[Federal Register Volume 72, Number 41 (Friday, March 2, 2007)]
[Proposed Rules]
[Pages 9479-9491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-870]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 424, and 498

[CMS-6003-P2]
RIN 0938-AI49


Medicare Program; Appeals of CMS or Contractor Determinations 
When a Provider or Supplier Fails To Meet the Requirements for Medicare 
Billing Privileges

AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish an appeals process for 
providers and suppliers whose applications for enrollment or renewal of 
enrollment were denied. It would also grant providers and suppliers the 
right to a hearing by an Administrative Law Judge (ALJ) within the 
Department of Health and Human Services after an adverse decision at 
the reconsideration level when a provider or supplier's Medicare 
enrollment application is denied to those situations in which the 
provider or supplier's Medicare billing privileges are revoked. In 
addition, this proposed rule would grant providers and suppliers the 
right to Departmental Appeals Board review of an adverse ALJ decision.
    It would also establish timeframes for deciding enrollment appeals 
by an ALJ or the DAB. This proposed rule would also establish the use 
of electronic funds transfer (EFT) be used for all Federal payments to 
providers and suppliers.
    Finally, this proposed rule would implement section 936(b)(1) of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA), which specifies the timeframes in which contractors must 
process all provider and supplier enrollment actions (initial 
enrollments, change of information actions, revalidations, etc.).

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on May 1, 2007.

ADDRESSES: In commenting, please refer to file code CMS-6003-P2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular 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-6003-P2, P.O. Box 8017, Baltimore, MD 
21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send 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-6003-P2, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. 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)786-7195 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.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

[[Page 9480]]


FOR FURTHER INFORMATION CONTACT: August Nemec, (410) 786-0612.

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-6003-P2.
    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. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely will also 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. Background

    A Medicare beneficiary may obtain covered Medicare items or 
services from any person, or institution that is enrolled in the 
Medicare program and is qualified to furnish those services. Various 
provisions of the statute and regulations establish conditions of 
participation or standards that a healthcare provider or supplier must 
meet in order to receive Medicare payment. These standards differ 
depending on the type of provider or supplier involved and whether the 
services are furnished under Parts A, B, or C of the Medicare statute. 
There are also differences in qualifications between providers and 
suppliers of services, and differences among the various types of 
suppliers, in how they are enrolled in the Medicare program. For some 
classifications of providers and suppliers, an on-site survey is 
required. For other individuals or entities, a determination can be 
made based largely on the information provided by the applicant.
    The Medicare regulations in part 498 provide appeal rights for 
providers and suppliers that have been found to not meet certain 
conditions of participation or established standards. For the purposes 
of part 498, these suppliers include independent laboratories; 
suppliers of portable x-ray services; rural health clinics; federally 
qualified health centers; ambulatory surgical centers; end-stage renal 
disease treatment facilities; and chiropractors and physical therapists 
in private practice. For the purposes of Part 498, the term 
``provider'' refers to a hospital, critical access hospital, skilled 
nursing facility, comprehensive outpatient rehabilitation facility 
(CORF), home health agency or hospice, that has in effect an agreement 
to participate in Medicare; or a clinic, rehabilitation agency, or 
pubic health agency that has in effect a similar agreement but only to 
furnish outpatient physical therapy or speech pathology services; or 
community mental health center that has in effect a similar agreement 
but only to furnish partial hospitalization services.
    In addition, our regulations at Sec.  405.874 provide an appeals 
process for suppliers of Durable Medical Equipment, Prosthetics and 
Orthotics and Supplies (DMEPOS) that wish to contest a denial of an 
application for a billing number or the revocation of an existing 
billing number. The Sec.  405.874 appeals process affords DMEPOS 
suppliers the right to a carrier hearing before a carrier official who 
was not involved in the original determination, and the right to seek a 
review before a CMS official designated by the CMS Administrator.
    In December 1998, we issued CMS Ruling 98-1, regarding the appeals 
process Medicare carriers must provide to physicians, nonphysician 
practitioners, and to certain entities that receive reassigned benefits 
from physicians and nonphysician practitioners. CMS Rulings are 
decisions of the Administrator that serve as precedent final opinions 
and orders and statements of policy and interpretation. They provide 
clarification and interpretation of complex or ambiguous provisions of 
statute or regulations relating to Medicare, Medicaid, Utilization and 
Quality Control Peer Review, private health insurance, and related 
matters. CMS Rulings are binding on all our components, Medicare 
contractors, the Provider Reimbursement Review Board, the Medicare 
Geographic Classification Review Board, and ALJs who hear Medicare 
appeals. These Rulings promote consistency in interpretation of policy 
and adjudication of disputes. This proposed rule is different from the 
clarification of appeals procedures found in CMS Ruling 98-1, because 
it adds provisions in order to comply with the MMA. Whereas the ruling 
followed the procedures in Sec.  405.874, this proposed rule would 
grant suppliers the right, after denial or revocation of a supplier's 
Medicare billing privileges, to a hearing by an ALJ after an adverse 
decision at the reconsideration level as well as judicial review.

II. Provisions of the Proposed Rule Published on October 25, 1999

    In the October 25, 1999 Federal Register (64 FR 57431), we 
published a proposed rule that set forth proposed revisions to Sec.  
405.874 (Appeals of carrier decisions that supplier standards are not 
met) to extend appeal rights to all suppliers whose enrollment 
applications for Medicare billing privileges are revoked, except for 
those suppliers covered under the appeals provisions of part 498. The 
proposed rule stated that these administrative appeal rights would 
apply to suppliers of durable medical equipment, prosthetics, 
orthotics, and supplies; ambulance service providers; independent 
diagnostic testing facilities; physicians; and other suppliers such as 
physician assistants. We also proposed revisions to the existing 
procedures in Sec.  405.874.
    Since section 902 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) prohibits the Secretary from 
finalizing a proposed rule that was published more than 3 years earlier 
except under exceptional circumstances, we are not seeking comment on 
our earlier proposed rule. In addition, we have revised the October 25, 
1999 proposed rule in order to comply with section 936 of the MMA. 
However, we are including a summary discussion of the significant 
provisions stated in the October 25, 1999 proposed rule in order to 
provide historical background regarding the development of this 
proposed rule. The following is a summary of the procedural changes 
found in the October 25, 1999 proposed rule.
    In our October 1999 proposed rule we proposed to:
    <bullet> Set forth the procedures to be followed by carriers 
concerning notifying a supplier of the denial of an enrollment 
application for supplier billing privileges.
    <bullet> Clarify that a revocation of a supplier billing number 
that is based on a Federal exclusion or debarment is effective with the 
effective date of the exclusion or debarment, regardless of the date of 
the notice from the carrier that the billing number is revoked.
    <bullet> Change the language in current Sec.  405.874(c) that 
requires a carrier

[[Page 9481]]

hearing officer to schedule a hearing to be held within 1 week.
    <bullet> Clarify that we would not pay for services furnished by 
suppliers during a period in which the supplier's billing privileges 
have been denied or revoked.
    <bullet> Clarify that the supplier must be in compliance with all 
requirements in order to have its billing number reinstated, and that 
we must be satisfied that the supplier is in compliance and will remain 
in compliance.
    <bullet> Permit the carrier, carrier hearing officer, or CMS (then 
HCFA) official to reopen and revise its initial determination
    <bullet> Restrict DMEPOS suppliers from billing for services prior 
to the date that their billing number was issued.
    <bullet> Describe the procedure for submitting claims after a 
reversal of a supplier enrollment application denial or billing number 
revocation, or after a billing number reinstatement.

