[Federal Register Volume 72, Number 106 (Monday, June 4, 2007)]
[Rules and Regulations]
[Pages 30706-30711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2740]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Indian Health Service

42 CFR Part 136

Center for Medicare & Medicaid Services

42 CFR Part 489

[CMS-2206-F]
RIN 0917-AA02


Section 506 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003--Limitation on Charges for Services Furnished 
by Medicare Participating Inpatient Hospitals to Individuals Eligible 
for Care Purchased by Indian Health Programs

AGENCY: Indian Health Service (IHS), Center elsewhere for Medicare & 
Medicaid Services (CMS), Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: The Secretary of the Department of Health and Human Services 
(HHS) hereby issues this final rule establishing regulations required 
by section 506 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), (Pub. L. 108-173). Section 506 of the 
MMA amended section 1866 (a)(1) of the Social Security Act to add 
subparagraph (U) which requires hospitals that furnish inpatient 
hospital services payable under Medicare to participate in the contract 
health services program (CHS) of the Indian Health Service (IHS) 
operated by the IHS, Tribes, and Tribal organizations, and to 
participate in programs operated by urban Indian organizations that are 
funded by IHS (collectively referred to as I/T/Us) for any medical care 
purchased by those programs. Section 506 also requires such 
participation to be in accordance with the admission practices, payment 
methodology, and payment rates set forth in regulations established by 
the Secretary, including acceptance of no more than such payment rates 
as payment in full.

DATES: These final regulations are effective July 5, 2007.

FOR FURTHER INFORMATION CONTACT: Carl Harper, Director, Office of 
Resource Access and Partnerships, IHS, 801 Thompson Avenue, Twinbrook 
Metro Plaza Suite 360, Rockville, Maryland 20852, telephone (301) 443-
2694. Dorothy Dupree, Director, Tribal Affairs Group, OEA, CMS, 7500 
Security Boulevard, Mail Stop: C1-13-11, Baltimore, Maryland 21244, 
telephone (410) 786-1942. (These are not toll free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

    On April 28, 2006, IHS and CMS published proposed rules in the 
Federal Register (71 FR 25124) as mandated by section 506(c) of the 
MMA, which requires the Secretary to publish rules implementing the 
requirements of section 506 of the MMA. Under that statutory provision, 
hospitals that furnish inpatient hospital services payable under 
Medicare are required to participate both in the contract health 
service (CHS) program of IHS operated by IHS, Tribes, and Tribal 
organizations, and in programs operated by urban Indian organizations 
(I/T/Us) that are funded by the IHS, for medical care purchased by 
those programs. Section 506 also requires such participation to be in 
accordance with the admission practices, payment methodology, and 
payment rates set forth in regulations established by the Secretary, 
including acceptance of no more than such rate as payment in full. The 
proposed rule provided interested persons until June 27, 2006 to submit 
written comments.

II. Provisions of the Proposed Regulations

a. The Proposed Rule

    We proposed to amend the IHS regulations at 42 CFR part 136, by 
adding a new subpart D to describe the payment methodology and other 
requirements for Medicare-participating hospitals and critical access 
hospitals (CAHs) that furnish inpatient services, either directly or 
under arrangement, to individuals who are authorized to receive 
services from such hospitals under a CHS program of the IHS, Tribes, 
and Tribal organizations, and IHS-funded programs operated by urban 
Indian organizations (collectively, I/T/U programs). As provided in the 
statute, we also proposed to amend CMS regulations at 42 CFR part 489 
to require Medicare-participating hospitals and critical access 
hospitals (CAHs) that furnish inpatient hospital services to 
individuals who are eligible for and authorized to receive items and 
services covered by such I/T/U programs to accept no more than the 
payment methodology under 42 CFR part 136, subpart D as payment in full 
for such items and services. The proposed rule did not include 
additional regulation of admission practices.

b. Summary of Changes in the Final Rule

    In reviewing several comments, IHS and CMS determined that the 
payment methodology in the proposed rule was not adequately explained. 
Therefore, we are clarifying the payment methodologies established by 
this regulation to include more detail. For hospital services that 
would be paid under prospective payment systems (PPS) by the Medicare 
program, the basic payment methodology under this rule is based on the 
applicable PPS. For example, inpatient hospital services of acute care 
hospitals, psychiatric hospitals, rehabilitation hospitals, and long-
term care hospitals will be paid based on the same four Medicare PPS 
systems as would be used to pay for similar hospital services to the 
hospitals' Medicare patients, as described under 42 CFR part 412, while 
outpatient hospital services and skilled nursing facility services 
(SNF) will be paid based on their Medicare PPS systems, as described 
under 42 CFR part 419 (outpatient) and 42 CFR part 413

