[Federal Register Volume 89, Number 199 (Tuesday, October 15, 2024)]
[Rules and Regulations]
[Pages 83240-83294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23195]



[[Page 83239]]

Vol. 89

Tuesday,

No. 199

October 15, 2024

Part III





 Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 476, and 489





Medicare Program: Appeal Rights for Certain Changes in Patient Status; 
Final Rule

Federal Register / Vol. 89, No. 199 / Tuesday, October 15, 2024 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 476, and 489

[CMS-4204-F]
RIN 0938-AV16


Medicare Program: Appeal Rights for Certain Changes in Patient 
Status

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule implements an order from the Federal district 
court for the District of Connecticut in Alexander v. Azar that 
requires HHS to establish appeals processes for certain Medicare 
beneficiaries who are initially admitted as hospital inpatients but are 
subsequently reclassified as outpatients receiving observation services 
during their hospital stay and meet other eligibility criteria.

DATES: These regulations are effective on October 11, 2024.

FOR FURTHER INFORMATION CONTACT: 
    David Danek, <a href="/cdn-cgi/l/email-protection#680c091e010c460c09060d03280b051b4600001b460f071e"><span class="__cf_email__" data-cfemail="b6d2d7c0dfd298d2d7d8d3ddf6d5dbc598dedec598d1d9c0">[email protected]</span></a>, for issues related to the 
retrospective process.
    Janet Miller, <a href="/cdn-cgi/l/email-protection#e48e858a8190ca898d88888196a4878997ca8c8c97ca838b92"><span class="__cf_email__" data-cfemail="f298939c9786dc9f9b9e9e9780b2919f81dc9a9a81dc959d84">[email protected]</span></a>, for issues related to the 
prospective process.
    Shaheen Halim, <a href="/cdn-cgi/l/email-protection#13607b727b76767d3d7b727f7a7e53707e603d7b7b603d747c65"><span class="__cf_email__" data-cfemail="691a0108010c0c07470108050004290a041a4701011a470e061f">[email protected]</span></a> for issues related to 
Quality Improvement Organization review.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

    The purpose of this final rule is to establish appeals processes to 
comply with a court order issued in the case Alexander v. Azar, 613 F. 
Supp. 3d 559 (D. Conn. 2020), aff'd sub nom., Barrows v. Becerra, 24 
F.4th 116 (2d Cir. 2022). The processes will apply to certain Medicare 
beneficiaries who are initially admitted as hospital inpatients but are 
subsequently reclassified as outpatients receiving observation services 
during their hospital stay and meet other eligibility criteria.
    The processes consist of the following:
    <bullet<ls-thn-eq> Expedited appeals: We are establishing an 
expedited appeals process for certain beneficiaries who disagree with 
the hospital's decision to reclassify their status from inpatient to 
outpatient receiving observation services (resulting in a denial of 
coverage for the hospital stay under Part A). Eligible beneficiaries 
will be entitled to request an expedited appeal regarding that decision 
prior to release from the hospital. Appeals will be conducted by a 
Beneficiary & Family Centered Care--Quality Improvement Organization 
(BFCC-QIO).
    <bullet<ls-thn-eq> Standard appeals: Beneficiaries who do not file 
an expedited appeal will have the opportunity to file a standard appeal 
(that is, an appeal requested by a beneficiary eligible for an 
expedited appeal, but filed outside of the expedited timeframes) 
regarding the hospital's decision to reclassify their status from 
inpatient to outpatient receiving observation services (resulting in a 
denial of coverage for the hospital stay under Part A). These standard 
appeals will follow similar procedures to the expedited appeals process 
but without the expedited timeframes to file and for the QIO to make 
decisions.
    <bullet<ls-thn-eq> Retrospective appeals: We are establishing a 
retrospective review process for certain beneficiaries to appeal 
denials of Part A coverage of hospital services (and certain SNF 
services, as applicable), for specified inpatient admissions involving 
status changes that occurred prior to the implementation of the 
prospective appeals process, dating back to January 1, 2009. Consistent 
with existing claims appeals processes, Medicare Administrative 
Contractors (MACs) will perform the first level of appeal, followed by 
Qualified Independent Contractor (QIC) reconsiderations, Administrative 
Law Judge (ALJ) hearings, review by the Medicare Appeals Council, and 
judicial review. Eligible beneficiaries will have 365 calendar days 
from the implementation date of this rule to file a request for a 
retrospective appeal. We will announce the implementation date on 
CMS.gov and/or Medicare.gov.
    In general, as explained in this final rule, we are finalizing the 
procedures for these appeals as proposed. However, we are making some 
editorial/technical corrections to the regulations text, as well as 
several revisions and clarifications to the retrospective appeal 
procedures based on the public comments we received. These revisions 
include:
    <bullet> Extending the timeframe for providers to submit a claim 
following a favorable decision from 180 calendar days to 365 calendar 
days.
    <bullet> Extending the timeframe for providers to submit records as 
requested by a contractor from 60 calendar days to 120 calendar days.
    <bullet> Clarifying the effect of a favorable appeal decision to 
explain that if a hospital chooses to submit a Part A inpatient claim, 
the hospital must refund any payments received for the Part B 
outpatient claim before submitting the Part A inpatient claim to 
Medicare. If a Part A claim is submitted, the previous Part B 
outpatient claim will be reopened and canceled, and any Medicare 
payments will be recouped to prevent duplicate payment.
    <bullet> Clarifying the effect of a favorable decision for a 
beneficiary who was not enrolled in Medicare Part B at the time of 
hospitalization to explain that the hospital must refund any payments 
collected for the outpatient services even if the hospital chooses not 
to submit a Part A claim for payment to the program.
    <bullet> Clarifying the effect of favorable appeals involving 
beneficiaries who were enrolled in Medicare Part B at the time of 
hospitalization to explain that hospitals must refund any payments 
collected for the outpatient hospital services only if the hospital 
chooses to submit a Part A inpatient claim for such services.
    <bullet> Clarifying that out-of-pocket payments made by a family 
member on behalf of a beneficiary for SNF services (for the purpose of 
determining whether those SNF services are eligible for inclusion in an 
appeal under these procedures), may include out-of-pocket payments made 
by individuals who are not biologically related to the beneficiary (for 
example, a close family friend, roommate, or a former spouse).

II. Background

    This rule finalizes a proposal issued in December 2023 \1\ and sets 
forth new appeals procedures to implement the court order in Alexander 
v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020), aff'd sub nom., Barrows 
v. Becerra, 24 F.4th 116 (2d Cir. 2022). In this order, the court 
directed the Department of Health and Human Services (HHS) to ``permit 
all members of the . . . class to appeal the denial of their Part A 
coverage'' and to establish appeal procedures for certain beneficiaries 
in Medicare Part A and B (``Original Medicare'') who are initially 
admitted to a hospital as an inpatient by a physician or otherwise 
qualified practitioner \2\ but whose status during

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their stay is changed to outpatient by the hospital, thereby 
effectively denying Part A coverage for their hospital stay.\3\ In some 
cases, the status change also affects the availability of Part A 
coverage for a beneficiary's post-hospital extended care services 
furnished in a skilled nursing facility (SNF). The court imposed 
additional conditions on the right to appeal as described in detail in 
this final rule.
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    \1\ 88 FR 89506.
    \2\ As discussed in section III.A.1. of this final rule in 
response to a public comment, we acknowledge that under existing 
policies, for purposes of payment under Medicare Part A, an 
individual is considered an inpatient of a hospital if formally 
admitted as an inpatient pursuant to an order for hospital inpatient 
admission by a physician or certain qualified practitioners as 
defined in 42 CFR 412.3. We inadvertently omitted other qualified 
practitioners when describing the inpatient admission process and 
have revised our language in this final rule accordingly, when 
referencing persons ordering hospital inpatient admissions.
    \3\ The terms of the court order refer to denials of Part A 
coverage. Consistent with the court order, the appeals processes in 
this rule do not extend to enrollees in MA plans. MA plan enrollees 
have existing rights that afford enrollees the right to appeal a 
plan organization determination where the plan refuses to provide or 
pay for services, in whole or in part, including the type or level 
of services, that the enrollee believes should be furnished or 
arranged for by the MA organization (42 CFR 422.560 through 
422.634). For example, if an MA plan has refused to authorize an 
inpatient admission, the enrollee may request a standard or 
expedited plan reconsideration of that organization determination 
(42 CFR 422.566(b), 422.580 through 422.596, and 422.633).
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    The court's order requires new appeal procedures be afforded to the 
following class: Medicare beneficiaries who, on or after January 1, 
2009--
    <bullet> Have been or will have been formally admitted as a 
hospital inpatient;
    <bullet> Have been or will have been subsequently reclassified by 
the hospital as an outpatient receiving ``observation services''; \4\
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    \4\ For the purposes of these procedures, a beneficiary is 
considered an outpatient receiving observation services when the 
hospital changes a beneficiary's status from inpatient to outpatient 
while the beneficiary is in the hospital and the beneficiary 
subsequently receives observation services following a valid order 
for such services (see 42 CFR 405.931(h)).
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    <bullet> Have received or will have received an initial 
determination or Medicare Outpatient Observation Notice (MOON) \5\ 
indicating that the observation services are not covered under Medicare 
Part A; and
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    \5\ As explained in 42 CFR 489.21(y), the Medicare Outpatient 
Observation Notice (MOON) is a written notice furnished by a 
hospital to Medicare beneficiaries who receive observation services 
as an outpatient for more than 24 hours. The notice explains why the 
beneficiary is not an inpatient and also explains the consequences 
of being an outpatient rather than an inpatient. A copy of the 
notice is available to download at https://www.cms.gov//medicare/forms-notices/beneficiary-notices-initiative/ffs-ma-moon.
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    <bullet> Either--(1) were not enrolled in Part B coverage at the 
time of their hospitalization; or (2) stayed at the hospital for 3 or 
more consecutive days but were designated as inpatients for fewer than 
3 days, unless more than 30 days has passed after the hospital stay 
without the beneficiary's having been admitted to a SNF. Medicare 
beneficiaries who meet the requirements of the foregoing sentence but 
who pursued an administrative appeal and received a final decision of 
the Secretary before September 4, 2011, are excluded from the class.
    The court determined that beneficiaries who are members of the 
class described previously have been deprived of due process and 
ordered the following:
    <bullet> Class members shall have an opportunity to appeal the 
denial of their Part A coverage.
    <bullet> Class members who have stayed, or will have stayed, at a 
hospital for 3 or more consecutive days, but who were designated as 
inpatients for fewer than 3 days, shall have the right to an appeal 
through an expedited appeals process substantially similar to the 
existing expedited process for challenging hospital discharges.
    <bullet> Class members shall be permitted to argue that their 
inpatient admission satisfied the relevant criteria for Part A 
coverage--for example, that the medical record supported a reasonable 
expectation of a medically necessary two-midnight stay at the time of 
the physician's or otherwise qualified practitioner's initial inpatient 
order, in the case of a post-Two Midnight Rule hospital stay--and that 
the hospital utilization review committee's (URC) determination to the 
contrary was therefore erroneous. If a class member prevails, then for 
the purposes of determining Part A benefits, including both Part A 
hospital coverage and Part A SNF coverage, the beneficiary's 
reclassification as an outpatient that resulted from the URC's 
erroneous determination shall be disregarded.
    <bullet> For class members whose due process rights were violated, 
or will have been violated, prior to the availability of the procedural 
protections as previously set forth, such beneficiaries shall be 
afforded a meaningful opportunity to appeal the denial of their Part A 
coverage, as well as effective notice of this right.
    In addition, on December 9, 2022, the district court issued an 
``Order Clarifying Judgment'' with respect to the claims for outpatient 
hospital services received by beneficiaries who were enrolled in Part B 
of the program at the time such services were furnished. In this 
clarifying order, the court stated that it intended to provide a 
meaningful opportunity for class members whose due process rights were 
violated to appeal the denial of Part A coverage, but it also stressed 
the need to provide a remedy for class members who endured 
undercompensated stays at skilled nursing facilities. It further stated 
that, since class members with Part B coverage had much of their past 
hospital stays paid for by such coverage, it did not intend to require 
the unwinding of previously approved Part B outpatient hospital claims 
so they could be reprocessed as Part A claims. The clarification states 
that if a class member enrolled in Part B coverage at the time of their 
hospitalization prevails in an appeal of a claim, then an adjustment of 
payment for the underlying hospital services (including any applicable 
deductible and coinsurance amounts) is not required, and Part A payment 
for covered SNF services may be made without any adjustment to the 
payment for the underlying hospital services.
    In section III.A. of this final rule, we describe the procedures 
that will be available to members of the class described previously 
(hereinafter, eligible beneficiaries) to appeal denials of Part A 
coverage of hospital services (and certain SNF services, as 
applicable), for specified inpatient admissions involving status 
changes that occurred prior to the implementation of the prospective 
appeals process, dating back to January 1, 2009. We refer to this as 
the retrospective appeals process. In section III.B. of this final 
rule, we describe the expedited and standard appeals procedures that 
will be available prospectively (meaning to beneficiaries whose status 
is changed after the effective date of this rule and after the 
implementation and availability of the procedures established by the 
rule) to eligible beneficiaries who, among other things, are admitted 
as hospital inpatients and are reclassified by hospitals as outpatients 
receiving observation services (the ``prospective appeals process'').
    Eligible beneficiaries who are hospitalized and entitled to an 
appeal under these procedures prior to the implementation date of the 
prospective appeals process will be able to utilize the retrospective 
appeals process, subject to the filing limitation proposed in Sec.  
405.932(a)(2)(i)(B).
    The flowcharts below depict the overall appeals processes being 
finalized in this regulation. With the exception of some editorial 
revisions and updating the amount in controversy requirements for 
calendar year 2025 ($190 for an Administrative Law Judge hearing and 
$1,900 for judicial review), the flowcharts are the same as what was 
outlined in the proposed rule (88 FR 59509).
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BILLING CODE 4120-01-C
    In the sections that follow, we provide an overview of the 
different appeal processes and describe the proposed provisions, the 
comments received on those provisions, and our response to those 
comments. We then indicate whether we are finalizing the provisions as 
proposed or with modifications.

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III. Provisions of the Proposed Rule and Analysis of and Responses to 
Public Comments

A. Retrospective Appeals

1. Overview
    The retrospective appeals required by the court order constitute a 
new process under the Medicare program, as the appeals would be based 
on alleged entitlement to coverage for services that were not actually 
billed to the program on a claim. That is, under existing claims 
appeals processes for the Original Medicare program, a beneficiary is 
asking for a determination on whether specific items and services 
billed on a claim for payment should have been covered and paid, not 
whether items and services should have been billed or whether there 
should have been coverage when there is no claim. Sections 205(a), 
1871, and 1872 of the Social Security Act (the Act) provide the 
Secretary authority to establish regulations to carry out the 
administration of the insurance programs under Title XVIII of the 
Act.\6\ The new retrospective appeals procedures required under the 
court order do not fit into the existing claims appeals process for 
Original Medicare claims established under section 1869 of the Act. 
However, in our view, these new procedures would have similarities to 
the longstanding claims appeals procedures with which Medicare 
beneficiaries are familiar. Accordingly, we proposed new procedures to 
govern the retrospective appeals process in proposed 42 CFR 405.931 
through 405.938 that would be based, in large part and to the extent 
appropriate, on the existing claims appeals procedures in the existing 
provisions in 42 CFR part 405 Subpart I (as authorized under section 
1869 of the Act).
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    \6\ Section 205(a) of the Act, incorporated into Title XVIII by 
section 1872 of the Act, provides that the Secretary ``shall have 
full power and authority to make rules and regulations and to 
establish procedures, not inconsistent with the provisions of this 
title, which are necessary or appropriate to carry out such 
provisions[.]'' Section 1871 of the Act states that the Secretary 
shall prescribe such regulations as may be necessary to carry out 
the administration of the insurance programs under this title.
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    In Sec.  405.931(b), we proposed to define the term ``eligibility 
contractor'' to mean the contractor that would serve as a single point 
of contact for incoming retrospective appeal requests. As proposed in 
Sec.  405.932(a) through (e), the eligibility contractor would 
determine if the request for appeal is valid, including whether the 
request is timely and contains the required elements for an appeal. In 
addition, we proposed that the eligibility contractor would determine 
whether the individual submitting the request (or the individual for 
whom a request is submitted, in the case of a request filed by a 
representative) meets the definition of a class member as defined by 
the court, and is, thus, an eligible party entitled to an appeal under 
the terms of the court order. The eligibility contractor would then 
either deny or approve each appeal request received and notify the 
individual (or their representative) of the determination. For those 
requests that are denied (that is, the beneficiary has not demonstrated 
they meet the definition of a class member and is not eligible for an 
appeal, or the appeal request is not otherwise valid), we proposed in 
Sec.  405.932(e) that the individual filing the request (or their 
representative) would have an opportunity to correct any errors and/or 
demonstrate why the appeal request should be approved. An individual's 
request to review a denial must be received by the eligibility 
contractor within 60 calendar days of the individual's receipt of the 
denial notice under proposed Sec.  405.932(e)(2). For appeal requests 
that are approved (that is, the beneficiary satisfies the requirements 
for class membership--and thus, is determined to be an eligible party--
and the request is valid), the eligibility contractor would forward 
those requests to the processing contractor to conduct the first level 
appeal.
    In Sec.  405.931(b), we proposed that the processing contractor 
would perform the first level of appeal. The processing contractor 
would be the MAC that currently has jurisdiction over Part A claims for 
the hospital at which the beneficiary was initially admitted prior to 
being subject to a status change. As proposed in Sec.  405.932(f) 
through (i), processing contractors would generally follow existing 
procedures that govern redeterminations (42 CFR 405.940 through 
405.958), as appropriate, except as we otherwise proposed in Sec.  
405.932.
    In Sec.  405.934, we proposed that eligible parties (or their 
representatives) who are dissatisfied with the processing contractor's 
appeal decision would have the opportunity to request a reconsideration 
to be performed by a QIC. We proposed that the QICs would generally 
utilize existing procedures that govern reconsiderations (42 CFR 
405.960 through 405.978), as appropriate, except as we otherwise 
proposed in Sec.  405.934.
    Following a reconsideration, in Sec.  405.936 we proposed that 
eligible parties (or their representatives) who are dissatisfied with 
the reconsideration would be able to request a hearing before an 
Administrative Law Judge (ALJ) (or review by an attorney adjudicator) 
if the claims under appeal meet the amount in controversy 
requirement.\7\ In Sec.  405.936(c), we proposed a new method of 
calculating the amount in controversy that reflects the differences 
between these new appeals and typical claims appeals under existing 
procedures. In addition, under proposed Sec.  405.938, eligible parties 
(or their representatives), would be able to request review by the 
Medicare Appeals Council (hereinafter, Council). As with the first two 
levels of appeal, we proposed that these new appeals before an ALJ (or 
attorney adjudicator) and the Council would generally follow existing 
procedures in 42 CFR 405.1000 through 1140, as appropriate, except as 
we have otherwise proposed in Sec. Sec.  405.936 through 405.938. 
Eligible parties would also be able to request judicial review under 
the existing provisions in 42 CFR 405.1136.
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    \7\ The amount in controversy requirement for CY 2025 is $190 
for a hearing before an Administrative Law Judge, and $1,900 for 
judicial review. Notice of the updated minimum amounts for each 
calendar year is published in the Federal Register and is available 
on https://www.cms.gov/medicare/appeals-grievances/fee-for-service/third-level-appeal.
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    In Sec.  405.932(a)(2), we proposed to limit the time to file a 
request for a retrospective appeal to 365 calendar days following the 
implementation date of the final rule. We have provided notice of the 
pending appeals process for class members since July 2022 on both 
Medicare.gov and CMS.gov and we will continue to update those websites 
with information as this rulemaking proceeds and as we begin to 
implement the final rule. Thus, when this rulemaking is concluded and 
procedures are finalized, effective, and operational, we believe we 
would have afforded eligible beneficiaries ample time to gather 
necessary documentation in anticipation of filing appeal requests.
    We received many comments in support of the overall process we 
proposed for retrospective appeals. In addition, we received several 
general comments on the scope and proposed procedures for the 
retrospective appeals process and several comments on the outreach 
efforts we proposed.
    Comment: A commenter expressed concern that due to the length of 
the entire retrospective appeal process, eligible parties could 
experience delays in receiving coverage decisions for up to a year or 
more.
    Response: We appreciate the concerns raised by the commenter. We

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understand that beneficiaries and their families, in some cases, have 
waited for many years to access an appeals process for the issues 
addressed in these procedures. As we explained in the proposed rule, 
the new appeals procedures ordered by the court do not fit neatly into 
existing processes, but to the extent possible, we are mirroring 
existing appeals processes for these new appeals. This relative 
consistency in the processes will benefit individuals filing appeals as 
well as our contractors who process appeals. In some cases, decisions 
can be made in less time than the deadlines prescribed in the 
regulations. We believe these timeframes, which have been in place for 
existing appeals for 15 years, are reasonable and balance the need to 
resolve complex issues with the interests of appellants in receiving 
timely decisions.
    Comment: A commenter requested that CMS clarify whether these new 
appeals procedures apply to persons enrolled in Medicare Advantage (MA) 
plans and consider extending these rights to the MA program.
    Response: The retrospective appeals process (addressed in section 
III.A. of this final rule) and the prospective appeals process 
(addressed in section III.B. of this final rule) do not apply to the MA 
program and will not be available for MA enrollees. As we explained in 
the proposed rule, the terms of the court order refer to denials of 
Part A coverage. Consistent with the court order, we are creating a new 
appeals process for beneficiaries enrolled in Original Medicare. We 
further explained that the appeals processes proposed in this rule do 
not extend to enrollees in MA plans because we have determined that the 
considerations underlying the protections ordered by the court for 
beneficiaries enrolled in Original Medicare do not apply to MA plan 
enrollees. MA enrollees have rights and protections as set forth in 42 
CFR part 422 Subpart M. Under the MA regulations at 42 CFR 
422.566(b)(3), an MA plan's refusal to provide or pay for services, in 
whole or in part, including the type or level of services, that the 
enrollee believes should be furnished or arranged for by the MA plan is 
an organization determination. If an MA plan enrollee disagrees with a 
plan's organization determination, the enrollee has the right to 
request a reconsideration of that decision under the rules at Sec.  
422.578. In the event an MA plan refuses to authorize an inpatient 
admission, this is an adverse organization determination and the 
enrollee may request a standard or expedited plan reconsideration 
(Sec. Sec.  422.580 through 422.590, 422.633). If an MA plan upholds an 
adverse decision at the reconsideration level, the case is 
automatically sent to the Part C IRE for review (Sec. Sec.  422.592 and 
422.594). Additional levels of appeal that may be available to an MA 
enrollee include ALJ and Council review and judicial review (Sec. Sec.  
422.600 through 422.612). Because of these existing rights and 
protections afforded to MA enrollees, we did not propose any new 
procedures applicable to MA enrollees. To the extent we identify 
additional processes that may be necessary for the MA program, any such 
proposals would be subject to full public discussion through notice and 
comment rulemaking.
    Comment: A commenter requested that we use ``provider-neutral 
language'' throughout the rule, for example, instead of using 
physician, we should consider using physician or otherwise qualified 
practitioner.
    Response: We appreciate the suggestion from this commenter. We have 
reviewed the language in the proposed rule and found several instances 
where it would be more appropriate to use the phrase ``physician or 
other qualified practitioner'' consistent with the regulatory 
provisions regarding inpatient admissions in 42 CFR 412.3(a). We will 
use this terminology going forward.
    Comment: A commenter requested that we amend the text of several 
sections of the proposed codified regulations text to include the word 
``shall'' to strengthen and emphasize required actions.
    Response: We appreciate the suggestion by the commenter. We drafted 
the regulation text for these new procedures to be consistent with 
existing regulation text in 42 CFR part 405 Subpart I. Those provisions 
also include required actions for contractors, but generally use 
``must'' rather than ``shall'' to indicate a requirement. We reviewed 
the proposed regulation text and did not identify language that was 
vague or did not clearly indicate a requirement where we intended a 
requirement. Thus, we are not adopting the recommendations made by the 
commenter.
    Comment: Many commenters expressed their support for the outreach 
and education that we plan to conduct following the issuance of the 
final rule as we implement these procedures. Commenters suggested 
additional means of educating beneficiaries and their representatives 
on the new appeal rights offered in this rule. For example, commenters 
recommended we include information in the Medicare & You handbook and 
with Medicare Summary Notices (MSNs) while the filing period is open 
and create new materials available to beneficiaries and advocates such 
as social workers and State Health Insurance Assistance Program (SHIP) 
counselors. Commenters also suggested that we provide translations of 
these materials into various languages.
    Response: We appreciate the support of these commenters on our 
general approach to conducting education and outreach related to these 
new appeals procedures. We are committed to providing educational and 
training materials on our website for advocates to reference and 
provide to beneficiaries. We are also committed to creating new 
documents and publications, as well as updating current publications 
such as Medicare & You, that may be downloaded from Medicare.gov and/or 
CMS.gov. This includes the translation of materials into different 
languages as needed. We intend to train and provide information to 
customer service representatives at 1-800-MEDICARE to assist and inform 
beneficiaries with questions about these procedures. We also intend to 
provide information to SHIP counselors and other advocacy groups in 
providing updates on new and emerging programs in Medicare, such as 
these new appeal rights.
    In addition, we will include a message regarding this new appeal 
right on beneficiary MSNs. This message will refer beneficiaries to the 
detailed information that will be included on Medicare.gov and/or 
CMS.gov.
    Comment: A commenter suggested that we extend the date of receipt 
of notices or decisions sent by the eligibility contractor, processing 
contractor or other appeals adjudicators, to 30 calendar days following 
receipt of the notice.
    Response: We appreciate the comment. Our longstanding policy 
presumes receipt of a notice in the appeals process is 5 calendar days 
after the date of the notice. We adopted this policy for these new 
retrospective appeals as we intended the process for these new appeals 
to mirror existing processes as much as possible. This presumption is 
rebuttable if the appellant can establish receipt outside of the 5-day 
window. The reason for this longstanding presumption is to account for 
the time between the printing and mailing of the notice receipt by the 
appellant and because filing timeframes at subsequent levels of appeal 
begin upon receipt of the decision at the previous level. Our 
longstanding experience is that this 5-day window for

[[Page 83246]]

receipt is generally consistent with postal delivery timeframes. We do 
not believe the time between mailing the notice and receipt would be as 
long as 30 calendar days. Thus, we are not adopting the recommendation 
made by the commenter.
2. Party Status, Authorized Representatives, and Appointed 
Representatives
    The court order instructs HHS to establish new appeals procedures 
for certain beneficiaries, specifically, beneficiaries who are members 
of the defined class, as previously described in the overview and in 
proposed Sec.  405.931(b). The court's decision noted that some class 
members suffered financial or other consequences as a result of the 
change in their status from inpatient to outpatient receiving 
observation services, including having to pay for the costs of post-
hospital extended care services in a SNF out of pocket because they did 
not satisfy the statutory requirement for SNF coverage of having a 3 
consecutive day qualifying inpatient stay (see section 1861(i) of the 
Act). In addition, other class members had to pay for their hospital 
services themselves because they lacked Medicare Part B coverage. The 
court directed HHS to afford class members a right to appeal certain 
denials of Part A coverage which are defined later is this section. The 
court ordered an appeal process be made available to those class 
members who did not have such a process available if their hospital 
stays, dating back to January 1, 2009, met the conditions of the order. 
Accordingly, in Sec.  405.931(b) we proposed to define an eligible 
party as an individual who meets the definition of a class member in 
Alexander v. Azar. In that case, the court adopted the following class 
definition: a Medicare beneficiary who, on or after January 1, 2009--
    <bullet> Was formally admitted as a hospital inpatient;
    <bullet> While in the hospital was subsequently reclassified as an 
outpatient receiving observation services (as defined in Sec.  
405.931(h));
    <bullet> Has received an initial determination (as defined in Sec.  
405.920) or a Medicare Outpatient Observation Notice (MOON) (as 
described in Sec.  489.20(y)) indicating that the observation services 
are not covered under Medicare Part A; and
    <bullet> Either--
    ++ Was not enrolled in the Supplementary Medical Insurance program 
(that is, Medicare Part B coverage) at the time of beneficiary's 
hospitalization; or
    ++ Stayed at the hospital for 3 or more consecutive days but was 
designated as an inpatient for fewer than 3 days, unless more than 30 
calendar days has passed after the hospital stay without the 
beneficiary's having been admitted to a SNF.
    An eligible party would be entitled to request an appeal under the 
proposed retrospective process.
    In contrast, the court's decision did not include providers as 
class members entitled to additional appeals procedures and did not 
require HHS to afford new appeal rights to providers in these new 
appeals proceedings. Accordingly, in Sec.  405.931(b) and (c), we 
proposed to limit party status in these new appeals to beneficiaries 
who meet the definition of a class member as specified in the court 
order.
    As we believe some beneficiaries who are members of the class may 
require assistance with their appeal requests, we proposed to apply 
existing rules regarding appointed representatives and authorized 
representatives (see Sec. Sec.  405.902 and 405.910) to these new 
appeals.\8\ There may also be some situations in which a class member 
has died since their hospitalization and, as applicable, admission to a 
SNF. Our existing rules in Sec.  405.906(a)(1) permit certain 
successors in interest to file appeals on behalf of a deceased 
beneficiary. Thus, in Sec.  405.931(d)(3) we proposed to apply those 
rules to deceased class members who would have been eligible to request 
an appeal under the proposed procedures for retrospective appeals.
---------------------------------------------------------------------------

    \8\ Appointed representative means an individual appointed by a 
party to represent the party in a Medicare claim or claim appeal. 
Authorized representative means an individual authorized under State 
or other applicable law to act on behalf of a beneficiary involved 
in the appeal (for example, a beneficiary's legal guardian, 
surrogate decision-maker for an incapacitated beneficiary, or an 
SSA-appointed representative payee). The authorized representative 
will have all of the rights and responsibilities of a beneficiary or 
party, as applicable, throughout the appeals process and does not 
need a further appointment.
---------------------------------------------------------------------------

    However, contrary to existing claims appeals procedures, in Sec.  
405.931(d)(1)(i) we proposed to exclude providers from representing 
beneficiaries in these new appeals, and we proposed to prohibit the 
assignment of appeal rights to providers as well. Since the decision to 
change a patient's status is made by the hospital, we had concerns that 
the interests of a class member could conflict with the interests of a 
hospital or SNF, and we were concerned that a class member's challenge 
to their denial of Part A coverage resulting from a change in status 
from inpatient to outpatient receiving observation services may not be 
appropriately represented by the hospital that initiated that change, 
determined that outpatient services were appropriate for the 
beneficiary, and in most cases, previously received payment for 
outpatient services. We had similar concerns regarding representation 
by SNFs that already received payment for the SNF services at issue. 
Unlike most existing claims appeals, where the primary issue under 
review is the denied coverage and payment for items and/or services 
billed on a claim, the issue on appeal under these procedures is 
whether services meet the relevant criteria for coverage and payment 
under the inpatient hospital benefit under Part A of the program rather 
than under the Part B outpatient benefit where payment was, in most 
cases,\9\ previously made to the hospital, and the consequences of that 
decision on coverage of SNF services. Moreover, as we are implementing 
procedures required under the court's order under the Secretary's 
rulemaking authority in sections 205(a), 1871, and 1872 of the Act, we 
believed the provisions of section 1869 of the Act guide, but do not 
explicitly govern, the appeals procedures for the new retrospective 
appeals ordered by the court.
---------------------------------------------------------------------------

    \9\ We acknowledge that payment by Medicare would not have been 
made in appeals brought by a beneficiary who was not enrolled in 
Part B at the time of hospitalization. In those situations, the 
beneficiary would have been responsible for payment for outpatient 
services furnished by the hospital.
---------------------------------------------------------------------------

    We proposed to include a definition of ``unrepresented 
beneficiary'' applicable to appeals under proposed Sec. Sec.  405.931 
through 405.938. In the existing claims appeals process in 42 CFR part 
405 subpart I, certain procedural requirements do not apply to an 
unrepresented beneficiary. However, that term is not defined in 
existing regulations. Therefore, in Sec.  405.931(d)(5), we proposed to 
define an unrepresented beneficiary as a beneficiary who is an eligible 
party and: (1) has not appointed a representative under Sec.  405.910; 
or (2) has an authorized representative as defined in Sec.  405.902; 
\10\ or (3) has appointed as its representative, a member of the 
beneficiary's family, a legal guardian, or

[[Page 83247]]

an individual who routinely acts on behalf of the beneficiary, such as 
a family member or friend who has a power of attorney; or (4) in the 
case of a deceased beneficiary, the appeal request is filed by an 
eligible party who meets the conditions set forth in Sec.  
405.906(a)(1).
---------------------------------------------------------------------------

    \10\ Typically, an authorized representative will be a legal 
guardian, representative payee or someone acting under state law on 
behalf of a beneficiary (for example, a family member with a durable 
power of attorney). Often these authorized representatives are 
family members or other individuals who are unfamiliar with the 
technical requirements of the existing claim appeals process. We 
believed it was reasonable to treat appeals filed by authorized 
representatives, like other existing claim appeals filed by family 
members (that is, as if the appeal was filed by an unrepresented 
beneficiary).
---------------------------------------------------------------------------

    We also proposed to incorporate certain existing policies that 
would apply in the new appeals procedures for the convenience of 
appellants and adjudicators. For example, in Sec.  405.931(f), we 
proposed that the date of receipt of a notice or decision sent by the 
eligibility contractor, processing contractor or other appeals 
adjudicator is presumed to be 5 calendar days following the date on the 
notice unless there is evidence to the contrary. In addition, in Sec.  
405.931(g) we proposed that for the purposes of determining whether a 
beneficiary has a qualifying inpatient stay for SNF eligibility and for 
eligibility as a class member, days are counted consistent with 
existing policy in Sec.  409.30 (that is, 3 consecutive calendar days 
starting with the admission day but not counting the discharge day).
    In proposed Sec.  405.931(h), we explained that for the purposes of 
determining eligibility for an appeal under these procedures, a 
beneficiary would be considered an outpatient receiving observation 
services when the hospital changes a beneficiary's status from 
inpatient to outpatient while the beneficiary is in the hospital and 
the beneficiary subsequently receives observation services following a 
valid order for such services.
    We received several comments regarding eligibility requirements for 
an appeal under these procedures and several comments regarding the 
limitation on provider representation of eligible parties.
    Comment: A few commenters questioned the MOON being a determining 
factor for eligibility for an appeal under the new procedures. A 
commenter noted that the MOON was established in August 2015, but 
retroactive appeals are available to eligible beneficiaries with 
hospital admissions starting on January 1, 2009. Another commenter 
suggested that the proposed regulation in Sec.  405.931(b) defining an 
eligible party requires the delivery of the MOON as a condition of 
eligibility for a retrospective appeal.
    Response: We appreciate the commenter's observations regarding the 
implementation date of the MOON and the eligibility criteria under 
these appeal procedures. The federal district court order and our 
definition of an eligible party states that receipt of either an 
initial determination or a MOON would serve to meet one condition of 
eligibility for an appeal under these new procedures. For 
hospitalizations that predate the effective date of the MOON, a 
beneficiary's receipt of an initial determination for their hospital 
and/or SNF claim (that is, a Medicare Summary Notice resulting from 
processing a claim submitted by a provider) would serve to meet the 
requirement.
    Comment: A commenter sought clarification on whether a beneficiary 
must receive observation services after the change in status from 
inpatient to outpatient in order to be eligible for an appeal under 
these new procedures.
    Response: We appreciate the opportunity to provide this 
clarification. A beneficiary must receive observation services after 
the change in status from inpatient to outpatient in order to be 
eligible for an appeal under these new procedures. As explained in the 
proposed rule, consistent with the court order, the class members who 
are to be afforded an opportunity to appeal the denial of their Part A 
coverage include Medicare beneficiaries who, on or after January 1, 
2009, have been or will have been subsequently reclassified by the 
hospital as an outpatient receiving observation services, and meet the 
other conditions specified in the order (88 FR 89506 (December 27, 
2023)). We further stated in the proposed rule that, for the purposes 
of these proposed procedures, a beneficiary is considered an outpatient 
receiving observation services when the hospital changes a 
beneficiary's status from inpatient to outpatient while the beneficiary 
is in the hospital and the beneficiary subsequently receives 
observation services following a valid order for such services (88 FR 
89506).
    Comment: Several commenters stated that the proposed rule does not 
address how beneficiaries who are eligible for a retrospective appeal 
will be identified and receive notice of the new appeal procedures that 
are available. A commenter suggested that CMS utilize claims data, 
hospital records, or beneficiary reports to identify eligible parties.
    Response: We appreciate the commenter's suggestions. We considered 
this issue as we assessed how to implement the court order and 
determined that it would not be feasible to proactively identify 
eligible parties. Unfortunately, the claims data available to us do not 
align precisely with the eligibility criteria for these new appeals 
procedures. For example, the outpatient claim submitted by a hospital 
would not provide any indication of when observation services were 
furnished to a beneficiary. Thus, we could not discern between a 
beneficiary who received observation services prior to the inpatient 
admission (who would not meet eligibility criteria) and a beneficiary 
who received observation services after the change in status from 
inpatient to outpatient simply based on claims information. This aspect 
of eligibility for an appeal would only be available after a review of 
medical records, and we believe it would be inefficient and ineffective 
to request and review medical records for all potentially eligible 
beneficiaries (estimated to be over 32,000) in order to identify those 
beneficiaries who are, in fact, eligible for an appeal. Such attempts 
would cause undue burden on the program and would delay appeals due to 
the volume of records requests and resources needed to review every 
medical record. Instead, we will rely on education and outreach to 
alert beneficiaries to the availability of these new appeal procedures 
and the eligibility requirements to access these appeals established in 
this final rule.
    Comment: A commenter questioned whether beneficiaries who were not 
enrolled in Medicare Part B at the time of their hospitalization but 
had other insurance coverage to cover outpatient services (such as a 
group health plan) would be eligible for an appeal.
    Response: A beneficiary not enrolled in Medicare Part B who meets 
all stated eligibility criteria would be eligible for an appeal under 
these new procedures, even if the beneficiary had other insurance 
coverage that covered Part B outpatient hospital services. We would 
expect such appeals would be rare and would likely focus on noncovered 
SNF services that resulted in out-of-pocket expenditures by the 
beneficiary.
    Comment: A few commenters disagreed with our limitation on provider 
representation for these new appeals as proposed in Sec.  405.931. 
Generally, these commenters were concerned about the lack of support 
for beneficiaries to work through these appeals. A commenter stated 
that beneficiaries sometimes rely on provider staff to understand 
benefits and available coverage and requested clarification regarding 
whether provider staff may provide information and assistance to 
beneficiaries filing appeals. A commenter stated that SNFs should be 
able to file appeals on behalf of beneficiaries since SNFs have the 
motivation to ensure that they receive proper payment for the services 
they provide. A commenter expressed support for the definition of an 
unrepresented beneficiary and the rights it will extend to 
beneficiaries under 42 CFR part 405 subpart I.

