[Federal Register Volume 60, Number 238 (Tuesday, December 12, 1995)]
[Rules and Regulations]
[Pages 63634-63645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30130]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Part 1004

RIN 0991-AA73


Health Care Programs: Fraud and Abuse; Revisions to the PRO 
Sanctions Process

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Final rule.

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SUMMARY: This final rule revises and updates the procedures governing 
the imposition and adjudication of program sanctions predicated on 
recommendations of State Utilization and Quality Control Peer Review 
Organizations (PROs). These changes are being made as a result of 
statutory revisions designed to address health care fraud and abuse 
issues and the OIG sanctions process. In addition, this final rule sets 
forth new appeal and reinstatement procedures for practitioners and 
other persons excluded by the OIG based on a PRO recommendation.

EFFECTIVE DATE: December 12, 1995.

FOR FURTHER INFORMATION CONTACT:

Joe J. Schaer, Office of Management and Policy, (202) 619-3270
Joanne Lanahan, Office of Civil Fraud and Administrative Adjudication, 
(410) 786-9609.

SUPPLEMENTARY INFORMATION: 

I. Background

A. The PRO Sanctions Process

    Section 1156 of the Social Security Act imposes specific statutory 
obligations on practitioners and other persons to furnish necessary 
services to Medicare and State health care program beneficiaries that 
meet professionally recognized standards, and authorizes the 
Secretary--based on a PRO's recommendation--to impose sanctions on 
those who fail to comply with these statutory obligations.
    Under the PRO sanctions process, no practitioner or other person is 
recommended for an exclusion or a monetary penalty until the 
practitioner or other person has an opportunity to provide additional 
information and have an extensive discussion with the PRO. After the 
receipt of a recommendation from a PRO, the OIG excludes or imposes a 
monetary penalty only after a careful review of all submitted documents 
and a separate determination that the practitioner or 

[[Page 63635]]
other person (1) violated the statutory obligations to render medically 
necessary and appropriate care or failed to provide evidence of medical 
necessity and quality, and (2) was unwilling or unable to comply with 
these obligations. A practitioner or other person who is excluded from 
Medicare and any State health care programs, or assessed a monetary 
penalty, on the basis of a PRO finding is entitled to administrative 
and judicial review after such sanction is assessed.

B. Summary of Recent Statutory Changes

    A number of recent statutory changes have resulted in revisions to 
section 1156 of the Act--
    Public Law 100-93: Section 6 of the Medicare and Medicaid Patient 
and Program Protection Act extended the obligation to provide 
appropriate and medically necessary care that meets professionally 
recognized standards of quality, and the obligation to ensure that the 
care is appropriately documented, to encompass all health care services 
for which payment may be made under the Act, and not just Medicare. In 
addition, the exclusion authority under section 1156 of the Social 
Security Act was extended to encompass violations occurring in, and 
exclusions from, the State health care programs.
    Public Law 100-203: Section 4095 of the Omnibus Budget 
Reconciliation Act (OBRA) of 1987 provided that an exclusion of a 
practitioner or other person who practices in a county of less than 
70,000 people or in a rural health professional shortage area (HPSA) 
cannot be effectuated until an opportunity for a preliminary 
administrative hearing is provided and, if requested, the 
administrative law judge (ALJ) determines that the practitioner or 
other person will pose a serious risk to beneficiaries if permitted to 
continue furnishing services during the appeals process.
    Public Law 101-508: Section 4205 of OBRA 1990 set forth new 
statutory requirements for PROs, where appropriate, to offer a 
corrective action plan (CAP) to practitioners and other persons prior 
to making a finding; and, in determining whether a practitioner or 
other person is willing and able to comply with his or her obligations, 
require the Secretary to consider whether they entered into and 
successfully completed a CAP prior to the PRO's submission of a 
recommendation and report to the Secretary.
    Public Law 103-432: Section 156 of the Social Security Act 
Amendments of 1994 set forth the requirement that if a PRO, after 
reasonable notice and opportunity for discussion with the physician or 
practitioner concerned, finds that the physician or practitioner has 
furnished services in violation of section 1156(a) of the Act and 
determines that the physician or practitioner should enter into a CAP 
under section 1156(b)(1), the PRO will notify the State board(s) 
responsible for the licensing or disciplining of the physician or 
practitioner of its finding and of any action taken as a result of the 
finding. (See discussion regarding Sec. 1004.70 under the Response to 
the Public Comments section regarding use of the term ``physician and 
practitioner.'')

II. Summary of the Proposed Regulations

    On February 28, 1994, the OIG published a notice of proposed 
rulemaking in the Federal Register that set forth a comprehensive 
rewrite of 42 CFR part 1004 consistent with the statutory revisions and 
other proposed procedures and recommendations. The proposed regulations 
were specifically designed to revise and update the administrative 
procedures for the imposition and adjudication of the PRO sanctions 
process. The proposed regulations addressed revisions in three broad 
areas: (1) Procedural changes resulting from the OBRA 1990 provisions, 
(2) the establishment of preliminary hearings for practitioners and 
other persons in rural areas or counties, and (3) an alternative 
sanctions notification process.

A. The OBRA 1990 Provisions Relating to PRO's

    Among other things, the proposed regulations provided for--
    <bullet> The elimination of the procedural distinction between 
``substantial'' violations and ``gross and flagrant'' violations.
    <bullet> The use of any violations of the obligations identified 
during a CAP period in support of the PRO's recommendation regarding a 
practitioner's or other person's unwillingness or inability to comply 
with statutory obligations.\1\

    \1\ If a PRO decides to use any of the violations identified 
during a corrective action plan as a basis for a pending 
recommendation for sanction, instead of a basis to support 
unwillingness or inability, the PRO must send out a notification on 
these violations in accordance with Sec. 1004.40.
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    <bullet> The inclusion of a provision that no physician member of 
the PRO panel may be in direct competition with, or have a substantial 
bias for or against, the practitioner or other person being considered 
for sanction.
    <bullet> The revision of Sec. 1004.30(e) by setting forth 
instructions to PROs on the actions to be taken when a physician 
relocates after receiving a sanction notice.
    <bullet> The inclusion of any prior problems that any State health 
care program has had with a practitioner or other person as an 
additional factor to be considered by the OIG in imposing an exclusion.

B. Preliminary Hearings

    The proposed regulations also set forth provisions to allow a 
practitioner or other person in specified rural areas or counties of a 
specified population to request a preliminary hearing when notified by 
the OIG of an exclusion from participation in the Medicare program 
resulting from a PRO recommendation. The preliminary hearing would be 
solely on the issue of whether such practitioner's or other person's 
continued participation in the program during the appeal to an ALJ 
would place program beneficiaries at serious risk.
    Entitlement to such a preliminary hearing would apply to 
practitioners and other persons for whom an exclusion is proposed who 
practice in a rural HPSA for their specialty or in a county with a 
population of less than 70,000. A practitioner's or other person's 
practice was considered to be where over 50 percent of his, her or its 
services were rendered. The proposed regulations provided that a 
practitioner's or other person's request for a preliminary hearing must 
be received within 15 days of receipt of an OIG exclusion notice.

C. Sanctions Notification Process

    The proposed regulations set forth an alternative sanctions 
notification process that would allow sanctioned practitioners and 
other persons the option of informing all their patients directly of 
the sanction action taken against them. If they selected this option 
and complied with its requirements in a timely fashion, sanctioned 
practitioners and other persons would be exempted from current 
requirement for public notice.
    Under this proposed option, practitioners and other persons would 
be required to certify to the Department that they have taken action to 
inform all their patients of the sanction and, in the case of 
exclusion, that they would notify new patients before furnishing 
services. Each sanctioned practitioner or other person opting for this 
alternative notice procedure would have to alert both existing patients 
and all new patients through written notification based on a suggested, 
non-mandatory model that would be provided by the OIG. For 

[[Page 63636]]
those sanctioned practitioners or other persons not electing this 
alternative method or failing to return the required certification form 
within the proposed 30-day period, the OIG would follow its standard 
procedure for public notification.