[[Page 30707]]

(SNF) respectively. The basic payment methodology under this rule for 
Medicare-participating hospitals that furnish inpatient services but 
are exempt from PPS and currently receive reasonable cost reimbursement 
under the Medicare program (for example, critical access hospitals 
(CAHs), children's hospitals, cancer hospitals, and certain other 
hospitals reimbursed by Medicare under special arrangements), is based 
on 42 CFR part 413, which addresses reasonable cost reimbursement.
    In addition, based on the comments received, IHS and CMS determined 
that the requirement that providers participate in IHS and Tribal CHS 
programs and IHS-funded urban Indian organization programs was not 
clear in the proposed rule and additional guidance was needed. 
Therefore, we clarified that hospitals participating in Medicare that 
furnish inpatient hospital services will be required to accept the 
payment methodology and no more than the rates established under 42 CFR 
part 136, subpart D as payment in full for such services. This change 
also clarifies that such hospitals may not refuse service to an 
individual on the basis that the individual may be eligible for payment 
under such CHS and IHS-funded urban Indian programs. We did not include 
additional prohibitions on discrimination in admission practices 
because such requirements are already covered and enforced by the HHS 
Office for Civil Rights under existing regulations at 45 CFR part 80.

III. Analysis of and Responses to Public Comments

    The IHS received 35 comments from Tribes, Tribal organizations, 
hospital associations, CAHs, and individuals. The IHS, in partnership 
with CMS, carefully reviewed the submissions by individuals, groups, 
Indian, and non-Indian organizations. We did not consider 4 of these 
comments, because they were received after the closing date. Of the 31 
timely comments, 26 comments supported the proposed regulation. Several 
comments requested clarification of certain sections of the rule.
    Comment: We received 10 comments that expressed serious concern 
regarding the long delay in publication of the proposed rule and 
requested expedited publication of a final rule.
    Response: The development of this final rule has been a long and 
careful process, involving consultation with the Tribes through the CMS 
Tribal Technical Advisory Group, and close collaboration between IHS 
and CMS. An incidental benefit of this process has been greater 
understanding by all parties of the service delivery and payment 
processes that are at issue in this rule.
    Comment: A number of the comments from Tribes and Tribal 
organizations expressed concerns that affected Indian health programs 
would need training to fully implement and monitor the participation 
and payment requirements.
    Response: IHS is authorized to provide technical assistance 
regarding implementation of this final rule. Tribal program 
representatives can contact Mr. Carl Harper at the phone number listed 
in the contact information.
    Comment: One commenter expressed concern that American Indian/
Alaska Native (AI/AN) populations have many complications and co-
morbidities that do not exist to the same extent in the patient 
population as a whole, including diabetes, cardiovascular disease, 
injury, trauma, and alcoholism. The commenter suggested that costs to 
treat this population are higher and suggested IHS would be paying less 
for its patient population than Medicare actually pays for services 
furnished to a comparable population.
    Response: Patients who are more seriously ill tend to require a 
higher level of hospital resources than patients who are less seriously 
ill even though they may be admitted to the hospital for the same 
reason. Recognizing this, Medicare payments can be higher for patients 
in certain diagnostic-related groups (DRGs) based on a secondary 
diagnosis that could indicate specific complications or co-morbidities. 
Also, the DRG groupings take into consideration co-morbidity factors, 
and payment adjustments that would be available to reflect the higher 
costs of disproportionate share hospital adjustments and outlier 
payments are provided for exceptionally high cost cases, all of which 
would address high costs of this patient population. As a result, IHS 
payment under this rule will reflect the serious health issues faced by 
its patient population.
    Comment: One commenter expressed concern that the CHS program 
payments are not always timely and should be paid in accordance with 
Medicare timeline requirements.
    Response: This regulation addresses practices, payment 
methodologies, and rates of payment that are not already addressed 
under current laws or regulations. The time frame for paying claims 
authorized by IHS under the CHS program is already governed by section 
220 of the Indian Health Care Improvement Act (IHCIA).
    Comment: One commenter expressed concern that payment for services 
should be absolute for services rendered, not at the service unit's 
discretion. In addition, this commenter suggested IHS set the timeline 
for notification of emergency services at a minimum of 30 days 
following services rendered.
    Response: Payment for services is based on a medical priority 
system which is based on the availability of funds as established under 
42 CFR part 136, subpart C. Under subpart C of title 42, notification 
of emergency services must be provided within 72 hours after the 
beginning of treatment or admission to a health care facility. The 
timeline for notification of emergency services for the elderly and 
disabled is currently set at 30 days in accordance with section 406 of 
the IHCIA.
    Comment: One commenter expressed concern that the proposed rule 
places an additional burden on hospitals by capping rates paid to 
public and private non-IHS funded hospitals, with no additional 
responsibility or accountability placed on I/T/U programs regarding 
payments to such hospitals.
    Response: This rule would provide for rates that hospitals accept 
under the Medicare program. We do not believe these rates place an 
additional burden on hospitals.
    Comment: One commenter asked whether the payment rates required 
under this rule would apply to claims for services furnished by long-
term care hospitals, independent inpatient rehabilitation facilities, 
and inpatient psychiatric facilities to individuals who were authorized 
for the service by an I/T/U program.
    Response: Long-term care hospitals, independent inpatient 
rehabilitation facilities, and inpatient psychiatric facilities are 
covered by these rules because they meet the criteria of section 506 of 
the MMA: They are covered by the definition of ``hospital'' in section 
1861(e) or (f), as applicable, of the Social Security Act and they 
furnish inpatient hospital services. They will be paid based upon their 
respective Medicare PPS systems.
    Comment: A commenter asked whether agents will be precluded from 
charging the I/T/U for the records needed for payment determination or 
quality assurance in cases in which a facility is using an outside 
agent to manage its medical records and patient information.
    Response: Under section 136.30(j), additional payment would not be 
available for the cost of copying of medical records to an outside 
agent who

