Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27251

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[FR Doc. 98–13119 Filed 5–15–98; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[HCFA–1876–P]

RIN 0938–AH61

Medicare Program; Revision to Accrual

Basis of Accounting Policy

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Proposed rule.

SUMMARY: Current policy provides that

payroll taxes a provider becomes

obligated to remit to governmental

agencies are included in allowable costs

under Medicare only in the cost

reporting period in which payment

(upon which the payroll taxes are based)

is actually made to an employee.

Therefore, for payroll accrued in one

year but not paid until the next year, the

associated payroll taxes on the payroll

are not an allowable cost until the next

year. This proposed rule would make

one exception, in the situation where

payment would be made to the

employee in the current year but for the

fact the regularly scheduled payment

date is after the end of the year. In that

case, the rule would require allowance

in the current year of accrued taxes on

payroll that is accrued through the end

of the year but not paid until the

beginning of the next year, thus

allowing accrued taxes on end-of-the

year payroll in the same year that the

accrual of the payroll itself is allowed.

The effect of this proposal is not on the

allowability of cost but rather only on

the timing of payment; that is, the cost

of payroll taxes on end-of-the-year

payroll would be allowable in the

current period rather than in the

following period.

DATES: Written comments will be

considered if we receive them at the

appropriate address, as provided below,

no later than 5 p.m on July 17, 1998.

ADDRESSES: Mail written comments (one

original and three copies) to the

following address: Health Care

Financing Administration, Department

of Health and Human Services,

Attention: HCFA–1876–P, P.O. Box

7517, Baltimore, MD 21207–0517.

If you prefer, you may deliver your

written comments to one of the

following addresses:

Room 309–G, Hubert H. Humphrey

Building, 200 Independence Avenue,

SW, Washington, DC 20201, or

Room C5–11–17 Central Building, 7500

Security Boulevard, Baltimore, MD

21244–1850.

Because of staffing and resource

limitations, we cannot accept comments

by facsimile (FAX) transmission. In

commenting, please refer to file code

HCFA–1876–P. Comments received

timely will be available for public

inspection as they are received,

generally beginning approximately 3

weeks after publication of a document,

in room 309–G of the Department’s

offices at 200 Independence Avenue,

SW, Washington, DC, on Monday

through Friday of each week from 8:30

a.m. to 5 p.m. (Phone: (202) 690–7890).

Copies: To order copies of the Federal

Register containing this document, send

your request to: New Orders,

Superintendent of Documents, PO Box

37194, Pittsburgh, PA 15250–7954.

Specify the date of the issue requested

and enclose a check or money order

payable to the Superintendent of

Documents, or enclose your Visa or

MasterCard number and expiration date.

Credit card numbers can also be placed

by calling the order desk at (202) 512–

1800 or by faxing to (202) 512–2250.

The cost for each copy is $8.00. As an

alternative, you can view and

photocopy the Federal Register

document at most libraries designated

as Federal Deposit Libraries and at

many other public and academic

libraries throughout the country that

receive the Federal Register.

This Federal Register document is

also available from the Federal Register

online database through GPO Access, a

service of the U.S. Government Printing

Office. Free public access is available on

a Wide Area Information Server (WAIS)

through the Internet and via

asynchronous dial-in. Internet users can

access the database by using the World

Wide Web; the Superintendent of

Documents home page address is http:/

/www.access.gpo.gov/suldocs/, by

using local WAIS client software, or by

telnet to swais.access.gpo.gov, then

login as guest (no password required).

Dial-in users should use

communications software and modem

to call (202) 512–1661; type swais, then

login as guest (no password required).

FOR FURTHER INFORMATION CONTACT: John

Eppinger, (410) 786–4518.

SUPPLEMENTARY INFORMATION:

I. Background

Generally, under the Medicare

program, health care providers not

subject to prospective payment are paid

for the reasonable costs of covered

services furnished to Medicare

beneficiaries. This policy pertains to all

services furnished by providers other

than inpatient hospital services

furnished in acute care hospitals

(section 1886(d) of the Social Security

Act (the Act)) and certain inpatient

routine services furnished by skilled

nursing facilities choosing to be paid on

a prospective payment basis (section

1888(d) of the Act). Additionally, there

are other limited services not paid on a

reasonable cost basis, to which this

policy will not apply.