III. Analysis of and Responses to Public Comments Received From the 
Proposed Rule Published on October 25, 1999

    The following is a summary of our comments and responses to the 
October 25, 1999 proposed rule. Notwithstanding the presentation of 
these comments and responses, we are only soliciting comments on this 
proposed rule.
    Comment: One commenter suggested that we simplify the enrollment 
application (Form CMS 855) instead of removing the requirement that a 
carrier must accept or reject an entity's enrollment application for a 
billing number or request additional information within 15 days of the 
receipt of the enrollment application.
    Response: Since the publication of our October 25, 1999 proposed 
rule we have published several notices requesting public comment on the 
enrollment applications in the Federal Register including one on 
February 2, 2001, (66 FR 8807). The final approval notice was granted 
on September 25, 2001. Most recently, we sought public comments on our 
revised provider enrollment application on July 8, 2005. In the April 
25, 2003 Federal Register (68 FR 22064), we published a proposed rule 
concerning our provider enrollment procedures entitled ``Requirements 
for Establishing and Maintaining Medicare Billing Privileges,'' that 
includes proposed revisions to the CMS 855 enrollment applications. In 
addition, to be consistent with the nomenclature in this proposed rule 
and existing manual instructions, we are changing the term 
``disallowance'' to the term ``denial'' throughout this proposed rule.
    Comment: Two commenters suggested that carriers be given a 
timeframe for processing these applications, such as 30 or 45 days. 
Many commenters recommended that we maintain and enforce a time limit 
for the carrier to process enrollment applications and expressed 
concern about delays in billing or the inability to bill for Medicare 
items and services.
    Response We do maintain and enforce provider enrollment processing 
standards for carriers. Currently, the time limit for the carrier to 
process an initial determination, can be found in Program Integrity 
Manual, Chapter 10-Healthcare Provider/Supplier Enrollment. Carriers 
are evaluated against this standard in the Contractor Performance 
Evaluation process.
    In addition, section 936(a) of the MMA adds a new section 
1866(j)(1)(B) to the Act, requiring the Secretary to ``* * * establish 
by regulation procedures under which there are deadlines for actions on 
applications for enrollment (and, if applicable, renewal of 
enrollment). The Secretary shall monitor the performance of Medicare 
Administrative Contractors in meeting the deadlines * * *'' In this 
proposed rule, we would establish deadlines for processing all provider 
and supplier enrollment actions as discussed in greater detail in 
section IV. of the preamble of this proposed rule.
    Comment: Several commenters suggested that we should provide 
temporary provider numbers during the enrollment process to permit 
suppliers to submit claims for their provision of items and services 
prior to receiving a permanent supplier billing number.
    Response: Since the publication of the October 25, 1999 proposed 
rule, we published the Requirements for Providers and Suppliers to 
Establish and Maintain Medicare enrollment final rule(71 FR 20754), 
where we required that providers and suppliers obtain billing numbers 
before enrolling in the Medicare program. The purpose of the enrollment 
process is to ensure that we enroll qualified, eligible individuals and 
entities as providers and suppliers of Medicare services. Allowing 
providers and suppliers to submit claims prior to enrollment in the 
Medicare program would undermine this process.
    Comment: Two commenters suggested that a supplier should not have 
to prove compliance with all enrollment qualifications because this 
allows the carrier to raise new objections without warning and shifts 
the burden of proof to the supplier.
    Response: Since the publication of the October 25, 1999 proposed 
rule, we published the Requirements for Providers and Suppliers to 
Establish and Maintain Medicare enrollment final rule (April 21, 2006, 
71 FR 20754). In this final rule, we require providers and supplier to 
meet and maintain all Federal and State requirements to be issued and 
retain Medicare billing privileges. When suppliers enroll in the 
Medicare program, they are required to sign a certification statement 
that they are in compliance with all Medicare enrollment requirements. 
This appeals proposed rule would not alter the burden of proof already 
placed on the supplier in the initial application process.
    Comment: Two commenters suggested that we should propose a separate 
enrollment process for those suppliers whose enrollment applications 
have been denied, who have lost their appeal, and who decide to submit 
a new enrollment application to the carrier.
    Response: We maintain that if a supplier's enrollment application 
has been denied and the denial was upheld by the appeals process, then 
that supplier would still be eligible to reapply for a Medicare 
supplier number. If the supplier still wanted to enroll, we assume that 
the supplier would correct the reasons for the denial. The supplier 
would be required to submit the enrollment application as an initial 
enrollment. Therefore, a separate enrollment process for applicants who 
were denied enrollment would not be practical.
    Comment: A commenter stated that we had established the effective 
date for purposed for billing Medicare for DMEPOS services in a change 
of ownership (CHOW) situation to be ``the date of the actual change in 
ownership, rather than the date of assignment of the National Supplier 
Clearinghouse.''
    Response: We agree with the commenter. This is the current policy 
as long as at the time of the CHOW, all CMS Medicare DMEPOS supplier 
standards specified in Sec.  424.57 are met.
    Comment: Three commenters stated that physicians should not be 
characterized as suppliers.
    Response: For purposes of Medicare terminology, it has been a 
longstanding practice for physicians to be considered as suppliers. Our 
regulations at Sec.  400.202 define a supplier as a physician or other 
practitioner, or an entity other than a provider that furnishes health 
care services under Medicare. In addition, section 901(b) of the MMA 
amended section 1861 of the Act by adding paragraph (d), which defines 
a supplier to include a physician. Therefore, we are retaining the 
current definition for the purpose of this proposed rule.

[[Page 9482]]

