[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2002 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

                    42


          Part 430 to End

                         Revised as of October 1, 2002

Public Health





          Containing a codification of documents of general 
          applicability and future effect
          As of October 1, 2002
          With Ancillaries
          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 42:
          Chapter IV--Centers for Medicare & Medicaid 
          Services, Department of Health and Human Services 
          (Continued)                                                3
          Chapter V--Office of Inspector General-Health Care 
          (HHS)                                                   1095
  Finding Aids:
      Material Approved for Incorporation by Reference........    1197
      Table of CFR Titles and Chapters........................    1199
      Alphabetical List of Agencies Appearing in the CFR......    1217
      Table of OMB Control Numbers............................    1227
      List of CFR Sections Affected...........................    1229



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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 42 CFR 430.0 refers 
                       to title 42, part 430, 
                       section 0.

                     ----------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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INCORPORATION BY REFERENCE

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This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
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This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

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REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

October 1, 2002.



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                               THIS TITLE

    Title 42--Public Health is composed of three volumes. The parts in 
these volumes are arranged in the following order: Parts 1-399, parts 
400-429 and part 430 to end. The first volume (parts 1-399) contains 
current regulations issued under chapter I--Public Health Service (HHS). 
The second volume (parts 400-429) includes regulations issued under 
chapter IV--Centers for Medicare & Medicaid Services (HHS) and the third 
volume (part 430 to end) contains the remaining regulations in chapter 
IV and the regulations issued under chapter V by the Office of Inspector 
General-Health Care (HHS). The contents of these volumes represent all 
current regulations codified under this title of the CFR as of October 
1, 2002.

    The OMB control numbers for the Centers for Medicare & Medicaid 
Services appear in Sec. 400.310 of chapter IV. For the convenience of 
the user, subpart C consisting of Secs. 400.300-400.310 is reprinted in 
the Finding Aids section of the third volume.

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

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                         TITLE 42--PUBLIC HEALTH




                            (Part 430 to End)

  --------------------------------------------------------------------
                                                                    Part

chapter iv-- Centers for Medicare & Medicaid Services, 
  Department of Health and Human Services (Continued).......         430

chapter v-- Office of Inspector General-Health Care, 
  Department of Health and Human Services...................        1000

[[Page 3]]



  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                 HEALTH AND HUMAN SERVICES--(Continued)




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter IV appear at 66 FR 
39452, July 31, 2001 and 67 FR 36540, May 24, 2002.

                SUBCHAPTER C--MEDICAL ASSISTANCE PROGRAMS
Part                                                                Page
430             Grants to States for Medical Assistance 
                    Programs................................           5
431             State organization and general 
                    administration..........................          19
432             State personnel administration..............          61
433             State fiscal administration.................          66
434             Contracts...................................         103
435             Eligibility in the States, District of 
                    Columbia, the Northern Mariana Islands, 
                    and American Samoa......................         106
436             Eligibility in Guam, Puerto Rico, and the 
                    Virgin Islands..........................         166
438             Managed care................................         193
440             Services: General provisions................         228
441             Services: Requirements and limits applicable 
                    to specific services....................         245
442             Standards for payment to nursing facilities 
                    and intermediate care facilities for the 
                    mentally retarded.......................         279
447             Payments for services.......................         286
455             Program integrity: Medicaid.................         311

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456             Utilization control.........................         318
    SUBCHAPTER D--STATE CHILDREN'S HEALTH INSURANCE PROGRAMS (SCHIPS)
457             Allotments and grants to States.............         355
   SUBCHAPTER E--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
460             Programs of all-inclusive care for the 
                    elderly (PACE)..........................         406
             SUBCHAPTER F--QUALITY IMPROVEMENT ORGANIZATIONS
475             Quality improvement organizations...........         442
476             Utilization and quality control review......         455
478             Reconsiderations and appeals................         457
480             Acquisition, protection, and disclosure of 
                    peer review information.................         463
                SUBCHAPTER G--STANDARDS AND CERTIFICATION
482             Conditions of participation for hospitals...         474
483             Requirements for States and long term care 
                    facilities..............................         496
484             Home health services........................         562
485             Conditions of participation: Specialized 
                    providers...............................         581
486             Conditions for coverage of specialized 
                    services furnished by suppliers.........         607
488             Survey, certification, and enforcement 
                    procedures..............................         637
489             Provider agreements and supplier approval...         922
491             Certification of certain health facilities..         950
493             Laboratory requirements.....................         955
494             [Reserved]

498             Appeals procedures for determinations that 
                    affect participation in the Medicare 
                    program and for determinations that 
                    affect the participation of ICFs/MR and 
                    certain NFs in the Medicaid program.....        1077

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                SUBCHAPTER C--MEDICAL ASSISTANCE PROGRAMS



PART 430--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS--Table of Contents




               Subpart A--Introduction; General Provisions

Sec.
430.0 Program description.
430.1 Scope of subchapter C.
430.2 Other applicable Federal regulations.
430.3 Appeals under Medicaid.
430.5 Definitions.

                         Subpart B--State Plans

430.10 The State plan.
430.12 Submittal of State plans and plan amendments.
430.14 Review of State plan material.
430.15 Basis and authority for action on State plan material.
430.16 Timing and notice of action on State plan material.
430.18 Administrative review of action on State plan material.
430.20 Effective dates of State plans and plan amendments.
430.25 Waivers of State plan requirements.

   Subpart C--Grants; Reviews and Audits; Withholding for Failure To 
   Comply; Deferral and Disallowance of Claims; Reduction of Federal 
                            Medicaid Payments

430.30 Grants procedures.
430.32 Program reviews.
430.33 Audits.
430.35 Withholding of payment for failure to comply with Federal 
          requirements.
430.38 Judicial review.
430.40 Deferral of claims for FFP.
430.42 Disallowance of claims for FFP.
430.45 Reduction of Federal Medicaid payments.
430.48 Repayment of Federal funds by installments.

 Subpart D--Hearings on Conformity of State Medicaid Plans and Practice 
                         to Federal Requirements

430.60 Scope.
430.62 Records to be public.
430.63 Filing and service of papers.
430.64 Suspension of rules.
430.66 Designation of presiding officer for hearing.
430.70 Notice of hearing or opportunity for hearing.
430.72 Time and place of hearing.
430.74 Issues at hearing.
430.76 Parties to the hearing.
430.80 Authority of the presiding officer.
430.83 Rights of parties.
430.86 Discovery.
430.88 Evidence.
430.90 Exclusion from hearing for misconduct.
430.92 Unsponsored written material.
430.94 Official transcript.
430.96 Record for decision.
430.100 Posthearing briefs.
430.102 Decisions following hearing.
430.104 Decisions that affect FFP.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 53 FR 36571, Sept. 21, 1988, unless otherwise noted.



               Subpart A--Introduction; General Provisions



Sec. 430.0  Program description.

    Title XIX of the Social Security Act, enacted in 1965, authorizes 
Federal grants to States for medical assistance to low-income persons 
who are age 65 or over, blind, disabled, or members of families with 
dependent children or qualified pregnant women or children. The program 
is jointly financed by the Federal and State governments and 
administered by States. Within broad Federal rules, each State decides 
eligible groups, types and range of services, payment levels for 
services, and administrative and operating procedures. Payments for 
services are made directly by the State to the individuals or entities 
that furnish the services.



Sec. 430.1  Scope of subchapter C.

    The regulations in subchapter C set forth State plan requirements, 
standards, procedures, and conditions for obtaining Federal financial 
participation (FFP). Each part (or subpart of section) in the subchapter 
describes the specific statutory basis for the regulation. However, 
where the basis is the Secretary's general authority to issue 
regulations for any program under the Act (section 1102 of the Act), or 
his general authority to prescribe State plan requirements needed for 
proper and efficient administration of the

[[Page 6]]

plan (section 1902(a)(4)), those statutory provisions are simply cited 
without further description.



Sec. 430.2  Other applicable Federal regulations.

    Other regulations applicable to State Medicaid programs include the 
following:
    (a) 5 CFR part 900, subpart F, Administration of the Standards for a 
Merit System of Personnel Administration.
    (b) The following HHS Regulations in 45 CFR subtitle A:

Part 16--Procedures of the Departmental Appeals Board.
Part 74--Administration of Grants.
Part 80--Nondiscrimination Under Programs Receiving Federal Assistance 
Through the Department of Health and Human Services: Effectuation of 
Title VI of the Civil Rights Act of 1964.
Part 81--Practice and Procedure for Hearings Under 45 CFR part 80.
Part 84--Nondiscrimination on the Basis of Handicap in Programs and 
Activities Receiving or Benefiting From Federal Financial Assistance.
Part 95--General Administration--grant programs (public assistance and 
medical assistance).

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec. 430.3  Appeals under Medicaid.

    Three distinct types of disputes may arise under Medicaid.
    (a) Compliance with Federal requirements. Disputes that pertain to 
whether a State's plan or proposed plan amendments, or its practice 
under the plan meet or continue to meet Federal requirements are subject 
to the hearing provisions of subpart D of this part.
    (b) FFP in Medicaid expenditures. Disputes that pertain to 
disallowances of FFP in Medicaid expenditures (mandatory grants) are 
heard by the Departmental Appeals Board (the Board) in accordance with 
procedures set forth in 45 CFR part 16.
    (c) Discretionary grants disputes. Disputes pertaining to 
discretionary grants, such as grants for special demonstration projects 
under sections 1110 and 1115 of the Act, which may be awarded to a 
Medicaid agency, are also heard by the Board. 45 CFR part 16, appendix 
A, lists all the types of disputes that the Board hears.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec. 430.5  Definitions.

    As used in this subchapter, unless the context indicates otherwise--
    Contractor means any entity that contracts with the State agency, 
under the State plan, in return for a payment, to process claims, to 
provide or pay for medical services, or to enhance the State agency's 
capability for effective administration of the program.
    Representative has the meaning given the term by each State 
consistent with its laws, regulations, and policies.

[67 FR 41094, June 14, 2002]



                         Subpart B--State Plans



Sec. 430.10  The State plan.

    The State plan is a comprehensive written statement submitted by the 
agency describing the nature and scope of its Medicaid program and 
giving assurance that it will be administered in conformity with the 
specific requirements of title XIX, the regulations in this Chapter IV, 
and other applicable official issuances of the Department. The State 
plan contains all information necessary for CMS to determine whether the 
plan can be approved to serve as a basis for Federal financial 
participation (FFP) in the State program.



Sec. 430.12  Submittal of State plans and plan amendments.

    (a) Format. A State plan for Medicaid consists of preprinted 
material that covers the basic requirements, and individualized content 
that reflects the characteristics of the particular State's program.
    (b) Governor's review--(1) Basic rules. Except as provided in 
paragraph (b)(2) of this section--
    (i) The Medicaid agency must submit the State plan and State plan 
amendments to the State Governor or his designee for review and comment 
before submitting them to the CMS regional office.
    (ii) The plan must provide that the Governor will be given a 
specific period

[[Page 7]]

of time to review State plan amendments, long-range program planning 
projections, and other periodic reports on the Medicaid program, 
excluding periodic statistical, budget and fiscal reports.
    (iii) Any comments from the Governor must be submitted to CMS with 
the plan or plan amendment.
    (2) Exceptions. (i) Submission is not required if the Governor's 
designee is the head of the Medicaid agency.
    (ii) Governor's review is not required for preprinted plan 
amendments that are developed by CMS if they provide absolutely no 
options for the State.
    (c) Plan amendments. (1) The plan must provide that it will be 
amended whenever necessary to reflect--
    (i) Changes in Federal law, regulations, policy interpretations, or 
court decisions; or
    (ii) Material changes in State law, organization, or policy, or in 
the State's operation of the Medicaid program. For changes related to 
advance directive requirements, amendments must be submitted as soon as 
possible, but no later than 60 days from the effective date of the 
change to State law concerning advance directives.
    (2) Prompt submittal of amendments is necessary--
    (i) So that CMS can determine whether the plan continues to meet the 
requirements for approval; and
    (ii) To ensure the availability of FFP in accordance with 
Sec. 430.20.

[53 FR 36571, Sept. 21, 1988, as amended at 60 FR 33293, June 27, 1995]



Sec. 430.14  Review of State plan material.

    CMS regional staff reviews State plans and plan amendments, 
discusses any issues with the Medicaid agency, and consults with central 
office staff on questions regarding application of Federal policy.



Sec. 430.15  Basis and authority for action on State plan material.

    (a) Basis for action. (1) Determinations as to whether State plans 
(including plan amendments and administrative practice under the plans) 
originally meet or continue to meet the requirements for approval are 
based on relevant Federal statutes and regulations.
    (2) Guidelines are furnished to assist in the interpretation of the 
regulations.
    (b) Approval authority. The Regional Administrator exercises 
delegated authority to approve the State plan and plan amendments on the 
basis of policy statements and precedents previously approved by the 
Administrator.
    (c) Disapproval authority. (1) The Administrator retains authority 
for determining that proposed plan material is not approvable or that 
previously approved material no longer meets the requirements for 
approval.
    (2) The Administrator does not make a final determination of 
disapproval without first consulting the Secretary.



Sec. 430.16  Timing and notice of action on State plan material.

    (a) Timing. (1) A State plan or plan amendment will be considered 
approved unless CMS, within 90 days after receipt of the plan or plan 
amendment in the regional office, sends the State--
    (i) Written notice of disapproval; or
    (ii) Written notice of any additional information it needs in order 
to make a final determination.
    (2) If CMS requests additional information, the 90-day period for 
CMS action on the plan or plan amendment begins on the day it receives 
that information.
    (b) Notice of final determination. (1) The Regional Administrator or 
the Administrator notifies the Medicaid agency of the approval of a 
State plan or plan amendment.
    (2) Only the Administrator gives notice of disapproval of a State 
plan or plan amendment.



Sec. 430.18  Administrative review of action on State plan material.

    (a) Request for reconsideration. Any State dissatisfied with the 
Administrator's action on plan material under Sec. 430.15 may, within 60 
days after receipt of the notice provided under Sec. 430.16(b), request 
that the Administrator reconsider the issue of whether the plan or plan 
amendment conforms to the requirements for approval.
    (b) Notice and timing of hearing. (1) Within 30 days after receipt 
of the request, the Administrator notifies the

[[Page 8]]

State of the time and place of the hearing.
    (2) The hearing takes place not less than 30 days nor more than 60 
days after the date of the notice, unless the State and the 
Administrator agree in writing on an earlier or later date.
    (c) Hearing procedures. The hearing procedures are set forth in 
subpart D of this part.
    (d) Decision. A decision affirming, modifying, or reversing the 
Administrator's original determination is made in accordance with 
Sec. 430.102.
    (e) Effect of hearing decision. (1) Denial of Federal funds, if 
required by the Administrator's original determination, will not be 
delayed pending a hearing decision.
    (2) However, if the Administrator determines that his or her 
original decision was incorrect, CMS pays the State a lump sum equal to 
any funds incorrectly denied.



Sec. 430.20  Effective dates of State plans and plan amendments.

    For purposes of FFP, the following rules apply:
    (a) New plans. The effective date of a new plan--
    (1) May not be earlier than the first day of the quarter in which an 
approvable plan is submitted to the regional office; and
    (2) With respect to expenditures for medical assistance, may not be 
earlier than the first day on which the plan is in operation on a 
statewide basis.
    (b) Plan amendment. (1) For a plan amendment that provides 
additional services to individuals eligible under the approved plan, 
increases the payment amounts for services already included in the plan, 
or makes additional groups eligible for services provided under the 
approved plan, the effective date is determined in accordance with 
paragraph (a) of this section.
    (2) For a plan amendment that changes the State's payment method and 
standards, the rules of Sec. 447.256 of this chapter apply.
    (3) For other plan amendments, the effective date may be a date 
requested by the State if CMS approves it.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec. 430.25  Waivers of State plan requirements.

    (a) Scope of section. This section describes the purpose and effect 
of waivers, identifies the requirements that may be waived and the other 
regulations that apply to waivers, and sets forth the procedures that 
CMS follows in reviewing and taking action on waiver requests.
    (b) Purpose of waivers. Waivers are intended to provide the 
flexibility needed to enable States to try new or different approaches 
to the efficient and cost-effective delivery of health care services, or 
to adapt their programs to the special needs of particular areas or 
groups of recipients. Waivers allow exceptions to State plan 
requirements and permit a State to implement innovative programs or 
activities on a time-limited basis, and subject to specific safeguards 
for the protection of recipients and the program. Detailed rules for 
waivers are set forth in subpart B of part 431, subpart A of part 440, 
and subpart G of part 441 of this chapter.
    (c) Effect of waivers. (1) Waivers under section 1915(b) allow a 
State to take the following actions:
    (i) Implement a primary care case-management system or a specialty 
physician system.
    (ii) Designate a locality to act as central broker in assisting 
Medicaid recipients to choose among competing health care plans.
    (iii) Share with recipients (through provision of additional 
services) cost-savings made possible through the recipients' use of more 
cost-effective medical care.
    (iv) Limit recipients' choice of providers (except in emergency 
situations and with respect to family planning services) to providers 
that fully meet reimbursement, quality, and utilization standards, which 
are established under the State plan and are consistent with access, 
quality, and efficient and economical furnishing of care.
    (2) A waiver under section 1915(c) of the Act allows a State to 
include as ``medical assistance'' under its plan home and community 
based services furnished to recipients who would otherwise need 
inpatient care that is furnished in a hospital, SNF, ICF, or ICF/

[[Page 9]]

MR, and is reimbursable under the State plan.
    (3) A waiver under section 1916 (a)(3) or (b)(3) of the Act allows a 
State to impose a deduction, cost-sharing or similar charge of up to 
twice the ``nominal charge'' established under the plan for outpatient 
services, if--
    (i) The outpatient services are received in a hospital emergency 
room but are not emergency services; and
    (ii) The State has shown that Medicaid recipients have actually 
available and accessible to them alternative services of nonemergency 
outpatient services.
    (d) Requirements that are waived. In order to permit the activities 
described in paragraph (c) of this section, one or more of the title XIX 
requirements must be waived, in whole or in part.
    (1) Under section 1915(b) of the Act, and subject to certain 
limitations, any of the State plan requirements of section 1902 of the 
Act may be waived to achieve one of the purposes specified in that 
section.
    (2) Under section 1915(c) of the Act, the following requirements may 
be waived:
    (i) Statewideness--section 1902(a)(1).
    (ii) Comparability of services--section 1902(a)(10)(B).
    (iii) Income and resource rules--section 1902(a)(10)(C)(i)(III).
    (3) Under section 1916 of the Act, paragraphs (a)(3) and (b)(3) 
require that any cost-sharing imposed on recipients be nominal in 
amount, and provide an exception for nonemergency services furnished in 
a hospital emergency room if the conditions of paragraph (c)(3) of this 
section are met.
    (e) Submittal of waiver request. The State Governor, the head of the 
Medicaid agency, or an authorized designee may submit the waiver 
request.
    (f) Review of waiver requests. (1) This paragraph applies to initial 
waiver requests and to requests for renewal or amendment of a previously 
approved waiver.
    (2) CMS regional and central office staff review waiver requests and 
submit a recommendation to the Administrator, who--
    (i) Has the authority to approve or deny waiver requests; and
    (ii) Does not deny a request without first consulting the Secretary.
    (3) A waiver request is considered approved unless, within 90 days 
after the request is received by CMS, the Administrator denies the 
request, or the Administrator or the Regional Administrator sends the 
State a written request for additional information necessary to reach a 
final decision. If additional information is requested, a new 90-day 
period begins on the day the response to the additional information 
request is received by the addressee.
    (g) Basis for approval--(1) Waivers under section 1915 (b) and (c). 
The Administrator approves waiver requests if the State's proposed 
program or activity meets the requirements of the Act and the 
regulations at Sec. 431.55 or subpart G of part 441 of this chapter.
    (2) Waivers under section 1916. The Administrator approves a waiver 
under section 1916 of the Act if the State shows, to CMS's satisfaction, 
that the Medicaid recipients have available and accessible to them 
sources, other than a hospital emergency room, where they can obtain 
necessary nonemergency outpatient services.
    (h) Effective date and duration of waivers--(1) Effective date. 
Waivers receive a prospective effective date determined, with State 
input, by the Administrator. The effective date is specified in the 
letter of approval to the State.
    (2) Duration of waivers--(i) Home and community-based services under 
section 1915(c). The initial waiver is for a period of three years and 
may be renewed thereafter for periods of five years.
    (ii) Waivers under sections 1915(b) and 1916. The initial waiver is 
for a period of two years and may be renewed for additional periods of 
up to two years as determined by the Administrator.
    (3) Renewal of waivers. (i) A renewal request must be submitted at 
least 90 days (but not more than 120 days) before a currently approved 
waiver expires, to provide adequate time for CMS review.
    (ii) If a renewal request for a section 1915(c) waiver proposes a 
change in services provided, eligible population, service area, or 
statutory sections

[[Page 10]]

waived, the Administrator may consider it a new waiver, and approve it 
for a period of three years.