[[Page 30708]]

manages medical records and patient information.
    Comment: One commenter expressed concern that the proposed rule 
does not clearly define what it means to ``participate'' in programs 
operated by IHS, Tribes, Tribal organizations, or urban Indian (I/T/U) 
programs.
    Response: Participation in I/T/U programs means that all hospitals 
covered by this rule must accept the admission practices, payment 
methodology, and no more than the rates of payment established under 
this rule as payment in full for items and services purchased by I/T/U 
programs for individuals eligible for and referred by such programs. To 
clarify that acceptance of these requirements is mandatory for 
participation in Medicare, IHS has revised the proposed rule in two 
ways. First, subsections (a) and (b) of 42 CFR 136.30 have been amended 
to clarify which entities are affected by the rule and the services 
that will be covered. Second, 42 CFR 489.29 has also been amended to be 
consistent with 42 CFR part 136, subpart D. Paragraph (b) has been 
added to 42 CFR 489.29 to clarify that hospitals cannot deny services 
to an individual on the basis that payment for such services is 
authorized by an I/T/U program. However, the rule does not provide 
additional regulation of discrimination in admission practices because 
such requirements are already covered and enforced by the HHS Office 
for Civil Rights under existing regulations at 45 CFR part 80.
    Comment: One commenter asked whether hospitals which are not 
reimbursed on a reasonable cost basis will be reimbursed based on the 
Medicare DRGs or other prospective payment rate.
    Response: We have clarified the payment methodology in the final 
rule in response to this comment. We are clarifying that, for hospital 
services that would be paid under prospective payment systems (PPS) by 
the Medicare program, the basic payment methodology under this rule is 
based on the applicable PPS. For example, inpatient services furnished 
by acute care hospitals, psychiatric hospitals, rehabilitation 
hospitals, and long-term care hospitals will be paid based on their 
respective PPS used in the Medicare program to pay for similar hospital 
services to the hospitals' Medicare patients, as described under 42 CFR 
part 412, while outpatient hospital services and skilled nursing 
facility (SNF) services will be paid based on their Medicare PPS, as 
described under 42 CFR part 419 (outpatient) and 42 CFR part 413 (SNF) 
respectively. Under the basic payment methodology of this rule for 
Medicare-participating hospitals that furnish inpatient services but 
are exempt from PPS and currently receive reasonable cost reimbursement 
under the Medicare program (for example, CAHs, children's hospitals, 
cancer hospitals, and certain other hospitals reimbursed by Medicare 
under special arrangements), I/T/Us will reimburse such hospitals for 
claims in accordance with 42 CFR part 413, which addresses reasonable 
cost reimbursement. In other words, hospitals reimbursed by Medicare on 
a reasonable cost basis will not be paid by use of DRGs or other case 
classification systems used under the various Medicare PPS payment 
methods. To clarify what hospitals can expect to receive as 
reimbursements, IHS has created two basic payment determinations under 
section 136.30(c) in the final rule; one for PPS based payments and one 
for payments based on reasonable costs.
    Comment: Two commenters recommended that payment adjustments for 
organ acquisition costs, blood clotting factors, new technology 
services, and disproportionate share be included in the interim payment 
calculations in order to provide for an appropriate level of 
reimbursement.
    Response: IHS agrees that payment adjustments for the types of 
services listed above should be included in the payment calculations in 
order to provide for an appropriate level of reimbursement. Payment 
adjustments for disproportionate share and new medical technology 