III. Response to the Public Comments

    As a result of the proposed rulemaking published on February 28, 
1994, the OIG received a total of 12 timely-filed public comments from 
various practitioners and providers, medical and professional 
associations, third party payers, peer review organizations and other 
interested parties.
    Set forth below is a summary of those comments and our response to 
the issues and concerns raised.

Section 1004.1--Scope and Definitions

    Comment: Three commenters stated that the term ``gross and 
flagrant'' was confusing, and as currently defined, has been 
erroneously interpreted to permit the Department and the PROs to focus 
on the outcome of the procedure and not on the degree of the violation. 
The commenters believed that under the existing definition the PROs 
have been given broad authority to arbitrarily determine that any given 
quality concern is potentially sanctionable, and that this, in turn, 
has lead to the initiation of the sanction process in some questionable 
cases.
    Response: We believe it is important to retain the present 
definition and classification for the term ``gross and flagrant'' so 
that the severity of the violation can be demonstrated. While we have 
considered alternative definitions for defining this term, we believe 
that the current classification adequately and properly reflects the 
severity of the violation of the obligation(s) and the risk to the 
patient(s) which has already been identified. As to one commenter's 
suggestion that the patient must be ``harmed'' before a violation can 
be considered gross and flagrant, we disagree. We believe that a gross 
and flagrant violation includes those situations where a patient is 
placed in danger or in a high-risk situation, whether or not the 
patient is harmed. Thus, we are retaining the current definition.
    Comment: While agreeing that there needs to be a definition for the 
term ``pattern of care,'' one commenter was concerned that the 
definition for ``substantial violation in a substantial number of 
cases''--which encompasses the requirement that there be an 
inappropriate pattern of care--has been interpreted to support a 
finding of a substantial violation exclusively on the basis of multiple 
allegations of treatment deficiencies in a single patient. The 
commenter believes this is unfair since, while a physician's course of 
treatment with respect to one patient may be alleged to be negligent, 
the treatment of a single individual does not indicate the ``pattern'' 
of professional negligence that the law was designed to address.
    Response: We agree with the commenter's concern and have revised 
the definition of ``pattern of care'' in substantial violation cases to 
mean that the care under question has been demonstrated in more than 3 
instances, which must involve different admissions. Under this revised 
definition, the instances could involve the same patient but reflect 
problems with the treatment occurring at different times. This is in 
contrast with the definition of gross and flagrant violations in which 
multiple violations may be found within the same admission.
    Comment: One commenter objected to our defining the term ``practice 
area'' as ``the location where over 50 percent of the practitioner's or 
other person's patients are seen,'' and requested that the definition 
be deleted. The commenter believed that a practitioner who has any 
amount of practice in a rural area should be entitled to a preliminary 
hearing on the issue of whether that person's continued participation 
during the appeal of the exclusion would place program beneficiaries at 
serious risk.
    Response: We are rejecting this comment since we believe it is not 
consistent with the statutory provision and congressional intent in 
providing for such preliminary hearings. If Congress wanted to extend 
the right to a preliminary hearing to all, or virtually all, 
practitioners and other persons, it would have done so in the statutory 
language. Rather, the statute and these regulations are targeted only 
to those who ``practice'' in a HPSA or a county with a population of 
less than 70,000, and not those who may occasionally see a patient in a 
rural area. In order to carry out the intent of the statutory 
provision, we believe that the definition for the term ``practice 
area'' is appropriate, fair and reasonable.

Section 1004.40--Action on Identification of a Violation

    Comment: While several commenters strongly supported the OIG's 
proposal to eliminate the distinction between ``substantial'' 
violations and ``gross and flagrant'' violations, one commenter 
believed that the elimination of this distinction would result in less 
due process by removing the physician's right to receive two notices 
and two hearings for any violation.
    Response: As noted in the proposed rule, the second meeting in 
substantial violation cases has proven simply to be a repeat of the 
initial or 20-day meeting. This, in turn, has increased the risk of 
serious patient harm due to this procedural delay. Experience has shown 
that this dual meeting process has tended to be cumbersome, time-
consuming and confusing to both the physician responding to substantial 
violations issues and the physician members of the PRO's sanction 
panel. The OIG believes that this approach to eliminating the 
violations' distinction will serve program beneficiaries well while 
still continuing to provide adequate due process to all practitioners 
and other persons.
    Comment: One commenter strongly agreed with the additional 
safeguards under Sec. 1004.40 that state that the notice must contain 
information regarding the meeting, that an attorney may represent the 
practitioner, and that the attorney may make opening and closing 
remarks, ask clarifying questions at the meeting and assist the 
practitioner in presenting testimony of expert witnesses who may appear 
on behalf of the practitioner. However, the commenter believed that the 
notice should also contain a provision stating that the attorney may 
also cross-examine any physician or other expert who provided evidence 
upon which the PRO relied in identifying a potential violation under 
Sec. 1004.10.
    Response: We do not agree with the commenter's recommendation under 
Sec. 1004.40 that notice should also include a provision that would 
allow attorney cross-examination. The meeting between the PRO and the 
practitioner or other person is not a formal adversarial hearing or 
trial. Rather, this meeting serves only as a medical dialogue to afford 
the practitioner or other person an opportunity to discuss medical 
issues.
    Comment: Under Sec. 1004.40, when a PRO identifies a violation, it 
must send a notice to the practitioner or provider identifying the 
specific concerns. One commenter stated that, while traditionally it 
has been up to the provider or practitioner to initiate a CAP before 
the PRO would consider it, this rule change places the obligation on 
the PRO to initiate resolution through a CAP. The commenter questioned 
whether the absence of a CAP in the notice constituted a determination 
by the PRO that the case cannot, at that 

[[Page 63637]]
time, be resolved with a CAP, and opined that if a CAP is not 
considered appropriate, perhaps the notice should state this along with 
the reasons why. The commenter also wanted the practitioner or provider 
to be given an opportunity to submit additional information within 15 
days of receipt of notice without, at the same time, having to decide 
to request a meeting.
    Response: With regard to the use of a CAP, we believe that there 
are times when the PRO will not know if, or what type of, a CAP is 
appropriate until they have met with or heard from the practitioner or 
other person in response to the letter. We are, therefore, dissuaded by 
the comment raised. With regard to the commenter's second point, before 
the PRO sends out a notice under this regulatory process, the 
practitioner or other person is given at least one and, in most 
instances, two opportunities to present clarifying information. 
Therefore, we do not believe that another opportunity such as that 
proposed by the commenter would be necessary.
    Comment: One commenter indicated concern with the proposed language 
in Sec. 1004.40(b)(5) that stated the PRO must advise the practitioner 
or other person of ``the sanction that the PRO could recommend to the 
OIG if the violation continues'' (italic added). The phrase ``if the 
violation continues'' is not contained in the current ``gross and 
flagrant'' notice, and the commenter believed that the use of these 
words in the regulations would prevent an exclusion recommendation by 
the PRO in the most egregious of circumstances if the PRO cannot 
document that the violation continues. The commenter specifically 
recommended that this phrase be deleted.
    Response: We agree with the commenter and are deleting this wording 
from Sec. 1004.40(b)(5).

