[Federal Register Volume 62, Number 159 (Monday, August 18, 1997)]
[Rules and Regulations]
[Pages 43931-43937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21731]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 431, 442, 488, 489, and 498

[HSQ-139-F]
RIN 0938-AC88


Medicare and Medicaid Programs: Effective Dates of Provider 
Agreements and Supplier Approvals

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This rule establishes uniform criteria for determining the 
effective dates of Medicare and Medicaid provider agreements and of the 
approval of Medicare suppliers when the provider or supplier is subject 
to survey and certification as a basis for determining participation in 
those programs. It also establishes appeal

[[Page 43932]]

rights and procedures for entities that are dissatisfied with effective 
date determinations.

DATES: Effective date: This rule is effective September 17, 1997.

FOR FURTHER INFORMATION CONTACT: Diane Bavaria, (410) 786-6773 or 
Sandra Farragut, (410) 786-3503.

SUPPLEMENTARY INFORMATION:

A. Background

    Under sections 1866 and 1902 of the Social Security Act (the Act), 
providers of services seeking to participate in Medicare or Medicaid 
must enter into an agreement with the Secretary or the State Medicaid 
agency, as appropriate. Under HCFA rules, suppliers of Medicare 
services must be approved for coverage of the services they furnish to 
Medicare beneficiaries.
    Generally, in order to enter into a provider agreement or obtain 
approval as a supplier, an entity must first be surveyed by HCFA or the 
State survey agency to ascertain whether it complies with the 
conditions of participation, conditions for coverage, or long-term care 
requirements. However, under section 1865 of the Act, HCFA may ``deem'' 
that an entity meets the Federal requirements if that entity is 
accredited by a national accrediting organization whose program is 
approved by HCFA.
    Medicare or Medicaid payment may not be made for services furnished 
before the effective date of the provider agreement or supplier 
approval.

B. Notice of Proposed Rulemaking

    On October 8, 1992, we published a Notice of Proposed Rulemaking 
(at 57 FR 46362) to establish uniform criteria for determining the 
effective date of provider agreements and supplier approvals. We 
received 6 letters of comment from two States, one health care 
association, the Small Business Administration, one lawyer, and one 
citizen. Those comments and our responses to them are detailed below.

C. Discussion of Comments

1. Level of Compliance

    Comment: One commenter noted that the proposed rule was not 
consistent with Federal statutes that require full compliance for 
skilled nursing facilities (SNFs) and nursing facilities (NFs) or 
automatic termination within 6 months after survey. The commenter 
disagreed with our references to level A and level B requirements, and 
the provision that would permit initial certification of SNFs and NFs 
that have lower level deficiencies.
    Response: As noted by the commenter, under the Omnibus Budget 
Reconciliation Act of 1987 (OBRA '87), we must, for SNFs and NFs, 
replace our hierarchical requirement scheme (condition level or level 
A, and standard level or level B) with a scheme built on the premise 
that all requirements must be met and enforced. However, because the 
final rule for implementing the OBRA '87 amendments had not been 
published, we had to continue using the hierarchical ``level A and 
Level B'' scheme in the proposed rule.
    A final rule identified as HSQ-156-F, published on November 10, 
1994 (at 59 FR 56116) implemented the OBRA '87 amendments. That rule--
    <bullet> Establishes a revised enforcement system that detects and 
responds to noncompliance with any of the requirements, as opposed to 
the previous system which provided for adverse action only when the 
noncompliance was with level A requirements;
    <bullet> Establishes the concept of ``substantial compliance'' as 
the criterion that SNFs and NFs must meet in order to participate in 
Medicare and Medicaid, and defines the term;
    <bullet> Provides for termination of any SNF or NF that does not 
achieve substantial compliance within 6 months from the date of survey; 
and
    <bullet> Removes references to ``level A and level B'' 
requirements.
    Regarding the issue of allowing participation by an SNF or NF that 
has minor deficiencies, we believe that it is impractical and 
unrealistic to require perfect compliance. In fact, in 1992, only 7.3 
percent of all SNFs and NFs surveyed were deficiency-free. Under the 
previous enforcement system defined by ``level A'' and ``level B'' 
requirements, most of the facilities that were experiencing only minor 
problems could continue to participate because the system allowed for 
some noncompliance at the lower or ``B'' level. That is no longer the 
case. By vastly increasing the number of statutory requirements that 
SNFs and NFs must meet, and by requiring us to do away with the 
hierarchy of requirements, Congress made it far more difficult for the 
facilities to qualify for program participation. We do not believe that 
Congress intended to write into law a set of requirements that would 
preclude almost all SNFs and NFs from participating in Medicare and 
Medicaid. Therefore, we have defined ``substantial compliance'' as a 
degree of compliance such that any existing deficiencies have not 
caused actual harm and do not create the potential for more than 
minimal harm to a resident. This definition is consistent with the 
statutory focus on resident outcomes as opposed to procedural 
requirements that do not always accurately measure whether quality care 
is being furnished. Although an SNF or NF that falls short of total 
compliance may escape imposition of a remedy, it still has a duty to 
provide, to each resident, care that enhances the chances of positive 
outcomes and avoids negative outcomes. If a single resident experiences 
any harm, the facility has not satisfied its statutory obligations. 
Given the statute's focus on each resident's right to receive quality 
care, and the facility's obligation to provide it, we could not adopt a 
less rigorous standard of compliance. (The preamble to HSQ-156-F 
contained a more detailed discussion of the background and rationale 
for the ``substantial compliance'' concept.)
    However, precisely because the new standard is more stringent than 
its predecessor, it follows that once an SNF or NF achieves 
``substantial compliance'', it has demonstrated its capacity for 
participation in the programs. Thus, if the survey finds that the 
facility is in ``substantial compliance'', the provider agreement is 
effective on the date the survey is completed. If we require the SNF or 
NF to submit a plan of correction for whatever requirements it does not 
fully meet, that does not delay the effective date of the agreement. If 
the facility needs a waiver, current practice remains unchanged, and 
the effective date is delayed until we receive an approvable waiver 
request.