already are included in the PPS methodology under subparts F and G of 
part 412. Moreover, to ensure that hospitals receiving PPS payment 
include these payment adjustments, IHS will use the Medicare PRICER 
system (or a similar system) in calculating final payment. The system 
includes adjustments such as those above. For items not adjusted within 
the system, the IHS fiscal intermediary will be instructed to use 
standard payments calculated by CMS (for example, payments based on the 
Average Sales Price (ASP) for hemophilia clotting factors). To clarify 
that such payments will be added to the basic rate calculation, IHS has 
added a new section 136.30(d) to the rule.
    Comment: Several commenters expressed concern that the interim 
payment rates will have a financial impact on CAHs. Another commenter 
expressed concern about the per diem mechanism used to make interim 
payments to CAHs because there is no requirement to follow Medicare 
regulations by the I/T/U.
    Response: The economic financial impact study conducted by an IHS 
fiscal intermediary demonstrates that the interim payment rates will 
have limited financial impact on rural and small rural hospitals as 
explained in section VI of this final rule, Regulatory Impact 
Statement. Moreover, in revising the proposed adoption of the Medicare 
payment methodologies in section 136.30(c) of the final rule, IHS has 
identified two basic determinations for payment. Payments to CAHs are 
covered under section 136.30(c)(2). IHS will follow payment guidance 
based on the reasonable cost methodology under 42 CFR 413.70, ``Payment 
for services of a CAH''. As with other payments based on reasonable 
cost, payments to CAHs will be based on the interim payment rate 
established under 42 CFR part 413, subpart E.
    Comment: One commenter asked whether the final rule will be applied 
to claims which are received after the effective date, regardless of 
the date of service, or only to claims with a date of service after the 
effective date.
    Response: The requirements of the final rule will apply to claims 
with a date of service on or after the effective date of the final 
regulation.
    Comment: A commenter asked whether contracts will become 
invalidated by this regulation or remain in effect until they expire in 
situations in which a hospital contract is currently in place with IHS, 
which has rates that are not based on Medicare or are not less than 
Medicare rates.
    Response: Medicare-participating hospitals that furnish inpatient 
services must accept the rate methodology established under this 
regulation as a condition of participation in the Medicare program. 
Current hospital contract rates that are lower than the rates 
established by this regulation will continue to apply in accordance 
with section 136.30(c).
    Comment: One commenter asked if the Medicare timely filing 
guidelines will be waived and/or modified for claims when the I/T/U (1) 
is not the primary payor and the patient has alternate resources or, 
(2) delayed in sending out a timely purchase order.
    Response: Under 42 CFR 136.61, as applied in this rule, the I/T/U 
program is the payor of last resort for individuals eligible for any 
alternate resources. The timely filing period under 42 CFR 424.44 and 
provisions of the Medicare Claims Processing Manual will apply to all 
claims submitted to an I/T/U program for payment.
    Comment: One commenter asked the IHS to remove the Health Insurance 
Portability and Accountability Act

[[Page 30709]]

(HIPAA) requirement for electronic claim submission.
    Response: If the I/T/U program accepts paper claims, this is still 
an acceptable format for claims submission. However, if non-I/T/U 
providers generally submit their claims electronically to other payers, 
they should also do so for I/T/U payers that accept electronic claims. 
HIPAA requires electronic claims to be filed using the standard 837 
format.