Section 1004.50--Meeting With a Practitioner or Other Person

    Comment: Several commenters strongly agreed with the codification 
of the requirement that no physician member of the PRO panel may be in 
direct competition with, or have a substantial bias against, the 
practitioner or other person being considered for sanction. One 
commenter urged, however, that this section be expanded to include 
specific reference to the right of the practitioner's attorney to 
cross-examine any reviewing physician who has made recommendations to 
the PRO regarding the quality of care rendered by the practitioner 
under review. The commenter also raised concern over the lack of a 
requirement that physicians providing expertise to the PRO in regard to 
the sanction investigation or other proceedings be in the same 
specialty as the practitioner under review.
    Response: As discussed above, we do not believe that it is 
necessary that the physician's attorneys have the opportunity to cross-
examine physician panel members. The meeting between the PRO and the 
physician or other person is not a formal adversarial hearing or trial. 
Rather, it is intended to remain merely a medical dialogue designed to 
afford the practitioner or other person an opportunity to discuss 
medical issues. With respect to the suggestion that the medical 
professional providing expertise be of the same or closely related 
specialty and be practicing in similar circumstances to the 
practitioner under review, we believe that proposed section (d) of this 
section satisfies this specific concern. Specifically, Sec. 1004.50(d) 
states that at least one member of the PRO panel meeting with the 
practitioner or other person should practice in a similar geographic 
area, and at least one member of the panel must be in the same 
specialty. Both requirements can be met by a single individual.
    Comment: One commenter asked that the composition of the sanctions 
panel be expanded to include persons trained and experienced in 
``hospital issues'' before any hospital can be appropriately subject to 
a sanction.
    Response: Since the obligations with regard to any violation 
involve medical quality of care issues, necessary services and medical 
documentation, we remain unclear as to what unique ``hospital issues'' 
are involved. As set forth, we believe that the changes contained in 
the rulemaking adequately remove any bias from addressing the pertinent 
issues in the ongoing sanction process.
    Comment: Section 1004.50(g) provides that, when a practitioner or 
other person requests a meeting with the PRO, ``[t]he PRO may allow the 
practitioner or other person 5 working days after the meeting to 
provide the PRO additional relevant information that may affect its 
decision * * *.'' One commenter suggested that 5 working days was not 
adequate time for a practitioner to provide additional information to 
the PRO, and that 14 days would be a more reasonable amount of time.
    Response: We believe that the 5-day period granted to provide 
additional information after the meeting is adequate. We believe that 
the practitioner or other person has been afforded several 
opportunities up to this point to provide additional information, and 
that 5 days, consistent with the American Medical Association (AMA) 
understanding, is sufficient in this instance.
    Comment: One commenter indicated that the terms ``determination,'' 
``decision'' and ``finding'' are used interchangeably in Secs. 1004.40 
and 1004.50, and requested that the terms ``determination'' and 
``decision'' be eliminated and the term ``finding'' be used 
consistently throughout.
    Response: We agree with the commenter's concern, and to be 
consistent throughout these sections, we are deleting the terms 
``decision'' and ``determination'' by a PRO and inserting the word 
``finding'' in its place.

Section 1004.60--PRO Finding of a Violation

    Comment: One commenter requested that we specifically clarify the 
term ``issue'' in this section, and specify when it has been resolved 
since no clear distinction is made between a ``issue,'' a 
``determination'' and a ``finding.'' In addition, the commenter asked 
that the last sentence in Sec. 1004.60(a) be eliminated and a new 
sentence to paragraph (b) stating that ``(T)he PRO may, on the basis of 
the additional information, modify either its finding or recommendation 
or close the case.''
    Response: While we have agreed to replace the term ``issue'' with 
the word ``finding,'' there remain numerous ways for a ``finding'' to 
be resolved by a PRO and believe it would not be appropriate in these 
regulations to attempt to attempt further clarification of this term. 
With regard to the commenter's second point, we have agreed instead to 
modify the language in paragraph (a). As revised, the language in 
Sec. 1004.60(a) will state that ``(I)f the finding has been resolved to 
the PRO's satisfaction, the PRO may modify its initial finding or 
recommendation or close the case.''

Section 1004.70--PRO Action on Final Finding of a Violation

    Comment: A commenter stated that in Sec. 1004.70(c) the word 
``physician'' should be replaced with the phrase ``physician or other 
person'' to be consistent with other references found elsewhere in 
these regulations.
    Response: We agree that a revision to this section is appropriate. 
In addition, a technical correction is being made over language in 
section 1154(a)(9)(B) of the Act resulting from Pub. L. 103-432. With 
regard to the requirement that the PRO notify licensure boards for 
practitioners other than physicians when it submits a report and 
recommendation to the OIG, section 1154(a)(9)(B) of the Social Security 
Act, as recently amended by Pub. L. 103-

[[Page 63638]]
432, provides that if a PRO finds that a ``physician or practitioner 
has furnished services in violation of section 1156(a) and the 
organization determines that the physician or practitioner should enter 
into a corrective action plan under section 1156(b)(1), the 
organization shall notify the State board or boards responsible for the 
licensing or disciplining of the physician or practitioner of its 
finding and of any action taken as a result of the finding.''
    The Secretary may require by regulation that the PRO notify 
appropriate licensure boards for non-physician practitioners when those 
practitioners are found in violation. Accordingly, we are revising 
Sec. 1004.70(c) to include notification by the PRO of appropriate 
licensure boards when it sends a report to the OIG regarding a 
physician or other person.

Section 1004.100--Acknowledgement and Review of Report

    Comment: While a number of respondents concurred with the content 
of this section, one commenter stated that if the OIG believes that a 
particular sanction recommendation is not warranted, procedures should 
be in place for the OIG to discuss the matter with the PRO before 
making a final decision. Accordingly, the commenter requested that we 
add a provision requiring the OIG physician advisor to communicate with 
one or more of the physicians on the PRO panel.
    Response: We disagree with the need for this added requirement. We 
believe such communication on the part of the OIG physician advisor 
could raise specific concerns of due process. There would be no clear 
way for the practitioner or other person to be made aware of the 
questions raised and the responses made by the PRO through such 
communication. In addition, since the PRO has provided all the 
documentation on which it has based its recommendation, we believe that 
it is unnecessary for such discussion to occur prior to the OIG making 
a decision.

Section 1004.110--Notice of Sanction

    Comment: Two commenters strongly opposed any alternative 
notification process for sanctions. One of the commenters indicated 
that an option of allowing the physician to notify privately both his 
or her existing and new patients does not adequately protect the public 
interest. While acknowledging the OIG's concerns that the current 
public notification may not be effectively reaching all of the 
physician's patients, the commenter stated that the same risk exists 
with private notification and, therefore, suggested that private 
notification be mandatory and that it be used in addition to the 
current public notification process.
    Response: We believe that the present public notification process 
has not yielded the most effective results of informing affected 
parties and program beneficiaries of a specific sanction action taken 
under the program. As a result of preliminary discussions with the AMA, 
the American Association of Retired Persons (AARP) and the Health Care 
Financing Administration, we believe that this approach, with built-in 
safeguards such as the certification of patient notice, would afford 
both the provider community and the patient community with an 
alternative for disseminating information regarding program sanctions. 
By definition, this alternative approach will offer a second options 
for public notification. Any effort to require both newspaper 
publication and direct notice to a physician's patients would, in 
effect, not offer an alternative as we have contemplated, but rather 
impose an additional layer of burden on the practitioner or other 
person. Our intent is for such notice to be both effective and cost-
efficient, and we believe that this approach will meet those 
objectives. In addition, as indicated in the preamble to the proposed 
rule, where the OIG receives reliable evidence that a practitioner or 
other person has not adequately informed his, her or its new and 
existing patients of the sanction, the OIG reserves the right to follow 
existing procedures for public notification. Failure by the 
practitioner or other person to comply with the alternative method of 
notification once he, she or it has elected to do so will be adversely 
considered by the OIG at the time of application for reinstatement.
    Comment: While supportive of the alternative notification process, 
two commenters requested that the regulations also include a 
requirement that the OIG receive a copy of the notice sent to each 
patient to determine its adequacy, or include in the regulations 
certain minimum requirements for the content of such notice. One 
commenter recommended that if providers are allowed to create their own 
letters, then it should be required that the letters be reviewed and 
approved first by the OIG prior to the provider sending them to the 
patients.
    Response: We believe that the requirements that were set forth in 
proposed Sec. 1004.110(d) with regard to patient notification and 
certification are adequate. As indicated, the OIG will provide the 
sanctioned practitioner or other person a suggested model letter 
designed to address the nature of the sanction, as well as the 
exclusion's effective date and duration. In turn, the practitioner or 
other person is to specifically certify to the OIG that the information 
provided is truthful and accurate. Failure to properly inform one's 
patients and return to the required certification to the OIG within 30 
days, or the obtaining of reliable evidence by the OIG that the 
practitioner or other person failed to adequately inform patients of 
the sanction, will result in the publication of a public notice and 
will be considered an aggravating factor at the time of the 
practitioner's or other person's application for reinstatement. As a 
result, we do not believe that the use of additional OIG staff time in 
reviewing such individuals letters is necessary.
    Comment: In order to have each practitioner or other person in full 
compliance with the alternative notification approach, one commenter 
asked that the term ``all existing patients'' be cleared defined. In 
addition, the commenter questioned how notice to a new patient 
presenting himself or herself for emergency care would be handled, and 
whether such required notice would impede the provision or quality of 
care to such patients.
    Response: We agree that the term ``all existing patients'' could be 
interpreted in different ways. In doing so, we believe it is necessary 
to balance our intent of assuring that proper notice is provided to the 
largest possible spectrum of program beneficiaries that may be affected 
by this sanction, without insurmountable burdens being placed on 
practitioners and other persons to contact their affected patient base. 
For this reason, we have agreed to define the term ``all existing 
patients'' to include all patients currently under active treatment 
with the practitioner or other person, as well as all patients who have 
been treated by the practitioner or other person within the last three 
years. We believe that this definition will provide adequate 
notification of the sanction to those most likely to be affected by it 
while assuring that this alternative approach remains a viable, 
effective option.
    Patients being treated in an emergency situation could be notified 
verbally at the point they seek treatment, and since excluded 
physicians and others can be paid for emergency services, we do not 
believe this to result in a significant quality of care problem.

