Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58649 

southerly to 61°02′32.5′′ N, 146°41′25′′ 

W; thence north west to 61°02′40.5′′N, 

146°41′47′′ W; thence north east to 

61°04′07.5′′ N, 146°40′15′′ W; thence 

north east to 61°05′22′′ N, 146°37′38′′ W; 

thence south east back to the starting 

point at 61°05′15′′ N, 146°37′18′′ W. 

(b) Regulations. (1) The general 

regulations in 33 CFR 165.33 apply to 

the security zones described in 

paragraph (a) of this section. 

(2) Tank vessels transiting directly to 

the TAPS terminal complex, engaged in 

the movement of oil from the terminal 

or fuel to the terminal, and vessels used 

to provide assistance or support to the 

tank vessels directly transiting to the 

terminal, or to the terminal itself, and 

that have reported their movements to 

the Vessel Traffic Service, as required 

under 33 CFR part 161 and § 165.1704, 

may operate as necessary to ensure safe 

passage of tank vessels to and from the 

terminal. 

(3) All persons and vessels must 

comply with the instructions of the 

Coast Guard Captain of the Port and the 

designated on-scene patrol personnel. 

These personnel comprise 

commissioned, warrant, and petty 

officers of the Coast Guard. Upon being 

hailed by a vessel displaying a U.S. 

Coast Guard ensign by siren, radio, 

flashing light, or other means, the 

operator of the vessel must proceed as 

directed. Coast Guard Auxiliary and 

local or state agencies may be present to 

inform vessel operators of the 

requirements of this section and other 

applicable laws. 

Dated: September 23, 2005. 

M.S. Gardiner, 

Commander, United States Coast Guard, 

Captain of the Port, Prince William Sound, 

Alaska. 

[FR Doc.05–20276 Filed 10–6–05; 8:45 am] 

BILLING CODE 4910–15–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 421 

[CMS–6022–P] 

RIN 0938–AN31 

Medicare Program; Termination of 

Non-Random Prepayment Review 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement the statutory requirements 

regarding the termination of nonrandom prepayment review under the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003. This proposed rule provides the 

criteria for terminating a provider or 

supplier from non-random prepayment 

review. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on December 6, 2005. 

ADDRESSES: In commenting, please refer 

to file code CMS–6022–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http:// 

www.cms.hhs.gov/regulations/ 

ecomments. (Attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word.) 

2. By mail. You may mail written 

comments (one original and two copies) 

to the following address ONLY: Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–6022–P, PO 

Box 8012, Baltimore, MD 21244–8012. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

9994 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Lieutenant Commander Marie Casey, 

(410) 786–7861 or Daniel Schwartz, 

(410) 786–4197. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–6022–P. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. CMS posts all electronic 

comments received before the close of 

the comment period on its public 

website as soon as possible after they 

have been received. Comments received 

timely will be available for public 

inspection as they are received, 

generally beginning approximately 3 

weeks after publication of a document, 

at the headquarters of the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, 

Maryland 21244, Monday through 

Friday of each week from 8:30 a.m. to 

4 p.m. To schedule an appointment to 

view public comments, phone 1–800–

743–3951. 

I. General and Legislative History 

Medicare contracting authority has 

been in place since the inception of the 

Medicare program in 1965. Section 1874 

of the Social Security Act (the Act) 

authorizes the Secretary to perform 

Medicare program functions directly or 

by contract. 

On August 21, 1995, the Congress 

enacted the Health Insurance Portability 

and Accountability Act of 1996 (Pub. L. 

104–191) (HIPAA). Section 202 of 

HIPAA added section 1893 to the Act 

that establishes the Medicare Integrity 

Program and allows us to contract with 

eligible entities to perform program 

integrity activities. Specifically, we 

contract with intermediaries as 

specified in section 1816(a) of the Act; 

and carriers as specified in section 

1842(a) of the Act; and program 

safeguard contractors (PSCs) to perform 

medical, fraud, and utilization reviews, 

and cost report audits of Medicare 

claims. (Hereinafter, intermediaries, 

carriers, and PSCs that perform medical 

review functions are referred to as 

contractors). This program is funded by 

the Medicare Hospital Insurance Trust 

Fund for activities related to Medicare 

Part A and Part B. 

