50262 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

DEPARTMENT OF AGRICULTURE

Forest Service 

36 CFR Part 228 

RIN 0596–AC20 

DEPARTMENT OF THE INTERIOR 

Bureau of Land Management 

43 CFR Part 3160 

[W0–610–411H12–24 1A] 

RIN 1004–AD59 

Onshore Oil and Gas Operations; 

Federal and Indian Oil and Gas Leases; 

Onshore Oil and Gas Order Number 1, 

Approval of Operations

AGENCIES: U.S. Forest Service, 

Agriculture; Bureau of Land 

Management, Interior.

ACTION: Proposed rule; Notice of 

extension of public comment period. 

SUMMARY: The Bureau of Land 

Management (BLM) and the U.S. Forest 

Service (FS) are extending by 60 days 

the public comment period for the 

proposed rule published in the Federal 

Register on July 27, 2005 (70 FR 43349). 

The proposed rule would revise existing 

Onshore Oil and Gas Order Number 1 

(see 48 FR 48916 as amended at 48 FR 

56226 (1983)). The Order provides the 

requirements necessary for the approval 

of all proposed oil and gas exploratory, 

development, or service wells on all 

Federal and Indian (except Osage Tribe) 

onshore oil and gas leases, including 

leases where the surface is managed by 

the FS. It also covers approvals 

necessary for subsequent well 

operations, including abandonment. In 

response to public requests for 

additional time and because the recently 

enacted Energy Policy Act of 2005 

impacts certain provisions of the 

proposed rule, the BLM and the FS are 

extending the comment period 60 days 

from the original comment period 

closing date of August 26, 2005. The 

comment period is extended to October 

25, 2005, to give the public additional 

time to comment.

DATES: Send your comments to the BLM 

on or before October 25, 2005. The BLM 

and the FS may not necessarily consider 

or include in the Administrative Record 

for the final rule comments that we 

receive after the close of the comment 

period or comments delivered to an 

address other than those listed below 

(see ADDRESSES).

ADDRESSES: Mail: Director (630), Bureau 

of Land Management, Eastern States 

Office, 7450 Boston Boulevard, 

Springfield, Virginia 22153. Hand 

Delivery: 1620 L Street, NW., Suite 401, 

Washington, DC 20036. E-mail: 

comments_washington@blm.gov.

Federal eRulemaking Portal: http://

www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

James Burd at (202) 452–5017 or Ian 

Senio at (202) 452–5049 at the BLM or 

Barry Burkhardt at (801) 625–5157 at 

the FS. Persons who use a 

telecommunications device for the deaf 

(TDD) may contact these persons 

through the Federal Information Relay 

Service (FIRS) at 1–800–877–8339, 24 

hours a day, 7 days a week.

SUPPLEMENTARY INFORMATION: The BLM 

and the FS published the proposed rule 

on July 27, 2005 (70 FR 43349), and 

provided a 30 day comment period that 

will end on August 26, 2005. We are 

extending the comment period on the 

proposed rule until October 25, 2005. 

The comment period is being extended 

as a result of requests for extension from 

the public, but also because the recently 

enacted Energy Policy Act of 2005 (Act) 

impacts certain provisions of the 

proposed rule having to do with timing 

of the Application for Permit to Drill or 

Deepen package (APD) approvals. To 

make the proposed rule consistent with 

the provisions in that Act, the BLM 

intends to publish a further proposed 

rule in the Federal Register in the near 

future amending provisions associated 

with the timing of APD approvals.

Dated: August 22, 2005. 

Dale N. Bosworth, 

Chief, USDA—Forest Service. 

Dated: August 19, 2005. 

Rebecca W. Watson, 

Assistant Secretary of the Interior.

[FR Doc. 05–17051 Filed 8–25–05; 8:45 am] 

BILLING CODE 4310–84–P

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 447 and 455

[CMS–2198–P] 

RIN 0938–AN09

Medicaid Program; Disproportionate 

Share Hospital Payments

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

SUMMARY: This proposed rule would 

implement section 1001(d) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) which establishes new 

reporting and auditing requirements for 

State Disproportionate Share Hospital 

payments.

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on October 25, 2005.

ADDRESSES: In commenting, please refer 

to file code CMS–2198–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http://

www.cms.hhs.gov/regulations/

ecomments. (Attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word). 

2. By mail. You may mail written 

comments (one original and two copies) 

to the following address ONLY: Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2198–P, P.O. 

Box 8010, Baltimore, MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

9994 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–8010.

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period.

FOR FURTHER INFORMATION CONTACT: Jim 

Frizzera, (410) 786–9535.

