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[Federal Register Volume 62, Number 209 (Wednesday, October 29, 1997)]
[Rules and Regulations]
[Pages 56106-56111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28594]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 489

[BPD-748-F]
RIN 0938-AG03

Medicare Program; Changes in Provider Agreement Regulations 
Related to Federal Employees Health Benefits

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

ACTION: Final rule.

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SUMMARY: This final rule makes two changes to Medicare's provider 
agreement regulations concerning payment for inpatient hospital 
services furnished to retired enrollees of fee-for-service Federal 
Employees Health Benefits (FEHB) plans who do not have Medicare Part A 
coverage. The first change specifies that payment for inpatient 
hospital services furnished to retired Federal workers age 65 or older 
who are enrolled in a fee-for-service FEHB plan but are not covered 
under Medicare Part A is limited to a payment amount that approximates 
the Medicare diagnosis-related group payment rates established under 
Medicare's inpatient hospital prospective payment system.
    The second change specifies that HCFA will consider termination or 
nonrenewal of a hospital's provider agreement with Medicare if a 
hospital knowingly and willfully fails to accept, on a repeated basis, 
the Medicare rate as payment in full for inpatient hospital services 
provided to a retired Federal worker who is enrolled in a fee-for-
service FEHB plan and who does not have Medicare Part A coverage.
    This final rule implements section 7002(f) of the Omnibus Budget 
Reconciliation Act of 1990.

[[Page 56107]]

EFFECTIVE DATE: These regulations are effective on November 28, 1997.

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FOR FURTHER INFORMATION CONTACT: David Walczak, (410) 786-4475.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Personnel Management (OPM) administers the Federal 
Employees Health Benefits (FEHB) program. This program provides health 
insurance coverage to current Federal employees, retired Federal 
workers, and their eligible family members. While most retired Federal 
employees age 65 or older are eligible to receive hospital insurance 
benefits under Medicare Part A, some retired Federal workers are not 
covered. This group generally encompasses those Federal workers who 
retired from the Federal Government before January 1, 1983, and who did 
not have Medicare withholdings taken from their salary while employed 
with the Federal Government or did not acquire coverage in another way.
    Existing Medicare provider agreement regulations at 42 CFR 
489.21(a) specify that a provider must agree not to charge a 
beneficiary for services for which the beneficiary is entitled to have 
payment made under Medicare. Under this provision, the provider agrees 
to accept Medicare payment in full for services covered under Medicare 
and furnished by the provider. However, the regulations do not require 
that hospitals accept the Medicare hospital inpatient prospective 
payment system (PPS) rate as payment in full when issued by a fee-for-
service FEHB plan for a FEHB enrollee not covered by Medicare Part A.
    Section 7002(f) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA '90) (Pub. L. 101-508) requires that fee-for-service FEHB plans 
limit their inpatient payment for services furnished to retired FEHB 
enrollees age 65 and older who are not covered under Medicare Part A to 
rates that would have been paid by Medicare under section 1886 of the 
Social Security Act (the Act). Under sections 1886 (d) and (g) of the 
Act, Medicare payment for hospital inpatient operating and capital-
related costs is made at a predetermined specific rate for each 
hospital discharge based on the assigned diagnosis-related group (DRG) 
for each patient. Thus, a hospital knows at the time of discharge what 
Medicare will pay for each discharge.
    Section 7002(f) of OBRA '90 also requires that OPM notify the 
Secretary of Health and Human Services (the Secretary) of incidents 
when a hospital knowingly and willfully attempts to collect, on a 
repeated basis, more than the Medicare payment rates. The Secretary may 
consider such incidents as violations of the Medicare provider 
agreement and may terminate or refuse to renew the agreement. A 
Medicare provider agreement is an agreement between HCFA and providers 
specified in regulations to furnish services to Medicare beneficiaries 
and to comply with section 1866 of the Act, which establishes 
conditions that providers must meet in order to have an agreement to 
participate in the Medicare program. HCFA may terminate a provider 
agreement if any of the failings listed in regulations at 
Sec. 489.53(a) are attributable to a provider.
    On February 10, 1994, we published in the Federal Register (59 FR 
6228) a proposed rule to revise regulations in Part 489 to implement 
section 7002(f) of OBRA '90. We proposed to:
     Amend Sec. 489.21, which sets forth specific limitations 
on charges under Medicare provider agreements, to make the limitations 
on payment for inpatient hospital services applicable to services 
furnished to retired fee-for-service FEHB plan enrollees age 65 or 
older who are not covered under Medicare Part A hospital benefits.
     Specify, under a new Sec. 489.21(I), that a provider may 
not attempt to collect more than the amount established for Medicare 
purposes for inpatient hospital services under section 1886 of the Act.
     Add a new Sec. 489.53(a)(13) to specify that HCFA will 
consider termination or nonrenewal of a Medicare provider agreement 
with any hospital that knowingly and willfully fails to accept, on a 
repeated basis, the Medicare rate established under the inpatient 
hospital PPS system, minus any applicable health plan deductibles or 
copayments, as payment in full from a fee-for-service FEHB plan.
    Our February 10, 1994 proposed rule paralleled the provisions of a 
July 20, 1993 OPM final rule (58 FR 38661) that defined a retired 
enrolled individual and set forth the circumstances under which the 
limit on hospital charges and FEHB benefit payments take effect.