58650 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

On December 8, 2003, the Congress 

enacted the Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA). Section 934 of the MMA 

amended section 1874A of the Act by 

adding a new subsection regarding 

random prepayment reviews and nonrandom prepayment reviews including 

the termination date of non-random 

prepayment reviews. 

Although section 934 of the MMA 

specifies requirements regarding 

random prepayment review, contractors 

do not perform random prepayment 

review. However, contractors do 

perform non-random prepayment 

review. 

For purposes of this regulation, we are 

proposing the following definitions 

related to medical review activities: 

Allowable charges means the dollar 

amount (including co-pay and 

deductibles) that the Medicare program 

will pay for a particular item or service. 

Complex Medical Review means 

review of claim information and 

medical documentation by a licensed 

medical professional, for a billed item or 

service identified by data analysis 

techniques or probe review to have a 

likelihood of sustained or high level of 

payment error. 

Error rate means the dollar amount of 

allowable charges for a particular item 

or service billed in error as determined 

by complex medical review, divided by 

the dollar amount of allowable charges 

for that medically reviewed item or 

service. 

Initial error rate means the calculation 

of an error rate based on the results of 

a probe review prior to the initiation of 

non-random prepayment complex 

medical review. 

Medical review means the process 

performed by Medicare contractors to 

ensure that billed items or services are 

covered and are reasonable and 

necessary as specified under section 

1862(a)(1)(A) of the Act. 

Non-clinician medical review staff 

means specially trained medical review 

staff that do not possess the knowledge, 

skills, training, or medical expertise of 

a licensed medical professional. 

Non-random prepayment complex 

medical review means the prepayment 

medical review of claim information 

and medical documentation by a 

licensed medical professional, for a 

billed item or service identified by data 

analysis techniques or probe review to 

have a likelihood of sustained or high 

level of payment error. 

Non-random prepayment medical 

review means the prepayment medical 

review of claims for a billed item or 

service identified by data analysis 

techniques or probe review to have a 

likelihood of a sustained or high level 

of payment error. 

Provider-specific probe review means 

the complex medical review of a small 

sample of claims, generally 20 to 40 

claims, from a specific provider or 

supplier for a specific billing code to 

confirm that the provider or supplier is 

billing the program in error. 

Quarterly error rate means the 

calculation of an error rate based on the 

results of non-random prepayment 

complex medical review for a specific 

billing code for a specific quarter. 

Service-specific probe review means 

the complex medical review of a sample 

of claims, generally 100 claims, across 

the providers or suppliers that bill a 

particular item or service to confirm that 

the item or service is billed in error. 

Termination of non-random 

prepayment complex medical review 

means the cessation of non-random 

prepayment complex medical review. 

II. General Overview of the Medical 

Review Process 

A. Medical Review 

We enter into contractual agreements 

with contractors to perform medical 

review functions. One of the functions 

of a contractor is to ensure the fiscal 

integrity of the Medicare program by 

conducting medical review of claims to 

determine whether items or services are 

covered and are reasonable and 

necessary. When a claim is submitted 

for payment, it may be subject to 

medical review before payment is made. 