[56 FR 8846, Mar. 1, 1991]



   Subpart C--Grants; Reviews and Audits; Withholding for Failure To 
   Comply; Deferral and Disallowance of Claims; Reduction of Federal 
                            Medicaid Payments



Sec. 430.30  Grants procedures.

    (a) General provisions. (1) Once CMS has approved a State plan, it 
makes quarterly grant awards to the State to cover the Federal share of 
expenditures for services, training, and administration.
    (2) The amount of the quarterly grant is determined on the basis of 
information submitted by the State agency (in quarterly estimate and 
quarterly expenditure reports) and other pertinent documents.
    (b) Quarterly estimates. The Medicaid agency must submit Form CMS-25 
(Medicaid Program Budget Report; Quarterly Distribution of Funding 
Requirements) to the central office (with a copy to the regional office) 
45 days before the beginning of each quarter.
    (c) Expenditure reports. (1) The State must submit Form CMS-64 
(Quarterly Medicaid Statement of Expenditures for the Medical Assistance 
Program) to the central office (with a copy to the regional office) not 
later than 30 days after the end of each quarter.
    (2) This report is the State's accounting of actual recorded 
expenditures. The disposition of Federal funds may not be reported on 
the basis of estimates.
    (d) Grant award--(1) Computation by CMS. Regional office staff 
analyzes the State's estimates and sends a recommendation to the central 
office. Central office staff considers the State's estimates, the 
regional office recommendations and any other relevant information, 
including any adjustments to be made under paragraph (d)(2) of this 
section, and computes the grant.
    (2) Content of award. The grant award computation form shows the 
estimate of expenditures for the ensuring quarter, and the amounts by 
which that estimate is increased or decreased because of an 
underestimate or overestimate for prior quarters, or for any of the 
following reasons:
    (i) Penalty reductions imposed by law.
    (ii) Accounting adjustments.
    (iii) Deferrals or disallowances.
    (iv) Interest assessments.
    (v) Mandated adjustments such as those required by section 1914 of 
the Act.
    (3) Effect of award. The grant award authorizes the State to draw 
Federal funds as needed to pay the Federal share of disbursements.
    (4) Drawing procedure. The draw is through a commercial bank and the 
Federal Reserve system against a continuing letter of credit certified 
to the Secretary of the Treasury in favor of the State payee. (The 
letter of credit payment system was established in accordance with 
Treasury Department regulations--Circular No. 1075.)
    (e) General administrative requirements. With the following 
exceptions, the provisions of 45 CFR part 74, which establish uniform 
administrative requirements and cost principles, apply to all grants 
made to States under this subpart:

45 CFR part 74
Subpart G--Matching and Cost Sharing
Subpart I--Financial Report Requirements



Sec. 430.32  Program reviews.

    (a) Review of State and local administration. In order to determine 
whether the State is complying with the Federal requirements and the 
provisions of its plan, CMS reviews State and local administration 
through analysis of the State's policies and procedures, on-site review 
of selected aspects of agency operation, and examination of samples of 
individual case records.
    (b) Quality control program. The State itself is required to carry 
out a continuing quality control program as set forth in part 431, 
subpart P, of this chapter.
    (c) Action on review findings. If Federal or State reviews reveal 
serious problems with respect to compliance with any Federal 
requirement, the State must correct its practice accordingly.

[[Page 11]]



Sec. 430.33  Audits.

    (a) Purpose. The Department's Office of Inspector General (OIG) 
periodically audits State operations in order to determine whether--
    (1) The program is being operated in a cost-efficient manner; and
    (2) Funds are being properly expended for the purposes for which 
they were appropriated under Federal and State law and regulations.
    (b) Reports. (1) The OIG releases audit reports simultaneously to 
State officials and the Department's program officials.
    (2) The reports set forth OIG opinion and recommendations regarding 
the practices it reviewed, and the allowability of the costs it audited.
    (3) Cognizant officials of the Department make final determinations 
on all audit findings.
    (c) Action on audit exceptions--(1) Concurrence or clearance. The 
State agency has the opportunity of concurring in the exceptions or 
submitting additional facts that support clearance of the exceptions.
    (2) Appeal. Any exceptions that are not disposed of under paragraph 
(c)(1) of this section are included in a disallowance letter that 
constitutes the Department's final decision unless the State requests 
reconsideration by the Appeals Board. (Specific rules are set forth in 
Sec. 430.42.)
    (3) Adjustment. If the decision by the Board requires an adjustment 
of FFP, either upward or downward, a subsequent grant award promptly 
reflects the amount of increase or decrease.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991]



Sec. 430.35  Withholding of payment for failure to comply with Federal requirements.

    (a) Basis for withholding. CMS withholds payments to the State, in 
whole or in part, only if, after giving the agency reasonable notice and 
opportunity for a hearing in accordance with subpart D of this part, the 
Administrator finds--
    (1) That the plan no longer complies with the provisions of section 
1902 of the Act; or
    (2) That in the administration of the plan there is failure to 
comply substantially with any of those provisions.

(Hearings under subpart D are generally not called until a reasonable 
effort has been made to resolve the issues through conferences and 
discussions. These may be continued even if a date and place have been 
set for the hearing.)
    (b) Noncompliance of the plan. A question of noncompliance of a 
State plan may arise from an unapprovable change in the approved State 
plan or the failure of the State to change its approved plan to conform 
to a new Federal requirement for approval of State plans.
    (c) Noncompliance in practice. A question of noncompliance in 
practice may arise from the State's failure to actually comply with a 
Federal requirement, regardless of whether the plan itself complies with 
that requirement.
    (d) Notice and implementation of withholding. If the Administrator 
makes a finding of noncompliance under paragraph (a) of this section, 
the following rules apply:
    (1) The Administrator notifies the State:
    (i) That no further payments will be made to the State (or that 
payments will be made only for those portions or aspects of the program 
that are not affected by the noncompliance); and
    (ii) That the total or partial withholding will continue until the 
Administrator is satisfied that the State's plan and practice are, and 
will continue to be, in compliance with Federal requirements.
    (2) CMS withholds payments, in whole or in part, until the 
Administrator is satisfied regarding the State's compliance.



Sec. 430.38  Judicial review.

    (a) Right to judicial review. Any State dissatisfied with the 
Administrator's final determination on approvability of plan material 
(Sec. 430.18) or compliance with Federal requirements (Sec. 430.35) has 
a right to judicial review.
    (b) Petition for review. (1) The State must file a petition for 
review with the U.S. Court of Appeals for the circuit in which the State 
is located, within 60

[[Page 12]]

days after it is notified of the determination.
    (2) The clerk of the court will file a copy of the petition with the 
Administrator and the Administrator will file in the court the record of 
the proceedings on which the determination was based.
    (c) Court action. (1) The court is bound by the Administrator's 
findings of fact if they are supported by substantial evidence.
    (2) The court has jurisdiction to affirm the Administrator's 
decision, to set it aside in whole or in part, or, for good cause, to 
remand the case for additional evidence.
    (d) Response to remand. (1) If the court remands the case, the 
Administrator may make new or modified findings of fact and may modify 
his or her previous determination.
    (2) The Administrator will certify to the court the transcript and 
record of the further proceedings.
    (e) Review by the Supreme Court. The judgment of the appeals court 
is subject to review by the U.S. Supreme Court upon certiorari or 
certification, as provided in 28 U.S.C. 1254.



Sec. 430.40  Deferral of claims for FFP.

    (a) Requirements for deferral. Payment of a claim or any portion of 
a claim for FFP is deferred only if--
    (1) The Regional Administrator or the Administrator questions its 
allowability and needs additional information in order to resolve the 
question; and
    (2) CMS takes action to defer the claim (by excluding the claimed 
amount from the grant award) within 60 days after the receipt of a 
Quarterly Statement of Expenditures (prepared in accordance with CMS 
instructions) that includes that claim.
    (b) Notice of deferral and State's responsibility. (1) Within 15 
days of the action described in paragraph (a)(2) of this section, the 
Regional Administrator sends the State a written notice of deferral 
that--
    (i) Identifies the type and amount of the deferred claim and 
specifies the reason for deferral; and
    (ii) Requests the State to make available all the documents and 
materials the regional office then believes are necessary to determine 
the allowability of the claim.
    (2) It is the responsibility of the State to establish the 
allowability of a deferred claim.
    (c) Handling of documents and materials. (1) Within 60 days (or 
within 120 days if the State requests an extension) after receipt of the 
notice of deferral, the State must make available to the regional 
office, in readily reviewable form, all requested documents and 
materials except any that it identifies as not being available.
    (2) Regional office staff usually initiates review within 30 days 
after receipt of the documents and materials.
    (3) If the Regional Administrator finds that the materials are not 
in readily reviewable form or that additional information is needed, he 
or she promptly notifies the State that it has 15 days to submit the 
readily reviewable or additional materials.
    (4) If the State does not provide the necessary materials within 15 
days, the Regional Administrator disallows the claim.
    (5) The Regional Administrator has 90 days, after all documentation 
is available in readily reviewable form, to determine the allowability 
of the claim.
    (6) If the Regional Administrator cannot complete review of the 
material within 90 days, CMS pays the claim, subject to a later 
determination of allowability.
    (d) Effect of decision to pay a deferred claim. Payment of a 
deferred claim under paragraph (c)(6) of this section does not preclude 
a subsequent disallowance based on the results of an audit or financial 
review. (If there is a subsequent disallowance, the State may request 
reconsideration as provided in paragraph (e)(2) of this section.)
    (e) Notice and effect of decision on allowability. (1) The Regional 
Administrator or the Administrator gives the State written notice of his 
or her decision to pay or disallow a deferred claim.
    (2) If the decision is to disallow, the notice informs the State of 
its right to reconsideration in accordance with 45 CFR part 16.

[[Page 13]]



Sec. 430.42  Disallowance of claims for FFP.

    (a) Notice of disallowance and of right to reconsideration. When the 
Regional Administrator or the Administrator determines that a claim or 
portion of claim is not allowable, he or she promptly sends the State a 
disallowance letter that includes the following, as appropriate:
    (1) The date or dates on which the State's claim for FFP was made.
    (2) The time period during which the expenditures in question were 
made or claimed to have been made.
    (3) The date and amount of any payment or notice of deferral.
    (4) A statement of the amount of FFP claimed, allowed, and 
disallowed and the manner in which these amounts were computed.
    (5) Findings of fact on which the disallowance determination is 
based or a reference to other documents previously furnished to the 
State or included with the notice (such as a report of a financial 
review or audit) which contain the findings of fact on which the 
disallowance determination is based.
    (6) Pertinent citations to the law, regulations, guides and 
instructions supporting the action taken.
    (7) A request that the State make appropriate adjustment in a 
subsequent expenditure report.
    (8) Notice of the State's right to request reconsideration of the 
disallowance and the time allowed to make the request.
    (9) A statement indicating that the disallowance letter is the 
Department's final decision unless the State requests reconsideration 
under paragraph (b)(2) of this section.
    (b) Reconsideration of FFP disallowance. (1) The Departmental 
Appeals Board reviews disallowances of FFP under title XIX.
    (2) A State that wishes to request reconsideration must submit the 
request to the Chair, Departmental Appeals Board, within 30 days after 
receipt of the disallowance letter, and include--
    (i) A copy of the disallowance letter;
    (ii) A statement of the amount in dispute; and
    (iii) A brief statement of why the disallowance is wrong.
    (c) Reconsideration procedures. The reconsideration procedures are 
those set forth in 45 CFR part 16 for Medicaid and for many other 
programs administered by the Department.
    (d) Implementation of decisions. If the reconsideration decision 
requires an adjustment of FFP, either upward or downward, a subsequent 
grant award promptly reflects the amount of increase or decrease.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991]



Sec. 430.45  Reduction of Federal Medicaid payments.

    (a) Methods of reduction. CMS may reduce Medicaid payments to a 
State as required under the Act by reducing--
    (1) The Federal Medical Assistance Percentage;
    (2) The amount of State expenditures subject to FFP;
    (3) The rates of FFP; or
    (4) The amount otherwise payable to the State.
    (b) Right to reconsideration. A state that receives written final 
notice of a reduction under paragraph (a) of this section has a right to 
reconsideration. The provisions of Sec. 430.42 (b) and (c) apply.
    (c) Other applicable rules. Other rules regarding reduction of 
Medicaid payments are set forth in parts 433 and 447 of this chapter.



Sec. 430.48  Repayment of Federal funds by installments.

    (a) Basic conditions. When Federal payments have been made for 
claims that are later found to be unallowable, the State may repay the 
Federal Funds by installments if the following conditions are met:
    (1) The amount to be repaid exceeds 2\1/2\ percent of the estimated 
or actual annual State share for the Medicaid program; and
    (2) The State has given the Regional Administrator written notice, 
before total repayment was due, of its intent to repay by installments.
    (b) Annual State share determination. CMS determines whether the 
amount to be repaid exceeds 2\1/2\ percent of the annual State share as 
follows:
    (1) If the Medicaid program is ongoing, CMS uses the annual 
estimated

[[Page 14]]

State share of Medicaid expenditures. This is the sum of the estimated 
State shares for four consecutive quarters, beginning with the quarter 
in which the first installment is to be paid, as shown on the State's 
latest CMS-25 form.
    (2) If the Medicaid program has been terminated by Federal law or by 
the State, CMS uses the actual State share. The actual State share is 
that shown on the State's Statement of Expenditures reports for the last 
four quarters before the program was terminated.
    (c) Repayment amounts, schedules, and procedures--(1) Repayment 
amount. The repayment amount may not include any amount previously 
approved for installment repayment.
    (2) Repayment schedule. The number of quarters allowed for repayment 
is determined on the basis of the ratio of the repayment amount to the 
annual State share of Medicaid expenditures. The higher the ratio of the 
total repayment amount is to the annual State share, the greater the 
number of quarters allowed, as follows:

------------------------------------------------------------------------
                                                               Number of
   Total repayment amount as percentage of State share of      quarters
              annual expenditures for Medicaid                  to make
                                                               repayment
------------------------------------------------------------------------
2.5 pct. or less............................................           1
Greater than 2.5, but not greater than 5....................           2
Greater than 5, but not greater than 7.5....................           3
Greater than 7.5, but not greater than 10...................           4
Greater than 10, but not greater than 15....................           5
Greater than 15, but not greater than 20....................           6
Greater than 20, but not greater than 25....................           7
Greater than 25, but not greater than 30....................           8
Greater than 30, but not greater than 47.5..................           9
Greater than 47.5, but not greater than 65..................          10
Greater than 65, but not greater than 82.5..................          11
Greater than 82.5, but not greater than 100.................          12
------------------------------------------------------------------------

    (3) Quarterly repayment amounts. The quarterly repayment amounts for 
each of the quarters in the repayment schedule may not be less than the 
following percentages of the estimated State share of the annual 
expenditures for Medicaid:

------------------------------------------------------------------------
                                                              Repayment
                                                             installment
                                                              may not be
             For each of the following quarters               less than
                                                                these
                                                             percentages
------------------------------------------------------------------------
1 to 4.....................................................          2.5
5 to 8.....................................................          5.0
9 to 12....................................................         17.5
------------------------------------------------------------------------

    (4) Extended schedule. The repayment schedule may be extended beyond 
12 quarterly installments if the total repayment amount exceeds 100% of 
the estimated State share of annual expenditures. In these 
circumstances, paragraph (c)(2) of this section is followed for 
repayment of the amount equal to 100 percent of the annual State share. 
The remaining amount of the repayment is in quarterly amounts equal to 
not less than 17.5 percent of the estimated State share of annual 
expenditures.
    (5) Repayment process. Repayment is accomplished through adjustment 
in the quarterly grants over the period covered by the repayment 
schedule.

If the State chooses to repay amounts representing higher percentages 
during the early quarters, any corresponding reduction in required 
minimum percentages is applied first to the last scheduled payment, then 
to the next to the last payment, and so forth as neccessary.
    (6) Offsetting of retroactive claims. The amount of a retroactive 
claim to be paid a State will be offset against any amounts to be, or 
already being, repaid by the State in installments. Under this 
provision, the State may choose to:
    (i) Suspend payments until the retroactive claim due the State has, 
in fact, been offset; or
    (ii) Continue payments until the reduced amount of its debt 
(remaining after the offset), has been paid in full.

This second option would result in a shorter payment period.

A retroactive claim for the purpose of this regulation is a claim 
applicable to any period ending 12 months or more before the beginning 
of the quarter in which CMS would pay that claim.



 Subpart D--Hearings on Conformity of State Medicaid Plans and Practice 
                         to Federal Requirements



Sec. 430.60  Scope.

    (a) This subpart sets forth the rules for hearings to States that 
appeal a decision to disapprove State plan material (under Sec. 430.18) 
or to withhold Federal funds (under Sec. 430.35), because the

[[Page 15]]

State plan or State practice in the Medicaid program is not in 
compliance with Federal requirements.
    (b) Nothing in this subpart is intended to preclude or limit 
negotiations between CMS and the State, whether before, during, or after 
the hearing to resolve the issues that are, or otherwise would be, 
considered at the hearing. Such negotiations and resolution of issues 
are not part of the hearing, and are not governed by the rules in this 
subpart except as expressly provided.



Sec. 430.62  Records to be public.

    All pleadings, correspondence, exhibits, transcripts of testimony, 
exceptions, briefs, decisions, and other documents filed in the docket 
in any proceeding may be inspected and copied in the office of the CMS 
Docket Clerk. Inquiries may be made to the Docket Clerk, Hearing Staff, 
Bureau of Eligibility, Reimbursment and Coverage, 300 East High Rise, 
6325 Security Boulevard, Baltimore, Maryland, 21207. Telephone: (301) 
594-8261.



Sec. 430.63  Filing and service of papers.

    (a) Filing. All papers in the proceedings are filed with the CMS 
Docket Clerk, in an original and two copies. Originals only of exhibits 
and transcripts of testimony need be filed.
    (b) Service. All papers in the proceedings are served on all parties 
by personal delivery or by mail. Service on the party's designated 
attorney is considered service upon the party.



Sec. 430.64  Suspension of rules.

    Upon notice to all parties, the Administrator or the presiding 
officer may modify or waive any rule in this subpart upon determination 
that no party will be unduly prejudiced and the ends of justice will 
thereby be served.



Sec. 430.66  Designation of presiding officer for hearing.

    (a) The presiding officer at a hearing is the Administrator or his 
designee.
    (b) The designation of the presiding officer is in writing. A copy 
of the designation is served on all parties.



Sec. 430.70  Notice of hearing or opportunity for hearing.

    The Administrator mails the State a notice of hearing or opportunity 
for hearing that--
    (a) Specifies the time and place for the hearing;
    (b) Specifies the issues that will be considered;
    (c) Identifies the presiding officer; and
    (d) Is published in the Federal Register.



Sec. 430.72  Time and place of hearing.

    (a) Time. The hearing is scheduled not less than 30 nor more than 60 
days after the date of notice to the State. The scheduled date may be 
changed by written agreement between CMS and the State.
    (b) Place. The hearing is conducted in the city in which the CMS 
regional office is located or in another place fixed by the presiding 
officer in light of the circumstances of the case, with due regard for 
the convenience and necessity of the parties or their representatives.



Sec. 430.74  Issues at hearing.

    The list of issues specified in the notice of hearing may be 
augmented or reduced as provided in this section.
    (a) Additional issues. (1) Before a hearing under Sec. 430.35, the 
Administrator may send written notice to the State listing additional 
issues to be considered at the hearing. That notice is published in the 
Federal Register.
    (2) If the notice of additional issues is furnished to the State 
less than 20 days before the scheduled hearing date, postponement is 
granted if requested by the State or any other party. The new date may 
be 20 days after the date of the notice, or a later date agreed to by 
the presiding officer.
    (b) New or modified issues. If, as a result of negotiations between 
CMS and the State, the submittal of plan amendment, a change in the 
State program, or other actions by the State, any issue is resolved in 
whole or in part, but new or modified issues are presented, as specified 
by the presiding officer, the hearing proceeds on the new or modified 
issues.

[[Page 16]]

    (c) Issues removed from consideration--(1) Basis for removal. If at 
any time before, during, or after the hearing, the presiding officer 
finds that the State has come into compliance with Federal requirements 
on any issue or part of an issue, he or she removes the appropriate 
issue or part of an issue from consideration. If all issues are removed, 
the hearing is terminated.
    (2) Notice to parties. Before removing any issue or part of an issue 
from consideration, the presiding officer provides all parties other 
than CMS and the State with--
    (i) A statement of the intent to remove and the reasons for removal; 
and
    (ii) A copy of the proposed State plan provision on which CMS and 
the State have agreed.
    (3) Opportunity for written comment. The notified parties have 15 
days to submit, for consideration by the presiding officer, and for the 
record, their views as to, or any information bearing upon, the merits 
of the proposed plan provision and the merits of the reasons for 
removing the issue from consideration.
    (d) Remaining issues. The issues considered at the hearing are 
limited to those issues of which the State is notified as provided in 
Sec. 430.70 and paragraph (a) of this section, and new or modified 
issues described in paragraph (b) of this section. They do not include 
issues or parts of issues removed in accordance with paragraph (c) of 
this section.