    Comment: A commenter stated that it is unclear whether this 
regulation applies to physicians.
    Response: This proposed rule would apply to physicians, as 
physicians are considered suppliers in accordance with the definitions 
specified in Sec.  400.202.
    Comment: One commenter stated that this regulation should have been 
incorporated into a rule that established requirements for obtaining 
and maintaining Medicare billing privileges.
    Response: As stated previously, we finalized CMS-6002-F, 
Requirements for Provider and Suppliers to Establish and Maintain 
Medicare Enrollment, on April 21, 2006 (71 FR 20754). Accordingly, we 
are not able to adopt this suggestion.
    Comment: A commenter suggested that we add an exception to this 
rule for time periods during which a supplier is unaware of the 
debarment or exclusion of another entity with which it is doing 
business.
    Response: While we understand this comment, we believe that 
information on excluded or debarred entities is readily available to 
the public. For example, the Office of Inspector General's (OIG's) Web 
site pages which include the following:
    <bullet> OIG's ``List of Excluded Individuals and Entities.'' This 
list is commonly referred to as the ``OIG Sanction List'' for those 
parties excluded by the OIG from participation in the Medicare, 
Medicaid, and all Federal health care programs (as defined in section 
1128B(f) of the Act);
    <bullet> ``List of Parties Excluded from Federal Procurement and 
Non-procurement Programs,'' known as the ``GSA Debarment List'', for 
those parties debarred, suspended or otherwise excluded by other 
Federal agencies from participation in Federal procurement and 
nonprocurement programs and activities.
    The aforementioned lists are in accordance with the Federal 
Acquisition and Streamlining Act of 1994, and with the HHS Common Rule 
at 45 CFR part 76. The Web site for the OIG exclusion list can be found 
at http://www.oig.hhs.gov and the Web site for the debarment list can 
be found at http://www.epls.arnet.gov.
    Comment: Two commenters suggested that we should more clearly 
distinguish between those suppliers whose initial enrollment 
applications had been denied and those whose enrollment had been 
revoked.
    Response: With the publication of Requirements for Provider and 
Suppliers to Establish and Maintain Medicare Enrollment final rule 
(April 21, 2006, 71 FR 20754), we believe we have clarified the 
differences between a denial of billing privileges and revocation of 
billing privileges. In addition, we believe that only one appeals 
process is necessary to resolve adverse administrative enrollment 
decisions.
    Comment: One commenter stated that the appeal rights of a supplier 
that has been excluded by the OIG are more expansive than the appeal 
rights contained in this regulation for a supplier whose billing number 
has been revoked, since an excluded supplier may request an 
Administrative Law Judge (``ALJ'') hearing.
    Response: This proposed rule reflects the requirements of section 
936(a) of the MMA to grant the right to an ALJ hearing, judicial 
review, and DAB review to a revoked supplier. Therefore, an excluded 
supplier would no longer have more expansive appeal rights.
    Comment: Several commenters noted that Sec.  405.874(a) should 
clearly state that the carrier should fully inform the supplier in 
detail as to why it has denied the supplier's enrollment application or 
revoked the supplier's enrollment.
    Response: We agree with the commenters. In this proposed rule, we 
are proposing in Sec.  405.874(a) and (b) that the carrier provide the 
reason why a supplier's enrollment application was denied or why its 
billing number was revoked.
    Comment: Several commenters were opposed to reducing the timeframe 
to file an appeal of a denial of an enrollment application or the 
revocation of a Medicare billing number from 90 to 60 days.
    Response: We are proposing to follow the longstanding processes of 
part 498, which allow 60 days for filing an appeal.
    Comment: A few commenters contended that we should accept a 
postmark as the reliable date to determine when suppliers have learned 
of a carrier decision to deny an application or revoke Medicare billing 
privileges.
    Response: We agree with the commenters. We believe that Sec.  
498.22(b)(3), Sec.  498.22(d), and Sec.  498.40 clearly address when we 
must accept a postmark as the reliable date to determine when suppliers 
have learned of a carrier decision to deny an application or revoke 
Medicare billing privileges.
    Comment: One commenter stated that it is confusing to base the 
revocation of a billing number on the effective date of the Federal 
action (exclusion or debarment), regardless of the date of notice from 
the carrier.
    Response: The OIG sends an exclusion notice to the supplier and the 
carrier at the same time explaining that the supplier is being excluded 
from Medicare, Medicaid, and other Federal health care programs. The 
effective date of the exclusion is 20 days after the date the notice is 
sent to the supplier and the carrier (see Sec.  1001.2002(b)). The 
carrier does not establish the date for the exclusion nor can the 
carrier alter the effective date of OIG exclusion.
    Comment: One commenter stated that the carrier should not have the 
discretion to implement a carrier hearing officer's decision to deny or 
revoke a supplier billing number pending a possible appeal. This 
commenter suggested that carriers be required to decide within 15 days 
whether to appeal a hearing officer's reversal decision, and if the 
carrier chooses not to appeal, then it must immediately implement the 
decision.
    Response: In accordance with section 936(1)(b)(1) of the MMA, we 
propose to follow the process of part 498. These procedures have 
specific timeframes.
    Comment: Several commenters stated that an ALJ, rather than a CMS 
official, should conduct the appeal that follows the carrier hearing.
    Response: Section 936(l)(b)(1) of the MMA provides for an ALJ 
hearing. Therefore, we are proposing to modify our regulations to 
address this concern.
    Comment: One commenter stated that when a revocation of a supplier 
billing number is reversed upon appeal, the supplier billing number 
should be reinstated to the date upon which the revocation became 
effective.
    Response: We agree. In this proposed rule, we would revise Sec.  
405.874(d), to provide that in the case of a reversal of a revocation 
on appeal, a supplier billing number is reinstated back to the date 
that the revocation became effective.
    Comment: One commenter suggested that we should establish clear 
guidelines as to when and why a carrier or a carrier hearing officer 
can reopen an existing decision or determination, and another commenter 
suggested that reopening of decisions should be limited to situations 
where good cause has been established and new and material evidence has 
been uncovered.
    Response: While we considered establishing a reopening process, we 
believe that the appeals process that would be established in this 
proposed rule affords providers and suppliers with sufficient 
protections. We would appreciate receiving additional public comments 
regarding the benefits associated with expanding on the

[[Page 9483]]

reopening process established in Sec.  498.30.
    Comment: One commenter stated that the provisions relating to the 
rejection of claims fails to distinguish between suppliers whose 
billing numbers have been revoked and those whose enrollment 
applications are pending. The commenter also was concerned that 
payments will be rejected only when a supplier's enrollment has been 
revoked because a carrier's rejection of claims affords no appeal 
rights.
    Response: It is true that the provision that claims be rejected 
does not in fact, distinguish between those suppliers whose billing 
numbers are revoked and those whose enrollment applications are 
pending. Claims are rejected when the supplier does not have valid 
billing privileges at the time that claims were submitted. When a 
supplier's application is approved and it is assigned a billing number, 
these claims may be resubmitted and paid retroactively, except for 
DMEPOS suppliers, who do not have retroactive billing privileges. In 
addition, we maintain that claims are rejected for those suppliers 
whose billing privileges are revoked so the contractor does not have to 
hold the claims in its system indefinitely.
    Comment: Two commenters stated that we should ensure that all 
decisions are reached and implemented prior to the claims expiration 
date, or the agency should allow exceptions in circumstances when the 
timeframe to pay allowable claims has expired.
    Response: The timely filing requirements for claims submission, as 
specified in Sec.  424.44, are not affected by an enrollment 
application pending processing or by the appeal of the Agency's 
enrollment decision. As specified in Sec.  405.874(i), if a supplier is 
successful in overturning its denial or revocation, it has up to 1 year 
after the reversal decision to file any claims for items furnished 
during the overturned period.

IV. Provisions of This Proposed Rule

    After consideration of the comments reviewed, analysis of specific 
issues, and the provisions of section 936(l)(b)(1) of the MMA we are 
modifying the October 25, 1999 proposed rule by making clarifying and 
editorial changes, and revising the sections affected by 936(l)(b)(1) 
of the MMA.
    With the implementation of the National Provider Identifier (NPI) 
(which is a standard unique identifier for health care providers) 
scheduled for May 23, 2007, we believe that it is appropriate to 
propose use of the term ``Medicare billing privileges'' in lieu of the 
term ``Medicare billing number.'' (See the January 23, 2004 final rule 
(69 FR 3469) for more detailed information regarding the NPI.) After 
implementation of the NPI, providers or suppliers will have to obtain 
an NPI before initiating enrollment in the Medicare program. Medicare 
will use the NPI as the billing number. However, providers and 
suppliers must still enroll with a fee-for-service contractor in order 
to bill the Medicare program. Thus, the fee-for-service contractor will 
convey billing privileges.
    We propose to maintain Sec.  405.874, which specifies provisions 
that would apply to certain suppliers as defined in Sec.  405.802.
    In Sec.  405.802, we propose to define prospective supplier and 
suppliers by specifying the provisions of Sec.  405.874 that would 
apply. These suppliers include an independent laboratory; supplier of 
durable medical equipment, prosthetics, orthotics, or supplies 
(DMEPOS); ambulance service provider; independent diagnostic testing 
facility; physician, other practitioner such as physician assistant; 
physical therapist in independent practice; clinical laboratories; 
supplier of portable x-ray services; rural health clinic (RHC); 
Federally qualified health center (FQHC); ambulatory surgical center 
(ASC); an entity approved by CMS to furnish outpatient diabetes self-
management training, or end-stage renal disease (ESRD) treatment 
facility that is approved by CMS as meeting the conditions for coverage 
of its services, and prospective supplier means any of the listed 
entities that seek to be approved for coverage of its services under 
Medicare.
    In new Sec.  405.874(a), Denial of a supplier enrollment 
application, we propose that if a carrier denies a supplier's 
enrollment application, the carrier must notify the supplier by 
certified mail. The notice must include the following: (1) The reason 
for denial in sufficient detail to allow the supplier to understand the 
nature of its deficiencies; (2) the right to appeal in accordance with 
part 498; and (3) the address to which the written appeal must be 
mailed.
    We propose these changes to comply with section 936(a)(2) of the 
MMA. Part 498 of these regulations includes the right of a supplier to 
a reconsideration of a determination that it does not qualify for 
Medicare billing privileges. This reconsideration would be performed by 
a carrier hearing officer not involved in the original determination. 
Part 498 also grants suppliers the right to a hearing by an ALJ, DAB 
review and judicial review. These various levels of appeal would also 
apply to revocations of Medicare billing privileges.
    In proposed Sec.  405.874(b)(1), Notice of revocation, we would 
clarify that if a carrier revokes a supplier's Medicare billing 
privileges that the carrier must notify the supplier by certified mail 
and that the notice must include--(1) the reason for the revocation in 
sufficient detail for the supplier to understand the nature of its 
deficiencies; (2) the right to appeal in accordance with part 498 of 
this chapter; (3) the address to which the written appeal must be 
mailed.
    In proposed Sec.  405.874(b)(2), Revocation of a supplier's billing 
privileges, we would separate the procedures in existing Sec.  
405.874(a) and Sec.  405.874(b) because we believe the language in the 
October 29, 1999 proposed rule was not sufficiently clear. In proposed 
Sec.  405.874(b)(2), we clarify that a revocation of a supplier's 
billing privileges that is based on a Federal exclusion or debarment is 
effective with the effective date of the exclusion or debarment, 
regardless of the date of the notice from the carrier that the billing 
number is revoked. Moreover, if CMS, or one of its designated 
contractors revokes Medicare billing privileges, we would not revoke an 
individual or organization's NPI.
    In proposed Sec.  405.874(b)(3), Payment, we would revise this 
section to clarify that suppliers are not paid for items or services 
furnished during a period in which a supplier does not have billing 
privileges or its billing privileges have been revoked. Concerning 
DMEPOS suppliers, section 1834(j)(1) of the Act states that, with the 
exception of medical equipment and supplies furnished incident to a 
physician's service, no payment may be made by Medicare for items and 
supplies unless the supplier has active Medicare billing privileges. We 
further propose that claims submitted to carriers for items or services 
furnished during a period of supplier ineligibility are to be rejected 
by the carrier, not denied.
    In Sec.  405.874(c)(1) Appeal rights, we propose that a supplier's 
appeal rights would follow the processes detailed in part 498.
    We are proposing to revise Sec.  405.874(d), Impact of reversal of 
carrier determination on claims processing, to reflect that claims for 
services furnished to Medicare beneficiaries during a period in which 
the supplier's billing privileges were not effective are rejected and 
not denied. If a provider or supplier is determined not to have 
qualified for billing privileges in one period but qualified in 
another, contractors process claims for services

