24400 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

the requestor, taking into account

uncontested claims or facts to the

contrary; and resolution of the factual

issues(s) in the manner sought by the

requestor would be adequate to justify

the action requested (40 CFR 178.32).

IV. Regulatory Assessment

Requirements

This final rule establishes a timelimited tolerance under FFDCA section

408. The Office of Management and

Budget (OMB) has exempted these types

of actions from review under Executive

Order 12866, entitled Regulatory

Planning and Review (58 FR 51735,

October 4, 1993). This final rule does

not contain any information collections

subject to OMB approval under the

Paperwork Reduction Act (PRA), 44

U.S.C. 3501 et seq., or impose any

enforceable duty or contain any

unfunded mandate as described under

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA) (Public

Law 104–4). Nor does it require any

prior consultation as specified by

Executive Order 13084, entitled

Consultation and Coordination with

Indian Tribal Governments (63 FR

27655, May 19, 1998); special

considerations as required by Executive

Order 12898, entitled Federal Actions to

Address Environmental Justice in

Minority Populations and Low-Income

Populations (59 FR 7629, February 16,

1994); or require OMB review or any

Agency action under Executive Order

13045, entitled Protection of Children

from Environmental Health Risks and

Safety Risks (62 FR 19885, April 23,

1997). This action does not involve any

technical standards that would require

Agency consideration of voluntary

consensus standards pursuant to section

12(d) of the National Technology

Transfer and Advancement Act of 1995

(NTTAA), Public Law 104–113, section

12(d) (15 U.S.C. 272 note). Since

tolerances and exemptions that are

established on the basis of a FIFRA

section 18 petition under FFDCA

section 408, such as the tolerance in this

final rule, do not require the issuance of

a proposed rule, the requirements of the

Regulatory Flexibility Act (RFA) (5

U.S.C. 601 et seq.) do not apply. In

addition, the Agency has determined

that this action will not have a

substantial direct effect on States, on the

relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government, as specified in

Executive Order 13132, entitled

Federalism (64 FR 43255, August 10,

1999). Executive Order 13132 requires

EPA to develop an accountable process

to ensure ‘‘meaningful and timely input

by State and local officials in the

development of regulatory policies that

have federalism implications.’’ ‘‘Policies

that have federalism implications’’ is

defined in the Executive Order to

include regulations that have

‘‘substantial direct effects on the States,

on the relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government.’’ This final rule

directly regulates growers, food

processors, food handlers and food

retailers, not States. This action does not

alter the relationships or distribution of

power and responsibilities established

by Congress in the preemption

provisions of FFDCA section 408(n)(4).

V. Submission to Congress and the

Comptroller General

The Congressional Review Act, 5

U.S.C. 801 et seq., as added by the Small

Business Regulatory Enforcement

Fairness Act of 1996, generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the Comptroller General

of the United States. EPA will submit a

report containing this rule and other

required information to the U.S. Senate,

the U.S. House of Representatives, and

the Comptroller General of the United

States prior to publication of this final

rule in the Federal Register. This final

rule is not a ‘‘major rule’’ as defined by

5 U.S.C. 804(2).

List of Subjects in 40 CFR Part 180

Environmental protection,

Administrative practice and procedure,

Agricultural commodities, Pesticides

and pests, Reporting and recordkeeping

requirements.

Dated: April 12, 2000.

James Jones,

Director, Registration Division, Office of

Pesticide Programs.

Therefore, 40 CFR chapter I is

amended as follows:

PART 180—[AMENDED]

1. The authority citation for part 180

continues to read as follows:

Authority: 21 U.S.C. 321(q), 346(a) and

371.

§ 180.242 [Amended]

2. In § 180.242, amend the entry for

‘‘Lentils’’ in the table under paragraph

(b) by revising ‘‘4/30/00’’ to read ‘‘12/

31/01’’.

[FR Doc. 00–10041 Filed 4–25–00; 8:45 am]

BILLING CODE 6560–50–F

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1001, 1003, 1005 and

1006

RIN 0991–AA90

Health Care Programs: Fraud and

Abuse; Revised OIG Civil Money

Penalties Resulting From Public Law

104–191

AGENCY: Office of Inspector General

(OIG), HHS.

ACTION: Final rule.

SUMMARY: This final rule revises the

OIG’s civil money penalty (CMP)

authorities, in conjunction with new

and revised provisions set forth in the

Health Insurance Portability and

Accountability Act of 1996. Among

other provisions, this final rulemaking

codifies new CMPs for excluded

individuals retaining ownership or

control interest in an entity; upcoding

and claims for medically unnecessary

services; offering inducements to

beneficiaries; and false certification of

eligibility for home health services. This

rule also codifies a number of technical

corrections to the regulations governing

OIG’s sanction authorities.

EFFECTIVE DATE: These regulations are

effective on April 26, 2000.

FOR FURTHER INFORMATION CONTACT: Joel

Schaer, (202) 619–0089 OIG Regulations

Officer.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Health Insurance Portability and

Accountability Act of 1996

The Health Insurance Portability and

Accountability Act (HIPAA) of 1996,

Public Law 104–191, included a number

of changes to the OIG’s authorities

intended to curtail and eliminate health

care fraud and abuse. With regard to the

sanction authorities, HIPAA expanded

the scope of certain basic fraud

authorities by extending the application

of current CMP provisions beyond those

programs funded by the Department of

Health and Human Services (the

Department) to include all Federal

health care programs. The HIPAA also

significantly revised and strengthened

the OIG’s existing CMP authorities

pertaining to violations under Medicare

and the State health care programs.

Among other provisions related to the

OIG’s CMP authority, HIPAA (1)

increased the maximum penalty

amounts per false claim from $2,000 to

$10,000; (2) allowed CMPs to be

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24401

1Section 232 of HIPAA, setting forth the CMP for

false certification of Medicare home health benefit

eligibility, applies to certifications made on or after

August 21, 1996, the enactment date of the statute.

2 In HIPAA, this exception was originally

contained in the general waiver of co-payment

exception. This provision has since been made a

separate exception under section 4331(e) of the

Balanced Budget Act of 1997, and has been further

modified by the Omnibus Consolidated and

Emergency Supplemental Appropriations Act for

Fiscal Year 1999 (Pub. L. 105–277) to expand this

exception from co-payment waivers protected by an

anti-kickback statute safe harbor to any payment

practice that meets an anti-kickback statute safe

harbor.

assessed for incorrect coding, medically

unnecessary services, and offering

remuneration to beneficiaries to

influence their choice of a particular

provider or supplier; and (3) established

a new CMP for physicians’ false

certification of eligibility for Medicarecovered home health services.

While the majority of these revisions

to the OIG’s CMP authorities under

section 1128A of the Social Security Act

(the Act) were effective on January 1,

1997,1 these provisions did allow the

Department some policy discretion in

their implementation. As a result, we

developed proposed rulemaking to

address these HIPAA CMP provisions,

along with other technical revisions and

conforming policy changes to the OIG’s

sanction authorities codified in 42 CFR

parts 1003, 1005 and 1006.

B. Summary of the Proposed Rule

On March 25, 1998, the Department

published proposed rulemaking (63 FR

14393) addressing new and revised CMP

authorities in accordance with HIPAA,

in addition to a number of proposed

technical and corrections to 42 CFR

parts 1003, 1005 and 1006. Set forth

below is a brief summary of the

regulatory provisions contained in that

proposed rule—

1. Extension of Current CMP Authority

Section 231(a) of HIPAA expanded

the scope of the CMP authorities beyond

programs funded by the Department, to

include application to other Federal

agencies’ health care programs. The

statute may now be used to address

violations involving other Federal

health care programs such as Tricare,

Veterans Affairs, and the Public Health

Service programs which are involved

with the funding or provision of health

care items and services (42 U.S.C.

1320a–7b(f)). We proposed amending

the basis and purpose sections of 42

CFR part 1003, as well as the current

definitions for the terms ‘‘claim’’ and

‘‘exclusion’’ in § 1003.101, to extend

CMP coverage to other applicable

Federal health care programs.

2. Increased CMP Amounts

In accordance with section 231(c) of

HIPAA, we proposed amending

§ 1003.103(a) of the regulations to

increase the CMP maximum amount

from $2,000 to $10,000 per false item or

service or prohibited practice, and

amending § 1003.104 to raise the

amount of authorized assessments from

double to triple the amount claimed.

These amounts are consistent with the

penalty and damage amounts contained

in the False Claims Act (FCA) (31 U.S.C.

3729(b)).

3. CMPs for Excluded Individuals

Retaining Ownership or Control Interest

in a Participating Entity

A major loophole existed under the

law prior to HIPAA whereby an

excluded individual was able, without

sanction, to continue to gain benefits

from the Medicare and the State health

care programs by retaining a direct or

indirect ownership or control interest in

a health care entity that participates in

Medicare or any State health care

program. Revised OIG regulations, in

accordance with section 231(b) of

HIPAA, were proposed to codify a new

CMP designed to deter such affiliations.

Specifically, the rule proposed a new

§ 1003.102(b)(11) (now being designated

as (b)(12)), and other conforming

revisions, to establish a CMP of up to

$10,000 for each day that an excluded

individual retains a prohibited

ownership or control interest in an

entity participating in Medicare or any

State health care program. The penalty

provision would apply to excluded

individuals, having an ownership or

control interest in a participating entity,

who know, or should know, of the

action constituting the basis for the

exclusion. It also applies to any

excluded persons who remain as

officers or managing employees of a

participating entity.

4. CMPs for Upcoding Claims and

Medically Unnecessary Services

While the OIG has historically viewed

upcoding medical procedure codes and

the submission of claims for medically

unnecessary services as warranting the

imposition of a CMP, section 231(e) of

HIPAA expressly identifies a ‘‘pattern’’

of these practices as violations of the

CMP statute. The regulations proposed

revising § 1003.102(a)(1) to reflect that a

CMP and assessment may be imposed

for submitting, or causing to be

submitted, claims that the person knows

or should know will result in greater

payment than the code applicable to the

item or service actually provided. A

new § 1003.102(a)(6) was also proposed

for purposes of imposing CMPs and

assessments for submitting or causing to

be submitted claims for medically

unnecessary items or services.

5. CMPs for Offering Inducements to

Beneficiaries

A new § 1003.102(b)(12)(now being

designated as (b)(13)), and conforming

changes, were proposed in accordance

with section 231(h) of HIPAA to address

the new CMP authority imposing

sanctions against individuals or entities

that offer remuneration to a program

beneficiary that they know, or should

know, will influence the beneficiary’s

decision to order or receive items or

services from a particular provider,

practitioner or supplier reimbursable by

Medicare or the State health care

programs. Under the statute and the

proposed regulations, remuneration

would include both the waiver of all or

part of deductible and coinsurance

amounts, and the transfer of items and

services for free or for other than fair

market value.

Congress enacted statutory

exemptions to the definition of

‘‘remuneration’’ under this CMP

provision to encompass deductible and

coinsurance waivers that meet certain

conditions, certain differentials in

coinsurance amounts as part of a benefit

plan design, and incentives to promote

the delivery of preventive care.

Specifically, Congress exempted:

• Waivers of coinsurance and

deductible amounts that are not

advertised or solicited, are not routine,

and are made either after a good faith,

individualized determination of

financial need or after reasonable

collection efforts have failed;

• Any waiver of coinsurance or

deductible amounts made in accordance

with a ‘‘safe harbor’’ to the anti-kickback

statute or other regulations issued by the

Secretary; 2

• Differentials in coinsurance and

deductible amounts as part of a benefit

plan design where the differentials have

been disclosed in writing to all

beneficiaries, third party payers, and

providers, to whom claims are

presented and where the differentials

meet standards set forth in regulations

issued by the Secretary; and

• Incentives given to individuals to

promote the delivery of preventive care,

as determined by the Secretary.

We proposed defining

‘‘remuneration’’ consistent with the

above provisions.

6. CMPs for the False Certification of

Home Health Services Eligibility

The regulations proposed the addition

of § 1003.102(b)(13) (now being

24402 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

designated as (b)(14)), and conforming

changes, to address the new CMP

authority set forth in section 232 of

HIPAA imposing sanctions against a

physician who falsely certifies the

necessity of Medicare-covered home

health services when he or she knows

that such care is not necessary. Under

this authority and the proposed rule, the

physician could be subject to a CMP of

the greater of $5,000 or 3 times the

amount of Medicare payments made for

the home health services.

7. Clarification of the CMP Knowledge

Standard

Section 1128A of the Act and the

implementing OIG regulations have

applied a ‘‘knows or should know’’

standard of proof with regard to false

claims and other prohibited acts. The

‘‘should know’’ standard historically

placed a duty on providers to use

reasonable diligence to ensure that

claims submitted to the government are

true and accurate. However, to make the

knowledge standard consistent with the

FCA, section 231(d) of HIPAA clarified

the applicable standard of proof. Under

the proposed revised definition for

‘‘should know or should have known’’

in § 1003.101, the proposed regulations

indicated that individuals and entities

would only be liable under the CMP

authority if they acted with actual

knowledge, or with reckless disregard or

deliberate ignorance of information

supporting the truth or falsity of a claim

or other fraud. No specific intent to

defraud would be required. The rule

also proposed adding a new

§ 1003.102(e) to clarify, in accordance

with the legislative history of HIPAA,

that the term ‘‘knowingly’’ will be

applied to the presentment of a claim

under the CMP statute consistent with

the standard of knowledge set forth in

the FCA.

8. Other Technical Corrections

In addition to a number of conforming

changes to the CMP provisions in part

1003 required by HIPAA, the

regulations proposed to revise certain

procedures applicable to the appeal of

OIG exclusions, CMPs and assessments

in 42 CFR part 1005. These included—

• Clarification of the scope of an

administrative law judge’s (ALJ)

authority to issue subpoenas at a

hearing in § 1005.9(b) to indicate that

the ALJ is authorized to issue a

subpoena to any individual to attend the

hearing and to provide documentary

evidence at or prior to that hearing. (The

existing language has been

misconstrued in some situations as only

authorizing the production of

documents at the hearing itself.)

• A proposed revision to § 1005.7(e)

to provide for motions to compel

discovery once a request for production

of documents has been received. The

proposed revision was intended to

clarify that a party has a right to object

to discovery requests without requiring

that party to file for a protective order,

leaving it to the party seeking the

documents to justify why access is

appropriate in a motion to compel

discovery.

• A revision to § 1005.21(d) was

proposed to allow for interlocutory

appeal to the Departmental Appeals

Board (DAB) of the timeliness of the

filing of a hearing request. The proposed

rule indicated that without this

proposed change, a final DAB ruling

that a hearing request was untimely

filed can be meaningless, since the

hearing has often taken place before

appeal of an ALJ’s ruling on timeliness

can occur.

II. Response to Comments and

Summary of Revisions

In response to the notice of proposed

rulemaking, the OIG received a total of

31 timely-filed public comments from

various health care providers and

organizations, professional medical

societies and associations, and other

interested parties. The comments

included both broad concerns about the

issuance of these CMP regulations, and

more detailed comments on specific

aspects of the HIPAA CMP provisions.

