Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations 31123

because the Federal SIP approval does

not impose any new requirements, I

certify that it does not have a significant

impact on any small entities affected.

Moreover, due to the nature of the

Federal-State relationship under the

Act, preparation of a flexibility analysis

would constitute Federal inquiry into

the economic reasonableness of State

action. The Act forbids EPA to base its

actions concerning SIPs on such

grounds. See Union Electric Co. v. U.S.

EPA, 427 U.S. 246, 255–66 (1976); 42

U.S.C. 7410(a)(2).

C. Unfunded Mandates

Under section 202 of the Unfunded

Mandates Reform Act of 1995, signed

into law on March 22, 1995, EPA must

prepare a budgetary impact statement to

accompany any proposed or final rule

that includes a Federal mandate that

may result in estimated costs to State,

local, or tribal governments in the

aggregate; or to the private sector, of

$100 million or more. Under section

205, EPA must select the most costeffective and least burdensome

alternative that achieves the objectives

of the rule and is consistent with

statutory requirements. Section 203

requires EPA to establish a plan for

informing and advising any small

governments that may be significantly

or uniquely impacted by the rule.

The EPA has determined that the

approval action promulgated does not

include a Federal mandate that may

result in estimated costs of $100 million

or more to either State, local, or tribal

governments in the aggregate, or to the

private sector. This Federal action

approves preexisting requirements

under State or local law, and imposes

no new requirements. Accordingly, no

additional costs to State, local, or tribal

governments, or to the private sector,

result from this action.

D. Submission to Congress and the

Comptroller General

The Congressional Review Act, 5

U.S.C. 801 et seq., as added by the Small

Business Regulatory Enforcement

Fairness Act of 1996, generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the Comptroller General

of the United States. The EPA will

submit a report containing this rule and

other required information to the U.S.

Senate, the U.S. House of

Representatives, and the Comptroller

General of the United States prior to

publication of the rule in the Federal

Register. This rule is not a ‘‘major rule’’

as defined by 5 U.S.C. 804(2).

E. Executive Order 13045: Protection of

Children From Environmental Health

Risks and Safety Risks

This final rule is not subject to E.O.

13045, entitled ‘‘Protection of Children

from Environmental Health Risks and

Safety Risks’’ (62 FR 19885, April 23,

1997), because this is not an

economically significant regulatory

action as defined by E.O. 12866. The

environmental risks or safety risks

addressed by this action do not have a

disproportionate effect on children.

F. Petitions for Judicial Review

Under section 307(b)(1) of the Act,

petitions for judicial review of this

action must be filed in the United States

Court of Appeals for the appropriate

circuit by August 7, 1998. Filing a

petition for reconsideration by the

Administrator of this final rule does not

affect the finality of this rule for the

purposes of judicial review nor does it

extend the time within which a petition

for judicial review may be filed, and

will not postpone the effectiveness of

such rule action. This action may not be

challenged later in proceedings to

enforce its requirements. See section

307(b)(2).

List of Subjects in 40 CFR Part 52

Environmental protection, Air

pollution control, Hydrocarbons,

Incorporation by reference, Ozone,

Reporting and recordkeeping

requirements, and Volatile organic

compounds.

Dated: May 12, 1998.

Jerry Clifford,

Deputy Regional Administrator, Region 6.

Part 52, chapter I, title 40 of the Code

of Federal Regulations is amended as

follows:

PART 52—[AMENDED]

1. The authority citation for part 52

continues to read as follows:

Authority: 42 U.S.C. 7401 et seq.

Subpart SS—Texas

2. Section 52.2270 is amended by

adding paragraph (c)(110) to read as

follows:

§ 52.2270 Identification of plan.

* * * * *

(c) * * *

(110) Revision to the Texas State

Implementation Plan adopted by the

Texas Natural Resource Conservation

Commission (TNRCC) on October 15,

1997, and submitted by the Governor on

November 12, 1997, repealing the

Perchloroethylene Dry Cleaning

Systems regulations from the Texas SIP.

(i) Incorporation by reference.

TNRCC Order Docket No. 97–0534–

RUL issued October 21, 1997, repealing

Perchloroethylene Dry Cleaning

Systems regulations (Sections 115.521

to 115.529) from 30 TAC Chapter 115.

(ii) Additional materials.

(A) letter from the Governor of Texas

dated November 12, 1997, submitting

amendments to 30 TAC Chapter 115 for

approval as a revision to the SIP.