Sec. 430.76  Parties to the hearing.

    (a) CMS and the State. CMS and the State are parties to the hearing.
    (b) Other individuals--(1) Basis for participation. Other 
individuals or groups may be recognized as parties if the issues to be 
considered at the hearing have caused them injury and their interest is 
within the zone of interests to be protected by the governing Federal 
statute.
    (2) Petition for participation. Any individual or group wishing to 
participate as a party must, within 15 days after notice of hearing is 
published in the Federal Register, file with the CMS Docket Clerk, a 
petition that concisely states--
    (i) Petitioner's interest in the proceeding;
    (ii) Who will appear for petitioner;
    (iii) The issues on which petitioner wishes to participate; and
    (iv) Whether petitioner intends to present witnesses.

The petitioner must also serve a copy of the petition on each party of 
record at that time.
    (3) Comments on petition. Any party may, within 5 days of receipt of 
the copy of the petition, file comments on it.
    (4) Action on petition. (i) The presiding officer promptly 
determines whether each petitioner has the requisite interest in the 
proceedings and approves or denies participation accordingly.
    (ii) If petitions are made by more than one individual or group with 
common interests, the presiding officer may--
    (A) Request all those petitioners to designate a single 
representative; or
    (B) Recognize one or more of those petitioners to represent all of 
them.
    (iii) The presiding officer gives each petitioner written notice of 
the decision and, if the decision is to deny, briefly states the grounds 
for denial.
    (c) Amicus curiae (friend of the court)--(1) Petition for 
participation. Any person or organization that wishes to participate as 
amicus curiae must, before the hearing begins, file with the CMS Docket 
Clerk, a petition that concisely states--
    (i) The petitioners' interest in the hearing;
    (ii) Who will represent the petitioner; and
    (iii) The issues on which the petitioner intends to present 
argument.
    (2) Action on amicus curiae petition. The presiding officer may 
grant the petition if he or she finds that the petitioner has a 
legitimate interest in the proceedings, that such participation will not 
unduly delay the outcome and may contribute materially to the proper 
disposition of the issues.
    (3) Nature of amicus participation. An amicus curiae is not a party 
to the hearing but may participate by--
    (i) Submitting a written statement of position to the presiding 
officer before the beginning of the hearing;

[[Page 17]]

    (ii) Presenting a brief oral statement at the hearing, at the point 
in the proceedings specified by the presiding officer; and
    (iii) Submitting a brief or written statement when the parties 
submit briefs.

The amicus curiae must serve copies of any briefs or written statements 
on all parties.



Sec. 430.80  Authority of the presiding officer.

    (a) The presiding officer has the duty to conduct a fair hearing, to 
avoid delay, maintain order, and make a record of the proceedings. He or 
she has the authority necessary to accomplish those ends, including but 
not limited to authority to take the following actions:
    (1) Change the date, time, and place of the hearing after due notice 
to the parties. This includes authority to postpone or adjourn the 
hearing in whole or in part. In a hearing on disapproval of a State 
plan, or State plan amendments, changes in the date of the hearing are 
subject to the time limits imposed by section 1116(a)(2) of the Act.
    (2) Hold conferences to settle or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the issues.
    (3) Regulate participation of parties and amici curiae and require 
parties and amici curiae to state their position with respect to the 
various issues in the proceeding.
    (4) Administer oaths and affirmations.
    (5) Rule on motions and other procedural items, including issuance 
of protective orders or other relief to a party against whom discovery 
is sought.
    (6) Regulate the course of the hearing and conduct of counsel.
    (7) Examine witnesses.
    (8) Receive, rule on, exclude or limit evidence or discovery.
    (9) Fix the time for filing motions, petitions, briefs, or other 
items.
    (10) If the presiding officer is the Administrator, make a final 
decision.
    (11) If the presiding officer is a designee of the Administrator, 
certify the entire record including recommended findings and proposed 
decision to the Administrator.
    (12) Take any action authorized by the rules in this subpart or in 
conformance with the provisions of 5 U.S.C. 551 through 559.
    (b) The presiding officer does not have authority to compel by 
subpoena the production of witnesses, papers, or other evidence.
    (c) If the presiding officer is a designee of the Administrator, his 
or her authority pertains to the issues of compliance by a State with 
Federal requirements, and does not extend to the question of whether, in 
case of any noncompliance, Federal payments will be denied in respect to 
the entire State plan or only for certain categories under, or parts of, 
the State plan affected by the noncompliance.



Sec. 430.83  Rights of parties.

    All parties may:
    (a) Appear by counsel or other authorized representative, in all 
hearing proceedings.
    (b) Participate in any prehearing conference held by the presiding 
officer.
    (c) Agree to stipulations as to facts which will be made a part of 
the record.
    (d) Make opening statements at the hearing.
    (e) Present relevant evidence on the issues at the hearing.
    (f) Present witnesses who then must be available for cross-
examination by all other parties.
    (g) Present oral arguments at the hearing.
    (h) Submit written briefs, proposed findings of fact, and proposed 
conclusions of law, after the hearing.



Sec. 430.86  Discovery.

    CMS and any party named in the notice issued under Sec. 430.70 has 
the right to conduct discovery (including depositions) against opposing 
parties. Rules 26-37 of the Federal Rules of Civil Procedures apply to 
such proceedings; there will be no fixed rule on priority of discovery. 
Upon written motion, the presiding officer promptly rules upon any 
objection to discovery action initiated under this section. The 
presiding officer also has the power to grant a

[[Page 18]]

protective order or relief to any party against whom discovery is sought 
and to restrict or control discovery so as to prevent undue delay in the 
conduct of the hearing. Upon the failure of any party to make discovery, 
the presiding officer may issue any order and impose any sanction (other 
than contempt orders) authorized by Rule 37 of the Federal Rules of 
Civil Procedure.



Sec. 430.88  Evidence.

    (a) Evidentiary purpose. The hearing is directed to receiving 
factual evidence and expert opinion testimony related to the issues 
involved in the proceeding. Argument is not received in evidence. It 
must be presented in statements, memoranda, or briefs, as determined by 
the presiding officer. Brief opening statements, concerning the party's 
position and what he or she intends to prove, may be made at hearings.
    (b) Testimony. Testimony is given orally under oath or affirmation 
by witnesses at the hearing. Witnesses are available at the hearing for 
cross-examination by all parties.
    (c) Stipulations and exhibits. Two or more parties may agree to 
stipulations of fact. Those stipulations, and any exhibit proposed by 
any party, are exchanged before the hearing if the presiding officer so 
requires.
    (d) Rules of evidence. (1) Technical rules of evidence do not apply 
to hearings conducted under this subpart. However, rules or principles 
designed to ensure production of the most credible evidence available 
and to subject testimony to test by cross-examination are applied by the 
presiding officer when reasonably necessary.
    (2) A witness may be cross-examined on any matter material to the 
proceeding without regard to the scope of his or her direct examination.
    (3) The presiding officer may exclude irrelevant, immaterial, or 
unduly repetitious evidence.
    (4) All documents and other evidence offered or taken for the record 
are open to examination by the parties and an opportunity is given to 
refute facts and arguments advanced on either side of the issues.



Sec. 430.90  Exclusion from hearing for misconduct.

    The presiding officer may immediately exclude from the hearing any 
person who--
    (a) Uses disrespectful, disorderly, or contumacious language or 
engages in contemptuous behavior;
    (b) Refuses to comply with directions; or
    (c) Uses dilatory tactics.



Sec. 430.92  Unsponsored written material.

    Letters expressing views or urging action and other unsponsored 
written material regarding matters in issue in a hearing are placed in 
the correspondence section of the docket of the proceeding. These data 
are not considered part of the evidence or record in the hearing.



Sec. 430.94  Official transcript.

    (a) Filing. The official transcripts of testimony, together with any 
stipulations, briefs, or memoranda of law, are filed with CMS.
    (b) Availability of transcripts. CMS designates an official reporter 
for each hearing. Transcripts of testimony in hearings may be obtained 
from the official reporter by the parties and the public at rates not in 
excess of the maximum rates fixed by the contract between CMS and the 
reporter.
    (c) Correction of transcript. Upon notice to all parties, the 
presiding officer may authorize corrections that affect substantive 
matters in the transcript.



Sec. 430.96  Record for decision.

    The transcript of testimony, exhibits, and all papers and requests 
filed in the proceedings, except the correspondence section of the 
docket, including rulings and any recommended or initial decision 
constitute the exclusive record for decision.



Sec. 430.100  Posthearing briefs.

    The presiding officer fixes the time for filing posthearing briefs, 
which may contain proposed findings of fact and conclusions of law. The 
presiding officer may also permit reply briefs.

[[Page 19]]



Sec. 430.102  Decisions following hearing.

    (a) Administrator presides. If the presiding officer is the 
Administrator, he or she issues the hearing decision within 60 days 
after expiration of the period for submission of posthearing briefs.
    (b) Administrator's designee presides. If the presiding officer is 
other than the Administrator, the procedure is as follows:
    (1) Upon expiration of the period allowed for submission of 
posthearing briefs, the presiding officer certifies the entire record, 
including his or her recommended findings and proposed decision, to the 
Administrator. The Administrator serves a copy of the recommended 
findings and proposed decision upon all parties and amici, if any.
    (2) Any party may, within 20 days, file with the Administrator 
exceptions to the recommended findings and proposed decision and a 
supporting brief or statement.
    (3) The Administrator reviews the recommended decision and, within 
60 days of its issuance, issues his or her own decision.
    (c) Effect of Administrator's decision. The decision of the 
Administrator under this section is the final decision of the Secretary 
and constitutes ``final agency action'' within the meaning of 5 U.S.C. 
704 and a ``final determination'' within the meaning of section 
1116(a)(3) of the Act and Sec. 430.38. The Administrator's decision is 
promptly served on all parties and amici.



Sec. 430.104  Decisions that affect FFP.

    (a) Scope of decisions. If the Administrator concludes that 
withholding of FFP is necessary because a State is out of compliance 
with Federal requirements, in accordance with Sec. 430.35, the decision 
also specifies--
    (1) Whether no further payments will be made to the State or whether 
payments will be limited to parts of the program not affected by the 
noncompliance; and
    (2) The effective date of the decision to withhold.
    (b) Consultation. The Administrator may ask the parties for 
recommendations or briefs or may hold conferences of the parties on the 
question of further payments to the State.
    (c) Effective date of decision. The effective date of a decision to 
withhold Federal funds will not be earlier than the date of the 
Administrator's decision and will not be later than the first day of the 
next calendar quarter. The provisions of this section may not be waived 
under Sec. 430.64.



PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION--Table of Contents




Sec.
431.1 Purpose.

                     Subpart A--Single State Agency

431.10 Single State agency.
431.11 Organization for administration.
431.12 Medical care advisory committee.
431.15 Methods of administration.
431.16 Reports.
431.17 Maintenance of records.
431.18 Availability of agency program manuals.
431.20 Advance directives.

             Subpart B--General Administrative Requirements

431.40 Basis and scope.
431.50 Statewide operation.
431.51 Free choice of providers.
431.52 Payments for services furnished out of State.
431.53 Assurance of transportation.
431.54 Exceptions to certain State plan requirements.
431.55 Waiver of other Medicaid requirements.
431.56 Special waiver provisions applicable to American Samoa and the 
          Northern Mariana Islands.
431.57 Waiver of cost-sharing requirements.

       Subpart C--Administrative Requirements: Provider Relations

431.105 Consultation to medical facilities.
431.107 Required provider agreement.
431.108 Effective date of provider agreements.
431.110 Participation by Indian Health Service facilities.
431.115 Disclosure of survey information and provider or contractor 
          evaluation.
431.120 State requirements with respect to nursing facilities.

             Subpart D--Appeals Process for NFs and ICFs/MR

431.151 Scope and applicability.
431.152 State plan requirements.
431.153 Evidentiary hearing.

[[Page 20]]

431.154 Informal reconsideration for ICFs/MR.

         Subpart E--Fair Hearings for Applicants and Recipients

                           General Provisions

431.200 Basis and purpose.
431.201 Definitions.
431.202 State plan requirements.
431.205 Provision of hearing system.
431.206 Informing applicants and recipients.

                                 Notice

431.210 Content of notice.
431.211 Advance notice.
431.213 Exceptions from advance notice.
431.214 Notice in cases of probable fraud.

                            Right to Hearing

431.220 When a hearing is required.
431.221 Request for hearing.
431.222 Group hearings.
431.223 Denial or dismissal of request for a hearing.

                               Procedures

431.230 Maintaining services.
431.231 Reinstatement of services.
431.232 Adverse decision of local evidentiary hearing.
431.233 State agency hearing after adverse decision of local evidentiary 
          hearing.
431.240 Conducting the hearing.
431.241 Matters to be considered at the hearing.
431.242 Procedural rights of the applicant or recipient.
431.243 Parties in cases involving an eligibility determination.
431.244 Hearing decisions.
431.245 Notifying the applicant or recipient of a State agency decision.
431.246 Corrective action.

                     Federal Financial Participation

431.250 Federal financial participation.

    Subpart F--Safeguarding Information on Applicants and Recipients

431.300 Basis and purpose.
431.301 State plan requirements.
431.302 Purposes directly related to State plan administration.
431.303 State authority for safeguarding information.
431.304 Publicizing safeguarding requirements.
431.305 Types of information to be safeguarded.
431.306 Release of information.
431.307 Distribution of information materials.

Subparts G-L [Reserved]

                Subpart M--Relations With Other Agencies

431.610 Relations with standard-setting and survey agencies.
431.615 Relations with State health and vocational rehabilitation 
          agencies and title V grantees.
431.620 Agreement with State mental health authority or mental 
          institutions.
431.621 State requirements with respect to nursing facilities.
431.625 Coordination of Medicaid with Medicare part B.
431.630 Coordination of Medicaid with QIOs.
431.635 Coordination of Medicaid with Special Supplemental Food Program 
          for Women, Infants, and Children (WIC).
431.636 Coordination of Medicaid with the State Children's Health 
          Insurance Program (SCHIP).

   Subpart N--State Programs for Licensing Nursing Home Administrators

431.700 Basis and purpose.
431.701 Definitions.
431.702 State plan requirement.
431.703 Licensing requirement.
431.704 Nursing homes designated by other terms.
431.705 Licensing authority.
431.706 Composition of licensing board.
431.707 Standards.
431.708 Procedures for applying standards.
431.709 Issuance and revocation of license.
431.710 Provisional licenses.
431.711 Compliance with standards.
431.712 Failure to comply with standards.
431.713 Continuing study and investigation.
431.714 Waivers.
431.715 Federal financial participation.

Subpart O [Reserved]

                       Subpart P--Quality Control

                           General Provisions

431.800 Scope of subpart.
431.802 Basis.
431.804 Definitions.
431.806 State plan requirements.
431.808 Protection of recipient rights.

           Medicaid Eligibility Quality Control (MEQC) Program

431.810 Basic elements of the Medicaid eligibility quality control 
          (MEQC) program.
431.812 Review procedures.
431.814 Sampling plan and procedures.
431.816 Case review completion deadlines and submittal of reports.
431.818 Access to records: MEQC program.
431.820 Corrective action under the MEQC program.
431.822 Resolution of differences in State and Federal case eligibility 
          or payment findings.

[[Page 21]]

   Medicaid Quality Control (MQC) Claims Processing Assessment System

431.830 Basic elements of the Medicaid quality control (MQC) claims 
          processing assessment system.
431.832 Reporting requirements for claims processing assessment systems.
431.834 Access to records: Claims processing assessment systems.
431.836 Corrective action under the MQC claims processing assessment 
          systems.

                     Federal Financial Participation

431.861-431.864 [Reserved]
431.865 Disallowance of Federal financial participation for erroneous 
          State payments (for annual assessment periods ending after 
          July 1, 1990).

    Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 1302).

    Source: 43 FR 45188, Sept. 29, 1978, unless otherwise noted.



Sec. 431.1  Purpose.

    This part establishes State plan requirements for the designation, 
organization, and general administrative activities of a State agency 
responsible for operating the State Medicaid program, directly or 
through supervision of local administering agencies.



                     Subpart A--Single State Agency



Sec. 431.10  Single State agency.

    (a) Basis and purpose. This section implements section 1902(a)(5) of 
the Act, which provides for designation of a single State agency for the 
Medicaid program.
    (b) Designation and certification. A State plan must--
    (1) Specify a single State agency established or designated to 
administer or supervise the administration of the plan; and
    (2) Include a certification by the State Attorney General, citing 
the legal authority for the single State agency to--
    (i) Administer or supervise the administration of the plan; and
    (ii) Make rules and regulations that it follows in administering the 
plan or that are binding upon local agencies that administer the plan.
    (c) Determination of eligibility. (1) The plan must specify whether 
the agency that determines eligibility for families and for individuals 
under 21 is--
    (i) The Medicaid agency; or
    (ii) The single State agency for the financial assistance program 
under title IV-A (in the 50 States or the District of Columbia), or 
under title I or XVI (AABD), in Guam, Puerto Rico, or the Virgin 
Islands.
    (2) The plan must specify whether the agency that determines 
eligibility for the aged, blind, or disabled is--
    (i) The Medicaid agency;
    (ii) The single State agency for the financial assistance program 
under title IV-A (in the 50 States or the District of Columbia) or under 
title I or XVI (AABD), in Guam, Puerto Rico, or the Virgin Islands; or
    (iii) The Federal agency administering the supplemental security 
income program under title XVI (SSI). In this case, the plan must also 
specify whether the Medicaid agency or the title IV-A agency determines 
eligibility for any groups whose eligibility is not determined by the 
Federal agency.
    (d) Agreement with Federal or State agencies. The plan must provide 
for written agreements between the Medicaid agency and the Federal or 
other State agencies that determine eligibility for Medicaid, stating 
the relationships and respective responsibilities of the agencies.
    (e) Authority of the single State agency. In order for an agency to 
qualify as the Medicaid agency--
    (1) The agency must not delegate, to other than its own officials, 
authority to--
    (i) Exercise administrative discretion in the administration or 
supervision of the plan, or
    (ii) Issue policies, rules, and regulations on program matters.
    (2) The authority of the agency must not be impaired if any of its 
rules, regulations, or decisions are subject to review, clearance, or 
similar action by other offices or agencies of the State.
    (3) If other State or local agencies or offices perform services for 
the Medicaid agency, they must not have the authority to change or 
disapprove any administrative decision of that agency, or otherwise 
substitute their judgment for that of the Medicaid agency with respect 
to the application of policies,

[[Page 22]]

rules, and regulations issued by the Medicaid agency.

[44 FR 17930, Mar. 23, 1979]



Sec. 431.11  Organization for administration.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes the general organization and staffing requirements 
for the Medicaid agency and the State plan.
    (b) Medical assistance unit. A State plan must provide for a medical 
assistance unit within the Medicaid agency, staffed with a program 
director and other appropriate personnel who participate in the 
development, analysis, and evaluation of the Medicaid program.
    (c) Description of organization. (1) The plan must include--
    (i) A description of the organization and functions of the Medicaid 
agency and an organization chart;
    (ii) A description of the organization and functions of the medical 
assistance unit and an organization chart; and
    (iii) A description of the kinds and number of professional medical 
personnel and supporting staff used in the administration of the plan 
and their responsibilities.
    (d) Eligibility determined by other agencies. If eligibility is 
determined by State agencies other than the Medicaid agency or by local 
agencies under the supervision of other State agencies, the plan must 
include a description of the staff designated by those other agencies 
and the functions they perform in carrying out their responsibility.

[44 FR 17931, Mar. 23, 1979]



Sec. 431.12  Medical care advisory committee.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes State plan requirements for establishment of a 
committee to advise the Medicaid agency about health and medical care 
services.
    (b) State plan requirement. A State plan must provide for a medical 
care advisory committee meeting the requirements of this section to 
advise the Medicaid agency director about health and medical care 
services.
    (c) Appointment of members. The agency director, or a higher State 
authority, must appoint members to the advisory committee on a rotating 
and continuous basis.
    (d) Committee membership. The committee must include--
    (1) Board-certified physicians and other representatives of the 
health professions who are familiar with the medical needs of low-income 
population groups and with the resources available and required for 
their care;
    (2) Members of consumers' groups, including Medicaid recipients, and 
consumer organizations such as labor unions, cooperatives, consumer-
sponsored prepaid group practice plans, and others; and
    (3) The director of the public welfare department or the public 
health department, whichever does not head the Medicaid agency.
    (e) Committee participation. The committee must have opportunity for 
participation in policy development and program administration, 
including furthering the participation of recipient members in the 
agency program.
    (f) Committee staff assistance and financial help. The agency must 
provide the committee with--
    (1) Staff assistance from the agency and independent technical 
assistance as needed to enable it to make effective recommendations; and
    (2) Financial arrangements, if necessary, to make possible the 
participation of recipient members.
    (g) Federal financial participation. FFP is available at 50 percent 
in expenditures for the committee's activities.