Set forth below is a synopsis of the

various comments and

recommendations received, our

response to those concerns, and a

summary of the specific revisions and

clarifications being made to the

regulations at 42 CFR parts 1003, 1005

and 1006 as a result of the proposed

HIPAA CMP rule and the public

comments.

General Comments

Comment: One commenter raised

concern over how the Government’s

anti-fraud activities under this new rule

would be coordinated with private

sector efforts. The commenter believed

that increased enforcement efforts in the

public sector might cause fraud

perpetrators to shift their illegal

activities to programs not covered by

these regulations, such as the Federal

Employees Health Benefits Program

(FEHBP), causing these programs to lose

money. The commenter believed that

there appeared to be little opportunity

for private health insurance plans to

receive restitution for their losses.

Response: The OIG is equally

concerned about the spread of potential

fraud in all health care programs not

covered by these regulations, such as

the FEHBP. The statute, however,

created an exception for that program

under the CMP provisions, excluding

the FEHBP from the definition of a

Federal health care program. Overall,

we believe the OIG’s anti-fraud efforts

should serve to identify and sanction

those health care providers that are in

a position to defraud both the Federal

health care and private sector health

care programs.

Comment: In light of the fact that

CMPs can now reach $10,000 per claim,

one commenter urged the OIG, as well

as the Department of Justice, to review

and investigate preliminary findings

carefully before accusing a health care

provider of fraud and abuse.

Response: We understand and agree

with the commenter’s concerns with

regard to increased maximum CMP

amounts. The OIG has stressed, and will

continue to stress, the importance of

investigating specific allegations against

a provider thoroughly and completely

before taking any action.

Specific Comments

Section 1003.102(a)(1) and (a)(6),

Claims for Upcoding and for Medically

Unnecessary Services

Comment: Several commenters

expressed concern that physicians not

be prosecuted for honest coding

mistakes and legitimate differences of

opinion over medical necessity or the

use of appropriate billing codes.

Commenters suggested that failure to

document the medical basis for a claim

may be an oversight rather than proof of

a medically unnecessary claim. Other

commenters believed that the OIG needs

to clarify both that CMPs will not be

imposed before intent is established,

and that CMPs will only be imposed

commensurate with the harm to the

Federal Government and not as a

bargaining tool.

One organization urged the OIG, in

implementing this CMP authority, to

work with the medical profession to

educate physicians regarding proper

billing procedures, in order to minimize

potential fraud and abuse violations.

Still another commenter believed that

peer review should be mandatory before

a physician can be subject to a penalty

for upcoding or providing services

deemed to be not medically necessary.

This commenter believed that because

of the serious consequences associated

with improper coding, it is imperative

that judgment on the appropriateness of

these claims rest essentially with

physicians.

Response: Sanctions may only be

imposed against those who act in

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24403

‘‘deliberate ignorance’’ or with ‘‘reckless

disregard’’ of the truth or falsity of

information specified on claims. A

physician whose documentation fails to

support the level of service submitted

for a service code would not be subject

to CMP liability unless he or she

specifically acted in ‘‘deliberate

ignorance’’ or ‘‘reckless disregard’’ of

the truth or falsity of the claim. As a

result, the OIG would not consider as a

basis for CMP action the submitting of

a claim for a service found upon review

to be medically unnecessary, without

evidence that the issue of medical

necessity was deliberately ignored or

recklessly disregarded. Honest or

inadvertent billing or coding mistakes

will not be the basis for the imposition

of CMPs. In addition, CMPs may be

imposed only where a ‘‘pattern’’ of

improper claims with upcoded

procedures or unnecessary services

exists. Sanctions will be imposed only

in appropriate cases where a ‘‘pattern’’

of upcoding or billing for unnecessary

services has been identified.

Comment: One commenter believed

the proposed § 1003.102(a)(6) raised a

number of issues for laboratories since

laboratories do not determine medical

necessity or actually order laboratory

services. The commenter believed that it

would be inappropriate for the OIG to

allege this provision was violated if the

laboratory merely submitted a claim for

services with an ICD–9 code that the

carrier did not recognize as

demonstrating the medical necessity of

the services. The commenter cited

several reasons why the laboratory

might submit such claims. Specifically,

the commenter indicated that the

beneficiary has a right to ask that the

claim be submitted to obtain the denial,

and that laboratories often disagree with

carriers’ coding determinations and may

submit a claim to obtain the denial so

that it can pursue further appeal rights.

As a result, the commenter believed that

the regulations should emphasize that

the mere submission of a claim with an

ICD–9 code that is not acceptable to the

carrier should not constitute a violation.

Response: Consistent with the statute

and the legislative history, the OIG does

not intend this penalty provision to

apply when providers submit claims

that they know will not be considered

reimbursable as medically necessary,

but that are required to be submitted

because their patients need to document

that the Medicare program will not

cover the service. However, as

explained in the legislative history to

this statutory provision, in submitting

such claims providers must explicitly

notify Medicare carriers that a claim is

being submitted not for payment, but

solely for the purpose of seeking

reimbursement from secondary payers.

Comment: Proposed § 1003.106(a)(6)

provided that CMPs may be imposed if

a claim is submitted for ‘‘an item or

service that is medically unnecessary,

and which is part of a pattern or

practice of such claims.’’ Several

commenters indicated that the proposed

language in § 1003.102(a)(6), regarding

the submission of claims for services

that are medically unnecessary, should

be amended to include the ‘‘knows or

should know’’ standard found in the

statute and in the proposed revision to

§ 1003.102(a)(1). Commenters believed

that absence of a ‘‘knows or should

know’’ standard for all errors pertaining

to medical necessity will place the OIG

in the position of subjecting legitimate

medical decisions to CMPs, and

believed that the ‘‘know or should

know’’ language is critical to ensuring

that physicians are not prosecuted for

inadvertent billing mistakes or

legitimate disagreements over medical

necessity of items or services. Another

commenter also stated that the

conjunctive re-phrasing of

§ 1003.102(a)(6) of the proposed

regulation (an item or service that is

medically unnecessary and part of a

pattern or practice) could alter the

meaning of the statutory language.

In addition, one commenting

organization stated that the language in

proposed § 1003.102(a)(6) was identical

to section 231(c)(4) of HIPAA, except

that the words ‘‘or practice’’ were not

included in the HIPAA language. The

commenter indicated that HIPAA

requires an actual pattern of medically

unnecessary claims as a prerequisite to

CMPs, while the regulation, as drafted,

would allow CMPs for a single claim.

Response: The knowledge standard in

the statute requires that providers

assume responsibility for appropriate

billing of their services. It is not our

intent, however, to subject physicians to

penalties for legitimate disagreements

over the medical necessity of items and

services, or for honest mistakes or

errors. The OIG intends to impose CMPs

only after establishing that a provider

knew that a billed item or service was

not medically necessary, or that he or

she deliberately ignored or recklessly

disregarded such information. In

response to comments, we are revising

§ 1003.102(a)(6) by adding the words

‘‘knows or should know’’ to read as

follows: ‘‘An item or service that a

person knows or should know is

medically unnecessary, and which is

part of a pattern of such claims’’

(emphasis added).

We are also amending the proposed

§ 1003.102(a)(6) by deleting the words

‘‘or practice’’ from this section in order

to be consistent with language set forth

in HIPAA.

Section 1003.102(b)(12), Retaining

Ownership or Control Interest While

Excluded

Comment: Two commenters believed

that the regulations do not adequately

allow for the timely divestiture of an

excluded person’s interest in a health

care entity. One commenter indicated,

for example, that continuing care of

patients might be harmed by the failure

to allow an excluded individual to

divest his or her interest in a health care

entity over a period of time. A second

commenter indicated that, given the

complexity of business arrangements, it

may not be possible to immediately

divest an ownership or controlling

interest, and that a CMP should not be

imposed until the individual has been

given adequate time to dispose of his or

her interest in the entity.

Response: The use of this CMP

authority remains discretionary, with

the OIG taking into full consideration

the effect on program beneficiaries of

any sanctions action. The OIG would

refrain from imposing an exclusion

normally if it believed that such action

would jeopardize patient care. However,

where we have deemed a particular

provider unfit to participate in the

Medicare and other Federal health care

programs, and to provide items or

services for which these programs will

pay (by virtue of a program exclusion),

we believe that, ordinarily, immediate

exclusion will protect, rather than harm,

program beneficiaries. With respect to

allowing a sufficient time period to

permit excluded individuals to divest

themselves of an ownership or

controlling interest in a health care

entity once excluded, the OIG is

cognizant of the complex nature of some

business arrangements involving

ownership or controlling interests in

health care entities, and will remain

flexible in its imposition of a CMP if it

receives adequate assurances from the

excluded individual that he or she is

taking concrete steps to dispose of an

ownership or controlling interest in a

timely manner.

Section 1003.102(b)(13), Offering

Inducements to Program Beneficiaries

a. Waivers of Coinsurance and

Deductibles

Congress exempted from the

prohibition on persons offering

inducements to beneficiaries certain

waivers of Federal health care program

copayments that are not advertised, that

are not routine, and that are either made

24404 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

after an individualized determination of

financial need or the failure of

reasonable collection efforts. Congress

also exempted copayment waivers that

are exempt from the anti-kickback

statute in accordance with the safe

harbor or other regulations.

Comment: While supporting the

exception for waivers of coinsurance

and deductible amounts in cases where

the beneficiary is indigent or reasonable

collection efforts have failed, several

commenters requested guidance as to

what constitutes ‘‘financial need’’ and

‘‘reasonable collection efforts.’’ At a

minimum, commenters asked that we

incorporate the text of the statutory

definition of remuneration into the

regulations, instead of merely

incorporating it by reference.

Response: We agree with the

commenters and are incorporating the

language of the statutory definition of

‘‘remuneration’’ in the final regulations

in full text form. We are not specifying

any particular method of determining

financial need because we believe what

constitutes ‘‘financial need’’ varies

depending on the circumstances. What

is important is that providers make

determinations of financial need on a

good faith, individualized, case-by-case

basis in accordance with a reasonable

set of income guidelines uniformly

applied in all cases. The guidelines

should be based on objective criteria

and appropriate for the applicable

locality. We do not believe that it is

appropriate to apply inflated income

guidelines that result in waivers of

copayments for persons not in genuine

financial need. ‘‘Reasonable collection

efforts’’ are those efforts that a

reasonable provider would undertake to

collect amounts owed for items and

services provided to patients.

If the patient has an insurer providing

secondary coverage that refuses to pay

a copayment amount, the provider

should attempt to collect from the

patient, unless the provider has

contractually agreed with the insurer

not to balance bill the patient. In that

case, the insurer remains liable for the

copayment.

Comment: One commenter also

sought clarification as to whether

section 231(h)(6)(B) of HIPAA, which

exempts any ‘‘permissible waiver’’ as

specified in an anti-kickback statute safe

harbor, applies to items or services

covered by a health plan that are

protected from anti-kickback liability

under the safe harbor for reduced costsharing amounts at § 1001.952(l).

Response: In accordance with an

amendment contained in section

5201(a) of the Omnibus Consolidated

and Emergency Supplemental

Appropriations Act of 1999, Public Law

105–277, prohibited remuneration

under section 231(h) of HIPAA does not

include ‘‘any permissible practice

described in any subparagraph of

section 1128B(b)(3) of the Act or in

regulations issued by the Secretary’’

(with the exception of certain premium

payment arrangements described in the

statute). In other words, payment

practices that are protected by a safe

harbor to the anti-kickback statute are

also protected from sanction under

section 231(h) of HIPAA.

b. Differentials in Coinsurance and

Deductibles as Part of a Benefits Plan

Design

Congress exempted from the

definition of remuneration differentials

in coinsurance and deductible amounts

as part of a benefits plan design where

the differentials are disclosed to

beneficiaries, providers and third-party

payers, and otherwise conform to

standards promulgated by the Secretary.

We stated in the preamble to the

proposed rule that we do not interpret

this exemption as authorizing any

benefits plan design that directly or

indirectly operates to waive deductible

or coinsurance amounts required by any

Federal health care program. Thus, for

example, a private plan’s ‘‘coordination

of benefits’’ provision may not relieve a

provider or a plan that is secondary to

Medicare from its respective obligations

to bill and pay Medicare copayments.

We solicited comments regarding how

to best define differentials in

coinsurance and deductibles that are

part of a plan design.

Comment: Commenters expressed

three major concerns in response to our

statement that the exception for plan

coinsurance differentials did not

authorize any benefit plan design that

directly or indirectly operates to waive

deductible or coinsurance amounts

required by any Federal health care

program. The first concern expressed by

several physicians’ organizations is that

the practice is not uncommon and that

many health care plans require

physicians to enter into contracts that

limit payment for services to the plan’s

specified fee schedule (which is usually

lower than Medicare’s fee schedule) and

prohibit physicians from billing

beneficiaries for any amounts. These

plans include enrollees who are

Medicare beneficiaries for whom

Medicare is the primary payer (on a feefor-service basis) and the plan is the

secondary payer. The commenters

indicated the following sequence of

events for physicians: (i) The physician

bills Medicare for a service at the

physician’s ‘‘actual charge’’ and is paid

80 percent of the lower of the charge or

the Medicare fee schedule amount; (ii)

the physician bills the secondary plan

for the 20 percent Medicare copayment;

(iii) the secondary plan denies payment

for all or part of the copayment on the

ground that the physician has already

received full payment under the

contract, because the amount paid by

Medicare (80 percent of the lower of the

charge or Medicare fee schedule

amount) is more than the applicable

amount in the plan’s fee schedule; and

(iv) the physician, barred from billing

the beneficiary for any amounts, must

forego the unpaid copayment amount.

These commenters stated that the effect

of this is to waive routinely the

Medicare copayment, since neither the

secondary plan nor the beneficiary has

paid it.

The second major concern that was

expressed by the same physician groups

is that, because physicians join multiple

managed care plans and agree to

different discounted rates with each

one, often physicians do not know the

plans’ reimbursement rates. They

indicated that, in some cases, plans do

not provide fee schedules to their

physicians, and that plan payment

schedules are often changed unilaterally

and retroactively, sometimes without

notification to participating physicians.

Moreover, the commenters stated that

the exact amount of plan reimbursement

is often contingent on bonus and

withhold pools.