SUPPLEMENTARY INFORMATION: 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50263

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–2198–P

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. CMS posts all electronic 

comments received before the close of 

the comment period on its public Web 

site as soon as possible after they have 

been received. Hard copy comments 

received timely will be available for 

public inspection as they are received, 

generally beginning approximately 3 

weeks after publication of a document, 

at the headquarters of the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, 

Maryland 21244, Monday through 

Friday of each week from 8:30 a.m. to 

4 p.m. To schedule an appointment to 

view public comments, phone 1–800–

743–3951. 

I. Background 

Title XIX of the Social Security Act 

(the Act) authorizes Federal grants to 

States for Medicaid programs that 

provide medical assistance to lowincome families, the elderly, and 

persons with disabilities. Section 

1902(a)(13)(A)(iv) of the Act requires 

that States make Medicaid payment 

adjustments for hospitals that serve a 

disproportionate number of low-income 

patients with special needs. Section 

1923(a)(2)(D) of the Act requires States 

to provide an annual report to the 

Secretary describing the payment 

adjustments made to each 

disproportionate share hospital (DSH). 

Section 1923 of the Act also sets out 

certain limits on Federal financial 

participation for State DSH payments. 

Section 1923(f) of the Act defines, for 

each State, an aggregate annual limit on 

Federal financial participation for DSH 

payments. Section 1923(g)(1) of the Act 

also defines hospital-specific limits on 

Federal financial participation for DSH 

payments. Under the hospital-specific 

limits, a hospital’s DSH payments must 

not exceed the costs incurred by that 

hospital in furnishing services during 

the year to Medicaid patients and the 

uninsured, less other Medicaid 

payments made to the hospital and 

payments made by uninsured patients 

(‘‘uncompensated care costs’’). 

II. The Medicare Prescription Drug, 

Improvement, and Modernization Act 

of 2003

Section 1001(d) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173, enacted on December 8, 

2003) added section 1923(j) to the Act 

to require States to report additional 

information about their DSH programs. 

Section 1923(j)(1) of the Act requires 

States to submit an annual report that 

includes the following: 

• Identification of each DSH that 

received a DSH payment under the 

State’s Medicaid program in the 

preceding fiscal year and the amount of 

DSH payments paid to that hospital in 

the same year. 

• Such other information as the 

Secretary of Health and Human Services 

determines necessary to ensure the 

appropriateness of DSH payments.

Section 1923(j)(2) of the Act also 

requires States to have their DSH 

payment programs independently 

audited and to submit the independent 

certified audit annually to the Secretary. 

The certified independent audit must 

verify: 

• The extent to which hospitals in the 

State have reduced uncompensated care 

costs to reflect the total amount of 

claimed expenditures made under 

section 1923 of the Act. 

• DSH payments to each hospital 

comply with the applicable hospitalspecific DSH payment limit. 

• Only the uncompensated care costs 

of providing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals and uninsured 

individuals as described in section 

1923(g)(1)(A) of the Act are included in 

the calculation of the hospital-specific 

limits. 

• The State included all Medicaid 

payments, including supplemental 

payments, in the calculation of such 

hospital-specific limits. 

• The State has separately 

documented and retained a record of all 

its costs under the Medicaid program, 

claimed expenditures under the 

Medicaid program, uninsured costs in 

determining payment adjustments 

under section 1923 of the Act, and any 

payments made on behalf of the 

uninsured from payment adjustments 

under section 1923 of the Act.

Under section 1923(j) of the Act, Federal 

matching payments are contingent upon 

a State’s submission of the annual DSH 

report and independent certified audit. 

III. Provisions of the Proposed 

Regulations 

A. Reporting Requirements 

To implement the reporting 

requirements in section 1923(j)(1) of the 

Act, we are proposing to modify the 

DSH reporting requirements in Federal 

regulations at 42 CFR 447. 

Currently, under § 447.299, each State 

is required to report and maintain 

certain information about DSH program 

spending. Under § 447.299(a) and (b), 

each State is required to submit and 

report to CMS the quarterly aggregate 

amount of DSH payments. Each State is 

also required, under § 447.299(c), to 

maintain and make available upon 

request supporting documentation for 

the State’s DSH program, including the 

amount of DSH payments to each 

individual hospital each quarter. 

Section 447.299(d) provides that future 

grant awards may be deferred or 

disallowed if a State fails to comply 

with these reporting requirements. 

We are proposing to add a new 

paragraph (c) to the reporting 

requirements in § 447.299. We are 

proposing to redesignate the 

documentation requirements in 

paragraph (c) as paragraph (d) and 

redesignate the deferrals and 

disallowances information in paragraph 

(d) as paragraph (e), respectively. We are 

proposing that the following 

information reflects the data elements 

necessary to ensure that DSH payments 

are appropriate such that each 

qualifying hospital receives no more in 

DSH payments than the amount 

permitted under section 1923(g) of the 

Act. Specifically, proposed paragraph 

(c) would require each State receiving 

an allotment under section 1923(f) of 

the Act, beginning with the first full 

State fiscal year (SFY) immediately after 

the enactment of section 1001(d) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act 

(MMA) and each year thereafter, to 

report to us the following information 

for each DSH hospital: 

• Hospital Name. 