There are three types of non-random 

prepayment medical review: 

Automated, routine, and complex. A 

non-random prepayment automated 

medical review is when decisions are 

made at the system level, using 

available electronic information, 

without the intervention of contractor 

personnel. A non-random prepayment 

routine medical review is limited to 

rule-based determinations performed by 

specially trained non-clinical medical 

review staff. Automated and routine 

non-random prepayment medical 

review does not create an administrative 

burden on the provider or supplier since 

additional medical documentation does 

not need to be submitted for these types 

of medical reviews and payments for 

covered, reasonable and necessary items 

or services are not delayed. Therefore, 

these types of reviews pose no 

discernable administrative burden on 

the provider or supplier because there is 

no interaction between the contractor 

and the provider or supplier during the 

medical review process. As indicated 

above, non-random prepayment 

complex medical review is the 

evaluation of medical records or any 

other documentation by a licensed 

medical professional prior to Medicare 

payment. Complex medical review 

determinations require the reviewer to 

make a clinical judgment about whether 

an item or service is covered, and is 

reasonable and necessary. In order for 

this determination to be made the 

provider or supplier would submit a 

copy of the medical records that 

indicate that the items or services billed 

are covered, and are reasonable and 

necessary for the condition of the 

patient. This type of review delays 

payment until the contractor is able to 

make a determination that the items or 

services billed are covered and are 

reasonable and necessary. This 

proposed rule only applies to 

terminating a provider or supplier from 

non-random prepayment complex 

medical review. (A detailed description 

of the concepts for performing the 

different types of non-random 

prepayment medical review functions 

are located in our manual instructions at 

http://www.cms.hhs.gov/manuals/ 

108_pim/pim83toc.asp). 

The contractor employs data analysis 

procedures to identify claims that may 

be billed inappropriately. These 

procedures may be based on claims data 

(national and local) beneficiary 

complaints, and alerts from other 

organizations (for example, Office of 

Inspector General and Government 

Accountability Office). When a 

contractor identifies a likelihood of 

sustained or high level of payment error, 

the contractor may request supporting 

medical record documentation. 

Examples of a high level of payment 

error include unusual patterns such as 

prescribing the same items or services 

for a high number of patients, 

consistently prescribing inappropriate 

treatments, unexplained increases in 

volume when compared to historical or 

peer trends, or any other reasons as 

determined by the Secretary or his 

designees. 

Before a contractor places a provider 

or supplier on non-random prepayment 

complex medical review, the contractor 

would perform a probe review (that is, 

complex medical review of a small 

sample of claims for a specific billing 

code, generally 20 to 40 claims to 

confirm that the provider or supplier is 

billing the program in error). In the case 

of a widespread ‘‘item or servicespecific’’ problem, a larger sample of 

claims (generally 100 claims of the item 

or service in question) would be 

subjected to complex medical review. 

Performing medical review on a sample 

of claims for a specific billing code 

before placing the provider or supplier 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58651 

on non-random prepayment complex 

medical review allows for a 

determination as to whether a problem 

exists and ensures that contractor 

medical review resources are targeted 

appropriately and that providers and 

suppliers are not unnecessarily 

burdened. 

When a probe confirms that a 

provider or supplier is billing the 

program in error, and those billing 

errors present a likelihood of sustained 

or high level of payment error (for 

example, a high billing error rate or 

errors on claims representing high 

dollar value) this may result in the 

provider or supplier being placed on 

non-random prepayment complex 

medical review. Contractors target 

medical review activities at providers, 

items or services that place the greatest 

risk of making improper payments from 

the Medicare trust funds. 

This activity may involve complex 

medical review. Complex medical 

review involves the application of 

clinical judgment by a licensed medical 

professional in order to evaluate 

medical records to determine whether 

an item or service is covered, and is 

reasonable and necessary. 

Medical records include any medical 

documentation, other than what is 

included on the face of the claim that 

supports the item or service that is 

billed. For Medicare to consider 

coverage and payment for any item or 

service, the information submitted by 

the supplier or provider (that is, claims) 

must be supported by the 

documentation in the patient’s medical 

records. The patient’s medical records 

include—(1) physician’s office records; 

(2) hospital records; (3) nursing home 

records; (4) home health agency records; 

(5) records from other healthcare 

professionals; and (6) diagnostic reports 

and other supporting documentation. 