IV. Collection of Information Requirements

    This document does not impose any new information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35). Note: The burden 
requirements in section 136.30(h)(1) for submitting a claim form are 
currently approved under OMB approval number 0938-0279.

V. Regulatory Impact Statement

    The IHS has examined the impact of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This action 
is not a significant regulatory action under Executive Order 12866. 
Further regulatory evaluation is not necessary because the economic 
impact will be minimal.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
included in the definition of a small entity.
    The I/T/Us have entered into contracts with many public and private 
non-I/T Medicare-participating hospitals at rates less than or equal to 
the rate proposed in this rule. IHS intends to continue existing 
contracts with these hospitals; however, to the extent that I/T/Us are 
not able to negotiate a contract with a hospital, payment rates 
established by this rule will apply. This action will alleviate the 
need for and administrative burden of negotiating rates through 
individual contracts by IHS as well as the Medicare-participating 
hospitals.
    The IHS conducted a study to determine the financial impact the 
interim payment rates, as proposed by this regulation, would have on 
public and private non-I/T/U hospitals. As part of this study, IHS 
compared the interim rates to the rates that IHS has negotiated per 
contracts with public and private non-I/T/U hospitals. For FY 2003, of 
the 387 hospitals that IHS does business with, IHS has negotiated 
contracts with 48 percent of these hospitals. Based on IHS data, the 
findings revealed the overall negative impact on these public and 
private non-I/T/U hospitals would be less than 1 percent. Of the 387 
hospitals in the study, 105 are rural hospitals. Out of the 105 rural 
hospitals, 84 are small rural hospitals (less than 100 beds). By 
comparing the interim rate to full billed charges, (that is, what IHS 
pays if a contract is not negotiated) revealed a negative financial 
impact of 8 percent on these rural hospitals. Further analysis of the 
inpatient bed utilization by hospital revealed IHS represents less than 
2 percent of the rural and small rural hospitals total business meaning 
that 98 percent of the hospitals' income comes from other sources. For 
these reasons, IHS has determined that the rates proposed by these 
regulations will not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq.
    In addition, section 1102(b) of the Act requires IHS to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, IHS defines a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. For the reasons provided 
above, IHS has determined that this rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose requirements mandate expenditure in any 1 year 
by State, local, or Tribal governments, in the aggregate, or by the 
private sector, of $120 million. This proposal would not impose 
substantial Federal mandates on State, local or Tribal governments or 
private sector.
    Executive Order 13132 establishes certain requirements that an 
Agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications. It has 
been determined that this action would not have a substantial direct 
effect 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, and therefore 
would not have Federalism implications.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

List of Subjects

42 CFR Part 136

    American Indian, Alaska Natives, Health, Medicare.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    Dated: November 2, 2006.
Charles W. Grim,
Assistant Surgeon General, Director, Indian Health Service.
    Dated: November 16, 2006.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 18, 2007.
Michael O. Leavitt,
Secretary.

0
The Indian Health Service is amending 42 CFR Chapter I as set forth 
below:

PART 136--INDIAN HEALTH

0
1. The authority citation for part 136 continues to read as follows:

    Authority: 25 U.S.C. 13; 42 U.S.C. 1395cc(a)(1)(U), 42 U.S.C. 
2001 and 2003, unless otherwise noted.


[[Page 30710]]



0
2. Add new subpart D consisting of Sec. Sec.  136.30 through 136.32, to 
read as follows:
Subpart D--Limitation on Charges for Services Furnished by Medicare-
Participating Hospitals to Indians
Sec.
136.30 Payment to Medicare-participating hospitals for authorized 
Contract Health Services.
136.31 Authorization by urban Indian organization.
136.32 Disallowance.

Subpart D--Limitation on Charges for Services Furnished by 
Medicare-Participating Hospitals to Indians


Sec.  136.30  Payment to Medicare-participating hospitals for 
authorized Contract Health Services.