[FR Doc. 98–15018 Filed 6–5–98; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 420

[HCFA–6144–FC]

RIN 0938–AH86

Medicare Program; Incentive

Programs-Fraud and Abuse

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Final rule with comment period.

SUMMARY: This final rule with comment

period establishes a program for

payment to individuals who provide

information on Medicare fraud and

abuse or other sanctionable activities.

This final rule implements section

203(b) of the Health Insurance

Portability and Accountability Act of

1996.

DATES: Effective date: This final rule is

effective July 8, 1998. Comment period:

Comments will be considered if we

receive them at the appropriate address,

as provided below, no later than 5 p.m.

on August 7. 1998.

ADDRESSES: Mail written comments (1

original and 3 copies) to the following

address: Health Care Financing

Administration, Department of Health

and Human Services, Attention: HCFA–

6144–FC, P.O. Box 26688, Baltimore,

MD 21207–0488.

If you prefer, you may deliver your

written comments (1 original and 3

copies) to one of the following

addresses:

Room 309–G, Hubert H. Humphrey

Building, 7500 Independence Avenue,

SW., Washington, DC 20201, or

Room C5–09–26, 7500 Security

Boulevard, Baltimore, MD 21244–

1850.

FOR FURTHER INFORMATION CONTACT:

Delilah Schmitt, (410) 786–4300.

SUPPLEMENTARY INFORMATION: Comments

may also be submitted electronically to
31124 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations

the following e-mail address:

hcfa6144fc@hcfa.gov. E-mail comments

must include the full name and address

of the sender and must be submitted to

the referenced address to be considered.

All comments must be incorporated in

the e-mail message because we may not

be able to access attachments.

Electronically submitted comments will

be available for public inspection at the

Independence Avenue address below.

Because of staffing and resource

limitations, we cannot accept comments

by facsimile (FAX) transmission. In

commenting, please refer to file code

HCFA–6144–FC. 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).

I. Rewards for Information Relating to

Medicare Fraud and Abuse

A. Background

Section 203(b)(1) of the Health

Insurance Portability and

Accountability Act of 1996 (Public Law

104–191) instructs the Secretary to

establish a program to encourage

individuals to report information on

individuals and entities that are engaged

in or have engaged in acts or omissions

that constitute grounds for the

imposition of a sanction under section

1128, 1128A, or 1128B of the Social

Security Act (the Act) or who have

otherwise engaged in sanctionable fraud

and abuse against the Medicare program

under title XVIII of the Act. By

increasing the incentives for concerned

citizens to report evidence of suspected

fraudulent behavior, Congress hopes to

protect beneficiaries and the Medicare

Trust Funds.

Section 203(b)(2) of Public Law 104–

191 authorizes the Secretary to pay a

reward to individuals who provide

information under the program

established under section 203(b)(1) if

the information leads to the recovery of

at least $100 (excluding penalties under

section 1128B of the Act) by the

Secretary or the Attorney General of the

United States. Public Law 104–191

requires the reward to come from the

amounts collected. The Statute also

addresses a suggestion program. We are

still analyzing the most effective

methods for implementing this

requirement and will address it in

subsequent rulemaking.

B. Provisions of this Final Rule

This rule adds a new Subpart E,

consisting of §§ 420.400 through

420.405, to 42 CFR part 420 (‘‘Program

Integrity: Medicare). New Subpart E

includes provisions to implement

section 203(b) of Public Law 104–191

and is entitled as ‘‘Rewards for

Information Relating to Medicare Fraud

and Abuse’’.

Section § 420.400 sets forth the

statutory basis and scope of Subpart E.

Section § 420.405 sets forth our

policies regarding, and procedures for,

rewarding individuals for furnishing

information relating to Medicare fraud

and abuse. The statute contains no

provisions limiting or restricting our

discretion in determining the rewards to

be granted under the program

established under section 203(b).

Therefore, in paragraph (a) of § 420.405,

we specify that when HCFA exercises

its discretion in determining that

someone is eligible for a reward and the

reward amount, the reward will be

granted and the individual notified

according to the procedures in

§ 420.405(d). Further, we specify that

we may make a monetary reward only

for information that leads to a minimum

recovery of $100 of Medicare funds from

individuals and entities that are

engaging in, or have engaged in, acts or

omissions that constitute grounds for

the imposition of a sanction under

section 1128, section 1128A, or section

1128B of the Act or that have otherwise

engaged in fraud and abuse against the

Medicare program under title XVIII of

the Act and for which there is a sanction

provided under law. This provision,

which is specifically mandated in the

authorizing statute, ensures that a

reward is paid only if Medicare funds

are recovered because of the

commission of certain specifically

sanctionable offenses. These include the

defrauding of the Medicare program or

the offering of or solicitation of

kickbacks for services payable by

Medicare. Individuals who furnish

information concerning actions or

omissions for which there are no

sanctions at law are not eligible to

receive a reward under this program

even if the information leads to the

recovery of Medicare payments.

