; 
 
  For providers and suppliers that require agreements, the RO signs the two original 
agreement forms previously signed by an authorized representative of the new 
owning entity and forwarded to the RO by the SA.  The RO retains one original 
agreement form in its certification file and encloses the other with the notice letter 
to the provider/supplier; 
 
  For providers and ESRD facilities, the RO prepares a Provider Tie-In Notice 
(Form CMS-2007) and forwards it to the FI.  If there is a change in FI, the RO 
sends copies of Form CMS-2007 to the old and the new intermediaries. (See 
3210.4);  
 
  For all CHOWs, the RO should ensure that a kit of certification documents 
reflecting the change and all available current information is entered in the 
OSCAR/ASPEN system. 
 
  As corporate structures have become increasingly complex, it has become more 
difficult for professionals in nonlegal entities to discern all of the management 
and control relationships in individual situations and to determine accurately 
whether or not a CHOW has occurred for purposes of the Medicare program.  The 
RO should refer all CHOW determinations that are in any way complicated by the 
intricacies of the case or otherwise require professional legal expertise to the 
appropriate Regional Attorney. 
 
   
 
3210.3 - CHOWS Involving Multi-Regional Chain Organizations 
(Rev. 24, Issued:  01-26-07; Effective:  10-01-05; Implementation:  01-26-07) 
 
When a CHOW involves a multi-regional chain organization, a lead or coordinating RO 
is designated.  For certification purposes, this will typically be the RO serving the State in 
which the headquarters of the chain is located.  The coordinating RO will notify all 
affected ROs of its lead role, make a CHOW determination that is uniform for all regions, 
and notify all affected ROs of the determination. 
 
Exceptions to the lead RO procedure can occur. In an example involving 100 commonly-
owned hospitals in eight regions, not all of the transactions met the definition of a CHOW 
under the regulations.  Many of the transactions required individual, detailed analysis.  In 
this case, no coordinating RO was designated because no uniform circumstances existed. 
In any situation in which the RO believes a coordinating RO may need to be designated, 
CO must be contacted for guidance. 
 
New providers that belong to CMS-recognized chains have the option of being assigned 
to the local designated FI or to the FI that serves the chain home office. 
 
The CORFs, CMHCs, OPT facilities, rehabilitation facilities, and ESRD facilities will be 
assigned to the local designated FI.  This group of providers will also not be able to 
become chain organizations or receive single FI status.  However, some exceptions have 
been made for ESRD facilities.  Exceptions are made on a case-by-case basis where the 
ESRD provider makes a compelling argument that to become a chain organization or 
have single FI status would be in the best interests of the Medicare program. 
 
3210.4 - Other Changes Related to CHOW - RO Procedures 
(Rev. 24, Issued:  01-26-07; Effective:  10-01-05; Implementation:  01-26-07) 
 
The new owner of a provider has the opportunity to change the provider's fiscal reporting 
period.  The provider sends a written request to its fiscal intermediary.  The fiscal 
intermediary reviews the request to determine if good cause exists, and will either 
approve or deny the request.  See 3210.4B.  
 
There are also some instances in which the RO must assign a different provider number. 
See 3210.4C. 
 
3210.4A - New Owner Requests Different Intermediary 
(Rev. 24, Issued:  01-26-07; Effective:  10-01-05; Implementation:  01-26-07) 
 
All participating providers that change ownership and accept assignment of the existing 
provider agreement will continue with the same fiscal intermediary that served the 
previous owner.  If the new owner does not accept assignment of the provider agreement, 
  the new provider will be treated as a new applicant to the Medicare program and once all 
Federal requirements have been met, a new provider agreement with a new provider 
number will be issued to the new owner.  The new owner will then be assigned to the 
local designated FI. 
 
For CORFs, CMHCs, OPT facilities, rehabilitation facilities, and ESRD facilities, please 
refer to 3210.3. 
 
3210.4B - New Owner Sets Different Fiscal Reporting Period 
(Rev. 24, Issued:  01-26-07; Effective:  10-01-05; Implementation:  01-26-07) 
 
At the time of a CHOW, the new owner must select its cost reporting year for purposes of 
reimbursement under the program.  The new owner may file its initial cost report 
covering a period of at least 1 month of provider operations under the program, but no 
more than 13 months of provider operations under the program. 
 
The SA reports to the RO what cost reporting year the new owner has selected for use, 
and the RO indicates the selected cost reporting year on Form CMS-2007.  Subsequent 
requests for changes in the fiscal reporting period must be made in writing by the 
provider to the FI.  A change in the cost reporting period will be made only after the FI 
has established good cause.  Good cause exists if there is a good reason or justifiable 
purpose in seeking a change in the cost reporting period.  Neither the RO nor the SA can 
change the cost reporting year of a provider. 
 
3210.4C - New Provider Number Must Be Issued 
(Rev. 1, 05-21-04) 
 
In most cases, the identification number previously assigned to the provider organization 
stays with the provider organization, regardless of which legal entity is the owner.  A new 
number is not assigned based on a CHOW.  There are exceptions, however. These 
exceptions involve cases in which the form of the provider number indicates a particular 
status of the provider or supplier to which it is assigned, and that status has changed as a 
result of the CHOW.  For example, a hospital-based ESRD facility becomes freestanding 
or vice versa.  The RO should note in the CHOW notice letter that one identification 
number is being retired effective with the CHOW date and a new one is being issued 
based on the change in provider/supplier status.  The RO also includes this notice on 
Form CMS-2007. 
 
Before issuing a CHOW acknowledgement letter, the RO should review 2779, RO 
Assignment of Provider and Supplier Identification Numbers, to be sure the previously-
assigned identification number continues to be appropriate.  For additional instructions 
regarding provider identification numbers in merger and CHOW situations, see 2779.  
Following are the most likely examples of the need to issue a new identification number 
as a result of a CHOW: 
 
  1 - ESRD 
 
An ESRD facility can be classified as hospital-based and be located on the hospitals 
premises (having an identification number in the series 00-2300 through 00-2499), as a 
hospital satellite off the hospitals premises (having an identification number in the series 
00-3500 through 00-3699), or as non-hospital/independent (having an identification 
number in the series 00-2500 through 00-2899).  If the ESRD facilitys classification 
changes as a result of a CHOW, the RO retires the facilitys original number and issues a 
new number in the appropriate form, effective with the CHOW date.  If the facilitys 
location changes as a result of a CHOW, the RO has the SA conduct a survey of the new 
location. 
 
2- RHC 
 
A RHC can be classified as freestanding (having an identification number in the series 
00-3800 through 00-3974 or 8900-8999), or as provider-based (having an identification 
number in the series 00-3975 through 00-3999, 00-3400 through 00-3499, or 00-8500 
through 00-8899). If the RHCs classification changes as a result of a CHOW, the RO 
retires the original number and issues a new number in the appropriate form, effective 
with the CHOW date. 
 
3210.5 - New Owner Refuses to Accept Assignment of the Provider 
Agreement 
(Rev. 1, 05-21-04) 
 
3210.5A - New Owner Refuses to Accept Assignment of Previous 
Owners Provider Agreement 
(Rev. 1, 05-21-04) 
 
A new owner may refuse to accept assignment of the previous owners provider 
agreement, which means that the existing provider agreement terminated effective with 
the CHOW date. The refusal to accept assignment must be put in writing by the new 
owner and forwarded to the RO 45 calendar days prior to the CHOW date to allow for the 
orderly transfer of any beneficiaries that are patients of the provider. The refusal can take 
the form of a letter initiated by the prospective owner or can be indicated in response to a 
letter sent to the new owner by the RO or the SA that is designed to document the new 
owners desire to continue program participation. 
 
In all cases of refusal to accept assignment, all reasonable steps must be taken to ensure 
that beneficiaries under the care of the provider are aware of the prospective termination 
of the agreement.  In this situation, there may be a period when the facility is not 
participating and beneficiaries must have sufficient time and opportunity to make other 
arrangements for care prior to the CHOW date.  
 
After the CHOW has taken place, the RO acknowledges the refusal to accept assignment 
in a letter to the new owner, with copies to the SA and the FI.  The RO completes a Form 
  CMS-2007 with the date the agreement is no longer in effect, noting that the termination 
is due to the new owners refusal to accept assignment of the provider agreement.  
 
It is the responsibility of a prospective purchaser of a Medicare provider to know that it 
can refuse to accept assignment of the provider agreement and that it should formally 
indicate its choice in that regard.  If, however, the CHOW goes into effect without a 
refusal or acceptance of assignment on record, the RO concludes that the agreement has 
been automatically assigned to the new owner and completes processing of the CHOW. 
 