The contractor specifies which pieces of 

documentation they want. Providers 

and suppliers may supply additional 

documentation not explicitly listed by 

the contractor. This supporting 

information may be requested by CMS 

and its agents on a routine basis in 

instances where diagnoses on the claims 

do not clearly indicate medical 

necessity. For example, documentation 

supporting the medical necessity of a 

power wheelchair would not be 

requested in the vast majority of cases 

where patients have definite medical 

conditions such as neurological spinal 

cord injury, cerebral palsy, multiple 

sclerosis or stroke with residual 

myoplegia (not all inclusive). On the 

other hand, it is more likely that 

documentation would be requested for 

patients whose diagnoses are limited to 

non-neurological conditions such as 

chronic obstructive pulmonary disease, 

congestive heart failure, coronary artery 

disease, arthritis or obesity (not all 

inclusive). 

Any determination must be 

documented and include the rationale 

for the decision. While medical review 

staff must follow National Coverage 

Determinations and Local Coverage 

Determinations, they are expected to use 

their expertise to make clinical 

judgments when making medical review 

determinations. They must take into 

consideration the clinical condition of 

the beneficiary as indicated by the 

beneficiary’s diagnosis and medical 

history when making these 

determinations. At any time during the 

medical review process the contractor 

detects possible fraud, the contractor 

would refer the issue to the Benefit 

Integrity Program Safeguard Contractor. 

Before the enactment of the MMA, we 

continued to perform non-random 

prepayment complex medical review 

until the provider or supplier 

demonstrated compliance with 

Medicare billing requirements as 

evidenced by an acceptable error rate. 

The contractor made the determination 

of ‘‘acceptable error rate.’’ As a result, 

some providers and suppliers have 

remained on medical review for a 

considerable period of time. 

B. Termination of Non-Random 

Prepayment Complex Medical Review 

In accordance with section 934 of the 

MMA, we are proposing to terminate in 

most cases a provider or supplier from 

non-random prepayment complex 

medical review no later than 1 year from 

the initiation of the review or when the 

provider’s or supplier’s error rate 

decreases by 70 percent from the initial 

error rate. The initiation of review 

begins on the date the contractor sends 

a letter to the provider or supplier. The 

letter would notify the provider or 

supplier of the results of the probe 

review and would inform them that they 

would be subjected to non-random 

prepayment complex review. In 

addition, we are proposing terminating 

a provider or supplier from non-random 

prepayment complex medical review 

when medical review error rate findings 

indicate that the provider or supplier 

has corrected its billing errors resulting 

in at least a 70 percent decrease from its 

initial error rate. The initial error rate 

would be calculated based on the probe 

review prior to the initiation of nonrandom complex prepayment medical 

review. We initially considered whether 

a 90 to 95 percent decrease in a 

provider’s or supplier’s error rate was 

appropriate but determined that a 90 to 

95 percent reduction in a provider’s or 

supplier’s error rate would be 

impracticable. Therefore, we believe an 

error rate reduction of 70 percent from 

the error rate calculated during probe 

review, the ‘‘initial error rate,’’ would 

protect the financial integrity of the 

Medicare program and allow the 

provider or supplier a realistic 

opportunity to be terminated from nonrandom prepayment complex medical 

review. 

When a provider or supplier is 

terminated from non-random 

prepayment complex medical review 

after 1 year of review and the contractor 

determines that the provider or supplier 

continues to have a high error rate 

despite educational interventions, the 

contractor must consider referring the 

provider or supplier to the Benefit 

Integrity Program Safeguard Contractor. 

Contractors must also consider 

continuing educational interventions 

without performing medical review or 

consider performing postpayment 

medical review. 