• Medicare Provider Number. 

• Medicaid Provider Number. 

• Type of Hospital. The State would 

indicate if the hospital is an acute, longterm care, psychiatric, teaching, 

children’s, rehabilitation, or other 

facility. If other facility, the State would 

be asked to specify the type. 

• Type of Hospital Ownership. The 

State would indicate whether the 

hospital is a privately-owned, State 

government-owned, non-State 

government-owned, or a facility owned 

by the Indian Health Service, or a tribal 

government. The State would also 

50264 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

indicate whether the hospital is 

privately operated, State-government 

operated, non-State government 

operated, or a facility operated by the 

Indian Health Service, or a tribal 

government. 

• Medicaid Inpatient Utilization Rate. 

The State would indicate the hospital’s 

Medicaid inpatient utilization rate, as 

defined in section 1923(b)(2) of the Act. 

• Low Income Utilization Rate. The 

State would indicate the hospital’s low 

income utilization rate, as defined in 

section 1923(b)(3) of the Act. The low 

income utilization rate determination 

should only include those individuals 

that have no source of third party 

coverage for the inpatient hospital 

services they receive. 

• DSH Payments. The State would 

indicate the total annual DSH payments 

made to the hospital. States need only 

report the single, aggregate annual 

amount of DSH payments made to the 

hospital, regardless of the number of 

separate DSH pools or the number of 

individual payments.

• Regular Medicaid Rate Payments. 

The State would indicate the total 

annual amount paid to the hospital by 

the State, not including any DSH 

payments or supplemental/enhanced 

payments, for inpatient hospital and 

outpatient hospital services furnished to 

Medicaid eligible individuals. 

• Medicaid Managed Care 

Organization Payments. The State 

would indicate the total annual amount 

paid to the hospital by Medicaid 

managed care organizations for 

inpatient hospital and outpatient 

hospital services furnished to Medicaid 

eligible individuals. 

• Supplemental/Enhanced Medicaid 

Payments. The State would indicate the 

total annual amount of supplemental/

enhanced Medicaid payments made to 

the hospital by the State for inpatient 

hospital and outpatient hospital services 

furnished to Medicaid eligible 

individuals. These amounts do not 

include DSH payments, regular 

Medicaid rate payments, and Medicaid 

managed care organization payments. 

• Indigent Care Revenue. The State 

would indicate the total annual 

payments received by the hospital from 

individuals with no source of third 

party coverage for inpatient hospital and 

outpatient hospital services they 

receive. 

• Transfers. The State would indicate 

the total annual amount of funds 

transferred by the hospital to the State 

or local governmental entity as a 

condition of the hospital receiving any 

Medicaid payment or DSH payment. 

• Total Cost of Care. The State would 

indicate separately the total annual 

costs incurred for furnishing inpatient 

hospital and outpatient hospital services 

provided to Medicaid individuals and 

the total costs incurred for furnishing 

those services provided to individuals 

with no source of third party coverage 

for the inpatient hospital and outpatient 

hospital services they receive. 

• Uncompensated Care Costs. The 

State would indicate separately the total 

annual amount of uncompensated care 

costs for furnishing inpatient hospital 

and outpatient hospital services to 

Medicaid eligible individuals and to 

individuals with no source of third 

party coverage for the inpatient hospital 

and outpatient services they receive. 

The total annual uncompensated care 

cost equals the total cost of care for 

furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals and to individuals 

with no source of third party coverage 

for the inpatient hospital and outpatient 

hospital services they receive less the 

sum of regular Medicaid rate payments, 

Medicaid managed care organization 

payments, supplemental/enhanced 

Medicaid payments, and indigent care 

revenue). Uncompensated care costs do 

not include bad debt or payer discounts. 

• Medicaid Eligible and Uninsured 

Individuals. The State would indicate 

the total annual unduplicated number of 

Medicaid eligible individuals receiving 

inpatient hospital and outpatient 

hospital services and the total annual 

unduplicated number of individuals 

with no source of third party coverage 

for the inpatient hospital and outpatient 

hospital services they receive. 

Section 1011, Federal Reimbursement 

of Emergency Health Services Furnished 

to Undocumented Aliens, of the MMA, 

requires that the Secretary directly pay 

hospitals and certain other providers for 

their otherwise un-reimbursed costs of 

providing services required by section 

1867 of the Act (EMTALA) and related 

hospital inpatient, outpatient, and 

ambulance services furnished to 

undocumented aliens, aliens paroled 

into the United States at a U.S. port of 

entry for the purpose of receiving such 

services, and Mexican citizens 

permitted temporary entry to the U.S. 

with a laser visa. In addition, payment 

will be made from an allotment that 

varies by the number of undocumented 

aliens in each State. Provider payments 

are subject to a pro-rata reduction if the 

State allocation is insufficient to 

provide full reimbursement under the 

formula established by the Secretary. 

