Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43657

Authority: 21 U.S.C. 346a and 371.

2. Section 180.1182 is added to

subpart D to read as follows:

§ 180.1182 Coat Protein of Potato Virus Y

and the genetic material necessary for its

production; exemption from the

requirement of a tolerance.

An exemption fron the requirement of

a tolerance is established for residues of

the biological plant pesticide Coat

Protein of Potato Virus Y and the

genetic material necessary for its

production in or on all food

commodities.

[FR Doc. 97–21690 Filed 8–14–97; 8:45 am]

BILLING CODE 6560–50–F

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, and 414

[BPD–763–F]

RIN 0938–AG20

Medicare Program; End-Stage Renal

Disease (ESRD) Payment Exception

Requests and Organ Procurement

Costs

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Final rule.

SUMMARY: These final regulations

specify the criteria HCFA uses to

determine if a facility that furnishes

dialysis services to Medicare patients

with end-stage renal disease (ESRD)

qualifies for a higher payment under an

exception to its prospectively

determined payment rate and the

procedures HCFA uses to evaluate ESRD

payment exception requests. These

regulations also revise the way HCFA

computes acquisition costs for organs

that are transplanted into Medicare

beneficiaries.

EFFECTIVE DATE: September 15, 1997.

FOR FURTHER INFORMATION CONTACT:

Michael Powell, (410) 786–4557.

SUPPLEMENTARY INFORMATION:

I. Background

Under sections 1881(b)(2) and (b)(7)

of the Social Security Act (the Act), a

facility that furnishes dialysis services

to Medicare patients with ESRD is paid

a prospectively determined rate for each

dialysis treatment furnished. This rate is

a composite that includes all costs

associated with furnishing dialysis

services except for the costs of

physician services and certain

laboratory tests and drugs that are billed

separately. The composite rate may be

adjusted periodically to reflect actual

facility costs.

When a facility’s costs are higher than

the prospectively determined rate, we

may, under certain conditions, grant the

facility an exception to its composite

rate and set a higher prospective rate.

The facility must show, on the basis of

projected cost and utilization trends,

that it will have an allowable cost per

treatment higher than its prospective

payment rate and that the excess costs

are attributable to one or more specific

circumstances. These conditions are

specified in existing regulations at 42

CFR 413.170 and are discussed in

greater detail in Chapter 27 of the

Medicare Provider Reimbursement

Manual (PRM) (HCFA Pub. 15–1).

A facility may incur excess costs

when it furnishes dialysis services to a

patient population with a greater than

average number of pediatric patients or

patients with other medical conditions,

such as those with heart disease or

unstable medical conditions, who

require special equipment, procedures,

supplies, or staff trained in treating

these patients. This is referred to as

‘‘atypical’’ service intensity (or patient

mix). A facility may also incur increased

costs when it is the only supplier of

dialysis services in its geographical area

and its patients are unable to obtain

dialysis services elsewhere without

considerable hardship (an isolated

essential facility).

Increased training costs may also be

associated with a facility’s self-dialysis

training program. A facility may train

patients to perform self-dialysis with

little or no professional assistance in the

facility or at home. It may also train

other individuals to assist patients in

performing self-dialysis or home

dialysis. A facility that has training

costs greater than its composite training

rate may apply for an exception, but

must prove that the costs are reasonable

and allowable.

Typically, a patient undergoes

dialysis three times a week. A facility

may furnish a substantial number of

treatments to patients who dialyze less

frequently than three times a week. As

a result, the facility typically has higher

per treatment costs because the

treatments involve increased labor or

supplies. When this occurs, a facility

may apply for an exception to the

composite rate.

On several occasions, we have denied

exception requests based on application

of the criteria contained in the PRM,

and the facilities have appealed the

denials. Subsequently, some denials

have been overturned by the Provider

Reimbursement Review Board (PRRB)

because the PRRB is not bound by the

guidelines in the PRM. Therefore, we

believe it is necessary to codify in

regulations the specific requirements for

determining exceptions.

II. Provisions of the Proposed Rule

On August 26, 1994, we published in

the Federal Register (59 FR 44097) a

proposed rule that specified the

conditions (previously contained in the

PRM) that a facility furnishing dialysis

services to patients with ESRD must

meet in order to qualify for a higher

payment under an exception to the

prospectively determined payment rate.

The proposed rule also contained the

criteria that we would use to evaluate

whether the facility meets the

conditions.

We also proposed to revise 42 CFR

Part 413, Subpart H, Payment for ESRD

Services. Currently, all of the Medicare

payment rules for covered outpatient

maintenance dialysis treatments can be

found in § 413.170. We proposed to

reorganize the content of Subpart H and

divide existing § 413.170 into several

smaller sections so that readers can

more easily locate specific topics. The

table outlining this change is shown

below.

New section Old section

413.170 Scope .............................................................................................................................................................................. 413.170(a)

413.172 Principles of prospective payment ................................................................................................................................. 413.170(b)

413.174 Prospective rates for hospital-based and independent ESRD facilities ........................................................................ 413.170(c)

413.176 Amount of payments ...................................................................................................................................................... 413.170(d)

413.178 Bad debts ....................................................................................................................................................................... 413.170(e)

413.180 Procedures for requesting exceptions to payment rates ............................................................................................... 413.170(f)

413.182 Criteria for approval of exception requests .................................................................................................................... 413.170(g)

413.184 Payment exception: Atypical service intensity (patient mix) .......................................................................................... 413.170(g)(1)

413.186 Payment exception: Isolated essential facility ................................................................................................................ 413.170(g)(2)
43658 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

New section Old section

413.188 Payment exception: Extraordinary circumstances ......................................................................................................... 413.170(g)(4)

413.190 Payment exception: Self-dialysis training costs ............................................................................................................. 413.170(g)(5)

413.192 Payment exception: Frequency of dialysis ..................................................................................................................... 413.170(g)(6)

413.194 Appeals ........................................................................................................................................................................... 413.170(h)

413.196 Notification of changes in rate-setting methodologies and payment rates .................................................................... 413.170(i)

413.198 Recordkeeping and cost reporting requirements for outpatient maintenance dialysis .................................................. 413.174

413.200 Payment of independent organ procurement organizations and histocompatibility laboratories .................................. 413.178

413.202 Organ procurement organization (OPO) cost for kidneys sent to foreign countries or transplanted in patients other

than Medicare beneficiaries.

413.179

III. Analysis of and Responses to Public

Comments

In response to the August 26, 1994

proposed rule, we received nine timely

items of correspondence. The specific

comments and our responses are set

forth below following each section

describing the specific provisions of the

proposed rule. The sections generally

follow the order of the discussed topics

in the proposed rule, with the exception

of the section entitled Bad debts that

appears last.

A. General

Comment: One commenter suggested

that we update the composite rate on a

regularly scheduled basis, as is done for

the hospital inpatient prospective

payment system rates, home health

agency rates, hospice rates, and

resource-based relative value scale rates.

Response: Under section 4201 of the

Omnibus Budget Reconciliation Act of

1990 (OBRA ’90), Public Law 101–508,

from January 1, 1991, onward, Congress

has set the composite rates for payment

for ESRD services furnished to Medicare

beneficiaries. Any change would require

legislative action. Thus, we have no

discretion in this regard.

B. Procedures for Requesting Exceptions

to Payment Rates (§ 413.180)

We proposed to redesignate the

content of § 413.170(f), Procedures for

requesting exceptions to payment rates,

as new § 413.180. In § 413.180(d), we

proposed to specify that a facility

requesting an exception to its payment

rate must do so within 180 days of:

• The effective date of its new

composite payment rate(s);

• The effective date that HCFA opens

the exceptions process; or

• The date on which an extraordinary

cost-increasing event, as described in

proposed §§ 413.182(c) and 413.188.

In § 413.180(f)(5), we proposed to

require that the facility applying for an

exception request compare its most

recently completed cost report with

those of prior years. Such comparisons

may reveal significant changes that may

indicate errors or problems with the cost

or statistical data and, thus, the need for

us to more intensively review the

applicable area. Any changes to cost or

statistical data (for example, number of

treatments) must be explained and the

explanation included with the

documentation supporting the

exception request.

We also proposed in § 413.180(f) and

§ 413.182 to require that ESRD facilities

provide documentation showing that

their excessive costs are specifically or

directly attributable to one or more of

the exception criteria. As an example,

for an atypical service intensity request,

the facility should be able to document

the excessive costs of furnishing care to

patients with severe medical conditions.

After submitting evidence that it treats

these patients, the facility should

submit records to show that a more

experienced and better trained nursing

staff is required to treat these patients

and/or additional nursing staff time is

needed. An example of the type of

records that a provider should submit to

document its higher nursing costs could

consist of staffing schedules indicating

staff and patients per shift. The facility

could indicate (on the schedules) the

patients with other medical conditions

that were treated and the more

experienced or additional staff needed

to treat them. The monthly staffing

schedules should represent 12 months

and coincide with the actual cost

reporting period of the cost report

submitted with the exception request.

In § 413.180 (g) and (h), we proposed

to codify in regulations the requirement

under section 1881(b)(7) of the Act that

specifies that unless we disapprove a

composite rate exception request within

60 working days after it is filed with an

intermediary, the exception is deemed

approved. We require that

intermediaries review and process all

exception requests within 15 working

days, and we process the exceptions

within 45 working days.

Comment: One commenter suggested

that we set three levels of

documentation for exception requests in

order to reduce the amount of work

involved in both the preparation and

review of an exception request. These

three levels of documentation would

include new requests, renewal of an

existing request with significant

changes, and renewal of an existing

request with no significant changes,

respectively. The first level (new

requests) would incorporate the

standard currently required for all

exception requests. The second level

(renewal of an existing request) would

require sufficient documentation to

justify any additional amounts over the

amount previously granted by HCFA but

would not require documentation for

previously justified exceptions. The

third level (renewal of an existing

request with no significant changes)

would require only the submission of

basic data and a facility certification to

demonstrate that the situation has not

changed.

Response: We do not agree with the

commenter that the exceptions process

should be established at three different

levels. Given the limited timeframe

allowed by the Act to approve or deny

an exception (60 working days), we do

not believe it would be feasible to sort

through three levels of requests and

address the specific issues associated

with each level. Moreover, because of

the volume of exceptions we receive

during each exception window, we are

unable to maintain exception

documentation on past windows inhouse, but must store these files at the

Federal Records Center. Retrieving

records could significantly lengthen the

time we would need to review a request.

However, we agree with the

commenter that requiring facilities to

file new exception requests each time a

cycle is opened may be overly

burdensome for those facilities where

no significant changes have occurred

from the previous exception cycle.

Therefore, we are providing (at

§ 413.180(e)) a mechanism for a facility

to request retention of its current

exception rate. This option is only

available to those facilities that can

demonstrate that the circumstances

under which their current exception

rates were granted still apply.

Historically, these providers have

been required to prepare new exception

request submissions for each exception
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43659

cycle. Almost all pediatric hospitals

furnishing dialysis services that apply

for exceptions are granted them, and the

same is true for many isolated essential

facilities. To ease the repetitive filing

burden (and cost) for these types of

facilities, we are providing for the

continuation of prior exception amounts

for qualifying facilities. Also, this

provision would eliminate uncertainties

concerning future payment rates.

We note that during an earlier

exception cycle that opened March 1,

1991 and closed August 27, 1991, we

allowed renal facilities a similar option

of continuing to receive the exception

payment rates approved during the

preceding exception cycle (December 1,

1989 to May 29, 1990).

For each exception cycle, servicing

intermediaries will inform all facilities

by letter, 30 days prior to the effective

date of a new exception cycle, that they

can request exception payment rates

approved during the preceding

exception cycle. The facilities must then

file a request with their servicing

intermediary during the 30 days prior to

the opening of the next exception cycle.

This request should consist of a letter to

the facility’s servicing intermediary

requesting the continuation of its

previously approved exception amount.

While no specific documentation is

required with this request, the facility

should provide enough information to

adequately demonstrate that the

circumstances under which the

previous exception was granted have

not changed. For example, for all

exception requests facilities should

document that its cost per treatment is

higher than its composite payment rate,

or if a facility is an isolated essential

facility, it should specify that no new

facilities have been established nearby.

This request must be filed with the

intermediary before the beginning of the

exception cycle. The document must be

delivered during the intermediary’s

regular business hours. Delivery of the

request must be accomplished through a

method that documents the time and

date of receipt. A postmark or other

similar mark does not serve as

documentation of the time and date of

receipt.

The intermediary will determine

whether the renal facility still meets the

exception criteria, that is, that the

circumstances under which the

exception was granted still exist. The

intermediary will be required to make a

determination on these requests within

10 working days and notify the provider

and HCFA. If the intermediary

determines that the renal facility meets

the exception criteria, the approved

exception amount would be equal to the

previously approved rate, and payment

at this approved rate would continue. In

cases where an exception cycle is

opened because a rate increase has been

approved by Congress, a facility that

chooses to retain its exception rate

would do so in lieu of any update to its

composite payment rate(s).