Section 1861(v)(1)(A) of the Act

defines reasonable cost and provides

that reasonable cost shall be determined

in accordance with implementing

regulations. Section 413.24 establishes

the methods to be used and the

adequacy of data needed to determine

reasonable costs for various types or

classes of institutions, agencies, and

services. Section 413.24(a) requires

providers receiving payment on the

basis of reasonable cost to maintain

financial records and statistical data

sufficient for the proper determination

of costs payable under the program and

for verification of costs by qualified

auditors. The cost data are required to

be based on an approved method of cost

finding and on the accrual basis of

accounting. Section 413.24(b)(2)

provides that under the accrual basis of

accounting, revenue is reported in the

period in which it is earned, regardless

of when it is collected, and expenses are

reported in the period in which they are

incurred, regardless of when they are

paid. Further, § 413.100 (see 60 FR

33126, June 27, 1995) provides for

special treatment of certain accrued

costs, including Federal Insurance

Contribution Act (FICA) and other

payroll taxes claimed by providers on

their cost reports. Specifically,

§ 413.100(c)(2)(vi) provides that a

provider’s share of FICA and other

payroll taxes that the provider becomes

obligated to remit to governmental

agencies is included in allowable costs

only during the cost reporting period in

which payment (upon which the payroll

taxes are based) is actually made to the

employee.

Prior to publication of § 413.100 on

June 27, 1995, we published a proposed

rule on October 9, 1991 (56 FR 50834).

Following publication of that proposal,

we received several comments that we

should recognize accrued payroll taxes

during the same period that the

employee benefits are earned and

accrued. One commenter asserted that

costs related to the accrual of payroll

taxes should be allowed especially as

they relate to the accrual of year-end
27252 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules

wages. Based on our belief that payroll

taxes should not be accrued and

claimed for Medicare payment until the

period in which actual payment is made

to the employees, we published

§ 413.100(c)(2)(vi) in its present form.

The policy in § 413.100(c)(2)(vi)

continues to be Medicare’s policy,

subject to the exception proposed in

section II below. When an employee is

paid by a provider as part of a provider

payroll, whether the payment is for time

worked during the payroll period or for

benefits (for example, vacation benefits)

earned in an earlier period, the

provider’s share of FICA and other

payroll taxes is an allowable cost during

the cost reporting period in which

payment is made to the employee. Our

policy is based on the fact that a

provider becomes obligated to

governmental agencies for payroll taxes

only at the time that the salary or

benefits, upon which the payroll taxes

are based, are actually paid to the

provider’s employee. Further, until the

salary or benefits are actually paid, it

cannot be known for certain whether

there will be a payroll tax or taxes, what

the amount of the tax(es) will be, or

whether a particular employee will be

liable for the tax(es).

II. Provisions of Proposed Rule

Upon reconsideration, we agree with

the comment to the October 9, 1991

proposed rule that Medicare should

recognize, as allowable, the costs related

to the accrual of provider payroll taxes

specifically as they relate to the accrual

of year-end payroll. Therefore, we

propose to revise § 413.100(c)(2)(vi) to

make one exception to the above-stated

policy. We propose to provide that if

payment would be made to an employee

during a cost reporting period but for

the fact that the regularly scheduled

payment date is after the end of the

period, costs of accrued payroll taxes

related to the portion of payroll accrued

through the end of the period, but paid

to the employee after the beginning of

the new period, are allowable costs in

the year of accrual, subject to the

liquidation requirements specified in

the regulations (§ 413.100(c)(2)(i)). The

revision made in this proposed rule thus

is intended to allow accrued taxes on

end-of-the-year payroll in the same year

that the accrual of the payroll itself is

allowed, just as Medicare, in other than

end-of-the-year payroll situations,

allows accrued taxes on payroll in the

same year that the accrual of the payroll

is allowed. Our proposal is based on the

notion that the insignificant amount of

time passing between the accrual of the

end-of-the-year payroll and the payment

of the payroll in the following year does

not give rise to the same concerns

described in section I. above.

We also propose to change the

example in § 413.100(c)(2)(vi) to

emphasize, as discussed above, that

payroll taxes applicable to benefits

accrued, such as vacation benefits, are

not allowable until the period in which

the employee uses the benefits, that is,

takes the vacation. Finally, we propose

to change payroll tax from singular to

plural throughout the section to clarify

that there can be more than one payroll

tax.

III. Impact Statement

We have examined the impact of this

proposed rule as required by Executive

Order 12866. Executive Order 12866

directs agencies to assess all costs and

benefits of available regulatory

alternatives and, when regulation is

necessary, to select regulatory

approaches that maximize net benefits

(including potential economic,

environmental, public health and safety

effects; distributive impacts; and

equity). This proposed rule, which

would permit allowance of accrued

taxes on end-of-the-year payroll in the

same year that the accrual of the payroll

itself is allowed, does not make any

significant changes in program

payments. The proposal is limited in

nature, as it affects only accrued payroll

taxes for payroll accrued at the end of

one cost reporting period which is not

actually paid to employees until the

beginning of the next period.