Finally, in order to ensure that the

program does not duplicate other

Government incentive programs, we

also specify, in paragraph (a), that we

may pay rewards only in instances in

which a reward is not otherwise

provided at law. That is, if the

information furnished qualifies the

participant for a reward under another

Government program, the individual is

not entitled to a reward under this

program.

Paragraph (b) of § 420.405 specifies

the information that would be required

in order for a participant to be eligible

to receive a reward. Section 203(b)(1) of

Public Law 104–191 requires that the

reward program discourage the

submission of information that is

frivolous or otherwise not relevant or

material to the imposition of a sanction.

Such information will not be considered

by the Secretary. Therefore, we have

developed criteria to ensure that only

individuals who provide information

that directly contributes to the recovery

of Medicare funds from a fraudulent

provider or supplier are considered for

a reward. Those criteria are discussed

below.

Paragraph (b)(1) of § 420.405 specifies

that, in order for an individual to

qualify for a reward, the information

furnished by that individual must relate

to a specific situation, individual, or

entity, and must specify the time period

of the alleged activities. This provision

is intended to discourage individuals

from furnishing information of a general

nature and to ensure that information

submitted be of assistance in the

investigation of a specific sanctionable

offense. To be of assistance in the

development of an investigation,

information must relate to specific

actions by a specific individual or

entity. Any information that is too

general in nature (for example,

‘‘Medicare should look into home health

agencies in Smith County’’) is of little or

no use in targeting scarce investigation

resources and does not show that the

individual has any specific knowledge

of wrongdoing on the part of a certain

individual or entity. An example of the

kind of information that would meet the

requirements of this provision would be

that a particular home health agency is

billing Medicare for visits not actually

furnished.

Paragraph (b)(2) of § 420.405 specifies

that we do not give a reward for the

submission of information relating to

sanctionable activities already known or

suspected by the Government, its

contractors, or State or local law

enforcement agencies. Accordingly,

information relating to an individual or

entity that, at the time the information

is provided, is already the subject of a

review or investigation by us, our

contractors, or the Office of Inspector

General (OIG), the Department of

Justice, the Federal Bureau of

Investigation, or any other Federal,

State, or local law enforcement agency

would not serve as the ‘‘basis for the

collection’’ and could not be

compensated. Paragraph (c) of § 420.405
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations 31125

sets forth the criteria that an individual

must meet in order to be eligible for a

reward. Paragraph (c)(1) provides that

any person, other than one excluded

under paragraph (c)(2), is eligible to

receive a reward under the reward

program if he or she submits the

information in the prescribed manner

(discussed later in this preamble).

Accordingly, Medicare beneficiaries,

Medicare providers, and any other

individuals may be eligible to receive

awards under this reward program.

Paragraph (c)(2) specifies who is

ineligible to receive a reward under the

reward program. Specifically, paragraph

(c)(2)(i) provides that an individual who

was or is an immediate family member

of an officer or employee of the

Department of Health and Human

Services (HHS) or its contractors, the

Social Security Administration, a State

Medicaid agency, the OIG, or the

Department of Justice, the Federal

Bureau of Investigation, or any other

Federal, State, or local law enforcement

agency at the time he or she came into

possession of or reported information

leading to a recovery of Medicare funds

is not eligible to receive a reward.

Paragraph (c)(2)(ii) specifies that any

other Federal or State employee or

contractor or HHS grantee is not eligible

for a reward if he or she acquired the

submitted information in the course of

his or her official duties.

The purpose of the exclusion is to

prevent Government employees,

contractors, or grantees from personally

profiting from information gained while

doing public business. These

individuals may, in the course of

performing their official duties, obtain

information relating to sanctionable

offenses by individuals or entities

providing services under the Medicare

program. As a responsibility of their

position, however, these individuals are

obligated to take the necessary steps to

ensure that this information is reported

to the appropriate authorities. This

exclusion also applies to former

employees of the specified organizations

if the information in question was

obtained during their employment.