If the new owner refuses to accept assignment after the date the CHOW has taken place, 
the RO should contact its regional attorney for guidance. 
 
If a new owner refuses to accept assignment and also wishes to participate in the 
Medicare program, the RO first processes the refusal as indicated above and then treat the 
new owner as it would any new applicant to the program: obtain and process application 
documents, have the SA perform an initial survey and, if all requirements for 
participation are met, assign an effective date of participation based upon the applicable 
regulation.  (See 42 CFR 489.13.) 
 
The earliest possible effective date for the applicant is the date the RO determines that all 
Federal requirements are met.  The Federal requirements include, in addition to the CoP, 
enrollment as described in 2005, capitalization (HHAs), and any other special 
requirements such as the special provisions for psychiatric hospitals at 42 CFR 482.60.  
The aforementioned requirements are the same regardless of whether the new owner 
operates a non-accredited facility or is seeking Medicare compliance with the CoP via 
deemed status. 
 
As mentioned above, these requirements include enrollment of the provider in accordance 
with the instructions in 2005.  The Form CMS-855 must be submitted prior to the 
CHOW date.  However, the subsequent survey of the new applicant must be performed 
(1) after the CHOW, because the provider agreement of the former owner terminates 
effective with the CHOW date and the new owner must be treated as a new Medicare 
applicant; and (2) after the FI makes a recommendation to CMS for approval in 
accordance with the current procedures.  If for any reason the accrediting body of the 
entity seeking deemed status chooses not to conduct or to delay a survey of the new 
entity, CMS will inform the entity that is will be unable to participate in the Medicare 
program until a survey is conducted and CMS is assured that the new entity meets all 
applicable health and safety requirements.  In such a circumstance the new applicant may 
choose to have the SA conduct its survey. 
 
In addition to the policies articulated above and in 3210.1.C relating to accredited 
providers, the following policies apply. 
 
  Hospitals and Units Excluded from Medicares Prospective Payment System (PPS) 
 
Accreditation by itself does not determine whether to exclude a hospital or unit from 
Medicare PPS (see Subpart B of 42 CFR 412).  All PPS exclusion determinations must be 
made by the appropriate CMS RO based on the facts at the time the decision is made.  
PPS hospitals with such units must also be surveyed by the SA to determine if exclusion 
requirements are met by the new owner following the CHOW. 
 
Rehabilitation Unit 
 
If the rehabilitation unit is properly accredited as a rehabilitation program (3100-
3112.3), the SA must verify only the requirements for the rehabilitation director at 
42 CFR 412.23(b)(5).  The FI must make its determination regarding the 75 percent 
rule (See 42 CFR 412.23(b)(2)).  If the rehabilitation program is not accredited, the 
rehabilitation unit must be surveyed onsite by the SA for compliance with the 
requirements at 42 CFR 412.25 and 412.29. 
 
Psychiatric Unit 
 
The SA must perform an onsite survey to determine if the psychiatric unit complies with 
the PPS exclusion criteria at 42 CFR 412.25 and 412.27 on or after the effective date of 
the CHOW.  The FI must re-verify that other criteria at Part 412 are met. 
 
CHOW of a Hospital within a Hospital 
 
The non-assignment of a Medicare provider agreement involving a CHOW of a PPS 
excluded hospital within another hospital (HWH) may affect the PPS exclusion of the 
HWH if the contractual agreements between the HWH and the new host hospital have 
changed.  If there has been a change, the HWH will lose its exclusion unless the 
agreements between the two hospitals are renegotiated with the new owner, and the 
HWH must submit updated evidence of compliance with the regulation to the RO via the 
SA.  In addition, if the HWH is not in compliance with the CoP, it is subject to a loss of 
deemed status (if accredited) and placed under SA monitoring.  It could subsequently 
be terminated if compliance is not achieved. 
 
Also, when a host PPS hospital containing a PPS excluded HWH undergoes a CHOW,  
the HWH must be notified that it must show CMS that it complies with 42 CFR 
412.22(e)(5) with the new provider within 30 calendar days of the CHOW date. 
 
Offsite Location Based to Provider that Undergoes a CHOW and Non-Assignment of 
Provider Agreement 
 
In the case of a provider with other providers or entities based to it that undergoes a 
CHOW with a new owner who chooses not to accept assignment of the current provider 
agreement, the provider-based status of the other providers or entities ends with the 
termination of the former owners provider agreement.  The request for Medicare 
  approval of the new owner must include information related to other providers or entities 
if the new owner intends for these entities to meet the provider-based criteria found in 
2004.  In the case of hospitals with multiple components that operate as a single 
hospital, both 2024 and 2004 apply.  It is important to note that 2024 would be 
inapplicable to provider-based entities other than hospitals with multiple components that 
operate as a single hospital.  The new owner must once again justify to the SA, FI and 
CMS that these provider-based entities meet CMS provider-based criteria.  The 
accreditation body, and the SA as appropriate, must consider these entities in conducting 
the survey of the new provider for compliance with the CoP or accreditation standards.  
Specifically, the RO must ensure that all off-site entities that claim to be provider-based 
comply with the Medicare CoP, or in the case of accredited hospitals, comply with 
standards that are at least equivalent to the Medicare CoP.   
 
CHOW Involves a Related Organization 
 
In situations where the CHOW is an organization related to the former owner (e.g., 
CHOW from general corporate ownership to subsidiary corporation, limited partnership 
or other related entity) with assumption of the provider agreement the SA or the RO may 
wish to include the following paragraph in the notice to the provider if you believe there 
may be outstanding liabilities of the former owner.  The change of ownership does not 
release the former owner or successor owner from liabilities resulting from past provider 
operations.  The former owner may be liable for overpayments, penalties and other 
payments arising from the period it owned the provider.  In addition, successor owners 
have joint and several liability for these debts notwithstanding divestiture of assets by the 
former owner. 
 
In situations where the new owner fails to notify you of a CHOW timely, treat as an 
assigned agreement (3210.5). 
 
3210.5B - Withdrawal After CHOW - Provider 
(Rev. 1, 05-21-04) 
 
If, after a CHOW takes place, the RO receives notice that the new owner of a provider 
desires to withdraw from the program, the RO consults with the new owner to set a 
withdrawal date designed to protect the health and safety of program beneficiaries who 
may be patients of the provider.  The RO sets a withdrawal date of up to 6 months 
beyond the providers notice of intent to withdraw.  Under these circumstances, the RO 
processes a complete CHOW notice and a withdrawal.  
 
3210.5C - CHOW and Withdrawal - Supplier 
(Rev. 1, 05-21-04) 
 
If the new owner of a supplier declines to participate, the RO negotiates a withdrawal 
date that does not disadvantage any program beneficiaries that the supplier may be 
serving.  The RO processes the supplier withdrawal as usual. 
 
  Expansion of Services 
 
3220 - Certifications of Additional Services 
(Rev. 1, 05-21-04) 
 
Several categories of providers/suppliers require specific approval prior to becoming 
eligible to receive Medicare and Medicaid payment for certain services beyond those for 
which they were initially approved.  The specific provider/supplier types affected by this 
requirement are: 
 
  HHAs; 
 
  RHCs; and 
 
  ESRD facilities. 
 
During the initial survey and resurveys, the SA advises the provider/supplier to inform it 
and the appropriate FI or carrier promptly in writing when an additional service is 
contemplated, so that it can evaluate compliance with the pertinent CoPs or Conditions 
for Coverage.  Do not accept oral requests.  When the SA is notified by the provider or 
supplier or the FI or carrier of the addition by the provider/supplier or learns that a 
service has been added, it reviews applicable documentation and, as necessary, performs 
a survey of the new service promptly.  The SA records the results on the appropriate 
survey report. 
 
The only services of an HHA that when added would require a survey are OPT and 
speech language pathology services are when these services are provided by the HHA as 
a provider of outpatient physical therapy services (See 42 CFR 484.38 and 3222.)  This 
usually does not require an immediate survey, but can be surveyed at the time of the next 
standard survey.  
 
3220A - Services in Compliance 
(Rev. 1, 05-21-04) 
 
If a new survey is performed and the service meets the applicable Conditions, the SA 
recertifies the provider/supplier as continuing to meet the CoPs or Conditions for 
Coverage and complete Form CMS-1539.  It includes an explanation in Item 17 
concerning the added service and an evaluation of the new service. 
 