If the facility does not continue to

meet the exception criteria, the

intermediary will notify the facility that,

effective with the opening of the new

exception cycle, the currently approved

exception rate will expire and the

current composite rate will go into

effect. If this facility still believes it is

entitled to an exception during this

exception cycle, it can file a complete

exception request during the remainder

of the 180-day cycle.

If a renal facility does not request

retention of its previously approved

exception rate but still wishes an

exception, the facility would be

required to submit a new request during

the new exception cycle. However, the

approval of an exception does not

assure that the amount would be equal

to or higher than the currently approved

exception amount. Furthermore, if the

facility fails to adequately justify its

exception request in accordance with

the regulations and program

instructions, its exception request could

be denied.

Comment: One commenter suggested

that we add an inflation factor to the

approved rate in the second and third

year during which an exception has

been granted.

Response: A facility requesting

approval of an exception to its

composite rate must request a higher

payment rate based on its projected

budget estimate(s). Therefore, an

approved exception rate based on

projected costs would already include

the inflation factor. The projected

budget estimate(s) should cover the

period to which the exception rate is to

apply.

Comment: Several commenters

suggested that we should establish

regularly scheduled intervals or

effective dates for the opening of the

exceptions process to avoid placing an

administrative burden on the provider,

the intermediary, and HCFA.

Response: Currently, the exceptions

process is opened each time there is a

legislative change in the composite

payment rate. In addition, because of

the lack of any updates to the composite

rates in recent years, we have opened

the exceptions process three times

without issuing new rates, most recently

from November 1, 1993 through April

29, 1994. Only Congress has the

authority to issue new rates. Deciding

whether to issue new rates has been

driven by several factors, such as: (a) A

review of updated ESRD audited cost

and statistical data; (b) an analysis of the

general growth and mix of the ESRD

population in renal dialysis facilities,

and (c) Congressional concerns with

payment rates. Therefore, if new

prospective payment rates are not

issued by Congress, we will continue to

determine when to open the exceptions

process.

Comment: One commenter suggested

that when we open the exceptions

process all facilities should be eligible

to apply for an exception, rather than

the limited group of facilities specified

in the proposed rule.

Response: In the preamble of the

proposed rule, we stated that we had

opened the exceptions process in

situations where there had not been a

rate change, permitting facilities that

had received partial approvals, new

facilities, or facilities that had been

previously denied exceptions the

chance to file for an exception. We did

not mean to imply that the exceptions

process is only open to these facilities.

Whenever we have opened the

exceptions window, all facilities have

been permitted to apply for an

exception, regardless of previous

circumstances. However, it is only when

the exception window is open that a

facility may seek an exception.

Likewise, a facility wishing to retain its

previously approved exception rate may

only do so during the 30-day period

prior to the opening of an exception

cycle. We have added a sentence to

§ 413.180(b) to clarify this requirement.

Comment: One commenter pointed

out that § 413.180(f)(5), which requires

the facility to provide a comparative

analysis of its costs in the most recent

cost reporting period and prior years,

does not specify the number of prior

years’ data required. The commenter

believed that in order to avoid

arbitrarily denying an exception request

that did not contain enough

comparative years, we should specify

the number of years required.

Response: We agree with the

commenter and have included language

in § 413.180(f)(5) to state that the

materials submitted to us must include

a comparative analysis of the facility’s

costs in its most recently completed cost

report with reported costs from (at least

2) prior years.

Comment: One commenter

recommended that the regulation

should specify the intermediary’s

review responsibilities during the 15

working days it has to make a

recommendation to HCFA. Another

commenter stated that the
43660 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

intermediary’s determinations regarding

‘‘completeness’’ invite subjective

interpretations. Both commenters

suggested the intermediary’s 15 working

day timeframe should be extended.

Response: The specific review

responsibilities for intermediaries are

detailed in Chapter 27 of the PRM.

These responsibilities include: (a)

Reviewing for completeness and

accuracy the exception request, the cost

report, the facility’s projected costs, and

any other documentation submitted by

the facility to support its exception; (b)

maintaining a composite rate exception

log; (c) developing the content of the

letter used to return an exception

request to the facility; and (d)

determining whether the facility’s costs

are reasonable and allowable. The

intermediary makes the determination

with respect to ‘‘completeness,’’ and, if

the renal facility fails to submit the

documentation required by Chapter 27

of the PRM, the exception request is

returned to the facility. Rather than

specify the intermediary’s

responsibilities in the regulation, we

believe the PRM is the appropriate place

to do so. Because of the statutory

deadline (section 1881(b)(7) of the Act)

that an exception request is deemed

approved unless we disapprove it

within 60 working days, and the volume

of exceptions received during an

exceptions window, we believe the

present timeframes (15 working days for

the intermediary and 45 working days

for HCFA) for processing exceptions

should be maintained in order to ensure

that all exceptions are processed timely.

Comment: One commenter was

concerned about the implications of

proposed § 413.180(l). The commenter

stated that this section implies that the

facility must submit an entirely new

exception request if the first request (or

any subsequent request) is denied.

Furthermore, the commenter believed

that facilities should be able to send all

additional data or clarifications directly

to HCFA. The commenter asserted that

filing an entirely new request was

unnecessary.

Response: As explained above, the

intermediary has 15 working days to

review the exception request for

completeness and accuracy, and, if the

exception request is denied because the

ESRD facility did not submit the

required documentation, the

intermediary returns the exception

request with a letter. Presently, the

instructions in the PRM require that the

entire exception request be returned

when an exception is denied, and a new

request must be submitted with the

missing documentation.

We agree with the commenter that, in

this situation, the submission of an

entirely new exception request is not

necessary. We have revised the

instructions in the PRM to indicate that

the denial letter from the intermediary

to the ESRD facility will include a list

of missing or inadequate documentation

and the intermediary will request only

the submission of the missing or

corrected information. However, we do

not agree with the suggestion that the

ESRD facility should provide the

additional information directly to

HCFA. Because of the volume of

exceptions received during an exception

window, administratively it will be

more efficient to have each servicing

intermediary track the exceptions

processed through its office and review

the new information submitted by the

ESRD facility. The intermediary will

then forward the exceptions to us in

accordance with Chapter 27 of the PRM.

Comment: One commenter suggested

that because of the significant data

gathering and analysis required for an

exception, it should be understandable

that some data elements are missed or

that additional support or clarification

may be required by the intermediary.

The commenter suggested that providers

should be permitted to submit this

additional documentation after the 180-

day period without an immediate

exception denial. Furthermore, rate

increases should be approved

retroactively to the date that all detailed

information is received.

Response: We disagree with the

commenter. An ESRD facility that files

its exception request promptly at the

opening of a 180-day exception period

and has its exception denied would

have an additional opportunity to

submit a new request before the

exception period closes. If a facility

chooses instead to file an exception

request at or near the end of the 180-day

exception period and it is not filed with

all required documentation, we do not

believe that it is unfair to deny the

exception request. Facilities must accept

the risk associated with filing their

exception requests at the last minute.

Since the composite rate system is a

prospective payment system, we believe

that it would be inconsistent to grant

exceptions retroactively based on the

subsequent receipt of information.

C. Criteria for Approval of Exception

Requests (§ 413.182)

We proposed to redesignate the

contents of § 413.170(g), Criteria for

approval of exception requests, as

§ 413.182. In this section, we listed the

criteria that may be the basis of a rate

exception. These criteria are: atypical

service intensity (patient mix) (new

§ 413.184); isolated essential facility

(new § 413.186); extraordinary

circumstances (new § 413.188); selfdialysis training costs (new § 413.190);

and frequency of dialysis (new

§ 413.192).

We received no comments on this

listing. Comments on the criteria

themselves are discussed in the

appropriate sections below.

D. Payment Exception: Atypical Service

Intensity (Patient Mix) (§ 413.184)

In the proposed rule, we specified the

documentation required of a facility

requesting a rate exception based on

patient mix.

In § 413.184(b)(1), we proposed to

require that a facility submit a list of all

outpatient dialysis patients (including

all home patients) treated during the

most recently completed fiscal or

calendar year showing:

• Patients who received transplants,

including the date of the transplant;

• Patients awaiting a transplant who

are medically able, have given consent,

and are on an active transplant list, as

well as projected transplants;

• Home patients;

• In-facility patients, staff-assisted or

self-dialysis;

• Individual patient diagnoses;

• Diabetic patients;

• Patients isolated because of a

contagious disease;

• Age of patients;

• Mortality rate, by age and diagnosis;

• Number of patient transfers, reasons

for transfers, and any related

information; and

• Total number of hospital

admissions for the facility’s ESRD

patients, including reason and length of

stay for each admission.

When adjudicating exception requests

to determine if a substantial proportion

of the facility’s outpatient maintenance

dialysis treatments involves more

intense dialysis services and special

dialysis procedures, we will compare

the above data submitted by providers

to data contained in our Patient Profile

Tables. The information in the Tables is

developed annually and represents

information on persons with ESRD

covered by Medicare.

In § 413.184(b)(2)(i), we proposed to

require that a facility submit the

following documentation on costs of

nursing personnel (registered nurses

(RNs), licensed practical nurses (LPNs),

technicians and aides) incurred during

the most recently completed fiscal or

calendar year cost report showing:

• Amount of remuneration of each

employee;

• Number of personnel;
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43661

• Amount of time spent in the

dialysis unit; and

• Staff-to-patient ratio based on total

hours, with an analysis of productive

and nonproductive hours.

The facility must demonstrate that its

nursing personnel costs have been

allocated properly between each mode

of care, and that the additional nursing

hours per treatment are not the result of

an excess number of employees in the

outpatient maintenance renal dialysis

department. Normally, we use staff-topatient ratios to determine whether

there is an excess number of employees

assigned to a facility’s dialysis

department; however, we also may

consider staffing schedules. Thus, an

example of the type of records that a

provider should submit to document its

higher nursing costs could consist of

staffing schedules, indicating staff and

patients per shift. The facility could

indicate on the schedules the patients

with other medical conditions that were

treated and the more experienced or

additional staff needed to treat them.

When adjudicating exception

requests, we will utilize the above data

to determine if the facility’s patients

received significantly more nursing

hours per treatment than patients would

receive in other facilities and whether

the facility’s higher per treatment costs

were necessitated by the special needs

of the patients.

Proposed § 413.184(b)(2)(ii) included

the requirement that a facility submit

documentation on supply costs incurred

during the most recently completed

fiscal or calendar year cost report

showing—

• By modality, a complete list of

supplies used routinely in a dialysis

treatment;

• The make and model number and

component cost of each dialyzer; and

• That the supplies are prudently

purchased (for example, the facility uses

bulk purchase discounts when

available).

The facility must demonstrate that

excess supply cost per treatment is

caused by the special needs of the

patients and is not the result of

inefficiency.

When adjudicating exception

requests, we will utilize the above data

to determine if the facility’s patients

received supplies that are medically

necessary to meet their special medical

needs.

Comment: One commenter believed it

is an unreasonable burden to require

facilities to submit 12 months of staffing

schedules, since these schedules are not

normally kept as permanent files and a

facility might not be able to anticipate

the opening of an exception window.

The commenter suggested that 3 to 6

months of staffing schedules would be

more than reasonable to sufficiently

document a facility’s normal staffing

ratios.

Response: Staffing schedules were

only mentioned in the proposed rule as

an example of the type of records a

provider could submit to document its

higher nursing costs and/or to

demonstrate that there is not an

excessive number of employees

assigned to a facility’s dialysis

department. These schedules are basic

source documents representing services

rendered, and we believe that renal

dialysis facilities maintain these

schedules. We continue to believe that

it is not unreasonable for a facility to

submit 12 months of staffing schedules

in support of its higher nursing costs.

Regardless of the nature of the

supporting documentation submitted,

the facility must ensure that the data

adequately substantiate its higher labor

costs for the entire cost reporting year.

Comment: One commenter wanted

the meaning of ‘‘productive and

nonproductive hours’’ clarified. The

commenter was confused as to where

activities such as educational meetings,

lunch breaks, paperwork, and charting

fit into the documentation of staff costs.

Response: The term ‘‘productive

hours’’ means the amount of paid

nursing staff time spent on direct

(hands-on) patient care and any hours

explicitly connected to patient care,

such as charting. All other paid nursing

staff time, such as training, education,

management, holidays, vacations, sick

time, and lunch breaks, is considered

‘‘nonproductive hours’’.

Comment: One commenter believed

that serving an atypical patient

population could result in cost increases

in areas beyond staff and supplies.

Specifically, patients with severe

cardiac complications might require

additional monitoring equipment, and

patients with communicable respiratory

diseases (such as tuberculosis) might

require special ventilation systems. The

commenter recommended that

documented overhead costs should be

included in the calculation of a higher

exception rate.