    (a) Scope. All Medicare-participating hospitals, which are defined 
for purposes of this subpart to include all departments and provider-
based facilities of hospitals (as defined in sections 1861(e) and (f) 
of the Social Security Act) and critical access hospitals (as defined 
in section 1861(mm)(1) of the Social Security Act), that furnish 
inpatient services must accept no more than the rates of payment under 
the methodology described in this section as payment in full for all 
items and services authorized by IHS, Tribal, and urban Indian 
organization entities, as described in paragraph (b) of this section.
    (b) Applicability. The payment methodology under this section 
applies to all levels of care furnished by a Medicare-participating 
hospital, whether provided as inpatient, outpatient, skilled nursing 
facility care, as other services of a department, subunit, distinct 
part, or other component of a hospital (including services furnished 
directly by the hospital or under arrangements) that is authorized 
under part 136, subpart C by a contract health service (CHS) program of 
the Indian Health Service (IHS); or authorized by a Tribe or Tribal 
organization carrying out a CHS program of the IHS under the Indian 
Self-Determination and Education Assistance Act, as amended, Pub. L. 
93-638, 25 U.S.C. 450 et seq.; or authorized for purchase under Sec.  
136.31 by an urban Indian organization (as that term is defined in 25 
U.S.C. 1603(h)) (hereafter ``I/T/U'').
    (c) Basic determination. (1) Payment for hospital services that the 
Medicare program would pay under a prospective payment system (PPS) 
will be based on that PPS. For example, payment for inpatient hospital 
services shall be made per discharge based on the applicable PPS used 
by the Medicare program to pay for similar hospital services under 42 
CFR part 412. Payment for outpatient hospital services shall be made 
based on a PPS used in the Medicare program to pay for similar hospital 
services under 42 CFR part 419. Payment for skilled nursing facility 
(SNF) services shall be based on a PPS used in the Medicare program to 
pay for similar SNF services under 42 CFR part 413.
    (2) For Medicare participating hospitals that furnish inpatient 
services but are exempt from PPS and receive reimbursement based on 
reasonable costs (for example, critical access hospitals (CAHs), 
children's hospitals, cancer hospitals, and certain other hospitals 
reimbursed by Medicare under special arrangements), including provider 
subunits exempt from PPS, payment shall be made per discharge based on 
the reasonable cost methods established under 42 CFR part 413, except 
that the interim payment rate under 42 CFR part 413, subpart E shall 
constitute payment in full for authorized charges.
    (d) Other payments. In addition to the amount payable under 
paragraph (c)(1) of this section for authorized inpatient services, 
payments shall include an amount to cover: The organ acquisition costs 
incurred by hospitals with approved transplantation centers; direct 
medical education costs; units of blood clotting factor furnished to an 
eligible patient who is a hemophiliac; and the costs of qualified non-
physician anesthetists, to the extent such costs would be payable if 
the services had been covered by Medicare. Payment under this 
subsection shall be made on a per discharge basis and will be based on 
standard payments established by the Centers for Medicare & Medicaid 
Services (CMS) or its fiscal intermediaries.
    (e) Basic payment calculation. The calculation of the payment by I/
T/Us will be based on determinations made under paragraphs (c) and (d) 
of this section consistent with CMS instructions to its fiscal 
intermediaries at the time the claim is processed. Adjustments will be 
made to correct billing or claims processing errors, including when 
fraud is detected. I/T/Us shall pay the providing hospital the full PPS 
based rate, or the interim reasonable cost rate, without reduction for 
any co-payments, coinsurance, and deductibles required by the Medicare 
program from the patient.
    (f) Exceptions to payment calculation. Notwithstanding paragraph 
(e) of this section, if an amount has been negotiated with the hospital 
or its agent by the I/T/U, the I/T/U will pay the lesser of: The amount 
determined under paragraph (e) of this section or the amount negotiated 
with the hospital or its agent, including but not limited to capitated 
contracts or contracts per Federal law requirements;
    (g) Coordination of benefits and limitation on recovery. If an I/T/
U has authorized payment for items and services provided to an 
individual who is eligible for benefits under Medicare, Medicaid, or 
another third party payor--
    (1) The I/T/U shall be the payor of last resort under Sec.  136.61;
    (2) If there are any third party payers, the I/T/U will pay the 
amount for which the patient is being held responsible after the 
provider of services has coordinated benefits and all other alternative 
resources have been considered and paid, including applicable co-
payments, deductibles, and coinsurance that are owed by the patient; 
and
    (3) The maximum payment by the I/T/U will be only that portion of 
the payment amount determined under this section not covered by any 
other payor; and
    (4) The I/T/U payment will not exceed the rate calculated in 
accordance with paragraph (e) of this section or the contracted amount 
(plus applicable cost sharing), whichever is less; and
    (5) When payment is made by Medicaid it is considered payment in 
full and there will be no additional payment made by the I/T/U to the 
amount paid by Medicaid (except for applicable cost sharing).
    (h) Claims processing. For a hospital to be eligible for payment 
under this section, the hospital or its agent must submit the claim for 
authorized services--
    (1) On a UB92 paper claim form (until abolished, or on an 
officially adopted successor form) or the HIPAA 837 electronic claims 
format ANSI X12N, version 4010A1 (until abolished, or on an officially 
adopted successor form) and include the hospital's Medicare provider 
number/National Provider Identifier; and
    (2) To the I/T/U, agent, or fiscal intermediary identified by the 
I/T/U in the agreement between the I/T/U and the hospital or in the 
authorization for services provided by the I/T/U; and
    (3) Within a time period equivalent to the timely filing period for 
Medicare claims under 42 CFR 424.44 and provisions of the Medicare 
Claims Processing Manual applicable to the type of item or service 
provided.
    (i) Authorized services. Payment shall be made only for those items 
and