   
 
 
 
3220B - Services Not In Compliance (HHAs, RHCs, and ESRD 
Facilities) 
(Rev. 1, 05-21-04) 
 
If a new service does not meet the applicable Condition(s), the SA informs the 
provider/supplier that it must either come into compliance or stop providing the service to 
avoid termination action. 
 
If the provider/supplier agrees to stop providing a service, the SA notes this action in its 
files and follows up within 60 calendar days to ascertain whether the service has been 
discontinued.  If the provider/supplier is unwilling to correct or stop providing the 
service, the SA initiates termination action. 
 
3222 - Specific Requirements for Expansion of Services 
(Rev. 1, 05-21-04) 
 
3222A - HHAs Request to Provide OPT Services on Its Premises 
(Rev. 1, 05-21-04) 
 
An HHA may provide OPT services on its premises as well as in patients homes.  The 
HHA providing services on its premises must meet and should be surveyed for 
compliance with 42 CFR 485.723 and 485.727.  These regulations do not apply to 
physical therapy services provided in patients homes. 
 
3222B - RHCs Request to Provide Visiting Nurse Services 
(Rev. 1, 05-21-04) 
 
After the clinic is approved as an RHC, it may also seek approval to provide covered 
visiting nurse services.  An RN, LPN, or licensed vocational nurse must furnish these 
services.  (See 42 CFR 405.2411, 405.2416, and 405.2417.) 
 
When a request is received, the RO must determine whether there is a shortage of HHAs 
in the area.  If there is an existing HHA furnishing services in the RHC area, the SA 
contacts the HHA for a statement of its ability or inability to adequately furnish nursing 
services in the area.  In addition, the SA obtains information from the local or State health 
planning organization.  The SA transmits the request and all pertinent documentation to 
the RO.  The SA does not approve the visiting nurse services at this point. 
 
If the RO determines that there is not a shortage of home health services for the area, 
authority to furnish visiting nursing services to homebound patients will be denied, and 
  the RHC will be expected to refer its homebound patients to the HHA serving the area.  
The SA will receive a copy of the RO determination notice. 
 
For purposes of this development, a homebound individual is one permanently or 
temporarily confined to his/her place of residence because of a medical or health 
condition.  The individual may leave the place of residence infrequently and still be 
considered homebound.  However, an individual in a hospital or long term care facility is 
not homebound for purposes of visiting nurse services. 
 
If the RO determines that there is a shortage of home health services, it will request that 
the SA evaluate the qualifications of RHC personnel who are responsible for delivery of 
nursing services. 
 
The SA completes the applicable sections of the Rural Health Clinic Survey Report 
(Form CMS-30) for visiting nurse services and a written plan of care.  The SA reviews 
records (plans of care and other appropriate records) to verify that such services are 
provided to homebound individuals and are furnished under written plans of care 
developed and signed by the supervising physician, nurse practitioner, physician 
assistant, or nurse midwife and reviewed by the supervising physician at least every 60 
calendar days.  If the service has recently been implemented, it may be necessary for the 
SA to follow-up later to determine that the 60-day requirement is being observed. 
 
When the above development has been completed and evaluated, the SA completes a 
supplementary certification for the visiting nurse service. 
 
Follow the procedure in 2274.  (Also see Exhibit 27.) 
 
3224 - Addition of Sites to an Existing Provider 
(Rev. 1, 05-21-04) 
 
It is inherent in the provider certification process that a provider give notification to CMS 
of its proposal to expand its service area by adding a branch, satellite or extension 
location.  The Medicare statute and applicable regulations are implicit that the proposed 
expanded service area meet the Conditions of Participation the same as the primary 
location that has signed the provider agreement or that has been assigned a provider 
number or both.  In the absence of notification, CMS has no way of determining whether 
the requirements critical to health and safety are met at the expanded location.  For 
example, a hospices request for satellite location may be denied because it cannot 
demonstrate how the hospice will assume administrative and supervisory responsibility 
for the services provided at the expansion site.  Moreover, there is no basis for a provider 
to bill Medicare for services provided by a site which has not been determined to meet 
applicable requirements of participation. 
 
  When an expansion request is received, before making a determination the RO considers 
the following: 
 
  Whether the proposal meets Medicare statutory and regulatory requirements.  For 
example, in the case of an HHA, does the proposed branch meet the definition of 
a branch office at 42 CFR 484.2.  If it is possible to make a decision based on the 
providers description of how it intends to operate, an onsite survey may not be 
necessary. 
 
  If the proposal complies with State and local laws related to the particular type of 
provider/supplier; and  
 
  Whether Medicare reimbursement is affected by the proposal.  For example, a 
hospital states that is has purchased a physicians clinic that is now a part of the 
hospital.  In such a case, input from the Division of Medicare and the fiscal 
intermediary will likely be necessary.  While CMS does not dictate to a provider 
how it should operate its business, the provider does have to comply with 
Medicare requirements.  Whenever an entity can meet the requirements of two 
different categories; e.g., subunit and independent home health agency, it is 
generally CMS policy to designate the category for which there is the least 
potential to increase Medicare costs.  If a proposed branch is in an area that would 
receive a different payment rate than the parent HHA, it could be found to be in a 
different geographic area and determined not to be a branch. 
 
Although legal authority exists for conducting a survey, a survey may not be necessary 
because the provider furnishes the RO with sufficient information to make a 
determination about its proposed expansion either at the time of its initial request or 
subsequently.  If the RO believes a survey is required, but the SA is unable to conduct a 
survey within a reasonable period of time, the RO may take one of the following actions: 
 
  Make a determination based on the expansion information provided by the 
provider and inform the provider of the decision; and 
 
  Inform the provider that a survey will be necessary and that it should not bill 
Medicare for services provided at the proposed expansion location until the 
survey is conducted and a determination is made. 
 
In the absence of notification of an expansion, CMS has the authority to deny bills for 
services furnished at the expanded site.  When notification is received of a proposed 
expansion, the RO should inform the provider of whether the expanded site meets 
applicable requirements.  The fiscal intermediary should be notified of the ROs decision.  
 
  Validation Surveys of Accredited Providers and Suppliers 
 
3240 - Validation Surveys - General 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
A deemed provider or supplier means a provider or supplier which has voluntarily 
applied for and has been accredited by a CMS-approved Medicare accreditation program 
whose recommendation for deemed status for that provider or supplier has been accepted 
by the RO.   A list of current CMS-approved Medicare accreditation programs may be 
found at:  https://www.cms.gov/Medicare/Provider-Enrollment-and-
Certification/SurveyCertificationGenInfo/Downloads/AOContactInformation.pdf  
 
NOTE: For the purposes of this section, the term Condition refers to any Condition of 
Participation, Condition for Coverage, or Condition for Certification. (See Chapter VI for 
discussion of validation surveys for accredited laboratories.)  
 
SAs may not conduct a Medicare survey of a deemed provider or supplier unless 
specifically authorized by the RO to do so.  Sections 1864(c) and 1865 of the Act provide 
the basis for conducting validation surveys of deemed providers and suppliers.  
Regulations authorizing such surveys are found in 42 CFR Part 488.  The CMS may 
require a survey of a deemed provider or supplier to validate the accreditation 
organizations process.  These surveys will be conducted on either a representative 
sample basis (i.e., representative sample validation survey), or in response to a substantial 
allegation of noncompliance (i.e., complaint survey).  
 
A representative sample validation survey is usually a standard or full survey of all 
applicable conditions. 
 
A substantial allegation/complaint survey is authorized by the RO in response to a 
credible allegation which, if substantiated, would result in a condition-level citation.  The 
RO advises the SA which conditions are to be assessed for compliance, based on the 
nature of the complaint.  See Chapter 5, Sections 5100  5110 for more information on 
substantial allegation survey policies, procedures and timeframes. 
 
The Form CMS 2802 is transmitted from the RO to the SA via the ASPEN Central Office 
(ACO) system, for a representative sample validation survey, or via the ASPEN 
Complaint Tracking System (ACTS) for a substantial allegation validation survey.  The 
RO uses this form to: 
 
  authorize the SA to conduct a validation survey of a particular provider/supplier; 
  identify the applicable AO(s); 
  indicate the type of validation survey to be conducted; 
  indicate, when applicable in the case of a representative sample validation survey, 
the AOs survey end-date; and 
  in the case of a substantial allegation validation survey, identify the specific 
conditions for which the SA must assess compliance. 
   