Furthermore, in this situation, the effect

of the proposal is only on the timing of

payment; that is, it does not allow an

additional cost of payroll taxes but

rather allows the cost in the current

period instead of in the following

period. The proposal should not involve

changes in provider accounting systems

and, in fact, will free providers or

intermediaries from making cost report

adjustments, under the current policy,

to postpone reimbursement of the cost

on the current cost report to the

subsequent cost report. We do not

expect any significant costs or savings

due to this change.

We have also examined the impact of

the proposed rule as required by the

Regulatory Flexibility Act (RFA) (Pub.

L. 96–354), and by section 1102(b) of the

Act. The RFA requires agencies to

analyze options for regulatory relief for

small businesses. For purposes of the

RFA, most hospitals, and most other

providers, physicians, and health care

suppliers are small entities, either by

nonprofit status or by having revenues

of $5 million or less annually. In

addition, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis if a rule may have a

significant impact on the operations of

a substantial number of small rural

hospitals. Such an analysis must

conform to the provisions of section 603

of the RFA. For purposes of section

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

rural hospital as a hospital that is

located outside of a Metropolitan

Statistical Area and has fewer than 50

beds.

We are not preparing analyses for

either the RFA or section 1102(b) of the

Act since we have determined, and we

certify, that this proposed rule would

not result in a significant economic

impact on a substantial number of small

entities and would not have a

significant impact on the operations of

a substantial number of small rural

hospitals.

In accordance with the provisions of

Executive Order 12866, this proposed

rule was reviewed by the Office of

Management and Budget.

IV. Paperwork Reduction Act

This document does not impose

information collection and

recordkeeping requirements.

Consequently, it need not be reviewed

by the Office of Management and

Budget under the authority of the

Paperwork Reduction Act of 1995.

V. Response to Public Comments

Because of the large number of items

of correspondence we normally receive

on Federal Register documents

published for comment, we are not able

to acknowledge or respond to them

individually. We will consider all

comments we receive by the date and

time specified in the DATES section of

this preamble, and, if we proceed with

a subsequent document, we will

respond to the comments in the

preamble to that document.

List of Subjects in 42 CFR Part 413

Health facilities, Kidney disease,

Medicare, Puerto Rico, Reporting and

recordkeeping requirements.

42 CFR part 413 would be amended

as follows:

PART 413—PRINCIPLES OF

REASONABLE COST

REIMBURSEMENT; PAYMENT FOR

END—STAGE RENAL DISEASE

SERVICES; OPTIONAL

PROSPECTIVELY DETERMINED

PAYMENT RATES FOR SKILLED

NURSING FACILITIES

A. The authority citation for part 413

continues to read as follows:

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

1871 of the Social Security Act (42 U.S.C.

1302, 1395x(v)(1)(A), and 1395hh).
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Proposed Rules 27253

1A copy of each diskette submitted to the Board

should be provided to any other party upon request.

2The using railroad must compensate the

incumbent railroad for the use of its tracks, at a

level to be determined by the carriers or fixed by

the Board. 49 U.S.C. 11324(c), 11102(a), and

11123(b)(2).

Subpart F—Specific Categories of

Costs

B. In § 413.100, paragraph (c)(2)(vi) is

revised to read as follows:

§ 413.100 Special treatment of certain

accrued costs.

(c) Recognition of accrued costs.

* * * * *

(2) Requirements for liquidation of

liabilities.

* * * * *

(vi) FICA and other payroll taxes.—

(A) General rule. The provider’s share of

FICA and other payroll taxes that the

provider becomes obligated to remit to

governmental agencies is included in

allowable costs only during the cost

reporting period in which payment

(upon which the payroll taxes are based)

is actually made to the employee. For

example, payroll taxes applicable to

vacation benefits are not to be accrued

in the period in which the vacation

benefits themselves are accrued but

rather are allowable only in the period

in which the employee takes the

vacation.

(B) Exception. If payment would be

made to an employee during a cost

reporting period but for the fact the

regularly scheduled payment date is

after the end of the period, costs of

accrued payroll taxes related to the

portion of payroll accrued through the

end of the period, but paid to the

employee after the beginning of the new

period, are allowable costs in the year

of accrual, subject to the liquidation

requirements specified in paragraph

(c)(2)(i) of this section.

* * * * *

(Catalog of Federal Domestic Assistance

Program No. 93.773, Medicare—Hospital

Insurance)

Dated: January 26, 1998.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing

Administration.

Dated: April 8, 1998.

Donna E. Shalala,

Secretary.