In general, we believe that the receipt 

of a section 1011 payment will not 

impact the calculation of a hospital’s 

Medicaid DSH payment amount if the 

hospital has not reached its DSH cap. 

For hospitals receiving DSH payments 

at or near their DSH limit, States will 

need to consider a section 1011 

payment when determining the 

hospital’s DSH limit, because the total 

DSH payments should not exceed the 

total amount of uncompensated care at 

the hospital. 

To ensure uniform and timely data 

transmission, we have prepared an 

Excel spreadsheet for States to use to 

transmit their DSH information to us. 

The information supplied on this 

spreadsheet would satisfy the 

requirements under sections 

1923(a)(2)(D) and 1923(j)(1) of the Act. 

B. Audit Requirements 

Section 1001(d) of the MMA amended 

section 1923(j)(2) of the Act to require 

States to annually submit to CMS an 

independent certified audit report that 

verifies information about DSH 

payments to hospitals. The statute 

specifies five items that require 

verification by an independent audit. 

Collectively, these five items will 

provide independent verification that 

State Medicaid DSH payments comply 

with the hospital-specific DSH limit in 

section 1923(g) of the Act, and that such 

limits are accurately computed.

In proposed § 455.201, we state that 

‘‘SFY’’ stands for State fiscal year. In 

addition, we are proposing to define 

that an ‘‘independent audit’’ means an 

audit conducted according to the 

standards specified in the generally 

accepted government auditing standards 

issued by the Comptroller General of the 

United States. 

Section 1923(j) of the Act requires 

that each State must submit annually 

the independent certified audit of its 

DSH program as a condition for 

receiving Federal payments under 

section 1903(a)(1) and 1923 of the Act. 

We are proposing to add a new 

§ 455.204(a) to reflect this requirement. 

As noted previously, each State must 

obtain an independent certified audit, 

beginning with an audit of its State 

fiscal year 2005 DSH program. We are 

proposing to add a new § 455.204(b) to 

reflect this requirement. We are 

proposing a submission requirement 

within 1 year of the independent 

certified audit. 

In the audit report, the auditor must 

verify whether the State’s method of 

computing the hospital-specific DSH 

limit and the DSH payments made to 

the hospital comply with the following 

five items required by section 1923(j)(2) 

of the Act: 

• Verification 1: The extent to which 

hospitals in the State have reduced their 

uncompensated care costs to reflect the 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50265

total amount of claimed expenditures 

made under section 1923 of the Act. 

Section 1923(g)(1) of the Act defines 

a hospital-specific limit on Federal 

financial participation for DSH 

payments. Each State must develop a 

methodology to compute this hospitalspecific limit for each DSH hospital in 

the State. As defined in section 

1923(g)(1) of the Act, the State’s 

methodology must calculate for each 

hospital, for each fiscal year, the 

difference between the costs incurred by 

that hospital for furnishing inpatient 

hospital and outpatient hospital services 

during the applicable State fiscal year to 

Medicaid individuals and individuals 

with no source of third party coverage 

for the inpatient hospital and outpatient 

hospital services they receive, less all 

Medicaid payments made to the 

hospital for such hospital services and 

payments made by uninsured 

individuals for such hospital services. 

This difference, if any, between 

incurred inpatient hospital and 

outpatient hospital costs and associated 

Medicaid payments and other payments 

received from or on behalf of 

individuals with no source of third 

party coverage is considered the 

hospital’s uncompensated care cost 

(UCC) limit. Federal financial 

participation is not available for DSH 

payments that exceed the hospital’s 

UCC for furnishing inpatient hospital 

and outpatient hospital services to 

Medicaid eligible individuals and 

individuals with no source of third 

party coverage in any given State fiscal 

year. 

For purposes of Federal claiming, 

States report DSH expenditures to CMS. 

These DSH expenditures are matched at 

the Federal Medicaid Assistance 

Percentage. In some States, the nonFederal share of the DSH expenditures 

are funded by State and/or local 

government general fund 

appropriations. In other States, the DSH 

hospitals, either through 

intergovernmental transfers or certified 

public expenditures, fund the nonFederal share of the DSH expenditures. 

In determining compliance with the 

hospital-specific limit, total DSH 

expenditures, regardless of the source of 

the non-Federal share, cannot exceed 

the UCC. 

We interpret section 1923(j)(2)(A) of 

the Act to require that the independent 

audit verify whether total claimed DSH 

expenditures for each hospital, 

including the non-Federal share, are 

included as revenues when determining 

whether DSH payments are less than or 

equal to each hospital’s UCC. 