If a provider or supplier selected for a validation survey (representative sample or 
substantial allegation) is found to have one or more condition-level deficiencies, it will no 
longer be deemed to meet the Medicare Conditions.  The RO advises the provider or 
supplier that its deemed status is removed and that it is being placed under SA 
jurisdiction.  However, no change is made to the providers or suppliers deemed status in 
the Automated Survey Process Environment (ASPEN).  Instead, the placement of the 
provider or supplier under SA jurisdiction is noted under the Deeming tab within the 
certification kit in ACO. 
 
3241 - Objective of Validation Surveys 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Validation surveys are intended to develop a reasonable estimate of an accreditation 
organizations performance.  Validation surveys are to be conducted in accordance with 
the survey protocol for the provider/supplier type being surveyed to assure a fair basis for 
comparing the effectiveness of CMS-approved Medicare accreditation programs. 
 
3242 - Representative Sample Validation Surveys of  Deemed 
Providers/Suppliers 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
The deemed provider/supplier validation survey process is designed to evaluate the 
performance of a CMS-approved Medicare accreditation program by determining 
whether a provider/supplier that is deemed to be in compliance with the Medicare 
conditions on the basis of its accreditation  and is, in fact, meeting Medicare health and 
safety requirements.  Such validation surveys are authorized in accordance with 1864 of 
the Act.  Moreover, CMS is required under 1875(b) of the Act to provide an annual 
report to Congress on the performance of all CMS-approved Medicare accreditation 
programs approved under Section 1865 of the Act, including a validation of the 
accreditation process. 
 
The SA conducts validation surveys of deemed provider/supplier types in accordance 
with established survey protocols for the provider or supplier type.  
 
CO selects a representative sample of deemed providers and suppliers for the SA to 
conduct a validation survey and forwards this listing each month to the ROs.  Upon 
receipt of the monthly list, the RO electronically issues the applicable Form CMS 2802, 
depending on the type of provider or supplier, promptly to the SA via the ACO system 
deeming tab in the recertification/validation kit.  The RO also provides CO via the 
designated Sharepoint site a copy of the Form CMS 2802 once it is issued, for tracking 
purposes. 
 
The representative sample validation survey is a standard, i.e. full, survey of ALL 
conditions applicable to that provider or supplier type.   Unless the survey is a mid-cycle 
survey (see below), representative sample validation surveys must be conducted within 
  60 calendar days following the scheduled end date of the accreditation organization 
survey.  The CO advises the RO of the AO scheduled survey end date, and the RO shares 
this information with the SA via the electronic version of the applicable Form CMS 2802. 
The SA must not share this information with any outside parties.  The SA must also not 
request a copy of the AO survey report from the AO, in order to avoid bias in the SAs 
conduct of an independent survey of the provider or supplier. 
 
In addition to the traditional representative sample validation surveys, the CO sample 
selection may include deemed facilities at various points in their accreditation cycle (e.g., 
mid-cycle).  Generally the assignment of such surveys is not tied to the timing of a 
scheduled AO survey, and thus there is no AO survey end date that determines the timing 
of the SAs validation survey.  The CO will include any additional instructions (if 
applicable) for the conduct of such surveys, including the timeframe for completion of 
the survey by the SA. 
 
3243 - Substantial Allegation Validation Surveys of Deemed 
Providers/Suppliers 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
A substantial allegation/complaint survey is authorized by the RO in response to a 
credible allegation which, if substantiated, would result in a condition-level citation.  The 
RO advises the SA which conditions are to be assessed for compliance, based on the 
nature of the complaint.  The SA conducts the complaint investigation in accordance with 
the established protocols for the provider or supplier type.  It is not sufficient for the SA 
to review only the medical record(s) related to the specific complaint allegation; rather, 
the SA must assess the providers/suppliers general, current compliance with each 
condition specified by the RO on the authorizing Form CMS 2802 transmitted in ACTS. 
 
See Chapter 5, Sections 5100  5110 for more information on substantial allegation 
survey policies, procedures and timeframes 
 
3244 - SA Preparation for Validation Survey  
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
The SA follows standard survey processes when conducting validation surveys.  For 
example, all validation surveys are unannounced.  All substantial allegation validation 
surveys must include an assessment of compliance with the condition(s) specified by the 
RO; it is not acceptable for the SA to review only the record and other information 
related to the specific complaint. 
 
The SA assigns surveyors who normally conduct surveys of non-deemed providers or 
suppliers to conduct validation surveys for the same provider/supplier types.  The size of 
the survey team and the time that the SA spends on-site must be comparable to that used 
by the SA for non-deemed providers/suppliers of similar size or complexity.  Whenever 
possible, all team members should survey a provider or supplier concurrently.  This 
applies to staff who conduct the LSC portion of a standard survey as well as to personnel 
  who conduct the health portion of the survey.  If situations occur where this is not 
feasible, the SA must contact the RO for further direction. 
 
As with any other Federal survey, CMS personnel may be present during the survey to 
provide assistance and to help assure nationwide uniformity and validity. 
 
3246 - Provider/Supplier Authorization for Validation Survey 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
During the entrance conference for either type of validation survey the SA presents to the 
provider or supplier a letter signed by the SA Director announcing the validation survey 
(Exhibit 37), as well as an Authorization by Deemed Provider/Supplier Selected for 
Accreditation Organization Validation Survey, (Exhibit 287).  The SA requires the 
signature of the provider/supplier CEO or other authorized individual on the 
authorization document, acknowledging that the provider/supplier must permit the 
validation survey by the SA to take place, as well as SA monitoring of the correction of 
any substantial noncompliance found through the validation survey. 
 
3248  Provider/Supplier Refusal to Permit Validation Survey 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
If, after efforts have been made to explain the validation survey protocol procedure, the 
provider/supplier refuses to permit the validation survey to take place, the SA informs the 
provider/supplier that its deemed status will be removed and the provider/supplier may 
also be subject to termination from the Medicare program (and, where applicable, the 
Medicaid program. [see ref.  489.53(a)(4)]  If the provider/supplier continues to refuse to 
permit the validation survey, the SA notifies the RO.  The SA informs the RO of all 
efforts made to encourage compliance.  The RO notifies the provider or supplier that its 
participation in Medicare will be terminated, following standard termination procedures. 
 
3252 - SA Forwarding Validation Survey Records to RO 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Representative sample validation surveys:  The SA submits the appropriate information 
as specified on the List of Documents in Certification Packet (see Exhibit 63) to the RO 
or through an update to the ASPEN database within 30 calendar days of completing the 
survey. In cases where immediate jeopardy exists, the SA submits all the appropriate 
information specified on the List of Documents in Certification Packet to the RO within 
two working days of completion of the survey, and enters survey data to the ASPEN 
database, in a timely manner. The SA also completes the Survey Team Composition and 
Workload Report (Form CMS-670). 
 
Substantial allegation validation surveys:  The SA follows the procedures in Chapter 5, 
Section 5110. 
 
  If the provider/supplier has been cited as a result of the validation survey for deficiencies 
at the standard level only, the provider/supplier remains deemed.  It is not obligated to 
submit a plan of correction (PoC), although it may voluntarily choose to do.  If the 
provider/supplier submits a PoC, the SA includes it in the survey file. 
 
3254 - RO Actions Following Validation Survey 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Upon receipt of survey materials, the RO analyzes and considers the SA findings and 
recommendations and determines whether it agrees with them.  If the RO disagrees with 
the SAs findings or recommendations, it may require the SA to revise the Form CMS 
2567 before it is issued to the provider or supplier.  The RO takes necessary action to 
make a compliance determination and notify the provider/supplier as soon as possible, in 
the case of an immediate jeopardy, and within 30 calendar days for all other cases.  The 
RO inputs the information into ASPEN in a timely manner. 
 
In the case of a representative sample validation survey only, once the survey report is 
finalized the RO forwards to CO via the designated Sharepoint site a copy of the Form 
CMS 2567 and the accompanying correspondence to the facility.  
 
If the validation survey identifies substantial noncompliance, i.e., condition-level 
deficiencies, the RO removes the providers or suppliers deemed status.  The 
provider/supplier continues to be accredited by its accreditation organization and is still 
permitted to participate in the Medicare/Medicaid programs while correcting the 
deficiencies.  However, until the provider/supplier either achieves substantial compliance 
or its Medicare agreement is terminated, it is subject to the same requirements, survey 
and enforcement procedures that are applied to non-accredited provider/suppliers found 
out of compliance following a survey.  The SA monitors the provider/supplier until it 
reaches substantial compliance with all conditions or it is terminated from the Medicare 
program, and where applicable, the Medicaid program. 
 