[[Page 83248]]

    Response: We appreciate the concerns raised by these commenters. 
While we generally agree that providers may provide valuable assistance 
to beneficiaries seeking appeals of denied services under existing 
procedures, we believe that in these new appeals, the circumstances 
warrant a different approach to appointed representatives. We note that 
beneficiaries entitled to an appeal under these new rules still have 
many options for obtaining assistance in their appeal. For example, 
friends and family members are eligible to be appointed as a 
representative. In each state, state health insurance assistance 
programs (SHIPs) are available to explain coverage and benefits and to 
represent and assist beneficiaries in appeals. Private advocacy groups 
are also available to assist and represent beneficiaries in Medicare 
appeals. Staff employed by providers may also assist beneficiaries by 
providing them with information and support in their appeals. These are 
just a few illustrative examples of persons and groups that may be 
available to assist beneficiaries, and we do not believe that 
precluding providers from representing beneficiaries for services, in 
some cases, furnished many years ago, will have a negative impact on 
beneficiary access or representation in these new appeals.
    As explained in the proposed rule, we are concerned about a 
provider acting as the appointed representative of a beneficiary in 
these new appeals. Appointed representatives play a significant role in 
a beneficiary's appeal. The representative is responsible for 
submitting forms, receiving and submitting information on behalf of the 
beneficiary, and making arguments on behalf of the beneficiary. While 
an appointed representative is acting on behalf of a beneficiary, the 
representative exercises control over most aspects of the appeal. In 
many of the appeals we expect under these new procedures, beneficiaries 
or family members reimbursed SNFs for the care that was furnished to 
the beneficiary. In some of these cases, we believe a SNF's interests 
could be at odds with the interest of the beneficiary. For example, a 
SNF could be motivated by maintaining the status quo with respect to 
payment already received for services in light of the burden associated 
with refunding payments and billing the Medicare program for payment 
for services furnished as many as 15 years earlier. We believe 
restricting formal provider representation in the appeals process, 
given the broad availability of other resources, affords beneficiaries 
the best opportunity for independent and unbiased assistance, if 
needed. While a provider may not act as an appointed representative for 
a beneficiary under these procedures, we believe it would be entirely 
appropriate for providers to lend assistance to beneficiaries in 
providing records, information, and advice about the appeal and the 
appeal process. Thus, we are not adopting the recommendation to allow 
providers to be appointed as a representative for an eligible party.
    We would also like to clarify the scope of our proposal in adding a 
definition to the term unrepresented beneficiary in Sec.  405.931(d)(5) 
for these new appeal procedures. As proposed in Sec.  405.931(d)(5), a 
beneficiary who is an eligible party is considered unrepresented if the 
beneficiary meets one of several criteria specified in that section. As 
we explained in the introductory paragraph of Sec.  405.931(d), the 
policies established in that section are for the limited purposes of 
these new appeal procedures, that is, appeals conducted under 
Sec. Sec.  405.931 through 405.938. We did not intend to apply the 
definition of unrepresented beneficiary in Sec.  405.931(d)(5) to claim 
appeals conducted under existing 42 CFR part 405 subpart I. The purpose 
in adding this definition is to help eligible parties who are 
considered unrepresented understand how certain existing procedural 
requirements, adopted for these new procedures, will apply. For 
example, in Sec.  405.1018, there are specific requirements regarding 
the submission of evidence at an ALJ hearing that do not apply to an 
unrepresented beneficiary. For the purposes of appeals conducted under 
Sec. Sec.  405.931 through 405.938, those requirements will not apply 
to an unrepresented beneficiary as defined in Sec.  405.931(d)(5).
    We appreciate the feedback that we received from commenters on 
eligibility requirements and policies regarding appointed 
representatives. Based on analysis of the public comments, we will be 
finalizing the proposals related to such procedures as proposed.
3. Appeal Requests and Determinations of Eligibility by the Eligibility 
Contractor
    In Sec.  405.932, we proposed to channel all retrospective appeal 
requests from eligible parties through a single point of contact, the 
eligibility contractor. We proposed, in Sec.  405.932(a)(2) for a 
retrospective appeal, that the appeal request filed by an eligible 
party (or their representative) must be received by the eligibility 
contractor within 365 calendar days from the implementation date of 
these provisions which would be specified when this rule is finalized. 
We proposed that details regarding the filing of appeal requests would 
be posted to Medicare.gov and/or CMS.gov once the retrospective appeals 
process is operational. A single point of contact will relieve 
beneficiaries of the burden of determining which contractor is 
currently responsible for claims processed many years ago in order to 
file their appeal request. In addition, due to the complexity of the 
requirements for determining eligibility as a class member for an 
appeal, we believed having a single point of contact would promote 
consistency in such determinations and would provide a better overall 
experience for eligible beneficiaries pursuing their appeal rights.
    We anticipated eligible parties (or their representatives) would 
provide relevant information to demonstrate their eligibility as a 
member of the class afforded appeal rights in the court order as 
proposed in Sec.  405.932(a) through (c), including medical records 
that may serve to document certain conditions of eligibility under the 
court order. Medical records would also assist in determining whether 
the beneficiary received observation services following the 
reclassification from inpatient to outpatient receiving observation 
services. However, we understood the challenges beneficiaries and their 
representatives may face in obtaining and producing such information in 
situations where significant time may have passed since a beneficiary 
was hospitalized. Therefore, we proposed in Sec.  405.932(c)(2) that 
the eligibility contractor would work with MACs, eligible parties, and 
providers, whenever necessary, to attempt to obtain the information 
needed to make such determinations. In our existing claims appeals 
process, contractors routinely seek records from providers to assist 
beneficiaries filing appeals when the beneficiary is unable to provide 
records needed to adjudicate the appeal.
    In Sec.  405.932(b), we proposed that eligible parties (or their 
representatives) provide, in writing, certain minimum basic information 
in their appeal request, so the eligibility and processing contractors 
may identify the prior claims filed for the hospital stay and SNF 
services, as applicable, that serve as the basis for the retrospective 
appeal. These required elements for an appeal request (which are 
similar to existing requirements for requesting a redetermination under 
Sec.  405.944) include the beneficiary's name, Medicare number (the 
number on the beneficiary's Medicare card), name of the hospital and 
the dates of

[[Page 83249]]

hospitalization, and the name of the SNF and the dates of stay (as 
applicable). If the appeal includes SNF services not covered by 
Medicare, the written request must also include an attestation to the 
out-of-pocket payment(s) made by the beneficiary for such SNF services 
and must include documentation of payments made to the SNF for such 
services. CMS would prepare a model form that appellants may use to 
file requests for a retrospective appeal under these provisions. Once 
the appeal process is operational, this notice would be available 
online at Medicare.gov to download and complete and would be available 
to request in printed or accessible form by calling 1-800-MEDICARE.
    We also proposed in Sec.  405.932(b)(2) that eligible parties 
attest to their out-of-pocket costs (other than customary cost sharing 
paid to a third-party payer or insurer) paid for SNF services not 
covered by Medicare because the statutory requisite, 3-consecutive 
calendar day inpatient hospital stay, was not met. (We note that for 
the purposes of determining coverage of SNF services under section 1861 
of the Act, inpatient hospital days are counted in accordance with 
longstanding, existing policy in Sec.  409.30, that is, a patient must 
have a qualifying inpatient stay of at least 3 consecutive calendar 
days starting with the admission day but not counting the discharge day 
(see Sec.  405.931(g)).
    In cases where a third-party payer or insurer covered all of the 
cost of SNF services of an eligible party, we proposed that such 
services be excluded from consideration in the retrospective appeals 
process. (Payments for SNF services made by a family member would not 
be considered payment by a third-party payer but would be considered 
out-of-pocket payment for the eligible party.) In light of the 
clarification to the court order indicating that the new appeal 
processes are intended to provide a remedy for class members who 
already endured uncompensated or undercompensated stays at skilled 
nursing facilities, we did not believe the court order requires the 
readjudication of such paid services under a Medicare appeal process if 
payment for that care is provided by another insurer.\11\ Moreover, 
readjudicating these claims potentially puts Medicare trust fund 
dollars at risk for making duplicate payments to providers for 
previously compensated care, as Medicare does not have authority to 
compel refunds with respect to payments made by third-party payers to 
providers. In addition, focusing our efforts on situations involving 
payments for denied services made by beneficiaries (or their families) 
focuses resources for appeals for beneficiaries (or their families) 
that paid out of pocket for the cost of care.
---------------------------------------------------------------------------

    \11\ However, if an eligible party paid out of pocket for some 
or all of the SNF services, including situations where a denial by a 
third-party insurer resulted in the beneficiary making out of pocket 
payments for some or all of the SNF services, then those SNF 
services that resulted in out of pocket payments would be eligible 
for an appeal.
---------------------------------------------------------------------------

    We proposed in Sec.  405.932(d) that the eligibility contractor 
would be responsible for determining the validity of requests for 
appeal under these provisions, that is, whether the request is filed by 
an eligible party, is timely filed, and contains the required elements 
for a valid request specified in Sec.  405.932(b)(1) and (2). The 
eligibility contractor would issue a decision to approve or deny such 
requests. In proposed Sec.  405.932(d)(1)(ii), we would require the 
eligibility contractor to issue a written decision within 60 calendar 
days of receipt of a valid appeal request from the eligible party (or 
their representative). We proposed in Sec.  405.932(d)(2) that approved 
requests (meaning those meeting both eligibility and filing 
requirements), would be forwarded to the processing contractor (the MAC 
with jurisdiction over the hospital claim), and the processing 
contractor would perform the appeal. Under proposed Sec.  
405.932(d)(3), requests that are not eligible for an appeal or do not 
meet the requirements under proposed in Sec. Sec.  405.931 and 405.932 
would be denied. However, we proposed that individuals receiving a 
notice of denial of an appeal request would have an opportunity to 
request a review of the denial by the eligibility contractor in order 
to provide additional clarification, or correct any deficiencies in the 
filing, under the provisions proposed in Sec.  405.932(e). Our proposed 
approach to handling requests that are ineligible for an appeal 
differed slightly from how similar appeal requests are handled under 
existing claims appeals procedures in Sec.  405.952. Under existing 
rules, such requests are dismissed, and dismissals may be reviewed and 
vacated by the adjudicator who issued the dismissal or appealed to the 
next level adjudicator to determine if the dismissal was appropriate. 
However, given the complexity of the eligibility requirements, the age 
of the service in question and in many cases, the lack of a claim to 
review, in our view the most effective and efficient approach to 
resolving eligibility concerns was to keep these disputes with the 
eligibility contractor, requiring review by an individual not involved 
with the initial denial determination.
    We received several comments regarding the proposed filing 
timeframes and procedures for retrospective appeals, the procedures for 
eligibility determinations, and the submission of medical records in 
support of an eligible party's appeal.
    Comment: Several commenters recommended CMS extend the filing 
timeframes for retrospective appeals beyond the period of 1 year 
following the implementation of the final rule proposed by CMS, citing 
that beneficiaries may have trouble locating such dated medical records 
and that the process to determine eligibility could prove to be 
complex. Commenters varied in their recommendations, some suggested 2 
years while another suggested 4 years. Commenters also recommended that 
CMS apply existing good cause rules that allow for exceptions to appeal 
filing deadlines.
    Response: We believe the 1-year (that is, 365 calendar day) filing 
timeframe from the implementation date of the final rule affords 
eligible parties adequate time to submit appeal requests under these 
new procedures. The 1-year timeframe is twice as long as any other 
existing timeframe to file an appeal. Moreover, we note that general 
information regarding the forthcoming right to appeal has been posted 
on Medicare.gov and CMS.gov since 2021.\12\ We also anticipate 
providing more detailed information regarding the appeals process 
online and in Medicare publications, including MSNs, in the time 
between publication of the final rule and the actual implementation of 
the provisions. Thus, we believe the time between publication of the 
final rule and the implementation date, and the 1-year timeframe to 
file from the implementation date will give eligible parties a 
reasonable amount of time to compile information necessary for their 
case, and to file an appeal (and as we explain in this final rule, 
Medicare contractors will assist in obtaining medical records if the 
records cannot be submitted with the appeal request). Accordingly, we 
are not adopting the recommendations made by the commenters to lengthen 
the filing timeframe for retrospective appeals. (We note that the 
procedures in Sec.  405.932(a)(2)(ii) include an exception that allows 
the eligibility contractor to accept an untimely filed appeal request

[[Page 83250]]

if the eligible party establishes good cause under the existing appeal 
provisions in Sec.  405.942(b)(2) and (3).)
---------------------------------------------------------------------------

    \12\ See https://www.medicare.gov/providers-services/claims-appeals-complaints/appeals/original-medicare and https://www.cms.gov/medicare/appeals-grievances/fee-for-service.
---------------------------------------------------------------------------

    Finally, we are making an editorial revision in Sec.  
405.932(a)(2)(ii) to insert the word calendar after the number 365 for 
clarity and to be consistent with existing language regarding 
timeframes being measured in calendar days, both in these procedures 
and in our existing appeals procedures.
    Comment: A commenter recommended that CMS create an online portal 
for the submission of appeal requests and supporting documentation.
    Response: We appreciate the recommendation submitted by commenter 
to create an online portal for the submission of appeal requests and 
supporting documentation. We considered this option as we began to plan 
for implementation of this new appeals process, but ultimately found 
this approach to be impracticable due to a variety of time, cost, and 
security considerations. The length of development time, testing, and 
sheer level of effort required to implement a secured beneficiary-
facing portal is at odds with the complex security environment and the 
need to implement these new procedures as quickly as possible. 
Moreover, we are committed to mirroring existing appeal procedures as 
much as possible for these new appeals. Therefore, we are not adopting 
the recommendation made by the commenters. We believe it is appropriate 
for beneficiary appeal requests to continue to be submitted via mail. 
CMS will provide clear instructions to beneficiaries on where to mail 
their requests.
    Comment: A commenter suggested that we consider having 
beneficiaries file appeals with the health plan and have the plan 
conduct the initial eligibility determination in addition to the 
appeal. Other commenters supported our proposal to use a single point 
of contact for receiving appeals and making eligibility determinations.
    Response: We appreciate the comments and support for our use of an 
eligibility contractor. We considered having MACs conduct the appeal 
intake and make eligibility determinations. However, as we explained in 
the proposed rule, we are establishing a single point of contact, the 
eligibility contractor, to receive these new appeals and to make 
eligibility determinations. We believe a single point of contact will 
relieve beneficiaries of the burden of determining which MAC would be 
responsible for performing an appeal under these new procedures. In 
addition, we believe a single contractor making eligibility 
determinations will promote consistency in such determinations. 
Following the determination of eligibility, the processing contractor 
(the MAC) will conduct the appeal. We also note that, as explained in 
the proposed rule, these new appeals are limited to beneficiaries in 
Medicare Part A and B (``Original Medicare''). Claims processing and 
first level appeals in Original Medicare are conducted by MACs and not 
health plans. Thus, we are not adopting the recommendation to use a 
health plan or the MACs to make eligibility determinations.
    Comment: Many commenters supported the availability of a model form 
that could be used to file an appeal request. Commenters suggested that 
we make the form available in multiple languages, including an ASL 
interpretation of the form.
    Response: We appreciate the support of the commenters regarding our 
proposal for a model form that beneficiaries may use to submit an 
appeal request. We plan to translate the form into different languages 
as needed.
    Comment: Several commenters requested that we provide more 
information about the submission of medical records as part of the 
retrospective appeal request and what types of records and information 
would be needed as part of the appeal. Commenters also suggested that 
we provide eligible parties with instruction about how to seek 
assistance from the eligibility contractor in obtaining records and 
suggested other information that we should consider including in our 
instructions for filing appeal requests (for example, the types of 
records that would be helpful, the dates spent in the hospital, orders 
regarding admission and care, etc.).
    Response: We appreciate the recommendations submitted by commenters 
for the content of instructions related to filing appeal requests. We 
intend to carefully consider these recommendations for the online 
educational materials we intend to publish prior to implementation of 
the new procedures. We agree that as part of our educational efforts, 
it will be helpful to provide beneficiaries with information about the 
types of records needed for these new appeals and suggestions for how 
to get access to them.
    We would like to emphasize, as we did in the proposed rule, that we 
strongly encourage beneficiaries or their representatives to submit 
with their appeal request all available medical records related to the 
hospitalization and, as applicable, SNF services, and documentation of 
amounts paid out of pocket for care that was not covered under Part A. 
However, in these new appeals, we understand the difficulty some 
beneficiaries may have in obtaining records for services furnished many 
years ago. For that reason, we will require the eligibility contractor 
to work with the appropriate MAC to request all relevant records that 
are needed to establish eligibility for an appeal from the appropriate 
providers if some, or all, of those records are not submitted with the 
appeal request. In addition, as necessary, the eligibility contractor 
and MAC will request missing records related to the hospital, and as 
applicable, SNF services furnished to the beneficiary to determine 
whether coverage under Part A is warranted. Such records should be 
comprehensive with respect to the treatment and services received and 
would include, but are not limited to, hospital records that document 
admission as an inpatient, orders for observation services, diagnosis 
and treatment notes, orders and results of testing, discharge planning 
notes, as well as records from services furnished by the SNF (as 
applicable). In addition, beneficiaries should submit information 
related to the out of pocket payments that were made for the services 
at issue in the appeal, particularly SNF services for which a provider 
refund is sought. Such information could include provider bills and/or 
invoices, proof of payment in the form of a copy of a cashed check, 
credit card statement, etc.
    Comment: A commenter requested clarification on how contractors 
will request additional information from providers related to an appeal 
request, and who within the provider's organization would be authorized 
to share patient information with the contractor.
    Response: Providers have a longstanding obligation to provide 
requested information related to services furnished to a beneficiary 
under section 1815(a) of the Act. MACs will utilize existing methods 
for requesting additional documentation and records, that is, the 
Additional Documentation Request (ADR) process, where a letter 
outlining the requested records and dates of service is mailed to the 
provider. Providers that have registered to receive ADRs and submit 
records in response electronically may use the existing system (for 
example, the Electronic Submission of Medical Documentation (esMD) 
system). Providers should follow existing privacy protocols for the 
submission of records requested by the MAC for these appeals in the 
same manner as they would for

[[Page 83251]]

other records requests by a MAC or other contractor.
    Comment: Several commenters recommended that we give individuals 
and providers additional time to submit records requested for an 
appeal. The commenters stated that the 60-day timeframe in the proposed 
rule is inadequate and suggested we allow 120 calendar days for the 
submission of missing information. A commenter expressed concern about 
the impact of records requests on providers. Some commenters also 
recommended that we also allow extensions of the timeframe for good 
cause. Commenters also expressed concern about whether providers would 
be penalized for being unable to locate records that are older than 
existing record retention requirements and urged CMS to ensure 
contractors are aware of record retention requirements.
    Response: We understand and appreciate the concerns of the 
commenters regarding the potential issue some individuals or providers 
may have in locating and producing records for services furnished many 
years ago, and the burden of these requests on providers. While we are 
concerned that extended timeframes to respond to records requests may 
cause delays in establishing eligibility of the beneficiary in order to 
adjudicate valid appeals, we agree with the commenters that affording 
up to 120 calendar days to submit records to the eligibility contractor 
is reasonable. Accordingly, we are revising Sec.  405.932(c)(2) to 
provide that the eligibility contractor will allow up to 120 calendar 
days for submission of missing information.
    However, in light of the 365-calendar day filing timeframe to 
request an appeal under these procedures and the additional 60 calendar 
days we are granting to submit records, we believe it is also 
reasonable not to include extensions to the 120-calendar day timeframe 
in which records must be submitted to the eligibility contractor. It is 
important to balance the interests in affording individuals adequate 
time to obtain records with the interests in avoiding extended delays 
in processing appeals. We believe the 365-calendar day filing timeframe 
to request an appeal provides individuals with adequate time to obtain 
the necessary documentation to support their appeal. Should the 
eligibility contractor still need additional information, we believe 
allowing up to another 120 calendar days is reasonable. If an 
individual or provider cannot meet the deadline, the eligibility 
contractor will make a decision based on the information in the record. 
If the information in the record does not establish the individual's 
eligibility, then the eligibility contractor will issue a denial 
notice. The individual (or their representative) may request a review 
of the eligibility contractor's denial in accordance with the 
procedures outlined in Sec.  405.932(e) and may submit any records 
subsequently obtained that serve to establish eligibility and/or 
coverage of services.
    We acknowledge the concerns raised by commenters about the extended 
lookback period for retrospective appeals and the ability of providers 
to locate medical records for services that were furnished on dates 
that are not covered by existing record retention requirements. 
Medicare requires records be retained by providers for 7 years from the 
date of service (42 CFR 424.516(f)). While providers are not required 
to maintain records beyond the 7-year timeframe specified in 
regulations, we encourage providers to make reasonable efforts to 
search for and furnish any records in their possession, including those 
outside the record retention requirements. However, contractors are 
aware of existing record retention requirements, and we will not 
penalize providers who cannot locate records for dates of service that 
are beyond the record retention timeframe.
    Comment: Several commenters stated that we should advise 
beneficiaries in our instructions for these new appeals that they may 
still submit retrospective appeal requests even if their medical 
records are unavailable. The commenters also requested that we specify 
that in the absence of medical records, acceptable evidence for the 
determination of Part A coverage would include written statements from 
beneficiaries, family members and providers who are familiar with the 
facts giving rise to the appeal.
    Response: We agree with these commenters that beneficiaries may 
submit a retrospective appeal request without medical records. 
Consistent with the proposed rule, under this final rule we will 
require the eligibility contractor and the appropriate MAC to 
coordinate with providers to obtain necessary medical records to 
determine eligibility and to process the appeal regarding the denial of 
Part A coverage. Written statements from a beneficiary or family member 
regarding hospital services and, as applicable, SNF services furnished 
to a beneficiary may be submitted as evidence in the appeal. However, 
we believe an adjudicator will need some form of documentary evidence, 
such as medical records, to determine whether specific aspects of 
eligibility are met (for example, whether the hospital in fact admitted 
a patient as an inpatient and subsequently changed their status, or 
whether observation services were furnished after such change in status 
to outpatient). The adjudicator will also need to determine whether 
services meet Part A coverage requirements (for example, with hospital 
admissions subject to the original two-midnight rule from 2013, whether 
the patient is reasonably expected to require a stay of at least two 
midnights, and where the medical record includes information to support 
the physician's or otherwise qualified practitioner's expectation that 
the patient would require a stay of at least two midnights). Thus, 
testimonial evidence, such as statements from a beneficiary or provider 
regarding the care or treatment received will be accepted and 
considered in an appeal. However, without corresponding medical 
documentation, such statements by themselves may be insufficient to 
establish eligibility and/or determine if Part A coverage requirements 
were met. Thus, we decline to adopt the recommendation made by the 
commenters.
    Comment: Several commenters recommended that our instructions for 
filing appeals and other guidance regarding the new appeals procedures 
explain the relevant standard for coverage that beneficiaries will have 
to meet in order to demonstrate that their hospital stay met the 
relevant Part A coverage criteria for inpatient hospital services.
    Response: We appreciate this recommendation, and we agree that 
guidance regarding the coverage standards for inpatient admissions will 
be important information for beneficiaries eligible for an appeal. We 
intend to provide information regarding the relevant standards for 
inpatient hospital coverage and the applicable timeframes in materials 
we will publish on our websites.
    Comment: A few commenters contended that the regulatory text in the 
proposed rule did not provide sufficient detail regarding the 
information contained in the notice related to a denial of eligibility 
for an appeal. The commenters suggested that the eligibility denial 
notice should contain specific information to assist beneficiaries in 
understanding the reason for the denial as well as what information is 
necessary to cure the denial.
    Response: We appreciate the suggestions made by the commenters. We 
believe the regulatory language regarding the content of the denial 
notice in Sec.  405.932(d)(3)(ii) is sufficient

[[Page 83252]]

with respect to specifying the reason for denial of the appeal request 
(``The denial notice explains that the request is not eligible for an 
appeal, the reason(s) for the denial of the appeal request, and the 
process for requesting a review of the eligibility denial under Sec.  
405.932(e).''). However, we agree that it would be appropriate to 
specify that the denial notice include a statement about the 
information needed to cure the appeal request to establish eligibility. 
We view this as implied in providing the reason(s) for the denial but 
also see the value of including this additional requirement in the 
denial notice prepared by the eligibility contractor. Therefore, we are 
revising Sec.  405.932(d)(3)(ii) to state that the denial notice 
explains that the request is not eligible for an appeal, the reason(s) 
for the denial of the appeal request, the information needed to cure 
the denial, and the process for requesting a review of the eligibility 
denial under Sec.  405.932(e). We appreciate the feedback that we 
received from commenters on eligibility determinations and filing 
appeals under these new procedures. Based on analysis of the public 
comments, we will be finalizing the proposals related to such 
procedures as proposed with the exception of the amendments to 
Sec. Sec.  405.932(c)(2) and 405.932(d)(3)(ii), described previously.
4. Conduct of Appeals by Processing Contractors
    Currently, MACs perform the first level of administrative appeal 
for Medicare claims (see 42 CFR 405.940 through 405.958). We proposed a 
similar process for these new appeals, utilizing existing procedures, 
as appropriate, with MACs performing the first level of retrospective 
appeals under this rule. Specifically, we proposed that the MAC that 
currently has jurisdiction over Part A claims from the relevant 
hospital would be responsible for conducting the retrospective appeal 
as the processing contractor. Where we believed the procedures for the 
new retrospective appeals would need to differ from existing claims 
appeals procedures, we proposed new processes. For example, in Sec.  
405.931(b) and (c), we proposed that party status for these appeals be 
limited to the eligible class members (or their authorized 
representatives).
    In Sec.  405.932(f)(1), we proposed that if the processing 
contractor determines there is necessary information missing from the 
appeal case file, the processing contractor would attempt to obtain the 
information from the provider and/or the eligible party (or their 
representative), as applicable. We proposed that the processing 
contractor afford entities up to 60 calendar days to submit requested 
information. If the requested information is not submitted in the 
specified timeframe, we proposed that the processing contractor would 
make a decision based on the information available.
    In proposed Sec.  405.932(f)(3), we required processing contractors 
to issue a written decision within 60 calendar days of receipt of a 
valid appeal request from the eligibility contractor. However, in cases 
where the processing contractor needs additional information to conduct 
the appeal from the eligible party (or their representative) or a 
provider, in Sec.  405.932(f)(1), we proposed that the time between the 
request for such information and when it is received (up to 60 calendar 
days) would not count towards the 60-calendar day adjudication 
timeframe. If the requested information is not sent to the processing 
contractor, then we proposed that the time afforded by the contractor 
for submission of the information would not count towards the 
adjudication timeframe. In effect, the 60-calendar day timeline on 
which the processing contractor must make its decision will be tolled 
during the period between the date the processing contractor requests 
information from the provider and/or the eligible party and the later 
of the date that information is received or the deadline by which the 
information is requested has passed.
    Under proposed Sec.  405.932(f) and (g), based on the information 
available, the processing contractors would determine whether the 
hospital admission, and as applicable, SNF services, satisfied the 
relevant criteria for Part A coverage at the time of the admission, 
notwithstanding subsequent reclassification by the hospital, and 
whether the hospital services, and as applicable, SNF services, should 
have been covered under Part A. If the processing contractor determines 
that the hospital admission and, as applicable, SNF services satisfied 
the relevant criteria for Part A coverage at the time services were 
furnished, it would render a favorable decision and would send written 
notice to the eligible party (or their representative). The notice 
would explain the rationale for, and effect of, the decision, similar 
to existing notices for redeterminations.
    In Sec.  405.932(g)(4), when applicable, we proposed that 
processing contractors would send notice of a favorable decision to the 
SNF that furnished services to the beneficiary in order to inform the 
SNF of the reason for the decision and the effect of the decision. In 
addition, under Sec.  405.932(g)(2) and (6), processing contractors 
would send SNFs notice of a partially favorable decision where the 
beneficiary's hospital inpatient admission would have met the criteria 
for Part A coverage, but the SNF services subsequently received by the 
beneficiary do not meet the relevant criteria for Part A coverage (for 
example, if the services are determined not medically reasonable and 
necessary under section 1862(a)(1)(A) of the Act). The notice of a 
partially favorable decision sent to a SNF informs the SNF of the 
reason the hospital services were determined to meet the relevant 
criteria for Part A coverage, and the reasons the SNF services were 
determined not to be covered under Part A. We proposed that the 
processing contractor also explain that the notice is being sent to the 
SNF for informational purposes only, and that only the eligible party 
(or the eligible party's representative) may appeal the decision to the 
QIC under proposed Sec.  405.934. An eligible party may appeal a 
partially favorable decision with respect to coverage of SNF services 
to the QIC under proposed Sec.  405.934 in the same manner as 
unfavorable decisions with respect to Part A coverage of the hospital 
services. In addition, in Sec.  405.932(g)(5), with respect to an 
appeal filed by a beneficiary not enrolled in Medicare Part B at the 
time of hospitalization, we proposed that processing contractors would 
send notice of a favorable decision to the hospital to inform the 
hospital of the reason for the decision and the effect of the decision.
    Providers are reminded that under sections 1814 and 1866 of the 
Act, Sec. Sec.  489.20 and 489.21 of the regulations, and the terms of 
the provider agreement, providers may not collect any amounts for 
covered services other than applicable coinsurance and deductible. 
Accordingly, in the case of a favorable appeal decision that involves 
SNF services paid for by the beneficiary, we proposed in Sec.  
405.932(g)(4) and (h)(2)(i) that SNFs would be required to refund any 
payments collected from the beneficiary for the covered SNF services 
(see 42 CFR part 489 Subpart D regarding the requirements for handling 
of incorrect collections). Similarly, in the case of a favorable appeal 
decision rendered for a beneficiary who was not enrolled in Medicare 
Part B at the time of hospitalization, we proposed in Sec.  
405.932(g)(5) and (h)(2)(ii) that hospitals would be required to refund 
any payments collected for the outpatient hospital services.
    Furthermore, we believed that the Medicare statute requires a 
provider of services to submit new claims in order

[[Page 83253]]

to determine the amount of benefits due for covered services and to 
receive payment under Part A of the program. Under section 1814(a)(1) 
of the Act, and 42 CFR 424.33, and 42 CFR 424.51, payment for Part A 
services furnished to an individual may be made only to a provider of 
services eligible to receive payment under section 1866 of the Act 
after a request for payment (a claim) is filed with Medicare by the 
provider. The clarifying order issued by the court stated that the 
program is not required to unwind previously filed Part B outpatient 
hospital claims in order to make payment for covered SNF services in 
the case of a favorable decision (meaning for the purposes of 
effectuating a favorable decision, any existing Part B outpatient 
hospital claim will not be reopened or revised by the MAC to reflect an 
appeal decision that the class member's hospital admission satisfied 
the relevant criteria for Part A coverage at the time of the admission, 
and the hospital will not be required to submit a claim for inpatient 
services under Medicare Part A \13\). However, the clarification only 
applies to beneficiary class members who were enrolled in Medicare Part 
B at the time of hospitalization. Thus, in the case of a beneficiary 
class member who was not enrolled in Medicare Part B at the time of 
hospitalization, we proposed in Sec.  405.932(h)(2)(ii) that following 
a favorable appeal decision and making any required refund for payments 
received for covered services, the hospital may submit a new Part A 
inpatient claim to Medicare in order to determine the appropriate 
amount of benefits and for Medicare to make payment for inpatient 
hospital services under Part A. We also proposed in Sec.  
405.932(h)(2)(ii) that the claim must be submitted by the hospital 
within 180 calendar days after the hospital receives its notice of a 
favorable appeal decision for the eligible party.
---------------------------------------------------------------------------

    \13\ We note that a previously paid claim is still subject to 
reopening under Sec.  405.980 for other reasons unrelated to the 
appeal decision (for example, if payment for the claim was procured 
by fraud or similar fault).
---------------------------------------------------------------------------

    In addition, if a favorable appeal decision includes eligible SNF 
services that are covered, in Sec.  405.932(h)(2)(i), we proposed that 
following a refund of amounts collected from the beneficiary, the SNF 
may then submit a claim (or claims) for such services to Medicare in 
order to determine the appropriate amount of benefits, and for Medicare 
to make payment for the covered SNF services. The SNF claim, following 
a favorable appeal decision (that is, the hospital admission satisfied 
the relevant criteria for Part A coverage as an inpatient at the time 
of admission and the SNF services met relevant Part A coverage 
criteria), would be processed without regard to the hospital's 
erroneous reclassification of the beneficiary as an outpatient 
receiving observation services. We also proposed in Sec.  
405.932(h)(2)(i) that the SNF submit the claim within 180 calendar days 
after receiving the notice of a favorable appeal decision for the 
eligible party.
    If the processing contractor determines that the hospitalization 
did not meet applicable Part A inpatient coverage requirements, we 
proposed in Sec.  405.932(g)(3) the MAC would send notice of its 
unfavorable decision to the eligible party (or their representative). 
If the processing contractor determines that the hospital admission 
meets applicable Part A inpatient coverage requirements, but the SNF 
services eligible for the appeal do not meet applicable coverage 
requirements, we also proposed in Sec.  405.932(g)(2) that the 
processing contractor would send notice of its partially favorable 
decision to the eligible party (or their representative). The notice of 
an unfavorable or partially favorable decision would inform the 
eligible party (or their representative) of the right to request a 
reconsideration with a QIC under proposed Sec.  405.934 and would 
provide detailed information about the requirements for filing the 
request and where the request must be filed.
    We received several comments regarding the processing of 
retrospective appeals and the effectuation of favorable or partially 
favorable appeals.
    Comment: A commenter requested clarification regarding coordination 
among MACs if a hospital claim and SNF claim are processed by different 
MACs. The commenter questioned how the MAC processing the appeal would 
get information about the SNF. The commenter also inquired about the 
process for handling requests from the eligibility contractor that are 
sent to the wrong MAC.
    Response: We appreciate the commenter's questions about how 
contractors will coordinate activities to ensure appropriate 
information is available to the eligibility and processing contractors. 
We considered the concerns raised by the commenter as we were 
developing the procedures in the proposed rule and we intend to include 
a process for contractors to coordinate with each other and with CMS in 
the rare case of different contractors having responsibility for the 
SNF claim and the hospital claim. This will ensure information needed 
to request documentation will be made available to the appropriate 
contractor. We will also instruct contractors to work with CMS in the 
event that the eligibility contractor sends requests to the incorrect 
MAC. In turn, CMS will assist the eligibility contractor, as needed, to 
determine the appropriate processing contractor so the appeal will be 
handled in a timely manner.
    Comment: A commenter expressed concern about estate recovery under 
the Medicaid program in situations under these new procedures where a 
beneficiary could not obtain Medicare coverage of SNF services, but 
ultimately received coverage of SNF services from Medicaid. The 
commenter suggested that CMS encourage states to use hardship waiver 
authority to relieve individuals of estate recovery for portions of SNF 
stays that Medicare should have covered.
    Response: We appreciate the concerns raised by the commenter. If a 
State Medicaid agency determines that a deceased beneficiary may be 
subject to estate recovery, it may only make recoveries from the 
beneficiary's estate under certain circumstances, including when 
recovery would not create an undue hardship for survivors. States are 
required by section 1917(b)(3) of the Act to have procedures to waive 
estate recovery where it would create an undue hardship for the 
deceased Medicaid recipient's heirs. States have flexibility and 
discretion to design reasonable criteria for determining what 
constitutes an undue hardship and who may be afforded protection from 
estate recovery in such instances. The State plan needs only specify 
the criteria for waiver of estate recovery claims due to undue 
hardship. Individuals will need to work directly with their State 
Medicaid Agency to file an undue hardship claim.
    Comment: Several commenters suggested CMS clarify that due to the 
COVID-19 public health emergency (PHE) and the waivers implemented by 
CMS with respect to the 3 consecutive day qualifying hospital stay 
(QHS) eligibility requirement for SNF benefits, that there should be no 
appealable SNF stays for the period in which the PHE waivers were in 
effect.
    Response: We appreciate the commenters' suggestions on this issue. 
Under the terms of the court order and the proposed rule establishing 
eligibility for retrospective appeals (Sec. Sec.  405.931 through 
405.938), an eligible party may appeal the denial of Part A coverage. 
We anticipate an overwhelming majority of appeals filed under these new 
provisions will focus on denials of Part A SNF coverage due to 
financial liability for the denied SNF services. We

[[Page 83254]]

agree with the commenter that appeals under these new provisions should 
not include SNF services that were paid by Medicare as the result of a 
SNF invoking the COVID-19 PHE waiver authority for a QHS (or services 
paid by a third-party payer as noted in Sec.  405.932(b)(2)). 
Nevertheless, we would like to clarify that we are not restricting an 
eligible party's right to appeal the denial of Part A coverage for 
hospital services under these procedures even if the SNF services were 
covered by Medicare or a third-party payer; we do not believe that such 
a restriction is consistent with the court order in Alexander. However, 
following the clarifying order by the court which does not require the 
unwinding or adjustment of the Part B outpatient hospital claim 
following a favorable appeal decision, we do not expect many appeals to 
be filed if the beneficiary's SNF services were covered.
    Comment: A few commenters suggested that we clarify how the new 
appeals process will interact with existing claims appeals processes. A 
commenter requested that we address situations where a hospital is 
pursuing a claim appeal under the existing claims appeals process and 
then an eligible party initiates a retrospective appeal under these new 
procedures. The commenter acknowledged there would likely be few such 
cases.
    Response: We agree with the commenter that we expect very few, if 
any, situations where a claim for hospital outpatient services is 
pending in the claims appeal process and then an eligible party files 
an appeal for Part A coverage under the new process. However, in that 
unlikely situation, the determination of coverage under Part A for the 
hospital claim would be conclusive with respect to the hospital 
services and would be binding for purposes of the beneficiary's 
hospitalization.
    To illustrate, under existing procedures in Sec.  405.940, et seq., 
if the hospital appealed a denial of coverage of outpatient hospital 
services for not being medically reasonable and necessary under section 
1862(a)(1)(A) of the Act, that appeal would only address the coverage 
and payment of the outpatient services on the hospital's Part B claim 
submitted to Medicare. An appeal filed by a hospital under existing 
procedures would not address whether coverage under Part A would have 
been appropriate. However, if an eligible party filed an appeal for the 
denial of Part A coverage under the provisions in Sec. Sec.  405.931 
through 405.938, then that determination would be conclusive for the 
purposes of coverage for the hospital services. Adjudicators deciding 
an appeal of the Part B outpatient claim would be bound by the 
determination with respect to Part A coverage as a result of an appeal 
under Sec. Sec.  405.931 through 405.938. Similarly, if the appeal 
under Sec. Sec.  405.931 through 405.938 involves coverage of SNF 
services, the determination would be binding on any pending claims 
appeal under existing procedures.
    In order to address the issue raised by the commenter, we are 
revising Sec.  405.931 to add new paragraph (i) to explain that the 
determination of Part A coverage made in an appeal decision under these 
procedures is conclusive and binding with respect to coverage of such 
services under Part A for any other appeal under Part 405 Subpart I. 
Specifically, Sec.  405.931(i) would be added to state that, for the 
purposes of appeals under Sec. Sec.  405.931 through 405.938, the 
determination with respect to coverage under Part A is conclusive and 
binding with respect to the services furnished and shall be applied to 
any existing appeals with respect to coverage and payment for hospital 
services under Part B and SNF services (as applicable).
    Comment: Several commenters expressed support for the process 
outlined in the proposed rule regarding applicable refunds to 
beneficiaries for out-of-pocket payments made following a favorable or 
partially favorable appeal decision. A commenter suggested that CMS 
clarify that ``family member'' in the context of out-of-pocket payments 
include individuals who are not biologically related to the eligible 
party. A commenter requested that CMS state that the application of 42 
CFR part 489 Subpart D with respect to handling incorrect collections 
means that providers must issue refunds promptly (generally within 60 
days of a binding favorable appeal decision) and must comply with 
existing legal protections. A commenter also suggested that CMS provide 
additional explanation for situations where a provider has changed 
ownership or has closed, and a refund is owed to a beneficiary. A 
commenter also indicated that CMS should consider how refunds will get 
to the appropriate individual, particularly with respect to appeals 
filed on behalf of deceased beneficiaries.
    Response: We appreciate the commenters' support and suggestions on 
this issue. Our goal in creating this new retrospective appeals process 
is to implement the court order in a way that provides class members 
with a meaningful opportunity to appeal the denial of Part A coverage 
that is similar to the existing claim appeal process and provide a 
remedy for those class members who endured uncompensated or 
undercompensated care at SNFs. At the same time, there are limits on 
our authority to fashion remedies in effectuating favorable appeal 
decisions. For example, payment for hospital and SNF services may only 
be made to providers following submission of a claim by the provider. 
Section 1814(a)(1) of the Act; 42 CFR 424.33 and 42 CFR 424.51. In 
addition, existing policies for handling incorrect collections of funds 
from a beneficiary (42 CFR part 489 Subpart D) do not authorize the 
program to reimburse beneficiaries directly except in very limited 
circumstances (see Sec.  489.42(a)). For this reason, we must rely on 
providers and the terms of their provider agreement to issue refunds to 
beneficiaries where applicable.
    In the proposed rule, we explained that we are limiting our review 
of SNF services in these new appeals to situations where the 
beneficiary or a family member paid out-of-pocket for the SNF services 
(42 CFR 405.932(b)(2)). We explained that payments, including cost 
sharing payments, made by a third-party payer do not constitute out-of-
pocket payments made on behalf of the eligible party. We agree with the 
commenter who suggested that for the purposes of determining whether 
there were out-of-pocket payments made for SNF services, we consider 
payments made by individuals who are not biologically related but who 
paid out-of-pocket expenses on behalf of a beneficiary to be considered 
as out-of-pocket payments made by a family member. This could include, 
for example, close family friends, a former spouse, a roommate, or 
other individuals who would not have a legal or contractual obligation 
to pay for a beneficiary's care. We are revising Sec.  
405.932(b)(2)(iii) to state that payments made by a family member 
(including payments made by an individual not biologically related to 
the beneficiary) for an eligible party's SNF services are considered an 
out-of-pocket payment for the eligible party.
    With respect to the comments received about the timing of refunds 
that may be required following a favorable or partially favorable 
appeal decision, we reiterate our position as explained in the proposed 
rule that providers have an obligation to comply with applicable 
statutory and regulatory requirements with respect to charging for 
covered services. In the proposed rule (88 FR 89514), we stated that 
providers are reminded that under sections 1814 and 1866 of the Act, 42 
CFR 489.20 and 489.21, and the terms