Obligations of the qualifying DSH 

hospital to fund the non-Federal share 

of a DSH payment or any other 

Medicaid payment cannot be included 

as uncompensated care for purposes of 

the hospital-specific DSH limit. We are 

proposing to add a new § 455.204(c)(1) 

to reflect the requirement that the audit 

report include a determination that 

qualifying hospitals in States have 

properly reduced their uncompensated 

care costs to reflect the total amount of 

claimed DSH expenditures. 

• Verification 2: DSH payments to 

hospitals comply with the hospitalspecific DSH limit. 

We interpret section 1923(j)(2)(B) of 

the Act to require that the audit verify 

whether claimed DSH expenditures for 

each eligible hospital are less than or 

equal to the hospital’s UCC. In order to 

evaluate compliance with this hospitalspecific DSH limit, DSH payments made 

in the audited State fiscal year (SFY) 

must be measured against the actual 

uncompensated care costs in that same 

audited SFY, which for all States will 

begin with their respective SFY 2005. 

We are proposing to add a new 

§ 455.204(c)(2) to reflect the requirement 

that the audit report include a 

determination that DSH payments to 

each qualifying hospital in the State 

comply with the hospital-specific DSH 

payment limit, that is, the DSH 

payments do not exceed the 

uncompensated care for furnishing 

inpatient hospital and outpatient 

hospital services to Medicaid eligible 

individuals and to individuals with no 

source of third party coverage for the 

inpatient hospital and outpatient 

hospital services they receive.

• Verification 3: Only uncompensated 

care costs of providing inpatient and 

outpatient hospital services to Medicaid 

eligible individuals and uninsured 

individuals are included in the hospitalspecific DSH payment limit. 

The independent audit must verify 

whether the hospital-specific DSH 

limits calculated by the State include 

only costs incurred for inpatient 

hospital and outpatient hospital services 

furnished to Medicaid eligible 

individuals and to individuals with no 

source of third party coverage for the 

inpatient hospital and outpatient 

hospital services they receive. 

First, the audit must verify whether 

the State has included only costs 

incurred for inpatient hospital and 

outpatient hospital services in the 

estimate of uncompensated care costs 

for each DSH hospital. Medicaid 

regulations at § 440.10 and § 440.20(a) 

define inpatient hospital services and 

outpatient hospital services, which 

generally include facility services 

furnished under the direction of a 

physician or dentist. The 

uncompensated care costs of providing 

physician services cannot be included 

in the calculation of hospital-specific 

DSH limit. In some circumstances, 

government-owned and operated 

hospitals fund the non-Federal share of 

DSH and other Medicaid payments 

through intergovernmental transfers to 

the State. These intergovernmental 

transfers cannot be considered an 

incurred cost for the purposes of 

calculating the hospital-specific DSH 

limits. The audit must verify whether 

the State has excluded such transfer 

amounts when determining hospitals’

costs for the purposes of the hospitalspecific DSH limits. 

Second, the audit must verify that 

only costs incurred for Medicaid eligible 

individuals and uninsured individuals 

are included in the hospital-specific 

limit calculation. Medicaid eligible 

individuals are those individuals that a 

State has determined to be eligible for 

its Federal Medicaid program in 

accordance with applicable eligibility 

requirements. Uninsured individuals 

are individuals with no source of third 

party coverage for the inpatient hospital 

and outpatient hospital services they 

receive. 

We are proposing to add a new 

§ 455.204(c)(3) to reflect the requirement 

that the audit report include a 

determination that each qualifying 

hospital’s DSH limit is determined by 

including only the uncompensated care 

costs for furnishing inpatient hospital 

and outpatient hospital services to 

Medicaid eligible individuals and to 

individuals with no source of third 

party coverage for the inpatient hospital 

and outpatient hospital services they 

receive. 

• Verification 4: The State included 

all payments under this title, including 

supplemental payments, in the 

calculation of hospital-specific DSH 

payment limits. 

This provision requires the audit to 

verify that all sources of Medicaid 

payments received by a hospital are 

fully counted in the State’s calculation 

of the hospital-specific DSH limits. For 

example, a State might supplement the 

Medicaid payments that are made to 

hospitals under a prospective payment 

system with additional/enhanced nonDSH Medicaid payments. Under these 

circumstances, the total amount of these 

supplemental/enhanced Medicaid 

payments should be added to all other 

Medicaid payments received by the 

hospital to determine the hospital’s 

UCC. 