2. Appeals and Payment

    Comment: One commenter expressed the opinion that the proposed rule 
would not change the basic procedures for determining effective date, 
but merely add an appeal mechanism. The commenter understood the 
appeals provisions to mean that--
    <bullet> Payment to a new provider would continue during the 
pendency of an appeal; and
    <bullet> If the hearing decision changed the effective date, 
payments would be effective as of the new date.
    Response: We agree that the procedures for determining effective 
date remain essentially unchanged except for the new ``substantial 
compliance'' concept for SNFs and NFs. For other providers, the rule 
continues to be that the effective date is the earlier of the date on 
which the provider meets all requirements or the date on which it meets 
all condition level requirements (or conditions for coverage in the 
case of suppliers) and has an acceptable plan of correction for 
standard level

[[Page 43933]]

deficiencies or an approvable waiver request, or both.
    To preclude any confusion concerning the determination of effective 
date when it is related to a plan of correction or waiver request, we 
revised the rule to state that the effective date of the agreement or 
approval is the date that the State or HCFA receives (as opposed to the 
date the facility submits) the acceptable plan or approvable waiver 
request.
    The commenter is correct in interpreting that payment would be 
made, during pendency of the appeal, for services furnished on or after 
the effective date of the agreement or approval; and would be adjusted 
to the new effective date determined by the hearing decision.