The third concern expressed by

commenters was that secondary insurer

contracts that operate to waive Medicare

copayments do not implicate the statute,

since section 231(h) of HIPAA only

precludes remuneration that is likely to

influence the choice of a particular

provider. In situations where all

providers participating in a particular

plan are equally restricted from billing

beneficiaries for copayments, the

commenters believed that the waiver

will not influence a patient’s choice of

provider. Alternatively, some

commenters urged that the definition of

‘‘remuneration’’ as used in this CMP

provision exclude routine waivers of

coinsurance where a secondary insurer

contract prohibits physicians from

billing either the plan or the beneficiary

for the full Medicare copayment

amount. Similarly, some commenters

requested that a section 231(h) ‘‘safe

harbor’’ regulation be established for

physician waivers of copayments in

circumstances where Medicare

requirements conflict with physician

contractual arrangements with

secondary insurers, arguing that in these

circumstances physicians do make

reasonable collection efforts and

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24405

3See, for example, 42 CFR 1001.952(k)(1)(iii)

(hospital waiver of inpatient deductible or

coinsurance not protected by safe harbor regulation

if part of an agreement between hospital and third

party payer, including a health plan) and OIG

Advisory Opinion 98–5 (April 17, 1998).

therefore fall within the exemption for

waivers of coinsurance. Finally, some

other commenters advocated a contrary

view; they suggested that the regulations

should prohibit the contractual waiver

of copayments and require that all

secondary carriers (including Medigap

insurers) cover the full Medicare

copayment and deductible amounts.

Response: We agree that differentials

in copayments or coinsurance amounts

paid out of pocket by beneficiaries as

part of plan designs that are properly

disclosed to beneficiaries, providers and

third party payers are not remuneration

within the meaning of section 231(h) of

HIPAA and do not violate the

prohibition in section 231(h). However,

as explained below, this practice

implicates other Federal laws including,

most notably, the anti-kickback statute.

The Department is actively developing a

safe harbor for waivers of coinsurance

incidental to fee schedules for employer

plans in which ten percent or less of the

enrollees have primary coverage under

Medicare.

Our statement in the preamble to the

proposed regulation that the benefits

plan design exception does not

authorize any plan design that directly

or indirectly operates to waive statutory

coinsurance obligations for any Federal

health care program was somewhat

misconstrued by the commenters. Our

original statement was only intended to

make clear that plan designs that

operate to waive Federal health care

program statutory coinsurance

obligations so that they are not satisfied

by anyone may implicate other Federal

laws, including the anti-kickback

statute. Since the inception of the

Medicare program and continuing to the

present, the Social Security Act has

imposed cost-sharing obligations on

program beneficiaries, including

beneficiaries enrolled in Medicare

HMOs. However, most of these

coinsurance obligations are imposed in

conjunction with Medicare fee-forservice reimbursement. These

coinsurance requirements help cover

the total cost of health care, and they

control overutilization by encouraging

beneficiaries to be prudent purchasers.

For most benefits covered under the Part

B program, Medicare pays 80 percent of

the lower of the physician’s actual

charge or the Medicare fee schedule.

Providers are legally obligated to make

reasonable efforts to collect the

remaining 20 percent from the

beneficiary. Part A also has certain

coinsurance and deductible

requirements. Private contracts cannot

waive or defeat these Federal statutory

obligations.

Supplemental Medicare insurance is

very important to many program

beneficiaries. Approximately ninety

percent of all beneficiaries have some

form of supplemental Medicare

insurance coverage. Approximately

thirty percent of beneficiaries purchase

separate Medigap insurance which can

cost $100 per month or more without

any prescription drug benefit. Another

15 percent cover the coinsurance

through joining Medicare HMOs; in

these plans, the actuarial cost of the

coinsurance obligation is covered either

by the beneficiary’s copayments and

premiums or by the plan in lieu of

returning profits to the Medicare

program. Approximately 12 percent of

beneficiaries have Medicaid coverage.

Approximately 30 percent of

beneficiaries have supplemental

coverage from their former employers.

Generally, Medicare is the primary

insurer and the employer-sponsored

plan is secondary. For retirees in these

plans, Medicare pays the plan’s

providers on a fee-for-service basis. The

comments we received indicate that an

increasing number of these plans are

utilizing contracts with their

participating providers that purport to

release the plans and their enrollees

from some or all of the applicable

Medicare coinsurance obligations. This

result is achieved through a

combination of: (i) A fee schedule that

is below the Medicare fee schedule; (ii)

a prohibition on a provider billing

enrollees more than a token copayment;

and (iii) a ‘‘coordination of benefits’’

provision that obligates the plan to pay

providers only to the extent that

payments from the primary insurer

(including Medicare) are less than the

contract fee schedule.

For example, an employer establishes

a retiree plan that requires no

copayments by the retirees if the retirees

utilize certain ‘‘preferred providers.’’

The contracts between the employer (or

more likely a third party administrator)

and the providers establish a fee of $80

for a procedure for which Medicare will

allow $100; a ‘‘coordination of benefits’’

clause that limits plan liability if the

provider has received the contract fee

(i.e., $80) from another insurer; and a

prohibition on balance billing enrollees.

The net result is that Medicare pays the

$80 (80% of $100); the plan refuses to

pay any copayment because the

provider has already received the $80

plan contract fee amount; and the

beneficiary pays nothing. In other

words, the employer plan receives a

substantial financial benefit equal to the

coinsurance obligations it does not pay.

The employer in this example is ‘‘free

riding’’ on the Medicare program. The

practice is unfair and inequitable to the

roughly 60 percent of Medicare

beneficiaries who must pay the

coinsurance obligations out of their own

pockets or purchase Medigap insurance

at considerable personal expense. It is

also unfair to beneficiaries in Medicare

HMOs, who must either pay the

coinsurance obligation through their

premiums or copayments or forgo other

desirable benefits, such as enhanced

prescription drug coverage, which an

HMO might have offered if it had not

applied its surplus profit to pay the

beneficiaries’ premiums. Simply stated,

liabilities imposed by Federal law

should not turn on happenstance of a

beneficiary’s employer benefit plan.

Routine waivers of Medicare

copayments and deductibles in

accordance with a contract between an

insurer and a plan also implicate the

anti-kickback statute. This practice

presents a significant risk of

overutilization of services and increased

program costs to Medicare. Since

neither plans nor beneficiaries pay for

services where the copayment is

waived, they have no incentive to

control costs or utilization. We have

repeatedly expressed our concern that

such agreements between providers and

health plans can result in kickbacks

from providers to health care plans in

exchange for Federal health care

program business.3

We recognize that the interplay

between Medicare and employeesponsored supplemental plans is

complex. As indicated above, the

Department is developing a safe harbor

for waivers of coinsurance incidental to

fee schedules that would protect

employer plans in which ten percent or

less of the plan enrollees have primary

coverage under Medicare.

Absent a safe harbor, plans that

prohibit participating physicians from

balance billing enrollees for whom

Medicare is the primary insurer are

responsible for those enrollees’

outstanding Medicare copayments.

Accordingly, to avoid receiving

prohibited remuneration, the secondary

plan must pay the Medicare copayment

in full if physicians bill Medicare an

amount higher than the plan’s fee

schedule amount. Medicare would pay

80 percent of the Medicare fee schedule

amount and the plan would pay the 20

percent copayment, resulting in

physicians receiving 100 percent of the

Medicare fee schedule amount.

24406 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

Alternatively, the physicians must bill

Medicare the lower amount they agreed

to accept from the plan. For example, if

the Medicare fee schedule amount for a

given service is $100 and the plan fee

schedule for the service is $80, the

physician would submit a claim to

Medicare for $80, receive $64 from

Medicare (80 percent of $80), and the

secondary plan would pay $16 (the

twenty percent copayment obligation).

We understand that physicians

currently may have difficulty in

identifying the payment amount they

will receive under a particular contract.

However, that is an issue between them

and the plans and can be addressed by

developing with a plan a fixed fee

schedule for plan participants that have

primary coverage under Medicare. If a

plan is denying payment on the ground

that the provider has already received

the full amount the plan is obligated to

pay, the plan must necessarily know

how much it is obligated to pay.

In sum, properly disclosed benefit

plan designs that utilize differentials in

coinsurance and deductible amounts

paid by an enrollee are not

remuneration within the meaning of

section 231(h) of HIPAA. However,

when such differentials are coupled

with other provisions to achieve a

waiver of Medicare coinsurance

obligations, they implicate other Federal

laws, including the anti-kickback

statute.

Comment: One commenter requested

guidance with regard to a physician’s

obligation to seek payment from a

beneficiary when the beneficiary’s

health plan capitates payment to the

physician, and the physician has been

paid a capitation for the beneficiary.

Response: From Medicare’s

perspective, if the beneficiary is a feefor-service patient, the physician is

obligated to collect the full amount of

the Medicare coinsurance, unless a

waiver of the copayment would comply

with the requirements for the

exemptions under section 231(h) of

HIPAA for waivers of coinsurance and

deductibles. Where the capitation

amount has been actuarially determined

to equate with the expected copayment,

no further payment amount would be

required.

Comment: Two commenters believed

that the policy position taken by the

OIG on physician billing of copayments

was an attempt to use the fraud and

abuse laws to effectuate a ‘‘most favored

nation’’ Medicare payment policy (for

which there is no statutory authority),

requiring physicians to limit their

Medicare fees to levels established by

private payers. One commenter stated

that section 1848 of the Act explicitly

exempts the Medicare physician fee

schedule from the comparability rules

that are applicable to many other

services under Part B of the Medicare

program.

Response: We do not believe that

anything in these regulations requires

physicians to limit their Medicare fees

to private payer levels. However, it

should be noted that section

1128(b)(6)(a) of the Act prohibits

charges that are ‘‘substantially in

excess’’ of a provider’s ‘‘usual charges.’’

Therefore, provider charges to Medicare

should be comparable (and not

‘‘substantially in excess’’) of charges to

private payers. In circumstances where

plans and providers contract so as to

prohibit physicians from seeking

payment of coinsurance from Medicare

beneficiaries and where plans decline to

pay the coinsurance on behalf of

beneficiaries, it is the plan and

physicians that impose the lower fee

amount for the plan’s Medicare-covered

members.

Comment: Several commenters asked

that we clarify that this CMP provision

does not affect the ability of physicians

to be reimbursed for beneficiary

copayments and deductibles through

Medigap insurance.

Response: As discussed above, the

exemption for differentials in

coinsurance amounts that are part of a

plan design includes arrangements

where a beneficiary’s copayments are

paid by a secondary insurer, provided

there is proper disclosure as required by

the statute. Our main concern is with

situations where nobody is obligated to

pay the copayment amounts for

beneficiaries for whom Federal health

care payment is made on a fee-forservice basis (as is the case for many

retirees in employer plans). In those

circumstances, there is no one with an

economic interest in controlling

utilization of reimbursable services. We

caution, however, that a secondary

insurer’s refusal to pay a claim for a

copayment amount does not obviate the

physician’s obligation to engage in

reasonable efforts to collect the

copayment, including reasonable efforts

to collect directly from the beneficiary

in circumstances in which there is no

contractual prohibition on billing

beneficiaries.

Comment: One commenter questioned

the applicability of the differentials

exemption in the context of Medicare

risk- and cost-based managed care

contractors, who are permitted by HCFA

to waive coinsurance and deductibles

and whose waivers are exempt from

section 231(h) of HIPAA by virtue of the

anti-kickback safe harbor for reduced

cost-sharing amounts at § 1001.952(l).

Response: Differentials in coinsurance

and deductible amounts by Medicare

managed care contractors disclosed to,

and approved by, HCFA do not

implicate section 231(h) of HIPAA.

Comment: One commenter requested

that the Secretary exercise her

discretion under section 231(h)(6)(B) of

HIPAA to promulgate regulations

identifying other permissible copayment

waivers, including ‘‘professional

courtesy’’ waivers offered by physicians

to fellow physicians and family

members.

Response: At this time, we are not

identifying other permissible copayment

waivers, but reserve the right to do so

in the future. With respect to

‘‘professional courtesy,’’ we note that

traditionally the term means free care

(i.e., no charge is made to anyone), not

care provided on an ‘‘insurance only’’

basis. Generally, a routine practice by a

physician of waiving the entire fee for

services provided to other physicians

without regard to the potential for

referrals is not a problem under section

231(h) of HIPAA or the anti-kickback

statute. However, waivers of Medicare

or other Federal health care program

copayments for non-indigent persons,

whether physicians or any other groups,

are problematic.

Comment: One national association,

commenting on what constitutes

acceptable payment differentials under

benefits plans, proposed that it should

be acceptable for health plans to impose

one deductible for a supplier that

participates in the plan network and a

different deductible for a comparable

supplier that does not participate. The

association also recommended that

acceptable plan designs should include

copayment or deductible differentials

based on whether a beneficiary chooses

brand name or generic drugs, and

whether the beneficiary chooses drugs

that are (or are not) on the relevant drug

formulary. The association asserted that

such differentials have legitimate

economic bases and do not raise fraud

concerns. On the other hand, the

association asked that the OIG deem

unacceptable differentials that exist

between two suppliers that participate

equally in the plan, such as a

community pharmacy and a mail order

pharmacy.

Response: We believe that Congress

intended section 231(h) of HIPAA to be

broadly construed to permit plans

maximum flexibility to structure their

financial incentives within their

benefits packages, so long as the

resulting arrangement does not have the

effect of waiving payment of the

Medicare copayment to the provider

and is properly disclosed.

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24407

c. Applicability of Section 231(h) of

HIPAA to Managed Care Organizations

Comment: Several managed care

organizations and associations

commented that section 231(h) should

not apply to managed care

organizations. These commenters stated

that the OIG’s interpretation of the

statute set forth in the proposed rule

was expansive and inappropriate on the

grounds that the OIG’s interpretation

presumed that offering an incentive to

enroll in a particular health plan is

equivalent to offering an incentive to

use a particular provider. Although the

incentives may influence a beneficiary’s

choice of health plans, the commenters

stated that such choice is not the same

as influencing the choice of a particular

provider. Another commenter remarked

that limiting incentives provided by

managed care organizations for

Medicare and Medicaid enrollees was

unfair to those populations, as such

incentives are commonly offered in the

commercial managed care market to

those who are not Medicare or Medicaid

enrollees. In addition, the commenter

indicated that one effect of the

regulation would be to terminate certain

benefits that Medicare and Medicaid

enrollees of employee benefit plans had

been receiving before becoming eligible

for Medicare or Medicaid. One

commenter stated that even if managed

care plans were not covered by section

231(h) of HIPAA, the OIG would still

have the authority to oversee

inducements by managed care plans

under the anti-kickback statute.

Response: After having reviewed all

of the comments, we agree that health

plans that provide incentives to Federal

health care program beneficiaries to

enroll in a plan are not offering

remuneration to induce the enrollees to

use a particular provider, practitioner,

or supplier. Accordingly, we are

indicating that health plans that provide

incentives to enroll in a plan will not be

subject to sanctions under this

provision. However, incentives

provided by health plans to induce a

Federal health care program beneficiary

to use a particular provider,

practitioner, or supplier once the

beneficiary has enrolled in a plan are

within the purview of this provision

and are prohibited if they do not meet

an exception. For example, coinsurance

differentials for out-of-network

providers fall within the prohibition of

this statute, although they fit within the

exception for differentials of

coinsurance and deductibles, as long as

the other requirements of the exception

are met.

We remain concerned that health

plans may use inducements in a manner

that leads to enrollment of only healthy

beneficiaries, such as offering

memberships to exercise clubs for

purposes of patient screening. However,

such ‘‘cherry picking’’ is prohibited

under separate CMP provisions that are

unaffected by this provision.

Additionally, incentives provided by

health plans remain subject to the antikickback statute.