In addition, the audit must verify 

whether or not the State has properly 

accounted for all Medicaid payments in 

the calculation of uncompensated care 

50266 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

costs, regardless of whether Medicaid 

payments exceeded the incurred cost of 

furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

patients. For purposes of this hospitalspecific DSH limit, Medicaid payments 

made to a DSH hospital for furnishing 

inpatient hospital and outpatient 

hospital services that are in excess of 

the Medicaid incurred costs of such 

services should be applied against the 

uncompensated care costs of furnishing 

inpatient hospital and outpatient 

hospital services to patients with no 

source of third party coverage for such 

services. That is, Medicaid 

‘‘overpayments’’ for Medicaid 

individuals must be used to offset any 

shortfalls in payment for uninsured 

individuals. Therefore, the audit must 

verify whether the State has 

appropriately calculated 

uncompensated care costs by 

subtracting total, combined payments 

for Medicaid and uninsured payments 

from total, combined incurred costs of 

furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals and individuals 

with no source of third party coverage 

for the inpatient hospital and outpatient 

hospital services they receive. We are 

proposing to add a new § 455.204(c)(4) 

to reflect the requirement that the audit 

report include a determination that 

States properly account for all Medicaid 

payments, including regular Medicaid 

rates and Medicaid supplemental/

enhanced payments, made to hospitals 

for furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals. 

• Verification 5: The State has 

separately documented and retained a 

record of all its costs under this 

Medicaid program, claimed 

expenditures under this Medicaid 

program, uninsured costs in 

determining payment adjustments 

under this section, and any payments 

made on behalf of the uninsured from 

payment adjustments under this section.

This provision requires that the audit 

verify whether the State has collected 

and continues to maintain appropriate 

documentation for its calculation of 

hospital-specific DSH limits and for the 

payments made to eligible hospitals. We 

are proposing to add a new 

§ 455.204(c)(5) to reflect the requirement 

that the audit report include a 

determination that the State has 

collected, documented, and is retaining 

appropriate documentation for its DSH 

limits calculation and payments to the 

qualified hospitals. 

As part of the documentation 

verification, the audit report must 

describe the methodology used by the 

State to calculate each hospital’s limit 

under section 1923(g)(1) of the Act. 

Included in the description of the 

methodology, the audit report must 

specify how the State defines incurred 

inpatient hospital and outpatient 

hospital costs. We are proposing to add 

a new § 455.204(c)(6) to reflect the 

requirement that the audit report 

include a determination that each State 

employs an appropriate methodology 

for calculating the hospital-specific DSH 

limit. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60-

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Therefore, we are soliciting public 

comments on each of these issues for 

the information collection requirements 

discussed below. 

The following information collection 

requirements and associated burdens 

are subject to the PRA. 

We also received one public comment 

responding to the proposed 

requirements for a Medicaid 

Disproportionate Share Annual Report 

for Hospitals and Institutions in the 

Federal Register notice dated March 26, 

2004, (69 FR 15853). We have 

determined that there was an error in 

the Collection of Information portion of 

that notice and are drafting a correction 

notice for publication. 

Section 447.299 Reporting 

Requirements 

In summary, paragraph (c) of this 

section requires the States to submit to 

CMS information for each DSH for the 

most recently-completed State fiscal 

year beginning with the first full State 

fiscal year (SFY) after the enactment of 

section 1001(d) of the MMA, which for 

all States will begin with their 

respective SFY 2005 and each 

subsequent SFY. This paragraph 

presents the information to be 

submitted. 

The burden associated with this 

requirement is the time and effort for 

the States to prepare and submit the 

required information. We estimate that 

it will take each State approximately 30 

minutes to prepare and submit the 

information for each of its DSHs. On 

average, each State has approximately 

75 DSHs. Therefore, we estimate it will 

take 38 hours per State to comply for a 

total of 1,976 annual hours. 

Section 455.202 Audit Reporting 

Requirements 

In summary, this section states what 

information must be included in the 

audit report. 

The PRA exempts the information 

collection activities referenced in this 

section. In particular, 5 CFR 1320.4 

excludes collection activities during the 

conduct of administrative actions, 

investigations, or audits involving an 

agency against specific individuals or 

entities.

Section 455.203 Submission Date 

In summary, this section requires 

States to submit to us an independent 

certified audit. 

The PRA exempts the information 

collection activities referenced in this 

section. In particular, 5 CFR 1320.4 

excludes collection activities during the 

conduct of administrative actions, 

investigations, or audits involving an 

agency against specific individuals or 

entities. 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the information collection requirements 

described above. These requirements are 

not effective until they have been 

approved by OMB. 

If you comment on any of these 

information collection and record 

keeping requirements, please mail 

copies directly to the following:

Centers for Medicare & Medicaid 

Services, Office of Strategic 

Operations and Regulatory Affairs, 

Regulations Development and 

Issuances Group, Attn: Jimmy 

Wickcliffe, CMS–2198–P Room C5–

11–04, 7500 Security Boulevard, 

Baltimore, MD 21244–1850; and 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 

20503, Attn: Katherine Astrich, CMS 

Desk Officer.