II. Analysis of and Responses to Public Comments

    We received four letters of comment on the February 10, 1994, 
proposed rule. A summary of these comments and our responses are 
discussed below.
    Comment: Two commenters identified a number of problems with the 
administrative procedures designed to enforce the limit on inpatient 
charges and to monitor overcharges in fee-for-service plans. One 
commenter stated that the oversight process relies on the FEHB plan 
having a good system for cross-referencing actual charges against the 
limits placed on hospital inpatient charges. The same commenter also 
expressed concern over the lack of any provision for enrollee input 
into the compliance process, except when an enrollee notices that an 
overcharge has been billed and then notifies the FEHB plan or OPM. A 
second commenter noted that there is no incentive for monitoring 
overcharges in fee-for-service plans, since these plans base future 
premiums on prior claims experience. The same commenter pointed out 
that the fee-for-service plans usually pay coinsurances and copayment 
amounts based on charges submitted by providers, and that the plans 
will not pursue potential overcharges, especially when the hospital is 
a preferred provider for the plan.
    Response: We believe that there are adequate procedures and 
controls in place among the FEHB plans, OPM, and HCFA to monitor 
overcharges in fee-for-service plans covering retired Federal

[[Page 56108]]

enrollees age 65 or older who do not have Medicare Part A hospital 
coverage.
    OPM is responsible for administering the day-to-day operations of 
the FEHB program. OPM's regulations governing the FEHB program are 
described in 5 CFR part 890. Regulations describing the limits are in 
subpart I of part 890. The FEHB plans inform both the hospital and the 
enrollee of the limits on inpatient charges for covered Medicare 
inpatient hospital services provided to a retired Federal enrollee age 
65 or older who does not have Medicare Part A benefits. The FEHB plans 
inform their enrollees through an explanation of benefits (EOB) 
statement, that describes what the plan pays for, the amount the 
enrollee must pay, the limits on inpatient hospital charges for 
Medicare-covered services, and the date each service was provided. The 
limits on hospital inpatient charges are also covered in the plans' 
benefit brochures. FEHB plans inform hospitals that a hospital cannot 
collect more than what Medicare would have paid if the FEHB enrollee 
had been covered by Medicare Part A. In other words, the fee-for-
service FEHB plan pays the hospital an amount that approximates as 
closely as possible the Medicare payment rate, minus any enrollee 
deductibles or copayment amounts.
    Since FEHB plans do not have a system in place for routinely 
checking for overcharges, any discrepancies are brought to the 
attention of a fee-for-service FEHB plan by an enrollee. According to 
OPM, overbilling of retired Federal enrollees of fee-for-service FEHB 
plans is not a problem. There have been no known instances of a 
hospital repeatedly overbilling. On the other hand, there have been a 
few instances where hospitals have disagreed with the Medicare 
prospective payment system rates that have been paid by the fee-for-
service FEHB plans. Disputes over the determination of the equivalent 
DRG payment rate have been resolved on a case-by-case basis between the 
fee-for-service FEHB plans and hospital providers.
    If there are instances of overbilling, fee-for-service FEHB plans 
must inform the hospital that it is violating the law. If the hospital 
does not comply with the law after being notified, the fee-for-service 
FEHB plans must notify OPM. If OPM determines that a hospital knowingly 
and willfully attempted to collect more than the Medicare payment rate 
for inpatient hospital services, OPM notifies HCFA to take appropriate 
action. HCFA is authorized to either terminate or nonrenew a hospital's 
provider agreement to participate in Medicare, in accordance with 
section 1866(b)(2) of the Act.
    HCFA's authority to take enforcement action against a hospital by 
stopping its Medicare reimbursement serves as a powerful and effective 
incentive for a hospital to follow acceptable billing practices. There 
is also a strong incentive for fee-for-service FEHB plans to ensure 
that a hospital is charging within the acceptable limits. If enrollees 
are continually being overcharged, they likely will become dissatisfied 
with a plan's service, and may eventually switch health plans. We 