Many other comments were submitted

that raised issues with regard to health

plans. These comments were all

premised on inducements to enroll in

health plans falling within the

provisions of the statute (section 1857 of

the Act). Since such inducements will

not be subject to section 231(h), these

comments are no longer relevant.

d. Incentives To Promote the Delivery of

Preventive Care

The statutory exception for preventive

care, as defined in the proposed rule,

exempted from the definition of

remuneration incentives given to

individuals to promote the delivery of

preventive care. In the preamble to the

proposed rule, we indicated that such

incentives did not include the direct

rendering of preventive medical care.

Specifically, the exception included the

provision of incentives to individuals

eligible for benefits under a Federal

health care program where the

incentives are provided for the purpose

of inducing individuals to obtain

preventive care.

For purposes of the exception, we

proposed defining in § 1003.101 the

term ‘‘preventive care’’ to mean annual

physicals and care associated with, and

integral to, preventing the need for

treatment or diagnosis of a specific

illness, symptom, complaint or injury

(including, but not limited to, prenatal

and postnatal care, flu shots, and

immunizations for childhood diseases,

AIDS and HIV testing, mammograms,

pap smears and prostate cancer

screenings, eye examinations, treatment

for alcohol and drug addiction, and

treatment designed to prevent domestic

violence) where such care is provided or

directly supervised by the medical

provider that has provided the

incentive. In addition, the proposed rule

listed examples of permissible and

impermissible incentives under this

provision. Specifically, we stated that

impermissible incentives would include

items or services related to the

promotion of general health and fitness

(excluding annual physicals), such as

health club memberships,

nonprescription vitamins, nutritional

supplements and beauty aids. In

addition, cash and cash equivalents

would not be permissible incentives.

In the section discussing this

exception we also reiterated the

conference report statement that made

clear that section 231(h) does not

preclude the provision of items and

services of nominal value, including, for

example, refreshments, medical

literature, complimentary local

transportation services or participation

in free health fairs. We interpreted the

conference report to mean that the

provision of items and services to an

individual is not prohibited if the

aggregate value of such items and

services is nominal. However, it should

be recognized that the frequent

rendering of items or services to any

individual may preclude such items and

services from being classified as

nominal in value.

Comment: We received a number of

comments addressing the exception for

incentives to promote the delivery of

preventive care. Commenters expressed

concern about the proposed definition

of ‘‘preventive care.’’ Some commenters

found the proposed definition too

narrow and confusing. One commenter,

for example, questioned whether

pharmacy care is included in the

definition. Other commenters urged that

preventive care include care related to

general health and fitness and care

associated with acute and chronic

illnesses and diseases. Some

commenters urged us to adopt a broad

definition of preventive care, noting, for

example, that preventive care promotes

healthier patient populations, leads to

increased productivity by patients, and

results in lower health care costs.

Commenters also raised objections to

the proposed scope of permissible

incentives. These commenters requested

clarification of permissible and

impermissible incentives under the

preventive care exception. For example,

several commenters objected to the

statement that the direct rendering of

preventive medical care was not a

permissible incentive, urging that the

provision of free or discounted

preventive care should fall within the

exception for incentives to promote the

delivery of preventive care. Other

commenters noted that health plans

often give patients, particularly

Medicaid patients, gifts to encourage the

use of health care services, such as

diabetes management programs and

prenatal care. These incentives include,

among other things, coupons, gift

certificates, Thanksgiving turkeys,

amusement park tickets, books on caring

for babies, baby blankets and medicine

droppers. Several commenters noted

that the examples of permissible

24408 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

4U.S. Preventive Services Task Force, Guide to

Clinical Preventive Services, 2nd ed. Baltimore:

Williams and Wilkins, 1996.

incentives provided in the proposed

regulation were all non-medical items or

services and requested clarification that

permissible incentives could also

include incentives that were health care

related.

Some commenters suggested that lists

of permissible and impermissible

incentives be included in the text of the

regulation. Commenters also suggested

that the OIG add limiting factors to the

definition of permissible incentives,

such as a requirement that permissible

incentives be offered to all similarly

situated persons in a given community.

Further, commenters requested

clarification of the meaning of the term

‘‘cash equivalent’’ set forth in the

proposed regulation. Two commenters

suggested that a cash equivalent be

defined as ‘‘an item easily convertible to

cash.’’

Several commenters recommended

that incentives that promote general

health and fitness be allowed under the

preventive care exception. The

commenters argued that such incentives

encourage healthy behavior, even

though they are not tied to prevention

of a specific illness, complaint, or

injury. According to commenters,

permissible incentives that promote

general fitness should include items

such as health club memberships,

nonprescription vitamins, nutritional

supplements and beauty aids. Specific

examples offered by commenters

included discounts for completion of a

weight watchers program, a discounted

price for an American Red Cross CPR

course, and free YMCA visits for

postpartum mothers.

Response: Based on our review of the

public comments and after further

consideration of the statutory language

and public policy, we have concluded

that the regulations should be revised to

accord more fully with the statutory

language of section 231(h) and the scope

of coverage of preventive care by

existing Federal health care programs.

The following discussion addresses

three key elements of the preventive

care exception: The meaning of

‘‘preventive care,’’ the scope of

permissible incentives, and the

requirement that incentives promote the

delivery of preventive care. Some

additional issues are addressed in

separate comments and responses

below.

• Definition of Preventive Care

Our review of the public comments

disclosed considerable uncertainty

about the proposed definition of

preventive care for purposes of the

preventive care exception. Moreover, it

became apparent, based on an internal

review, that the proposed definition did

not comport with the scope of

preventive care services reimbursed by

Medicare or the State health care

programs. For these reasons, we

concluded that it would be preferable to

replace our proposed definition with an

objective, ‘‘bright line’’ rule.

Section 231(h) of HIPAA prohibits

remuneration paid to an eligible

beneficiary to influence him or her to

order or receive from a particular

provider, practitioner, or supplier any

item or service for which payment may

be made by Medicare or a State health

care program (as defined in 42 U.S.C.

1320a–7(h)). In other words, section

231(h) generally bars incentives paid to

influence the choice of provider,

practitioner, or supplier for covered

items or services.

We believe that in enacting the

preventive care exception, Congress

recognized that in some circumstances

it may be prudent to allow providers to

encourage beneficiaries to obtain

covered preventive care services

through payment of remuneration

linked to the delivery of such services.

Well-recognized benefits from

appropriate preventive care include,

among other things: Healthier patient

populations, lower health care costs,

and reduced morbidity and mortality.

For these reasons, it is especially

important that Medicare and Medicaid

beneficiaries access appropriate

preventive care services.

Accordingly, for purposes of the

preventive care exception to section

231(h) of HIPAA, we are interpreting

preventive care to mean preventive care

covered by Medicare or the State health

care program in the applicable State. We

have decided to define ‘‘preventive

care’’ as any service that is a prenatal

service or a post-natal well-baby visit or

is a specific clinical service described in

the then current U.S. Preventive

Services Task Force’s Guide to Clinical

Preventive Services.4 If such services are

covered by medicare or the applicable

State health care program, they fall

within the preventive care exception to

section 231(h) of HIPAA.

The Guide to Clinical Preventive

Services addresses preventive care

services provided to asymptomatic

individuals in a clinical setting,

classifying a number of preventive care

services into three broad categories:

screening tests, counseling

interventions, and immunizations and

chemoprophylaxis. For purposes of this

regulation, to be considered as

preventive care the service in question

must be described in the Guide (e.g.,

listed in the table of contents) to fall

within the exception. The mere fact that

a service involves screening, counseling,

or immunization will not suffice to

qualify the service for the preventive

care exception. The Guide also includes

measures of the effectiveness of

preventive care services when

performed on a routine basis. For

purposes of determining whether a

service is preventive under this

regulation, these effectiveness measures

will not be taken into account. By way

of example, the second edition of the

Guide includes ‘‘screening for visual

impairment’’ as a preventive care

service, but does not recommend certain

kinds of screening for all elderly

patients. Notwithstanding, any

screening for visual impairment, if

covered by the applicable Federal health

care program, is a preventive care

service within the meaning of the

exception.

For beneficiaries enrolled in Medicare

or Medicaid managed care programs,

covered preventive care services would

be those services included in the

managed care organization’s annual

contract with HCFA or a State health

care program.

Remuneration paid to influence the

selection of a provider for non-covered

preventive care services falls outside the

scope of the statutory proscription. We

are concerned, however, about

arrangements that purport to provide

patients with incentives to obtain noncovered items or services, where the

true purpose of the incentives is to

influence the selection of a provider for

covered services. We are similarly

concerned about arrangements where an

incentive to obtain covered preventive

care services is, in reality, an incentive

paid to patients to induce them to

obtain other covered services. Any tie

between provision of an exempt covered

preventive care service and a covered

service that is not preventive would

vitiate the preventive care exception

and might constitute a violation of

section 231(h), the Federal anti-kickback

statute, or other legal authorities.

• Scope of Permissible ‘‘Incentives’’

Many commenters sought clarification

regarding the meaning of ‘‘incentives’’

for purposes of the preventive care

exception. Because Congress intended

the scope of permissible incentives

under the preventive care exception to

be reasonably broad, except for the

limitations noted below, we are not

imposing any particular limitations on

the type or value of incentives that may

qualify under the preventive care

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24409

exception. Examples of permissible

incentives include health care items or

services (e.g., blood sugar screenings,

cholesterol tests, medic alert jewelry)

and non-health care items or services

(e.g., gift certificates, t-shirts, infant car

seats, Thanksgiving turkeys). Because of

the large variety of permissible

incentives, we decline to list

permissible incentives in the regulation.

A price reduction is likely to be an

effective means of encouraging

beneficiaries to obtain preventive care

services. Providers can offer a price

reduction for a covered service for

Medicare and Medicaid beneficiaries in

one of two ways: (1) By waiving all or

part of a copayment obligation, or (2) by

offering care as a free community

service and forgoing billing Medicare or

Medicaid, as well as beneficiaries. Thus,

notwithstanding our long-held and

continuing concern with routine

waivers of copayments, we are

permitting providers to waive

copayments as an incentive to promote

the delivery of preventive care. We

believe a copayment waiver in these

limited circumstances comports with

congressional intent in enacting the

preventive care exception.

We are imposing two limitations on

permissible incentives. First, we are

concerned that excessively valuable

incentives may be intended to induce a

beneficiary to select a provider for more

than just the covered preventive care

service. Therefore, we are providing that

the value of the incentive must bear a

reasonable relationship to the value of

the preventive care service (i.e., to the

service itself or to future health care

costs reasonably expected to be avoided

as a result of the preventive care). A

disproportionately large incentive gives

rise to an inference that at least part of

the incentive is being provided to

induce beneficiaries to obtain additional

services beyond the preventive care that

is the predicate for the incentive. Such

incentives for additional services are not

covered by the preventive care

exception to section 231(h) of HIPAA.

An incentive that is disproportionally

small in comparison to the value of the

preventive care service does not raise

similar concerns and is permissible.

Second, we proposed excluding cash

and cash equivalents from the scope of

permissible incentives. Several

commenters indicated confusion

regarding the meaning of the term ‘‘cash

equivalents.’’ We agree that the term

may not have clearly captured our

intent. Accordingly, we are excluding

from the scope of permissible

exceptions cash payments and

instruments convertible to cash. Thus,

for example, it would not be permissible

to provide an incentive in the form of

a check.

Finally, we note that section 231(h) of

HIPAA only prohibits incentives that

are likely to influence a beneficiary’s

choice of a provider for particular

services. Such influence is only possible

if the beneficiary knows about the

incentive before making his or her

choice. Thus, incentives that are not

advertised or otherwise disclosed to a

beneficiary before the beneficiary selects

a provider for services do not come

within the statutory proscription, and

therefore need not qualify under any of

the exceptions, including the preventive

care exception. For example, discounted

CPR courses or home visits offered to

women who have delivered a child at a

particular hospital are not prohibited

under section 231(h), if the availability

of the discounted CPR course or home

visits is not made known to the mother

until after she enters the hospital to

deliver her child.

• Promoting the Delivery of Preventive

Care

We interpret the phrase ‘‘to promote

the delivery of preventive care’’ to mean

that the incentives must be designed to

encourage individuals to avail

themselves of preventive care services,

as defined above. Thus, the exception

requires that a nexus exist between the

incentive and the delivery of specific

preventive care services. The preventive

care must be care that is delivered by a

person qualified to provide or furnish

such services under State licensure laws

and Federal health care program

requirements (including conditions of

participation and billing requirements).

Moreover, as discussed above, there

must be a rational relationship between

the value of the incentive and the value

of the preventive care service.

Comment: Several commenters urged

the OIG to expand the definition of

preventive care to include items or

services designed to prevent the

deterioration of, or complications from,

an acute or chronic illness, such as

hemophilia or diabetes. These

commenters argued that preventive care

should include care aimed at managing

and preventing the exacerbation of

chronic conditions, such as disease

management programs.

Response: As indicated above, the

final rule defines preventive care with

reference to those services that are both

described in the then current U.S.

Preventive Services Task Force’s Guide

to Clinical Preventive Services (as well

as pre-natal and well-baby care visits)

and covered by Medicare or a State

health care program for the particular

patient. The Guide to Clinical

Preventive Services is limited to certain

primary and secondary preventive care

services provided to asymptomatic

individuals in a clinical setting. Primary

preventive care measures prevent the

onset of a targeted condition (e.g.,

routine immunization of healthy

children). Secondary preventive

measures identify and treat

asymptomatic persons who have

developed risk factors or preclinical

disease, but in whom the condition has

not become clinically apparent (e.g.,

screening for high blood pressure).

An expansion of the preventive care

exception to include tertiary preventive

care (that is, preventive care that is part

of the treatment and management of

persons with clinical illnesses), as

suggested by the commenters, would

understandably be desirable from the

perspective of those individuals

afflicted with acute or chronic illness,

but would create an exception that

would swallow the general prohibition.

Most medical services provided to a

symptomatic patient can arguably be

characterized as designed to prevent the

patient from getting worse or developing

complications. We do not believe that

Congress intended the preventive care

exception to be so broadly construed.

Given the large number of possible

chronic and acute conditions, we also

do not believe it is feasible or fair to

craft a rule that would apply only to

some diseases or illnesses (such as

hemophilia or diabetes), but not to

others.

Comment: One commenter noted that

HCFA and the Health Resources and

Services Administration (HRSA) have

promoted programs to enlist the support

of the business community to provide

incentives to encourage medically

uninsured populations to receive

needed health care services or obtain

available health insurance coverage. The

commenter questioned the effect of

these regulations on such outreach

programs.

Response: We do not believe anything

in this final rule is inconsistent with the

HCFA and HRSA outreach programs. As

explained above, incentives to

encourage an individual to enroll in a

particular health plan or program are

outside the scope of the statutory

provision, as are incentives provided to

individuals not covered by Medicare or

a State health care program.