Sec. 431.15  Methods of administration.

    A State plan must provide for methods of administration that are 
found by the Secretary to be necessary for the proper and efficient 
operation of the plan.


(Sec. 1902(a)(4) of the Act)

[44 FR 17931, Mar. 23, 1979]



Sec. 431.16  Reports.

    A State plan must provide that the Medicaid agency will--
    (a) Submit all reports required by the Secretary;

[[Page 23]]

    (b) Follow the Secretary's instructions with regard to the form and 
content of those reports; and
    (c) Comply with any provisions that the Secretary finds necessary to 
verify and assure the correctness of the reports.

[44 FR 17931, Mar. 23, 1979]



Sec. 431.17  Maintenance of records.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes the kinds of records a Medicaid agency must 
maintain, the retention period, and the conditions under which microfilm 
copies may be substituted for original records.
    (b) Content of records. A State plan must provide that the Medicaid 
agency will maintain or supervise the maintenance of the records 
necessary for the proper and efficient operation of the plan. The 
records must include--
    (1) Individual records on each applicant and recipient that contain 
information on--
    (i) Date of application;
    (ii) Date of and basis for disposition;
    (iii) Facts essential to determination of initial and continuing 
eligibility;
    (iv) Provision of medical assistance;
    (v) Basis for discontinuing assistance;
    (vi) The disposition of income and eligibility verification 
information received under Secs. 435.940 through 435.960 of this 
subchapter; and
    (2) Statistical, fiscal, and other records necessary for reporting 
and accountability as required by the Secretary.
    (c) Retention of records. The plan must provide that the records 
required under paragraph (b) of this section will be retained for the 
periods required by the Secretary.
    (d) Conditions for optional use of microfilm copies. The agency may 
substitute certified microfilm copies for the originals of 
substantiating documents required for Federal audit and review, if the 
conditions in paragraphs (d)(1) through (4) of this section are met.
    (1) The agency must make a study of its record storage and must show 
that the use of microfilm is efficient and economical.
    (2) The microfilm system must not hinder the agency's supervision 
and control of the Medicaid program.
    (3) The microfilm system must--
    (i) Enable the State to audit the propriety of expenditures for 
which FFP is claimed; and
    (ii) Enable the HHS Audit Agency and CMS to properly discharge their 
respective responsibilities for reviewing the manner in which the 
Medicaid program is being administered.
    (4) The agency must obtain approval from the CMS regional office 
indicating--
    (i) The system meets the conditions of paragraphs (d)(2) and (3) of 
this section; and
    (ii) The microfilming procedures are reliable and are supported by 
an adequate retrieval system.

[44 FR 17931, Mar. 23, 1979, as amended at 51 FR 7210, Feb. 28, 1986]



Sec. 431.18  Availability of agency program manuals.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes State plan requirements for facilitating access to 
Medicaid rules and policies by individuals outside the State Medicaid 
agency.
    (b) State plan requirements. A State plan must provide that the 
Medicaid agency meets the requirements of paragraphs (c) through (g) of 
this section.
    (c) Availability in agency offices. (1) The agency must maintain, in 
all its offices, copies of its current rules and policies that affect 
the public, including those that govern eligibility, provision of 
medical assistance, covered services, and recipient rights and 
responsibilities.
    (2) These documents must be available upon request for review, 
study, and reproduction by individuals during regular working hours of 
the agency.
    (d) Availability through other entities. The agency must provide 
copies of its current rules and policies to--
    (1) Public and university libraries;
    (2) The local or district offices of the Bureau of Indian Affairs;
    (3) Welfare and legal services offices; and
    (4) Other entities that--
    (i) Request the material in order to make it accessible to the 
public;

[[Page 24]]

    (ii) Are centrally located and accessible to a substantial number of 
the recipient population they serve; and
    (iii) Agree to accept responsibility for filing all amendments or 
changes forwarded by the agency.
    (e) Availability in relation to fair hearings. The agency must make 
available to an applicant or recipient, or his representative, a copy of 
the specific policy materials necessary--
    (1) To determine whether to request a fair hearing; or
    (2) To prepare for a fair hearing.
    (f) Availability for other purposes. The agency must establish rules 
for making program policy materials available to individuals who request 
them for other purposes.
    (g) Charges for reproduction. The agency must make copies of its 
program policy materials available without charge or at a charge related 
to the cost of reproduction.

[44 FR 17931, Mar. 23, 1979]



Sec. 431.20  Advance directives.

    (a) Basis and purpose. This section, based on section 1902(a) (57) 
and (58) of the Act, prescribes State plan requirements for the 
development and distribution of a written description of State law 
concerning advance directives.
    (b) A State Plan must provide that the State, acting through a State 
agency, association, or other private nonprofit entity, develop a 
written description of the State law (whether statutory or as recognized 
by the courts of the State) concerning advance directives, as defined in 
Sec. 489.100 of this chapter, to be distributed by Medicaid providers 
and health maintenance organizations (as specified in section 
1903(m)(1)(A) of the Act) in accordance with the requirements under part 
489, subpart I of this chapter. Revisions to the written descriptions as 
a result of changes in State law must be incorporated in such 
descriptions and distributed as soon as possible, but no later than 60 
days from the effective date of the change in State law, to Medicaid 
providers and health maintenance organizations.

[57 FR 8202, Mar. 6, 1992, as amended at 60 FR 33293, June 27, 1995]



             Subpart B--General Administrative Requirements

    Source: 56 FR 8847, Mar. 1, 1991, unless otherwise noted.



Sec. 431.40  Basis and scope.

    (a) This subpart sets forth State plan requirements and exceptions 
that pertain to the following administrative requirements and provisions 
of the Act:
    (1) Statewideness--section 1902(a)(1);
    (2) Proper and efficient administration--section 1902(a)(4);
    (3) Comparability of services--section 1902(a)(10) (B)-(E);
    (4) Payment for services furnished outside the State--section 
1902(a)(16);
    (5) Free choice of providers--section 1902(a)(23);
    (6) Special waiver provisions applicable to American Samoa and the 
Northern Mariana Islands--section 1902(j); and
    (7) Exceptions to, and waiver of, State plan requirements--sections 
1915 (a)-(c) and 1916 (a)(3) and (b)(3).
    (b) Other applicable regulations include the following:
    (1) Section 430.25 Waivers of State plan requirements.
    (2) Section 440.250 Limits on comparability of services.



Sec. 431.50  Statewide operation.

    (a) Statutory basis. Section 1902(a)(1) of the Act requires a State 
plan to be in effect throughout the State, and section 1915 permits 
certain exceptions.
    (b) State plan requirements. A State plan must provide that the 
following requirements are met:
    (1) The plan will be in operation statewide through a system of 
local offices, under equitable standards for assistance and 
administration that are mandatory throughout the State.
    (2) If administered by political subdivisions of the State, the plan 
will be mandatory on those subdivisions.
    (3) The agency will ensure that the plan is continuously in 
operation in all local offices or agencies through--
    (i) Methods for informing staff of State policies, standards, 
procedures, and instructions;
    (ii) Systematic planned examination and evaluation of operations in 
local

[[Page 25]]

offices by regularly assigned State staff who make regular visits; and
    (iii) Reports, controls, or other methods.
    (c) Exceptions. (1) ``Statewide operation'' does not mean, for 
example, that every source of service must furnish the service State-
wide. The requirement does not preclude the agency from contracting with 
a comprehensive health care organization (such as an HMO or a rural 
health clinic) that serves a specific area of the State, to furnish 
services to Medicaid recipients who live in that area and chose to 
receive services from that HMO or rural health clinic. Recipients who 
live in other parts of the State may receive their services from other 
sources.
    (2) Other allowable exceptions and waivers are set forth in 
Secs. 431.54 and 431.55.

[56 FR 8847, Mar. 1, 1991; 56 FR 23022, May 20, 1991]



Sec. 431.51  Free choice of providers.

    (a) Statutory basis. This section is based on sections 1902(a)(23), 
1902(e)(2), and 1915(a) and (b) and 1932(a)(3) of the Act.
    (1) Section 1902(a)(23) of the Act provides that recipients may 
obtain services from any qualified Medicaid provider that undertakes to 
provide the services to them.
    (2) Section 1915(a) of the Act provides that a State shall not be 
found out of compliance with section 1902(a)(23) solely because it 
imposes certain specified allowable restrictions on freedom of choice.
    (3) Section 1915(b) of the Act authorizes waiver of the section 
1902(a)(23) freedom of choice of providers requirement in certain 
specified circumstances, but not with respect to providers of family 
planning services.
    (4) Section 1902(a)(23) of the Act provides that a recipient 
enrolled in a primary care case management system or Medicaid managed 
care organization (MCO) may not be denied freedom of choice of qualified 
providers of family planning services.
    (5) Section 1902(e)(2) of the Act provides that an enrollee who, 
while completing a minimum enrollment period, is deemed eligible only 
for services furnished by or through the MCO or PCCM, may, as an 
exception to the deemed limitation, seek family planning services from 
any qualified provider.
    (6) Section 1932(a) of the Act permits a State to restrict the 
freedom of choice required by section 1902(a)(23), under specified 
circumstances, for all services except family planning services.
    (b) State plan requirements. A State plan, except the plan for 
Puerto Rico, the Virgin Islands, or Guam, must provide as follows:
    (1) Except as provided under paragraph (c) of this section and part 
438 of this chapter, a recipient may obtain Medicaid services from any 
institution, agency, pharmacy, person, or organization that is--
    (i) Qualified to furnish the services; and
    (ii) Willing to furnish them to that particular recipient.

This includes an organization that furnishes, or arranges for the 
furnishing of, Medicaid services on a prepayment basis.
    (2) A recipient enrolled in a primary care case-management system, a 
Medicaid MCO, or other similar entity will not be restricted in freedom 
of choice of providers of family planning services.
    (c) Exceptions. Paragraph (b) of this section does not prohibit the 
agency from--
    (1) Establishing the fees it will pay providers for Medicaid 
services;
    (2) Setting reasonable standards relating to the qualifications of 
providers: or
    (3) Subject to paragraph (b)(2) of this section, restricting 
recipients' free choice of providers in accordance with one or more of 
the exceptions set forth in Sec. 431.54, or under a waiver as provided 
in Sec. 431.55.
    (d) Certification requirement. (1) Content of certification. If a 
State implements a project under one of the exceptions allowed under 
Sec. 431.54 (d), (e) or (f), it must certify to CMS that the statutory 
safeguards and requirements for an exception under section 1915(a) of 
the Act are met.
    (2) Timing of certification. (i) For an exception under 
Sec. 431.54(d), the State may not institute the project until

[[Page 26]]

after it has submitted the certification and CMS has made the findings 
required under the Act, and so notified the State.
    (ii) For exceptions under Sec. 431.54 (e) or (f), the State must 
submit the certificate by the end of the quarter in which it implements 
the project.

[56 FR 8847, Mar. 1, 1991, as amended at 67 FR 41094, June 14, 2002]



Sec. 431.52  Payments for services furnished out of State.

    (a) Statutory basis. Section 1902(a)(16) of the Act authorizes the 
Secretary to prescribe State plan requirements for furnishing Medicaid 
to State residents who are absent from the State.
    (b) Payment for services. A State plan must provide that the State 
will pay for services furnished in another State to the same extent that 
it would pay for services furnished within its boundaries if the 
services are furnished to a recipient who is a resident of the State, 
and any of the following conditions is met:
    (1) Medical services are needed because of a medical emergency;
    (2) Medical services are needed and the recipient's health would be 
endangered if he were required to travel to his State of residence;
    (3) The State determines, on the basis of medical advice, that the 
needed medical services, or necessary supplementary resources, are more 
readily available in the other State;
    (4) It is general practice for recipients in a particular locality 
to use medical resources in another State.
    (c) Cooperation among States. The plan must provide that the State 
will establish procedures to facilitate the furnishing of medical 
services to individuals who are present in the State and are eligible 
for Medicaid under another State's plan.



Sec. 431.53  Assurance of transportation.

    A State plan must--
    (a) Specify that the Medicaid agency will ensure necessary 
transportation for recipients to and from providers; and
    (b) Describe the methods that the agency will use to meet this 
requirement.


(Sec. 1902(a)(4) of the Act)



Sec. 431.54  Exceptions to certain State plan requirements.

    (a) Statutory basis. Section 1915(a) of the Act provides that a 
State shall not be deemed to be out of compliance with the requirements 
of sections 1902(a) (1), (10), or (23) of the Act solely because it has 
elected any of the exceptions set forth in paragraphs (b) and (d) 
through (f) of this section.
    (b) Additional services under a prepayment system. If the Medicaid 
agency contracts on a prepayment basis with an organization that 
provides services additional to those offered under the State plan, the 
agency may restrict the provision of the additional services to 
recipients who live in the area served by the organization and wish to 
obtain services from it.
    (c) [Reserved]
    (d) Special procedures for purchase of medical devices and 
laboratory and X-ray tests. The Medicaid agency may establish special 
procedures for the purchase of medical devices or laboratory and X-ray 
tests (as defined in Sec. 440.30 of this chapter) through a competitive 
bidding process or otherwise, if the State assures, in the certification 
required under Sec. 431.51(d), and CMS finds, as follows:
    (1) Adequate services or devices are available to recipients under 
the special procedures.
    (2) Laboratory services are furnished through laboratories that meet 
the following requirements:
    (i) They are independent laboratories, or inpatient or outpatient 
hospital laboratories that provide services for individuals who are not 
hospital patients, or physician laboratories that process at least 100 
specimens for other physicians during any calendar year.
    (ii) They meet the requirements of subpart M of part 405 or part 482 
of this chapter.
    (iii) Laboratories that require an interstate license under 42 CFR 
part 74

[[Page 27]]

are licensed by CMS or receive an exemption from the licensing 
requirement by the College of American Pathologists. (Hospital and 
physician laboratories may participate in competitive bidding only with 
regard to services to non-hospital patients and other physicians' 
patients, respectively.)
    (3) Any laboratory from which a State purchases services under this 
section has no more than 75 percent of its charges based on services to 
Medicare beneficiaries and Medicaid recipients.
    (e) Lock-in of recipients who over-utilize Medicaid services. If a 
Medicaid agency finds that a recipient has utilized Medicaid services at 
a frequency or amount that is not medically necessary, as determined in 
accordance with utilization guidelines established by the State, the 
agency may restrict that recipient for a reasonable period of time to 
obtain Medicaid services from designated providers only. The agency may 
impose these restrictions only if the following conditions are met:
    (1) The agency gives the recipient notice and opportunity for a 
hearing (in accordance with procedures established by the agency) before 
imposing the restrictions.
    (2) The agency ensures that the recipient has reasonable access 
(taking into account geographic location and reasonable travel time) to 
Medicaid services of adequate quality.
    (3) The restrictions do not apply to emergency services furnished to 
the recipient.
    (f) Lock-out of providers. If a Medicaid agency finds that a 
Medicaid provider has abused the Medicaid program, the agency may 
restrict the provider, through suspension or otherwise, from 
participating in the program for a reasonable period of time.
    Before imposing any restriction, the agency must meet the following 
conditions:
    (1) Give the provider notice and opportunity for a hearing, in 
accordance with procedures established by the agency.
    (2) Find that in a significant number or proportion of cases, the 
provider has:
    (i) Furnished Medicaid services at a frequency or amount not 
medically necessary, as determined in accordance with utilization 
guidelines established by the agency; or
    (ii) Furnished Medicaid services of a quality that does not meet 
professionally recognized standards of health care.
    (3) Notify CMS and the general public of the restriction and its 
duration.
    (4) Ensure that the restrictions do not result in denying recipients 
reasonable access (taking into account geographic location: and 
reasonable travel time) to Medicaid services of adequate quality, 
including emergency services.



Sec. 431.55  Waiver of other Medicaid requirements.

    (a) Statutory basis. Section 1915(b) of the Act authorizes the 
Secretary to waive most requirements of section 1902 of the Act to the 
extent he or she finds proposed improvements or specified practices in 
the provision of services under Medicaid to be cost effective, 
efficient, and consistent with the objectives of the Medicaid program. 
Sections 1915 (f) and (h) prescribe how such waivers are to be approved, 
continued, monitored, and terminated. Section 1902(p)(2) of the Act 
conditions FFP in payments to an entity under a section 1915(b)(1) 
waiver on the State's provision for exclusion of certain entities from 
participation.
    (b) General requirements. (1) General requirements for submittal of 
waiver requests, and the procedures that CMS follows for review and 
action on those requests are set forth in Sec. 430.25 of this chapter.
    (2) In applying for a waiver to implement an approvable project 
under paragraph (c), (d), (e), or (f) of this section, a Medicaid agency 
must document in the waiver request and maintain data regarding:
    (i) The cost-effectiveness of the project;
    (ii) The effect of the project on the accessibility and quality of 
services;
    (iii) The anticipated impact of the project on the State's Medicaid 
program and;
    (iv) Assurances that the restrictions on free choice of providers do 
not apply to family planning services.

[[Page 28]]

    (3) No waiver under this section may be granted for a period longer 
than 2 years, unless the agency requests a continuation of the waiver.
    (4) CMS monitors the implementation of waivers granted under this 
section to ensure that requirements for such waivers are being met.
    (i) If monitoring demonstrates that the agency is not in compliance 
with the requirements for a waiver under this section, CMS gives the 
agency notice and opportunity for a hearing.
    (ii) If, after a hearing, CMS finds an agency to be out of 
compliance with the requirements of a waiver, CMS terminates the waiver 
and gives the agency a specified date by which it must demonstrate that 
it meets the applicable requirements of section 1902 of the Act.
    (5) The requirements of section 1902(s) of the Act, with regard to 
adjustments in payments for inpatient hospital services furnished to 
infants who have not attained age 1 and to children who have not 
attained age 6 and who receive these services in disproportionate share 
hospitals, may not be waived under a section 1915(b) waiver.
    (c) Case-management system. (1) Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to implement a 
primary care case-management system or specialty physician services 
system.
    (i) Under a primary care case-management system the agency assures 
that a specific person or persons or agency will be responsible for 
locating, coordinating, and monitoring all primary care or primary care 
and other medical care and rehabilitative services on behalf of a 
recipient. The person or agency must comply with the requirements set 
forth in part 438 of this chapter for primary care case management 
contracts and systems.
    (ii) A specialty physician services system allows States to restrict 
recipients of specialty services to designated providers of such 
services, even in the absence of a primary care case-management system.
    (2) A waiver under this paragraph (c) may not be approved unless the 
State's request assures that the restrictions--
    (i) Do not apply in emergency situations; and
    (ii) Do not substantially impair access to medically necessary 
services of adequate quality.
    (d) Locality as central broker. Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to allow a 
locality to act as a central broker to assist recipients in selecting 
among competing health care plans. States must ensure that access to 
medically necessary services of adequate quality is not substantially 
impaired.
    (1) A locality is any defined jurisdiction, e.g., district, town, 
city, borough, county, parish, or State.
    (2) A locality may use any agency or agent, public or private, 
profit or nonprofit, to act on its behalf in carrying out its central 
broker function.
    (e) Sharing of cost savings. (1) Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to share with 
recipients the cost savings resulting from the recipients' use of more 
cost-effective medical care.
    (2) Sharing is through the provision of additional services, 
including--
    (i) Services furnished by a plan selected by the recipient; and
    (ii) Services expressly offered by the State as an inducement for 
recipients to participate in a primary care case-management system, a 
competing health care plan or other system that furnishes health care 
services in a more cost-effective manner.
    (f) Restriction of freedom of choice--(1) Waiver of appropriate 
requirements of section 1902 of the Act may be authorized for States to 
restrict recipients to obtaining services from (or through) qualified 
providers or practitioners that meet, accept, and comply with the State 
reimbursement, quality and utilization standards specified in the 
State's waiver request.
    (2) An agency may qualify for a waiver under this paragraph (f) only 
if its applicable State standards are consistent with access, quality 
and efficient and economic provision of covered care and services and 
the restrictions it imposes--
    (i) Do not apply to recipients residing at a long-term care facility 
when a restriction is imposed unless the State

[[Page 29]]

arranges for reasonable and adequate recipient transfer.
    (ii) Do not discriminate among classes of providers on grounds 
unrelated to their demonstrated effectiveness and efficiency in 
providing those services; and
    (iii) Do not apply in emergency circumstances.
    (3) Demonstrated effectiveness and efficiency refers to reducing 
costs or slowing the rate of cost increase and maximizing outputs or 
outcomes per unit of cost.
    (4) The agency must make payments to providers furnishing services 
under a freedom of choice waiver under this paragraph (f) in accordance 
with the timely claims payment standards specified in Sec. 447.45 of 
this chapter for health care practitioners participating in the Medicaid 
program.
    (g) [Reserved]
    (h) Waivers approved under section 1915(b)(1) of the Act--(1) Basic 
rules. (i) An agency must submit, as part of it's waiver request, 
assurance that the entities described in paragraph (h)(2) of this 
section will be excluded from participation under an approved waiver.
    (ii) FFP is available in payments to an entity that furnishes 
services under a section 1915(b)(1) waiver only if the agency excludes 
from participation any entity described in paragraph (h)(2) of this 
section.
    (2) Entities that must be excluded. The agency must exclude an 
entity that meets any of the following conditions:
    (i) Could be excluded under section 1128(b)(8) of the Act as being 
controlled by a sanctioned individual.
    (ii) Has a substantial contractual relationship (direct or indirect) 
with an individual convicted of certain crimes, as described in section 
1128(b)(8)(B) of the Act.
    (iii) Employs or contracts directly or indirectly with one of the 
following:
    (A) Any individual or entity that, under section 1128 or section 
1128A of the Act, is precluded from furnishing health care, utilization 
review, medical social services, or administrative services.
    (B) Any entity described in paragraph (h)(2)(i) of this section.
    (3) Definitions. As used in this section, substantial contractual 
relationship means any contractual relationship that provides for one or 
more of the following services:
    (i) The administration, management, or provision of medical 
services.
    (ii) The establishment of policies, or the provision of operational 
support, for the administration, management, or provision of medical 
services.

