Medicare: Advisory Opinions as a Means of Clarifying Program Requirements
Released: 2004-12-08T00:00:00

Letter

Background

The process of implementing programs established by federal law often begins with the issuance of rules to guide those who are subject to the law’s requirements. The requirements for promulgating rules, set out in the Administrative Procedure Act (APA), usually include the publication of a proposed rule, an opportunity for public comment, and the publication of a final rule after taking into consideration the comments received. Final rules, also referred to as regulations, have the force and effect of law. To explain and clarify the statutory law and implementing regulations, the APA also permits agencies to issue orders, which are the result of an adjudication that resolves a dispute or controversy between the agency and one or more parties. While orders are typically binding only on the parties directly involved, agency officials and program participants often use them for guidance. Because agencies rarely issue regulations or orders that explain every element of the programs they administer, they also produce a wide variety of written guidance, which may include advisory opinions. Although the APA prescribes the process agencies generally must follow to issue rules and orders, it does not prescribe a process for producing advisory opinions. In light of this, agencies generally have discretion in how they can structure their advisory opinion processes, subject to constraints, if any, in other applicable statutes.

HHS produces written guidance about Medicare in a variety of forms. For example, it issues “rulings” that, according to the agency, provide clarification and interpretation of complex or ambiguous provisions of law or regulations and promote consistency in the interpretation of policy and adjudication of disputes. Although rulings are not issued in response to specific requests, they are binding on CMS and Medicare contractors, among others. In addition, HHS’s Medicare Appeals Council (MAC) issues written decisions in disputes over Medicare eligibility and specific Medicare claims. Although MAC is a component of HHS, it functions independently and is not bound by guidance, such as Medicare program instructions or memoranda, issued by CMS. MAC decisions are binding precedent in subsequent disputes and serve as another significant source of Medicare guidance. Furthermore, HHS provides Medicare guidance through reimbursement manuals, program transmittals, coverage determinations, program instructions, CMS publications, program memorandums, fraud alerts, press releases, and other publications. In addition, CMS and its claims administration contractors respond to millions of written and oral questions from providers and beneficiaries annually.

HHS does not issue advisory opinions on the Medicare program except where expressly required by statute. CMS and HHS-OIG have processes that generally focus on two provisions of Medicare law concerning specific types of business arrangements. Specifically, HHS-OIG provides advisory opinions in connection with the federal health care antikickback statute, which imposes criminal penalties for knowingly giving, offering, soliciting, or receiving payment for patient referrals, among other things. CMS provides advisory opinions related to the so-called Stark Law, which generally prohibits physicians from referring patients to heath care facilities in which they have a financial interest. Both statutory advisory opinion provisions state that these advisory opinions shall be binding only on the agency and requesting party. The agencies also advise that other parties are not bound by and cannot legally rely on these advisory opinions.

IRS and EBSA differ from CMS and HHS-OIG in the scope, management, and history of their advisory opinion processes. While both CMS and HHS-OIG have developed their advisory opinion processes within the last decade, IRS and EBSA have a long history of providing advisory opinions under their authority to administer federal tax and employee benefits law, respectively. Unlike CMS and HHS-OIG, the processes in IRS and EBSA were initiated by the agencies under their authority to administer laws in these areas rather than in response to specific statutory requirements. IRS established its advisory opinion process in 1953 to answer requests regarding the tax effects of certain acts or transactions. EBSA established its process in 1976 to answer inquiries regarding the Employee Retirement Income Security Act of 1974 (ERISA), which is a federal law governing employee benefit plans. Despite these differences, IRS and EBSA also characterize their advisory opinions as binding on the agency, subject to the agencies’ ability to modify or revoke the opinion, as appropriate. The two agencies also advise that the opinions do not apply to other parties and situations.

Five Key Factors for Establishing an Advisory Opinion Process

The processes at the four agencies we contacted—CMS, HHS-OIG, IRS, and EBSA—reflect common elements that merit consideration when establishing an advisory opinion process. We identified five key factors related to agency planning efforts and allocation of resources that each of the four agencies addressed in establishing its advisory opinion process. These factors are (1) establishing criteria for submitting advisory opinion requests, (2) developing alternative ways to respond to advisory opinion requests, (3) determining the time frame for issuing advisory opinions, (4) considering anticipated workloads, staffing requirements, and user fees, and (5) creating internal review and external coordination procedures. The structures of the legally binding advisory opinion processes at the four agencies, however, reflect differences in their respective constituencies and responsibilities.