We are also proposing that a 

contractor could extend a non-random 

prepayment complex medical review 

beyond the 1-year limit in certain 

situations. The contractor could extend 

non-random prepayment complex 

medical review if a provider or supplier 

stops billing the code under review or 

shifts billing to another inappropriate 

code to avoid the contractor’s proper 

calculation of the error rate. If the 

reduction in the error rate is attributed 

to a 25 percent or greater reduction in 

the number of claims submitted for the 

specific billing code under review, nonrandom prepayment complex medical 

review for that provider or supplier 

could be extended. However, if the 

number of claims submitted for a 

specific code was reduced because the 

provider or supplier began billing 

claims using a new appropriate code, or 

there is another legitimate explanation 

for the reduced number of claims billed, 

at the contractor’s discretion, the 

provider or supplier may not be 

required to undergo extended nonrandom prepayment complex medical 

review. If extended medical review is 

necessary, contractors would notify 

providers and suppliers in writing the 

reason for the need to perform 

additional prepayment complex medical 

review. 

The contractor would evaluate the 

results of non-random complex 

prepayment medical review, and the 

length of time a provider or supplier 

remains on review, at least every quarter 

following the initiation of non-random 

prepayment complex medical review. 

Quarterly error-rate evaluations would 

58652 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

be for the discrete quarter; a rolling error 

rate average over more than one quarter 

would not be appropriate. After the 

contractor determines that the provider 

or supplier should be terminated from 

non-random prepayment complex 

medical review, the contractor would 

update the claims processing system 

within 2 business days to ensure that 

the provider’s and supplier’s claims are 

no longer suspended for that specific 

billing error. 

Once a provider or supplier is 

terminated from non-random 

prepayment complex medical review 

contractors would periodically reevaluate the provider or supplier’s data. 

If necessary the contractor could place 

a provider or supplier that appears to 

have resumed a high level of payment 

error on complex medical review. This 

review would only be initiated if a 

probe review confirms that there 

continues to be a high level of payment 

error. 

III. Provisions of the Proposed 

Regulations 

To comply with section 934 of the 

MMA, we are proposing to amend 42 

CFR part 421 by adding and reserving 

subpart D and adding a new subpart E 

entitled, ‘‘Medicare Payment Review.’’

This subpart would establish the general 

criteria for terminating a provider or 

supplier from non-random prepayment 

complex medical review. 

In § 421.401, we are proposing to 

define the following terms for purposes 

of this new subpart: 

• Error rate. 

• Initial error rate. 

• Medical review. 

• Non-random complex prepayment 

medical review. 

• Non-random prepayment medical 

review. 

• Provider specific probe review. 

• Quarterly error rate. 

• Service specific probe review 

• Termination of non-random 

prepayment complex medical review. 

In addition, we are proposing in 

§ 421.405 to specify the termination 

criteria for non-random prepayment 

complex medical review. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

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. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each issue for § 421.405 as summarized 

and discussed below that contain 

information collection requirements. 

Section 421.405 Termination and 

Extension of Non-Random Prepayment 

Complex Medical Review 

In summary, § 421.405 outlines the 

proposed requirements and process for 

the termination and extension of nonrandom prepayment complex medical 

review, a form of complex medical 

review. Contractors conduct complex 

medical review to determine whether 

items or services billed are covered, 

correctly coded, and are reasonable and 

necessary for the condition of the 

patient. Under complex medical review 

the provider or supplier must submit a 

copy of the medical records that support 

the items or services billed. 

The burden associated with this 

section is the time and effort necessary 

for the provider or supplier of services 

to locate and obtain the supporting 

documentation for the claim to 

Medicare and to forward the materials 

for submission to Medicare contractors 

for review. We expect that this 

information would generally be 

maintained by suppliers and/or 

providers as a normal course of business 

and that this information will be readily 

available. 

The burden associated with this 

requirement is estimated to be 10 

minutes per provider or supplier, to 

locate, photocopy and transmit this 

information to the contractor upon 

request. 

Over the past 3 years, Medicare 

contractors have performed complex 

medical review on an average of 2.9 

million claims. 

The total annual burden associated 

with this requirement is estimated to be 

483,333 hours (2.9 million requests for 

medical records × 10 minutes). 