[[Page 63639]]

    Comment: One commenter believed that effective monitoring and 
validation of timely and complete compliance with this notice option by 
the OIG would be very difficult. A second commenter stated that 
monitoring this option should include a signed statement of completion 
by the sanctioned provider and a follow-up mail survey of a sample of 
patients to determine if the requirements were met.
    Response: The issue of ensuring that direct patient notification is 
enforced was given full consideration during the development of the 
alternative notification process. Specifically, we do not foresee 
expending and designating an excessive amount of staff time to directly 
monitor the alternative notification process. Rather, when the OIG 
learns through patient complaints or other methods that the 
practitioner or other person has not fully complied, it will at that 
point taken an action to remedy the situation, such as pursuing 
penalties for the filing of a false statement.
    Comment: One commenter recommended that since PRO activity relates 
only to Medicare patients, the alternative notification process should 
be limited to Medicare patients only.
    Response: Our rationale for selecting notification to all patients 
rests with the statutory requirement for ``reasonable notice to the 
public'' (underlining added). U.S.C. 1320c-5(b)(2). We believe that 
such proper public notice would not be met by having sanctioned parties 
limit notice to only their program-eligible patients. This selected 
option is designed to protect both Medicare program beneficiaries and 
future beneficiaries, and to ensure that the statutorily-required 
notice to the public of a sanction action is as effective as possible. 
As a result, in an effort to achieve proper notification and public 
awareness in an effective manner, we have opted to require that 
alternative notification be given to all patients.
    Comment: While supportive of the alternative sanctions notification 
process, one commenter believed that the requirement that hospitals 
post a sign ``in all affiliated entities'' needs to be clarified to 
indicate what would be required of a hospital electing this alternative 
approach.
    Response: We agree with the commenter over the need to define this 
term. Accordingly, we are defining in Sec. 1004.110(d)(1)(i) the term 
``in all affiliated entities'' to encompass all entities and properties 
which provide services and in which the hospital has a direct or 
indirect ownership interest of 5 percent or more and any management, 
partnership or control of the entity.
    Comment: One commenter was concerned with the timeframes provided 
for in Sec. 1004.110(b). That section provides that ``the sanction is 
effective 15 days from the date of receipt of the notice. The date of 
receipt is presumed to be 5 days after the date on the notice, unless 
there is a reasonable showing to the contrary.'' The commenter believed 
that in order for the provisions of this rule to be consistent, the 
effective date of a sanction should be 30 days from the date of the 
receipt of the notice in order to allow the sanctioned practitioner's 
patients adequate time to make other arrangements.
    Response: Section 1156(b)(2) of the Social Security Act requires 
the effective date of the sanction to be consistent with section 
1128(c) of the Act. Therefore, we are retaining the effective date as 
20 days from the date of notice.

Section 1004.140--Appeal Rights

    Comment: The proposed regulations provided that a request for a 
preliminary hearing must be received within 15 days of receipt of an 
OIG exclusion notice. Two commenters indicated that they did not 
believe 15 days is sufficient time to request a preliminary hearing, 
with one of these commenters suggesting that providers be given 30 
days, rather than 15 days, to request such a preliminary hearing of a 
sanction.
    Response: The OIG's concern remains with the protection of program 
beneficiaries and with decisions being reached in a timely and 
efficient manner. Accordingly, we believe that since the practitioner 
or other person continues to participate in the program until the time 
period for requesting a preliminary hearing has expired or a decision 
is made after a preliminary hearing, this process must be expeditious. 
Since all notices of exclusion under Sec. 1004.110 are sent by 
overnight mail, we continue to believe that 15 days is sufficient time 
to request a preliminary hearing when desired.
    Comment: The proposed regulations provided for a preliminary 
hearing prior to exclusion ``if the location where services are 
rendered to over 50 percent of the practitioner's or other person's 
patients at the time of the exclusion notice is in a rural HPSA or in a 
county where the population is less than 70,000.'' Citing that it is 
contrary to the public's interest to impose a specific, quantitative 
requirement on the amount of services that a practitioner provides in a 
rural area as a condition for eligibility for a hearing, one commenter 
disagreed with limiting the right to a preliminary hearing to 
physicians where over 50 percent of their practice is located in such a 
rural area.
    Further, a second commenter indicated that they believe it would be 
difficult in many instances for the PRO to determine where 50 percent 
of the practitioner's practice is located.
    Response: Section 1156(a) of the Act specifically limits the right 
to a preliminary hearing to those physicians who practice in a county 
with a population of less than 70,000 or those practicing in a HPSA. 
The statutory language was intentionally limiting and did not provide 
the right to such a hearing to every practitioner or other person who 
may occasionally provide a service in a rural HPSA. We believe that the 
``over 50 percent'' standard is reasonable and is in keeping with the 
statutory intent.
    Comment: One commenter believed that there should be an additional 
regulatory requirement that the OIG notify the PRO when a sanction 
appeal is made. The commenter believed that they should have this 
knowledge so that they can participate with and assist the OIG through 
the administrative appeal process.
    Response: The OIG does not receive specific notification when a 
sanction is being appealed and, therefore, it cannot routinely notify 
the PRO of such action. In most cases, it is the Regional Counsel's 
office that notifies the PRO so that it can prepare the defense of the 
practitioner's or other person's exclusion action.

IV. Technical Revisions to 42 CFR Part 1004

    In addition to the public comments received on the proposed 
rulemaking, the OIG received a number of internal technical comments 
from two of the Department's Regional Counsel's offices. These comments 
and recommendations for change were designed to further clarify 
specific aspects of the regulatory language set forth in 42 CFR part 
1004, and are technical, non-substantive and editorial in nature. We 
have adopted a number of these suggestions and have incorporated them 
into the revised text for part 1004 set forth below.