3254A  Providers/Suppliers Found in Compliance Following 
Validation Survey 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
If the provider/supplier is in compliance with all Medicare Conditions, the RO notifies 
the provider/supplier and sends a copy to the SA and the AO. 
 
3254B - Providers/Suppliers Found Not In Compliance With One or 
More Conditions Following Validation Survey and Noncompliance 
Constitutes Immediate Jeopardy 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
If the SA finds deficiencies that pose an immediate jeopardy to patients health and 
safety, the SA immediately notifies the RO by phone and then forwards the survey packet 
  to the RO within two working days after the completion of the survey.  If after the RO 
review of the survey packet, the RO determines that there are deficiencies that pose 
immediate jeopardy (IJ) to patient health and safety, the provider or supplier will be 
placed on the 23-day termination track.  See Chapter 5, section 5110.2 for detailed 
procedures and timeframes for substantial allegation validation surveys.  
 
In the case of a representative sample validation survey the RO removes the 
providers/suppliers deemed status and places it under SA survey jurisdiction.  The 
procedures and timelines in Chapter 5, Section 5110.4b apply. 
 
3254C - Condition-level Deficiencies That Do Not Pose Immediate 
Jeopardy 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
If the SA determines, and the RO agrees, that the provider/supplier is out of compliance 
with one or more Conditions, but the deficiencies do not pose immediate jeopardy to 
patient health and safety, the SA and RO follow the procedures in Chapter 5, Section 
5110.3 for substantial allegation validation surveys.  For representative sample validation 
surveys, the RO removes the providers/suppliers deemed status and places it under SA 
survey jurisdiction.  The procedures and timelines in Chapter 5, Section 5110.4c apply. 
 
3254E - Plans of Correction 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
See 2728B for discussion of the requirements for an acceptable PoC, as well as the 
options available to the provider/supplier. 
 
See Chapter 5, Sections 5100  5110 for information on when the RO must review an SA 
recommendation on whether or not a PoC is acceptable and when the RO must send a 
notice to the provider/supplier with a copy to the applicable AO(s). 
 
3254F - Termination 
(Rev. 1, 05-21-04) 
 
The CMS will terminate a provider/supplier if it does not submit an acceptable PoC, or if 
after a reasonable period of time, it does not correct the Conditions that have been 
determined to be noncompliant. The RO obtains copies from the SA of the latest survey 
material before proceeding with termination procedures. 
 
3254G - Compliance with All Conditions After Correction of 
Deficiencies 
(Rev. 1, 05-21-04) 
 
When an accredited provider/supplier is determined to be in compliance with all 
Conditions, the RO notifies the provider/supplier accordingly (and where applicable, the 
  SMA).  The RO informs the SA, in writing, to cease monitoring activities.  Revisits by 
the SA are not authorized after an accredited provider/supplier has been notified that it is 
back in compliance with all Medicare Conditions, and its deemed status is reinstated. 
 
3256 - RO Provision of Information to Accrediting Organizations 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
The RO must provide the AOs copies of every Form CMS 2567 issued to a deemed 
facility accredited by the AO(s) in a timely manner, i.e., as soon as possible after issuance 
to the provider/supplier.  ROs have the option of sending this material to AOs 
electronically rather than mailing hard copies.  Copies to be provided include all Form 
CMS 2567s resulting from a SA validation survey, including both representative sample 
and substantial allegation (complaint) surveys, as well as all Form CMS 2567s issued 
after the providers or suppliers deemed status has been removed and the facility has 
been placed under SA jurisdiction until it can achieve substantial compliance.  Copies of 
any correspondence sent to the provider or supplier related to a Form CMS 2567 must 
also be provided to the applicable AO(s), as well as correspondence concerning the status 
of the providers suppliers Medicare provider agreement or supplier approval (e.g., 
issuance of an agreement/approval with CCN, notice of potential termination of the 
agreement/approval, notice of termination of the agreement/approval, etc.). 
 
Note that a provider or supplier may be accredited under a CMS-approved Medicare 
accreditation program by more than one AO; in such cases all AOs must receive copies. 
 
Forward copies to the applicable AO(s) using the contact information found at 
https://www.cms.gov/Medicare/Provider-Enrollment-and-
Certification/SurveyCertificationGenInfo/Downloads/AOContactInformation.pdf    
Where RO resources and workload resources permit, the RO should consider sending 
copies of this information electronically to the AO contacts e-mail address. 
 
3257 - Reinstatement to Accrediting Organization Jurisdiction 
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
A provider/supplier that has been under SA monitoring is returned to deemed status when 
it is determined that it is in substantial compliance with the applicable conditions.  The 
provider or supplier is no longer monitored by the SA but is instead under the jurisdiction 
of the AO.  The deeming tab in ASPEN is updated to reflect the end of the SA 
monitoring. 
 
The SA may not conduct any further surveys of the provider/supplier without a new 
authorization from the RO via the applicable Form CMS 2802.  
 
When the provider/supplier is returned to the accreditation organizations jurisdiction, the 
RO notifies the provider or supplier in writing, with a copy to the applicable AO(s). 
 
  3258 - Termination or Other Adverse Accreditation Action for a 
Deemed Provider or Supplier  
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14) 
 
Termination 
 
A CMS-approved AO must notify CMS, whenever it terminates the accreditation of a 
Medicare deemed provider or supplier.  The notice must be submitted by e-mail 
simultaneously to: 
 
  the CMS AO oversight program electronic mailbox; and 
  the applicable CMS RO electronic mailbox: 
 
CMS provides the specific electronic mailbox addresses to the AOs. 
 
The AOs notice to CMS notice must provide the effective date of the termination of 
accreditation, as well as the reason for the termination.  The RO forwards the termination 
notice electronically to the applicable SA.   
 
  Accreditation termination is concurrent with switch to another CMS-approved 
Medicare accreditation program, or provider/supplier was previously also deemed by 
another AO whose accreditation remains in effect:   
 
  Unless there was an involuntary termination for failure to comply with the AOs 
accreditation standards, if the providers/suppliers termination by one AO is 
concurrent with a new recommendation for accredited, deemed status by another 
CMS-approved AO, or if the provider/supplier was previously deemed based on 
multiple accreditations, each by a different AO, then the provider/supplier 
remains deemed and under the jurisdiction of the other AO.  The recommendation 
for deeming is sent by the AO to the CMS AO oversight program and the 
applicable CMS RO, which forwards the AOs recommendation letter 
electronically to the applicable SA.  An update packet including the new 
recommendation for deemed status by another AO must be submitted by the SA 
to the RO. The SA also updates the information in the deemed status tab of the 
providers/supplier certification information in ASPEN to reflect both the 
termination of the first AOs accreditation and, where there was a switch to 
another AO, the accreditation by the second AO.   
 
  If the termination was involuntary due to failure to comply with the AOs 
accreditation standards and if the provider or suppliers deemed status has not 
already been removed due to a prior enforcement action, the RO must consider 
this a substantial allegation of noncompliance with Medicare standards and must 
authorize the SA to conduct a complaint investigation survey.  The SA surveys 
the provider/supplier within 45 days (or, if the ROs reason for termination 
suggests an immediate jeopardy, according to the immediate jeopardy timeline for 
complaints) in order to provide assurance that the facility is in substantial 
  compliance with the applicable health and safety standards.  If the SAs survey 
finds no condition-level deficiencies, the provider/supplier retains deemed status 
under the other/new AO.  If the SA finds condition-level deficiencies, then 
deemed status is removed in the same manner as for any other survey of a deemed 
provider/supplier.   
 
  Accreditation termination is not concurrent with switch to another AO, or 
provider/supplier was not previously deemed by multiple AOs:   
 
If there is no concurrent recommendation of deemed status for the provider/supplier 
from another AO or if the provider/supplier was not previously deemed based on 
multiple accreditations, each by a different AO, the providers/suppliers deemed 
status is removed and it is placed under SA jurisdiction.  The SA updates the 
information in the deemed status tab of the providers/suppliers certification 
information in ASPEN to reflect the termination of the AOs accreditation and 
removal of deemed status.   The SA surveys the provider or supplier in order to 
provide assurance that the facility is in substantial compliance with the applicable 
health and safety standards.  Timing of the SA survey is as follows: 
 
  When the AO advises CMS that the providers/suppliers accreditation was 
involuntarily terminated due to failure to comply with the AOs accreditation 
standards, the SA must conduct the compliance survey within 45 days or, if the 
ROs reason for termination suggests an immediate jeopardy, according to the 
immediate jeopardy timeline for complaints.. 
 
