State Operations Manual 
Chapter 4 - Program Administration and Fiscal 
Management 
 
Table of Contents 
 
(Rev. 188, 04-26-19) 
 
Transmittals for Chapter 4 
 
Administration 
4000 - Federal/State Relationship for Provider Certification 
4000A - Title XVIII - Medicare Regulations 
4000B - Title XIX - Medicaid Regulations 
4001 - Federal Administrative Responsibilities 
4002 - Nature and Source of Payments to States 
4002A - Trust Funds for Title XVIII-Related Activities 
4002B - Grant Funds for Title XIX-Related Activities 
4003 - SA Administrative Responsibilities 
4003.1 - SA Responsibility for Records and Reports 
4003.2 - SA Responsibility for Staff Training and Development 
4003.2A - Staff Training 
4003.2B - In-Agency Training 
4003.2C - Outside-of-Agency Training 
4004 - SA Reporting of Possible Certification Fraud 
4005 - Reliance Upon States to Initiate Budget - Coordinated Activity Plans for Carrying 
Out Program Action 
4006 - Interagency Subagreements 
4006A - Authority 
4006B - Need for Subagreements With Public Entities 
4006C - Program Specialization of Tasks Performed by Subagreement 
Entity 
4006.1 - Negotiating Subagreements With Non-Public Entities 
4007 - Assistance of CMS in SA Program Administration 
4008 - Conflicts of Interest of SA Employees 
4008A - Examples of Potential Conflicts of Interest 
4008B - Report and Investigation of Improper Acts 
4009 - Federal Surveyor Qualifications Standards 
4009A - Persons Covered 
  4009B - Health Professional Qualifications 
4009C - Education, Training, and Experience 
4009D - Evaluation 
4009E - Implementation 
4009F - Quality Indicator Survey (QIS) Training Process 
4009F.1 - Orientation and Training of Newly Employed Surveyors 
in a State Implementing the QIS 
4009F.2 - Training Process: Registered QIS Surveyor 
4009F.3 - Training Process: CMS-Certified QIS Trainer 
4009F.4 - Documentation of Successful Completion of Training 
4009F.5 - CMS Regional Office Staff Participation in QIS 
Training 
4009.1 - Federal Minimum Qualification Standards for LTC Facility Surveyors 
4009.1A - Purpose 
4009.1B - Prerequisites 
4009.1C - Test Composition 
4009.1D - Successful Performance 
4009.1E - Unsuccessful Performance 
4009.2 - Test Administration/Registration 
4009.2A - State Agency (SA) Registration Responsibilities 
4009.2B - Regional Office (RO) Registration Responsibilities 
4009.2C - Contractor Registration Responsibilities 
4009.2D  Testing Center Registration Responsibilities 
4009.3 - Additional Responsibilities 
4009.3A - Additional State Agency (SA) Responsibilities 
4009.3B - Additional Regional Office (RO) Responsibilities 
4009.3C  Surveyor Responsibilities 
4009.4  Test Related Activities 
4009.4A  Recordkeeping 
4009.4B  Training of Surveyors That Do Not Pass The SMQT 
4010 - SA Annual Activity Plan 
4011 - SA Planning Annual Workload 
4018 - Regulatory Role of Surveyor and Consultant 
4055 - Ordering CMS Forms and Literature 
Office of Management and Budget (OMB) Approval 
of Information Collected from the Public 
4060 - Approval of Information Collected From Public by SAs - General 
4062 - Information That Does Not Require OMB Approval 
4062.1 -Verification or Correction Information 
4062.2 - Certifications 
  Survey and Certification Related Activities 
4100 - Basis for Determining Health Insurance Relatedness of Activity Costs 
4101 - Survey-Related Activities - General 
4102 - Activities With Accredited Entities Deemed to Meet Participation Requirements 
4111 - Higher Than National Standards 
4115 - Non-Facility-Related Activities 
4116 - SA Promotional and Public Informational Activities 
4116.1 - Medical Societies 
4117 - Relations with Other Programs 
4131 - Deeming and Waiver of Nurse Aide Training and Competency Evaluation 
(NATCEP) Requirements 
4132 - NATCEPs and CEPs 
4132.1 - Approval of NATCEPs and CEPs 
4132.1A - Requirements for Program Approval 
4132.1B - Time Frames for Review 
4132.1C - Prohibition of Program Approval 
4132.1D - Withdrawal of Program Approval 
4132.1E - Waiver of Program Prohibition 
4132.1F - Conflicts of Interest 
4132.2 - Requirements for NATCEPs 
4132.2A - Hours of Training 
4132.2B - Restrictions on Activities of Students in a NATCEP 
4132.2C - Instructor Qualifications 
4132.2D - Minimum Curriculum Requirements 
4132.2E - Competency Evaluation Component 
4132.2F - Prohibition of Charges 
4132.3 - Requirements for CEP 
4132.3A - Notification to Individual 
4132.3B - Content of CEP 
4132.3C - Administration of NACEP 
4132.3D - Proctoring 
4132.3E - Successful Completion of CEP 
4132.3F - Unsuccessful Completion of Competency Evaluation 
4140 - Guidance to States for Medicaid NF Remedies 
4140A - Background 
4140B - Required State Remedies 
4140C - Alternative Remedies 
4140D - Incentives for High Quality Care 
  4140E - Federal Financial Participation (FFP) 
4141  Nurse Aide Registry (NAR) 
4141A - Registry Function 
4141B - Registry Information 
4141C - Responsibility for NAR 
4145 - Specification of Resident Assessment Instruments (RAIs) for Use in Long Term 
Care Facilities 
4145.1 - Statutory Requirements 
4145.2 - Definitions 
4145.3 - RAI by CMS 
4145.4 - Specification of a State RAI 
4145.5 - Variations in Formatting the State-Specified RAI 
4145.6 - Approval Process 
4146 - Minimum Data Set (MDS) System 
4146.1 - System Description 
4146.2 - Administration Requirements 
4146.3 - Validation and Editing Process 
4146.4 - Reports 
4146.5 - Correction of Errors in MDS Records That Have Been Accepted by the 
Standard MDS System at the State 
4146.6 - Replication to the CMS Repository 
4146.7 - Privacy and Confidentiality 
4146.7A - System of Records 
4146.7B - Procedures for Disclosure of Information Pursuant to Data Use 
Agreement 
4146.7C - Routine Uses 
4146.7D - Access by an Individual to His or Her Own Records 
4146.7E - Criminal Penalties for Improper Disclosure 
4146.8 - System Security 
4146.9 - RO Roles and Responsibilities 
4146.10 - Provider Relations 
SA Analysis Activity 
4149 - OSCAR System 
4149A - Summary 
4149B - Availability of OSCAR Data 
4149C - Review of Certification Data 
4149D - OSCAR Input Considerations 
4149E - Suggested Output Utilization 
4150 - RO Oversight of SA Surveyor Training 
  4151 -RO Program Analysis Activity 
4151A - Analysis of Administrative Factors 
4151B - Analysis of SA Reviews 
4151C - Analysis of Individual Special Programs 
4152  State Performance Measures for All Providers and Suppliers 
4157 - Federal Monitoring Surveys - Definition and Purpose 
4157A - Definition 
4157B - Purpose 
4157C - Scope of Survey 
4157D - Survey Definitions 
4158 - Federal Oversight Support Survey (FOSS) Expectations and Responsibility 
4158A - SA Responsibility 
4158B - RO Responsibility 
4159 - Selecting and Scheduling Facilities for Monitoring Surveys 
4160 - Conduct of Monitoring Surveys 
Provider Certification Files and Program Reporting 
4200 - SA Provider Certification Files 
4205 - Materials Forwarded to RO 
4210 - SA Files Used for Case Control and Reporting 
4225 - Establishment of SA Case Folders and Controls 
Necessary SA Expenses 
4500 - General 
4502 - SA Cost of Studies of Distribution of Staff Time 
4504 - Pro Rata Costs - General Rule 
4508 - SA Goods, Facilities, Services from Other State Agencies or From Local Agencies 
4508A - Definition 
4508B - Centralized State Services 
4510 - SA Personnel Services 
4510A - Selection of Personnel 
4510B - Charges for Director and Secretary of State Survey Activities 
Determined by Pro Rata Method 
4514 - SA Determination of Necessary Staff 
4514A - Full-Time 
4514B - Limitation of Full-Time Identifiable Positions 
4514C - Part-Time and Temporary 
4514D - Charging for Multi-Program Staff - Program Activities Readily 
Identifiable 
4514E - Charging for Multi-Program Staff - Program Activities Not Separate 
4518 - Use of Overtime in SAs 
  4518.1 - Payment for Overtime 
4530 - SA Non-Personnel Services 
4531 - Travel by SA Personnel 
4531A - Certification and Administrative Travel 
4531B - Training and Conference Travel 
4532 - SA Communications and Supplies 
4532A - Communications 
4532B - Supplies 
4532C - Basis for Charges 
4534 - SA Office Space 
4534.1 - Standard of Comparable Rental 
4535 - Rent in Privately-Owned Space 
4535A - Cancellation Clause 
4535B - Lease Not Exceeding One Year 
4535C - Consulting RO 
4536 - Space in Publicly-Owned Buildings 
4537 - SA Repairs and Alterations 
4537A - Maintenance Repairs 
4537B - Major Repairs and Replacements 
4537C - Alterations 
4538 - SA Identifiable (Direct) Costs 
4539 - SA Office Maintenance 
4540 - SA Equipment 
4540A - Definition and Quality of Office Equipment 
4540B - Title to and Accountability 
4540C - Purchase of Equipment 
4540D - Rental of Equipment 
4541 - SA Retirement and Social Security 
4542 - Other SA Expenses 
4542.1 - Consultants Expenses 
4542.2 - SA Expenses for Training of SA Personnel 
4542.2A - Funding 
4542.2B - Requesting Approval 
4542.2C - Justification for Attendance 
4542.2D - Fiscal and Reporting Considerations 
4542.2E - Educational and Training Leave 
4542.2F - Agreements by Employees to Continue on Job 
4542.3 - Miscellaneous SA Expenses 
  4542.3A - Bonding 
4542.3B - Public Liability 
4543 - NAR/NATCEP 
4544 - LTC Facility Workload (SNF/NF) 
The Budgetary Process 
4600 - SA Budget Request 
4605 - Developing SA Budget Justification 
4610 - Line Item Justification for SA Personnel Services 
4611 - Line Item Justifications for SA Direct and Indirect Costs 
4612 - Preparation of State Agency Budget List of Positions, Form CMS-1465a (Exhibit 
47) 
4614 - Preparation of State Agency Schedule for Equipment Purchase, Form CMS-1466 
(Exhibit 54) 
4625 - Preparation of State Survey Agency Budget Request - Non-Long-Term Care, 
Form CMS-435 (Exhibit 45) 
4626 - Preparation of State Survey Agency Budget Request - Long-Term Care, Form 
CMS-435 (Exhibit 45) 
4627 - Preparation of the State Survey Agency Certification Workload Report - Form 
CMS-434 (Exhibit 52) 
4628 - Preparation of Budget Request 
4629 - Developing Budget Recommendations - RO Procedures 
4630 - Notification of Approval 
4636 - RO Distribution of Approved Funds 
4636.1 - Disbursement of Approved Funds 
4640 - Need for Additional Title XVIII and Title XIX Funds 
4640.1 - Title XVIII Supplemental Budgets 
4642 - RO Monitoring of SA Fiscal Budgets 
Financial Accounts and Reporting 
4700 - SA Accounts 
4701 - Supports for SA Expenditures 
4710 - SA Financial Reporting 
4711 - Cash Basis 
4712 - SA Limit on Expenditures 
4714 - Periodic Analysis of Accounts 
4716 - Cash Balances and Expenditure Authority 
4718 - Un-Liquidated Obligations 
4719 - Nothing to Report on a Given Line 
4740 - State Survey Agency Quarterly Expenditure Report, Form CMS-435, and State 
Survey Agency Certification Workload Report, Form CMS-434  Preparation and 
Due Date 
  4760 - Preparation of State Survey Agency Non-Long-Term Care Quarterly Expenditure 
Report, Form CMS-435 (Exhibit 45) 
4766 - Preparation of State Survey Agency Quarterly Expenditure Report, Long-Term 
Care Facility Workload, Form CMS-435 
4766A - Preparation of State Survey Agency Quarterly Expenditure Report, 
MDS, Form CMS-435 
4766B - Preparation of State Survey Agency Quarterly Expenditure Report, 
OASIS, Form CMS-435 
4767 - Initial Survey Activity Reports 
4767A - Preparation of Report on State Initial Survey Activity 
4767B - Preparation of Aging Report on Pending Initial Survey Activity 
Section 1864/Section 1903(a) Fiscal Audits 
4780 - Scope of Audit 
4781 - Objectives of Audit 
4782 - Records to Be Reviewed 
4784 - RO Role During Audit Process 
4784A - Pre-Audit 
4784B - During Audit 
4784C - At Exit Conference 
4785 - Draft and Pre-Release Audit Report to RO 
4786 - Final Audit Report and Final Determination - RO Procedures 
4786A - General 
4786B - Timeliness of Final Audit Resolutions 
4787 - RO Review of SA Response 
4787A - Contacting SA 
4787B - Timely Response 
4787C - Consideration of Supporting Arguments and Information 
4787D - Agreements and Disagreements 
4787E - Program Findings and Recommendations 
4788 - SA Disallowance Appeals 
4788.1 - Medicare Disallowance Appeals 
4788.2 - Medicaid Disallowance Appeals 
4789 - RO Documentation of Agreements on Actions to Correct Audit Deficiencies 
4790 - General Rules on Cost Allowability - RO Procedures 
4790A - Cost Allowability 
4790B - Exceptions to Cost Allowability Rules 
4790.1 - Determinations of Overpayment - RO Procedures 
4790.2 - Determination and Computation of Dollar Amounts - Use of Estimates - 
RO Procedures 
  4790.3 - Time Period for Computing Disallowances - RO Procedures 
4790.4 - Inability to Determine Dollar Amounts - RO Procedures 
4790.4A - Supporting Costs By Alternative Means or Developing 
Reasonable Estimate of Unallowable Costs 
4790.4B - Costs Have Not Been Supported 
4791 - RO Documentation of Agreements to Effectuate Repayments 
4791.1 - Repayment Not Made Within 30 Days of Agreement Letter - RO 
Procedures 
4792 - Audit Disallowance Actions - RO Notification 
4792.1 - Non-Audit Medicare and/or Medicaid Disallowances - RO Procedures 
4792.1A - Preparation of Case File 
4792.1B - Assignment of File Control Number 
4792.1C - Preparation Draft Disallowance Letter 
4792.1D - Circulation Draft Disallowance Action for Review 
4792.1E - Signature of Disallowance Letter 
4792.1F - Notification of CMS 
4792.1G - Disallowance Letter to Appropriate Recipients 
4793 - Establishing Records Supporting Non-Audit Medicare and/or Medicaid 
Disallowance Actions - RO Procedures 
4793A - Disallowance Analysis Memorandum (DAM) 
4793B - Claim-Related Work Papers 
4793C - Citations of Authority 
4794 - Collections - RO Procedures 
4794A - Processing Collections 
4794B - Appeal Will Suspend Collection Action 
4794C - Calculating Interest Charges 
4794C1 - Interest on Medicare Disallowance 
4794C2 - Interest on Medicaid Disallowance 
4794C3 - Interest Rates 
4794C4 - Date of Payment 
4794D - Periodic Notices of Amounts Still Due 
4794.1 - Accounts Payable - RO Procedures 
4795 - Audit Clearance Document - RO Procedures 
4795.1 - RO Preparation and Processing Audit Clearance Document 
4795.1A - Part I - Decisions by CMS 
4795.1B - Part II - Recommendations Remaining Open 
4795.1C - Attachments 
4795.1D - Amended ACDs 
4795.1E - Dispatching ACD 
  4795.1F - CO Action 
4795.2 - Clearing Audit Clearance Document - RO Procedures 
4795.3 - Closure Versus Clearance - RO Procedures 
4796 - Audit Findings and Recommendations Remaining Open at End of Four Months - 
RO Procedures 
Disposition of Medicare and Medicaid Records 
4800 - Retention and Destruction of Medicare and Medicaid Records 
4801 - Provider Certification Records 
4802 - Budget and Financial Report Files- Records to Be Retained 
4803 - Title XVIII State Agreements 
4804 - Title XIX State Plans 
4805 - SA Review Files 
4806 - Destruction of Records 
 
  Administration 
 
4000 - Federal/State Relationship for Provider Certification 
 
(Rev. 1, 05-21-04) 
 
4000A - Title XVIII - Medicare Regulations 
 
(Rev. 1, 05-21-04) 
 
Section 1864 of the Social Security Act (the Act) outlines the functional role of State 
survey agencies (SAs) in the Medicare program, and provides for establishing an 
administrative relationship based upon a formal agreement negotiated between the 
governor of the State and the Secretary of HHS. 
 
4000B - Title XIX - Medicaid Regulations 
 
(Rev. 1, 05-21-04) 
 
Pursuant to Title XIX, the SA is a grantee of Federal funds, and is required under 1902 
of the Act to develop and adhere to its own administrative State plan, for which HHS 
provides the major share of financing through grants, the terms of which are spelled out 
in 1903 of the Act. The Federal share is termed Federal financial participation (FFP). If 
the Secretary finds that a State is not complying with its plan (as approved by the 
Secretary), 1904 of the Act provides that FFP can be reduced or withheld. 
 
Extensive regulatory standards for the development and terms of the State plans, for the 
management of the grants, and for the standards limiting participation of health care 
institutions are found in 42 CFR Chapter IV, Subchapter C.  However, those regulations 
which directly affect the State component administering the Medicaid program (known as 
the State Medicaid agency or the single State agency) are widely dispersed through 
Subchapter C.  Provisions of Federal grant laws other than title XIX also impinge upon 
the financial administration of the SA. 
 
4001 - Federal Administrative Responsibilities 
 
(Rev. 1, 05-21-04) 
 
Among the responsibilities of the parties to the agreements are obligations imposed upon 
the Federal government (delegated to CMS) dealing with the States program 
administration, which include: 
 
  Setting policy and providing policy interpretations on the provider and supplier 
certification program standards; 
 
    Providing consultation to agencies involved in administering the Federal 
requirements; 
 
  Paying the appropriate and allowable costs of the SA functions relating to 
administration of regulations and provisions of the agreement and State Plan; 
 
  Making determinations of allowable State costs to submit for Federal payment; 
 
  Controlling payment of Federal trust funds (and grant awards) to appropriate SA 
for survey and certification costs incurred in administering title XVIII and title 
XIX programs; and 
 
  Approving qualified State personnel used in the provider certification program. 
 
4002 - Nature and Source of Payments to States 
 
(Rev. 1, 05-21-04) 
 
4002A - Trust Funds for Title XVIII-Related Activities 
 
(Rev. 1, 05-21-04) 
 
Execution of an agreement with a SA under 1864 of the Act involves the assumption by 
CMS of the obligation to meet the necessary and reasonable expenses of performing 
services provided for in the agreement.  Payments to States under 1864 of the Act are 
made from the Federal Hospital and Supplementary Medical 
 
Insurance Trust Funds to cover the costs of services performed under the agreement are 
authorized by 1864 of the Act.  The costs of health insurance benefits and the 
administrative costs of the program are charged to the Trust Funds.  Administrative 
expenses (including advances or payment to States under 1864 of the Act) are 
authorized for expenditure from the Trust Funds only through the regular appropriation 
process of Congress. 
 
4002B - Grant Funds for Title XIX-Related Activities 
 
(Rev. 1, 05-21-04) 
 
Sections 1903(a)(4) and (a)(7) provide that to the extent the SA is performing 
certification activities pursuant to an approved State plan, the Federal financial grant 
mechanisms are used to pay the State for a percentage of the cost of those activities 
during each quarter of the year.  The matching grants come from appropriated general 
revenues of the United States.  The Secretary is authorized to pay a percentage against 
these costs for the proper and efficient administration of the State plan.  Whereas the title 
XVIII trust funds are controlled under terms of the State agreement, the grant funds are 
controlled by the established rules of Federal grant laws and regulations. 
   
4003 - SA Administrative Responsibilities 
 
(Rev. 1, 05-21-04) 
 
The SA is responsible for: 
 
  Establishing and maintaining organizational relationships with other State and 
local governmental groups as necessary for attaining program or related program 
goals; 
 
  Keeping CMS advised of program needs and trends, and of responsive actions 
taken; 
 
  Providing the material, equipment, and the training and support of personnel to 
perform the above functions; and 
 
  Furnishing necessary records and accounting to provide justification for costs 
claimed for payment by the Secretary. 
 
4003.1 - SA Responsibility for Records and Reports 
 
(Rev. 1, 05-21-04) 
 
The SA establishes and maintains basic records and prepares operating reports to reflect 
essential administrative and fiscal data of mutual concern to the SA and CMS.  These 
records and reports provide: 
 
  Evaluation of the effectiveness of program operations; 
 
  Analysis of workloads; 
 
  Identification of administrative or technical problem areas; 
 
  Development and justification of budget estimates; and 
 
  Supporting documentation for the expenditure of Federal and State funds. 
 
For the most part, the SA responsibility for records and reports, on a continuing or special 
request basis, is limited to those pertinent to the managing of agency operations and those 
that reflect the agencys workload.  To the extent possible, these will be designed to fit 
within the framework of the SA operations.  The CMS requirement for a minimum of 
specific records and reports is not intended to limit in any way the SA fiscal and 
administrative practices. 
 
  4003.2 - SA Responsibility for Staff Training and Development 
 
(Rev. 1, 05-21-04) 
 
4003.2A - Staff Training 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
All health facility surveyors employed in the Medicare and/or Medicaid programs must 
successfully complete the Basic Health Facility Surveyor Training Course within the first 
year of employment. When applicable, the surveyor must also attend laboratory, LSC, 
ESRD, and other specified training as necessary or required by the Federal government. 
 
Each State is responsible for providing continuing education to its surveyors.  In 
conjunction with and subject to the approval of the Regional Training Administrator, 
each SA must have a procedure for identifying the training needs of its surveyors.  Each 
SA provides the appropriate training through in-service education, State, regional, and/or 
national conferences, seminars and workshops, and related courses as needed and 
appropriate within fiscal limitations approved by CMS.  The SAs are to assure that 
surveyors are trained to survey for all regulatory requirements and have the necessary 
skills to perform the survey. 
 
For surveyors of long term care facilities, i.e., nursing homes, CMS is implementing a 
computer-assisted survey process, the Quality Indicator Survey (QIS), in selected State 
Survey Agencies to determine if Medicare and Medicaid certified nursing homes meet 
the Federal participation requirements.  In addition to completion of any other 
requirements, surveyors of nursing homes in States implementing the QIS are required to 
successfully complete the additional QIS training requirements described below at 
4009F. 
 
4003.2B - In-Agency Training 
 
(Rev. 1, 05-21-04) 
 
Each SA must have its own program of staff development that responds to the needs of 
new employees for orientation and basic training, and to the needs of experienced 
employees for continuing development and education. 
 
4003.2C - Outside-of-Agency Training 
 
(Rev. 1, 05-21-04) 
 
In evaluating the appropriateness of any outside training activity for survey and 
certification funding, the SA and CMS must consider the degree to which the benefit to 
the trainee is applied toward his/her service to the survey and certification program.  This 
is especially important where personnel are serving on a part-time basis. 
   
4004 - SA Reporting of Possible Certification Fraud 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
Section 1128.B of the Act and P.L. 104.191, the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) contains specific penalties for fraud and abuse 
under Medicare and Medicaid.  It provides criminal penalties for: 
 
  Making false statements or representation for any benefit or payment under 
Medicare and Medicaid; 
 
  Soliciting or receiving any kickback, bribe, or rebate; 
 
  Making false statements or representations with respect to the conditions or 
operation of any institution, facility, or entity in order to qualify (either initial 
certification or recertification) for participation in Medicare or Medicaid; 
 
  Charging for any services provided to a patient under Medicaid at a rate in excess 
of the established State rate, or charging, soliciting, accepting, or receiving in 
addition to any amounts otherwise required to be paid under Medicaid, any gift, 
money, donation, or other consideration as a precondition of admitting a patient to 
a hospital, NF, or ICF/IID, or a requirement for the patients continued stay in 
such a facility;   
 
  Charging for services not rendered; and 
 
  Physicians and suppliers who agree to accept assignment and violate the terms of 
that agreement. 
 
When the SA believes that there may be certification fraud, it should immediately notify 
the RO via memorandum.  This memorandum should include the name and provider 
number of the facility, together with a statement of the relevant facts.   In addition, the 
SA should make no further contacts with the offending individual or facility with respect 
to this matter unless requested to do so by the appropriate RO personnel.  This is 
necessary because any unauthorized contacts may compromise the potential or pending 
investigation, including chances for successful prosecution of any criminal violation that 
has occurred. 
 
4005 - Reliance Upon States to Initiate Budget - Coordinated Activity 
Plans for Carrying Out Program Action 
 
(Rev. 1, 05-21-04) 
 
States are encouraged to conduct their administrative affairs to harmonize, within broad 
Federal guidelines, with their own programmatic resources, recognized needs, and 
accustomed methods of operation.  State-initiated proposals are considered within certain 
  limits for adoption or approval by the CMS.  They are evaluated for efficiency in 
attaining program objectives, and for general administrative prudence and accountability. 
 
4006 - Interagency Subagreements 
 
(Rev. 1, 05-21-04) 
 
4006A - Authority 
 
(Rev. 1, 05-21-04) 
 
When an SA wishes to assign part of its responsibility to another State or local public 
agency or a private agency, the authority to seek such assignment is found in the 
agreements of State plans negotiated by the States and the Secretary of HHS in Article IV 
of the 1864 Agreement. 
 
With prior written authorization of the Secretary, the State may utilize the 
services, facilities, and records of any other State agency or any local 
governmental agency to assist the State survey agency in carrying out its 
functions authorized by this Agreement.  Only the reasonable and 
necessary costs incurred by such agencies in furnishing to the State survey 
agency such services, facilities, or records, may be allowed under this 
Agreement, in accordance with Article IX. 
 
4006B - Need for Subagreements With Public Entities 
 
(Rev. 1, 05-21-04) 
 
The consideration contained in subsection A.3 of the 1864 Agreement does not apply 
where use of individuals or services not an integral part of the SA are generally obtained 
by detail or reassignment within State government. Neither would the consideration 
contained in subsection A.3 apply where licensure responsibility is delegated to local 
entities, when a pattern of close administrative relationships has been established.  In 
such situations, no formal agreement is necessary, except where required by State 
practice.  The necessary costs of services are identified in the normal manner used by the 
SA for survey and certification activities. 
 
The fact that the activities are decentralized would not in itself require an assignment of 
responsibility, provided decentralization is an integral part of the SA.  If the SA has 
already established operating arrangements with the local agency under State law and 
supervises local health department activities, or generally oversees these activities 
through conditional financial assistance similar to Federal-State grants-in-aid, no formal 
agreement is needed, and the costs of the services should be identified and reported in the 
normal manner. 
 
  There may be situations, however, in which the SA finds it desirable to arrange for 
services which it would not directly supervise, but over which it would maintain a certain 
amount of control. This might occur when the SA wishes to delegate survey functions to 
a local health department, yet retain the authority to make final evaluation of 
recommendations and forward certifications to CMS. 
 
The SA would need to enter into an agreement with the local health department setting 
forth the responsibilities of both entities and enabling the department to be paid the 
necessary costs incurred in furnishing such services.  The SA includes such costs in 
estimates for advance of funds and in reports of its actual expenditures. 
 
4006C - Program Specialization of Tasks Performed by Subagreement 
Entity 
 
(Rev. 1, 05-21-04) 
 
Section 1902(a)(9) of the Act requires that the same SA that performs title XVIII 
certification functions must also be responsible for pursuing compliance in title XIX 
institutional standards.  Section 1902(a)(33) of the Act provides that the State health 
licensing agency (which may or may not be the same agency) determines for title XIX 
whether institutions meet the standards for participation.  The combined practical effect 
of these provisions is to require that the same SA make certifications for both titles XVIII 
and XIX.  However, in no way does this preclude division of functions for inspecting and 
providing consultation between different State components. The important thing is that 
the SA designated in the 1864 State Agreement has control and responsibility for both 
title XVIII certification recommendations and title XIX approval decisions in all cases.  
As long as this is the case, it does not matter that another State or local agency is 
designated to perform field functions as long as the following provisions are included: 
 
  A clear delineation of responsibilities and duties to be carried out by both parties; 
 
  Provision for the degree of supervision and control to be exercised by the SA; 
 
  Provision for payment by the SA on an approved cost basis; 
 
  A termination clause specifying the length of the agreement (normally one year, 
with provision for extensions as necessary); and 
 
  A statement acknowledging the applicability of the 1864 Agreement or State 
plan to the other agency which includes the following: 
 
All of the terms and provisions of the agreement or State plan 
between the State of (insert State) and the Secretary of Health and 
Human Services entered into (insert date), pursuant to 1864 or 
1902, respectively, of the Social Security Act, as amended, which 
are applicable to the (insert title of State agency) also shall be 
  applicable to the (insert title of other agency) in its performance on 
behalf of the (insert title of State agency) of the functions herein 
enumerated. 
 
In conformity with usual State practice, the format should make provision for signatures 
of representatives of the two contracting agencies.  Since the document relates to 
understandings reached at the State-local level, a representative of CMS should not make 
provision in the agreement for signature. 
 
When a suitable title XVIII agreement is negotiated, two copies of the agreement are 
forwarded to the CMS.  The CMS approval will be in the form of a separate letter from 
CMS and will constitute authorization for utilization of the other agencys services as 
provided in the agreement.  Approval from CMS must be obtained whenever such an 
agreement is renewed or renegotiated. 
 
4006.1 - Negotiating Subagreements With Non-Public Entities 
 
(Rev. 1, 05-21-04) 
 
This represents an unusual situation because arrangements with non-public organizations 
such as universities, hospital associations, etc., may create difficulties of program control.  
A unique problem might compel using a non-public agency.  However, an agreement 
with a non-public agency would require a more precise contract than the agreement that 
is considered sufficient with other governmental agencies.  Agreements with such 
agencies are not to be considered within the scope of the above sections.  This is due to 
their complexity, and the need to ensure that the results from such non-public services are 
acceptable from an appeals standpoint.  Not all SA agreements specify in 4006.A (A.3) 
that the services of non-public agencies can be utilized.  Accordingly, where this is 
lacking, the 1864 agreement must be modified before such a request could be approved. 
 
4007 - Assistance of CMS in SA Program Administration 
 
(Rev. 1, 05-21-04) 
 
The CMS RO is the representative of CMS Central Office (CO) in all certification 
functions and is responsible for: 
 
  Reviewing and recommending action on SA budget submittals; 
 
  Furnishing program guidance and policy interpretation to SA officials; 
 
  Coordinating communications with SAs, providers, and intermediaries on 
certification activities; and 
 
  Consulting on a regular basis with SAs for mutual assessment of program 
activities, achievement of stated objectives, and establishment of future goals. 
   
These functions are in addition to the CMS RO Directors responsibility for assessing the 
adequacy of SA documentation of title XVIII certification recommendations, monitoring 
SA title XIX certification decisions, making the determination of acceptance for 
participation, denial, and termination in the title XVIII program, and for recommending 
the same to the RO division responsible for Medicaid. 
 
Before approving State budget submittals, the RO considers the following: 
 
  Is the SAs plan of program activities appropriately related to the national aims 
and needs of CMS programs? 
 
  Is adequate provision made for deploying staff to accomplish these aims, and are 
the professional qualifications for these positions appropriate to the functions to 
be performed? 
 
  Do the workload and activity plans and the staffing estimates properly distribute 
emphasis upon recertification, administrative and coordinative planning, and 
efficient agency administration in terms of supervision, training, records control, 
and interdivisional relationships? 
 
  Does the budget request represent a consistent application and understanding of 
approved principles of reasonable cost to the SAs specific circumstances, are the 
requested funds proper, and has adequate provision been made for validating the 
costs to be charged to certification? 
 
  Have activities not falling under the purview of survey and certification functions, 
such as State licensure and medical review, been appropriately excluded? 
 
  Has the SA provided for the appropriate State match for title XIX FFP? 
 
4008 - Conflicts of Interest of SA Employees 
 
(Rev. 1, 05-21-04) 
 
(Also see 7202) 
 
Conflicts of interest may arise within the Medicare/Medicaid certification program when 
public employees utilize their position for private gain or to secure unfair advantages for 
outside associates. The gain involved may or may not be monetary.  Abuses of privileged 
information, abuses of influence, and other abuses of trust are included, regardless of 
whether a monetary advantage is gained or sought.  Almost all States have laws or 
regulations prohibiting, and providing punishment for, overt specific violations of public 
trust. 
 
  It is not possible to list all situations which could be construed as potential conflicts of 
interest in the certification process, but many would be among the examples in subsection 
A, below.  SA administrators should require employees to make a declaration of any such 
outside interests and update this declaration periodically.  The SA should evaluate the 
need for preventive measures to protect the integrity of the certification program.  In 
cases where certification work is performed by agencies other than the designated SA, the 
SA administrators and the subagency administrators have a shared responsibility for such 
surveillance. 
 
It is not necessary for the SA to inform the RO of all potential and apparent conflict 
situations.  However, if an overt abuse requires corrective action, the SA should inform 
the RO as described in subsection B, below. 
 
4008A - Examples of Potential Conflicts of Interest 
 
(Rev. 1, 05-21-04) 
 
The following are typical situations that may raise a question of possible conflicts of 
interest on the part of an agency employee representing the Medicare/Medicaid survey 
and certification program: 
 
  Participation in ownership of a health facility located within the employing State; 
 
  Service as a director or trustee of a health facility; 
 
  Service on a UR committee; 
 
  Private acceptance of fees or payments from a health facility, group of health 
facilities, or association of health facility officers for personal appearances, 
personal services, consultant services, contract services, referral services, or for 
furnishing supplies to a health facility; 
 
  Participation in a news service disseminating trade information to a segment of 
the health industry; and/or 
 
  Having members of ones immediate family engaged in any of the above 
activities, other than non-managerial employees of health facilities. 
 
4008B - Report and Investigation of Improper Acts 
 
(Rev. 1, 05-21-04) 
 
State codes should provide judicial or administrative remedies for abuses of influence, 
privileged information, or trust arising through conflicts of interest.  Any acts of 
employees in violation of State laws or regulations should be handled in accordance with 
applicable State procedures.  When there appears to be Medicare/Medicaid program 
  involvement, the SA immediately reports this to CMS and keeps it advised of corrective 
actions.  Also, the SA requests assistance or advice on any case of an impropriety 
involving conflicts of interest that cannot be handled immediately under an applicable 
State procedure.  The regional OIG, along with the RO, will work in close cooperation 
with the responsible State officials to resolve the matter. 
 
4009 - Federal Surveyor Qualifications Standards 
(Rev. 1, 05-21-04) 
 
(Also see 7201) 
 
In accordance with the Personnel clause of the State agreement, SA personnel must be 
under a merit system that meets Federal standards.  Minimum standards specifically 
applicable to surveyors for Medicare and Medicaid Programs are as follows: 
 
4009A - Persons Covered 
(Rev. 1, 05-21-04) 
 
The term surveyor means a person who investigates, evaluates, and/or makes official 
reports of situations and conditions in a health facility, and who determines the degree to 
which the facility meets specific criteria contained in regulations issued pursuant to titles 
XVIII and XIX of the Act. 
 
4009B - Health Professional Qualifications 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
To perform the surveyor functions requires an appropriate background in the health 
professions or health administration, in addition to basic investigative skills.  Therefore, 
one element in the standard is that the surveyor be qualified in one of the following 
professions: 
 
  Hospital administrator; 
 
  Industrial hygienist; 
 
  Laboratory or medical technologist, bacteriologist, microbiologist, or chemist; 
 
  Medical record librarian; 
 
  Nurse; 
 
  Nursing home administrator; 
 
  Nutritionist; 
 
    Pharmacist; 
 
  Physical Therapist; 
 
  Physician; 
 
  Qualified Intellectual Disabilities Professional; 
 
  Sanitarian; 
 
  Social worker; or 
 
  Any other professional category used within State merit systems for health 
professional positions, provided the State has determined the position 
classification skill level to be commensurate with any of the above professions. 
 
This does not mean that the surveyor must belong to a professional organization or have 
prior work experience in the profession.  It means that he/she must satisfy necessary 
requirements to be employed in one of these specialties by the State. 
 
4009C - Education, Training, and Experience 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
To assure that individuals have the necessary knowledge, skills, and abilities to carry out 
survey functions, the following prerequisites apply: 
 
  The amount of academic education required is that which is necessary to qualify 
in a profession listed in 4009B; 
 
  Newly hired surveyors must successfully complete an orientation program 
approved by CMS that includes the core elements of the CMS-developed 
orientation program. (See Exhibit 42.)  The CMS provides this program for 
Federal surveyors and the States provide it for theirs; 
 
  The CMS and States assure that the health facility surveyors, laboratory 
surveyors, and Life Safety Code (LSC) surveyors have successfully completed, 
within the first 12 months of employment, the basic surveyor training course 
developed under CMS auspices, including all course prerequisites.  LSC 
surveyors are required to complete a LSC basic course (there is self-paced 
training on a CD-ROM as a prerequisite).  No individual may serve on a survey 
team until he or she fulfills this requirement, except as a trainee who is 
accompanied onsite by a surveyor, who has successfully completed the required 
training and testing program;  
 
  In States implementing the Quality Indicator Survey (QIS) process to determine if 
Medicare and Medicaid certified nursing homes meet the Federal participation 
  requirements, additional training in QIS as described below at 4009F must be 
completed. 
 
  Before any State or Federal surveyor may serve on a survey team (except as a 
trainee) for an ICF/IID, ESRD facility, HHA, or Hospice survey, he/she must 
have successfully completed the relevant provider-specific Basic course and any 
course prerequisites; 
 
  Some State position classifications may require additional education, training, and 
experience as State minimums, as requirements for promotion, or entry at a higher 
scale of position classification; and 
 
  SAs must have a mechanism to identify and respond to the in-service training 
needs of the surveyors. 
 
4009D - Evaluation 
(Rev. 1, 05-21-04) 
 
The surveyor must demonstrate ability to perform the essentials of the survey function, 
including knowledge of new or changing Federal regulations as obtained through 
continuing education sponsored by CMS or the State.  All survey and certification staff 
must attend job-related training courses annually. 
 
4009E - Implementation 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
Surveyors are considered qualified if: 
 
  They undergo the training prescribed in the second and third bullets and, if 
applicable, in the fourth bullet for QIS States in 4009C.  Personnel are regarded 
as being in an associate or apprentice capacity until such time as they meet these 
training requirements; and 
 
  They either devoted 50 percent or more of their working time to Medicare and/or 
Medicaid survey activities or meet the professional qualifications for positions 
described in 4009B; 
 
  Associates and others who are not qualified surveyors may continue to participate 
as members of survey teams.  However, teams must include one qualified 
surveyor who has responsibility for completing and signing the survey report and 
for the accuracy of the surveys conducted by associate or apprentice surveyors. 
 
4009F - Quality Indicator Survey (QIS) Training Process 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
  CMS is implementing the Quality Indicator Survey (QIS) which is a computer-assisted 
long term care survey process used by selected State Survey Agencies and CMS to 
determine if Medicare and Medicaid certified nursing homes meet the Federal 
requirements.  The QIS is a federally-approved process for surveying nursing homes and 
it includes the use of computer technology that is not utilized in the traditional survey 
process.  National implementation of the QIS is progressing State-by-State as resources 
are available to conduct training of State and Federal surveyors.  Once a State is selected 
by CMS to implement the QIS, the time frame for achieving statewide QIS 
implementation can range from one to three years.  The rate at which implementation 
occurs is dependent upon the number of surveyors needing QIS training and other issues 
as determined by the State.  Therefore, until all nursing home surveyors in a selected 
State have received training in the QIS process, some nursing homes will continue to 
receive the traditional survey to determine compliance with Federal participation 
requirements. 
 
The standards outlined in this section apply to all State Survey Agencies (SAs) 
implementing the QIS and their respective CMS Regional Offices (ROs).  Only CMS-
approved QIS surveyor training course material will be used to train surveyors and 
trainers.  The CMS-approved QIS training materials (with CMS logo) include the 
procedures, processes, and forms that are used to support the QIS process. 
 
CMS has approved the training entity to conduct the initial QIS training of selected State 
and CMS RO surveyors and the subsequent training of a States designated QIS trainers.  
Surveyors who successfully complete all QIS training components will be recognized as 
Registered QIS Surveyors.  From the pool of initial Registered QIS Surveyors who 
have successfully completed at least six QIS surveys of record, individuals will be 
selected by the SA to receive additional training to become CMS-Certified QIS 
Trainers.  (The approved CMS training entity certifies to CMS that these individuals 
have met the requirements to train surveyors on the QIS process.)  The CMS-Certified 
QIS Trainers provide QIS training to the remaining nursing home surveyors in their State. 
 
4009F.1 - Orientation and Training of Newly Employed Surveyors in a 
State Implementing the QIS 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
Each QIS State determines if a newly hired surveyor will be trained in the QIS process or 
the traditional survey process, and this determination will be based on the manner in 
which a QIS State is implementing the QIS.  Implementation of the QIS process in a 
State does not replace or alter the requirements that a newly employed surveyor must be 
oriented to the nursing home survey process, successfully complete the Basic Long Term 
Care Health Facility Surveyor Training Course (BLTCC), and receive a passing score on 
the Surveyor Minimum Qualifications Test (SMQT). 
 
In a QIS State, if a newly hired surveyor is being oriented to the QIS process, the 
preceptor assigned to this surveyor is both SMQT qualified and a Registered QIS 
  Surveyor.  The preceptor performs the same responsibilities as a preceptor of a newly 
hired surveyor in a State using the traditional survey process. 
 
As part of the field experience in the States orientation to the QIS process of a newly 
hired surveyor and prior to attending the formal QIS classroom training, the newly hired 
surveyor in a QIS State should: 
 
  Receive training in basic computer skills (including data management using 
Folders, Import/Export functions and Microsoft Word); 
 
  Observe one or more QIS surveys to gain exposure to the QIS process; 
 
  Complete QIS survey tasks under the direct supervision of the preceptor to the 
extent that the preceptor is confident that the newly employed surveyor 
understands the QIS  process; and  
 
  Attend the formal QIS training at the point in time that the State determines the 
newly employed surveyor is prepared to begin QIS training. 
 
The QIS training includes several required components described below.  It is not a 
requirement that the newly hired surveyor be SMQT qualified prior to participating in 
QIS training components.  Successful completion of all QIS training components will 
culminate in the student becoming a Registered QIS Surveyor.  The designation as 
Registered QIS Surveyor indicates that the newly hired surveyor successfully 
completed the QIS training and is registered in the CMS Survey & Certification Learning 
Management System (LMS).  The newly hired Registered QIS Surveyor continues to 
work as part of the team under an SMQT qualified and Registered QIS Surveyor 
preceptor. 
 
The newly hired surveyor who is a Registered QIS Surveyor meets the same 
requirements as a newly hired surveyor in a State that is not yet implementing the QIS 
process.  Specifically, the newly hired surveyor must successfully complete the Basic 
Long Term Care Course (BLTCC) within the first year of employment and receive a 
passing score on the SMQT to independently (that is, without supervision of an SMQT 
qualified surveyor) survey nursing homes to determine compliance with the requirements 
of participation. 
 