If you comment on these information 

collection and recordkeeping 

requirements, please mail copies 

directly to the following: Centers for 

Medicare & Medicaid Services, Office of 

Strategic Operations and Regulatory 

Affairs, Regulations Development 

Group, Attn: William N. Parham, III, 

CMS–6022–P, Room C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850; and 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503, 

Attn: Christopher Martin, CMS Desk 

Officer, CMS–6022–P, 

Christopher_Martin@omb.eop.gov. Fax 

(202) 395–6974. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We would consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we would 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Act, the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4), and 

Executive Order 13132. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibility of 

duties) directs 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 

equity). A regulatory impact analysis 

(RIA) be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). This rule 

does not reach the economic threshold 

and thus is not considered a major rule. 

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 

government agencies. Most hospitals 

and most other providers and suppliers 

are small entities, either by nonprofit 

status or by having revenues of $6 

million to $29 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 that 

this rule would not have a significant 

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 58653 

economic impact on a substantial 

number of small entities. We believe 

that this rule would decrease the costs 

for providers and suppliers because it 

establishes guidelines for terminating a 

provider or supplier from non-random 

prepayment complex medical review. 

We believe this rule would eliminate 

inappropriate reviews and would ensure 

that Medicare payments would not be 

withheld for extended time periods. 

Because a contractor would no longer 

be maintaining providers or suppliers 

on non-random prepayment complex 

medical review for extended periods, 

administrative expenses (for example, 

copying, mailing, and the retention of 

medical documentation) would be 

reduced. 

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. This 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 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this rule 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 that may result in expenditure in 

any 1 year by State, local, or tribal 

governments, in the aggregate, or by the 

private sector, of $100 million. This rule 

would have no consequential effect on 

the governments mentioned 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 would not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 421 

Administrative practice and 

procedure, Health facilities, Health 

professions, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 421—INTERMEDIARIES, 

CARRIERS, AND PROGRAM 

SAFEGUARD CONTRACTORS 

1. The authority citation for part 421 

continues to read as follows: 

Authority: Sec. 1102 and 1871 of the Social 

Security Act (42 U.S.C. 1302 and 1395hh). 

2. The heading for Part 421 is revised 

to read as set forth above. 

3. Add and reserve a new subpart D. 

4. Add new subpart E, consisting of 

§ 421.400 through § 421.405, to read as 

follows: 

Subpart E—Medical Review 

Sec. 

421.400 Medicare review functions. 

421.401 Definitions. 

421.405 Termination and extension of nonrandom prepayment complex medical 

review. 

Subpart E—Medical Review 

§ 421.400 Medicare review functions. 

CMS enters into contractual 

agreements with intermediaries, 

carriers, and program safeguard 

contractors (PSCs) (hereinafter, 

intermediaries, carriers, and PSCs that 

perform medical review functions are 

referred to as contractors) to perform 

medical review functions to ensure that 

items or services are covered and are 

reasonable and necessary in accordance 

with Medicare coverage policies and 

program instructions. 

§ 421.401. Definitions. 

As used in this subpart—

Allowable charges means the dollar 

amount (including co-pay and 

deductibles) that the Medicare program 

will pay for a particular item or service. 

Complex Medical Review means all 

medical review of claim information 

and medical documentation by a 

licensed medical professional, for a 

billed item or service identified by data 

analysis techniques or probe review to 

have a likelihood of sustained or high 

level of payment error. 

Error rate means the dollar amount of 

allowable charges for a particular item 

or service billed in error as determined 

by complex medical review, divided by 

the dollar amount of allowable charges 

for that medically reviewed item or 

service. 

Initial error rate means the calculation 

of an error rate based on the results of 

a probe review prior to the initiation of 

non-random prepayment complex 

medical review. 

Medical review means the process 

performed by a contractor to ensure that 

billed items or services are covered and 

are reasonable and necessary as 

specified under section 1862(a)(1)(A) of 

the Act. 