[56 FR 8847, Mar. 1, 1991, as amended at 59 FR 4599, Feb. 1, 1994; 59 FR 
36084, July 15, 1994; 67 FR 41094, June 14, 2002]



Sec. 431.56  Special waiver provisions applicable to American Samoa and the Northern Mariana Islands.

    (a) Statutory basis. Section 1902(j) of the Act provides for waiver 
of all but three of the title XIX requirements, in the case of American 
Samoa and the Northern Mariana Islands.
    (b) Waiver provisions. American Samoa or the Northern Mariana 
Islands may request, and CMS may approve, a waiver of any of the title 
XIX requirements except the following:
    (1) The Federal medical assistance percentage specified in section 
1903 of the Act and Sec. 433.10(b) of this chapter.
    (2) The limit imposed by section 1108(c) of the Act on the amount of 
Federal funds payable to American Samoa or the Northern Mariana Islands 
for care and services that meet the section 1905(a) definition for 
Medicaid assistance.
    (3) The requirement that payment be made only with respect to 
expenditure made by American Samoa or the Northern Mariana Islands for 
care and services that meet the section 1905(a) definition of medical 
assistance.



Sec. 431.57  Waiver of cost-sharing requirements.

    (a) Sections 1916(a)(3) and 1916(b)(3) of the Act specify the 
circumstances under which the Secretary is authorized to waive the 
requirement that cost-sharing amounts be nominal.
    (b) For nonemergency services furnished in a hospital emergency 
room, the Secretary may by waiver permit a State to impose a copayment 
of up to double the ``nominal'' copayment amounts determined under 
Sec. 447.54(a)(3) of this subchapter.

[[Page 30]]

    (c) Nonemergency services are services that do not meet the 
definition of emergency services at Sec. 447.53(b)(4) of this 
subchapter.
    (d) In order for a waiver to be approved under this section, the 
State must establish to the satisfaction of CMS that alternative sources 
of nonemergency, outpatient services are available and accessible to 
recipients.
    (e) Although, in accordance with Sec. 431.55(b)(3) of this part, a 
waiver will generally be granted for a 2-year duration, CMS will 
reevaluate waivers approved under this section if the State increases 
the nominal copayment amounts in effect when the waiver was approved.
    (f) A waiver approved under this section cannot apply to services 
furnished before the waiver was granted.

[59 FR 4600, Feb. 1, 1994]



       Subpart C--Administrative Requirements: Provider Relations



Sec. 431.105  Consultation to medical facilities.

    (a) Basis and purpose. This section implements section 1902(a)(24) 
of the Act, which requires that the State plan provide for consultative 
services by State agencies to certain institutions furnishing Medicaid 
services.
    (b) State plan requirements. A State plan must provide that health 
agencies and other appropriate State agencies furnish consultative 
services to hospitals, nursing homes, home health agencies, clinics, and 
laboratories in order to assist these facilities to--
    (1) Qualify for payments under the maternal and child health and 
crippled children's program (title V of the Act), Medicaid or Medicare;
    (2) Establish and maintain fiscal records necessary for the proper 
and efficient administration of the Act; and
    (3) Provide information needed to determine payments due under the 
Act for services furnished to recipients.
    (c) State plan option: Consultation to other facilities. The plan 
may provide that health agencies and other appropriate State agencies 
furnish consultation to other types of facilities if those facilities 
are specified in the plan and provide medical care to individuals 
receiving services under the programs specified in paragraph (b) of this 
section.



Sec. 431.107  Required provider agreement.

    (a) Basis and purpose. This section sets forth State plan 
requirements, based on sections 1902(a)(4), 1902(a)(27), 1902(a)(57), 
and 1902(a)(58) of the Act, that relate to the keeping of records and 
the furnishing of information by all providers of services (including 
individual practitioners and groups of practitioners).
    (b) Agreements. A State plan must provide for an agreement between 
the Medicaid agency and each provider or organization furnishing 
services under the plan in which the provider or organization agrees to:
    (1) Keep any records necessary to disclose the extent of services 
the provider furnishes to recipients;
    (2) On request, furnish to the Medicaid agency, the Secretary, or 
the State Medicaid fraud control unit (if such a unit has been approved 
by the Secretary under Sec. 455.300 of this chapter), any information 
maintained under paragraph (b)(1) of this section and any information 
regarding payments claimed by the provider for furnishing services under 
the plan;
    (3) Comply with the disclosure requirements specified in part 455, 
subpart B of this chapter; and
    (4) Comply with the advance directives requirements for hospitals, 
nursing facilities, providers of home health care and personal care 
services, hospices, and HMOs specified in part 489, subpart I, and 
Sec. 417.436(d) of this chapter.

[44 FR 41644, July 17, 1979, as amended at 57 FR 8202, Mar. 6, 1992]



Sec. 431.108  Effective date of provider agreements.

    (a) Applicability--(1) General rule. Except as provided in paragraph 
(a)(2) of this section, this section applies to Medicaid provider 
agreements with entities that, as a basis for participation in Medicaid-
-
    (i) Are subject to survey and certification by CMS or the State 
survey agency; or

[[Page 31]]

    (ii) Are deemed to meet Federal requirements on the basis of 
accreditation by an accrediting organization whose program has CMS 
approval at the time of accreditation survey and accreditation decision.
    (2) Exception. A Medicaid provider agreement with a laboratory is 
effective only while the laboratory has in effect a valid CLIA 
certificate issued under part 493 of this chapter, and only for the 
specialty and subspecialty tests it is authorized to perform.
    (b) All requirements are met on the date of survey. The agreement is 
effective on the date the onsite survey (including the Life Safety Code 
survey if applicable) is completed, if on that date the provider meets--
    (1) All applicable Federal requirements as set forth in this 
chapter; and
    (2) Any other requirements imposed by the State for participation in 
the Medicaid program. (If the provider has a time-limited agreement, the 
new agreement is effective on the day following expiration of the 
current agreement.)
    (c) All requirements are not met on the date of survey. If on the 
date the survey is completed the provider fails to meet any of the 
requirements specified in paragraph (b) of this section, the following 
rules apply:
    (1) An NF provider agreement is effective on the date on which--
    (i) The NF is found to be in substantial compliance as defined in 
Sec. 488.301 of this chapter; and
    (ii) CMS or the State survey agency receives from the NF, if 
applicable, an approvable waiver request.
    (2) For an agreement with any other provider, the effective date is 
the earlier of the following:
    (i) The date on which the provider meets all requirements.
    (ii) The date on which a provider is found to meet all conditions of 
participation but has lower level deficiencies, and CMS or the State 
survey agency receives from the provider an acceptable plan of 
correction for the lower level deficiencies, or an approvable waiver 
request, or both. (The date of receipt is the effective date of the 
agreement, regardless of when CMS approves the plan of correction or 
waiver request, or both.)
    (d) Accredited provider requests participation in the Medicaid 
program--(1) General rule. If a provider is currently accredited by a 
national accrediting organization whose program had CMS approval at the 
time of accreditation survey and accreditation decision, and on the 
basis of accreditation, CMS has deemed the provider to meet Federal 
requirements, the effective date depends on whether the provider is 
subject to requirements in addition to those included in the accrediting 
organization's approved program.
    (i) Provider subject to additional requirements. For a provider that 
is subject to additional requirements, Federal or State, or both, the 
effective date is the date on which the provider meets all requirements, 
including the additional requirements.
    (ii) Provider not subject to additional requirements. For a provider 
that is not subject to additional requirements, the effective date is 
the date of the provider's initial request for participation if on that 
date the provider met all Federal requirements.
    (2) Special rule: Retroactive effective date. If the provider meets 
the requirements of paragraphs (d)(1) and (d)(1)(i) or (d)(1)(ii) of 
this section, the effective date may be retroactive for up to one year, 
to encompass dates on which the provider furnished, to a Medicaid 
recipient, covered services for which it has not been paid.

[62 FR 43935, Aug. 18, 1997]



Sec. 431.110  Participation by Indian Health Service facilities.

    (a) Basis. This section is based on section 1902(a)(4) of the Act, 
proper and efficient administration; 1902(a)(23), free choice of 
provider; and 1911, reimbursement of Indian Health Service facilities.
    (b) State plan requirements. A State plan must provide that an 
Indian Health Service facility meeting State requirements for Medicaid 
participation must be accepted as a Medicaid provider on the same basis 
as any other qualified provider. However, when State licensure is 
normally required, the facility need not obtain a license but must meet 
all applicable standards for licensure. In determining whether a

[[Page 32]]

facility meets these standards, a Medicaid agency or State licensing 
authority may not take into account an absence of licensure of any staff 
member of the facility.



Sec. 431.115  Disclosure of survey information and provider or contractor evaluation.

    (a) Basis and purpose. This section implements--
    (1) Section 1902(a)(36) of the Act, which requires a State plan to 
provide that the State survey agency will make publicly available the 
findings from surveys of health care facilities, laboratories, agencies, 
clinics, or organizations; and
    (2) Section 1106(d) of the Act, which places certain restrictions on 
the Medicaid agency's disclosure of contractor and provider evaluations.
    (b) Definition of State survey agency. The State survey agency 
referred to in this section means the agency specified under section 
1902(a)(9) of the Act as responsible for establishing and maintaining 
health standards for private or public institutions in which Medicaid 
recipients may receive services.
    (c) State plan requirements. A State plan must provide that the 
requirements of this section and Sec. 488.325 of this chapter are met.
    (d) Disclosure procedure. The Medicaid agency must have a procedure 
for disclosing pertinent findings obtained from surveys made by the 
State survey agency to determine if a health care facility, laboratory, 
agency, clinic or health care organization meets the requirements for 
participation in the Medicaid program.
    (e) Documents subject to disclosure. Documents subject to disclosure 
include--
    (1) Survey reports, except for Joint Commission on the Accreditation 
of Hospitals reports prohibited from disclosure under Sec. 422.426(b)(2) 
of this chapter;
    (2) Official notifications of findings based on survey reports:
    (3) Pertinent parts of written documents furnished by the health 
care provider to the survey agency that relate to the reports and 
findings; and
    (4) Ownership and contract information as specified in Sec. 455.104 
of this subchapter.
    (f) Availability for inspection and copy of statements listing 
deficiencies. The disclosure procedure must provide that the State 
survey agency will--
    (1) Make statements of deficiencies based on the survey reports 
available for inspection and copying in both the public assistance 
office and the Social Security Administration district office serving 
the area where the provider is located; and
    (2) Submit to the Regional Medicaid Director, through the Medicaid 
agency, a plan for making those findings available in other public 
assistance offices in standard metropolitian statistical areas where 
this information would be helpful to persons likely to use the health 
care provider's services.
    (g) When documents must be made available. The disclosure procedure 
must provide that the State survey agency will--
    (1) Retain in the survey agency office and make available upon 
request survey reports and current and accurate ownership information; 
and
    (2) Make available survey reports, findings, and deficiency 
statements immediately upon determining that a health care provider is 
eligible to begin or continue participation in the Medicaid program, or 
within 90 days after completion of the survey, whichever occurs first.
    (h) Evaluation reports on providers and contractors. (1) If the 
Secretary sends the following reports to the Medicaid agency, the agency 
must meet the requirements of paragraphs (h) (2) and (3) of this section 
in releasing them:
    (i) Individual contractor performance reviews and other formal 
performance evaluations of carriers, intermediaries, and State agencies, 
including the reports of followup reviews;
    (ii) Comparative performance evaluations of those contractors, 
including comparisons of either overall performance or of any particular 
aspect of contractor operations; and
    (iii) Program validation survey reports and other formal performance 
evaluations of providers, including the reports of followup reviews.

[[Page 33]]

    (2) The agency must not make the reports public until--
    (i) The contractor or provider has had a reasonable opportunity, not 
to exceed 30 days, to comment on them; and
    (ii) Those comments have been incorporated in the report.
    (3) The agency must ensure that the reports contain no 
identification of individual patients, individual health care 
practitioners or other individuals.

[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 41644, July 17, 1979; 
59 FR 56232, Nov. 10, 1994]



Sec. 431.120  State requirements with respect to nursing facilities.

    (a) State plan requirements. A State plan must--
    (1) Provide that the requirements of subpart D of part 483 of this 
chapter are met; and
    (2) Specify the procedures and rules that the State follows in 
carrying out the specified requirements, including review and approval 
of State-operated programs.
    (3) To an NF or ICF/MR that is dissatisfied with a determination as 
to the effective date of its provider agreement.
    (b) Basis and scope of requirements. The requirements set forth in 
part 483 of this chapter pertain to the following aspects of nursing 
facility services and are required by the indicated sections of the Act.
    (1) Nurse aide training and competency programs, and evaluation of 
nurse aide competency (1919(e)(1) of the Act).
    (2) Nurse aide registry (1919(e)(2) of the Act).

[56 FR 48918, Sept. 26, 1991, as amended at 62 FR 43935, Aug. 18, 1997]



             Subpart D--Appeals Process for NFs and ICFs/MR

    Source: 44 FR 9753, Feb. 15, 1979, unless otherwise noted.



Sec. 431.151  Scope and applicability.

    (a) General rules. This subpart sets forth the appeals procedures 
that a State must make available as follows:
    (1) To a nursing facility (NF) that is dissatisfied with a State's 
finding of noncompliance that has resulted in one of the following 
adverse actions:
    (i) Denial or termination of its provider agreement.
    (ii) Imposition of a civil money penalty or other alternative 
remedy.
    (2) To an intermediate care facility for the mentally retarded (ICF/
MR) that is dissatisfied with a State's finding of noncompliance that 
has resulted in the denial, termination, or nonrenewal of its provider 
agreement.
    (3) To an NF or ICF/MR that is dissatisfied with a determination as 
to the effective date of its provider agreement.
    (b) Special rules. This subpart also sets forth the special rules 
that apply in particular circumstances, the limitations on the grounds 
for appeal, and the scope of review during a hearing.

[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997]



Sec. 431.152  State plan requirements.

    The State plan must provide for appeals procedures that, as a 
minimum, satisfy the requirements of Secs. 431.153 and 431.154.

[59 FR 56232, Nov. 10, 1994, as amended at 61 FR 32348, June 24, 1996]



Sec. 431.153  Evidentiary hearing.

    (a) Right to hearing. Except as provided in paragraph (b) of this 
section, and subject to the provisions of paragraphs (c) through (j) of 
this section, the State must give the facility a full evidentiary 
hearing for any of the actions specified in Sec. 431.151.
    (b) Limit on grounds for appeal. The following are not subject to 
appeal:
    (1) The choice of sanction or remedy.
    (2) The State monitoring remedy.
    (3) [Reserved]
    (4) The level of noncompliance found by a State except when a 
favorable final administrative review decision would affect the range of 
civil money penalty amounts the State could collect.
    (5) A State survey agency's decision as to when to conduct an 
initial survey of a prospective provider.

[[Page 34]]

    (c) Notice of deficiencies and impending remedies. The State must 
give the facility a written notice that includes:
    (1) The basis for the decision; and
    (2) A statement of the deficiencies on which the decision was based.
    (d) Request for hearing. The facility or its legal representative or 
other authorized official must file written request for hearing within 
60 days of receipt of the notice of adverse action.
    (e) Special rules: Denial, termination or nonrenewal of provider 
agreement. (1) Appeal by an ICF/MR. If an ICF/MR requests a hearing on 
denial, termination, or nonrenewal of its provider agreement--
    (i) The evidentiary hearing must be completed either before, or 
within 120 days after, the effective date of the adverse action; and
    (ii) If the hearing is made available only after the effective date 
of the action, the State must, before that date, offer the ICF/MR an 
informal reconsideration that meets the requirements of Sec. 431.154.
    (2) Appeal by an NF. If an NF requests a hearing on the denial or 
termination of its provider agreement, the request does not delay the 
adverse action and the hearing need not be completed before the 
effective date of the action.
    (f) Special rules: Imposition of remedies. If a State imposes a 
civil money penalty or other remedies on an NF, the following rules 
apply:
    (1) Basic rule. Except as provided in paragraph (f)(2) of this 
section (and notwithstanding any provision of State law), the State must 
impose all remedies timely on the NF, even if the NF requests a hearing.
    (2) Exception. The State may not collect a civil money penalty until 
after the 60-day period for request of hearing has elapsed or, if the NF 
requests a hearing, until issuance of a final administrative decision 
that supports imposition of the penalty.
    (g) Special rules: Dually participating facilities. If an NF is also 
participating or seeking to participate in Medicare as an SNF, and the 
basis for the State's denial or termination of participation in Medicaid 
is also a basis for denial or termination of participation in Medicare, 
the State must advise the facility that--
    (1) The appeals procedures specified for Medicare facilities in part 
498 of this chapter apply; and
    (2) A final decision entered under the Medicare appeals procedures 
is binding for both programs.
    (h) Special rules: Adverse action by CMS. If CMS finds that an NF is 
not in substantial compliance and either terminates the NF's Medicaid 
provider agreement or imposes alternative remedies on the NF (because 
CMS's findings and proposed remedies prevail over those of the State in 
accordance with Sec. 488.452 of this chapter), the NF is entitled only 
to the appeals procedures set forth in part 498 of this chapter, instead 
of the procedures specified in this subpart.
    (i) Required elements of hearing. The hearing must include at least 
the following:
    (1) Opportunity for the facility--
    (i) To appear before an impartial decision-maker to refute the 
finding of noncompliance on which the adverse action was based;
    (ii) To be represented by counsel or other representative; and
    (iii) To be heard directly or through its representative, to call 
witnesses, and to present documentary evidence.
    (2) A written decision by the impartial decision-maker, setting 
forth the reasons for the decision and the evidence on which the 
decision is based.
    (j) Limits on scope of review: Civil money penalty cases. In civil 
money penalty cases--
    (1) The State's finding as to a NF's level of noncompliance must be 
upheld unless it is clearly erroneous; and
    (2) The scope of review is as set forth in Sec. 488.438(e) of this 
chapter.

[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997; 
64 FR 39937, July 23, 1999]



Sec. 431.154  Informal reconsideration for ICFs/MR.

    The informal reconsideration must, at a minimum, include--
    (a) Written notice to the facility of the denial, termination or 
nonrenewal and the findings upon which it was based;
    (b) A reasonable opportunity for the facility to refute those 
findings in writing, and

[[Page 35]]

    (c) A written affirmation or reversal of the denial, termination, or 
nonrenewal.

[44 FR 9753, Feb. 15, 1979, as amended at 59 FR 56233, Nov. 10, 1994; 61 
FR 32349, June 24, 1996]



         Subpart E--Fair Hearings for Applicants and Recipients

    Source: 44 FR 17932, Mar. 29, 1979, unless otherwise noted.

                           General Provisions



Sec. 431.200  Basis and scope.

    This subpart--
    (a) Implements section 1902(a)(3) of the Act, which requires that a 
State plan provide an opportunity for a fair hearing to any person whose 
claim for assistance is denied or not acted upon promptly;
    (b) Prescribes procedures for an opportunity for a hearing if the 
State agency or PAHP takes action, as stated in this subpart, to 
suspend, terminate, or reduce services, or an MCO or PIHP takes action 
under subpart F of part 438 of this chapter; and
    (c) Implements sections 1919(f)(3) and 1919(e)(7)(F) of the Act by 
providing an appeals process for any person who--
    (1) Is subject to a proposed transfer or discharge from a nursing 
facility; or
    (2) Is adversely affected by the pre-admission screening or the 
annual resident review that are required by section 1919(e)(7) of the 
Act.

[67 FR 41094, June 14, 2002]



Sec. 431.201  Definitions.