In a QIS State that has fully implemented the QIS process or has otherwise determined 
that the newly hired surveyor would be oriented to the nursing home survey process via 
the QIS and not the traditional process, it is expected that newly employed surveyors 
would complete the requirements and become Registered QIS Surveyors before attending 
the BLTCC. 
 
4009F.2 - Training Process: Registered QIS Surveyor 
 
  (Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
The initial QIS training process in a newly selected State begins with the training of two 
core survey teams of four surveyors each.  The initial QIS training is conducted by the 
CMS-approved training entity.  The initial core group selected in a State Survey Agency 
(SA) implementing the QIS must: 
 
  Have a minimum of two years of recent long term care (LTC) survey experience;  
 
  Have received a passing score on the SMQT; 
 
  Possess strong leadership ability and/or prior experience as a trainer or teacher; 
and  
 
  Possess intermediate computer skills. 
 
Every SA or CMS RO surveyor must successfully complete prescribed training 
components to be considered a Registered QIS Surveyor whether the training is provided 
initially by the CMS-approved training entity or subsequently by a SA or RO CMS-
Certified QIS Trainer.  The training of surveyors in the QIS process includes all of the 
following components: 
 
  Web-based Lessons - Surveyors will initially complete a short series of Web-
based learning modules prior to participation in the classroom training.  The 
designated Web-based modules provide background information, a general 
overview of the QIS process, and an introduction to the QIS specific software. 
 
  Classroom Training - The classroom training uses the CMS-approved QIS 
surveyor training course manual, which incorporates various media presentations, 
lectures, exercises, computer tutorials, and discussions.  Generally, each class will 
be comprised of 8 surveyor-students (2 teams of 4 surveyors each).  In the case 
that a SA wishes to have more than 8 surveyors in one class at a time, 
consideration should be given to constructing teams of 4 surveyors each to assure 
there are a sufficient number of instructors to accompany each team on its mock 
survey and surveys of record.  Class size will be determined by the State in 
consultation with the CMS training entity.  If the State wishes to train additional 
survey teams initially, the State is expected to bear the expense and to make 
arrangements with the CMS training entity. 
 
During the initial round of QIS training of core surveyors in a State, the State will 
assure that at least one first-line supervisor/manager with responsibility for QIS 
surveys and an informational technology (IT) staff person receives training in the 
QIS training process.  Additional training for the IT staff member is provided.  
The QIS utilizes the QIS Data Collection Tool (DCT) software.  Therefore, it is 
essential that the States IT staff be available immediately either on site at the 
nursing home or by telephone to support the training activities conducted in the 
  field.  In addition, the CMS-Certified QIS Trainer must be able to assist students 
in resolving technical issues. 
 
  Mock Training Survey - Immediately upon completion of the QIS classroom 
training portion, surveyors will be organized into two survey teams (of about four 
surveyors each) and each team will participate in a mock, or simulated, survey in 
a nursing home using the QIS process. 
 
The mock training survey is a learning opportunity and not a survey of record.  
During the mock training survey, two trainers (the trainers may be CMS-Certified 
QIS Trainers or the CMS-approved training entity) are present and work with the 
survey teams to assure that the surveyors understand and implement the QIS 
process correctly.  The trainers will identify problems, if any, in the surveyors 
adherence to the procedures and correct any problems identified.  If there is a 
concern with the implementation of the QIS process by the surveyors, an 
additional mock survey would be conducted.  A surveyor would not conduct 
surveys of record until instructor staffs are satisfied that the surveyor can 
independently conduct survey activities using the QIS.  If necessary, additional 
classroom training or mock surveys would be conducted as a remediation activity 
before conducting surveys of record using the QIS process.  The State Survey 
Agency bears the expense of any further remediation activities required beyond 
the first remediation visit provided in the CMS contract with the CMS training 
entity. 
 
  Surveys of Record with Compliance Assessments - Surveys of record will be 
conducted following the successful completion of the mock survey(s).  During the 
first survey of record, two trainers (the trainers may be CMS-Certified QIS 
Trainers or the CMS-approved training entity) are present to assess the surveyors 
compliance with the QIS process and evaluate the extent to which surveyors are 
adhering to QIS procedures.  The first compliance assessment will be conducted 
during each surveyors first survey of record.  The second compliance assessment 
will be conducted usually during the second survey of record or, after one 
intervening survey (that is, during the third survey of record). 
 
There should be no more than one intervening survey of record between the first 
and second compliance assessment.  Surveyors must pass two consecutive 
compliance assessments to become Registered QIS Surveyors.  If a surveyor fails 
either of the two compliance assessments, additional compliance assessments will 
be conducted until there are two successful consecutive assessments.  If additional 
compliance assessments are conducted by the CMS training entity, the State will 
bear the additional expense of this activity. 
 
The rate of a States QIS implementation and the availability of State resources may 
allow a State the ability to provide experienced and SMQT qualified surveyors an 
opportunity to observe an actual QIS survey before attending the required QIS training. 
 
  4009F.3 - Training Process:  CMS-Certified QIS Trainer 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
Trainer-candidates will be selected from the two core survey teams initially trained in 
QIS by the CMS- approved training entity.  The CMS-Certified QIS Trainers function as 
a training team of two persons and provide QIS training to the States remaining nursing 
home surveyors.  CMS expects that each State will have a minimum of two training 
teams composed of two CMS-Certified QIS Trainers on each team.  If a State wishes to 
have more than the initial 4 trainers, the State bears the expense of training the additional 
two person teams as QIS trainers for the State.  In the event that a trainer-candidate fails 
any component of the training, the costs associated with remediation training for QIS 
trainer-candidates are the responsibility of the SA. 
 
Those selected to become CMS-Certified QIS Trainers must: 
 
  Be Registered QIS Surveyors; 
 
  Have participated in at least six QIS surveys of record; and  
 
  Developed sufficient mastery of the QIS process to serve as an instructor/trainer. 
 
To become a CMS-Certified QIS Trainer, the selected Registered QIS Surveyors must 
successfully complete the following training components, under the tutelage of the CMS 
training entity: 
 
  Train-the-Trainer Workshop - Trainer-candidates will participate in a 4-day train-
the-trainer workshop, which will be held in a classroom setting by the State.  Led 
by the CMS-approved training entity, this workshop will provide trainer-
candidates specialized background information and knowledge of the QIS, 
including in-depth training on the QIS Data Collection Tool (DCT), classroom 
and onsite facilitation techniques, optimal use of the QIS process, protocols for 
assessing onsite compliance with the QIS process, and preparation for questions 
frequently asked by surveyors. 
 
  Instruct One Class of Surveyor-Students - Generally, four trainer-candidates will 
provide classroom training to a class of approximately eight surveyor-students 
with CMS training entity staff observer(s) participating at the classroom session.  
The class size may vary; however, the number of surveyors trained in the QIS 
process is dependent on the trainers ability to perform all of the training steps in 
a timely manner.  The training components include classroom instruction, mock 
survey, two successful compliance assessments, and remediation training, if 
necessary.  The QIS classroom training session will be conducted as follows: 
 
    Presentations and instruction are rotated to provide the CMS training entity 
staff multiple opportunities for observation and evaluation of the trainer-
candidates delivery of the QIS training to surveyor-students.  
 
  Each trainer-candidates performance during the classroom training will be 
evaluated on knowledge of the QIS, QIS computer skills, ability to articulate 
QIS concepts to the group, and ability to answer questions from the class. 
 
  The surveyor-students will evaluate the trainer-candidates and these 
evaluations will be considered in addition to the CMS training entitys 
evaluation of each trainer-candidate. 
 
  Each of the four components of performance will be rated on a Pass/Fail basis.  
If a trainer-candidate fails any one of the four topic areas, he/she fails the 
classroom training component of the trainer certification process. 
 
  Evaluations of Surveyor-Students During Mock Surveys  Each mock survey 
will include two trainer-candidates and four surveyor-students (generally), 
accompanied by the CMS training entity staff.  Each trainer candidate will be 
evaluated by the CMS training entity on QIS knowledge, QIS computer skills, 
ability to answer individual questions, and organizational skills.  Evaluations 
will be rated on a Pass/Fail basis; and failure of any of the four components 
will result in failure on the mock survey training component of the trainer 
certification process. 
 
  Oversight of First Survey of Record with Compliance Assessment  The first 
survey of record will be comprised of two trainer-candidates, usually four 
surveyor-students, and one or two CMS training entity staff.  Each trainer-
candidate will be evaluated by the CMS training entity based on individual 
QIS knowledge, QIS computer skills, and the ability to apply the CMS-
approved compliance assessment and use of forms to conduct the first 
compliance assessment of surveyor-students.  Evaluations of the trainer-
candidates will be rated on a Pass/Fail basis, and failure on any of the three 
components will result in failure on the survey of record component of the 
trainer certification process. 
 
In summary, as described above, the training approach developed for QIS requires 
surveyors in each State to first master the QIS process and become Registered QIS 
Surveyors.  The trainer-candidates must have conducted QIS surveys of record and 
achieved proficiency with the QIS.  The trainer-candidates must have completed an 
intensive train-the-trainer workshop.  Through these processes, the States trainer-
candidates have developed a unique body of knowledge and achieved a level of expertise 
that they will pass on to surveyor-students in the classroom and in the other training 
components. 
 
  Many QIS surveyor-students participating in the training process are seasoned SMQT-
qualified surveyors, supervisors, or RO staff, all with proven proficiency in the traditional 
survey process.  However, in the QIS classroom training, mock survey, and survey of 
record with compliance assessment, the QIS surveyor-students are the learners.  To 
optimize the learning experience, it is essential that the surveyor-students be open-
minded about the QIS process and respect the leadership and expertise of the CMS-
Certified QIS Trainers and QIS trainer-candidates.  The training process includes the 
requirement that the QIS trainer-candidates conduct evaluations of the surveyor-students 
use of the QIS process.  These evaluations are not intended to critique the surveyor-
students skills but rather to ensure the consistent and accurate implementation of the QIS 
process as approved by CMS. 
 
The CMS-Certified QIS Trainer status awarded to each individual who has successfully 
completed the QIS trainer program remains in effect as long as the individual is actively 
involved in the QIS process.  To be considered actively involved, the CMS-Certified QIS 
Trainer is expected to conduct a minimum of two SA QIS trainings of all components 
(classroom, mock, compliance assessments) per year or participate as a survey team 
member in at least one QIS survey per quarter.  A trainers name will be removed from 
the LMS as a CMS-Certified QIS Trainer if the individual is not actively involved. 
 
4009F.4 - Documentation of Successful Completion of Training 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
The CMS Survey and Certification Learning Management System (LMS) tracks the 
successful completion of training as a Registered QIS Surveyors and the successful 
completion of training as a CMS-Certified QIS Trainers.  Completion of the QIS 
training requirements for surveyors and trainers must be timely documented in the LMS 
so that surveyors can conduct QIS surveys. 
 
4009F.5 - CMS Regional Office Staff Participation in QIS Training 
 
(Rev. 39, Issued: 12-19-08, Effective: 12-19-08, Implementation: 12-19-08) 
 
The number of States implementing the QIS in each particular CMS Regional Office 
(RO) will determine the number of RO surveyors to receive QIS training.  At least two 
RO SMQT-qualified long term care surveyors are expected to participate as students in a 
States QIS training; however, the two RO surveyors need not participate at the same QIS 
training session.  The selected RO surveyor(s) will travel to the State within their region 
that is conducting the QIS training.  The CMS training entity is present during the first 
cycle of QIS training conducted by the State's trainer-candidates and this may be an 
opportune time for RO surveyor participation. 
 
The RO surveyors nominated to complete QIS training to become Registered QIS 
Surveyors should have: 
 
   Have a minimum of 2 years of recent long term care survey experience; 
 
 Have received a passing score on the SMQT; 
 
  Possess strong leadership ability and/or prior experience as a trainer or teacher; and  
 
 Possess intermediate computer skills. 
 
The RO surveyors are students and participate in all components of the QIS training 
process  including classroom, mock survey, compliance assessments, and six surveys of 
record (conducted consecutively if possible, to maximize learning and minimize 
disruption).  The two compliance assessments of the RO surveyors will be conducted by 
the States QIS trainer-candidates.  It is expected that the two RO surveyors will each be 
embedded with a different State survey team (one RO surveyor per State QIS team).  By 
being embedded, the RO surveyor will participate as a member of the team, receiving 
survey assignments and carrying out the same survey functions as other members of the 
team.  The RO surveyor who is learning the QIS process will also need to become 
proficient performing some of the team coordinator functions such as, using the primary 
laptop.  The RO surveyors will receive the same QIS training as SA surveyors to become 
Registered QIS Surveyors. 
 
In the future, the ROs Registered QIS Surveyors must complete the same QIS training 
process as the States Registered QIS Surveyors to become CMS-Certified QIS Trainers.  
A CMS consortium may decide to develop a blended training team consisting of two RO 
Registered QIS Surveyors from different ROs within the consortium to receive training to 
be CMS-Certified QIS Trainers. 
 
As the CMS training entity instructs initial core teams of surveyors, supervisors, and IT 
staff in new States, a CMS RO informational technology (IT) expert should participate 
with the States IT experts in receiving the specialized QIS IT training. 
 
4009.1 - Federal Minimum Qualification Standards for LTC Facility 
Surveyors 
 
(Rev. 1, 05-21-04) 
 
Sections 1819(g)(2)(C)(ii), 1819(g)(2)(E)(iii), 1919(g)(2)(C)(ii), and 1919(g)(2)(E)(iii) of 
the Act require that individual members of long term care (LTC) survey teams meet 
minimum qualifications established by the Secretary and successfully complete a training 
and testing program in survey and certification techniques.  In addition, LTC surveyors 
must successfully complete a training and testing program, which includes the Surveyor 
Minimum Qualifications Test (SMQT). 
 
  4009.1A - Purpose 
 
(Rev. 1, 05-21-04) 
 
The SMQT is part of the training and testing program and addresses the knowledge, 
skills, and abilities (KSAs) needed to conduct standard and extended surveys in LTC 
facilities. 
 
4009.1B - Prerequisites 
 
(Rev. 1, 05-21-04) 
 
Prior to taking the SMQT, a LTC surveyor must complete the CMS Orientation Program, 
and the Basic Long Term Care Health Facility Surveyor Training Course. 
 
4009.1C - Test Composition 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
  The Surveyor Minimum Qualifications Test (SMQT) is a 1 day 4 hour automated 
test which focuses on the LTC facility, the survey process, related laws, 
regulations and guidelines, environmental quality, sanitation, resident assessment 
and care plans, facility records, medicine, nursing, rehabilitation, gerontology, 
disability, chronic disease, resident rights, quality of life, nutrition, pharmacy, 
infection control, scope, and severity.  The test also focuses on skill in 
documenting, gathering, and integrating information. 
 
4009.1D - Successful Performance 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
Successful Completion 
 
An individual must successfully complete the SMQT in order to survey independently.  A 
surveyor can serve as a member of a survey team with at least one surveyor who has 
successfully completed the required training, but cannot survey independently until the 
surveyor has successfully completed the SMQT. 
 
4009.1E - Unsuccessful Performance 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
1.  Unsuccessful Completion  
 
  Individuals who do not successfully complete the SMQT must retake the examination 
until they are successful.  Alternate procedures for meeting surveyor minimum 
qualifications in rare and extraordinary circumstances are specified in 4009.l.E.3.  If a 
surveyor fails to successfully complete the SMQT, the State Survey Agency (or, if a 
federal surveyor, the RO) must develop an individual training plan (ITP) for the surveyor 
to correct deficiencies.  The components of the ITP are specified in 4009.1.E.2.  During 
this period, the surveyor may participate in surveys as a trainee, i.e., the surveyor must be 
accompanied onsite by a surveyor who has successfully completed the training and 
testing program. 
 
2.  Individual Training Plan (ITP) 
 
The ITP must have the following components: 
 
  Individual training objectives that address the area of deficiency identified by the 
training and testing program; 
 
  A plan to meet training objectives; 
 
  A schedule for meeting these objectives; and 
 
  Someone designated to monitor the progress of the individual toward meeting 
these objectives. 
 
Upon completing the ITP, the surveyor must retake the SMQT. 
 
3.  Rare and Extraordinary Circumstances 
 
If the SA considers an individual to be a highly qualified LTC surveyor and that 
individual does not successfully complete the SMQT after three attempts, the State 
Survey and Certification Director may petition the RO for an exception to the 
requirement of passing the SMQT for the individual.  The State must include at least the 
following documentation in its request for an exception: 
 
  A rationale as to why this individual has not successfully completed the SMQT;  
 
  Attestation by the State Survey and Certification Director that the individual for 
whom the request is being made is a highly qualified LTC surveyor; and 
 
Evidence that the individual has full understanding of LTC requirements, guidelines, 
and survey procedures, and has applied them accurately, consistently, and 
effectively when conducting LTC surveys or accompanying the survey team.  
This evidence may consist of documentation of onsite evaluations of the 
surveyors performance by experienced surveyors, including supervisors. 
 
 
  4009.2 - Test Administration/Registration 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
The SMQT is administered at over 200 testing centers located throughout the United 
States.  Each testing center determines their specific hours of operation; however, all 
testing centers are open at least 16 hours each week, with most open 32 to 40 hours. 
 
4009.2A - State Agency (SA) Registration Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
State Agency (SA) registration responsibilities areas are as follows: 
 
  SAs work with the surveyors to determine when and where they will take the 
SMQT; 
 
  At least 4 weeks before the preferred test date, the SA submits surveyor 
information on the State Candidates SMQT Roster Sheet to the SMQT 
contractor and the RO and lists three possible dates and times for each surveyor 
to take the test; 
 
  At least 3 weeks before the test date, and once the SA is notified that the SMQT 
contractor has contacted the testing center and put the surveyors names on the 
eligible list, the SA calls the testing center to schedule the SMQT for surveyors; 
 
  Within 24 hours of registration, the SA notifies the surveyor of the date, time, 
and location of their test; and 
 
States must ensure that surveyors or surveyors supervisors call the testing center to 
cancel the appointment at least 24 hours before the scheduled testing time if the 
surveyor cannot take the SMQT at the designated time.  If cancelled less than 24 
hours in advance, CMS will be charged.  The contractor and the RO must be 
notified of all cancellations. 
 
  4009.2B - Regional Office (RO) Registration Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
Regional Office (RO) registration responsibilities are as follows: 
 
  ROs must ensure that they receive the SMQT State Candidates Roster Sheet 
when surveyors are registered to take the SMQT; 
 
  ROs must ensure that States follow the established procedures for registering 
surveyors to take the SMQT; and 
 
ROs must share with the States any updates or changes to the SMQT procedures or 
policies conveyed to them. 
 
4009.2C - Contractor Registration Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
Contractor registration responsibilities are as follows: 
 
  Within 3 days of receipt of the SMQT State Candidates Roster Sheet, the 
SMQT contractor registers surveyors listed on the roster with the testing center; 
and 
 
  The SMQT contractor notifies the SA of successful registration. 
 
4009.2D  Testing Center Registration Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
Testing center registration responsibilities are as follows: 
 
  When the SMQT contractor contacts the testing center to register a surveyor as 
eligible, the testing center representative puts the surveyors name on the list of 
eligible surveyors; and 
 
The testing center and the SA immediately notify surveyors of the date, time, and 
location for testing. 
 
4009.3 - Additional Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
  4009.3A - Additional SA Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
The SA has the following additional responsibilities: 
 
  Approving, training, and monitoring training programs; 
 
  Distributing SMQT related materials, including any updates or changes to 
the SMQT procedures and policies as conveyed to them by the RO; 
 
  Distributing test results to individual surveyors; 
 
  Approving, coordinating, and monitoring training programs for individuals 
who do not successfully complete the test; and 
 
Maintaining records of the State surveyors progress toward successful completion of the 
training and testing program in each LTC surveyors personnel file.  This record should 
include information specified in 4009.4.A.  Do not destroy SMQT records. 
 
  4009.3B - Additional RO Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
The RO has the following additional responsibilities: 
 
  Distributing SMQT related materials to Federal surveyors; 
 
  Notifying Federal surveyors of dates, times, and locations for testing; 
 
  Informing Federal surveyors of test results; 
 
  Approving, coordinating, and monitoring implementation of training 
programs for RO surveyors who do not successfully complete the test; and 
 
  Maintaining records of Federal surveyors progress toward successful 
completion of the training and testing program in each RO LTC surveyors 
personnel file.  This record should include information specified in 
4009.4.A.  Do not destroy SMQT records. 
 
4009.3C  Surveyor Responsibilities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
Test Procedures and Security 
 
Each individual participating in the test must adhere to testing procedures established by 
the testing center, the RO, and the State. 
 
4009.4 - Test-Related Activities 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
4009.4A  Recordkeeping 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
The SA will use a standardized format to structure an SMQT record for each LTC 
surveyor.  The SA uses this format to track implementation of the training and testing 
program and the progress of individual surveyors toward its completion.  The RO will 
use this format for Federal surveyors.  Each record must include at least the following: 
 
     Full name; 
 
  Surveyor identification number; 
 
  Entry on duty date; 
 
  Date the individual completed prerequisite requirements for the SMQT; 
 
  Date(s) the individual took the SMQT, dates of retests; and 
 
  Date of successful completion of the SMQT. 
 
These records should not be destroyed under any circumstances and are confidential. 
 
4009.4B  Training of Surveyors That Do Not Pass the SMQT 
 
(Rev. 23, Issued:  01-19-07; Effective/Implementation Dates:  02-20-07) 
 
The SA develops a standardized plan to provide training for those surveyors who do not 
successfully complete the SMQT, (e.g., onsite observation of survey team, independent 
study, continuing education).  The plan should address how the SA identifies the most 
effective approach for each individual in training, and how it manages the individuals 
progress. 
 
4010 - SA Annual Activity Plan 
 
(Rev. 1, 05-21-04) 
 
The SA with its budget request submits the annual activity plan; a description of planned 
program activities for the ensuing fiscal year. This enables CMS to assess the adequacy 
and appropriateness of the programs planned by the State and match those activities 
against the accompanying State budget. 
 
4011 - SA Planning Annual Workload 
 
(Rev. 1, 05-21-04) 
 
The need for professional skills and additional personnel can only be ascertained after the 
workload is identified and a plan for accomplishing the work is outlined.  Since the 
survey and certification program requires that health facilities be surveyed according to 
an established coverage level (with leeway permitted to spread the workload, and to 
integrate it with other programs, where feasible), the SA should find it helpful to set goals 
by numbers and categories of facilities.  The activity plan should establish a program that 
will permit survey and certification work to be done on an orderly basis throughout the 
year with a workload distribution as even as possible.  Additional workloads caused by 
  amendments to title XVIII or title XIX of the Act are to be treated as separate workload 
items. 
 
The SA checks the range of activities projected for the budget year to identify possible 
questions relating to survey and certification requirements.  If it appears questions would 
arise, include sufficient details in the activity plan on activities to show justification for 
survey and certification program support. 
 
The State Survey Agency Certification Workload Report, Form CMS-434 (see 
Exhibit 52), is the vehicle for identifying the number of facilities to be surveyed during 
the year. It must be furnished by the SA as a supplement to the narrative activity plan in 
order to permit evaluation of the plan in recognition of the quantity and types of work to 
be accomplished. 
 
In addition to the numbers of surveys entered on Form CMS-434, there is data available 
on the number of instances of certification deficiencies that the SA has identified relative 
to each of the Conditions of Participation (CoPs).  The SA cites the data in the narrative 
work plan, as appropriate, to show the SAs need to engage consultants in particular 
specialty areas or to explain why the SA requests the Secretarys concurrence to give 
selective emphasis to particular facets of program activity. 
 
4018 - Regulatory Role of Surveyor and Consultant 
 
(Rev. 1, 05-21-04) 
 
(Also see 2727, and Appendix P  Section 9) 
 
The survey and certification process is intended to ascertain whether providers and 
suppliers meet program participation requirements.  Therefore, the primary role of the 
surveyor is to assess the quality of care and services and relate those findings to statutory 
and regulatory requirements. 
 
When deficiencies are found in the course of a survey, the surveyor should explain to the 
provider what the deficiency is in terms specific enough to allow a reasonably 
knowledgeable person to understand why the requirement is not met.  In many situations, 
the explanation of the deficiency itself provides the necessary information needed to 
correct the problem.  This is not considered to be consultation. 
 
However, in some instances there may be several possible causes for the deficiency, and 
it is for these situations that the policy for not providing consultation is intended.  It is not 
the surveyors job to examine the facilitys policies and procedures to determine or 
speculate on the root cause of deficiencies, or to sift through various alternatives to 
prescribe one acceptable remedy.  In these situations, the provider is responsible for 
determining the most feasible and economical way of achieving compliance. 
 
  On resurvey, the surveyors task is to ascertain whether compliance has been achieved 
and not whether the provider did what the surveyor recommended.  Thus, in reviewing a 
proposed PoC, the SA reviews the plan only for effectiveness and timeliness. 
 
Surveyors should be willing to explain the requirements and why something is a 
deficiency. For example, if a provider is cited for maintaining incomplete clinical 
records, the surveyor is to specify what is missing, not why it is missing or what process 
is best for ensuring that the records are complete in the future.  Under no circumstances 
should a data tag or a reiteration of the regulations be used as a substitute for an 
explanation. 
 
The SA staff should be willing to work with all groups in its State if such discussions or 
meetings lead to more meaningful surveys or an overall improvement in compliance by 
providers and suppliers. 
 
4055 - Ordering CMS Forms and Literature 
 
(Rev. 1, 05-21-04) 
 
The Chief of the Printing Management Branch at CMS CO sends an order form to each 
SA every 6 months.  The SA head may request a supply of forms and CMS literature 
sufficient to meet anticipated needs within the agency and for any necessary 
redistribution by the agency.  Also, as new forms are devised, he/she arranges for a 
simultaneous advance shipment.  Estimate the number of copies of new materials needed 
before the next regular six-month supply period and request that number directly.  
Shipments are by parcel post or bill of lading (never C.O.D.). 
 
The SA should maintain an adequate supply of each required form and publication until it 
becomes obsolete.  The SA submits interim orders any time that a supplemental supply is 
needed.  However, since it takes approximately four weeks to fill and ship an order, the 
SA should submit a reorder while an eight or ten-week supply is on hand. 
 
Address any contacts regarding the ordering of public literature or forms to: 
 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard - South Building 
Elizabeth Ostrowski 
Form Management Specialist 
Baltimore, Maryland  21244-1850 
 
Phone:  (410) 786-7863 
 
NOTE:  If the SA receives any shipment or mailing of materials in error, do not return 
them without first contacting the Forms Management Specialist for instructions. 
 
  Address any contacts regarding the ordering of the SOM to: 
 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard - South Building 
Linda Douglas 
Baltimore, Maryland 21244-1850 
 
Phone:  (410) 786-7860 
 
   
  Office of Management and Budget (OMB) Approval 
of Information Collected from the Public 
 
4060 - Approval of Information Collected From Public by SAs - General  
 
(Rev. 1, 05-21-04) 
 
The Paperwork Reduction Act (PRA) was enacted on December 11, 1980.  Section 3512 
of the Act stipulates that no member of the public may be penalized for failing to 
maintain or provide information to any agency if the information collection request does 
not display an approval number from OMB or does not state that such request is not 
subject to the PRA.  The term agency includes executive departments (such as CMS) 
and their contractors (such as intermediaries, carriers, and SAs).  The term public 
includes all entities that are not employees of or contractors to the Federal government.  
For CMS purposes, the public includes health care providers, suppliers, physicians, 
beneficiaries, QIOs, and SMAs.  
 
The CMS forms originating from CO which reference information collection should 
already have OMB approval.  The OMB approval number (e.g., 0938-XXXX) is printed 
in the upper right-hand corner of these forms.  Over the years, SAs developed other forms 
subject to the PRA in response to instructions contained in CMS program issuances.  
Thus, the actual requirement for the information resides in the program issuance manuals 
approved by OMB. 
 
In some categories, the specification of data elements may unduly limit the performance 
of SAs.  In these cases, OMB approval will be obtained for a more generalized collection 
of information, such as an area of inquiry.  The area of inquiry would be accompanied 
by examples of data elements, typical of the area of inquiry.  The SAs forms could use 
these data elements or others of a similar nature, as long as they fall within the area of 
inquiry as described in the program issuance manual and approved by OMB. 
 
As the categories are reviewed and defined in terms of their data elements or areas of 
inquiry, the program issuance will convey this information.  The SAs forms will then be 
limited to the routine collection of the data so specified.  
 
In the future, as CMS identifies new categories of information that SAs should collect, 
two areas of the program issuance manuals will be updated and reapproved by OMB. 
First, the forms in the exhibits will identify the new OMB approval number and the data 
elements that are to be collected.  Secondly, the SAs responsibility in collecting this 
information will be described in the appropriate section of the manual. 
 
The PRA requires the display of the OMB approval number on each form.  It should be 
printed in the top right-hand corner of each page as shown below.  No special typesetting 
is required. 
Form Approved  
OMB No. 0938-XXXX  
   
4062 - Information That Does Not Require OMB Approval 
 
(Rev. 1, 05-21-04) 
 
There are a number of forms that do not come under the provisions of the PRA.  The 
following definitions and discussion identify the types of forms that do not require OMB 
approval nor the display of an OMB approval number. 
 
4062.1 -Verification or Correction Information 
 
(Rev. 1, 05-21-04) 
 
If a form that has OMB approval is filled out incompletely or incorrectly, the request for 
the missing or corrected data does not require OMB approval. 
 
NOTE:  The follow-up request is limited to those items present on the OMB-approved 
form. If additional items are included, the form cannot be considered approved by OMB. 
 
This is an exception to the PRA that was granted by OMB.  It has particular relevance to 
claims development activities, but can be invoked by OMB. 
 
4062.2 - Certifications 
 
(Rev. 1, 05-21-04) 
 
A certification attests to the accuracy of a statement or the receipt of articles or services.  
It is limited to identifying information and a signature.  A certification may include, at a 
maximum, the following information: 
 
  The name, title, address, and phone number of the individual or entity making the 
certification; 
 
  Any number identifying the certifier, such as the provider number, physician 
number, social security number, license number, tax number, or health insurance 
number; 
 
  An identification of the article received, for instance, a benefit check; 
 
  An authorization statement which, for instance, names a representative to act on 
ones behalf, or which identifies an entity to whom the information may be 
revealed; 
 
  The statement to be certified.  The statement must be printed on the form.  The 
certifier cannot write it.  It is acceptable to have more than one certification 
statement printed with a line/box to be checked off by the certifier; and 
   
  A date and a signature line. 
 
Information in excess of that described above would make the form subject to OMB 
review and approval. 
 
   
  Survey and Certification Related Activities 
 
4100 - Basis for Determining Health Insurance Relatedness of Activity 
Costs 
 
(Rev. 1, 05-21-04) 
 
Sections 1864 and 1902 of the Social Security Act (the Act) provide the basis for 
agreements and plans with States under which CMS pays States for costs incurred in 
performing survey and certification functions  The primary State function may be 
characterized as certification of health facilities, and the costs of SA activities that are 
an integral part of this process are appropriate for survey and certification funding. 
 
This manual discusses the procedures involved in the certification function.  The criteria 
contained in 4100-4109 are controlling in terms of the nature and extent of activity that 
may be charged to the survey and certification program within the limits of the approved 
budget. 
 
The operating procedures contained in Part Two outline activities that are required to 
support an initial certification that a facility does or does not qualify to participate in, or 
have their services covered under the survey and certification program, or a certification 
recommending continuing participation, coverage, or termination. 
 
Such activities are certification-related and are funded under the survey and certification 
program  In those agencies where activities are performed for survey and certification 
only, the survey and certification program pays the entire costs.  In many States, these 
activities serve other programs in addition to survey and certification (e.g., certification 
as well as licensure).  When this situation exists, the SA establishes a method of 
determining the survey and certification share of the cost.  (See 4500-4544.)  Where 
the SA has responsibility for performing survey-related activities under title XVIII and 
title XIX, establish appropriate safeguards to ensure that proper charges are made to each 
program and that duplicate charges are avoided. 
 
4101 - Survey-Related Activities - General 
 
(Rev. 1, 05-21-04) 
 
In addition to survey activity which identifies and documents deficiencies, the SA 
communicates CMS guidelines and explains the CoPs (or requirements for SNFs/NFs, to: 
 
  Nonparticipating facilities or agencies that have either filed a Request to Establish 
Eligibility or a Request for Approval or have otherwise expressed interest in 
participating in the appropriate title XVIII or title XIX certification program and 
which have a reasonable potential for qualifying, when surveyed; and 
 
    Those participating providers and suppliers that have correctable deficiencies. 
 
The information provided should be concerned with specific steps the facility must take 
to meet program requirements, for example, advising that medical staff bylaws need to 
describe the organization of the medical staff.  However, the SA does not provide direct 
assistance (e.g., helping the facility to actually rewrite the bylaws), since direct assistance 
is not an agency function under 1864 (the Agreement) or 1902 (State plan) of the Act. 
 
The services that may be offered to facilities are subject to limitations that prohibit the 
program from assuming responsibilities and costs that are properly those of the facility, 
another agency, or another program. 
 
4102 - Activities With Accredited Entities Deemed to Meet Participation 
Requirements 
 
(Rev. 1, 05-21-04) 
 
Section 1865 of the Act allows CMS to find that if the accreditation of the following 
entities by any national accreditation organization provides reasonable assurance that the 
CoPs or Conditions for Coverage(CoCs), or requirements for SNFs, are met for these 
entities, then CMS may deem these entities by virtue of their accreditation as meeting the 
Medicare conditions.  The entities covered by the law that can be deemed are hospitals, 
psychiatric hospitals, ASCs, RHCs, laboratories, hospices, HHAs, SNFs, CORFs, and 
clinic rehabilitation agencies or public health agency providers of OPT (including speech 
pathology services) or occupational therapy services.  Section 353 of the Public Health 
Service Act (PHSA) also provides the same recognition for accreditation organizations 
and State licensure programs of CLIA laboratories.  The CMS published a notice in the 
Federal Register to notify the public of any organizations whose accredited specified 
types of providers or suppliers are deemed to meet Medicare or CLIA participation 
requirements.  Sample validation or substantial allegation surveys of entities accredited 
by accreditation organizations approved by CMS are acceptable reimbursement activity.  
See 1018 for those facilities that may participate by virtue of their accreditation by an 
approved accrediting body. 
 
4111 - Higher Than National Standards 
 
(Rev. 1, 05-21-04) 
 
Section 1863 of the Act permits, at the request of a State, higher requirements for that 
State than the Federal Conditions or Requirements if approved under a State plan.  If 
approved by the Secretary, the Secretary will impose like requirements in entities within 
that State.  When a State has higher standards (approved by the Secretary) than those 
imposed nationally, the costs of certification activities necessary to apply the higher 
requirements are paid by Federal trust fund and grant monies. 
 
  4115 - Non-Facility-Related Activities 
 
(Rev. 1, 05-21-04) 
 
In addition to activities that are related to individual facilities, there are other activities 
necessary to the proper functioning of the survey and certification program.  These 
activities include relationships with other programs and organizations that permit 
effective accomplishment of program goals as they relate to individual facilities. 
 
4116 - SA Promotional and Public Informational Activities 
 
(Rev. 1, 05-21-04) 
 
Most of the promotional and public informational activities are carried out by CMS, 
primarily through CO and ROs and, to a lesser extent, by intermediaries. However, 
1819(g)(1)(B) and 1919(g)(1)(B) of the Act require each State to conduct periodic 
educational programs for the staff and residents (and their representatives) of SNFs and 
NFs in order to present current regulations, procedures, and policies.  Persons having 
general questions about Medicare and/or Medicaid are referred to the RO for information.  
Certain professional relations activities on the part of the SAs personnel are necessary 
and proper for maintaining ongoing relationships in the health professions.  Participation 
by SA employees as speakers, panelists, or consultants at meetings of professional 
organizations (hospital associations, medical societies) in the interest of furthering 
compliance with Medicare and/or Medicaid standards and objectives would be proper 
activities for survey and certification funding. 
 
4116.1 - Medical Societies 
 
(Rev. 1, 05-21-04) 
 
Contacts by SA officials with medical societies are desirable to clarify the objectives of 
survey and certification program and enlist the cooperation of the medical societies in 
meeting those objectives that are certification-related. 
 
Objectives may relate to a specific CoP or CoC or to broader objectives such as effective 
use of the different levels of care offered through hospitals, LTC facilities, HHAs, and 
other medical facilities. 
 
4117 - Relations with Other Programs 
 
(Rev. 1, 05-21-04) 
 
It is incumbent on each State to maintain effective liaison with other programs having 
activities similar to those performed for the survey and certification program.  The need 
for establishing and maintaining relationships is particularly obvious with reference to 
licensure programs.  In addition to licensure, examples of other programs with goals 
  closely related to those of certification are hospital survey and construction programs, 
health facilities planning programs, and mental health and chronic ESRD programs.  
These programs, while not bearing the same relationship to survey and certification as 
does licensure, include activities that approximate health insurance activities.  
Additionally, the SA should consider joint activities with mutually benefiting programs 
on an ad hoc basis.  This assumes that each State makes protracted and frequent 
contacts at an administrative level in the interest of the survey and certification program. 
 
4131 - Deeming and Waiver of Nurse Aide Training and Competency 
Evaluation (NATCEP) Requirements 
 
(Rev. 1, 05-21-04) 
 
The Omnibus Budget Reconciliation Act (OBRA) of 1987 prohibits SNFs and NFs from 
using as nurse aides any individuals who have not successfully completed a nurse aide 
training and competency evaluation program (NATCEP) or competency evaluation 
program (CEP) approved by the State.   The OBRAs 1987 and 1989 deemed some 
individuals to meet this requirement and permitted States to waive this requirement for 
others.  All individuals who are deemed to meet the nurse aide NATCEP requirements, or 
for whom the State waives the requirement to complete a CEP, must be included in the 
nurse aide registry described in 4141. 
 
A nurse aide is deemed to satisfy the requirement of completing a NATCEP if, before 
July 1, 1989, he or she completed a nurse aide training and CEP of at least 60 hours and 
made up at least the difference between the number of hours in the program he or she 
completed and 75 hours in supervised practical nurse aide training, or in regular in-
service nurse aide education. 
 
A nurse aide is deemed to satisfy the requirement of completing a NATCEP if, before 
July 1, 1989, the individual was found competent (whether or not by the State) after 
completing nurse aide training of at least 100 hours duration. 
 
The State may deem an individual to have completed a NATCEP if the individual 
completed, before July 1, 1989, a NATCEP that it determines would have met the 
requirements for approval at the time it was offered. 
 
The State may waive the requirement for an individual to complete a CEP for any 
individual who can demonstrate to its satisfaction that he or she has served as a nurse aide 
at one or more facilities of the same employer in the State for at least 24 consecutive 
months before December 19, 1989. 
 
Any individual described above may be employed as a nurse aide by a nursing home if 
that individual is also competent to perform nursing or nursing-related services. 
 
  4132 - NATCEPs and CEPs 
 
(Rev. 1, 05-21-04) 
 
The OBRA of 87 requires the State to specify those NATCEPs and CEPs it approves.  
The State should follow the requirements detailed in 4132.1 - 4132.3 when reviewing 
and approving programs, and when withdrawing approval from programs.  The State may 
offer its own NATCEP and/or CEP as long as the program meets these requirements. 
 
4132.1 - Approval of NATCEPs and CEPs 
 
(Rev. 1, 05-21-04) 
 
If the State does not offer a NATCEP or CEP, the State should review and approve or 
disapprove all NATCEPs, upon request.  The State should approve NATCEPs and CEPs 
offered by any entity as long as the requirements for approval are met. 
 
4132.1A - Requirements for Program Approval 
 
(Rev. 1, 05-21-04) 
 
Before approving a NATCEP or CEP, the State should: 
 
  For NATCEPs, determine whether the requirements of 4132.2 are met;  
 
  For CEPs, determine whether the requirements of 4132.3 are met; and 
 
  In all reviews other than the initial review, visit the entity providing the program. 
 
4132.1B - Time Frames for Review 
 
(Rev. 1, 05-21-04) 
 
Within 90 days of a request to review a program or receipt of additional information from 
a requester, the State must: 
 
  Advise the requestor whether the program has been approved; or 
 
  Request additional information. 
 
The State may not grant approval of a program for more than 2 years.  The State should 
require programs to notify the State when there are substantive changes to the program 
within the two-year period, and the State should review programs to which substantive 
changes are made. 
 
  4132.1C - Prohibition of Program Approval 
 
(Rev. 1, 05-21-04) 
 
Unless program disapproval is waived in accordance with subsection E below, the State 
must not approve a NATCEP or nurse aide CEP offered by or in a nursing home if, in the 
2 years prior to the States review, that facility: 
 
  In the case of a skilled nursing facility, has operated under a waiver under 
1819(b)(4)(C)(ii)(II) of the Act; 
 
  In the case of a nursing facility, has operated under a waiver under 
1919(b)(4)(C)(ii) of the Act that was granted on the basis of a demonstration that 
the NF is unable to provide nursing care required under 1919(b)(4)(C)(i) of the 
Act for a period in excess of 48 hours a week; 
 
  Has been subject to an extended (or partial extended) survey under 
1819(g)(2)(B)(i) or 1919(g)(2)(B)(i) of the Act; 
 
Has  been  assessed  a  civil  money  penalty  described  in  1819(h)(2)(B)(ii)  or 
1919(h)(2)(A)(ii) of the Act of not less than $5,000.  This requirement applies to civil 
money penalties for Federal citations only after the facility has had an opportunity to a 
hearing as specified in 1128A of the Act and the penalty is determined due and payable; 
or 
 
  Has been subject to a remedy described in 1819(h)(2)(B)(i) or (iii), 1819(h)(4), 
1919(h)(1)(B)(i), or 1919(h)(2)(A)(i), or (iii), or (iv) of the Act. 
 
4132.1D - Withdrawal of Program Approval 
 
(Rev. 1, 05-21-04) 
 
Unless the State waives program disapproval in accordance with subsection E below, the 
State must withdraw approval from: 
 
  Any NATCEP or CEP described in subsection C; and 
 
  Any NATCEP or CEP if the entity offering the program refuses to permit 
unannounced State visits.  (Also, any facility that refuses to permit unannounced 
State visits is subject to having its provider agreement terminated, and being 
excluded from the program by the Office of the Inspector General.) 
 
The State may withdraw approval of a NATCEP or CEP if the State determines that any 
of the requirements described in 4132.2 and 4132.3 are not met by the program.  The 
State may also withdraw approval from any program that does not meet any requirements 
the State may have in excess of the minimum Federal requirements, or that otherwise 
  fails to meet State standards. 
 
When withdrawing approval from a NATCEP or a CEP, the State should: 
 
  Notify the program in writing, indicating the reason(s) for withdrawal of 
approval; and 
 
  In the case of a NATCEP, permit students who have already started the program 
to finish it. 
 
4132.1E - Waiver of Program Prohibition 
(Rev. 126, Issued: 11-21-14, Effective: 11-21-14, Implementation: 11-21-14) 
 
A facility may request that CMS waive the disapproval of its nurse aide training program 
when the facility has been assessed a civil money penalty of no less than $5,000 if the 
civil money penalty was not related to the quality of care furnished to residents in the 
facility. 
 