Comment: One commenter questioned

whether permissible incentives include

incentives designed to promote the

delivery of services that can lead to

preventive care, such as early detection

tests. The commenter asked whether it

would be permissible for a hospital to

offer free blood sugar screenings, which

24410 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

are not covered by Medicare, at health

care fairs or as part of a National

Diabetes Awareness Week campaign.

The purpose of the screenings would be

to increase diabetes awareness and to

identify diabetic individuals who are

not receiving treatment. The screenings

might also identify individuals eligible

for Medicare-covered diabetes selfmanagement education programs.

Response: Under the final rule,

certain early detection tests may

themselves qualify as preventive care if

they are enumerated in the Guide to

Clinical Preventive Services and covered

by Medicare or an applicable State

health care program. With respect to the

hypothetical posed by the commenter,

provision of a free non-covered

screening test would not violate section

231(h) of HIPAA so long as the test is

not tied to the provision of other

services by the hospital. Thus, for

example, the screening test would be

permissible where the hospital provides

an individual who tests positive for

diabetes with general information or

literature and a recommendation that

the individual contact his or her

personal physician. If, on the other

hand, as part of the screening program,

the hospital makes appointments for

individuals with one of its physicians,

offers individuals discounts for

additional covered services, or

otherwise promotes its particular

diabetes programs, an inference may be

drawn that the free screening test was

an inducement to choose the hospital as

a provider of other services. Finally, we

note that some early detection tests may

be of such nominal value as not to come

within the scope of the statutory

prohibition, as discussed below.

Comment: One commenter suggested

that the rule include a requirement that

permissible incentives be offered to all

similarly situated persons in a given

community.

Response: We are not requiring in this

rule that incentives to promote the

delivery of preventive care be offered to

all similarly situated persons in a given

community. For example, a health plan

may offer incentives designed to

influence plan members’ selections of

particular participating providers for

preventive services to plan members

only. Requiring permissible incentives

to be offered to all similarly situated

persons might discourage providers

from offering potentially beneficial

preventive care to a limited number of

individuals, for example, to the first xnumber of individuals who show up.

We do not believe that Congress

intended to prohibit such arrangements.

Comment: A commenter questioned

whether a managed care organization

violates section 231(h) of HIPAA if it

provides transportation for Medicaid

patients to and from health care services

for diagnosed conditions. The

commenter observed that transportation

costs are often a barrier to care for this

patient population and that some States

require managed care organizations to

provide such transportation as a covered

benefit.

Response: We do not believe that

section 231(h) is violated if a State

requires a managed care organization to

include transportation services as a

covered benefit. Moreover, we do not

believe that the statute is violated if the

transportation is provided on an equal

basis to all plan enrollees and

transportation is available to any

participating plan provider.

Comment: A number of commenters

questioned whether incentives to

promote the delivery of preventive care

must be of nominal value.

Response: The incentives need not be

of nominal value. As discussed below,

incentives that are of nominal value

may not be improper under section

231(h) of HIPAA.

Comment: One commenter believed

that our proposed interpretation of the

preventive care exception would

conflict with the HCFA marketing

guidelines, since vitamins, nutritional

supplements and beauty aids valued at

under $10 would be permissible under

HCFA’s guidelines but prohibited by the

OIG rule.

Response: No conflict exists between

the HCFA marketing guidelines and this

CMP provision. Vitamins, nutritional

supplements and the like are

permissible incentives if offered to

promote the delivery of covered

preventive care services or if they are of

nominal value, as discussed below.

Moreover, pre-enrollment incentives

offered by health plans do not implicate

section 231(h) of HIPAA for the reasons

stated above under paragraph heading

c., Applicability of section 231(h) to

managed care organizations. Finally, a

payment will not be considered

impermissible remuneration if it falls

into any one of the statutory exceptions.

Comment: Numerous commenters

requested clarification as to the

requirement that the preventive care

must be provided, or directly supervised

by, the medical provider that provided

the incentive. Managed care

organizations and associations

commenting on the proposed rule raised

concern over how this requirement

would apply to them, since it is the

managed care organization and not the

provider that is offering the incentive. In

addition, a physician association

commented that the ‘‘directly

supervised’’ language was very

restrictive, especially if it is given the

same meaning as under the proposed

Stark II regulations.

Response: As a result of these

concerns and in light of our revised

interpretation of this provision, we have

amended the regulations to delete this

requirement. In drafting the proposed

rule, we did not intend to limit

‘‘medical providers’’ to physicians.

Accordingly, we wish to clarify that

preventive services may be provided by

non-medical providers, including health

plans, as long as all elements of the

preventive care exception described

above are satisfied.

e. Applicability to Items That Are of

Nominal Value

Comment: Several commenters

requested clarification as to whether

items of nominal value also had to be

related to preventive care. One

commenter stated that if an item or

service is preventive, it need not be

nominal in value, and conversely, if the

item is nominal it need not be

preventive. One commenter suggested

that if an item is of nominal value, it

would not induce a beneficiary to

choose a particular provider,

practitioner, or supplier. In addition,

two commenters asked that we

incorporate a nominal value

‘‘exception’’ into the final regulations.

Response: Incentives that are only of

a nominal value were not specifically

exempted in the language of this CMP

provision. However, we agree with the

interpretation of the commenter who

suggested that if an incentive is nominal

in value, then the individual providing

the incentive would not and should not

know that the incentive is likely to

induce a beneficiary to use a particular

provider, practitioner or supplier.

Accordingly, we believe that incentives

that are only nominal in value are not

prohibited by the statute, and therefore

no exception is necessary. Further, we

wish to clarify that the exception for

preventive care is separate from the

issue of whether an incentive is of

nominal value. Consequently,

incentives that meet the preventive care

exception do not need to be nominal in

value, and items of nominal value do

not have to meet the preventive care

exception.

Comment: The OIG was asked by

commenters to clarify and take a flexible

position as to what constitutes

‘‘nominal.’’ Most of the commenters on

this issue were not in favor of

aggregating the value of items,

suggesting that recordkeeping would be

difficult and cumbersome. One

commenter requested that the measure

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24411

5 63 FR 1659; January 9, 1998.

of nominal value be greater for patients

with chronic diseases because such

patients receive items and services more

frequently. The commenter suggested

using the proposed Stark II definition 5

of de minimis compensation as a basis

for defining ‘‘nominal.’’

Response: For purposes of

consistency with the HCFA national

marketing guidelines, we are

interpreting nominal value to be no

more than $10 per item, or $50 in the

aggregate on an annual basis.

Section 1003.102(b)(14), False

Certification of Home Health Services

Eligibility

Comment: While supporting efforts to

prevent, investigate and eliminate fraud

and abuse associated with the provision

of home health services, one commenter

expressed concern over any increased

enforcement and investigative activities

that would unfairly target physicians for

authorizing appropriate home health

services.

Response: These regulations are

merely designed to implement new

CMP authorities, consistent with the

statute, for program violations related to

the false certification of home health

services eligibility. Only in those

circumstances where there is evidence

that the physician had actual knowledge

that Medicare-covered home health

services certified were medically

unnecessary will the OIG seek to impose

appropriate penalties. These situations

will come to our attention from the

OIG’s normal investigative efforts

focusing on all aspects of fraud and

abuse in Medicare and other Federal

health care programs.

Section 1003.106, Determining CMP and

Assessment Amounts

Comment: Several commenters

expressed concern that the guidelines

set forth in § 1003.106(b)(2) fall below

the level of intent required for CMPs

established under section 321(d) of

HIPAA. Specifically, commenters

indicated that the mitigating

circumstance under the degree of

culpability—described in part as

‘‘unintentional and unrecognized’’

errors—is not consistent with the

‘‘knows or should know’’ standard set

forth in HIPAA and § 1003.101 of the

proposed regulations.

Response: We agree with the concerns

expressed by the commenters and are

modifying these guidelines by deleting

this phrase from § 1003.106(b)(2) to

more accurately reflect the level of

intent required under HIPAA for the

imposition of CMPs.

Comment: One commenter raised

concern over health care providers’

reliance on Medicare contractors and

the contractors’ responsibility for

accurate guidance on Medicare

reimbursement issues. As a result, the

commenter requested that

§ 1003.106(b)(2), addressing the degree

of culpability, be amended to include

contractor error as a mitigating factor

when determining whether, and how

much, to penalize a health care

provider.

Response: We do not believe the

recommended change is necessary. The

OIG already takes into account such

factors as contractor error in

determining the culpability of a health

care provider.

Comment: One commenter believed

that, with regard to determining penalty

amounts, the factor relating to ‘‘prior

offenses’’ should be expanded to

include any item reported to the Health

Care Fraud and Abuse Data Collection

Program, established under section 221

of HIPAA. The Data Collection Program

requires Government agencies and

private health plans to report all final

adverse actions against health care

providers, suppliers and practitioners to

the Healthcare Integrity and Protection

Data Bank (HIPDB). The commenter

suggested that § 1003.106(d) be

amended to include as an aggravating

circumstance any time a respondent has

an action reported in the final adverse

action database.

Response: ‘‘Prior offenses’’ will

routinely be identified in the HIPDB.

We do not believe respondents should

be penalized twice by having the listing

of a prior offense in the HIPDB

constitute a separate aggravating factor.

However, the HIPDB includes many

sanction actions (such as loss of

professional license) that would not

typically be considered ‘‘prior offenses.’’

Therefore, we are amending

§ 1003.106(d)(3) to state that, with

respect to prior offenses, it would be an

aggravating circumstance if there were

evidence that at any time prior to the

current violation(s) the respondent was

identified in the HIPDB for any conduct

not constituting a ‘‘prior offense’’ in

accordance with the statute.

Comment: With regard to the

‘‘financial condition’’ circumstance set

forth in § 1003.106(b)(5), some

commenters objected to the proposed

deletion of the mitigating circumstance

under which ‘‘the imposition of the

penalty or assessment without reduction

will jeopardize the ability of the

respondent to continue as a health care

provider.’’ One commenter believed that

this factor should be maintained since it

allows physicians and other providers

to retain important protections from loss

of their profession and livelihood and,

in the case of health professional

shortage areas, protects against

physician loss that could otherwise

impair the delivery of health care

services.

Response: We have indicated that the

current factor does not represent a

generally applicable standard since the

penalty authority is intended to apply

not only to direct providers of health

care, but also to those involved in other

related activities and positions.

Accordingly, we believe this language

change to § 1003.106 is appropriate and

warranted. With regard to the concerns

stated by several of the commenters, in

health professional shortage areas where

the loss of a provider could seriously

impair the delivery of health care

services, the OIG still retains the

authority to waive any sanctions action

that it believes would seriously impair

the delivery of health care services. Our

foremost responsibility is and remains

the protection of program beneficiaries

and the care they receive.

Section 1005.7, Discovery

Comment: One commenter indicated

that the OIG needs to be sensitive to the

fact that some evidentiary material may

involve medical records for patients

undergoing active medical treatment,

and that discovery procedures should

not impede the ongoing care of patients.

In addition, the commenter expressed

concern about discovery requests for

records in the possession of private

health insurance companies that need

the documents for private fraud cases.

Response: With respect to medical

records involving ongoing patient care

and private health care cases, the OIG’s

current practice is to photocopy

appropriate medical records, exercising

all due precaution to protect records

and not compromise patient care.

Comment: One commenter was

concerned that the proposed regulatory

changes to the discovery process would

transform the administrative process

into a formal judicial process.

Response: We disagree. The changes

we proposed in the discovery section of

the proposed rule have been designed to

streamline the discovery process and to

avoid protracted litigation over the

failure to produce documents in a

timely fashion. These changes are not

intended to create a more formal

administrative process, but rather are

designed to protect against discovery

abuses.

Comment: One commenter believed

that the 15 days given to health care

providers to comply fully with the

request for documents is inadequate and

24412 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

recommended expanded time frames.

The commenter indicated that this

provision makes no distinction between

a request for information on a handful

of claims and a request involving

numerous claims, and fails to recognize

that such information may be stored at

different locations.

Response: The time frame set forth in

§ 1005.7(e) is intended to induce parties

to produce discovery within a

reasonable period of time. We believe

that the 15-day period will be adequate

in the majority of cases, and the ALJs

have been amenable to granting

extensions in appropriate

circumstances. Also, we are amending

§ 1005.7 to indicate that, upon a

showing of good cause, the period of

time for fully responding to the request

for discovery may be extended by the

ALJ.

III. Provisions of the Final Rule

For the most part, this final rule

incorporates the provisions of the March

25, 1998 proposed rule. A brief

description of the provisions of this

final rule follow.

• We are amending

§§ 1003.100(b)(1)(i), 1003.102(a)(3),

1003.109(a), as well as the definitions

for the terms claim and exclusion set

forth in § 1003.101, to apply CMP

coverage to all applicable Federal

Government health care programs. The

definition for the term program in

§ 1003.101 is being deleted.

• We are amending the definition of

the term remuneration in § 1003.101 by

incorporating the language of the

statutory definition of ‘‘remuneration’’

in the final regulations and reflecting

the fact that incentives to promote the

delivery of preventive care services are

exceptions to the prohibition on

inducements. We are also adding a new

definition for the term preventive care.

• We are amending § 1003.103(a) to

address the increase in the penalty

amount from $2,000 to $10,000 per item

or service improperly claimed or

prohibited practice, and amending

§ 1003.104 to address the increase in the

authorized assessment amount from

double to triple the amount claimed.

• In § 1003.101, we are specifically

defining the terms should know and

should have known, and are making

corresponding revisions in

§§ 1003.100(b)(1)(i) and 1003.102(a) and

(b). We are also adding a new paragraph

(e) to § 1003.102, defining the term

knowingly, to clarify congressional

intent to apply the False Claims Act

(FCA) standard of knowledge to the

presentment of a claim under the CMP

law.

• In § 1003.102, we are adding a new

paragraph (b)(12) to codify the new CMP

authority for excluded individuals that

retain ownership or control interests in

a participating entity. Conforming

revisions are also being made to

§ 1003.100 through the addition of a

new paragraph (b)(1)(xi), and to

§ 1003.103 through the addition of a

new paragraph (j). We are also making

technical changes in §§ 1003.105 and

1003.106 to reflect this new authority.

• We are clarifying § 1003.102(a)(1) to

indicate that the OIG may impose a

penalty and assessment against any

person it determines has presented or

caused to be presented a claim for any

item or service that the person knows,

or should have known, was not

provided as claimed, including any

claim that is part of a pattern or practice

of claims based on upcoding. We are

also adding a new § 1003.102(a)(6) to

implement the OIG’s authority to

impose a CMP and assessment for any

claim for an item or service that was

medically unnecessary and part of a

pattern of such claims.

• We are adding a new

§ 1003.102(b)(13) to codify the new CMP

authority for the offering of

inducements to beneficiaries, along with

a conforming change through a new

§ 1003.100(b)(1)(xii). In addition, we are

adding new §§ 1003.106(a)(1)(i),

(a)(1)(vii) and (b)(2)(iv) to include the

factors the OIG will take into account

with respect to this authority in

determining a penalty and assessment,

including the degree of culpability and

the amount of remuneration offered or

transferred.