Response: We agree with the

commenter and have in the past

approved exception amounts for

overhead costs related to (a) special

equipment necessary for the care of

patients with other medical conditions,

and (b) isolation areas required for the

care of hepatitis or other patients where

the facility can show that isolation is

necessary. For these costs to be

considered under this set of exception

criteria, documentation must be

submitted demonstrating the basis of the

higher costs and the incremental impact

on per treatment costs. The

documentation must also explain how

these costs relate to the atypical patient

mix exception criteria. We have added

§ 413.184(b)(2)(iii) to state that the

facility must submit documentation on

overhead costs incurred during the most

recently completed cost reporting year

showing—

• The basis of the higher overhead

costs;

• The impact on the specific cost

components; and

• The effect on per treatment costs.

Comment: One commenter suggested

that we should publish a complete,

detailed list of supplies used in the

typical dialysis treatment, including the

cost of those supplies and the volume of

each that is used per treatment. The

commenter recommended that the

listing should be in the same format as

we require the facilities to use. The

commenter also stated that we must

publish the components of the

composite rate in order to allow

appropriate comparisons, including the

costs, staffing ratios, and employee mix

(that is, anything that we deem to be

essential in order to make the

comparison).

Response: When evaluating the

reasonableness of a facility’s component

costs shown in its exception request, we

use national data and general program

statistics. Chapter 27 of the PRM

includes our median cost per treatment

data as follows:

Cost component Amount

Salaries ........................................... $40.00

Supplies .......................................... 33.00

Overhead, excluding employee

benefits ........................................ 47.00

Overhead, including employee benefits .............................................. 54.00

Employee benefits .......................... 7.00

Laboratory ....................................... 3.00

We do not maintain detailed

breakdowns of the above cost

components. The cost components were

derived from audited cost reports of

hospital-based and independent renal

dialysis facilities. Therefore, it would be

difficult for us to publish an accurate

list of these components to use as

comparisons.

Comment: One commenter stated that

where a provider had demonstrated that

higher nursing staff costs are necessary

to care for the sicker patients being

treated, we should also recognize the

higher amount of administrative and

general (A & G) costs that will be

allocated through the step-down process

on the hospital’s cost report. The
43662 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

commenter also stated that since

Medicare cost reporting policy

recognizes ‘‘accumulated cost’’ as a fair

and accurate basis for allocating A & G

costs for cost reporting purposes, we

must consider these allocated A & G

costs when adjudicating ESRD

exception requests.

Response: As stated in the proposed

rule, the accounting protocol used for

cost reporting is separate and distinct

from identifying the actual A & G costs

that are directly attributable to higher

nursing staff costs. For a hospital-based

facility, if the direct cost of nursing staff

salaries in the dialysis department

increased, the A & G allocated to that

department would automatically

increase. This is the result of the

hospital cost reporting accounting

protocol, which requires A & G costs to

be allocated on the basis of the

accumulated costs of the other

departments. Since the total A & G costs

represent costs allocated to the dialysis

department, they do not accurately

reflect the actual A & G costs incurred

as a result of the additional nursing staff

salary costs.

In accordance with § 413.180(f)(3), a

facility must submit materials that show

that the elements of excessive costs are

specifically attributable to one or more

of the conditions specified by the

exception criteria set forth in § 413.182.

According to § 413.182, HCFA may

approve exceptions to an ESRD facility’s

prospective payment rate if the facility

demonstrates with convincing objective

evidence that its total per treatment

costs are reasonable and allowable

under the relevant cost reimbursement

principles of Part 413 and its per

treatment costs, in excess of its payment

rate, are directly attributable to any of

the exception criteria.

Our regulations do not require that

the same principles of cost allocations

and cost apportionment be used to

determine which costs, in excess of the

payment rate, are directly attributable to

the exception criteria. Moreover, a

provider that is granted an exception is

not automatically entitled to the same

payment it would have received under

cost reimbursement. The excess costs

must be directly attributable to the

exception criteria.

E. Payment Exception: Isolated Essential

Facility (§ 413.186)

We proposed to include the

requirements of existing § 413.170(g)(2)

as new § 413.186, and add

documentation requirements for

facilities that apply for a payment rate

exception based on being an isolated

essential facility.

1. Isolated Facility

To be considered isolated, a facility

must document that it is located outside

an established Metropolitan Statistical

Area (MSA) and provides dialysis to a

permanent patient population as

opposed to a transient patient

population.

2. Essential Facility

To be considered essential, the facility

must document that a substantial

number of its patients cannot obtain

dialysis services elsewhere without

substantial additional hardship and the

additional hardship the patients will

incur, generally, will be in travel time

and cost.

3. Cost Per Treatment

The facility must document that its

cost per treatment is reasonable and

explain how the facility’s cost per

treatment in excess of its composite rate

relates to the isolated essential facility

criteria. For example, if a facility incurs

higher supply costs, it must identify the

additional costs incurred on a per

treatment basis and then relate that

additional cost per treatment to the

exception criteria.

4. Additional Information

The facility must also furnish, in a

format that concisely explains the

facility’s cost and patient data to

support its request, the following

information:

• A list of current and requested

payment rates for each modality.

• An explanation of how the facility’s

costs in excess of its composite rate

payment are attributable to the isolated

essential facility criteria.

• An explanation of any unusual

geographic conditions in the area

surrounding the facility.

• A copy of the latest filed cost report

and a budget estimate for the next 12

months on cost report forms.

• An explanation of unusual costs

reported on the facility’s actual or

budgeted cost reports and any

significant changes in budgeted costs

and data compared to actual costs and

data reported on the latest filed cost

report.

• The name, location of, and distance

to the nearest ESRD facility.

• A list of patients, treatment

modality, commuting distance, and

commuting time to the current and next

to nearest ESRD facility.

• The historical and projected

patient-to-staff ratios and number of

machines used for maintenance dialysis

treatments.

• A computation of the facility’s

treatment capacity, computed by

dividing the maintenance treatments

actually furnished by the total

maintenance treatments that could have

been furnished (in other words, total

stations multiplied by the number of

hours of operation divided by the

average length of dialysis) for the year.

• The geographic boundaries and

population size of the facility’s service

area.

Comment: One commenter sought an

explanation of the basis for the existing

volume of treatment criterion

(redesignated § 413.186(b)(3)). The

commenter also recommended the

establishment of a guideline for the

necessary size of a facility’s permanent

patient population and a guideline

related to a facility’s minimum

utilization rate.

Response: Facilities applying for an

isolated essential facility exception are

required to submit information with

respect to the volume of treatments in

order to permit comparisons with

similar facilities and to determine a

facility’s treatment capacity. We will

review the issue of developing

guidelines for permanent patient

population size and minimum

utilization rates to determine whether it

is appropriate to establish national

guidelines.

Comment: One commenter requested

that we clarify the language in

§ 413.186(b)(4) pertaining to usage of the

facility ‘‘by area residents other than the

applying facility’s patients.’’

Response: We have revised

§ 413.186(b)(4) to specify that in

determining whether a facility qualifies

for an exception based on its being an

isolated essential facility, we will

consider the extent to which dialysis

facilities (other than the applying

facility’s patients) are used by area

residents.

Comment: One commenter suggested

that a facility could be located in an

MSA but still be the only supplier of

dialysis in its geographical area. The

commenter recommended that

§ 413.186(c)(1) be revised to prevent an

otherwise ‘‘isolated’’ and ‘‘essential’’

facility from being automatically denied

because it is located in an MSA.

Response: We agree with the

commenter that it is possible that an

‘‘isolated’’ facility might be located in

an MSA but still qualify for an

exception based on all other criteria

specified in this section. We are aware

of several unique situations in this

country where only one dialysis facility

is located in a particular area that is

considered an MSA. In these situations,

given the characteristics associated with

most MSAs, we look more closely at

whether these facilities are truly
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43663

isolated (for example, increased

availability of mass transportation,

better road conditions, and stronger

commuting patterns).

Further, we are aware that sole

community hospitals (SCHs) and

isolated essential facilities are defined

utilizing different criteria. SCHs and

isolated essential facilities render

distinct care, with SCHs responsible for

normal inpatient hospital stays, and

isolated essential facilities responsible

for routine outpatient maintenance

dialysis that can be provided by a

hospital-based or independent dialysis

facility. Also, SCHs are defined under

42 CFR Part 412—Prospective Payment

Systems for Inpatient Hospital Services,

and isolated essential facilities are

defined under 42 CFR Part 413, subpart

H—Payment for End-Stage Renal

Disease Services. However, in one

criterion, location in an MSA, the

definitions are similar. Within this

definition, an SCH located in an MSA

is automatically disqualified from being

designated as an SCH. Because of the

differences between isolated essential

facilities and SCHs and the fact that

several isolated essential facilities are

unique (as explained above) we are

changing the definition for isolated

essential facilities located in an MSA.

Therefore, we are revising

§ 413.186(c)(1) to state that to be

considered isolated, we would generally

require the facility to document that it

is located outside an established MSA.

F. Payment Exception: Extraordinary

Circumstances (§ 413.188)

We proposed to redesignate existing

§ 413.170(g)(4) as § 413.188.

We received no comments on this

proposed change.

G. Payment Exception: Self-Dialysis

Training Costs (§ 413.190)

We proposed to repeat the content of

existing § 413.170(g)(5) in new

§ 413.190(a) and to specify the

documentation that we would require of

a facility requesting a rate exception

under this provision. We proposed to

require that a facility justify its

exception request by separately

identifying those elements contributing

to its costs in excess of the composite

training rate. In adjudicating these

exception requests, we would consider

the facility’s total costs, cost finding,

and apportionment, including its

allocation methodology, to determine if

costs are properly reported by treatment

modality. Exception requests for a

higher training rate will be granted only

with respect to those cost components

relating to training such as technical

staff, medical supplies, and the special

costs of education (manuals and

education materials). Overhead and

other indirect costs do not generally

form a basis for granting an exception

for purposes of self-dialysis training

costs.

Under § 413.190(e), we proposed that

the facility must provide the following

information to support its exception

request:

• A copy of the facility’s training

program.

• Computation of the facility’s cost

per treatment for maintenance and

training sessions, including an

explanation of the cost difference

between the two modalities.

• Class size and patients’ training

schedules.

• Number of training sessions

required, by treatment modality, to train

patients.

• Number of patients trained for the

current year and the prior 2 years on a

monthly basis.

• Projection for the next 12 months of

future training candidates.

• Number and qualifications of staff

at training sessions.

Proposed § 413.190(f) provided that

an ESRD facility may bill Medicare for

a dialysis training session only when a

patient receives a dialysis treatment

(which normally is three times a week).

If an ESRD facility elects to train all its

patients using a particular modality

more often than during each dialysis

treatment and, as a result, the number

of actual training sessions exceeds the

billable limit, the facility may request a

composite rate adjustment limited to the

lesser of the facility’s projected training

cost per treatment or calculate the cost

per treatment using the minimum and

maximum training sessions discussed

below.

An ESRD facility may bill a maximum

of 25 training sessions per patient for

hemodialysis training and 15 training

sessions for continuous cycling

peritoneal dialysis (CCPD) and

continuous ambulatory peritoneal

dialysis (CAPD) training. To ensure

adequate patient training, we presume a

minimum number of training sessions

per patient in calculating exception

rates, 15 for hemodialysis and 5 for

CAPD and CCPD, where the renal

facility’s actual experience is less than

the minimum number of training

sessions.

To justify an accelerated training

exception request, the proposed rule

required that an ESRD facility document

that all training sessions provided under

a particular modality are to be provided

during the shorter but more condensed

period. The facility must submit with

the exception request a list of patients,

by modality, trained during the most

recent cost report period. The list must

include each beneficiary’s name, age,

and training status (completed, not

completed, being retrained, or in the

process of being trained). The total

treatments from the patient list must

agree with the total treatments reported

on the cost report filed with the request.

We proposed to deny any exception

request that a facility submits without

the above documentation.

For purposes of clarification, we have

revised § 413.190(f)(2) to state that a

facility may request an exception if the

facility elects to train its patients using

a particular treatment modality more

often than during each dialysis

treatment and, as a result, the number

of its billable training dialysis sessions

is less than its actual training sessions.

Comment: One commenter objected to

the current criterion under which a

facility must train at least five patients

per year in order to qualify for a selfdialysis training exception. The

commenter believed that establishing a

minimum number of patients trained

may serve as a disincentive for facilities

to start a new home training program

and may conflict with the requirement

of section 1881(b)(7) of the Act and

proposed § 413.174(a)(3) states that our

payment policies provide incentives for

increasing the use of home dialysis.

Response: This criterion was not

addressed in the proposed rule.

However, we do use a minimum

number of three patients per modality as

a qualifying criterion for a self-dialysis

training exception. To determine if a

facility qualifies, we use each facility’s

average number of patients trained for

the 2 previous years (if 2 years are

available). We believe each facility must

have a minimum number of patients to

ensure that it is operating an ongoing

cost-effective training program. Based

on our experience and review of this

subject we determined the number to be

three.

Comment: One commenter suggested

that the overhead and physical plant

cost components represent real,

necessary, and unavoidable facility

costs and should be included in the

calculation of training exception rates.

Response: In the proposed rule at

§ 413.190(d), we stated that the higher

training costs do not generally include

overhead and other indirect costs.