Establishing criteria for submitting advisory opinion requests: All four agencies have defined the scope of their processes by identifying criteria for submitting advisory opinion requests. For example, none of these agencies will provide advisory opinions for requests that are based on hypothetical situations. IRS has identified circumstances under which it will not issue an advisory opinion, such as those concerning issues that it finds frivolous or those that it expects will be resolved following the issuance of pending regulations or anticipated guidance. IRS has also identified circumstances under which it will not ordinarily respond to requests, such as those that involve matters already under examination or audit by IRS, or those that involve pending litigation. Generally, EBSA will not provide advisory opinions for requests where all parties involved are insufficiently identified and described, where material facts or details of the transaction are omitted, or where the requester is seeking an opinion on alternative courses of action. Further, EBSA generally only provides advisory opinions for requests on future actions, rather than actions or transactions that have already occurred. HHS-OIG and CMS also have defined submission criteria for their processes. Specifically, they will not provide advisory opinions for requests dealing with general questions of interpretation, or activities in which the requester is not and does not plan to be involved. In addition, HHS-OIG does not issue opinions on matters where the same, or substantially the same, subject matter is or has been the subject of a government proceeding, or if an informed opinion cannot be made, or could be made only after extensive investigation.

Two of the four agencies, IRS and EBSA, whose advisory opinion processes otherwise involve broad areas of law, have identified substantive issues on which they will not provide advisory opinions. IRS has developed extensive “no-rule” lists of certain domestic and international tax law matters on which the agency will not provide advisory opinions, and EBSA has identified sections of ERISA about which it will not ordinarily provide advisory opinions. By contrast, while the statutory requirements for HHS to provide advisory opinions focusing on specific Medicare provisions set out two substantive restrictions, HHS-OIG and CMS have not identified other substantive areas that would eliminate an advisory opinion request from consideration, provided that the subject of the request falls within the scope authorized by statute.

Developing alternative ways of responding to advisory opinion requests: To have efficient advisory opinion processes, the agencies do not automatically provide an advisory opinion for every request received, and may respond through other means. For example, if an agency decides that a request concerns matters that are not complex, it may find it more appropriate to provide a response during a telephone conversation. Although not legally binding, such a response may provide the requester with a satisfactory and timely answer, prompting the withdrawal of the request for an advisory opinion. The agencies told us that they respond in this manner when requests involve relatively straightforward questions that may have already been addressed through earlier guidance. For example, an official at HHS-OIG told us that the agency may respond orally to a hospital’s question on whether a hospital that restocks supplies for local ambulances violates the federal health care antikickback statute by providing incentives to the ambulance companies to direct patients to the hospital. In this case, the HHS-OIG official said the agency could direct the requester to existing guidance on the matter. However, should a requester want an advisory opinion after receiving informal guidance, HHS-OIG will issue an opinion, as required.

IRS and EBSA have also established forms of written correspondence in addition to legally binding advisory opinions to respond to individual requesters. Specifically, both agencies provide information letters, which are written statements that call attention to a well-established interpretation or principle of law without applying it to a specific factual situation. The agencies provide such letters in response to requests that they determine do not merit an advisory opinion and could be addressed by supplying the requester with general information. For example, IRS may decide that an advisory opinion request on a certain income tax deduction is best answered through an information letter describing the general requirements for claiming these deductions. Neither agency publishes all of their information letters.

In addition, one agency responds to some requests for advisory opinions by publishing guidance with broad applicability. IRS publishes general guidance, which includes revenue rulings that inform the public about IRS’s position on a particular issue to ensure its uniform application of guidance. For example, a revenue ruling might conclude that, given a specific set of facts, taxpayers may be entitled to claim certain income tax credits. IRS also publishes revenue procedures, which consist of official statements of internal practices and procedures, such as filing procedures, which affect the rights and duties of taxpayers. For example, a revenue procedure might describe filing procedures that taxpayers must follow to claim certain income tax deductions and credits. IRS officials said that the agency places a higher priority on issuing more broadly focused guidance, such as revenue rulings, than on other, more narrowly focused forms of guidance such as advisory opinions.

Determining the time frame for issuing advisory opinions: The four agencies varied on how they addressed the issue of a time frame for providing advisory opinions. HHS-OIG is required by law to issue advisory opinions within 60 days. CMS’s regulations provide for it to issue opinions within 90 days or, for requests that it determines involve complex legal issues or complicated fact patterns, within a reasonable time. IRS does not have any statutory time frame requirements and has its own deadlines. According to IRS officials, the agency’s goal is to complete more than half of the requests received within 4 months, and about 90 percent of the requests received within 6 months. EBSA officials estimate that they typically provide advisory opinions within 7 to 9 months after receiving requests. However, EBSA has not established any time frames. The agency prioritizes its responses to requests after considering the significance of the issue addressed by a request and whether it involves a time-critical matter, such as a pending financial transaction.