While the waivers should be submitted to the State, CMS will make the final 
determination on a case by case basis after considering the recommendation and facts of 
the case as provided by the State. 
 
Duration of Waiver - A waiver may not exceed 2 years, but must be withdrawn earlier if 
the facility is subsequently found to no longer meet the waiver criteria.  If 2-year 
disapproval periods overlap, any non-waived disapproval in the earlier period will control 
waiver rights in the second until the two periods no longer overlap.  Below are examples 
describing the effect of a series of survey findings on a facilitys ability to have a waiver. 
 
EXAMPLE: 
 
Year 1: 
 
A survey conducted at Facility X identifies substandard quality of care.  The finding 
of substandard quality of care results in nurse aide training and competency 
evaluation program disapproval for 2 years.  The facility requests and is granted a 
waiver after the State has confirmed that the facility has removed the substandard 
quality of care.  The waiver may not exceed 2 years.  
 
Year 2: 
 
The survey of Facility X identifies substandard quality of care.  Based on this current 
finding of substandard quality of care, the facility loses its existing waiver.  This 
nurse aide training and competency evaluation program disapproval, based on this 
survey, is effective for 2 years.  Additionally, the facility forfeits the waiver granted 
in year 1 due to its inability to continue to meet waiver criteria at E.1.b. (i.e., to be 
free of deficiencies which constitute substandard quality of care. 
   
Year 3: 
 
The survey of Facility X identifies deficiencies that do not constitute substandard 
quality of care, but result in the imposition of denial of payment for new admissions.  
The imposition of this remedy results in nurse aide training and competency 
evaluation program disapproval for 2 years.  The facility requests and is granted a 
waiver.  The waiver may not exceed 2 years.  However, since the facility is currently 
operating under a nurse aide training and competency evaluation program disapproval 
for 2 years, based on its year two survey, the waiver resulting from this current survey 
will not apply until the remainder of the disapproval period (which overlaps with part 
of the waiver period) is satisfied. 
 
4132.1F - Conflicts of Interest 
 
(Rev. 1, 05-21-04) 
 
States are governed by their respective conflict of interest laws and are free to develop 
their own policies or rules about what may or may not constitute a conflict of interest 
relative to nurse aide training and competency evaluation programs.  This gives States the 
ability to define their programs so that they can meet their needs relative to NATCEPs 
while meeting the intent of the law.  Factors States may consider in making conflict of 
interest determinations may include, but are not limited to, the following: 
 
  Whether the training program being offered is owned and operated independently 
of the ownership and operation of the nursing home that has lost its ability to 
train; 
 
  Whether facility staff, who are also employees of an approved outside training 
program, should be permitted to train in the facility (as employees of the outside 
training program) if the facility loses its ability to train; and 
 
  Any other factors the State believes to be relevant in making conflict of interest 
determinations.  
 
  4132.2 - Requirements for NATCEPs 
 
(Rev. 1, 05-21-04) 
 
 (S&C01-20) 
 
4132.2A - Hours of Training 
 
(Rev. 1, 05-21-04) 
 
A NATCEP must consist of a minimum of 75 clock hours of training in order to be 
approved by the State.  The State has the discretion to require additional hours of 
training. 
 
NOTE:  Transporting residents is the only nursing home service that does not require the 
use of nurse aides with 75 hours of training. It was never the intent that transporting 
residents by driving a van or pushing a wheelchair would require 75 hours of nurse aide 
training. However, transferring residents, for example from bed to wheelchair, from 
wheelchair to the toilet or bath does require the services of a nurse aide who has 
completed the NATCEP.  
 
4132.2B - Restrictions on Activities of Students in a NATCEP 
 
(Rev. 1, 05-21-04) 
 
The State should not approve a program unless it ensures that: 
 
  Students do not perform any services for which they have not trained and been 
found proficient by the instructor; and 
 
  Students providing services to residents are under the general supervision of a 
licensed nurse or an RN. 
 
4132.2C - Instructor Qualifications 
 
(Rev. 1, 05-21-04) 
 
The training of nurse aides must be performed by or under the general supervision of a 
registered professional nurse who possesses a minimum of 2 years of nursing experience, 
at least one year of which must be in the provision of long-term care facility services.  
Instructors of nurse aides must have completed a course in teaching adults or have 
experience in teaching adults or supervising nurse aides.  In a facility-based program, the 
training of nurse aides may be performed under the general supervision of the Director of 
Nursing, who is prohibited from performing the actual training. 
 
  Other individuals may supplement the instructor.  Following are examples of those who 
might be useful in a NATCEP: 
 
  RNs;  
 
  Licensed practical/vocational nurses;  
 
  Pharmacists;  
 
  Dietitians;  
 
  Social workers;  
 
  Sanitarians;  
 
  Fire safety experts;  
 
  Nursing home administrators;  
 
  Gerontologists;  
 
  Psychologists;  
 
  Physical and occupational therapists;  
 
  Activities specialists;  
 
  Speech/language/hearing therapists; and 
 
  Resident rights experts. 
 
The program may utilize individuals from fields other than those listed as examples if 
needed to meet the planned program objectives for a specific unit.  Supplemental 
personnel must have a minimum of one year of experience in their fields.  The State may 
require that these individuals be, where applicable, licensed, registered, and/or certified in 
their field.  
 
4132.2D - Minimum Curriculum Requirements 
 
(Rev. 1, 05-21-04) 
 
The objective of NATCEPs is to enable nurse aides to provide quality services to 
residents.  Therefore, a NATCEP must contain at least these minimum curriculum 
requirements for it to be approved.  The State may also specify additional areas to be 
included. 
   
Within the minimum 75 hours of training, at least 16 hours must be devoted to supervised 
practical training.  Supervised practical training is defined as training in a laboratory or 
other setting in which the student demonstrates knowledge while performing tasks on an 
individual under the direct supervision of an RN or LPN.  A program must also include at 
least 16 hours of classroom instruction prior to a trainees direct involvement with a 
resident. This instruction must include the following: 
 
  Communication and interpersonal skills; 
 
  Infection control; 
 
  Safety/emergency procedures, including the Heimlich maneuver; 
 
  Promoting residents independence; and 
 
  Respecting residents rights. 
 
The curriculum must also include training in the following areas: 
 
1.  Basic nursing skills: 
 
a. Taking and recording vital signs; 
 
b. Measuring and recording height and weight; 
 
c. Caring for the residents environment; 
 
d. Recognizing abnormal changes in body functioning and the importance of 
reporting such changes to a supervisor.  Some examples of abnormal 
changes are: 
 
  Shortness of breath; 
 
  Rapid respiration; 
 
  Fever; 
 
  Coughs; 
 
  Chills; 
 
  Pains in chest; 
 
  Blue color to lips; 
 
    Pain in abdomen; 
 
  Nausea; 
 
  Vomiting; 
 
  Drowsiness; 
 
  Excessive thirst; 
 
  Sweating; 
 
  Pus; 
 
  Blood or sediment in urine; 
 
  Difficulty urinating; 
 
  Frequent urination in small amounts; 
 
  Pain or burning on urination; and 
 
  Urine has` dark color or strong odor. 
 
e. Caring for residents when death is imminent. 
 
2.  Personal care skills: 
 
a.  Bathing; 
 
b.  Grooming, including mouth care; 
 
c.  Dressing; 
 
d.  Toileting; 
 
e.  Assisting with eating and hydration; 
 
f.  Proper feeding techniques;  
 
g.  Skin-care; and 
 
h.  Transfers, positioning, and turning. 
 
  3.  Mental health and social service needs: 
 
a.  Modifying aides behavior in response to residents behavior; 
 
b.  Awareness of developmental tasks associated with the aging process; 
 
c.  How to respond to resident behavior; 
 
d.  Allowing residents to make personal choices, providing and reinforcing 
other behavior consistent with the residents dignity; and 
 
e.  Utilizing residents family as a source of emotional support. 
 
4.  Care of cognitively impaired residents: 
 
a.  Techniques for addressing the unique needs and behaviors of individuals 
with dementia (Alzheimers and others); 
 
b.  Communicating with cognitively impaired residents;  
 
c.  Understanding the behavior of cognitively impaired residents;  
 
d.  Appropriate responses to the behavior of cognitively impaired residents; 
and  
 
e.  Methods of reducing the effects of cognitive impairments. 
 
5.  Basic Restorative Services - The nurse aide should be able to demonstrate skills 
which incorporate principles of restorative nursing, including: 
 
a.  Training the resident in self-care according to the residents abilities; 
 
b.  The use of assistive devices in transferring, ambulation, eating, and 
dressing; 
 
c.  Maintenance of range of motion; 
 
d.  Proper turning and positioning both in bed and chair; 
 
e.  Bowel and bladder training; and 
 
f.  Care and use of prosthetic and orthotic devices. 
 
  6.  Residents Rights - The nurse aide should be able to demonstrate behavior that 
maintains residents rights, including but not limited to:  
 
a.  Providing privacy and maintenance of confidentiality; 
 
b.  Promoting the residents right to make personal choices to accommodate 
their needs; 
 
c.  Giving assistance in resolving grievances and disputes; 
 
d.  Providing needed assistance in getting to and participating in resident and 
family groups and other activities; 
 
e.  Maintaining care and security of residents personal possessions; 
 
f.  Providing care which maintains the resident free from abuse, 
mistreatment, and neglect, and reporting any instances of such treatment to 
appropriate facility staff; and 
 
g.  Avoiding the need for restraints in accordance with current professional 
standards. 
 
4132.2E - Competency Evaluation Component 
 
(Rev. 1, 05-21-04) 
 
All NATCEPs must contain competency evaluation procedures that meet the requirements 
specified in 4132.3. 
 
4132.2F - Prohibition of Charges 
 
(Rev. 1, 05-21-04) 
 
No nurse aide who is employed by, or who has an offer of employment from, a facility on 
the date on which the aide begins a NATCEP may be charged for any portion of the 
program (including any fees for textbooks or other required course materials).  If an 
individual who is not employed or does not have an offer to be employed as a nurse aide 
becomes employed by or receives an offer of employment from a facility not later than 
12 months after completing a NATCEP, the State must provide payment for costs 
incurred in completing the program on a pro rata basis during the period in which the 
individual is employed as a nurse aide. 
 
  4132.3 - Requirements for CEP 
 
(Rev. 1, 05-21-04) 
 
4132.3A - Notification to Individual 
 
(Rev. 1, 05-21-04) 
 
The State provides advance notice to any individual who takes the competency evaluation 
that a record of the successful completion of the evaluation will be included in the nurse 
aide registry (NAR). 
 
4132.3B - Content of CEP 
 
(Rev. 1, 05-21-04) 
 
Competency evaluations must consist of two components: a written or oral examination 
and a skills demonstration program.  The written or oral examination must: 
 
  Allow aides to choose between a written and an oral examination;  
 
  Address each item specified in 4132.2.D; 
 
  Be developed from a pool of test questions, only a portion of which is used in any 
one examination;  
 
  Use a system that prevents disclosure of both the test questions and the individual 
competency evaluations; and 
 
  If oral, must be read from a prepared text in a neutral manner. 
 
The skills demonstration must consist of a demonstration of randomly-selected items 
drawn from a pool consisting of tasks generally performed by nurse aides.  This pool of 
skills must include all of the personal care skills listed in 4132.2.D. 
 
4132.3C - Administration of NACEP 
 
(Rev. 1, 05-21-04) 
 
The competency evaluation may be administered and evaluated only by: 
 
  The State directly; or 
 
  A State-approved entity which is not the SNF which provided the training. 
 
  The skills demonstration component of the evaluation must be: 
 
  Performed in a facility or laboratory setting similar to the setting in which the 
individual functions as a nurse aide; and 
 
  Administered and evaluated by an RN with at least one years experience in 
providing care for the elderly or the chronically ill of any age. 
 
4132.3D - Proctoring 
 
(Rev. 1, 05-21-04) 
 
The competency evaluation may, at the nurse aides option, be conducted at the facility in 
which the nurse aide is or will be employed unless the facility is described in 4132.1.C. 
 
The State may permit the competency evaluation to be proctored by facility personnel if 
it finds that the procedure adopted by the facility assures that the NATCEP: 
 
  Is secure from tampering; 
 
  Is standardized and scored by a testing, educational, or other organization 
approved by the State; and 
 
  Requires no scoring by facility personnel. 
 
The State retracts the right to proctor nurse aide competency evaluations from facilities in 
which it finds any evidence of impropriety or tampering by facility staff. 
 
4132.3E - Successful Completion of CEP 
 
(Rev. 1, 05-21-04) 
 
The State establishes a standard for successful completion of the competency evaluation.  
To complete the competency evaluation successfully, an individual must pass both the 
written or oral examination and the skills demonstration.  A record of successful 
completion of the competency evaluation must be included in the NAR described in 
4141 within 30 days of the date the individual is found to be competent. 
 
4132.3F - Unsuccessful Completion of Competency Evaluation 
 
(Rev. 1, 05-21-04) 
 
If an individual does not complete the evaluation satisfactorily, the individual must be 
advised: 
 
  Of the areas in which he or she did not pass; and 
   
  That he or she has at least three opportunities to take the evaluation. 
 
The State may impose a maximum on the number of times an individual may attempt to 
complete the competency evaluation successfully, but the maximum may be no less than 
three. 
 
4140 - Guidance to States for Medicaid NF Remedies  
 
(Rev. 1, 05-21-04) 
 
(See also Chapter 7) 
 
4140A - Background 
 
(Rev. 1, 05-21-04) 
 
Section 1919(h) of the Act requires the State Medicaid Agency (SMA) to establish, by 
statute or regulation, remedies for NFs that do not meet the requirements of participation. 
The State must design remedies to result in faster correction of deficiencies and ensure 
the health or safety of residents of NFs.  The SMA imposes these remedies for those NFs 
that are not operated by the State or those found noncompliant by the CMS validation 
process. The SA sends recommendations to the SMA for remedies under SMA 
jurisdiction, and to the RO for remedies under RO jurisdiction.  
 
4140B - Required State Remedies 
 
(Rev. 1, 05-21-04) 
 
The SMA specifies the criteria as to when and how each remedy is applied, the amounts 
of any fines, and the severity of each remedy.  The SMA designs the procedures to 
minimize the time between identification of violations and final imposition of remedies.  
Denial of payment for new admissions, appointment of temporary management, and 
closure are remedies that may be imposed during the pending of any hearing. 
 
The criteria for all remedies are to provide for incrementally more severe fines for 
repeated or uncorrected deficiencies.  In determining what action to take, the SMA will 
consider the NFs compliance history, change of ownership, and the number and gravity 
of the deficiencies.  The SMA may also specify additional remedies, as long as the SMA 
can demonstrate are as effective in deterring non-compliance and correcting deficiencies 
as those that follow: 
 
The SMA will follow regular procedures to amend its approved State plan to establish at 
least the following remedies: 
 
  4140C - Alternative Remedies 
 
(Rev. 1, 05-21-04) 
 
The SMA will include the specified remedies in subpart B in its approved State plan for 
any quarter beginning after October 1, 1989.  However, the SMA may establish remedies 
alternative to the specified State remedies (except for the remedy of termination) if the 
SMA can demonstrate to the satisfaction of CMS that their alternative remedies are as 
effective in deterring noncompliance and correcting deficiencies as those under 1919 
(h)(2)(A) of the Act.  For example, the SMA may already have alternative remedies in 
place for the licensure program or for the Medicaid program under State law, such as: 
 
  Civil or administrative fines (different from the specified OBRA remedy); 
 
  Court-appointed receiver; 
 
  Conditional/provisional licensing, probationary license, or license revocation; and 
 
  Withholding of payments. 
 
If the SMA has alternative remedies in place, it will summarize its past experience with 
alternative remedies, indicating that they are effective in deterring noncompliance and 
correcting deficiencies. 
 
The SMA will provide the following types of documentation to indicate the effectiveness 
of its alternative remedies, such as: 
 
  Procedures for implementing the remedies including explanations of what type of 
deficiencies trigger the remedies, a method or ranking the seriousness of 
violations and corresponding remedies, timing of remedies and appeals and 
specific rules designating responsibility for the violation and liability for the 
remedies; 
 
  Identification of the agency responsible for ensuring imposition of the remedies 
and the amount of resources being devoted to this effort, including legal and other 
enforcement-related staff; and 
 
  Method of evaluation and supporting data for alternative remedies that have 
proved to be effective in deterring noncompliance and correcting deficiencies 
including the number of facilities in evaluation and the rate of recidivism. 
 
Alternatives to the specified remedies must be submitted under the established 
procedures for approval of State plan amendments. 
 
  4140D - Incentives for High Quality Care 
 
(Rev. 1, 05-21-04) 
 
In addition to the remedies specified under 1919(h)(2) of the Act, the SMA may 
establish in its approved State plan a program to reward NFs that provide the highest 
quality care to Medicaid residents.  The reward may be in the form of public recognition, 
incentive payments, or both.   
 
The expenses incurred in carrying out such a program are considered expenses necessary 
for the proper and efficient administration of the State plan under Medicaid.  (See 
1903(a)(7) of the Act.) 
 
If the SMA elects to use an incentive payment, the State plan amendment must define 
highest quality care, state the criteria to be met, and the measurements to be used in 
awarding an incentive payment.  To be considered as efficient in the administration of 
the State plan, the incentive payment must be reasonable, as determined by the RO in its 
State plan review process. 
 
4140E - Federal Financial Participation (FFP) 
 
(Rev. 1, 05-21-04) 
 
Reasonable State expenditures for the proper and efficient administration of the State 
plan, such as temporary management, closing a NF, transfer of residents to another NF, 
and other expenses associated with implementing these remedies, are subject to Federal 
matching payment at the rate of 50 percent.  The SMA establishes procedures to prevent 
claiming FFP for expenditures which have been funded by the CMPs discussed in subpart 
B. 
 
4141  Nurse Aide Registry (NAR) 
 
(Rev. 1, 05-21-04) 
 
The State establishes and maintains a NAR of individuals who have successfully 
completed a NATCEP or CEP approved by the State, or are deemed to have completed a 
NATCEP, or have had the competency evaluation requirement waived.  (See 4131.) 
 
4141A - Registry Function 
 
The State ensures that the NAR: 
 
  Lists all individuals who have successfully completed a NATCEP or CEP 
approved by the State; 
 
  Lists all individuals who are deemed to have completed a NATCEP; 
   
  Lists all individuals for whom the requirement to complete a CEP has been 
waived by the State; 
 
  Lists all nurse aides who are found by the State to have abused or neglected a 
resident or misappropriated resident property; 
 
  Removes entries for all individuals who have performed no nursing or nursing-
related services for monetary compensation for a period of 24 consecutive 
months, except those individuals who are found to have abused or neglected 
residents or misappropriated resident property; 
 
  Discloses to everyone requesting information about an individual on the registry, 
the date of eligibility for placement on the registry, and any information 
pertaining to a finding of resident abuse or neglect, or misappropriation of 
resident property.  (The State may disclose any additional information it deems 
necessary.); 
 
  Provides individuals on the registry with all information in the registry on them 
when findings of resident abuse or neglect or misappropriation of resident 
property are made, or upon request; 
 
  Permits all individuals on the registry sufficient opportunity to correct any 
misstatements or inaccuracies contained in the registry; 
 
  Is sufficiently accessible to meet the needs of the public and health care providers; 
 
  Provides requested information promptly; and 
 
  Does not impose any charges related to registration on individuals listed in the 
registry. 
 
The NAR may include information on home health aides who have successfully 
completed a home health aide training and competency evaluation program approved by 
the State if home health aides are differentiated from nurse aides. 
 
4141B - Registry Information 
 
(Rev. 1, 05-21-04) 
 
The following items must be maintained and retrievable from the NAR for each 
individual who has completed a NATCEP or CEP approved by the State, who has been 
deemed to have completed a NATCEP, or for whom the State has waived the 
competency evaluation requirement: 
 
1.  The individuals full name; 
   
2.  Information necessary to identify the individual; 
 
3.  The date the individual became eligible for placement in the registry; and 
 
4.  Any finding by the SA of resident abuse or neglect or misappropriation of 
resident property by an individual documenting: 
 
  The SA investigation, including the nature of the allegation and the evidence 
that led it to conclude that the allegation was valid; 
 
  The date of the hearing (if the individual chose to have one) and its outcome; 
and 
 
  A statement disputing the allegation, if the individual chose to make one. 
 
Findings of resident abuse or neglect or misappropriation of resident property against a 
nurse aide must be included in the registry within 10 working days of the finding and 
must remain in the registry permanently, unless the finding was made in error, the 
individual was found not guilty in a court of law, or the State is notified of the 
individuals death. 
 
4141C - Responsibility for NAR 
 
(Rev. 1, 05-21-04) 
 
The State may contract the daily operation and maintenance of the registry to a non-State 
entity.  However, the State must maintain overall accountability for operation of the 
registry and compliance with regulations, and only the SA is permitted to place findings 
of resident abuse or neglect or misappropriation of resident property on the registry.  
 
4145 - Specification of Resident Assessment Instruments (RAIs) for Use 
in Long Term Care Facilities 
 
(Rev. 1, 05-21-04) 
 
4145.1 - Statutory Requirements 
 
(Rev. 1, 05-21-04) 
 
Sections 1819(b)(3), 1819(e)(5), 1819(f)(6)(B), 1919(b)(3), 1919(e)(5), and 
1919(f)(6)(B) of the Act specify assessment requirements for SNFs for Medicare and NFs 
for Medicaid, which provide nursing, medical, and rehabilitative care to Medicare and/or 
Medicaid beneficiaries. These provisions require facilities to conduct comprehensive, 
accurate, standardized, and reproducible assessments of each residents functional 
  capacity using an RAI that has been specified by the State.  Facilities are required to 
examine their residents no less frequently than once every three months. 
 
These provisions place specific responsibilities on the Department of Health and Human 
Services, the State, and providers.  The CMS is responsible for designating the minimum 
data set (MDS), common definitions and utilization guidelines, and for designating one or 
more RAIs for use by the States.  The States are responsible for specifying the RAI for 
use by facilities in the State.  The State may use an RAI designated by CMS or specify 
its own instrument provided that it includes the MDS and that it has been approved by 
CMS.  All State RAIs must include the MDS of core elements, common definitions and 
utilization guidelines specified by CMS.  (See 4145.2.)  Providers are responsible for 
using the specific assessment instrument that has been specified by the State and 
approved by the Secretary. 
 
4145.2 - Definitions 
 
(Rev. 1, 05-21-04) 
 
  Minimum Data Set (MDS) - A core set of screening and assessment elements, 
including common definitions and coding categories, that forms the foundation of 
the comprehensive assessment for all residents of long term care facilities 
certified to participate in Medicare and/or Medicaid.  The items in the MDS 
standardize communication about resident problems and conditions within 
facilities, between facilities, and between facilities and outside agencies. 
 
  Common Definitions  - Standardized instructions for how to interpret each 
element specified in the MDS. 
 
  Coding Categories - Levels of measurement for each element included in the 
MDS. 
 
  Triggers - Specific resident responses for one or a combination of MDS 
elements.  These triggers identify residents who require further evaluation using 
resident assessment protocols designated within the State specified RAI. 
 
  Resident Assessment Protocols (RAPs) - A component of the utilization 
guidelines, the RAPs are structured, problem-oriented frameworks for organizing 
MDS information, and additional clinically relevant information about an 
individual that identifies medical problems and forms the basis for individualized 
care planning. 
 
  Resident Assessment Instrument (RAI) - An instrument which requires for 
completion the performance of a standardized assessment system, comprised of 
the MDS and utilization guidelines (including the RAPs and triggers).  This 
assessment system provides a comprehensive, accurate, standardized, 
  reproducible assessment of each long-term care facility residents functional 
capabilities and identifies medical problems. 
 
  Utilization Guidelines - Instructions concerning when and how to use the RAI.  
These include instructions for completion of the RAI as well as structured 
frameworks for synthesizing MDS and other clinical information. 
 
  Quarterly Review - Part of the Secretarys designated instrument.  The quarterly 
review is a subset of MDS items reviewed (i.e., reassessed) no less frequently 
than once every three months (92 days) to assure the continued accuracy of the 
care plan. 
 
4145.3 - RAI by CMS 
 
(Rev. 1, 05-21-04) 
 
The CMS is responsible for designating the MDS, its common definitions and utilization 
guidelines, and for designating one or more RAI(s).  The CMS RAI is specified in 
Appendix R and is comprised of the utilization guidelines (including the RAPs), the MDS 
of core elements and common definitions, and the quarterly review items.  The utilization 
guidelines for completion of the RAI are specified in Appendix R, Part I; the core 
elements of the MDS, common definitions, and quarterly review items are specified in 
Part II; and the utilization guidelines pertaining to the RAPs, triggers and instructions are 
specified in Part III. 
 
4145.4 - Specification of a State RAI 
 
(Rev. 1, 05-21-04) 
 
The State must specify an RAI for use in long term care facilities that participate in 
Medicare and/or Medicaid.  The State must either specify: 
 
  The RAI designated by CMS, which is comprised of the MDS with common 
definitions, the utilization guidelines, including CMS RAPs, triggers and a 
documentation format (see Appendix R), and quarterly review items; or 
 
  An alternate instrument for use in the State.  An alternate instrument must be 
approved by CMS prior to the State specifying it to facilities.  To receive 
approval, an alternate instrument must contain: 
 
a. The Utilization Guidelines for Completion of the RAI - See Appendix R, 
Part I. 
 
b. The MDS - See Appendix R, Part II.  All data elements and corresponding 
coding categories specified in the MDS must be contained in the States 
instrument.  A State agency may not alter the MDS definitions or the coding 
  categories used with each MDS element.   The State may not rearrange the 
sequence of core MDS items or introduce new items within the core set of 
MDS items specified by CMS. 
 
  The State agency may add data elements additional to those in the 
MDS that are needed to meet unique State operational needs.  Include 
these elements at the end of the core MDS in Section S, which is 
designated for State supplemental items.  These additional items will 
be reviewed by CMS to assure there is no conflict with elements 
included in the MDS.  However, CMS will not evaluate the merits of 
those elements.  Under the SNF Prospective Payment System (PPS) 
requirement, for residents in a Medicare part A covered stay, Section T 
must be completed with each MDS that is required for payment 
purposes.  In addition, States may specify MDS sections T and/or U as 
part of the State-specified RAI. 
 
  Discharge Tracking - Includes section AA Items 1 - 9, (but only the 
three discharge codes from Item 8, Reasons for Assessment), Items 
AB1 - 2, A6, and R3 - 4.  This form is completed when a resident dies 
or leaves the facility and is actually admitted to another health care 
facility, regardless of whether the long-term care facility formally 
discharges the resident.  (Refer to Appendix R for additional detail 
regarding the Discharge Tracking form and its use.) 
 
  Reentry Tracking - This form contains Section AA Items 1 - 9, (but 
only one Reentry code from Item 8, Reasons for Assessment), and 
Items A4 and 6.  This form is completed whenever a resident reenters 
the nursing home following temporary admission to a hospital or other 
health care setting, even if the residents clinical record was not 
formally closed, and regardless of whether the resident was formally 
discharged from the facility. (Refer to Appendix R for additional detail 
regarding the Reentry Tracking form and its use.) 
 
c.  Utilization Guidelines Pertaining to the RAPs  At a minimum, States RAI 
must include CMS RAPs.  As CMS develops new RAPs or revises RAP 
triggers or guidelines, a State agency must develop comparable changes. 
 
To develop a new RAP, provide the following documentation to CMS when 
requesting approval to add the RAP to the State-specified RAI: 
 
  Assessment triggers, based on MDS elements or other information 
requirements that screen which residents are subject to additional 
assessment; 
 
    Guidelines, which provide a framework for additional assessment or 
structured investigation of issues to facilitate clinical decision-making 
for care planning; and 
 
  Supporting documentation for clinical validation of RAP content (e.g., 
literature citations, expert consensus, research studies, results of field 
testing). 
 
  States wishing to pursue RAP development are encouraged to seek 
consultation and assistance from CMS during the planning phase.  
Additionally, States are encouraged to volunteer to participate in 
CMS-sponsored RAP development/revision activities. 
 
d.  RAP Summary Form - Information from Section V of the MDS is 
documented on the RAP Summary Form.  Each States RAI must include 
CMS RAP Summary Form or another standardized format for documentation 
of the RAP assessment.  States may request approval of an alternate format for 
inclusion in the State RAI which:  
 
  Identifies the location of information derived from RAPs about the 
residents status in the triggered area.  As appropriate for the resident, 
information may include the nature of problems, complications and 
risk factors, the need for referral to appropriate health professionals, 
and the reasons for deciding to proceed or not to proceed with care 
planning specific to the triggered problems;   
 
  Provides a means for collecting data on triggered RAPs and care plan 
decisions; and 
 
  Provides a method for staff to certify the accuracy and completeness of 
the RAP assessment (i.e., signature and date). 
 
e.  Quarterly Review  States must specify a Quarterly assessment form, for use 
by facilities that include at least the items on the CMS-designated form (See 
Section R).  The Quarterly assessment form contains the mandated subset of 
MDS items from Section A (Identification and Background Information) 
through Section R (Assessment Information) that serve as the minimum 
requirement within each States RAI.  Some States have mandated an 
expanded Optional Quarterly assessment form.  The CMS has published two 
optional versions that States may require.  A State may also require a full 
assessment on a quarterly basis.  Contract your state RAI coordinator for State 
specifics.  States have the following options for the Quarterly Assessment: 
 
  Minimum Required MDS Quarterly Assessment; 
 
  MDS Quarterly Assessment Form Optional Version for RIG-III; 
   
  Full MDS Assessment; 
 
  Medicare Prospective Payment Assessment Form (MPAF). 
 
The State may require facilities to use the full MDS or may add MDS elements to the 
quarterly review but may not omit or reorder any elements in CMS designated form.  
States may add items to their quarterly review form in one of two ways: 
 
  Items that are part of CMS MDS should be added within the same area of the 
quarterly review form that it falls on the full MDS (e.g., the State would add item 
H4, Change in Urinary Continence, after item H3 on the quarterly review form); 
or 
 
  Items that are part of the State supplement (i.e., MDS Section S) should be added 
at the end of the State quarterly review form. 
 
4145.5 - Variations in Formatting the State-Specified RAI 
 
(Rev. 1, 05-21-04) 
 
The CMS approval of a State-specified RAI covers those items included on the 
instrument, the working and sequence of those items, and all definitions and instructions 
for the RAI.  Approval of the State-specified instrument does not address the attributes of 
the instrument related to formatting (for example, print type, color coding, or changes, 
such as integrating triggers into the instrument).  States are encouraged to permit some 
flexibility in form design (e.g., print type, color, shading, or integrated triggers) or 
through use of a computer-generated printout of the RAI.  The CMS approval is not 
required for a State to permit such formatting variations.  However, a State must assure 
that any RAI form or printout in the residents record accurately and completely 
represents the State-specified RAI as approved by CMS, in accordance with 42 CFR 
483.20(b).  In other words, it includes all and only the items on the State-specified 
instrument with the exact wording and in the same sequence. 
 
4145.6 - Approval Process 
 
(Rev. 1, 05-21-04) 
 
A State agency must not revise its specified RAI without first notifying CMS and 
receiving CMS approval.  All State agencies must adopt any revisions to the RAI that 
are specified by CMS. 
 
All State agencies must inform CMS whether they intend to specify the RAI designed by 
CMS, or request approval for an alternative State instrument.   
 
  When specifying CMS instrument, a State agency must include the following in its letter 
to CMS: 
 
  A plan for implementation that includes time frames (e.g., effective dates) and 
plans for training the facilities; and 
 
  The name, address, phone number, and e-mail address (if known) of the State RAI 
coordinator (i.e., the individual responsible for liaison and training of providers 
and State agency staff). 
 
When requesting approval for an alternative instrument, or modifications to an existing 
specified instrument, a State agency must include the following in its request to CMS: 
 
  A copy of the proposed instrument and any instructions that exceed CMS 
utilization guidelines; 
 
  A short narrative specifying how the instrument conforms with CMS designated 
MDS and utilization guidelines (including the RAPs); 
 
  A description of the items and their definitions that will appear in the State 
supplement section of the MDS; 
 
  A plan for implementation that includes time frames and plans for training the 
facilities;  
 
  The name, address, phone number, and e-mail address (if known) of the State RAI 
coordinator (i.e., the individual responsible for liaison and training of providers 
and State agency staff); and 
 
  The name, address, phone number, and e-mail address (if known) of the State 
agencys contact for technical questions on the proposed alternate instrument. 
 
Please send all correspondence to: 
 
Centers for Medicare & Medicaid Services  
Center for Medicaid and State Operations  
Survey and Certification Group 
Technical Director, Division of Nursing Homes 
7500 Security Boulevard 
Mail Stop S2-12-25 
Baltimore, Maryland 21244 
 
Once CMS has received a State agencys request for use of an alternate instrument, or 
modifications to an existing specified instrument, CMS will review the proposed 
instrument to determine whether it is an acceptable alternate, and will communicate 
directly with the State agencys representatives to clarify information, if necessary.  The 
  CMS will work with the State agency to meet its needs for resident assessment 
information. 
 
Once a State agency has received approval from CMS for the alternate instrument, the 
State agency must implement the approved alternate.  Within 60 days of receiving CMS 
approval of the alternate RAI, the State agency must notify all long term care facilities 
participating in the Medicare and/or Medicaid programs in its State of the alternate 
instrument.  This notification must include a copy of the approved specified instrument 
and the procedures for using the instrument. 
 
States that have specified the CMS-designated RAI as their specified instrument must 
notify all long-term care facilities participating in the Medicare and/or Medicaid 
programs in their States of the specified instrument and any updates issued by CMS, with 
sufficient time for the facilities to meet the effective implementation date. 
 
The State agency must ensure that all long-term care facilities participating in the 
Medicare and/or Medicaid programs in its State are using specified instrument within 90 
days after a State agency has notified its providers of the specified instrument.  To ensure 
that facilities are properly trained, each State agency must provide periodic educational 
programs for facility staff to assist with implementation of the specified RAI. 
 
4146 - Minimum Data Set (MDS) System 
 
(Rev. 1, 05-21-04) 
 
The MDS system in each State is the cornerstone for a comprehensive, Quality 
Improvement and Evaluation System (QIES) that will not only fulfill MDS 
administration requirements, but also support other assessment-based programs (such as 
the Outcome and Assessment Information Set (OASIS) for home health agencies 
(HHAs), quality and performance indicators; and new, integrated survey and certification 
data systems.  The State must use the MDS system for editing, storing, and processing 
MDS data to support CMS MDS operating requirements within the State and to transmit 
the required MDS data to the CMS MDS repository. The State may not add additional 
software applications to the MDS system without a specific directive from CMS. 
 
The automated MDS system is a critical component of State agency and CMS operations, 
and provides the means for transmission of assessment data to CMS for validating 
payments under the Medicare SNF Prospective Payment System (SNF PPS) for nursing 
homes. 
 
The initial phase of the MDS system implementation involved a CMS-funded installation 
of standardized computer hardware and data management software at each State Agency 
to allow electronic transfer of MDS data elements from all Medicare and Medicaid 
nursing homes to the State.  The data management software:   
 
  1.  Validates the basic accuracy of the data and rejects submission files (batches) with 
Fatal File Errors, such as a missing or invalid Facility ID, incorrect record 
length, or missing headers or trailers;  
 
2.  Validates individual assessment records and rejects those records with Fatal 
Record Errors,  
 
3.  Stores and reports Non-Fatal Errors on records that are accepted by the database; 
and  
 
4.  Builds a database of MDS information for all residents in each nursing home in 
the State. 
 
The MDS system implemented electronic transmission of MDS data by all Medicare and 
Medicaid nursing homes beginning with the regulations effective date of June 22, 1998.  
This provides for enhanced analytical capabilities at the State agencies; electronic 
transmission from the State databases to a national repository; integration with 
performance indicators for quality oversight and survey planning by the State Agency; 
use of MDS data as a basis for prospective payment of nursing homes; research directed 
at improving quality of care; feedback to providers; and dissemination of information to 
purchasers, beneficiaries, and others. 
 
The following procedures describe MDS system operations. 
 
4146.1 - System Description 
 
(Rev. 1, 05-21-04) 
 
The CMS has provided each State with an MDS system composed of standardized 
hardware and software platforms scaled to meet each States anticipated processing 
volumes.  The hardware is comprised of a communications server, database server, 
modems and other peripheral devices.  The QIES system software includes an Oracle 
database, Netscape Enterprise Server, Netscape Personal Edition, Microsoft Windows 
NT, the MDS/OASIS Data Management Application, and all required software licenses. 
The MDS system deployed to each State was specifically engineered and purchased to 
fulfill the MDS requirements of 42 CFR 483.20(f) and 483.315(h), additional CMS 
provider assessment processes as they become effective, and operational support of 
Medicare and Medicaid survey and certification pursuant to 1864 of the Social Security 
Act.  The system was designed with an emphasis on flexibility and integration, so that 
additional software components could be easily added to provide the States with new 
MDS-related functionality (such as new or revised quality indicators and expanded 
analytical reports), as well as applications that support future assessment processes for 
other provider types, and new capabilities to support survey and certification operations 
or any other entity using the MDS data or system.  Since each States system was 
specifically sized to accommodate these planned functions, the SA or any other entity 
  using the MDS data or system must not add other, non-CMS prescribed, applications or 
databases to the MDS system. 
 
4146.2 - Administration Requirements 
 
(Rev. 1, 05-21-04) 
 
The States are directly responsible for fulfilling requirements to operate the State MDS 
system.  However, the State may enter into an agreement with the SMA, another State 
component, or a private contractor to perform day-to-day operations of the system. 
 
The State must obtain RO approval prior to entering an agreement with another agency.  
Criteria for approval are provided at Exhibit 259.  Under any such arrangement, the State 
must be guaranteed real-time, priority access to this system to fully support all MDS 
functions specified in the MDS procedures and this manual.  All CMS privacy and 
confidentiality requirements must be met.  Off-site operation of the MDS system will 
require high capacity, fault-tolerant network connections to ensure reliable support for the 
States daily operations that will be affected by this system.  The State also must use the 
MDS system for reporting MDS data to the CMS central repository. 
 
To promote national consistency in MDS system operations and troubleshooting, each 
State must designate one individual as the MDS automation project coordinator.  This 
person is CMS key contact within each State for managing MDS system issues.  This 
person must be familiar with the use of the RAI and the MDS automation and 
transmission process.  Technical knowledge of information systems is useful but far less 
critical than an understanding of the RAI and MDS processes, good communications and 
project management skills, and the ability to educate and work with providers and 
vendors to ensure successful implementation of an automated process for all providers.  
The State should designate additional staff, including a system administrator to manage 
the technical aspects of running the MDS system, and support staff to assist in answering 
routine user questions, assigning passwords, etc. 
 
With respect to systems maintenance, the MDS system installed in each State is 
comprised of commercial off-the-shelf hardware and software components that are 
generally covered under typical umbrella service agreements that the State may already 
have in place for maintenance of data processing equipment.  Those MDS software 
components that are developed and distributed by CMS will be maintained and upgraded 
centrally by CMS.  The State will not be responsible for these software upgrades. 
 
To the extent that the State has developed customized external applications for using 
information obtained from the MDS database (e.g., to support Medicaid payment), the 
costs of developing and maintaining these additional software applications (and any 
related hardware components) will not be funded through the survey and certification 
budget.   
 
  4146.3 - Validation and Editing Process 
 
(Rev. 1, 05-21-04) 
 
Each time a facility accesses the State MDS system and transmits an assessment file, the 
State system performs a series of three levels of validations: 
 
1.  Fatal File Errors - The first check examines the basic structure and integrity of 
the submission file.  If there are fatal flaws in the file (batch of records), the entire 
file is rejected and the facility is notified of the reason for rejection in the Initial 
Feedback Report.  In the event that a batch is rejected due to Fatal File Errors, 
the facility will not receive a Final Validation Report. Rejected files must be 
corrected and retransmitted. Fatal File Errors are described in a document 
named spdoc110.pdf, that is posted at the CMS website, 
http://www.cms.hhs.gov/medicaid/mds20/ under MDS Software and Data 
Specifications and then under Version 1.10 Files Available for Downloading. 
The spdoc.pdf document is in a zip file names MDS 110.zip. 
 
2.  Fatal Record Errors - If the file structure is acceptable, then each MDS record in 
the file is examined individually for Fatal Record Errors.  These errors include 
out of range responses (this edit applies to most, but not all fields), selected 
inconsistent relationships between fields, or errors which made identifying a 
resident or record type difficult.  Fatal Record Errors result in rejection of 
individual records by the State MDS database.  The facility is informed of Fatal 
Record Errors on both the Initial Feedback Report and the Final Validation 
Report.  An overview of Fatal Record Errors is provided in a document called 
spdoc110.pdf, available in a zip file names mds 110.zip at 
http://www.cms.hhs.gov/medicaid/mds20 under MDS Software and Data 
Specification and then under Version 1.10 Files Available for Downloading. A 
detailed listing of Fatal Record Errors is provided in the item-by-item MDS 
record specifications,  Document names d_dt120.pdf, available in a zip file 
names mds 120.zip at http://www.cms.hhs.gov/medicaid/mds20 under MDS 
Software and Data Specifications and then under Data Specifications Version 
1.20 for the QIES MDS July 2002 Release.  One additional Fatal Record Error is 
based on the submission requirement under which the MDS record is submitted 
by the facility.  There is a data field called SUB_REQ that deals with this issue.  
Fatal Record Errors based upon the SUB_REQ field are described in a special 
document named subreqspecs.pdf at http://www.cms.hhs.gov/medicaid/mds20 
under MDS Software and Data Specifications and then under Data 
Specifications and Instructions for the QIES MDS November 26, 2001 Release.  
At this level of validation, the MDS standard system at the State is designed to 
reject individual records with Fatal Record Errors and to accept records with no 
Fatal Record Errors.  An electronic final validation report is made available to 
the facility and includes error messages for individual records found to have 
errors, and a statement of record status (accepted or rejected), with associated 
  error statements for any rejected records.  Rejected records must be corrected and 
retransmitted. 
 
3.  Non-Fatal Errors - If there are no Fatal Record Errors, the record is loaded 
into the State database and the record is further examined for Non-Fatal Errors.  
Any Non-Fatal Errors are reported to the facility in the Final Validation 
Report.  Non-Fatal Errors include missing or questionable data of a non-critical 
nature, field consistency errors of a non-critical nature, and record sequencing and 
timing errors. 
 
The Initial Feedback Report is available for the facility to download immediately 
following the submission of a file.  Since the Final Validation Report will not be 
available as quickly as the Initial Feedback Report, the facility may, based on experience, 
choose to obtain this report on a subsequent logon. 
 
The validations and edits described above fulfill all of CMS editing requirements under 
42 CFR 483.315(h)(1)(iv).  Also, as specified at 42 CFR 483.315(h)(2)(ii), States or other 
data/system users may not modify any aspect of the CMS MDS standard system, 
including these validations and edits, the Standard Record Layout, and the software code 
and specifications on which the system is based. 
 