Similarly, any other Federal, State, or

local government employee or

contractor or HHS grantee is excluded

from receiving a reward under this

reward program if the information was

obtained in the course of his or her

official duties. As with the previous

exclusion, this exclusion is intended to

prevent individuals from personally

profiting from information gained in the

course of conducting public business.

Paragraph (c)(2)(iii) excludes any

individual who illegally obtained the

information he or she submitted from

receiving a reward under this program.

Paragraph (c)(2)(iv) excludes any

participants in the alleged sanctionable

offense with respect to which payment

would be made from receiving a reward

under this program. These exclusions

are intended to prevent those who have

violated the law from profiting from

their actions at the expense of this

program.

Paragraph (d) of § 420.405 sets forth

reward notification procedures.

Paragraph (d)(1) specifies that, as a

general rule, we notify an individual of

his or her eligibility to receive a reward,

by letter sent to the individual’s last

known address. Paragraph (d)(1) further

specifies that the notification is sent

after Medicare funds have been

recovered and a participant has been

determined eligible to receive a reward.

We add that it is the individual’s

responsibility to provide all relevant

information and to ensure that the

reward program is notified of any

changes in that information.

Paragraph (d)(2) provides that an

individual has up to 1 year from the

date on the notification letter to claim

his or her reward. This paragraph also

specifies that no interest is paid on

rewards that are not immediately

claimed.

Paragraph (d)(2) also specifies that, if

the participant has become

incapacitated or died, an executor,

administrator, or other legal

representative may claim the reward on

behalf of the participant or participant’s

estate. In order to protect participants

from being defrauded by individuals

falsely claiming to be their legal

representatives, we add that the

claimant must submit certified copies of

letters testamentary, letters of

administration, or other similar

evidence to show his or her authority to

claim the reward. Here, again, we

specify that the reward must be claimed

within 1 year from the date on which

we mailed notification to the

participant.

We have set these 1-year limitations

to minimize the administrative burden

associated with the reward program. We

believe 1 year is a reasonable period of

time during which an individual may

claim his or her reward. In addition, the

1-year limitation protects the

Government from the administrative

and fiscal burden that would be

associated with maintaining claims for a

longer or indefinite period. Rewards not

claimed within 1 year from the date of

the notification letter will not be

awarded.

In paragraph (e) of § 420.405, we

establish the limits on rewards and set

forth the processes by which we

determine whether we will pay a reward

and, if a reward is to be paid, the

amount of the reward. Paragraph (e)(1)

specifies that, in determining whether

we will pay a reward, and the amount

of the reward, we take into

consideration all relevant factors,

including the significance of the

information furnished in relation to the

ultimate resolution of the case and the

recovery of Medicare funds.

To give participants a realistic

expectation of potential reward

amounts, we establish general

guidelines for the calculation of the

amount of any reward and a maximum

potential reward amount. Since the

primary goal of this program is to

preserve and protect the Medicare Trust

Funds, and because the funds used for

rewards under the program will come

from recovered trust fund monies, it

would be inappropriate to grant

excessive or overly-generous rewards.

Therefore, § 420.405(e)(2) specifies that

the amount of a reward represents what

we consider to be adequate

compensation in the particular case, not

to exceed 10 percent of the

overpayments recovered in the case, or

$1,000, whichever is less. We believe

this approach provides adequate

compensation and notification to those

individuals who provide important

information on sanctionable activities,

while also establishing an objective

limit on Trust Fund disbursements.

We anticipate that some commenters

will object to this limit as being too low.

In response, we point out that persons

with information on individuals or

entities purportedly defrauding the

Medicare program also have the option

of initiating a ‘‘qui tam’’ action against

the fraudulent individual or entity in

cooperation with the Government. (A

qui tam action is an action brought by

a private individual, under a statute that

establishes a penalty for the commission

or omission of a certain act that is

recoverable in a civil action. In a qui

tam action, an individual brings the

civil action on behalf of him or herself

and the Government, State, or other

entity. Part of any collected penalty goes

to the person who brings the civil

action.)

We determine reward amounts on a

case by case basis. Section 420.405(e)(3)

specifies that, if more than one

participant provides information that

leads to the recovery of Medicare funds,

we allocate the overall reward (not to

exceed 10 percent of the overpayments

recovered in that case or $1,000,

whichever is less) among the total

number of participants. Again, this

provision is intended to protect the
31126 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations

Medicare Trust Funds to the greatest

possible extent.