3. Effective Date When Facility Is Accredited Before It Seeks 
Participation

    Comment: Two commenters were concerned about how the proposed rule 
would be applied when a facility had already been accredited by an 
accrediting organization. The proposed rule would not allow the 
provider to enter into a retroactive agreement so that it could receive 
payment for services furnished after accreditation but before it sought 
participation in Medicare or Medicaid. The commenters stated that this 
situation commonly arises when a provider that has been surveyed and 
found to be in compliance with Federal requirements--
    <bullet> Is participating in its own State's Medicaid program and 
provides services to a Medicaid recipient from another State; or
    <bullet> Is not participating in Medicaid but provides services to 
a Medicaid recipient before learning of the individual's Medicaid 
status.
    Response: We consider the concerns to be justified. Accordingly, we 
have revised Sec. 431.108 (content previously contained in Sec. 442.13) 
and Sec. 489.13 to provide that an agreement or approval may be made 
retroactive for a provider or supplier that--
    <bullet> Has been deemed to meet all applicable Federal 
requirements on the basis of accreditation by an accrediting 
organization whose program had HCFA approval at the time the 
organization surveyed and accredited the provider or supplier; and
    <bullet> Meets all applicable State licensure and Life Safety Code 
requirements.
    Specifically, the final rule provides that the effective date of an 
agreement or approval can be made retroactive for up to one year to 
encompass dates on which the provider or supplier furnished covered 
services to a beneficiary or recipient. However, the retroactive 
effective date may not be before the earlier of--
    <bullet> The date on which HCFA approves the accrediting 
organization's program; and
    <bullet> The date of accreditation.
    We already have several regulations that provide for payment in 
special situations:
    Sec. 431.52--for Medicaid services furnished out of State.
    Part 424 and Secs. 440.170(e) and 482.2--for emergency care 
furnished by nonparticipating hospitals.
    We believe that additional flexibility in determining effective 
dates of agreements and approvals will further ensure that all eligible 
providers and suppliers receive payment. The one-year period for 
retroactivity is consistent with Medicare and Medicaid regulations 
which generally require that claims be submitted for payment within one 
year from the date of service.

4. Applicability of the Rule

    Comment: Two commenters questioned whether physicians in private 
practice and other non-institutional providers of Medicaid services 
would be subject to the regulation since, according to Sec. 440.3, the 
effective date provisions apply to all types of Medicaid providers. One 
of the commenters disagreed with the provisions governing deemed status 
if they are to be applied to Medicaid private non-institutional 
providers.
    Response: In response to these comments, Sec. 431.108(a)(2) (for 
Medicaid) and Sec. 489.13(a) (for Medicare) specify that the rules for 
determining effective date apply only to providers and suppliers that 
are subject to survey and certification by HCFA or the State survey 
agency, or have deemed status on the basis of accreditation by an 
accrediting organization whose program has HCFA approval. (Section 
440.3 of the proposed rule cited Sec. 442.13 for the effective date 
rules. In this final regulation, we have moved those rules to the new 
Sec. 431.108 of subpart C because that is the subpart that pertains to 
Medicaid provider agreements.)

5. Regulatory Impact Statement

    Comment: One commenter noted that the impact statement in the 
proposed rule did not explain why the Secretary certified that the rule 
would not have a significant impact on a substantial number of small 
entities. The commenter requested that the final rule include a 
comprehensive regulatory impact analysis.
    Response: A regulatory impact analysis is required when a rule 
would have a significant impact. It has been determined that the effect 
of this rule on small entities is negligible because, in practice, we 
have for the most part determined effective dates of provider 
agreements and supplier approvals using the policies and procedures 
that were not until now incorporated in the regulations. Therefore, 
since the procedures for determining effective dates generally do not 
change, the impact on providers and suppliers is inconsequential and 
thus forms the basis for certifying that this rule will not have a 
significant economic impact. Since there is no significant impact, a 
regulatory impact analysis is not required.
    Although this rule makes only minimal changes in the way effective 
dates are determined, it does add an appeals mechanism. We do not 
anticipate a significant increase in the number of requests for 
hearings for two reasons:
    First, the current Federal regulations provide appeal rights for a 
prospective provider or supplier who is denied participation in the 
Medicare program. (State regulations may provide a similar appeals 
mechanism for Medicaid denials.) A determination to deny a prospective 
provider's or prospective supplier's request for participation in 
Medicare is usually based on the entity's lack of compliance with our 
requirements for participation. Effective date hearings would, for the 
most part, focus on the same noncompliance issues. Appeals from 
effective date determinations will probably arise when an entity 
disagrees with the date that HCFA or the State determines that 
noncompliance was corrected. We do not anticipate that entities will 
appeal both an initial denial and a subsequent effective date 
determination.
    Second, the right to appeal an effective date determination, while 
not previously codified, had already been confirmed by court decisions. 
Since the effective date of participation is usually determined only 
once, at the time of the initial survey (the exception being ICFs/MR 
which have time-limited agreements), and since entities are already 
appealing these decisions, we do not anticipate that codification of 
the appeal rights will cause any great increase in the number of 
hearing requests.
    Further, we have no reason to anticipate that publication of this 
rule will cause an increase in the number of small entities that 
request agreements or approvals for participation in Medicare, or 
Medicaid, or both. Neither do we have any basis for estimating how many 
prospective providers or suppliers will

[[Page 43934]]

make such requests after this rule is published.