believe that if the health plans want to keep enrollees as customers, 
fee-for-service FEHB plans will make every effort to monitor, prevent, 
and correct a hospital's overbilling as much as possible.
    Comment: One commenter stated that the language on HCFA termination 
of Medicare provider agreements in Sec. 489.53(a)(13) is broad and 
permissive. The commenter pointed out that a provider may misinterpret 
the words. ``HCFA may terminate the agreement if the provider knowingly 
and willfully charges, on a repeated basis * * *'', and suggested 
replacing the word ``may'' with the word ``will.''
    Response: Section 489.53(a) establishes HCFA's authority to 
terminate a provider's agreement and outlines the circumstances under 
which HCFA may proceed with the termination action. The phrase ``may 
terminate'' is used in the regulation rather than ``will terminate'' 
because it provides HCFA with the discretion to evaluate each situation 
carefully and to apply the termination provisions fairly. Thus, HCFA is 
not forced to arbitrarily terminate a provider's agreement if 
mitigating circumstances apply.
    In addition, the phrases ``* * * knowingly and willfully * * *'', 
``* * * on a repeated basis * * *'', and ``* * * may * * *'' are 
language taken directly from section 7002(f) of OBRA '90. Our 
regulations at Sec. 489.53 are based on the language and intent of this 
statute. The important point is that when OPM notifies HCFA that a 
violation has occurred, HCFA will investigate and make every attempt to 
enforce the requirements of the statute and regulations.
    Comment: One commenter believed that fee-for-service FEHB plans 
should inform their enrollees who are without Medicare Part A hospital 
benefits that their hospital bills have been reviewed, to assure that 
the inpatient charges do not exceed the Medicare approved payment 
amounts.
    Response: OPM has taken several measures to inform enrollees of 
fee-for-service FEHB plans of the limits on inpatient hospital charges 
and fee-for-service FEHB plan payments. First, OPM published the 1991 
Open Season Information and Instructions for Annuitants and included an 
explanation of the limits in a highlighted section entitled ``Attention 
All Enrollees''. In addition, an explanation of the limits has been 
included in all brochures of fee-for-service health plans of the FEHB 
program beginning in 1992 through the present.
    As stated in a previous response, a fee-for-service FEHB plan 
informs both the hospital and the enrollee of the current Medicare 
approved payment limits. The FEHB plan notifies the enrollee what the 
enrollee is obligated to pay (the deductible or copayment amount) in 
the EOB statement. When a fee-for-service FEHB plan receives a hospital 
bill for an enrollee covered by section 7002(f) of OBRA '90, the FEHB 
plan pays the hospital an amount that approximates the Medicare DRG 
payment amount minus any enrollee deductible or copayment. Thus, a 
hospital bears the responsibility not to collect more than the Medicare 
DRG payment rate established under the inpatient hospital prospective 
payment system, minus any enrollee deductibles or copayments, as 
payment in full from a fee-for-service FEHB plan. HCFA may terminate or 
nonrenew a hospital's provider agreement with Medicare, if OPM reports 
that a hospital is refusing to accept an amount that approximates the 
Medicare rate as payment in full for inpatient hospital services 
provided to a retired Federal worker who is enrolled in a fee-for-
service FEHB plan and who does not have Medicare Part A.
    Comment: One commenter believed that it is sometimes difficult to 
identify the appropriate primary payer types for all patients. Thus, 
the commenter recommended that every retired Federal enrollee who is 
not covered under Medicare Part A be issued an identification card to 
be presented when the individual receives inpatient hospital services. 
The commenter also suggested that the card include a message on one 
side stating that the card carrier is a Medicare limited-reimbursement 
patient, and display an accompanying telephone number for benefit 
information.
    Response: As noted above, OPM has operational authority over the 
administration of the FEHB program. HCFA does not have any 
responsibility in this area. We have forwarded this suggestion to OPM 
for its consideration.
    However, OPM did comment to us that the cost of producing a 
different identification card for retirees over age 65 not covered by 
Medicare Part A