States that use MDS data for Medicaid payment may require additional assessment 
information not required by CMS MDS system.  Section S (the State-specific section) of 
the MDS system was designed for this purpose.  Moreover, some States may impose 
additional edits on Medicaid assessments.  However, a State or other data system users 
may not interfere with, modify, or delay the transmission of records, meeting CMS edit 
standards, from a Medicare and/or Medicaid certified facility to the CMS MDS standard 
system. 
 
Furthermore, the State or other data system users may not impose any requirements that 
modify the clinical accuracy of CMS prescribed MDS records, reports, or calculations. 
 
4146.4 - Reports 
 
(Rev. 1, 05-21-04) 
 
The MDS system provides the following reports to both the State and the provider.  
These reports, which focus on errors in MDS submissions, are key to working with 
facilities to ensure successful transmission of MDS data. 
 
1 - Initial Feedback Report 
 
During a submission session, the facility will be informed of file submission status in an 
Initial Feedback Report.  The Initial Feedback Report may indicate that the batch was 
accepted, received (for a test file), or that it was rejected.  Since the Initial 
  Feedback Report is not automatically saved by the system, it must be reviewed prior to 
logging off after a batch submission. 
 
The top section of this report gives general information about the entire batch of records. 
 
  Report Date/Time; 
 
  Batch Status - Status is Rejected if a file had Fatal File Errors and the entire 
batch of records was rejected.  Status is Accepted if a file had no Fatal File 
Errors and individual records were processed for loading into the State database.  
For test files only, status is Received if the test submission had no Fatal File 
Errors.  Test records are not inserted in the database; 
 
  Submission Date/Time - Date/time that the MDS file was submitted; may be 
needed for troubleshooting any problems with a batch; 
 
  Submission Batch ID - Unique ID assigned to each batch used for troubleshooting 
problems with a batch; 
 
  Facility ID - The standard system logon ID for the facility; 
 
  Facility Name; 
 
  Number of Records Processed - Number of data records in the file (batch)--value 
will be 0 if the entire file is rejected; 
 
  Number of Records Rejected - Number of data records that contained Fatal 
Record Errors and were not accepted into the State database.  If the entire file 
was not rejected, this value will be 0 on the Initial Feedback Report.  This value 
and the Report Detail will be provided in the Final Validation Report upon 
validation of all records in the file; 
 
  Number of Records with Errors - Number of records that were accepted into the 
State database but that also contained Non-Fatal Errors.  If the entire file was 
not rejected, this value will be 0 on the Initial Feedback Report.  This value and 
the Report Detail will be provided in the Final Validation Report upon validation 
of all records in the file; and 
 
  Total Number of Errors - Total number of Non-Fatal Errors across all records 
accepted into the State database.  If the entire file was not rejected, this value will 
be 0 on the Initial Feedback Report.  This value and the Report Detail will be 
provided in the Final Validation Report upon validation of all records in the file. 
 
  Detail concerning any file header and trailer errors will appear in the lower portion of the 
Initial Feedback Report, under Report Detail.  The Report Detail section includes the 
following information (clarification of labels is given in parentheses): 
 
  Record Type, Effective Date - The record type field can contain Header for a 
header record, Trailer for a trailer record; 
 
  Field - Field in error; 
 
  Invalid Data - Data that caused the error; and 
 
  Error Description - Descriptive error message. 
 
2 - Final Validation Report 
 
If there are Fatal File Errors with the MDS submission file, the entire batch of records is 
rejected and the only feedback that the facility will receive during the submission session 
is the Initial Feedback Report.  However, if there are no Fatal File Errors, a Final 
Validation Report will also be received by the facility.  The Final Validation Report has 
exactly the same layout as the Initial Feedback Report.  The Report Detail section of 
the Final Validation Report details all errors found in the data records in the batch.  These 
errors can be Fatal Record Errors (resulting in record rejection) or Non-Fatal Errors.  
The following information is displayed in the record detail section: 
 
  SSN, Name - Resident SSN and name; 
 
  Record Type, Effective Date - The Record Type field contains Header for a 
header record, and Trailer for a trailer record.  For data records, the record type 
field contains the data record types as defined in definitions section (e.g., A for 
an initial admission assessment record, Q for a quarterly update assessment, 
etc.).  For a data record, the Effective Date for the record follows the record type.  
The effective date A4a for a reentry record R2b for an assessment record, and R4 
for a discharge record. 
 
  Target Date.- The target date field contains the date that the reentry, assessment or 
discharge event occurred.  The target date is A4a for a reentry record.  A3a for an 
assessment record, and R4 for a discharge record. 
 
  Field or MDS Items. - Field or fields in error.  A single field or item will be 
present for data range or formatting errors.  Two fields will be present for errors 
involving required consistency between pairs of MDS items. 
 
  Invalid Data Submitted - Data values that caused the error.  There will be single 
value for errors involving data range or formatting errors.  Two values will be 
present involving consistency between pairs of MDS items. 
 
    Message Number.- The system numeric code for the error detected.  The numeric 
codes are negative numbers.  After the numeric code the report indicates if the 
error is Fatal or Non-Fatal. 
 
  Message. - Descriptive error message. 
 
The additional reports listed below are available to the State for the MDS system, but not 
directly to the provider.  The State may provide copies of these reports to the facilities as 
they deem appropriate. 
 
  Assessment Field Information - Displays information about each assessment 
field in the database including field name, start position, field length, valid values, 
start and end ranges (for numeric fields), field data type, field description, and 
which assessment section contains the field; 
 
  Assessment Primary Reason - (MDS Item A8a or AA8a) - Displays information 
about primary reason for assessment; 
 
  Assessment Sections - Displays which assessment sections are included for each 
combination of Primary Reason for Assessment (MDS Item A8a or AA8a) and 
Special Reason for Assessment (MDS Item AA8b) values; 
 
  Assessment Special Reason - (MDS Item A8b or AA8b) - Displays information 
about these values; 
 
  Case Mix Codes - Displays details of each CMI set that is in the database.  
Information includes CMI sequence, set name, ADL values, CMI codes, CMI 
values, and descriptions; 
 
  Discharges in Previous Month - A list of residents who had discharge 
assessments (as the last assessment) submitted in the last 30 days.  Report can be 
generated for a single facility or all facilities; 
 
  Duplicate Resident Names - A list of residents with identical first and last 
names. Useful for finding duplicate residents in a facility; 
 
  Duplicate Resident SSN - A list of residents who are listed as having the same 
SSN.  All residents for a particular SSN are listed.  This report is also useful for 
finding duplicate residents; 
 
  Error Summary - This report lists the errors that have occurred in submissions, 
the number of occurrences, and the percentage of assessments with each error.  
The report is for a single facility, all facilities, for a single vendor, all vendors, or 
for an entire State for a specified time period; 
 
  Error Message - Displays all of the error message codes and descriptions; 
   
  Error Detail - List of all errors for all submissions grouped by assessment.  The 
report can be generated for a single facility, all facilities, a single vendor, or all 
vendors for a specified time period; 
 
  Errors by Field - Lists, by field, the number of assessments that had an error in 
that field, the number of assessments successfully processed, and the percentage 
of assessments with each error.  Can be generated for a single facility, all 
facilities, a single vendor, all vendors, or the entire State for a specified period of 
time; 
 
  Facility Accounts Report - Lists all facilities and their logon ID and password; 
 
  Facility List - Listing of all facilities in a State that submit MDS assessments; 
 
  Facility List, No Recent Submissions - Listing of all facilities in the State that 
have not submitted assessments since a specified date; 
 
  Facility List - Non-Submitted Data - Listing of all facilities that have not 
submitted assessments; 
 
  Overdue Assessments - Listing of all residents who have not had assessments 
submitted within the required timeframe.  Report includes which assessment 
type(s) is/are expected. Available for a single facility or all facilities; 
 
  Quarterly Assessment Fields - Listing of all fields that are included for each 
quarterly assessment type grouped by each MDS Item AA8a/AA8b combination; 
 
  Roster Report - Lists all residents who are currently in a facility.  Can be 
generated for a single facility or all facilities; 
 
  Roster Timeframe Report - List all residents who are in a facility within a 
specified date range.  Can be generated for a single facility or for all facilities; 
 
  Sequencing Report - Displays invalid sequences between assessments.  
Displayed by two sets of MDS Item A8a/A8b or AA8a/AA8b combinations and 
Record Types (current and previous); 
 
  State Customization - List the values for the active CMI set for the State, State 
optional fields (if any), and the validation engine options set by the State; 
 
  Summary Statistics - List the number of files received, number of records 
processed (by record type), number of records rejected, and number of records 
received with errors (by record type).  Available for a single facility or all 
facilities for a specified time period; 
 
    Validation Codes - A reference report that lists valid codes for various fields in 
the assessment; 
 
  Vendor List - A list of facilities that have used a particular vendor.  This report 
can be generated for a single vendor or multiple vendors; and 
 
  Ad Hoc Reports - Various user-defined reports can also be generated using 
structured query language within the Data Management Application. 
 
In addition, the MDS system has made other reports available to both the States and 
providers, based on the deployment of analytical and quality indicator software. 
 
4146.5 - Correction of Errors in MDS Records That Have Been Accepted 
by the Standard MDS System at the State 
 
(Rev. 1, 05-21-04) 
 
The standard MDS system in each State includes a mechanism by which facilities can 
electronically submit corrections to MDS data that have already been accepted into the 
State MDS database.  Depending on the circumstances surrounding the error, corrections 
may include modification or inactivation of MDS records (assessments, Discharge 
Tracking forms and Reentry tracking forms).  The MDS system provides management 
reports to the State that analyze the type, nature and frequency of corrections submitted 
by facilities to the MDS database at the State.  For information about the process of 
correcting errors in MDS records in the State database, refer to Correction Policy for 
MDS Records in Appendix R, Part IV. 
 
4146.6 - Replication to the CMS Repository 
 
(Rev. 1, 05-21-04) 
 
Each States MDS database will be transmitted to CMS Central Repository at least 
monthly using a data replication process initiated by CMS.  Since the process will be 
managed by CMS through an automatic polling process, the States will not actually have 
to transmit the data.  However, the State must ensure that the CMS data-line established 
for this purpose is accessible to CMS at all times for testing and monitoring purposes. 
Actual replication access to the Oracle assessment data tables may be controlled by the 
States but, in such cases, a fixed schedule must be established with CMS Central Office. 
 
The MDS system and CMS data line meet all industry security standards.  However, if 
the State is concerned about security, it may establish a firewall (an electronic block) to 
restrict access to the States portion of the network.  Access must not be restricted to the 
CMS-supplied MDS System. 
 
  4146.7 - Privacy and Confidentiality 
 
(Rev. 1, 05-21-04) 
 
4146.7A - System of Records 
 
(Rev. 1, 05-21-04) 
 
The MDS database is operated and maintained by States as a Federal database and, as 
such, is subject to the requirements of the Federal Privacy Act.  The text of the System of 
Records notice for the MDS, which follows, describes the legal requirements regarding 
privacy and disclosure of information by CMS or the State. 
 
The purpose of the Long Term Care Minimum Data Set (LTC MDS) 
System NO. 09-70-1517 is to aid in the administration of the survey and 
certification of Medicare/Medicaid long term care facilities and to study 
the effectiveness and quality of care given in those facilities.  This system 
supports regulatory, reimbursement, policy and research functions.  In 
addition, this system will enable Federal and State regulators to provide 
long term care facility staff with outcome data for providers internal 
quality improvement activities. 
 
This system shall contain clinical information found in the comprehensive assessments of 
persons residing in long term care facilities that are certified to participate in the 
Medicare and/or Medicaid programs (including private pay individuals).  This 
information is found in the Long Term Care Minimum Data Set for Nursing Home 
Resident Assessment. 
 
The CMS established this system in accordance with the principles and requirements of 
the Privacy Act. The Privacy Act allows the disclosure of information from this system 
without an individuals consent if the information is to be used for a purpose that is 
compatible with the purposes for which the information was collected.  Any such 
compatible use of data is known as a routine use.  The proposed routine uses for this 
system meet the compatibility requirement of the Privacy Act since they are consistent 
with the purpose of analyzing data on the physical, mental, functional, and psychosocial 
status of nursing facility residents living in the State. 
 
The routine uses specify the circumstances under which CMS and the State in their roles 
as contractors representing CMS may release information from the long-term care MDS 
system without the consent of the individual to whom such information pertains.  The 
CMS System Manager must evaluate each proposed disclosure of information under the 
routine uses and/or an individual authorized by CMS.  The authority to release data is 
limited to the System Manager or authorized designee. 
 
  4146.7B - Procedures for Disclosure of Information Pursuant to Data 
Use Agreement 
 
(Rev. 1, 05-21-04) 
 
Releases of information must be evaluated to determine if disclosure is legally 
permissible by the CMS System Manager or authorized designee, including but not 
limited to ensuring that the purpose of the disclosure is compatible with the purpose for 
which the information was collected.  Releases are generally only made for the routine 
uses specified in the system notice.  The CMS System Manager or authorized designee 
must require each prospective recipient of LTC MDS system information to agree in 
writing to certain conditions to ensure the continuing confidentiality and to physically 
safeguard of the information.  For each disclosure it is necessary for the System Manager 
or authorized designee to, as necessary and appropriate: 
 
1.  Determine that no other Federal statute specifically prohibits disclosure of the 
information; 
 
2.  Determine that the use or disclosure does not violate legal limitations under which 
the information was provided, collected, or obtained; 
 
3.  Determine the purpose for which the disclosure is to be made: 
 
a.  Cannot reasonably be accomplished unless the information is provided in 
individually identifiable form; 
 
b.  Is of sufficient importance to warrant the effect on or the risk to the 
privacy of the individual(s) that additional exposure of the record(s) might 
bring; 
 
c.  There is a reasonable probability that the purpose of the disclosure will be 
accomplished; and 
 
d.  The purpose is within the scope of a routine use. 
 
4.  Require the recipient of the information to: 
 
a.  Establish reasonable administrative, technical, and physical safeguards to 
prevent unauthorized access, use, or disclosure of the record or any part 
thereof.  The physical safeguards shall provide a level of security that is at 
least equivalent to the level of security contemplated in OMB Circular No. 
A-130 (revised), Appendix III, Security of Federal Automated Information 
Systems, which sets forth guidelines for security plans for automated 
information systems in Federal agencies; contemplated in OMB Circular 
No. A-130 (revised), Appendix III, Security of Federal Automated 
  Information Systems, which sets forth guidelines for security plans for 
automated information systems in Federal agencies; 
 
b.  Remove or destroy the information that allows subject individual(s) to be 
identified at the earliest time at which removal or destruction can be 
accomplished, consistent with the purpose of the request; 
 
c.  Refrain from using or disclosing the information for any purpose other 
than the stated purpose under which the information was disclosed; and 
 
d.  Make no further use or disclosure of the information except: 
 
  To prevent or address an emergency directly affecting the health or 
safety of an individual; 
 
  For use on another project under the same conditions, provided the 
System Manager or authorized designee has authorized the 
additional use(s) in writing; or 
 
  When required by law. 
 
5.  Secure a written statement or agreement from the prospective recipient of the 
information whereby the prospective recipient attests to an understanding of, and 
willingness to abide by the foregoing provisions and any additional provisions 
that the System Manager deems appropriate in the particular circumstance.  The 
System Manager or authorized designee must use a CMS-approved Data Release 
Agreement that cannot be modified; and  
 
6.  Determine whether the disclosure constitutes a computer matching program as 
defined in 5 U.S.C. 552a(a)(8).  If the disclosure is determined to be a computer 
matching program the instructions regarding preparation and transmission of a 
matching agreement as stated in 5 U.S.C. 552a(o) must be followed. 
 
4146.7C - Routine Uses 
 
(Rev. 1, 05-21-04) 
 
The following lists the routine uses published in the LTC MDS System NO. 09-70-1517 
(current as of February 2002). 
 
Disclosure may be made: 
 
1.  To Agency contractors, or consultants who have been engaged by the Agency to 
assist in accomplishment of a CMS function relating to the purposes for this 
system and who need to have access to the records in order to assist CMS; 
  
  2.  To another Federal or state agency, agency of a state government, and agency 
established by state law, or its fiscal agent to: 
 
a.  Contribute to the accuracy of CMS proper payment of Medicare benefits; 
 
b.  Enable such agency to administer a Federal health benefits program, or as 
necessary to enable such agency to fulfill a requirement of a Federal 
statute or regulation that implements a health benefit program funded in 
whole or in part with Federal funds, and/or; 
 
c.  Assist Federal/state Medicaid programs within the state. 
 
3.  To QIOs in connection with review of claims, or in connection with studies or 
other review activities, conducted pursuant to Part B of Title XI of the Act and in 
performing affirmative outreach activities to individuals for the purpose of 
establishing and maintaining their entitlement to Medicare benefits or health 
insurance plans; 
  
4.  To insurance companies, underwriters, third parties administrators (TPA), 
employers, self-insurers, group health plans, health maintenance organizations 
(HMO), health and welfare benefit funds, managed care organizations, other 
supplemental insurers, non-coordinating insurers, multiple employer trusts, 
liability insurers, no-fault medical automobile insurers, workers compensation 
carriers or plans, other groups providing protection against medical expenses 
without the beneficiarys authorization, and any entity having knowledge of the 
occurrence of any event affecting (a) an individuals right to any such benefit or 
payment, or (b) the initial right to any such benefit or payment, for the purpose of 
coordinating of benefits with Medicare program and implementation of MSP 
provision at 42 U.S.C. 1395y(b).  Information to shall be limited to Medicare 
utilization data necessary to perform that specific function.  In order to receive the 
information, they must agree to: 
 
a.  Certify that the individual about whom the information is being provided 
is one of its insured or employees, or is insured and/or employed by 
another entity for whom they serve as a TPA; 
 
b.  Utilize the information solely for the purpose of processing the 
individuals insurance claims; and 
 
c.  Safeguard the confidentiality of the data and prevent unauthorized access. 
 
Other insurers may require LTCMDS information in order to support evaluations 
and monitoring of Medicare clams, information of beneficiaries, including proper 
reimbursement for services provided. 
 
  5.  To an individual or organization for research, evaluation, or epidemiological 
projects related to the prevention of disease or disability, the restoration or 
maintenance of health, or payment related projects; 
  
6.  To a Member of Congress or congressional staff member in response to an 
inquiry of the congressional office made at the written request of the constituent 
about whom the record is maintained; 
 
7.  To the Department of Justice (DOJ), court or adjudicatory body when: 
 
a.  The Agency or any component thereof; 
 
b.  Any employee of the Agency in his or her official capacity;  
 
c.  Any employee of the Agency in his or her individual capacity where the 
DOJ has agreed to represent the employee; or 
 
d.  The United State Government, is a party to litigation or has an interest in 
such litigation, and by careful review, CMS determines that the records 
are both relevant and necessary to the litigation. 
 
8.  To a CMS contractor (including, but not limited to fiscal intermediaries and 
carriers) that assists in the administration of a CMS-administered health benefits 
program, or to a grantee of a CMS-administered grant program, when disclosure 
is deemed reasonably necessary by CMS to prevent, deter, discover, detect, 
investigate, examine, prosecute, sue with respect to, defend against, correct, 
remedy, or otherwise combat fraud or abuse in such program; 
 
9.  To another Federal agency or to an instrumentality of any governmental 
jurisdiction within or under the control of the United States (including any state or 
local government agency), that administers, or that has the authority to investigate 
potential fraud or abuse in a health benefits program funded in whole or in part by 
Federal funds, when disclosure is deemed reasonably necessary by CMS to 
prevent, deter, discover, detect, investigate, examine, prosecute, sue with respect 
to, defend against, correct, remedy, or otherwise combat fraud or abuse in such 
programs.  Other agencies may require LTCMDS information for the purpose of 
combating fraud and abuse in such Federally funded programs; and 
 
10. To a national accrediting organization whose accredited facilities are presumed to 
meet certain Medicare requirements fro inpatient hospital (including swing beds) 
services; e.g., the Joint Commission for the Accrediting of Healthcare 
Organizations (JCAHO).  Information will be released to accrediting 
organizations only for those facilities that they accredit and that participate in the 
Medicare program. 
 
  4146.7D - Access by an Individual to His or Her Own Records 
 
(Rev. 1, 05-21-04) 
 
Upon request by any individual with records contained in the system of records, the 
System Manager or authorized designee shall permit the individual to review his/her 
records and obtain a copy of all or any portion thereof (in a form comprehensible to the 
individual) unless an exemption under the Privacy Act applies.  Fees may be charged 
only for the cost of copying the records, and not for time spent searching for the records 
or determining whether to release the records.  The individual may have another person 
accompany him/her while reviewing the records, but must furnish a written statement 
authorizing disclosure and discussion of the records in the accompanying persons 
presence.  The individual may request amendment of any portion of his/her records which 
is not accurate, relevant, timely or complete. 
 
4146.7E - Criminal Penalties for Improper Disclosure 
 
(Rev. 1, 05-21-04) 
 
Under the Federal Privacy Act, the following criminal penalties may be applicable: 
 
  Any officer or employee of the State who intentionally discloses individually 
identifiable information prohibited from disclosure under the Privacy Act, shall be 
guilty of a misdemeanor and fined not more than $5,000; 
 
  Any officer or employee of the State who willfully maintains a system of records 
without meeting the notice requirements of the Privacy Act shall be guilty of a 
misdemeanor and fined not more than $5,000; and 
 
  Any individual who knowingly and willfully requests or obtains any record 
concerning an individual from an agency under false pretenses shall be guilty of a 
misdemeanor and fined not more than $5,000. 
 
4146.8 - System Security 
 
(Rev. 1, 05-21-04) 
 
As distinguished from confidentiality and privacy, which primarily focus on the rules for 
release on information when it is authorized, security relates to the means by which the 
information is protected from unauthorized access, disclosure and misuse.  The State 
must ensure that the electronic data in the MDS system is protected to the same degree 
that paper records containing any identifiable data must be safeguarded.  Additionally, 
any printed copies of reports from the system must be maintained in a secure locked area 
while they are needed and shredded when no longer needed. 
 
  The State must issue a policy that delimits the qualifications for an individual to access 
the MDS system and the system administrator must issue passwords and user IDs in strict 
adherence to those requirements.  Those who receive passwords must be aware of the 
requirement of the States security policies and those of the System of Records and the 
Privacy Act.  The system administrator and those who have received passwords must 
protect passwords.  Passwords must be disabled at the time an individual leaves a 
position requiring MDS system access. 
 
No one should leave the MDS system in a logged-on status when leaving the area.  If 
possible, the system hardware should be located in an enclosed area, with a door having 
interior hinges that can be locked.  Keys or a combination should be available to only a 
minimal group of individuals with a need for access to the system. 
 
In addition to the specific guidance above, the safeguards must provide a level of security 
at least equivalent to that required by the Office of Management and Budget Circular A-
130 (revised) Appendix III, Security of Federal Automated Systems. 
 
4146.9 - RO Roles and Responsibilities 
 
(Rev. 1, 05-21-04) 
 
ROs must provide the States with the program guidance and technical assistance critical 
to successful implementation of MDS and subsequent programs and ensure that the States 
have the necessary resources to accomplish these goals. 
 
The following activities must be performed by the RO: 
 
1.  Budget Process - The RO must review each State agencys budget request and 
the required MDS Implementation Plans in accordance with the Budget Call 
Memorandum and reasonable and prudent expenditure of funds to ensure that 
States receive a fair and reasonable allocation.  The RO must monitor Quarterly 
Expenditure Reports against the States allocation; 
 
2.  Review State Implementation Plans - The RO must review all annual MDS 
Implementation Plans from the States and ensure that the States have reasonable 
plans for ensuring facilities have the technical information, training, and 
assistance they need to comply with MDS submission and accuracy, privacy and 
security requirements, and that the States are monitoring facility compliance with 
MDS requirements;  
 
3.  Review Contracts and Agreements - The RO must ensure that the State survey 
agency has executed an agreement with another entity if that other entity is 
operating the MDS system on behalf of the State survey agency responsible for 
nursing home survey and certification;  
 
  4.  Provide Training and Technical Assistance - The RO must provide training and 
technical assistance to the States in MDS implementation requirements and 
continuing education in the MDS program; 
 
5.  Perform Focused Reviews/Federal Surveys - The RO will use the National 
MDS Repository assessment and quality indicator data to select facilities for 
focused reviews, and in preparation for Federal surveys; and 
 
6.  Take Enforcement Action - The RO will process and effectuate enforcement 
actions for non-compliance with MDS requirements.  
 
4146.10 - Provider Relations 
 
(Rev. 1, 05-21-04) 
 
With CMS technical support and guidance, the States must work closely with the 
provider community and their MDS 2.0 software vendors in providing information on 
specific requirements related to the submission of MDS assessments to the State MDS 
system.  The standardization of the State MDS system extends back to the provider 
because a common data communications software package is used by providers to 
transmit MDS assessments to the State. 
 
The CMS expects that a facilitys software vendor will provide primary support to the 
facility in terms of MDS encoding and transmission to the State repository.  The State, 
however, must work with facilities and software vendors in educating them about this 
process and in working out some of the initial problems in getting provider data through 
the vendor software and into the State MDS system. The States must also provide 
training and technical assistance in interpretation of MDS reports provided to facilities.  
The State will also fund the monthly telephone line charges associated with transmission 
of the MDS data from the facilities to the State. 
 
   
  SA Analysis Activity 
 
4149 - OSCAR System 
 
(Rev. 1, 05-21-04) 
 
4149A - Summary 
 
(Rev. 1, 05-21-04) 
 
The Online Survey Certification and Reporting System (OSCAR) collects provider and 
supplier certification information and generates reports which compile this information 
into a workable format.  The SA has primary responsibility for entering all recertification 
and Medicaid initial survey data, except for nursing homes and home health agencies, 
into the Online Data Input and Edit (ODIE) subsystem of OSCAR via computer 
terminals.  The RO is responsible for entering all Medicare initials and terminations 
unless this has been delegated to the SA.  Nursing homes and home health agencies data 
must now be entered through ASPEN Central Office (ACO) by SAs and ASPEN 
Regional Office (ARO) for ROs.  The data will move from ASPEN to OSCAR. Entered 
deficiency data is compared against a list of critical requirements (flags) in order to 
identify surveys that require submittal to the RO by the SA for substantive professional 
review prior to approval for continued program participation.  After a compliance 
determination is made, additional information is entered into the system to complete the 
certification record.  Standard reports are available from OSCAR and can be produced on 
an as-needed basis.  User designed reports can be set up and saved in a user library for 
future use.  Each standard and user designed report pertains to a particular aspect of the 
certification process.  The intended use of these reports is to help SAs understand and 
manage their workload and identify processing problems for correction. 
 
4149B - Availability of OSCAR Data 
 
(Rev. 1, 05-21-04) 
 
Provider information abstracted from the certification documents is maintained in 
OSCAR data records and produced in various formats to assist the SA, RO, and CO in 
managing and assessing their respective areas of responsibility in the certification 
process.  It is the responsibility of each SA, the ROs, and CO to generate the reports 
necessary to monitor and manage their certification workload.  
 
The SA/RO should generate OSCAR Report 2 (Facilities Scheduled for Survey) on a 
regular basis for those provider/supplier types currently being surveyed on an annual 
basis. They should obtain history profile of deficiencies for these facilities by running 
OSCAR Report 3 (Facility History Profile).  Here, they can target their search on 
Condition, standard, lesser requirements, or all deficiencies.  Other OSCAR reports that 
would be useful to the SA, RO, or CO and can be generated on an as-needed basis are:  
 
    OSCAR Report 9 (Average Certification Work Processing Times) which 
calculates the average processing times to complete the certification of each 
category of participating providers and suppliers;  
 
  OSCAR Report 9R (Recap of Certification Work Processing Times) compares the 
average processing times by certification processing steps and type of certification 
action;  
 
  OSCAR Reports 18 through 20 provide a Comparison of Deficiency Patterns by 
tag number sequence, by State, region, and frequency of occurrence.  This 
information is displayed either by State, region, and nation; and 
 
  OSCAR report 5 and 6 provide a listing of all Medicare/Medicaid facilities in 
alphabetical order by type of facility, chronological survey date order, zip code, or 
State region code.  
 
Through the user defined features of OSCAR, users can customize and design their own 
reports as well as extract data and download that data to a PC where it can further be 
analyzed with the available PC tools.  
 
OSCAR has on-line information retrieval.  Its inquiry option provides the ability to 
search by name, provider number, provider type, or ZIP code. 
 
4149C - Review of Certification Data 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
It is crucial that the SA and RO review all certification documents for completeness and 
accuracy prior to data entry to maintain the integrity of the OSCAR database.  To avoid 
processing delays, make sure the appropriate forms, as listed below, are at hand.  The 
ODIE and ACO systems are programmed to accept data from complete certification kits 
that contain all required forms.  Some documents are common to all initial and 
recertification kits including the Medicare/Medicaid Certification and Transmittal 
(Form CMS-1539), the appropriate Request for Certification form, the Statement of 
Deficiencies and Plan of Correction (Form CMS-2567), and the Crucial Data Extract 
(CDE).  The SA and RO may enter the data from the Post-Certification Revisit Report 
(Form CMS-2567B) detailing the status of the deficiencies on the revisit either at the time 
of initial data entry or, if the facility record is already in OSCAR, at a later time.  The 
CDE must be present in every kit.  The CDE for each type of institution corresponds to 
the respective Survey Report and abstracts certain compliance and deficiency information 
for data collection purposes. 
 
The following list includes all the basic certification documents (including their provider 
number series that follows the 2-digit State code) required for ODIE or ASPEN Central 
Office input in all routine initial and recertification packages: 
(See also 2779.) 
 
  1.  Nonaccredited Acute Hospital (0001 to 0879) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-1514 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Crucial Data Extract for Form CMS-2786 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
2.  Nonaccredited Psychiatric Hospital (4000 to 4499) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-1514 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Crucial Data Extracts for Form CMS-2786 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
3.  Accredited Acute Hospital (0001 to 0879) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-1514 
 
4.  Accredited Psychiatric Hospital (4000 to 4499) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-1514 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
5.  Home Health Agency (7000 to 8499 and 9000 to 9499) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
    Home Health Agency Survey and Deficiencies Report, Form CMS-
1572(A) 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
6.  Portable X-Ray (X0000001 to X9999999) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-1880 
 
  Portable X-Ray Survey Report, Form CMS-1882 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
7.  Rehabilitation Agency (OPT/SP)  (6500 to 6989) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
  Request to Establish Eligibility, Form CMS-1856 
 
  Crucial Data Extract for Form CMS-1893 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
8.  Rural Health Clinic (3400 to 3499, 3800 to 3999 and 8500 to 8999) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-29 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Crucial Data Extract for Form CMS-30(E) 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
9.  ESRD (2300 to 2999 and 3500 to 3799) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
   
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Crucial Data Extract for Form CMS-3427 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
10. SNF and SNF/NF - Titles XVIII and XVIII/XIX (5000 to 6399) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Long Term Care Facility Application for Medicare/Medicaid, Form 
CMS-671 
 
  Resident Census and Conditions of Residents, Form CMS-672 
 
  Statement of Deficiencies and Plan of Correction, Form CMS- 2567 
 
  Fire Safety Survey Report Crucial Data Extract, Form CMS-2786 
 
  Survey Team Composition and Workload Report, Form CMS-670 
11. NF (A001 to A999, 00-B001 to B999, E001 to E999, and F001 to F999) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Long Term Care Facility Application for Medicare/Medicaid, Form 
CMS-671 
 
  Resident Census and Conditions of Residents, Form CMS-672 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Fire Safety Survey Report Crucial Data Extract, Form CMS-2786 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
12. Intermediate Care Facilities for Individuals with Intellectual Disabilities 
(GOO1 to G999, H001 to H999) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Intermediate Care Facility for Individuals with Intellectual Disabilities 
Survey Report, Form CMS-3070G 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
   
  Fire Safety Survey Report Crucial Data Extract, Form CMS-2786 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
13. Ambulatory Surgical Centers (C0000001 to C9999999) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Ambulatory Surgical Center Request for Certification in the Medicare 
Program, Form CMS-377 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Ambulatory Surgical Center Survey Report, Form CMS-378 and 
Ambulatory Surgical Center Report -- Crucial Data Extract, Form 
CMS-378E 
 
  Fire Safety Survey Report, Form CMS-2786H 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
14. Comprehensive Outpatient Rehabilitation Facilities (4500 to 4599, 3200 to 
3299, 4500 to 4599 and 4800 to 4899) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-359 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
15. Hospice (1500 to 1799) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Request to Establish Eligibility, Form CMS-417 
 
  Statement of Deficiencies and Plan of Correction, Form CMS-2567 
 
  Crucial Data Extract for Form CMS-643 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
  16. Community Mental Health Centers (4600 to 4999 and 1400 to 1499) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Community Mental Health Center Crucial Data Extract (No CMS 
number.) 
 
17. Federally Qualified Health Centers (1800 to 1989) 
 
  Medicare/Medicaid Certification and Transmittal, Form CMS-1539 
 
  Federally Qualified Health Center Crucial Data Extract 
 
18. CLIA Laboratories (D0000001 to D9999999) 
 
  Medicare/Medicaid Certification and Transmittal Form CMS-1539 
 
  Survey Report Form (CLIA), Form CMS-1557 
 
  Statement of Deficiencies and Plan of Correction, Form-2567 
 
  Survey Team Composition and Workload Report, Form CMS-670 
 
4149D - OSCAR Input Considerations 
 
(Rev. 1, 05-21-04) 
 
After the kit is reviewed to ensure that the appropriate certification documents are 
complete and the data is entered into ODIE or ACO, it undergoes a series of edit and 
consistency checks programmed into the system to screen input errors and data 
inconsistencies.  Depending upon the nature of the error, the data may be rejected or 
placed in a pending transaction file until corrected information is received and accepted 
to the record.  To assure efficient operation of the system, the SA should be careful that 
all certification data are completed properly, keyed accurately, and transmitted promptly. 
 
4149E - Suggested Output Utilization 
 
(Rev. 1, 05-21-04) 
 
1 - SA 
 
The SA produces the OSCAR reports identified in subsection B on a regular basis.  These 
reports provide pertinent information concerning the ongoing management of the 
certification process.  The SA uses these as tools in monitoring the status of individual 
providers and suppliers in the State.  Preliminary analysis of facility deficiency profiles 
(OSCAR Report 17) can help the SA determine the appropriate survey team composition 
  for resurveys.  The survey team can use the profiles to familiarize themselves with the 
histories and characteristics of facilities scheduled for forthcoming surveys based on 
previous findings and reported corrective actions.  For HHA and NH surveys, surveyors 
should also review the appropriate quality indicator and quality measures reports.   
OSCAR Report 2 can be utilized to verify internal controls and existing records for 
scheduling resurveys.  Additional management information can be derived from OSCAR 
Report 5 or 6 since each lists all participating providers and suppliers in alphabetical 
order by facility name for reference purposes.  Also, OSCAR Report 5 or 6 can sort the 
facilities by provider number order, zip code, or State region code.  These reports should 
help the SA maintain a balanced survey schedule and avoid certification backlogs. 
 
The SA, through careful analysis of OSCAR Reports 18 through 20, can uncover 
significant State deficiency patterns and reflect a possible need for additional surveyor 
training or provider consultation in problem areas.  The SA can then investigate the 
causative factors that underlie frequently occurring deficiencies and institute plans for 
corrective action.  Similarly, if a State consistently shows few deficiencies for 
requirements often out of compliance nationwide, it can explore whether the facilities are 
strong in that area or if there are problems with the survey process.  OSCAR reports may 
also be used to track selected deficiencies over a specified time period and enable the SA 
to monitor any changes in deficiency patterns. 
 
2 - RO Usage 
 
Evaluation of SA performance is the most important responsibility of the RO and use of 
OSCAR data is an integral part of this evaluation.  Analysis of data derived from the 
various OSCAR reports can provide the RO with insights into such areas of SA 
performance as timeliness of certification actions (OSCAR Reports 9 and 9R) and facility 
deficiency patterns as compared to other States, regions, and the nation (OSCAR Reports 
18-20).  OSCAR reports can specifically provide the RO with the tools to: 
 
  Identify overdue recertifications; 
 
  Prepare for SA visits; and 
 
  Monitor SA processing times. 
 
3 - CO Usage 
 
CO calls upon OSCAR to answer informational requests from interested parties (e.g., 
Congress, public interest groups, governmental agencies) and to supply statistical 
information to the Administrator of CMS.  The data from OSCAR is also used 
extensively in the general oversight of the certification process on the national level. 
 
  4150 - RO Oversight of SA Surveyor Training 
 
(Rev. 1, 05-21-04) 
 
Responsibilities of RO staff for the surveyor training program fall into the following four 
groupings: 
 
A.  To enforce and interpret the SA surveyor qualifications and training statement.  
The RO: 
 
1.  Determines whether surveyors hired by SAs meet the Federal 
qualifications requirements; 
 
2.  Assures that new surveyors complete the orientation program and attend 
the appropriate Basic surveyor Training Course; and 
 
3.  Maintains an updated roster of SA surveyors. 
 
B.  To review, approve, and monitor the SA orientation programs for new surveyors.  
The RO: 
 
1.  Assists States in adapting CMS orientation program to State needs; 
 
2.  Reviews and approves States proposed orientation program;  
 
3.  Monitors the implementation of the program assuring that each new 
surveyor completes the orientation program; 
 
4.  Informs new surveyor in training (either when several trainees can come 
to the RO at one time, or when the regional training administrator visits a 
State or at some other convenient time and place), regarding the 
responsibilities of ROs as they relate to their State; 
 
5.  Confers and advises the preceptor and/or coordinator on the administrative 
and technical issues regarding the orientation program; 
 
6.  Participates in the evaluation of new surveyors development; 
 
7.  Plans, conducts, and coordinates the RO orientation program; 
 
8.  Issues a certificate to each surveyor satisfactorily completing the 
orientation program; 
 
9.  Acts as a liaison between CO and the SA in overall implementation, 
monitoring and evaluation of the orientation program; and 
 
  10. Evaluates the in-service training program in the SA as it relates to the 
continued development of the skill knowledge of the new surveyor. 
 
C.  To provide nominations of eligible surveyors for basic and specialty courses.  The 
RO: 
 
1.  Maintains accurate information on surveyors who need to attend the basic 
Surveyor Training Course; 
 
2.  Provides CO with nominations for the Basic Course on a timely basis; and 
 
3.  Selects attendees to specialty courses and provides the names to CO. 
 
D.  To design and carry out surveyor training programs that meet special needs of 
individual States in the region.  The RO: 
 
1.  Assists Central Office in assessing training needs of surveyors and 
participates in task forces developing nationally offered specialty courses; 
and 
 
2.  Based upon analytical studies, identifies training needs of SA surveyors 
and develops training programs to meet those needs. 
 
4151 -RO Program Analysis Activity 
 
(Rev. 1, 05-21-04) 
 
Program analysis may be focused in the following areas: 
 
4151A - Analysis of Administrative Factors 
 
(Rev. 1, 05-21-04) 
 
Analyze administrative data.  This data includes (but is not limited to): 
 
  Level of expenditures; 
 
  Number of surveyors; 
 
  Surveyor turnover rates; 
 
  Number of providers; 
 
  Time and effort statistics; and 
 
  OSCAR reports. 
   
The manipulation of this data may lead to the identification of the causes of performance 
problems, or help explain differences in survey-related costs. 
 
4151B - Analysis of SA Reviews 
 
(Rev. 1, 05-21-04) 
 
The major focus of analysis of SA evaluations concerns areas where a State shows 
persistent substandard performance.  This may not be evident through periodic reviews, 
since the reviews do not encompass the same functions.  A focus on the results of each 
area may impact other areas.  For example, a high surveyor turnover rate will be evident 
in financial data (increased training costs) and in 670 data (increased survey completion 
time).  The important element is that several areas of data can be used to demonstrate and 
support a request for SA corrective action. 
 
SA reviews should also be studied to each other (State-to-State) to determine common 
areas of success as well as difficulty.  These areas should be clearly delineated since 
difficulties common to most States represent areas where major programmatic efforts 
should be made to improve program processes. 
 
4151C - Analysis of Individual Special Programs 
 
(Rev. 1, 05-21-04) 
 
The special program or innovation must be directly evaluated.  The approach must be one 
that studies interrelationships among the agencys components.  The analysis should 
determine what work the agency produces, how well and quickly its produced, and its 
cost.  These considerations must also be studied to determine effects in each area.  For 
example, a program aimed at cost-reduction through a decrease in survey team size may 
show a trend toward the citing of fewer deficiencies.  The results of any analysis should 
be discussed with the SA with the common goal of improving the quality of survey and 
certification activities. 
 
4152  State Performance Measures for All Providers and Suppliers  
 
(Rev. 1, 05-21-04) 
 
(Refer to 7801) 
 
  4157 - Federal Monitoring Surveys - Definition and Purpose 
 
(Rev. 1, 05-21-04) 
 
4157A - Definition 
 
(Rev. 1, 05-21-04) 
 
A Federal Monitoring Survey (FMS) is a survey performed by the RO or designated 
contractors  under  the  authority  of  the  Central  or  Regional  Offices,  of  any 
Medicare/Medicaid participating provider and/or supplier (see Chapter 6 for Labs). 
 
4157B - Purpose 
 
(Rev. 1, 05-21-04) 
 
The RO conducts the survey to: 
 
  Monitor SA performance in interpreting and applying Federal standards; 
 
  Identify training and/or technical assistance needs of surveyors; 
 
  Identify problems that surveyors and/or providers encounter in implementing 
Federal regulations; and 
 
  Require correction of problems that exist in individual facilities or in 
individual surveys. 
 
4157C - Scope of Survey 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
1.  Full Survey 
 
A survey of all applicable CoPs and standards for all types of Medicare/Medicaid 
providers and/or suppliers except SNFs, NFs and ICFs/IID.  SNFs, NFs are described 
separately in 3 below, and ICFs/IID are described separately in 4 below. 
 
2.  Partial Survey 
 
A survey of selected Conditions and/or standards for any type of Medicare/Medicaid 
provider and/or supplier, except SNFs and/or NFs and ICFs/IID.  SNFs and/or NFs are 
described separately in 3 below, and ICFs/IID are described separately in 4 below. 
 
  3.  SNF and/or NF Surveys 
 
a.  Standard Survey - A standard survey is composed of Tasks 1-7, and is a 
resident-centered, outcome-oriented inspection which relies on a case-mix 
stratified sample of residents to gather information about the facilitys compliance 
with participation requirements.  Based on the specific procedures detailed in 
Appendix P, a standard survey assesses: 
 
  Compliance with residents rights and quality of life requirements; 
 
  The accuracy of  residents comprehensive assessments and the adequacy 
of care plans based on these assessments; 
 
  The quality of services furnished, as measured by indicators of medical, 
nursing, rehabilitative care and drug therapy, dietary and nutrition 
services, activities and social participation, sanitation and infection 
control; and 
 
  The effectiveness of the physical environment to empower residents, 
accommodate resident needs, and maintain resident safety. 
 