6. Part Title

    Comment: One commenter suggested that we change the title of part 
442 from ``Standards for Payment to Nursing Facilities and Intermediate 
Care Facilities for the Mentally Retarded'' to ``Standards for Payment 
to Nursing Facilities and Intermediate Care Facilities for Persons with 
Mental Retardation''.
    Response: We agree that it would be preferable to have a title that 
recognizes the person first and the disability second, as opposed to 
referring directly to the disability. However, section 1905(d) of the 
statute identifies these institutions as ``intermediate care facilities 
for the mentally retarded''. We believe that retention of that language 
is the best way to preclude any possible misunderstanding.

7. Miscellaneous Comments

    Comment: We received favorable comments on two provisions of the 
proposed rule--
    <bullet> Having the State survey agency recommend the effective 
date when it has conducted the survey.
    <bullet> Precluding appeals based on the contention that a survey 
should have been conducted earlier than it was.
    Response: We appreciate the commenter's support and believe that 
these two provisions will contribute to smooth implementation of the 
rules.

D. Provisions of the Final Rule

    In summary, this final rule--
    <bullet> Makes clear that the rules for determination of the 
effective date of a provider agreement or supplier approval apply to 
all providers and suppliers that are subject to survey and 
certification by HCFA, or the State survey agency, or have deemed 
status on the basis of accreditation;
    <bullet> Provides that the State agency that conducts the survey 
makes recommendations concerning the effective date;
    <bullet> Reflects statutory changes under which the basis for 
determining effective date for SNFs and NFs is different from the basis 
used in connection with other providers and with suppliers;
    <bullet> Sets forth the circumstances under which effective dates 
may be made retroactive;
    <bullet> Makes existing Medicare appeals procedures available, and 
requires Medicaid agencies to make their existing appeals procedures 
available, for effective date determinations.
    <bullet> Specifies that, for laboratories, Medicaid agreements and 
Medicare approvals are effective only while the laboratory has in 
effect a valid CLIA certificate issued under part 493 of the HCFA 
rules, and only for the specialty and subspecialty tests it is 
authorized to perform; and
    <bullet> Sets forth the effective date rules that apply to Medicare 
provider agreements with community mental health centers (CMHCs) and 
Federally qualified health centers (FQHCs). The effective date rule for 
Medicaid agreements with FQHCs will be issued as part of a separate 
regulation. (CMHCs do not participate in the Medicaid program.)
    We are also taking advantage of this opportunity to clarify policy 
on termination of provider agreements, as set forth in Sec. 489.53. 
Specifically, this final rule amends that section to revise the 
paragraph (b) heading and restore language that was inadvertently 
changed by HSQ-156-F, Survey, Certification, and Enforcement for 
Skilled Nursing Facilities and Nursing Facilities (59 FR 56116 of 
November 10, 1994).
    The 1994 final rule, in revising Sec. 489.53, inadvertently 
expanded an exception by making the 2-day notice applicable to ``a 
provider or supplier'', instead of only to a skilled nursing facility 
(SNF). This rule revises Sec. 489.53(c)(2) to restore the previous 
language: ``For an SNF with deficiencies that pose immediate jeopardy 
to the health or safety of its residents, HCFA gives notice at least 2 
days before the effective date of termination of the provider 
agreement.'' (The correctly limited rule for nursing facilities is set 
forth in Sec. 488.402(f)(3) of the HCFA rules.)
    We would also correct a technical error--the retention of ``; and'' 
at the end of Sec. 489.11(c)(2) when paragraph (c)(3) of that section 
was removed.

Collection of Information Requirements

    This rule contains no new information collection requirements 
subject to review by the Office of Management and Budget under the 
Paperwork Reduction Act.