Comments submitted to OMB may also 

be e-mailed to the following address: email: Katherine_T._Astrich

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50267

@omb.eop.gov; or faxed to OMB at (202) 

395–6974. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Statement 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule does not reach 

the economic threshold and thus is not 

considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and 

government agencies. Most hospitals 

and most other providers and suppliers 

are small entities, either by nonprofit 

status or by having revenues of $6 

million to $29 million in any 1 year. 

Individuals and States are not included 

in the definition of a small entity. We 

are not preparing an analysis for the 

RFA because we have determined that 

this rule would not have a significant 

economic impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule that may result in expenditure in 

any 1 year by State, local, or tribal 

governments, in the aggregate, or by the 

private sector, of $110 million. This rule 

would have no consequential effect on 

the governments mentioned or on the 

private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget.

List of Subjects 

42 CFR Part 447

Accounting, Administrative practice 

and procedure, Drugs, Grant programshealth, Health facilities, Health 

professions, Medicaid, Reporting and 

record keeping requirements, Rural 

areas. 

42 CFR Part 455

Fraud, Grant programs-health, Health 

facilities, Health professions, 

Investigations, Medicaid, Reporting and 

recordkeeping requirements.

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows:

PART 447—PAYMENTS FOR 

SERVICES 

1. The authority citation for part 447 

continues to read as follows:

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302).

2. Section 447.299 is amended by—

A. Redesignating existing paragraphs 

(c) and (d) as paragraphs (d) and (e). 

B. Adding a new paragraph (c) to read 

as set forth below.

§ 447.299 Reporting requirements.

* * * * *

(c) Beginning with each State’s fiscal 

year 2005 and each subsequent State 

fiscal year, States must submit to CMS 

the following information for each DSH 

hospital: 

(1) Hospital name.

(2) Medicare provider number.

(3) Medicaid provider number.

(4) Type of hospital. Indicate whether 

the hospital is an acute, long-term care, 

psychiatric, teaching, children’s, 

rehabilitation, or other facility. If other 

facility, specify the type. 

(5) Type of hospital ownership.

Indicate whether the hospital is owned 

by a private entity, State government, 

non-State government, the Indian 

Health Service, or a tribal government. 

Indicate whether the hospital is 

operated by a private entity, State 

government, non-State government, the 

Indian Health Service, or a tribal 

government. 

(6) Medicaid inpatient utilization rate.

Indicate the hospital’s Medicaid 

inpatient utilization rate, as defined in 

section 1923(b)(2) of the Act. 

(7) Low income utilization rate.

Indicate the hospital’s low income 

utilization rate, as defined in section 

1923(b)(3) of the Act. The low income 

utilization rate calculation only 

includes individuals that have no 

source of third party coverage for the 

inpatient and/or outpatient hospital 

services they receive. 

(8) Disproportionate share hospital 

payments. Indicate total annual 

payment adjustments made to the 

hospital under section 1923(g) of the 

Act. 

(9) Regular Medicaid rate payments.

Indicate the total annual amount paid to 

the hospital by the State, not including 

DSH payments or supplemental/

enhanced Medicaid payments, for 

inpatient and outpatient services 

furnished to Medicaid eligible 

individuals.

(10) Medicaid managed care 

organization payments. Indicate the 

total annual amount paid to the hospital 

by Medicaid managed care 

organizations for inpatient hospital and 

outpatient hospital services furnished to 

Medicaid eligible individuals. 

(11) Supplemental/enhanced 

Medicaid payments. Indicate the total 

annual amount of supplemental/

enhanced Medicaid payments made to 

the hospital by the State for inpatient 

hospital and outpatient hospital services 

furnished to Medicaid eligible 

individuals. These amounts do not 

include DSH payments, regular 

Medicaid rate payments, and Medicaid 

managed care organization payments. 

(12) Indigent care revenue. Indicate 

total annual payments received by the 

50268 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

hospital from individuals with no 

source of third party coverage for 

inpatient and outpatient hospital 

services they receive. 

(13) Transfers. Indicate the total 

annual amount of funds transferred by 

the hospital to the State or local 

governmental entity as a condition of 

the hospital receiving any Medicaid 

payment or DSH payment. 

(14) Total cost of care. Indicate 

separately the total annual costs 

incurred for furnishing inpatient 

hospital and outpatient hospital services 

to Medicaid eligible individuals and the 

total costs incurred for furnishing 

inpatient hospital and outpatient 

hospital services to individuals with no 

source of third party coverage for the 

hospital services they receive. 

(15) Uncompensated care costs.

Indicate separately the total annual 

amount of uncompensated care costs for 

furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals and to individuals 

with no source of third party coverage 

for the hospital services they receive. 