[[Page 56109]]

cannot be justified when FEHB plans inform hospitals each time the 
limits apply, and by now, hospitals know the category of individuals 
that are covered by the limits.
    Comment: One commenter stated that the proposed rule did not 
address the Medicare payment limits established for providers that are 
excluded from PPS, such as psychiatric hospitals and units, 
rehabilitation hospitals and units, long-term care hospitals, 
children's hospitals, and cancer hospitals. Providers that are excluded 
from PPS are paid on a reasonable cost basis, subject to a hospital-
specific target rate per discharge.
    Response: Section 7002(f) of OBRA '90 specifies that a hospital may 
not charge more than the limitations on hospital charges established 
under section 1886 of the Act to fee-for-service FEHB plans for 
inpatient hospital services provided to retired Federal enrollees age 
65 or older who do not have Medicare Part A hospital coverage. Section 
1886 of the Act refers to Medicare payment to hospitals for inpatient 
services, which could be construed as including both the PPS rates and 
the payment limits for hospitals excluded from PPS. Both OPM and HCFA 
interpret that the intent of section 7002(f) of OBRA '90 applies only 
to hospitals that are paid under the PPS as specified in sections 
1886(d) and (g) of the Act. On the other hand, hospitals and units that 
are excluded from PPS are paid on a reasonable cost basis, known as the 
TEFRA payment system, and are not intended to be covered under section 
7002(f) of OBRA '90. There are a number of operational and 
administrative reasons why the limits on a fee-for-service FEHB plan's 
payment to a hospital for inpatient services provided to a retired 
Federal enrollee, age 65 or older, who is without Medicare Part A, are 
subject to Medicare's prospective payment system, rather than to 
Medicare's reasonable cost system of payment (TEFRA).
    First, under PPS, payment for acute inpatient hospital stays under 
Medicare Part A are based on prospectively set rates. Under this 
system, Medicare payment is made at a predetermined, specific rate for 
each hospital discharge, according to a DRG payment rate. A PPS 
hospital generally knows at the time of discharge what Medicare will 
pay for each Medicare discharge. In contrast, Medicare payment to 
providers subject to the TEFRA target limit is based on total Medicare 
discharges times a hospital-specific cost limit per discharge. Thus, 
hospitals and units that are excluded from PPS do not know what their 
total Medicare payments will be until after their year-end cost reports 
have been settled.
    Moreover, it is not feasible for fee-for-service FEHB plans to 
calculate Medicare payments rates for inpatient hospital services 
provided in PPS excluded hospitals and units. OPM and HCFA agree that 
the intent of section 7002(f) of OBRA '90 was not to have the fee-for-
service FEHB plans perform year-end settlements of hospital cost 
reports to determine a hospital's TEFRA payments, which are hospital-
specific as opposed to the patient-specific payments under PPS. 
Although it is feasible for a fee-for-service FEHB plan to compare 
prospective payments for a single beneficiary against a hospital's 
charges for that patient, it would not be feasible for a fee-for-
service FEHB to compare the TEFRA limit to the charges for a specific 
patient that would in effect involve aggregating all individual 
patients' charges and then imposing the limits. Instead, HCFA and OPM 
agree that the intent of section 7002(f) of OBRA '90 is to establish 
Medicare payment limits on inpatient hospital charges in accordance 
with the payment rates established under sections 1886(d) and (g) of 
the Act.
    We note that both OPM's interim final rule (published March 27, 