Non-clinician medical review staff 

means specially trained medical review 

staff that do not possess the knowledge, 

skills, training, or medical expertise of 

a licensed health care professional. 

Non-random prepayment complex 

medical review means the prepayment 

medical review of claim information 

and medical documentation by a 

licensed medical professional, for a 

billed item or service identified by data 

analysis techniques or probe review to 

have a likelihood of sustained or high 

level of payment error. 

Non-random prepayment medical 

review means the prepayment medical 

review of claims for a billed item or 

service identified by data analysis 

techniques or probe review to have a 

likelihood of a sustained or high level 

of payment error. 

Provider-specific probe review means 

the complex medical review of a small 

sample of claims, generally 20 to 40 

claims, from a specific provider or 

supplier for a specific billing code to 

confirm that the provider or supplier is 

billing the program in error. 

Quarterly error rate means the 

calculation of an error rate based on the 

results of non-random prepayment 

complex medical review for a specific 

billing code for a specific quarter. 

Service-specific probe review means 

the complex medical review of a sample 

of claims, generally 100 claims, across 

the providers or suppliers that bill a 

particular item or service to confirm that 

the item or service is billed in error. 

Termination of non-random 

prepayment complex medical review 

means the cessation of non-random 

prepayment complex medical review. 

§ 421.405 Termination and extension of 

non-random prepayment complex medical 

review. 

(a) Except for cases described in 

paragraph (b) of this section, a 

contractor may terminate a provider or 

supplier from non-random prepayment 

complex medical review—

(1) No later than 1 year following the 

initiation of non-random prepayment 

complex medical review; or 

(2) If calculation of the error rate 

indicates that the provider or supplier 

has reduced its initial error rate by 70 

percent or more. A contractor must 

review claims for a specific billing code 

aberrancy for the quarter and calculate 

58654 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Proposed Rules 

the quarterly error rate for those claims 

medically reviewed in that quarter. In 

order for this determination to be made, 

the provider or supplier must submit a 

copy of the medical records that 

indicate that the items or services billed 

are covered, correctly coded, and are 

reasonable and necessary for the 

condition of the patient. When a 

provider or supplier is terminated from 

non-random prepayment complex 

medical review after 1 year of review 

and the contractor determines that the 

provider or supplier continues to have 

a high error rate despite educational 

interventions the contractor must 

consider referring the provider or 

supplier to the Benefit Integrity PSC. 

Contractors must also consider 

continuing educational interventions 

without performing medical review or 

must consider performing postpayment 

medical review. 

(b) Extension of non-random 

prepayment complex medical review. 

(1) A contractors must extend nonrandom prepayment complex medical 

review beyond the 1 year timeframe if 

a provider or supplier stops billing the 

code under review or shifts billing to 

another inappropriate code to avoid 

proper calculation of the error rate. If 

the reduction in the error rate is 

attributed to a 25 percent or greater 

reduction in the number of claims 

submitted for the specific billing code 

under review, non-random prepayment 

complex medical review for that 

provider or supplier must be extended. 

However, if the number of claims 

submitted for a specific code were 

reduced because the provider or 

supplier began billing claims using a 

new appropriate code, or there is 

another legitimate explanation for the 

reduced number of claims billed, at 

contractor discretion, the provider or 

supplier may not be required to undergo 

extended non–random prepayment 

complex medical review. 

(2) If extended medical review is 

necessary, contractors must notify 

providers and suppliers in writing the 

reasons for the need to perform 

additional prepayment complex review. 

(c) Quarterly termination evaluation—

(1) Contractors, at a minimum, must 

evaluate the length of time a provider or 

supplier has been on non-random 

prepayment complex medical review on 

a quarterly basis. A determination as to 

whether the provider’s or supplier’s 

initial probe review error rate for a 

specific billing code has been reduced 

by 70 percent must also be evaluated 

quarterly. 