V. Regulatory Impact Statement

    The Office of Management and Budget has reviewed this final rule in 
accordance with the provisions of Executive Order 12866. As indicated 
above, the revisions contained in this final rule are intended to 
revise and update administrative procedures governing the imposition 
and adjudication of program sanctions, based on PRO recommendations, 
against practitioners and other persons who 

[[Page 63640]]
violate the statute. We believe that the great majority of 
practitioners and other persons do not engage in such prohibited 
activities and practices, and that the aggregate economic impact of 
these provisions should, in effect, be minimal, affecting only those 
who have engaged in prohibited behavior in violation of statutory 
intent. As such, these regulations should have no direct effect on the 
economy or on Federal or State expenditures.
    In addition, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 601 through 612), the Secretary certifies that this final 
rulemaking will not have a significant economic impact on a substantial 
number of small entities. While some sanctions and penalties may have 
an impact on small entities, we do not anticipate that a substantial 
number of these small entities would be significantly affected by this 
rulemaking. Therefore, we have determined, and the Secretary certifies, 
that this final rule should not have a significant economic impact on a 
number of small business entities.

List of Subjects in 42 CFR Part 1004

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, Peer Review Organizations, Penalties, Reporting 
and recordkeeping requirements.

    Part 1004 is revised to read as follows:

PART 1004--IMPOSITION OF SANCTIONS ON HEALTH CARE PRACTITIONERS AND 
PROVIDERS OF HEALTH CARE SERVICES BY A PEER REVIEW ORGANIZATION

Subpart A--General Provisions

Sec.
1004.1  Scope and definitions.

Subpart B--Sanctions Under the PRO Program; General Provisions

1004.10  Statutory obligations of practitioners and other persons.
1004.20  Sanctions.

Subpart C--PRO Responsibilities

1004.30  Basic responsibilities.
1004.40  Action on identification of a violation.
1004.50  Meeting with a practitioner or other person.
1004.60  PRO finding of a violation.
1004.70  PRO action on final finding of a violation.
1004.80  PRO report to the OIG.
1004.90  Basis for recommended sanction.

Subpart D--OIG Responsibilities

1004.100  Acknowledgement and review of report.
1004.110  Notice of sanction.

Subpart E--Effect and Duration of Exclusion

1004.120  Effect of an exclusion on program payments and services.
1004.130  Reinstatement after exclusion.

Subpart F--Appeals

1004.140  Appeal rights.

    Authority: 42 U.S.C. 1302 and 1320c-5.

Subpart A--General Provisions


Sec. 1004.1  Scope and definitions.

    (a) Scope. This part implements section 1156 of the Act by--
    (1) Setting forth certain obligations imposed on practitioners and 
providers of services under Medicare;
    (2) Establishing criteria and procedures for the reports required 
from peer review organizations (PROs) when there is failure to meet 
those obligations;
    (3) Specifying the policies and procedures for making 
determinations on violations and imposing sanctions; and
    (4) Defining the procedures for appeals by the affected party and 
the procedures for reinstatements.
    (b) Definitions. As used in this part, unless the context indicates 
otherwise--
    Dentist is limited to licensed doctors of dental surgery or dental 
medicine.
    Economically means the services are provided at the least 
expensive, medically appropriate type of setting or level of care 
available.
    Exclusion means that items and services furnished or ordered (or at 
the medical direction or on the prescription of a physician) by a 
specified health care practitioner, provider or other person during a 
specified period are not reimbursed under titles V, XVIII, XIX, or XX 
of the Social Security Act and all other Federal non-procurement 
programs.
    Gross and flagrant violation means a violation of an obligation has 
occurred in one or more instances which presents an imminent danger to 
the health, safety, or well-being of a program patient or places the 
program patient unnecessarily in high-risk situations.
    Health care service or services means services or items for which 
payment may be made (in whole or in part) under the Medicare or State 
health care programs.
    Health professional shortage area (HPSA) means an area designated 
by the Secretary and defined in 42 CFR 5.2.
    Metropolitan Statistical Area means an area as defined by the 
Executive Office of Management and Budget.
    Obligation means any of the obligations specified at section 
1156(a) of the Act.
    Other person means a hospital or other health care facility, an 
organization or an agency that provides health care services or which 
payment may be made (in whole or in part) under the Medicare or State 
health care programs.
    Pattern or care means that the care under question has been 
demonstrated in more than three instances, each of which involved 
different admissions.
    Pharmacy professional is a term limited to individuals who are 
licensed or registered to provide pharmaceutical services.
    Podiatric professional is a term limited to licensed doctors of 
podiatric medicine.
    Practice area means the location where over 50 percent of the 
practitioner's or other person's patients are seen.
    Practitioner means a physician or other health care professional 
licensed under State law to practice his or her profession.
    Primary medical care professional is a term limited to:
    (i) Licensed doctors of medicine and doctors of osteopathy 
providing direct patient care who practice in the fields of general or 
family practice, general internal medicine, pediatrics, obstetrics and 
gynecology, surgery, and any other specialty that is not accommodated 
by the remaining specialty HPSA designator, or
    (ii) Those facilities where care and treatment is provided to 
patients with health problems other than mental disorders.
    Pro area means the geographic area subject to review by a 
particular PRO.
    Provider means a hospital or other health care facility, agency, or 
organization.
    Psychiatric professional is a term limited to licensed doctors of 
medicine who limit their practice to psychiatry or to those facilities 
where care and treatment is limited to patients with mental disorders.
    Rural means any area outside an urban area.
    Rural health professional shortage area means any health 
professional shortage area located outside a Metropolitan Statistical 
Area.
    Sanction means an exclusion or monetary penalty that the Secretary 
may impose on a practitioner or other person as a result of a 
recommendation from a PRO.
    Serious risk includes situations that may involve the risk of 
unnecessary treatment, prolonged treatment, lack of treatment, 
incorrect treatment, medical complication, premature discharge, 
physiological or anatomical impairment, disability, or death.
    State health care program means a State plan approved under title 
XIX, any 

[[Page 63641]]
program receiving funds under title V or from an allotment to a State 
under such title, or any program receiving funds under title XX or from 
an allotment to a State under such title.
    Substantial violation in a substantial number of cases means a 
pattern of providing care, as defined in this section, that is 
inappropriate, unnecessary, or does not meet recognized professional 
standards of care, or is not supported by the necessary documentation 
of care as required by the PRO.
    Urban means a Metropolitan Statistical Area as defined by the 
Executive Office of Management and Budget.
    Vision care professional is a term limited to licensed doctors of 
medicine who limit their practice to ophthalmology and to doctors of 
optometry.

Subpart B--Sanctions Under the PRO Program; General Provisions


Sec. 1004.10   Statutory obligations of practitioners and other 
persons.

    It is the obligation of any health care practitioner or other 
person who furnishes or orders health care services that may be 
reimbursed under the Medicare or State health care programs to ensure, 
to the extent of his or her or its authority, that those services are--
    (a) Provided economically and only when, and to the extent, 
medically necessary;
    (b) Of a quality that meets professionally recognized standards of 
health care; and
    (c) Supported by evidence of medical necessity and quality in the 
form and fashion and at such time that the reviewing PRO may reasonably 
require (including copies of the necessary documentation and evidence 
of compliance with pre-admission or pre-procedure review requirements) 
to ensure that the practitioner or other person is meeting the 
obligations imposed by section 1156(a) of the Act.


Sec. 1004.20   Sanctions.

    In addition to any other sanction provided under law, a 
practitioner or other person may be--
    (a) Excluded from participating in programs under titles V, XVIII, 
XIX, and XX of the Social Security Act; or
    (b) In lieu of exclusion and as a condition for continued 
participation in titles V, XVIII, XIX, and XX of the Act, if the 
violation involved the provision or ordering (or at the medical 
direction or the prescription of a physician) of health care services 
that were medically improper or unnecessary, required to pay an amount 
not in excess of the cost of the improper or unnecessary services that 
were furnished or ordered (and prescribed, if appropriate). The 
practitioner or other person will be required either to pay the 
monetary assessment within 6 months of the date of notice or have it 
deducted from any sums the Federal government owes the practitioner or 
other person.