[[Page 83255]]

of the provider agreement, providers may not collect any amounts for 
covered services other than applicable coinsurance and deductible. 
Refunding amounts previously paid for services determined to be covered 
following an appeal is the responsibility of the provider, and must be 
made consistent with the provisions in part 489 Subpart D. We expect 
that the provider will promptly refund amounts incorrectly collected, 
meaning the refund should be issued within 60 days of receipt of the 
decision letter to avoid the set aside requirements in 42 CFR 
489.41(b).
    With respect to concerns about refunds getting to the appropriate 
individual in the case of deceased beneficiaries, we note that an 
appellant would need to establish authority to file on behalf of a 
deceased beneficiary as they do under existing appeals procedures (see 
42 CFR 405.906(a)(1)). Coordination of any refund owed by a provider 
following a favorable appeal decision is a private matter between the 
provider and the individual entitled to a refund, and state law would 
govern in the case of a refund owed to a deceased beneficiary or their 
estate, or refunds owed by a provider that is no longer operating. CMS 
has limited authority under the statute to intervene. CMS may only make 
payment to an individual in situations where the provider invokes the 
set aside provision in Sec.  489.41 and fails to issue a refund. CMS 
would then determine whether payment of an amount equal to the 
incorrect collection should be made under Sec.  489.42. However, 
failure to issue a refund and retain funds from sources other than 
Medicare for covered services would constitute a violation of section 
1866(a)(1)(A) of the Act and the terms of the entity's provider 
agreement.
    Finally, in situations where there is change of ownership for a 
provider, obligations of the previous entity are generally transferred 
to the new owners. In rare situations where the new owners do not 
accept assignment of the provider agreement, including prior 
obligations, or in cases where the provider is no longer in operation, 
state law would apply with respect to the entity's obligations to 
remedy a debt.
    Comment: A commenter indicated that the proposed rule did not 
consider the implications for the Medicare Secondary Payer (MSP) 
program and the impact on other insurers or payers involved in the 
beneficiary's insurance coverage.
    Response: We appreciate the concern raised by the commenter. In the 
retrospective appeals process, we explained that following a favorable 
decision, to prevent duplicate payment, a provider who wishes to submit 
a claim for Part A payment would be obligated to refund amounts 
previously collected for Part B services determined, on appeal, to be 
covered under Part A. Providers would follow existing procedures for 
making refunds of amounts previously collected for such Part B services 
prior to submitting a Part A claim for payment as the services are 
considered non-covered under Part B. Then providers could collect 
payment for the covered Part A services based on the beneficiary's 
insurance coverage at the time the services were furnished. However, 
consistent with the court's clarifying order issued on December 9, 
2022, with respect to appeals involving beneficiaries enrolled in both 
Medicare Part A and B at the time of hospitalization, we remind 
hospitals that they are not required to submit a claim for Part A 
hospital services. Absent a Part A claim, we will not reopen or unwind 
previous Part B outpatient hospital payments in order to make payment 
for any SNF services determined to be covered under Part A.
    Comment: A few commenters requested that CMS allow providers up to 
1 year, as well as extensions for good cause or hardships, to file a 
claim following a favorable appeal decision. Commenters also requested 
that CMS consider all options to facilitate the submission of claims 
for Part A services following a favorable retrospective appeal 
decision. A commenter suggested that the decision itself could be 
sufficient to adjudicate a Part A claim for payment. A commenter 
questioned whether hospitals could collect the Part A hospital 
inpatient deductible following refund of any Part B payments collected 
and submission of a Part A claim.
    Response: We appreciate the concerns raised by commenters about 
billing for services following a favorable or partially favorable 
appeal decision. We acknowledge that submitting a claim may be 
complicated in situations where services were furnished many years ago, 
and in developing the procedures to implement the court order, we 
considered options with respect to claims for newly covered Part A 
services. As we stated in the proposed rule, under section 1814(a)(1) 
of the Act, and Sec. Sec.  424.33 and 424.51, payment for Part A 
services furnished to an individual may be made only to a provider of 
services eligible to receive payment under section 1866 of the Act 
after a request for payment (a claim) is filed with Medicare by the 
provider. In addition, under section 1815(a) of the Act, providers must 
furnish information as requested in order to determine the amounts due 
for Part A services. Thus, while the coverage determination with 
respect to the Part A services is conclusive based on the appeal 
decision, we would not make payment for covered Part A services solely 
based on a favorable or partially favorable appeal decision without a 
Part A claim for payment from the provider, in light of section 
1814(a)(1) of the Act. Moreover, an existing Part B outpatient claim 
cannot be ``adjusted'' into a Part A inpatient claim due to the 
different characteristics and requirements of inpatient and outpatient 
claims. (See 78 FR 50917, 50926 (August 19, 2013) where we explained 
that we could not ``adjust'' a Part A inpatient claim into a Part B 
claim for the purposes of Part B inpatient billing.) We are currently 
developing instructions for submission of these claims and will have a 
process approved and finalized shortly after this final rule is 
published.
    However, we agree that extending the timeframe for providers to 
submit claims in response to a favorable or partially favorable 
decision is warranted in light of the complexities that may surround 
such submissions. Thus, we are adopting the commenters' suggestion to 
extend the deadline for providers to file a claim(s) from 180 calendar 
days to 365 calendar days from the date of receipt of the notice of a 
favorable or partially favorable appeal decision. Specifically, we are 
revising Sec. Sec.  405.932(h)(2)(i), 405.932(h)(2)(ii), 
405.934(d)(2)(i), 405.934(d)(2)(ii), 405.936(e)(2)(i), 
405.936(e)(2)(ii), 405.938(d)(2)(i), and 405.938(d)(2)(ii) to replace 
``180 calendar days'' with ``365 calendar days''. We note that this 
365-calendar day timeframe to submit a claim is established solely in 
furtherance of implementing operational aspects of the court order in 
the Alexander case and is unrelated to existing rules for timely filing 
of claims in section 1814(a)(1) of the Act and 42 CFR 424.44. As 
suggested by commenters, we will also permit extensions to the claims 
filing deadline upon establishment of good cause. In determining 
whether a provider has established good cause when requesting an 
extension for filing a claim following a favorable or partially 
favorable appeal decision under these procedures, we will apply the 
provisions in Sec.  405.942(b) and (c) to the provider's request.
    We also remind hospitals that submission of a claim for Part A 
payment of inpatient hospital services is not required under these 
procedures, nor is submission of a claim prohibited. Hospitals may have 
received payment for Part B outpatient services at the time these 
services were furnished. As a

[[Page 83256]]

result of the clarifying order issued by the court, for beneficiaries 
who were enrolled in both Part A and Part B at the time of 
hospitalization, Medicare will not immediately unwind previously paid 
Part B outpatient claims in the case of a favorable or partially 
favorable appeal decision for Part A coverage of the hospital services. 
However, if a hospital chooses to submit a Part A inpatient claim for 
payment following a favorable or partially favorable decision, in order 
to prevent duplicate payment for services, we will unwind the Part B 
claim (by canceling the claim) before processing the Part A claim, and 
recover any monies paid to the hospital. The hospital would also need 
to refund any other payments collected for the outpatient services, 
including payments collected from any source related to coinsurance and 
deductibles for the outpatient services prior to submitting the Part A 
inpatient claim. Hospitals may then collect applicable cost sharing 
based on the beneficiary's insurance coverage at the time of 
hospitalization in accordance with the processed Part A claim.
    In order to clarify these points, we are amending Sec. Sec.  
405.932(h)(1)(ii), 405.934(d)(1)(ii), 405.936(e)(1)(ii) and 
405.938(d)(1)(ii) to state that following a favorable appeal decision, 
a prior Part B outpatient hospital claim will not be reopened and 
revised (that is, unwound) unless a hospital submits a Part A claim for 
inpatient services. These sections will be revised to read as follows: 
For the purposes of effectuating a favorable [decision type], unless a 
Part A claim is submitted by a hospital, any claims previously 
submitted for outpatient hospital services and payments made for such 
services (including any applicable deductible and coinsurance amounts) 
are not reopened or revised by the MAC, and payment, as applicable, for 
covered SNF services may be made by the MAC to the SNF without regard 
to the hospital claim.
    We are amending Sec. Sec.  405.932(h)(2)(ii), 405.934(d)(2)(ii), 
405.936(e)(2)(ii) and 405.938(d)(2)(ii) and we are adding Sec. Sec.  
405.932(h)(2)(iii), 405.934(d)(2)(iii), 405.936(e)(2)(iii) and 
405.938(d)(2)(iii) to clarify that if a hospital chooses to submit a 
Part A inpatient claim following a favorable appeal decision for any 
eligible party, the hospital must refund any payments collected for the 
outpatient hospital services prior to submitting a Part A inpatient 
claim in order to prevent receipt of duplicate payment, and to clarify 
that a refund of payments collected for the outpatient hospital 
services is required if the favorable or partially favorable appeal 
decision involves a beneficiary who was not enrolled in Medicare Part B 
at the time of hospitalization even if the hospital does not submit a 
Part A inpatient claim for payment. While we do not anticipate 
hospitals will submit Part A claims in situations where they previously 
received Part B payment for an outpatient claim, a refund would be 
required before the submission of a Part A inpatient claim submitted 
for any eligible party, and not limited to situations where a 
beneficiary was not enrolled in Part B at the time of hospitalization.
    Accordingly, these sections are being revised to state that a 
hospital that furnished services to any eligible party (including those 
enrolled in both Medicare Part A and Part B at the time of 
hospitalization) must refund any payments collected for the outpatient 
hospital services prior to submitting a Part A inpatient claim for such 
services, and that the claim must be submitted within 365 calendar days 
of receipt of the notice of a favorable decision. These revisions also 
clarify that if a favorable or partially favorable decision is issued 
to a beneficiary who was not enrolled in Medicare Part B at the time of 
hospitalization, a refund is required for any amounts collected for the 
outpatient hospital services even if a Part A inpatient claim for 
payment is not submitted to the program.
    Finally, we are adding Sec. Sec.  405.932(h)(2)(iii), 
405.934(d)(2)(iii), 405.936(e)(2)(iii) and 405.938(d)(2)(iii) to 
differentiate appeals involving beneficiaries who were enrolled in 
Medicare Part B at the time of hospitalization in order to clarify that 
hospitals must refund any payments collected for the outpatient 
hospital services only if the hospital chooses to submit a Part A 
inpatient claim for such services following a favorable or partially 
favorable decision for these beneficiaries, and the timeframe to submit 
such claims (365 calendar days).
    Comment: Several commenters raised questions about billing for 
services following a favorable or partially favorable appeal decision. 
A commenter questioned how a favorable decision with respect to Part A 
coverage for both the hospital and SNF services would be effectuated 
with respect to the SNF if the SNF had previously submitted and 
received payment for Part B services, and now decides to submit a claim 
for covered Part A services. Commenters also raised questions about 
specific condition codes to be used in billing for services, how Common 
Working File (CWF) edits would be implemented to accommodate these new 
claims, and how these new claims would be identified by the MAC. The 
commenters requested that CMS acknowledge the complexity of billing for 
SNF services furnished prior to FY 2020 and that CMS address how this 
will be resolved in the final rule.
    Response: Following a favorable appeal decision and after issuing a 
refund to the beneficiary for any out of pocket payments made for SNF 
services, if a SNF decides to submit a claim for covered Part A 
services, then in order to avoid duplicate payment, Medicare would 
recover the funds paid to the SNF for the Part B services to the extent 
such Part B services are included in the payment made for Part A 
services. Medicare would then process the Part A claim and make the 
appropriate payment to the SNF for covered services.
    We appreciate the comments about the complexity of this billing 
process and understand the complexity involved not only in billing, but 
also in processing these claims manually. We anticipate that each 
situation will involve subtle differences that will need to be 
addressed on a case-by-case basis. We are currently working to make the 
necessary system changes to accommodate these claims and to create 
billing instructions that will be approved and finalized shortly after 
publication of this final rule. That will give providers some advance 
time to work internally and/or with billing agents to be able to submit 
claims following a favorable appeal. We will be working to implement 
condition codes and remarks codes to be used on claims submitted 
following a favorable decision so those claims may be identified by the 
MAC. We anticipate the process will be similar to the Part B inpatient 
rebilling process (https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/MM8185.pdf) implemented in response to CMS 
Ruling CMS-1455-R and the provisions in the Fiscal Year 2014 Hospital 
Inpatient Prospective Payment System final rule (CMS-1599-F, https://www.govinfo.gov/content/pkg/FR-2013-08-19/pdf/2013-18956.pdf). But we 
are unable to incorporate this operational guidance into this 
rulemaking.
    Finally, we note that we agree with commenters who expressed 
similar concerns about the complexity of this process. As explained 
earlier, we are extending the time period to submit claims in response 
to a favorable or partially favorable decision to 365 calendar days 
from the date of receipt of the appeal decision and MACs will provide 
support, as needed, to providers who wish to submit Part A claims.
    We appreciate the feedback that we received from commenters on the

[[Page 83257]]

procedures for appeals conducted by processing contractors. Based on 
analysis of the public comments, we will be finalizing the proposals 
related to such procedures as proposed except for the addition of 
Sec. Sec.  405.931(i) and 405.932(h)(2)(iii), and the amendments to 
Sec. Sec.  405.932(b)(2)(iii), 405.932(h)(1)(ii) and 405.932(h)(2)(i) 
and (ii), described previously.
5. Conduct of Reconsiderations by Qualified Independent Contractors
    In Sec.  405.934(a), we proposed that the second level of 
retrospective appeals be performed by QICs. As with the first level of 
appeal, we proposed that the second level of retrospective appeal 
generally follow existing procedures for reconsiderations outlined in 
Sec. Sec.  405.960 through 405.978, as appropriate, except as specified 
in the provisions proposed in this rule. Under proposed Sec.  
405.934(a), eligible parties (or their representative) who are 
dissatisfied with a MAC's unfavorable decision in proposed Sec.  
405.932(g)(2) may file a request for reconsideration with the QIC 
within 180 calendar days of receipt of the MAC's notice. The MAC's 
decision would specify the elements required for the request for 
reconsideration, and we proposed that those elements would be the same 
as the existing requirements for a reconsideration set forth in Sec.  
405.964. Requests for reconsideration under Sec.  405.934 that are 
untimely or incomplete would be handled consistent with existing 
procedures for dismissals in Sec.  405.972.
    Consistent with the conduct of reconsiderations under existing 
procedures in Sec.  405.968, the QICs shall review all evidence 
furnished during the first level of appeal and any additional evidence 
submitted with the request for reconsideration. Under proposed Sec.  
405.934(c), the QIC determines if the inpatient admission, and as 
applicable, SNF services, satisfied the relevant criteria for Part A 
coverage at the time the services were furnished, then the QIC issues 
notice of its decision to the eligible party (or their representative).
    We proposed in Sec.  405.934(c)(3) that the QIC mail or otherwise 
transmit notice of its decision within 60 calendar days of receipt of 
the request for reconsideration. We also proposed to apply existing 
procedures in Sec.  405.970 regarding the calculation of decision-
making timeframes, and the provisions regarding the escalation of cases 
for a QIC's failure to meet such timeframes, as appropriate, to these 
new appeals. In proposed Sec.  405.934(c)(4), the notice of a favorable 
decision sent by the QIC to the eligible party (or their 
representative) would include an explanation of the decision and 
information regarding the effect of the decision, as well as other 
information similar to that found in existing reconsideration notices 
under Sec.  405.974.
    In Sec.  405.934(c)(5), when applicable, we proposed that QICs 
would send notice of a favorable reconsideration to the SNF that 
furnished services to the beneficiary in order to inform the SNF of the 
reason for its decision and the effect of the decision. In addition, in 
Sec.  405.934(c)(6), with respect to an appeal filed by a beneficiary 
not enrolled in Medicare Part B at the time of hospitalization, we 
proposed that the QIC would send notice of a favorable decision to the 
hospital to inform the hospital of the reason for its decision and the 
effect of the decision. In addition, we proposed that the QIC would 
send the SNF notice of a partially favorable decision where the 
inpatient admission meets the criteria for Part A coverage, but the SNF 
services do not meet the relevant criteria for Part A coverage (for 
example, if the services are determined not medically reasonable and 
necessary under section 1862(a)(1)(A) of the Act). The notice of a 
partially favorable decision sent to a SNF would inform the SNF of the 
reason the hospital services were determined to meet the relevant 
criteria for Part A coverage, and the reason the SNF services were 
determined not to be covered under Part A. We proposed that the QIC 
also explain that the notice is being sent to the SNF for informational 
purposes only, and that only the eligible party may appeal the decision 
to an ALJ under Sec.  405.936. An eligible party would have the right 
to appeal such a partially favorable decision with respect to the 
coverage of SNF services under proposed Sec.  405.936 in the same 
manner as unfavorable decisions with respect to Part A coverage of the 
hospital services.
    Consistent with the processes following a favorable first level of 
appeal decision, as previously described, in the case of a beneficiary 
who was not enrolled in Medicare Part B at the time of hospitalization, 
we proposed in Sec.  405.934(d)(2)(ii) that following a favorable 
appeal decision and making any required refund for payments received 
for covered services, the hospital may submit a new Part A inpatient 
claim to Medicare in order to determine the appropriate amount of 
benefits, and for Medicare to make payment for inpatient hospital 
services. We also proposed in Sec.  405.934(d)(2)(ii) that the claim 
must be submitted by the hospital within 180 calendar days after the 
hospital receives its notice of favorable reconsideration for the 
eligible party.
    In addition, if a favorable appeal decision includes eligible SNF 
services that are covered, in Sec.  405.934(d)(2)(i), we proposed that 
following a refund of amounts collected from the beneficiary, the SNF 
may then submit a claim (or claims) for such services in order to 
determine the appropriate amount of benefits, and that Medicare would 
make payment for the covered SNF services. We also proposed in Sec.  
405.934(d)(2)(ii) that the SNF submit the claim within 180 calendar 
days after receiving the notice of a favorable appeal decision for the 
eligible party.
    If the QIC determines that the hospitalization did not meet 
applicable Part A inpatient coverage requirements, we proposed in Sec.  
405.934(c)(2) that the QIC would send notice of its unfavorable 
decision to the eligible party (or their representative). If the QIC 
determines that the hospital admission meets applicable Part A 
inpatient coverage requirements, but the SNF services eligible for the 
appeal do not meet applicable coverage requirements, we also proposed 
in Sec.  405.934(c)(2) that the QIC would send notice of its partially 
favorable decision to the eligible party (or their representative). The 
notice of an unfavorable or partially favorable decision would inform 
the eligible party (or their representative) of the right to request a 
hearing before an ALJ (or review by an attorney adjudicator) under 
proposed Sec.  405.936 and would provide detailed information about the 
requirements for filing the request and where the request must be 
filed.
    We did not receive any comments on the proposed policies related to 
QIC reconsiderations. We are finalizing our policies as proposed with 
the exception of the following modifications, described in section 
III.A.4. of this final rule:
    <bullet> Amending Sec.  405.934(d)(1)(ii) to clarify that existing 
outpatient claims will not be unwound unless the hospital files a Part 
A inpatient claim following a favorable appeal decision.
    <bullet> Amending Sec. Sec.  405.934(d)(2)(i) and (ii) to extend 
the time for providers to file claims following a favorable decision to 
365 calendar days.
    <bullet> Adding Sec.  405.934(d)(2)(iii) to clarify that hospitals 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services following a favorable or partially favorable appeal 
decision for beneficiaries who were enrolled in Medicare Part B at the 
time of hospitalization.

[[Page 83258]]

6. Conduct of Hearings Before Administrative Law Judges and Decisions 
by Administrative Law Judges or Attorney Adjudicators
    Currently, the third level of claims appeals are performed by ALJs 
and attorney adjudicators within the HHS Office of Medicare Hearings 
and Appeals (OMHA). As with the first two levels of appeal, we proposed 
in Sec.  405.936(b) that the third level of retrospective appeal 
generally follow existing procedures for claims appeals in Sec. Sec.  
405.1000 through 405.1063, as appropriate, except as specified in the 
provisions proposed in this rule. Under proposed Sec.  405.936(a), 
eligible parties (or their representative) who are dissatisfied with 
either a QIC's dismissal of a request for reconsideration, or an 
unfavorable reconsideration in proposed Sec.  405.934(c)(2), may file a 
request in writing with the OMHA within 60 calendar days of receipt of 
the QIC's notice. The reconsideration notice would specify the elements 
required for the request for hearing, and we proposed that these 
elements would mirror existing requirements for appeal requests in 
Sec.  405.1014(a)(1). We also proposed that untimely or incomplete 
requests would be handled under existing procedures for dismissals in 
Sec.  405.1014(e) and Sec.  405.1052.
    As we previously noted, in some respects, the nature of the appeals 
required by the court order dictate a new implementation approach that 
cannot utilize existing procedures. For example, ordinarily under 
current claims appeals procedures, adjudicators review claims that 
contain denied items or services to determine whether items and/or 
services billed on a Medicare claim are covered and whether payment may 
be made. In addition, under Sec.  405.1006, billed charges on claims 
submitted to Medicare serve as the basis for determining the amount in 
controversy required for an appeal at the third level of appeal and for 
judicial review in federal district court. However, under the proposed 
process, with respect to the relevant hospital stay, there is no 
inpatient hospital claim and no denial of billed services.
    For retrospective appeals, we proposed to incorporate the existing 
amount in controversy requirement required for a hearing before an ALJ 
or judicial review in federal court consistent with section 
1869(b)(1)(E) of the Act and Sec.  405.1006.\14\ However, with respect 
to the methodology for calculating the amount in controversy, we cannot 
utilize the existing method for claims appeals in Sec.  405.1006(d)(1) 
to calculate such amount. The procedures in existing regulations 
require the use of actual charges from the disputed claim(s) billed to 
Medicare, and in the scenario giving rise to appeal rights in the court 
order, no Part A inpatient claim will have been filed. Without a Part A 
inpatient claim, there are no billed charges for the denied Part A 
coverage to serve as the basis for calculating the amount in 
controversy. Other methods in Sec.  405.1006(d) for calculating the 
amount in controversy are designed for appeals that are factually 
different than these new appeals, and thus, we did not believe it would 
be appropriate to adopt other existing calculation methods to apply 
them here.
---------------------------------------------------------------------------

    \14\ For calendar year 2025, the minimum amount in controversy 
for a hearing at the OMHA level is $190, and for judicial review the 
minimum amount in controversy is $1,900. These amounts are 
calculated annually in accordance with section1869(b)(1)(E) of the 
Act and notice of the updated minimum amounts for each calendar year 
is published in the Federal Register and is available on https://www.cms.gov/medicare/appeals-grievances/fee-for-service/third-level-appeal.
---------------------------------------------------------------------------

    In the case of a beneficiary who was enrolled in Medicare Part B at 
the time of hospitalization, we believe it would be appropriate to 
utilize the billed charges on a claim filed by the hospital for Part B 
outpatient hospital services as the basis for calculating the amount in 
controversy for these new appeals. Since we do not have a Part A 
inpatient claim for the hospital services furnished to the beneficiary, 
we do not have available to us the costs of the denied Part A services 
that are at issue in the appeal to serve as the basis for the amount in 
controversy. While the billed charges for outpatient services will 
differ from those that would have been billed on an inpatient claim, we 
believed it was reasonable to use the billed charges on the approved 
outpatient claim for the purposes of determining the amount in 
controversy, and in Sec.  405.936(c)(2) we proposed including those 
charges in calculating the amount in controversy for a hearing before 
an ALJ and for judicial review in federal district court. We emphasized 
that, as explained in section III.A.4. of this rule, for beneficiaries 
enrolled in Part B at the time of hospitalization, we will not make an 
adjustment of payment related to the previously submitted Part B 
outpatient hospital claim (including any deductible and coinsurance 
amounts) when effectuating a favorable appeal decision. Nevertheless, 
we proposed that the billed charges for the outpatient hospital 
services would be included in determining whether the amount in 
controversy requirement is met because we do not have available to us 
the costs of the denied Part A hospital services at issue in the appeal 
and because we believe that for purposes of determining the amount in 
controversy it is appropriate to attribute a dollar amount to the 
hospital services at issue, even if ultimately we would not adjust the 
payment for the hospital services.
    For any billed SNF services that are included in the appeal, the 
billed charges on a claim submitted by the SNF would be utilized in 
calculating the amount in controversy. However, in cases where a claim 
was not submitted by the SNF because the services were not covered, the 
amount the beneficiary was charged for SNF services, as reflected in an 
itemized statement received by the beneficiary or evidence of payments 
made by the beneficiary to the SNF, would be used in determining the 
amount in controversy.
    Thus, we proposed in Sec.  405.936(c)(2) that the billed charges on 
the Part B outpatient claim and the billed charges for any SNF claim at 
issue in the appeal, or the billed charges paid by the beneficiary in 
the absence of a claim, would serve as the amount in controversy for 
hearings before an ALJ and for judicial review in federal district 
court. Furthermore, as the cost sharing for a Part A inpatient claim 
will be different than the cost sharing for the Part B outpatient 
claim, we did not reduce the amount in controversy by any applicable 
cost sharing, or other payments made for the Part B outpatient hospital 
claim as we do for existing calculation methods. Nor did we factor in 
any cost sharing or payments made related to the SNF claim, as 
applicable, to reduce the amount in controversy.
    For beneficiaries who are eligible parties because they were not 
enrolled in Medicare Part B at the time of their hospitalization, in 
most situations, we did not believe hospitals would have submitted a 
claim to the program for Part B outpatient services. Therefore, for 
beneficiaries who were not enrolled in Part B at the time of 
hospitalization and did not have a claim submitted to Medicare on their 
behalf for hospital outpatient services, we proposed in Sec.  
405.936(c)(3) to calculate the amount in controversy by using the 
hospital's billed charges to the beneficiary for such outpatient 
services. We believed the hospital's charges to the beneficiary, as 
reflected in an itemized statement received by the beneficiary, or 
evidence of payments made to the hospital, were a reasonable estimation 
of the financial impact of the denial of Part A coverage to the 
beneficiary and the amount at issue in the appeal. In addition, the

[[Page 83259]]

billed charges for SNF services, if any, paid by the beneficiary would 
also be used in computing the amount in controversy for appeals 
involving beneficiaries not enrolled in Medicare Part B at the time of 
hospitalization.
    Consistent with the conduct of appeals before ALJs and attorney 
adjudicators under existing procedures in Sec. Sec.  405.1028 through 
405.1030, we proposed that ALJs and attorney adjudicators review all 
evidence furnished during the first two levels of appeal and any 
additional evidence submitted by the beneficiary with the request for 
hearing or request for review of a dismissal. Under proposed Sec.  
405.936(d), the ALJ or attorney adjudicator determines if the inpatient 
admission, and as applicable, SNF services, satisfied the relevant 
criteria for Part A coverage at the time the services were furnished, 
and then issues notice of the decision to the eligible party (or their 
representative). In proposed Sec.  405.936(d)(2), we explained that the 
notice of an unfavorable decision or partially favorable decision (that 
is, a decision where Part A coverage is approved for the hospital 
admission, but Part A coverage is not approved for applicable SNF 
services that are at issue in the appeal) would be sent to the eligible 
party (or their representative). In proposed Sec.  405.936(d)(3), the 
notice of a favorable decision sent to the eligible party (or their 
representative) would include an explanation of the decision and 
information regarding the effect of the decision, as well as other 
information similar to that found in existing notices under Sec.  
405.1046.
    In Sec.  405.936(d)(4), when applicable, we proposed that the ALJ 
or attorney adjudicator would send notice of a favorable 
reconsideration to the SNF that furnished services to the beneficiary 
in order to inform the SNF of the reason for the decision and the 
effect of the decision. In addition, in Sec.  405.936(d)(5), with 
respect to an appeal filed by a beneficiary not enrolled in Medicare 
Part B at the time of hospitalization, we proposed that the ALJ or 
attorney adjudicator would send notice of a favorable decision to the 
hospital to inform the hospital of the reason for the decision and the 
effect of the decision. In the case of a partially favorable decision, 
we proposed in Sec.  405.936(d)(2) that notice would be sent to the SNF 
as an informational copy, and in proposed Sec.  405.936(d)(6) we 
specified the elements included in the notice sent to the SNF. The 
notice of a partially favorable decision sent to a SNF would inform the 
SNF of the reason the hospital services were determined to meet the 
relevant criteria for Part A coverage, and the reason the SNF services 
were determined not to be covered under Part A. We proposed that the 
ALJ or attorney adjudicator also explain that the notice is being sent 
to the SNF for informational purposes only, and that only the eligible 
party may appeal the decision to the Council under Sec.  405.938.
    In Sec.  405.936(d)(7), we proposed to utilize the existing 
procedures in Sec.  405.1016 regarding the calculation of timeframes 
within which ALJs and attorney adjudicators must issue decisions, 
including applicable waivers and extensions to the adjudication 
timeframe, and the option for an eligible party (or their 
representative) to escalate an appeal for failure to issue a decision 
in the applicable timeframe.
    Consistent with the processes at the first two levels of appeal, as 
previously described, in the case of a beneficiary who was not enrolled 
in Medicare Part B at the time of hospitalization, we proposed in Sec.  
405.936(e)(2)(ii) that following a favorable appeal decision and making 
any required refund for payments received for covered services, the 
hospital may submit a new Part A inpatient claim to Medicare in order 
to determine the appropriate amount of benefits, and for Medicare to 
make payment for inpatient hospital services. We also proposed in Sec.  
405.936(e)(2)(ii) that the claim must be submitted by the hospital 
within 180 calendar days after the hospital receives its notice of 
favorable decision for the eligible party.
    In addition, if a favorable appeal decision includes eligible SNF 
services that are covered, in Sec.  405.936(e)(2)(i), we proposed that 
following a refund of amounts collected from the beneficiary, the SNF 
may then submit a claim (or claims) for such services in order to 
determine the appropriate amount of benefits, and for Medicare to make 
payment for the covered SNF services. We also proposed in Sec.  
405.936(e)(2)(i) that the SNF submit the claim within 180 calendar days 
after receiving the notice of a favorable appeal decision for the 
eligible party.
    If the ALJ or attorney adjudicator determines that the hospital 
admission did not meet applicable Part A inpatient coverage 
requirements, we proposed in Sec.  405.936(d)(2) and (d)(3)(vii) the 
ALJ or attorney adjudicator would send notice of the unfavorable 
decision to the eligible party (or their representative). If the ALJ or 
attorney adjudicator determines that the hospital admission meets 
applicable Part A inpatient coverage requirements, but the SNF services 
eligible for the appeal do not meet applicable coverage requirements, 
we also proposed in Sec.  405.936(d)(2) that the ALJ or attorney 
adjudicator would send notice of its partially favorable decision to 
the eligible party (or their representative). The notice of an 
unfavorable or partially favorable decision would inform the eligible 
party (or their representative) of the right to request review by the 
Council under proposed Sec.  405.938 and would provide detailed 
information about the requirements for filing the request and where the 
request must be filed.
    In proposed Sec.  405.936(e) and (f), we explain the effect of an 
ALJ or attorney adjudicator decision as binding on the eligible party 
unless it is further appealed or reopened. The reopening of an ALJ or 
attorney adjudicator decision would be processed under existing 
procedures in Sec.  405.980(d) and (e). The effect of an ALJ or 
attorney adjudicator decision is consistent with the effect of 
decisions at other levels in the appeals process, as previously 
described. We proposed that an eligible party (or their representative) 
who is dissatisfied with an unfavorable decision by an ALJ or attorney 
adjudicator may request review by the Council under proposed Sec.  
405.938(a), and the ALJ or attorney adjudicator decision notice would 
provide detailed information about the process for filing such a 
request.
    We did not receive any comments on the proposed policies related to 
ALJ hearings and decisions by ALJs or Attorney Adjudicators. We are 
finalizing our policies as proposed with the exception of the following 
modifications, described in section III.A.4. of this final rule:
    <bullet> Amending Sec.  405.936(e)(1)(ii) to clarify that existing 
outpatient claims will not be unwound unless the hospital files a Part 
A inpatient claim following a favorable appeal decision.
    <bullet> Amending Sec.  405.936(e)(2)(i) and (ii) to extend the 
time for providers to file claims following a favorable decision to 365 
calendar days.
    <bullet> Adding Sec.  405.936(e)(2)(iii) to clarify that hospitals 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services following a favorable or partially favorable appeal 
decision for beneficiaries who were enrolled in Medicare Part B at the 
time of hospitalization.
7. Conduct of Review by the Medicare Appeals Council
    Under Sec.  405.938, we proposed that retrospective reviews at the 
fourth level of appeal would be conducted by the Council and would 
generally follow existing procedures for claims appeals

[[Page 83260]]

in Sec. Sec.  405.1100 through 405.1130, except as specified in the 
provisions proposed in this rule. Under proposed Sec.  405.938(a), 
eligible parties (or their representative) who are dissatisfied with 
either a dismissal of a request for hearing by an ALJ or attorney 
adjudicator, or an unfavorable ALJ or attorney adjudicator decision in 
proposed Sec.  405.936(d)(2) may file a request in writing with the 
Council within 60 calendar days of receipt of the notice from the ALJ 
or attorney adjudicator. The request must include the elements 
specified in the notice issued by the ALJ or attorney adjudicator, and 
we proposed to use the existing requirements for requests for Council 
review in Sec.  405.1112. We proposed that untimely or incomplete 
requests would be handled under existing procedures in Sec. Sec.  
405.1100 through 405.1116.
    We proposed that the Council would review appeal requests and 
requests for review of dismissal actions under existing procedures in 
Sec. Sec.  405.1100 through 405.1132, as applicable. Under proposed 
Sec.  405.938(c)(1), the Council makes a decision or remands the case 
to an ALJ or attorney adjudicator. We proposed in Sec.  405.938(c)(2) 
that the Council may adopt, modify, or reverse the decision of an ALJ 
or attorney adjudicator, consistent with existing Council procedures. 
In Sec.  405.938(c)(3), we proposed the Council would send notice of 
its decision, or its remand to an ALJ or attorney adjudicator, to the 
eligible party (or their representative), and we proposed that a 
decision would contain information regarding the effect of a favorable 
decision. In the case of an unfavorable or partially favorable 
decision, we proposed that the Council include information about filing 
a request for judicial review under existing procedures in 405.1136. We 
also explained in proposed Sec.  405.938(c)(3) that a partially 
favorable decision issued by the Council refers to a determination that 
the inpatient admission satisfied the relevant criteria for Part A 
coverage, but the SNF services did not satisfy the relevant criteria 
for Part A coverage. Notice of a partially favorable decision is sent 
to the eligible party (or their representative), and to the SNF that 
furnished services under appeal, but for informational purposes only.
    In addition, we proposed in Sec.  405.938(c)(4), when applicable, 
the Council would send notice of a decision favorable to an eligible 
party to the hospital and the SNF that furnished services. The notice 
would explain the effect of the decision as specified in proposed Sec.  
405.938(d), including the provider's obligation to refund payments 
collected for services determined to be covered following the appeal. 
The notice would also explain, as applicable, the process for a SNF or 
a hospital to submit a claim for the covered services to determine the 
amount of benefits due following the refund of payments previously 
collected.
    In Sec.  405.938(c)(5), we proposed to utilize the existing 
procedures in Sec.  405.1100 regarding the calculation of timeframes 
within which the Council must issue decisions, including applicable 
waivers and extensions to the adjudication timeframe,\15\ and the 
option for an eligible party (or their representative) to escalate an 
appeal for failure to issue a decision in the applicable timeframe.
---------------------------------------------------------------------------

    \15\ For example, under Sec.  405.1106(a), if a party submits a 
timely filed request for Council review with an entity other than 
the entity specified in the notice of the ALJ's or attorney 
adjudicator's action, the Council's adjudication period to conduct a 
review begins on the date the request for review is received by the 
entity specified in the notice of the ALJ's or attorney 
adjudicator's action. In other words, if an ALJ decision specifies 
that a party must submit a request for Council review with the 
Council, and the party mistakenly files their request with, for 
example, OMHA, then the Council's adjudication time period does not 
begin until the Council receives the request for review from OMHA.
---------------------------------------------------------------------------

    In proposed Sec.  405.938(e) and (f), we explained that a Council 
decision is considered final and binding on the eligible party unless 
it is reopened and revised, or in the case of an unfavorable decision, 
a Federal district court issues a decision modifying the Council 
decision. The reopening of a Council decision would be processed under 
existing procedures in Sec.  405.980(d) and (e). The effect of a 
favorable Council decision is consistent with the effect of decisions 
at other levels in the appeals process, as previously described. We 
proposed in Sec.  405.938(e)(1) that an eligible party (or their 
representative) who meets the requirements to escalate a case under 
Sec.  405.1132 or is dissatisfied with an unfavorable decision by the 
Council, may request judicial review consistent with existing 
procedures in Sec. Sec.  405.1132 through 405.1136. Based on its 
existing procedures, the Council's decision notice would provide 
detailed information about the process for filing such a request.
    We did not receive any comments on the proposed policies related to 
Appeals Council review. We are finalizing our policies as proposed with 
the exception of the following modifications, described in section 
III.A.4. of this final rule:
    <bullet> Amending Sec.  405.938(d)(1)(ii) to clarify that existing 
outpatient claims will not be unwound unless the hospital files a Part 
A inpatient claim following a favorable appeal decision.
    <bullet> Amending Sec.  405.938(d)(2)(i) and (ii) to extend the 
time for providers to file claims following a favorable decision to 365 
calendar days.
    <bullet> Adding Sec.  405.938(d)(2)(iii) to clarify that hospitals 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services following a favorable or partially favorable appeal 
decision for beneficiaries who were enrolled in Medicare Part B at the 
time of hospitalization.
8. Judicial Review
    We proposed in Sec.  405.938(f)(1) that eligible parties 
dissatisfied with a final decision of the Council whose claims meet the 
amount in controversy requirement in proposed Sec.  405.936(c) may 
request judicial review in Federal district court under the existing 
procedures in Sec.  405.1136. In addition, under proposed Sec.  
405.938(f)(2), an eligible party (or their representative) who 
satisfies the amount in controversy requirement in proposed Sec.  
405.936(c) and is entitled to escalate a case from the Council to 
Federal district court upon satisfying the criteria set forth in Sec.  
405.1132, may request judicial review under the existing procedures in 
Sec.  405.1136.
    We did not receive any comments on the proposed policies related to 
judicial review. We are finalizing our policies as proposed.
    We appreciate the support and feedback we have received from the 
commenters on our proposals related to the retrospective appeals 
process. After review and consideration of all comments, we are 
finalizing the regulations for the retrospective appeal procedures as 
proposed with the following modifications:
    <bullet> We are adding Sec.  405.931(i) to clarify that the 
coverage decision for a retrospective Part A patient status appeal is 
conclusive for any pending claim appeal.
    <bullet> At Sec.  405.932(b)(2)(iii) we are clarifying that a 
family member may include individuals who are not biologically related 
to the beneficiary (solely for the purpose of determining whether out 
of pocket payments were made for SNF services, making those services 
eligible for an appeal).
    <bullet> At Sec.  405.932(c)(2) we are extending the timeframe for 
providers to respond to a request for medical records to aid in 
establishing a beneficiary's eligibility for an appeal from 60 calendar 
days to 120 calendar days.