1992, in the Federal Register at 57 FR 10609) and final rule (published 
July 20, 1993, in the Federal Register at 58 FR 38661) specify that 
limitations on inpatient hospital charges and FEHB program payments are 
based on Medicare's DRG equivalent payment amount (a rate that 
represents as closely as possible the amount that Medicare would have 
paid had a retired FEHB enrollee been covered under Medicare Part A). 
Again, because of the differences in the two payment systems (PPS and 
TEFRA) and the difficulty in comparing what Medicare would have paid 
for a particular patient in a TEFRA provider, both HCFA and OPM agree 
that section 7002(f) of OBRA '90 does not apply to inpatient hospital 
services provided in non-PPS hospitals and units.
    Comment: One commenter stated that it has encountered a problem in 
receiving correct payment amounts for inpatient hospital services 
furnished to retired Federal workers age 65 and older who are enrolled 
in a fee-for-service FEHB plan and who do not have Medicare Part A 
benefits. The commenter expressed concern that payment rates for some 
hospitals have not been equal to Medicare payment rates for the same 
services, and that the payment rates used by OPM and the fee-for-
service FEHB plans are not the most recent rates. The commenter 
recommended that the Medicare payment rates received by OPM and the 
fee-for-service FEHB plans be current and updated as of October 1 of 
each year when new DRG rates are known and technical corrections have 
been made. Two commenters also requested that the payment rates include 
all applicable adjustments to the DRG rate, such as the indirect 
medical education cost adjustment, payment for direct graduate medical 
education costs, outlier payments, inpatient capital costs, kidney 
acquisition costs, etc.
    Response: OPM addressed a similar comment in its July 20, 1993 
final rule (58 FR 38661). We agree with OPM's response, which stated 
that OPM and the FEHB plans intend to calculate the DRG equivalent 
amount as closely as possible to the amount that would have been paid 
by Medicare.
    We have been working with OPM to provide the latest DRG payment 
rates. In fact, the data provided by HCFA to OPM for calculating the 
DRG equivalent payment amount include all applicable adjustments to the 
DRG rate, such as the indirect medical education cost adjustment, 
payment for direct graduate medical education costs, organ acquisition 
costs, capital costs, and outlier payments. Any dispute involving a 
payment made by a fee-for-service FEHB plan for inpatient hospital 
services provided to a retired Federal worker who is enrolled in the 
fee-for-service FEHB plan and who does not have Medicare Part A 
coverage should be resolved by the particular FEHB plan and the 
provider.
    Medicare Grouper, Code Editor and Pricer software data provide 
current DRG payment data to OPM as of October 1 of each fiscal year. 
The Medicare fiscal intermediaries send HCFA a provider file every 3 
months. The provider-specific file includes the data needed to 
calculate adjustments to the DRG rate, such as outlier payments, the 
indirect medical education cost adjustment, payment for direct graduate 
medical education costs, organ acquisition costs, and inpatient capital 
costs.
    Because of a transition to a new capital payment system, capital 
cost data for 1992 were not available to the fee-for-service FEHB 
plans. The fee-for-service FEHB plans were advised by OPM to use 
``pass-through'' information multiplied by the length of stay to 
determine an equivalent capital cost adjustment amount. Capital cost 
information has been available to the fee-for-service FEHB plans since 
the 1993 coverage year.
    Comment: One commenter recommended that an appeal mechanism be put 
in place to resolve payment differences and ensure that