• We are adding a new

§§ 1003.100(b)(1)(xiii), 1003.102(b)(14)

and 1003.103(i), allowing for a CMP of

the greater of $5,000 or 3 times the

amount of the Medicare payments

made, against any physician who falsely

certifies the medical necessity for

Medicare-covered home health services,

knowing that the care is not necessary.

This provision applies to false

certifications made on or after August

21, 1996.

• We are deleting

§ 1003.100(b)(1)(viii) and redesignating

the remaining paragraphs accordingly,

since many CMPs (including several

new CMP authorities in HIPAA) do not

involve the submission of claims as the

prohibited conduct. The existing

language in § 1003.100(b)(1)(viii) had

provided for the imposition of CMPs

and, as applicable, assessments against

persons who have ‘‘submitted certain

prohibited claims against the Medicare

program.’’

• We are deleting the language in

§§ 1003.102(b)(2) and (b)(3) and are

reserving these paragraphs. The

statutory freeze for actual charges

exceeding the maximum allowed has

expired, making CMPs for nonparticipating physicians billing for

actual charges in excess of the

maximum allowable actual charge in

§ 1003.102(b)(2) no longer valid. The

CMP authority for billing for the

services of an assistant at routine

cataract surgery in § 1003.102(b)(3) has

been delegated to the Health Care

Financing Administration. We are

making conforming changes through the

deletion of § 1003.107(c) and (e).

• We are updating the language in

§§ 1003.103(e) and 1003.105(a)(1),

relating to patient anti-dumping

provisions, to remove the knowledge

and penalty provisions that are no

longer applicable. With respect to the

imposition of a CMP against hospitals

and physicians under the patient antidumping statute (section 1867 of the

Act), the statute imposes liability based

upon the negligent violation of statutory

requirements, and we are confirming

that the new ‘‘should know’’ standard

does not apply to CMPs for violations of

the patient anti-dumping provisions.

• In § 1003.106, we are broadening

the language in paragraph (a)(1) to

include all existing and new CMP

authorities. In addition, we are

amending § 1003.106(b)(5), the factor

addressing financial condition, by

deleting the first sentence in this

paragraph to clarify that this penalty

authority is intended to apply not only

to direct providers of health care, but

also to those involved in other related

activities and positions (such as a

transporter of patients or a CEO of a

drug company). Section 1003.106(b)(2)

is being revised, in part, by deleting the

mitigating circumstance involving

‘‘unintentional and unrecognized

errors’’ under the degree of culpability,

to be consistent with § 1003.101.

• We are amending § 1003.107(b) to

incorporate reference to the new CMP

authorities being set forth in

§§ 1003.102(b)(12) and (13).

• We are revising § 1005.1,

Definitions, to include a definition for

the term ‘‘Inspector General.’’

• We are amending § 1005.7(e) to

provide for motions to compel discovery

once a request for production of

documents has been received. The

revision to § 1005.7(e) will make clear

that a party has a right to object to

discovery requests without requiring

that party to file for a protective order,

leaving it to the party seeking the

documents to justify why access is

appropriate in a motion to compel

discovery. Any objections to production

of documents will have to be filed with

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24413

the opposing party within 15 days of

receiving the discovery request, unless

good cause is shown for an extension of

time. The party seeking the production

of documents may then file a motion to

compel discovery within the next 15

days unless a lengthier time frame is set

by the administrative law judge (ALJ).

• We are amending § 1005.9(b) to

clarify that this provision is intended to

authorize an ALJ to issue a subpoena to

any individual to attend the hearing and

to provide documentary evidence at or

prior to the hearing. The language

clarifies that an ALJ may issue a

subpoena duces tecum requiring

documents to be produced before the

hearing.

• In § 1005.15(b), the language

incorrectly used the term ‘‘respondent’’

to refer to several exclusion authorities.

(Section 1005.2(b) of the regulations

defines a ‘‘respondent’’ as the party

appealing a CMP, and a ‘‘petitioner’’ as

the party appealing an exclusion.) We

are revising § 1005.15(b) to make the

language in this paragraph consistent

with the way parties are currently

defined in § 1005.2(b).

• We are revising § 1005.21(d) to

allow for interlocutory appeals to the

Departmental Appeals Board (DAB) in

one limited situation, the timeliness of

filing of the hearing request. Absent this

change, in many cases a final ruling on

the timeliness of a hearing request will

be rendered meaningless because the

hearing will take place before an appeal

of an ALJ’s ruling on timeliness can

occur.

• We are making technical revisions

in §§ 1003.126, 1003.128(b) and

1006.4(b)(2) by deleting the reference to

‘‘the Office of the General Counsel.’’

With the consolidation of the IG

Division of Office of the General

Counsel into the OIG, these regulatory

revisions give the OIG exclusive

authority to settle or compromise cases

brought under these regulations, and to

attend investigational inquiries.

• We are also making technical

revisions to §§ 1003.109(b) and 1005.2

that were not previously addressed in

the proposed rule. Specifically, § 1005.2

is being amended to provide that a

request for an administrative appeal be

to the DAB. In addition, § 1003.109(b) is

being amended to provide that an

administrative appeal be sent certified

mail with a return receipt. These

changes are being made to ensure that

the appropriate adjudicating body, the

DAB, receives the request for appeal.

The certification requirement is being

made to ensure that the Department has

knowledge of the appeal and its receipt.

These procedural clarifications should

help avoid the improper filing of

requests for hearings with the OIG, as

well as having to litigate timeliness

issues.

IV. Additional Technical Revision

We are also making technical

clarifications to §§ 1001.2003 and

1005.20 with regard to exclusion

decisions made under section 1128(b)(7)

of the Act. Under the current

regulations, there appears to be some

uncertainty as to when an exclusion

under section 1128(b)(7) of the Act may

be implemented. Section 1001.2003

currently states that the exclusion will

not take effect unless the ALJ upholds

the decision to exclude, while § 1005.20

indicates that the ALJ decision is final

and binding 30 days from the date of the

decision unless appealed to the DAB.

This language would indicate that an

appeal to the DAB on any case stays the

effect of the ALJ decision until the DAB

rules on the request. The intent of

§ 1001.2003 is to give the individual or

entity an opportunity to have an ALJ

hearing before the effectuation of an

exclusion under section 1128(b)(7) of

the Act. As it was never intended that

the individual or entity would be able

to exhaust all appeals before the

exclusion could go into effect, the OIG

believes that it is appropriate to

implement the exclusion under section

1128(b)(7) once an ALJ makes a ruling.

Accordingly, we are revising

§§ 1001.2003(b)(2) and 1005.20(d) to

conform these provisions and to clearly

indicate that the OIG will be able to

effectuate an exclusion under section

1128(b)(7) of the Act once an ALJ

decision is rendered, even if an appeal

is still pending.

V. Regulatory Impact Statement

The Office of Management and Budget

(OMB) has reviewed this final rule in

accordance with the provisions of

Executive Order 12866 and the

Regulatory Flexibility Act (5 U.S.C.

601–612), and has determined that it

does not meet the criteria for a

significant regulatory action. Executive

Order 12866 directs agencies to assess

all costs and benefits of available

regulatory alternatives and, when

rulemaking is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health,

safety distributive and equity effects).

Section 202 of the Unfunded Mandates

Reform Act of 1995 (Public Law 104–4)

also requires that agencies assess

anticipated costs and benefits before

issuing any final rulemaking that may

result in an expenditure by State, local

or tribal government, in the aggregate, or

by the private sector of $100 million or

more in any given year. In addition,

under the Regulatory Flexibility Act, if

a rule has a significant economic effect

on a number of businesses the Secretary

must specifically consider the economic

effect of a rule on small business entities

and analyze regulatory options that

could lessen the impact of the rule.

Further, Executive Order 13132,

Federalism, requires agencies to

determine if a final rule will have a

significant affect on States, on their

relationship with the Federal

Government, and on the distribution of

power and responsibility among the

various levels of government.

As indicated above, the provisions

contained in this final rule are primarily

intended to comply with amended

statutory authority by (1) expanding the

protection of certain basic fraud

authorities beyond the Department to

include other Federal health care

programs, (2) strengthening current legal

authorities pertaining to our imposition

of CMPs against individuals and entities

engaged in prohibited actions and

activities, and (3) codifying other new

and revised OIG sanction authorities set

forth in Public Law 104–191.

We believe that these regulations will

not have a significant economic effect

on Federal, State or local economies,

nor will they have a significant

economic effect on a substantial number

of small entities. In addition, in

accordance with the Unfunded

Mandates Reform Act, there are no

significant costs associated with this

rule that will impose mandates on State,

local or tribal governments or on the

private sector that would result in an

expenditure of $100 million or more in

any given year. The CMP statute, as

enacted by Congress in 1981, was an

administrative remedy to combat

increases in health care fraud. The CMP

provisions have been expanded upon

since their original enactment to

counteract evolving fraudulent and

abusive practices. These final

regulations merely continue the

approach of authorizing CMP sanctions

against individuals and entities that

abuse Federal and State health care

programs as emerging fraudulent

practices are identified. These remedial

sanctions are addressed to a limited

group of individuals and entities; that

is, providers who abuse the Federal

health care programs to the detriment of

the beneficiaries and the public fisc.

The revised CMP provisions set forth

in this final rule that address the

upcoding of claims, and claims for

medically unnecessary services, are

essentially clarifications of existing OIG

authorities. In addition, with respect to

the new penalty authorities being

24414 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

codified, such as the CMP for excluded

individuals retaining ownership or

control interests in an entity and the

CMP for the false certification of

eligibility for home health services,

these provisions target egregious

conduct that is limited in scope and

nature.

These final regulations implement

congressional intent in the area of fraud

and abuse in health care programs. The

regulations target areas of health care

fraud, not specific segments of the

industry; the scope of effect is narrow

and targeted specifically to those

individuals defrauding or abusing the

Medicare and State health care

programs. There should be little or no

increase in paperwork or reporting

burdens in any pre-existing programs as

a result of these regulations.

Similarly, while increases in the

authorized CMP amounts from $2,000 to

$10,000 per false item or service

claimed or prohibited practice may

increase overall penalty amounts and

recoveries, the process for deriving any

settlement will remain essentially the

same. While the rise in the amount of

penalty from $2,000 to $10,000 is an

increase, it is only proportionate to the

amount of fraud against the public fisc.

It also serves as a deterrent to health

care fraud, consistent with

congressional intent in the enactment of

HIPAA. This penalty amount increase

should not significantly affect the health

care industry; the only effect is remedial

against those who perpetrate fraud

against the system and thus violate

Federal and State law. This increased

maximum amount per false claim or

prohibited practice may, in certain

circumstances, reduce OIG investigative

costs since fewer individual false claims

will need to be developed and proved

in order for the Government to recover

appropriate penalties and assessments.

Overall, we believe that any increase

in CMP recoveries will not be

significant since the vast majority of

individuals, organizations and entities

addressed by these regulations do not

engage in such prohibited activities and

practices. As indicated, these final

regulations are narrow in scope and

effect, serve to codify or revise existing

OIG sanctions, comport with

congressional and statutory intent, and

strengthen the Department’s legal

authorities against those who defraud or

otherwise act improperly against the

Federal and State health care programs.

Since there is no significant economic

effect on the industry as a whole, there

is little likelihood of effect on Federal or

State expenditures to implement these

regulations. In addition, while some

sanctions addressed in this rule may

have a minor impact on small entities,

it is the nature of the violation and not

the size of the entity that will result in

an action by the OIG. In conclusion, we

believe that the aggregate economic

impact of these final regulations will be

minimal, affecting only those limited

few who have chosen to engage in

prohibited arrangements, schemes and

practices in violation of statutory intent.

As a result, we have concluded, and the

Secretary certifies, that this final rule

should not have a significant effect on

Federal, State or local economies and

expenditures, and would not have a

significant economic impact on a

substantial number of small entities that

would require a regulatory flexibility

analysis. We have also reviewed this

final rule under the threshold criteria of

Executive Order 13132, Federalism, and

we have determined that this final rule

does not significantly affect the rights,

roles and responsibilities of States.

List of Subjects

42 CFR Part 1001

Administrative practice and

procedure, Fraud, Health facilities,

Health professions, Medicaid, Medicare.

42 CFR Part 1003

Administrative practice and

procedure, Fraud, Grant programs—

health, Health facilities, Health

professions, Maternal and child health,

Medicaid, Medicare, Penalties.

42 CFR Part 1005

Administrative practice and

procedure, Fraud, Penalties.

42 CFR Part 1006

Administrative practice and

procedure, Fraud, Investigations,

Penalties.

Accordingly, 42 CFR Parts 1001, 1003,

1005 and 1006 are amended as set forth

below:

PART 1001—[AMENDED]

A. Part 1001 is amended as follows:

1. The authority citation for part 1001

continues to read as follows:

Authority: 42 U.S.C. 1302, 1320a–7,

1320a–7b, 1395u(h), 1395u(j), 1395u(k),

1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) and

(F), and 1395hh; and sec. 2455, Pub. L. 103–

355, 108 Stat. 3327 (31 U.S.C. 6101 note).

2. Section 1001.2003 is amended by

revising paragraph (b)(2) to read as

follows:

§ 1001.2003 Notice of proposal to exclude.

* * * * *

(b) * * *

(2) If the individual or entity makes a

timely written request for a hearing and

the OIG determines that the health or

safety of individuals receiving services

under Medicare or any of the State

health care programs does not warrant

immediate exclusion, an exclusion will

only go into effect, with the date of the

ALJ’s decision, if the ALJ upholds the

decision to exclude.

* * * * *

PART 1003—[AMENDED]

B. Part 1003 is amended as follows:

1. The authority citation for part 1003

is revised to read as follows:

Authority: 42 U.S.C. 1302, 1320–7, 1320a–

7a, 1320b–10, 1395u(j), 1395u(k), 1395cc(j),

1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d),

1396b(m), 11131(c) and 11137(b)(2).

2. Section 1003.100 is revised to read

as follows:

§ 1003.100 Basis and purpose.

(a) Basis. This part implements

sections 1128(c), 1128A, 1140,

1876(i)(6), 1877(g), 1882(d) and

1903(m)(5) of the Social Security Act,

and sections 421(c) and 427(b)(2) of

Pub. L. 99–660 (42 U.S.C. 1320a–7,

1320a–7a, 1320a–7(c), 1320b(10),

1395mm, 1395ss(d), 1396b(m), 11131(c)

and 11137(b)(2)).