[[Page 83261]]

    <bullet> At Sec.  405.932(d)(3)(ii) we are requiring that the 
eligibility contractor's notice of denial of eligibility will also 
include an explanation of the information needed to cure the denial.
    <bullet> At Sec. Sec.  405.932(h)(1)(ii), 405.932(h)(2)(ii), 
405.934(d)(1)(ii), 405.934(d)(2)(ii), 405.936(e)(1)(ii), 
405.936(e)(2)(ii), 405.938(d)(1)(ii) and 405.938(d)(2)(ii) we are 
revising the regulation text to clarify that in the case of a favorable 
appeal decision, a hospital who chooses to submit a Part A inpatient 
claim must refund any payments received for the Part B outpatient claim 
before submitting the Part A inpatient claim. If a Part A claim is 
submitted, the previous Part B outpatient claim will be reopened and 
canceled, and any Medicare payments will be recouped to prevent 
duplicate payment. In addition, we are revising the regulation text to 
clarify that in the case of a favorable decision for a beneficiary who 
was not enrolled in Medicare Part B at the time of hospitalization, the 
hospital must refund any payments collected for the outpatient services 
even if the hospital chooses not to submit a Part A claim for payment 
to the program.
    <bullet> At Sec. Sec.  405.932(h)(2)(i) and (ii), 405.934(d)(2)(i) 
and (ii), 405.936(e)(2)(i) and (ii) and 405.938(d)(2)(i) and (ii) we 
are amending the content of decision letters to specify that a 
provider's claim filing timeframe will be 365 calendar days following a 
favorable or partially favorable decision under the retrospective 
appeals process.
    <bullet> We are adding Sec. Sec.  405.932(h)(2)(iii), 
405.934(d)(2)(iii), 405.936(e)(2)(iii) and 405.938(d)(2)(iii) to 
clarify the effect of favorable appeals involving beneficiaries who 
were enrolled in Medicare Part B at the time of hospitalization to 
explain that hospitals must refund any payments collected for the 
outpatient hospital services only if the hospital chooses to submit a 
Part A inpatient claim for such services.
    In addition, in drafting this final regulation we identified 
several erroneous cross-references in the proposed regulations text 
that we will be correcting. Specifically--
    <bullet> In proposed Sec.  405.931(a)(1), the reference to Sec.  
405.931(b)(1) is revised to read Sec.  405.931(b);
    <bullet> In proposed Sec.  405.932(c)(2), the reference to Sec.  
405.931(b)(1) is revised to read Sec.  405.931(b);
    <bullet> In proposed Sec.  405.932(d)(2)(ii), the reference to 
Sec.  405.932(e) is revised to read Sec.  405.932(f); and
    <bullet> In proposed Sec.  405.932(f)(3), the reference to 
paragraph (e)(1) is revised to read (f)(1).
    After publication of this final rule regarding the procedures for 
these new appeals, we intend to specify the implementation date for 
filing appeal requests for retrospective and prospective appeals. When 
the prospective process is fully implemented, eligible beneficiaries 
who are hospitalized and receive notice of their appeal rights and wish 
to pursue an appeal will be expected to utilize the prospective 
procedures (proposed Sec. Sec.  405.1210 through 405.1212). We will 
announce the implementation dates on cms.gov and/or Medicare.gov.

B. Prospective Appeal Rights

1. Overview
    This final rule also establishes and implements a new notice 
requirement and an expedited appeals process, on a prospective basis, 
for certain beneficiaries whose status was changed from inpatient to 
outpatient receiving observation services while they were still in the 
hospital. The expedited appeals process parallels the process in effect 
for inpatient hospital discharge appeals set forth at Sec. Sec.  
405.1205 and 405.1206, with some differences. In its order dated March 
26, 2020, the court indicated that HHS should use a process for the 
expedited appeals that is ``substantially similar'' to the existing 
process for expedited hospital discharge appeals at Sec. Sec.  405.1205 
through 405.1208; under that hospital discharge appeals process, 
beneficiaries receive a notice of their rights and may request an 
expedited determination by a Quality Improvement Organization (QIO) 
about the hospital's decision to discharge the beneficiary. While the 
processes are largely similar, a notable difference is that the issue 
under appeal in this process relates to the change of status from an 
inpatient to an outpatient receiving observation services. This change 
of status may affect cost sharing for the hospital stay as well as 
whether any post hospital care in a skilled nursing facility would be 
covered by Medicare.
    CMS contracts with QIOs, pursuant to Title XI, Part B of the Act 
and section 1862(g) of the Act, to perform certain statutorily required 
functions and contractual quality improvement and other activities for 
the purposes of improving the quality of care furnished to Medicare 
beneficiaries with respect to Medicare covered items and services. The 
QIO Program is part of the HHS' national quality strategy for providing 
quality and patient centered care to Medicare beneficiaries. Section 
1154(a)(1) of the Act establishes certain review functions of QIOs, 
including that QIOs review the services furnished to Medicare 
beneficiaries by physicians, other healthcare practitioners, and 
institutional and non-institutional providers of services (as defined 
in section 1861(u) of the Act and including hospitals). In addition, 
under section 1154(a)(18) of the Act, QIOs must also provide, subject 
to the terms of their contract with CMS, such other activities as the 
Secretary determines may be necessary for the purposes of improving the 
quality of care furnished to individuals with respect to items and 
services for which payment may be made under Medicare. This flexibility 
allows CMS to establish and further define the types of reviews 
performed by the QIOs in order to meet evolving needs and issues 
pertaining to healthcare delivered under the Medicare program.
    As discussed in sections II. and III.A. of this rule, a recent 
court decision requires the Secretary to implement an appeal process 
for certain Medicare beneficiaries that is substantially similar to the 
existing hospital discharge appeals conducted by QIOs under Sec. Sec.  
405.1205 through 405.1208. See Alexander v. Azar, 613 F. Supp. 3d 559 
(D. Conn. 2020)), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d 
Cir. 2022). These new review and appeals activities are within the 
scope of the Secretary's authority under section 1154(a)(18) of the Act 
to contract with QIOs to perform additional activities that are not 
already specified in section 1154 of the Act or other provisions. 
Section 1155 of the Act governs appeals of QIO determinations that are 
made under Title XI, subpart B, which includes section 1154 of the Act. 
Therefore, the proposed new QIO determinations, performed under section 
1154(a)(18) of the Act, are subject to the appeal process specified in 
section 1155 of the Act.\16\ Based on the QIOs' expertise and 
longstanding performance of similar functions, CMS has determined that 
the QIOs are the most appropriate entity to perform beneficiary-
initiated appeals regarding hospital reclassifications of inpatients to 
outpatients receiving observation

[[Page 83262]]

services proposed in Sec. Sec.  405.1211 through 405.1212.
---------------------------------------------------------------------------

    \16\ Under section 1155 of the Act, a beneficiary who is 
entitled to benefits under title XVIII (that is, a Medicare 
beneficiary) and who is dissatisfied with a determination made by a 
QIO in conducting its review responsibilities shall be entitled to a 
reconsideration of such determination by the reviewing organization 
(that is, the QIO). For the purposes of these appeals, section 1155 
of the Act authorizes the QIO to conduct a reconsideration of its 
expedited determination regarding the hospital reclassification 
under Sec.  405.1211 to determine if an eligible beneficiary is 
entitled to coverage under Part A of the program.
---------------------------------------------------------------------------

    We proposed an expedited appeals process that would be available to 
beneficiaries \17\ who, after formally being admitted as an inpatient, 
have subsequently been reclassified by the hospital as an outpatient 
while the beneficiary is still in the hospital, received observation 
services following the reclassification, and met one of the following 
two criteria:
---------------------------------------------------------------------------

    \17\ Since the court order specifically requires the provision 
of appeal rights to a defined set of class members, and that 
definition does not include the provider of services (that is, 
hospitals and SNFs), we are limiting party status for these new 
appeals to the defined class members. We note that this limitation 
currently exists for hospital discharge appeals procedures in 
Sec. Sec.  405.1205 and 405.1206, where a provider of services does 
not have party status.
---------------------------------------------------------------------------

    <bullet> Their stay in the hospital was at least 3 days but they 
were an inpatient for fewer than 3 days.
    <bullet> They did not have Medicare Part B coverage (these eligible 
beneficiaries would not need to remain in the hospital for at least 3 
days to be eligible for an appeal).
    We proposed in new Sec.  405.1210(a)(3) the criteria that must be 
met for a beneficiary to be eligible for the new prospective appeal 
rights. We proposed to require hospitals to deliver, as soon as 
possible after certain conditions are met and prior to release from the 
hospital, a new standardized beneficiary notice, informing eligible 
beneficiaries of the change in their status, the resulting effect on 
Medicare coverage of their stay, and their appeal rights if they wish 
to challenge that change. This new notice will be called the Medicare 
Change of Status Notice (MCSN).\18\ This new notice follows the format 
and structure of the Important Message from Medicare (IM), which is the 
notice hospitals are required, by Sec.  405.1205, to provide to 
beneficiaries to inform them of their right to appeal an inpatient 
hospital discharge. See section IV.D. of this final rule for details on 
how to obtain a copy of the MCSN.\19\
---------------------------------------------------------------------------

    \18\ OMB control number 0938-1467.
    \19\ Section IV.D. of this final rule states that to obtain 
copies of the supporting statement and any related forms, 
individuals should visit the CMS website at https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing.
---------------------------------------------------------------------------

    We considered alternatives to creating a new notice for this 
process. One consideration was standardizing and adding appeals 
information to the required written Condition Code 44 notification used 
by hospitals to inform beneficiaries when their status is changed from 
inpatient to outpatient after review by a hospital utilization review 
committee and the entire episode will be billed as outpatient. However, 
those eligible for this new process would be a small subset of the 
population receiving the existing Condition Code 44 notification. 
Specifically, individuals would not only require a change of status 
from inpatient to outpatient, they must also meet the criteria set 
forth in proposed Sec.  405.1210 (a)(2) and (3) to pursue an appeal 
regarding a change in status. The vast majority of beneficiaries 
receiving the existing notification of inpatient to outpatient change 
will not be eligible for this new appeals process and would likely find 
the inclusion of information about an appeals process for which they 
are not eligible confusing. We also considered adding appeals 
information to the Medicare Outpatient Observation Notice (MOON). The 
MOON (42 CFR 489.20(y)) is used to inform beneficiaries who receive 
observation services for a certain amount of time that they are not 
hospital inpatients, but rather outpatients receiving observation 
services. However, like the change in status notice mentioned earlier, 
the MOON would be overbroad and the vast majority of beneficiaries 
receiving it would not be eligible for an appeal in this new process. 
Further, per section 1866(a)(1)(Y) of the Act, the MOON is only 
required for beneficiaries who have been outpatients receiving 
observation services for more than 24 hours, yet we proposed that, for 
prospective appeals, beneficiaries reclassified from inpatients to 
outpatients receiving observation services be eligible for an appeal if 
any amount of time is spent in observation following the status change 
(in this respect, we are expanding the population of beneficiaries 
eligible for an appeal beyond the class as defined by the court, and 
not limiting eligibility to those beneficiaries who have received a 
MOON). Because the MOON is not required for observation stays shorter 
than 24 hours, using the MOON would likely result in not all eligible 
beneficiaries receiving notification of their appeal rights under the 
proposed new process. We concluded that a targeted appeals notice, 
delivered only to those beneficiaries eligible for this specific 
appeal, would be the most effective and efficient means of informing 
eligible beneficiaries of their appeal rights.
    The proposed MCSN contains a similar layout and language to the IM 
and includes information on the change in coverage, a description of 
appeal rights and how to appeal, and the implications for SNF coverage 
following the hospital stay. We believed that by proposing the delivery 
of this largely generic notice, the notice delivery burden on hospitals 
would be as minimal as possible, without any adverse effect on patient 
rights.
    We reviewed the notice delivery procedures for the IM notice 
related to inpatient hospital discharges and have mirrored that process 
in this new process, wherever possible. In proposing this approach, our 
goal was to design notice procedures that balance a beneficiary's need 
to be informed about his or her appeal rights in an appropriate and 
timely manner, without imposing unnecessary burdens on hospitals.
    We proposed to require hospitals to deliver the notice to eligible 
beneficiaries as soon as possible after a beneficiary is eligible for 
this process per Sec.  405.1210(a)(2) and (3), but no later than 4 
hours prior to release from the hospital. For beneficiaries with Part 
B, we proposed that the notice must be delivered as soon as possible 
after the hospital reclassifies the beneficiary from inpatient to 
outpatient receiving observation services and the third day in the 
hospital is reached. Beneficiaries will likely not reach this required 
third day in the hospital until very close to release from the 
hospital. This is because these will be beneficiaries that hospitals 
have determined do not need an inpatient level of care and thus, the 
overall length of the hospital stay is not expected to exceed a few 
days. For beneficiaries without Medicare Part B coverage, we proposed 
that hospitals must deliver the notice as soon as possible after the 
change in status from inpatient to outpatient receiving observation 
services because a 3-day hospital stay is not required for these 
beneficiaries to be part of the class specified in the court order.
    We believed the approach we proposed would not be overly burdensome 
for hospitals as the proposed notice is standardized and requires very 
little customization by the hospital before delivery. The proposed 
notice was modeled after the existing hospital discharge appeals notice 
(IM), and like that notice, does not require extensive time for 
hospitals to prepare and deliver to beneficiaries. We believed that the 
number of beneficiaries that are eligible for this proposed appeal 
process would be significantly lower than the volume that receive the 
hospital discharge appeals notification. (Please see section IV.B. for 
more information on assumptions and estimates related to this proposed 
appeals process.) Additionally, the delivery of the MCSN notice to the 
beneficiary would mimic the process already in place for hospitals 
delivering

[[Page 83263]]

the IM, so implementing this process should not be overly difficult or 
burdensome.
    One notable difference, as compared to that for inpatient hospital 
discharge appeals, is that under this new appeals process beneficiaries 
will not have financial liability protection for hospital services 
received while their appeal is adjudicated. Section 
1869(c)(3)(C)(iii)(III) of the Act, which provides beneficiaries with 
coverage during the inpatient hospital discharge appeal, only applies 
to beneficiaries being discharged from a Medicare covered inpatient 
hospital stay, and thus would not be applicable to beneficiaries 
pursuing an appeal regarding the change in status from inpatient to 
outpatient receiving observation services.
    We proposed that the QIOs perform these reviews. The nature of 
these reviews is consistent with the mission and functions of the QIO 
Program. QIOs have contracts with CMS under section 1862(g) of the Act 
and Part B of Title XI of the Act to perform certain statutorily 
required reviews of the services furnished to Medicare beneficiaries 
and to implement quality improvement initiatives involving Medicare 
beneficiaries, providers, and their communities. (See 42 CFR parts 475 
through 480.) Historically, QIOs have performed expedited discharge 
reviews for beneficiaries appealing inpatient discharges (42 CFR 
405.1205 through 405.1208, 422.620 and 422.622) as well as similar 
expedited reviews for termination of provider services in non-hospital 
settings (42 CFR 405.1202 through 405.1204, 422.624, and 422.626). 
Currently, these reviews, as well as other case reviews related to the 
quality of care received by Medicare beneficiaries, compliance with 
certain conditions of coverage for inpatient services, and reviews of 
the validity of certain diagnostic and procedural information supplied 
by hospitals among other types of care reviews, are performed by the 
Beneficiary and Family Centered Care QIOs (BFCC-QIOs), while quality 
improvement initiatives are performed by a different type of QIO. We 
stated that if the proposed rule was finalized, we would require the 
BFCC-QIOs to perform this new type of appeal because their scope of 
knowledge, expertise and experience with beneficiary appeals and 
Medicare coverage ensures an adequate and reliable review.
    Finally, the court order only requires that an expedited appeals 
process be made available to class members ``who have stayed, or will 
have stayed, at the hospital for 3 or more consecutive days.'' For 
class members who lacked Part B and did not stay in the hospital for 3 
or more consecutive days, it would appear that a non-expedited appeals 
process might be sufficient. Nonetheless, we proposed to use the 
expedited process for all prospective appeals, with minor differences 
depending on whether the expedited appeal request is made timely. In 
other words, an eligible beneficiary may request the QIO review at or 
around the time of receiving the notice in a hospital, or after a claim 
is filed, and in both instances, beneficiaries will be afforded a 
review and determination by the QIO. An appeal filed outside of the 
expedited timeframes may be referred to herein as a standard or 
untimely appeal.
    Comment: The vast majority of commenters supported the proposed 
prospective appeals process that would provide eligible beneficiaries 
with the right to pursue an appeal regarding a hospital 
reclassification from inpatient to outpatient receiving observation 
services. Many commenters stated the policy would protect beneficiary 
access to medically necessary post-acute care services, specifically 
skilled nursing and occupational therapy services. Several commenters 
noted appreciation that the prospective appeals process would protect 
beneficiaries from the potentially detrimental effects of hospital 
status changes. A few commenters believed the appeals process would 
increase transparency for beneficiaries receiving hospital care.
    Response: We appreciate the commenters' support for the proposed 
prospective appeals process.
    Comment: Multiple commenters strongly recommended CMS finalize and 
implement the proposed prospective appeals process as soon as possible, 
with a commenter suggesting beneficiaries have lacked recourse to 
hospital reclassifications for too long already. Conversely, several 
commenters requested CMS delay implementation of the prospective 
appeals process for at least 1 year to allow hospitals to better 
understand their responsibilities and have time to integrate the 
appeals processes into existing workflows, with a commenter urging CMS 
to not finalize the proposed rule without addressing commenters' 
concerns and reducing the potential administrative burden the process 
would place on hospitals. Lastly, a commenter sought clarification on 
the implementation timeline and whether the prospective appeals process 
would be permanent.
    Response: We appreciate the commenters' perspectives on the 
policy's implementation schedule. When considering the implementation 
timeline, we are balancing the need to provide beneficiaries access to 
the prospective appeals process as soon as possible with the time 
needed for finalizing guidance and notices and educating the industry 
on the new requirements, as well as the time needed by hospitals to 
integrate the new process into their existing workflows. We believe 
scheduling implementation as soon as operationally feasible not only 
meets the Court's order but strikes the proper balance between ensuring 
beneficiaries are adequately protected and providing hospitals 
sufficient lead time to prepare for and comply with the new 
requirements.
    Comment: Multiple commenters strongly recommended CMS monitor 
hospital compliance with the prospective appeals process after 
implementation and to identify unintended consequences and make updates 
to the appeals process as necessary. A commenter suggested specifically 
monitoring the impact the prospective appeals process may have on SNF 
intake and hospital length of stay statistics. Another commenter 
suggested CMS monitor the impact the prospective appeals process may 
have on quality improvement reporting programs.
    Another commenter suggested CMS coordinate and align the proposed 
appeals process with the Medicare Secondary Payer (MSP) program and 
ensure beneficiaries rights and benefits are not adversely affected. 
Another commenter predicted hospital inpatient admissions would 
decrease as a result of the proposed prospective appeals process 
because hospitals would want to avoid having their reclassifications 
effectively overturned.
    Response: We appreciate the input from commenters and the suggested 
areas for increased monitoring as we implement the new prospective 
appeals process. While we did not propose to establish any oversight 
programs specific to the new appeals process, we plan to utilize 
existing program oversight authorities related to Medicare provider 
agreements to ensure industry compliance. We note, however, as 
explained in the proposed rule, the class of beneficiaries eligible to 
appeal a denial of Part A coverage relating to a hospital 
reclassification from inpatient to outpatient receiving observation 
services in any given year is relatively small (we estimated hospitals 
will deliver 15,655 beneficiary notices and the QIOs will process 
approximately 8,000 appeals, per year). Because of the relative few 
numbers of appeals, and proportionally fewer anticipated appeal

[[Page 83264]]

overturns, we do not believe this new appeals process will have a 
disruptive effect on other areas of the Medicare program, including the 
MSP program operations. Similarly, we do not believe approximately 
8,000 annual appeals will meaningfully affect the regimented decision-
making currently used by hospitals when determining the medical 
necessity of inpatient admissions for millions of beneficiaries 
annually. Nevertheless, if in our monitoring, we identify the new 
appeal process having unintended adverse consequences on the Medicare 
program, beneficiaries, or the hospital industry, we will respond with 
additional rulemaking or guidance, as we deem appropriate.
    Comment: Multiple commenters urged CMS to conduct education and 
outreach to ensure impacted beneficiaries and their representatives are 
aware of the new prospective appeals process. A commenter suggested 
outreach efforts should specifically focus on culturally diverse 
populations, beneficiaries with limited English-speaking, and 
beneficiaries with visual or hearing impairments. The commenter also 
suggested CMS educate SHIPs and other beneficiary-assistance programs 
on the finalized prospective appeal procedures. In addition, several 
commenters suggested CMS also ensure the hospital industry is properly 
educated on the requirements of the new appeals process. Lastly, a 
commenter suggested CMS provide beneficiaries with educational material 
on Medicare inpatient coverage criteria and the reasons hospitals 
decide to reclassify them from inpatient to outpatient receiving 
observation services.
    Response: We appreciate the commenters' suggestions for ensuring 
beneficiaries, associated assistance programs, and the hospital 
industry are properly informed of their respective rights and 
requirements of the prospective appeals process. As we finalize the 
prospective appeals requirements, we plan to add information on the 
appeals process to Medicare publications, manuals, and websites, as 
necessary and appropriate. Through this process we can explore whether 
providing information related to criteria for Medicare Part A coverage 
of inpatient admissions and common rationales for hospitals 
reclassifying certain beneficiaries from inpatient to outpatient 
receiving observation services will help beneficiaries understand the 
new prospective appeals process. Beneficiaries do not need prior 
knowledge of their appeal rights in order to avail themselves of the 
prospective appeals process, as relevant appeal submission information 
will be included in the Medicare Change of Status Notice (MCSN).
    Comment: A commenter sought clarification whether the prospective 
appeals process requirements apply to MA enrollees with several 
commenters recommending that CMS expand the prospective appeals process 
to the MA program.
    Response: The retrospective appeals process (addressed in section 
III.A. of this final rule) and the prospective appeals process 
(addressed in section III.B. of this final rule) do not apply to the MA 
program and will not be available for MA plans for MA enrollees. We did 
not propose extending application of the prospective appeals 
requirements to the MA program. We explained in the proposed rule that 
the terms of the court order refer to denials of Part A coverage. 
Consistent with the court order, the appeals processes in this rule do 
not extend to enrollees in MA plans. MA plan enrollees have existing 
rights that afford enrollees the ability to appeal a plan organization 
determination where the plan refuses to provide or pay for services, in 
whole or in part, including the type or level of services, that the 
enrollee believes should be furnished or arranged for by the MA 
organization (see 42 CFR 422.562(b)(4)). For example, if an MA plan 
refuses to authorize an inpatient admission, the enrollee may request a 
standard or expedited plan reconsideration of that organization 
determination pursuant to Sec. Sec.  422.578 through 422.590, and 
422.633. As such, we are declining commenters' suggestions to extend 
the prospective appeals processes in this rule to MA enrollees. To the 
extent we identify additional processes that may be necessary for the 
MA program, any such proposals would be subject to notice and comment 
rulemaking. We note that MA enrollees do have access to QIO reviews of 
quality of care concerns, hospital discharges, and terminations of 
services furnished by home health agencies (HHAs), skilled nursing 
facilities (SNFs), and comprehensive outpatient rehabilitation 
facilities (CORFs) that is similar to the QIO reviews available for 
Original Medicare beneficiaries. See Sec. Sec.  422.562(a)(2)(ii), 
422.564(c) and (e)(3), 422.622 through 422.626.\20\
---------------------------------------------------------------------------

    \20\ The Independent Review Entity (IRE) referenced in 
Sec. Sec.  422.624 and 422.626 is the BFCC-QIO.
---------------------------------------------------------------------------

    Comment: A few commenters requested that CMS define certain terms 
related to the prospective appeals process. A commenter requested that 
CMS explain ``what is considered a change in patient status'' and how 
such a change must be documented. Another commenter requested that CMS 
define a ``formal admission.'' The same commenter also requested that 
CMS clarify when a beneficiary is considered discharged or released 
from the hospital.
    Response: We proposed at Sec.  405.1210(a)(2) that, for purposes of 
the prospective appeals process, a change of status occurs when a 
beneficiary is reclassified from an inpatient to an outpatient 
receiving observation services (as defined in Sec.  405.931(h)). As we 
discussed in the proposed rule, hospitals are already required to 
deliver the written Condition Code 44 notification to enrollees whose 
status is changed from inpatient to outpatient after review by a 
hospital utilization review committee and the entire episode will be 
billed as outpatient. As this process is already in place, we did not 
propose any new documentation requirements related to a beneficiary's 
change in status and will not be making any modifications in this final 
rule.
    We did not propose specific definitions for the terms ``formal 
admission'' or ``discharge'' since these terms are frequently used in 
the healthcare industry and, as used in the preamble of the proposed 
rule and at proposed Sec. Sec.  405.1210(a)(3)(i) (for ``formally 
admitted'') and 405.1210(a)(3)(iv) (for ``discharge''), their meaning 
should be ascribed to their common usage and parlance in the healthcare 
context. Therefore, we decline the commenter's suggestion to establish 
these definitions in this final rule.
    Comment: A commenter disagreed with CMS's proposal to allow 
hospitals to bill beneficiaries for reasonable costs associated with 
duplicating and delivering documentation provided to the QIO, when 
requested by the beneficiary, believing it was extremely burdensome on 
the beneficiary.
    Response: We proposed at Sec.  405.1211(d)(2) a requirement for 
hospitals, upon request, to provide a beneficiary with any 
documentation, including written records of any information provided by 
telephone, it provides to the QIO. We explained in the proposed rule 
that we intended for Sec.  405.1211(d)(2) to operate the same way as 
the existing regulation at Sec.  405.1206(e)(3), specifically that the 
hospital may charge the beneficiary a reasonable amount to cover the 
costs of duplicating and delivering the requested materials. We note 
that the proposal mirrors an existing policy that has been in effect 
for many years, and from our

[[Page 83265]]

programmatic experience, it has not shown to be burdensome on 
beneficiaries. Thus, we do not agree with the commenter that the 
proposed regulation is unduly burdensome and are finalizing Sec.  
405.1211(d)(2) as proposed.
    Comment: A commenter requested the QIOs publish detailed annual 
reports on the new appeals process, including data on the number of 
appeals, the appeal dispositions, the general geographic location area 
of appeal requests, and information confirming whether beneficiaries 
are being reimbursed upon a successful appeal. Another commenter 
recommended CMS publish statistics on the number of times the ALJ 
overturns a QIO decision under the new appeals process. The commenter 
suggested to apply the data as a quality measure when considering 
renewing the QIO contracts.
    Response: We did not propose and are not finalizing a process to 
publicly disclose any data related to the new prospective appeals 
process. CMS routinely tracks the timeliness of resolving beneficiary 
appeals for internal monitoring and evaluation purposes, and will do so 
for these new prospective appeals. We appreciate the commenters' 
interest in program transparency and may consider requiring such data 
disclosures at a later time.
    We appreciate the comments received on the general structure of the 
proposed prospective appeals process. After consideration of the 
comments, we are finalizing these provisions as proposed.
2. Notifying Eligible Beneficiaries of Appeal Rights When a Beneficiary 
Is Reclassified From an Inpatient to an Outpatient Receiving 
Observation Services (Sec.  405.1210)
    To implement the changes discussed previously, we proposed to 
revise Subpart J of 42 CFR 405 to add new Sec. Sec.  405.1210 through 
405.1212. These new proposed regulations were largely modeled after the 
existing regulations at Sec. Sec.  405.1205 through 405.1206 
controlling notices to beneficiaries and the QIO review of hospital 
discharges.
    Proposed new Sec.  405.1210(a) set forth the applicability and 
scope of this new appeals process along with definitions of specific 
terms used in the proposed new regulations. Specifically, in Sec.  
405.1210(a)(1) we proposed to define a hospital as, for purposes of the 
new notice requirements and appeals process, any facility providing 
care at the inpatient hospital level, to include short term or long 
term, acute or non-acute, paid through a prospective payment system or 
other reimbursement basis, limited to specialty care or providing a 
broader spectrum of services and including critical access hospitals 
(CAHs). This broad definition tracks Sec.  405.1205(a).
    Paragraphs (a)(2) and (a)(3) of proposed Sec.  405.1210 addressed 
the circumstance and eligibility of beneficiaries for appeals in this 
new process. A change in status occurs when a hospital reclassifies a 
beneficiary from an inpatient to an outpatient receiving observation 
services. The phrase ``outpatient receiving observation services'' used 
in Sec. Sec.  405.1210 through 405.1212 was used as defined in proposed 
Sec.  405.931(h) to mean when the hospital changes beneficiary's status 
from inpatient to outpatient while the beneficiary is in the hospital 
and the beneficiary subsequently receives observation services 
following a valid order for such services. An eligible beneficiary, 
consistent with the court order, would be one who: (1) was formally 
admitted as a hospital inpatient; (2) while in the hospital was 
subsequently reclassified as an outpatient receiving observation 
services; and (3) either (A) was not enrolled in Part B coverage at the 
time of the beneficiary's hospitalization, or (B) stayed at the 
hospital for 3 or more consecutive days but was classified as an 
inpatient for fewer than 3 days. We also proposed to be explicit in new 
Sec.  405.1210(a)(iv)) that the period ``3 or more consecutive days'' 
is counted using the existing rules for determining coverage of SNF 
services under section 1861 of the Act and Sec.  409.30 of this 
chapter. This meant that the admission day is counted as a day, but the 
discharge day is not. For example, if a beneficiary is admitted to a 
Medicare covered inpatient hospital stay on a Monday and discharges on 
the following Wednesday, Monday, and Tuesday are counted towards the 
``3 or more consecutive days'', but Wednesday is not.
    The provisions of proposed Sec.  405.1210(b) are designed to track 
closely with the provisions of Sec.  405.1205 that require delivery of 
a notice to beneficiaries about inpatient hospital discharges. We 
proposed in Sec.  405.1210(b)(1) that hospitals would be required to 
deliver a standardized, largely generic, notice informing eligible 
beneficiaries about the availability of the new appeals process.
    We proposed to require hospitals to deliver the notice to eligible 
beneficiaries as soon as possible after a beneficiary is eligible for 
this process per Sec.  405.1210(a)(2) and (3) and no later than 4 hours 
prior to release from the hospital. For beneficiaries with Part B, we 
proposed that the notice must be delivered as soon as possible after 
the hospital reclassifies the beneficiary from inpatient to outpatient 
receiving observation services and the third day in the hospital is 
reached. For beneficiaries without Medicare Part B coverage, we 
proposed that hospitals must deliver the notice as soon as possible 
after the change in status from inpatient to outpatient receiving 
observation services because a 3-day hospital stay is not required for 
these beneficiaries to be eligible for an appeal.
    Per proposed Sec.  405.1210(b)(2), the new notice would include (1) 
the beneficiary's right to request an expedited determination regarding 
the decision to change the beneficiary's status from an inpatient to an 
outpatient receiving observation services, including a description of 
the process as specified in Sec.  405.1211, and the availability of 
possible appeals procedures if the beneficiary's request is untimely; 
(2) an explanation of the implications of the decision to change the 
status of the eligible beneficiary from an inpatient to an outpatient 
receiving observation services, the potential change in beneficiary 
hospital charges resulting from a favorable decision, and subsequent 
eligibility for Medicare coverage for SNF services; and (3) any other 
information required by CMS. As to category 2 (see Sec.  
405.1210(b)(2)(ii)) regarding the implications of the decision, this 
notice would describe for eligible beneficiaries the possible changes 
in the charges for their hospital stay as well as the potential for 
non-coverage if they enter a SNF after the hospital stay.
    Proposed new Sec.  405.1210(b)(3) and (4) provided that notice 
delivery would be valid when the notice is delivered as required in 
Sec.  405.1210(a)(3) and the beneficiary signs and dates the notice to 
indicate receipt and that the beneficiary understands the notice. 
Further, if a beneficiary refuses to sign the notice to acknowledge 
receipt, the hospital may annotate its copy of the beneficiary's notice 
to indicate the refusal. The date of refusal would be considered the 
date of receipt of the notice. The hospital would be required to 
maintain a copy of the signed or annotated notice as part of its 
records regarding the stay, per federal or state law.
    As with existing beneficiary notice requirements, hospitals 
generally would need to determine whether a patient is capable of 
comprehending and signing the notice. Hospitals would be required to 
comply with applicable State laws and CMS guidance regarding the use of 
representatives and have procedures in

[[Page 83266]]

place to determine an appropriate representative.
    We received the following comments regarding our proposed 
requirements related to notification of appeals rights.
    Comment: Multiple commenters were supportive of our proposal to 
require hospitals to deliver a standardized notice to eligible 
beneficiaries, informing them of the change in their hospital status, 
the resulting effect on Medicare coverage of their stay, and their 
appeal rights.
    Several commenters approved of the proposed requirement for 
hospitals to deliver the standardized notice as soon as possible after 
a beneficiary becomes eligible for the appeal process. A commenter 
agreed that timely notice will provide beneficiaries with an 
opportunity to properly evaluate whether they want to pursue an appeal 
relating to their status change before leaving the hospital, consider 
whether to enter a SNF for post-acute care, and resolve questions about 
liability for their hospital stay. Lastly, another commenter agreed 
that a targeted appeals notice, delivered only to those eligible to 
appeal, would be the most effective and efficient means of informing 
eligible beneficiaries of their appeal rights.
    Response: We appreciate the commenters' support and agree that it 
is imperative eligible beneficiaries receive notice of the change in 
their hospital status, the resulting effect on Medicare coverage of 
their stay, and information on their appeal rights in a format and 
manner that is readily understandable.
    Comment: Many commenters urged CMS to apply specific revisions to 
the proposed MCSN. A few commenters suggested we ensure the final MCSN 
clearly describes, using plain language, the fact that the beneficiary 
was reclassified from inpatient to outpatient receiving observation 
services and the availability of appeal rights. Other commenters 
requested CMS ensure the finalized MCSN accurately describes the 
benefits and risks of the proposed appeal process.
    A commenter suggested we incorporate check boxes to the list of 
ramifications for hospitals to use when completing the MCSN. The 
commenter believes the check boxes will assist beneficiaries in 
identifying the information that is relevant to them and may reduce 
hospital burden when delivering the MCSN by reducing the number of 
beneficiary questions. The same commenter suggested we add a new 
section explaining that beneficiaries without Part B may be charged for 
the full cost of their stay. Another commenter felt the MCSN is 
directed to a broader class of beneficiaries than set forth at Sec.  
405.1210(a) and suggested all the elements from Sec.  405.1210(a) be 
listed on the MCSN.
    Several commenters suggested we remove from the beneficiary 
acknowledgement and signature block the statement ``I also understand 
if I win my appeal, my hospital charges will be different and possibly 
higher.'' The commenters found the tone of this language alarming and 
believe the statement may act to deter beneficiaries from appealing 
their reclassification when, in many cases, the beneficiary's risk of 
higher hospital charges is relatively low.
    Other commenters recommended we add a disclaimer to the proposed 
MCSN explaining beneficiaries do not have financial liability 
protection while their appeal is pending. Several commenters requested 
we add a statement to the proposed MCSN advising beneficiaries that 
leaving the hospital will not impact a pending appeal and they will 
still receive notice of the appeal decision. Similarly, a commenter 
predicted beneficiaries would be concerned about the impact leaving the 
hospital would have on a pending appeal.
    A commenter suggested we reorder the list of potential 
ramifications from a status reclassification, found in the introductory 
paragraph, to have information related to SNF coverage precede, rather 
than follow, information related to changes to the beneficiary's 
hospital bill. The commenter reasoned SNF eligibility is relevant to 
all beneficiaries that receive the MCSN, has a greater financial 
impact, and has a more immediate impact on a beneficiary's health than 
potential changes to a beneficiary's hospital charges.
    Response: We appreciate the commenters' support and wide range of 
suggested modifications for the proposed MCSN \21\ and we will be 
incorporating several commenters' suggested edits to the proposed MCSN 
that we believe will increase beneficiary understanding of the status 
change and the potential ramifications.
---------------------------------------------------------------------------

    \21\ Section IV.D. of this final rule states that to obtain 
copies of the supporting statement and any related forms, 
individuals should visit the CMS website at https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing.
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    We added check boxes to the list of potential ramifications for the 
hospital staff to indicate which items apply to the beneficiary 
receiving the notice. We also added an explanation that eligible 
beneficiaries without Part B may be charged for the full cost of the 
outpatient stay, due to the hospital status change. Further, we 
simplified and streamlined language throughout the notice, including in 
the list of potential ramifications, to increase readability.
    We also revised the MCSN to confirm that a beneficiary may initiate 
a standard appeal after leaving the hospital and to clarify that a 
beneficiary who requested a timely expedited determination will receive 
notice of the QIO decision even if they leave the hospital before the 
decision is made. We agree with commenters on the importance of 
including these clarifications on the MCSN to enhance beneficiaries 
understanding and comfortability with the new appeals process.
    In addition, we added text to the MCSN to explain if the 
beneficiary remains in the hospital during the appeals process and they 
receive an unfavorable appeal decision, the beneficiary could be 
responsible for the cost of the Part B coinsurance and applicable 
deductible for any covered services and the full cost of any non-
covered services received during the appeals process. We agree with 
commenters on the importance of beneficiaries understanding that the 
appeals process does not provide the same liability protections 
afforded when being discharged from a covered inpatient stay. However, 
we did not add an explanation that a hospital could release a 
beneficiary during an appeal, as suggested by some commenters, because 
hospital decisions related to safely releasing patients following 
treatment falls outside the scope of this appeals process. Hospitals 
must continue to assess the appropriateness of release by applying the 
beneficiary's particular medical circumstances, using their usual 
operating procedures, and in accordance with all applicable laws.
    We have removed from the beneficiary acknowledgement and signature 
block text stating beneficiaries may face higher hospital charges upon 
a successful appeal. We agree with commenters that some beneficiaries 
could be alarmed by such a warning and potentially not proceed with an 
appeal they otherwise would want to pursue.
    We did not believe it necessary or prudent to add details on the 
criteria necessary for a beneficiary to receive the MCSN and pursue an 
appeal relating to their hospital status reclassification. We believe 
including such detailed information about the appeals criteria would 
likely be confusing to beneficiaries and is unnecessary for them to 
decide whether to appeal. Importantly, the MCSN will only be

[[Page 83267]]

delivered to those beneficiaries eligible to appeal.
    Finally, while we agree that Medicare not covering a SNF stay 
following a status change from inpatient to outpatient receiving 
observation services is an important ramification for beneficiaries, we 
did not reorder the list in the notice to reflect this. Through the 
course of consumer testing of the MCSN after reordering the notice to 
list SNF coverage information before information on potential hospital 
coverage, it was apparent that discussing SNF coverage after discussing 
the hospital coverage was confusing to beneficiaries.\22\
---------------------------------------------------------------------------

    \22\ This testing methodology is set forth and approved in OMB 
collection 0938-1382 Gen IC #11.
---------------------------------------------------------------------------