[[Page 9484]]

furnished to beneficiaries during the period for which the provider or 
supplier was Medicare-qualified. Subpart C of this part sets forth the 
requirements for recovery of overpayments. The appeals process for 
denied claims should not apply if a provider or supplier does not have 
billing privileges.
    In Sec.  405.874(d)(3), we propose that if a revocation of a 
provider's or supplier's billing privileges are reversed upon appeal, 
the provider's or supplier's billing privileges are reinstated back to 
the date that the revocation became effective.
    Section 405.874(d)(4) would specify that if a denial of a 
provider's or supplier's billing privileges is reversed upon appeal, 
then the appeal decision establishes the date that the provider's or 
supplier's billing privileges will become effective.
    We propose revising Sec.  405.874(e), Reinstatement of provider's 
or supplier's billing privileges following corrective action, to state 
that if a provider or supplier completes a corrective action plan and 
provides sufficient evidence to the carrier that it has complied fully 
with the Medicare requirements, the carrier may reinstate the 
supplier's billing privileges. The carrier may pay for services 
furnished on or after the effective date of the reinstatement. The 
effective date of the reinstatement will be based on the date the 
provider or supplier is in full compliance with all Medicare 
requirements. However, a carrier's refusal to reinstate billing 
privileges based on the submission of a corrective action plan is not 
an initial determination and may not be appealed. We believe that 
allowing suppliers to appeal an adverse corrective action plan would 
establish two separate appeal processes and result in an 
administratively inefficient appeals process. Any supplier seeking to 
appeal a carrier's determination to deny or revoked billing privileges 
must submit an appeal within the timely filing period established for 
reconsideration, regardless of the submission of a corrective action 
plan.
    In Sec.  405.874(f) we propose to revise the effective date for 
DMEPOS supplier's billing privileges. If a carrier, carrier hearing 
officer, or ALJ determines that a DMEPOS supplier's denied enrollment 
application meets the standards in Sec.  424.57 of this chapter and any 
other requirements that may apply (for example, reinstatement after an 
OIG exclusion), the determination establishes the effective date of the 
billing number as not earlier than the date the carrier made the 
determination to deny the supplier's enrollment application. Claims are 
rejected for services furnished before that effective date.
    In Sec.  405.874(g), Submission of claims, we propose that a 
provider or supplier succeeding in having its enrollment application 
denial or billing number revocation reversed, or in having its billing 
number reinstated, may submit claims to the carrier for services 
furnished during periods of Medicare qualification, subject to the 
limitations in Sec.  424.44 of this chapter, regarding the timely 
filing of claims. If the claims previously were filed timely but were 
rejected, they would be considered filed timely upon resubmission. 
Previously denied claims for items or services rendered during a period 
of denial or revocation may be resubmitted to CMS within 1 year after 
the date of reinstatement or reversal.
    In Sec.  424.510(d)(2)(iv) Submittal of electronic funds transfer 
(EFT) authorization form, we propose that at the time of enrollment, an 
enrollment change request or revalidation, providers and suppliers 
shall submit the CMS-588 form to receive payments via electronic funds 
transfer.
    Consistent with the authority found at 31 U.S.C. 3332(f)(1), all 
Federal payments, including Medicare payments to providers and 
suppliers, shall be made by electronic funds transfer (EFT). Further, 
under 31 U.S.C. 3332(g), each recipient of Federal payments required to 
be made by electronic funds transfer shall designate 1 or more 
financial institutions or other authorized agents to which the payments 
shall be made and provide the information to CMS. While the statutory 
provisions at 31 CFR part 208 govern the Department of Treasury, they 
apply to all Federal government agencies.
    Consequently, we want to clarify that the EFT requirement applies 
to providers and suppliers enrolling in the Medicare program or making 
changes to enrollment. We are proposing to require the EFT payments 
for--(1) providers and suppliers initially enrolling in the Medicare 
program; and (2) providers and suppliers submitting a CMS-855 change 
request who are not currently receiving payments via EFT. Note if a 
provider or supplier is not enrolled in the Medicare program or is not 
submitting a change in their enrollment information, no action is 
necessary. We will continue to encourage all providers and suppliers to 
switch to EFT payments voluntarily.
    We believe that this change will reduce the paperwork burden for 
the public and reduce our administrative costs. Moreover, we believe 
that the transition to EFT will help ensure that payments are made to 
the provider or supplier of services. Finally, in the event of a 
national disaster, such as Hurricane Katrina, providers and suppliers 
utilizing EFT would be ensured a continuity of payment. We are 
proposing to revise Sec.  424.545(a), provider and supplier appeal 
rights, which was part of the April 21, 2006 final rule (71 FR 20754), 
regarding the Requirements for Providers and Suppliers To Establish and 
Maintain Medicare Enrollment. The existing provision states that a 
revocation of billing privileges also results in the termination of a 
corresponding provider agreement. Therefore, we are proposing to revise 
Sec.  424.545(a) by--
    <bullet> Redesignating the first sentence of current paragraph(a) 
as the introductory text and revising that text to remove the reference 
to part 405 subpart H.
    <bullet> Redesignating the second sentence of current paragraph (a) 
as paragraph (a)(1)(i).
    <bullet> Adding paragraph (a)(1)(ii) to clarify that if a provider 
appeals both of these sanctions, then both matters will be resolved 
using a single appeals process.
    <bullet> Redesignating the last sentence of current paragraph (a) 
as paragraph (a)(2).
    We believe that our proposal (the addition of paragraph (a)(1)(ii) 
is not a change from the current regulatory provision. In fact, the 
current provision in Sec.  424.545(a) provides that a final decision 
would apply both to the revocation and the termination. However, this 
proposal is an effort to clarify that a provider will be able to appeal 
both sanctions using one appeals process. We also are proposing that 
this process would follow the appeals procedures established for 
revocations. We believe that a single appeals process would result in 
less administrative burden for both the agency and any affected 
provider.
    We are proposing to add Sec.  405.874(h) to establish deadlines for 
the adjudication of provider enrollment actions. We are proposing that 
contractors adjudicate initial determinations and revalidations within 
180 days of receipt and that carriers adjudicate change-of-information 
and reassignment of payment request within 90 days of receipt.
    To assist the reader in understanding the provider enrollment 
appeals process discussed in this proposed rule, the chart below 
provides first the established timeframes in which a provider or 
supplier must file an appeal to an adverse determination (that is, 
denial of billing privileges or revocation

[[Page 9485]]

of billing privileges), and second our proposed adjudication 
timeframes. Additional information regarding the appeals process is 
described in the following preamble.