Subpart C--PRO Responsibilities


Sec. 1004.30   Basic responsibilities.

    (a) The PRO must use its authority or influence to enlist the 
support of other professional or government agencies to ensure that 
each practitioner or other person complies with the obligations 
specified in Sec. 1004.10.
    (b) When the PRO identifies situations where an obligation 
specified in Sec. 1004.10 is violated, it will afford the practitioner 
or other person reasonable notice and opportunity for discussion and, 
if appropriate, a suggested method for correcting the situation and a 
time period for a corrective action in accordance with Secs. 1004.40 
and 1004.60.
    (c) The PRO must submit a report to the OIG after the notice and 
opportunity provided under paragraph (b) of this section and, if 
appropriate, the opportunity to enter into and complete a corrective 
action plan (CAP) if the PRO finds that the practitioner or other 
person has--
    (1) Failed substantially to comply with any obligation in a 
substantial number of admissions; or
    (2) Grossly and flagrantly violated any obligation in one or more 
instances.
    (d) The PRO report to the OIG must comply with the provisions of 
Sec. 1004.80.
    (e) If a practitioner or other person relocates to another PRO area 
prior to a finding of a violation or sanction recommendation, and the 
originating PRO--
    (1) Is able to make a finding, the originating PRO must, as 
appropriate, close the case or forward a sanction recommendation to the 
OIG; or
    (2) Cannot make a finding, the originating PRO must forward all 
documentation regarding the case to the PRO with jurisdiction, and 
notify the practitioner or other person of this action.
    (f) The PRO must deny payment for services or items furnished or 
ordered (or at the medical direction or on the prescription of an 
excluded physician) by an excluded practitioner or other person when 
the PRO identifies the services or items. It must report the findings 
to the Health Care Financing Administration.


Sec. 1004.40  Action on identification of a violation.

    When a PRO identifies a violation, it must--
    (a) Indicate whether the violation is a gross and flagrant 
violation or is a substantial violation in a substantial number of 
cases; and
    (b) Send the practitioner or other person written notice of the 
identification of a violation containing the following information--
    (1) The obligation(s) involved;
    (2) The situation, circumstances or activity that resulted in a 
violation;
    (3) The authority and responsibility of the PRO to report 
violations of any obligation under section 1156(a) of the Act;
    (4) A suggested method for correcting the situation and a time 
period for corrective action, if appropriate;
    (5) The sanction that the PRO could recomment to the OIG;
    (6) The right of the practitioner or other person to submit to the 
PRO within 30 days of receipt of the notice additional information or a 
written request for a meeting with the PRO to review and discuss the 
finding, or both. The date of receipt is presumed to be 5 days after 
the date on the notice, unless there is a reasonable showing to the 
contrary. The notice will also state that if a meeting is requested--
    (i) It will be held within 30 days of receipt by the PRO of the 
request, but may be extended for good cause;
    (ii) The practitioner or other person may have an attorney present; 
and
    (iii) The attorney, if present, will be permitted to make opening 
and closing remarks, ask clarifying questions at the meeting and assist 
the practitioner or other person in presenting the testimony of expert 
witnesses who may appear on the practitioner's or other person's 
behalf; and
    (7) A copy of the material used by the PRO in arriving at its 
finding except for PRO deliberations, as set forth in Sec. 476.139 of 
this part.


Sec. 1004.50  Meeting with a practitioner or other person.

    If the practitioner or other person requests a meeting with the 
PRO--
    (a) The PRO panel that meets with the practitioner or other person 
must consist of a minimum of 3 physicians;
    (b) No physician member of the PRO panel may be in direct economic 
competition with the practitioner or other person being considered for 
sanction;
    (c) The PRO must ensure that no physician member of the PRO panel 
has 

[[Page 63642]]
a substantial bias for or against the practitioner or other person 
being considered for sanction;
    (d) At least one member of the PRO panel meeting with the 
practitioner or other person should practice in a similar area, e.g., 
urban or rural, and at least one member of the panel must be in the 
same specialty (both requirements could be met by a single individual);
    (e) If the practitioner or other person has an attorney present, 
that attorney will be permitted to make opening and closing remarks, 
ask clarifying questions and assist the practitioner or other person in 
presenting the testimony of expert witnesses who may appear on the 
practitioner's or other person behalf;
    (f) The physician who recommends to the PRO that a practitioner or 
other person be sanctioned may not vote on that recommendation at the 
meeting;
    (g) The PRO may allow the practitioner or other person 5 working 
days after the meeting to provide the PRO additional relevant 
information that may affect its finding; and
    (h) A verbatim record must be made of the meeting and must be made 
available to the practitioner or other person promptly.


Sec. 1004.60  PRO finding of a violation.

    (a) On the basis of any additional information received, the PRO 
will affirm or modify its finding. If the PRO affirms its finding, it 
may suggest in writing a method for correcting the situation and a time 
period for corrective action. This CAP could correspond with, or be a 
continuation of, a prior CAP or be a new proposal based on additional 
information received by the PRO. If the finding has been resolved to 
the PRO's satisfaction, the PRO may modify its initial finding or 
recommendation or close the case.
    (b) The PRO must give written notice to the practitioner or other 
person of any action it takes as a result of the additional information 
received, as specified in Sec. 1004.70.
    (c) At least one member of the PRO participating in the process 
which resulted in a recommendation to the OIG that a practitioner or 
other person be sanctioned should practice in a similar geographic 
area, e.g. urban or rural, and at least one member of the panel must be 
in the same medical specialty. Both requirements can be met by a single 
individual. In addition, no one at the PRO who is a participant in such 
a finding may be in direct economic competition with, or have a 
substantial bias for or against, that practitioner or other person 
being recommended for sanction.


Sec. 1004.70  PRO action on final finding of a violation.

    If the finding is not resolved to the PRO's satisfaction as 
specified in Sec. 1004.60(a), the PRO must--
    (a) Submit its report and recommendation to the OIG;
    (b) Send the affected practitioner or other person a concurrent 
final notice, with a copy of all the material that is being forwarded 
to the OIG, advising that--
    (1) The PRO recommendation has been submitted to the OIG;
    (2) The practitioner or other person has 30 days from receipt of 
this final notice to submit any additional written material or 
documentary evidence to the OIG at its headquarters location. The date 
of receipt is presumed to be 5 days after the date on the notice, 
unless there is a reasonable showing to the contrary; and
    (3) Due to the 120-day statutory requirement specified in 
Sec. 1004.100(e), the period for submitting additional information will 
not be extended and any material received by the OIG after the 30-day 
period will not be considered; and
    (c) Provide notice to the State medical board or to other 
appropriate licensing boards for other practitioner types when it 
submits a report and recommendations to the OIG with respect to a 
physician or other person whom the board is responsible for licensing.


Sec. 1004.80  PRO report to the OIG.