    Comment: A commenter suggested the proposed MCSN be further 
developed with beneficiary input to ensure that the information 
conveyed by the notice is accessible and understandable to 
beneficiaries.
    Response: We agree seeking beneficiary input is vital when 
developing new notices and that it is essential for the MCSN to clearly 
inform the beneficiary of their change in status and related financial 
implications as well as how they may appeal this change. To that end, 
we edited the proposed MCSN to use research-based plain language that 
should be more understandable to beneficiaries. In addition, before 
distribution, the MCSN will have undergone consumer testing. We will 
also continue to refine the notice for future revisions.
    Comment: A commenter recommended we require hospitals specify the 
exact appeal timeframes and deadlines for each beneficiary that 
receives the MCSN.
    Response: We appreciate the commenter's intent to have 
beneficiaries receive as personalized a notice as possible. We proposed 
for the MCSN to contain a statement that, if a beneficiary wishes to 
pursue an appeal, the beneficiary should request an appeal as soon as 
possible and before leaving the hospital, which is the proposed 
deadline for an expedited determination. We believe such a statement is 
preferable to a customized notice as it sufficiently advises 
beneficiaries of their appeal timeframes while not further increasing 
the burden that would come from hospitals having to customize each 
notice before delivery. We also are hesitant to create a notice with a 
glut of dates and information that could inadvertently lead to 
beneficiary confusion and may detract from other important and 
actionable material on the MCSN. We note this level of information is 
consistent with similar appeals notices, such as the IM, that have not 
elicited complaints related to uncertainty of when to appeal.
    Comment: A few commenters asserted that hospitals only change a 
beneficiary's status from inpatient to outpatient when they are certain 
the change is appropriate and that the guidelines for inpatient versus 
outpatient coverage and payment are complicated. The commenters 
suggested the MCSN include specific information on the criteria for 
Medicare inpatient coverage and medical review for inpatient admissions 
to inform beneficiaries. One of the commenters also suggested such 
information and additions to the MCSN would assist preventing potential 
overuse of the proposed appeals process.
    Response: We appreciate the commenters' perspective on the 
appropriateness of hospital decisions to change a beneficiary's status 
from inpatient to outpatient receiving observation services. However, 
the purpose of the proposed prospective appeal process is not to 
validate the hospital change of status decision, but to provide 
beneficiaries with the ability to pursue an appeal relating to a change 
in a beneficiary's status, when certain criteria are met, because of 
the substantial impact these decisions may have on beneficiaries. We 
believe a core component of creating an effective appeals process is to 
ensure ease of access and understanding for Medicare beneficiaries. We 
do not believe including detailed coverage criteria in the MCSN would 
promote beneficiary understanding on the effect of their change in 
status or their right to appeal such change. Indeed, considering the 
commenters' acknowledgement that coverage and medical review criteria 
are complicated, we believe including this information on the MCSN 
would only risk confusing beneficiaries and possibly dissuading them 
from requesting appeals.
    Lastly, we are unclear of the commenter's meaning when they 
expressed concern of potential overuse of the appeals process. In 
accordance with the Court's order, access to the prospective appeals 
process is limited to eligible beneficiaries. Once the appeal process 
is established, we strongly believe all eligible enrollees who wish to 
pursue a valid appeal should have the ability to do so with reasonable 
ease. We believe including complex coverage criteria on the notice, 
with a stated purpose to dissuade otherwise valid appeals, would be 
antithetical to the Court's order and our proposed goals. Therefore, we 
decline the commenter's suggestion to include material in the MCSN when 
the inclusion is intended to reduce otherwise valid appeals.
    Comment: Multiple commenters provided feedback on the proposed 
requirements related to the timing of delivery of the notice. A few 
commenters were uncertain when the MCSN must be delivered, some 
commenters requested that hospitals be given more time for delivery, 
and another commenter requested a flexible delivery timeframe. 
Commenters based their feedback on wanting to minimize the risk of 
confusion on the part of the beneficiary, reduce provider burden, and 
not wanting to delay hospital releases (and affecting beneficiary 
options for SNF placement).
    Response: We proposed a requirement at Sec.  405.1210(b) that 
hospitals would be required to deliver a standardized notice informing 
eligible beneficiaries of their right to appeal a denial of Part A 
coverage relating to a hospital's decision to reclassify them from 
inpatient to outpatient receiving observation services. We proposed at 
Sec.  405.1210(b)(1) to require hospitals to deliver the notice to 
eligible beneficiaries as soon as possible after the beneficiary is 
eligible for this process per Sec.  405.1210(a)(2) and (3) and no later 
than 4 hours prior to release from the hospital. This means, for 
beneficiaries with Part B, the notice must be delivered as soon as 
possible after the hospital reclassifies the beneficiary from inpatient 
to outpatient receiving observation services and after the beneficiary 
has been in the hospital for 3 consecutive days. For beneficiaries 
without Part B, hospitals must deliver the notice as soon as possible 
after the change in status from inpatient to outpatient receiving 
observation services because a 3-day hospital stay is not required for 
these beneficiaries to be eligible to appeal.
    We believe the MCSN delivery timeframes, as with other beneficiary 
notices, appropriately balance the interests of beneficiaries with the 
necessary burden placed upon hospitals. As we explained in the proposed 
rule, we reviewed the notice delivery procedures for other beneficiary 
notices, specifically the IM notice related to inpatient hospital 
discharges, and have mirrored those processes for delivery of the MCSN, 
wherever possible. Accordingly, the timeframe to deliver the MCSN is 4 
hours prior to a beneficiary's scheduled release time from the 
hospital, as is existing practice for the IM. We believe it impractical 
to expect a beneficiary to understand the ramifications of their status 
change and have time to fully

[[Page 83268]]

consider whether they wish to file an appeal before leaving the 
hospital if the notice were to be given closer to the beneficiary's 
release.
    Comment: Several commenters questioned the hospital's role in 
delivering the MCSN. A commenter requested that CMS provide clear 
directives for hospitals to operationalize the delivery of the MCSN and 
integrate the notice into existing hospital workflows.
    Commenters also requested clarification in the following areas:
    <bullet> Is a hospital required to verbally explain the MCSN to 
beneficiaries and, if so, specify how detailed the explanation must be?
    <bullet> When must a hospital deliver the MCSN in circumstances 
where a beneficiary's hospital status is reclassified shortly after 
their formal inpatient admission and then remains in outpatient 
receiving observation for 3 days?
    <bullet> Must a beneficiary receive 4 hours of observation services 
after receiving the standardized notice?
    <bullet> Should hospitals document when a beneficiary voluntarily 
leaves the hospital less than 4 hours from receiving the MCSN?
    <bullet> To what extent are hospitals required to document delivery 
of the MCSN when a beneficiary refuses to sign the notice?
    A few commenters suggested that CMS prohibit hospitals from filling 
in the date and time in the beneficiary signature block because it may 
result in inaccurate information. Another commenter supported CMS' 
proposal for hospitals to annotate the MCSN if a beneficiary refuses to 
sign or acknowledge receipt.
    Response: We proposed at Sec.  405.1210(b)(3) that a hospital's 
delivery of the notice is considered valid when the hospital issues the 
notice timely, in accordance with Sec.  405.1210(b)(1), the notice 
contains all required elements, in accordance with Sec.  
405.1210(b)(2), and the eligible beneficiary or their representative 
signs and dates the notice to indicate receipt and comprehension of its 
contents.
    We did not propose to require hospital staff to orally convey the 
information on the MCSN to eligible beneficiaries. Instead, the 
hospital is only required to complete and timely deliver the MCSN while 
ensuring the beneficiary can comprehend its contents. As we explained 
in the proposed rule, as with existing beneficiary notice requirements, 
hospitals generally would need to determine whether a patient is 
capable of comprehending and signing the MCSN. We continue to believe 
that the clinicians treating a beneficiary are in the best position to 
determine whether their patients are capable of receiving and 
comprehending a notice, and whether a representative should be 
contacted. It would not be practicable to establish specific criteria 
to ascertain whether a hospital properly assessed beneficiary 
`understanding' for the purposes of receiving the MCSN. The 
determination should fall within the practiced day-to-day assessments a 
hospital is making when communicating with, and providing care to, 
beneficiaries.
    We note, the proposed requirement at Sec.  405.1210(b)(1) only 
governs the timeframes in which hospitals must deliver the MCSN to 
eligible beneficiaries. We did not propose to require hospitals to 
render observation services during that timeframe nor did we propose to 
restrict beneficiaries from choosing to leave the hospital earlier than 
their scheduled release time. Instead, we expect for hospitals to build 
this relatively brief 4-hour window into their standard patient release 
planning processes, as appropriate, for beneficiaries receiving the 
MCSN, and for delivery to occur, no later than, 4 hours from the 
anticipated end of medically necessary services. Hospitals are already 
adept at timing the issuance of other beneficiary notices to correspond 
with the end of medically necessary services. In the event a 
beneficiary voluntarily leaves the hospital prior to the hospital's 
schedule time of release, the hospital may document the time of and 
circumstances surrounding the beneficiary's departure on their copy of 
the MCSN.
    If the beneficiary or their representative refuses to sign the 
notice, we proposed at Sec.  405.1210(b)(4) to permit a hospital to 
annotate its copy of the notice of the beneficiary's refusal to sign. 
The hospital would be required to maintain a copy of the signed or 
annotated notice as part of its records regarding the stay, pursuant to 
federal and state law. In the December 2023 proposed rule (88 FR 
89521), we further explained that a hospital would need to determine 
whether the beneficiary is capable of comprehending and signing the 
notice in the same manner as existing beneficiary notice requirements.
    As suggested by some commenters, the proposed delivery requirements 
do not permit hospital staff to prefill the date and time elements of 
the beneficiary receipt acknowledgement section before delivery of the 
MCSN. Proposed Sec.  405.1210(b)(3)(A) states valid delivery of the 
MCSN only occurs when, among other criteria, an ``eligible beneficiary 
(or the eligible beneficiary's representative) has signed and dated the 
notice to indicate that he or she has received the notice and can 
comprehend its contents [or when annotated if the beneficiary refuses 
to sign the notice].'' Because a beneficiary's acknowledgement of 
receipt and comprehension is recorded through their (or their 
representative's) signing and dating the document, hospital staff must 
not prefill these sections before delivery. Our proposed rules do not 
prevent hospital staff from assisting beneficiaries with completing the 
necessary elements after delivery.
    We agree with commenters that the hospital responsibilities for 
delivering the MCSN should be delineated as clearly as possible and 
appreciate the interest in appropriately implementing the MCSN into 
hospital workflows. Following finalization of this rule, we plan to 
issue sub-regulatory guidance to further explain specific operational 
practices as we have for other beneficiary notices.
    Comment: A commenter sought clarification on the consequences 
hospitals would face for failing to deliver the MCSN in accordance with 
the proposed requirements.
    Response: We did not propose and are not finalizing new 
consequences or penalties for hospitals that specifically fail to 
comply with the prospective appeal requirements. Hospitals will 
continue to be subject to existing enforcement actions related to non-
compliance with Medicare conditions of participation. As always, we 
would determine the degree and manner of any potential enforcement 
action on a case-by-case basis.
    Comment: Multiple commenters suggested the proposed MCSN should not 
be finalized because the notice was too confusing for beneficiaries and 
hospitals. Several commenters worried the proposed MCSN would confuse 
beneficiaries by unnecessarily adding to the amount of documentation 
beneficiaries already receive.
    A few commenters suggested the proposed MCSN might confuse 
beneficiaries in situations where the beneficiary receives notice of 
their right to appeal, through the proposed MCSN, before they receive 
notice of their reclassification. (The commenters incorrectly inferred 
the purpose of the MOON is to notify beneficiaries that they have been 
reclassified from inpatient to outpatient receiving observations 
services.)
    Some commenters expressed concern that the MCSN could be confused 
with other existing standardized notices,

[[Page 83269]]

such as the MOON and other commenters suggested CMS not create a new 
standardized notice but, instead, incorporate language on hospital 
status reclassifications into the MOON or, in the alternative, require 
delivery of the new notice at the same time as the MOON.
    Response: We appreciate and share the commenters' mindfulness for 
avoiding beneficiary and hospital confusion related to the proposed 
MCSN. We explained in the proposed rule that after determining the need 
for beneficiaries to receive notice of their right to appeal, we 
considered several options and, ultimately, decided the creation of a 
new standardized notice that would only be provided to eligible 
beneficiaries would be the least confusing and burdensome option 
available. In addition, we mirrored the notice delivery procedures to 
the IM notice procedures, a beneficiary notice with which hospitals are 
already familiar. We believe this approach balances a beneficiary's 
need to be informed of their appeal rights in an appropriate and timely 
manner, without imposing unnecessary burdens on hospitals.
    We do not agree with commenters that merely creating a new 
beneficiary notice will inevitably lead to beneficiary confusion. While 
CMS has several beneficiary notices that must be delivered by 
hospitals, each has a discrete purpose and not all are provided at one 
time. As we have explained, the MCSN is a dedicated notice that will 
only be provided to the relatively few eligible beneficiaries who have 
the right to appeal based on a hospital reclassification from inpatient 
to outpatient receiving observation services. This means most 
beneficiaries will not receive the notice, drastically reducing the 
risk of beneficiary confusion. In addition, to enhance comprehension, 
we derived much of the verbiage used on the MCSN from other consumer-
tested CMS beneficiary notices. Because of the narrow scope of the 
MCSN, the limited audience that will receive the notice, and our focus 
to use clear and concise language to convey the purpose of the notice, 
we believe we have taken all necessary steps to limit beneficiary and 
hospital confusion.
    We explained in the proposed rule that we considered alternatives 
to creating a new notice for this process, including adding appeals 
information to the MOON or other existing beneficiary notifications. 
However, as discussed in the proposed rule, the vast majority of 
beneficiaries receiving the MOON will not be eligible for an appeal 
under this new process. Therefore, we believe using the MOON instead 
of, or in addition to, the MCSN, would be confusing to the nearly 
600,000 beneficiaries receiving the MOON per year who would not be 
eligible for this appeal process.
    Further, the MOON is only required for beneficiaries who have been 
outpatients receiving observation services for more than 24 hours. We 
proposed, however, the prospective appeals process would be available 
to eligible beneficiaries that received observation services for any 
amount of time after their reclassification from inpatient to 
outpatient. Therefore, because the MOON is not required for observation 
stays shorter than 24 hours, using the MOON, or attaching delivery of 
the MCSN to delivery of the MOON, would result in eligible 
beneficiaries not receiving notification of their right to appeal 
regarding a hospital status reclassification.
    We also do not agree that beneficiaries will be confused if they 
receive the MCSN before the MOON. The MOON does not indicate whether 
the hospital has changed the beneficiary's status from inpatient to 
outpatient receiving observation services and, importantly, would not 
be required to be delivered to beneficiaries that have had their status 
changed and receive less than 24 hours of observation services. Instead 
of the MOON, hospitals are currently required to provide a written 
Condition Code 44 notification to inform beneficiaries when their 
status is changed from inpatient to outpatient after review by a 
hospital utilization review committee and the entire episode will be 
billed as outpatient.
    We decided against adding information on the prospective appeals 
process to the Condition Code 44 notice, however, because the number of 
beneficiaries eligible for this new appeals process would only be a 
small subset of the population receiving the existing Condition Code 44 
notification. Therefore, we believe the MCSN and Condition Code 44 
notification have distinct roles that will also provide complementary 
information to beneficiaries eligible for this appeals process.
    Comment: Multiple commenters generally asserted the requirement for 
hospitals to deliver a new standardized notice specific to 
beneficiaries reclassified from inpatient to outpatient receiving 
observation services is too burdensome for hospitals and recommended 
against finalizing the policy. A commenter suggested the new delivery 
requirement, combined with existing workforce issues, would create an 
undue burden for hospitals and would be logistically almost impossible 
for hospitals to comply. Another commenter suggested hospitals already 
struggle with the timely delivery of the MOON and IM and adding another 
notice with a shorter deadline would compound an already 
administratively burdensome process. A commenter asserted the notice 
requirement would be an enormous burden on hospitals for what is 
estimated to be a small volume of appeals.
    A commenter predicted the notice requirement would exacerbate 
hospital nursing shortages because the QIOs will need to hire new 
staff, thereby decreasing the pool of hirable nurses. A few commenters 
recommended CMS minimize the role of providers in delivering the 
proposed MCSN to protect the providers' patient care time. However, 
another commenter recommended CMS require hospitals use clinical staff 
to deliver the notice.
    Response: We estimated in the proposed rule that hospitals would be 
required to give 15,655 MCSNs to beneficiaries each year, which we 
acknowledged is likely an overestimation based on limitations to our 
data collection. The current number of Medicare-certified hospitals in 
the country is approximately 6,162. Therefore, we estimate a single 
Medicare-certified hospital would deliver on average fewer than 3 
notices, per year. While we understand the act of delivering new 
notices, even in a low volume, is an appreciable increase in 
responsibilities for hospitals, we do not believe the new appeals 
process will significantly affect operations or staffing within 
hospitals.
    As we explained in the proposed rule, when considering developing 
the MCSN we needed to balance hospital burden with the need to 
appropriately notify beneficiaries of their appeal rights. We strongly 
believe the use of a dedicated, standardized notice, delivered by 
hospital staff to patients while still in the hospital is the most 
efficient and effective manner by which to inform beneficiaries of 
their appeal rights. We considered but ruled out adding the appeals 
language to existing beneficiary notices because, primarily, the 
appeals information would not be applicable to most beneficiaries 
receiving those notices. In addition, we are wary of adding too much 
information onto a single notice as consumer research consistently 
demonstrates that beneficiaries are not adept at self-selecting 
information. We, therefore, believe using a notice exclusively for 
those beneficiaries eligible to pursue an appeal relating to a hospital 
status

[[Page 83270]]

reclassification will ensure beneficiaries understand their appeal 
rights and how to exercise them.
    The proposed delivery requirements for the MCSN were derived from 
the existing procedures hospitals must follow when delivering the IM. 
Our intention for mirroring the delivery processes was to leverage the 
familiarity that existing hospital processes and staff have with the IM 
procedures to more easily incorporate the new MCSN delivery 
requirements. Further, we developed the new MCSN to be a largely 
generic notice that would only require hospital staff to complete a few 
fields before delivering to the beneficiary. We strongly believe that 
considering the limited estimated volume of MCSNs hospitals would need 
to deliver annually, the similarity between the IM and new MCSN 
delivery procedures, and the familiarity existing hospital processes 
and staff have with the IM, will allow for hospital compliance with 
very limited increase in burden.
    Finally, while we used a registered nurse's hourly rate to compute 
our burden calculation, we would like to clarify that there is no 
requirement for hospitals to use clinical personal to deliver the MCSN. 
As with similar notices, such as the IM and MOON, we do not feel it 
appropriate or necessary to regulate which hospital staff are capable 
of delivering the MCSN. Such decisions are best left to hospitals to 
make based on their internal protocols and staffing requirements. In 
regard to the impact the new appeals process will have on QIO-hiring 
demands, we estimated that the QIO will receive an estimated 8,000 
appeals per year. While we do anticipate the QIO will need to hire 
additional clinical staff to review the increasing appeal volume, we do 
not anticipate an impact on hospital hiring practices on a national 
level. Thus, we do not foresee this new appeals process having a 
significant impact on clinical care resources or the demand for nurse 
labor.
    We appreciate the feedback we received from commenters on the 
notification requirements. We will be finalizing the proposals at Sec.  
405.1210 as proposed. (We note that changes to the MCSN will be 
reflected in OMB control number 0938-1467 which is discussed in section 
IV.B.2. of the final rule.)
3. Expedited Determination Procedures When a Beneficiary Is 
Reclassified From an Inpatient to an Outpatient Receiving Observation 
Services (Sec.  405.1211)
    Proposed new Sec.  405.1211 sets forth the procedures for the new 
expedited QIO review leading up to issuance and effect of the QIO's 
determination. We stated in the proposed rule that proposed Sec.  
405.1211 would establish the responsibilities of the hospitals, QIOs, 
and beneficiaries relative to the process.
    Proposed Sec.  405.1211(a) described a beneficiary's right to 
request an expedited determination by a QIO when they are reclassified 
by their hospital from an inpatient to an outpatient receiving 
observation services, and the beneficiary meets the criteria to be 
eligible for an appeal as established in Sec.  405.1210(a)(3). As 
previously discussed, QIOs are experienced in performing expedited 
appeals for beneficiaries in a hospital setting and thus, are well 
prepared to implement and execute this new appeals process in an 
effective and expeditious manner. Currently, Beneficiary and Family 
Centered QIOs (BFCC-QIOs) perform the case review functions that are 
similar to the reviews that would be required by Sec. Sec.  405.1211 
and 405.1212, so we proposed to assign these new reviews to BFCC-QIOs 
under our contracts with them; in the event that CMS reconsiders in the 
future how QIO functions are assigned and the categorization of QIOs, 
we stated that we intended that the type of QIOs that perform case 
review functions (see 42 CFR 405.1200 through 405.1208, 475.102, 476.1 
et seq.) would also perform these new reviews of changes in status.
    In new Sec.  405.1211(b), we proposed the process for eligible 
beneficiaries to request an expedited determination by the QIO. First, 
the eligible beneficiary's request must be by telephone to the QIO, or 
in writing. We did not propose any parameters of what a request in 
writing would constitute, but it could be an email or fax transmitted 
to the QIO. We also proposed at Sec.  405.1211(b)(1) the timeframe for 
requesting such an appeal: eligible beneficiaries would be required to 
request an appeal to the QIO prior to release from the hospital. The 
notice required under proposed Sec.  405.1210 would identify the BFCC-
QIO that serves the geographic area that includes the hospital so that 
this information is available to the eligible beneficiary.
    Proposed sections 405.1211(b)(2) and (b)(3) explained the 
responsibilities of beneficiaries to discuss the case, if requested by 
the QIO, and their right to submit written evidence to be considered by 
the QIO. Per proposed Sec.  405.1211(b)(4), if an eligible beneficiary 
requests an appeal timely, they would not be billed during the QIO 
appeals process. However, if the appeal is untimely, the hospital may 
bill a beneficiary before this QIO process is complete; proposed 
paragraphs (b)(4) and (e) make this clear. Finally, we also proposed, 
in Sec.  405.1211(b)(5), that an eligible beneficiary may file a 
request for review by the QIO regarding the change in status after the 
deadline established in proposed Sec.  405.1211(b)(1) (that is, the 
beneficiary may file the request after release from the hospital) but 
that the QIO's determination will be provided on a different timeframe 
and the eligible beneficiary will not be entitled to the billing 
protection proposed in paragraph (e). Keeping untimely appeals with the 
QIO will provide beneficiaries with a decision far sooner though (2 
calendar days), than if those beneficiaries were provided with the 
timeframes set forth in the standard claims appeals (60 days at the 
first level of the claims appeals process). We proposed that these 
untimely requests may be made at any time in order to afford maximum 
opportunity for beneficiaries to exercise their appeal rights. Of most 
concern are those beneficiaries who may have had a SNF stay following 
their change in status from an inpatient to an outpatient receiving 
observation services. These beneficiaries should have the maximum 
opportunity to appeal and potentially obtain coverage for what might 
have been a costly out-of-pocket outlay.
    Proposed Sec.  405.1211(c)(1) through (c)(5) described the 
procedures that the QIO would be required to follow in performing the 
expedited determination. We proposed at Sec.  405.1211(c)(1) that the 
QIO must immediately notify the hospital that a request for an 
expedited appeal has been made. In addition, as proposed in Sec.  
405.1211(c)(2) and (3), the QIO would be required to determine whether 
valid notice was delivered and examine medical and other relevant 
records that pertain to change in status. As proposed at Sec.  
405.1211(c)(4) and (5), the QIO would be required to solicit the views 
of the beneficiary and provide the hospital an opportunity to explain 
why the reclassification of the beneficiary from an inpatient to an 
outpatient receiving observations services is appropriate. The QIO will 
review the information submitted with the appeal request and any 
additional information it obtains to determine if the inpatient 
admission satisfied the relevant criteria for Part A coverage at the 
time the services were furnished.
    Proposed section 405.1211(c)(6) addressed the timing of the QIO's 
determination. Per proposed paragraph (c)(6)(i), the QIO must render a 
decision and notify all relevant persons and entities within 1 calendar 
day of receiving all requested pertinent

[[Page 83271]]

information if the eligible beneficiary requested the expedited 
determination as specified in proposed Sec.  405.1211(b)(1) (that is, 
no later than the day of release from the hospital). Based on current 
experience regarding documentation submitted by hospitals under other 
expedited beneficiary appeal timeframes, we did not anticipate that the 
QIO will encounter delays in receiving any information necessary from 
the hospital once the hospital is notified of the appeal (see proposed 
Sec.  405.1211(d)(1)). This timeframe is as rapid as possible to 
minimize potential liability for beneficiaries as well as to maximize 
their potential for coverage in a SNF should they obtain a favorable 
decision by the QIO. A Medicare covered SNF stay must begin within 30 
days of a beneficiary's discharge from a hospital. To that end, QIOs 
would make their decisions as quickly as possible so beneficiaries 
receiving favorable decisions will have time to plan for and begin a 
SNF stay within the 30-day parameter.
    Proposed Sec.  405.1211(c)(6)(ii) provided that the 1 calendar day 
QIO decision deadline does not apply if a beneficiary makes an untimely 
request for an expedited appeal, but that the QIO would still accept 
the request and render a decision within 2 calendar days after the QIO 
receives all requested information that the hospital must provide per 
proposed Sec.  405.1211(d)(1).\23\ This provides a beneficiary with the 
maximum ability to exercise their right to an expedited appeal, and the 
opportunity to obtain SNF coverage within the Medicare coverage 
limitation of 30 days after leaving a hospital, should their appeal to 
the QIO be favorable.
---------------------------------------------------------------------------

    \23\ The proposed regulations text at Sec.  405.1211(c)(6)(ii) 
contained a typographical error that stated that the QIO must render 
a decision for untimely requests within 1 day. This was an error 
that will be corrected in this final rule.
---------------------------------------------------------------------------

    In Sec.  405.1211(c)(7) we proposed that if the QIO does not 
receive the information needed to make its decision, the QIO may move 
forward and make a decision based on the information it has at the 
time. This is to protect the interests of the beneficiary by ensuring 
they receive their decision within the QIO's required timeframes of 1 
calendar day for a timely request and 2 calendar days for an untimely 
request.
    The QIO decision, as required by proposed Sec.  405.1211(c)(8), 
must be conveyed to the eligible beneficiary, the hospital, and SNF (if 
applicable) by telephone followed by a written notice. We proposed that 
the QIO's written notice of its determination must include the basis 
for the determination, a detailed rationale for the QIO decision, an 
explanation of the Medicare payment consequences of the determination, 
and information about the beneficiary's right to an expedited 
reconsideration as set forth in Sec.  405.1212, including how and in 
what time period a beneficiary may make that reconsideration request. 
The basis of a decision is a description of, and citations to, the 
Medicare coverage rule, instruction, or other policies applicable to 
the review. A detailed rationale is an explanation of why services do 
or do not meet the relevant criteria for Part A coverage based on the 
facts specific to the beneficiary's situation and the QIO's review of 
the pertinent information provided by the hospital (as with other 
expedited beneficiary appeals of hospital discharges and service 
terminations).
    Proposed Sec.  405.1211(d) set forth the responsibilities of 
hospitals in the expedited appeals process. Section 405.1211(d)(1) 
provided that the hospital must supply all information that the QIO 
needs, no later than noon of the calendar day after the QIO notifies 
the hospital of the appeals request. We also proposed that at the 
discretion of the QIO, the hospital must make the information available 
by phone or in writing (with a written record of any information not 
transmitted initially in writing). Section 405.1211(d)(2) required that 
hospitals, upon request, must provide the beneficiary any 
documentation, including written records of any information provided by 
telephone, it provides to the QIO. We proposed that this obligation 
work the same way that it does under Sec.  405.1206(e)(3), specifically 
that the hospital may charge a reasonable amount to cover the costs of 
duplicating and delivering the requested materials and must accommodate 
such a request by no later than close of business of the first day 
after the material is requested by the beneficiary or the beneficiary's 
representative.
    In Sec.  405.1211(e), we proposed that a hospital may not bill a 
beneficiary who has appealed timely for any services at issue in the 
appeal until the expedited determination process (and reconsideration 
process) is complete. Although there is liability protection in the 
inpatient discharge expedited appeals process under section 
1869(c)(3)(C)(iii) of the Act (incorporating the financial liability 
protection in section 1154(e)(4) of the Act in effect prior to the 
enactment of section 1869(c)(3)(C) of the Act), there is no statutory 
provision protecting the beneficiary from financial liability for the 
hospital stay and services furnished during the pendency of the QIO's 
review proposed here. Therefore, we proposed only that the hospital may 
not bill the beneficiary until after the QIO has issued its 
determination. This proposal mirrored existing procedures for the 
similar expedited appeals procedures the termination of non-hospital 
services found at Sec.  405.1202(g). This process would not extend 
coverage available to beneficiaries during an appeal, which is 
consistent with Sec.  405.1202(g).
    Proposed Sec.  405.1211(f) set forth that a QIO determination is 
binding for payment purposes on the beneficiary, hospital, and MAC, 
unless the beneficiary pursues an expedited reconsideration per Sec.  
405.1212. The decision is binding for purposes of payment only, such 
that if the hospital submits a claim under Part A, CMS will make 
payment.
    We received the following comments regarding our proposed 
requirements related to the prospective appeal determination 
procedures.
    Comment: Many commenters expressed approval that the proposed 
prospective appeals process would be available to all beneficiaries who 
have been reclassified by a hospital from an inpatient to an outpatient 
receiving observation services, rather than limiting the class of 
eligible beneficiaries to those who receive a MOON, which is only 
required to be delivered when outpatient services reach 24 hours in 
duration. Multiple commenters strongly supported that beneficiaries 
with Part A but not Part B would not need to remain in the hospital for 
at least 3 days in order to be eligible for an appeal.
    Response: We thank the commenters for their support of the proposed 
prospective appeals policy and our expansion of the population of 
beneficiaries eligible for an appeal.
    Comment: Multiple commenters sought clarification on the criteria 
required for beneficiaries to access the proposed prospective appeals 
process. A few commenters questioned whether a beneficiary who is 
reclassified from inpatient to outpatient but does not receive 
observation services may appeal the reclassification. A few commenters 
questioned whether it was CMS's intent to require a beneficiary to 
receive the MOON in order to be eligible to appeal regarding a hospital 
status reclassification.
    A commenter questioned whether a beneficiary may use the proposed 
appeals process when they have been reclassified from inpatient to 
outpatient receiving observation services, do not

[[Page 83272]]

have Medicare Part B, but have other insurance coverage for outpatient 
observation services. A few commenters questioned whether a beneficiary 
must specify they are seeking SNF care in order to request an appeal. A 
commenter questioned how the proposed appeals process would be affected 
if a beneficiary exhausts their Medicare inpatient coverage and whether 
beneficiaries, in those circumstances, could pursue an appeal under the 
proposed prospective appeals process.
    Response: We proposed at Sec.  405.1211(a) that a beneficiary has 
the right to request an appeal by a QIO when they are reclassified by 
their hospital from an inpatient to an outpatient receiving observation 
services, and the beneficiary meets the eligibility criteria 
established in Sec.  405.1210(a)(3). Pursuant to proposed Sec.  
405.1210(a)(3), an eligible beneficiary would be one who was formally 
admitted as a hospital inpatient, was subsequently reclassified as an 
outpatient receiving observation services, and either was not enrolled 
in Medicare Part B at the time of the beneficiary's hospitalization or 
stayed in the hospital for 3 or more consecutive days but was 
classified as an inpatient for fewer than 3 days.
    We explained in the proposed rule the provisions of the prospective 
appeals process are intended to implement the District Court order in 
Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020), aff'd sub nom., 
Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022). The Court's order 
required new appeal procedures be afforded to a specific class of 
Medicare beneficiaries who, among other criteria, have or will have 
been subsequently reclassified by the hospital as an outpatient 
receiving observation services. In accordance with the court order, we 
established the beneficiary eligibility criteria for this new appeal 
process at Sec.  405.1210(a)(3), which requires eligible beneficiaries 
to have been reclassified by their hospital to an outpatient receiving 
observation services, among other criteria. We defined the phrase 
``outpatient receiving observation services'' at proposed Sec.  
405.931(h) to mean when the hospital changes the beneficiary's status 
from inpatient to outpatient while the beneficiary is in the hospital 
and the beneficiary subsequently receives observation services 
following a valid order for such services. Thus, we believe it to be 
explicitly clear that a beneficiary must have received at least some 
observation services after being reclassified from an inpatient to 
outpatient in order to be eligible for the proposed appeals process.
    As discussed in the proposed rule, a beneficiary does not need to 
receive the MOON in order to be eligible to request a prospective 
appeal. The MOON is a beneficiary notice furnished by a hospital to 
beneficiaries who receive observation services as an outpatient for 
more than 24 hours. However, in accordance with the proposed Sec.  
405.1210(a)(3) beneficiaries are eligible for the prospective appeals 
process after being reclassified from inpatient to outpatient receiving 
observation services if any time is spent in observation following the 
reclassification. Thus, the MOON is not required to be received by, and 
likely would not be received by many, beneficiaries in order to be 
eligible to appeal regarding a hospital status change under the new 
process. We acknowledge, as we did in the proposed rule, that this 
policy expands the population of beneficiaries eligible for an appeal 
beyond the class defined by the court in Alexander.
    As we have previously explained, eligible beneficiaries include 
those whose hospital status was changed from inpatient to outpatient 
receiving observation services and were not enrolled in Medicare Part B 
at the time. We did not propose to include consideration of non-
Medicare insurance among the required elements for appeal eligibility 
and do not believe it is prudent to do so now for several reasons. 
First, we do not believe verifying non-Medicare insurance in real-time 
during a fast-moving expedited process would be practical without 
risking delays to the appeal decisions if the QIO must first confirm a 
beneficiary does not have other outpatient insurance coverage. In 
addition, a beneficiary's possession of non-Medicare outpatient 
insurance does not actually guarantee coverage in all circumstances. 
Such decisions would be made on a case-by-case basis by the other 
insurer. Lastly, the Medicare program does not limit a beneficiary's 
appeal eligibility based on having outside insurance in other 
circumstances. Thus, we do not believe it reasonable to limit a 
beneficiary's right to appeal under the prospective appeals process 
merely because they may possess outpatient insurance coverage from 
another source.
    Similarly, we did not propose at Sec.  405.1210 (a), establishing 
the scope of prospective appeals process, a requirement for 
beneficiaries to request SNF services to be eligible to pursue an 
appeal regarding a hospital reclassification from inpatient to 
outpatient receiving observation services. While we expect SNF coverage 
to be a driving factor for many beneficiaries considering whether to 
pursue a prospective appeal, this is not the only reason an appeal 
might be warranted. For example, a beneficiary may want to appeal 
because they expect that their out-of-pocket costs would be lower as an 
inpatient or, in another case, the beneficiary may not have Part B and 
would want to appeal in order to not be liable for the full cost of the 
hospital stay. More importantly, some beneficiaries may not want to 
enter post-acute SNF care and, in those cases, we do not feel it would 
be just to condition a beneficiary's ability to pursue an appeal 
regarding a hospital reclassification on the requirement that they seek 
SNF care. Thus, while eligibility for a covered SNF stay is an 
important consideration for many beneficiaries considering an appeal, 
we believe it would be improper to significantly limit the class of 
eligible beneficiaries by requiring a beneficiary to seek SNF care as a 
prerequisite for appealing based on a hospital reclassification.
    Finally, an implicit requirement for beneficiaries seeking 
inpatient coverage through the prospective appeals process is having 
available Medicare Part A benefits. The proposed appeals process, as 
with other similar appeals processes, does not override statutory 
benefit limits, such as the availability of inpatient hospital days. 
Should a beneficiary begin an appeal and it becomes evident that 
inpatient days are exhausted, the appeal decision will be unfavorable. 
Even if the QIO is unaware that the beneficiary had exhausted their 
inpatient days, the usual claim edits would trigger, and coverage would 
not be available to the beneficiary upon the submission of a claim. 
This appeals process does not confer benefits in excess of Medicare 
statutory limits.
    Comment: A commenter recommended CMS permit SNF staff to file 
appeals under the prospective appeals process on behalf of eligible 
beneficiaries. The commenter asserted beneficiaries often lack the 
necessary support to work through appeals processes on their own and 
SNFs would be motivated to ensure they receive proper payment for 
services they render. Another commenter questioned whether hospital 
staff may assist a beneficiary in the proposed appeals process by 
answering questions and guiding the beneficiary through the appeals 
process.
    Response: We appreciate the commenter's suggestion to permit a SNF 
to file an appeal on behalf of an enrollee; however, we do not agree 
that

[[Page 83273]]

party status should be extended to providers for the new appeals 
process. The prospective appeals process, proposed at Sec. Sec.  
405.1210 through 405.1212, is available to eligible beneficiaries who, 
after formally being admitted as an inpatient, have subsequently been 
reclassified by the hospital as an outpatient receiving observation 
services. We explained in the proposed rule that the court order 
specifically required the provision of appeal rights to a defined set 
of class members, and that definition did not include the provider of 
services (that is, hospitals and SNFs). Accordingly, we proposed 
limiting party status for these new appeals to the defined class 
members. The same limitation currently exists for hospital discharge 
appeals procedures in Sec. Sec.  405.1205 and 405.1206, where a 
provider of services does not have party status.
    While we are not extending party status to SNFs or other provider 
types, we are not modifying existing rules related to appointed 
representatives who may act on behalf of a beneficiary, nor have we 
restricted hospital or provider staff from assisting beneficiaries as 
they navigate their status reclassification and appeals process. We 
believe hospital and other provider staff already routinely engage in 
support activities for beneficiaries in their care and we endorse 
providers extending such support to eligible beneficiaries appealing 
based on a hospital reclassification. We do not believe it is necessary 
to strictly define or limit the type of support that may be provided to 
an eligible beneficiary but believe such support could include 
answering questions, providing explanations on the reclassification and 
appeals process, or assisting the beneficiary or their representative 
in contacting a State Health Insurance Program, 1-800-MEDICARE, or the 
QIO. We note that we do not believe support includes hospital staff 
completing the beneficiary specific portions of the MCSN that document 
the beneficiary's comprehension of the notice and the date/time of 
receipt before delivery to the beneficiary.
    Comment: Multiple commenters commended CMS for not placing a 
deadline on when an eligible beneficiary may submit an appeal request 
to the QIO after leaving the hospital. A few commenters sought 
clarification on whether there is a deadline for eligible beneficiaries 
to submit an appeal to the QIO after leaving the hospital.
    Response: We thank commenters for their support on the proposed 
appeal submission timeframes and for recognizing our intent to afford 
beneficiaries maximum flexibility when considering whether to request 
an appeal under the prospective appeals process. We proposed in Sec.  
405.1211(b)(5) that an eligible beneficiary may file a request for 
review by the QIO regarding their change in hospital status after the 
deadline established for expedited determinations, at proposed Sec.  
405.1211(b)(1). More specifically, the beneficiary may file an appeal 
request after they are released from the hospital. In addition, we 
proposed that these untimely appeal requests, which we also referred to 
as ``standard'' appeal requests, may be made ``at any time.'' We did 
not propose a deadline for these appeal requests in order to afford 
beneficiaries flexibility when exercising their appeal rights, 
especially those who may have had a SNF stay following their change in 
status from inpatient to outpatient receiving observation services. We 
continue to believe beneficiaries should have the maximum opportunity 
to pursue an appeal regarding their status change and potentially 
obtain coverage for SNF services which they may have paid out-of-
pocket.
    Comment: A commenter suggested CMS extend the timeframe for 
eligible beneficiaries to request an expedited determination to 48 
hours after leaving the hospital. The commenter explained that an 
extended submission timeframe would better protect a beneficiary's 
rights by affording the shortest appeal decision timeframe available.
    Response: We understand and appreciate the commenter's intent to 
provide beneficiaries with as long as possible to request and receive 
an expedited determination from the QIO. When proposing the expedited 
appeal submission timeframe, we weighed the benefit of providing 
beneficiaries ample time to submit an appeal request with ensuring 
beneficiaries submit the appeal request as soon as possible. Because 
there is no liability coverage during the proposed appeals process, we 
believe it is in beneficiaries' best interest to receive an appeal 
decision as soon as possible. In addition, we believe rapid decisions 
will provide beneficiaries with a more accurate picture of their 
inpatient coverage status and better inform their future financial and 
health care decisions, such as electing post-acute care services. If a 
beneficiary obtains a favorable decision from the QIO, a rapid decision 
will also maximize their potential for coverage in a SNF or other post-
acute care facility.
    We believe the proposed policy requiring beneficiaries to submit an 
expedited appeal before leaving the hospital strikes an effective 
balance that incentivizes beneficiaries to submit appeals quickly, so 
to receive a faster appeal decision, with ensuring untimely appeals are 
still processed expeditiously. An expedited appeal timely submitted to 
the QIO will be decided within 1 calendar day of receiving all relevant 
requested information. An untimely expedited appeal submission to the 
QIO will be decided within 2 calendar days of receiving all relevant 
requested information. This policy, while slightly slower than the 
expedited determination timeframes, still provides beneficiaries with a 
decision far sooner than if they had to request an appeal under the 
standard claims appeal timeframes (60 days at the first level of the 
claims appeals process).
    Comment: Multiple commenters sought clarification from CMS on 
whether the proposed regulations require hospitals to retain 
beneficiaries for the duration of an expedited QIO review. A few 
commenters suggested CMS clarify that the QIO must continue to process 
an expedited determination request whether the beneficiary is present 
in the hospital or not. Several commenters recommended CMS permit 
hospitals to discharge or release beneficiaries from the hospital, as 
reasonable and necessary, during the pendency of an expedited 
determination. Other commenters warned the proposed policy will 
needlessly delay beneficiaries' safe release from hospitals and warned 
that requiring hospitals to keep beneficiaries in the facilities would 
increase the risk of beneficiaries contracting hospital infections and 
may lead to increased mortalities.
    Response: We did not propose and are not finalizing a requirement 
that would restrict hospitals from safely releasing eligible 
beneficiaries that are awaiting a decision from the QIO on an expedited 
determination request. We explained in the proposed rule that the court 
in Alexander indicated that HHS should use a process for expedited 
appeals regarding hospital status changes that is ``substantially 
similar'' to the existing process for expedited hospital discharge 
appeals at Sec. Sec.  405.1205 through 405.1208. While we believe we 
have appropriately followed the direction of the court, we noted in the 
proposed rule that there are certain differences between the proposed 
expedited determination process and the existing hospital discharge 
appeals process. Most notably, we explained that the proposed expedited 
determination process does not afford beneficiaries