------------------------------------------------------------------------
                                                             Proposed
                                           Timeframe to       maximum
      Medicare provider enrollment        file an appeal   adjudication
              determination                    (days)        timeframe
                                                              (days)
------------------------------------------------------------------------
Initial.................................              60             180
Reconsideration.........................              60              60
Administrative Law Judge Review.........              60             180
Departmental Appeals Board Review.......              60             180
Federal District Court..................             N/A             N/A
------------------------------------------------------------------------

    We are proposing to update Sec.  424.525(a)(1) and Sec.  
424.525(a)(2) for reasons for rejecting enrollment applications by 
reducing the amount of time that a provider or supplier must furnish 
complete information requested by a contractor from 60 to 30 days. 
Additionally, we are proposing a reduction from 60 to 30 days for the 
period allowed to furnish all supporting documentation for submitting 
their enrollment application.
    We are proposing to reject an application that is submitted by a 
provider or supplier if it is incomplete or if it fails to include all 
required supporting documentation on the enrollment application within 
30 days of receipt. We are proposing this change because approximately 
70 percent of the submitted applications are incomplete or lack the 
supporting documents for enrollment. This change will help facilitate 
the enrollment process and reduce the administrative burden associated 
with processing these applications.
    We are also proposing to expand revocations by the addition of a 
revocation for the abuse of billing privileges to Sec.  424.535. In the 
new Sec.  424.535(a)(8) we are proposing to allow Medicare fee-for-
service (FFS) contractors to revoke Medicare billing privileges when a 
provider or supplier submits a claim or claims for services that could 
not have been furnished to a beneficiary. Specifically, we believe that 
it is both appropriate and necessary that CMS' FFS contractors be given 
the ability to revoke billing privileges when services could not have 
been furnished by a provider or supplier. We have found numerous 
examples of situations where a physician or other practitioner has 
billed for services furnished to beneficiaries that are undeliverable, 
including but not limited to situations where the beneficiary was 
deceased, the directing physician or beneficiary was not in the State 
or country when services were furnished, or when the beneficiary was in 
another setting where these services could not be administered, or the 
equipment necessary for testing was not present where the testing is 
said to have occurred.
    We do not believe the determination made by the CMS FFS contractors 
constitutes a determination of fraud. In addition we believe that this 
new revocation authority is in line with other revocations already used 
by CMS and its FFS contractors. Further, providers and suppliers may 
appeal a contractor revocation using the process outlined in part 498.
    We believe that this type of provision is essential to the 
efficient operation of the Medicare program because it would enable us 
to take an important step in protecting the expenditure of public 
monies with respect to service providers whose motives and billing 
practices are questionable, at best, and, at worst, of a sort that 
might prompt an aggressive response from the law enforcement community. 
The Medicare program ought not be forced to rely solely on its 
authority to deny claims on a piecemeal basis while having to devote 
extensive resources to maintaining the kind of close scrutiny of each 
of these providers and suppliers that would be required to minimize the 
program's exposure to the payment of claims that, by anyone's 
definition, ought not be tolerated. For this reason, we are proposing 
this provision in accordance with our broad rulemaking authorities in 
sections 1871 and 1102 of the Act.
    We should note that providers or suppliers that expressly flag 
claims that they believe might be perceived by us as being in this 
category would not face prosecution under the False Claims Act.
    In the new Sec.  424.535(c), we are proposing a timeframe to wait 
for reapplication to the Medicare program when a provider or supplier 
is revoked. We are proposing that when a provider or supplier, 
including all authorized officials, delegating officials and 
practitioners, is revoked for any of the reasons listed at Sec.  
424.535 that the provider, supplier, delegated official or authorizing 
official be prohibited from enrolling for 3 years. We believe that 
revocations are serious matters and must be treated as such to maintain 
the integrity of the program. We invite public comment on whether we 
should consider different (that is, shorter or longer) timeframes for 
prohibiting a provider or supplier from re-enrolling in the Medicare 
program after a revocation has been issued.
    Under the Medicare regulations, we know from experience that it is 
often the case that providers, and particularly some suppliers, simply 
react to a termination from the program by turning around and 
immediately seeking reentry into the program, oftentimes in another 
location or with a different name. Such practices make a sham of the 
enforcement process leaving us with the obligation to constantly 
monitor suspect providers and suppliers, forcing the agency to stand by 
while the same offenders engage in the same noncompliant billing 
practices that led to their expulsion in the first place. We do not 
believe it is consistent with our mandate to administer an efficient 
program or to protect the expenditure of public monies by being 
compelled to take such a passive approach to what are clearly 
substandard practices. By having a regulatory provision that would keep 
such entities out of the program for 3 years, we believe we would be 
establishing a credible deterrent to these substandard billing 
practices where providers and suppliers would know that there are real 
consequences to their actions. The Medicare program ought not have to 
choose to do business with all entities simply because they express 
their willingness to accept Federal payment for services that they have 
demonstrated are too often suspicious or so poorly presented that they 
cause the program to devote too many resources to determine their 
accuracy.
    We are proposing to revise in Sec.  498.1(g) in accordance with 
section

[[Page 9486]]