Agencies have identified concerns associated with establishing time frames for issuing advisory opinions. EBSA officials told us that their agency has not developed time frames for issuing advisory opinions because imposing a deadline creates an artificial requirement that bears no relationship to the nature of the request. EBSA prefers to have flexibility because of the uncertainty of the types and number of requests the agency will receive. Although HHS-OIG is required to respond to requesters within 60 days, an agency official told us that it is sometimes difficult to complete all of the research and other necessary steps within the required time frame because of both the complexity of the issues and the other responsibilities held by lawyers issuing the opinions. However, regulations provide for the suspension of time limits in order to compensate for delays that are not within HHS-OIG’s control, such as those associated with obtaining additional information from requesters or expert opinions from external third parties.

Considering anticipated workloads, staffing requirements and user fees: All four agencies addressed staffing issues to make their advisory opinion processes effective. For example, EBSA officials told us that EBSA’s process needs to be supported by an adequate number of staff with appropriate backgrounds, such as attorneys and individuals with program expertise. As shown in table 1, agencies vary in the size of their workloads and the number of staff they assign to their advisory opinion processes. In fiscal year 2003, EBSA and HHS-OIG provided 17 and 18 opinions, respectively. In contrast, IRS provided about 3,000 advisory opinions and used about 69 full-time equivalent (FTE) staff to respond to requests. Agencies also differed in the number of opinions issued per FTE. At EBSA and HHS-OIG, 1 FTE staff member was required for every 8 to 9 opinions provided, while IRS needed 1 FTE staff member to process 42 opinions on average. Agency variation in the number of advisory opinions generated by an FTE may reflect differences in case complexity as well as in the proportion of requests that are withdrawn prior to issuance of an opinion. For example, an HHS-OIG official estimated that two-thirds of requests submitted to the agency are withdrawn before an opinion is issued. In some instances, the requesters terminated the process after HHS-OIG staff had performed all of the legal research and analysis necessary to issue the opinions.

Despite differences in workload and productivity, all three agencies employ flexible staffing arrangements to process advisory opinions. For instance, IRS selects staff from a pool of approximately 500 to 600 attorneys who, in addition to processing advisory opinions, also provide other guidance to individual taxpayers. Similarly, HHS-OIG draws from a group of staff who are assigned to respond to requests for advisory opinions in addition to other responsibilities. EBSA staffs its advisory opinion processes by assigning personnel to work on opinions on an as needed basis.

Three of the four agencies we contacted charge a fee to process their advisory opinions. These user fees enable the government to recoup some of its costs. CMS and HHS-OIG charge an initial nonrefundable fee to accept a request for an advisory opinion and impose hourly fees for the time staff spend responding to a request for an opinion. IRS has implemented a fee schedule and charges fees that vary depending on the type of requester. The fee is $6,000 with a reduced fee for qualifying requesters. Table 2 summarizes the user fees charged by the four agencies in fiscal year 2004.

Although three of the four agencies charge user fees, only IRS has authority to apply those fees to fund its advisory opinion process. However, although CMS and HHS-OIG do not retain the user fees charged, they may have been able to absorb the costs of issuing opinions because they receive relatively few requests per year. According to legal experts we interviewed, the amount of user fees charged, and an agency’s ability to use them to offset costs, could be critical to the success of a large advisory opinion process.

Creating internal review and external coordination procedures: In addition to reviewing its response to an advisory opinion request internally, an agency issuing an advisory opinion may also need to coordinate its response with other federal agencies. The agencies said that this is particularly important if those entities have a stake in the outcome—for example, if the advisory opinion involves laws affecting another agency. Internal review and external coordination permit other entities to bring their perspectives to the issue and to raise matters that may not have been previously considered.