Regulatory Impact Statement

    Consistent with the Regulatory Flexibility Act (RFA) and section 
1102(b) of the Social Security Act, we prepare a regulatory impact 
analysis for each rule, unless we can certify that the rule will not 
have a significant economic impact on a substantial number of small 
entities, or a significant impact on the operation of a substantial 
number of small rural hospitals.
    The RFA defines small entity as a small business, a nonprofit 
enterprise, or a governmental jurisdiction (such as a county, city, or 
township) with a population of less than 50,000. We also consider all 
providers and suppliers of services to be small entities. For purposes 
of section 1102(b) of the Act, we define small rural hospital as a 
hospital that has fewer than 50 beds, and is not located in a 
metropolitan statistical area.
    This rule makes minimal changes in the procedures for determining 
the effective date of a provider agreement or a supplier approval, and 
makes existing appeals procedures available to entities that are 
dissatisfied with any effective date determination. It has been 
determined that the effect of these changes on small entities is 
negligible because, in practice, we have for the most part determined 
effective dates of agreements and approvals using the policies and 
procedures that had not until now been incorporated in our regulations. 
The important aspect of this rule is that it is essentially a matter of 
codification, of inclusion of those practices in the CFR.
    In addition, we do not anticipate that codification of the right to 
appeal effective date determinations will lead to a significant 
increase in the number of hearing requests for several reasons.
    First, current Federal regulations provide appeal rights for a 
prospective provider or supplier who is denied participation in the 
Medicare program. (State regulations may provide a similar appeals 
mechanism for Medicaid denials). Denial of participation is usually 
based on the prospective provider's or prospective supplier's lack of 
compliance with our requirements. Effective date hearings would, for 
the most part, focus on the same noncompliance issues. Appeals from 
effective date determinations will probably arise when the entity 
disagrees with the date that HCFA or the State determines that the 
noncompliance was corrected. We do not believe that entities will 
appeal both an initial denial and a subsequent effective date 
determination.
    Second, the right to appeal an effective date determination, while 
not previously codified, had been confirmed by court decisions. Since 
entities are currently appealing these decisions, and since the 
effective date of participation is usually determined only once, at the 
time of the initial survey (the exception being ICFs/MR which have 
time-limited agreements) we do not anticipate a large increase in the 
number of hearing requests.
    It is clear that, since the procedures for determining and 
appealing effective date determinations generally will not

[[Page 43935]]

change as a result of publishing this rule, the criteria for requiring 
a regulatory impact analysis are not met. Accordingly, we have not 
prepared a regulatory impact analysis because we have determined and 
the Secretary certifies that this rule will not have a significant 
economic impact on a substantial number of small entities or a 
significant impact on the operation of a substantial number of small 
rural hospitals.
    We have no reason to anticipate that this rule will cause an 
increase in the number of small entities that request agreements or 
approvals for participation in Medicare or Medicaid or both. Neither do 
we have any basis for estimating how many will make such requests after 
the effective date of this rule.
    We have reviewed this rule and determined that, under the 
provisions of Public Law 104-121, it is not a major rule.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 431

    Grant programs--health, Health facilities, Reporting and 
recordkeeping requirements.

42 CFR Part 442

    Grant programs--health, Health facilities, Health professions, 
Health records, Medicaid, Nursing homes, Nutrition, Reporting and 
recordkeeping requirements, Safety.

42 CFR Part 488

    Health facilities, Survey and certification, Forms and guidelines.

42 CFR Part 489

    Health facilities, Medicare.

42 CFR Part 498

    Administrative practice and procedure, Appeals, Medicare, 
Practitioners, providers, and suppliers.

    42 CFR Chapter IV is amended as set forth below.

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

    A. Part 431 is amended as set forth below.
    1. The authority citation for part 431 continues to read as 
follows:

    Authority: Section 1102 of the Social Security Act (42 U.S.C. 
1302).

    2. Subpart C is amended to add new Sec. 431.108 to read as follows:


Sec. 431.108  Effective date of provider agreements.