If in conducting the information gathering tasks of the standard survey the RO 
identifies a possible noncompliant situation related to any requirement, it 
investigates the situation to determine whether the facility is in compliance with 
the requirements. 
 
b.  Extended Survey - The extended survey is conducted after substandard quality of 
care is found during a standard survey.  When, based on performing the resident-
centered tasks of the standard survey the RO makes a determination that the 
facility has provided substandard quality of care in 42 CFR 483.13, Resident 
Behavior and Facility Practices; 42 CFR 483.15, Quality of Life; and/or 42 CFR 
483.25, Quality of Care, then an extended survey must be conducted within 14 
days after completion of a standard survey.  (See Appendix P, Part I, Section III, 
the extended and partial extended survey.) 
 
c.  Partial Extended Survey - A partial extended survey is always conducted after 
substandard quality of care is found during an abbreviated standard survey.  
When, based on performing the abbreviated standard survey, the RO makes a 
determination that the facility has provided substandard quality of care in 42 CFR 
483.13, Resident Behavior and Facility Practices; 42 CFR 483.15, Quality of Life; 
and/or 42 CFR 483.25, Quality of Care, it must conduct a partial extended survey.  
(See Appendix P, Part I, Section III, the extended and partial extended survey.) 
 
  4.  ICF/IID Surveys 
 
a.   Fundamental Survey - Conducted to determine the quality of services and 
supports received by individuals, as measured by outcomes for individuals and 
essential components of a system which must be present for the outcomes of 
active treatment to occur. Certain requirements are designated as fundamental and 
are reviewed first. The remaining requirements (that are not designated as 
fundamental) are supporting structures or processes that the facility must 
implement. A decision that a provider is in compliance with the fundamental 
requirements indicates an outcome-reviewed compliance with the non-
fundamental requirements and associated Conditions of Participation. (Reference 
Transmittal No. 278 for specific tag numbers included primarily under 42 CFR 
483.420, Client Protections, 42 CFR 483.440, Active Treatment Services, 42 CFR 
483.450, Client Behavior and Facility Practices, 42 CFR 483.460, Health Care 
Services). 
 
b.   Extended Survey - Conducted when standard-level deficiencies are found during 
the fundamental survey and the survey team has determined or suspects that one 
or more CoP examined during the fundamental survey are not met. The team 
needs to gather additional information in order to identify the structural and 
process requirements that are not met and to support their condition-level 
compliance decision. The team reviews all of the requirements within the CoP(s) 
for which compliance is in doubt.   
 
c.   Full Survey - A survey of all applicable CoPs and standards. A full survey is 
conducted by the State Agency at an initial survey and at the discretion of the RO, 
based on the ROs identification of concerns related to the providers capacity to 
furnish adequate services. 
 
4157D - Survey Definitions 
(Rev. 1, 05-21-04) 
 
1.  Comparative Survey 
 
A Federal survey conducted within 60 days of the State survey to assess SA performance 
in the interpretation, application, and enforcement of Federal requirements.  Whenever 
possible, the RO conducts comparative surveys within 30 days of the State survey. 
 
2.  Direct/Federal Jurisdictional Survey 
 
A Federal survey to assess provider performance and to determine whether a 
provider/supplier meets all applicable program requirements.  It is used as the basis for 
approving a provider where the SA lacks jurisdiction.  Federal personnel conduct surveys 
of health facilities of the Indian Health Services, Commonwealth of the Virgin Islands, 
and participating ESRD facilities in VA hospitals. 
 
  3.  Validation Survey for Accredited Facilities 
 
A survey of an accredited entity, e.g., hospital, HHA, ASC, to validate the presumed 
compliance of the entitys deemed status and the survey process of the accrediting 
organization, recognized by CMS. 
 
4. - Validation Survey of SNFs or NFs 
 
An on-site survey of a representative sample of SNFs or NFs in each State (at least 5 
percent of the number of SNFs and NFs surveyed by the State in the year, but in no case 
less than 5 SNFs and NFs in the State) within 2 months of the date of a States standard 
or an extended survey.  The sample is of a sufficient size to allow inferences about the 
adequacy of the States surveys, and, in conducting a validation survey of SNFs and NFs, 
CMS uses the same survey protocols the State used. 
 
5.  Federal Oversight Support Survey (FOSS) 
 
An on-site SNF/NF survey where the Federal surveyor(s) attends the State survey (initial, 
recertification, revisit and/or complaint) to observe and assess State surveyor team 
performance.  The RO surveyor(s) may provide training and/or technical assistance to 
address identified performance needs while on-site as a result of the evaluation of 
outcomes. The outcomes include: 
 
  Concern Identification  
 
  Sample Selection 
 
  General Investigation 
 
  Kitchen and Food Service Investigation 
 
  Medication Investigation 
 
  Deficiency determination 
 
The Form CMS-2567 is also evaluated to identify whether deficient practices identified 
on-site are reflected in the Form CMS-2567. 
 
  4158 - Federal Oversight Support Survey (FOSS) Expectations and 
Responsibility 
 
(Rev. 1, 05-21-04) 
 
4158A - SA Responsibility 
 
(Rev. 1, 05-21-04) 
 
Once the survey schedule has been prepared, the SA should forward this schedule to the 
RO at least two weeks prior to the earliest survey date.  This schedule should include: 
 
  Survey dates (including projected end date) 
 
  Facility name and provider number 
 
  SA surveyor names or initials, with the identification of the team leader 
 
  Any use of specialty surveyors 
 
  Type of survey (initial, recertification, complaint, etc) 
 
Once the survey schedule has been forwarded to the RO, and/or the SA has been notified 
of the selection for Federal oversight, the SA must notify the RO prior to the survey 
regarding any survey changes (for those selected for FOSS surveys).  Changes may be 
defined as increasing or decreasing team size and composition, altering the survey date, 
and changing locations.  SA justification should accompany the communication of such 
changes. 
 
During a FOSS, the SA surveyors must inform the RO surveyors when they are or will be 
conducting certain functions during the survey process.  These include, at a minimum: 
 
  Interviews (with staff, family and/or residents) 
 
  Team meetings 
 
  Observations of care delivery 
 
The SA team will share all survey documentation with the RO surveyor(s) for review.  
 
The SA team must determine if Harm, Substandard Quality of Care and/or Immediate 
Jeopardy are present during the information gathering tasks of the survey and/or during 
information analysis and decision-making. 
 
  Once the FOSS and SA survey have concluded and the SA has documented the 
compliance decisions, the SA must forward the CMS-2567 to the RO at the same time the 
CMS-2567 is forwarded to the facility. 
 
4158B - RO Responsibility 
 
(Rev. 1, 05-21-04) 
 
The RO, in preparation for the survey, shall review the survey schedule provided by the 
SA and notify the State Agency when a survey has been selected for a FOSS.  However, 
an RO may select a survey for an unannounced FOSS. 
 
The RO, in conducting a FOSS will generally perform several steps in gathering 
information about survey team performance. These include: 
 
  Observing surveyors 
 
  Talking with SA surveyors to clarify observations and interpretations 
 
  Reviewing facility documentation and surveyor notes 
 
  Conducting limited fact finding 
 
  Attending survey team meetings. 
 
The RO surveyor must be able to be present at as many interviews as possible with 
residents and key facility staff.  In addition, the evaluator must be able to be present 
during all team meetings, investigative activities and during resident care observations as 
appropriate for their discipline. 
 
The RO surveyor(s) may perform limited fact finding in order to assess the SA survey 
teams achievement of outcome measures associated with assessing a providers 
compliance with Federal regulations. (See FOSS Manual for guidance) 
 
The RO team must provide evaluators to ensure RO to SA ratios of 1:2, but no less than 
1:3. The RO surveyors shall not remain on-site if the SA survey team has ended that 
days observations and investigations.  When the SA leaves the facility, the RO should 
also depart. 
 
The RO team will debrief the SA survey team regarding the effectiveness of its survey 
behaviors in achieving the goals and outcomes of the survey following the completion of 
the survey, or within the first week the State survey team and RO surveyors return to the 
office.  The RO team will also document the SA teams performance on each outcome 
that was observable during the survey, and rate that performance by assigning the team a 
numerical score on each outcome.  If appropriate, the RO team will identify SA team 
training needs. 
   
Upon the conclusion of the FMS (FOSS), the RO team will provide SA management with 
written feedback on the FOSS at two key points: 
 
  Within 30 days after the completion of the survey, the FOSS Rating and 
Documentation Form will be provided to the SA. 
 
  Within 30 days after receipt of the facility copy of the Form CMS-2567 by the 
RO, the FOSS Evaluation Form for Form CMS-2567 will be provided to the SA. 
 
4159 - Selecting and Scheduling Facilities for Monitoring Surveys 
 
(Rev. 1, 05-21-04) 
 
Provider and supplier institutions selected for RO monitoring surveys are usually selected 
from those the SA recently surveyed.  Other criteria for the number and types of 
institutions chosen include the SA workload, whether the SA is regionalized or 
centralized, and unique survey problems known to exist in the State.  The RO notifies the 
SA in advance, advising it of those institutions selected for a survey.  In cases where the 
RO wishes the SA to announce the survey beforehand, the SA uses Exhibit 62 to notify 
the provider or supplier of the date and purpose of the survey. 
 
The SA surveyor may be invited to accompany the Federal surveyors or the Federal 
surveyors may accompany a SA team, e.g., OSPATS.  If LSC enforcement in the State is 
handled by a subcontracting agency, someone from that agency maybe asked to 
accompany the Federal LSC inspector. 
 
4160 - Conduct of Monitoring Surveys 
 
(Rev. 1, 05-21-04) 
 
To prevent any misunderstanding about the purpose of the survey, the Federal RO team 
leader explains the purpose of the survey to provider personnel as the survey begins.  The 
survey usually covers all CoPs.  All survey reports are fully completed, but some partial 
surveys may be conducted to cover selected Conditions or standards. 
 
At a brief exit conference, the RO team gives the provider a general appraisal of its 
operation.  If deficiencies were found that would significantly affect patient health and 
safety, the provider is made aware of those particular deficiencies and is cautioned that 
such deficiencies could result in adverse action by the RO. 
 
   
  Provider Certification Files and Program Reporting 
 
4200 - SA Provider Certification Files 
 
(Rev. 1, 05-21-04) 
 
The certification files the SA maintains can be used as: 
 
  Working files to enable it to carry on correspondence with the providers and 
suppliers; 
 
  A repository for its copies of the investigative reports and records supporting 
certification recommendations; and 
 
  A source for statistical and narrative report data that may be requested by the RO. 
 
4205 - Materials Forwarded to RO 
 
(Rev. 1, 05-21-04) 
 
The SA forwards all documents supporting its certifications to the RO as outlined in 
2760. To retain a copy of the file, the SA duplicates or obtains multiple copies of the 
material.  When CMS forms are copied, the SA sends the original to the RO.  Copies of 
other material sent to the RO must be legible and must contain the appropriate 
signature(s), if required. 
 
The files in the RO may be needed to substantiate terminations, reconsiderations, 
hearings, and appeals. The RO may ask the SA to supply supplementary evidence to 
support the decisions in these cases.  However, whenever an appeal action is pending and 
the SA obtains additional evidence relating to the certification deficiencies, it 
immediately forwards copies of this material to the RO without waiting for a request. 
 
4210 - SA Files Used for Case Control and Reporting 
 
(Rev. 1, 05-21-04) 
 
The RO may also need more specific information about an aspect of the certification 
operations in a State, or may need other special tabulations and reports concerning an 
area of program activity.  Some items of information that may be needed are: 
 
  The status of a facilitys Request to Establish Eligibility; 
 
  The number of initial surveys pending; 
 
  The number of applications pending for various lengths of time; 
   
  The reasons that action has not been completed on a certification, e.g., a revisit 
scheduled; 
 
  Survey schedules; and 
 
  The progress made with a facility. 
 
The SA can use this additional data for its own purposes as well.  All such data should be 
readily available from its records. 
 
4225 - Establishment of SA Case Folders and Controls 
 
(Rev. 1, 05-21-04) 
 
The SA must have an effective case control system.  The system of control should be 
used to maintain a record of every action taken by the SA. The system may be either 
manual or electronic and must provide easy access to those in the office. 
 
   
  Necessary SA Expenses 
 
4500 - General 
 
(Rev. 1, 05-21-04) 
 
Any class or kind of administrative expenditure that is properly chargeable to Federal 
funds under plans approved by the Department of Health and Human Services (DHHS) 
could generally be properly chargeable to State provider certification program funds 
provided the expenditure is essential to certification functions and in a proper amount.  
The SA exercises due care in the expenditure of funds, as these funds must be effectively 
and economically used in carrying out the provisions of the Social Security Act (the Act) 
for survey and certification activities. 
 
Necessary expenses can include a portion of the cost of operations that serve the 
certification program and one or more other programs.  The SA is required to submit a 
specific plan for determining the certification programs cost for such multi-program 
activities as part of the overall plan and budget.  Include in the budget both the basis on 
which the certification program share or ratio is determined and the expenses to which 
this ratio is applied. 
 
The CMS current policy is that the total survey costs must be allocated to each 
benefiting program or activity to determine the payable costs for that program or activity.  
Knowledge of the States licensure requirements is necessary in formulating the budget to 
ensure that cost shares are equitable and in line with current CMS policy.  (See 4514.D 
and E.) 
 
In many States, two or more programs are served by the SA activities, e.g., those relating 
to certification versus licensure.  However, there may be activities that are required by the 
State survey program only.  Under these circumstances, the total cost of these activities 
would be an appropriate charge to the State survey program. 
 
A State is entitled to receive FFP for Medicaid activities by way of payment or advances 
to support the reasonable cost of performing services provided for in the agreement with 
the Secretary or State plan.  The reasonable cost includes all necessary expenses 
involved, i.e., expenses that are in accord with these standards and within the limits of the 
approved SA budget. 
 
4502 - SA Cost of Studies of Distribution of Staff Time 
 
(Rev. 1, 05-21-04) 
 
An important administrative objective is to explore alternative methods of budgeting to 
facilitate budget preparation, approval, and execution.  Studies of the distribution of SA 
staff time to various definable areas of State activity within the State survey program may 
be required.  The cost of all studies, recording, and reporting that a State may be 
  requested to do by CMS is considered a necessary expense.  The results of such studies 
are made available to the States. 
 
4504 - Pro Rata Costs - General Rule 
 
(Rev. 1, 05-21-04) 
 
The general rule for prorating costs is that the share apportioned to the State survey 
program shall not exceed an amount that reflects the ratio of total monies disbursed for 
personnel services in the State survey program to the total monies disbursed for personnel 
services in the agencys total program.  This total includes the total monies disbursed for 
personnel services in the State survey program and is based on the calendar quarter for 
which a report is prepared.  This general rule applies except as expressly modified 
elsewhere.  
 
The basis for apportioning shared costs is a matter of record.  All pro rata allocations are 
to be supported by documentation maintained by the SA. (See 4508.B and 4510.B.) 
 
4508 - SA Goods, Facilities, Services from Other State Agencies or From 
Local Agencies 
 
(Rev. 1, 05-21-04) 
 
4508A - Definition 
 
(Rev. 1, 05-21-04) 
 
The definitions of the terms goods, facilities, and services, and the criteria for 
application of the standards are those in effect for State grant-in-aid relationship with 
DHHS. 
 
4508B - Centralized State Services 
 
(Rev. 1, 05-21-04) 
 
In some States, services of an administrative nature (including certain commodities) such 
as accounting, printing, civil service, or central purchasing are furnished to the various 
operating agencies of the State by specialized service departments outside the health 
department (or other agency having an agreement and/or State plan with DHHS under 
1864 and/or 1903 of the Act).  An equitable part of such charges may be allocated to 
the State survey and certification program if the services are necessary and are ones from 
which the program derives a benefit similar to that accruing to other units of the agency, 
and provided that:  
 
    The pro rata share charged to the State survey program does not include costs 
attributable to the general expense of State government in carrying out the 
coordinating, fiscal, and administrative functions of government;  
 
  The charge is based on cost; and 
 
  The costs are extra, identifiable, and readily ascertainable either by segregation or 
as a pro rata share of the cost of such facilities or services. 
 
The basis of the service agencys charge must be described, including the method of 
proration and the services provided, and the description submitted for approval to CMS.  
Such costs should be separately identified in the SA budget. 
 
4510 - SA Personnel Services 
 
(Rev. 1, 05-21-04) 
 
4510A - Selection of Personnel 
 
(Rev. 1, 05-21-04) 
 
Personnel employed for, or assigned to, duties the cost of which may appropriately be 
charged to DHHS must meet the qualification requirements of, and be appointed and paid 
in accordance with, the personnel standards contained in the approved State plan, the 
provisions of the State civil service or other merit system of personnel administration in 
effect for the designated SA, or the Standard for a Merit System of Personnel 
Administration issued by DHHS. 
 
The costs of all personnel services required to effectively carry out the SAs 
responsibility under its agreement are proper charges to DHHS.  In accordance with 
prevailing State practice, the SA may include fees for consultants and experts as direct 
personnel service charges in the personnel services detailed in the budget submittal, or as 
a contractual arrangement under other direct charges.  (See 4542.) 
 
4510B - Charges for Director and Secretary of State Survey Activities 
Determined by Pro Rata Method 
 
(Rev. 1, 05-21-04) 
 
In some agencies a director of survey and certification activities is shared with one or 
more other agency programs.  In such cases, the State survey programs share of the 
directors salary and that of his/her secretary may be determined by a proration method 
other than time records, provided such method can be shown to be equitable to the State 
survey program and to the other programs involved.  One acceptable method is based on 
the ratio of the total monies disbursed for personnel services in the State survey program 
to the total monies disbursed for personnel services in that segment of the agency having 
  the programs for which this director is responsible (including the State survey program).  
Quarterly charges for this position would be derived by multiplying the salary paid to the 
incumbent(s) during the quarter by this pro rata percentage.  For purposes of this 
computation, both the amount representing salary paid to the incumbent(s) and the pro 
rata percentage would be based on actual expenses in each report quarter. 
 
4514 - SA Determination of Necessary Staff 
 
(Rev. 1, 05-21-04) 
 
4514A - Full-Time 
 
(Rev. 1, 05-21-04) 
 
Full-time staff as used here means persons who devote their entire time to the State 
survey program, and who are employed by the State on a full-time basis. 
 
The number and composition of the full-time staff identified with survey and certification 
activities should be sufficient to provide for timely and efficient program direction and 
coordination.  The determination of necessary full-time staff is to be based on 
organizational arrangements and workload in each agency.  At a minimum, each agency 
whose workload requires two or more staff-years of activity in a fiscal year should 
consider establishing a full-time professional position.  The incumbent of this position 
would provide continuous program direction and, as appropriate in the context of agency 
workload, might also perform line functions. 
 
Neither this section nor Subsection B apply to full-time equivalent positions described in 
Subsection C. 
 
4514B - Limitation of Full-Time Identifiable Positions 
 
(Rev. 1, 05-21-04) 
 
The number of persons on duty at the end of a monthly reporting period who occupy full-
time identifiable positions in the State survey program is limited in any category 
(professional or clerical) to the number of such positions approved in the budget for that 
period, unless prior authorization to exceed that number is obtained from CMS. 
 
4514C - Part-Time and Temporary 
 
(Rev. 1, 05-21-04) 
 
To augment the full-time State survey staff with the appropriate professional specialties 
required to perform State survey activities, the SA is authorized to: 
 
  Recruit part-time or temporary State employees; or 
   
  Arrange for part of the working time of full-time State employees (multi-program 
staff). 
 
Both types of employees are considered part-time employees to the survey program.  As 
a general rule, consultants are not included in this category unless they are employees of 
the State.  See 4611 for instructions relating to budget requests for consultants fees. 
 
Provision is made for equivalent positions to allow regular agency personnel to 
perform State survey functions where the agencys regular personnel are already fully 
occupied and unable to devote time to this function unless the equivalent of the human 
resources used is added to their regular staff. 
 
Under this concept, an agency that estimated that the aggregate total time of multi-
program personnel to be devoted to the State survey program would equal the time of one 
(or more) full-time person, could hire, with CMS approval, one (or more) full-time 
person as an equivalent.  In such cases, the agency with approval could also purchase 
equipment needed by the persons hired.  However, it is essential that the individuals time 
be fully offset by time spent on the State survey program by other staff of the agency.  
The SA must maintain time records to validate charges to the State survey program. 
 
4514D - Charging for Multi-Program Staff - Program Activities Readily 
Identifiable 
 
(Rev. 1, 05-21-04) 
 
In agencies where the function performed is separate and readily identifiable as serving 
the State survey program only, charges for multi-program staff performing State survey 
functions might be based on daily estimates of time spent on these functions, periodic 
sample time studies, or continuous time records.  Periodic sample time studies must be 
approved by CMS in advance before the SA can use them as a basis for making charges 
under this section. 
 
4514E - Charging for Multi-Program Staff - Program Activities Not 
Separate 
 
(Rev. 1, 05-21-04) 
 
Where some or all of the State survey activities are shared with other on-going agency 
programs so that a common function, e.g., survey of a hospital, will serve for State survey 
and certification as well as for licensure or other State programs and the work involved 
cannot be separated into program elements, time records may not be an appropriate basis 
for determining cost to the State survey program.  The SA may use one of the following 
methods or submit another proposal for apportioning costs between the State survey 
program and the other agency program(s) involved. 
 
  1 - Cost Due to Acceleration of Usual Agency Functions 
 
Where the agency can identify an increase in its usual workload that is caused by such 
program requirements as recertification deadlines, the State survey program share would 
be equivalent to the cost of accomplishing this incremental workload.  Charges would be 
substantiated by records indicating that the usual workload as well as the increase for the 
State survey program was, in fact, accomplished.  If possible, substantiate charges by 
agency data on human resource requirements necessary for this workload, e.g., previous 
studies of time or human resources required for surveys of facilities in other agency 
programs. 
 
2 - Ratio of Specific Workload Requirements of State Survey Program to Total 
Workload Requirements of All Agency Programs Involved 
 
This method may be used when the SA can identify countable activities (standards) for 
each type of survey which: 
 
  Need to be evaluated because of the requirements of the State survey program, 
and 
 
  Others that are related more to the requirements of another program. 
 
The ratio of countable activities required by the State survey program to the sum of the 
countable activities required by all programs could then be applied to the cost of the 
multi-program activity.  Specific applications of this general principle would have to be 
developed jointly to allow for circumstances a particular agency may encounter and take 
into account the comparability of such activities between programs.  All such proposals 
require approval by CMS before charges can be made under them.  In some instances the 
comparability of activities or adjustments made in treating countable activities may have 
to be verified by later operational studies. 
 
4518 - Use of Overtime in SAs 
 
(Rev. 1, 05-21-04) 
 
The CMS expects the SA to take the initiative in bringing about the adoption of such 
special measures as it believes necessary to meet workload objectives.  To provide the 
productive capacity to meet certification workloads on a timely basis, all agencies should 
take steps to secure authority for future use of paid overtime for State survey program 
staff. 
 
  4518.1 - Payment for Overtime 
 
(Rev. 1, 05-21-04) 
 
In the absence of specific State laws or State-wide regulations concerning payment for 
overtime services, consideration will be given to a States rules as well as established 
State practice.  Funds advanced to an SA may be used for expenditures for overtime 
services performed by its personnel under conditions (including rate of pay) authorized 
by State regulations. 
 
4530 - SA Non-Personnel Services 
 
(Rev. 1, 05-21-04) 
 
Non-personnel services costs, to a substantial degree, will be chargeable directly to the 
State survey program.  Expenses not charged directly may be prorated as indicated in the 
sections that follow.  Generally, each object of expenditure should be either a direct 
charge in its entirety or a joint charge subject to proration.  In justifiable circumstances, 
however, a portion of expense in an object classification may be charged as a direct cost 
and the remainder prorated e.g., charges for office space may be based on both direct and 
indirect costs where one or more rooms are occupied by individuals whose entire time is 
devoted to State survey activities, and other space is occupied by individuals whose time 
is devoted only in part to this activity.  The basis for apportioning shared costs should be 
a matter of record and all pro rata allocations should be supported by documentation 
maintained in the agency. 
 
4531 - Travel by SA Personnel 
 
(Rev. 1, 05-21-04) 
 
The cost of travel, including, where appropriate, per diem or subsistence in lieu of per 
diem, in the State survey program should be charged in accordance with provisions of 
State law, regulations, and administrative procedure applicable to travel of State 
employees. 
 
4531A - Certification and Administrative Travel 
 
(Rev. 1, 05-21-04) 
 
Certification travel includes travel to a facility for initial certification, resurveys for 
continuing compliance, consultation with a facility applying for certification, and 
meetings with CMS personnel. 
 
Administrative travel is defined as travel within the State for management purposes 
related to the State survey program to attend agency administrative staff meetings, State 
  survey program meetings or activities conducted or sponsored by CMS, and planning or 
liaison visits to other agencies having to do with certification. 
 
Travel expenses for an employee performing activities for the State survey program and 
other agency programs may be prorated on the basis of individual trips in accordance 
with distribution of direct personal service time spent on each program involved as 
recorded for each trip.   
 
Alternatively, such trip records may be accumulated to prorate for an accounting period.  
For example, if at the end of the period such records showed that a third of the 
employees productive time while in travel status was devoted to the State survey 
program, then the agency would charge a third of the total travel cost to Federal funds 
(including transportation, per diem, etc.). 
 
In lieu of the proration described above, travel expenses for employees performing 
activities for the State survey program and one or more other agency programs may be 
prorated in accordance with the proration of the salary costs of the traveler, or in 
accordance with the general pro rata formula outlined in 4504, as appropriate. 
 
4531B - Training and Conference Travel 
 
(Rev. 1, 05-21-04) 
 
This category of travel includes travel that is not directly related to line operations of 
certification, consultation, and administration.  Examples are travel performed: 
 
  Incident to orientation and basic training of new employees in areas appropriate to 
activities in the survey and certification program; and 
 
  To meet the needs of experienced employees for retraining. 
 
Also included is travel related to conferences, meetings, training institutes, workshops, 
and seminars, if agenda material is directly related to survey functions.  Travel for such 
purposes may be funded by CMS in accordance with the guidelines on training contained 
in 4542.2. Travel expenses related to training are to be included in the Training line 
item on the Form CMS-435, line 11.  
 
  4532 - SA Communications and Supplies 
 
(Rev. 1, 05-21-04) 
 
4532A - Communications 
 
(Rev. 1, 05-21-04) 
 
Communication expenses include such items as telephone services, telegraph messages 
(except such items as are payable on travel expense accounts), postage, postage meter 
charges, printed stamped envelopes, registry and special delivery fees, insurance charges 
on fourth class mail, or postage-due charges. 
 
4532B - Supplies 
 
(Rev. 1, 05-21-04) 
 
Supply charges include such expenses as: 
 
  General office supplies such as paper, pencils, folders, unstamped envelopes, 
clips; 
 
  Non-consumable supplies, such as staplers, pencil sharpeners, file baskets, and 
books, which do not exceed a $25 cost per unit; 
 
  Printing, duplicating expense, and the cost of procuring forms such as printed or 
duplicated general office forms; and 
 
  Costs of transportation or shipment of any of the above items.  
 
The $25 cost per unit under non-consumables applies unless a different amount is 
specified by State law, in which case the amount so specified shall control. 
 
4532C - Basis for Charges 
 
(Rev. 1, 05-21-04) 
 
Communications and supplies should be direct charges if separable and identifiable as to 
unit cost.  These expenses may be charged on a pro rata basis (see 4504) or, if equitable, 
there may be a combination of both direct charges and pro rata charges.  For example, if 
long distance calls are routed through a switchboard or can otherwise be identified as to 
program, the State survey program calls can be made a direct charge.  Otherwise, all long 
distance charges should be prorated. 
 
  Further, it would not be equitable to charge State survey program for installation and 
rental of telephones used by the State survey staff and in addition charge a pro rata share 
of the corresponding telephone costs of other components of the agency. 
 
4534 - SA Office Space 
 
(Rev. 1, 05-21-04) 
 
The cost of office space essential for State survey functions is a proper charge against 
CMS funds.  Such charges may take the form of: 
 
  Rent, service, and maintenance cost in privately-owned buildings; 
 
  Monthly rental charges based on the cost of initial construction or purchase of 
publicly-owned buildings; and 
 
  Meeting the costs of service and maintenance in lieu of rent in publicly-owned 
buildings. 
 
In addition, charges may be made for repairs and alterations to either privately or 
publicly-owned buildings.  Payment will be made only for periods of occupancy unless 
approval is received from CMS for payment for periods of non-occupancy. 
 
4534.1 - Standard of Comparable Rental 
 
(Rev. 1, 05-21-04) 
 
Charges against CMS funds for office space must not exceed the rental rate of 
comparable privately-owned space in the same or similar locality.  Although the rental 
rate of comparable privately-owned space is not a fixed amount for any particular 
locality, and the rental rates may vary within a locality as well as between localities, it is 
expected that a realistic determination of the rental rate of comparable privately-owned 
space be made.  Keep on file the basis and documentation for establishing the rental rate 
of comparable privately-owned space. 
 
4535 - Rent in Privately-Owned Space 
 
(Rev. 1, 05-21-04) 
 
Charges against CMS funds for privately-owned space, including expenses for services 
and maintenance, repairs, and alterations, must not exceed the rental rate of equivalent 
space and facilities in the same or similar locality. 
 
In contracting a lease for privately-owned space, include cancellation or conditional 
clauses in rental agreements. 
 
  The following guides are applicable with respect to the rental of space in privately-owned 
buildings when renewing an existing lease or when obtaining new or additional space 
under a lease: 
 
4535A - Cancellation Clause 
 
(Rev. 1, 05-21-04) 
 
When executing or renewing leases, the SA should make every effort to include a 
reasonable right of cancellation (30 days, if possible) for the State, if such right can be 
included in the light of rental rates, probable permanency of occupancy, and other 
pertinent factors.  Secure a cancellation clause in all rental agreements covering space for 
more than one year, if possible. 
 
4535B - Lease Not Exceeding One Year 
 
(Rev. 1, 05-21-04) 
 
When the SA is unsuccessful in securing a cancellation clause, secure leases not to 
exceed one years duration, if possible, with an annual renewal option for an extended 
period such as 3 or 5 years. 
 
4535C - Consulting RO 
 
(Rev. 1, 05-21-04) 
 
Where neither of the above is possible, consult the RO at least 30 days in advance of the 
date the lease will be signed. 
 
4536 - Space in Publicly-Owned Buildings 
 
(Rev. 1, 05-21-04) 
 
The following standards apply to charges for office space in a publicly-owned building: 
 
A.  Actual Cost - The amount charged for office space in a publicly-owned building 
must not exceed actual costs over a long-run period.  The agency is required to 
produce records of actual costs for examination, as necessary. 
 
The cost of land may not be included as part of the cost of initial construction or 
purchase of publicly-owned buildings in determining rental charges.  This 
exclusion is based on the fact that land has no actual physical depreciation.  The 
State would always have the land as an asset long after the building had become 
obsolete or demolished and value could be realized. 
 
  The estimated useful life of the building should be established if depreciation is 
included as an element of cost.  In case the building is vacated before the end of 
its useful life, past claims for amortization must be adjusted to a reasonable 
depreciation basis. 
 
B.  Cost After Building Amortization - After the initial cost of a building has been 
amortized, only the costs of service and maintenance may be charged. 
 
C.  75 Percent Rule - The amount charged for office space in a publicly-owned 
building may not exceed 75 percent of the lowest comparable rental for privately-
owned space, unless there are special considerations justifying a greater charge.  
Use of this standard as an expedient interim measure, in the absence of actual cost 
data, enables you to claim costs that are not in excess of 75 percent of the lowest 
cost of privately-owned space without prior review or approval by CMS. 
 
D.  Ratio of Charge To Rental Rates In Privately-Owned Space - Experience 
gained in analyzing the elements of rental rates in privately-owned space shows 
that approximately 75 percent of the rate represents the expenses of service, 
maintenance, and depreciation.  The portion in excess of 75 percent of the rental 
rate of comparable privately-owned space generally represents taxes and profit on 
investment that would ordinarily accrue.  Therefore, whenever a charge is made 
for space in a publicly-owned building that is not in excess of 75 percent of the 
lowest cost of comparable privately-owned space in the same or similar locality, it 
may be assumed that such charge is reasonably related to the expense of service, 
maintenance, and depreciation.  The reasonable relationship of such charges to 
actual costs over a long-run period, however, would be subject to verification. 
 
When a monthly rental charge based on the cost of initial construction or purchase 
of publicly-owned buildings exceeds 75 percent of lowest comparable rental for 
privately-owned space, or when the cost of service and maintenance in lieu of rent 
in publicly-owned buildings exceeds 75 percent, obtain prior approval from CMS. 
 
E.  Charge Based on Cost of Initial Construction or Purchase - When rental 
charges are based on costs of initial construction or purchase of a publicly-owned 
building, and such charges exceed 75 percent of the lowest comparable rent for 
privately-owned space, prior to acquisition or occupancy of the space, the SA 
submits justification for review and approval by CMS. 
 
F.  Charges Based on Meeting Cost of Service and Maintenance - When the total 
charges for service and maintenance in a publicly-owned building exceed 75 
percent of the lowest comparable rental for privately-owned space, the SA must 
submit, prior to its claim, the following data for review and approval by CMS: 
 
  Total useable floor space and the amount of space allocated to the State 
survey program unit; 
 
    Total costs of service and maintenance and the portion to be charged to 
CMS funds; 
 
  The elements of cost; and 
 
  The rental cost of comparable privately-owned space, with at least three 
statements of appraisals. 
 
4537 - SA Repairs and Alterations 
 
(Rev. 1, 05-21-04) 
 
Charges may be made for repairs and alterations in privately-owned or publicly-owned 
space necessary to maintain proper facilities for efficient administration of the State 
survey unit. 
 
4537A - Maintenance Repairs 
 
(Rev. 1, 05-21-04) 
 
Maintenance repairs such as painting, repairs to plaster, patching roofs and minor repairs 
to doors, elevators, electrical equipment, etc., may be included in the rate for service and 
maintenance. 
 
4537B - Major Repairs and Replacements 
 
(Rev. 1, 05-21-04) 
 
Major repairs and replacements, such as structural changes in buildings, new roofs, new 
heating systems, etc., may be amortized over a period of years provided the total cost for 
space on an annual basis does not exceed lowest comparable rental, or in the case of 
public owned buildings, 75 percent of lowest comparable rental for privately-owned 
space.  If the cost is amortized, the repairs and alterations must be of a permanent nature.  
Repairs and alterations that remain the property of the agency can usually be classified as 
moveable equipment. 
 
4537C - Alterations 
 
(Rev. 1, 05-21-04) 
 
Normally, quarters completely adequate to the agency should be obtained from the lessor, 
and the cost of necessary alterations borne by the landlord.  However, where the landlord 
is unwilling to bear the cost of necessary alterations, CMS funds can be authorized to 
meet the cost of alterations provided the proposed alterations are needed for better 
utilization of the space, and the improvements are not obligations of the lessor under the 
terms of the lease.  In some situations, lessors will not agree to make necessary 
  alterations but offer space at a relatively low rental rate.  In such cases, the agency may 
be able to negotiate an arrangement under which the lessor would make necessary 
alterations and the agency would amortize the cost by an increase in rent for a stipulated 
length of time.  Before agreeing to an arrangement providing for repair or alteration, an 
agency should first secure approval from the RO. 
 
4538 - SA Identifiable (Direct) Costs 
 
(Rev. 1, 05-21-04) 
 
An SA that is locating program personnel in extra identifiable space should charge CMS 
funds for the cost of such space.  Where State survey program personnel share space with 
the agencys regular personnel, the cost of such space shall be apportioned between the 
programs.  Apportionment is based upon a proration plan submitted by the SA and 
approved by CMS.  The approved method applies only to rental fees paid for locations 
where State survey program personnel share occupancy.  Bases for prorating rental costs 
should be reappraised when changes in physical facilities or other conditions results in 
inequitable cost sharing.  The SA is required to submit a rental cost apportionment plan 
each year as part of the budget documentation.  Approval of the budget constitutes 
approval of the plan of apportionment. 
 
4539 - SA Office Maintenance 
 
(Rev. 1, 05-21-04) 
 
A - Definition 
 
Office maintenance includes services such as light, heat, time clock and water service, 
towel and janitor service, and machine repair service prorated on the same basis as rent, 
provided such services are not already included in rental costs. 
 
B - Basis for Charges 
 
If associated office maintenance cost, in whole or in part, is included in a rental contract, 
it need not be separated but note the inclusion.  Maintenance costs that are not included in 
rentals may be charged on the same basis as rental costs. 
 
  4540 - SA Equipment 
 
(Rev. 1, 05-21-04) 
 
4540A - Definition and Quality of Office Equipment 
 
(Rev. 1, 05-21-04) 
 
Items that are of a non-expendable nature, that is, have a life expectancy of one year or 
more and a probable resale, salvage, or trade-in value, are classified as office equipment 
if they have a unit cost in excess of $25.  However, if State law specifies a different 
amount, the amount so specified shall apply.  The quality of items should not exceed the 
quality of similar office equipment in general use in other offices of the agency. 
 
4540B - Title to and Accountability 
 
(Rev. 1, 05-21-04) 
 
Title to and accountability for office equipment purchased for State survey program 
purposes, or for shared use with other State or Federal programs, shall rest with the State.  
However, the purchase price(s) of individual pieces of office equipment may be shared 
with other State and/or Federal programs.  Where the costs of equipment are prorated 
between Medicare and other programs, the same proration must be used in crediting 
residual value to the Medicare program of all disposed equipment.  Where Medicare 
funds are used to fully fund equipment, 100 percent of the residual value must be credited 
to Medicare. 
 
4540C - Purchase of Equipment 
 
(Rev. 1, 05-21-04) 
 
1 - State Practice 
 
For equipment purchased for the State survey program, follow established State law or 
regulations for procurement of equipment. 
 
2 - Purchases Related to Budget Process 
 
Funds for equipment purchases will be requested by SAs and approved by CMS as part 
of the budget process.  The SA should anticipate the bulk of its equipment needs for the 
budget period during pre-budget planning, and request needed equipment in the budget 
submittal.  To estimate equipment needs, the SA should examine the condition of 
equipment on hand, and consider any proposed staff increases. 
 
The total expended for equipment during a budget period cannot exceed total funds 
allocated for equipment for that period without prior approval of the RO.  Budget 
  requests should, therefore, include items which were approved in the prior budget period 
but which will not be paid for in that period. 
 
3 - Items Deleted by CMS 
 
After reviewing an SAs estimate for equipment, CMS may delete an item or restrict the 
purchase of such an item.  When CMS deletes an item, the SA may submit another 
request with added supporting information.  However, unless the restriction is removed, 
the item cannot be purchased with Federal funds. 
 
4 - Purchase of Items Not Included in Budget Submittal 
 
Although the SA is expected to anticipate the bulk of equipment needs, occasionally a 
need for equipment that was not included in the budget submittal may arise.  The SA 
must receive approval of the RO, before purchasing such items of equipment.  However, 
if sufficient uncommitted funds are available, the SA may purchase items not included in 
the budget approval without prior RO approval when the unit cost of the item is $50 or 
less, and the item is of a kind approved in any previous budget period, e.g., tables, chairs, 
coat racks.  Such items should be listed and identified in the equipment schedule 
submitted at the end of the quarter in which purchased. 
 
5 - Reporting Equipment 
 
The SA is required to maintain an inventory of equipment following usual State 
inventory practices, and make an annual physical count of equipment items for 
comparison against the inventory records.  In the event of equipment loss and/or 
substantial damages due to theft, fire or weather, the SA submits a statement concerning 
such losses to the RO as soon as possible. 
 
4540D - Rental of Equipment 
 
(Rev. 1, 05-21-04) 
 
Situations may occur where it will be advisable to rent certain office equipment instead of 
purchasing it.  Providing rental of office equipment is not contrary to State law or 
regulations, expenditures for such rental are considered necessary if: 
 
  The rental is for a short period of time; 
 
  The equipment is not available for purchase (e.g., leased telephone lines, 
electrostatic photocopy machines); or 
 
  Proof that renting rather than purchasing an item of equipment is advantageous in 
terms of cost. 
 
  The SA secures prior approval of the RO if it wishes to rent equipment for more than 90 
days. 
 
4541 - SA Retirement and Social Security 
 
(Rev. 1, 05-21-04) 
 
A - Retirement Contributions 
 
Retirement contributions include the SAs cost (not employees share) of contributions to 
retirement funds such as State retirement, social security, etc. 
 
B - Prorating Costs 
 
Where the SA prorates the personal services costs of State survey personnel, the 
retirement costs for these personnel are to be prorated. 
 
4542 - Other SA Expenses 
 
(Rev. 1, 05-21-04) 
 
Other expenses include expenditures which can be properly charged to the State survey 
program, but which have not been provided for in any of the preceding classifications.  
Examples of such items are discussed below by category. 
 
4542.1 - Consultants Expenses 
 
(Rev. 1, 05-21-04) 
 
Consultant services are generally defined as being furnished by persons who are not State 
employees, but who will be used on a part-time, temporary, or fee-for-service basis to 
provide needed skills to the State survey program.  State practice will be the determining 
criterion in distinguishing between consultants and part-time personnel for purposes of 
allocating charges to the State survey program. 
 
4542.2 - SA Expenses for Training of SA Personnel 
(Rev. 126, Issued: 11-21-14, Effective: 11-21-14, Implementation: 11-21-14) 
 
The cost of training personnel engaged in title XVIII and title XIX survey activities is 
chargeable to the State survey program when the training is related to the States 
responsibilities for survey and certification activities. 
 
Training includes attendance at job-related meetings, conferences, seminars, workshops, 
or training courses.  Training which is considered related to the SAs responsibilities 
includes attendance at meetings, courses, etc., where the subject matter concerns one or 
more areas in the certification requirements related to appraising the activities of a health 
  facility.  This may include areas such as medical records, dietary services, infection 
control, etc.  Other training considered related to the SAs responsibilities includes 
attendance at professional meetings that enable individuals in the various health 
disciplines who are engaged in titles XVIII and XIX to stay abreast of pertinent 
developments affecting the inspection and approval of health facilities. Examples of 
professional meetings at which attendance could possibly be funded, subject to the 
considerations outlined here and in succeeding paragraphs, are the annual meetings of the 
Association of Health Facility Survey Agencies (AHFSA),  American Hospital Association, 
American Public Health Association, American Dietetic Association, and similar national 
or regional organizations. 
 
4542.2A - Funding 
(Rev. 1, 05-21-04) 
 
The CMS will fund the entire cost of such approved training of full-time employees and 
generally will pay a proportionate share for the training of part-time employees, e.g., 50 
percent for employees who work one-half time on State survey activity.  The State should 
include the cost of travel relating to training in the dollar figure requested for training. 
However, with specific justification, where the training meeting or course is primarily 
concerned with subject matter that directly relates to the SAs responsibilities in carrying 
out survey and certification activities, CMS will fund the entire cost of training of part-
time employees.  All funding for training is subject to the following considerations: 
 
  Out-of-State attendance must be in accord with established State rules and 
regulations (NOTE:  When Federal requirements mandate that the training is 
necessary, a States travel policy for out-of-State travel is not an excuse for non-
participation in the Federal training); 
 
  Federal funds may not be used for attendance at any meetings, if the attendee is 
paid by the sponsoring organization for attending, for speaking, or for rendering 
other services in connection with the meeting; and 
 
  Attendance will not significantly impair progress of certification activities. 
 
4542.2B - Requesting Approval 
 
(Rev. 1, 05-21-04) 
 
Request funds for conferences and short-term training activity in the annual budget 
submittal.  Activity of this nature that has not been provided for in the approved budget 
must be approved by the RO on a case-by-case basis. 
 