In accordance with section 203(b)(2)

of Public Law 104–191, § 420.405(e)(4)

specifies that rewards are based solely

on recovered Medicare payments and

not on amounts collected as penalties or

fines. Section 420.405(e)(5) specifies

that rewards are awarded only after all

overpayments, fines, and penalties have

been collected. It is important for

participants to understand that the

investigation, development, and

prosecution or settlement of a fraud case

is a complicated and lengthy process.

Given the material and human resource

constraints, it is not unusual for 3 to 5

years to elapse before fraudulentlyobtained Medicare funds are recovered

and any applicable fines or penalties

collected. This means that, on average,

a participant who provides information

that leads to a Medicare recovery from

an individual or entity that committed

a sanctionable offense would have to

wait several years before receiving a

reward under this program.

Section 420.405(e)(6) specifies that no

person may make any offer or promise

or otherwise bind us or HHS with

respect to the payment of any reward or

the amount of the reward.

Paragraph (f) of § 420.405 describes

the procedure individuals must follow

when submitting information in order to

be eligible to receive a reward under

this program. Paragraph (f)(1) provides

that an individual may submit

information to us on individuals and/or

entities allegedly engaging in, or that

have allegedly engaged in, fraud and

abuse against the Medicare program by

calling the Office of Inspector General or

the Medicare intermediary or carrier

that has jurisdiction over the suspected

fraudulent provider or supplier.

Paragraph (f)(2) of § 420.405 adds that

an individual interested in receiving a

reward must provide his or her name,

address, telephone number, and any

other requested identifying information

so that he or she may be contacted, if

necessary, for additional information

and, when applicable, for the payment

of a reward upon resolution of the case.

An individual may elect to furnish

information to the Office of the

Inspector General, or to the

intermediary or carrier anonymously.

However, if an individual elects to do

so, he or she would not be eligible to

receive a reward under this program.

Section 420.405(g) specifies that we

do not disclose the participant’s identity

to any persons except as required by

law. Finally, § 420.405(h) specifies that,

if, after an award had been accepted, the

awardee is determined ineligible to

receive a reward under this program, the

Government is not liable for the reward

and the awardee must refund all monies

received. This provision is intended to

protect the Government from paying

rewards to individuals it later finds

were not eligible to participate in the

program. For example, the Government

would recover a reward granted to a

participant who was later found to have

participated in the sanctionable offense

with respect to which payment was

made.

II. Response to 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.

III. Regulatory Impact Analysis

A. Introduction

We have examined the impact of this

rule as required by Executive Order

12866 and the Regulatory Flexibility Act

(RFA) (Public Law 96–354). Executive

Order 12866 directs agencies to assess

all costs and benefits of available

regulatory alternatives and, when

regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health

and safety effects, distributive impacts,

and equity). The RFA requires agencies

to analyze options for regulatory relief

of small businesses. For purposes of the

RFA, small entities include small

businesses, nonprofit organizations, and

governmental agencies. Most hospitals

and most other providers and suppliers

are small entities, either by nonprofit

status or by having revenues of $5

million or less annually. Individuals are

not considered to be small entities.

Section 1102(b) of the Social Security

Act requires us to prepare a regulatory

impact analysis for any rule that 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 603

of the RFA. For purposes of section

1102(b), we define a small rural hospital

as a hospital that is located outside a

Metropolitan Statistical Area and has

fewer than 50 beds.

B. Summary of This Rule

This rule establishes a payment

system as a means of encouraging

individuals to report instances of

suspected fraud and abuse or other

sanctionable activities under the

Medicare program. The rule delineates

program parameters, information

requirements, eligibility criteria,

establishes an upper limit for payments,

defines proportionate distribution in

cases of multiple informants, and

outlines the process and time

limitations for obtaining a reward.

C. Discussion of Impact

This rule is expected to affect

beneficiaries, their personal

representatives, providers, physicians,

other suppliers, and managed care

plans. (We have separate authority to

impose intermediate sanctions against

managed care plans participating in the

Medicare program. The law also permits

the Office of Inspector General to

impose civil money penalties on the

health maintenance organization or

competitive medical plan as set forth in

42 CFR part 1003.) Taxpayers and the

trust fund could also be impacted by

this rule.

Beneficiaries as a group are expected

to be impacted by this regulation in a

variety of ways. First, beneficiaries are

often the first to recognize and question

provider practices. This regulation

encourages these individuals to share

such information with the agency by (1)

providing a clearly defined process for

submitting information to the

appropriate source and (2) offering a

monetary incentive to support the effort.