[[Page 56110]]

correct payments are made to providers. The same commenter suggested 
that a paid Medicare remittance for an identical DRG should be adequate 
documentation to ensure that a provider is being paid the correct 
amount, that is, the equivalent Medicare DRG payment amount.
    Response: In its July 20, 1993 final rule, OPM stated that fee-for-
service FEHB plans have an obligation to work with hospital providers 
to determine the correct payment amounts and to make any necessary 
adjustments. Any decision to implement an appeals mechanism would be at 
the discretion of OPM, since OPM administers the FEHB program. 
Therefore, whether or not a paid Medicare remittance for identical DRG 
constitutes acceptable documentation is a matter for OPM and the FEHB 
plans to decide.

III. Provisions of the Final Regulations

    After further review of the regulation text set forth in the 
February 10, 1994 proposed rule, we believe that several changes are 
needed to improve clarity.
    The proposed rule would have revised the introductory text of 
Sec. 489.21 and adding a new paragraph (I). We have determined that the 
proposed language does not have the same context as the language in 
Sec. 489.21, and Sec. 489.21 does not have the same meaning as the 
intent of section 7002(f) of OBRA '90. The existing introductory 
paragraph in Sec. 489.21 states that providers agree not to charge a 
beneficiary for any of the services listed in this section (which would 
have included the services listed in the proposed paragraph (I)). 
However, the intent of section 7002(f) of OBRA '90 is that a fee-for-
service FEHB plan should not pay a provider for inpatient hospital 
services furnished to a retired FEHB enrollee age 65 or older who is 
without Medicare Part A hospital insurance, more than the amount that 
Medicare would have paid had the enrollee been covered under Part A, 
minus any enrollee deductibles or copayment. Therefore, we are 
withdrawing the proposed language change to the existing regulation 
text in Sec. 489.21.
    Instead, we are adding a new Sec. 489.23, which will require a 
provider to accept, as payment in full, an amount that approximates the 
Medicare payment rate established under the inpatient hospital PPS for 
inpatient hospital services furnished to retired Federal workers age 65 
or older who are enrolled in a fee-for-service FEHB plan and who do not 
have Medicare Part A benefits.
    We also proposed to amend Sec. 489.53 to specify that HCFA may 
terminate the Medicare provider agreement with any hospital that 
knowingly and willfully fails to accept, on a repeated basis, the 
Medicare payment rate established under PPS, minus any enrollee 
deductibles or copayments, as payment in full from a fee-for-service 
FEHB plan for inpatient services provided to retired Federal enrollees 
age 65 or older who do not have Medicare Part A benefits. In order to 
further clarify the proposed change, we are revising 
Sec. 489.53(a)(13)(redesignated now as (a)(15)) to specify that the 
provision applies only to providers that furnish inpatient hospital 
services to retired Federal enrollees of fee-for-service FEHB plans who 
are 65 or older who do not have Medicare Part A benefits.