    (a) Applicability--(1) General rule. Except as provided in 
paragraph (a)(2) of this section, this section applies to Medicaid 
provider agreements with entities that, as a basis for participation in 
Medicaid--
    (i) Are subject to survey and certification by HCFA or the State 
survey agency; or
    (ii) Are deemed to meet Federal requirements on the basis of 
accreditation by an accrediting organization whose program has HCFA 
approval at the time of accreditation survey and accreditation 
decision.
    (2) Exception. A Medicaid provider agreement with a laboratory is 
effective only while the laboratory has in effect a valid CLIA 
certificate issued under part 493 of this chapter, and only for the 
specialty and subspecialty tests it is authorized to perform.
    (b) All requirements are met on the date of survey. The agreement 
is effective on the date the onsite survey (including the Life Safety 
Code survey if applicable) is completed, if on that date the provider 
meets--
    (1) All applicable Federal requirements as set forth in this 
chapter; and
    (2) Any other requirements imposed by the State for participation 
in the Medicaid program. (If the provider has a time-limited agreement, 
the new agreement is effective on the day following expiration of the 
current agreement.)
    (c) All requirements are not met on the date of survey. If on the 
date the survey is completed the provider fails to meet any of the 
requirements specified in paragraph (b) of this section, the following 
rules apply:
    (1) An NF provider agreement is effective on the date on which--
    (i) The NF is found to be in substantial compliance as defined in 
Sec. 488.301 of this chapter; and
    (ii) HCFA or the State survey agency receives from the NF, if 
applicable, an approvable waiver request.
    (2) For an agreement with any other provider, the effective date is 
the earlier of the following:
    (i) The date on which the provider meets all requirements.
    (ii) The date on which a provider is found to meet all conditions 
of participation but has lower level deficiencies, and HCFA or the 
State survey agency receives from the provider an acceptable plan of 
correction for the lower level deficiencies, or an approvable waiver 
request, or both. (The date of receipt is the effective date of the 
agreement, regardless of when HCFA approves the plan of correction or 
waiver request, or both.)
    (d) Accredited provider requests participation in the Medicaid 
program.--(1) General rule. If a provider is currently accredited by a 
national accrediting organization whose program had HCFA approval at 
the time of accreditation survey and accreditation decision, and on the 
basis of accreditation, HCFA has deemed the provider to meet Federal 
requirements, the effective date depends on whether the provider is 
subject to requirements in addition to those included in the 
accrediting organization's approved program.
    (i) Provider subject to additional requirements. For a provider 
that is subject to additional requirements, Federal or State, or both, 
the effective date is the date on which the provider meets all 
requirements, including the additional requirements.
    (ii) Provider not subject to additional requirements. For a 
provider that is not subject to additional requirements, the effective 
date is the date of the provider's initial request for participation if 
on that date the provider met all Federal requirements.
    (2) Special rule: Retroactive effective date. If the provider meets 
the requirements of paragraphs (d)(1) and (d)(1)(i) or (d)(1)(ii) of 
this section, the effective date may be retroactive for up to one year, 
to encompass dates on which the provider furnished, to a Medicaid 
recipient, covered services for which it has not been paid.
    3. Section 431.151(a) is amended to republish the introductory text 
and add a paragraph (a)(3), to read as follows:


Sec. 431.151  Scope and applicability.

    (a) General rules. This subpart sets forth the appeals procedures 
that a State must make available as follows:
* * * * *
    (3) To an NF or ICF/MR that is dissatisfied with a determination as 
to the effective date of its provider agreement.
* * * * *
    4. Section 431.153 is amended to republish the introductory text of 
paragraph (b) and add a paragraph (b)(5), to read as follows:


Sec. 431.153  Evidentiary hearing.

* * * * *
    (b) Limit on grounds for appeal. The following are not subject to 
appeal:
* * * * *
    (5) A State survey agency's decision as to when to conduct an 
initial survey of a prospective provider.
* * * * *

[[Page 43936]]

Sec. 431.610  [Amended]

    5. In Sec. 431.610, the following changes are made:
    a. In paragraph (e)(1), ``if'' is removed and ``whether'' is 
inserted in its place.
    b. In paragraph (e)(2), the period is removed and ``; and'' is 
added in its place.
    c. A new paragraph (e)(3) is added, to read as set forth below:


Sec. 431.610  Relations with standard-setting and survey agencies.

* * * * *
    (e) Designation of survey agency. * * *
    (3) The agency designated in paragraph (e)(1) of this section makes 
recommendations regarding the effective dates of provider agreements, 
as determined under Sec. 431.108.
* * * * *

PART 442--STANDARDS FOR PAYMENT TO NURSING FACILITIES AND 
INTERMEDIATE CARE FACILITIES FOR THE MENTALLY RETARDED

    B. Part 442 is amended as set forth below.
    1. The heading for part 442 is revised to read as set forth above.
    2. The authority citation for part 442 continues to read as 
follows:

    Authority: Section 1102 of the Social Security Act (42 U.S.C. 
1302).