[[Page 83274]]

protection from financial liability for services furnished during the 
pendency of the QIO's review. Instead, we proposed that the hospital 
may not bill the beneficiary until after the QIO has issued its 
expedited determination or issued a decision in response to a timely 
reconsideration request, as applicable. We noted that this billing 
protection does not extend coverage to beneficiaries during the appeal, 
which is consistent with Sec.  405.1202(g).
    Although we believed the policy was clearly described in the 
proposed rule, as several commenters had similar misunderstandings, we 
explicitly state here that the new appeals process does not direct 
hospitals to house or treat a beneficiary with medically unnecessary 
care during the pendency of their appeal. Hospitals should continue to 
follow all existing federal, state, and local rules and internal 
standard operating procedures when considering the release of a 
beneficiary who no longer requires hospital services. The only 
interaction this appeals process has with an eligible beneficiary's 
release from the hospital is the proposed requirement for hospitals to 
deliver the MCSN no later than 4 hours before the beneficiary's release 
from the hospital. We continue to believe that hospitals are equipped 
to accurately estimate, to within 4 hours, when an enrollee will cease 
to need medical care and should be able to comply with the MCSN 
delivery requirement.
    Because we did not propose and are not finalizing a requirement 
that restricts hospitals from releasing eligible beneficiaries during 
an appeal, we do not believe we need to address the comments related to 
unnecessarily housing patients that do not need hospital-level care in 
hospitals.
    Comment: Multiple commenters requested CMS clarify whether 
enrollees receive financial liability protection for services received 
while their appeal is pending. Several commenters urged CMS to hold 
beneficiaries harmless for the costs of services received while an 
expedited appeal is pending. These commenters suggested CMS will 
violate the court's direction that CMS should use a process for the 
expedited appeals that is ``substantially similar'' to the inpatient 
hospital discharge appeals process if beneficiaries are not held 
financially harmless while an expedited appeal is pending.
    Several commenters requested guidance on how to code and bill 
beneficiaries for time spent in the hospital during their appeal. These 
commenters incorrectly believed the hospital could not release patients 
during the appeals process and suggested the hospital would need to 
bill for custodial care. Similarly, other commenters questioned how to 
properly inform a beneficiary that they will be financially liable for 
services received during their appeal.
    Response: We appreciate the commenters' concerns and interests in 
protecting beneficiaries' financial liability during the expedited 
appeals process. As we previously explained, we believe the proposed 
structure of the expedited appeals process complies with the court 
order indicating we should use a process for expedited appeals 
regarding hospital status changes that is ``substantially similar'' to 
the existing process for expedited hospital discharge appeals at 
Sec. Sec.  405.1205 through 405.1208. Nevertheless, there are certain 
important differences between the two appeals processes. Most notably, 
the proposed expedited determination process does not afford 
beneficiaries protection from financial liability for services 
furnished during the pendency of the QIO's review. As discussed in the 
proposed rule, Section 1869(c)(3)(C)(iii)(III) of the Act (by 
incorporating the financial liability protection in section 1154(e)(4) 
of the Act in effect prior to the enactment of section 1869(c)(3)(C)) 
provides beneficiaries with coverage during the inpatient hospital 
discharge appeal process. However, this statute only applies to 
beneficiaries being discharged from a Medicare covered inpatient 
hospital stay. Under the proposed appeals process, beneficiaries are 
eligible to appeal based on a hospital's reclassification of their 
inpatient status to outpatient receiving observation services. Because 
the new appeals process is not an appeal of a covered inpatient 
hospital discharge, section 1869(c)(3)(C)(iii)(III) is inapplicable to 
the new appeals process. Thus, we did not propose and are not 
finalizing financial liability protections for eligible beneficiaries 
that appeal regarding a hospital reclassification from inpatient to 
outpatient receiving observation services.
    We note that most of the commenters requesting guidance on 
notification and coding related to billing beneficiaries during the 
appeals process seem to misinterpret our proposed regulations to 
require hospitals to retain beneficiaries during the appeals process 
even if they no longer meet the requirements for medically necessary 
care. As we addressed in a previous comment, the proposed appeals 
procedures do not prevent hospitals from safely releasing beneficiaries 
based on their particular medical circumstances. Therefore, hospitals 
should continue to follow all existing federal, state, and local 
requirements for providing, and notifying beneficiaries of their 
financial liability related to non-covered care.
    Comment: A few commenters urged CMS to grant beneficiaries 
presumptive SNF coverage from the date a prospective appeal is 
requested to at least the date of the QIO decision.
    Response: While we appreciate the commenters' suggestion, we 
decline to create a policy that would provide presumptive SNF coverage 
for the days in which a prospective appeal is being adjudicated by the 
QIO. To qualify for SNF services coverage, section 1861(i) of the Act 
requires Medicare beneficiaries to have a medically necessary 3-
consecutive-day inpatient hospital stay within 30 days of admission to 
a SNF. However, beneficiaries eligible for the proposed prospective 
appeals process had their hospital status changed from inpatient to 
outpatient receiving observation services. This means the beneficiaries 
may not have acquired the necessary 3-day stay to qualify for SNF 
coverage. Indeed, this is one of the primary reasons the court in 
Alexander directed CMS to create an expedited determination process for 
eligible beneficiaries. Therefore, in order to meet the 3-day stay 
requirement, as established by statute, most eligible beneficiaries 
would have to receive a favorable decision from the QIO. If CMS were to 
provide presumptive SNF coverage for the days in which a QIO is 
adjudicating a prospective appeal, but then a beneficiary did not 
receive a favorable decision from the QIO, the SNF stay would likely 
result in non-covered SNF care, with potentially significant 
beneficiary out-of-pocket expenses, regardless of any previous 
presumption of coverage. We believe the commenters' suggestion would, 
therefore, lead to inequitable outcomes for beneficiaries that receive 
unfavorable QIO decisions.
    Comment: Multiple commenters supported our proposed requirement 
prohibiting hospitals from billing eligible beneficiaries until the 
expedited determination and reconsideration, when applicable, processes 
are complete. A commenter sought clarification on the appropriate time 
to bill a beneficiary for services after an expedited determination has 
been made. The commenter also questioned whether the hospital should 
rescind a bill issued to a beneficiary in the time between when the 
beneficiary received an expedited determination and requested a timely 
reconsideration. Separately, a few commenters requested

[[Page 83275]]

CMS extend the beneficiary billing protections for expedited appeals to 
untimely appeals.
    Response: We appreciate the commenters support for our proposal. We 
proposed in Sec.  405.1211(e) that a hospital may not bill a 
beneficiary who requested a timely appeal for any services at issue in 
the appeal until the expedited determination process (and 
reconsideration process, when applicable) is complete. This policy 
mirrors existing procedures for appeals related to the termination of 
non-hospital services found at Sec.  405.1202(g). If a hospital 
inadvertently bills a beneficiary during a period in which the proposed 
requirements restrict hospital billing, we agree with the commenter 
that the hospital should immediately rescind the bill.
    With respect to extending beneficiary billing protections for 
untimely appeals, we appreciate the commenters' suggestion and interest 
in enhancing beneficiary protections. However, pursuant to our proposed 
policy, eligible beneficiaries may at any time request a standard (that 
is, untimely) appeal relating to a hospital's decision to reclassify 
their status from inpatient to outpatient receiving observation 
services. While this policy provides beneficiaries with maximum 
flexibility when considering an appeal relating to a hospital 
reclassification, the timing of appeal requests could be unpredictable 
and, in some cases, a standard appeal request could be submitted after 
a beneficiary receives a hospital bill. We believe adopting such a 
proposal would be administratively impractical for hospitals to comply 
with as they could not be expected to reasonably anticipate when they 
would be barred from billing a beneficiary.
    Comment: A commenter suggested the adjudication timeframes for 
``regular appeals'' could result in financial uncertainty for hospitals 
as organizations could wait 2 years before the issuance of a final 
decision.
    Response: We are unclear how the commenter estimated hospitals may 
have to wait 2 years before receiving a final decision. We posit the 
commenter considered the potential cumulative adjudication times if an 
eligible beneficiary appealed an adverse expedited reconsideration 
decision to the ALJ or beyond. Nevertheless, as stated in the proposed 
rule at Sec. Sec.  405.1211(e) and 405.1212(e), a hospital is only 
prohibited from billing a beneficiary during the expedited levels of 
the determination and reconsideration processes. However, hospitals are 
permitted to bill beneficiaries after the QIO expedited determination 
and reconsideration levels of appeal are complete. As with other 
Medicare expedited and claim appeal processes, the higher levels of 
administrative appeal may not conclude until well after the service and 
billing are completed. Even so, we do not believe the proposed appeals 
adjudication timeframes would introduce significant financial 
uncertainty for hospitals due to the very low anticipated first level 
appeals volume of around 8,000 appeals nationally, per year.
    Comment: Multiple commenters sought clarification on the impact of 
a beneficiary receiving a favorable expedited or standard determination 
from the QIO. Their questions were as follows:
    <bullet> Upon the QIO issuing a favorable expedited determination 
to a beneficiary who remained in the hospital during their appeal, is 
the hospital required to present the IM before the beneficiary may be 
discharged?
    <bullet> Would a beneficiary in that scenario be able to appeal the 
hospital inpatient discharge to the QIO, if desired?
    <bullet> Upon a successful appeal, must a new inpatient order be 
entered or is the hospital reclassification decision considered null 
and void?
    <bullet> Must the inpatient order be revised if a beneficiary 
received a favorable standard appeal decision and already released from 
the hospital?
    <bullet> May a hospital collect the Part A deductible from the 
beneficiary upon a favorable determination by the QIO? (The commenter 
also wanted CMS to understand that some beneficiaries may have higher 
out-of-pocket costs when they receive a favorable appeal, due to the 
higher Part A deductible.)
    <bullet> Must hospitals use a specific condition code when 
rebilling a Part A claim after a favorable standard appeal decision 
that was requested after the hospital had billed Part B?
    Another commenter suggested hospitals should not have to refund to 
an eligible beneficiary any payments collected prior to the beneficiary 
receiving a favorable standard appeal decision from the QIO. The 
commenter suggested the Part B claim should be reopened instead and the 
hospital should be paid any remaining balance before the hospital is 
required to refund the beneficiary, as necessary.
    Response: We did not propose and are not finalizing any changes to 
other hospital notice delivery requirements. If a beneficiary is still 
present in the hospital when a hospital's reclassification is reversed 
by a QIO, the beneficiary would again be deemed an inpatient under the 
original hospital admission order for purposes of Medicare Part A 
coverage. Hospitals would then be required to follow all applicable 
Medicare inpatient requirements when treating and discharging the 
beneficiary to include following the standard IM delivery guidelines 
set forth at Sec.  405.1205(1). However, we expect most beneficiaries 
will receive their appeal decisions after being released from the 
hospital as hospitals historically have reclassified beneficiaries 
close to termination of hospital services. We will issue instructions 
for the submission or adjustment of claims affected by a disregarded 
reclassification in program instructions following this rule. The 
instructions will make use of existing standard claim coding and 
submission processes familiar to the affected providers.
    We appreciate the feedback we received from commenters on the 
expedited determination procedures. Based on analysis of the public 
comments, we will be finalizing these provisions as proposed.
4. Expedited Reconsideration Procedures When a Beneficiary Is 
Reclassified From an Inpatient to an Outpatient Receiving Observation 
Services (Sec.  405.1212)
    In new Sec.  405.1212 we proposed to set forth the procedures for 
the new expedited reconsideration process. Proposed Sec.  405.1212 
contained the responsibilities of the hospitals, QIOs, and 
beneficiaries relative to the reconsideration process.
    Proposed Sec.  405.1212(a) described an eligible beneficiary's 
right to request an expedited reconsideration by a QIO when they are 
dissatisfied with the expedited determination decision by the QIO.
    In Sec.  405.1212(b) we proposed a process for beneficiaries to 
request an expedited reconsideration by a QIO. Proposed paragraph 
(b)(1) provided that beneficiaries must request an appeal to the QIO no 
later than noon of the calendar day following the initial notification 
of the expedited determination by the QIO. Under this proposal, the 
earlier of the calendar day of the QIO's notification of the 
beneficiary by telephone or in writing of its determination (under 
Sec.  405.1211(c)(8)) would start the timeframe for the beneficiary to 
request an expedited reconsideration. The beneficiary's request for a 
reconsideration may be in writing or by telephone.
    Proposed Sec. Sec.  405.1212(b)(2) and (b)(3) also explained the 
responsibilities of beneficiaries to discuss the case, if

[[Page 83276]]

requested by the QIO, as well as beneficiaries' right to submit written 
evidence to be considered by the QIO. Finally, proposed (b)(4) and 
(b)(5) stated that if a beneficiary requests an appeal timely, they 
would not be billed until the QIO makes its reconsideration decision; 
however, if the beneficiary's request for an expedited reconsideration 
is untimely, the hospital may bill a beneficiary before the 
reconsideration determination has been made.
    Proposed Sec. Sec.  405.1212(c)(1) through 405.1212(c)(4) described 
the procedures that the QIO must follow in performing the expedited 
reconsideration. Specifically, we proposed in Sec.  405.1212(c)(1) that 
the QIO must immediately notify a hospital that a request for an 
expedited reconsideration has been made; this means that the notice to 
the hospital must be the day the QIO receives the request for expedited 
reconsideration. Per proposed Sec.  405.1212(c)(2), the QIO would be 
required to offer both the beneficiary and the hospital an opportunity 
to provide further information. An example of further information from 
the hospital could include an explanation of why the beneficiary was 
reclassified from an inpatient to an outpatient receiving observation 
services. Similarly, an example of further information from the 
eligible beneficiary could include an explanation of why inpatient 
status should have been maintained.
    Proposed Sec.  405.1212(c)(3)(i) provided that the QIO must render 
a decision and notify all relevant persons and entities within 2 
calendar days of receiving all information necessary to complete the 
appeal if the beneficiary requested the reconsideration by noon of the 
day after receiving notice of the QIO's determination under Sec.  
405.1211. This timeframe is as rapid as possible to minimize potential 
liability for beneficiaries as well as to maximize their potential for 
coverage in a SNF should they obtain a favorable reconsideration 
decision by the QIO. A Medicare-covered SNF stay must begin within 30 
days of a beneficiary's discharge from a hospital. To that end, we 
proposed a review process for QIOs to make their decisions as quickly 
as possible so beneficiaries receiving favorable decisions will have 
time to plan for and begin a SNF stay within the 30-day limit for 
coverage.
    Proposed Sec.  405.1212(c)(3)(ii) provided that if a beneficiary 
makes an untimely request for an expedited reconsideration, the QIO 
must still accept the request and render a decision within 3 calendar 
days. Under this proposal, the 2-calendar day QIO decision deadline 
does not apply in the case of an untimely request for an expedited 
reconsideration. However, the expeditious 3-day untimely timeframe 
affords a beneficiary the ability to exercise their right to an 
expedited appeal and potentially be entitled to SNF coverage within the 
30-calendar day time limit for SNF coverage following hospital release, 
should they receive a favorable expedited reconsideration determination 
from a QIO.
    The QIO decision, as required by proposed Sec.  405.1212(c)(4)(i-
iv), must include the basis and detailed rationale for the QIO 
decision. The basis of a decision is a description of, and citations 
to, the Medicare coverage rule, instruction, or other policies 
applicable to the review. A detailed rationale includes the facts 
specific to the beneficiary's situation and a detailed explanation of 
why the inpatient admission did or did not satisfy the relevant 
criteria for Part A coverage at the time the services were furnished. 
The decision must also include the potential financial ramifications, 
such as deductibles or coinsurance for the beneficiary, the 
beneficiary's right to a hearing by an ALJ, and how a beneficiary may 
make a request for an expedited reconsideration.
    Proposed Sec.  405.1212(d) set forth the responsibilities of 
hospitals in the expedited appeals process. As proposed, a hospital 
may, but is not required to, submit evidence to be considered by a QIO 
in making its reconsideration decision. If a hospital does not furnish 
a QIO with requested additional information, the QIO may proceed to 
make a decision based on the information used in the expedited 
determination. This is to protect the interests of the beneficiary by 
ensuring they receive their decision within the QIO's \24\ required 
timeframes of 2 calendar days for a timely request and 3 calendar days 
for an untimely request. This proposed policy is consistent with 
obligations on hospitals in the second level expedited review of a 
hospital discharge and on providers of services in the second level 
expedited review of a termination of provider services (Sec.  
405.1204(e)).
---------------------------------------------------------------------------

    \24\ We referred to ``BFCC-QIO'' in the proposed rule but note 
that we are making a technical change at Sec.  405.1211(d) to change 
to ``QIO'' so that it comports with all other references to the QIO 
in this subpart.
---------------------------------------------------------------------------

    In Sec.  405.1212(e) we proposed that a hospital may not bill a 
beneficiary who has appealed timely for any services at issue in the 
appeal until the expedited reconsideration process is complete.
    Proposed Sec.  405.1212(f) set forth that a QIO reconsideration is 
binding on the beneficiary, hospital, and MAC unless the beneficiary 
pursues an appeal with an ALJ in accordance with 42 CFR part 478 
subpart B. This concept is consistent with the existing claims appeals 
process currently established under Sec. Sec.  405.1000 through 
405.1140. The decision is binding for purposes of payment only, such 
that if the hospital submits a claim under Part A or Part B, CMS will 
make payment.
    Per section 1155 of the Act, a beneficiary who is dissatisfied by a 
QIO's reconsideration of its initial decision may seek additional 
administrative review and, ultimately, judicial review, if the amount 
in controversy limits are met.\25\ Our proposal followed that process.
---------------------------------------------------------------------------

    \25\ Under section 1155 of the Act, for an appeal with an ALJ, 
the amount in controversy must be $200 or more, and for judicial 
review, the amount in controversy must be $2,000 or more.
---------------------------------------------------------------------------

    We received the following comments regarding our proposed 
requirements related to the prospective appeal reconsideration 
procedures.
    Comment: Several commenters supported the proposed reconsideration 
procedures when a beneficiary is reclassified from an inpatient to an 
outpatient receiving observation services. A commenter believed the 
proposed timelines for beneficiaries to request, and QIOs to render, a 
reconsideration decision were reasonable and would protect the ability 
of beneficiaries to potentially obtain SNF benefits within the 30-day 
period following release from a hospital.
    Response: We thank the commenters for their support.
    Comment: A commenter suggested CMS harmonize the proposed 
prospective appeals procedures with existing Parts A and B claims 
appeal procedures because the commenter believed the proposed appeal 
procedures do not clearly identify if beneficiaries may continue to 
appeal after receiving an unfavorable QIO reconsideration decision.
    Response: We explained in the proposed rule that a beneficiary who 
is dissatisfied by a QIO's reconsideration of its initial determination 
may seek additional administrative review and, ultimately, judicial 
review, if the amount-in-controversy limits are met. This means a 
beneficiary may appeal an adverse QIO reconsideration decision to an 
ALJ, if the amount in controversy is $200 or more, then to the Medicare 
Appeals Council (MAC), and, if the MAC denies the request for review or 
issues an unfavorable decision, to

[[Page 83277]]

federal district court, as long as the amount in controversy is $2,000 
or more.
    Comment: A commenter asserted beneficiaries should be given up to 
24 hours to request an appeal of a QIO expedited determination, rather 
than noon of the next day, as was proposed in Sec.  405.1212 (b). The 
commenter was concerned that beneficiaries may not understand the 
appeals process in time to receive an expedited reconsideration. 
Another commenter generally suggested beneficiaries receive more time 
to request an expedited reconsideration.
    Response: We appreciate the commenters' interest in providing 
beneficiaries sufficient time to request a timely reconsideration. We 
proposed the expedited reconsideration request timeframes to mirror 
appeal submission timeframes for similar processes, such as inpatient 
hospital discharge appeals. In our experience, beneficiaries have 
sufficient opportunity to request an expedited reconsideration under 
the proposed timeframes. Additionally, when a QIO provides an expedited 
determination by phone, the QIO personnel will ask the beneficiary, or 
their representative, if the beneficiary would like to request an 
expedited reconsideration during the same phone call. This means a 
beneficiary, or their representative, may immediately request a second-
level appeal (an expedited reconsideration) at the time they receive 
their first-level decision (expedited determination), without having to 
take any additional actions.
    We note that even if the beneficiary fails to timely request an 
expedited reconsideration, the QIO will process an untimely request and 
the beneficiary will receive a decision in 3 calendar days (instead of 
2 calendar days, which is the expedited processing timeframe).
    Comment: A commenter requested that CMS acknowledge that hospitals 
may submit claims and receive Part A payment for services that are on 
appeal to an ALJ under the proposed prospective appeals process.
    Response: We believe the commenter meant to request that CMS 
confirm that hospitals may bill Medicare and receive Part B payment 
while an appeal regarding a hospital status change is pending before an 
ALJ. If a hospital decides to reclassify a beneficiary from inpatient 
to outpatient receiving observation services, then the hospital would 
only bill Medicare under Part B. Nevertheless, we confirm that a 
hospital may bill Medicare for covered services while an appeal is 
pending at the ALJ.
    Comment: A commenter requested CMS clarify which beneficiary notice 
a hospital must deliver to a beneficiary to notify them of their 
financial liability following an unfavorable expedited reconsideration 
decision.
    Response: We proposed at Sec.  405.1212(c)(4)(i) through (iv) that 
a QIO reconsideration decision must include, among other items, the 
potential financial ramifications, such as deductible and coinsurance 
for the beneficiary. Thus, the QIO is responsible for informing a 
beneficiary of their potential financial liability related to an 
unfavorable reconsideration decision.
    We appreciate the feedback we received from commenters on the 
expedited reconsideration procedures. Based on analysis of the public 
comments, we will be finalizing these provisions as proposed.
5. Conforming Changes Beneficiary Notice of Discharge or Change in 
Status Rights (Sec.  489.27)
    In conjunction with the proposed notice provisions Sec. Sec.  
405.1210 through 405.1212, we proposed to make conforming changes to a 
related existing regulatory provision. We proposed to amend the 
provider agreement requirements in Sec.  489.27(b) to cross-reference 
the proposed notice requirements. Thus, proposed Sec.  489.27(b) 
specified that delivery of the proposed appeals notice was required as 
part of the Medicare provider agreement. Lastly, to account for this 
conforming change, we proposed to change the title of Sec.  489.27 to 
include ``change in status'' to more accurately reflect the actions 
that would require the issuance of a notice.
    We did not receive any comments on the proposed changes related to 
these conforming changes. As a result, we are finalizing our policies 
as proposed.
6. Conforming Changes to Quality Improvement Organization (QIO) Review 
Regulations
    We also proposed to amend the QIO regulations at Sec.  476.71(a) to 
conform with the proposed changes in review responsibilities at 
Sec. Sec.  405.1210 through 405.1212. The proposed amendment to the QIO 
regulations would add a new review type to the currently enumerated 
list of reviews performed by QIOs, specifically for beneficiary appeals 
regarding hospital reclassifications of a fee-for-service beneficiary's 
inpatient status to that of outpatient receiving observation services 
when the eligibility requirements to file a prospective appeal being 
finalized in this rule are met. The beneficiary eligibility 
requirements for filing expedited appeals and the required processes 
for those appeals are described in sections III.B.1. through III.B.5. 
of this final rule. This proposed amendment to the QIO regulation 
specified that QIOs perform review functions for these beneficiary 
appeals in a manner that is consistent with other QIO review functions 
while ensuring alignment with the proposed beneficiary eligibility and 
process requirements for such appeals.
    The QIO regulations at 42 CFR 476.1(a) define ``QIO review'' as a 
review performed in fulfillment of a contract with CMS, either by the 
QIO or its subcontractors. Under regulations at Sec.  476.71, the QIO's 
review responsibilities include: (1) whether services are or were 
reasonable and medically necessary for diagnosis or treatment; (2) 
whether the quality of the services meets professionally recognized 
standards of health care, as determined through the resolution of oral 
beneficiary complaints; (3) whether care and services furnished or 
proposed on an inpatient basis could be effectively furnished more 
economically on an outpatient basis or in another inpatient setting; 
(4) diagnostic related group (DRG) validation of diagnosis and 
procedure information provided by hospitals; (5) the completeness, 
adequacy and quality of hospital care provided; (6) medical necessity, 
reasonableness and appropriateness of hospital admissions and 
discharges; (7) medical necessity, reasonableness and appropriateness 
of inpatient hospital care for which additional outlier payment is 
sought; and (8) whether a hospital has misrepresented admission or 
discharge information resulting in unnecessary or multiple admissions, 
or inappropriate billing.
    We stated in the proposed rule that our proposed amendment to Sec.  
476.71(a) would add paragraph (9) to this list of QIO review 
responsibilities to include the new beneficiary-initiated appeals for 
when a hospital reclassifies certain fee-for-service beneficiaries' 
admission status from inpatient to that of outpatient.
    In considering the existing hospital discharge appeals process, CMS 
determined that the circumstances for these new appeals, and the 
potential impact of such appeal decisions on Part A coverage for 
subsequent care in other settings, necessitated a new notification 
process and review timelines which differ from the processes that 
govern the existing hospital discharge appeals process. These new 
appeals are discussed in section III.B. of this final rule and appear 
at Sec. Sec.  405.1210 through 405.1212.
    The proposed amendment to the QIO regulations, as previously 
discussed, applied to the processes and timeframes

[[Page 83278]]

for the new appeals discussed in section III.B. of this final rule, 
which have been designed to meet the needs of beneficiaries who have 
had their inpatient status reclassified to outpatient receiving 
observation services.
    In general, we received comments that were supportive of having the 
BFCC-QIOs conduct the new expedited and standard appeals and 
reconsiderations as a new type of QIO review under proposed Sec.  
476.71(a)(9), and for which QIOs would follow the processes specified 
under Sec. Sec.  405.1211 and 405.1212.
    Comment: Commenters indicated that QIOs' expertise conducting 
similar types of beneficiary appeals as well as reviewing patient 
status under the 2-midnight rule places them in an ideal position to 
review the new appeals under the prospective appeals process.
    Response: We thank the commenters for their recognition of the 
QIOs' experience with beneficiary appeals and ability to conduct these 
new beneficiary appeals. QIOs have been performing expedited reviews 
for beneficiaries appealing inpatient discharges and termination of 
provider services in non-hospital settings for decades. We believe 
placing responsibility for reviewing the new prospective appeals with 
the QIOs will ensure consistent and timely review.
    CMS is finalizing the conforming change to the QIO regulation as 
proposed, which adds the new prospective appeals to the enumerated list 
of QIO review responsibilities under Sec.  476.71(a)(9).
    A few commenters requested further clarification on specific topic 
areas which we address below.
    Comment: A few commenters requested clarification on the decision-
making criteria that would be used by the BFCC-QIOs for whether an 
inpatient admission order was valid; citing the potential for 
uncertainty, inconsistency and discretion in medical decision making.
    Response: Consistent with existing CMS medical review guidance, in 
determining whether an initial inpatient admission met the criteria for 
Part A coverage, the QIOs would only consider the medical evidence 
which was available to the physician at the time an admission decision 
was made. Information which became available only after admission (for 
example, test results) would not be taken into consideration ``except 
in cases where considering the post-admission information would support 
a finding that an admission was medically necessary'' as stated in the 
Medicare Benefits Policy Manual, Ch. 1, Sec.  10.
    Comment: A commenter requested clarification regarding whether the 
QIOs will be staffed over weekends and holidays to conduct appeals and 
whether hospitals are expected to respond to requests from QIOs for 
patient records (as described in proposed Sec.  405.1211(d)(1)) over 
weekends.
    Response: We clarify that pursuant to their contracts, BFCC-QIOs 
are required to maintain operations 24 hours a day, 7 days a week. 
Should a beneficiary file a request for an expedited appeal over a 
weekend or holiday, the QIO will proceed with contacting the hospital 
to notify the hospital of the request and obtain medical documentation 
for the appeal. The hospital is required to respond by noon of the 
calendar day after the QIO notifies the hospital of the request for an 
expedited appeal.
    However, should a beneficiary or their representative request that 
the hospital provide them with a copy of the records it provided to the 
QIO for the appeal, the hospital will be required to provide the 
records by no later than close of business of the first day after the 
material is requested by the beneficiary or the beneficiary's 
representative under 42 CFR 405.1211(d)(2). We clarify that for 
administrative functions ``close of business'' generally means 5:00 
p.m. in the hospital's time zone.
    Comment: A few commenters requested clarification on how the QIO 
will communicate decisions to the hospital and to the beneficiary.
    Response: QIOs employ multiple modes of communication with 
beneficiaries and providers during current expedited appeals processes 
under 42 CFR 405.1202 and will do so for the expedited appeals 
finalized in this rule. These multiple modes of communication are used 
by the QIOs to ensure timely intake, patient record requests, and 
communication of decisions to both beneficiaries and providers. 
Currently a beneficiary appeal may be initiated via phone but would be 
formalized in writing by the QIO as required for expedited appeals 
under 42 CFR 405.1202(e)(8). QIO patient record requests for appeals, 
and appeal status tracking typically occur via web-based systems and 
phone. Under Sec. Sec.  405.1211 and 405.1212, QIOs are required to 
notify the eligible beneficiary, the hospital, and SNF, if applicable, 
of their decision by telephone and issue written decisions for both 
initial determinations and reconsiderations.
    Comment: Commenters suggested that CMS provide clear and objective 
guidelines for the BFCC-QIOs to follow when conducting the new appeals 
to ensure consistency.
    Response: We appreciate the commenters' suggestion and will 
consider developing further implementation guidance for the BFCC-QIOs.
    Comment: A commenter suggested that the BFCC-QIOs should issue 
written notices of their decisions to both the beneficiaries and the 
hospitals that contain the reasons and evidence for their 
determinations.
    Response: We appreciate the need for beneficiaries and hospitals to 
understand the basis and rationale for the QIO's decision. Under 
Sec. Sec.  405.1211 and 405.1212, QIOs are required to issue written 
decisions for both initial determinations and reconsiderations. These 
written decisions contain the reasons for their decision-making and the 
content that was evaluated to make their decisions.
    Comment: A commenter suggested that CMS track the timeliness of the 
BFCC-QIOs in adjudicating the appeals and to report information on 
these and other appeals to the public.
    Response: CMS routinely tracks the timeliness of resolving 
beneficiary appeals and will do so for these new prospective appeals. 
We appreciate the public's interest in ensuring accountability for the 
timely conduct of these appeals and may consider additional reporting 
in the future.
    Comment: A few commenters suggested that CMS establish an 
electronic means for the BFCC-QIO to provide updates on appeals to 
hospitals.
    Response: The QIOs currently maintain electronic/web-based means of 
communicating with providers for beneficiary appeals--both for patient 
record requests, and for appeal decisions.
    Comment: A commenter expressed concern that the BFCC-QIOs may not 
have adequate resources to conduct these reviews, and this may divert 
resources from other areas like quality improvement and quality 
reporting. The BFCC-QIOs may need to hire a large number of clinical 
staff for these appeals, thus contributing to healthcare workforce 
shortages. Another commenter was concerned that the new appeals could 
negatively affect the QIOs' ability to work on quality reporting and 
improvement programs for hospitals.
    Response: We do not believe the new appeals process will 
significantly affect operations or staffing within hospitals due to the 
low annual volume anticipated. While we anticipate the BFCC-QIOs will 
need to hire additional

[[Page 83279]]

clinical staff to review the additional appeals, we do not anticipate 
this would have an impact on the clinical workforce on a national 
level. Thus, we do not foresee this new appeals process having a 
significant impact on clinical care resources.
    We thank the commenters for their feedback and recommendations for 
the prospective appeals process. After consideration of the public 
comments, we will be finalizing our policies as proposed. However, we 
note that we are making the following editorial/technical corrections:
    <bullet> In Sec.  405.1211(c)(6)(ii), we are correcting a 
typographical error in the proposed regulations text and stating that 
for untimely requests, the QIO must make a determination within 2 
calendar days.
    <bullet> In Sec.  405.1211(d), we are changing ``BFCC-QIO'' to 
``QIO'' to comport with all other references to the QIO in this 
subpart.
    <bullet> In Sec.  405.1211(d)(7), we are making technical edits for 
clarity.
    <bullet> In Sec.  405.1212 --
    ++ In paragraph (c)(3)(i), we are revising the phrase ``A timely 
request from in accordance'' to ``A timely request in accordance'';
    ++ In paragraph (c)(4), we are revising the phrase ``When the QIO 
issues an reconsideration'' to ``When the QIO issues a 
reconsideration'', and
    ++ In paragraph (d), we are revising the phrase ``beyond that 
furnished to the BFCC-QIO'' to ``beyond that furnished to the QIO'' to 
be consistent with other references to the QIO.
    <bullet> In Sec.  476.71(a)(9), we are correcting the cross-
reference in the last sentence of the paragraph to refer more broadly 
to ``Sec.  405.1212''.
    As noted previously, after publication of this final rule regarding 
the procedures for these new appeals, we intend to specify the 
implementation date for filing appeal requests for retrospective and 
prospective appeals. When the prospective process is fully implemented, 
eligible beneficiaries who are hospitalized and receive notice of their 
appeal rights and wish to pursue an appeal will be expected to utilize 
the prospective procedures (proposed Sec. Sec.  405.1210 through 
405.1212). We will announce the implementation dates on CMS.gov and/or 
Medicare.gov.

C. Other/Out of Scope Comments

    We also received comments that are outside the scope of this 
rulemaking, summarized as follows.
    Comment: Several commenters urged CMS to address policy issues 
related to outpatient stays and observation services and the impact on 
SNF coverage for Medicare beneficiaries. Some commenters recommended 
that CMS count all time in the hospital towards satisfying the 
requirement of a 3-day qualifying inpatient hospital stay for SNF 
coverage. A commenter suggested that CMS directly address the issue of 
long outpatient stays with hospitals to avoid the need for 
beneficiaries to use an appeals process when they disagree with their 
outpatient status. The commenter suggested that CMS should implement 
policies to prohibit or severely restrict hospital reclassifications 
from inpatient to outpatient and long outpatient stays, and further 
suggested that hospitals should bear the burden of justifying long 
outpatient stays (lasting more than two-midnights).
    Response: We appreciate the concerns raised by commenters related 
to observation services and long outpatient stays. This final rule 
implements the court order in Alexander v. Azar for the limited purpose 
of establishing appeal processes for certain Medicare beneficiaries who 
are initially admitted as hospital inpatients but are subsequently 
reclassified as outpatients receiving observation services during their 
hospital stay and meet other eligibility criteria. It is beyond the 
limited scope of this rule to address the concerns raised by commenters 
regarding observation services, the counting of all hospital days 
towards satisfying the statutory requirement of a 3-day qualifying 
inpatient hospital stay for SNF coverage, and restricting hospital 
decisions regarding the length of outpatient stays or 
reclassifications. CMS acknowledges this feedback and may further 
consider it in future policymaking.

D. Severability

    The various provisions of this final rule are intended to implement 
the court order in Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 
2020), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022). 
As detailed in the preamble, this final rule establishes processes for 
retrospective appeals and prospective appeals (standard prospective 
appeals and expedited prospective appeals). To the extent a court may 
enjoin any part of this final rule, the Department intends that other 
provisions or parts of provisions remain in effect. For example, the 
portions of this rule addressing retrospective appeals and prospective 
appeals are mutually severable from each other. Per the court order, 
the retrospective appeals process applies to class members whose due 
process rights may have been violated prior to the availability of the 
procedural protections set forth in the prospective appeals process, 
whereas the prospective appeals process applies to class members whose 
due process right may be violated in the future. In addition to 
applying to different beneficiaries, the retrospective and prospective 
appeals processes involve different timeframes for the reviews to take 
place, different contractors to perform the reviews, and potentially 
different claims. The existence of the prospective appeals process does 
not depend on the existence of the retrospective appeals process, and 
vice versa. These distinct processes can function independent of each 
other and are thus mutually severable. This example is not intended to 
be exhaustive and should not be viewed as an intention by HHS to 
consider specific provisions of the rule as not severable from other 
provisions of the rule. To the extent a court enjoins any part of this 
final rule, the other provisions of the rule would still further the 
purpose of implementing the court order and establishing appeals 
processes for qualifying beneficiaries.
    We did not receive comments on this issue, and we intend to apply 
the concept of severability to this final rule as described.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.) we are required to provide 30-day notice in the Federal Register 
and solicit public comment before a ``collection of information'' 
requirement is submitted to the Office of Management and Budget (OMB) 
for review and approval. For the purpose of the PRA and this section of 
the final rule, collection of information is defined under 5 CFR 
1320.3(c) of the PRA's implementing regulations.
    To fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements and

[[Page 83280]]

comments are responses are discussed in the following.

A. Wage Estimates

1. Private Sector
    To derive average costs, we used wage data from the U.S. Bureau of 
Labor Statistics' (BLS) May 2023 National Occupational Employment and 
Wage Estimates (https://www.bls.gov/oes/2023/may/oes_nat.htm). In this 
regard, Table 1 presents BLS' mean hourly wage, our estimated cost of 
fringe benefits and other indirect costs, and our adjusted hourly wage.