However, we agree with the commenter

that it is appropriate to include

overhead and physical plant costs for

exception request purposes. Therefore,

we have revised this section to state that

‘‘the exception requests for higher

training rates are limited to those cost

components relating to training such as
43664 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

technical staff, medical supplies, and

the special costs of education (manuals

and education materials). These

requests may include overhead and

other indirect costs to the extent that

these costs are directly attributable to

the additional training costs.’’

Comment: One commenter stated that

under proposed § 413.190(f)(1),

accelerated training exceptions

evidently are based on training sessions

for hemodialysis training, since

hemodialysis is normally furnished

three times a week. The commenter

believed the regulations should also

provide for exceptions for accelerated

training associated with CAPD or CCPD,

which are typically daily treatment

modalities.

Response: The proposed rule may not

have been clear with respect to

exceptions related to CAPD and CCPD

training. Although CAPD and CCPD are

daily treatment modalities, ESRD

facilities are paid for training sessions

based on the equivalent of three

hemodialysis treatments a week for each

week that CAPD and CCPD treatments

are provided. Accordingly, we are

revising § 413.190(f)(1) to specify the

basis for payment of training sessions

for CAPD and CCPD patients. Thus,

exceptions for accelerated training are

considered for each modality (including

CAPD and CCPD) based on the number

of actual training sessions in excess of

billable training sessions (three per

week).

Comment: One commenter objected to

our proposed requirement that every

training session for a particular

modality be provided during the

shorter, but more condensed, training

period.

Response: We have revised proposed

§ 413.190(f)(5) to change the

requirement that ‘‘all’’ training sessions

be provided on an accelerated basis and

are instead requiring that an ESRD

facility must show that ‘‘a significant

number of training sessions for a

particular modality are provided during

a shorter, but more condensed, period.’’

Based on our experience and review of

this subject we determined that 80

percent represents a significant number

of training sessions.

H. Payment Exception: Frequency of

Dialysis (§ 413.192)

We proposed to redesignate

§ 413.170(g)(6) as § 413.192 and add

several new requirements as discussed

below.

Existing § 412.170(g)(6) specifies that,

to qualify for an exception to the

prospective payment rate based on

frequency of dialysis, the facility must

have a substantial portion of outpatient

maintenance dialysis treatments

furnished to patients who dialyze less

frequently than three times per week. A

facility that furnishes a substantial

portion of outpatient maintenance

dialysis services to patients who dialyze

less frequently than three times per

week typically has higher costs per

treatment because the treatments that

are furnished to these patients last

longer and involve higher labor and

supply costs. For a facility to qualify as

having a substantial portion of

outpatient maintenance dialysis

treatments furnished to patients who

dialyze less frequently than three times

per week, a facility must be able to

document that it has a decrease in

treatments in excess of 15 percent and

cost increases due to frequency.

To document that it furnishes a

substantial number of dialysis

treatments at a frequency of less than

three times per week, we proposed that

a facility must submit a list of patients

who received outpatient dialysis

treatments for the latest historical cost

report that is being filed with the

request. The list must indicate—

• Whether the patients are

permanent, transient (vacationing

patients or frequently relocating

patients), or temporary;

• The medically prescribed frequency

of dialysis; and

• The number of dialysis treatments

that each patient received on a weekly

and yearly basis and an explanation of

any discrepancy between that

calculation and the number of

treatments reported on the facility’s cost

report.

We also proposed that the facility

must submit a list of patients used to

project treatments. The list must

indicate—

• Whether the patients are

permanent, transient, or temporary;

• The medically prescribed frequency

of dialysis; and

• The number of dialysis treatments

that each patient is projected to receive

on a weekly and yearly basis, an

explanation of any discrepancy between

that calculation and the number of

treatments reported on the facility’s

projected cost report, and an

explanation for any change between

prior, actual, and projected data.

In order for us to determine if the

facility meets the 15 percent

requirement discussed above, the

following information must be

submitted:

• A schedule showing the number of

treatments to be furnished twice a week

and the number of treatments that

would have been furnished if each

beneficiary were dialyzed three times a

week, including a computation of the

facility’s projected cost per treatment

using projected treatments based on the

twice a week calculation and the three

times a week calculation.

• A schedule showing the

computation of the percentage decrease

in the number of treatments, which

must be at least 15 percent to be deemed

substantial for approval of an exception.

We received no comments on these

proposed provision.

I. Appeals (§ 413.194)

We proposed to redesignate existing

§ 413.170(h) as § 413.194. In addition,

we proposed to specify that exhaustion

of administrative remedies is a

prerequisite for judicial review.

We did not receive any comments on

these proposed changes.

J. Notification of Changes in RateSetting Methodologies and Payment

Rates (§ 413.196)

We proposed to redesignate existing

§ 413.170(i) as § 413.196 with only

coding and editorial changes.

We did not receive any comments on

these proposed changes.

K. Recordkeeping and Cost Reporting

Requirements for Outpatient

Maintenance Dialysis (§ 413.198)

We proposed to redesignate existing

§ 413.174 as § 413.198.

We did not receive any comments on

this proposed change.

L. Organ Acquisition Costs (§ 412.113)

Under § 412.113, Medicare pays for

kidney, heart, liver, and lung

acquisition costs incurred by transplant

centers on a reasonable cost basis.

Currently, Medicare-certified transplant

centers compute Medicare acquisition

costs for these organs on Supplemental

Worksheet D–6 of the Hospital Cost

Report (Form HCFA–2552). The average

acquisition costs of hearts, livers, and

lungs transplanted in patients other

than Medicare beneficiaries are

deducted from the total acquisition

costs for all hearts, livers, and lungs.

Medicare reimburses the remaining

balance as program costs for these

organs. Based on recent cost analyses,

we are concerned about the high

Medicare costs associated with

acquiring a small number of hearts,

livers, and lungs. As a result, we

proposed to change the method of

computing heart, liver, and lung

acquisition costs to determine more

accurately the costs of acquiring organs

transplanted in Medicare recipients.

The method we proposed for computing

acquisition costs for hearts, livers, and

lungs conforms to the method used for
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43665

kidney acquisition costs, which more

accurately accounts for Medicare’s

portion of such costs, including organ

wastage. The formula for payment for

kidney acquisition is specified in

existing § 413.179. We also proposed to

revise the heading in paragraph (d) of

this section by replacing the terms

‘‘heart, kidney, liver, and lung’’ with

‘‘organ’’ and revising the cross-reference

to indicate that ‘‘organs are defined in

§ 486.302.’’

In the August 26, 1994 proposed rule,

we made the following specific

proposals:

1. Payment to Independent Organ

Procurement Organizations (OPOs) and

Histocompatibility Laboratories

We proposed to redesignate existing

§ 413.178 as § 413.200. In proposed

§ 413.200(b), we revised the definition

of ‘‘freestanding’’ to provide that an

OPO or a histocompatibility laboratory

is freestanding unless it—

• Is subject to the control of the

hospital with regard to the hiring, firing,

training, and paying of employees; and

• Is considered as a department of the

hospital for insurance purposes

(including malpractice insurance,

general liability insurance, worker’s

compensation insurance, and employee

retirement insurance).

We also proposed to remove from the

definition of ‘‘freestanding’’ the

requirement that hospital-based OPOs

service a single transplant center.

Section 4009(g) of the Omnibus Budget

Reconciliation Act of 1987 (Public Law

100–203) required that OPOs be

designated by Medicare to include no

more than one OPO per service area. As

the certification process limited only

one OPO to an area and some of the

OPOs were hospital-based, limiting the

OPO’s responsibility to a single

transplant center became impractical.

An OPO (whether independent or

hospital-based) is required to service all

transplant centers in its area.

Accordingly, a hospital-based OPO may

not necessarily service a single

transplant center.

We received no comments on this

proposed revision.

2. OPO or Transplant Center Costs for

Kidneys Sent to Foreign Countries or

Transplanted in Patients Other Than

Medicare Beneficiaries

We proposed to redesignate existing

§ 413.179 as § 413.202 with the changes

discussed below.

We proposed to expand the

applicability of redesignated § 413.202

to include hearts, livers, and lungs by

making it apply to ‘‘organs’’ instead of

‘‘kidneys.’’ We believed that this

revision would result in a more

reasonable determination of Medicare

heart, liver, and lung acquisition costs

because the formula for determining

kidney acquisition costs more fairly

accounts for Medicare’s portion of such

costs, including organ wastage. We cross

referred § 412.113 to § 413.202 to ensure

proper cost determination.

Comment: Several commenters

asserted that substituting the term

‘‘organs’’ for ‘‘kidneys’’ in redesignated

§ 413.202 inappropriately imposed the

revised methodology for determining

Medicare’s share of heart, liver, and

lung acquisition costs on OPOs. They

argued that OPOs do not have the data

necessary to allocate organs between

Medicare and non-Medicare patients.

Response: We agree with the

commenters that substituting the term

‘‘organs’’ for ‘‘kidneys’’ would impose

the revised methodology for

determining Medicare’s share of heart,

liver, and lung acquisition costs on

OPOs. Our intention in the proposed

notice was to revise the methodology for

Medicare transplant centers, but the

proposed revision of redesignated

§ 413.202 inadvertently applied to OPOs

as well. Therefore, we have returned to

the original language in redesignated

§ 413.202 by resubstituting ‘‘kidneys’’

for ‘‘organs’’ and removing any

reference to transplant centers; however,

this section is now only applicable to

OPOs. To account for all organs

acquired by all transplant centers, we

have added § 413.203. In addition, we

have specified that the term ‘‘organs’’ is

defined in § 486.302.

Comment: Several commenters

suggested that the payment method that

we proposed to apply to heart, liver, and

lung acquisition costs is not always

accurate. The number of Medicare

beneficiaries awaiting kidneys and

receiving ancillary pretransplant

services could be greater or less than the

percentage of Medicare beneficiaries

ultimately receiving transplants. The

commenters suggested revising

Supplemental Worksheet D–6 (HCFA

Form 2552), so that the kidney

acquisition ancillary charges can be

segregated into two columns, one for

Medicare beneficiary services and

another for the non-Medicare patients,

thereby assuring that the appropriate

ancillary service costs for each payer

group could be accurately identified.

The other direct kidney acquisition

costs such as the kidney itself,

transportation costs, etc., flowing

through the step-down process could be

determined based on the ratio of usable

kidneys transplanted into Medicare and

non-Medicare patients. The commenters

believed that this approach would

ensure that we would not be in violation

of the requirement under section

1861(v)(1)(A) of the Act that the costs of

services be borne by the appropriate

payer.

Response: We will consider the

suggested ancillary cost report revisions

during our next review of Supplemental

Worksheet D–6.

M. Payment for Erythropoietin/Epoietin

(EPO) (§ 413.174(f))

Erythropoietin (EPO) is an antianemia drug given to dialysis patients

with a specified level of anemia.

Payments to ESRD facilities for EPO are

based on increments of 1,000 unit doses,

rounded to the nearest 100 units.

Section 13566 of the Omnibus Budget

Reconciliation Act of 1993 (Public Law

103–66) amended section

1881(b)(11)(B)(ii) of the Act to reduce

the maximum payment for EPO from

$11 to $10 per 1,000 units. HCFA may

adjust this amount, as appropriate,

within stated limits. Existing

§ 413.170(c)(6)(iii)(B) provides for

annual publication of a Federal Register

notice indicating whether an update in

the EPO payment amount is appropriate

and requesting public comment. We

proposed to revise § 413.174(f) to add

the statutory reference and to state that

we would only publish a Federal

Register notice proposing a revision to

the EPO payment amount when we

determine that an adjustment to the

payment amount is necessary. We

would no longer publish an annual

notice.

Comment: One commenter supported

our proposal to eliminate the

requirement to publish an annual notice

regarding EPO payment when there is

no payment change. However, the

commenter objected to the provision

under proposed § 413.174(f)(3)(iii) that

limited any EPO payment increases to

the percentage increase in the implicit

price deflator for the gross national

product. The commenter believed that

this provision is unfair to ESRD

providers because the providers cannot

control the cost of EPO. The commenter

noted that other drugs given to dialysis

patients are reimbursed based on

acquisition costs or wholesale prices, or

both.

Response: Proposed § 413.174(f)(3)(iii)

is merely a redesignation of existing

§ 413.170(c)(6)(iii)(c). This provision is

mandated by section

1881(b)(11)(B)(ii)(II) of the Act, which

gives the Secretary authority to adjust

the EPO payment rate (beginning in

1995), but limits the amount of any

payment increase. Since this

requirement is statutorily mandated, we

do not have the authority to eliminate
43666 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

this provision. However, in assessing

the need for an adjustment to the EPO

payment rate, we would consider the

actual costs incurred by ESRD facilities

for EPO. If we determined that the

payment limit set by statute is

inadequate to ensure access to EPO by

Medicare beneficiaries, we would seek a

legislative change.

N. Bad Debts (§ 413.178)

In the proposed rule, we proposed to

redesignate existing § 413.178 as

§ 413.200 and move the requirements of

existing § 413.170(e) to new § 413.178.

New § 413.178 will cover the

proceedings for payment and

reimbursement of bad debts.