  In all other cases the SA prioritizes the providers/suppliers survey on the basis 
of the current CMS policy concerning survey frequencies and SA workload 
priorities, using the date of the most recent accreditation survey to calculate the 
survey interval, unless: 
 
  The facility is a home health agency (HHA). then the SA must conduct the 
survey no later than 3 years after the last accreditation survey; or 
 
  The RO exercises its discretion to request the SA to conduct the survey by a 
specified date.  
 
Adverse accreditation action other than termination 
 
When an AO takes an adverse action that is not termination against the accreditation 
status of a provider/supplier, the AO is required to inform both the CMS CO and the 
appropriate RO of the adverse action.  As long as providers/suppliers accreditation is 
not terminated, the providers/supplier's participation in Medicare is not affected.  
Generally the RO will not authorize a validation survey by the SA, but it has the 
discretion to do so in rare circumstances.  
 
  Note that none of the above scenarios concerning termination or other adverse 
accreditation actions apply to the situation where a provider or supplier is acquired by a 
new owner who rejects assignment of the prior Medicare agreement.  In such a situation 
CMS terminates the provider agreement of the seller as a voluntary cessation of business.  
It does not matter whether the terminated provider or supplier was deemed, whether 
under one or multiple CMS-approved Medicare accreditation programs, nor are any 
further actions taken by CMS or the SA in response to a notification by an AO of an 
accreditation termination or other adverse accreditation action related to the provider or 
supplier covered by that prior Medicare agreement.  (See Section 2003B.) 
 
  Handling Public Inquiries 
 
3300 - Confidentiality and Disclosure of Records - Citations and 
Applicability 
(Rev. 1, 05-21-04) 
 
Section 1106 of the Social Security Act (the Act) prohibits disclosure of any file, record, 
report, or other writing, or any information obtained at any time by or from the Secretary 
or an office or employee of DHHS in the course of discharging his duties under the Act, 
except as prescribed by regulations.  The applicable regulations are found in 
42 CFR 401, Subpart B (Confidentiality and Disclosure). 
 
The regulations set out what records are available, how they may be obtained, and, where 
applicable, when a fee is paid to offset the cost of administrative activity involved in 
furnishing the information. 
 
3302 - Federal Freedom of Information Act (FOIA) 
(Rev. 1, 05-21-04) 
 
Coexisting with the confidentiality provision of 1106 of the Act are the provisions of the 
1967 Freedom of Information amendment to the Administrative Procedures Act.  This 
amendment establishes the right of the public to access numerous types of Federal 
records and information.  Exempted from mandatory disclosure under this amendment, 
however, are records and information that other Federal confidentiality statutes prohibit 
being disclosed.  See 42 CFR 401.118 regarding the deletion of identifying details. 
 
3304 - Multi-Program Information in SA Files 
(Rev. 1, 05-21-04) 
 
The CMS rules governing disclosure of Medicare/Medicaid/CLIA records and 
information to the public may be more or less restrictive than SA rules or those of other 
Federal programs.  The SA should carefully distinguish between: 
 
A.  Records and information the SA acquires as an agent of a CMS program, and 
 
B.  Other records and information which: 
 
1.   The SA independently acquires through a State program; or 
 
2.   Are known to other parties who are not subject to a restriction or 
disclosure.  The information known to these parties is considered as 
having entered the public domain. 
 
Only the information the SA acquired in its role as an agent of CMS, and which has not 
otherwise entered the public domain, is subject to CMS disclosure rules. 
 
  When the SA obtains a record or an item of information that is not in the public domain 
and is held for joint use by the Medicare/Medicaid programs and other State or Federal 
programs, the SA applies the most restrictive confidentiality policies of all the programs 
to which the information relates. 
 
Once any record or item of information has been forwarded to CMS, it is treated 
according to whatever CMS rule is applicable.  Consequently, the SA is free to disclose 
the information listed in 3308 below, either on the basis that the State is an agent of the 
Medicare/Medicaid/CLIA program or on the basis that such information has entered the 
public domain through CMS. 
 
3305 - Sharing State Licensure Information With Medicare Contractors 
(Rev. 1, 05-21-04) 
 
To promote the fiscal integrity of Federal health programs it is essential that all health 
care professional liscensure revocations, non-renewals and denials as well as other 
changes in the legal ability to practice a profession or operate a health care business are 
reported to any appropriate Medicare fiscal intermediary, carrier or other Medicare 
contractor within two weeks after the State takes action as the result of such a change. 
Notice of a change in licensure status or the legal ability to practice should be reported in 
writing (hard copy or electronically) and should contain the reason for change in the 
licensure status, as well as all information necessary to adequately identify the health 
professionals or entities in question. This would include entities and individuals such as 
physicians who, although they are not surveyed for compliance with Conditions, 
nevertheless play an important role in the Medicare program by approving plans of care 
or treatment and ordering items and services for Medicare beneficiaries. 
 
3308 - Information That May Be Disclosed to Public  
(Rev. 1, 05-21-04) 
 
(See Chapter 7 for disclosure requirements for SNFs and NFs) 
 
3308A - Information Disclosable to Public Under CMS Rules That May 
Be Disclosed Directly by the SA 
(Rev. 1, 05-21-04) 
 
1.  A facility does or does not participate in the Medicare/Medicaid/CLIA program; 
 
2.  The official Medicare/Medicaid/CLIA report of a survey, except to the extent that 
it contains: 
 
  The name of any patient; 
 
  Medical information about any identifiable patient; 
 
  The identity of a complainant; 
   
  The address of anyone other than an owner of the facility; or 
 
  Information which could be defamatory toward any identifiable person. 
 
NOTE - The SA reviews the report of survey, and if it contains any of the above 
elements, it deletes the information from the report by blocking it out fully prior 
to release of the report.  (See 42 CFR 401.118) 
 
3.  Citations of deficiencies that have been conveyed to the provider following a 
survey, except to the extent the report contains any of the identifiable information 
listed above.  The SA blocks this information out prior to release of the statement 
of deficiencies; 
 
4.  PoC and pertinent comments submitted by the provider relating to 
Medicare/Medicaid/CLIA deficiencies cited following a survey, except to the 
extent the PoC or comments contain any of the identifiable information listed 
above.  The SA blocks this information out prior to release of the PoC; 
 
5.  Official notices of involuntary provider termination; 
 
6.  Reports and information about a laboratorys performance in proficiency testing 
programs; 
 
7.  The CMS manuals distributed to the SAs, intermediaries, carriers, providers, or 
suppliers; and 
 
8.  Statistical data on provider characteristics that do not identify any specific 
provider or individual. 
 
3310 - Requests for Information About Nonparticipating Institutions 
(Rev. 1, 05-21-04) 
 
Information disclosable about an institution, agency, organization, or supplier that has 
never been surveyed for participation in the Medicare/Medicaid/CLIA program is limited 
to the fact that it has never participated. 
 
3312 - Charges for Information 
(Rev. 1, 05-21-04) 
 
If a member of the public requests from CMS copies of the records and information 
described in 3308 of this manual, there will generally be a charge.  The SA does not 
provide free copies of more than a few pages of disclosable information if the cost of 
reproduction is to be charged to the Medicare/Medicaid/CLIA program.  Charges should 
be in accordance with 42 CFR 401.136 and 401.140 for Medicare, or with any applicable 
State fee schedules for reproduction. 
   
3314 - Time Periods for Disclosure Other Than Nursing Homes 
(Rev. 1, 05-21-04) 
 
(See Chapter 7 for Disclosure requirements for SNFs and NFs) 
 
For Medicare, 1864(a) of the Act specifies that the Secretary shall disclose survey 
information within 90 days following the completion of each survey.  Implementing 
regulations in 42 CFR 401.133(a) and (b) further provide that survey-related information 
prepared by the State and responded to by the facility must be disclosed within 90 days 
following completion of the survey by the State but may not exceed 30 days following 
CMS receipt of such information, or if prepared by CMS, within 30 days following the 
final preparation. 
 
For Medicaid, 1902(a)(36) of the Act and 42 CFR 431.115 provide that survey-related 
information must be disclosed either upon determining that a provider is eligible to be 
certified or recertified, or within 90 days after completion of the survey, whichever 
occurs first.  Any applicable State law(s) would also be considered. 
 