(b) Purpose. This part—

(1) Provides for the imposition of civil

money penalties and, as applicable,

assessments against persons who—

(i) Have knowingly submitted certain

prohibited claims under Federal health

care programs;

(ii) Seek payment in violation of the

terms of an agreement or a limitation on

charges or payments under the Medicare

program, or a requirement not to charge

in excess of the amount permitted under

the Medicaid program;

(iii) Give false or misleading

information that might affect the

decision to discharge a Medicare patient

from the hospital;

(iv) Fail to report information

concerning medical malpractice

payments or who improperly disclose,

use or permit access to information

reported under part B of title IV of

Public Law 99–660, and regulations

specified in 45 CFR part 60;

(v) Misuse certain Departmental and

Medicare and Medicaid program words,

letters symbols or emblems;

(vi) Violate a requirement of section

1867 of the Act or § 489.24 of this title;

(vii) Substantially fail to provide an

enrollee with required medically

necessary items and services; engage in

certain marketing, enrollment,

reporting, claims payment, employment

or contracting abuses; or do not meet the

requirements for physician incentive

plans for Medicare specified in

§§ 417.479(d) through (f) of this title;

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24415

(viii) Present or cause to be presented

a bill or claim for designated health

services (as defined in § 411.351 of this

title) that they know, or should know,

were furnished in accordance with a

referral prohibited under § 411.353 of

this title;

(ix) Have collected amounts that they

know or should know were billed in

violation of § 411.353 of this title and

have not refunded the amounts

collected on a timely basis;

(x) Are physicians or entities that

enter into an arrangement or scheme

that they know or should know has as

a principal purpose the assuring of

referrals by the physician to a particular

entity which, if made directly, would

violate the provisions of § 411.353 of

this title;

(xi) Are excluded, and who retain an

ownership or control interest of five

percent or more in an entity

participating in Medicare or a State

health care program, or who are officers

or managing employees of such an

entity (as defined in section 1126(b) of

the Act);

(xii) Offer inducements that they

know or should know are likely to

influence Medicare or State health care

program beneficiaries to order or receive

particular items or services; or

(xiii) Are physicians who knowingly

misrepresent that a Medicare

beneficiary requires home health

services;

(2) Provides for the exclusion of

persons from the Medicare or State

health care programs against whom a

civil money penalty or assessment has

been imposed, and the basis for

reinstatement of persons who have been

excluded; and

(3) Sets forth the appeal rights of

persons subject to a penalty, assessment

and exclusion.

3. Section 1003.101 is amended as

follows:

A. By republishing the introductory

text;

B. By revising the definition for the

terms Claim and Exclusion;

C. By removing the terms General

Counsel and Program; and

D. By adding, in alphabetical order,

definitions for the terms Preventive care,

Remuneration and Should know, or

should have known. The republication,

revisions and additions read as follows:

§ 1003.101 Definitions.

For purposes of this part:

* * * * *

Claim means an application for

payment for an item or service to a

Federal health care program (as defined

in section 1128B(f) of the Act).

* * * * *

Exclusion means the temporary or

permanent barring of a person from

participation in a Federal health care

program (as defined in section 1128B(f)

of the Act).

* * * * *

Preventive care, for purposes of

§ 1003.102(b)(13) of this part and the

preventive care exception to section

231(h) of HIPAA, means any service

that—

(1) Is a prenatal service or a post-natal

well-baby visit or is a specific clinical

service described in the current U.S.

Preventive Services Task Force’s Guide

to Clinical Preventive Services, and

(2) Is reimbursable in whole or in part

by Medicare or an applicable State

health care program.

Remuneration, as set forth in

§ 1003.102(b)(13) of this part, is

consistent with the definition contained

in section 1128A(i)(6) of the Act, and

includes the waiver of coinsurance and

deductible amounts (or any part thereof)

and transfers of items or services for free

or for other than fair market value. The

term ‘‘remuneration’’ does not include—

(1) The waiver of coinsurance and

deductible amounts by a person, if the

waiver is not offered as part of any

advertisement or solicitation; the person

does not routinely waive coinsurance or

deductible amounts; and the person

waives coinsurance and deductible

amounts after determining in good faith

that the individual is in financial need

or failure by the person to collect

coinsurance or deductible amounts after

making reasonable collection efforts;

(2) Any permissible practice as

specified in section 1128B(b)(3) of the

Act or in regulations issued by the

Secretary;

(3) Differentials in coinsurance and

deductible amounts as part of a benefit

plan design (as long as the differentials

have been disclosed in writing to all

beneficiaries, third party payers and

providers), to whom claims are

presented; or

(4) Incentives given to individuals to

promote the delivery of preventive care

services where the delivery of such

services is not tied (directly or

indirectly) to the provision of other

services reimbursed in whole or in part

by Medicare or an applicable State

health care program. Such incentives

may include the provision of preventive

care, but may not include—

(i) Cash or instruments convertible to

cash; or

(ii) An incentive the value of which

is disproportionally large in relationship

to the value of the preventive care

service (i.e., either the value of the

service itself or the future health care

costs reasonably expected to be avoided

as a result of the preventive care).

* * * * *

Should know or should have known

means that a person, with respect to

information—

(1) Acts in deliberate ignorance of the

truth or falsity of the information; or

(2) Acts in reckless disregard of the

truth or falsity of the information. For

purposes of this definition, no proof of

specific intent to defraud is required.

* * * * *

4. Section 1003.102 is amended as

follows:

A. By revising introductory text

paragraph (a) and paragraphs (a)(1) and

(a)(3);

B. Republishing the introductory text

of paragraph (a)(4) and revising

paragraphs (a)(4)(iii) and (5);

C. Adding a new paragraph (a)(6);

D. Republishing the introductory text

of paragraph (b) and revising paragraph

(b)(1), introductory text;

E. Removing and reserving paragraphs

(b)(2) and (b)(3);

F. Revising paragraphs (b)(4) and

(b)(9); and

G. By adding new paragraphs (b)(12)

through (b)(14) and (e). The revisions,

additions and republications read as

follows:

§ 1003.102 Basis for civil money penalties

and assessments.

(a) The OIG may impose a penalty and

assessment against any person whom it

determines in accordance with this part

has knowingly presented, or caused to

be presented, a claim which is for—

(1) An item or service that the person

knew, or should have known, was not

provided as claimed, including a claim

that is part of a pattern or practice of

claims based on codes that the person

knows or should know will result in

greater payment to the person than the

code applicable to the item or service

actually provided;

* * * * *

(3) An item or service furnished

during a period in which the person was

excluded from participation in the

Federal health care program to which

the claim was made;

(4) A physician’s services (or an item

or service) for which the person knew,

or should have known, that the

individual who furnished (or supervised

the furnishing of) the service—

* * * * *

(iii) Represented to the patient at the

time the service was furnished that the

physician was certified in a medical

specialty board when he or she was not

so certified;

24416 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

(5) A payment that such person

knows, or should know, may not be

made under § 411.353 of this title; or

(6) An item or service that is

medically unnecessary, and which is

part of a pattern of such claims.

(b) The OIG may impose a penalty,

and where authorized, an assessment

against any person (including an

insurance company in the case of

paragraphs (b)(5) and (b)(6) of this

section) whom it determines in

accordance with this part—

(1) Has knowingly presented or

caused to be presented a request for

payment in violation of the terms of—

* * * * *

(2) [Reserved]

(3) [Reserved]

(4) Has knowingly given or caused to

be given to any person, in the case of

inpatient hospital services subject to the

provisions of section 1886 of the Act,

information that he or she knew, or

should have known, was false or

misleading and that could reasonably

have been expected to influence the

decision when to discharge such person

or another person from the hospital.

* * * * *

(9) Has not refunded on a timely

basis, as defined in § 1003.101 of this

part, amounts collected as the result of

billing an individual, third party payer

or other entity for a designated health

service that was provided in accordance

with a prohibited referral as described

in § 411.353 of this title.

* * * * *

(12) Who is not an organization,

agency or other entity, and who is

excluded from participating in Medicare

or a State health care program in

accordance with sections 1128 or 1128A

of the Act, and who—

(i) Knows or should know of the

action constituting the basis for the

exclusion, and retains a direct or

indirect ownership or control interest of

five percent or more in an entity that

participates in Medicare or a State

health care program; or

(ii) Is an officer or managing employee

(as defined in section 1126(b) of the Act)

of such entity.

(13) Offers or transfers remuneration

(as defined in § 1003.101 of this part) to

any individual eligible for benefits

under Medicare or a State health care

program, that such person knows or

should know is likely to influence such

individual to order or to receive from a

particular provider, practitioner or

supplier any item or service for which

payment may be made, in whole or in

part, under Medicare or a State health

care program.

(14) Is a physician and who executes

a document falsely by certifying that a

Medicare beneficiary requires home

health services when the physician

knows that the beneficiary does not

meet the eligibility requirements set

forth in sections 1814(a)(2)(C) or

1835(a)(2)(A) of the Act.

* * * * *

(e) For purposes of this section, the

term ‘‘knowingly’’ is defined consistent

with the definition set forth in the Civil

False Claims Act (31 U.S.C. 3729(b)),

that is, a person, with respect to

information, has actual knowledge of

information, acts in deliberate ignorance

of the truth or falsity of the information,

or acts in reckless disregard of the truth

or falsity of the information, and that no

proof of specific intent to defraud is

required.

5. Section 1003.103 is amended by

revising paragraphs (a) and (e); and by

adding new paragraphs (i) and (j) to read

as follows:

§ 1003.103 Amount of penalty.

(a) Except as provided in paragraphs

(b) through (h) of this section, the OIG

may impose a penalty of not more

than—

(1) $2,000 for each wrongful act

occurring before January 1, 1997 that is

subject to a determination under

§ 1003.102; and

(2) $10,000 for each wrongful act

occurring on or after January 1, 1997

that is subject to a determination under

§ 1003.102.

* * * * *

(e) For violations of section 1867 of

the Act or § 489.24 of this title, the OIG

may impose—

(1) Against each participating hospital

with an emergency department, a

penalty of not more than $50,000 for

each negligent violation occurring on or

after May 1, 1991, except that if the

participating hospital has fewer than

100 State-licensed, Medicare-certified

beds on the date the penalty is imposed,

the penalty will not exceed $25,000; and

(2) Against each responsible

physician, a penalty of not more than

$50,000 for each negligent violation

occurring on or after May 1, 1991.

* * * * *

(i) For violations of § 1003.102(b)(14)

of this part, the OIG may impose a

penalty of not more than the greater of—

(1) $5,000, or

(2) Three times the amount of

Medicare payments for home health

services that are made with regard to the

false certification of eligibility by a

physician in accordance with sections

1814(a)(2)(C) or 1835(a)(2)(A) of the Act.

(j) The OIG may impose a penalty of

not more than $10,000 per day for each

day that the prohibited relationship

described in § 1001.102(b)(12) of this

part occurs.

* * * * *

6. Section 1003.104 is revised to read

as follows:

§ 1003.104 Amount of assessment.

(a) The OIG may impose an

assessment, where authorized, in

accordance with § 1003.102, of not more

than—

(1) Two times the amount for each

item or service wrongfully claimed prior

to January 1, 1997; and

(2) Three times the amount for each

item or service wrongfully claimed on

or after January 1, 1997.

(b) The assessment is in lieu of

damages sustained by the Department or

a State agency because of that claim.

7. Section 1003.105 is amended as

follows:

A. By revising the section heading

and paragraphs (a)(1);

B. Removing existing paragraph (b)(1);

and

C. By redesignating existing

paragraphs (b)(2) and (b)(3) respectively

as new paragraphs (b)(1) and (b)(2). The

revisions read as follows:

§ 1003.105 Exclusion from participation in

Medicare, Medicaid and all Federal health

care programs.

(a)(1) Except as set forth in paragraph

(b) of this section, the following persons

may be subject, in lieu of or in addition

to any penalty or assessment, to an

exclusion from participation in

Medicare for a period of time

determined under § 1003.107. There

will be exclusions from Federal health

care programs for the same period as the

Medicare exclusion for any person

who—

(i) Is subject to a penalty or

assessment under § 1003.102(a), (b)(1),

(b)(4), (b)(12) or (b)(13); or

(ii) Commits a gross and flagrant, or

repeated, violation of section 1867 of

the Act or § 489.24 of this title on or

after May 1, 1991. For purposes of this

section, a gross and flagrant violation is

one that presents an imminent danger to

the health, safety or well-being of the

individual who seeks emergency

examination and treatment or places

that individual unnecessarily in a highrisk situation.

* * * * *

8. Section 1003.106 is amended as

follows:

A. By revising paragraph (a)(1);

B. Republishing the introductory text

of paragraph (b) and revising paragraphs

(b)(2) and (b)(5);

C. Revising the introductory text of

paragraph (c) and paragraph (c)(3);

D. Redesignating existing paragraphs

(d) and (e) as new paragraphs (e) and (f);

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24417

E. Revising the introductory text of

the new redesignated paragraph (e); and

F. By adding a new paragraph (d). The

revisions, republication and additions

read as follows:

§ 1003.106 Determinations regarding the

amount of the penalty and assessment.

(a) Amount of penalty. (1) In

determining the amount of any penalty

or assessment in accordance with

§ 1003.102(a), (b)(1), (b)(4) and (b)(9)

through (b)(14) of this part, the

Department will take into account—

(i) The nature of the claim, referral

arrangement or other wrongdoing;

(ii) The degree of culpability of the

person against whom a civil money

penalty is proposed;

(iii) The history of prior offenses of

the person against whom a civil money

penalty is proposed;

(iv) The financial condition of the

person against whom a civil money

penalty is proposed;

(v) The completeness and timeliness

of the refund with respect to

§ 1003.102(b)(9);

(vi) The amount of financial interest

involved with respect to

§ 1003.102(b)(12);

(vii) The amount of remuneration

offered or transferred with respect to

§ 1003.102(b)(13); and

(viii) Such other matters as justice

may require.

* * * * *

(b) Determining the amount of the

penalty or assessment. As guidelines for

taking into account the factors listed in

paragraph (a)(1) of this section, the

following circumstances are to be

considered—

* * * * *

(2) Degree of culpability. It should be

considered a mitigating circumstance if

corrective steps were taken promptly

after the error was discovered. It should

be considered an aggravating

circumstance if—

(i) The respondent knew the item or

service was not provided as claimed or

if the respondent knew that the claim

was false or fraudulent;

(ii) The respondent knew that the

items or services were furnished during

a period that he or she had been

excluded from participation and that no

payment could be made as specified in

§§ 1003.102(a)(3) and 1003.102(b)(12),

or because payment would violate the

terms of an assignment or an agreement

with a State agency or other agreement

or limitation on payment under

§ 1003.102(b);

(iii) The respondent knew that the

information could reasonably be

expected to influence the decision of

when to discharge a patient from a

hospital; or

(iv) The respondent knew that the

offer or transfer of remuneration

described in § 1003.102(b)(13) of this

part would influence a beneficiary to

order or receive from a particular

provider, practitioner or supplier items

or services reimbursable under

Medicare or a State health care program.

* * * * *

(5) Financial condition. In all cases,

the resources available to the

respondent will be considered when

determining the amount of the penalty

and assessment.

* * * * *

(c) In determining the amount of the

penalty and assessment to be imposed

for every item or service or incident

subject to a determination under

§§ 1003.102(a), (b)(1) and (b)(4)—

* * * * *

(3) Unless there are extraordinary

mitigating circumstances, the aggregate

amount of the penalty and assessment

should never be less than double the

approximate amount of damages and

costs (as defined in paragraph (f) of this

section) sustained by the United States,

or any State, as a result of claims or

incidents subject to a determination

under §§ 1003.102(a), (b)(1) and (b)(4).