    (a) Manner of reporting. If the violation(s) identified by the PRO 
have not been resolved, it must submit a report and recommendation to 
the OIG at the field office with jurisdiction.
    (b) Content of report. The PRO report must include the following 
information--
    (1) Identification of the practitioner or other person and, when 
applicable, the name of the director, administrator or owner of the 
entity involved;
    (2) The type of health care services involved;
    (3) A description of each failure to comply with an obligation, 
including specific dates, places, circumstances and other relevant 
facts;
    (4) Pertinent documentary evidence;
    (5) Copies of written correspondence, including reports of 
conversations with the practitioner or other person regarding the 
violation and, if applicable, a copy of the verbatim transcript of the 
meeting with the practitioner or other person;
    (6) The PRO's finding that an obligation under section 1156(a) of 
the Act has been violated and that the violation is substantial and has 
occurred in a substantial number of cases or is gross and flagrant;
    (7) A case-by-case analysis and evaluation of any additional 
information provided by the practitioner or other person in response to 
the PRO's initial finding;
    (8) A copy of the CAP that was developed and documentation of the 
results of such plan or an explanation of why such the CAP will be used 
to support the PRO's recommendation regarding inability or 
unwillingness in accordance with Sec. 1004.80(c)(6) and not as a basis 
for the sanction;
    (9) The number of admissions by the practitioner or other person 
reviewed by the PRO during the period in which the violation(s) were 
identified;
    (10) The professional qualifications of the PRO's reviewers; and
    (11) The PRO's sanction recommendation.
    (c) PRO recommendation. The PRO must specify in its report--
    (1) The sanction recommended;
    (2) The amount of the monetary penalty recommended, if applicable;
    (3) The period of exclusion recommended, if applicable;
    (4) The availability of alternative sources of services in the 
community, with supporting information;
    (5) The county or counties in which the practitioner or other 
person furnishes services; and
    (6) A recommendation, with supporting documentation, as to whether 
the practitioner or other person is unable or unwilling substantially 
to comply with the obligation that was violated and the basis for that 
recommendation.


Sec. 1004.90  Basis for recommended sanction.

    The PRO's specific recommendation must be based on documentation 
provided to the OIG showing its consideration of--
    (a) The type of offense involved;
    (b) The severity of the offense;
    (c) The deterrent value;
    (d) The practitioner's or other person's previous sanction record;
    (e) The availability of alternative sources of services in the 
community; and
    (f) Any other factors that the PRO considers relevant, such as the 
duration of the problem.

Subpart D--OIG Responsibilities


Sec. 1004.100  Acknowledgement and review of report.

    (a) Acknowledgement. The OIG will inform the PRO of the date it 
received the PRO's report and recommendation.

[[Page 63643]]

    (b) Review. The OIG will review the PRO report and recommendation 
to determine whether--
    (1) The PRO has followed the regulatory requirements of part 1004;
    (2) A violation has occurred; and
    (3) The practitioner or other person has demonstrated an 
unwillingness or lack of ability substantially to comply with an 
obligation.
    (c) Rejection of the PRO recommendation. If the OIG decides that a 
sanction is not warranted, it will notify the PRO that recommended the 
sanction, the affected practitioner or other person, and the licensing 
board informed by the PRO of the sanction recommendation that the 
recommendation is rejected.
    (d) Decision to sanction. If the OIG decides that a violation of 
obligations has occurred, it will determine the appropriate sanction by 
considering--
    (1) The recommendation of the PRO;
    (2) The type of offense;
    (3) The severity of the offense;
    (4) The previous sanction record of the practitioner or other 
person;
    (5) The availability of alternative sources of services in the 
community;
    (6) Any prior problems the Medicare or State health care programs 
have had with the practitioner or other person;
    (7) Whether the practitioner or other person is unable or unwilling 
to comply substantially with the obligations, including whether he, she 
or it entered into a CAP--where such plan was deemed appropriate by the 
PRO--prior to the PRO's recommendation and, if so, whether he, she or 
it successfully completed such CAP; and
    (8) Any other matters relevant to the particular case.
    (e) Exclusion sanction. If the PRO submits a recommendation for 
exclusion to the OIG, and a determination is not made by the 120th day 
after actual receipt by the OIG, the exclusion sanction recommended 
will become effective and the OIG will provide notice in accordance 
with Sec. 1004.110(f).
    (f) Monetary penalty. If the PRO recommendation is to assess a 
monetary penalty, the 120-day provision does not apply and the OIG will 
provide notice in accordance with Sec. 1004.110 (a)-(e).


Sec. 1004.110  Notice of sanction.

    (a) The OIG must notify the practitioner or other person of the 
adverse determination and of the sanction to be imposed.
    (b) The sanction is effective 20 days from the date of the notice. 
Receipt is presumed to be 5 days after the date on the notice, unless 
there is a reasonable showing to the contrary.
    (c) The notice must specify--
    (1) The legal and factual basis for the determination;
    (2) The sanction to be imposed;
    (3) The effective date and, if appropriate, the duration of the 
exclusion;
    (4) The appeal rights of the practitioner or other person;
    (5) The opportunity and the process necessary to provide 
alternative notification as set forth in paragraphs (d) and (e) of this 
section; and
    (6) In the case of exclusion, the earliest date on which the OIG 
will accept a request for reinstatement.
    (d) Patient notification. (1)(i) The OIG will provide a sanctioned 
practitioner or other person an opportunity to elect to inform each of 
their patients of the sanction action. In order to elect this option, 
the sanctioned practitioner or other person must, within 30 calendar 
days from receipt of the OIG notice, inform both new and existing 
patients through written notification--based on a suggested (non-
mandatory) model provided to the sanctioned individual by the OIG--of 
the sanction and, in the case of an exclusion, its effective date and 
duration. Receipt of the OIG notice is presumed to be 5 days after the 
date of the notice, unless there is a reasonable showing to the 
contrary. Within this time period, the practitioner or other person 
must also sign and return the certification that the OIG will provide 
with the notice. For purposes of this section, the term ``all existing 
patients'' includes all patients currently under active treatment with 
the practitioner or other person, as well as all patients who have been 
treated by the practitioner or other person within the last 3 years. In 
addition, the practitioner or other person must notify all prospective 
patients orally at the time such persons request an appointment. If the 
sanctioned party is a hospital, it must notify all physicians who have 
privileges at the hospital, and must post a notice in its emergency 
room, business office and in all affiliated entities regarding the 
exclusion. In addition, for purposes of this section, the term ``in all 
affiliated entities'' encompasses all entities and properties in which 
the hospital has a direct or indirect ownership interest of 5 percent 
or more and any management, partnership or control of the entity.
    (ii) The certification will provide that the practitioner or other 
person--
    (A) Has informed each of his, her or its patients in writing that 
the practitioner or other person has been sanctioned, or if a hospital, 
has informed all physicians having privileges at the hospital that it 
has been sanctioned;
    (B) If excluded from Medicare and the State health care programs, 
has informed his, her or its existing patients in writing that the 
programs will not pay for items and services furnished or ordered (or 
at the medical direction or on the prescription of an excluded 
physician) by the practitioner or other person until they are 
reinstated, or if a hospital, has provided this information to all 
physicians having privileges at that hospital;
    (C) If excluded from Medicare and State health care programs, will 
provide prospective patients--or if a hospital, physicians requesting 
privileges at that hospital prior to furnishing or ordering (or in the 
case of an excluded physician, medically directing or prescribing) 
services--oral information of both the sanction and that the programs 
will not pay for services provided and written notification of the same 
at the time of the provision of services;
    (D) If excluded from Medicare and State health care programs and is 
an entity such as a hospital, has posted a notice in its emergency 
room, business office and in all affiliated entities that the programs 
will not pay for services provided; and
    (E) Certifies to the truthfulness and accuracy of the notification 
and the statements in the certification.
    (2) If the sanctioned practitioner or other person does not inform 
his, her or its patients and does not return the required certification 
within the 30-day period, or if the sanctioned practitioner or other 
person returns the certification within the 30-day period but the OIG 
obtains reliable evidence that such person nevertheless has not 
adequately informed new and existing patients of the sanction, the 
OIG--
    (i) Will see that the public is notified directly of the identity 
of the sanctioned practitioner or other person, the finding that the 
obligation ha been violated, and the effective date and duration of any 
exclusion; and
    (ii) May consider this failure to adhere to the certification 
obligation as an adverse factor at the time the sanctioned practitioner 
or other person requests reinstatement.
    (3) If the sanctioned practitioner or other person is entitled to a 
preliminary hearing in accordance with Sec. 1004.140(a) and requests 
such a preliminary hearing, and if the administrative law judge (ALJ) 
decides that he, she or it poses a risk to program beneficiaries, the 
sanctioned practitioner or other person would have 30 days from the 
date of receipt of the ALJ's decision to provide certification to 