At a States request, CMS will include a dollar authorization for short-term training 
activity over and above the cost of attendance at CMS-sponsored meetings within the 
funds approved for each fiscal year.  This authorization covers travel, per diem, 
admission fees, and any other costs related to attendance at the meetings. 
   
Justification for the request, other than the relationship to professional staff-years, is not 
required provided that the total amount requested does not exceed the approved budget.  
(If the agency believes it necessary to exceed the allotment, see Subsection C below.)  Up 
to the limit of funds approved in response to such a request, the SA can make 
expenditures for short-term training activities without consulting the RO for specific 
authorization provided that all of the following conditions are met: 
 
  No single meeting will be attended more than five working days; 
 
  The proposed attendees are professional State employees who regularly perform 
State survey functions; 
 
  The training is related to SA responsibilities as defined at the beginning of 
4542.2; and 
 
  A State can not charge a higher percentage of the cost of attendance by part-time 
employees than the percentage of time they devote to the State survey program, as 
indicated by the percentage of the employees salary reported on the State Survey 
Agency Budget/Expenditure Report (Form CMS-435) for the most recent 
complete calendar quarter. 
 
If the employee came on duty during that quarter or later, the SA charges the percentage 
applicable to the employee in the budget approval.  The SA ensures that there is adequate 
documentation of every expenditure following State practice, for subsequent audit. 
 
Where one or more of the preceding conditions are not met with respect to any particular 
meeting, the SA furnishes detailed justification as explained in Subsection C below. 
 
Authorization of funds for short-term training is in addition to the cost of attending any 
meetings called by CMS.  The SA should consult the RO for budget information about 
proposed CMS meetings as part of the process of preparing the budget submittal. 
 
4542.2C - Justification for Attendance 
 
(Rev. 1, 05-21-04) 
 
Where it is necessary to furnish detailed justification to the RO for attendance at short-
term meetings, either in the original budget or later in the fiscal year, e.g., the criteria in 
Subsection B, 
 
Above, will not be met, or the allotment has been exhausted, the SA provides the 
following information: 
 
  Name and position title of each person proposed for attendance; 
 
    A list of previous out-of-State training meetings attended by each proposed 
attendee during the current fiscal year (other than CMS-sponsored meetings) 
which were charged to Federal funds; 
 
  Whether each proposed attendee is full-time or part-time.  If part-time, the SA 
provides the percentage of time charged to State survey activities on the most 
recent Quarterly Expenditure Report (or for a new employee, the percentage 
approved in the budget) and the percentage of costs the SA proposes to charge to 
the State survey program.  If the latter percentage is higher, the SA includes 
justification explaining how the meeting or course directly relates to the 
employees State survey activities or, where appropriate, showing how the 
percentage of the employees time reflected in the most recent Quarterly 
Expenditure Report is not indicative of the time the employee regularly devotes to 
the program; 
 
  An itemized listing of proposed expenditures for attendance, including travel, per 
diem, and admission fees; and 
 
  Name, location, and dates of the meeting, the subject matter on the agenda and the 
name and address of the sponsoring organization.  Where the description of the 
subject matter does not clearly establish that the subject matter relates to SA 
responsibilities, it includes an explanation of how the subject matter relates to the 
survey and certification process. 
 
4542.2D - Fiscal and Reporting Considerations 
 
(Rev. 1, 05-21-04) 
 
This pertains to the amount requested for travel costs of such activity.  The total amount 
approved and expended is shown on line 11 of Form CMS-435.  The amounts reported as 
expended need not be broken down by specific meetings or conferences.  However, the 
SA keeps detailed records of all expenditures for regular audit purposes. 
 
4542.2E - Educational and Training Leave 
 
(Rev. 1, 05-21-04) 
 
Educational leave is leave granted for specialized professional or technical study in an 
accredited educational institution.  Training leave is leave granted to an employee for 
attendance at short-term courses that will run longer than five working days, outside the 
agency.  Approval of educational or training leave can only be granted if it is for 
purposes related to carrying out SA survey responsibilities.  Additionally, State rules and 
regulations and practice must permit taking of leave for such purposes. 
 
  Approval of training or educational leave is claimed in advance from the RO.  Such 
proposals are considered individually, based on the specific circumstances involved.  
Requests are to include the following: 
 
  Employees name, type of appointment held, position and grade, length of service 
with the SA, previous experience and education; 
 
  Description of any other specialized training or courses taken by the employee 
within the previous 24 months; 
 
  Name and location of training institution; 
 
  Title and description of training in sufficient detail to demonstrate its scope, 
content, and how it relates to the SAs survey and certification responsibilities; 
 
  A statement indicating how this training will benefit the employees work and 
improve the agencys activity; 
 
  The training period, showing the number of days and hours the employee will be 
absent from duty; 
 
  A statement from the supervisor dealing with the ability of the unit to forego the 
services of the trainee during his/her absence; and 
 
  The cost of tuition, fees, books, in detail. 
 
4542.2F - Agreements by Employees to Continue on Job 
 
(Rev. 1, 05-21-04) 
 
In order to discourage resignation of an employee for whom there has been a 
considerable expenditure for formal training, some States require the employee to sign an 
agreement that he/she will remain on the job for a certain length of time (e.g., 6 months) 
after completion of the training.  If State regulation or practice provides for such 
agreements, after obtaining RO approval for the activity, the SA has the selected 
employee sign such an agreement. 
 
4542.3 - Miscellaneous SA Expenses 
 
(Rev. 1, 05-21-04) 
 
Items illustrative of this category are bonding and public liability, equipment rental, SA 
cost (not employees share) of workmens compensation, group insurance, 
unemployment insurance, proportionate share of merit system of civil service charges, 
etc. 
 
  4542.3A - Bonding 
 
(Rev. 1, 05-21-04) 
 
Where a new bond or an amendment to an existing bond is required in relation to 
receiving and handling Federal funds, the cost of such bond, when borne by the State, or 
the additional cost attributable to an amended bond is a proper charge. 
 
4542.3B - Public Liability 
 
(Rev. 1, 05-21-04) 
 
An appropriate share of the cost to a SA for protection against financial responsibility for 
injury to person(s) or property is properly charged to CMS when such expenses are in the 
form of premiums for public liability or property damage insurance.  The cost of awards, 
judgments, or settlements arising from injury to person(s) or property are not chargeable 
to CMS.  
 
The share of public liability and property damage insurance costs properly chargeable to 
CMS, in the case of motor pool or personally-owned vehicles used in the discharge of a 
States official business will be proportionate to that share of all agency personnel which 
is devoted to activities directly concerned with the State survey program. 
 
The other items mentioned above may be prorated or charged directly, as appropriate.  If 
prorated, the method of prorating should be appropriate and acceptable to the State and to 
CMS.  Thus, the costs of workmens compensation, group insurance, or unemployment 
insurance would usually be charged directly for employees whose salary costs are 
prorated in the same ratio as salary costs. 
 
4543 - NAR/NATCEP 
 
(Rev. 1, 05-21-04) 
 
The allowable costs that can be charged to the Medicare State certification program for 
activities involving NATCEP testing are outlined in 1819(e)(1) and (2) of the Act.  
These costs relate to the State requirement to specify and review NATCEPs together with 
establishing and maintaining a NAR.  The State is required to conduct these activities as 
part of its 1864 agreement as authorized by 1864(d) of the Act.  The actual training and 
competency evaluation testing of nurse aides is not paid under the 1864 agreement, and 
therefore is not payable as part of this agreement. 
 
All expenses incurred for title XVIII-only NATCEPs and the NAR are to be reported on 
Form CMS-435 as a separate line item under Miscellaneous.  The Medicare survey and 
certification budget allows sufficient funds for this purpose. 
 
  Expenses incurred for title XIX-only facilities for NAR/NATCEP are considered 
administrative costs and are to be reported on the Quarterly Medicaid Statement of 
Expenditures for the Medical Assistance Program, Form CMS-64.  There are no 
provisions in the survey and certification budgets for these expenses.  
 
Costs incurred in joint title XVIII/XIX facilities for NAR/NATCEP are to be split 50-50. 
Report expenses incurred for title XVIII on Form CMS-435 and expenses for title XIX on 
Form CMS-64. 
 
4544 - LTC Facility Workload (SNF/NF) 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
The certification requirements for SNFs and NFs in the Medicare and Medicaid programs 
are virtually identical.  The same staff must perform the survey activity relating to 
SNF/NFs. This ensures that interpretation of the regulations to the provider remains 
consistent regardless of program participation.  In addition to surveying SNFs, the same 
staff may survey ICFs/IID for the Medicaid program in order to consolidate survey 
activities being performed for both programs. 
 
The Federal share of the costs of the survey and certification activities and follow-up 
visits related to surveys of nursing homes participating in both titles XVIII and XIX are 
to be divided equally by the two programs.  FFP in the costs for each program are to be in 
accordance with regulations pertaining to the respective program.  Costs of survey and 
certification activities and follow-up visits related to surveys of ICFs/IID are to be 
chargeable entirely to title XIX in accordance with Federal regulations. 
 
The costs of activities performed by this survey staff for purposes of the State licensure 
program or any other State program must be borne entirely by the State.  The SA 
maintains records to reflect the costs of these activities.  Time records having prior 
approval by the RO are used to support the actual charges made to either the Medicaid or 
Medicare program. 
 
Since a portion of the survey and certification costs for Medicaid continues to be borne 
by the State, it is necessary that the budget and activity plan be submitted to the SMA for 
review and approval.  This procedure will also assure proper coordination and scheduling 
of survey and certification activities by the SA with the medical review and UR 
responsibilities of the title XIX agency. 
 
   
  The Budgetary Process 
 
4600 - SA Budget Request 
 
(Rev. 1, 05-21-04) 
 
The annual funding allocation cycle begins in June/July of the preceding FY when CO 
issues a budget call letter to the ROs and SAs, providing guidelines and program 
priorities to assist in the SAs annual budget request preparation and ROs with State 
budget negotiations.  
 
Beginning in FY 2003, State Agencies should submit initial budget request documents 
and forms in accordance with instructions contained in the current State Survey and 
Certification Budget Call Letter.  Furthermore, once a Fiscal Year budget allocation has 
been provided, the SA will be requested to prepare a Form CMS-435 and supporting 
budget forms via the State Survey and Certification and CLIA automated reporting 
system.  The Automated Reporting System is a web-based application provided by CMS.  
The automated reporting system replaces the system of manually preparing and 
submitting reports.  Supporting documentation is to be provided via e-mail, or common 
carrier. 
 
In the event a congressional appropriation is not passed at the beginning of the Federal 
FY (October 1), Congress approves a continuing resolution that allows work to continue 
at the prior year funding level.  
 
A - Expenditure Categories to Be Shown 
 
The SA budget request should be a detailed estimate of State survey program costs for 
both LTC and non-LTC requirements.  Such costs are to be classified according to the 
category of proposed expenditure. The estimate of each category must be completely 
explained with respect to program objectives, the State Agencys plan of operations, and 
the method used to compute the request.  Funds provided to agencies as a result of the 
budget request are to be used only for necessary expenses.  (See 4500.)  States are free 
to shift funds from one expenditure category to another, except State surveyor training 
funds, which may only be re-designated with RO prior approval. 
 
B - Due Date 
 
Each SA is to prepare the budget in accordance with the due date provided by CO to 
ensure that CMS can complete the budget approval process in time to prevent an 
interruption to cash flow when one FY ends and the succeeding year begins. 
 
C - Budget Summary 
 
The SAs are to complete Form CMS-435 (see Exhibit 45) State Survey Agency 
Budget/Expenditure Report and Form CMS-434 (see Exhibit 52) State Survey Agency 
  Workload Report for both non-LTC and LTC requirements.  Form CMS-435 is a multi-
purpose form (budget request and approvals, expenditures reports, supplemental funding 
request, etc.) used in Medicare and Medicaid applications.  Its various uses are displayed 
at the top of the form.  The SA indicates the specific use of the form by checking the 
appropriate box.  These forms summarize requested funding levels for each category of 
expense and provide projected workload.  The SA budget request must also include 
documentation as outlined in the annual budget call letter and a Form CMS-1465A 
(Exhibit 47) - State Agency Budget List of Positions; Form CMS-1466 (Exhibit 54) - 
State Agency Schedule for Equipment Purchase, and any other form in accordance 
with instructions contained in the current State Survey and Certification Budget Call 
Letter. 
 
D - Line Item Budget Justification 
 
Explanations for specific categories of expense are essential in both budget preparation 
and subsequent analysis.  Therefore, the budget request must contain complete rationale 
regarding each line item. Line item justification should consist of narrative statements 
providing specific rationale for budgetary needs. 
 
4605 - Developing SA Budget Justification 
 
(Rev. 1, 05-21-04) 
 
The following instructions are provided to assist the SA in the development and 
preparation of its budget request.  (4605-4628.) 
 
A - Base Data 
 
The basis for estimating line item expenditures is the States projected workload together 
with historical costs.  Consideration should be given to additional workload projected in 
the next Federal FY, such as newly established provider groups and initial inspections for 
facilities requesting program participation. Prior year expenditures may serve as a guide 
in computing expected increases or decreases in each line item for the budget year.   
 
B - Line Item Justification - General 
 
Projected workload together with the impact of expected program developments and 
emphases, the States own plan and historical costs are to be translated into specific line 
item justification.  The SA should develop the budget estimate using these factors as a 
guide. 
 
C - RO Assistance 
 
RO personnel are available to assist the SAs in preparing budget requests. The SA should 
consult with the RO on any problem or questions as early as possible in the budget 
preparation process. 
   
4610 - Line Item Justification for SA Personnel Services 
 
(Rev. 1, 05-21-04) 
 
A - Full-Time Positions 
 
The budget justification describes the organizational location of the staff and how it 
functions in relation to the workload included in the work plan.  The SA lists the 
positions on Form CMS-1465A (see Exhibit 47) in accordance with 4612.  The SA 
completes a separate Form CMS-1465A listing the positions requested for title XVIII 
non-LTC, title XVIII LTC, and title XIX LTC.  The SA prepares three Forms CMS-
1465A with its annual budget request. 
 
B - Approval To Exceed Authorized Full-Time Staffing 
 
The RO will place limitations on the number of full-time equivalents (FTEs) charged to 
Medicare program budgets so the SA cannot exceed the approved full-time staff without 
prior RO authorization.  This ensures that ROs can track onboard surveyor disciplines 
and analyze fund requirements for support of additional staff.  RO recommendations for 
staffing under the Medicaid program represent Federal estimates of required survey 
personnel. 
 
C - Part-Time and Temporary 
 
The SA is authorized to augment the full-time staff with the appropriate professional 
specialties and other positions required to perform the State survey activities and to 
secure the services of such persons on a part-time or temporary basis.  Specific rationale 
for the need for such positions and skills are required in the line item justification, 
relating these manpower needs to activities and staff-days noted in the work plan.  The 
SA details the basis for determining charges for part-time or temporary services in the 
line item justification and lists the positions requested on Form CMS-1465A in 
accordance with instructions stated in 4612. 
 
4611 - Line Item Justifications for SA Direct and Indirect Costs 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
In making the entries for items under non-personal services (Other Direct Costs, lines 5 
through 14, of Form CMS-435), the SA is required to justify the amounts approved by 
providing the rationale developed for each line item separately, using base period data 
and format as described in 4605.  Specific guides and criteria are listed below. 
 
  A.  Retirement Contributions and Fringe Benefits 
 
The SA enters the estimated total of the employers share of social security taxes, State 
retirement system(s) contributions and other fringe benefits.  Also, the SA indicates the 
percentage used to determine the level of funding for Retirement and Fringe Benefits. 
 
B.  Travel 
 
The SA includes the estimated travel costs of its personnel, including, where appropriate, 
per diem or subsistence in lieu of per diem, applicable to the State survey program.  The 
SA derives estimated costs based on provisions of State law, regulation and 
administrative procedures applicable to travel of State employees.  The SA indicates in 
the budget estimate expected number, type and extent of trips, and purpose.  For out-of-
state travel, the SA indicates the number of trips, the purpose, and basis for charges to the 
State survey program. The SA includes the basis for charges for all out-of-State travel 
other than to meetings called by CMS. 
 
C.  Communications 
 
In the budget estimate, the SA breaks out e-mail, telephone, telegraph, postage, and other 
communications separately. 
 
D.  Supplies 
 
In the budget estimate, the SA breaks out all major items of supplies, i.e., any supplies 
comprising 20 percent or more of the total cost of supplies. 
 
E.  Office Space 
 
1 - Agency In Identifiable Space  
 
Analysis of base period expenditures and the budget estimate must contain these 
elements for each location: total rental costs, number of square feet of space, cost per 
square foot, and services included in rental.  The SA identifies office space that is 
State-owned. 
 
2 - Office Space - Agency In Shared Space 
 
SA analysis of base period expenditures and the budget estimate must contain these 
elements:   
 
  Total cost of space to the agency;  
 
  Basis of proration; 
 
  Office locations of SA staff; and 
   
  Estimate of square feet allocated to the State survey program.  The SA 
identifies State-owned space. 
 
3 - Office Maintenance 
 
In the budget estimate, the SA breaks out the major items of expense, e.g., light, heat, 
janitorial service, office equipment repair.  If office maintenance, in whole or in part, 
is included in the SA rental contract, the SA notes this fact and the amount need not 
be separated. 
 
F.  Equipment 
 
The SA enters costs of equipment to support specific personnel positions such as desks, 
chairs, typewriters, computers and computer-related equipment, file cabinets, tables, and 
other machines (fax machines, photocopiers, etc.) that are necessary for program 
operational, administrative and management needs. In addition to line item justification, 
the SA documents the budget estimate through use of Form CMS-1466 (Exhibit 54) for 
both LTC and non-LTC requirements.  (See 4614.) 
 
G.  Training 
 
The budget estimate should provide for the cost of training SA personnel.  The SA 
includes the cost of travel and per diem associated with training sessions. 
 
H.  Consultants 
 
The SA provides the estimated cost of consultants who are not State employees, but who 
are used on a part-time, temporary, or fee-for-service basis. 
 
I.  Subcontracts 
 
The SA provides the estimated cost of subcontracts when part of its responsibilities are 
assigned to another State or local public agency.  Subcontract costs attributable to State 
survey activities (e.g., State Fire Marshal) are allowable and payable at the FFP rate 
established for surveyors, i.e., 100 percent Federal payment for Medicare and 75 
percent/25 percent FFP for Medicaid, with the exception of ICF/IID.  The Federal 
matching rate for ICF/IID is 75 percent of FFP for salary, fringe benefits, travel and 
training.  All other costs are matched at 50 percent FFP. 
 
J.  Miscellaneous 
 
The SA provides the estimated cost of other items, which have not been reported in any 
of the preceding classifications.  Also, the SA enters as a separate line item anticipated 
cost associated with the NAR and NATCEP, line 14A.  (See 4543.) 
 
  K..  Total Direct Costs 
 
Calculated sum total cost of all line items outlined here and in 4612. 
L.  Indirect Costs 
 
The SA provides the rate negotiated and approved by the Director, Division of Cost 
Allocation and Liaison, DHHS, for use during the budget FY together with the line item 
base, against which it is applied. 
 
Expenditures included in this category must not be duplicated under direct costs. 
 
M.  Total Budget Request 
 
Calculated total of all direct and indirect costs. 
 
4612 - Preparation of State Agency Budget List of Positions, Form 
CMS-1465a (Exhibit 47) 
 
(Rev. 1, 05-21-04) 
 
A - Usage 
 
This form is applicable for both LTC and non-LTC budgeted positions. The SA prepares 
a separate Form CMS-1465A of staff years and salaries for title XVIII non-LTC, title 
XVIII LTC, and title XIX positions. The SA prepares three Forms CMS-1465A with its 
annual budget request. 
 
B - Heading 
 
The SA verifies the pre-filled official name of the agency and inserts the period for which 
funds are requested. 
 
NOTE:  The SA includes overtime needs for all categories of positions listed, and 
provides detail justification explanations for the estimated costs. 
 
The SA must not enter positions on Form CMS-1465A, which represents consultants 
(i.e., personnel who perform services on a fee basis and are not employees of the State).  
The SA shows funds for such services in Other Direct Costs, line 12 of Form CMS-435. 
 
The SA must not enter positions on Form CMS-1465A, which represents personnel 
related to NAR or NATCEP. The SA shows funds for such services in Other Direct 
Costs, as a separate line item in Miscellaneous of Form CMS-435.  (See 4543 for 
instructions pertaining to costs incurred for NAR/NATCEP.) 
 
  C - Positions - Column Entries 
 
1.  Column (A), Position Title/Name 
 
The SA lists each position and persons name.  A full-time incumbent position: 
 
  Will work full-time on the State survey program on a continuing basis; 
 
  Whose time will be subject to cost allocation between State and Federal 
programs. 
 
Where applicable, the SA indicates after the position title whether part-time (PT) or 
temporary (T) and subdivides positions into three classifications (surveyor, 
nonsurveyor professional and clerical) to simplify preparation of totals and for CMS 
review. 
 
2.  Column (B), City Where Located  
 
The SA shows the city where the incumbent is located.  If all positions are located in 
the same city, the SA shows the city on the first line followed by: (all). 
 
3.  Column (C), Number of Positions  
 
The SA enters the total number of positions planned for the FY shown on the 
corresponding line of column (A). 
 
4.  Column (D), Staff-Years  
 
The SA enters the total staff-years to be worked during the FY by the incumbent(s) 
for the position shown on corresponding line of column (C).  For full-time positions 
whose incumbents are on duty at the beginning of the fiscal year, this is the same 
number as shown in column (C).  The time shown in staff years for full-time positions 
should be the time that it is anticipated will be spent in that program for which the 
budget request applies.  The SA determines staff-years for new full-time positions 
based on the quarter the incumbent is expected to enter on duty, as follows: 
 
Entrance Quarters  Staff Years 
   
October-December  1.00 
January-March  .75 
April-June  .50 
July-September  .25 
 
The staff-years shown for part-time or temporary positions are derived by multiplying 
the percentage of time to be applied by the number shown in column (C). 
 
  5.  Column (E), Funds Required 
 
The automated system calculates the total funds required by multiplying column (D) 
Staff Years and column (F) Annual Salary. 
 
6.  Column (F), Annual Salary 
 
The SA enters the annual salary for each full-time position presented in column (A) 
including part-time and/or temporary positions.  
 
D - Totals 
 
After completion of column entries, the automated system tallies the salaries of all 
positions. These salaries should then be entered into the appropriate section on Form 
CMS-435, Salaries; line l and 2.  
 
E - Certification: Date, Signature, and Title 
 
The automated system dates the Form CMS-1465A.  The SA certifying official enters 
their name and title. 
 
4614 - Preparation of State Agency Schedule for Equipment Purchase, 
Form CMS-1466 (Exhibit 54) 
 
(Rev. 1, 05-21-04) 
 
A.  Usage 
 
This form is applicable for both LTC and non-LTC equipment requests and purchases.  
The SA prepares a separate equipment purchase schedule for title XVIII non-LTC, title 
XVIII LTC and title XIX LTC equipment and prepares three separate Form CMS-1466s 
with its annual budget request. 
 
B.  Heading 
 
The SA inserts official name of the agency, indicates which program and facility type 
(type XVIII LTC, XVIII non-LTC, or XIX LTC) and enters the name of the State in the 
designated space and the period for which equipment funds are requested.  When 
equipment is actually purchased, the SA prepares a revised Form CMS-1466 with the 
next quarterly expenditure report. 
 
C.  Column Entries 
 
1.  Column (A), Description of Equipment - The SA enters the items of equipment 
requested or reported as purchased.  Note with an asterisk or other notation items 
  previously approved by the RO, but which are being re-budgeted.  On separate form, the 
SA explains why the purchase was not completed in the prior budget period. 
 
2.  Column (B), Number of Items on Hand - The SA lists the number of items on hand in 
the State survey unit as of the time the form is being prepared which are similar to the 
item requested.  If a new and different item, enter zero (0) or leave blank in this 
column. 
 
3.  Columns (C) and (D), Number of Units (Additional) or (Replacement) - The SA lists 
the number of units in the appropriate column, (C) or (D). 
 
4.  Column (E), Unit Cost - The SA enters the unit cost for each item listed in column 
(A). 
 
5.  Column (F), Gross Cost - The automated system computes and enters the gross cost 
for each item in column (A) by multiplying the number of units in columns (C) or (D) by 
the unit cost, column (E). 
 
6.  Column (G), Trade-In Value If Replacement Item - The SA enters the trade-in value 
for any replacement item presented in column (A).   
 
7.  Column (H), Net Cost - Calculated value by subtracting column (G) from column (F).  
 
D.  Total Net Cost of Equipment 
 
The automated system sums all amounts shown in column (H).  The SA should enter this 
value on Form CMS-435, line 10, in the appropriate column. 
 
E.  Certification: Date, Signature, and Title 
 
The automated system dates the Form CMS-1466.  The SA certifying official enters their 
name and title. 
 
4625 - Preparation of State Survey Agency Budget Request - Non-Long-
Term Care, Form CMS-435 (Exhibit 45) 
 
(Rev. 1, 05-21-04) 
 
A. Usage - Form CMS-435 is a multi-purpose, multi-program form.  The SA can include 
its budget requests for title XVIII LTC and non-LTC, as well as title XIX LTC, on one 
Form CMS-435. 
 
B.  Heading -  Automated system inserts the official name of the State agency, enters the 
appropriate Region and State Code.  The SA enters the FY for which funds are requested. 
 
  C.  Rounding To Next Higher Dollar - In preparing Form CMS-435, the automated 
system rounds dollar amounts of funds requested for each line item to the next higher 
dollar. 
 
D.  Salaries - Secure totals for professional and clerical staff-years, and money amounts 
from the accompanying Form CMS-1465A. Place totals in appropriate columns.  
Separate reporting is required for title XVIII NLTC and title XIX positions. The funds 
requested to support activities carried out under title XVIII, title XIX and the State are to 
be based on the proration of staff time determined to be supportable by Medicare, 
Medicaid, and the State as negotiated with the CMS-RO.  (See 4514.) 
 
E.  Other Direct Costs - Enters estimates for these categories as developed in the narrative 
justification.  (See 4611.) 
 
F.  Total Direct Costs - Automated system adds lines 3 and 15 of the appropriate column. 
 
G.  Indirect Costs - Enters the rate and the base against which the rate is charged.  (See 
4611.) Expenditures included in this category must not be duplicated under direct costs. 
 
H.  Total Budget Request - Automated system totals lines 16 and 17 and enters the Total 
Costs in Line 19. 
 
I.  Certification: Date, Signature, and Title - The automated system enters the date for 
budget request.  In the signature space, the SAs certifying official types their name and 
title. 
 
4626 - Preparation of State Survey Agency Budget Request - Long-
Term Care, Form CMS-435 (Exhibit 45) 
(Rev. 1, 05-21-04) 
 
A.  Usage - Form CMS-435 is a multi-purpose, multi-program form.  The SA can include 
its budget requests for title XVIII LTC and non-LTC, as well as title XIX LTC, on 
one Form CMS-435. 
 
B.  Heading - Automated system inserts the official name of the State agency, enters the 
appropriate Region and State Code.  The SA enters the FY for which funds are 
requested. 
 
C.  Rounding To Next Higher Dollar - In preparing Form CMS-435, the automated 
system rounds dollar amounts of funds requested for each line item to the next higher 
dollar. 
 
D.  Salaries - Secure totals for professional and clerical staff-years, and money amounts 
from the accompanying Form CMS-1465A. Place totals in appropriate columns.  
Separate reporting is required for title XVIII LTC and title XIX positions. The funds 
requested to support activities carried out under title XVIII, title XIX and the State 
  are to be based on the proration of staff time determined to be supportable by 
Medicare, Medicaid, and the State as negotiated with the CMS-RO.  (See 4514.) 
 
E.  Other Direct Costs - Enters estimates for these categories as developed in the narrative 
justification.  (See 4611.) 
 
F.  Total Direct Costs - Automated system adds lines 3 and l5 of the appropriate column. 
 
G.  Indirect Costs - Enters the rate and the base against which the rate is charged.  (See 
4611.) Expenditures included in this category must not be duplicated under direct 
costs. 
 
H.  Total Budget Request - Automated system totals lines 16 and 17 and enters the Total 
Costs in Line 19. 
 
I.  Certification: Date, Signature, and Title - The automated system enters the date for 
budget request.  In the signature space, the SAs certifying official types their name 
and title. 
 
4627 - Preparation of the State Survey Agency Certification Workload 
Report - Form CMS-434 (Exhibit 52) 
(Rev. 1, 05-21-04) 
 
The SA is required to prepare a planned workload report to accompany its budget 
request for survey and certification activity.  The SA: 
 
A.  Column (A), Facility Counts  
 
Enters the projected number of facilities at the start of the FY for each facility type listed 
under column titled Type of Provider.  
 
B.  Column (B), Initial Visits 
 
Enters for projected facility type, the number of visits for initial certification surveys. 
 
C. Column (C), Resurvey Visits 
 
Enters for projected facility type, the number of visits for recertification surveys. 
 
D.  Column (D), Follow-Up Visits 
 
Enters for projected facility type, the number of visits that the SA makes as a result of 
finding deficiencies in initial, resurvey, and complaint visits to providers.  
 
  E.  Column (E), Complaint Visits 
 
Enters for each facility type, the number of visits the SA makes to investigate complaints 
from beneficiaries, facility staff, etc. 
 
F.  Column (F), Total Visits 
 
The automated system totals each facility type, the cumulative number for items, columns 
B through E. 
 
G. Certification 
 
Form CMS-434 must be certified by an appropriate SA official by typing their name and 
title in the appropriate space. 
 
4628 - Preparation of Budget Request 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
A.  List of Materials and Order of Assembly 
 
The SA assembles the budget documents in descending order, as follows: 
 
1.  Form CMS-435 and Form CMS-434; 
 
2.  State Agency Budget List of Positions, three Forms CMS-1465A; 
 
3.  State Agency Schedule for Equipment Purchases, three  Forms CMS-1466; 
 
4.  The justification arranged in line item order; 
 
5.  Any bulky exhibit referred to in the line item justification; and 
 
6.  Supplemental documentation as requested in the annual budget call letter. 
 
B.  Routing 
 
The SA certified documents are made available to RO and CO in accordance with the due 
date provided by CO.  This will ensure that CMS can complete the budget approval 
process in time to prevent interruption to cash flow when one FY ends and the 
succeeding FY begins. The request supporting title XIX SNF/NF, NFs, and ICF/IID 
workload (forms and narrative justification) should have the concurrence of the SMA.  
All additional documentation that was requested in the annual budget call letter should be 
sent the CO/RO. 
 
  4629 - Developing Budget Recommendations - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
It is the ROs responsibility to ensure that only necessary and reasonable funding is 
approved.  In negotiations and final recommendations of the SAs budget and planned 
workload, it is important to ensure that the SA has a full understanding of established 
CMS policies.  The following items are to assist the RO in the final recommendations of 
the SAs budget. 
 
A.  Base Data 
 
The number of facilities the SA is required to survey and the staff-years required to 
accomplish the survey activity is the basis for approving the line item budget.  These 
include any additional workload projected in the ensuing FY, e.g., newly-established 
provider expenditures for the 12-month period ending March 31 may also serve as a 
guide in determining expected increases or decreases for each line item for the budget 
year.  The RO will inform the State that funds provided as a result of the budget approval 
can only be used for the necessary expenses in carrying out the survey and certification 
activity. 
 
B.  Significance of Categorical Budget Recommendations 
 
The budget recommendation is a detailed concurrence or revision to State estimated 
survey program costs.  The RO negotiates the budgets by line item, according to the 
category of the proposed expenditure.  The RO explains the adjustment of any category 
with respect to program objectives and the methods used to compute each amount. 
 
The CMS places strong emphasis on training of State surveyors.  Therefore, the budget 
approval must include the request that States not reprogram training funds without prior 
RO approval. 
 
C.  Line Item Justification 
 
The projected workload, together with the impact of expected program developments and 
emphasis, the SAs own plans, and the experience of the 12-month period ending March 
31 are the primary factors to consider when approving the line item budget.  The RO 
considers these factors in its approval of the SAs budget request.  The rationale for any 
change by the RO of the States proposal should where possible: 
 
  Show the revised estimate; 
 
  Explain the rationale for the change; and 
 
  Provide the basis for computing the revised estimate. 
 
  D.  State Agency Budget List of Positions (Form 1465(A) - RO Recommendations 
 
The RO will review and validate the list of positions to determine if the staff-years and 
salary costs reported on Form CMS-435 are correct.  A limit on the number of full-time 
equivalents chargeable to the Federal program budgets will be set by the RO.  The RO is 
responsible for monitoring all staffing and analyzing State requests and requirements for 
additional support staff.  No costs associated with the NAR/NATCEP are to be included 
on this form.  All costs relating to NAR/NATCEP are to be reported as Miscellaneous, 
line 14A.  (See 4543.) 
 
E.  State Agency Schedule for Equipment Purchases (Form CMS-1466) - 
Recommendations 
 
This form has a two-fold purpose: It is used when requesting budget approval of 
equipment purchases, and it is to be completed and notification given to the RO when an 
actual purchase is completed. The RO reviews the list for the necessity of items 
requested, comparing it to inventories of the States existing equipment. 
 
4630 - Notification of Approval 
 
(Rev. 1, 05-21-04) 
 
A.  Explanation of State Survey Agency Budget Notice of Approval, Form CMS-435 
(Exhibit 45) 
 
This form is used to notify SAs of the amounts approved for the FY.  It is the same form 
as the budget request, hence, no explanation of the entries is necessary.  
 
B.  Notification of Availability of FFP 
 
ROs recommendation State estimated FFP Medicaid requirements on the same budget 
form (Form CMS-435) which the State provides to estimate State and Federal financial 
requirements.  Since this is the same form, no explanation of the entries is necessary.  
The annual approval for Medicaid is for planning purposes and is non-binding.  State-
provided quarterly estimated requirements and actual expenditures are the final 
determinants for Medicaid funding.  These requirements are covered under 4636. 
 
C.  Line Item Limitation on Use of Funds 
 
To provide flexibility to the SA, line item controls are generally not placed on amounts 
approved for a FY, with the exception of training. However, under certain circumstances, 
specific controls may be imposed on expenditures through the comments attached to the 
budget approval documents. 
 
D.  Due Date 
 
  The CO will forward notice of budget approval to the RO who in turn will forward the 
original documents to the State Agency.  
 
The RO assembles the budget documents as follows: 
 
  Three Forms CMS-435; 
 
  Form CMS-434; 
 
  Form CMS-1465A.  Separate forms are required for Medicare non-LTC and 
LTC and Medicaid LTC; 
 
  Form CMS-1466; and 
 
  Other documentation as required in the annual budget call letter. 
 
4636 - RO Distribution of Approved Funds 
 
(Rev. 1, 05-21-04) 
 
The RO forwards the SAs recommendation funding to CO for processing.  The CO is 
responsible for the execution and oversight of the SAs approved Medicare and Medicaid 
budgets for survey and certification activity.  
 
The CO prepares an internal document quarterly for each SA with an approved Medicare 
title XVIII budget authorizing funds upon which the State may draw.  The amount is one-
fourth of the SAs approved budget.  This information is forwarded to the Division of 
Accounting (DA) in CMS for processing.  The DA enters the authorization in the 
Payment Management System.  (See 4636.l.) 
 
Medicaid title XIX quarterly grants are prepared and issued to States with approved plans 
for survey and certification activity in accordance with 42 CFR Part 430.30. The amount 
of a grant is based on documents provided to the CMS-RO (estimate of Federal funds 
required with certification of States matching funds available and prior quarter actual 
expenditures). The CMS-RO reviews and approves the certified documents and provides 
notification to CMS-CO for processing. CO prepares a computation worksheet and two-
page grant award letter authorizing the release of funds to the SA. The original award is 
mailed to the SA and a copy is forwarded to the DA in CMS for entry into the Payment 
Management System. 
 
4636.1 - Disbursement of Approved Funds 
 
(Rev. 1, 05-21-04) 
 
The Public Health Service (PHS), Office of Resource Management, Division of Payment 
Management is responsible for the disbursement and tracking of Medicare and Medicaid 
  survey and certification funds.  As CO authorizes funding levels, they are entered into the 
automated Payment Management System for SAs to draw upon as funds are needed.  
Each SA interacts directly with the Division of Payment Management in the 
disbursement of funds. 
 
The SA should address any questions regarding policies and procedures to be followed 
regarding the disbursement of Federal funds as follows: 
 
Health and Human Services 
Program Support Center 
Financial Management Services 
Division of Payment Management 
Post Office Box 6021  
Rockville, Maryland 20852  
 
(301) 443-1660 
 
4640 - Need for Additional Title XVIII and Title XIX Funds 
 
(Rev. 1, 05-21-04) 
 
At the end of each quarter, the SA should analyze current rate of expenditures for the title 
XVIII non-LTC and LTC survey activities.  The SA advises the CMS-RO as soon as 
possible if a supplemental budget may be necessary. State Agencies should take full 
advantage of line-item flexibility (see 4630) to stay within their approved budget before 
requesting additional funding.  
 
Supplemental budget requests are not necessary for title XIX survey and certification 
activities. The SA will be paid at the appropriate FFP rate for the necessary and 
reasonable costs incurred during the FY for survey and certification activities relating to 
Medicaid title XIX.  
 
4640.1 - Title XVIII Supplemental Budgets 
 
(Rev. 1, 05-21-04) 
 
The SA is requested at the direction of the CO or RO, to review Medicare title XVIII 
non-LTC and LTC survey activity requirements for the balance of the FY.  If additional 
funds are required, the SA prepares and sends a supplemental budget request 
memorandum to the RO.  The memorandum should include the total amount of 
supplemental funding required and detailed justification supporting the request.  The SA 
should allow sufficient time for the RO to review, provide recommendation, and notify 
CO for processing of the supplemental budget request.  Please note that CO will make all 
final decisions regarding supplemental budget requests.  Furthermore, the limit on 
expenditures for a FY is the SAs approved budget.  Any expenditures reported on the 
  cumulative Form CMS-435 above the approved budget amount will be treated as a 
supplemental request.  All supplemental funding is subject to availability of funds. 
 
4642 - RO Monitoring of SA Fiscal Budgets 
 
(Rev. 1, 05-21-04) 
 
It is the responsibility of the RO to monitor the SAs performance in adhering to the 
policies and established guidelines.  Specific instructions are provided to the SAs 
regarding the fiscal management of the funds provided for survey and certification 
activities. 
 
A.  Mid-Year Review 
 
The RO advises the SAs to review their rate of expenditures to ensure that the Medicare 
title XVIII budget approval will not be exceeded.  (See 4712.)  Funds that exceed the 
SAs approved budget at the end of the FY may not be paid. 
 
B.  Supplemental Budget Requests 
 
At the direction of the CO, the ROs should instruct the SAs to review their fiscal 
requirements for the balance of the FY.  If it appears that additional funds will be 
required, the SA should prepare a supplemental budget request.  The request for 
additional funding must be prepared in the same manner as the initial SA budget request, 
on Form CMS-435.  The RO analyzes the States request and provides a recommendation 
for approval to CO for supplemental funding subject to the availability of funds. 
 
C.  Medicare Fiscal Year Cumulative Report (Form CMS-435) 
 
The SAs are to prepare and certify a cumulative FY title XVIII Medicare expenditure 
report no later than 60 days after the close of the FY and provide notification to the RO. 
A cumulative expenditure report for the Medicaid program is not required. 
 
D.  NAR/NATCEP 
 
The State is required to conduct these activities as part of its 1864 Agreement as 
authorized by 1864 of the Act.  Refer to 4543 for the allowable expenses.  The Survey 
and Certification Program does not pay expenses incurred for the training of nurse aides. 
 
E.  State Licensure Costs 
 
The CMS policy is that total survey costs must be allocated to each benefiting program 
or activity to determine the payable costs for that program or activity.  Knowledge of the 
States licensure requirements is necessary in negotiating the budget to ensure that the 
States share is equitable and in line with current policy.  For example, if a Medicare 
survey covers 100 standards and the State has adopted 50 of these standards as licensing 
  standards, Medicare would cover 100 percent of the survey costs of the 50 Medicare-only 
standards and the State and Medicare would equally share the survey costs of the other 50 
standards.  If the State has any non-Medicare standards, the State must bear 100 percent 
of the survey costs for those standards.  For requirements common to all three programs, 
the State must pay two-thirds of the survey costs (representing the allocation to State 
licensure and Medicaid), but receives FFP in the Medicaid one-third share. 
 
F.  Cost Sharing for Title XVIII/XIX Facilities 
 
As stated in subsection E above, it is the ROs responsibility to ensure the proper 
distribution of costs is made by the SA.  The RO informs the States of CMS policy 
concerning this issue.  The SAs may not deviate from this policy.  The costs of a survey 
for a title XVIII/XIX facility must be shared equally between Medicare and Medicaid 
(FFP applicable to title XIX) regardless of the number of beds assigned to each program.  
The requirements are the same for both Medicare and Medicaid.  Consequently, both 
programs benefit from the survey. 
 
   
  Financial Accounts and Reporting 
 
The following instructions are provided to assist the SA in the preparation of the Form 
CMS-435 and Form CMS-434.  Please review 4700 through 4766. 
 
4700 - SA Accounts 
 
(Rev. 1, 05-21-04) 
 
It is the responsibility of the State to ensure that all estimates and reports of expenditures 
and other reports are prepared timely and in accordance with appropriate budgetary and 
accounting methods and administrative practices adopted by DHHS. 
 
It is the desire and intent of CMS to accept State practice in the manner in which funds 
received from the Federal government are handled and accounted for, and in a States 
choice of a depository, subject to the general accountability required under Article IX, 
Cost of Administration, of the 1864 Agreement.  However, funds advanced to a State 
must be identifiable in a States records.  This is usually achieved by use of a separate 
account.  The policies and instructions established by CMS for States receipt of funding 
advances and submission of reports have been drafted with a view to following State 
patterns to the fullest extent possible. 
 
4701 - Supports for SA Expenditures 
 
(Rev. 1, 05-21-04) 
 
The SA must provide, through its accounting and statistical records, support for all 
expenditures incurred in connection with survey and certification.  No particular kind of 
accounting record, method, or procedure is required, but the States accounting records 
and supporting documents must be such as will permit verification by Federal fiscal audit 
and CMS administrative review of all charges and of the status of advances made to the 
State. 
 
If a State is receiving grants-in-aid administered by DHHS in connection with its regular 
program, the accounting and procurement methods and procedures described in the 
agencys approved plan for such grant-in-aid program are applicable with respect to the 
agreement to the fullest extent possible. 
 
The State is responsible for securing necessary data from its local or district offices, and 
ascertaining the validity of all data for budgetary and other purposes. 
 
  4710 - SA Financial Reporting 
 
(Rev. 1, 05-21-04) 
 
Beginning in FY 2002, the financial reporting process requires the electronic preparation 
of all budget requests for State Survey and Certification and CLIA funds through the 
automated reporting system.  The SA prepares a Form CMS-435 for budget submission, 
supplemental budget requests, and to report quarterly actual expenditures for both the 
Medicare and Medicaid survey and certification program.  The SA indicates the specific 
use by checking the appropriate box at the top of the form.  The year-end cumulative 
expenditure report for Medicare must also be prepared on Form CMS-435.  This form is a 
multi-purpose, multi-program form designed to capture funds requested, approved by the 
RO, and expended by the SA for survey and certification activity. 
 