    3. Section 442.13 is revised to read as follows:


Sec. 442.13  Effective date of provider agreement.

    The effective date of a provider agreement with an NF or ICF/MR is 
determined in accordance with the rules set forth in Sec. 431.108.

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

    C. Part 488 is amended as set forth below.
    1. The authority citation for part 488 continues to read as 
follows:

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

    2. Section 488.11 is revised to read as follows:


Sec. 488.11  State survey agency functions.

    State and local agencies that have agreements under section 1864(a) 
of the Act perform the following functions:
    (a) Survey and make recommendations regarding the issues listed in 
Sec. 488.10.
    (b) Conduct validation surveys of accredited facilities as provided 
in Sec. 488.7.
    (c) Perform other surveys and carry out other appropriate 
activities and certify their findings to HCFA.
    (d) Make recommendations regarding the effective dates of provider 
agreements and supplier approvals in accordance with Sec. 489.13 of 
this chapter.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    D. Part 489 is amended as set forth below.
    1. The authority citation for part 489 continues to read as 
follows:

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

    2. In Sec. 489.1, a new paragraph (d) is added, to read as follows:


Sec. 489.1  Statutory basis.

* * * * *
    (d) Although section 1866 of the Act speaks only to providers and 
provider agreements, the effective date rules in this part are made 
applicable also to the approval of suppliers that meet the requirements 
specified in Sec. 489.13.
    3. Sec. 489.13 is revised to read as follows:


Sec. 489.13  Effective date of agreement or approval.

    (a) Applicability--(1) General rule. Except as provided in 
paragraph (a)(2) of this section, this section applies to Medicare 
provider agreements with, and supplier approval of, entities that, as a 
basis for participation in Medicare--
    (i) Are subject to survey and certification by HCFA or the State 
survey agency; or
    (ii) Are deemed to meet Federal requirements on the basis of 
accreditation by an accrediting organization whose program has HCFA 
approval at the time of accreditation survey and accreditation 
decision.
    (2) Exceptions. (i) For an agreement with a community mental health 
center (CMHC) or a Federally qualified health center (FQHC), the 
effective date is the date on which HCFA accepts a signed agreement 
which assures that the CMHC or FQHC meets all Federal requirements.
    (ii) A Medicare supplier approval of a laboratory is effective only 
while the laboratory has in effect a valid CLIA certificate issued 
under part 493 of this chapter, and only for the specialty and 
subspecialty tests it is authorized to perform.
    (b) All Federal requirements are met on the date of survey. The 
agreement or approval is effective on the date the survey (including 
the Life Safety Code survey, if applicable) is completed, if on that 
date the provider or supplier meets all applicable Federal requirements 
as set forth in this chapter. (If the agreement or approval is time-
limited, the new agreement or approval is effective on the day 
following expiration of the current agreement or approval.)
    (c) All Federal requirements are not met on the date of survey. If 
on the date the survey is completed the provider or supplier fails to 
meet any of the requirements specified in paragraph (b) of this 
section, the following rules apply:
    (1) For an agreement with an SNF, the effective date is the date on 
which--
    (i) The SNF is in substantial compliance (as defined in 
Sec. 488.301 of this chapter) with the requirements for participation; 
and
    (ii) HCFA or the State survey agency receives from the SNF, if 
applicable, an approvable waiver request.
    (2) For an agreement with, or an approval of, any other provider or 
supplier, (except those specified in paragraph (a)(2) of this section), 
the effective date is the earlier of the following:
    (i) The date on which the provider or supplier meets all 
requirements.
    (ii) The date on which a provider or supplier is found to meet all 
conditions of participation or coverage, but has lower level 
deficiencies, and HCFA or the State survey agency receives an 
acceptable plan of correction for the lower level deficiencies, or an 
approvable waiver request, or both. (The date of receipt is the 
effective date regardless of when HCFA approves the plan of correction 
or the waiver request, or both.)
    (d) Accredited provider or supplier requests participation in the 
Medicare program--(1) General rule. If the provider or supplier is 
currently accredited by a national accrediting organization whose 
program had HCFA approval at the time of accreditation survey and 
accreditation decision, and on the basis of accreditation, HCFA has 
deemed the provider or supplier to meet Federal requirements, the 
effective date depends on whether the provider or supplier is subject 
to requirements in addition to those included in the accrediting 
organization's approved program.
    (i) Provider or supplier subject to additional requirements. If the 
provider or supplier is subject to additional requirements, the 
effective date of the agreement or approval is the date on which the 
provider or supplier meets all requirements, including the additional 
requirements.