[[Page 63644]]
the OIG in accordance with Sec. 1004.110(d)(1). The date of receipt is 
presumed to be 5 days after the date of the ALJ's decision, unless 
there is a reasonable showing to the contrary.
    (e) Notice of the sanction is also provided to the following 
entities as appropriate--
    (1) The PRO that originated the sanction report;
    (2) PROs in adjacent areas;
    (3) State Medicaid fraud control units and State licensing and 
accreditation bodies;
    (4) Appropriate program contractors and State agencies;
    (5) Hospitals, including the hospital where the sanctioned 
individual's case originated and where the individual currently has 
privileges, if known; skilled nursing facilities, home health agencies, 
and health maintenance organizations and Federally-funded community 
health centers where the practitioner or other person works;
    (6) Medical societies and other professional organizations; and
    (7) Medicare carriers and fiscal intermediaries, health care 
prepayment plans and other affected agencies and organizations.
    (f) If an exclusion sanction is effectuated because a decision was 
not made within 120 days after receipt of the PRO recommendation, 
notification is as follows--
    (1) As soon as possible after the 120th day, the OIG will issue a 
notice to the practitioner or other person, in compliance with the 
requirements of paragraph (c) of this section, affirming the PRO 
recommendation or modifying the recommendation based on the OIG's 
review of the case, and that the exclusion is effective 20 days from 
the date of the notice; and
    (2) Notice of the sanction is also provided as specified in 
paragraph (e) of this section; and
* * * * *

Subpart E--Effect and Duration of Exclusion


Sec. 1004.120  Effect of an exclusion on program payments and services.

    The effect of an exclusion is set forth in Sec. 1001.1901 of this 
chapter.


Sec. 1004.130  Reinstatement after exclusion.

    (a) A practitioner or other person who has been excluded in 
accordance with this part may apply for reinstatement at the end of the 
period of exclusion. The OIG will consider any request for 
reinstatement in accordance with provisions of Secs. 1001.3001 through 
1001.3005 of this chapter.
    (b) The OIG may also consider a practitioner's or other person's 
compliance with the certification obligation in Sec. 1004.110(d) at the 
time of reinstatement.

Subpart F--Appeals


Sec. 1004.140  Appeal rights.

    (a) Right to preliminary hearing. (1)(i) A practitioner or other 
person excluded from participation in Medicare and any State health 
care programs under section 1156 of the Act may request a preliminary 
hearing if the location where services are rendered to over 50 percent 
of the practitioner's or other person's patients at the time of the 
exclusion notice is in a rural HPSA or in a county with a population of 
less than 70,000.
    (ii) Unless the practitioner's or other person's practice meets the 
definition for psychiatric professional, vision care professional, 
dental professional, podiatric professional or pharmacy professional, 
the HPSA used by the OIG for determination of entitlement to a 
preliminary hearing will be the HPSA list for primary medical care 
professional.
    (iii) Information on the population size of a county in order to 
determine entitlement to a preliminary hearing will be obtained by the 
OIG from the responsible officials of that county.
    (2)(i) A request for a preliminary hearing must be made in writing 
and received by the Departmental Appeals Board (DAB) no later than the 
15th day after the notice of exclusion is received by a practitioner or 
other person. The date of receipt of the notice of exclusion by the 
practitioner or other person is presumed to be 5 days after the date 
appearing on the notice, unless there is a reasonable showing to the 
contrary.
    (ii) A request for a preliminary hearing will stay the effective 
date of the exclusion pending a decision of the ALJ at the preliminary 
hearing, and all the parties informed by the OIG of the exclusion will 
be notified of the stay.
    (iii) A request for a preliminary hearing received after the 15-day 
period has expired will be treated as a request for a hearing before an 
ALJ in accordance with paragraph (b) of this section.
    (iv) If the practitioner or other person exercises his, her or its 
right to a preliminary hearing, such a hearing must be held by the ALJ 
in accordance with paragraph (a)(3)(i) of this section unless the OIG 
waives it in accordance with paragraph (a)(6)(i) of this section.
    (v) The ALJ cannot consolidate the preliminary hearing with a full 
hearing without the approval of all parties to the hearing.
    (3)(i) The preliminary hearing will be conducted by an ALJ of the 
DAB in a city that the ALJ deems equitable to all parties. The ALJ will 
conduct the preliminary hearing and render a decision no later than 45 
days after receipt of the request for such a hearing by the DAB. Unless 
there is a reasonable showing to the contrary, date of receipt by the 
DAB is presumed to be 5 days after the date on the request for a 
preliminary hearing or, if undated, the date of receipt will be the 
date the DAB actually received the request. A reasonable extension to 
the 45-day period of up to 15 days may be requested by any party to the 
preliminary hearing and such a request may be granted upon concurrence 
by all parties to the preliminary hearing. Such request must be 
received no later than 15 days prior to the scheduled date of the 
preliminary hearing.
    (ii) The only issue to be heard and decided on by the ALJ at the 
preliminary hearing, based on the preponderance of the evidence, is 
whether the practitioner's or other person's continued participation in 
the Medicare and State health care programs during the appeal of the 
exclusion before an ALJ would place program beneficiaries at serious 
risk. The ALJ's decision is to be based on the preponderance of the 
evidence.
    (iii) In the interest of time, the ALJ may issue an oral decision 
to be followed by a written decision.
    (iv) In those cases where the ALJ has stayed an exclusion after a 
preliminary hearing, a full hearing must be held and a decision 
rendered by the ALJ within 6 months. If, for any reason, the request 
for a full hearing before the ALJ is withdrawn or dismissed, the 
practitioner or other person will be excluded effective 5 days after 
the notice of the withdrawal or dismissal is received in the OIG 
headquarters.
    (4) The preliminary hearing decision is not appealable or subject 
to further administrative or judicial review.
    (5) A practitioner or other person found at the preliminary hearing 
not to place program beneficiaries at serious risk, but later 
determined to have been properly excluded from program participation 
after a full hearing before an ALJ, is not entitled to have the 
exclusion stayed further during an appeal to the DAB. Exclusions in 
such instances will be effective 5 days after receipt of the ALJ 
decision in the OIG headquarters.
    (6)(i) After notice of a timely request for a preliminary hearing, 
the OIG may determine that the practitioner's or other person's 
continued program participation during the appeal before 

[[Page 63645]]
the ALJ will not place program beneficiaries at serious risk and waive 
the preliminary hearing. Under these circumstances, the exclusion will 
be stayed pending the decision of the ALJ after a full hearing. the 
hearing must be held, and a decision reached, within 6 months.
    (ii) If the OIG decides to waive the preliminary hearing, the 
request for the preliminary hearing will be considered a request for a 
hearing before the ALJ in accordance with paragraph (b) of this 
section.
    (b) Right to administrative review. (1) A practitioner or other 
person dissatisfied with an OIG determination, or an exclusion that 
results from a determination not being made within 120 days, is 
entitled to appeal such sanction in accordance with part 1005 of this 
chapter.
    (2) Due to the 120-day statutory requirement specified in 
Sec. 1004.100(e), the following limitations apply--
    (i) The period of time for submitting additional information will 
not be extended.
    (ii) Any material received by the OIG after the 30-day period 
allowed will not be considered by the ALJ or the DAB.
    (3) The OIG's determination continues in effect unless reversed by 
a hearing.
    (c) Rights to judicial review. Any practitioner or other person 
dissatisfied with a final decision of the Secretary may file a civil 
action in accordance with the provisions of section 205(g) of the Act.

    Approved: October 23, 1995.
June Gibbs Brown,
Inspector General.
[FR Doc. 95-30130 Filed 12-11-95; 8:45 am]
BILLING CODE 4150-04-M