IV. Regulatory Impact Statement

    HCFA has examined the impacts of this final rule as required by 
Executive Order 12866 and the regulatory Flexibility Act (Pub. L. 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. Most hospitals, and most other providers are small 
entities, either by nonprofit status or by having revenues of $5 
million or less annually.
    This final rule requires a provider that furnishes inpatient 
hospital services to retired Federal workers age 65 or older who are 
enrolled in a fee-for-service FEHB plan but who are not covered under 
Medicare Part A hospital benefits to accept as payment in full an 
amount that approximates the Medicare payment rates established under 
the prospective payment system.
    In addition, HCFA may terminate the Medicare provider agreement 
with any provider that knowingly and willfully fails to accept, on a 
repeated basis, an amount that approximates the Medicare rate 
established under the inpatient hospital prospective payment system, 
minus any health plan deductible or copayment, as payment in full from 
a fee-for-service FEHB plan, for inpatient hospital services provided 
to a retired Federal enrollee of the fee-for-service FEHB plan who does 
not have Medicare Part A benefits.
    Section 7002(f) of OBRA '90 became effective January 1, 1992, 
without rulemaking. Because hospitals will not be able to charge what 
they would normally charge private pay patients and other commercial 
insurers, it is estimated that there will be a substantial savings, per 
affected enrollee, to the FEHB program. Hospitals have been notified of 
their obligations through OPM administrative procedures. Savings will 
accrue directly through the OPM program, and compliance will be 
obtained and monitored by OPM.
    HCFA is involved only because the Congress required that we 
establish a sanction mechanism in case any hospitals knowingly and 
willfully violate the requirement on a repeated basis. These sanction 
procedures would come into play only after an OPM determination of a 
violation and notification to HCFA. Hospitals that do not charge more 
than an amount that approximates the hospital payments established for 
Medicare purposes would not be affected by this rule. We do not believe 
that any hospitals will knowingly refuse to comply, or that any 
hospital will lose provider status. Therefore, this final rule will 
have negligible economic effects.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a final 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 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside a Metropolitan 
Statistical Area and has fewer than 50 beds. We are not preparing a 
rural hospital impact statement because we have determined, and we 
certify, that this final rule will not affect a significant number of 
small entities and will not have a significant economic impact on the 
operations of a substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
final regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    42 CFR part 489 is amended as set forth below:

PART 489--PROVIDER AND SUPPLIER AGREEMENTS

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

    Authority: Secs. 1102, 1861, 1864(m), 1866, and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395x, 1395aa(m), 1395cc, and 
1395hh).

    2. A new Sec. 489.23 is added to read as follows:

[[Page 56111]]

Sec. 489.23  Specific limitation on charges for services provided to 
certain enrollees of fee-for-service FEHB plans.

    A provider that furnishes inpatient hospital services to a retired 
Federal worker age 65 or older who is enrolled in a fee-for-service 
FEHB plan and who is not covered under Medicare Part A, must accept, as 
payment in full, an amount that approximates as closely as possible the 
Medicare inpatient hospital prospective payment system (PPS) rate 
established under part 412. The payment to the provider is composed of 
a payment from the FEHB plan and a payment from the enrollee. This 
combined payment approximates the Medicare PPS rate. The payment from 
the FEHB plan approximates, as closely as possible, the Medicare PPS 
rate minus any applicable enrollee deductible, coinsurance, or 
copayment amount. The payment from the enrollee is equal to the 
applicable deductible, coinsurance, or copayment amount.
    3. In Sec. 489.53, the introductory text to paragraph (a) is 
republished and a new paragraph (a)(14) is added to read as follows:

Sec. 489.53  Termination by HCFA.

    (a) Basis for termination of agreement with any provider. HCFA may 
terminate the agreement with any provider if HCFA finds that any of the 
following failings is attributable to that provider:
* * * * *
    (14) The hospital knowingly and willfully fails to accept, on a 
repeated basis, an amount that approximates the Medicare rate 
established under the inpatient hospital prospective payment system, 
minus any enrollee deductibles or copayments, as payment in full from a 
fee-for-service FEHB plan for inpatient hospital services provided to a 
retired Federal enrollee of a fee-for-service FEHB plan, age 65 or 
older, who does not have Medicare Part A benefits.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

    Dated: October 17, 1997.
Nancy-Ann Min DeParle,
Deputy Administrator, Health Care Financing Administration.
[FR Doc. 97-28594 Filed 10-28-97; 8:45 am]
BILLING CODE 4120-01-P
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