[[Page 43937]]

    (ii) Provider or supplier not subject to additional requirements. 
For a provider or supplier that is not subject to additional 
requirements, the effective date is the date of the provider's or 
supplier's initial request for participation if on that date the 
provider or supplier met all Federal requirements.
    (2) Special rule: Retroactive effective date. If a provider or 
supplier meets the requirements of paragraphs (d)(1) and (d)(1)(i) or 
(d)(1)(ii) of this section, the effective date may be retroactive for 
up to one year to encompass dates on which the provider or supplier 
furnished, to a Medicare beneficiary, covered services for which it has 
not been paid.
    4. Section 489.53 is amended to revise the heading of paragraph (b) 
and paragraphs (c)(1) and (c)(2) to read as follows:


Sec. 489.53  Termination by HCFA.

* * * * *
    (b) Termination of agreements with certain hospitals. * * *
    (c) Notice of termination--(1) Timing: Basic rule. Except as 
provided in paragraph (c)(2) of this section, HCFA gives the provider 
notice of termination at least 15 days before the effective date of 
termination of the provider agreement.
    (2) Timing exceptions: Immediate jeopardy situations--(i) Hospital 
with emergency department. If HCFA finds that a hospital with an 
emergency department is in violation of Sec. 489.24, paragraphs (a) 
through (e), and HCFA determines that the violation poses immediate 
jeopardy to the health or safety of individuals who present themselves 
to the hospital for emergency services, HCFA--
    (A) Gives the hospital a preliminary notice indicating that its 
provider agreement will be terminated in 23 days if it does not correct 
the identified deficiencies or refute the finding; and
    (B) Gives a final notice of termination, and concurrent notice to 
the public, at least 2 , but not more than 4, days before the effective 
date of termination of the provider agreement.
    (ii) Skilled nursing facilities (SNFs). For an SNF with 
deficiencies that pose immediate jeopardy to the health or safety of 
residents, HCFA gives notice at least 2 days before the effective date 
of termination of the provider agreement.
* * * * *

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF CERTAIN ICFs/MR AND CERTAIN NFs IN THE 
MEDICAID PROGRAM

    E. Part 498 is amended as set forth below.
    1. The authority citation for part 498 continues to read as 
follows:

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

    2. Section 498.3 is amended to revise paragraph (a), republish the 
introductory text of paragraph (b) and add a paragraph (b)(14), revise 
the introductory text of paragraph (d) and add new paragraphs (d)(14) 
and (d)(15), to read as follows:


Sec. 498.3  Scope and applicability.

    (a) Scope. This part sets forth procedures for reviewing initial 
determinations that HCFA makes with respect to the matters specified in 
paragraph (b) of this section, and that the OIG makes with respect to 
the matters specified in paragraph (c) of this section. It also 
specifies, in paragraph (d) of this section, administrative actions 
that are not subject to appeal under this part.
    (b) Initial determinations by HCFA. HCFA makes initial 
determinations with respect to the following matters:
* * * * *
    (14) The effective date of a Medicare provider agreement or 
supplier approval.
* * * * *
    (d) Administrative actions that are not initial determinations. 
Administrative actions that are not initial determination (and 
therefore not subject to appeal under this part) include but are not 
limited to the following:
* * * * *
    (14) The choice of alternative sanction or remedy to be imposed on 
a provider or supplier.
    (15) A decision by the State survey agency as to when to conduct an 
initial survey of a prospective provider or supplier.
* * * * *
    F. Technical correction.


Sec. 489.1  [Amended]

    In Sec. 489.11(c), the following changes are made:
    a. At the end of paragraph (c)(1), the word ``and'' is added.
    b. At the end of paragraph (c)(2), ``; and'' is removed and a 
period is inserted in its place.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare-- 
Supplementary Medical Insurance; and Program No. 93.778, Medical 
Assistance.)

    Dated: September 20, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: December 27, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 97-21731 Filed 8-15-97; 8:45 am]
BILLING CODE 4120-01-P