[[Page 30711]]

services authorized by an I/T/U consistent with part 136 of this title 
or section 503(a) of the Indian Health Care Improvement Act (IHCIA), 
Public Law 94-437, as amended, 25 U.S.C. 1653(a).
    (j) No additional charges. A payment made in accordance with this 
section shall constitute payment in full and the hospital or its agent 
may not impose any additional charge--
    (1) On the individual for I/T/U authorized items and services; or
    (2) For information requested by the I/T/U or its agent or fiscal 
intermediary for the purposes of payment determinations or quality 
assurance.


Sec.  136.31  Authorization by urban Indian organization.

    An urban Indian organization may authorize for purchase items and 
services for an eligible urban Indian (as those terms are defined in 25 
U.S.C. 1603(f) and (h)) according to section 503 of the IHCIA and 
applicable regulations. Services and items furnished by Medicare-
participating inpatient hospitals shall be subject to the payment 
methodology set forth in Sec.  136.30.


Sec.  136.32  Disallowance.

    (a) If it is determined that a hospital has submitted inaccurate 
information for payment, such as admission, discharge or billing data, 
an I/T/U may as appropriate--
    (1) Deny payment (in whole or in part) with respect to any such 
services, and;
    (2) Disallow costs previously paid, including any payments made 
under any methodology authorized under this subpart. The recovery of 
payments made in error may be taken by any method authorized by law.
    (b) For cost based payments previously issued under this subpart, 
if it is determined that actual costs fall significantly below the 
computed rate actually paid, the computed rate may be retrospectively 
adjusted. The recovery of overpayments made as a result of the adjusted 
rate may be taken by any method authorized by law.

0
The Centers for Medicare & Medicaid Services is amending 42 CFR Chapter 
IV, as set forth below:

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
3. The authority citation for part 489 continues to read as follows:

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

Subpart B--Essentials of Provider Agreements

0
4. A new Sec.  489.29 is added to subpart B to read as follows:


Sec.  489.29  Special requirements concerning beneficiaries served by 
the Indian Health Service, Tribal health programs, and urban Indian 
organization health programs.

    (a) Hospitals (as defined in sections 1861(e) and (f) of the Social 
Security Act) and critical access hospitals (as defined in section 
1861(mm)(1) of the Social Security Act) that participate in the 
Medicare program and furnish inpatient hospital services must accept 
the payment methodology and no more than the rates of payment 
established under 42 CFR part 136, subpart D as payment in full for the 
following programs:
    (1) A contract health service (CHS) program under 42 CFR part 136, 
subpart C, of the Indian Health Service (IHS);
    (2) A CHS program under 42 CFR part 136, subpart C, carried out by 
an Indian Tribe or Tribal organization pursuant to the Indian Self-
Determination and Education Assistance Act, as amended, Public Law 93-
638, 25 U.S.C. 450 et seq.; and
    (3) A program funded through a grant or contract by the IHS and 
operated by an urban Indian organization under which items and services 
are purchased for an eligible urban Indian (as those terms are defined 
in 25 U.S.C. 1603 (f) and (h)).
    (b) Hospitals and critical access hospitals may not refuse service 
to an individual on the basis that the payment for such service is 
authorized under programs described in paragraph (a) of this section.

[FR Doc. 07-2740 Filed 6-1-07; 8:45 am]
BILLING CODE 4165-16-P