The total annual uncompensated care 

cost equals the total cost of care for 

furnishing inpatient hospital and 

outpatient hospital services to Medicaid 

eligible individuals and to individuals 

with no source of third party coverage 

for the hospital services they receive 

less the sum of regular Medicaid rate 

payments, Medicaid managed care 

organization payments, supplemental/

enhanced Medicaid payments, and 

indigent care revenue. Uncompensated 

care costs do not include bad debt or 

payer discounts. 

(16) Medicaid eligible and uninsured 

individuals. Indicate the total annual 

unduplicated number of Medicaid 

eligible individuals receiving inpatient 

hospital and outpatient hospital services 

and the total annual unduplicated 

number of individuals with no source of 

third party coverage for the inpatient 

hospital and outpatient hospital they 

receive.

* * * * *

PART 455—PROGRAM INTEGRITY: 

MEDICAID 

1. The authority citation for part 455 

continues to read as follows:

Authority: Sec 1102 of the Social Security 

Act (42 U.S.C. 1302).

2. Add new subpart C to read as 

follows:

Subpart C—Independent Certified Audit of 

State Disproportionate Share Hospital 

Payment Adjustments 

Sec. 

455.200 Purpose. 

455.201 Definitions. 

455.204 Condition for Federal financial 

participation (FFP).

Subpart C—Independent Certified 

Audit of State Disproportionate Share 

Hospital Payment Adjustments

§ 455.200 Purpose. 

This subpart implements section 

1923(j)(2) of the Act.

§ 455.201 Definitions. 

For the purposes of this subpart—

Independent certified audit means an 

audit that is conducted in accordance 

with generally accepted government 

auditing standards, as defined by the 

Comptroller General of the United 

States. 

SFY stands for State fiscal year.

§ 455.204 Condition for Federal financial 

participation (FFP). 

(a) General rule. A State must submit 

an independent certified audit to CMS, 

according to the requirements in this 

subpart, to receive Federal 

disproportionate share hospital (DSH) 

payment under sections 1903(a)(1) and 

1923 of the Act. 

(b) Timing. Beginning with FY 2005, 

a State must submit to CMS an 

independent certified audit report no 

later than 1 year after the completion of 

each State’s fiscal year. 

(c) Specific requirements. The 

independent certified audit report must 

verify the following: 

(1) Each hospital that qualifies for a 

DSH payment in the State has reduced 

its uncompensated care costs for 

furnishing inpatient hospital and 

outpatient hospital services during the 

SFY to Medicaid eligible individuals 

and individuals with no source of third 

party coverage for the services in order 

to reflect the total amount of claimed 

DSH expenditures. 

(2) DSH payments made to each 

qualifying hospital comply with the 

hospital-specific DSH payment limit. 

For each audited SFY, the DSH 

payments made in that audited SFY 

must be measured against the actual 

uncompensated care cost in that same 

audited SFY. 

(3) Only uncompensated care costs of 

furnishing inpatient and outpatient 

hospital services to Medicaid eligible 

individuals and individuals with no 

third party coverage for the inpatient 

and outpatient hospital services they 

receive as described in section 

1923(g)(1)(A) of the Act are included in 

the calculation of the hospital-specific 

disproportionate share limit payment 

limit, as described in section 

1923(g)(1)(A) of the Act. 

(4) For purposes of this hospitalspecific limit calculation, any Medicaid 

payments (including regular Medicaid 

rate payments, supplemental/enhanced 

Medicaid payments, and Medicaid 

managed care organization payments) 

made to a disproportionate share 

hospital for furnishing inpatient 

hospital and outpatient hospital services 

to Medicaid eligible individuals, which 

are in excess of the Medicaid incurred 

costs of such services, are applied 

against the uncompensated care costs of 

furnishing inpatient hospital and 

outpatient hospital services to 

individuals with no source of third 

party coverage for such services. 

(5) Any information and records of all 

of its inpatient and outpatient hospital 

service costs under the Medicaid 

program; claimed expenditures under 

the Medicaid program; uninsured 

inpatient and outpatient hospital service 

costs in determining payment 

adjustments under this section; and any 

payments made on behalf of the 

uninsured from payment adjustments 

under this section has been separately 

documented and retained by the State. 

(6) The information specified in 

paragraph (c)(5) of this section includes 

a description of the methodology for 

calculating each hospital’s payment 

limit under section 1923(g)(1) of the 

Act. Included in the description of the 

methodology, the audit report must 

specify how the State defines incurred 

inpatient hospital and outpatient 

hospital costs for furnishing inpatient 

hospital and outpatient hospital services 

to Medicaid eligible individuals and 

individuals with no source of third 

party coverage for the inpatient hospital 

and outpatient hospital services they 

receive.

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program)

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program)

Dated: January 5, 2005. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: May 5, 2005. 

Michael O. Leavitt, 

Secretary.

[FR Doc. 05–16974 Filed 8–25–05; 8:45 am] 

BILLING CODE 4120–01–P