Secondly, this group would benefit from

fraud reduction through greater

confidence in the program and its

continued financial viability. Some

beneficiaries may or may not be

motivated by a reward system to report

fraudulent provider activity because of

a perceived potential for breaching the

provider/patient relationship.

Notwithstanding some minimal

hesitancy in reporting fraud,

beneficiaries are already one of our

strongest allies in quickly detecting and

providing us with a great many leads

about instances of fraud and abuse in

the Medicare program. Beneficiaries are

asked to review the Explanation of

Medicare Benefits form, which lists

services and charges and is sent to each

beneficiary when a service is furnished,

and report any discrepancies concerning

those services to the Medicare

contractor serving their area. Medicare

contractors estimate that of the 130,000

calls they receive yearly concerning

potential fraud and abuse, 94,000 are

from beneficiaries, many of whom call

to question the propriety of claims made

on their behalf. We estimate that there

will be a 5 or 10 percent increase in the
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations 31127

volume of calls received as a result of

this monetary reward incentive

program. We support this activity by

regularly advising beneficiaries and

their representatives about

opportunities to preserve trust fund

dollars and how they can help combat

fraud and abuse.

Fraud, waste, and abuse in medical

care encompass a wide range of

practices, limited only by the scope of

human imagination. To the fraudulent

provider of health care services, fee-forservice reimbursement provides the

opportunity for: (1) Billing for services

not provided; (2) billing for a more

expensive service than was actually

provided; (3) providing and billing for

unnecessary services; (4) paying

kickbacks for referrals, including selfreferrals; and (5) duplicate billing. Two

fraudulent schemes involving falsifying

records and overcharging include

‘‘upcoding’’ and ‘‘unbundling.’’

Upcoding involves switching primary

and secondary diagnoses to substitute

more costly procedures and services

than were actually administered to the

patient. Unbundling involves

improperly separately billing for

procedures that should be billed for

under one code.

Under managed care, fraudulent and

abusive practices may include: (1)

Enrolling beneficiaries without their

active consent; (2) engaging in deceptive

marketing practices to entice

enrollment; (3) denying medically

necessary services; and (4) failure to

disclose appeal rights.

We believe the exact amount of

improper billing and health care fraud

are difficult to quantify because of their

hidden nature. However, a Government

Accounting Office (GAO) report on

Medicare (GAO/HR–91–10, February

1997) suggests that by reducing

unnecessary or inappropriate payments,

the Federal Government would realize

large savings and help dampen the

growth in Medicare costs. In this report,

the GAO states that estimates of the

costs of fraud and abuse, ranging from

3 to 10 percent, have been cited for

health expenditures nationwide, ‘‘so

applying this range to Medicare suggests

that such losses in fiscal year 1996

could range from $6 billion to as much

as $20 billion.’’ Program savings would

be offset by the amount of incentives

awarded under this rule. The total

amount of awards made in any year is

unknown but is expected to be nominal.

Overall, we expect that providers and

suppliers will benefit qualitatively from

this rule. Not only do many providers

and suppliers perceive that their

reputations are tarnished by the few

dishonest providers and suppliers that

take advantage of the Medicare program,

but some providers may have ideas that

could minimize the impact of this

adverse behavior. The media often focus

on the most egregious cases of Medicare

fraud and abuse, leaving the public with

the misperception that physicians and

other health care practitioners routinely

make improper claims. This rule

encourages individuals to report

instances of suspected fraud and abuse.

As the number of dishonest providers

and suppliers and improper claims

diminishes, ethical providers and

suppliers will benefit.

This rule could be considered to have

a negative impact on any provider or

supplier that routinely submits

questionable claims and those that have

been receiving inappropriate payments,

including managed care plans. Since

one objective of this rule is to eliminate

improper payments, we will not analyze

the effect the rule may have on

unscrupulous providers or suppliers.

We do not believe that this rule will

reduce a provider’s or supplier’s

legitimate income from Medicare.

The reporting of instances of

suspected fraud and abuse or other

sanctionable activities is not expected to

impose a paperwork burden on

individuals participating in this award

program. Beneficiaries and other

participating entities are expected to

rely upon existing record collection,

record keeping, review and reporting

processes similar to those already in

use.

D. Conclusion

We conclude that money would be

saved, and the solvency of the Trust

Funds extended as a result of this rule.