936(a)(2) of the MMA to provide an ALJ hearing, and judicial review for 
any provider or supplier whose application for enrollment or 
reenrollment in Medicare has been denied.
    In Sec.  498.2, we are proposing to revise the definition of a 
``supplier'' to--(1) include a supplier of durable medical equipment, 
prosthetics, orthotics, or supplies (DMEPOS); ambulance service 
provider; independent diagnostic testing facility; physician; and other 
practitioner such as physician assistant; and (2) remove the reference 
to ``prospective supplier.'' In Sec.  498.2, we are also proposing to 
add a separate definition of ``prospective supplier.'' We are removing 
the definition of the ``Office of Hearings and Appeals (OHA)'' because 
the function of this office has been moved from the Social Security 
Administration to the Department of Health and Human Services. We are 
also proposing to revise the definition of ``affected party'' to 
specify that it includes CMS or a CMS contractor.
    We are proposing to revise Sec.  498.5 by adding a new paragraph 
(l) to clarify the administrative process that a prospective provider, 
existing provider, prospective supplier or existing supplier 
dissatisfied with an initial determination or revised initial 
determination related to the denial or revocation of Medicare billing 
privileges would use.
    We are proposing to revise Sec.  498.5(f)(2) to be consistent with 
the change in Sec.  498.1(g). This would implement the mandate of 
section 936(a)(2) of the MMA regarding judicial review. We are 
proposing these standards because the FFS contractors need sufficient 
time to adjudicate the facts and make a reasoned decision. Moreover, 
while we are establishing an outside limit for processing these 
applications, the vast majority of these decisions are made within 120 
days. We are requesting comment on this existing standard.
    We are proposing to revise Sec.  498.22(a) to add that we have 
delegated authority to our contractors to reconsider an initial 
determination. We are also proposing to revise Sec.  498.22(b)(1) to 
state that a reconsideration request is to be filed with CMS or with 
the State survey agency, or, in the case of prospective suppliers, the 
entity specified in the notice of initial determination. We are 
proposing to revise Sec.  498.44 to remove the term Associate 
Commissioner for Hearings and Appeals, and we are replacing it with the 
Secretary, because this function is no longer under the Social Security 
Administration; it is now under the Department of Health and Human 
Services.
    With the proposed revision to Sec.  405.874(c)(2), we want to 
clarify that a provider or supplier is required to prove that it is in 
compliance with all Medicare requirements for billing privileges, and 
that the Medicare FFS contractor incorrectly denied or revoked the 
supplier's billing number. Accordingly, we believe that the burden of 
proof is on the provider or supplier to show that it met all 
requirements upon application, or at the time of revocation. In Sec.  
498.56, we are proposing to add a new paragraph (e) that specifies the 
``good cause'' exception to the admission of new evidence at the ALJ 
and DAB appeal levels.
    Accordingly, we propose to revise Sec.  498.56 and Sec.  498.86 to 
prohibit providers and suppliers from submitting new provider 
enrollment issues or evidence at the ALJ and DAB levels of review. We 
believe that the efficiency and accuracy of the appeals process is 
enhanced when the provider or supplier submits all necessary 
documentation with their appeal request to prove that they are in 
compliance with all Medicare requirements for enrollment. If supporting 
evidence is not submitted with the request for a reconsideration, the 
contractor will contact the supplier to try to obtain the missing 
evidence. The contractor must make a decision based on the information 
in the case file.
    The contractor may accept any additional documentation, even if it 
is not specified in the appeal notice. If the provider/supplier fails 
to submit evidence before the reviewing official issues its decision, 
the provider/supplier would be precluded from introducing the evidence 
at higher levels of the appeals process. It is presumed that the 
Medicare FFS contractor made a reasonable determination in its denial 
or revocation of a supplier's billing privileges based on information 
it had at the time of the decision. The provider/supplier would be 
required to furnish the evidence that clearly shows the determination 
was in error at the time it was made.
    We are proposing to revise Sec.  498.78(a) to delete the provision 
that an affected party concur in writing or on the record with a CMS or 
Office of Inspector General (OIG) request for remand. We believe that 
the appeals process can be enhanced by allowing an ALJ to remand a 
provider enrollment case to the Medicare FFS contractor when CMS 
requests a remand. Further, we believe that a remand request could 
result in either a favorable decision to the appellant or an 
administrative record that is complete.
    In Sec.  498.79, we are proposing that when a request for an ALJ 
hearing is filed after CMS or a FFS contractor has denied an enrollment 
application, that an ALJ must issue a decision, dismissal order or 
remand to CMS, as appropriate, no later than 180 days after the initial 
request for a hearing.
    Finally, in Sec.  498.88(g), we are proposing that when a request 
for a Board review is filed after an ALJ has issued a decision or 
dismissal order, that the Board must issue a decision, dismissal order 
or remand to the ALJ, as appropriate, no later than 180 days after the 
appeal was received by the Board.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 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 PRA requires 
that we solicit comments on the following issues:
    <bullet> Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    <bullet> The accuracy of the agency's estimate of the information 
collection burden;
    <bullet> The quality, utility, and clarity of the information to be 
collected; and
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques. However, we believe the information collection activities 
referenced in Sec.  405.874 are exempt under the terms of the PRA for 
the following reasons:
    <bullet> As defined in 5 CFR 1320.4(a)(2), information collections 
conducted or sponsored during the conduct of criminal or civil action, 
or during the conduct of an administrative action, investigation, or 
audit involving an agency against specific individuals or entities are 
exempt from the PRA.
    <bullet> As described in 5 CFR 1320.3(h)(9), facts or opinions 
obtained or solicited through nonstandardized follow-up questions 
designed to clarify responses to approved collections, are exempt from 
the PRA; and
    <bullet> Nonstandardized information collections directed to less 
than 10 persons do not constitute information collections as outlined 
in 5 CFR 1320.3(c).

[[Page 9487]]

    We believe that the collection requirements are part of the 
administrative process, and collected in a nonstandardized manner. 
Since each case will be different, based on the reasons for denial or 
revocation, and evidence presented, they fall under these exceptions.
    If you comment on any of these information collection and 
recordkeeping requirements, please mail copies directly to the 
following:
    Centers for Medicare and Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Regulations Development Group, 
Attn.: William Parham, CMS-6003-P2, 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.: Carolyn Lovett, 
CMS Desk Officer, CMS-6003-P2, <a href="/cdn-cgi/l/email-protection#46252734292a3f28192a293023323206292b246823293668212930"><span class="__cf_email__" data-cfemail="26454754494a5f48794a495043525266494b440843495608414950">[email protected]</span></a>. Fax (202) 
395-6974.

VI. 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 will 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 will respond to the 
comments in the preamble to that document.

VII. Regulatory Impact Statement

    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 Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4, and Executive Order 13132).
    Executive Order 12866 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) must 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 
for 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 to $29 
million in any one 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 will not have a 
significant economic impact on a substantial number of small entities.
    We maintain that this proposed rule would not have an adverse 
impact on small entities; in fact, it would afford small suppliers a 
measure of protection against adverse actions by us, and extend 
protection to a larger group of suppliers beyond the DMEPOS suppliers 
currently covered under Sec.  405.874. Because this proposed rule would 
merely clarify, expand, and update our current policy and 
administrative appeal rights, we anticipate slight, if any, economic 
impact on small entities.
    According to data submitted to us by carriers in calendar year 
2003, approximately 166,500 enrollment applications were submitted to 
the Medicare carriers by suppliers seeking to receive billing 
privileges. We believe that a vast majority of these applicants were 
small businesses. Of those applications, approximately 2,000 were 
denied, and approximately 200 applicants requested a reconsideration. 
Because we have already granted appeal rights to the affected suppliers 
via instructions to carriers, we estimate that this regulation would 
have minimal impact on carrier workloads.
    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, and 
we determined, that this proposed rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals. There is no negative impact on the program or on small 
businesses.
    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 $120 million. This rule does not mandate expenditures by 
either the governments mentioned or the private sector, therefore no 
analysis is required.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of 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.

Lists of Subjects

42 CFR Part 405

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

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

42 CFR Part 498

    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 would amend 42 CFR chapter IV as set forth below:

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

    1. The authority citation for Part 405, subpart H, continues to 
read as follows:

    Authority: Secs. 1102, 1842(b)(3)(C), 1869(b), and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395u(b)(3)(C), 1395ff(b) and 
1395hh).

Subpart H--Appeals Under the Medicare Part B Program

    2. Section 405.802 is revised by adding the definitions of 
``prospective supplier'' and ``supplier'' in alphabetical order to read 
as follows:


Sec.  405.802  Definitions.

* * * * *

[[Page 9488]]

    Prospective supplier means any of the listed entities specified in 
the definition of supplier that seeks to be approved for coverage of 
its services under Medicare.
* * * * *
    Supplier means an independent laboratory; supplier of durable 
medical equipment, prosthetics, orthotics, or supplies (DMEPOS); 
ambulance service provider; independent diagnostic testing facility; 
physician or other practitioner such as physician assistant; physical 
therapist in independent practice; clinical laboratories; supplier of 
portable X-ray services; rural health clinic (RHC); Federally qualified 
health center (FQHC); ambulatory surgical center (ASC); an entity 
approved by CMS to furnish outpatient diabetes self-management 
training; or end-stage renal disease (ESRD) treatment facility that is 
approved by CMS as meeting the conditions for coverage of its services.
* * * * *
    3. Section 405.874 is revised to read as follows:


Sec.  405.874  Appeals of carrier determinations that a supplier fails 
to meet the requirements for Medicare billing privileges.