Comment: One commenter suggested

that the language in proposed § 413.178,

implies that ESRD facilities can be

reimbursed for all Medicare bad debts

incurred for all covered services

provided. The commenter contended

that past policy had allowed

reimbursement for Medicare bad debts

incurred in the provision of ‘‘composite

rate’’ dialysis services only. Therefore,

the commenter recommended that the

wording be modified to clarify that only

bad debts related to composite rate

services are subject to reimbursement.

Response: We have not made any

changes to our existing bad debt policy.

Medicare bad debts for ESRD services

(that is, services covered under the

composite rate) will continue to be

determined by calculating a facility’s

unrecovered reasonable costs, which

represent the difference between a

facility’s total Medicare revenues

(including beneficiaries’ payments) and

Medicare total reasonable costs.

Payment for allowable bad debts is

limited to the lesser of the unrecovered

reasonable costs or the total of Medicare

uncollectible deductibles and

coinsurance. An example can be found

in chapter 27 of the PRM. We reimburse

each facility its allowable Medicare bad

debts in a single lump sum payment

after the facility’s cost reporting period

ends. As the commenter suggested, we

have revised § 413.178(c) to clarify,

consistent with our longstanding policy,

that reimbursement for bad debts is

available only for covered services

under the composite rate.

IV. Provisions of Final Regulations

As discussed above, we have

considered the public comments

received on the August 26, 1994

proposed rule and we are adopting that

rule as final with the following

modifications:

• In § 413.178(c), we state that a

facility must request payment for

uncollectible deductible and

coinsurance amounts owed by

beneficiaries by submitting an itemized

list of all specific uncollectable amounts

related to covered services under the

composite rate.

• We have added a sentence to

§ 413.180(b) to clarify the requirement

that a facility wishing to retain its

previously approved exception rate may

only do so during the 30-day period

prior to the opening of an exception

cycle.

• We have added § 413.180(e) to state

that a facility may elect to retain its

previously approved exception rate in

lieu of any composite rate increase or

any other exception amount if—

(1) The conditions under which the

exception was granted have not

changed;

(2) The facility files a request to retain

the rate with its fiscal intermediary

during the 30-day period before the

opening of an exception cycle; and

(3) The request is approved by the

fiscal intermediary.

• We specify in § 413.180(f)(5) that

the facility must compare its most

recently completed cost report with cost

reports from ‘‘(at least 2)’’ prior years.

• We have added new

§ 413.184(b)(2)(iii), stating that the

facility must submit documentation on

overhead costs incurred during the most

recently completed fiscal or calendar

year cost report showing the basis of the

higher overhead costs, the impact on the

specific cost components, and the effect

on per treatment costs.

• We have revised § 413.186(b)(4) to

clarify that in determining whether a

facility qualifies for an exception based

on its being an isolated essential facility,

we consider other dialysis facility usage

by area residents (other than the

applying facility’s patients).

• We have revised § 413.186(c)(1) to

state that to be considered isolated,

‘‘generally’’ a facility is located outside

an established MSA and provides

dialysis to a permanent patient

population.

• In § 413.190(d), we have specified

that an exception request for a higher

training rate may include overhead and

other indirect costs to the extent that

these costs are directly attributable to

the additional training costs.

• In § 413.190(f)(1), we have added

language to state that although CCPD

and CAPD are daily treatment

modalities, ESRD facilities are paid the

equivalent of three hemodialysis

training treatments for each week that

CAPD and CCPD training treatments are

provided.

• We have revised § 413.190(f)(2) to

state that a facility may request an

exception if the facility elects to train its

patients using a particular treatment

modality more often than during each

dialysis treatment and, as a result, the

number of its billable training dialysis

sessions is less than its actual training

sessions.

• We have revised § 413.190(f)(5) to

state that, to justify an accelerated

training exception request, an ESRD

facility must document that a

‘‘significant number of’’ training

sessions, rather than ‘‘all’’ sessions for a

particular modality are provided during

a shorter but more condensed period.

• In redesignated § 413.198, we have

revised the cross-references.

• We have made several changes

related to organ acquisition costs.

+ In § 412.113(d), we revised the

paragraph heading, and replaced the

terms ‘‘heart, kidney, liver, and lung’’

with ‘‘organ’’. We also revised the crossreference to indicate that ‘‘organs are

defined in § 485.12’’.

+ In § 413.202, we revised the section

title and made other technical changes.

+ We added a new § 413.203 that

specifies the transplant centers’ costs for

organs sent to foreign countries or

transplanted in patients other than

Medicare beneficiaries.

• We also have made minor technical

changes to the regulation text for

readability and ease of use.

V. Impact Statement

HCFA has examined the impacts of

this final rule as required by Executive

Order 12866 and the Regulatory

Flexibility Act (Public Law 96–354).

Executive Order 12866 directs agencies

to assess all costs and benefits of

available regulatory alternatives and,

when regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health

and safety effects; distributive impacts;

and equity. The Regulatory Flexibility

Act requires agencies to analyze options

for regulatory relief for small businesses.

For purposes of the RFA, States and

individuals are not considered small

entities. We do consider all hospitals

and ESRD facilities as small entities.

In addition, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis if a rule may have a

significant impact on the operations of

a substantial number of small rural

hospitals. Such an analysis must

conform to the provisions of section 604

of the RFA. For purposes of section

1102(b) of the Act, we define a small

rural hospital as a hospital that is

located outside of a Metropolitan

Statistical Area and has fewer than 50

beds.
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43667

A. Payment Exception Requests

The purpose of this portion of this

final rule is generally to codify in

regulations existing policy concerning

an ESRD facility’s request for an

exception to its prospectively

determined payment rate. This policy is

contained in chapter 27 of the PRM.

This final rule affects all ESRD facilities,

including hospital-based and

freestanding, that file a request for an

ESRD exception.

Our records indicate that as of

December 31, 1994, there were 2,526

renal dialysis facilities, all of which

were eligible to file exception requests.

Of these, 377 or 15 percent of the

facilities filed exception requests during

our most recent exception cycle,

November 1, 1993 to April 29, 1994. Of

these requests, 293 facilities were

granted exceptions (mostly partially

granted), and 84 were denied.

Currently, a facility whose request is

granted only partially or is denied an

exception may appeal this

determination to the PRRB. The PRRB is

bound by the statute and regulations but

not by program instructions; thus, it

may come to a different conclusion than

if it followed program instructions.

Codifying in regulations details now

found in the PRM instructions will bind

the PRRB to more specific bases for

adjudicating an appeal of a partially

denied or denied exception request.

B. Organ Acquisition Costs

In 1994, there were 72 hospitals

certified to perform heart transplants,

and 40 hospitals certified to perform

liver transplants. These hospitals

constitute less than 2 percent of all

Medicare-participating hospitals. In

1994, there were 381 heart transplants

and 283 liver transplants performed on

Medicare beneficiaries. Although the

number of Medicare transplants

represents 10 percent of the total

number of heart and liver transplants, a

preliminary review of cost report data

indicates the average Medicare

acquisition cost per heart and liver is

higher than the average non-Medicare

acquisition cost. We believe that the

current method of cost reimbursement

contains the potential for transplant

centers to include some non-Medicare

costs in the Medicare costs.

This final rule extends the formula

used to compute kidney acquisition

costs to other organs, including hearts,

livers, and lungs. Acquisition costs will

be based on the ratio of the number of

usable organs transplanted into

Medicare beneficiaries to the total

overall number of usable organs. This

ratio will not affect our obligation to pay

allowable organ acquisition costs, but

will prevent Medicare from bearing

costs associated with non-Medicare

procedures. Based on the number of

Medicare organ transplants, we

anticipate annual Medicare program

savings associated with this provision of

less than $5 million. Facilities that have

been correctly reporting non-Medicare

acquisition costs will not be affected by

this rule. Facilities that have not will

find their Medicare payments reduced

to better reflect Medicare’s share of

allowable acquisition costs.

We are not preparing analyses for

either the RFA or section 1102(b) of the

Act because we have determined and

certify that this final rule will not have

a significant economic impact on a

substantial number of small entities or

a significant impact on the operations of

a substantial number of small rural

hospitals.

In accordance with the provisions of

Executive Order 12866, this final rule

was not reviewed by the Office of

Management and Budget.

VI. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, agencies are required to provide

60-day notice in the Federal Register

and solicit public comments before a

collection of information requirement is

submitted to the Office of Management

and Budget (OMB) for review and

approval. In order to fairly evaluate

whether an information collection

should be approved by OMB, section

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

Reduction Act of 1995 requires that we

solicit comment on the following issues:

• Whether the information collection

is necessary and useful to carry out the

proper functions of the agency;

• The accuracy of the agency’s

estimate of the information collection

burden;

• The quality, utility, and clarity of

the information to be collected; and

• Recommendations to minimize the

information collection burden on the

affected public, including automated

collection techniques.

The information collection

requirements (42 CFR 413.178, 413.180,

413.182, 413.184, 413.186, 413.188,

413.190, 413.192, and 413.194)

associated with requiring ESRD

facilities to provide documentation for

payment exception requests are

currently approved by OMB under

0938–0296, HCFA–9044, that expires on

May 31, 1998.

List of Subjects

42 CFR Part 412

Administrative practice and

procedure, Health facilities, Medicare,

Puerto Rico, Reporting and

recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases,

Medicare, Puerto Rico, Reporting and

recordkeeping requirements.

42 CFR Part 414

Administrative practice and

procedure, Health facilities, Health

professions, Kidney diseases, Medicare,

Reporting and recordkeeping

requirements, Rural areas, X-rays.

42 CFR Chapter IV is amended as set

forth below:

A. Part 412 is amended as follows:

PART 412—PROSPECTIVE PAYMENT

SYSTEMS FOR INPATIENT HOSPITAL

SERVICES

1. The authority citation for part 412

continues to read as follows:

Authority: Secs. 1102 and 1871 of the

Social Security Act (42 U.S.C. 1302 and

1395hh).

Subpart H—Payments to Hospitals

Under the Prospective Payment

Systems

2. Section 412.113 is amended by

revising paragraph (d) to read as

follows:

§ 412.113 Other payments.

* * * * *

(d) Organ acquisition. Payment for

organ acquisition costs incurred by

hospitals with approved transplantation

centers is made on a reasonable cost

basis. The term ‘‘Organs’’ is defined in

§ 486.302 of this chapter.

B. Part 413 is amended as follows:

PART 413—PRINCIPLES OF

REASONABLE COST

REIMBURSEMENT; PAYMENT FOR

END-STAGE RENAL DISEASE

SERVICES; OPTIONAL

PROSPECTIVELY DETERMINED

PAYMENT RATES FOR SKILLED

NURSING FACILITIES

1. The authority citation for part 413

continues to read as follows:

Authority: Secs. 1102, 1861(v)(1)(a), and

1871 of the Social Security Act as amended

(42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

2. Subpart H is revised to read as

follows:
43668 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

Subpart H—Payment for End-Stage

Renal Disease (ESRD) Services and

Organ Procurement Costs

Sec.

413.170 Scope.

413.172 Principles of prospective payment.

413.174 Prospective rates for hospital-based

and independent ESRD facilities.

413.176 Amount of payments.

413.178 Bad debts.

413.180 Procedures for requesting

exceptions to payment rates.

413.182 Criteria for approval of exception

requests.

413.184 Payment exception: Atypical

service intensity (patient mix).

413.186 Payment exception: Isolated

essential facility.

413.188 Payment exception: Extraordinary

circumstances.

413.190 Payment exception: Self-dialysis

training costs.

413.192 Payment exception: Frequency of

dialysis.

413.194 Appeals.

413.196 Notification of changes in ratesetting methodologies and payment

rates.

413.198 Recordkeeping and cost reporting

requirements for outpatient maintenance

dialysis.

413.200 Payment of independent organ

procurement organizations and

histocompatibility laboratories.

413.202 Organ procurement organization

(OPO) cost for kidneys sent to foreign

countries or transplanted in patients

other than Medicare beneficiaries.

413.203 Transplant center costs for organs

sent to foreign countries or transplanted

in patients other than Medicare

beneficiaries.

§ 413.170 Scope.

This subpart implements sections

1881 (b)(2) and (b)(7) of the Act by—

(a) Setting forth the principles and

authorities under which HCFA is

authorized to establish a prospective

payment system for outpatient

maintenance dialysis furnished in or

under the supervision of an ESRD

facility approved under subpart U of

part 405 of this chapter (referred to as

‘‘facility’’ in this section). For purposes

of this section and § 413.172 through

§ 413.198, ‘‘outpatient maintenance

dialysis’’ means outpatient dialysis,

home dialysis, self-dialysis, and home

dialysis training, as defined in

§ 405.2102 (f)(2)(ii), (f)(2)(iii), and (f)(3)

of this chapter, and includes all items

and services specified in §§ 410.50 and

410.52 of this chapter.

(b) Providing procedures and criteria

under which a facility may receive an

exception to the prospective payment

rates; and

(c) Establishing procedures that a

facility must follow to appeal its

payment amount under the prospective

payment system.

§ 413.172 Principles of prospective

payment.