                          Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                            Fringe benefits
          Occupation title              Occupation code     Mean hourly   and other indirect    Adjusted hourly
                                                            wage ($/hr)      costs ($/hr)         wage ($/hr)
----------------------------------------------------------------------------------------------------------------
Registered Nurse....................            29-1141           45.42               45.42               90.84
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting our hourly wage estimate by a factor 
of 100 percent. This is necessarily a rough adjustment, both because 
fringe benefits and other indirect costs vary significantly from 
employer to employer, and because methods of estimating these costs 
vary widely from study to study. Nonetheless, we believe that doubling 
the hourly wage to estimate the total cost is a reasonably accurate 
estimation method.
2. Beneficiaries
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$23.18/hr.
    The Valuing Time in U.S. Department of Health and Human Services 
Regulatory Impact Analyses: Conceptual Framework and Best Practices 
\26\ identifies the approach for valuing time when individuals 
undertake activities on their own time. To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers of $1,117 \27\ for 2022, divided by 40 hours to 
calculate an hourly pre-tax wage rate of $27.93/hr. This rate is 
adjusted downwards by an estimate of the effective tax rate for median 
income households of about 17 percent or $4.75/hr ($27.93/hr x 0.17), 
resulting in the post-tax hourly wage rate of $23.18/hr ($27.93/hr-
$4.75/hr). Unlike our State and private sector wage adjustments, we are 
not adjusting beneficiary wages for fringe benefits and other indirect 
costs since the individuals' activities, if any, would occur outside 
the scope of their employment.
---------------------------------------------------------------------------

    \26\ https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//176806/VOT.pdf.
    \27\ https://fred.stlouisfed.org/series/LEU0252881500A.
---------------------------------------------------------------------------

B. Information Collection Requirements (ICRs)

    This final rule sets forth new appeals procedures as required by 
the court order in the case Alexander v. Azar, 613 F. Supp. 3d 559 (D. 
Conn. 2020)), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 
2022). Certain beneficiaries in Original Medicare, who are initially 
admitted to a hospital as an inpatient by a physician or otherwise 
qualified practitioner but whose status during their stay was changed 
to outpatient receiving observation services by the hospital, thereby 
effectively denying Part A coverage for their hospital stay, may pursue 
an appeal under this final rule. The appeal is filed with Medicare to 
decide if the inpatient admission meets the relevant criteria for Part 
A coverage.
1. ICRs Regarding Retrospective Appeals Requests (Sec.  405.932)
    The provisions in new Sec.  405.932 were submitted to OMB for 
review under control number 0938-1466 (CMS-10885). OMB will issue the 
control number's expiration date upon their approval of the final 
rule's collection of information request. The issuance of that date can 
be monitored at www.Reginfo.gov.
    As discussed in section III.A.3. of this final rule, Sec.  405.932 
establishes that eligible parties may file in writing an appeal related 
to a change in patient status which resulted in the denial of Part A 
coverage. A written appeal request must be received by the eligibility 
contractor no later than 365 days after the implementation date of the 
final rule. Details regarding the deadline to file an appeal and where 
such appeals should be filed would be posted to Medicare.gov and/or 
CMS.gov once the retrospective appeals process is operational. The 
written request must include the following information:
    <bullet> Beneficiary name.
    <bullet> Beneficiary Medicare number (the number on the 
beneficiary's Medicare card).
    <bullet> Name of the hospital and dates of hospitalization.
    <bullet> Name of the SNF and the dates of stay (as applicable).
    If the appeal includes SNF services not covered by Medicare, the 
written request must also include an attestation to the out-of-pocket 
payment(s) made by the beneficiary for such SNF services and must 
include documentation of payments made to the SNF for such services.
    We estimate that it would take an individual approximately 30 
minutes (0.5 hr) to complete the appeal request including the 
attestation and documentation of out-of-pocket payments for SNF 
services and submit the completed information to the eligibility 
contractor. Because this is a new appeal right and associated process, 
CMS does not have precise data and cannot meaningfully estimate how 
many individuals may request an appeal under the new appeals process. 
However, we believe that the closest equivalent is using the rate of 
individuals who appeal denials of initial claim determinations under 
the claim appeals process at the first level of appeal to a MAC (which 
is 3 percent) and aligning it with the appeal rates of higher levels of 
appeal (ranging from 21 percent to 27 percent) to arrive at an estimate 
of 20 percent. This estimate reflects our expectation that eligible 
parties in this process will be more motivated than in the claim 
appeals process to avail themselves of this unique opportunity for a 
retrospective appeal on potentially high dollar claims.
    Based on these data, we estimate that the total number of eligible 
beneficiaries is 32,894.\28\ Assuming that 20 percent of

[[Page 83281]]

individuals (6,579 = 32,894 x 0.20) who are eligible to appeal will 
file a request, we estimate a one-time burden of 3,290 hours (6,579 
requests x 0.5 hr/request) at a cost of $76,262 (3,290 hr x $23.18/hr).
---------------------------------------------------------------------------

    \28\ The data used in this report came from the 2022 CMS Part B 
institutional administrative claims data for 100 percent of Medicare 
beneficiaries enrolled in the fee-for-service (FFS) program, which 
are available from the Integrated Data Repository (IDR). The IDR 
contains a subset of data transmitted by the Common Working File 
(CWF), a computerized database maintained by CMS in connection with 
its processing and payment of Medicare claims.
---------------------------------------------------------------------------

2. ICRs Regarding Notifying Beneficiaries of Appeal Rights When 
Hospital Inpatient Coverage Is Reclassified to Coverage as an 
Outpatient Receiving Observation Services (Sec.  405.1210)
    The provisions in new Sec.  405.1210 were submitted to OMB for 
review under control number 0938-1467 (CMS-10868). OMB will issue the 
control number's expiration date upon their approval of the final 
rule's collection of information request. The issuance of that date can 
be monitored at reginfo.gov.
    Section 405.1210 requires hospitals to deliver, prior to release 
from the hospital, a standardized notice informing eligible 
beneficiaries of the change in status from an inpatient to an 
outpatient receiving observation services, and their appeal rights if 
they wish to challenge that change.
    The Medicare Change of Status Notice (MCSN) is new and is intended 
to be furnished only to those beneficiaries eligible for this specific 
new appeal process. The MCSN notice contains only two fields that 
hospitals must complete: (1) the beneficiary's name, and (2) the 
beneficiary's identifier number. The remaining information (information 
on the change in coverage, a description of appeal rights and how to 
appeal, and the implications for skilled nursing facility coverage 
following the hospital stay) is standardized.
    For beneficiaries with Medicare Part B coverage, hospitals will be 
required to deliver the notice to eligible beneficiaries as soon as 
possible after hospital reclassifies the beneficiary from an inpatient 
to an outpatient and the beneficiary has stayed in the hospital for 3 
or more consecutive days but was an inpatient for fewer than 3 days. 
The notice must be delivered no later than 4 hours before the 
beneficiary is released from the hospital.
    For beneficiaries without Medicare Part B coverage, hospitals will 
be required to deliver the notice to eligible beneficiaries as soon as 
possible after the change from inpatient to outpatient with observation 
services is made as a 3-day hospital stay is not required for these 
beneficiaries. The notice must be delivered no later than 4 hours 
before the beneficiary is released from the hospital.
    We estimate it would take 10 minutes (0.1667 hr) at $90.84/hr for a 
Registered Nurse to complete the two data fields and deliver each 
notice to the applicable beneficiary.
    The 10-minute estimate is same as that for our Important Message 
from Medicare (CMS-10065/10066; OMB 0938-1019), which the proposed MCSN 
notice is modeled after.
    In 2022 there were approximately 15,655 instances where hospital 
stays met the criteria for an appeal.\29\ With regard to this final 
rule we estimate that hospitals would be required to give an estimated 
15,655 MCSN notices to beneficiaries each year. In aggregate, we 
estimate an annual hospital burden of 2,610 hours (15,655 notices x 
0.1667 hr/notice) at a cost of $237,092 (2,610 hr x $90.84/hr).
---------------------------------------------------------------------------

    \29\ The data used in this report come from the 2022 CMS Part B 
institutional administrative claims data for 100 percent of Medicare 
beneficiaries enrolled in the fee-for-service (FFS) program, which 
are available from the CMS Chronic Condition Data Warehouse 
(www2.ccwdata.org/web/guest/home), accessed August 2023.
---------------------------------------------------------------------------

    Please note, our data does not permit us to determine whether the 
observation services occurred prior to the initial inpatient stay or 
followed the change in status from inpatient to outpatient, as required 
to qualify for an appeal. As a result, 15,655 MCSN notices likely 
overstates the number of beneficiaries eligible for an appeal.
    Please see section IV.D. of this final rule for information on how 
to view the draft standardized notice and supporting documentation.
3. ICRs Regarding Applicable QIO Review Regulations (Sec.  476.71 and 
Sec.  476.78)
    In section III.B. of this final rule, we provided that the QIOs 
will review the prospective expedited appeals under their contracts 
with the Secretary. CMS expects to revise the BFCC-QIO's contracts 
under the 13th Statement of Work to include the new prospective 
expedited appeals requirements after publication of the final rule. The 
additional costs to the government for the BFCC-QIOs to review the new 
appeals would include payment for the additional level of effort 
associated with communicating with beneficiaries and hospitals for the 
duration of the appeal, collecting and reviewing patient records, 
performing reconsiderations if requested, and providing case files 
requested for further levels of review if needed. It also would include 
the cost of reimbursing hospitals for the submission of patient records 
for prospective expedited appeals. Hospitals would submit patient 
records and request reimbursement from the QIO using the process 
established in the existing memorandums of agreement (MOAs) under Sec.  
476.78(a) between hospitals and the QIO having jurisdiction over the 
particular State in which the hospital stay occurred.
    As discussed in section III.B. of this final rule, hospitals will 
be required to submit patient records to the QIOs for prospective 
expedited appeals under Sec.  405.1211(d). Existing QIO regulations at 
Sec.  476.78(b)(2) and (c) require providers and practitioners to 
electronically submit patient records to the QIOs for purposes of one 
or more QIO functions and allow for the reimbursement of providers and 
practitioners by the QIO for the electronic submission of patient 
records for one or more QIO functions at a rate of $3.00 per submission 
under Sec.  476.78(e)(2). Hospitals that have waivers for the required 
electronic submission of records under Sec.  476.78(d) may be 
reimbursed by the QIO at a rate of $0.15 per page for submission of the 
patient records under Sec.  476.78(e)(3).
    The estimation methodology used to determine the reimbursement 
rates for electronic and non-electronic submission of patient records 
for one or more QIO functions is discussed further in section IX.A. of 
the preamble of the Fiscal Year (FY) 2021 Hospital Inpatient 
Prospective Payment System (IPPS)/Long-Term Care Prospective Payment 
System (LTCH PPS) final rule (85 FR 58977 through 58985). This 
estimation methodology is appropriate when applied to the proposed 
prospective expedited appeals due to the substantial similarity of its 
requirements and processes to those of other QIO functions upon which 
these rates were determined.
    In section III.B.6. of this final rule, we established the addition 
of a QIO review type at Sec.  476.71(a)(9) making the QIO's review of 
the prospective expedited appeals under proposed Sec.  405.1211(d) a 
QIO function using our authority in section 1154(a)(18) of the Act. As 
established earlier in the ICR section, the prospective appeals process 
would constitute a CMS administrative action toward a specific 
individual or entity. Thus, the preparation and submission of the 
appeal, supporting documentation needed for the appeal, and 
communications between the QIO and parties to the appeal are not 
subject to

[[Page 83282]]

the PRA as stipulated under 5 CFR 1320.4(a)(2).

C. Summary of Annual Burden Estimates for Changes

                                                    Table 2--Annual Requirements and Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Total      Labor
Regulation section(s) under Title    OMB Control No.        Respondents         Total      Time per response (hours)      time     cost ($/   Total cost
          42 of the CFR                (CMS ID No.)                           responses                                 (hours)      hr)         ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   405.932...................  0938-1466 (CMS-      32,894                     6,579  0.5 (30 min)...............      3,290      23.18       76,262
                                    10885).              beneficiaries.
Sec.   405.1210..................  0938-1467 (CMS-      6,162 hospitals....       15,655  0.1667 (10 min)............      2,610      90.84      237,092
                                    10868).
                                                       -------------------------------------------------------------------------------------------------
    Total........................  ...................  39,056.............       22,234  varies.....................      5,900     varies      313,354
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Submission of Comments

    We have submitted a copy of this final rule to OMB for its review 
of the rule's information collection requirements. The requirements are 
not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the collections discussed previously, please visit the CMS website 
at https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing, or call the Reports Clearance 
Office at 410-786-1326.
    Comment: Multiple commenters believed CMS underestimated the burden 
estimates related to hospitals timely delivering the new MCSN. A 
commenter believes the estimated annual volume of expedited appeals is 
generally understated because it failed to include appeals from 
beneficiaries with Part A but without Part B. Another commenter 
suggested CMS should be able to easily calculate the average annual 
number of eligible beneficiaries without Part B and should publish the 
number.
    Another commenter disputed our estimate that the MCSN would take 
hospital staff 10 minutes to prepare and deliver because it does not 
account for any time the staff will need to answer beneficiary 
questions upon delivery. Another commenter stated the burden estimate 
failed to account for the hospital time and resources needed, including 
the hiring of new personnel, to establish a new workflow, to provide 
requested records to the QIO, and to rebill claims and refund 
beneficiaries who obtained a successful appeal.
    Response: We acknowledge that the proposed rule estimates did not 
include hospital reclassifications of beneficiaries from inpatient to 
outpatient receiving observation services for beneficiaries that did 
not have Medicare Part B. Based on certain data collection limitations, 
it is not possible for CMS to fully estimate the number of 
beneficiaries with Part A but not Part B who are eligible to appeal in 
this process. Hospital stays for this population without Part B 
coverage who were changed from inpatient to outpatients receiving 
observation services are not reflected in Medicare claims data, as non-
covered Part B claims are generally not submitted to Medicare. 
Nevertheless, we did attempt to obtain estimates from the data that was 
available and only a handful of such non-covered Part B claims existed 
per year.
    In the proposed rule, we estimated the time it would take a 
hospital registered nurse to complete the MCSN to be 10 minutes as this 
is the longstanding estimate for delivery of the IM, a very similar 
notice. Throughout multiple public comment periods as part of the PRA 
renewal process, we have not received any comments or concerns 
regarding delivery of the IM or our estimated time to complete delivery 
of the notice. We also cannot account for all circumstances and our 
estimates only represent the average time we expect for notice 
preparation and delivery. We note that because this is a new appeals 
process, we must provide these estimates in the absence of historical 
data. However, we will update these estimates in each MCSN PRA renewal 
cycle. Finally, we acknowledge we did not provide burden estimates for 
hospital activities beyond delivering the new notice. We have not 
previously calculated the burden of activities ancillary to the appeals 
process, such as rebilling or submitting documentation to the QIO, for 
the IM or the Notice of Medicare Non-Coverage, which have similar 
notice and appeals processes for termination of coverage of sub-acute 
care. Therefore, we do not have data available to utilize for such an 
estimate. Even if we were to attempt such an estimate, we believe it 
would be impossible to provide an accurate estimate due to the 
variation in hospital size and workflow approaches. Nevertheless, we 
believe the financial impact and resource expenditure for hospitals 
delivering the MCSN to be minimal as hospitals already have processes 
and personnel in place that regularly deliver beneficiary notices with 
similar delivery requirements of the MCSN. We expect hospitals can 
incorporate this new notice into their well-established practices for 
pre-release paperwork delivery by caseworkers and other hospital staff.
    Comment: A commenter requested CMS provide guidance in the final 
rule on the expected impact to Medicare Supplement Insurance plans 
serving FFS beneficiaries, including impacts on cost-sharing, due to 
the proposed appeals processes.
    Response: We do not anticipate the proposed prospective appeals 
process will impact existing policies related to Medicare Supplement 
Insurance plans. We acknowledge that a beneficiary's cost-sharing may 
at times increase or decrease due to a favorable QIO decision, which in 
turn may potentially affect the amounts covered by an enrolled Medicare 
Supplement Insurance plan. However, we do not have the historical data 
necessary to accurately estimate any potential change in total payments 
made by Medicare Supplement Insurance plans.

V. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), Executive Order 14094 entitled ``Modernizing 
Regulatory Review'' (April 6, 2023), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and

[[Page 83283]]

equity). The Executive Order 14094 entitled ``Modernizing Regulatory 
Review'' (hereinafter, the Modernizing E.O.) amended section 3(f) of 
Executive Order 12866 (Regulatory Planning and Review). The amended 
section 3(f)(1) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) having an annual effect on the economy of $200 million or more in 
any 1 year. A regulatory impact analysis (RIA) must be prepared for the 
rules with significant regulatory action/s as per section 3(f)(1) ($200 
million or more in any 1 year). This rule does not reach the economic 
threshold and thus is not considered a significant rule under section 
3(f)(1).
    We are making the determination that the new appeals process will 
not have a significant financial impact on the Medicare program or 
interested parties based on our assumption about the overall number of 
projected appeals. While it is difficult to project how many 
beneficiaries will pursue appeals under this new process, overall, we 
anticipate a relatively low volume of retrospective appeals. We 
estimate that the total number of eligible beneficiaries for the 
retrospective process is 32,894.\30\ We are projecting approximately 
6,600 appeals at the first level of appeal (MAC level); 5,000 appeals 
at the second level of appeal (QIC Level); 2,800 appeals at the third 
level of appeal (ALJ level); and 150 at the Medicare Appeals Council. 
There will be administrative costs associated with tasking a contractor 
to serve as a point of contact and clearinghouse for incoming 
retrospective appeals requests.
---------------------------------------------------------------------------

    \30\ The data used in this report came from the 2022 CMS Part B 
institutional administrative claims data for 100 percent of Medicare 
beneficiaries enrolled in the fee-for-service (FFS) program, which 
are available from the Integrated Data Repository (IDR). The IDR 
contains a subset of data transmitted by the Common Working File 
(CWF), a computerized database maintained by CMS in connection with 
its processing and payment of Medicare claims.
---------------------------------------------------------------------------

    We also anticipate a very low volume of prospective and standard 
appeals on an ongoing basis. We estimate that around 15,655 notices 
informing beneficiaries of their change in status and informing them of 
their right to appeal will be delivered annually.\31\ We are estimating 
an appeal rate of 50 percent, which would result in about 8,000 appeals 
per year.
---------------------------------------------------------------------------

    \31\ The data used in this report come from the 2022 CMS Part B 
institutional administrative claims data for 100 percent of Medicare 
beneficiaries enrolled in the fee-for-service (FFS) program, which 
are available from the CMS Chronic Condition Data Warehouse 
(www2.ccwdata.org/web/guest/home), accessed August 2023.
---------------------------------------------------------------------------

    While our estimates reflect a relatively low number of appeals, we 
acknowledge that there will be administrative costs for hospitals to 
accommodate the new appeals process, as well as costs associated with 
modifying contracts for MACs, QICs, and the BFCC-QIOs to perform the 
retrospective, prospective and standard appeals.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $9.0 million to $47.0 million in any 1 year. Individuals and 
states are not included in the definition of a small entity. We are not 
preparing an analysis for the RFA because we have determined, and the 
Secretary certifies, that this would not have a significant economic 
impact on a substantial number of small entities. In addition, section 
1102(b) of the Act requires us to prepare an RIA if a rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital at 42 CFR 412.108 as a hospital that is 
located outside of a Metropolitan Statistical Area for Medicare payment 
regulations and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined, and 
the Secretary certifies, that this final regulation would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on September 27, 2024.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Diseases, Health facilities, 
Health professions, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 476

    Grant programs--health, Health care, Health facilities, Health 
professions, Health records, Peer Review Organization (PRO), Penalties, 
Privacy, Reporting and recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority:  42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).


0
2. Subpart I is amended by adding an undesignated center heading after 
Sec.  405.930 and Sec. Sec.  405.931, 405.932, 405.934, 405.936, and 
405.938 to read as follows:

Retrospective Appeals for Changes in Patient Status That Resulted in 
Denial of Part A Coverage for Hospital Services

Sec.
405.931 Scope, basis, and definitions.
405.932 Right to appeal a denial of Part A coverage resulting from a 
change in patient status.
405.934 Reconsideration.
405.936 Hearings before an ALJ and decisions by an ALJ or Attorney 
Adjudicator.
405.938 Review by the Medicare Appeals Council and judicial review.


Sec.  405.931  Scope, basis, and definitions.

    (a) Scope and basis. The provisions in Sec. Sec.  405.931 through 
405.938--
    (1) Implement a federal district court order requiring appeal 
rights for

[[Page 83284]]

hospital stays on or after January 1, 2009, for a specified class of 
beneficiaries under certain conditions (defined in Sec.  405.931(b)) 
who were admitted to a hospital as inpatients, but were subsequently 
reclassified by the hospital as outpatients receiving observation 
services; and
    (2) Apply to retrospective appeals, that is, appeals for hospital 
outpatient services, and as applicable, post-hospital extended care 
services in a skilled nursing facility (SNF services), furnished to 
eligible parties as defined in paragraph (b) of this section before the 
implementation of the prospective appeal process set forth in 
Sec. Sec.  405.1210 through 405.1212.
    (b) Definitions. For the purposes of the appeals conducted under 
Sec. Sec.  405.931 through 405.938, the following definitions apply:
    Eligible party means a beneficiary who, on or after January 1, 
2009, meets the following criteria, and is, thus, eligible to request 
an appeal under Sec. Sec.  405.931 through 405.938:
    (i) Was formally admitted as a hospital inpatient.
    (ii) While in the hospital was subsequently reclassified as an 
outpatient receiving observation services (as defined in Sec.  
405.931(h)).
    (iii) Has received an initial determination (as defined in Sec.  
405.920) or a Medicare Outpatient Observation Notice (MOON) (as 
described in Sec.  489.20(y)) indicating that the observation services 
are not covered under Medicare Part A.
    (iv)(A) Was not enrolled in the Supplementary Medical Insurance 
program (that is, Medicare Part B coverage) at the time of 
beneficiary's hospitalization; or
    (B) Stayed at the hospital for 3 or more consecutive days but was 
designated as an inpatient for fewer than 3 days, unless more than 30 
calendar days has passed after the hospital stay without the 
beneficiary's having been admitted to a SNF.
    (v) Medicare beneficiaries who meet the requirements of the 
paragraph (iv)(A) or (B) of this definition but who pursued an 
administrative appeal and received a final decision of the Secretary 
before September 4, 2011, are excluded from the definition of an 
eligible party.
    Eligibility contractor means the contractor who meets all of the 
following:
    (i) Is identified on the Medicare.gov website for accepting appeal 
requests.
    (ii) Receives appeal requests and makes determinations regarding 
eligibility for the appeal under Sec. Sec.  405.931 through 405.938.
    (iii) Issues notices of eligibility.
    (iv) Refers valid appeal requests to the processing contractor for 
a decision on the merits of the appeal.
    Processing contractor means the contractor responsible for 
conducting the first-level appeal and issuing a decision on the merits 
of the appeal. Appeals under Sec.  405.932 are conducted by the MAC 
who, at the time of the referral of the request for appeal under Sec.  
405.932(d)(2), has jurisdiction over claims submitted by the hospital 
where the eligible party received the services at issue.
    (c) Party to an appeal. For the purposes of the appeals conducted 
under Sec. Sec.  405.931 through 405.938, an eligible party is the only 
party to the appeal. The provisions of Sec.  405.906 do not apply to 
appeals processed under these provisions, and the provider that 
furnished services to an eligible party may not file a request for an 
appeal and is not considered a party to any appeal decision or 
determination.
    (d) Authorized representatives, appointed representatives, or 
representatives of a deceased eligible party. For the purposes of 
appeals conducted under Sec. Sec.  405.931 through 405.938:
    (1) The provisions of Sec.  405.910 apply to an eligible party 
appointing a representative to assist in such appeal, as appropriate, 
except as follows:
    (i) A provider of services who furnished items or services to a 
beneficiary whose claims are the subject of an appeal under the 
provisions of Sec. Sec.  405.931 through 405.938 is prohibited from 
representing the beneficiary or eligible party in such appeal.
    (ii) [Reserved.]
    (2) An authorized representative (as defined in Sec.  405.902) may 
act on behalf of an eligible party and has all of the same rights and 
responsibilities of an eligible party throughout the appeals process.
    (3) The provisions of Sec.  405.906(a)(1) apply to a deceased 
eligible party in the same manner in which such provisions apply to a 
deceased beneficiary.
    (4) The provisions of Sec.  405.906(c) do not apply.
    (5) A beneficiary who is an eligible party is considered 
unrepresented if the beneficiary meets any of the following:
    (i) Has not appointed a representative under Sec.  405.910.
    (ii) Has an authorized representative as defined in Sec.  405.902.
    (iii) Has appointed as its representative a member of the 
beneficiary's family, a legal guardian, or an individual who routinely 
acts on behalf of the beneficiary, such as a family member or friend 
who has a power of attorney.
    (iv) Is deceased but met the conditions for an eligible party in 
paragraph (b)(1) of this section and the appeal is filed by an 
individual who meets the conditions set forth in Sec.  405.906(a)(1).
    (e) Prohibition on assignment of appeal rights. For the purposes of 
the appeals conducted under Sec. Sec.  405.931 through 405.938, an 
eligible party may not assign appeal rights to a provider under the 
provisions of Sec.  405.912.
    (f) Date of receipt of a notice or decision. For the purposes of 
the appeals conducted under Sec. Sec.  405.931 through 405.938, the 
date of receipt of a notice or decision sent by the eligibility 
contractor, processing contractor or other appeals adjudicator is 
presumed to be 5 calendar days following the date on the notice unless 
there is evidence to the contrary.
    (g) Three or more consecutive days. For the purposes of the appeals 
conducted under Sec. Sec.  405.931 through 405.938, when determining if 
a beneficiary is an eligible party and for the purposes of determining 
coverage of SNF services under section 1861 of the Act, inpatient 
hospital days are counted in accordance with Sec.  409.30, that is, a 
patient must have a qualifying inpatient stay of at least 3 consecutive 
calendar days starting with the admission day but not counting the 
discharge day.
    (h) Outpatient receiving observation services. For the purposes of 
appeals conducted under Sec. Sec.  405.931 through 405.938 when 
determining if a beneficiary is an eligible party, a beneficiary is 
considered an outpatient receiving observation services when the 
hospital changes beneficiary's status from inpatient to outpatient 
while the beneficiary is in the hospital and the beneficiary 
subsequently receives observation services following a valid order for 
such services.
    (i) Conclusive effect of a Part A coverage determination. For the 
purposes of appeals under Sec. Sec.  405.931 through 405.938, the 
determination with respect to coverage under Part A is conclusive and 
binding with respect to the services furnished and must be applied to 
any existing appeals with respect to coverage and payment for hospital 
services under Part B and SNF services (as applicable).


Sec.  405.932   Right to appeal a denial of Part A coverage resulting 
from a change in patient status.

    (a) Filing an appeal request related to a change in patient status 
which resulted in the denial of Part A coverage. (1) Only an eligible 
party, the

[[Page 83285]]

party's appointed representative, or an authorized representative of an 
eligible party may request an appeal at any level of the appeals 
process under Sec. Sec.  405.931 through 405.938.
    (2) To initiate an appeal under Sec. Sec.  405.931 through 405.938, 
an eligible party, the party's appointed representative, or an 
authorized representative of an eligible party must meet the following 
requirements:
    (i) Submit a request for an appeal in writing to the eligibility 
contractor.
    (ii) The request must be received by the eligibility contractor no 
later than 365 calendar days after the implementation date of the final 
rule. The eligibility contractor denies the written request if it is 
not received by the applicable filing timeframe under paragraph (d)(3) 
of this section, unless the eligible party established good cause for 
late submission as specified in Sec.  405.942(b)(2) and (3).
    (3) If an eligible party (or the party's representative) misfiles a 
request for appeal with a contractor or government entity other than 
the eligibility contractor, then for the purpose of determining 
timeliness of the request for appeal, the date the misfiled request was 
received by the contractor or government agency is considered the date 
of receipt. The misfiled request and all documentation must be 
forwarded to the eligibility contractor within 30 calendar days of 
receipt, or as soon as practicable.
    (b) Content of the appeal request. (1) The written request filed by 
an eligible party, the party's appointed representative, or an 
authorized representative of an eligible party may be made on a model 
CMS form. If the model form is not used, to be valid, the written 
request must include all of the following identifying information:
    (i) Beneficiary name.
    (ii) Beneficiary Medicare number (the number on the beneficiary's 
Medicare card).
    (iii) Name of the hospital and dates of hospitalization.
    (iv) Name of the SNF and the dates of stay (as applicable).
    (2) If the appeal includes SNF services not covered by Medicare, 
the written request must also include an attestation to the out-of-
pocket payment(s) made by the beneficiary for such SNF services and 
must include documentation of payments made to the SNF for such 
services.
    (i) Payments for an eligible party's SNF services made by a third-
party payer do not constitute out-of-pocket expenses or payment for an 
eligible party. If a third-party payer made payment for the eligible 
party's SNF services, then the services are excluded from consideration 
in the appeal.
    (ii) Payments made for cost sharing (including, but not limited to, 
coinsurance and deductible) for SNF services covered by a third-party 
payer are not considered an out-of-pocket payment for the purposes of 
this provision.
    (iii) Payments made by a family member (including payments made by 
an individual not biologically related to the beneficiary) for an 
eligible party's SNF services are considered an out-of-pocket payment 
for the eligible party.
    (3) In the written request for an appeal, an eligible party (or 
their representative) may include an explanation of why the hospital 
admission satisfied the relevant criteria for Part A coverage and 
should have been covered under the Part A hospital insurance benefit 
instead of under the Part B supplementary medical insurance benefit.
    (c) Evidence and other information to be submitted with the appeal 
request. (1) Eligible parties (or their representatives) are encouraged 
to submit all available information and documentation, including 
medical records related to the hospital stay and SNF services, as 
applicable, at issue in the appeal with the written request for an 
appeal.
    (2) If the eligibility contractor determines there is information 
missing from the request that is needed to establish the beneficiary's 
eligibility as a party under Sec.  405.931(b) or satisfy other 
conditions for eligibility for an appeal, the eligibility contractor 
works with the appropriate MAC and attempts to obtain the information 
from the provider or the eligible party (or the party's representative) 
or both, as applicable. The eligibility contractor allows up to 120 
calendar days for submission of missing information.
    (3) If the necessary information cannot be obtained from either the 
provider or the eligible party (or the party's representative), the 
eligibility contractor makes an eligibility determination based on the 
information available.
    (d) Determining eligibility for an appeal. (1)(i) The eligibility 
contractor reviews the information submitted with the appeal request 
and any additional information it obtains to determine if the 
individual submitting the appeal request is an eligible party and that 
the services previously furnished are eligible for an appeal under 
Sec.  405.931.
    (ii) The eligibility contractor mails or otherwise transmits the 
notice of its determination to the eligible party (or the party's 
representative) within 60 calendar days of receipt of the appeal 
request.
    (iii) The time between the eligibility contractor's request for 
missing information and receipt of such information (or in the case of 
information that is requested but is not received, the time allowed by 
the contractor to submit the information) does not count toward the 
timeframe for issuing a notice to the eligible party (or the party's 
representative).
    (2) If the eligibility contractor determines that the individual is 
an eligible party and the services previously furnished are eligible 
for an appeal, the eligibility contractor--
    (i) Issues a notice of acceptance to the eligible party (or the 
party's representative), explaining that the appeal has been accepted 
for processing; and
    (ii) Refers the appeal to the processing contractor for 
adjudication under paragraph (f) of this section.
    (3)(i) If the eligibility contractor determines that the request 
for appeal is untimely or incomplete, the individual does not satisfy 
the requirements for an eligible party, or the services previously 
furnished are not eligible for an appeal, the eligibility contractor 
issues a denial notice to the individual (or the party's 
representative) in writing.
    (ii) The denial notice explains that the request is not eligible 
for an appeal, the reason(s) for the denial of the appeal request, the 
information needed to cure the denial, and the process for requesting a 
review of the eligibility denial under paragraph (e) of this section.
    (4) Notices regarding eligibility for an appeal issued by the 
eligibility contractor are written in a manner to be understood by the 
eligible party or the party's representative.
    (e) Review of an eligibility contractor's denial of a request for 
an appeal. (1)(i) An individual (or their representative) may request a 
review of the eligibility contractor's denial of a request for an 
appeal by filing a request in writing with the eligibility contractor.
    (ii) The request for review should explain the reason(s) the denial 
of the request for an appeal was incorrect, and should include 
additional information, as applicable, to support the validity of the 
original appeal request.
    (2) The request for review, with any additional information, must 
be received by the eligibility contractor no later than 60 calendar 
days from the date of receipt of the denial notice. If the request for 
review is received after this deadline, the individual (or the 
individual's representative) must establish good cause for untimely 
filing.

[[Page 83286]]

In determining whether good cause for untimely filing exists, the 
eligibility contractor applies the provisions in Sec.  405.942(b)(2) 
and (3).
    (3) The review by the eligibility contractor must be conducted by 
individuals not involved in the initial denial of the request for an 
appeal.
    (4) The eligibility contractor may issue a decision that affirms or 
reverses the denial of the request for an appeal or may dismiss the 
request for review. The notice of the eligibility contractor's decision 
must meet both of the following requirements:
    (i) Be written in a manner to be understood by the individual or 
the individual's representative.
    (ii) Be mailed or otherwise transmitted in writing within 60 
calendar days of the date of receipt of the request for review.
    (5) If the decision is to affirm the denial, or dismiss the 
request, the eligibility contractor must explain the rationale for the 
decision.
    (6) A denial notice under paragraph (d)(3) of this section issued 
due to receipt of an untimely appeal request must be reversed if the 
eligible party (or the party's representative) establishes good cause 
for late filing under Sec.  405.942(b)(2) and (3).
    (7) If the eligibility contractor reverses the initial denial of 
the request for appeal, the eligibility contractor forwards the request 
for appeal to the processing contractor under paragraph (f) of this 
section.
    (8) The eligibility contractor's decision that affirms the initial 
denial of a request for an appeal is binding and not subject to further 
review.
    (9) If the eligibility contractor determines that the request for 
review of the eligibility denial under paragraph (e)(2) of this section 
was not submitted timely, and the eligibility contractor did not find 
good cause for the untimely submission, then the eligibility contractor 
dismisses the request for review, and such dismissal is binding and not 
subject to further review.
    (f) Processing eligible requests for appeal. (1) If the processing 
contractor determines there is necessary information missing from the 
appeal case file, the processing contractor attempts to obtain the 
information from the provider or the eligible party (or the party's 
representative), as applicable.
    (i) The processing contractor allows the provider or eligible party 
(or the party's representative), or both, up to 60 calendar days to 
submit missing information.
    (ii) If the provider or eligible party (or the party's 
representative) does not submit the missing information within the 
allotted time, the processing contractor makes a decision on the 
request for appeal based on the information available.
    (iii) The time between the processing contractor's request for 
information and receipt of such information (or in the case of 
information that is requested but is not received, the time allowed by 
the contractor to submit the information) does not count toward the 
timeframe for issuing the processing contractor's decision.
    (2) The processing contractor reviews the information submitted 
with the appeal request and any additional information it obtains to 
determine if the inpatient admission satisfied the relevant criteria 
for Part A coverage at the time services were furnished. If the appeal 
request also includes a request to review denied SNF services that are 
eligible for an appeal, the processing contractor also determines if 
such eligible SNF services satisfied relevant criteria for Part A 
coverage at the time the services were furnished.
    (3) Subject to the provisions in paragraph (f)(1) of this section, 
the processing contractor mails or otherwise transmits its written 
decision on the request for appeal within 60 calendar days of receipt 
of the request.
    (g) Notice and content of the decision. (1) If the processing 
contractor determines that the inpatient admission, and as applicable, 
SNF services, satisfied the relevant criteria for Part A coverage at 
the time the services were furnished, then the processing contractor 
issues notice of the favorable decision to the eligible party (or the 
party's representative). The processing contractor also notifies the 
hospital and SNF, as applicable, in the case of a favorable 
determination for Part A coverage.
    (2)(i) If the processing contractor determines that the inpatient 
admission, or as applicable, SNF services, did not satisfy the relevant 
criteria for Part A coverage at the time the services were furnished, 
then the processing contractor issues notice of the unfavorable or 
partially favorable decision to the eligible party (or the party's 
representative).
    (ii) The processing contractor issues a notice of a partially 
favorable decision to the SNF if the inpatient admission satisfied the 
relevant criteria for Part A coverage, but the SNF services did not 
satisfy the relevant criteria for Part A coverage.
    (3) The notice issued to the eligible party (or the party's 
representative) must be written in a manner calculated to be understood 
by the eligible party (or the party's representative) and include all 
of the following:
    (i) A clear statement of the decision made by the processing 
contractor.
    (ii) The reason the hospital admission, and as applicable, the SNF 
services, satisfied or did not satisfy the relevant criteria for Part A 
coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) If a favorable decision, the effect of such decision, 
including, as applicable, a statement about the obligation of the SNF 
to refund any amounts collected for the covered SNF services, and that 
the SNF may then submit a new claim(s) for services covered under Part 
A in order to determine the amounts of benefits due.
    (vi) If an unfavorable or partially favorable decision, a statement 
of any specific missing documentation that should be submitted with a 
request for reconsideration, if applicable.
    (vii) The procedures for obtaining additional information 
concerning the decision, such as specific provisions of the policy, 
manual, regulations, or other rules used in making the decision.
    (viii) If an unfavorable or partially favorable decision, 
information about the procedures for filing a request for 
reconsideration under Sec.  405.934.
    (ix) Any other requirements specified by CMS.
    (4) As applicable, a notice of a favorable decision issued to the 
SNF (including a decision for a beneficiary not enrolled in the 
Supplementary Medical Insurance program (Medicare Part B) at the time 
of beneficiary's hospitalization), includes all of the following:
    (i) A clear statement of the decision made by the processing 
contractor.
    (ii) The reason the SNF services satisfied the relevant criteria 
for Part A coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
that the SNF must refund any payments collected from the beneficiary 
for the covered SNF services, and that the SNF

[[Page 83287]]

may then submit a new claim(s) to determine the amount of benefits due 
for covered services.
    (vi) Any other requirements specified by CMS.
    (5) In the case of a favorable decision for a beneficiary not 
enrolled in the Supplementary Medical Insurance program (Medicare Part 
B) at the time of the beneficiary's hospitalization, notice is issued 
to the hospital that includes all of the following:
    (i) A clear statement of the decision made by the processing 
contractor.
    (ii) The reason the hospital admission satisfied the relevant 
criteria for Part A coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
that the hospital must refund any payments collected for the outpatient 
hospital services, and that the hospital may then submit a new Part A 
inpatient claim in order to determine the amount of benefits due for 
covered services.
    (vi) Any other requirements specified by CMS.
    (6) In the case of a partially favorable decision issued to a SNF, 
the notice includes the following:
    (i) A clear statement of the decision made by the processing 
contractor.
    (ii) The reason the hospital admission satisfied the relevant 
criteria for Part A coverage at the time the services were furnished, 
and the reason the SNF services did not satisfy the relevant criteria 
for Part A coverage.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
that the decision is being sent for informational purposes only, and 
that only the eligible party may appeal the decision to a QIC under 
Sec.  405.934.
    (vi) Any other requirements specified by CMS.
    (h) Effect of a favorable appeal decision. (1)(i) If the processing 
contractor issues a decision that the beneficiary's inpatient admission 
satisfied the relevant criteria for Part A coverage and the hospital's 
decision to change the inpatient admission to outpatient receiving 
observation services was therefore erroneous, the beneficiary's 
reclassification as an outpatient is disregarded for the purposes of 
determining Part A benefits, including Part A SNF coverage, if 
applicable.
    (ii) For the purposes of effectuating a favorable decision by the 
processing contractor, unless a Part A claim is submitted by a 
hospital, any claims previously submitted for outpatient hospital 
services and payments made for such services (including any applicable 
deductible and coinsurance amounts) are not reopened or revised by the 
MAC, and payment, as applicable, for covered SNF services may be made 
by the MAC to the SNF without regard to the hospital claim.
    (2) In order to determine Part A benefits to be paid and to make 
payment for covered services as a result of a favorable decision, as 
applicable:
    (i) The SNF that furnished services to the beneficiary must refund 
payments previously collected from the beneficiary for the covered 
services and may then submit a Part A claim(s) for such services within 
365 calendar days of receipt of the notice of a favorable decision.
    (ii) In the case of a beneficiary not enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital 
services. After the refund is issued, the hospital may then submit a 
Part A inpatient claim for such services within 365 calendar days of 
receipt of the notice of a favorable decision.
    (iii) In the case of a beneficiary enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services. The deadline for submitting a Part A claim for such 
services is 365 calendar days after receipt of the notice of a 
favorable decision, and the hospital must refund any payments collected 
for the outpatient services before submitting the Part A inpatient 
claim.
    (3) The hospital, and as applicable, the SNF, must comply with all 
applicable provisions regarding charges to the beneficiary for covered 
services, including but not limited to relevant provisions in part 489 
Subparts B through D of this chapter.
    (i) A favorable appeal decision is considered binding unless it is 
reopened and revised under the provisions of Sec. Sec.  405.980 through 
405.986.
    (ii) The provisions regarding reopening of a redetermination in 
Sec.  405.980(b) and (c) apply in the same manner to favorable 
decisions issued under this section.
    (4) The notice of a favorable decision issued to a hospital and, as 
applicable, a SNF does not convey party status to such provider.
    (i) Effect of an unfavorable or partially favorable decision. (1) 
An unfavorable or partially favorable appeal decision is considered 
binding unless--
    (A) It is reopened and revised under the provisions of Sec. Sec.  
405.980 through 405.986; or
    (B) An eligible party (or the party's representative) files a 
request for reconsideration under Sec.  405.934.
    (2) The provisions regarding reopening of a redetermination in 
Sec.  405.980(b) and (c) apply in the same manner to unfavorable or 
partially favorable decisions issued under this section.