    For purposes of this subpart:
    Action means a termination, suspension, or reduction of Medicaid 
eligibility or covered services. It also means determinations by skilled 
nursing facilities and nursing facilities to transfer or discharge 
residents and adverse determinations made by a State with regard to the 
preadmission screening and annual resident review requirements of 
section 1919(e)(7) of the Act.
    Adverse determination means a determination made in accordance with 
sections 1919(b)(3)(F) or 1919(e)(7)(B) of the Act that the individual 
does not require the level of services provided by a nursing facility or 
that the individual does or does not require specialized services.
    Date of action means the intended date on which a termination, 
suspension, reduction, transfer or discharge becomes effective. It also 
means the date of the determination made by a State with regard to the 
preadmission screening and annual resident review requirements of 
section 1919(e)(7) of the Act.
    De novo hearing means a hearing that starts over from the beginning.
    Evidentiary hearing means a hearing conducted so that evidence may 
be presented.
    Notice means a written statement that meets the requirements of 
Sec. 431.210.
    Request for a hearing means a clear expression by the applicant or 
recipient, or his authorized representative, that he wants the 
opportunity to present his case to a reviewing authority.
    Service authorization request means a managed care enrollee's 
request for the provision of a service.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
67 FR 41095, June 14, 2002]



Sec. 431.202  State plan requirements.

    A State plan must provide that the requirements of Secs. 431.205 
through 431.246 of this subpart are met.



Sec. 431.205  Provision of hearing system.

    (a) The Medicaid agency must be responsible for maintaining a 
hearing system that meets the requirements of this subpart.
    (b) The State's hearing system must provide for--
    (1) A hearing before the agency; or
    (2) An evidentiary hearing at the local level, with a right of 
appeal to a State agency hearing.
    (c) The agency may offer local hearings in some political 
subdivisions and not in others.
    (d) The hearing system must meet the due process standards set forth 
in Goldberg v. Kelly, 397 U.S. 254 (1970), and any additional standards 
specified in this subpart.

[[Page 36]]



Sec. 431.206  Informing applicants and recipients.

    (a) The agency must issue and publicize its hearing procedures.
    (b) The agency must, at the time specified in paragraph (c) of this 
section, inform every applicant or recipient in writing--
    (1) Of his right to a hearing;
    (2) Of the method by which he may obtain a hearing; and
    (3) That he may represent himself or use legal counsel, a relative, 
a friend, or other spokesman.
    (c) The agency must provide the information required in paragraph 
(b) of this section--(1) At the time that the individual applies for 
Medicaid;
    (2) At the time of any action affecting his or her claim;
    (3) At the time a skilled nursing facility or a nursing facility 
notifies a resident in accordance with Sec. 483.12 of this chapter that 
he or she is to be transferred or discharged; and
    (4) At the time an individual receives an adverse determination by 
the State with regard to the preadmission screening and annual resident 
review requirements of section 1919(e)(7) of the Act.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993]

                                 Notice



Sec. 431.210  Content of notice.

    A notice required under Sec. 431.206 (c)(2), (c)(3), or (c)(4) of 
this subpart must contain--
    (a) A statement of what action the State, skilled nursing facility, 
or nursing facility intends to take;
    (b) The reasons for the intended action;
    (c) The specific regulations that support, or the change in Federal 
or State law that requires, the action;
    (d) An explanation of--
    (1) The individual's right to request an evidentiary hearing if one 
is available, or a State agency hearing; or
    (2) In cases of an action based on a change in law, the 
circumstances under which a hearing will be granted; and
    (e) An explanation of the circumstances under which Medicaid is 
continued if a hearing is requested.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992]



Sec. 431.211  Advance notice.

    The State or local agency must mail a notice at least 10 days before 
the date of action, except as permitted under Secs. 431.213 and 431.214 
of this subpart.



Sec. 431.213  Exceptions from advance notice.

    The agency may mail a notice not later than the date of action if--
    (a) The agency has factual information confirming the death of a 
recipient;
    (b) The agency receives a clear written statement signed by a 
recipient that--
    (1) He no longer wishes services; or
    (2) Gives information that requires termination or reduction of 
services and indicates that he understands that this must be the result 
of supplying that information;
    (c) The recipient has been admitted to an institution where he is 
ineligible under the plan for further services;
    (d) The recipient's whereabouts are unknown and the post office 
returns agency mail directed to him indicating no forwarding address 
(See Sec. 431.231 (d) of this subpart for procedure if the recipient's 
whereabouts become known);
    (e) The agency establishes the fact that the recipient has been 
accepted for Medicaid services by another local jurisdiction, State, 
territory, or commonwealth;
    (f) A change in the level of medical care is prescribed by the 
recipient's physician;
    (g) The notice involves an adverse determination made with regard to 
the preadmission screening requirements of section 1919(e)(7) of the 
Act; or
    (h) The date of action will occur in less than 10 days, in 
accordance with Sec. 483.12(a)(5)(ii), which provides exceptions to the 
30 days notice requirements of Sec. 483.12(a)(5)(i).

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993]

[[Page 37]]



Sec. 431.214  Notice in cases of probable fraud.

    The agency may shorten the period of advance notice to 5 days before 
the date of action if--
    (a) The agency has facts indicating that action should be taken 
because of probable fraud by the recipient; and
    (b) The facts have been verified, if possible, through secondary 
sources.

                            Right to Hearing



Sec. 431.220  When a hearing is required.

    (a) The State agency must grant an opportunity for a hearing to the 
following:
    (1) Any applicant who requests it because his claim for services is 
denied or is not acted upon with reasonable promptness.
    (2) Any recipient who requests it because he or she believes the 
agency has taken an action erroneously.
    (3) Any resident who requests it because he or she believes a 
skilled nursing facility or nursing facility has erroneously determined 
that he or she must be transferred or discharged.
    (4) Any individual who requests it because he or she believes the 
State has made an erroneous determination with regard to the 
preadmission and annual resident review requirements of section 
1919(e)(7) of the Act.
    (5) Any MCO or PIHP enrollee who is entitled to a hearing under 
subpart F of part 438 of this chapter.
    (6) Any PAHP enrollee who has an action as stated in this subpart.
    (b) The agency need not grant a hearing if the sole issue is a 
Federal or State law requiring an automatic change adversely affecting 
some or all recipients.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
67 FR 41095, June 14, 2002]



Sec. 431.221  Request for hearing.

    (a) The agency may require that a request for a hearing be in 
writing.
    (b) The agency may not limit or interfere with the applicant's or 
recipient's freedom to make a request for a hearing.
    (c) The agency may assist the applicant or recipient in submitting 
and processing his request.
    (d) The agency must allow the applicant or recipient a reasonable 
time, not to exceed 90 days from the date that notice of action is 
mailed, to request a hearings.



Sec. 431.222  Group hearings.

    The agency--
    (a) May respond to a series of individual requests for hearing by 
conducting a single group hearing;
    (b) May consolidate hearings only in cases in which the sole issue 
involved is one of Federal or State law or policy;
    (c) Must follow the policies of this subpart and its own policies 
governing hearings in all group hearings; and
    (d) Must permit each person to present his own case or be 
represented by his authorized representative.



Sec. 431.223  Denial or dismissal of request for a hearing.

    The agency may deny or dismiss a request for a hearing if--
    (a) The applicant or recipient withdraws the request in writing; or
    (b) The applicant or recipient fails to appear at a scheduled 
hearing without good cause.

                               Procedures



Sec. 431.230  Maintaining services.

    (a) If the agency mails the 10-day or 5-day notice as required under 
Sec. 431.211 or Sec. 431.214 of this subpart, and the recipient requests 
a hearing before the date of action, the agency may not terminate or 
reduce services until a decision is rendered after the hearing unless--
    (1) It is determined at the hearing that the sole issue is one of 
Federal or State law or policy; and
    (2) The agency promptly informs the recipient in writing that 
services are to be terminated or reduced pending the hearing decision.
    (b) If the agency's action is sustained by the hearing decision, the 
agency may institute recovery procedures against the applicant or 
recipient to recoup the cost of any services furnished the recipient, to 
the extent they were furnished solely by reason of this section.

[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980]

[[Page 38]]



Sec. 431.231  Reinstatement of services.

    (a) The agency may reinstate services if a recipient requests a 
hearing not more than 10 days after the date of action.
    (b) The reinstated services must continue until a hearing decision 
unless, at the hearing, it is determined that the sole issue is one of 
Federal or State law or policy.
    (c) The agency must reinstate and continue services until a decision 
is rendered after a hearing if--
    (1) Action is taken without the advance notice required under 
Sec. 431.211 or Sec. 431.214 of this subpart;
    (2) The recipient requests a hearing within 10 days of the mailing 
of the notice of action; and
    (3) The agency determines that the action resulted from other than 
the application of Federal or State law or policy.
    (d) If a recipient's whereabouts are unknown, as indicated by the 
return of unforwardable agency mail directed to him, any discontinued 
services must be reinstated if his whereabouts become known during the 
time he is eligible for services.



Sec. 431.232  Adverse decision of local evidentiary hearing.

    If the decision of a local evidentiary hearing is adverse to the 
applicant or recipient, the agency must--
    (a) Inform the applicant or recipient of the decision;
    (b) Inform the applicant or recipient that he has the right to 
appeal the decision to the State agency, in writing, within 15 days of 
the mailing of the notice of the adverse decision;
    (c) Inform the applicant or recipient of his right to request that 
his appeal be a de novo hearing; and
    (d) Discontinue services after the adverse decision.



Sec. 431.233  State agency hearing after adverse decision of local evidentiary hearing.

    (a) Unless the applicant or recipient specifically requests a de 
novo hearing, the State agency hearing may consist of a review by the 
agency hearing officer of the record of the local evidentiary hearing to 
determine whether the decision of the local hearing officer was 
supported by substantial evidence in the record.
    (b) A person who participates in the local decision being appealed 
may not participate in the State agency hearing decision.



Sec. 431.240  Conducting the hearing.

    (a) All hearings must be conducted--
    (1) At a reasonable time, date, and place;
    (2) Only after adequate written notice of the hearing; and
    (3) By one or more impartial officials or other individuals who have 
not been directly involved in the initial determination of the action in 
question.
    (b) If the hearing involves medical issues such as those concerning 
a diagnosis, an examining physician's report, or a medical review team's 
decision, and if the hearing officer considers it necessary to have a 
medical assessment other than that of the individual involved in making 
the original decision, such a medical assessment must be obtained at 
agency expense and made part of the record.



Sec. 431.241  Matters to be considered at the hearing.

    The hearing must cover--
    (a) Agency action or failure to act with reasonable promptness on a 
claim for services, including both initial and subsequent decisions 
regarding eligibility;
    (b) Agency decisions regarding changes in the type or amount of 
services;
    (c) A decision by a skilled nursing facility or nursing facility to 
transfer or discharge a resident; and
    (d) A State determination with regard to the preadmission screening 
and annual resident review requirements of section 1919(e)(7) of the 
Act.

[57 FR 56505, Nov. 30, 1992]



Sec. 431.242  Procedural rights of the applicant or recipient.

    The applicant or recipient, or his representative, must be given an 
opportunity to--
    (a) Examine at a reasonable time before the date of the hearing and 
during the hearing:
    (1) The content of the applicant's or recipient's case file; and

[[Page 39]]

    (2) All documents and records to be used by the State or local 
agency or the skilled nursing facility or nursing facility at the 
hearing;
    (b) Bring witnesses;
    (c) Establish all pertinent facts and circumstances;
    (d) Present an argument without undue interference; and
    (e) Question or refute any testimony or evidence, including 
opportunity to confront and cross-examine adverse witnesses.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56506, Nov. 30, 1992]



Sec. 431.243  Parties in cases involving an eligibility determination.

    If the hearing involves an issue of eligibility and the Medicaid 
agency is not responsible for eligibility determinations, the agency 
that is responsible for determining eligibility must participate in the 
hearing.



Sec. 431.244  Hearing decisions.

    (a) Hearing recommendations or decisions must be based exclusively 
on evidence introduced at the hearing.
    (b) The record must consist only of--
    (1) The transcript or recording of testimony and exhibits, or an 
official report containing the substance of what happened at the 
hearing;
    (2) All papers and requests filed in the proceeding; and
    (3) The recommendation or decision of the hearing officer.
    (c) The applicant or recipient must have access to the record at a 
convenient place and time.
    (d) In any evidentiary hearing, the decision must be a written one 
that--
    (1) Summarizes the facts; and
    (2) Identifies the regulations supporting the decision.
    (e) In a de novo hearing, the decision must--
    (1) Specify the reasons for the decision; and
    (2) Identify the supporting evidence and regulations.
    (f) The agency must take final administrative action as follows:
    (1) Ordinarily, within 90 days from the earlier of the following:
    (i) The date the enrollee filed an MCO or PIHP appeal, not including 
the number of days the enrollee took to subsequently file for a State 
fair hearing; or
    (ii) If permitted by the State, the date the enrollee filed for 
direct access to a State fair hearing.
    (2) As expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, from the MCO 
or PIHP, the case file and information for any appeal of a denial of a 
service that, as indicated by the MCO or PIHP--
    (i) Meets the criteria for expedited resolution as set forth in 
Sec. 438.410(a) of this chapter, but was not resolved within the 
timeframe for expedited resolution; or
    (ii) Was resolved within the timeframe for expedited resolution, but 
reached a decision wholly or partially adverse to the enrollee.
    (3) If the State agency permits direct access to a State fair 
hearing, as expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, directly 
from an MCO or PIHP enrollee, a fair hearing request on a decision to 
deny a service that it determines meets the criteria for expedited 
resolution, as set forth in Sec. 438.410(a) of this chapter.
    (g) The public must have access to all agency hearing decisions, 
subject to the requirements of subpart F of this part for safeguarding 
of information.

[44 FR 17932, Mar. 29, 1979, as amended at 67 FR 41095, June 14, 2002]



Sec. 431.245  Notifying the applicant or recipient of a State agency decision.

    The agency must notify the applicant or recipient in writing of--
    (a) The decision; and
    (b) His right to request a State agency hearing or seek judicial 
review, to the extent that either is available to him.



Sec. 431.246  Corrective action.

    The agency must promptly make corrective payments, retroactive to 
the date an incorrect action was taken, and, if appropriate, provide for 
admission or readmission of an individual to a facility if--
    (a) The hearing decision is favorable to the applicant or recipient; 
or

[[Page 40]]

    (b) The agency decides in the applicant's or recipient's favor 
before the hearing.

[57 FR 56506, Nov. 30, 1992]

                     Federal Financial Participation



Sec. 431.250  Federal financial participation.

    FFP is available in expenditures for--
    (a) Payments for services continued pending a hearing decision;
    (b) Payments made--
    (1) To carry out hearing decisions; and
    (2) For services provided within the scope of the Federal Medicaid 
program and made under a court order.
    (c) Payments made to take corrective action prior to a hearing;
    (d) Payments made to extend the benefit of a hearing decision or 
court order to individuals in the same situation as those directly 
affected by the decision or order;
    (e) Retroactive payments under paragraphs (b), (c), and (d) of this 
section in accordance with applicable Federal policies on corrective 
payments; and
    (f) Administrative costs incurred by the agency for--
    (1) Transportation for the applicant or recipient, his 
representative, and witnesses to and from the hearing;
    (2) Meeting other expenses of the applicant or recipient in 
connection with the hearing;
    (3) Carrying out the hearing procedures, including expenses of 
obtaining the additional medical assessment specified in Sec. 431.240 of 
this subpart; and
    (4) Hearing procedures for Medicaid and non-Medicaid individuals 
appealing transfers, discharges and determinations of preadmission 
screening and annual resident reviews under part 483, subparts C and E 
of this chapter.

[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980; 
57 FR 56506, Nov. 30, 1992]



    Subpart F--Safeguarding Information on Applicants and Recipients

    Source: 44 FR 17934, Mar. 29, 1979, unless otherwise noted.



Sec. 431.300  Basis and purpose.

    (a) Section 1902(a)(7) of the Act requires that a State plan must 
provide safeguards that restrict the use or disclosure of information 
concerning applicants and recipients to purposes directly connected with 
the administration of the plan. This subpart specifies State plan 
requirements, the types of information to be safeguarded, the conditions 
for release of safeguarded information, and restrictions on the 
distribution of other information.
    (b) Section 1137 of the Act, which requires agencies to exchange 
information in order to verify the income and eligibility of applicants 
and recipients (see Sec. 435.940ff), requires State agencies to have 
adequate safeguards to assure that--
    (1) Information exchanged by the State agencies is made available 
only to the extent necessary to assist in the valid administrative needs 
of the program receiving the information, and information received under 
section 6103(l) of the Internal Revenue Code of 1954 is exchanged only 
with agencies authorized to receive that information under that section 
of the Code; and
    (2) The information is adequately stored and processed so that it is 
protected against unauthorized disclosure for other purposes.

[51 FR 7210, Feb. 28, 1986]



Sec. 431.301  State plan requirements.

    A State plan must provide, under a State statute that imposes legal 
sanctions, safeguards meeting the requirements of this subpart that 
restrict the use or disclosure of information concerning applicants and 
recipients to purposes directly connected with the administration of the 
plan.



Sec. 431.302  Purposes directly related to State plan administration.

    Purposes directly related to plan administration include--
    (a) Establishing eligibility;
    (b) Determining the amount of medical assistance;
    (c) Providing services for recipients; and

[[Page 41]]

    (d) Conducting or assisting an investigation, prosecution, or civil 
or criminal proceeding related to the administration of the plan.



Sec. 431.303  State authority for safeguarding information.

    The Medicaid agency must have authority to implement and enforce the 
provisions specified in this subpart for safeguarding information about 
applicants and recipients.



Sec. 431.304  Publicizing safeguarding requirements.

    (a) The agency must publicize provisions governing the confidential 
nature of information about applicants and recipients, including the 
legal sanctions imposed for improper disclosure and use.
    (b) The agency must provide copies of these provisions to applicants 
and recipients and to other persons and agencies to whom information is 
disclosed.



Sec. 431.305  Types of information to be safeguarded.

    (a) The agency must have criteria that govern the types of 
information about applicants and recipients that are safeguarded.
    (b) This information must include at least--
    (1) Names and addresses;
    (2) Medical services provided;
    (3) Social and economic conditions or circumstances;
    (4) Agency evaluation of personal information;
    (5) Medical data, including diagnosis and past history of disease or 
disability; and
    (6) Any information received for verifying income eligibility and 
amount of medical assistance payments (see Sec. 435.940ff). Income 
information received from SSA or the Internal Revenue Service must be 
safeguarded according to the requirements of the agency that furnished 
the data.
    (7) Any information received in connection with the identification 
of legally liable third party resources under Sec. 433.138 of this 
chapter.

[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 
FR 5975, Feb. 27, 1987]



Sec. 431.306  Release of information.

    (a) The agency must have criteria specifying the conditions for 
release and use of information about applicants and recipients.
    (b) Access to information concerning applicants or recipients must 
be restricted to persons or agency representatives who are subject to 
standards of confidentiality that are comparable to those of the agency.
    (c) The agency must not publish names of applicants or recipients.
    (d) The agency must obtain permission from a family or individual, 
whenever possible, before responding to a request for information from 
an outside source, unless the information is to be used to verify 
income, eligibility and the amount of medical assistance payment under 
section 1137 of this Act and Secs. 435.940 through 435.965 of this 
chapter.

If, because of an emergency situation, time does not permit obtaining 
consent before release, the agency must notify the family or individual 
immediately after supplying the information.
    (e) The agency's policies must apply to all requests for information 
from outside sources, including governmental bodies, the courts, or law 
enforcement officials.
    (f) If a court issues a subpoena for a case record or for any agency 
representative to testify concerning an applicant or recipient, the 
agency must inform the court of the applicable statutory provisions, 
policies, and regulations restricting disclosure of information.
    (g) Before requesting information from, or releasing information to, 
other agencies to verify income, eligibility and the amount of 
assistance under Secs. 435.940 through 435.965 of this chapter, the 
agency must execute data exchange agreements with those agencies, as 
specified in Sec. 435.945(f).
    (h) Before requesting information from, or releasing information to, 
other agencies to identify legally liable third party resources under 
Sec. 433.138(d) of this chapter, the agency must execute data exchanges 
agreements, as

[[Page 42]]

specified in Sec. 433.138(h)(2) of this chapter.

[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 
FR 5975, Feb. 27, 1987]



Sec. 431.307  Distribution of information materials.

    (a) All materials distributed to applicants, recipients, or medical 
providers must--
    (1) Directly relate to the administration of the Medicaid program;
    (2) Have no political implications except to the extent required to 
implement the National Voter Registration Act of 1993 (NVRA) Pub. L. 
103-931; for States that are exempt from the requirements of NVRA, voter 
registration may be a voluntary activity so long as the provisions of 
section 7(a)(5) of NVRA are observed;
    (3) Contain the names only of individuals directly connected with 
the administration of the plan; and
    (4) Identify those individuals only in their official capacity with 
the State or local agency.
    (b) The agency must not distribute materials such as ``holiday'' 
greetings, general public announcements, partisan voting information and 
alien registration notices.
    (c) The agency may distribute materials directly related to the 
health and welfare of applicants and recipients, such as announcements 
of free medical examinations, availability of surplus food, and consumer 
protection information.
    (d) Under NVRA, the agency must distribute voter information and 
registration materials as specified in NVRA.