(a) Payments for outpatient

maintenance dialysis are based on rates

set prospectively by HCFA.

(b) All approved ESRD facilities must

accept the prospective payment rates

established by HCFA as payment in full

for covered outpatient maintenance

dialysis.

(c) HCFA publishes the methodology

used to establish payment rates and the

changes specified in § 413.196(b) in the

Federal Register.

§ 413.174 Prospective rates for hospitalbased and independent ESRD facilities.

(a) Establishment of rates. HCFA

establishes prospective payment rates

for ESRD facilities using a methodology

that—

(1) Differentiates between hospitalbased facilities and independent ESRD

facilities;

(2) Effectively encourages efficient

delivery of dialysis services; and

(3) Provides incentives for increasing

the use of home dialysis.

(b) Determination of independent

facility. For purposes of rate-setting and

payment under this section, HCFA

considers any facility that does not meet

all of the criteria of a hospital-based

facility to be an independent facility. A

determination under this paragraph (b)

is an initial determination under § 498.3

of this chapter.

(c) Determination of hospital-based

facility. A determination under this

paragraph (c) is an initial determination

under § 498.3 of this chapter. For

purposes of rate-setting and payment

under this section, HCFA determines

that a facility is hospital-based if the—

(1) Facility and hospital are subject to

the bylaws and operating decisions of a

common governing board. This

governing board, which has final

administrative responsibility, approves

all personnel actions, appoints medical

staff, and carries out similar

management functions;

(2) Facility’s director or administrator

is under the supervision of the

hospital’s chief executive officer and

reports through him or her to the

governing board;

(3) Facility personnel policies and

practices conform to those of the

hospital;

(4) Administrative functions of the

facility (for example, records, billing,

laundry, housekeeping, and purchasing)

are integrated with those of the hospital;

and

(5) Facility and hospital are

financially integrated, as evidenced by

the cost report, which reflects allocation

of overhead to the facility through the

required step-down methodology.

(d) Nondetermination of hospitalbased facility. In determining whether a

facility is hospital-based, HCFA does

not consider—

(1) An agreement between a facility

and a hospital concerning patient

referral;

(2) A shared service arrangement

between a facility and a hospital; or

(3) The physical location of a facility

on the premises of a hospital.

(e) Add-on amounts. If all the

physicians furnishing services to

patients in an ESRD facility elect the

initial method of payment (as described

in § 414.313(c) of this chapter), the

prospective rate (as described in

paragraph (a) of this section) paid to that

facility is increased by an add-on

amount as described in § 414.313.

(f) Erythropoietin/Epoietin (EPO). (1)

When EPO is furnished to an ESRD

patient by a Medicare-approved ESRD

facility or a supplier of home dialysis

equipment and supplies, payment is

based on the amount specified in

paragraph (f)(3) of this section.

(2) The payment is made only on an

assignment basis, that is, directly to the

facility or supplier, which must accept,

as payment in full, the amount that

HCFA determines.

(3) HCFA determines the payment

amount in accordance with the

following rules:

(i) The amount is prospectively

determined, as specified in section

1881(b)(11)(B)(ii) of the Act, reviewed

and adjusted by HCFA, as necessary,

and paid to hospital-based and

independent dialysis facilities and to

suppliers of home dialysis equipment

and supplies, regardless of the location

of the facility, supplier, or patient.

(ii) If HCFA determines that an

adjustment to the payment amount is

necessary, HCFA publishes a Federal

Register notice proposing a revision to

the EPO payment amount and

requesting public comment.

(iii) Any increase in this amount for

a year does not exceed the percentage

increase (if any) in the implicit price

deflator for gross national product (as

published by the Department of

Commerce) for the second quarter of the

preceding year over the implicit price

deflator for the second quarter of the

second preceding year.

(iv) The Medicare payment amount is

subject to the Part B deductible and

coinsurance.

(g) Additional payment for certain

drugs. In addition to the prospective

payment described in this section,

HCFA makes an additional payment for

certain drugs furnished to ESRD

patients by a Medicare-approved ESRD

facility. HCFA makes this payment
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43669

directly to the ESRD facility. The facility

must accept the allowance determined

by HCFA as payment in full. Payment

for these drugs is made as follows:

(1) Hospital-based facilities. HCFA

makes payments in accordance with the

cost reimbursement rules set forth in

this part.

(2) Independent facilities. HCFA

makes payment in accordance with the

methodology set forth in § 405.517 of

this chapter for paying for drugs that are

not paid on a cost or prospective

payment basis.

§ 413.176 Amount of payments.

(a) If the beneficiary has incurred the

full deductible applicable under Part B

of Medicare before the dialysis

treatment, the intermediary pays the

facility 80 percent of its prospective

payment rate.

(b) If the beneficiary has not incurred

the full deductible applicable under Part

B of Medicare before the dialysis

treatment, the intermediary subtracts

the amount applicable to the deductible

from the facility’s prospective rate and

pays the facility 80 percent of the

remainder, if any.

§ 413.178 Bad debts.

(a) HCFA will reimburse each facility

its allowable Medicare bad debts, as

defined in § 413.80(b), up to the

facility’s costs, as determined under

Medicare principles, in a single lump

sum payment at the end of the facility’s

cost reporting period.

(b) A facility must attempt to collect

deductible and coinsurance amounts

owed by beneficiaries before requesting

reimbursement from HCFA for

uncollectible amounts. Section 413.80

specifies the collection efforts facilities

must make.

(c) A facility must request payment

for uncollectible deductible and

coinsurance amounts owed by

beneficiaries by submitting an itemized

list that specifically enumerates all

uncollectable amounts related to

covered services under the composite

rate.

§ 413.180 Procedures for requesting

exceptions to payment rates.

(a) Outpatient maintenance dialysis

payments. All payments for outpatient

maintenance dialysis furnished at or by

facilities are made on the basis of

prospective payment rates.

(b) Criteria for requesting an

exception. If a facility projects on the

basis of prior year costs and utilization

trends that it will have an allowable cost

per treatment higher than its

prospective rate set under § 413.174,

and if these excess costs are attributable

to one or more of the factors in

§ 413.182, the facility may request, in

accordance with paragraph (d) of this

section, that HCFA approve an

exception to that rate and set a higher

prospective payment rate. However, a

facility may only request an exception

or seek to retain its previously approved

exception rate when authorized under

the conditions specified in paragraphs

(d) and (e) of this section.

(c) Application of deductible and

coinsurance. The higher payment rate is

subject to the application of deductible

and coinsurance in accordance with

§ 413.176.

(d) Payment rate exception request. A

facility must request an exception to its

payment rate within 180 days of—

(1) The effective date of its new

composite payment rate(s);

(2) The effective date that HCFA

opens the exceptions process; or

(3) The date on which an

extraordinary cost-increasing event

occurs, as specified (or provided for) in

§§ 413.182(c) and 413.188.

(e) Criteria for retaining a previously

approved exception rate. A facility may

elect to retain its previously approved

exception rate in lieu of any composite

rate increase or any other exception

amount if—

(1) The conditions under which the

exception was granted have not

changed;

(2) The facility files a request to retain

the rate with its fiscal intermediary

during the 30-day period before the

opening of an exception cycle; and

(3) The request is approved by the

fiscal intermediary.

(f) Documentation for a payment rate

exception request. If the facility is

requesting an exception to its payment

rate, it must submit to HCFA its most

recently completed cost report as

required under § 413.198 and whatever

statistics, data, and budgetary

projections as determined by HCFA to

be needed to adjudicate each type of

exception. HCFA may audit any cost

report or other information submitted.

The materials submitted to HCFA

must—

(1) Separately identify elements of

cost contributing to costs per treatment

in excess of the facility’s payment rate;

(2) Show that the facility’s costs,

including those costs that are not

directly attributable to the exception

criteria, are allowable and reasonable

under the reasonable cost principles set

forth in this part;

(3) Show that the elements of

excessive cost are specifically

attributable to one or more conditions

specified in § 413.182;

(4) Specify the amount of additional

payment per treatment the facility

believes is required for it to recover its

justifiable excess costs; and

(5) Specify that the facility has

compared its most recently completed

cost report with cost reports from (at

least 2) prior years. The facility must

explain any material statistical data or

cost changes, or both, and include an

explanation with the documentation

supporting the exception request.

(g) Completion of requirements and

criteria. The facility must demonstrate

to HCFA’s satisfaction that the

requirements of this section and the

criteria in § 413.182 are fully met. The

burden of proof is on the facility to

show that one or more of the criteria are

met and that the excessive costs are

justifiable under the reasonable cost

principles set forth in this part.

(h) Approval of an exception request.

An exception request is deemed

approved unless it is disapproved

within 60 working days after it is filed

with its intermediary.

(i) Determination of an exception

request. In determining the facility’s

payment rate under the exception

process, HCFA excludes all costs that

are not reasonable or allowable under

the reasonable cost principles set forth

in this part.

(j) Period of approval: Payment

exception request. Except for exceptions

approved under §§ 413.180(e),

413.180(k), 413.182(c), and 413.188, a

prospective exception payment rate

approved by HCFA applies for the

period from the date the complete

exception request was filed with its

intermediary until the earlier of the—

(1) Date the circumstances justifying

the exception rate no longer exist; or

(2) End of the period during which

the announced rate was to apply.

(k) Period of approval: Payment

exception request under §§ 413.182(c)

and 413.188. A prospective exception

payment rate approved by HCFA under

§§ 413.182(c) and 413.188 applies from

the date of the extraordinary event until

the end of the period during which the

prospective announced rate was to

apply, unless HCFA determines that

another date is more appropriate. If

HCFA does not extend the exception

period and the facility believes that it

continues to require an exception to its

rate, the facility must reapply in

accordance with the procedures in this

section.

(l) Denial of an exception request.

HCFA denies exception requests

submitted without the documentation

specified in § 413.182 and the

applicable regulations cited there.
43670 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

(m) Criteria for refiling a denied

exception request. A facility that has

been denied an exception request

during the 180 days may file another

exception request if all required

documentation is filed with the

intermediary by the 180th day.

§ 413.182 Criteria for approval of

exception requests.

HCFA may approve exceptions to an

ESRD facility’s prospective payment

rate if the facility demonstrates, by

convincing objective evidence, that its

total per treatment costs are reasonable

and allowable under the relevant cost

reimbursement principles of part 413

and that its per treatment costs in excess

of its payment rate are directly

attributable to any of the following

criteria:

(a) Atypical service intensity (patient

mix), as specified in § 413.184.

(b) Isolated essential facility, as

specified in § 413.186.

(c) Extraordinary circumstances, as

specified in § 413.188.

(d) Self-dialysis training costs, as

specified in § 413.190.

(e) Frequency of dialysis, as specified

in § 413.192.

§ 413.184 Payment exception: Atypical

service intensity (patient mix).

(a) To qualify for an exception to the

prospective payment rate based on

atypical service intensity (patient

mix)—

(1) A facility must demonstrate that a

substantial proportion of the facility’s

outpatient maintenance dialysis

treatments involve atypically intense

dialysis services, special dialysis

procedures, or supplies that are

medically necessary to meet special

medical needs of the facility’s patients.

Examples that may qualify under this

criterion are more intense dialysis

services that are medically necessary for

patients such as—

(i) Patients who have been referred

from other facilities on a temporary

basis for more intense care during a

period of medical instability and who

return to the original facility after

stabilization;

(ii) Pediatric patients who require a

significantly higher staff-to-patient ratio

than typical adult patients; or

(iii) Patients with medical conditions

that are not commonly treated by ESRD

facilities and that complicate the

dialysis procedure.

(2) The facility must demonstrate

clearly that these services, procedures,

or supplies and its per treatment costs

are prudent and reasonable when

compared to those of facilities with a

similar patient mix.

(3) A facility must demonstrate that—

(i) Its nursing personnel costs have

been allocated properly between each

mode of care; and

(ii) The additional nursing hours per

treatment are not the result of an excess

number of employees.

(b) Documentation. (1) A facility must

submit a listing of all outpatient dialysis

patients (including all home patients)

treated during the most recently

completed fiscal or calendar year

showing—

(i) Patients who received transplants,

including the date of transplant;

(ii) Patients awaiting a transplant who

are medically able, have given consent,

and are on an active transplant list, and

projected transplants;

(iii) Home patients;

(iv) In-facility patients, staff-assisted,

or self-dialysis;

(v) Individual patient diagnosis;

(vi) Diabetic patients;

(vii) Patients isolated because of

contagious disease;

(viii) Age of patients;

(ix) Mortality rate, by age and

diagnosis;

(x) Number of patient transfers,

reasons for transfers, and any related

information; and

(xi) Total number of hospital

admissions for the facility’s patients,

reason for, and length of stay of each

session.

(2) The facility also must—

(i) Submit documentation on costs of

nursing personnel (registered nurses,

licensed practical nurses, technicians,

and aides) incurred during the most

recently completed fiscal year cost

report showing—

(A) Amount each employee was paid;

(B) Number of personnel;

(C) Amount of time spent in the

dialysis unit; and

(D) Staff-to-patient ratio based on total

hours, with an analysis of productive

and nonproductive hours.