Sections 1819(g)(5) and 1919(g)(5) of the Act provide disclosure requirements specific to 
SNFs and NFs within 14 calendar days after the information is made available to the 
facility. (Also see 42 CFR 488.325.) 
 
For both Medicare and Medicaid, the date the survey is completed is the last day of the 
survey.  
 
The provisions of FOIA require that when a request to disclose information is received, 
the information be released within 20 working days, or if this is not possible, the 
requester be notified within 20 working days when the information will be released.  
Follow this policy unless the State has other disclosure rules in which case those rules 
apply to the time allowed for disclosure.  (See PL 104-321.) 
 
When the SA receives a request for information, disclosure of which is not clearly 
permissible under the preceding sections, the SA declines to disclose the information 
requested on the basis of the provisions of 1106 of the Act and refers the request to the 
RO.  The SA notifies the requester of this action within 20 working days and directs the 
requester to contact the RO for additional information concerning the denial.  (See PL 
104-321.) 
 
3316 - Information Furnished to Original Source 
(Rev. 1, 05-21-04) 
 
Any party is entitled to information which that party supplied initially.  Accordingly, one 
copy of the current survey report (subject to the restrictions in 3308 and 3320) or other 
official form completed by or for the provider/supplier, correspondence from the 
  provider/supplier, and documentation submitted by the provider/supplier may be 
furnished to the original source without charge. 
 
When a request is made by a provider/supplier to examine or secure copies of documents 
it has submitted, but the item requested has been sent to the RO, the SA acknowledges 
receipt of the request and refer the request to the RO, which will arrange for the original 
documents to be examined or copied, as appropriate. 
 
3318 - Disclosure of Information To and From Operating Components 
(Rev. 1, 05-21-04) 
 
According the 42 CFR 401.134, the SA may disclose confidential certification 
information about a provider/supplier without the provider/suppliers authorization when 
such disclosure is necessary for proper performance of the duties of: 
 
  An officer or employee of DHHS; 
 
  An officer or employee of a SA or an intermediary participating in administration 
of title XVIII and/or title XIX by contract, agreement, or State plan for purposes 
of carrying out such contract, agreement, or State plan; and 
 
  An officer or employee of a SA carrying out duties under State law in licensing or 
approving facilities. 
 
Generally, confidential certification information is not to be released outside of the State 
survey and certification unit.  Release by a SA to another State component or to a county 
or other local entity that performs survey functions for the SA is predicated on first 
obtaining agreement by the component or county to use the information only for 
certification or licensure purposes.  The receiving SA component or other State or local 
entity may not release any certification information, subject to the penalty provisions of 
1106 of the Act. 
 
3319 - Monthly Quality Indicator Comparison Reports Policy 
(Rev. 1, 05-21-04) 
 
3319A - Purpose 
(Rev. 1, 05-21-04) 
 
The Monthly Quality Indicator Comparison Report was created by CMS in order to give 
state personnel and facilities a report that can be selectively released to certain requestors 
without violating the confidentiality of resident information. The Facility Quality 
Indicator Profile Reports, which provide data on the MDS-based quality indicators at a 
facility level have been available for some time. Because of issues of resident privacy, it 
has not been permissible to release these reports to requestors such as consumers. The 
Monthly Quality Indicator Comparison Report contains facility-level information while 
conforming to privacy rules; thus, States and facilities may release these reports. 
   
3319B - Contents 
(Rev. 1, 05-21-04) 
 
The Monthly Quality Indicator Comparison Report is based on the same data used to 
produce the Facility Quality Indicator Profile Report, but the data are presented 
differently. (A sample of the report is attached to Survey and Certification Policy Letter 
01-17.) The Monthly Quality Indicator Comparison Report contains both state percent 
and national percent comparison columns. This allows the reviewer to compare the 
performance on each quality indicator measure to that of the state and of the nation. The 
state percent column contains the percent triggered for the quality indicator averaged 
over all facilities within the state. This is an unweighted average, meaning that each 
facility has an equal impact on the average, regardless of number of residents. The 
national percent is also an unweighted average. It represents the percent triggered for 
the quality indicator averaged over all the facilities in the nation. 
 
3319C - Differences From Facility Quality Indicator Profile Report 
(Rev. 1, 05-21-04) 
 
Because of concerns with protection of the privacy of residents, some of the data 
presented on the Facility Quality Indicator Profile Report are not included on the 
Monthly Quality Indicator Comparison Report. The numerator and denominator used to 
calculate the percents are not presented on the Monthly Quality Indicator Comparison 
Report. Additionally, totals are not displayed in instances when the number of residents 
in a facility is 10 or fewer. Also, if the percent triggered is 90 percent or greater for any 
given quality indicator, the exact percent triggered will not be displayed. Instead, a 
notation indicating that the percent triggered is greater than or equal to 90 percent will 
be displayed. 
 
3319D - Delivery of Report 
(Rev. 1, 05-21-04) 
 
At the end of every month, the Monthly Quality Indicator Comparison Report is 
generated for each facility within a state, and is placed in that facilitys directory. The 
report does not allow an option for user-defined dates. Due to a built-in lag in the data 
system, the data that appear on the report generated in a given month are based on quality 
indicators from four months prior. The name of the report text file in the directory reflects 
this. The file name is MSRmmyyyy.txt, where mmyyyy is the month and year of the data 
from which the report was created. This date also appears at the top of the report itself. 
 
3319E - Release of Report 
(Rev. 1, 05-21-04) 
 
The Monthly Quality Indicator Comparison Reports were designed for use by: 
 
1.  Family members of a facility resident;  
   
2.  Potential facility residents or their family members; and  
 
3.  The State ombudsman.  
 
Release of the reports for a large number of facilities or to individuals other than those 
named above is at the States discretion. Although CMS has suppressed certain data in 
order to protect individual privacy, the state and the facilities must be cautious in 
evaluating requests for these reports and in releasing them:  
 
  The reports were designed to enable individuals with a personal or professional 
interest in a facility, or a few facilities to have access to quality indicator 
information at a facility level. A State ombudsman, discharge planner, or other 
appropriate person could help the consumer understand and utilize the 
information in a small number of reports.  
  Since release of these reports was not designed for large batches, the data system 
does not include a direct method to print reports for a large number of facilities at 
once.  
 
  Explanatory language appropriate for consumers is not included with the reports; 
therefore the reports are not designed to be published or to be posted on the 
Internet.  
 
  State or facility staff should remind recipients of the reports that the information 
contained in the report is not a measure of a facilitys quality, but is rather an 
indicator of the potential for quality problems. Recipients should not use these 
reports alone to draw conclusions about a facilitys quality. They should also visit 
the facilities that they are evaluating.  
 
  Each recipient of a Monthly Quality Indicator Comparison Report should also 
receive a copy of the sheet The Monthly Quality Indicator Comparison Report: 
Guidelines (see F below). The sheet will aid recipients in the appropriate use of 
the report. 
 
3319F - Monthly Quality Indicator Comparison Report Guidelines 
(Rev. 1, 05-21-04) 
 
The Monthly Quality Indicator Comparison Report was created by the CMS to give 
individuals with either a personal or a professional interest in a specific facility access to 
facility-level data on quality indicators without violating the confidentiality of the nursing 
home residents. The report allows comparisons between a specific nursing home and the 
state, as well as the nation about the proportion of residents with a particular condition. 
 
  The data in these reports are only a starting point in reaching a decision about the 
quality of a nursing facility. The data should be viewed as measures of the 
  potential for quality problems. There may be a legitimate reason why a facility 
has higher than average percentages on a particular indicator. 
 
  In making decisions about quality of care, it is important to actually visit the 
nursing home being considered. Information in this report can help decide what 
type of questions an individual may want to ask on a visit to the nursing home. 
 
  Additional information about individual facilities can be found in the Nursing 
Home Compare section of the CMS Web site http://www.medicare.gov/. This 
includes the State inspection results, found in the About the Nursing Home 
Inspections Results section of this web site. 
 