The growing complexity of the Medicare

program easily lends itself to objective

critiques by those who are most affected

by the myriad of Medicare statutes,

provisions, and guidelines. In addition,

the dynamic nature of fraud and abuse,

as illustrated by the fact that

wrongdoers continue to find ways to

evade safeguards, supports the need for

constant vigilance and increasingly

sophisticated ways to protect against

‘‘gaming’’ of the system.

Based on the above analysis, we have

determined, and certify, that this rule

will not have a significant economic

impact on a substantial number of small

entities. We also have determined, and

certify, that this rule will 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 rule was not reviewed by the Office

of Management and Budget.

E. Waiver of Proposed Rulemaking

We ordinarily publish a notice of

proposed rulemaking in the Federal

Register and invite public comment on

the proposed rule. The notice of

proposed rulemaking includes a

reference to the legal authority under

which the rule is proposed, and the

terms and substances of the proposed

rule or a description of the subjects and

issues involved. This procedure can be

waived, however, if an agency finds

good cause that a notice-and-comment

procedure is impracticable,

unnecessary, or contrary to the public

interest and incorporates a statement of

the finding and its reasons in the rule

issued.

Publishing this rule expeditiously to

supplement activities that identify and

curtail fraud and abuse activities that

reduce the monetary drain on the

Medicare trust fund is in the public

interest. Specifically, we anticipate that

the implementation of this rule will

encourage individuals to report

potentially fraudulent and abusive

activities and we anticipate that such

reports will facilitate expeditious

recovery of money owed to the

Medicare trust funds. Further delaying

implementation of this program in order

to give the public an opportunity to

comment would deprive individuals of

the financial incentives that Congress

intended to provide to individuals who

come forward with relevant

information. Additional delay following

the publication of a proposed rule may

cause some individuals to withhold

information necessary to support the

Government’s efforts until final rules are

effective. Because the delay may make

it more difficult to successfully

complete investigation of those cases,

waiving notice and comment clearly is

within the public interest.

Therefore, we find good cause to

waive the notice of proposed

rulemaking and to issue this final rule

with comment period. We are providing

a 60-day comment period for public

comment.

List of Subjects in 42 CFR Part 420

Fraud, Health facilities, Health

professions, Incentive programs,

Medicare.

For the reasons set forth in the

preamble, 42 CFR part 420 is amended

as set forth below:

PART 420—PROGRAM INTEGRITY:

MEDICARE

1. The authority citation for part 420

continues to read as follows:
31128 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations

Authority: Secs. 1102 and 1871 of the

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

1395hh).

2. A new subpart E is added to part

420 to read as follows:

Subpart E—Rewards for Information

Relating to Medicare Fraud and Abuse

Sec.

420.400 Basis and scope.

420.405 Rewards for information relating to

Medicare fraud and abuse.

Subpart E—Rewards for Information

Relating to Medicare Fraud and Abuse

§ 420.400 Basis and scope.

This subpart implements section 203

(b) of Public Law 104–191, which

requires the establishment of a program

to encourage individuals to report

suspected cases of fraud and abuse.

Sections 203 (b) of Public Law 104–191

also provides the authority for HCFA to

reward individuals for reporting fraud

and abuse. This subpart sets forth

procedures for rewarding individuals.

§ 420.405 Rewards for information relating

to Medicare fraud and abuse.

(a) General rule. HCFA pays a

monetary reward for information that

leads to the recovery of at least $100 of

Medicare funds from individuals and

entities that are engaging in, or have

engaged in, acts or omissions that

constitute grounds for the imposition of

a sanction under section 1128, section

1128A, or section 1128B of the Act or

that have otherwise engaged in

sanctionable fraud and abuse against the

Medicare program. The determination of

whether an individual meets the criteria

for an award, and the amount of the

award, is at the discretion of HCFA.

HCFA pays rewards only if a reward is

not otherwise provided for by law.

When HCFA applies the criteria

specified in paragraphs (b), (c), and (e)

of this section to determine the

eligibility and the amount of the reward,

it notifies the recipient as specified in

paragraph (d) of this section.

(b) Information eligible for reward. (1)

In order for an individual to be eligible

to receive a reward, the information he

or she supplied must relate to the

activities of a specific individual or

entity and must specify the time period

of the alleged activities.

(2) HCFA does not give a reward for

information relating to an individual or

entity that, at the time the information

is provided, is already the subject of a

review or investigation by HCFA or its

contractors, or the OIG, the Department

of Justice, the Federal Bureau of

Investigation, or any other Federal,

State, or local law enforcement agency.