(ii) Submit documentation on supply

costs incurred during the most recently

completed fiscal or calendar year cost

report showing—

(A) By modality, a complete list of

supplies used routinely in a dialysis

treatment;

(B) The make and model number of

each dialyzer and its component cost;

and

(C) That supplies are prudently

purchased (for example, that bulk

discounts are used when available).

(iii) Submit documentation on

overhead costs incurred during the most

recently completed fiscal or calendar

year cost reporting year showing—

(A) The basis of the higher overhead

costs;

(B) The impact on the specific cost

components; and

(C) The effect on per treatment costs.

§ 413.186 Payment exception: Isolated

essential facility.

(a) Qualifications. To qualify for an

exception to the prospective payment

rate based on being an isolated essential

facility—

(1) The facility must be the only

supplier of dialysis in its geographical

area;

(2) The facility’s patients must be

unable to obtain dialysis services

elsewhere without substantial

additional hardship; and

(3) The facility’s excess costs must be

justifiable.

(b) Criteria for determining

qualifications. In determining whether a

facility qualifies for an exception based

on its being an isolated essential facility,

HCFA considers—

(1) Local, permanent residential

population density;

(2) Typical local commuting distances

from medical services;

(3) Volume of treatments; and

(4) The extent that other dialysis

facilities are used by area residents

(other than the applying facility’s

patients).

(c) Documentation. (1) Isolated.

Generally, to be considered isolated, the

facility must document that it is located

outside an established Metropolitan

Statistical Area and provides dialysis to

a permanent patient population, as

opposed to a transient patient

population.

(2) Essential. To be considered

essential, the facility must document—

(i) That a substantial number of its

patients cannot obtain dialysis services

elsewhere without additional hardship;

and

(ii) The additional hardship the

patients will incur in travel time and

cost.

(3) Cost per treatment. The facility

must—

(i) Document that its cost per

treatment is reasonable; and

(ii) Explain how the facility’s cost per

treatment in excess of its composite rate

relates to the isolated essential facility

criteria specified in paragraph (b) of this

section.

(4) Additional information. The

facility must also furnish the following

information in a format that concisely

explains the facility’s cost and patient

data to support its request:

(i) A list of current and requested

payment rates for each modality.

(ii) An explanation of how the

facility’s costs in excess of its composite

rate payment are attributable to its being

an isolated essential facility.
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43671

(iii) An explanation of any unusual

geographic conditions in the area

surrounding the facility.

(iv) A copy of the latest filed cost

report and a budget estimate for the next

12 months prepared on cost report

forms.

(v) An explanation of unusual costs

reported on the facility’s actual or

budgeted cost reports and any

significant changes in budgeted costs

and data compared to actual costs and

data reported on the latest filed cost

report.

(vi) The name, location of, and

distance to the nearest renal dialysis

facility.

(vii) A list of patients by modality

showing commuting distance and time

to the current and the next nearest renal

dialysis facility.

(viii) The historical and projected

patient-to-staff ratios and number of

machines used for maintenance dialysis

treatments.

(ix) A computation showing the

facility’s treatment capacity, arrived at

by taking the total stations multiplied by

the number of hours of operation for the

year divided by the average length of a

dialysis treatment.

(x) The geographic boundaries and

population size of the facility’s service

area.

§ 413.188 Payment exception:

Extraordinary circumstances.

(a) To qualify for an exception to the

prospective payment rate based on

extraordinary circumstances, the facility

must substantiate that it incurs excess

costs beyond its control due to a fire,

earthquake, flood, or other natural

disaster.

(b) HCFA will not grant an exception

based on increased costs if a facility has

chosen not to—

(1) Maintain adequate insurance

protection against such losses (through

the purchase of insurance, the

maintenance of a self-insurance

program, or other equivalent

alternative); or

(2) File a claim for losses covered by

insurance or utilize its self-insurance

program.

§ 413.190 Payment exception: Self-dialysis

training costs.

(a) Qualifications. To qualify for an

exception to the prospective payment

rate based on self-dialysis training costs,

the facility must establish that it incurs

per treatment costs for furnishing selfdialysis and home dialysis training that

exceed the facility’s payment rate for

such training sessions.

(b) Justification. To justify its

exception request, a facility must—

(1) Separately identify those elements

contributing to its costs in excess of the

composite training rate; and

(2) Demonstrate that its per treatment

costs are reasonable and allowable.

(c) Criteria for determining proper

cost reporting. HCFA considers the

facility’s total costs, cost finding and

apportionment, including its allocation

of costs, to determine if costs are

properly reported by treatment

modality.

(d) Limitation of exception requests.

Exception requests for a higher training

rate are limited to those cost

components relating to training such as

technical staff, medical supplies, and

the special costs of education (manuals

and education materials). These

requests may include overhead and

other indirect costs to the extent that

these costs are directly attributable to

the additional training costs.

(e) Documentation. The facility must

provide the following information to

support its exception request:

(1) A copy of the facility’s training

program.

(2) Computation of the facility’s cost

per treatment for maintenance sessions

and training sessions including an

explanation of the cost difference

between the two modalities.

(3) Class size and patients’ training

schedules.

(4) Number of training sessions

required, by treatment modality, to train

patients.

(5) Number of patients trained for the

current year and the prior 2 years on a

monthly basis.

(6) Projection for the next 12 months

of future training candidates.

(7) The number and qualifications of

staff at training sessions.

(f) Accelerated training exception. (1)

An ESRD facility may bill Medicare for

a dialysis training session only when a

patient receives a dialysis treatment

(normally three times a week for

hemodialysis). Continuous cycling

peritoneal dialysis (CCPD) and

continuous ambulatory peritoneal

dialysis (CAPD) are daily treatment

modalities; ESRD facilities are paid the

equivalent of three hemodialysis

treatments for each week that CCPD and

CAPD treatments are provided.

(2) If an ESRD facility elects to train

all its patients using a particular

treatment modality more often than

during each dialysis treatment and, as a

result, the number of billable training

dialysis sessions is less than the number

of actual training sessions, the facility

may request a composite rate exception,

limited to the lesser of the—

(i) Facility’s projected training cost

per treatment; or

(ii) Cost per treatment the facility

would have received in training a

patient if it had trained patients only

during a dialysis treatment, that is, three

times per week.

(3) An ESRD facility may bill a

maximum of 25 training sessions per

patient for hemodialysis training and 15

sessions for CCPD and CAPD training.

(4) In computing the payment amount

under an accelerated training exception,

HCFA uses a minimum number of

training sessions per patient (15 for

hemodialysis and 5 for CAPD and

CCPD) when the facility actually

provides fewer than the minimum

number of training sessions.

(5) To justify an accelerated training

exception request, an ESRD facility

must document that a significant

number of training sessions for a

particular modality are provided during

a shorter but more condensed period.

(6) The facility must submit with the

exception request a list of patients, by

modality, trained during the most recent

cost report period. The list must include

each beneficiary’s—

(i) Name;

(ii) Age; and

(iii) Training status (completed, not

completed, being retrained, or in the

process of being trained).

(7) The total treatments from the

patient list must be the same as the total

treatments reported on the cost report

filed with the request.

§ 413.192 Payment exception: Frequency

of dialysis.

(a) Qualification. To qualify for an

exception to the prospective payment

rate based on frequency of dialysis, the

facility must establish that it has a

substantial portion of outpatient

maintenance dialysis treatments

furnished to patients who dialyze less

frequently than three times per week.

(b) Definition. For purposes of this

section, ‘‘substantial’’ means the

number of treatments furnished by the

facility is at least 15 percent lower than

the number would be if all patients

dialyzed three times a week.

(c) Limitation for per treatment

payment rates. Per treatment payment

rates granted under this exception may

not exceed the amount that produces

weekly payments per patient equal to

three times the facility’s prospective

composite rate, exclusive of any

exception amounts.

(d) Documentation. To document that

an ESRD facility furnishes a substantial

number of dialysis treatments at a

frequency less than three times per

week per patient, the facility must

submit the following information:

(1) A list of patients receiving

outpatient dialysis treatments for the
43672 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

cost report that is filed with the request.

The list must indicate—

(i) Whether the patients are

permanent, transient, or temporary;

(ii) The medically prescribed

frequency of dialysis; and

(iii) The number of dialysis treatments

that each patient received on a weekly

and yearly basis and an explanation of

any discrepancy between that

calculation and the number of

treatments reported on the facility’s cost

report.

(2) A list of patients used to project

treatments. The list must indicate—

(i) Whether the patients are

permanent, transient, or temporary;

(ii) The medically prescribed

frequency of dialysis;

(iii) The number of dialysis treatments

that each patient is projected to receive

on a weekly and yearly basis, an

explanation of any discrepancy between

that calculation and the number of

treatments reported on the facility’s

projected cost report, and an

explanation for any change among prior,

actual, and projected data.

(3) A schedule showing the number of

treatments to be furnished twice a week

and the number of treatments that

would have been furnished if each

patient were dialyzed three times a

week.

(4) A computation of the facility’s

projected costs per treatment using

the—

(i) Projected number of treatments

furnished twice a week; and

(ii) Number of treatments if patients

dialyze three times a week.

(5) A schedule showing the

computation of the percentage decrease

in the number of treatments.

§ 413.194 Appeals.

(a) Appeals under section 1878 of the

Act. (1) A facility that disputes the

amount of its allowable Medicare bad

debts reimbursed by HCFA under

§ 413.178 may request review by the

intermediary or the Provider

Reimbursement Review Board (PRRB) in

accordance with subpart R of part 405

of this chapter.

(2) A facility must request and obtain

a final agency decision prior to seeking

judicial review of a dispute regarding

the amount of allowable Medicare bad

debts.

(b) Other appeals. (1) A facility that

has requested higher payment per

treatment in accordance with § 413.180

may request review from the

intermediary or the PRRB if HCFA has

denied the request in whole or in part.

In such a case, the procedure in subpart

R of part 405 of this chapter is followed

to the extent that it is applicable.

(2) The PRRB has the authority to

review the action taken by HCFA on the

facility’s requests. However, the PRRB’s

decision is subject to review by the

Administrator under § 405.1875 of this

chapter.

(3) A facility must request and obtain

a final agency decision, in accordance

with paragraph (b)(1) of this section,

prior to seeking judicial review of the

denial, in whole or in part, of the

exception request.

(c) Procedure. (1) The facility must

request review within 180 days of the

date of the decision on which review is

sought.

(2) The facility may not submit to the

reviewing entity, whether it is the

intermediary or the PRRB, any

additional information or cost data that

had not been submitted to HCFA at the

time HCFA evaluated the exception

request.

(d) Determining amount in

controversy. For purposes of

determining PRRB jurisdiction under

subpart R of part 405 of this chapter for

the appeals described in paragraph (b)

of this section—

(1) The amount in controversy per

treatment is determined by subtracting

the amount of program payment from

the amount the facility requested under

§ 413.180; and

(2) The total amount in controversy is

calculated by multiplying the amount in

controversy per treatment by the

projected number of treatments for the

exception request period.

§ 413.196 Notification of changes in ratesetting methodologies and payment rates.

(a) HCFA or the facility’s intermediary

notifies each facility of changes in its

payment rate. This notice includes

changes in individual facility payment

rates resulting from corrections or

revisions of particular geographic labor

cost adjustment factors.

(b) Changes in payment rates resulting

from incorporation of updated cost data

or general revisions of geographic labor

cost adjustment factors are announced

by notice published in the Federal

Register without opportunity for prior

comment. Revisions of the rate-setting

methodology are published in the

Federal Register in accordance with the

Department’s established rulemaking

procedures.

§ 413.198 Recordkeeping and cost

reporting requirements for outpatient

maintenance dialysis.

(a) Purpose and Scope. This section

implements section 1881(b)(2)(B)(i) of

the Act by specifying recordkeeping and

cost reporting requirements for ESRD

facilities approved under subpart U of

part 405 of this chapter. The records and

reports will enable HCFA to determine

the costs incurred in furnishing

outpatient maintenance dialysis as

defined in § 413.170(a).

(b) Recordkeeping and reporting

requirements. (1) Each facility must

keep adequate records and submit the

appropriate HCFA-approved cost report

in accordance with §§ 413.20 and

413.24, which provide rules on financial

data and reports, and adequate cost data

and cost finding, respectively.

(2) The cost reimbursement principles

set forth in this part (beginning with

§ 413.134, Depreciation, and excluding

the principles listed in paragraph (b)(4)

of this section), apply in the

determination and reporting of the

allowable cost incurred in furnishing

outpatient maintenance dialysis

treatments to patients dialyzing in the

facility, or incurred by the facility in

furnishing home dialysis service,

supplies, and equipment.

(3) Allowable cost is the reasonable

cost related to dialysis treatments.