[FR Doc. 98–13110 Filed 5–15–98; 8:45 am]

BILLING CODE 4120–01–P

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1146

[STB Ex Parte No. 628]

Expedited Relief for Service

Inadequacies

AGENCY: Surface Transportation Board,

DOT.

ACTION: Notice of Proposed Rulemaking.

SUMMARY: Pursuant to its decision in

Review of Rail Access and Competition

Issues, STB Ex Parte No. 575 (STB

served Apr. 17, 1998) (‘‘Review’’), the

Board is instituting a proceeding to

solicit comments on proposed rules that

would establish expedited procedures

for shippers to obtain alternative service

from another rail carrier when the

incumbent carrier cannot properly serve

shippers. The Board requests that

persons intending to participate in this

proceeding notify the agency of that

intent. A separate service list will be

issued based on the notices of intent to

participate that the Board receives.

DATES: Notices of intent to participate in

this proceeding are due May 28, 1998.

Comments on this proposal are due June

15, 1998. Replies are due July 15, 1998.

ADDRESSES: An original plus 12 copies

of all comments and replies, referring to

STB Ex Parte No. 628, must be sent to

the Office of the Secretary, Case Control

Unit, ATTN: STB Ex Parte No. 628,

Surface Transportation Board, 1925 K

Street, NW., Washington, DC 20423–

0001.

Copies of the written comments will

be available from the Board’s contractor,

D.C. News and Data, Inc., located in

Room 210 in the Board’s building. D.C.

News can be reached at (202) 289–4357.

The comments will also be available for

viewing and self copying in the Board’s

Microfilm Unit, Room 755.

In addition to an original and 12

copies of all paper documents filed with

the Board, the parties shall submit their

pleadings, including any graphics, on a

3.5-inch diskette formatted for

WordPerfect 7.0 (or in a format readily

convertible into WordPerfect 7.0). All

textual material, including cover letters,

certificates of service, appendices and

exhibits, shall be included in a single

file on the diskette. The diskettes shall

be clearly labeled with the filer’s name,

the docket number of this proceeding,

STB Ex Parte No. 628, and the name of

the electronic format used on the

diskette for files other than those

formatted in WordPerfect 7.0. All

pleadings submitted on diskettes will be

posted on the Board’s website

(www.stb.dot.gov). The electronic

submission requirements set forth in

this notice supersede, for the purposes

of this proceeding, the otherwise

applicable electronic submission

requirements set forth in the Board’s

regulations. See 49 CFR 1104.3(a), as

amended in Expedited Procedures for

Processing Rail Rate Reasonableness,

Exemption and Revocation Proceedings,

STB Ex Parte No. 527, 61 FR 52710, 711

(Oct. 8, 1996), 61 FR 58490, 58491 (Nov.

15, 1996).1

FOR FURTHER INFORMATION CONTACT:

Joseph H. Dettmar, (202) 565–1600.

[TDD for the hearing impaired: (202)

565–1695.]

SUPPLEMENTARY INFORMATION: In STB Ex

Parte No. 575, the Board conducted two

days of informational hearings, on April

2 and 3, 1998, to examine issues of rail

access and competition in today’s

railroad industry, and the statutory

remedies and agency regulations and

procedures that relate to those matters.

As a result of those hearings, we

announced, inter alia, that we would

begin a rulemaking proceeding to

consider revisions to our rules to

provide shippers receiving poor service

greater opportunity to obtain service

from an additional carrier.

Overview

While the Board lacks general

authority to require an unwilling

railroad to permit physical access over

its lines to the trains and crews of

another railroad, it may direct that

result in certain situations: under 49

U.S.C. 11324(c), as a condition to the

incumbent’s merger with another

railroad; under 49 U.S.C. 11102(a), to

serve terminal facilities when it would

be in the public interest; or, under 49

U.S.C. 11123(a), to serve any facilities

for a limited period of time (not more

than 270 days) because of the carrier’s

inability or failure to provide its

shippers with adequate service.2 The

Board may also direct an incumbent

railroad to afford access indirectly,

either by prescribing alternative through

routes under 49 U.S.C. 10705(a)

(requiring the incumbent to interline

traffic with another railroad over a

designated interchange and thereby

create an alternative route and rates for

a shipper’s traffic) or by requiring

reciprocal switching under 49 U.S.C.

11102(c) (where, for a fee, the

incumbent must switch cars to and from

another railroad so that the latter, even

though it cannot physically reach a

shipper, can constructively offer

alternative single-line service).

The access remedies under sections

11102 and 10705—terminal trackage

rights, reciprocal switching, and

alternative through routes—are now

invoked through the ‘‘competitive

access’’ regulations, 49 CFR part 1144,

and, to obtain relief, parties must show