    (a) Denial of a supplier enrollment application. If a carrier 
denies a supplier's enrollment application, the carrier must notify the 
supplier by certified mail. The notice must include the following:
    (1) The reason for the denial in sufficient detail to allow the 
supplier to understand the nature of its deficiencies.
    (2) The right to appeal in accordance with part 498 of this 
chapter.
    (3) The address to which the written appeal must be mailed.
    (b) Revocation of Medicare billing privileges. (1) Notice of 
revocation. If a carrier revokes a supplier's Medicare billing 
privileges, the carrier must notify the supplier by certified mail. The 
notice must include the following:
    (i) The reason for the revocation in sufficient detail for the 
supplier to understand the nature of its deficiencies.
    (ii) The right to appeal in accordance with part 498 of this 
chapter.
    (iii) The address to which the written appeal must be mailed.
    (2) Revocation of a supplier's billing privileges. The revocation 
of a supplier's billing privileges is effective 15 days after the 
carrier mails the notice of its determination to the supplier. A 
revocation based on a Federal exclusion or debarment is effective with 
the date of the exclusion or debarment.
    (3) Payment. (i) Medicare does not pay for any items or services 
furnished by a supplier during a period in which a supplier does not 
have billing privileges or its billing privileges are revoked.
    (ii) Carriers do not pay for services furnished by the supplier 
beginning with the effective date of a revocation.
    (iii) Medicare does not pay for items and supplies unless the 
supplier has a valid, active Medicare billing number.
    (iv) Claims for items or services furnished to Medicare 
beneficiaries after the effective date of the revocation are rejected. 
Rejections of claims because a supplier does not have a valid billing 
number may not be appealed by the supplier. Claims submitted to 
carriers for items or services furnished during a period of supplier 
ineligibility are rejected by the carrier, and not denied by the 
carrier.
    (c) Appeal rights. (1) A provider or supplier may appeal the 
initial determination to deny a provider or supplier's enrollment 
application, or if applicable, to revoke a current billing number by 
following the procedures specified in part 498 of this chapter.
    (2) The reconsideration of a determination to deny or revoke a 
provider or supplier's Medicare billing privileges may be handled by a 
carrier hearing officer not involved in the initial determination.
    (3) Providers and suppliers have the opportunity to submit evidence 
related to the enrollment action. Providers and suppliers must, at the 
time of their request, submit all evidence that they want to be 
considered.
    (4) If supporting evidence is not submitted with the appeal 
request, the contractor contacts the provider or supplier to try to 
obtain the evidence.
    (5) If the provider or supplier fails to submit this evidence 
before the contractor issues its decision, the provider or supplier is 
precluded from introducing new evidence at higher levels of the appeals 
process.
    (d) Impact of reversal of carrier determination on claims 
processing.
    (1) Claims for services furnished to Medicare beneficiaries during 
a period in which the supplier billing privileges was not effective are 
rejected.
    (2) If a supplier is determined not to have qualified for a billing 
privileges in one period but qualified in another, carriers process 
claims for services furnished to beneficiaries during the period for 
which the supplier was Medicare-qualified. Subpart C of this part sets 
forth the requirements for recovery of overpayments.
    (3) If a revocation of a supplier's billing privilege is reversed 
upon appeal, the supplier's billing privileges are reinstated back to 
the date that the revocation became effective.
    (4) If denial of a supplier's billing privileges is reversed upon 
appeal and becomes binding, then the appeal decision establishes the 
date that the supplier's billing privileges becomes effective.
    (e) Reinstatement of supplier billing privilege following 
corrective action. If a supplier completes a corrective action and 
provides sufficient evidence to the carrier that it has complied fully 
with the Medicare requirements, the carrier may reinstate the 
supplier's billing privileges. The carrier may pay for services 
furnished on or after the effective date of the reinstatement. The 
effective date is based on the date the supplier is in compliance with 
all Medicare requirements. A carrier's refusal to reinstate a 
supplier's billing privileges based on a corrective action is not an 
initial determination under part 498 of this chapter.
    (f) Effective date for DMEPOS supplier's billing privileges. If a 
carrier, carrier hearing officer, or ALJ determines that a DMEPOS 
supplier's denied enrollment application meets the standards in Sec.  
424.57 of this chapter and any other requirements that may apply, the 
determination establishes the effective date of the billing privileges 
as not earlier than the date the carrier made the determination to deny 
the DMEPOS supplier's enrollment application. Claims are rejected for 
services furnished before that effective date.
    (g) Submission of claims. A supplier succeeding in having its 
enrollment application denial or billing privileges revocation reversed 
in a binding decision, or in having its billing privileges reinstated, 
may submit claims to the carrier for services furnished during periods 
of Medicare qualification, subject to the limitations in Sec.  424.44 
of this chapter, regarding the timely filing of claims. If the claims 
previously were filed timely but were rejected, they are considered 
filed timely upon resubmission. Previously denied claims for items or 
services rendered during a period of denial or revocation may be 
resubmitted to CMS within 1 year after the date of reinstatement or 
reversal.
    (h) Deadline for processing provider enrollment initial 
determinations. Contractors approve or deny complete provider 
enrollment applications to approval or denial within the following 
timeframes:
    (1) Initial enrollments. Contractors process new enrollment 
applications within 180 days of receipt.

[[Page 9489]]

    (2) Revalidation of existing enrollments. Contractors process 
revalidations within 180 days of receipt.
    (3) Change-of-information and reassignment of payment request. 
Contractors process change-of-information and reassignment of payment 
requests within 90 days of receipt.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    4. The authority citation for part 424 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    5. Section 424.510 is amended by adding a new paragraphs (d)(2)(iv) 
and (e) to read as follows:


Sec.  424.510  Requirements for enrolling in the Medicare program.

* * * * *
    (d)
    (2) * * *
    (iv) The revisions read as follows:
    At the time of enrollment, an enrollment change request or 
revalidation, providers and suppliers must agree to receive Medicare 
payments via EFT. In order to receive Medicare payments via EFT, 
providers and suppliers must submit the CMS-588 form.
* * * * *
    (e) Providers and suppliers must--(1) Agree to receive Medicare 
payment via electronic funds transfer (EFT) at the time of enrollment, 
revalidation or submission of an enrollment change request; and
    (2) Submit the CMS-588 form to receive Medicare payment via 
electronic funds transfer.
    6. Section 424.525 is amended by--
    A. Republishing paragraph (a) introductory text.
    B. Revising paragraphs (a)(1) and (a)(2).
    The revisions read as follows:


Sec.  424.525  Rejection of a provider or supplier's enrollment 
application for Medicare enrollment.

    (a) Reasons for rejection. CMS may reject a provider or supplier's 
enrollment application for the following reasons:
    (1) The provider or supplier fails to furnish complete information 
on the provider/supplier enrollment application within 30 calendar days 
from the date of the contractor request for the missing information.
    (2) The provider or supplier fails to furnish all required 
supporting documentation within 30 calendar days of submitting the 
enrollment application.
* * * * *
    7. Section 424.535 is amended by--
    A. Adding a new paragraph (a)(8).
    B. Redesignating paragraphs (c) through (f) as paragraphs (d) 
through (g).
    C. Adding a new paragraph (c).
    The addition and revision read as follows:


Sec.  424.535  Revocation of enrollment and billing privileges from the 
Medicare program.

* * * * *
    (a) * * *.
    (8) Abuse of billing privileges. The provider or supplier submits a 
claim or claims for services that could not have been furnished to a 
specific individual on the date of service. These instances include but 
are not limited to situations where the beneficiary is deceased, the 
directing physician or beneficiary is not in the State or country when 
services were furnished, or when the equipment necessary for testing is 
not present where the testing is said to have occurred.
* * * * *
    (c) Reapplying after revocation. After a provider, supplier, 
delegated official or authorizing official has had their billing 
privileges revoked, they must wait 3 years from the date of revocation 
before they can reapply to participate in the Medicare program.
* * * * *
    8. Section 424.545 is amended by revising paragraph (a) to read as 
follows:


Sec.  424.545  Provider and supplier appeal rights.

    (a) General. A provider or supplier that is denied enrollment in 
the Medicare program, or whose Medicare enrollment has been revoked may 
appeal CMS' decision in accordance with part 498, subpart A of this 
chapter.
    (1) Appeals resulting in the termination of a provider agreement. 
(i) When revocation of billing privileges also results in the 
termination of a corresponding provider agreement, the provider may 
appeal CMS' decision in accordance with part 498 of this chapter with 
the final decision of the appeal applying to both the billing 
privileges and the provider agreement.
    (ii) When a provider appeals the revocation of billing privileges 
and the termination of its provider agreement, there will be one 
appeals process which will address both matters. The appeal procedures 
for revocation of Medicare billing privileges will apply.
    (2) Payment of unpaid claims. Payment is not made during the 
appeals process. If the provider or supplier is successful in 
overturning a denial or revocation, unpaid claims for services 
furnished during the overturned period may be resubmitted.
* * * * *

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFs/MR AND CERTAIN NFs IN THE MEDICAID 
PROGRAM

    9. The authority citation for part 498 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart A--General Provisions

    10. Section 498.1 is amended by revising paragraph (g) to read as 
follows:


Sec.  498.1  Statutory basis.