3320 - Necessary Preclearance With RO Before Releasing Confidential 
Information 
(Rev. 1, 05-21-04) 
 
The SA obtains advice from the RO when a request is received for confidential Medicare 
and/or Medicaid information under circumstances other than as permitted by 3308.  To 
the extent known, indicate the purpose to be served by the release, the specific 
information to be released, and, if appropriate, the availability of the information 
elsewhere. 
  Additional State Agency Responsibilities 
 
3330 - HHA Toll-Free Hotline and Investigative Unit 
(Rev. 1, 05-21-04) 
 
Section 1864(a) of the Act requires that the State establish a toll-free hotline to collect, 
maintain, and continually update information on Medicare participating HHAs including 
certification-related deficiencies found regarding patient care, corrective actions, and 
sanction activity during its most recent survey.  Complaints and questions will also be 
received over the hotline concerning HHAs in the State.  The State is to inform Medicare 
beneficiaries of the availability of the hotline, its purpose, the hotline telephone number, 
and hours during which it is in service.  The SA (under the 1864 agreement) may 
subcontract with the appropriate State or local agency for operation of the toll-free 
hotline.  However, the SA is required to investigate certification-related complaints 
received by the hotline. 
 
The instructions are minimum requirements for establishing and maintaining the hotline.  
Additional operating procedures may be used to complement the requirements.  This 
activity will be monitored by the RO and enforced through the 1864 agreement process. 
 
3330A - HHA Hotline Function 
(Rev. 1, 05-21-04) 
 
  Operate the toll-free hotline 6 hours per day (between 7:00 a.m. - 6:00 p.m.) 
Monday - Friday, except on State or Federal holidays.  Notify the public in 
advance if there are changes in hours of operation; 
 
  Provide HHA hotline information to HHAs and the public by telephone or in 
writing; 
 
  Record most recent certification and enforcement findings regarding patient care 
within 30 calendar days of the determination of certification or recertification, 
approved PoC, correction of deficiencies, and any sanctions imposed, including 
termination of a Medicare participating HHA; 
 
  Record complaints received on the HHA hotline; 
 
  Refer HHA hotline certification-related complaints to the survey unit for possible 
investigation; and 
 
  Refer non-certification related complaints to the appropriate components in the 
State agencies. 
 
 
 
  3330B - HHA Hotline Information 
(Rev. 1, 05-21-04) 
 
These items must be maintained and readily retrievable: 
 
  Name, address, and Medicare provider number of Medicare HHAs in the State; 
 
  Date of most recent Medicare certification or recertification survey of individual 
HHAs; 
 
  Record of any Condition level deficiencies found regarding patient care in the 
most recent survey conducted by the SA; 
 
  Date(s) of planned corrective action(s) and completed corrective action(s) for 
Condition level deficiencies; and 
 
  Date(s) and type of sanction(s), if any imposed, including termination. 
 
3330C - Disclosure of Information 
(Rev. 1, 05-21-04) 
 
When responding to calls requesting information, the SA releases the information 
verbally and as necessary in writing in accordance with CMS public disclosure rules.  
(See 3300-3320.) 
 
3330D - Record Keeping Requirements 
(Rev. 1, 05-21-04) 
 
The SA records each call as either a complaint or a general inquiry.  The record keeping 
system may be manual or automated and must indicate the general nature of the inquiry 
or complaint and the resolution, i.e., question answered, material sent, or complaint 
referred for investigation. 
 
3330E - Public Awareness 
(Rev. 1, 05-21-04) 
 
The State is to notify Medicare beneficiaries and HHAs of the availability of the hotline.  
In addition, the State is to notify each Medicare HHAs about the HHA hotline, the 
telephone number, purpose, and hours of operation. 
 
3330F - Hotline Investigative Unit 
(Rev. 1, 05-21-04) 
 
The SA investigates the certification-related complaints received by the hotline following 
procedures in SOM Chapter 5.  In instances where a complaint is not certification-related, 
  the SA refers that complaint to the proper State agency (e.g., the State medical society, 
the State licensure agency, or the State social services department), or the RO. 
 
Response to Subpoenas Served On and Suits Against the State Agency 
 
3350 - Subpoena for Program Records 
(Rev. 1, 05-21-04) 
 
When one of the officers or employees of an SA is served with a subpoena or other legal 
proceeding to produce title XVIII and/or title XIX records or CLIA records, whether or 
not the information is partly or wholly disclosable, accept the subpoena.  The SA should 
immediately notify its legal advisor or counsel and the RO of receipt of the subpoena, and 
provide copies of the subpoena and other pertinent documents to both.  The SA 
determines whether the subpoenaed records and information are routinely disclosable to 
the public or contain confidential information that is normally withheld.  The SA includes 
this information with the notification. 
 
The SA should place the subpoenaed records and information in a secure area to prevent 
unauthorized disclosure and assure the availability to counsel for review. 
 
If not included in the subpoena but known to the SA, it informs its legal advisor and the 
RO of the names, addresses, and telephone numbers of the presiding judge and attorneys, 
and the purpose of the subpoena. 
 
After the RO receives the materials, it coordinates with the SA legal advisor and takes 
other actions necessary to assist the SA.  After consultation with the SA, the RO and the 
SA legal advisor determine whether the SA must produce the subpoenaed records and 
information and if so, notify the SA director to comply.  If it is determined that all or part 
of the subpoenaed records and information are to be withheld, the RO and/or SA legal 
advisor represents the SA in dealing with the court of jurisdiction and enter the motions 
to quash the subpoena, based on the provisions of 1106 of the Act which prohibits 
disclosure of confidential records and information and other pertinent statutes and 
regulations. 
 
3352 - Forthwith Subpoena 
(Rev. 1, 05-21-04) 
 
On rare occasions the SA may be served with a Forthwith Subpoena.  Unlike a standard 
subpoena, which requires that records and information be produced on a specified date 
and delivered to the court, a Forthwith Subpoena requires that the SA immediately 
provide the subpoenaed records and information.  The SA accepts the subpoena and 
requests the individual to wait. 
 
The SA immediately notifies its SA legal advisor and requests that the legal advisor call 
the RO. 
 
  The RO and the SA legal advisor will determine by telephone the appropriate action to be 
taken.  The SA legal advisor will deal with the individual waiting for the records and 
information.  The SA should not take unilateral action of any type. 
 
3354 - Subpoena for SA Licensure Records 
(Rev. 1, 05-21-04) 
 
If the SA has integrated certification and licensure files and it receives a subpoena 
requiring it to produce licensure information, it should consult with the RO before 
complying with the subpoena to determine if the integrated file contains information 
prohibited from disclosure by 1106 of the Act.  (See 3300.)  If the files contain such 
information, the RO assists the SA legal advisor in determining the appropriate 
procedures and action to be taken in responding to the subpoena. 
 
3356 - Suit Against SA 
(Rev. 1, 05-21-04) 
 
Where a suit is brought against the SA as a result of its title XVIII and/or title XIX or 
CLIA functions, the SA forwards the notice of the suit to the RO.  The RO coordinates 
with the SA and its legal advisor. 
  Transmittals Issued for this Chapter 
 
Rev #  Issue Date  Subject  Impl Date  CR# 
R202SOMA 06/19/2020  State Operations Manual (SOM) Chapter  07/27/2020  N/A 
3, Additional Program Activities 
R198SOMA 01/17/2020  Revisions to the State Operations Manual  01/17/2020  N/A 
(SOM) Chapter 2 and Chapter 3 
R190SOMA 06/14/2019  Updates to the State Operations Manual  06/14/2019  N/A 
(SOM) Chapters 2, 3 and 9 to add 
instructions for Organ Transplant 
Programs. 
R188SOMA 04/26/2019  Revisions to the State Operations Manual  04/26/2019  N/A 
(SOM 100-07) Chapter 2, The 
Certification Process, Chapter 3, 
Additional Program Activities, and 
Chapter 4, Program Administration and 
Fiscal Management 
123SOM  10/03/2014  Revisions to State Operations Manual  10/03/2014  N/A 
(SOM) Chapters 1, 2 and 3 
R121SOM  09/19/2014  Update to State Operations Manual  Upon  N/A 
(SOM), Publication 100-07, Chapter 3, to  Implementation 
Provide Language-Only Changes for  of ICD-10 
Updating ICD-10 
R112SOM  04/11/20/14 State Operations Manual (SOM) Chapter  04/11/2014  N/A 
3 Policy Revisions For Organ 
Procurement Organizations (OPOs) 
R92SOM  11/20/2013  State Operations Manual (SOM) Chapter  11/22/2013  N/A 
3 Policy and Nomenclature revisions for 
Intermediate Care Facilities for 
Individuals with Intellectual Disabilities 
(ICF/IID) 
R24SOM  01/26/2007  Sunset of the Policies for Provider  01/26/2007  N/A 
Nominations for an Intermediary and the 
Provider Requests for a Change of 
Intermediary 
R01SOM  05/21/2004  Initial Issuance of Pub 100-07  N/A  N/A