All four agencies have developed internal review and external coordination procedures for their advisory opinion processes. Both CMS’s and HHS-OIG’s internal reviews consist of obtaining comments from one another as well as from the HHS Office of the Secretary and the HHS Office of the General Counsel. In addition, their external coordination includes consultation with the Department of Justice. CMS officials said that, in certain cases, there may need to be additional coordination because it has overlapping jurisdictions with other agencies such as HHS’s Public Health Service and Indian Health Service, as well as the Department of Veterans Affairs. EBSA’s internal review consists of coordination between the office drafting the advisory opinions and the agency’s legal counsel. Depending on the issue and whether it may have relevance to other laws, EBSA may also coordinate with IRS, the Pension Benefit Guaranty Corporation, and the Securities and Exchange Commission. In contrast, IRS has a limited internal review process that usually involves the attorney writing the opinion, a reviewing attorney, and the branch chief of the office issuing the opinion. IRS also rarely coordinates with external entities due to significant limitations in IRS’s ability to share taxpayer data.

Medicare Providers Consider Advisory Opinions as a Possible Way to Improve Guidance

Representatives of most provider organizations we spoke with told us that providers seeking clarification of Medicare rules and procedures often find it difficult to obtain reliable or timely written responses to their inquiries. As a result, most of these organizations viewed the establishment of an advisory opinion process to interpret Medicare regulations positively, particularly if the opinions were legally binding. However, representatives for some organizations told us that an advisory opinion process is only one way to address their concerns; improving existing CMS and contractors’ guidance was also viewed as important. In addition, some recognized that advisory opinions may not always be appropriate, given that questions related to Medicare regulations may sometimes require a quick response— something that an advisory opinion process may be unable to provide.

Medicare Providers Are Concerned about Unreliable and Untimely Answers to Their Questions from CMS and its Contractors

Officials from most provider organizations we contacted told us that providers are concerned that they often do not receive reliable or timely responses to their questions. They said that Medicare providers frequently have questions about a variety of issues related to Medicare regulations, including matters relating to billing, coverage of services, medical necessity, and beneficiary eligibility, particularly if a beneficiary is eligible for both Medicare and Medicaid. However, half said that they have difficulty obtaining the necessary clarification. For example, some told us that the claims administration contractors—who are generally the first point of contact for providers with questions—often respond to identical questions from providers with substantially different answers. In addition, about half of the provider organizations we contacted said that providers cannot rely on CMS to respond to their questions in a timely manner, particularly in writing. For example, representatives of one provider organization told us that they have been trying for about a year to obtain guidance from CMS concerning whether physicians in a state that has reduced its Medicaid benefits can bill beneficiaries who are eligible for both Medicare and Medicaid, to compensate for this reduction, without violating federal law. Similarly, officials at the hospital we visited told us that it took CMS about 6 months to reply to the hospital’s inquiry about the findings of a recently completed audit by the hospital’s claims administration contractor. The audit determined that procedures that the hospital had followed for 12 years—at the instruction of its contractor— were now considered by the contractor to be in violation of Medicare regulations. The hospital requested CMS to clarify whether it would be held liable for its past practices and how it should respond to the contractor’s audit findings. We have also recently reported on shortcomings in the way CMS and its contractors communicate with providers. Specifically, we identified problems in both the accuracy and timeliness of CMS’s written guidance and in its oral responses to providers who contact call centers operated by contractors with billing-related and other types of policy- oriented questions.

CMS officials acknowledged that because the agency receives thousands of inquiries every year, it is sometimes difficult to respond to all of them in a timely manner. The time it takes the agency to answer can vary based on the nature of the inquiry and the type of reply that is necessary. While basic or routine questions may receive a relatively quick response, more involved and complex questions, such as the one presented by the hospital, require extensive research and internal review, which could delay the agency’s response. CMS has taken steps in recent years to improve communications with providers. For example, it has held town hall meetings on new initiatives and developed provider-specific Web pages and listservs. In response to our recommendations to improve the accuracy of information given to providers from call centers operated by contractors, CMS has agreed to create a process to routinely screen, triage, and route provider calls to specialty staff by fiscal year 2005.

Medicare Providers View Advisory Opinions as One of Several Approaches to Enhance Guidance

Overall, representatives from most of the provider organizations we spoke with agreed that an advisory opinion process would partially address their concerns about the guidance that they currently receive from CMS and its contractors. Specifically, most said that such a process would provide them with useful answers that they could rely on to appropriately interpret Medicare regulations. Their reasons included that such a process would establish a central place to submit questions and that they would feel more confident about the accuracy of responses received because an advisory opinion process would, presumably, involve extensive legal research. In addition, written documentation that such a process would provide could later help to protect them from adverse actions if it is subsequently determined that they billed incorrectly or are otherwise found to be noncompliant with program rules. However, representatives recognized that while an advisory opinion process guarantees a response to an inquiry, it may not address providers’ need for quick answers. Some said that providers generally seek relatively rapid responses to their questions on Medicare regulations—for example, they told us that for billing questions, providers often need responses within 24 hours. However, CMS officials said that short time frames may be unrealistic because of the extensive research necessary to prepare an advisory opinion.