(2) Quarterly error rate evaluations 

must be for the discrete quarter; a 

rolling error rate average over more than 

one quarter is not permitted. After the 

contractor determines that the provider 

or supplier should be terminated from 

non-random prepayment complex 

medical review, the claims processing 

system must be updated within 2 

business days to ensure that a provider’s 

or supplier’s claims for a specific billing 

error is no longer suspended for nonrandom prepayment complex medical 

review. 

(d) Periodic re-evaluation. Once a 

provider or supplier is terminated from 

non-random prepayment complex 

medical review, contractors must 

periodically re-evaluate the provider or 

supplier’s data and if necessary must 

place a provider or supplier that appears 

to have resumed a high level of payment 

error on complex medical review. This 

review would only be initiated if a 

probe review confirms that there 

continues to be a high level of payment 

error. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: October 26, 2004. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: March 10, 2005. 

Michael O. Leavitt, 

Secretary. 

Editorial Note: This document was 

received at the Office of the Federal Register 

on September 30, 2005. 

[FR Doc. 05–19925 Filed 9–30–05; 2:47 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF THE INTERIOR 

Bureau of Land Management 

43 CFR Part 2560 

[WO–350–1410–00–24 1A] 

RIN 1004–AD60 

Alaska Native Veterans Allotments 

AGENCY: Bureau of Land Management, 

Interior. 

ACTION: Proposed rule. 

SUMMARY: The Bureau of Land 

Management (BLM) proposes to amend 

regulations published in the Federal 

Register on Friday, June 30, 2000 (65 FR 

40953). The existing regulations allowed 

certain Alaska Native veterans another 

opportunity to apply for a Native 

allotment under the repealed Native 

Allotment Act of 1906. This proposed 

rulemaking would delete the 

requirement that veteran applicants 

must post the land by marking all 

corners of the ground with their name 

and address prior to filing an 

application with the BLM. Enforcement 

of the posting rule for allotments 

adjudicated under the 1906 Act was 

previously waived by an Assistant 

Secretary. Therefore, the posting 

requirement is deemed unnecessary for 

Native veteran allotment cases. 

DATES: Comments: Send your comments 

to reach the BLM on or before December 

6, 2005. The BLM will not necessarily 

consider any comments received after 

the above date during its decision on the 

proposed rule. 

ADDRESSES: You may mail comments to 

Director (630), Bureau of Land 

Management, Eastern States Office, 7450 

Boston Boulevard, Springfield, Virginia 

22153. 

Hand Delivery: 1620 L. Street, NW., 

Suite 401, Washington, DC 20036. 

E-mail: 

comments_washington@blm.gov. 

Federal eRulemaking Portal: http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Mike Haskins, Division of Conveyance 

Management, Bureau of Land 

Management, 222 West 7th Avenue #13, 

Anchorage, Alaska 99513; telephone 

(907) 271–3351; or Kelly Odom, Bureau 

of Land Management, Regulatory Affairs 

Group, Mail Stop 401, 1620 L Street, 

NW., Washington, DC 20036; telephone 

(202) 452–5028. Persons who use a 

telecommunications device for the deaf 

(TDD) may contact these persons 

through the Federal Information Relay 

Service (FIRS) at 1–800–877–8339, 24 

hours a day, seven days a week. 

SUPPLEMENTARY INFORMATION: 

I. Public Comment Procedures 

II. Background 

III. Discussion of Proposed Rule 

IV. Procedural Matters 

I. Public Comment Procedures 

Written Comments 

Written comments on the proposed 

rule should be specific, should be 

confined to issues pertinent to the 

proposed rule, and should explain the 

reason for any recommended change. 

Where possible, comments should 

reference the specific section or 

paragraph of the proposal which the 

commenter is addressing. The BLM may 

not necessarily consider or include in 

the Administrative Record for the final 

rule comments which the BLM receives 

after the close of the comment period 

(See DATES) or comments delivered to an 

address other than those listed above 

(See ADDRESSES).