Sec.  405.934  Reconsideration.

    (a) Filing a request for reconsideration. An eligible party, the 
party's appointed representative, or an authorized representative who 
is dissatisfied with the decision rendered by a processing contractor 
in Sec.  405.932(g)(2) may request a reconsideration with a QIC within 
180 calendar days of receipt of the processing contractor's notice. The 
request for reconsideration must include the elements specified in the 
processing contractor's notice.
    (b) Applicability of other provisions. The provisions in Sec. Sec.  
405.960 through 405.978 that apply to reconsiderations of initial 
determinations apply to the extent they are appropriate/in the same 
manner to reconsiderations performed by a QIC under this section unless 
otherwise specified.
    (c) Notice and content of a reconsideration. (1) If the QIC 
determines that the inpatient admission, and as applicable, eligible 
SNF services, satisfied the relevant criteria for Part A coverage at 
the time the services were furnished, then the QIC issues notice of the 
favorable reconsideration to the eligible party (or the party's 
representative). The QIC also notifies the hospital and SNF, as 
applicable, in the case of a favorable determination for Part A 
coverage.
    (2)(i) If the QIC determines that the inpatient admission, or as 
applicable, SNF services, did not satisfy the relevant criteria for 
Part A coverage at

[[Page 83288]]

the time the services were furnished, then the QIC issues notice of the 
unfavorable or partially favorable reconsideration to the eligible 
party (or the party's representative).
    (ii) The QIC issues a notice of a partially favorable 
reconsideration to the SNF if the inpatient admission satisfied the 
relevant criteria for Part A coverage, but the SNF services did not 
satisfy the relevant criteria for Part A coverage.
    (3) The notice of reconsideration must be mailed or otherwise 
transmitted within 60 calendar days of the QIC's receipt of the request 
for reconsideration, subject to the exceptions specified in Sec.  
405.970.
    (4) The notice of reconsideration issued to the eligible party (or 
the party's representative) must be written in a manner calculated to 
be understood by the eligible party (or the party's representative) and 
include all of the following:
    (i) A clear statement of the decision made by the QIC.
    (ii) The reason the hospital admission, and as applicable, the SNF 
services, satisfied or did not satisfy the relevant criteria for Part A 
coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) If a favorable decision, the effect of such decision, including 
a statement about the obligation of the SNF to refund any amounts 
collected for the covered SNF services, and that the SNF may then 
submit a new claim(s) for services covered under Part A in order to 
determine the amounts of benefits due.
    (vi) If the decision in Sec.  405.932(f) indicated that specific 
documentation should be submitted with the reconsideration request, and 
the documentation was not submitted with the request for 
reconsideration, the summary must indicate how the missing 
documentation affected the reconsideration.
    (vii) The procedures for obtaining additional information 
concerning the decision, such as specific provisions of the policy, 
manual, regulations, or other rules used in making the decision.
    (viii) If an unfavorable or partially favorable decision, 
information concerning an eligible parties' right to an ALJ hearing, 
including the applicable amount in controversy requirement and 
aggregation provisions and other procedures for filing a request for an 
ALJ hearing under Sec.  405.936.
    (ix) Any other requirements specified by CMS.
    (5) As applicable, a notice of a favorable reconsideration issued 
to the SNF (including a decision for a beneficiary not enrolled in the 
Supplementary Medical Insurance program (Medicare Part B) at the time 
of the beneficiary's hospitalization), includes all of the following:
    (i) A clear statement of the decision made by the QIC.
    (ii) The reason the SNF services, satisfied the relevant criteria 
for Part A coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
the SNF must refund any payments collected from the beneficiary for the 
covered SNF services, and that the SNF may then submit a new claim(s) 
to determine the amount of benefits due for the covered services.
    (vi) Any other requirements specified by CMS.
    (6) In the case of a favorable reconsideration for a beneficiary 
not enrolled in the Supplementary Medical Insurance program (Medicare 
Part B) at the time of the beneficiary's hospitalization, notice is 
issued to the hospital that includes all the following:
    (i) A clear statement of the decision made by the QIC.
    (ii) The reason the hospital admission satisfied the relevant 
criteria for Part A coverage at the time the services were furnished.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
that the hospital must refund any payments collected for the outpatient 
hospital services, and that the hospital may then submit a new Part A 
inpatient claim in order to determine the amount of benefits due for 
covered services.
    (vi) Any other requirements specified by CMS.
    (7) In the case of a partially favorable reconsideration issued to 
a SNF the notice includes the following:
    (i) A clear statement of the decision made by the QIC.
    (ii) The reason the hospital admission satisfied the relevant 
criteria for Part A coverage at the time the services were furnished, 
and the reason the SNF services did not satisfy the relevant criteria 
for Part A coverage.
    (iii) A summary of the facts, including as appropriate, a summary 
of any clinical or scientific evidence used in making the 
determination.
    (iv) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case.
    (v) The effect of such decision, including a statement explaining 
that the decision is being sent for informational purposes only, and 
that only the eligible party may appeal the decision to an ALJ under 
Sec.  405.936.
    (vi) Any other requirements specified by CMS.
    (d) Effect of a favorable reconsideration. (1)(i) If the QIC issues 
a reconsideration decision that the beneficiary's inpatient admission 
satisfied the relevant criteria for Part A coverage and the hospital's 
decision to change the inpatient admission to outpatient receiving 
observation services was therefore erroneous, the beneficiary's 
reclassification as an outpatient is disregarded for the purposes of 
determining Part A benefits, including both Part A hospital coverage 
and Part A SNF coverage, if applicable.
    (ii) For the purposes of effectuating a favorable reconsideration, 
unless a Part A claim is submitted by a hospital, any claims previously 
submitted for outpatient hospital services and payments made for such 
services (including any applicable deductible and coinsurance amounts) 
are not reopened or revised by the MAC, and payment, as applicable, for 
covered SNF services may be made by the MAC to the SNF without regard 
to the hospital claim.
    (2) In order to determine Part A benefits to be paid and to make 
payment for covered services as a result of a favorable decision, as 
applicable--
    (i) The SNF that furnished services to the beneficiary must refund 
payments previously collected from the beneficiary for the covered 
services and may then submit a Part A claim(s) for such services within 
365 calendar days of receipt of the notice of a favorable decision;
    (ii) In the case of a beneficiary not enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any

[[Page 83289]]

payments collected for the outpatient hospital services. After the 
refund is issued, the hospital may then submit a Part A inpatient claim 
for such services within 365 calendar days of receipt of the notice of 
a favorable decision;
    (iii) In the case of a beneficiary enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services. The deadline for submitting a Part A claim for such 
services is 365 calendar days after receipt of the notice of a 
favorable decision, and the hospital must refund any payments collected 
for the outpatient services before submitting the Part A inpatient 
claim.
    (3) The hospital, and as applicable, the SNF, must comply with all 
applicable provisions regarding charges to the beneficiary for covered 
services, including but not limited to relevant provisions in part 489 
subparts B through D of this chapter.
    (4) A favorable reconsideration is considered binding unless it is 
reopened and revised under the provisions of Sec. Sec.  405.980 through 
405.986. The provisions regarding reopening of a reconsideration in 
Sec.  405.980(d) and (e) apply in the same manner to favorable 
reconsiderations issued under this section.
    (5) The notice of a favorable reconsideration sent to a hospital 
and, as applicable, a favorable or partially favorable reconsideration 
sent to a SNF does not convey party status.
    (e) Effect of an unfavorable or partially favorable 
reconsideration. (1) An unfavorable or partially favorable 
reconsideration is considered binding unless--
    (i) It is reopened and revised under the provisions of Sec.  
405.980(d) or (e); or
    (ii) An eligible party (or the party's representative) files a 
request for a hearing by an ALJ under Sec.  405.936.
    (2) The provisions regarding reopening of a reconsideration in 
Sec.  405.980(d) and (e) apply in the same manner to unfavorable and 
partially favorable decisions issued under this section.


Sec.  405.936  Hearings before an ALJ and decisions by an ALJ or 
Attorney Adjudicator.

    (a) Filing a request for hearing. An eligible party, the party's 
appointed representative, or an authorized representative who is 
dissatisfied with the reconsideration rendered by a QIC in Sec.  
405.934(c)(2), or a dismissal of a request for reconsideration, may 
request a hearing before an ALJ within 60 calendar days of receipt of 
the reconsideration. The request for hearing must include the elements 
specified in the QIC's reconsideration.
    (b) Applicability of other provisions. The provisions in Sec. Sec.  
405.1000 through 405.1064 that apply to ALJ hearings and decisions by 
an ALJ or an attorney adjudicator apply to the extent they are 
appropriate/in the same manner to ALJ hearings and decisions by an ALJ 
or an attorney adjudicator under this section unless otherwise 
specified.
    (c) Calculating the amount remaining in controversy for an ALJ 
hearing or judicial review. (1)(i) A request for ALJ hearing for an 
appeal under the provisions of Sec. Sec.  405.931 through 405.938 must 
meet the amount in controversy requirement in Sec.  405.1006(b).
    (ii) A request for judicial review in federal district court for an 
appeal under the provisions of Sec. Sec.  405.931 through 405.938 must 
meet the amount in controversy requirement in Sec.  405.1006(c), 
subject to the calculation methodology set forth in this paragraph.
    (2) For appeals under the provisions of Sec. Sec.  405.931 through 
405.938, the amount remaining in controversy for an ALJ hearing or for 
judicial review in federal district court under Sec.  405.1136 is 
determined by the sum of the billed charges on the Part B outpatient 
hospital claim and, as applicable, any billed charges for the SNF claim 
at issue, if such claims were submitted to Medicare. If no SNF claim 
was submitted for services furnished to the beneficiary, then the 
billed charges to the beneficiary as indicated on an itemized statement 
or evidence of payment made by the beneficiary for such services are 
used in calculating the amount remaining in controversy.
    (3) In the case of an appeal under the provisions of Sec. Sec.  
405.931 through 405.938 filed by an eligible party who was not enrolled 
in Part B at the time of hospitalization, and no Part B outpatient 
hospital claim was billed to Medicare, the amount remaining in 
controversy is determined by the charges billed to the beneficiary by 
the hospital for the outpatient hospital stay and billed charges for 
SNF services, if applicable. An itemized statement from the provider 
such services, or evidence of the payment made by the beneficiary to 
the provider is acceptable for the purpose of calculating the amount 
remaining in controversy.
    (4) Any payments made, including coinsurance and deductible, for 
the Part B outpatient hospital claim, and as applicable, the SNF claim 
must not reduce the calculation of the amount in controversy for the 
purposes of a hearing or judicial review under this paragraph.
    (d) Notice and content of an ALJ or attorney adjudicator decision. 
(1) If the ALJ or attorney adjudicator determines that the inpatient 
admission, and as applicable, eligible SNF services, satisfied the 
relevant criteria for Part A coverage at the time the services were 
furnished, then the ALJ or attorney adjudicator issues notice of the 
favorable decision to the eligible party (or the party's 
representative).
    (ii) The ALJ or attorney adjudicator also notifies the hospital and 
SNF, as applicable, in the case of a favorable determination for Part A 
coverage.
    (2)(i) If the ALJ or attorney adjudicator determines that the 
inpatient admission, or as applicable, SNF services, did not satisfy 
the relevant criteria for Part A coverage at the time the services were 
furnished, then the ALJ or attorney adjudicator issues notice of the 
unfavorable or partially favorable decision to the eligible party (or 
the party's representative).
    (ii) The ALJ or attorney adjudicator issues a notice of a partially 
favorable decision to the SNF if the inpatient admission satisfied the 
relevant criteria for Part A coverage, but the SNF services did not 
satisfy the relevant criteria for Part A coverage.
    (3) The ALJ or attorney adjudicator decision issued to the eligible 
party (or the party's representative) must be written in a manner 
calculated to be understood by the eligible party (or the party's 
representative) and include all of the following:
    (i) A clear statement of the decision made by the ALJ or attorney 
adjudicator.
    (ii) The findings of fact.
    (iii) The conclusions of law.
    (iv) The reason for the determination that the hospital admission, 
and as applicable SNF services, satisfied or did not satisfy the 
relevant criteria for Part A coverage at the time the services were 
furnished, and, to the extent appropriate, a summary of any clinical or 
scientific evidence used in making the determination.
    (v) The procedures for obtaining additional information concerning 
the decision, such as specific provisions of the policy, manual, 
regulations, or other rules used in making the decision.
    (vi) If a favorable decision, the effect of such decision, 
including, as applicable, a statement about the obligation of the SNF 
to refund any amounts collected for the covered SNF services, and that 
the SNF may then submit a new claim(s) for services

[[Page 83290]]

covered under Part A in order to determine the amount of benefits due.
    (vii) If an unfavorable decision or a partially favorable decision, 
information about the procedures for filing a request for review by the 
Appeals Council under Sec.  405.938.
    (4) As applicable, a notice of a favorable ALJ or attorney 
adjudicator decision (including a decision for a beneficiary not 
enrolled in the Supplementary Medical Insurance program (Medicare Part 
B) at the time of the beneficiary's hospitalization) issued to the SNF, 
includes the following:
    (i) A clear statement of the decision made by the ALJ or attorney 
adjudicator.
    (ii) The findings of fact.
    (iii) The conclusions of law.
    (iv) The reason for the determination that the SNF services, 
satisfied the relevant criteria for Part A coverage at the time the 
services were furnished, and to the extent appropriate, a summary of 
any clinical or scientific evidence used in making the determination.
    (v) The effect of such decision, including a statement explaining 
that the SNF must refund any payments collected from the beneficiary 
for the covered SNF services, and that the SNF may then submit a new 
claim(s) to determine the amount of benefits due for the covered 
services.
    (5) In the case of a favorable ALJ or attorney adjudicator decision 
for a beneficiary not enrolled in the Supplementary Medical Insurance 
program (Medicare Part B) at the time of beneficiary's hospitalization, 
notice is issued to the hospital that includes all of the following:
    (i) A clear statement of the decision made by the ALJ or attorney 
adjudicator.
    (ii) The findings of fact.
    (iii) The conclusions of law.
    (iv) The reason for the determination that the hospital admission 
satisfied the relevant criteria for Part A coverage at the time the 
services were furnished, and to the extent appropriate, a summary of 
any clinical or scientific evidence used in making the determination.
    (v) The effect of such decision, including a statement explaining 
that the hospital must refund any payments collected for the outpatient 
hospital services, and that the hospital may then submit a new Part A 
inpatient claim in order to determine the amount of benefits due for 
covered services.
    (6) In the case of a partially favorable decision issued to a SNF, 
the notice includes the following:
    (i) A clear statement of the decision made by the ALJ or attorney 
adjudicator.
    (ii) The findings of fact.
    (iii) The conclusions of law.
    (iv) The reason for the determination that the hospital admission 
satisfied the relevant criteria for Part A coverage at the time the 
services were furnished, and the reason the SNF services did not 
satisfy the relevant criteria for Part A coverage, and to the extent 
appropriate, a summary of any clinical or scientific evidence used in 
making the determination.
    (v) The effect of such decision, including a statement explaining 
that the decision is being sent for informational purposes only, and 
that only the eligible party may appeal the decision to the Medicare 
Appeals Council under Sec.  405.938.
    (7) The timeframe within which notices must be issued under this 
paragraph are determined under the provisions in Sec.  405.1016.
    (e) Effect of a favorable ALJ or attorney adjudicator decision. 
(1)(i) If the ALJ or attorney adjudicator issues a decision that the 
beneficiary's inpatient admission satisfied the relevant criteria for 
Part A coverage and the hospital's decision to change the inpatient 
admission to outpatient receiving observation services was therefore 
erroneous, the beneficiary's reclassification as an outpatient is 
disregarded for the purposes of determining Part A benefits, including 
Part A SNF coverage, if applicable.
    (ii) For the purposes of effectuating a favorable decision by an 
ALJ or attorney adjudicator, unless a Part A claim is submitted by a 
hospital, any claims previously submitted for outpatient hospital 
services and payments made for such services (including any applicable 
deductible and coinsurance amounts) are not reopened or revised by the 
MAC, and payment, as applicable, for covered SNF services may be made 
by the MAC to the SNF without regard to the hospital claim.
    (2) In order to determine Part A benefits to be paid and to make 
payment for covered services as a result of a favorable decision, as 
applicable--
    (i) The SNF that furnished services to the beneficiary must refund 
payments previously collected from the beneficiary for the covered 
services and may then submit a Part A claim(s) for such services within 
365 calendar days of receipt of the notice of a favorable decision;
    (ii) In the case of a beneficiary not enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital 
services. After the refund is issued, the hospital may then submit a 
Part A inpatient claim for such services within 365 calendar days of 
receipt of the notice of a favorable decision;
    (iii) In the case of a beneficiary enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services. The deadline for submitting a Part A claim for such 
services is 365 calendar days after receipt of the notice of a 
favorable decision, and the hospital must refund any payments collected 
for the outpatient services before submitting the Part A inpatient 
claim.
    (3) The hospital, and as applicable, the SNF, must comply with all 
applicable provisions regarding charges to the beneficiary for covered 
services, including but not limited to relevant provisions in part 489 
Subparts B through D of this chapter.
    (4) A favorable ALJ or attorney adjudicator decision is considered 
binding unless it is reopened and revised under the provisions of 
Sec. Sec.  405.980 through 405.986. The provisions regarding reopening 
of an ALJ or attorney adjudicator decision in Sec.  405.980(d) and (e) 
apply in the same manner to favorable ALJ or attorney adjudicator 
decisions issued under this section.
    (5) The notice of a favorable decision issued to a hospital and, as 
applicable, notice of a favorable or partially favorable decision sent 
to a SNF does not convey party status to such provider.
    (f) Effect of an unfavorable or partially favorable ALJ or attorney 
adjudicator decision. (1) An unfavorable or partially favorable ALJ or 
attorney adjudicator decision is considered binding unless--
    (i) It is reopened and revised under the provisions of Sec.  
405.980(d) or (e); or
    (ii) An eligible party (or the party's representative) files a 
request for Medicare Appeals Council review under Sec.  405.938.
    (2) The provisions regarding reopening of an ALJ or attorney 
adjudicator decision in Sec.  405.980(d) and (e) apply in the same 
manner to unfavorable and partially favorable decisions issued under 
this section.


Sec.  405.938  Review by the Medicare Appeals Council and judicial 
review.

    (a) Filing a request for Council review. An eligible party, the 
party's appointed representative, or an authorized representative who 
is dissatisfied with

[[Page 83291]]

the unfavorable decision of an ALJ or an attorney adjudicator in Sec.  
405.936(d)(2) may request the Council review the decision within 60 
calendar days of receipt of the decision. The request for review must 
contain the elements specified in the ALJ or attorney adjudicator's 
decision notice.
    (b) Applicability of other provisions. The provisions in Sec. Sec.  
405.1100 through 405.1130 that apply to Council review apply to the 
extent they are appropriate/in the same manner to Council review under 
this section unless otherwise specified.
    (c) Notice of the Council's action. (1) After it has reviewed all 
the evidence in the administrative record and any additional evidence 
received, subject to the limitations on consideration of additional 
evidence in Sec.  405.1122, the Council makes a decision or remands the 
case to an ALJ or attorney adjudicator.
    (2) The Council may adopt, modify, or reverse the ALJ's or attorney 
adjudicator's decision or recommended decision.
    (3) Notice of the Council's decision or remand order is issued to 
the eligible party (or the party's representative).
    (i) In the case of a modification or reversal of the ALJ's or 
attorney adjudicator's decision that is favorable to the eligible 
party, the Council's decision includes information regarding the effect 
of such decision, including, as applicable, a statement about the 
obligation of the SNF to refund any amounts collected from the 
beneficiary for the covered SNF services, and that the SNF may then 
submit a new claim(s) for services covered under Part A in order to 
determine the amount of benefits due.
    (ii) If the appeal involves a beneficiary not enrolled in the 
Supplementary Medical Insurance program (Medicare Part B) at the time 
of the beneficiary's hospitalization, a modification or reversal of the 
ALJ's or attorney adjudicator's decision that is favorable to the 
eligible party with respect to hospital services also includes a 
statement about the obligation of the hospital to refund any amounts 
collected for the outpatient hospital services, and that the hospital 
may then submit a new claim for covered inpatient hospital services in 
order to determine the amount of benefits due.
    (iii)(A) If the Council adopts or modifies an ALJ or attorney 
adjudicator decision that is unfavorable or partially favorable to the 
eligible party, the decision includes information about the procedures 
for filing a request for judicial review under Sec.  405.1136, 
including information regarding the amount in controversy requirement 
in Sec.  405.936(c).
    (B) A partially favorable decision issued by the Council refers to 
a determination that the inpatient admission satisfied the relevant 
criteria for Part A coverage but the SNF services did not satisfy the 
relevant criteria for Part A coverage.
    (4) Notice of a Council decision, favorable or partially favorable 
to the eligible party, that modifies or reverses the decision or 
recommended decision by an ALJ or attorney adjudicator, or a remand 
order that is favorable to the eligible party, is issued to the SNF, as 
applicable, and to the hospital in the case of an appeal filed by, or 
on behalf of, a beneficiary not enrolled in the Supplementary Medical 
Insurance program (Medicare Part B) at the time of hospitalization.
    (i)(A) Notice issued to the SNF includes information regarding the 
effect of such decision, including, as applicable, a statement 
explaining that the SNF must refund any payments collected from the 
beneficiary for the covered SNF services, and that the SNF may then 
submit a new claim(s) to determine the amount of benefits due for the 
covered services.
    (B) A decision that is partially favorable to the eligible party is 
sent to the SNF and explains the reason the hospital admission 
satisfied the relevant criteria for Part A coverage at the time the 
services were furnished, the reason the SNF services did not satisfy 
the relevant criteria for Part A coverage and explains that the 
decision is being sent for informational purposes only.
    (ii) Notice issued to a hospital (in the case of an appeal filed 
by, or on behalf of, a beneficiary not enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of 
hospitalization) includes information regarding the effect of such 
decision, including a statement explaining that the hospital must 
refund any payments collected for the outpatient hospital services, and 
that the hospital may then submit a new Part A inpatient claim in order 
to determine the amount of benefits due for covered services.
    (5) The timeframe within which notices must be sent under this 
paragraph are determined under the provisions in Sec.  405.1100.
    (d) Effect of a favorable Council decision. (1)(i) If the Council 
issues a decision that the beneficiary's inpatient admission satisfied 
the relevant criteria for Part A coverage and the hospital's decision 
to change the inpatient admission to outpatient receiving observation 
services was therefore erroneous, the beneficiary's reclassification as 
an outpatient is disregarded for the purposes of determining Part A 
benefits, including both Part A hospital coverage and Part A SNF 
coverage, if applicable.
    (ii) For the purposes of effectuating a favorable decision by the 
Council, unless a Part A claim is submitted by a hospital, any claims 
previously submitted for outpatient hospital services and payments made 
for such services (including any applicable deductible and coinsurance 
amounts) are not reopened or revised by the MAC, and payment, as 
applicable, for covered SNF services may be made by the MAC to the SNF 
without regard to the hospital claim.
    (2) In order to determine Part A benefits to be paid and to make 
payment for covered services as a result of a favorable decision, as 
applicable--
    (i) The SNF, that furnished services to the beneficiary must refund 
payments previously collected from the beneficiary for the covered 
services and may then submit a Part A claim(s) for such services within 
365 calendar days of receipt of the notice of a favorable decision;
    (ii) In the case of a beneficiary not enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital 
services. After the refund is issued, the hospital may then submit a 
Part A inpatient claim for such services within 365 calendar days of 
receipt of the notice of a favorable decision;
    (iii) In the case of a beneficiary enrolled in the Supplementary 
Medical Insurance program (Medicare Part B) at the time of the 
beneficiary's hospitalization, the hospital that furnished services 
must refund any payments collected for the outpatient hospital services 
only if the hospital chooses to submit a Part A inpatient claim for 
such services. The deadline for submitting a Part A claim for such 
services is 365 calendar days after receipt of the notice of a 
favorable decision, and the hospital must refund any payments collected 
for the outpatient services before submitting the Part A inpatient 
claim.
    (3) The hospital, and as applicable, the SNF, must comply with all 
applicable provisions regarding charges to the beneficiary for covered 
services, including but not limited to relevant provisions in part 489 
Subparts B through D of this chapter.
    (4) A favorable Council decision is considered final and binding 
unless it is reopened and revised under the

[[Page 83292]]

provisions of Sec. Sec.  405.980 through 405.986. The provisions 
regarding reopening of a Council decision in Sec.  405.980(d) and (e) 
apply in the same manner to favorable Council decisions issued under 
this section.
    (5) The notice of a favorable decision issued to a hospital and, as 
applicable, notice of a favorable or partially favorable decision 
issued to SNF does not convey party status to such provider.
    (e) Effect of an unfavorable or partially favorable Appeals Council 
decision. (1) An unfavorable or partially favorable Appeals Council 
decision is considered final and binding unless it is reopened and 
revised under the provisions of Sec.  405.980(d) or (e), or a Federal 
district court issues a decision modifying the Council's decision.
    (2) The provisions regarding reopening of an Appeals Council 
decision in Sec.  405.980(d) and (e) apply in the same manner to 
unfavorable and partially favorable decisions issued under this 
section.
    (f) Judicial review. (1) An eligible party (or the party's 
representative) dissatisfied with a final and binding decision under 
paragraph (e) of this section who satisfies the amount in controversy 
requirement in Sec.  405.936(c) may request judicial review in Federal 
district court under the procedures set forth in Sec.  405.1136.
    (2) An eligible party (or the party's representative) who satisfies 
the amount in controversy requirement in Sec.  405.936(c) and the 
requirements to escalate a case from the Council in Sec.  405.1132 may 
request judicial review in Federal district court under the procedures 
set forth in Sec.  405.1136.

0
3. The heading of subpart J is revised to read as follows:

Subpart J--Procedures and Beneficiary Rights for Expedited 
Determinations and Reconsiderations When Coverage Is Changed or 
Terminated

0
4. Add Sec. Sec.  405.1210, 405.1211, and 405.1212 to read as follows:


Sec.  405.1210  Notifying eligible beneficiaries of appeal rights when 
a beneficiary is reclassified from an inpatient to an outpatient 
receiving observation services.

    (a) Applicability and scope. (1) For purposes of this section and 
Sec. Sec.  405.1211 and 405.1212, the term ``hospital'' is defined as 
any facility providing care at the inpatient hospital level, whether 
that care is short term or long term, acute or non-acute, paid through 
a prospective payment system or other reimbursement basis, limited to 
specialty care or providing a broader spectrum of services. This 
definition includes critical access hospitals (CAHs).
    (2) For purposes of this section and Sec. Sec.  405.1211 and 
405.1212, the change in status occurs when a beneficiary is 
reclassified from an inpatient to an outpatient receiving observation 
services (as defined in Sec.  405.931(h)).
    (3) For purposes of this section and Sec. Sec.  405.1211 and 
405.1212, a beneficiary is eligible to pursue an appeal regarding a 
change in status when the beneficiary meets all the following:
    (i) Was formally admitted as a hospital inpatient in accordance 
with an order for inpatient admission by a physician or other qualified 
practitioner.
    (ii) Was subsequently reclassified by the hospital as an outpatient 
receiving observation services after the admission.
    (iii)(A) Was not enrolled in Part B coverage at the time of the 
beneficiary's hospitalization; or
    (B) Stayed at the hospital for 3 or more consecutive days but was 
classified as an inpatient for fewer than 3 days.
    (iv) The period ``3 or more consecutive days'' is counted using the 
rules for determining coverage of SNF services under section 1861 of 
the Act and Sec.  409.30 of this chapter (that is, a beneficiary must 
have a qualifying inpatient stay of at least 3 consecutive calendar 
days starting with the admission day but not counting the discharge 
day).
    (b) Advance written notice of appeal rights. For all eligible 
beneficiaries, hospitals must deliver valid, written notice of an 
eligible beneficiary's right to pursue an appeal regarding the decision 
to reclassify the beneficiary from an inpatient to an outpatient 
receiving observation services. The hospital must use a standardized 
notice specified by CMS in accordance with the following procedures:
    (1) Timing of notice. The hospital must provide the notice not 
later than 4 hours before release from the hospital and as soon as 
possible after the earliest of either of the following:
    (i) The hospital reclassifies the beneficiary from an inpatient to 
an outpatient receiving observation services and the beneficiary is not 
enrolled in Part B.
    (ii) The hospital reclassifies the beneficiary from an inpatient to 
an outpatient receiving observation services and the beneficiary has 
stayed in the hospital for 3 or more consecutive days but was an 
inpatient for fewer than 3 days.
    (2) Content of the notice. The notice must include the following 
information:
    (i) The eligible beneficiary's change in status and the appeal 
rights under Sec.  405.1211 if the beneficiary wishes to pursue an 
appeal regarding that change.
    (ii) An explanation of the implications of the change in status, 
including the potential change in beneficiary hospital charges 
resulting from a favorable decision, and subsequent eligibility for 
Medicare coverage for SNF services.
    (iii) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the written 
notice of appeal rights described in this section is valid if--
    (A) The eligible beneficiary (or the eligible beneficiary's 
representative) has signed and dated the notice to indicate that he or 
she has received the notice and can comprehend its contents, except as 
provided in paragraph (b)(4) of this section; and
    (B) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph 
(b)(2) of this section.
    (4) If an eligible beneficiary refuses to sign the notice. The 
hospital may annotate its notice to indicate the refusal, and the date 
of refusal is considered the date of receipt of the notice.


Sec.  405.1211  Expedited determination procedures when a beneficiary 
is reclassified from an inpatient to an outpatient receiving 
observation services.

    (a) Beneficiary's right to an expedited determination by the QIO. 
An eligible beneficiary has a right to request an expedited 
determination by the QIO when--
    (1) A hospital changes a beneficiary's status from an inpatient to 
an outpatient receiving observation services; and
    (2) The beneficiary meets other eligibility criteria as specified 
in Sec.  405.1210(a)(3).
    (b) Requesting an expedited determination. (1) An eligible 
beneficiary who wishes to exercise the right to an expedited 
determination must submit a request to the QIO that has an agreement 
with the hospital as specified in Sec.  476.78 of this chapter. The 
request must be made in writing or by telephone before release from the 
hospital.
    (2) The eligible beneficiary, or his or her representative, upon 
request by the QIO, must be available to discuss the case.
    (3) The eligible beneficiary may, but is not required to, submit 
written evidence to be considered by the QIO in making its decision.

[[Page 83293]]

    (4) An eligible beneficiary who makes a timely request for an 
expedited QIO review in accordance with paragraph (b)(1) of this 
section is subject to the billing protection under paragraph (e) of 
this section, as applicable.
    (5) An eligible beneficiary who fails to make a timely request for 
an expedited determination by a QIO, as described in paragraph (b)(1) 
of this section, may still request an untimely expedited QIO 
determination at any time. The QIO issues a decision in accordance with 
paragraph (c)(6)(ii) of this section, but the billing protection under 
paragraph (e) of this section does not apply.
    (c) Procedures the QIO must follow. (1) When the QIO receives the 
request for an expedited determination under paragraph (b)(1) of this 
section, it must immediately notify the hospital that a request for an 
expedited determination has been made.
    (2) The QIO determines whether the hospital delivered valid notice 
consistent with Sec.  405.1210(b)(3).
    (3) The QIO examines the medical and other records that pertain to 
the change in status.
    (4) The QIO must solicit the views of the eligible beneficiary (or 
the eligible beneficiary's representative) who requested the expedited 
determination.
    (5) The QIO must provide an opportunity for the hospital to explain 
why the reclassification of the beneficiary from an inpatient to an 
outpatient receiving observation services is appropriate.
    (6) The following timeframes apply for the QIO's decision when an 
eligible beneficiary requests--
    (i) A timely expedited determination in accordance with paragraph 
(b)(1) of this section, the QIO must make a determination within 1 
calendar day of receiving all requested pertinent information specified 
in paragraph (d)(1)(i) of this section; or
    (ii) An untimely request for a QIO expedited determination, the QIO 
must make a determination within 2 calendar days after the QIO receives 
all requested information specified in paragraph (d)(1)(i) of this 
section.
    (7) If the QIO does not receive the information specified in 
paragraph (d)(1)(i) of this section, it may make its determination 
based on the evidence at hand, or it may defer a decision until it 
receives the requested information.
    (8) When the QIO issues an expedited determination, the QIO must 
notify the eligible beneficiary, the hospital, and SNF (if applicable) 
of its decision by telephone, followed by a written notice that must 
include the following information:
    (i) The basis for the determination.
    (ii) A detailed rationale for the determination.
    (iii) An explanation of the Medicare payment consequences of the 
determination.
    (iv) Information about the eligible beneficiary's right to an 
expedited reconsideration of the QIO's determination as set forth in 
Sec.  405.1212, including how to request a reconsideration and the time 
period for doing so.
    (d) Responsibilities of hospitals. (1)(i) Upon notification by the 
QIO of the request for an expedited determination, the hospital must 
supply all information that the QIO needs to make its expedited 
determination, including a copy of the notice as required in Sec.  
405.1210(b) of this section.
    (ii) The hospital must furnish this information as soon as 
possible, but no later than by noon of the calendar day after the QIO 
notifies the hospital of the request for an expedited determination.
    (iii) At the discretion of the QIO, the hospital must make the 
information available by phone or in writing (with a written record of 
any information not transmitted initially in writing).
    (2)(i) At an eligible beneficiary's (or representative's) request, 
the hospital must furnish the beneficiary with a copy of, or access to, 
any documentation that it sends to the QIO, including written records 
of any information provided by telephone.
    (ii) The hospital may charge the beneficiary a reasonable amount to 
cover the costs of duplicating the documentation and, if applicable, 
delivering it to the beneficiary.
    (iii) The hospital must accommodate such a request by no later than 
close of business of the first calendar day after the material is 
requested.
    (e) Billing during QIO expedited review. When an eligible 
beneficiary requests an expedited determination in accordance with 
paragraphs (b)(1) through (b)(4) of this section, the hospital may not 
bill the beneficiary for any disputed services until the expedited 
determination process (and reconsideration process, if applicable) has 
been completed.
    (f) Effect of an expedited QIO determination. The QIO determination 
is binding for payment purposes upon the eligible beneficiary, 
hospital, and MAC, except if the eligible beneficiary is dissatisfied 
with the determination, he or she may request a reconsideration 
according to the procedures described in Sec.  405.1212.


Sec.  405.1212  Expedited reconsideration procedures regarding Part A 
coverage when a beneficiary is reclassified from an inpatient to an 
outpatient receiving observation services.

    (a) Beneficiary's right to an expedited reconsideration. An 
eligible beneficiary who is dissatisfied with a QIO's expedited 
determination per Sec.  405.1211(c)(6) may request an expedited 
reconsideration by the QIO identified in the written notice specified 
in Sec.  405.1211(c)(8)(iv).
    (b) Requesting an expedited reconsideration. (1) An eligible 
beneficiary who wishes to obtain an expedited reconsideration must 
submit a request for the reconsideration to the appropriate QIO, in 
writing or by telephone, by no later than noon of the calendar day 
following initial notification (whether by telephone or in writing) 
after receipt of the QIO's determination.
    (2) The eligible beneficiary, or his or her representative, must be 
available to answer questions or supply information that the QIO may 
request to conduct its reconsideration.
    (3) The eligible beneficiary may, but is not required to, submit 
evidence to be considered by the QIO in making the reconsideration.
    (4) An eligible beneficiary who makes a timely request for an 
expedited reconsideration in accordance with paragraph (b)(1) of this 
section is subject to the billing protection under paragraph (e) of 
this section, as applicable.
    (5) An eligible beneficiary who fails to make a timely request for 
an expedited reconsideration by a QIO, as described in paragraph (b)(1) 
of this section, may still request an expedited QIO reconsideration at 
any time. The QIO issues a reconsideration in accordance with paragraph 
(c)(3)(ii) of this section, but the billing protection under paragraph 
(e) of this section does not apply.
    (c) Procedures and responsibilities of the QIO. (1) On the day the 
QIO receives the request for an expedited reconsideration under 
paragraph (b) of this section, the QIO must immediately notify the 
hospital of the request for an expedited reconsideration.
    (2) The QIO must offer the eligible beneficiary and the hospital an 
opportunity to provide further information.
    (3) When the eligible beneficiary makes--
    (i) A timely request in accordance with paragraph (b)(1) of this 
section, the QIO must make a reconsideration determination within 2 
calendar days of

[[Page 83294]]

receiving all requested pertinent information; or
    (ii) An untimely request, the QIO must make a reconsideration 
determination within 3 calendar days of receiving all requested 
pertinent information.
    (4) When the QIO issues a reconsideration determination, the QIO 
must notify the eligible beneficiary, the hospital, and SNF, if 
applicable, of its decision by telephone, followed by a written notice 
that must include the following information:
    (i) The basis for the determination.
    (ii) A detailed rationale for the determination.
    (iii) An explanation of the Medicare payment consequences of the 
determination.
    (iv) Information about the eligible beneficiary's right to appeal 
the QIO's reconsideration decision to OMHA for an ALJ hearing in 
accordance with subpart I of this part, including how to request an 
appeal and the time period for doing so.
    (d) Responsibilities of the hospital. A hospital may, but is not 
required to, submit evidence to be considered by a QIO in making its 
reconsideration decision. If a hospital fails to comply with a QIO's 
request for additional information beyond that furnished to the QIO for 
purposes of the expedited determination, the QIO makes its 
reconsideration decision based on the information available.
    (e) Billing during QIO reconsideration. When an eligible 
beneficiary requests an expedited reconsideration in accordance with 
the deadline specified in paragraph (b)(1) of this section, the 
hospital may not bill the beneficiary for any disputed services until 
the QIO makes its reconsideration decision.
    (f) Effect of an expedited QIO reconsideration. The QIO expedited 
reconsideration is binding for payment purposes only, upon the eligible 
beneficiary, hospital, and MAC, except if a beneficiary elects to 
request a hearing by an ALJ in accordance with 42 CFR part 478 subpart 
B if he or she is dissatisfied with the expedited reconsideration 
decision.

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
5. The authority citation for part 476 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.


0
6. Section 476.71 is amended by adding paragraph (a)(9) to read as 
follows:


Sec.  476.71  QIO review requirements.

    (a) * * *
    (9) Hospital reclassification of a beneficiary's inpatient 
admission status to that of an outpatient receiving observation 
services when a beneficiary meets the eligibility criteria at 
Sec. Sec.  405.1210 through 405.1212 of this chapter. Appeals of 
determinations are available as specified in Sec.  405.1212 of this 
chapter.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

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

    Authority: 42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 1395cc, 
1395ff, and 1395hh.


0
8. Section 489.27 is amended by revising the section heading and 
paragraph (b) to read as follows:


Sec.  489.27  Beneficiary notice of discharge or change in status 
rights.

* * * * *
    (b) Notification by hospitals and other providers. Hospitals and 
other providers (as identified at Sec.  489.2(b)) that participate in 
the Medicare program must furnish each Medicare beneficiary, or 
representative, applicable CMS notices in advance of discharge or 
termination of Medicare services, or of changes from inpatient to 
outpatient status, including the notices required under Sec. Sec.  
405.1200, 405.1202, 405.1206, 405.1210, and 422.624 of this chapter.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-23195 Filed 10-11-24; 4:15 pm]
BILLING CODE 4120-01-P


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