Providers’ representatives also noted additional benefits that can be associated with the advisory opinion process. For example, even though these opinions may only be binding to the requesters, if published, they could also provide instructive guidance to the provider community at large. However, 8 of the 12 provider organizations we contacted suggested that, to maximize the usefulness of an advisory opinion process, the process should be structured to also permit an advisory opinion to be applied to similarly situated parties with similar questions, instead of just a single requester. One added that, unlike HHS-OIG’s process, which often requires requesters to provide proprietary information that could alert their competitors to their business plans, advisory opinion requests on Medicare regulations are more likely to involve day-to-day activities that are common to many providers. Along the same lines, three organizations suggested that an advisory opinion process also be open to entities representing providers, so that they could submit questions on behalf of larger constituencies. Even though it might not be possible for more broadly applicable advisory opinions to be legally binding, representatives of some provider organizations indicated that such an approach would make the process more efficient and responsive to those participating in Medicare.

Representatives of provider organizations told us that an advisory opinion process should not be used in place of, or precede other efforts, to improve the communication of guidance. They stressed that clarifying existing guidance to address common provider questions is important. They also told us that receipt of reliable and timely written responses to their questions would go far to reduce their interest in an advisory opinion process. While such responses may not carry as much weight as advisory opinions, these representatives said that they would help providers better understand regulations.

Representatives from one provider organization we contacted were opposed to instituting an advisory opinion process because they said such a process might disrupt the effective dialogue that the organization has established with CMS in recent years. Specifically, they were concerned that an advisory opinion process may prevent them from obtaining more informal and timely guidance from the agency on an as needed basis. In addition, officials from a beneficiary advocacy organization expressed concern that an advisory opinion process could negatively affect beneficiaries. Anticipating that providers would be the primary users of an advisory opinion process, this organization was concerned that beneficiaries’ interests would not be fully represented.

Concluding Observations

The Medicare program and its implementing regulations are inherently complex. It is critical that Medicare providers receive correct and complete answers to their questions about program rules. An advisory opinion process to interpret Medicare regulations could provide an avenue for providers to receive this information in the form of legally binding answers to complicated questions about their unique circumstances. Although providers have expressed concern about the lack of timeliness of CMS’s responses to their questions, it would be unreasonable to expect that advisory opinions could be issued in a matter of a few days or even a few weeks, given the complexity of the questions and the significance of obtaining legally binding responses. However, it is important that the establishment of such a process not preclude CMS or its contractors from responding promptly to providers with relatively straightforward questions that do not necessitate an advisory opinion. If established, an advisory opinion process to interpret Medicare regulations should not serve as a substitute for enhancing existing forms of CMS guidance. In addition, the lessons learned by other federal agencies may be useful in structuring a process for Medicare.

Agency Comments

In written comments on a draft of this report, HHS stated that an enhanced and more formal advisory opinion process for the Medicare program would not be a successful pursuit at this time. Specifically, HHS said such an effort would be costly to implement and noted that fees collected for its advisory opinions are not paid to or retained by HHS, and thus do not offset the costs of the staff time allocated to this work. Further, HHS said that such a process would not provide quick answers to providers’ questions, and would have limited applicability beyond the parties requesting advisory opinions. However, HHS acknowledged that the Medicare program and its implementing regulations are inherently complex and underscored its efforts to improve stakeholders’ understanding of the program’s complexities. HHS also provided us with technical comments, which we incorporated as appropriate. We have reprinted HHS’s letter in appendix II.

We also provided excerpts of the draft to EBSA and IRS. The excerpt that each agency received consisted only of statements pertaining to its respective advisory opinion processes. We received technical comments from both agencies, which we incorporated as appropriate.

We are sending copies of this report to the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. We will also make copies available to others upon request. In addition, this report will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you or your staffs have any questions about this report, please call me at (312) 220-7600. An additional GAO contact and other staff members who made major contributions to this report are listed in appendix III.

Medicare Stakeholders Contacted

Comments from the Department of Health and Human Services

GAO Contact and Staff Acknowledgments

GAO Contact

Acknowledgments

Pauline Seretakis, Richard Lipinski, Janet Rosenblad, and Craig Winslow made key contributions to this report.

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