(c) Persons eligible to receive a

reward—(1) General rule. Any person

(other than one excluded under

paragraph (c)(2) of this section) is

eligible to receive a reward under this

section if the person submits the

information in the manner set forth in

paragraph (f) of this section.

(2) Excluded individuals. (i) An

individual who was, or is an immediate

family member of, an officer or

employee of HHS or its contractors, the

SSA, the OIG, a State Medicaid Agency,

or the Department of Justice, the Federal

Bureau of Investigation, or any other

Federal, State, or local law enforcement

agency at the time he or she came into

possession of, or divulged, information

leading to a recovery of Medicare funds

is not eligible to receive a reward under

this section.

(ii) Any other Federal or State

employee or contractor or an HHS

grantee is not eligible for a reward under

this section if the information submitted

came to his or her knowledge in the

course of his or her official duties.

(iii) An individual who illegally

obtained the information he or she

submitted is excluded from receiving a

reward under this section.

(iv) An individual who participated in

the sanctionable offense with respect to

which payment would be made is

excluded from receiving a reward under

this section.

(d) Notification of eligibility—(1)

General rule. After all Medicare funds

have been recovered and HCFA has

determined a participant eligible to

receive a reward under the provisions of

this section, it notifies the informant of

his or her eligibility, by mail, at the

most recent address supplied by the

individual. It is the individual’s

responsibility to ensure that the reward

program has been notified of any change

in his or her address or other relevant

personal information (for example,

change of name, phone number).

(2) Special circumstances. (i) If the

individual has relocated to an unknown

address, the individual or his or her

legal representative may claim the

reward by contacting HCFA within 1

year from the date on which HCFA first

attempted to notify the individual about

a reward. HCFA does not consider the

individual or his or her legal

representative eligible for a reward more

than 1 year after the date on which it

first attempted to give notice. HCFA

does not pay interest on rewards that are

not immediately claimed.

(ii) If the individual has become

incapacitated or has died, an executor,

administrator, or other legal

representative may claim the reward on

behalf of the individual or the

individual’s estate. The claimant must

submit certified copies of the letters

testamentary, letters of administration,

or other similar evidence to show his or

her authority to claim the reward. The

claim must be filed within 1 year from

the date on which HCFA first gave or

attempted to give notice of the reward.

(e) Amount and payment of reward.

(1) In determining whether it will pay

a reward and, if so, the amount of the

reward, HCFA takes into account all

relevant factors, including the

significance of the information

furnished in relation to the ultimate

resolution of the case and the recovery

of Medicare funds.

(2) The amount of a reward represents

what HCFA considers to be adequate

compensation in the particular case, not

to exceed 10 percent of the

overpayments recovered in the case or

$1,000, whichever is less.

(3) If more than one person is eligible

to receive a reward in a particular case,

HCFA allocates the total reward amount

(not to exceed 10 percent of the

overpayments recovered in that case or

$1,000, whichever is less) among the

participants.

(4) HCFA bases rewards only on

recovered Medicare payments and not

on amounts collected as penalties or

fines.

(5) HCFA makes payments as

promptly as the circumstances of the

case permit, but not until it has

collected all Medicare overpayments,

fines, and penalties.

(6) No person may make any offer or

promise or otherwise bind HCFA or

HHS with respect to the payment of any

reward under this section or the amount

of the reward.

(f) Submission of information. (1) An

individual may submit information on

persons or entities engaging in, or that

have engaged in, fraud and abuse

against the Medicare program to the

Office of the Inspector General, or to the

Medicare intermediary or carrier that

has jurisdiction over the suspected

fraudulent provider or supplier.

(2) A participant interested in

receiving a reward must provide his or

her name, address, telephone number,

and any other requested identifying

information so that he or she may be

contacted, if necessary, for additional

information and, when applicable, for

the payment of a reward upon

resolution of the case.

(g) Confidentiality. HCFA does not

reveal a participant’s identity to any

person, except as required by law.

(h) Finding of ineligibility after reward

is accepted. If, after a reward is

accepted, HCFA finds that the awardee

was ineligible to receive the reward, the
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 /Rules and Regulations 31129

Government is not liable for the reward

and the awardee must refund all monies

received.

(Catalog of Federal Domestic Assistance

Program No. 93.774, Medicare—

Supplementary Medical Insurance Program)

Dated: April 4, 1998.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing

Administration.

Dated: June 2, 1998.

Donna E. Shalala,

Secretary.

[FR Doc. 98–15155 Filed 6–3–98; 1:19 pm]

BILLING CODE 4120–01–P