Reasonable cost includes all necessary

and proper expenses incurred by the

facility in furnishing the dialysis

treatments, such as administrative costs,

maintenance costs, and premium

payments for employee health and

pension plans. It includes both direct

and indirect costs and normal standby

costs. Reasonable cost does not include

costs that—

(i) Are not related to patient care for

outpatient maintenance dialysis;

(ii) Are for services or items

specifically not reimbursable under the

program;

(iii) Flow from the provision of luxury

items or servicess (items or services

substantially in excess of or more

expensive than those generally

considered necessary for the provision

of needed health services); or

(iv) Are found to be substantially out

of line with other institutions in the

same area that are similar in size, scope

of services, utilization, and other

relevant factors.

(4) The following principles of this

part do not apply in determining

adjustments to allowable costs as

reported by ESRD facilities:

(i) Section 413.157, Return on equity

capital of proprietary providers;

(ii) Section 413.200, Reimbursement

of OPAs and histocompatibility

laboratories;

(iii) Section 413.9, Cost related to

patient care (except for the principles

stated in paragraph (b)(3) of this

section); and

(iv) Sections 413.64, Payments to

providers, and §§ 413.13, 413.30,

413.35, 413.40, 413.74, and §§ 415.55
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43673

through 415.70, § 415.162, and

§ 415.164 of this chapter, Principles of

reimbursement for services by hospitalbased physicians.

§ 413.200 Payment of independent organ

procurement organizations and

histocompatibility laboratories.

(a) Principle. Covered services

furnished after September 30, 1978 by

organ procurement organizations

(OPOs) and histocompatibility

laboratories in connection with kidney

acquisition and transplantation will be

reimbursed under the principles for

determining reasonable cost contained

in this part. Services furnished by

freestanding OPOs and

histocompatibility laboratories, that

have an agreement with the Secretary in

accordance with paragraph (c) of this

section, will be reimbursed by making

an interim payment to the transplant

hospitals using these services and by

making a retroactive adjustment,

directly with the OPO or laboratory,

based upon a cost report filed by the

OPO or laboratory. (The reasonable

costs of services furnished by hospital

based OPOs or laboratories will be

reimbursed in accordance with the

principles contained in §§ 413.60 and

413.64.)

(b) Definitions. For purposes of this

section:

Freestanding refers to an OPO or a

histocompatibility laboratory that is

not—

(1) Subject to the control of the

hospital with respect to the hiring,

firing, training, and paying of

employees; and

(2) Considered as a department of the

hospital for insurance purposes

(including malpractice insurance,

general liability insurance, worker’s

compensation insurance, and employee

retirement insurance).

Histocompatibility laboratory means a

laboratory meeting the standards and

providing the services for kidneys or

other organs set forth in § 413.2171(d) of

this chapter.

OPO means an organization defined

in § 486.302 of this chapter.

(c) Agreements with independent

OPOs and laboratories. (1) Any

freestanding OPO or histocompatibility

laboratory that wishes to have the cost

of its pretransplant services reimbursed

under the Medicare program must file

an agreement with HCFA under which

the OPO or laboratory agrees—

(i) To file a cost report in accordance

with § 413.24(f) within three months

after the end of each fiscal year;

(ii) To permit HCFA to designate an

intermediary to determine the interim

reimbursement rate payable to the

transplant hospitals for services

provided by the OPO or laboratory and

to make a determination of reasonable

cost based upon the cost report filed by

the OPO or laboratory;

(iii) To provide such budget or cost

projection information as may be

required to establish an initial interim

reimbursement rate;

(iv) To pay to HCFA amounts that

have been paid by HCFA to transplant

hospitals and that are determined to be

in excess of the reasonable cost of the

services provided by the OPO or

laboratory; and

(v) Not to charge any individual for

items or services for which that

individual is entitled to have payment

made under section 1861 of the Act.

(2) The initial cost report due from an

OPO or laboratory is for its first fiscal

year during any portion of which it had

an agreement with the Secretary under

paragraphs (c) (1) and (2) of this section.

The initial cost report covers only the

period covered by the agreement.

(d) Interim reimbursement. (1)

Hospitals eligible to receive Medicare

reimbursement for renal transplantation

will be paid for the pretransplantation

services of a freestanding OPO or

histocompatibility laboratory that has an

agreement with the Secretary under

paragraph (c) of this section, on the

basis of an interim rate established by

an intermediary for that OPO or

laboratory.

(2) The interim rate will be based on

the average cost per service incurred by

an OPO or laboratory, during its

previous fiscal year, associated with

procuring a kidney for transplantation.

This interim rate may be adjusted if

necessary for anticipated cost changes.

If there is not adequate cost data to

determine the initial interim rate, it will

be determined according to the OPO’s or

laboratory’s estimate of its projected

costs for the fiscal year.

(3) Payments made on the basis of the

interim rate will be reconciled directly

with the OPO or laboratory after the

close of its fiscal year, in accordance

with paragraph (e) of this section.

(4) Information on the interim rate for

all freestanding OPOs and

histocompatibility laboratories shall be

disseminated to all transplant hospitals

and intermediaries.

(e) Retroactive adjustment. (1) Cost

reports. Information provided in cost

reports by freestanding OPOs and

histocompatibility laboratories must

meet the requirements for cost data and

cost finding specified in paragraphs (a)

through (e) of § 413.24. These cost

reports must provide a complete

accounting of the cost incurred by the

agency or laboratory in providing

covered services, the total number of

Medicare beneficiaries who received

those services, and any other data

necessary to enable the intermediary to

make a determination of the reasonable

cost of covered services provided to

Medicare beneficiaries.

(2) Audit and adjustment. A cost

report submitted by a freestanding OPO

or histocompatibility laboratory will be

reviewed by the intermediary and a new

interim reimbursement rate for the

succeeding fiscal year will be

established based upon this review. A

retroactive adjustment in the amount

paid under the interim rate will be made

in accordance with § 413.64(f). If the

determination of reasonable cost reveals

an overpayment or underpayment

resulting from the interim

reimbursement rate paid to transplant

hospitals, a lump sum adjustment will

be made directly between that

intermediary and the OPO or laboratory.

(f) For services furnished on or after

April 1, 1988, no payment may be made

for services furnished by an OPO that

does not meet the requirements of part

485, subpart D of this chapter.

(g) Appeals. Any OPO or

histocompatibility laboratory that

disagrees with an intermediary’s cost

determination under this section is

entitled to an intermediary hearing, in

accordance with the procedures

contained in §§ 405.1811 through

405.1833, if the amount in controversy

is $1,000 or more.

§ 413.202 Organ procurement organization

(OPO) cost for kidneys sent to foreign

countries or transplanted in patients other

than Medicare beneficiaries.

An OPO’s total costs for all kidneys is

reduced by the costs associated with

procuring kidneys sent to foreign

transplant centers or transplanted in

patients other than Medicare

beneficiaries. OPOs, as defined in

§ 435.302 of this chapter, must separate

costs for procuring kidneys that are sent

to foreign transplant centers and

kidneys transplanted in patients other

than Medicare beneficiaries from

Medicare allowable costs prior to final

settlement by the Medicare fiscal

intermediaries. Medicare costs are based

on the ratio of the number of usable

kidneys transplanted into Medicare

beneficiaries to the total number of

usable kidneys applied to reasonable

costs. Certain long-standing

arrangements that existed before March

3, 1988 (for example, an OPO that

procures kidneys at a military transplant

hospital for transplant at that hospital),

will be deemed to be Medicare kidneys

for cost reporting statistical purposes.

The OPO must submit a request to the
43674 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

fiscal intermediary for review and

approval of these arrangements.

§ 413.203 Transplant center costs for

organs sent to foreign countries or

transplanted in patients other than

Medicare beneficiaries.

(a) A transplant center’s total costs for

all organs is reduced by the costs

associated with procuring organs sent to

foreign transplant centers or

transplanted in patients other than

Medicare beneficiaries. Organs are

defined in § 486.302 (only covered

organs will be paid for on a reasonable

cost basis).

(b) Transplant center hospitals must

separate costs for procuring organs that

are sent to foreign transplant centers

and organs transplanted in patients

other than Medicare beneficiaries from

Medicare allowable costs prior to final

cost settlement by the Medicare fiscal

intermediaries.

(c) Medicare costs are based on the

ratio of the number of usable organs

transplanted into Medicare beneficiaries

to the total number of usable organs

applied to reasonable costs.

C. Part 414 is amended as follows:

PART 414—PAYMENT FOR PART B

MEDICAL AND OTHER HEALTH

SERVICES

1. The authority citation for part 414

continues to read as follows:

Authority: Secs. 1102, 1871, and 1881(b)(1)

of the Social Security Act (42 U.S.C. 1302,

1395hh, and 1395rr(b)(1)).

Subpart E—Determination of

Reasonable Charges Under the ESRD

Program

§ 414.313 [Amended]

2. In § 414.313(a), the reference ‘‘in

§ 413.170 of this chapter’’ is revised to

read ‘‘in part 413, subpart H of this

subchapter’’.

§ 414.314 [Amended]

3. In § 414.314(a)(5), the reference

‘‘(§ 413.170)’’ is revised to read ‘‘(part

413, subpart H of this subchapter)’’.

(Catalog of Federal Domestic Assistance

Program No. 93.773, Medicare—Hospital

Insurance; and Program No. 93.774,

Medicare—Supplementary Medical

Insurance Program)

Dated: June 7, 1997.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

[FR Doc. 97–21444 Filed 8–14–97; 8:45 am]

BILLING CODE 4120–01–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 648

[Docket No. 961210346–7035–02; I.D.

081197A]

Fisheries of the Northeastern United

States; Summer Flounder Fishery;

Commercial Quota Harvested for

Massachusetts

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Commercial quota harvest.

SUMMARY: NMFS announces that the

summer flounder commercial quota

available to the Commonwealth of

Massachusetts has been harvested.

Vessels issued a commercial Federal

fisheries permit for the summer

flounder fishery may not land summer

flounder in Massachusetts for the

remainder of calendar year 1997, unless

additional quota becomes available

through a transfer. Regulations

governing the summer flounder fishery

require publication of this notice to

advise the Commonwealth of

Massachusetts that the quota has been

harvested and to advise vessel and

dealer permit holders that no

commercial quota is available for

landing summer flounder in

Massachusetts.

DATES: Effective August 13, 1997,

through December 31, 1997.

FOR FURTHER INFORMATION CONTACT:

Dana Hartley, Fishery Management

Specialist, 508–281–9226.

SUPPLEMENTARY INFORMATION:

Regulations governing the summer

flounder fishery are found at 50 CFR

part 648. The regulations require annual

specification of a commercial quota that

is apportioned among the states from

North Carolina through Maine. The

process to set the annual commercial

quota and the percent allocated to each

state are described in § 648.100.

The initial total commercial quota for

summer flounder for the 1997 calendar

year was set equal to 11,111,298 lb

(5,040,000 kg) (March 7, 1997, 62 FR

10473). The percent allocated to vessels

landing summer flounder in

Massachusetts is 6.82046 percent, or

757,841 lb (343,751 kg).

Section 648.100(d)(2) stipulates that

any overages of commercial quota

landed in any state be deducted from

that state’s annual quota for the

following year. In the calendar year

1996, a total of 800,704 lb (363,193 kg)

were landed in Massachusetts. The

amount allocated for Massachusetts

landings in 1996 was 752,092 lb

(328,350 kg), creating a 48,612 lb

(22,050 kg) overage that was deducted

from the amount allocated for landings

in the Commonwealth of Massachusetts

during 1997 (July 15, 1997, 62 FR

37741). The resulting 1997 quota for

Massachusetts is 709,229 lb (321,701

kg).

Section 648.101(b) requires the

Administrator, Northeast Region, NMFS

(Regional Administrator), to monitor

state commercial quotas and to

determine when a state’s commercial

quota is harvested. The Regional

Administrator is further required to

publish a notice in the Federal Register

advising a state and notifying Federal

vessel and dealer permit holders that,

effective upon a specific date, the state’s

commercial quota has been harvested

and no commercial quota is available for

landing summer flounder in that state.

Because the available information

indicates that the Commonwealth of

Massachusetts has attained its quota for

1997, the Regional Administrator has

determined based on dealer reports and

other available information, that the

Commonwealth’s commercial quota has

been harvested.

The regulations at § 648.4(b) provide

that Federal permit holders agree as a

condition of the permit not to land

summer flounder in any state that the

Regional Administrator has determined

no longer has commercial quota

available. Therefore, effective August

13, 1997, further landings of summer

flounder in Massachusetts by vessels

holding commercial Federal fisheries

permits are prohibited for the remainder

of the 1997 calendar year, unless

additional quota becomes available

through a transfer and is announced in

the Federal Register. Effective the date

above, federally permitted dealers are

also advised that they may not purchase

summer flounder from federally

permitted vessels that land in

Massachusetts for the remainder of the

calendar year, or until additional quota

becomes available through a transfer.

Classification

This action is required by 50 CFR part

648 and is exempt from review under

E.O. 12286.

Authority: 16 U.S.C. 1801 et seq.

Dated: August 11, 1997.

Gary C. Matlock,

Director, Office of Sustainable Fisheries,

National Marine Fisheries Service.

[FR Doc. 97–21669 Filed 8–12–97; 2:16 pm]

BILLING CODE 3510–22–F