4711 - Cash Basis 
 
(Rev. 1, 05-21-04) 
 
The method of financial reporting recommended is the cash basis.  Thus, the data will 
be based upon cash accounting which requires that charges against CMS funds be 
entered on the SA books when the formal vouchers (or other documents that are accepted 
by the State fiscal office for payment) are prepared for transmission to the State fiscal 
officer for payment. 
 
4712 - SA Limit on Expenditures 
 
(Rev. 1, 05-21-04) 
 
The total amount approved in the States Medicare title XVIII annual approved budget at 
the end of the FY shall be the limit on expenditures.  The title XIX estimated annual 
budget is for planning purposes only.  The SA is paid the FFP rate for the reasonable and 
necessary costs incurred for survey and certification activity. 
 
4714 - Periodic Analysis of Accounts 
 
(Rev. 1, 05-21-04) 
 
Since title XVIII survey and certification total expenditures for a FY may not exceed the 
amount approved for that period, the SA should review the status of accounts not less 
frequently than once each quarter.  This allows observation of expenditure trends in order 
to avoid over-expenditure or the unrecognized accumulation of a large amount of un-
liquidated obligations, and also provide early identification of any need for supplemental 
funds. 
 
  4716 - Cash Balances and Expenditure Authority 
 
(Rev. 1, 05-21-04) 
 
Unexpended funds on hand in the agency at the end of each quarter will be available for 
expenditure in the succeeding quarter without formal reallotment provided it is in the 
same FY.  Funding authority for the title XVIII Medicare survey and certification activity 
lapses at the end of each FY.  Funds cannot be carried over into the next FY.  Funding for 
the title XIX Medicaid survey and certification activity does not lapse at the end of a FY. 
Unexpended funds on hand in the agency at the end of each quarter are applied to a future 
grant award. 
 
4718 - Un-Liquidated Obligations 
 
(Rev. 1, 05-21-04) 
 
SA fiscal controls should provide current information on un-liquidated obligations.  For 
purposes of CMS financial reporting, un-liquidated obligations are defined as bills 
received, but not yet prepared for transmission to the State fiscal officer for payment, 
and, obligations incurred for which there is acceptable evidence of a commitment or 
promise to pay for goods, facilities, or services in any category of expenditure, whether 
or not the goods or services have been received or a bill rendered. 
 
EXAMPLE: 
 
Equipment that had been ordered, but not paid for (whether or not received) on a semi-
annual or annual basis.  For example, for an item charged on an annual basis, the un-
liquidated obligation reported for the first quarter of the year would represent one-quarter 
of the estimated annual charge.  The un-liquidated obligation reported in the second 
quarter would represent one-half of the estimated annual charge, etc. 
 
In preparing the Medicare title XVIII year-end cumulative expenditure report, the SA 
should list un-liquidated obligations on line 20 of Form CMS-435.  CO will include this 
amount in preparing the SA year-end closeout adjustment, providing the cumulative total 
does not exceed the SA annual budget authority.  SAs should adjust line 20 of the 
cumulative year end Form CMS-435 as the obligations are liquidated.  
 
4719 - Nothing to Report on a Given Line 
 
(Rev. 1, 05-21-04) 
 
The SA indicates the fact that there is nothing to report on a given line by leaving the 
field blank. The automated system automatically enters a zero (0) for blank fields. 
 
  4740 - State Survey Agency Quarterly Expenditure Report, Form 
CMS-435, and State Survey Agency Certification Workload Report, 
Form CMS-434  Preparation and Due Date 
 
(Rev. 1, 05-21-04) 
 
Each SA is required to prepare quarterly a Form CMS-435 (Exhibit 45) reflecting actual 
expenditures incurred for survey and certification activity for both the title XVIII and title 
XIX programs.  The purpose of Form CMS-435 is to report in a categorical listing the 
expenditures for each quarter and to separate costs according to funding source.  (See 
4760 and 4766.)  A Form CMS-434 (State Survey Agency Certification Workload 
Report) must accompany the quarterly expenditure report.  Instructions for preparing the 
accomplished workload are the same as for the planned workload.  (See 4627.)  The 
Medicaid State Agency must approve the title XIX expenditures before they notify the 
RO.  The SA is required to prepare Form CMS-435/434 and notify the RO no later than 
45 days after the close of each quarter.  
 
4760 - Preparation of State Survey Agency Non-Long-Term Care 
Quarterly Expenditure Report, Form CMS-435 (Exhibit 45) 
 
(Rev. 1, 05-21-04) 
 
The purpose of Form CMS-435 (Exhibit 45) is to report in a categorical listing the 
expenditures for each quarter and to separate the costs according to funding source.  
Because Form CMS-435 is designed to capture the costs of both non-LTC and LTC 
expenditures by funding source, only one form needs to be prepared quarterly.  
 
A.  Heading 
 
The SA checks the box entitled title XVIII State Quarterly Expenditure Report. The SA 
selects the State agency and the automated system inserts the official name for the 
agency, and the appropriate Region and State Code.  The SA through a drop box selects 
the quarter and enters the year for budget period covered by the expenditure report. 
 
B.  Rounding to Next Higher Dollar 
 
The automated system rounds expenses incurred for each line item to the next higher 
dollar. 
 
C.  Salaries (Non-LTC) 
 
The SA reports staff years and salaries of both professional and clerical personnel (full-
time and part-time) on duty during the reporting quarter.  Staff-years to be captured here 
are those that relate to non-LTC activities in the Medicare program.  Instructions for 
reporting staff years and salaries for employees are explained below.  The figures 
  reported in this section should not exceed the number approved by the RO, except where 
the SA hired in anticipation of a vacancy. 
 
How To Report Staff-Year Totals - In each category (full-time, part-time, professional, 
and clerical) report the actual total of staff-years worked in the Medicare program.  Thus, 
the SA counts each employee who worked full-time in the Medicare program on non-
LTC activities during the entire quarter as having worked .25 staff-years and counts a 
full-time Medicare employee who started or ended work during the quarter as having 
worked the appropriate fraction of .25 staff-years. 
 
Similarly, the SA counts each employee who worked part-time in the Medicare program 
as having worked a fraction of .25 staff-years. 
 
EXAMPLE: 
 
If an agency has three employees, one of whom works 1/2 time in the Medicare program 
and two of whom work 1/4 time in the Medicare program, report total staff-years for 
these part-time employees as equivalent to the time worked by one full-time employee. 
 
EXAMPLE: 
 
1   x   1/2 x   .25  = .125 
2   x   1/4 x   .25  = .125 
Total            .250 
 
Line 1,  Professionals. 
 
The SA enters in columns (A) and (B) the staff-years and salary costs of those 
professional employees who work in the Medicare program. (See instructions below on 
determining staff-years.)  
 
1a. Surveyors 
 
1b. Non-Surveyors Professional 
 
2.  Line 2, Clerical 
 
The SA enters in column (A) and (B) the staff-years and salary costs of those employees 
doing work of a general clerical nature whom work with the Medicare program. Include 
clerical supervisors, clerks, typists, stenographers, etc.  (See instructions below on 
determining staff-year.) 
 
  3.  Line 3, Total Employees - Non-LTC 
 
Calculated staff-years and salary costs of all employees who worked (full-time or part-
time) in the Medicare program during the reporting period.  These entries are the sums of 
Lines la, 1b, and 2, columns (A) and (B). 
 
4.  Line 4, Rate % 
 
The SA enters the percentage used by the State to determine the level of funding for 
Retirement and Fringe Benefits. 
 
5.  Line 5, Retirement Contributions and Fringe Benefits 
 
The SA enters the total of the employers share of social security taxes, State retirement 
system(s) contributions and other fringe benefits. 
 
6.  Line 6, Travel 
 
The SA enters the costs of employee travel including per diem, or subsistence in lieu of 
per diem, applicable to the title XVIII State survey program and does not include costs 
incurred for training purposes. 
 
7.  Line 7, 8, and 9, Communications, Supplies, and Office Space 
 
The entries should include total expenditures in each of these categories for the quarter 
covered by the report. 
 
8.  Line 10, Equipment Purchases 
 
This entry should be the total amount expended for equipment during the report quarter.  
All equipment purchases must be supported by an accompanying State Agency 
Schedule for Equipment Purchases, Form CMS-1466, (Exhibit 54).  (See 4614 for 
instructions on completing Form CMS-1466.)  The SA does not include obligations for 
equipment on this line, but shows them on Line 20, Un-liquidated Obligations. 
 
9.  Line 11, 12, and 13, Training, Consultants, and Subcontracts 
 
The entries should cover total expenditures in each of these categories for the quarter 
covered by the report.  Training expenditures should include travel costs related to 
training. 
 
10.  Line 14, Miscellaneous 
 
The SA enters expenditures that have not been reported in any of the preceding 
classifications under.  The automated system sums of all miscellaneous expenditures 
  itemized in rows (A) through (G) on line 14.  If additional space is needed, the SA 
submits as supplemental data the attachment explaining these items. 
 
11.  Line 15, Total Other Direct Costs. 
 
The automated system calculates the sum of lines 5 through 14. 
 
12.  Line 16, Total Direct Costs 
 
The automated system calculates totals lines 3 and 15. 
 
13.  Line 17, Indirect Costs for Non-LTC Workload 
 
This figure calculated by multiplying the approved Indirect Costs rate by the negotiated 
money base it is applied against. (See Line 18.) 
 
14.  Line 18, Indirect Costs Rate for Non-LTC Workload 
 
The SA indicates the rate negotiated and approved by the Director, Division of Cost 
Allocation and Liaison, DHHS, for use during the FY and the money base it is applied 
against.  This official will also negotiate the money base at the same time the rate is 
established. 
 
15.  Line 19, Total Expenditures for Non-LTC Workload 
 
The automated system calculates total of lines 16, and 17, Column (B).  The complete 
quarterly expenditure report for the title XVIII Medicare program will be the total of Line 
19, column (B) and (D). 
 
16.  Line 20, Total Un-liquidated Obligations 
 
The SA enters the total obligations remaining unpaid at the end of the reporting period 
and itemizes all un-liquidated obligations by category (i.e., travel, office space, 
equipment) and submits as supplemental data. 
 
4766 - Preparation of State Survey Agency Quarterly Expenditure 
Report, Long-Term Care Facility Workload, Form CMS-435 
(Rev. 96, Issued, 12-13-13, Effective: 12-13-13, Implementation: 12-13-13) 
 
The purpose of Form CMS-435 (Exhibit 45) is to report in a categorical listing the 
expenditures for each quarter and to separate the costs according to funding source.  
Because Form CMS-435 is designed to capture the costs of both non-LTC and LTC 
expenditures by funding source, only one form needs to be prepared quarterly. 
 
  A.  Heading 
 
The SA checks the boxes entitled title XVIII State Quarterly Expenditure and title XIX 
State Quarterly Expenditures Reports. The SA selects the State agency and the automated 
system inserts the official name for the agency, and the appropriate Region and State 
Code.  The SA through a drop box selects the quarter and enters the year for budget 
period covered by the expenditure report.  
 
B.  Rounding to Next Higher Dollar 
 
In preparing the Form CMS-435, the automated system rounds amounts of expenses 
incurred for each line item to the closest dollar. 
 
C.  Report Columns 
 
Columns are provided for reporting staff-years and line item expenditures by funding 
source, i.e., Medicare, Medicaid, State matching, and totals by quarter.  The SA reports 
all costs associated with the Medicaid program in the appropriate column, and in the 
State matching column, those matching costs associated with the Medicaid program.  The 
SA does enters the State licensure costs in the State column. 
 
D.  FFP (Medicaid Only) 
 
The Federal matching share of costs for the Medicaid nursing home survey and 
certification program is 75 percent.  
 
The Federal matching rate for ICF/IID survey activity is 75 percent FFP for salaries, 
fringe benefits, travel, and training.  All other costs are matched at 50 percent. 
 
E.  Line Entries 
 
1.  Line 1a Surveyor, 1b Non-Survey Professional 
 
The SA enters the staff-years and total Federally supported salary costs of 
professional employees who worked on the LTC program during the reporting 
quarter.  (See 4760 for instructions on determining staff-years.)  For Title XVIII 
program, the SA enters in Columns (C) and (D) the staff-years and costs related to 
workload, and for Title XIX program the SA enters in Columns (E) and (F) the staff-
years and costs related to workload.  The State share is captured in column (G).  The 
total costs for LTC survey activity is total by the automated system in Column (H).  
Survey activity relating to ICF/IID is to be entered in Columns (E), (F), and (G). 
 
2.  Line 2, Clerical 
 
The SA follows the same instructions as for professionals and includes clerical 
supervisors, clerks, typists, stenographers, etc., working during the reporting quarter. 
   
3.  Line 3, Totals, Staff-Years, and Salaries (LTC) 
 
Calculated sums of Lines 1 and 2. 
 
4.  Line 4, Fringe Benefit Rate 
 
The SA enters the percentage used by the State to determine the level of funding for 
Retirement and Fringe Benefits. 
 
5. Lines 5, Retirement/Fringe Benefits 
 
The SA enters the total of the employers share of social security taxes, State 
retirement system(s) contributions, and other fringe benefits. 
 
6.  Line 6, Travel 
 
The SA enters the cost of travel, including per diem or subsistence in lieu of per diem 
and charges all travel for the LTC program in accordance with provisions of State 
law, regulations, and administrative procedures applicable to travel of State 
employees.  The SA does not include in this section travel cost incurred for training 
purposes.  
 
7.  Line 7, 8, and 9, Communications, Supplies, and Office Space 
 
The entries should cover total expenditures in each of these categories for the quarter 
covered by the report. 
 
8.  Line 10, Equipment 
 
This is the amount expended for equipment during the reporting quarter.  All 
equipment purchases must be supported by an accompanying State Agency Schedule 
for Equipment Purchases, Form CMS-1466. (See instructions in 4614 for 
completing Form CMS-1466.)  The SA does not include obligations for equipment. 
 
9. Lines 11, Training 
 
The SA enters the cost of training SA personnel.  Training expenditures should 
include travel costs related to training. 
 
10.  Line 12 and 13, Consultants and Subcontracts 
 
The SA enters total expenditures in each of these categories for the quarter covered 
by the report. 
 
  11.  Line 14, Miscellaneous 
 
The SA enters expenditures which have not been reported in any of the preceding 
classifications under Miscellaneous and enters all costs incurred for maintenance of 
the NAR and the NATCEP in line 14A under Miscellaneous.  This should include 
salaries, fringe benefits, indirect costs and any other expenses incurred to maintain the 
NAR and NATCEP. The automated system sums of all miscellaneous expenditures 
itemized in rows (A) through (G) on line 14.  If additional space is needed, the SA 
submits as supplemental data the attachment explaining these items.  
 
12. Lines 15, Total Other Direct Costs 
 
Calculated sum of lines 5 through 14. 
 
13. Lines 16, Total Direct Costs 
 
Calculated total of lines 3 and l5. 
 
14. Lines 17, Indirect Costs for LTC Workload 
 
This figure is derived by multiplying the approved Indirect Costs rate by the 
negotiated money base it is applied against.  (See Line 18.) 
 
15.  Line 18, Indirect Costs Rate for LTC Workload 
 
The SA indicates the rate negotiated and approved by the Director, Division of Cost 
Allocation and Liaison, DHHS, for use during the FY and the money base it is 
applied against.  This official will also negotiate the money base at the same time the 
rate is established. 
16.  Line 19, Total Expenditures for LTC Workload 
 
Calculated total of lines 16 and 17, Column (D).  The complete quarterly expenditure 
report for the title XVIII Medicare program will be the total of Line 19, column (B) 
and (D). 
17.  Line 20, Total Un-liquidated Obligations 
 
The SA enters the total obligations remaining unpaid at the end of the reporting 
period and itemizes all un-liquidated obligations by category (i.e., travel, office space, 
equipment) and submits as supplemental data. 
 
18.  Certification: Signature, Title, and Date 
 
For the Form CMS-435s, the automated system enters the date and the SA certifying 
official types their name and title. 
 
  4766A - Preparation of State Survey Agency Quarterly Expenditure 
Report, MDS, Form CMS-435 
 
(Rev. 1, 05-21-04) 
 
The SAs are to complete Form CMS-435 (see Exhibit 45) State Survey Agency 
Budget/Expenditure Report for costs associated with MDS.  Form CMS-435 is a multi-
purpose (budget request and approvals, reporting expenditures, supplemental funding 
request, etc.) form used in Medicare and Medicaid applications.  Its various uses are 
displayed at the top of the form.  The SA indicates the specific use of the form by 
following the same guidance provided for a standard Form CMS-435.  These forms 
summarize requested funding levels for each category of expense. 
 
4766B - Preparation of State Survey Agency Quarterly Expenditure 
Report, OASIS, Form CMS-435 
 
(Rev. 1, 05-21-04) 
 
The SAs are to complete Form CMS-435 (see Exhibit 45) State Survey Agency 
Budget/Expenditure Report for costs associated with OASIS.  Form CMS-435 is a multi-
purpose (budget request and approvals, reporting expenditures, supplemental funding 
request, etc.) form used in Medicare application.  Its various uses are displayed at the top 
of the form.  The SA indicates the specific use of the form by following the same 
guidance provided for a standard Form CMS-435.  These forms summarize requested 
funding levels for each category of expense.  
 
4767 - Initial Survey Activity Reports 
 
(Rev. 1, 05-21-04) 
 
The CMS CO has requested that SAs prepare and submit, on a quarterly basis, the initial 
survey activity being performed by the State agencies.  The ROs designed the Report on 
Initial Survey Activity (Exhibit 216) and the Aging Report on Pending Initial Survey 
Activity (Exhibit 217), to be prepared by each State agency.  Instructions for completion 
of these two forms are as follows:  
 
4767A - Preparation of Report on State Initial Survey Activity 
 
(Rev. 1, 05-21-04) 
 
Usage 
 
The Report on Initial Survey Activity  is used to record initial surveys requested by 
prospective Medicare providers in each State. 
 
  Heading 
 
Insert the State for which the information is being reported.  Enter the quarter ending date 
for which the activity is being reported. 
 
Definition of a Pending Initial 
 
A pending initial is one in which a prospective provider of care has requested and is 
ready for a survey.  The prospective provider must also have in place the tangible assets 
necessary to do business, such as a facility, equipment, etc., and have submitted an 
application to become a Medicare provider. 
 
Column A, # of Pending Initial Surveys at Start of the Quarter 
 
Enter for each facility type the number of pending initial surveys that were not completed 
at the beginning of the report period. 
 
Column B, # of Initials Requested for the Quarter 
 
Enter for each facility type the number of initial surveys that have been requested by a 
prospective provider for the current quarter. 
 
Column C, # of Initials Completed for the Quarter 
 
Enter for each facility type the number of initial surveys that were completed (i.e., a 
survey was performed) for the current quarter being reported. 
 
Column D, # of Initials Completed Year to Date 
 
Enter for each facility type the number of initial surveys that were completed (i.e., a 
survey was performed) beginning with the current fiscal year through the current 
reporting period. 
 
Column E, # of Applications Withdrawn for the Quarter 
 
Enter for each facility type the number of initial applications that were withdrawn (i.e., 
prospective providers that requested an initial survey but withdrew their request before 
being surveyed) for the current quarter being reported. 
 
Column F, # of Pending Initials End of Quarter 
 
Enter for each facility type the number of initial surveys remaining at the end of the 
current quarter.  This number must be obtained by adding Column A and Column B and 
subtracting Column C and Column E. 
 
  4767B - Preparation of Aging Report on Pending Initial Survey Activity 
 
(Rev. 1, 05-21-04) 
 
Usage 
 
The Aging Report on Pending Initial Survey Activity is used to record the number of 
days an initial survey is pending for each State by facility type. 
 
Reconciliation 
 
The number of pending initials as reported in column H on the Report on Initial 
Survey Activity must reconcile to the aggregate number of pending initials that are aged 
on the Aging Report on Pending Initial Survey Activity. 
 
Column A, 0 - 30 days 
 
Enter for each facility type the number of pending initials that are outstanding 0 to 30 
days.  
 
Column B, 31 - 60 days 
 
Enter for each facility type the number of pending initials that are outstanding 31 to 60 
days.  
 
Column C, 61 - 90 days 
 
Enter for each facility type the number of pending initials that are outstanding 61 to 90 
days.  
 
Column D, 91 - 120 days 
 
Enter for each facility type the number of pending initials that are outstanding 91 to 120 
days.  
 
Column E, Over 120 days 
 
Enter for each facility type the number of pending initials that are outstanding over 120 
days. 
 
   
  Section 1864/Section 1903(a) Fiscal Audits 
 
4780 - Scope of Audit 
 
(Rev. 1, 05-21-04) 
 
Occasionally, auditors for the DHHS regional OIG Office of Audit Services (OIG/OAS) 
audits each SA certification program to determine that: 
 
  The SA has properly reported its accountability of Federal program funds; 
 
  No Federal program funds were used for any purpose contrary to the 1864 
agreement, applicable State and Federal laws and regulations, or CMS financial 
administration standards; 
 
  The share of the Federal government in any miscellaneous receipts was properly 
credited on the books of the SA and reported to CMS. 
 
4781 - Objectives of Audit 
 
(Rev. 1, 05-21-04) 
 
The objectives of the audit of receipts and expenditures are to determine that: 
 
  Vouchers are mathematically correct, supported by substantiating documents, and 
in agreement with entries in the records; 
 
  Expenditures for which charges are made against the certification program are 
properly authorized, approved, and made in accordance with Federal and State 
laws, rules, regulations, and the 1864 agreement; 
 
  Expenditures are properly classified between the certification program and other 
programs of the SA; 
 
  Expenditures are actually disbursed in the correct amount to the proper payees; 
 
  Refunds or credits are properly accounted in computing the amount of the charges 
against Federal funds; and 
 
  The agency properly reports its accountability for Federal funds. 
 
The SA expenditures are audited on the basis of standards in effect at the time they were 
made or incurred.  The State is given a full explanation of any questioned items and 
afforded a reasonable length of time to explain them. 
 
  4782 - Records to Be Reviewed 
 
(Rev. 1, 05-21-04) 
 
All records required establishing the auditors may examine the correctness of an SAs 
claim for Federal funds.  The SA should be prepared to furnish not only those data 
usually considered as the formal accounting system, but also any other agency records 
which may contain information necessary to establish the facts.  This may include the 
accounts and records of State fiscal officers, if they involve receipt, custody, and 
disbursement of Federal funds, and the records of other State agencies where necessary to 
substantiate claims made against Federal funds. 
 
4784 - RO Role During Audit Process 
 
(Rev. 1, 05-21-04) 
 
4784A - Pre-Audit 
 
(Rev. 1, 05-21-04) 
 
The RO provides assistance to HHS auditors who visit the office to: 
 
  Interview RO staff to identify specific fiscal and certification problem areas and 
the corrective action taken or planned, or to review certification workflow and 
procedures for assuring SA compliance with title XVIII/XIX certification 
provisions; 
 
  Review RO records such as recent trip records, program review reports, validation 
survey findings, budget files, etc.; 
 
  Examine the working relationship between the RO and the SA; and 
 
  Analyze certification files in the RO instead of in the SA. 
 
4784B - During Audit 
 
(Rev. 1, 05-21-04) 
 
The RO has only an advisory role in the performance of the audit fieldwork.  It can 
answer program policy questions that surface during the audit, provide needed technical 
advice to auditors, and interpret instructions and guidelines.  The RO may be called upon 
by the OIG/OAS to participate in advance discussion of the audit if audit findings clearly 
warrant immediate corrective action, and to initiate needed action without waiting for the 
final audit report. 
 
  4784C - At Exit Conference 
 
(Rev. 1, 05-21-04) 
 
The regional OIG/OAS will notify the RO of the date of the exit conference with the SA 
at least 10 days in advance.  RO representation at the conference is optional insofar as the 
OIG/OAS is concerned; however, RO attendance provides an opportunity to hear both 
sides and to contribute the RO viewpoint prior to the final report.  An exit conference 
between the auditors and SA officials explains informally what the auditors intent to 
report and serves to clear up misunderstandings before the audit report is drafted. 
 
4785 - Draft and Pre-Release Audit Report to RO 
 
(Rev. 1, 05-21-04) 
 
Where findings are made, the auditors will issue a draft audit report and send it to the SA 
for comments.  Like the audit exit conference, the draft report provides the SA with an 
opportunity to furnish comments and information that will eliminate inaccuracies and 
misunderstandings from the final report. 
 
When significant findings are made, OIG/OAS will prepare a proposed final report or 
pre-release report which it sends to the RO with a request for written comments.  The 
report is normally accompanied by the States comments from the draft report.  This 
procedure provides an opportunity for the RO to have those recommendations that are not 
complete, not legally enforceable, or otherwise difficult to clear removed before the final 
report is released.  The RO uses the pre-release procedure as a means of obtaining audits 
with complete recommendations that are readily clearable within the required 6 months. 
 
The RO should submit comments on the proposed final report to the audit agency within 
30 days of the issuance of the report using a form called a pre-release notification 
document (PND).  (See Exhibit 218.)  The RA must either concur or nonconcur with 
each finding and recommendation in the report, providing the reason in the event of 
nonconcurrence.  When the RA signs the PND, the RO sends it to the originating regional 
OIG/OAS official.  Copies of the PND are sent to all parties on the report distribution 
schedule. 
 
4786 - Final Audit Report and Final Determination - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
4786A - General 
 
(Rev. 1, 05-21-04) 
 
The final audit report is distributed by the regional OIG/OAS in accordance with its 
distribution list.  If the SA accepts the findings and recommendations, the SAs signed 
  agreement must be obtained by the RO.  If the SA disagrees, the RO will issue a formal 
written determination.  (See 4792 for disallowance notifications.)  The determination 
should be made at the point when the RA can see the unlikelihood that an agreement will 
be reached with the SA on the audit recommendations, in order to clear the audit within 
the 6-month period required by law. 
 
4786B - Timeliness of Final Audit Resolutions 
 
(Rev. 1, 05-21-04) 
 
In accordance with P.L. 96-304, RAs are required to resolve (clear) audit findings within 
6 months of the date of issuance of the final audit report by the OIG/OAS.  For this 
purpose, resolution is deemed to occur when a final decision on the amount of any 
monetary recovery has been reached and communicated to the auditee; a satisfactory plan 
of corrective action, including time schedules, to correct all deficiencies has been 
established and communicated to the auditee; and the report has been cleared from the 
Departments tracking system by submission and acceptance of an audit clearance 
document (ACD).  
 
To resolve difference and obtain full information upon which to base a decision or obtain 
a settlement, the RA may consult with the SA and the auditors either before or after the 
SA reply.  This is a fact finding rather than a negotiating step.  It does not delay public 
access to the final audit report, which is made available for public inspection 30 days 
after it is issued to the State. 
 
4787 - RO Review of SA Response 
 
(Rev. 1, 05-21-04) 
 
4787A - Contacting SA 
 
(Rev. 1, 05-21-04) 
 
The letter transmitting the final audit report to the SA either advises the SA to respond to 
the RA within 30 days regarding the findings in the report or advises that CMS will 
contact the SA.  In either case, the RO will promptly contact the SA and, as appropriate, 
remind it to respond, request any needed information, and offer an opportunity for the SA 
to provide any further information on the report.  The SAs response should provide the 
following information: 
 
  Specific concurrence or nonconcurrence with each finding and recommendation; 
 
  A description of the specific actions taken or planned (including time schedules) 
to correct each deficiency, if it agrees that a deficiency(ies) exists; and 
 
  Specific reasons for each nonconcurrence. 
   
4787B - Timely Response 
 
(Rev. 1, 05-21-04) 
 
The RO must maintain controls indicating the due date of the SA response, and 
immediately contact the SA if the date is not met.  The RO should emphasize the 
importance of timely responses to audit reports and follow up if a response is not 
complete as described in subsection A.  Where justified, an extension of time for the 
submission of the response may be granted by the RO.  However, such extensions will 
not extend the 6-month due date set out in 4786.B. 
 
4787C - Consideration of Supporting Arguments and Information 
 
(Rev. 1, 05-21-04) 
 
The RO should accord full and fair consideration to any arguments and information 
submitted in support of the SAs position.  However, the SA should exercise caution in 
evaluating information that conflicts with information contained in the audit report or 
documentation that was not provided to the auditor.  When such information is 
significant, the RO can discuss it with the auditor and, where necessary, refer it to the 
auditor for review and comments. 
 
4787D - Agreements and Disagreements 
 
(Rev. 1, 05-21-04) 
 
If CMS finds that nonallowable costs have been charged to Federal awards and the State 
agrees with the finding, the agreement is confirmed in a letter from the RA to the State 
director, who signs and returns a copy of the letter to CMS.  This letter constitutes the 
initial notification to debtors of the United States as required by the Federal Claims 
Collection Standards (42 CFR 102.2).  Interest is charged in accordance with Federal 
claims collection standards. 
 
If the SA disagrees with the CMS finding, the RA will make a unilateral final 
determination, notify the SA of the amount that is unallowable, and advise of the right to 
appeal.  (See 4788.)  The CMS notification also includes information on the appeal 
procedure. 
 
4787E - Program Findings and Recommendations 
 
(Rev. 1, 05-21-04) 
 
Audit reports may fault SA management practices or fault the degree and manner in 
which the State carries out its responsibilities under applicable statutes and regulations.  
Although OIG/OAS maintains control of program findings that have significant monetary 
  implications and require certain safeguard measures to be taken, implementation of 
recommended corrections of program findings is primarily the responsibility of CMS. 
 
Whereas the repayment of funds may be thought of as a retrospective correction, 
elimination of deficient program management practices is prospective.  The SA and CMS 
must agree upon and specify appropriate corrective actions and a time schedule for 
completion, which CMS follows up on in the course of subsequent management 
monitoring activities.  Frequently, the auditor may accompany CMS representatives to 
meetings with the State to clarify what correction is needed.  Problems may be subject to 
follow-up by OIG/OAS as well.  In order to clear the audit, the RA must be able to advise 
OIG/OAS that agrees to how and when the problems will be satisfactorily corrected. 
 
4788 - SA Disallowance Appeals 
 
(Rev. 1, 05-21-04) 
 
The appeals for Medicare and Medicaid disallowances are discussed in 4788.1 and 
4788.2. 
 
4788.1 - Medicare Disallowance Appeals 
 
(Rev. 1, 05-21-04) 
 
To the extent that a dispute relates to the cost of the SAs activities pursuant to 1864 and 
the 1864 agreement, there is a right to appeal to the Armed Services Board of Contract 
Appeals in accordance with the Contract Disputes Act, 41 USC 607. 
 
In the event the SA elects to appeal title XVIII issues under the Contract Disputes Act, 
the SA must mail or otherwise furnish written notice of appeal to the Armed Services 
Board of Contract Appeals within 90 days from the date of the Medicare disallowance, as 
instructed in the disallowance notice.  Also, the SA mails a copy of such notice to the 
RO. 
 
The Contract Disputes Act also affords the SA the option to bypass the appeal process 
entirely by bringing an action directly to the U.S. Court of Claims within 12 months of 
the date of the Medicare disallowance. 
 
4788.2 - Medicaid Disallowance Appeals 
 
(Rev. 1, 05-21-04) 
 
When it is determined by the RO that a State claim for FFP in Medicaid expenditures for 
a particular item or class of items is not allowable, the RA issues a disallowance letter to 
the State.  A Medicaid disallowance action may be initiated based upon a review of a 
variety of information, such as the Form CMS-435, audit report findings, or a financial 
review. 
   
The SA will receive one of three letters based on the type of Medicaid disallowance 
determined: 
 
  A regular disallowance letter.  (See Exhibit 58.); 
 
  A deferral disallowance letter (see Exhibit 59) and, if necessary, a subsequent 
disallowance letter for amounts previously deferred.  (See Exhibit 60.); or 
 
  An audit disallowance letter.  (See Exhibit 61). 
 
  After receipt of a disallowance letter, the SA has two options in order to resolve 
the Medicaid disallowance action: 
 
  Concur with the Medicaid disallowance and take appropriate action to resolve it 
by adjusting the next quarterly expenditure report for the disallowed amount; or, 
 
  Appeal the action to the DAB via State appeal rights outlined in each 
disallowance letter. 
 
4789 - RO Documentation of Agreements on Actions to Correct Audit 
Deficiencies 
 
(Rev. 1, 05-21-04) 
 
When an agreement on the corrective actions is reached, the RO must confirm the 
agreement in a letter to the responsible SA official.  The RA must sign this letter, and the 
recipient State official must sign and return a copy of the letter to the RO.  If an 
agreement is reached on corrective actions for some but not all of the deficiencies, the 
letter should cover the agreed-upon actions.  All agreements on corrective actions must, 
at a minimum, include the information described below: 
 
  The specific actions taken or planned to correct each deficiency. Describe these 
actions in sufficient detail to permit a subsequent determination of the SAs 
compliance with the agreement; 
 
  The date(s) the actions have been or will be implemented; 
 
  Reference to any implementing policies, procedures, or forms, or a requirement 
that they be submitted by a specific date; and 
 
  Requirements that the organization obtain the ROs advance approval of any 
modifications to the agreement. 
 
  4790 - General Rules on Cost Allowability - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
4790A - Cost Allowability 
 
(Rev. 1, 05-21-04) 
 
Except as otherwise provided in section B, all decisions to allow or disallow costs must 
be based solely on whether they are allowable or unallowable under the regulatory cost 
principles and provisions of the budget approvals.  RAs have responsibility and authority 
(subject to appeal) for determining whether costs are allowable or unallowable and for 
determining the dollar amount of any unallowable costs.  In making these determinations, 
RAs have some discretion on matters of interpretation.  However, such discretion does 
not include the authority to ignore applicable laws, regulations, or policies or 
authoritative interpretations issued by the courts, GAO, OGC, responsible policy offices, 
or other appropriate authorities. 
 
  For any audit finding in which the auditor has recommended an adjustment 
exceeding $100,000, the CMS Administrator or Deputy Administrator must give 
prior written approval for any settlement which is less than 85 percent of the 
amount recommended by the auditor. 
 
  In the resolution of the findings, a clear distinction must be made between the 
determination of whether a cost is allowable or unallowable and the actual 
collectability of a disallowance.  If a determination is made that a cost is 
unallowable, the RA does not have the authority to waive collection of the 
disallowance.  Disallowances constitute claims by the Government and may be 
waived or reduced only by CMS claims collection officer under limited 
conditions prescribed in the Federal Claims Collection Act (P.L. 89-508), the 
Debt Collection Act of 1982 (P.L. 97-365), and implementing procedures 
described in the CMS Administrative Issuances System chapter on financial 
management. 
 
  In determining whether a cost is allowable or unallowable, the RO cannot use 
factors such as the good faith of the State, its successful accomplishment of 
program objectives, or its ignorance of the provisions of the budget approval 
process as a basis for allowing costs which are unallowable under the provisions 
of the budget approval. 
 
  4790B - Exceptions to Cost Allowability Rules 
 
(Rev. 1, 05-21-04) 
 
As stated in 3150, the decision to allow or disallow a cost must be based on whether it is 
allowable under the provisions of applicable regulations and the budget approval.  There 
are two situations, however, where an exception to this rule may be permitted: 
 
1.  If a transaction requiring prior approval under the provisions of a budget letter or 
the SOM is questioned because the approval was not requested, the transaction 
may be approved retroactively, assuming that funds are available.  Retroactive 
approvals may be granted, however, only where: 
 
  The transaction would have been approved had the State requested it in 
advance; and 
 
  The State agrees to institute controls to ensure that prior approval 
requirements are met in the future; or, 
 
2.  In exceptional cases where strict adherence to an original provision of an award 
would result in a clear inequity to the State, the provision may be waived. 
 
These exceptions are to be used in extraordinary situations when adherence to cost 
allowability rules would result in a serious inequity.  The provision to be excepted must 
not be one mandated by law.  The RO should request OGC concurrence that the proposed 
exception is legal and acceptable to OGC.  If OGC concurs, The RO may proceed to fix 
the amount of overpayment.  Thoroughly check all pertinent regulations and policies in 
45 CFR Part 74, in the HHS Grants Administration Manual, and in other guidelines, to 
assure proper handling of any deviation from standard procedures.  Note that if the 
auditors recommended adjustment was over $100,000, a settlement for less than 85 
percent requires approval by the Administrator or Deputy Administrator. 
 
4790.1 - Determinations of Overpayment - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
It is essential that overpayments be determined separately for each fiscal year involved.  
This is true even if estimates are used as in 4790.2. 
 
In some cases a sustained audit disallowance is not an overpayment debt to be collected 
by the U.S. Government.  An auditor and the audit action official may determine that a 
particular claimed expenditure is not allowable.  However, it is possible the auditee had 
never received cash withdrawal from the Department Federal Assistance Financing 
System for the disallowed expenditure.  While the expenditure was disallowed via the 
audit resolution process, it would not be an overpayment since the State had never 
requested nor received an actual  
   
Federal payment for the expenditure that was recorded on the debtors records.  Such a 
situation should be clearly explained on the audit clearance document to allow CMS to 
properly record the amount in the accounting records. 
 
4790.2 - Determination and Computation of Dollar Amounts - Use of 
Estimates - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
In some cases, the audit report may indicate that it was not possible or feasible to identify 
the precise amount of unallowable costs on each award, and that an aggregate amount of 
the costs for all affected awards was estimated based on an analysis of a representative 
sample of transactions. 
 
These estimates may be based on a valid statistical sample of the transactions, or if the 
use of statistical sampling was clearly impractical under the circumstances, on other 
reasonable and supportable estimating techniques (such as projections based on an 
analysis of transactions during a representative period of time).  The auditor is 
responsible for developing estimates of any unallowable costs. 
 
  If the SA disagrees with the use of an estimate or with the procedures used by the 
auditor to develop the estimate, the SA has the option of performing an alternative 
analysis within a specified period of time to develop more precise results.  Also, 
the RO should follow this procedure in situations where the auditor indicates that 
an estimate cannot be developed, but the SA contends that it can be developed 
and wishes to perform an analysis to develop the estimate.  If the SA elects to 
perform an analysis, advance agreement on the due date for submission of the 
analysis and the procedures to be followed in conducting the analysis so that the 
audit will be cleared within 6 months should be obtained by the RO.  The RO and 
the auditor must review the results of the analysis. 
 
  The estimates or the analysis will cover the period prescribed in the next 
paragraph (or will be projected to cover this period), and this amount will be used 
as the basis for a dollar settlement with the SA.  If the parties are unable to reach 
an agreement within the specified time, the RA must make a unilateral 
determination and notify the SA of the amount that is unallowable. 
 
  It should be noted that estimated costs (except statistically formed estimates) and 
costs upon which no opinion can be offered will not be coded by the OIGAA as to 
dollar disallowances.  They may, however, require the attention of the RO to 
assure correction of the deficiencies in the system responsible for the situation.  In 
this event, a management recommendation will be coded in the audit tracking 
system and will require corrective action and a response. 
 
  4790.3 - Time Period for Computing Disallowances - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
If costs are disallowed as a result of an estimate or analysis, the computation of the 
disallowance must cover the following periods: 
 
  If the costs can be identified to specific awards, the computation will cover the 
period the SA is required to retain records under applicable record retention 
requirements; 
 
  If an overall organization-wide estimate is used, the computation will cover the 
SAs three fiscal years immediately preceding the year in which the audit started 
and all subsequent periods up to the date the SA changes its procedures to 
discontinue the unallowable charges; 
 
  In situations involving fraud or deliberate misrepresentation by an organization, 
the period will be extended as far back as necessary; 
 
  If part of the period was covered by an earlier settlement of the same issue, the 
period will be appropriately reduced; and 
 
  The period may be appropriately extended in cases where a SA has submitted a 
retroactive claim for reimbursement of costs incurred in an earlier period, or has 
failed to carry out a prior commitment to take corrective action that would have 
prevented the problem. 
 
4790.4 - Inability to Determine Dollar Amounts - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
4790.4A - Supporting Costs By Alternative Means or Developing 
Reasonable Estimate of Unallowable Costs 
 
(Rev. 1, 05-21-04) 
 
As indicated above, every effort will be made by the auditors to identify or estimate the 
amount of any unallowable costs.  In some cases the deficiencies may be so serious that 
costs charged to the awards cannot be supported, and it is not possible for the auditor to 
develop a reasonable and supportable estimate of the amount of unallowable costs.  In 
these situations, offer the SA the opportunity to support the costs by alternative means or 
to develop a reasonable estimate of any unallowable costs.  The RO specifies a time limit 
so that the audit may be resolved within prescribed time frames.  If the SA submits this 
information, it should be evaluated by the RO and, if necessary, by the auditor to 
  determine whether it provides a sufficient basis for allowing the costs or for reaching a 
dollar settlement. 
 
4790.4B - Costs Have Not Been Supported 
 
(Rev. 1, 05-21-04) 
 
If the SA does not submit the information within the time limit set or if the information is 
inadequate or inconclusive, the RO will formally notify the SA that the costs have not 
been supported as required by Federal regulations.  The costs are therefore disallowed, 
and the organization may appeal this determination.  In extreme cases, the amounts 
involved or other circumstances may be such that this approach is impractical or 
inequitable.  In that event, the RO should take the following steps: 
 
1.  Notify CO that the costs have not been supported and request a programmatic 
evaluation to determine whether the charges to the projects or programs appear 
reasonable in relation to the work performed. 
 
2.  Responsible program officials will perform an evaluation to determine whether 
the charges appear reasonable, and if they do not appear reasonable, to determine 
the amount of the excessive charges.  To the maximum extent possible, program 
officials will complete the evaluation within 30 days of the ROs request.  After 
the evaluation is completed, the results will be transmitted to the RO. 
 
3.  If the evaluation indicates that the costs appear reasonable in relation to the work 
performed, the costs will be allowed.  If the evaluation indicates that the costs are 
unreasonable, the excessive amount will be disallowed.  
 
4791 - RO Documentation of Agreements to Effectuate Repayments 
 
(Rev. 1, 05-21-04) 
 
The SA may agree with the auditors findings in its response to the audit report, or the SA 
and RO may reach agreement only after substantial discussion regarding the amount to be 
adjusted. A letter signed by the RA and countersigned by the SA director (or other 
designated official that the State authorizes) must document any agreement.  The letter 
must: 
 
  Specify the method and time of repayment; 
 
  Stipulate the amount agreed to for each audit-questioned cost item, and clearly 
identify what the respective cost items are; 
 
  Set out the amounts and times of payment under an extended payment plan if it 
appears that the State might be unable to make repayment by the due date.  (See 
4791.1); 
   
  Advise that interest on Medicare overpayments will be charged by CMS if the 
amount is not paid within 30 days; and 
 
  Instruct the SA director to countersign and return a copy of the letter to the RO.  
(In States where an official other than the director is the only person authorized to 
make the financial commitment, the RO modifies the letter accordingly.) 
 
The RO includes two signed copies so that one can be countersigned and returned.  This 
letter constitutes the initial notification to debtors required by the Federal claims 
collection standards (42 CFR 102.2). 
 