* * * * *
    (g) Section 1866(j) of the Act provides for a hearing and judicial 
review for any provider or supplier whose application for enrollment or 
reenrollment in Medicare is denied or whose billing privileges are 
revoked.
* * * * *
    11. Section 498.2 is amended by--
    A. Revising the definition of ``affected party''.
    B. Removing the definition of ``OHA''.
    C. Adding in alphabetical order the definition of ``prospective 
supplier''.
    D. Revising the definition of ``supplier''.
    The addition and revisions read as follows:


Sec.  498.2  Definitions.

* * * * *
    Affected party means a provider, prospective provider, supplier, 
prospective supplier, or practitioner that is affected by an initial 
determination or by any subsequent determination or decision issued 
under this part, and ``party'' means the affected party or CMS, as 
appropriate. For provider or supplier enrollment appeals, an affected 
party includes CMS or a CMS contractor.
* * * * *
    Prospective supplier means any of the listed entities specified in 
the definition of supplier that seek to be approved for coverage of its 
services under Medicare.
* * * * *
    Supplier means an independent laboratory; supplier of portable X-
ray services, rural health clinic (RHC); Federally qualified health 
center

[[Page 9490]]

(FQHC); ambulatory surgical center (ASC); a supplier of durable medical 
equipment, prosthetics, orthotics, or supplies (DMEPOS); ambulance 
service provider; independent diagnostic testing facility; physician or 
other practitioner such as physician assistant, physical therapist in 
independent practice, clinical laboratories, an entity approved by CMS 
to furnish outpatient diabetes self-management training, or end-stage 
renal disease (ESRD) treatment facility that is approved by CMS as 
meeting the conditions for coverage of its services.
    12. Section 498.5 is amended by--
    A. Revising paragraph (f)(2).
    B. Adding a new paragraph (l).
    The revision and addition read as follows:


Sec.  498.5  Appeal rights.

* * * * *
    (f) * * *
    (2) A supplier or prospective supplier dissatisfied with an ALJ 
decision may request Board review, and has a right to seek judicial 
review of the Board's decision.
* * * * *
    (l) Appeal rights related to provider enrollment.
    (1) Any prospective provider, an existing provider, prospective 
supplier or existing supplier dissatisfied with an initial 
determination or revised initial determination related to the denial or 
revocation of Medicare billing privileges may request reconsideration 
in accordance with Sec.  498.22(a).
    (2) CMS, a CMS contractor, any prospective provider, an existing 
provider, prospective supplier or existing supplier dissatisfied with a 
reconsidered determination under paragraph (l)(1) of this section, or a 
revised reconsidered determination under Sec.  498.30, is entitled to a 
hearing before an ALJ.
    (3) CMS, a CMS contractor, any prospective provider, an existing 
provider, prospective supplier or existing supplier dissatisfied with a 
hearing decision may request Board review, and any prospective 
provider, an existing provider, prospective supplier, or existing 
supplier has a right to seek judicial review of the Board's decision.

Subpart B--Initial, Reconsidered, and Revised Determinations

    13. Section 498.22 is amended by revising paragraphs (a) and (b)(1) 
to read as follows:


Sec.  498.22  Reconsideration.

    (a) Right to reconsideration. CMS or one of its contractors 
reconsiders an initial determination that affects a prospective 
provider or supplier, or a hospital seeking to qualify to claim payment 
for all emergency hospital services furnished in a calendar year, if 
the affected party files a written request in accordance with 
paragraphs (b) and (c) of this section. For denial or revocation of 
enrollment, prospective providers and suppliers and providers and 
suppliers have a right to reconsideration.
    (b) * * *
    (1) With CMS or with the State survey agency, or in the case of 
prospective supplier the entity specified in the notice of initial 
determination;
* * * * *

Subpart D--Hearings

    14. Section 498.40 is amended by revising paragraph (a)(1) to read 
as follows:


Sec.  498.40  Request for hearing.

    (a) * * * (1) An affected party entitled to a hearing under Sec.  
498.5 may file a request for a hearing with the ALJ office identified 
in the determination letter.
* * * * *
    15. Section 498.44 is revised to read as follows:


Sec.  498.44  Designation of hearing official.

    (a) The Secretary or his or her delegate designates an ALJ or a 
member or members of the Board to conduct hearings.
    (b) If appropriate, the Secretary or the delegate may designate 
another ALJ or another member or other members of the Board to conduct 
the hearing.
    (c) As used in this part, ``ALJ'' includes any ALJ of the 
Department of Health and Human Services or members of the Board who are 
designated to conduct a hearing.
    16. Section 498.56 is amended by--
    A. Revising paragraph (a)(2).
    B. Adding a new paragraph (e).
    The revision and addition read as follows:


Sec.  498.56  Hearing on new issues.

* * * * *
    (a) * * *
    (2) Except for provider or supplier enrollment appeals which are 
addressed in Sec.  498.56(e), the ALJ may consider new issues even if 
CMS or the OIG has not made initial or reconsidered determinations on 
them, and even if they arose after the request for hearing was filed or 
after the prehearing conference.
* * * * *
    (e) Provider and supplier enrollment appeals: Good cause 
requirement. (1) Examination of any new documentary evidence. After a 
hearing is requested but before it is held, the ALJ will examine any 
new documentary evidence submitted to the ALJ by a provider or supplier 
to determine whether the provider or supplier has good cause for 
submitting the evidence for the first time at the ALJ level.
    (2) Determining if good cause exists. An ALJ finds good cause, for 
example, when the new evidence is material to an issue addressed in the 
reconsideration and that issue was not identified as a material issue 
before the reconsideration.
    (3) If good cause does not exist. If the ALJ determines that there 
was not good cause for submitting the evidence for the first time at 
the ALJ level, the ALJ must exclude the evidence from the proceeding 
and may not consider it in reaching a decision.
    (4) Notification to all parties. As soon as possible, but no later 
than the start of the hearing, the ALJ must notify all parties of any 
evidence that is excluded from the hearing.
    17. Section 498.78 is amended by revising paragraph (a) to read as 
follows:


Sec.  498.78  Remand by the Administrative Law Judge.

    (a) If CMS requests remand, the ALJ may remand any case properly 
before him or her to CMS.
* * * * *
    18. A new Sec.  498.79 is added to subpart D to read as follows:


Sec.  498.79  Timeframes for deciding an enrollment appeal before an 
ALJ.

    When a request for an ALJ hearing is filed after CMS or a FFS 
contractor has denied an enrollment application, the ALJ must issue a 
decision, dismissal order or remand to CMS, as appropriate, no later 
than the end of the 180-day period beginning from the date the appeal 
was filed with an ALJ.

Subpart E--Departmental Appeals Board Review

    19. Section 498.86 is amended by revising paragraph (a) to read as 
follows:


Sec.  498.86  Evidence admissible on review.

    (a) Except for provider or supplier enrollment appeals which are 
addressed in Sec.  498.56(e), the Board may admit evidence into the 
record in addition to the evidence introduced at the ALJ hearing (or 
the documents considered by the ALJ if the hearing was waived) if the 
Board considers that the additional evidence is relevant and material 
to an issue before it.
* * * * *

[[Page 9491]]

    20. Section 498.88 is amended by adding a new paragraph (g) to read 
as follows:


Sec.  498.88  Decision or remand by the Departmental Appeals Board.

* * * * *
    (g) When a request for Board review is filed after an ALJ has 
issued a decision or dismissal order, the Board must issue a decision, 
dismissal order or remand to the ALJ, as appropriate, no later than 180 
days after the appeal was received by the Board.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance Program; and No. 93.774, Medicare--
Supplementary Medical Insurance Program.)

    Dated: August 30, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare and Medicaid Services.

    Dated: November 8, 2006.
Micheal O. Leavitt,
Secretary.
[FR Doc. 07-870 Filed 2-23-07; 8:45 am]
BILLING CODE 4120-01-P


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