[44 FR 17934, Mar. 29, 1979, as amended at 61 FR 58143, Nov. 13, 1996]

Subparts G-L [Reserved]



                Subpart M--Relations With Other Agencies



Sec. 431.610  Relations with standard-setting and survey agencies.

    (a) Basis and purpose. This section implements--
    (1) Section 1902(a)(9) of the Act, concerning the designation of 
State authorities to be responsible for establishing and maintaining 
health and other standards for institutions participating in Medicaid; 
and
    (2) Section 1902(a)(33) of the Act, concerning the designation of 
the State licensing agency to be responsible for determining whether 
institutions and agencies meet requirements for participation in the 
State's Medicaid program.
    (3) Section 1919(g)(1)(A) of the Act, concerning responsibilities of 
the State for certifying the compliance of non-State operated NFs with 
requirements of participation in the State's Medicaid program.
    (b) Designated agency responsible for health standards. A State plan 
must designate, as the State authority responsible for establishing and 
maintaining health standards for private or public institutions that 
provide services to Medicaid recipients, the same State agency that is 
used by the Secretary to determine qualifications of institutions and 
suppliers of services to participate in Medicare (see 42 CFR 405.1902). 
The requirement for establishing and maintaining standards does not 
apply with respect to religious nonmedical institutions as defined in 
Sec. 440.170(b) of this chapter.
    (c) Designated agency responsible for standards other than health 
standards. The plan must designate the Medicaid agency or other 
appropriate State authority or authorities to be responsible for 
establishing and maintaining standards, other than those relating to 
health, for private or public institutions that provide services to 
Medicaid recipients.
    (d) Description and retention of standards. (1) The plan must 
describe the standards established under paragraphs (b) and (c) of this 
section.
    (2) The plan must provide that the Medicaid agency keeps these 
standards on file and makes them available to the Administrator upon 
request.
    (e) Designation of survey agency. The plan must provide that--
    (1) The agency designated in paragraph (b) of this section, or 
another State agency responsible for licensing health institutions in 
the State, determines for the Medicaid agency whether

[[Page 43]]

institutions and agencies meet the requirements for participation in the 
Medicaid program; and
    (2) The agency staff making the determination under paragraph (e)(1) 
of this section is the same staff responsible for making similar 
determinations for institutions or agencies participating under 
Medicare; and
    (3) The agency designated in paragraph (e)(1) of this section makes 
recommendations regarding the effective dates of provider agreements, as 
determined under Sec. 431.108.
    (f) Written agreement required. The plan must provide for a written 
agreement (or formal written intra-agency arrangement) between the 
Medicaid agency and the survey agency designated under paragraph (e) of 
this section, covering the activities of the survey agency in carrying 
out its responsibilities. The agreement must specify that--
    (1) Federal requirements and the forms, methods and procedures that 
the Administrator designates will be used to determine provider 
eligibility and certification under Medicaid;
    (2) Inspectors surveying the premises of a provider will--
    (i) Complete inspection reports;
    (ii) Note on completed reports whether or not each requirement for 
which an inspection is made is satisfied; and
    (iii) Document deficiencies in reports;
    (3) The survey agency will keep on file all information and reports 
used in determining whether participating facilities meet Federal 
requirements; and
    (4) The survey agency will make the information and reports required 
under paragraph (f)(3) of this section readily accessible to HHS and the 
Medicaid agency as necessary--
    (i) For meeting other requirements under the plan; and
    (ii) For purposes consistent with the Medicaid agency's effective 
administration of the program.
    (g) Responsibilities of survey agency. The plan must provide that, 
in certifying NFs and ICFs/MR, the survey agency designated under 
paragraph (e) of this section will--
    (1) Review and evaluate medical and independent professional review 
team reports obtained under part 456 of this subchapter as they relate 
to health and safety requirements;
    (2) Have qualified personnel perform on-site inspections 
periodically as appropriate based on the timeframes in the correction 
plan and--
    (i) At least once during each certification period or more 
frequently if there is a compliance question; and
    (ii) For non-State operated NFs, within the timeframes specified in 
Sec. 488.308 of this chapter.
    (3) Have qualified personnel perform on-site inspections--
    (i) At least once during each certification period or more 
frequently if there is a compliance question; and
    (ii) For intermediate care facilities with deficiencies as described 
in Secs. 442.112 and 442.113 of this subchapter, within 6 months after 
initial correction plan approval and every 6 months thereafter as 
required under those sections.
    (h) FFP for survey responsibilities. (1) FFP is available in 
expenditures that the survey agency makes to carry out its survey and 
certification responsibilities under the agreement specified in 
paragraph (f) of this section.
    (2) FFP is not available in any expenditures that the survey agency 
makes that are attributable to the State's overall responsibilities 
under State law and regulations for establishing and maintaining 
standards.

[43 FR 45188, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 
53 FR 20494, June 3, 1988; 57 FR 43923, Sept. 23, 1992; 59 FR 56233, 
Nov. 10, 1994; 62 FR 43936, Aug. 18, 1997; 64 FR 67052, Nov. 30, 1999]



Sec. 431.615  Relations with State health and vocational rehabilitation agencies and title V grantees.

    (a) Basis and purpose. This section implements section 1902(a)(11) 
and (22)(C) of the Act, by setting forth State plan requirements for 
arrangements and agreements between the Medicaid agency and--
    (1) State health agencies;
    (2) State vocational rehabilitation agencies; and
    (3) Grantees under title V of the Act, Maternal and Child Health and 
Crippled Children's Services.
    (b) Definitions. For purposes of this section--

[[Page 44]]

    ``Title V grantee'' means the agency, institution, or organization 
receiving Federal payments for part or all of the cost of any service 
program or project authorized by title V of the Act, including--
    (1) Maternal and child health services;
    (2) Crippled children's services;
    (3) Maternal and infant care projects;
    (4) Children and youth projects; and
    (5) Projects for the dental health of children.
    (c) State plan requirements. A state plan must--
    (1) Describe cooperative arrangements with the State agencies that 
administer, or supervise the administration of, health services and 
vocational rehabilitation services designed to make maximum use of these 
services;
    (2) Provide for arrangements with title V grantees, under which the 
Medicaid agency will utilize the grantee to furnish services that are 
included in the State plan;
    (3) Provide that all arrangements under this section meet the 
requirements of paragraph (d) of this section; and
    (4) Provide, if requested by the title V grantee in accordance with 
the arrangements made under this section, that the Medicaid agency 
reimburse the grantee or the provider for the cost of services furnished 
recipients by or through the grantee.
    (d) Content of arrangements. The arrangements referred to in 
paragraph (c) must specify, as appropriate--
    (1) The mutual objectives and responsibilities or each party to the 
arrangement;
    (2) The services each party offers and in what circumstances;
    (3) The cooperative and collaborative relationships at the State 
level;
    (4) The kinds of services to be provided by local agencies; and
    (5) Methods for--
    (i) Early identification of individuals under 21 in need of medical 
or remedial services;
    (ii) Reciprocal referrals;
    (iii) Coordinating plans for health services provided or arranged 
for recipients;
    (iv) Payment or reimbursement;
    (v) Exchange of reports of services furnished to recipients;
    (vi) Periodic review and joint planning for changes in the 
agreements;
    (vii) Continuous liaison between the parties, including designation 
of State and local liaison staff; and
    (viii) Joint evaluation of policies that affect the cooperative work 
of the parties.
    (e) Federal financial participation. FFP is available in 
expenditures for Medicaid services provided to recipients through an 
arrangement under this section.



Sec. 431.620  Agreement with State mental health authority or mental institutions.

    (a) Basis and purpose. This section implements section 
1902(a)(20)(A) of the Act, for States offering Medicaid services in 
institutions for mental diseases for recipients aged 65 or older, by 
specifying the terms of the agreement those States must have with other 
State authorities and institutions. (See part 441, subpart C of this 
chapter for regulations implementing section 1902(a)(20) (B) and (C).)
    (b) Definition. For purposes of this section, an ``institution for 
mental diseases'' means an institution primarily engaged in providing 
diagnosis, treatment, or care of persons with mental diseases. This 
includes medical attention, nursing care, and related services.
    (c) State plan requirement. A State plan that includes Medicaid for 
persons aged 65 or older in institutions for mental diseases must 
provide that the Medicaid agency has in effect a written agreement with-
-
    (1) The State authority or authorities concerned with mental 
diseases; and
    (2) Any institution for mental diseases that is not under the 
jurisdiction of those State authorities, and that provides services 
under Medicaid to recipients aged 65 or older.
    (d) Provisions required in an agreement. The agreement must specify 
the respective responsibilities of the agency and the authority or 
institution, including arrangements for--
    (1) Joint planning between the parties to the agreement;

[[Page 45]]

    (2) Development of alternative methods of care;
    (3) Immediate readmission to an institution when needed by a 
recipient who is in alternative care;
    (4) Access by the agency to the institution, the recipient, and the 
recipient's records when necessary to carry out the agency's 
responsibilities;
    (5) Recording, reporting, and exchanging medical and social 
information about recipients; and
    (6) Other procedures needed to carry out the agreement.

[44 FR 17935, Mar. 23, 1979]



Sec. 431.621  State requirements with respect to nursing facilities.

    (a) Basis and purpose. This section implements sections 
1919(b)(3)(F) and 1919(e)(7) of the Act by specifying the terms of the 
agreement the State must have with the State mental health and mental 
retardation authorities concerning the operation of the State's 
preadmission screening and annual resident review (PASARR) program.
    (b) State plan requirement. The State plan must provide that the 
Medicaid agency has in effect a written agreement with the State mental 
health and mental retardation authorities that meets the requirements 
specified in paragraph (c) of this section.
    (c) Provisions required in an agreement. The agreement must specify 
the respective responsibilities of the agency and the State mental 
health and mental retardation authorities, including arrangements for)--
(1) Joint planning between the parties to the agreement;
    (2) Access by the agency to the State mental health and mental 
retardation authorities' records when necessary to carry out the 
agency's responsibilities;
    (3) Recording, reporting, and exchanging medical and social 
information about individuals subject to PASARR;
    (4) Ensuring that preadmission screenings and annual resident 
reviews are performed timely in accordance with Secs. 483.112(c) and 
483.114(c) of this part;
    (5) Ensuring that, if the State mental health and mental retardation 
authorities delegate their respective responsibilities, these 
delegations comply with Sec. 483.106(e) of this part;
    (6) Ensuring that PASARR determinations made by the State mental 
health and mental retardation authorities are not countermanded by the 
State Medicaid agency, except through the appeals process, but that the 
State mental health and mental retardation authorities do not use 
criteria which are inconsistent with those adopted by the State Medicaid 
agency under its approved State plan;
    (7) Designating the independent person or entity who performs the 
PASARR evaluations for individuals with MI; and
    (8) Ensuring that all requirements of Secs. 483.100 through 483.136 
are met.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 431.625  Coordination of Medicaid with Medicare part B.

    (a) Basis and purpose. (1) Section 1843(a) of the Act requires the 
Secretary to have entered into an agreement with any State that 
requested that agreement before January 1, 1970, or during calendar year 
1981, under which the State could enroll certain Medicare-eligible 
recipients under Medicare Part B and agree to pay their premiums.
    (2) Section 1902(a)(10) of the Act (in clause (II) following 
subparagraph (D)), allows the State to pay the premium, deductibles, 
cost sharing, and other charges for recipients enrolled under Medicare 
Part B without obligating itself to provide the range of Part B benefits 
to other recipients; and
    (3) Section 1903 (a)(1) and (b) of the Act authorizes FFP for State 
payment of Medicare Part B premiums for certain recipients.
    (4) This section--
    (i) Specifies the exception, relating to Part B coverage, from the 
requirement to provide comparable services to all recipients; and
    (ii) Prescribes FFP rules concerning State payment for Medicare 
premiums and for services that could have been covered under Medicare.
    (5) Section 1902(a)(15) of the Act requires that if a State chooses 
to pay only a portion of deductibles, cost sharing or other charges for 
recipients enrolled under Medicare Part B, the portion that is to be 
paid by a Medicaid

[[Page 46]]

recipient must be reasonably related to the recipient's income and 
resources.
    (b) Exception from obligation to provide comparable services; State 
plan requirement. (1) The State's payment of premiums, deductibles, cost 
sharing, or similar charges under Part B does not obligate it to provide 
the full range of Part B services to recipients not covered by Medicare.
    (2) The State plan must specify this exception if it applies.
    (c) Effect of payment of premiums on State liability for cost 
sharing. (1) State payment of Part B premiums on behalf of a Medicaid 
recipient does not obligate it to pay on the recipient's behalf the Part 
B deductible and coinsurance amounts for those Medicare Part B services 
not covered in the Medicaid State plan.
    (2) If a State pays on a recipient's behalf any portion of the 
deductible or cost sharing amounts under Medicare Part B, the portion 
paid by a State must be reasonably related to the recipient's income and 
resources.
    (d) Federal financial participation: Medicare Part B premiums--(1) 
Basic rule. Except as provided in paragraph (d)(2) of this section, FFP 
is not available in State expenditures for Medicare Part B premiums for 
Medicaid recipients unless the recipients receive money payments under 
title I, IV-A, X, XIV, XVI (AABD or SSI) of the Act, or State 
supplements as permitted under section 1616(a) of the Act, or as 
required by section 212 of Pub. L. 93-66.
    (2) Exception. FFP is available in expenditures for Medicare Part B 
premiums for the following groups:
    (i) AFDC families required to be covered under Secs. 435.112 and 
436.116 of this subchapter, those eligible for continued Medicaid 
coverage despite increased income from employment;
    (ii) Recipients required to be covered under Secs. 435.114, 435.134, 
and 436.112 of this subchapter, those eligible for continued Medicaid 
coverage despite increased income from monthly insurance benefits under 
title II of the Act;
    (iii) Recipients required to be covered under Sec. 435.135 of this 
subchapter, those eligible for continued Medicaid coverage despite 
increased income from cost-of-living increases under title II of the 
Act;
    (iv) Recipients of foster care maintenance payments or adoption 
assistance payments who, under Part E of title IV of the Act are 
considered as receiving AFDC;
    (v) Individuals required to be covered under Sec. 435.120 of this 
chapter, that is, blind or disabled individuals who, under section 
1619(b) of the Act, are considered to be receiving SSI;
    (vi) Individuals who, in accordance with Secs. 435.115 and 436.114 
of this chapter are, for purposes of Medicaid eligibility, considered to 
be receiving AFDC. These are participants in a work supplementation 
program, or individuals denied AFDC because the payment would be less 
than $10;
    (vii) Certain recipients of Veterans Administration pensions during 
the limited time they are, under section 310(b) of Pub. L. 96-272, 
considered as receiving SSI, mandatory State supplements, or AFDC;
    (viii) Disabled children living at home to whom the State provides 
Medicaid under section 1902(e)(3) of the Act;
    (ix) Individuals who become ineligible for AFDC because of the 
collection or increased collection of child or spousal support, but, in 
accordance with section 406(h) of the Act, remain eligible for Medicaid 
for four more months; and
    (x) Individuals who become ineligible for AFDC because they are no 
longer eligible for the disregard of earnings of $30 or of $30 plus one-
third of the remainder, but, in accordance with section 402(a)(37) of 
the Act, are considered as receiving AFDC for a period of 9 to 15 
months.
    (3) No FFP is available in State Medicaid expenditures that could 
have been paid for under Medicare Part B but were not because the person 
was not enrolled in Part B. This limit applies to all recipients 
eligible for enrollment under Part B, whether individually or through an 
agreement under section 1843(a) of the Act. However, FFP is available in 
expenditures required by Secs. 435.914 and 436.901 of this subchapter 
for retroactive coverage of recipients.

[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979; 
52 FR 47933, Dec. 17, 1987; 53 FR 657, Jan. 11, 1988]

[[Page 47]]



Sec. 431.630  Coordination of Medicaid with QIOs.

    (a) The State plan may provide for the review of Medicaid services 
through a contract with a QIO designated under Part 462 of this chapter. 
Medicaid requirements for medical and utilization review are deemed to 
be met for those services or providers subject to review under the 
contract.
    (b) The State plan must provide that the contract with the QIO--
    (1) Meets the requirements of Sec. 434.6(a) of this part;
    (2) Includes a monitoring and evaluation plan by which the State 
ensures satisfactory performance by the QIO;
    (3) Identifies the services and providers subject to QIO review;
    (4) Ensures that the review activities performed by the QIO are not 
inconsistent with QIO review activities of Medicare services and 
includes a description of whether and to what extent QIO determinations 
will be considered conclusive for Medicaid payment purposes.

[50 FR 15327, Apr. 17, 1985]



Sec. 431.635  Coordination of Medicaid with Special Supplemental Food Program for Women, Infants, and Children (WIC).

    (a) Basis. This section implements sections 1902(a)(11)(C) and 
1902(a) (53) of the Act, which provide for coordination of Medicaid with 
the Special Supplemental Food Program for Women, Infants, and Children 
(WIC) under section 17 of the Child Nutrition Act of 1966.
    (b) Definitions. As used in this section, the terms breastfeeding 
women, postpartum women, and pregnant women mean women as defined in 
section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786(b)).
    (c) State plan requirements. A State Plan must provide for--
    (1) Coordinating operation of the Medicaid program with the State's 
operation of the Special Supplemental Food Program for Women, Infants, 
and Children;
    (2) Providing timely written notice of the availability of WIC 
benefits to all individuals in the State who are determined to be 
eligible (including presumptively eligible) for Medicaid and who are:
    (i) Pregnant women;
    (ii) Postpartum women;
    (iii) Breastfeeding women; and
    (iv) Children under the age of 5.
    (3) Referring individuals described under paragraphs (c)(2) (i) 
through (iv) of this section to the local agency responsible for 
administering the WIC program.
    (d) Notification requirements. (1) The agency must give the written 
notice required under paragraph (c) of this section as soon as the 
agency identifies the individual (e.g., at the time of an eligibility 
determination for Medicaid) or immediately thereafter (e.g., at the time 
of notice of eligibility).
    (2) The agency, no less frequently than annually, must also provide 
written notice of the availability of WIC benefits, including the 
location and telephone number of the local WIC agency or instructions 
for obtaining further information about the WIC program, to all Medicaid 
recipients (including those found to be presumptively eligible) who are 
under age 5 or who are women who might be pregnant, postpartum, or 
breastfeeding as described in paragraphs (c)(2) (i) through (iv) of this 
section.
    (3) The agency must effectively inform those individuals who are 
blind or deaf or who cannot read or understand the English language.

[57 FR 28103, June 24, 1992]



Sec. 431.636  Coordination of Medicaid with the State Children's Health Insurance Program (SCHIP).

    (a) Statutory basis. This section implements--
    (1) Section 2102(b)(3)(B) of the Act, which provides that children 
who apply for coverage under a separate child health plan under title 
XXI, but are found to be eligible for medical assistance under the State 
Medicaid plan, must be enrolled in the State Medicaid plan; and
    (2) Section 2102(c)(2) of the Act, which requires coordination 
between a State child health program and other public health insurance 
programs.
    (b) Obligations of State Medicaid Agency. The State Medicaid agency 
must adopt procedures to facilitate the Medicaid application process 
for, and the enrollment of children for whom the

[[Page 48]]

Medicaid application and enrollment process has been initiated in 
accordance with Sec. 457.350(f) of this chapter. The procedures must 
ensure that--
    (1) The applicant is not required to provide information or 
documentation that has been provided to the State agency responsible for 
determining eligibility under a separate child health program under 
title XXI and forwarded by such agency to the Medicaid agency on behalf 
of the child in accordance with Sec. 457.350(f) of this chapter;
    (2) Eligibility is determined in a timely manner in accordance with 
Sec. 435.911 of this chapter;
    (3) The Medicaid agency promptly notifies the State agency 
responsible for determining eligibility under a separate child health 
program when a child who was screened as potentially eligible for 
Medicaid is determined ineligible or eligible for Medicaid; and
    (4) The Medicaid agency adopts a process that facilitates enrollment 
in a State child health program when a child is determined ineligible 
for Medicaid at initial application or redetermination.

[66 FR 2666, Jan. 11, 2001]



   Subpart N--State Programs for Licensing Nursing Home Administrators



Sec. 431.700  Basis and purpose.

    This subpart implements sections 1903(a)(29) and 1908 of the Act 
which require that the State plan include a State program for licensing 
nursing home administrators.



Sec. 431.701  Definitions.

    Unless otherwise indicated, the following definitions apply for 
purposes of this subpart:
    Agency means the State agency responsible for licensing individual 
practitioners under the State's healing arts licensing act.
    Board means an appointed State board established to carry out a 
State program for licensing administrators of nursing homes, in a State 
that does not have a healing arts licensing act or an agency as defined 
in this section.
    Licensed means certified by a State agency or board as meeting all 
of the requirements for a licensed nursing home administrator specified 
in this subpart.
    Nursing home means any institution, facility, or distinct part of a 
hospital that is licensed or formally recognized as meeting nursing home 
standards established under State law, or that is determined under 
Sec. 431.704 to be included under the requirements of this subpart. The 
term does not include--
    (a) A religious nonmedical institution as defined in Sec. 440.170(b) 
of this chapter; or
    (b) A distinct part of a hospital, if the hospital meets the 
definition in Sec. 440.10 or Sec. 440.140 of this subchapter, and the 
distinct part is not licensed separately or formally approved as a 
nursing home by the State even though it is designated or certified as a 
skilled nursing facility.
    Nursing home administrator means any person who is in charge of the 
general administration of a nursing home whether or not the person--
    (a) Has an ownership interest in the home; or
    (b) Shares his functions and duties with one or more other persons.