(d) In considering the factors listed in

paragraph (a)(4) of this section for

violations subject to a determination

under § 1003.103(e), the following

circumstances are to be considered, as

appropriate, in determining the amount

of any penalty—

(1) Degree of culpability. It would be

a mitigating circumstance if the

respondent hospital had appropriate

policies and procedures in place, and

had effectively trained all of its

personnel in the requirements of section

1867 of the Act and § 489.24 of this title,

but an employee or responsible

physician acted contrary to the

respondent hospital’s policies and

procedures.

(2) Seriousness of individual’s

condition. It would be an aggravating

circumstance if the respondent’s

violation(s) occurred with regard to an

individual who presented to the

hospital a request for treatment of a

medical condition that was clearly an

emergency, as defined by § 489.24(b) of

this title.

(3) Prior offenses. It would be an

aggravating circumstance if there is

evidence that at any time prior to the

current violation(s) the respondent was

found to have violated any provision of

section 1867 of the Act or § 489.24 of

this title.

(4) Financial condition. In all cases,

the resources available to the

respondent would be considered when

determining the amount of the penalty.

A respondent’s audited financial

statements, tax returns or financial

disclosure statements, as appropriate,

will be reviewed by OIG in making a

determination with respect to the

respondent’s financial condition.

(5) Nature and circumstances of the

incident. It would be considered a

mitigating circumstance if an individual

presented a request for treatment, but

subsequently exhibited conduct that

demonstrated a clear intent to leave the

respondent hospital voluntarily. In

reviewing such circumstances, the OIG

would evaluate the respondent’s efforts

to—

(i) Provide the services required by

section 1867 of the Act and § 489.24 of

this title, despite the individual’s

withdrawal of the request for

examination or treatment; and

(ii) Document any attempts to inform

the individual (or his or her

representative) of the risks of leaving the

respondent hospital without receiving

an appropriate medical screening

examination or treatment, and obtain

written acknowledgment from the

individual (or his or her representative)

prior to the individual’s departure from

the respondent hospital that he or she

is leaving contrary to medical advice.

(6) Other matters as justice may

require. (i) It would be considered a

mitigating circumstance if the

respondent hospital—

(A) Developed and implemented a

corrective action plan;

(B) Took immediate appropriate

action against any hospital personnel or

responsible physician who violated

section 1867 of the Act or § 489.24 of

this title prior to any investigation of the

respondent hospital by HCFA; or

(C) Is a rural or publicly-owned

facility that is faced with severe

physician staffing and financial

deficiencies.

(ii) It would be considered an

aggravating circumstance if an

individual was severely harmed or died

as a result, directly or indirectly, of the

respondent’s violation of section 1867 of

the Act or § 489.24 of this title.

(iii) Other circumstances of an

aggravating or mitigating nature will be

taken into account if, in the interests of

justice, they require either a reduction

of the penalty or an increase in order to

assure the achievement of the purposes

of this part.

(e) In considering the factors listed in

paragraph (a)(5) of this section for

violations subject to a determination

under § 1003.103(f), the following

24418 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations

circumstances are to be considered, as

appropriate, in determining the amount

of any penalty—

* * * * *

9. Section 1003.107 is amended as

follows:

A. By revising paragraph (b);

B. Removing existing paragraphs (c)

and (e);

C. Redesignating paragraph (d) as new

paragraph (c) and revising it. The

revisions read as follows:

§ 1003.107 Determinations regarding

exclusion.

* * * * *

(b) With respect to determinations to

exclude a person under §§ 1003.102(a),

(b)(1), (b)(4), (b)(12) or (b)(13) of this

part, the Department considers those

circumstances described in

§ 1003.106(b). Where there are

aggravating circumstances with respect

to such determinations, the person

should be excluded.

(c) The guidelines set forth in this

section are not binding. Nothing in this

section limits the authority of the

Department to settle any issue or case as

provided by § 1003.126 of this part.

10. Section 1003.109 is amended by

revising the introductory text of

paragraph (a) and revising paragraph (b)

to read as follows:

§ 1003.109 Notice of proposed

determination.

(a) If the Inspector General proposes

a penalty and, when applicable,

assessment, or proposes to exclude a

respondent from participation in a

Federal health care program, as

applicable, in accordance with this part,

he or she must deliver or send by

certified mail, return receipt requested,

to the respondent written notice of his

or her intent to impose a penalty,

assessment and exclusion, as applicable.

The notice includes—

* * * * *

(b) Any person upon whom the

Inspector General has proposed the

imposition of a penalty, assessment or

exclusion may appeal such proposed

penalty, assessment or exclusion to the

DAB in accordance with § 1005.2 of this

chapter. The provisions of part 1005 of

this chapter govern such appeals.

* * * * *

11. Section 1003.126 is revised to read

as follows:

§ 1003.126 Settlement.

The Inspector General has exclusive

authority to settle any issues or case,

without consent of the ALJ.

12. Section 1003.128 is amended by

revising paragraph (b) to read as follows:

§ 1003.128 Collection of penalty and

assessment.

* * * * *

(b) A penalty or assessment imposed

under this part may be compromised by

the Inspector General, and may be

recovered in a civil action brought in

the United States district court for the

district where the claim was presented,

or where the respondent resides.

* * * * *

PART 1005—[AMENDED]

C. Part 1005 is amended as follows:

1. The authority citation for part 1005

continues to read as follows:

Authority: 42 U.S.C. 405(a), 405(b), 1302,

1320a–7, 1320a–7a and 1320c–5.

2. Section 1005.1 is amended by

adding, in alphabetical order, a

definition for the term Inspector General

to read as follows:

§ 1005.1 Definitions.

* * * * *

Inspector General (IG) means the

Inspector General of the Department of

Health and Human Services or his or

her designees.

3. Section 1005.2 is amended by

revising paragraph (c) to read as follows:

§ 1005.2 Hearing before an administrative

law judge.

* * * * *

(c) The request for a hearing will be

made in writing to the DAB; signed by

the petitioner or respondent, or by his

or her attorney; and sent by certified

mail. The request must be filed within

60 days after the notice, provided in

accordance with §§ 1001.2002, 1001.203

or 1003.109, is received by the

petitioner or respondent. For purposes

of this section, the date of receipt of the

notice letter will be presumed to be 5

days after the date of such notice unless

there is a reasonable showing to the

contrary.

* * * * *

4. Section 1005.7 is amended by

revising paragraphs (e)(1) and (e)(2) to

read as follows:

§ 1005.7 Discovery.

* * * * *

(e)(1) When a request for production

of documents has been received, within

15 days the party receiving that request

will either fully respond to the request,

or state that the request is being objected

to and the reasons for that objection. If

objection is made to part of an item or

category, the part will be specified.

Upon receiving any objections, the party

seeking production may then, within 15

days or any other time frame set by the

ALJ, file a motion for an order

compelling discovery. (The party

receiving a request for production may

also file a motion for protective order

any time prior to the date the

production is due.)

(2) The ALJ may grant a motion for

protective order or deny a motion for an

order compelling discovery if the ALJ

finds that the discovery sought—

(i) Is irrelevant,

(ii) Is unduly costly or burdensome,

(iii) Will unduly delay the

proceeding, or

(iv) Seeks privileged information.

* * * * *

5. Section 1005.9 is amended by

revising paragraph (b) to read as follows:

§ 1005.9 Subpoenas for attendance at

hearing.

* * * * *

(b) A subpoena requiring the

attendance of an individual in

accordance with paragraph (a) of this

section may also require the individual

(whether or not the individual is a

party) to produce evidence authorized

under § 1005.7 of this part at or prior to

the hearing.

* * * * *

6. Section 1005.15 is amended by

revising the introductory text of

paragraph (b) and paragraph (b)(1) to

read as follows:

§ 1005.15 The hearing and burden of

proof.

* * * * *

(b) With regard to the burden of proof

in civil money penalty cases under part

1003, in Peer Review Organization

exclusion cases under part 1004, and in

exclusion cases under §§ 1001.701,

1001.901 and 1001.951 of this chapter—

(1) The respondent or petitioner, as

applicable, bears the burden of going

forward and the burden of persuasion

with respect to affirmative defenses and

any mitigating circumstances; and

* * * * *

7. Section 1005.20 is amended by

revising paragraph (d) to read as

follows:

§ 1005.20 Initial decision.

* * * * *

(d) Except for exclusion actions taken

in accordance with § 1001.2003 of this

chapter and as provided in paragraph (e)

of this section, unless the initial

decision is appealed to the DAB, it will

be final and binding on the parties 30

days after the ALJ serves the parties

with a copy of the decision. If service is

by mail, the date of service will be

deemed to be 5 days from the date of

mailing.

* * * * *

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Rules and Regulations 24419

8. Section 1005.21 is amended by

revising paragraph (d) to read as

follows:

§ 1005.21 Appeal to DAB.

* * * * *

(d) There is no right to appear

personally before the DAB or to appeal

to the DAB any interlocutory ruling by

the ALJ, except on the timeliness of a

filing of the hearing request.

* * * * *

PART 1006—[AMENDED]

D. Part 1006 is amended as follows:

1. The authority citation for part 1006

continues to read as follows:

Authority: 42 U.S.C. 405(d), 405(e), 1302

and 1320a-7a.

2. Section 1006.4 is amended by

republishing the introductory text of

paragraph (b) and by revising paragraph

(b)(2) to read as follows:

§ 1006.4 Procedures for investigational

inquiries.

* * * * *

(b) Investigational inquiries are nonpublic investigatory proceedings.

Attendance of non-witnesses is within

the discretion of the OIG, except that—

* * * * *

(2) Representatives of the OIG are

entitled to attend and ask questions.

* * * * *

Dated: April 19, 1999.

June Gibbs Brown,

Inspector General.

Approved: November 24, 1999.

Donna E. Shalala,

Secretary.

[FR Doc. 00–10142 Filed 4–25–00; 8:45 am]

BILLING CODE 4150–04–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 90

[GN Docket No. 93–252, PR Docket No. 93–

144, PR Docket No. 89–553; FCC 00–106]

Commercial Mobile Radio Service

(CMRS)

AGENCY: Federal Communications

Commission.

ACTION: Final rule; dismissing various

petitions for reconsideration.

SUMMARY: This document dismisses or

denies fourteen of the fifteen petitions

for reconsideration filed against an

earlier Federal Communications

Commission (Commission) order. The

Commission takes this action because

most of the issues raised in the petitions

have been addressed in or rendered

moot by action taken in other

Commission orders. Other issues raised

in the petitions are being considered in

ongoing Commission proceedings. The

Commission does, however, amend its

rules to clarify the station identification

requirements applicable to CMRS

providers licensed under its private

land mobile radio services rules.

DATES: Effective June 26, 2000.

FOR FURTHER INFORMATION CONTACT:

Wilbert E. Nixon, Jr., Policy and Rules

Branch, Commercial Wireless Division,

Wireless Telecommunications Bureau,

at (202) 418–7240.

SUPPLEMENTARY INFORMATION: In this

document released on April 7, 2000, the

Commission, resolves various petitions

for reconsideration of Implementation of

Sections 3(n) and 332 of the

Communications Act, Regulatory

Treatment of Mobile Services, GN

Docket No. 93–252, Third Report and

Order, 59 FR 59945 (November 21,

1994) (CMRS Third Report and Order).

The primary goal of the CMRS Third

Report and Order was to establish the

regulatory framework for implementing

the mandate of the Omnibus Budget

Reconciliation Act of 1993, Pub. L. No.

103–66, Title VI § 6002(b), 107 Stat. 312,

392 (1993) (1993 Budget Act), to treat

‘‘substantially similar’’ CMRS providers

in a similar regulatory manner. In the

five years since the release of the CMRS

Third Report and Order, this task has

been accomplished through the revision

of scores of Commission rule sections in

several Commission proceedings. In

fact, the majority of the issues raised in

the petitions have been addressed in or

rendered moot by Commission action

taken in Amendment of Part 90 of the

Commission’s Rules to Facilitate Future

Development of SMR Systems in the

800 MHz Frequency Band, PR Docket

No. 93–144, Implementation of Sections

3(n) and 322 of the Communications

Act—Regulatory Treatment of Mobile

Services, GN Docket No. 93–252,

Implementation of Section 309(j) of the

Communications Act—Competitive

Bidding, PP Docket No. 93–253, First

Report and Order, Eighth Report and

Order and Second Further Notice of

Proposed Rulemaking, 61 FR 6212

(February 16, 1996) (800 MHz Report

and Order), Amendment of Parts 0, 1,

13, 22, 24, 26, 27, 80, 87, 90, 95, 97, and

101 of the Commission’s Rules to

Facilitate the Development and Use of

the Universal Licensing System in the

Wireless Telecommunications Service,

WT Docket No. 98–20, Report and

Order, 63 FR 68904 (December 14, 1998)

(ULS Report and Order), and other

Commission orders released subsequent

to the release of the CMRS Third Report

and Order. Other issues raised in the

petitions are being considered in

ongoing Commission proceedings. For

these reasons, with one exception, the

Commission dismisses or denies all of

the pending petitions for

reconsideration. The Commission does,

however, amend §§ 90.425 and 90.647

of our rules to clarify the station

identification requirements applicable

to CMRS providers licensed under part

90. The amended rule language appears

below.

This Order (FCC 00–106), adopted

March 17, 2000 and released on April 7,

2000, is available for inspection and

copying during normal business hours

in the FCC Reference Center, 445

Twelfth Street, SW, Washington, DC.

The complete text may be purchased

from the Commission’s copy contractor,

International Transcription Service, Inc.

1231 20th Street, NW, Washington DC

20036 (202) 857–3800. The document is

also available via the Internet at http:/

/www.fcc.gov/Bureaus/Wireless/

Orders/.

I. Final Regulatory Flexibility

Certification

1. Final Regulatory Flexibility

Certification. In this Memorandum

Opinion and Order on Reconsideration,

we amend §§ 90.425 and 90.647(d) of

the Commission’s rules as set forth in

the Rule Changes below. The amended

rules clarify that all part 90 CMRS

providers licensed by geographic area

are exempt from station identification

requirements, and that other part 90

CMRS providers need comply only with

the streamlined station identification

requirements of § 90.425(e).

Specifically, the amendments clarify

that station identification need only

occur once an hour instead of once

every 15 minutes and that the affected

CMRS providers need not comply with

other detailed technical requirements.

We therefore certify, pursuant to the

Regulatory Flexibility Act, that the rules

adopted in this Order will not have a

significant economic impact on a

substantial number of small entities.

2. The Commission will send a copy

of this Memorandum Opinion and

Order on Reconsideration, including

specifically a copy of this final

certification, in a report to Congress

pursuant to the Small Business

Regulatory Enforcement Fairness Act of

1996, see 5 U.S.C. 801(a)(1)(A). In

addition, the Memorandum Opinion

and Order on Reconsideration and this

certification will be sent to the Chief

Counsel for Advocacy of the Small

Business Administration, and will be