4791.1 - Repayment Not Made Within 30 Days of Agreement Letter - 
RO Procedures 
 
(Rev. 1, 05-21-04) 
 
If the State cannot agree to make repayment within 30 days from the date the RA signs 
the agreement letter, and this is known beforehand, the letter should note how and when 
payment will be made.  All debts owed to CMS are to be collected timely even though 
CMS may owe the State offsetting funds in a different program.  Consequently, it is not 
permissible to defer collection of a Medicare overpayment while determining whether a 
Medicaid underpayment might offset it, or vice versa. 
 
If the State can demonstrate to the ROs satisfaction that severe financial hardship would 
occur if the entire amount of debt had to be paid within 30 days, the State does have a 
right to elect to repay debts (or reduce them through a series of offset actions) under an 
installment plan over a maximum period of three years.  In such case, however, any 
deferred Medicare repayment is subject to interest that the RO must periodically calculate 
and add to the amount remaining due.  Medicaid repayments are not subject to interest 
charges in this situation.  The minimum repayment schedule, which is mandatory for 
Medicaid collections, is also considered the reasonable minimum for Medicare 
collections: 
 
  Total repayment amount as percentage of State  Number of quarters to 
share of annual expenditures for the specific  make repayment 
program 
2.5 pct. or less  1 
Greater than 2.5, but not greater than 5  2 
Greater than 5, but not greater than 7.5  3 
Greater than 7.5, but not greater than 10  4 
Greater than 10, but not greater than 15  5 
Greater than 15, but not greater than 20  6 
Greater than 20, but not greater than 25  7 
Greater than 25, but not greater than 30  8 
Greater than 30, but not greater than 47.5  9 
Greater than 47.5, but not greater than 65  10 
Greater than 65, but not greater than 82.5  11 
Greater than 82.5, but not greater than 100  12 
 
The quarterly repayment amounts for each of the quarters in the repayment schedule shall 
not be less than the following percentages of the estimated State share of the annual 
expenditures for the program against which the recovery is made. 
 
Repayment installment for each of the following quarters may not be less than these 
percentages: 
 
  1 to 4    2.5 
  5 to 8    5.0 
  9 to 12   17.5 
 
If the State chooses to repay amounts representing higher percentages during the early 
quarters, any corresponding reduction in required minimum percentages would be 
applied first to the last scheduled payment, then to the next to the last payment, and so 
forth as necessary. 
 
4792 - Audit Disallowance Actions - RO Notification 
 
(Rev. 1, 05-21-04) 
 
The following sections provide the RO with guidelines and instructions to assist in the 
completion of the audit process. 
 
As soon as it is clear that agreement will not be reached expeditiously on an audit 
exception, the RO should make a unilateral determination of disallowance.  This 
  determination should deal only with monetary adjustments which the SA disputes.  If at 
all possible, there should be separate earlier documents to address those financial 
adjustments to which the SA had agreed, remedies for audit-identified 
program/administrative problems, and safeguards.  The RO ensures that if there has 
been a prerelease notification document, there are no unreported deviations in the 
determination.  (See 4785.) 
 
In virtually all cases the disallowance notice must address closely intertwined Medicare 
and Medicaid aspects of the adjustment.  However, there are slightly different notice 
requirements for the two programs: 
 
  Collection and interest-charging rules are governed by Federal claim collection 
standards for Medicare, but are governed by 1903(d)(2) and (5) of the Act for 
Medicaid;  
 
  Medicare disputes are appealed under Federal contract appeal procedures, while 
Medicaid disputes are appealed under grant appeal procedures; and 
 
  If the disallowance affects Medicaid, both the SA as the auditee, and the SMA as 
the grantee, must be officially notified. 
 
Consequently, it is usually necessary to prepare two separate notices. The RO should 
address the Medicare notice to the SA and address the Medicaid notice to both the SA 
and the SMA. Both should be identical up to the point where the determination is 
announced, but their instructions for further action differ.  Exhibits 219 and 220 provide a 
model for the Medicaid and Medicare notices, respectively. 
 
4792.1 - Non-Audit Medicare and/or Medicaid Disallowances - RO 
Procedures 
 
(Rev. 1, 05-21-04) 
 
When a determination is made that a State claim for Medicare survey and certification 
budget payment and/or FFP in expenditures for a particular item or class of items is not 
allowable, the RO will issue a disallowance letter to the State.  A disallowance action 
may be initiated based upon a review of a variety of information, such as Form CMS-435 
or a financial review.  There must be a separate disallowance letter for the Medicare and 
FFP disallowances.  If a Medicaid FFP disallowance is under review, the ARA consults 
the RO Medicaid Division for advice on regional procedures.  
 
4792.1A - Preparation of Case File 
 
(Rev. 1, 05-21-04) 
 
After determining it appropriate to issue a disallowance, the RO prepares and organizes a 
case file, including a Disallowance Analysis Memorandum (DAM) containing necessary 
  documentation supporting the action.  (See 4793 for items comprising the records 
supporting disallowance actions.)  
 
4792.1B - Assignment of File Control Number 
 
(Rev. 1, 05-21-04) 
 
While organizing applicable documentation, the RO assigns a unique identifying file 
control number to each case as follows: 
 
  Begin the control number with a two letter State abbreviation (e.g., AL, FL, GA); 
 
  The next series of numbers includes the current two-digit fiscal year designation 
(e.g., 1980 = 80, 1981 = 81); and 
 
  The last series of numbers consists of a two-digit numerical designation (01, 02, 
03, etc.), running consecutively, beginning with 01.  Maintain sequential 
numbering series either within each State or within the region as a whole 
(examples: AL-80-01, FL-80-01, FL-80-02). 
 
4792.1C - Preparation Draft Disallowance Letter 
 
(Rev. 1, 05-21-04) 
 
Based upon the information contained in the case record, the RO prepares a draft 
disallowance letter generally following the suggested format, as shown in Exhibit 219 
and/or 221.  
 
4792.1D - Circulation Draft Disallowance Action for Review 
 
(Rev. 1, 05-21-04) 
 
The RO circulates the draft letter and the DAM for review within the immediate 
responsible unit and any other necessary units and obtains clearance from the regional 
Counsel. 
 
4792.1E - Signature of Disallowance Letter 
 
(Rev. 1, 05-21-04) 
 
Once the letter has been prepared in final format and the necessary concurrences 
obtained, the RO submits it through the ARA, to the RA for approval. 
 
  4792.1F - Notification of CMS 
 
(Rev. 1, 05-21-04) 
 
After the RA has approved the disallowance action, the RO prepares an alert to notify CO 
of the pending action and sends a copy of the alert, the disallowance letter, and the DAM 
to CO. 
 
4792.1G - Disallowance Letter to Appropriate Recipients 
 
(Rev. 1, 05-21-04) 
 
After headquarters clearance has been obtained, the RO transmits the letter to the State by 
certified mail, return receipt requested and sends a copy of the letter to CO.  
 
NOTE:  Once an appeal has been filed, the RO does not communicate with the State 
concerning the disallowance. All communications must be by or with the consent of the 
attorney assigned to handle the case.  
 
4793 - Establishing Records Supporting Non-Audit Medicare and/or 
Medicaid Disallowance Actions - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
The RO maintains a disallowance action record containing information necessary to 
support the disallowance decision.  The RO includes supporting documentation for items 
addressed in the disallowance notice.  See Exhibit 221 for a model non-audit 
disallowance notice.  
 
4793A - Disallowance Analysis Memorandum (DAM) 
 
(Rev. 1, 05-21-04) 
 
The appropriate RO/ARA must prepare a DAM for each disallowance taken.  The DAM 
is to be a summary of pertinent facts presented in greater detail than in the disallowance 
letter, so that a reader who is unfamiliar with the disallowance action is able to fully 
understand it. Specifically, the DAM should contain:  
 
  A chronology of events to date;  
 
  An explanation of why the disallowance should be taken; 
 
  Detailed findings of fact and an analysis as to why these findings are supported;  
 
    The disallowed amount, identified by quarter, either by proration or by specific 
item of cost; 
 
  A statement and discussion of the States position, if known, accompanied by the 
regional rebuttal or conclusion concerning the validity of the argument; 
 
  If the disallowance was based on a statistically valid sample, a detailed 
explanation of the sampling plan to include the methodology and computations 
used to arrive at the disallowed amount; 
 
  A statement as to whether a court order is in effect or litigation is in process; 
 
  Copies of related correspondence; and 
 
  Copies of hours, regulations, and CMS instructions.  
 
4793B - Claim-Related Work Papers 
 
(Rev. 1, 05-21-04) 
 
The RO keeps as backup material copies of all summary work papers, along with copies 
of journal entries, ledgers, or other documents showing that the State has made a claim.  
These are documents that support amounts claimed on Form CMS-2824 expenditure 
source documents.  If the amount claimed is part of a larger figure, the RO includes in the 
DAM an explanation with cost accumulation methodology and computation.  Where 
appropriate, the RO includes copies of audits, contracts, pertinent parts of cost allocation 
plans, applicable sections of the State plan, and State cost distribution methodologies.  
 
4793C - Citations of Authority 
 
(Rev. 1, 05-21-04) 
 
The RO keeps copies of the cited regulation, interpretations, policy, law, or whatever 
authority is used to substantiate the disallowance, a copy of the regional attorneys 
opinion, if any, and a copy of any material associated with litigation. 
 
The RO provides a copy of the DAM and the proposed disallowance letter to the office of 
the regional counsel handling the case.  
 
  4794 - Collections - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
4794A - Processing Collections 
 
(Rev. 1, 05-21-04) 
 
Audit disallowance notices include a request for full repayment within 30 days.  If checks 
in full or partial payment of audit disallowances made out to CMS are received by the 
RO, the RO accepts them and forwards them to CO for processing.  The RO reviews 
4796 and takes appropriate updating action each time a check is received.  The RO 
enforces interest charges if a Medicare debt is not repaid within thirty days of the 
repayment notice.  (See subsection C.) 
 
4794B - Appeal Will Suspend Collection Action 
 
(Rev. 1, 05-21-04) 
 
If the State appeals CMS determination, collection actions will be suspended pending a 
final decision on the appeal, unless otherwise requested by the State.  However, if the 
disallowance is sustained (fully or partially), interest will be charged for the full period, 
as described in subsection C. 
 
4794C - Calculating Interest Charges 
 
(Rev. 1, 05-21-04) 
 
The RO is responsible for assessing the interest charged on the total amount of a 
disallowance that is unpaid as of the due date.  If the resources cited below cannot be 
obtained from the ARA for Financial Operations, the RO phones the CO Division of 
Accounting for assistance in calculating the interest due. 
 
4794C1 - Interest on Medicare Disallowance 
 
(Rev. 1, 05-21-04) 
 
Interest on a Medicare disallowance accrues from the date on which the notice is sent to 
the SA.  (Waive interest if the debt is paid in full within 30 days after the date of notice.)  
If the State fails to appeal a disallowance within 30 days, the RO contacts CO 
immediately to offset the overpayment by reducing the current award. 
 
  4794C2 - Interest on Medicaid Disallowance 
 
(Rev. 1, 05-21-04) 
 
Interest on a Medicaid disallowance begins to accrue on the date of disallowance, and 
ends on the date of final decision, if the State elects to retain the disputed funds during 
the appeal, and if the disallowance is upheld by the Grant Appeals Board.  If the State is 
silent on its election to retain funds during the appeal, the RO notifies CO immediately to 
arrange for offset pending the appeal decision.  If the State does not formally appeal the 
disallowance within the specified 30-day time period, no interest is assessed. 
Immediately notify CMSO to arrange for offset of the disallowance by issuing a negative 
grant award.  The failure of a State to submit a revised expenditure report does not 
preclude offsetting against quarterly awards. 
 
4794C3 - Interest Rates 
 
(Rev. 1, 05-21-04) 
 
Interest rates on delinquent Medicare disallowances are set by the U.S. Treasury rates 
published in their quarterly Treasury Fiscal Requirements Manual Bulletins.  The rate is 
based on the current value of funds to the Treasury.  Interest rates on delinquent Medicaid 
disallowances are based on the average of the bond equivalent of the weekly 90-day 
Treasury bill auction rates during the period in which interest is to be charged.  Interest 
charges on extended Medicare repayment plans are based on the Treasurys monthly 
Schedule of Certified Interest Rates With Range of Maturities.  Extended repayment 
plans may not contain a grace period for late payments. 
 
4794C4 - Date of Payment 
 
(Rev. 1, 05-21-04) 
 
The date of payment is the date of offset against quarterly Medicaid grant awards or the 
date of reduction of Medicare annual awards. 
 
4794D - Periodic Notices of Amounts Still Due 
 
(Rev. 1, 05-21-04) 
 
The RO keeps up-to-date records of balances due on all determined overpayments, 
reflecting reductions when made by payment or by CMS offset action taken as a result of 
the SAs downward adjustment of quarterly expenditure reports to offset the debt.  If the 
quarterly expenditure report includes a specific downward adjustment to offset the debt, 
the RO considers the reduction to have been made at the end of the calendar quarter to 
which the expenditure report pertains, in order to calculate interest on the balance still 
due.  If the State has failed to take the required offset from the quarterly expenditure 
report, the RO reduces such expenditures (including calculation and reduction for 
  interest), and forwards documentation to DA through CO for offset through the awards 
process.  The RO notifies the SA, just before the end of each quarter in which a balance 
remains, of the amount still due including current interest.  This notice will serve as a 
reminder of offset action to be taken on expenditure reports by the State. 
 
4794.1 - Accounts Payable - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
If it is determined as the result of an audit that funds are owed to an SA by CMS and that 
payment of such amounts will not exceed the approved budget for title XVIII funding, 
CO will ensure that the necessary funds are made available to the SA after receipt of 
revised State-submitted, ARA-approved expenditure reports for the audited period.  In 
those cases where the SA chooses not to request payment, the RO notifies CO that will in 
turn notify DA to eliminate the account payable from the record.  Similarly, if the SA 
does not forward revised expenditure reports after notice by the RO to do so, and the RO 
determines that the SA is not going to forward them, it notifies CO which will notify DA 
to eliminate the account payable from the record. 
 
4795 - Audit Clearance Document - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
Upon issuance of the final report, the audit is placed on the audit agencys list of pending 
audits and remains pending until that agency receives (and accepts) an audit clearance 
document (ACD) (Exhibit 222) showing the resolution of all recommendations.  An audit 
clearance document provides a uniform medium by which full information is furnished to 
involved parties stating CMS decision as to actions to be taken and monies to be 
recovered as a result of the audit report. Therefore, following agreement with the SA on 
implementation, the RO completes an ACD listing each recommendation, the final 
determination made, the action to be taken, and the agreed upon time schedule.  If the 
final determination differs from OIGAAs position, the RO includes the rationale for the 
deviation. 
 
4795.1 - RO Preparation and Processing Audit Clearance Document 
 
(Rev. 1, 05-21-04) 
 
4795.1A - Part I - Decisions by CMS 
 
(Rev. 1, 05-21-04) 
 
This part shows decisions by CMS.  The RO completes as follows: 
 
1.  Date - Date submitted by RO. 
 
  2.  Audit Control No. - Number assigned to audit report by OIGAA. 
 
3.  Report Date - Date audit report was issued. 
 
4.  Cognizant PoC - CMS in all cases. 
 
5.  Program - Program covered by audit report.  In those instances where more than 
one program is covered, the RO indicates program with largest amount of funds 
(Medicare, Medicaid, Survey and Certification, or QIO.) 
 
6.  Other Principal Operating Components - All PoCs other than CMS involved in 
the audit report. 
 
7.  Grantee/Contractor - Name and address of the SA. 
 
8.  Grant/Contract No - Leave blank. 
 
9.  Common Accounting No - For monetary findings, the RO uses the common 
accounting number (CAN) for the organizational entity that made the original 
obligation.  This information will be included in the audit reports.  If not in the 
report, the RO obtains this information from the regional OIG/OAS. 
 
10. Appropriation No - For monetary findings, the RO uses the appropriation 
number for the program from which the original obligation was made.  This 
information will be included in the audit report.  If not in the report, the RO 
obtains it from the regional OIGAA. 
 
11. Audit Recommendation - The RO states the recommendation (not the finding) 
as it appears in the audit report.  The RO shows each recommendation on a 
separate page.  The RO uses the continuation sheet for this purpose. Amounts 
Recommended for Financial Adjustment 
 
12. Finding Code - Cost Element - The RO shows code number and type of expense 
disallowed. (These are obtained from the audit report.)  No more than one finding 
code is permitted on each line. 
 
13. Amount Recommended - The amount to be shown in this column is the amount 
recommended for adjustment that is being addressed by the ACD.  If, for some 
reason, only a portion of one recommended amount is being addressed, the RO 
shows this lesser figure in this column. 
 
14. Amount Sustained by PoC - The RO shows the amount of this recommendation 
that is being upheld by CMS.  It is the amount in this column that will determine 
the amount entered into CMS accounting records for recovery from the auditee. 
If less than 85 percent of a recommendation of $100,000 or more is upheld, the 
  RO obtains the concurrence of the CMS Administrator or Deputy Administrator 
and attaches it to the ACD. 
 
15. Action Taken on Recommendation - The RO indicates briefly the actions CMS 
is requiring the auditee to take to implement the recommendation.  If several steps 
need to be taken, the RO includes target dates for their accomplishment.  When 
CMS does not concur with a recommendation, the RO includes a concise 
explanation of the basis for nonconcurrence. If the report was processed under 
prerelease procedures and CMS is deviating, or allowing an auditee to deviate, 
from a previously agreed upon position, the RO furnishes a concise explanation 
for the deviation.  The RO also includes an explanation of the extent of 
consultation with OIG/OAS on the matter, prior to advising the auditee that the 
audit has been resolved.  In order to more adequately describe the circumstances 
resulting in nonconcurrence, the RO attaches supporting documentation to the 
ACD. When the action taken on a recommendation cannot be fully explained 
within the space provided, the RO continues the explanation on bond paper.  
Pertinent correspondence must be attached that will aid in explaining CMS 
action on this recommendation. 
 
16. Signature - The signature of the RA must appear on the right hand side as 
Reviewer if the ACD consummated a settlement or decision. All ACDs should 
be signed by the RO originating analyst or responsible audit officer. 
 
17. Office of the General Counsel (OGC) Approval - If CMS differs in its 
interpretation of the law, rule, or regulation used by OIG/OAS to support its 
recommended disallowance and does not uphold this disallowance (management 
or financial), OGCs concurrence with CMS position will be evidenced on the 
ACD by Counsels signature or the attachment of the OGC opinion.  CO will 
attach the OGC opinion. 
 
18. Part I - Continuation Sheet - The RO uses this page when more than one 
recommendation is being addressed. 
 
4795.1B - Part II - Recommendations Remaining Open 
 
(Rev. 1, 05-21-04) 
 
The RO includes this page with all ACD submissions and lists on this page any 
recommendations (or portions thereof) not covered by part I of the ACD; e.g., a financial 
recommendation that is awaiting a formal disallowance procedure before it can be 
cleared. 
 
On this page the RO indicates the current date, audit control number, finding code, and 
recommendation(s) and amount (if any) remaining open.  If the ACD clears all 
recommendations in the audit report, the RO shows the word none on this page. 
 
  4795.1C - Attachments 
 
(Rev. 1, 05-21-04) 
 
When applicable, the RO furnishes the following additional documentation with the 
ACD.  (All documents listed below must bear proper signatures and approvals.) 
 
  Disallowance letter, if one was necessary (5 copies); 
 
  Paperwork to verify the recovery of disallowed funds (2 copies); 
 
  Statement of concurrence of CMS Administrator if less than 85 percent of a 
recommendation of $100,000 or more was upheld (2 copies); and 
 
  Agreement letter to SA director and his/her concurrence, as required in 4789 or 
4791 (2 copies). 
 
4795.1D - Amended ACDs 
 
(Rev. 1, 05-21-04) 
 
In some cases, a situation may arise which would change CMS position as stated on the 
ACD when an audit was cleared, such as when an appeal overturns CMS decision or an 
additional amount of money is recovered as a result of the audit.  In these situations, the 
RO prepares an amended ACD stating the nature of the change and how it effects the 
original ACD and adds the word AMENDED to the upper right-hand corner of each 
page. 
 
4795.1E - Dispatching ACD 
 
(Rev. 1, 05-21-04) 
 
The RO sends the original and four copies of the ACD to CO.  If Medicaid is responsible 
for the funds overpaid in the audit, the RO Division of Financial Operations will prepare 
the ACDs for the audit and will forward them to ALS.  Some audits are combined with 
Medicaid program audits in such a way that ACDs must be coordinated by the Office of 
the Regional Administrator before release. 
 
4795.1F - CO Action 
 
(Rev. 1, 05-21-04) 
 
CO reviews each audit report and ACD to: 
 
  Verify that the ACD addresses all of the management recommendations; 
   
  Verify that all recommended financial adjustments are addressed on the ACD and 
that the amounts are accurate; and 
 
  Submit the required number of copies of the ACDs to Audit Liaison Staff in an 
acceptable and timely manner. 
 
If CO has questions about the ACD, it will request additional information from the RO.  
Upon completion of its review, CO transmits the original and three copies to ALS.  That 
office transmits the ACD to OIG/OAS. 
 
4795.2 - Clearing Audit Clearance Document - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
An audit may be cleared when: 
 
  The RA has rendered a decision as to what action CMS will require of the State to 
resolve each management recommendation in the report, and that decision has 
been transmitted to the State; and 
 
  A decision has been reached as to the amount of the financial recommendation to 
be upheld by CMS and to be repaid by the State, and that decision has been 
transmitted to the State. 
 
  It is not necessary that corrective action be completed before an ACD can be 
processed.  Even though a determination may be appealed, the ACD should be 
prepared by this point.  The RO should make every effort to include the entire 
audit in a single ACD issuance in order to expedite the clearance process. 
 
On occasion, clearance of an item occurs when the RO rejects an OIGOA 
recommendation in whole or in part.  Where the basis for disagreement is a difference in 
interpretation of the law, rule, or regulation used by the OIG/OAS to support its 
recommended action, the ACD must be cleared through the Office of the General 
Counsel before being sent to the Audit Agency.  (CMSO will request General Counsel 
reaction.)  The RO transmits the ACD to CO and, in a covering memorandum, points out 
that a disagreement of this nature exists and gives the rationale for the RO position. 
 
4795.3 - Closure Versus Clearance - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
A finding is cleared when there is conclusive agreement on a PoC or, in a financial audit, 
on the amount overpaid.  RO completion of an ACD showing that a final determination 
has been made on each OIG/OAS recommendation will clear an audit from the 
OIG/OASs pending list of audits or Stewardship Report and from CMS status report. 
   
A finding is closed when the RO reports it has been satisfied, by evidence or observation, 
that correction has been achieved, or when the overpayment has been offset or repaid.  
An audit is not considered closed until the SA has implemented all the final decisions and 
the implementation verified.  The RO furnishes documents verifying recovery of funds 
by check or by offset to the Audit Liaison Staff. 
 
4796 - Audit Findings and Recommendations Remaining Open at End 
of Four Months - RO Procedures 
 
(Rev. 1, 05-21-04) 
 
If the SA and the RO fail to reach agreement on all audit recommendations (as contained 
in the final report) and their implementation by the end of 4 months following the date of 
the final report, the RO completes the ACD within 10 working days. The RO shows those 
recommendations that have been cleared up to that time in the space provided together 
with implementation plans and expected implementation schedule.  The RO lists those 
not cleared in the page headed Findings Remaining Open, together with the reason not 
yet cleared and the expected date of resolution.  The RO prepares an ACD even when it is 
certain that a disallowance will be appealed. 
 
It is the responsibility of the RO to follow up on cleared audit reports until it has been 
determined that the State has taken action necessary to fully implement all audit 
recommendations.  When this has been done, the audit will be closed.  In order that 
central office components and ALS may be kept abreast of actions taken by the auditee 
and regional personnel to close audit recommendations, the RO submits a status report 
quarterly on all cleared audits not previously closed.  The RO sends one copy to ALS and 
one copy to CO 15 days after the end of the quarter. 
 
When audits have been cleared from the OIG/OAS Stewardship Report but are not 
entirely closed, ALS, not OIG/OAS, will maintain follow-up control.  The RO sends a 
memo to CO to report how and when final closure has been verified.  CO will then advise 
ALS to discontinue the control. 
 
   
  Disposition of Medicare and Medicaid Records 
 
4800 - Retention and Destruction of Medicare and Medicaid Records 
 
(Rev. 1, 05-21-04) 
 
The SAs copies of records produced in the administration of the State survey program 
become Federal records when the original documents are transmitted to CMS.  The 
provisions of the Federal Records Disposition Act, therefore, govern retention and 
destruction of these records. 
 
The following sections list the various types of title XVIII and XIX records to be retained 
in the SA and the applicable periods of retention.  However, where State law or practices 
require longer retention periods than those shown, State law or practice is controlling. 
 
4801 - Provider Certification Records  
 
(Rev. 1, 05-21-04) 
 
(See http://cmsnet.cms.hhs.gov/hpages/iocs/records/admin4.htm) 
 
PROVIDER RECORDS  
 
4801A. Provider Certification Files (N1-440-95-1, Item 9)  
 
(Rev. 1, 05-21-04) 
 
Documents relating to the survey and certification of suppliers and providers of 
service. Included are official certification and transmittal forms, survey report 
forms, utilization review plans, provider agreements, transfer agreements, plans of 
correction, civil rights compliance forms, intermediary designation and tie-in 
notices, certification letters, and various forms and correspondence used in the 
certification process with respect to individual facilities. Excluded from this 
definition are surveyors notes, rough copy survey report forms, and other work 
papers which are merged into and superseded by a final product.  
 
DISPOSITION:  
 
1. CMS Regional Office  
 
a.  Non-participating Facilities  
 
Cutoff file after termination or denial. Destroy 6 years after cutoff.  
 
  b.  Participating Facilities  
 
(1) Maintain the Form CMS-1561--(Health Insurance 
Benefits Agreement) the two most recent 
certifications and background/support materials - 
Maintain in an active file for as long as the facility 
is participating.  
 
(2) Survey report forms and related documents - Cutoff 
file after completion of survey. Destroy 6 years 
after cutoff.  
 
(3) Survey report forms and related documents 
pertaining to access hospitals, nursing homes and 
home health agencies-Cutoff file after removal from 
the access category and completion of the survey. 
Destroy 4 years after cutoff.  
 
(4) Mammography Facilities Files - Cutoff file upon 
approval of schedule and transfer to the FRC. 
Destroy 3 years after cutoff.  
 
2. State Agencies  
 
a.  Non-Participating Facilities- Cutoff file after termination, 
closure, withdrawal, or denial. Destroy 4 years after cutoff.  
 
(1) Non-Certified Facilities - Cutoff file after 
termination, closure, withdrawal, or denial. Destroy 
1 year after cutoff.  
 
b.  Participating Facilities  
 
(1) Retain a facilitys (hospitals and skilled nursing 
facilities (SNFs)) current utilization review plan, 
transfer agreements and floor plan or physical plant 
layout. Destroy when superseded, obsolete or when 
facility becomes non-participating.  
 
(2) Maintain the two most recent certification actions at 
all times. Destroy all other records when 4 years 
old.  
 
  4802 - Budget and Financial Report Files- Records to Be Retained 
 
(Rev. 1, 05-21-04) 
 
These files are used to estimate, justify, and approve SA program costs, and to account 
for funds received and expended by the SAs. 
 
The files include: Form CMS-1465A, State Agency Budget List of Positions; Form 
CMS-1466, State Agency Schedule for Equipment Purchases; Form CMS-435, 
Quarterly Expenditure Report(s); Form CMS-434, Certification Workload Report(s); 
and indirect cost forms. 
 
4802A.  Provider Statistical and Reimbursement Reports  (BHI.g:40-2, Item BB)  
 
EDP printouts or microfilms showing summaries of payments to hospitals, skilled 
nursing facilities, home health agencies, and other providers of service. They are 
used to effect cost settlements between the intermediaries and the providers for 
program validation purposes, and to determine accuracy of cost reports. These 
reports contain Part A and Part B inpatient and outpatient information, inpatient 
statistics, total bills, covered costs, and other related data.  
 
DISPOSITION: 
 
1.   CMS Headquarters - Destroy printouts after a total retention of 3 years 
after the date issued. Destroy microfilm upon receipt and verification of 
subsequent film.  
 
2.   Intermediaries - Destroy after a total retention of 5 years after completion 
of audit and/or settlement process for provider cost report for 
corresponding fiscal year.  
 
4802B.  Medical Facilities Directory Files  (BHI.g:40-2, Item CC)  
 
Listing of providers of service showing provider identification and intermediary 
numbers, effective date, and city where located. Also included are alphabetical 
listing of facilities by State, cities within the State, and facility name within the 
city. These lists contain mailing addresses, provider numbers, intermediary 
numbers, effective dates, termination codes, billing elections, radiological and 
laboratory services, total beds, nursing beds, and accreditation by Joint 
Commission on Accreditation of Hospitals and the American Osteopathic 
Association.  
 
DISPOSITION: Destroy when superseded or obsolete.  
 
  4802C.  State Agency Budget and Financial Report Files (NC1-440-79-1, Item 50, 
description revised 11/2000)  
 
Files used to estimate, justify, and approve State agency health insurance program 
costs, and to account for funds received and expended by the State agencies. 
Included are Forms CMS-435 (used by the State agencies to request funding by 
CMS regional offices to approve budgets, by the State agencies to request 
supplemental funding, and by the State agencies to report quarterly expenditures)-
-State Survey Agency Budget/Expenditure Report; CMS-1465A--State Agency 
Budget List of Positions; CMS-1466--State Agency Schedule for Equipment 
Purchases; and indirect cost forms. (Form CMS-435 replaces Forms CMS-1465, 
CMS-1467, CMS-1468 and CMS-1469A.) 
 
DISPOSITION:  
 
1.   CMS Headquarters and Regional Offices - Destroy after a total retention 
of 6 years following the close of the budget year.  
 
2.   State Agencies - Destroy after a total retention of 3 years after HHS audit 
or after a total retention of 5 years after the close of the budget year, 
whichever is earlier.  
 
4802D.  State Agency Agreements (BHI.g:40-2, Item EE)  
 
Agreements entered into with the State agencies by the Secretary of Health and 
Human Services under the provisions of Section 1864 of the Social Security Act, 
by which the State agency assists CMS in determining whether health care 
providers and suppliers met and continue to meet the requirements for coverage or 
participation. Also included are sub-agreements by which State agencies 
subcontract some Medicare functions to other governmental or private 
organizations.  
 
DISPOSITION:  
 
1.   CMS Headquarters - PERMANENT. Transfer to the FRC at the close of 
the calendar year in which terminated. Transfer to the National Archives 
20 years thereafter.  
 
2.   Regional Offices - Destroy after a total retention of 5 years after the close 
of the calendar year in which terminated.  
 
3.   State Agencies - Dispose of according to State practice.  
 
  4802E.  State Agency Review Files (BHI.g:40-2, Item FF)  
 
Documents relating to administrative review of State agency operations and 
certification procedures. Included are reports of visits, communications 
concerning improvements in operations, and other papers pertaining to reviews of 
State agency practices.  
 
DISPOSITION:  
 
1.   CMS Headquarters - Destroy after a total retention of 5 years after the 
close of the calendar year in which dated.  
 
2.   State Agencies - Dispose of according to State practice.  
 
4802F.  State Buy-In Agreements (BHI.g:40-2, Item GG)  
 
Agreements entered into with the State agencies by the Secretary of Health and 
Human Services under the provisions of section 1843 of the Social Security Act. 
The agreements provide coverage under the Supplementary Medical Insurance 
Program for certain individuals receiving money payments under State approved 
public assistance plans. Buy-In Agreements allow coverage for individuals not 
normally eligible for coverage.  
 
DISPOSITION:  
 
1.   CMS Headquarters - PERMANENT. Transfer to the FRC at the close of 
the calendar year in which terminated. Transfer to the National Archives 
20 years thereafter.  
 
2.   Regional Offices - Destroy after a total retention of 5 years after the close 
of the calendar year in which terminated.  
 
3.   State Agencies - Dispose of according to State practice.  
 
4802G.  Program Validation Reviews (BHI.g:40-2, Item HH)  
 
Documents relating to program validation reviews conducted to identify the 
degree to which program provisions are being properly applied by the providers 
of health care services. Included are planned validation reviews, notice of visits, 
and other papers directly related to the program validation review process.  
 
DISPOSITION: Place in inactive file after 2 years or upon receipt of 
subsequent review, whichever is earlier. Destroy after a total retention of 5 
years.  
 
  4802H.  Detailed Printouts (Depots) (BHI.g:40-2, Item II)  
 
EDP printouts showing individual bill and payment information for hospitals 
skilled nursing facilities, home health agencies, and other providers of service. 
These reports are used by intermediaries and providers to reconcile the Provider 
Statistical and Reimbursement Reports to their own records by itemizing which 
bills have been processed by CMS and are included in the PS&R report.  
 
DISPOSITION:  
 
1.   CMS Headquarters - Destroy printouts after a total retention of 3 years 
after the date issued.  
 
2.  Intermediaries - Destroy after a total retention of 5 years after the 
completion of the audit and/or settlement process for provider cost report 
for the corresponding fiscal year.  
 
4802I.  Interim Rate Listings (BHI.g:40-2, Item JJ)  
 
Listings of interim rates in use by intermediaries in making interim payments to 
hospitals, skilled nursing facilities, home health agencies, and other providers of 
services. These listing are used as a source of information and for studies.  
 
DISPOSITION: Destroy after a total retention of 5 years.  
 
4802J.  Provider Hearing Files (BHI.g:40-2, Item MM)  
 
These files accumulate when a provider of services is dissatisfied with CMS 
determination that it does not meet the conditions for participation in the 
Medicare program and requests an administrative hearing on the matter. The 
documents are used by CMS to support its initial determination at the hearing. 
Included are copies of provider inspection reports, correspondence, and similar 
records relating to provider operations. After the hearing, the files must be 
retained in the event that the provider seeks court review.  
 
DISPOSITION:  Transfer to the CMS Records Holding Area at the close of 
the calendar year in which hearing is held. Hold for 2 years and then transfer 
to the FRC. Destroy after a total retention of 7 years.  
 
4802K.  Supplementary Medical Insurance (SMI) General Enrollment 
Period (GEP) Records (N1-440-95-1, Item 10)  
(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. 
 
Records consisting of source documents, (the CMS-L40D) for all individuals who 
responded in the direct mail solicitation for SMI enrollment. The records contain 
such information as beneficiary name, Medicare beneficiary identifier, address, 
premium amount, and a check mark reflecting individuals election or refusal of 
enrollment.  
 
DISPOSITION:  
 
1.   Source Document - Cutoff at the close of the General Enrollment Period. 
Destroy 1 year after cutoff.  
 
2.   Timely Filed Yes Reply List - Cutoff at the end of the calendar year. 
Destroy 3 years after cutoff.  
 
4802L.  Claims Processing File (Previously, Quality Assurance File--NC1-440-
76-29, Item II)  
 
The Medicare Part B Carrier Quality Assurance System was designed as a 
program for measuring the quality of carrier claims processing operations and to 
provide management tools for identifying and monitoring actions needed to derive 
improvements in claims processing. Claims processing files are transmitted 
electronically to CMS Data Center (HDC) by all Part B carriers.  
 
DISPOSITION: Retained at the HDC for a total retention of 3 years.  
 
4802M.  Correction Payment Action Summary Report (NC1-440-76-29, Item 
III)  
 
Documents relating to corrective payment action taken on Part B claims selected 
for end-of-line or quality assurance sample review. Included are summary report 
forms and transmittal letters.  
 
DISPOSITION: Destroy after a total retention of 1 year.  
 
4802N.  Civil Litigation Case Files (NC1-440-79-1, Item 3HH) 
 
Case files documenting central office involvement in Medicare civil litigation. 
Civil Litigation cases usually have no fraud involvement. They relate to any 
aspect of the Medicare program, such as overpayment or underpayment of monies 
by CMS to contractors or providers of services, coverage and entitlement 
questions, provider terminations, and regulation promulgation and enforcement. 
Unless settled beforehand, civil litigation cases are heard in Federal (and rarely 
  State) courts. Documentation in the case files may include but not be limited to, 
complaints and answers, court orders, transcripts, briefs, evidentiary material 
(cost reports, accounting data, affidavits, etc.), correspondence and related 
background information. The Department of Justice maintains the record copy of 
cases reaching the court level. The Civil Litigation and Hearings Branch 
maintains record copies of central office involvement in these cases.  
 
DISPOSITION: Place in an inactive file after final action on the case. Cut off 
inactive file at the close of the calendar year in which final action was taken, 
hold 2 additional years, and then transfer to the FRC. Destroy when inactive 
for a total retention of 5 years.  
 
4802O.  Professional Qualifications File (NC1-440-79-1, Item IV.A.)  
 
Records of certain individuals who are employed in hospitals and clinical 
laboratories, or who are self-employed providing therapy and medical services 
who have taken HHS proficiency examinations. The records contain professional 
qualification information on the academic and experience qualifications of the 
individuals and identify information such as social security number, name, 
address license number and eligibility, and results of HHS proficiency 
examination. Records are maintained by State agencies and regional Medicare 
offices, and are used to determine whether individuals rendering health care 
services meet qualification requirements.  
 
DISPOSITION: Transfer to an inactive file upon termination of individuals 
participation. Destroy after a total retention of 5 years.  
 
4802P.  Teaching Hospital Medical Records Audit Files (NC1-440-78-1, Item 
A)  
 
Documents created from audits of teaching facilities medical records, conducted 
nationwide by carriers. These audits, conducted annually or semi-annually, are 
intended to verify, through medical records, the degree of participation of 
supervising physicians in the care and treatment of beneficiaries for which 
payment is requested under Part B Medicare. Documents in these files include 
copies of Part B claims records, letters of inquiry and responses from facilities or 
physicians, copies of documentation supplied to carriers, and related 
correspondence.  
 
DISPOSITION: Transfer to the FRC after completion of the audit. Destroy 
after a total retention of 4 years after completion of audit.  
 
  4802Q.  Teaching Hospital Medical Record Recoupment Audit Files (NC1-
440-78-1, Item B)  
 
Documents relating to periodic audits of teaching facilities nationwide by carriers 
to recover overpayment. These audits are similar to the teaching hospital medical 
record audits. Findings adverse to the facility may be appealed through the fair 
hearing process. Documents in the files include copies of Part B claims records; 
correspondence or documentation supplied by the facility or physician; and 
documents relating to the fair hearing (transcripts, decisions, etc.).  
 
DISPOSITION: Transfer to the FRC after completion and settlement of the 
audit. Destroy 4 years after completion of audit.  
 
4802R.  Utilization Review Files (NC1-440-80-1)  
 
Records documenting postpayment utilization review of physicians, conducted by 
State and local medical societies. These files are maintained by carriers 
nationwide and contain copies of Part B claim forms, medical documentation, 
determination documentation, correspondence and related background documents. 
No original claims records are included in these files. Physician overpayment may 
be collected based on the results of the reviews.  
 
DISPOSITION: Transfer to an inactive file upon completion of review. 
Close out inactive file at the end of each calendar year, and transfer to Federal 
Records Center (FRC). Destroy after a total retention of 7 years.  
 
4802S.  Provider/Supplier and Durable Medical Equipment Supplier 
Application  (N1-440-01-1) 
 
Document relating to the enrollment of providers and suppliers into the Medicare 
program. These include but are not limited to Form CMS-855 enrollment forms 
(OMB Approval No. 0938-0685) and all supporting documents. Also included are 
attachments that would be submitted with the application. These include but are 
not limited to copy(s) of: Federal, State and/or local (city/county) professional 
licenses, certifications and/or registrations; Federal, State, and/or local 
(city/county) business licenses, certification and/or registrations; professional 
school degrees or certificates or evidence of qualifying course work; curriculum 
vitae/resumes; CLIA certificates and FDA mammography certificates; controlled 
substances registrations from the Drug Enforcement Agency; Central Office letter 
issuing an indirect billing number to a managed care organization or plan. 
 
  1. Provider/Supplier and Durable Medical Equipment Supplier Application 
 
a.   Unprocessed applications as a result of provider/supplier failing to 
provide additional information 
 
DISPOSITION: Destroy when 7 years old. 
 
b.   Approved applications of provider/supplier 
 
DISPOSITION: Destroy 15 years after the provider/suppliers 
enrollment has ended. 
 
c.   Denied applications of provider/supplier. 
 
DISPOSITION: Destroy 15 years after the date of denial. 
 
d.   Approved application of provider/supplier, but subsequently, the 
billing number has been revoked 
 
DISPOSITION: Destroy 15 years after the billing number is revoked. 
 
e.   Voluntary deactivation of billing number 
 
DISPOSITION: Destroy 15 years after deactivation. 
 
f.   Provider/Supplier dies 
 
DISPOSITION: Destroy 7 years after date of death. 
 
2. Electronic Mail and Word Processing System Copies 
 
a.   Copies that have no further administrative value after the 
recordkeeping copy is made. Includes copies maintained by 
individuals in personal files, personal electronic mail directories, or 
other personal directories on hard disk or network drives, and copies 
on shared network drives that are used only to produce the 
recordkeeping copy. 
 
DISPOSITION: DELETE within 180 days after the recordkeeping 
copy has been produced. 
 
b.   Copies used for dissemination, revision or updating that are 
maintained in addition to the recordkeeping copy 
 
DISPOSITION: DELETE when dissemination, revision, or updating 
is complete. 
   
4803 - Title XVIII State Agreements 
 
(Rev. 1, 05-21-04) 
 
The SA retains 1864 agreements (see 4002) and interagency subagreements (see 
4006) during the life of the agreements, after which they may be disposed of according 
to State practice. 
 
4804 - Title XIX State Plans 
 
(Rev. 1, 05-21-04) 
 
The SA retains State plans, required by 1903 of the Act, during the life of the plan, after 
which they may be disposed of according to State practice. 
 
4805 - SA Review Files 
 
(Rev. 1, 05-21-04) 
 
Documents relating to administrative review of SA operations and certification 
procedures, such as reports of visits, communications concerning improvements in 
operations, and other papers pertaining to reviews of SA practices, are to be destroyed 3 
years after the year in which the document was prepared or when no longer needed for 
reference, whichever is later. 
 
4806 - Destruction of Records 
 
(Rev. 1, 05-21-04) 
 
When records no longer need to be retained, the SA may destroy them.  To ensure 
confidentiality, the SA destroys records by shredding, mutilation, or other protective 
measures. 
  Transmittals Issued for this Chapter 
 
Rev #  Issue Date  Subject  Impl Date  CR# 
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 
R126SOM  11/21/2014  Revisions to State Operations Manual  11/21/2014 N/A 
(SOM), Chapter 4  Program 
Administration and Fiscal Management 
R96SOM  12/13/2013  State Operations Manual (SOM) Chapter 4,  12/13/2013 N/A 
Policy and Nomenclature revisions for 
Intermediate Care Facilities for Individuals 
with Intellectual Disabilities (ICF/IID) 
R39SOM  12/19/2008  Revisions to Chapter 4-Program  12/19/2008 N/A 
Administration and Fiscal Management 
R23SOM  01/19/2007  Federal Minimum Qualifications Standards  02/20/2007 N/A 
R01SOM  05/21/2004  Initial Issuance of Pub 100-07  N/A  N/A