[43 FR 45188, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]



Sec. 431.702  State plan requirement.

    A State plan must provide that the State has a program for licensing 
administrators of nursing homes that meets the requirements of 
Secs. 431.703 through 431.713 of this subpart.



Sec. 431.703  Licensing requirement.

    The State licensing program must provide that only nursing homes 
supervised by an administrator licensed in accordance with the 
requirements of this subpart may operate in the State.



Sec. 431.704  Nursing homes designated by other terms.

    If a State licensing law does not use the term ``nursing home,'' the 
CMS Administrator will determine the term or terms equivalent to 
``nursing home'' for purposes of applying the requirements of this 
subpart. To obtain this determination, the Medicaid agency must submit 
to the Regional Medicaid Director copies of current State laws

[[Page 49]]

that define institutional health care facilities for licensing purposes.



Sec. 431.705  Licensing authority.

    (a) The State licensing program must provide for licensing of 
nursing home administrators by--
    (1) The agency designated under the healing arts act of the State; 
or
    (2) A State licensing board.
    (b) The State agency or board must perform the functions and duties 
specified in Secs. 431.707 through 431.713 and the board must meet the 
membership requirements specified in Sec. 431.706 of this subpart.



Sec. 431.706  Composition of licensing board.

    (a) The board must be composed of persons representing professions 
and institutions concerned with the care and treatment of chronically 
ill or infirm elderly patients. However--
    (1) A majority of the board members may not be representative of a 
single profession or category of institution; and
    (2) Members not representative of institutions may not have a direct 
financial interest in any nursing home.
    (b) For purposes of this section, nursing home administrators are 
considered representatives of institutions.



Sec. 431.707  Standards.

    (a) The agency or board must develop, impose, and enforce standards 
that must be met by individuals in order to be licensed as a nursing 
home administrator.
    (b) The standards must be designed to insure that nursing home 
administrators are--
    (1) Of good character;
    (2) Otherwise suitable; and
    (3) Qualified to serve because of training or experience in 
institutional administration.



Sec. 431.708  Procedures for applying standards.

    The agency or board must develop and apply appropriate procedures 
and techniques, including examinations and investigations, for 
determining if a person meets the licensing standards.



Sec. 431.709  Issuance and revocation of license.

    Except as provided in Sec. 431.714 of this subpart, the agency or 
board must--
    (a) Issue licenses to persons who meet the agency's or board's 
standards; and
    (b) Revoke or suspend a license if the agency or board determines 
that the person holding the license substantially fails to meet the 
standards.



Sec. 431.710  Provisional licenses.

    To fill a position of nursing home administrator that unexpectedly 
becomes vacant, the agency or board may issue one provisional license, 
for a single period not to exceed 6 months. The license may be issued to 
a person who does not meet all of the licensing requirements established 
under Sec. 431.707 but who--
    (a) Is of good character and otherwise suitable; and
    (b) Meets any other standards established for provisional licensure 
by the agency or board.



Sec. 431.711  Compliance with standards.

    The agency or board must establish and carry out procedures to 
insure that licensed administrators comply with the standards in this 
subpart when they serve as nursing home administrators.



Sec. 431.712  Failure to comply with standards.

    The agency or board must investigate and act on all complaints it 
receives of violations of standards.



Sec. 431.713  Continuing study and investigation.

    The agency or board must conduct a continuing study of nursing homes 
and administrators within the State to improve--
    (a) Licensing standards; and
    (b) The procedures and methods for enforcing the standards.



Sec. 431.714  Waivers.

    The agency or board may waive any standards developed under 
Sec. 431.707 of this subpart for any person who has served in the 
capacity of a nursing home administrator during all of the 3 calendar 
years immediately preceding

[[Page 50]]

the calendar year in which the State first meets the requirements in 
this subpart.



Sec. 431.715  Federal financial participation.

    No FFP is available in expenditures by the licensing board for 
establishing and maintaining standards for the licensing of nursing home 
administrators.

Subpart O [Reserved]



                       Subpart P--Quality Control

                           General Provisions

    Source: Sections 431.800 through 431.808 appear at 55 FR 22166, May 
31, 1990, unless otherwise noted.



Sec. 431.800  Scope of subpart.

    This subpart--
    (a) Establishes State plan requirements for a Medicaid eligibility 
quality control (MEQC) program designed to reduce erroneous expenditures 
by monitoring eligibility determinations and a claims processing 
assessment system that monitors claims processing operations.
    (b) Establishes rules and procedures for disallowing Federal 
financial participation (FFP) in erroneous Medicaid payments due to 
eligibility and recipient liability errors as detected through the MEQC 
program.



Sec. 431.802  Basis.

    This subpart implements the following sections of the Act, which 
establish requirements for State plans and for payment of Federal 
financial participation (FFP) to States:

    1902(a)(4) Administrative methods for proper and efficient operation 
of the State plan.
    1903(u) Limitation of FFP for erroneous medical assistance 
expenditures.



Sec. 431.804  Definitions.

    As used in this subpart--
    Active case means an individual or family determined to be currently 
authorized as eligible for Medicaid by the agency.
    Administrative period means the period of time recognized by the 
MEQC program for State agencies to reflect changes in case 
circumstances, i.e., a change in a common program area, during which no 
case error based on the circumstance change would be cited. This period 
consists of the review month and the month prior to the review month.
    Claims processing error means FFP has been claimed for a Medicaid 
payment that was made--
    (1) For a service not authorized under the State plan;
    (2) To a provider not certified for participation in the Medicaid 
program;
    (3) For a service already paid for by Medicaid; or
    (4) In an amount above the allowable reimbursement level for that 
service.
    Eligibility error means that Medicaid coverage has been authorized 
or payment has been made for a recipient or family under review who--
    (1) Was ineligible when authorized or when he received services; or
    (2) Was eligible for Medicaid but was ineligible for certain 
services he received; or
    (3) Had not met recipient liability requirements when authorized 
eligible for Medicaid; that is, he had not incurred medical expenses 
equal to the amount of his excess income over the State's financial 
eligibility level or he had incurred medical expenses that exceeded the 
amount of excess income over the State's financial eligibility level, or 
was making an incorrect amount of payment toward the cost of services.
    Negative case action means an action that was taken to deny or 
otherwise dispose of a Medicaid application without a determination of 
eligibility (for instance, because the application was withdrawn or 
abandoned) or an action to deny, suspend, or terminate an individual or 
family.
    State agency means either the State Medicaid agency or a State 
agency that is responsible for determining eligibility for Medicaid.



Sec. 431.806  State plan requirements.

    (a) MEQC program. A State plan must provide for operating a Medicaid 
eligibility quality control program that meets the requirements of 
Secs. 431.810 through 431.822 of this subpart.

[[Page 51]]

    (b) Claims processing assessment system. Except in a State that has 
an approved Medicaid Management Information System (MMIS) under subpart 
C of part 433 of this subchapter, a State plan must provide for 
operating a Medicaid quality control claims processing assessment system 
that meets the requirements of Secs. 431.830 through 431.836 of this 
subpart.



Sec. 431.808  Protection of recipient rights.

    Any individual performing activities under the MEQC program or the 
claims processing assessment system specified in this subpart must do so 
in a manner that is consistent with the provisions of Secs. 435.902 and 
436.901 of this subchapter concerning the rights of recipients.

           Medicaid Eligibility Quality Control (MEQC) Program

    Source: Sections 431.810 through 431.822 appear at 55 FR 22167, May 
31, 1990, unless otherwise noted.



Sec. 431.810  Basic elements of the Medicaid eligibility quality control (MEQC) program.

    (a) General requirements. The agency must operate the MEQC program 
in accordance with this section and Secs. 431.812 through 431.822 and 
other instructions established by CMS.
    (b) Review requirements. The agency must conduct MEQC reviews in 
accordance with the requirements specified in Sec. 431.812 and other 
instructions established by CMS.
    (c) Sampling requirements. The agency must conduct MEQC sampling in 
accordance with the requirements specified in Sec. 431.814 and other 
instructions established by CMS.



Sec. 431.812  Review procedures.

    (a) Active case reviews. (1) Except as provided in paragraph (a)(2) 
of this section, the agency must review all active cases selected from 
the State agency's lists of cases authorized eligible for the review 
month, to determine if the cases were eligible for services during all 
or part of the month under review, and, if appropriate, whether the 
proper amount of recipient liability was computed.
    (2) The agency is not required to conduct reviews of the following 
cases:
    (i) Supplemental Security Income (SSI) recipient cases in States 
with contracts under section 1634 of the Act for determining Medicaid 
eligibility;
    (ii) Foster care and adoption assistance cases under title IV-E of 
the Act found eligible for Medicaid; and
    (iii) Cases under programs that are 100 percent federally funded.
    (b) Negative case reviews. Except as provided in paragraph (c) of 
this section, the agency must review those negative cases selected from 
the State agency's lists of cases that are denied, suspended, or 
terminated in the review month to determine if the reason for the 
denial, suspension, or termination was correct and if requirements for 
timely notice of negative action were met. A State's negative case 
sample size is determined on the basis of the number of negative case 
actions in the universe.
    (c) Alternate systems of negative case reviews--(1) Basic provision. 
A State may be exempt from the negative case review requirements 
specified in paragraphs (b) and (e)(2) of this section and in 
Sec. 431.814(d) upon CMS's approval of a plan for the use of a superior 
system.
    (2) Submittal of plan for alternate system. An agency must submit 
its plan for the use of a superior system to CMS for approval at least 
60 days before the beginning of the review period in which it is to be 
implemented. If a plan is unchanged from a previous period, the agency 
is not required to resubmit it.

The agency must receive approval for a plan before it can be 
implemented.
    (3) Requirement for alternate system. To be approved, the State's 
plan must--
    (i) Clearly define the purpose of the system and demonstrate how the 
system is superior to the current negative case review requirements.
    (ii) Contain a methodology for identifying significant problem areas 
that could result in erroneous denials, suspensions, and terminations of 
applicants and recipients. Problem areas selected for review must 
contain at least as many applicants and recipients as were included in 
the negative case sample size previously required for the State.

[[Page 52]]

    (iii) Provide a detailed methodology describing how the extent of 
the problem area will be measured through sampling and review 
procedures, the findings expected from the review, and planned 
corrective actions to resolve the problem.
    (iv) Include documentation supporting the use of the system 
methodology. Documentation must include the timeframes under which the 
system will be operated.
    (v) Provide a superior means of monitoring denials, terminations, 
and suspensions than that required under paragraph (b) of this section.
    (vi) Provide a statistically valid error rate that can be projected 
to the universe that is being studied.
    (d) Reviews for erroneous payments. The agency must review all 
claims for services furnished during the review month and paid within 4 
months of the review month to all members of each active case related in 
the sample to identify erroneous payments resulting from--
    (1) Ineligibility for Medicaid;
    (2) Ineligibility for certain Medicaid services; and
    (3) Recipient understated or overstated liability.
    (e) Reviews for verification of eligibility status. The agency must 
collect and verify all information necessary to determine the 
eligibility status of each individual included in an active case 
selected in the sample as of the review month and whether Medicaid 
payments were for services which the individual was eligible to receive.

The agency must apply the administrative period described in 
Sec. 431.804 when considering the case circumstances and the case 
correctness. In order to verify eligibility information, the agency 
must--
    (1) Examine and analyze each case record for all cases under review 
to establish what information is available for use in determining 
eligibility in the review month;
    (2) Conduct field investigations including in-person recipient 
interviews for each case in the active case sample, and conduct in-
person interviews only when the correctness of the agency action cannot 
be determined by review of the case record with recipients for cases in 
the negative case action sample (unless this is otherwise addressed in a 
superior system provided for in paragraph (c)(1) of this section);
    (3) Verify all appropriate elements of eligibility for active cases 
through at least one primary source of evidence or two secondary sources 
of evidence as defined by CMS by documentation or by collateral contacts 
as required, or both, and fully record the information on the 
appropriate forms;
    (4) Determine the basis on which eligibility was established and the 
eligibility status of the active case and each case member;
    (5) Collect copies of State paid claims or recipient profiles for 
services delivered during the review month and, if indicated, any months 
prior to the review month in the agency's selected spenddown period, for 
all members of the active case under review;
    (6) Associate dollar values with eligibility status for each active 
case under review; and
    (7) Complete the payment, case, and review information for all 
individuals in the active case under review on the appropriate forms.



Sec. 431.814  Sampling plan and procedures.

    (a) Plan approval. The agency must submit a basic MEQC sampling plan 
(or revisions to a current plan) that meets the requirements of this 
section to the appropriate CMS regional office for approval at least 60 
days before the beginning of the review period in which it is to be 
implemented. If a plan is unchanged from a previous period, the agency 
is not required to resubmit the entire plan. Universe estimates and 
sampling intervals are required 2 weeks before the first monthly sample 
selection for each review period. The agency must receive approval for a 
plan before it can be implemented.
    (b) Plan requirements. The agency must have an approved sampling 
plan in effect for the full 6-month sampling period that includes the 
following:
    (1) The population to be sampled;
    (2) The list(s) from which the sample is selected and the following 
characteristics of the list(s):
    (i) Sources;

[[Page 53]]

    (ii) All types of cases in the selection lists;
    (iii) Accuracy and completeness of sample lists in reference to the 
population(s) of interest;
    (iv) Whether or not the selection list was constructed by combining 
more than one list;
    (v) The form of the selection list (whether the list or part of the 
list is automated);
    (vi) Frequency and length of delays in updating the selection lists 
or their sources;
    (vii) Number of items on the lists and proportion of listed-in-error 
items:
    (viii) Methods of deleting unwanted items from the selection lists; 
and
    (ix) Structure of the selection lists.
    (3) The sample size, including the minimum number of reviews to be 
completed and the expected number of cases to be selected. Minimum 
sample sizes are based on the State's relative level of Medicaid annual 
expenditures for services for active cases, and on the total number of 
negative case actions in the universe for negative cases. When the 
sample is substratified, there can be no fewer than 75 cases in each 
substratum, except as provided in paragraph (c) of this section or as 
provided in an exception documented in an approved sampling plan which 
contains a statement accepting the precision and reliability of the 
reduced sample.
    (4) The sample selection procedure. Systematic random sampling is 
recommended. Alternative procedures must provide a representative 
sample, conform to principles of probability sampling, and yield 
estimates with the same or better precision than achieved in systematic 
random sampling.
    (5) Procedures used to identify amounts paid for services received 
in the review month.
    (6) Specification as to whether the agency chooses to--
    (i) Use billed amounts to offset recipient liability toward cost of 
care (No indication will be interpreted to mean that the agency will use 
paid claims); and
    (ii) Use denied claims to offset recipient liability toward cost of 
care in the payment review. (No indication will be interpreted to mean 
denied claims will not be used.)
    (7) Indication of whether the agency opts to drop or complete cases 
selected more than once in a sample period. (No indication will be 
interpreted to mean that the agency will complete cases selected more 
than once.)
    (c) Eligibility universe--active cases. The MEQC universe for active 
cases must be divided into two strata, the Aid to Families with 
Dependent Children (AFDC) stratum and the Medical Assistance Only (MAO) 
stratum.
    (1) All States must use the AFDC quality control sample for the AFDC 
stratum.
    (2) States must include in the MAO stratum all cases certified as 
eligible for Medicaid that are not in the AFDC stratum, excluding 
individuals specified in paragraph (c)(4) of this section.
    (3) States that do not have an agreement with the Social Security 
Administration under section 1634 of the Act and do not have more 
restrictive eligibility criteria under section 1902(f) of the Act but 
require a separate Medicaid application for recipients of SSI and 
determine Medicaid eligibility using SSI criteria must divide the MAO 
stratum into two substrata: MAO cases and SSI cash cases for the first 
review period beginning after July 1, 1990 and for review periods 
thereafter. The SSI substratum sample size must be 75 cases or one-half 
of the total MAO sample, whichever is smaller. The non-SSI MAO 
substratum sample will be the remainder of the MAO stratum cases.

States may be exempt from this requirement when implementing an approved 
sampling option that does not accommodate this stratification method.
    (4) States must exclude from the MEQC universe SSI beneficiaries 
whose eligibility determinations were made exclusively by the Social 
Security Administration under an agreement under section 1634 of the 
Act, individuals in foster care or receiving adoption assistance whose 
eligibility is determined under title IV-E of the Act, and individuals 
receiving Medicaid under programs that are 100 percent federally funded.
    (d) Eligibility universe--negative cases. Unless the agency has an 
approved superior system under Sec. 431.812(c) that provides otherwise, 
the universe for

[[Page 54]]

negative Medicaid eligibility cases must consist of all denied 
applications, suspensions, and terminations occurring during the review 
month except transfers between counties without any break in 
eligibility, cases in which eligibility is exclusively determined by SSA 
under a section 1634 contract, cases determined eligible for foster care 
and adoption assistance under title IV-E of the Act, and cases under 
programs that are 100 percent federally funded.
    (e) Sampling procedures. The agency must document all sampling 
procedures used by the State agency, including 98 percent accuracy of 
program identifier codes used in the sampling frame to separate listed-
in-error cases from those in the population of interest, must make them 
available for review by CMS, and must be able to demonstrate the 
integrity of its sampling procedures in accordance with this section.
    (f) Sampling periods. The agency must use 6-month sampling periods, 
from April through September and from October through March.
    (g) Statistical samples. The agency must select statistically valid 
samples of both active and negative case actions.
    (h) Sample selection lists. The agency must submit to CMS monthly a 
list of cases selected in the sample to be reviewed, after the State's 
sample selection and before commencing MEQC reviews on the cases in the 
sample.
    (i) Universe estimates and sampling intervals. The agency must 
submit detailed universe estimates and sampling intervals to CMS for 
approval at least 2 weeks before the first sample selection of the 
review period if the estimates differ from the previous period. The 
sampling intervals must be used continuously throughout the sampling 
period unless otherwise specified in an approved sampling plan. Final 
universe counts based on the actual sampling universe must be determined 
and reported to CMS for each stratum/substratum designated in the 
sampling plan.

The agency also must submit universe counts for cases eligible for 
foster care and adoption assistance under title IV-E of the Act, and, 
for States with an agreement under section 1634 of the Act, for cases 
found eligible by the Social Security Administration.
    (j) Sample size and methodology options. The agency may select a 
sample size in accordance with the minimum established under paragraph 
(b)(3) of this section or use one of the methodologies specified in 
paragraph (j)(1) or (2) of this section.
    (1) Increase in size. The agency may, at its option, increase its 
sample size for a sampling period above the federally prescribed minimum 
sample size provided for under paragraph (b)(3) of this section, and 
receive FFP for any increased administrative costs the agency incurs by 
exercising this option.
    (2) Retrospective sampling. The agency may, at its option, implement 
retrospective sampling in which cases are stratified by dollar value of 
claims paid. If the agency selects retrospective sampling, it must--
    (i) Draw an initial case sample size each month that is no less than 
5 times the required sample size. The sample will be selected from the 
universe of cases that were certified eligible in the fourth month prior 
to the month of case selection;
    (ii) Identify claims paid for services furnished to all individuals 
during the review month (and, if indicated, any months prior to the 
review month in the agency's selected spenddown period) for these cases;
    (iii) Stratify the cases by dollar value of the claims into three 
strata; and
    (iv) Select a second statistically valid sample within each group 
subject to the sample size requirements specified in paragraph (b)(3) or 
(j)(1) of this section.



Sec. 431.816  Case review completion deadlines and submittal of reports.

    (a) The agency must complete case reviews and submit reports of 
findings to CMS as specified in paragraph (b) of this section in the 
form and at the time specified by CMS.
    (b) In addition to the reporting requirements specified in 
Sec. 431.814 relating to sampling, the agency must complete case reviews 
and submit reports of findings to CMS in accordance with

[[Page 55]]

paragraphs (b)(1) through (6) of this section for review periods 
beginning after July 1, 1990.The agency must not combine or otherwise 
integrate case findings from the MAO and AFDC strata to meet the case 
percentage deadlines as specified in paragraphs (b)(1) through (6) of 
this section.
    (1) Active case eligibility reviews--MAO stratum. (i) The agency 
must complete case eligibility reviews and report the findings 
electronically through the system prescribed by CMS for 90 percent of 
all active MAO cases within 105 days of the end of the review month for 
which those cases were reviewed, within 125 days for 95 percent of all 
active MAO cases, and within 150 days for 100 percent of all MAO active 
cases.
    (ii) The agency must submit a report on cases selected for the 
review month.
    (2) Active case eligibility reviews--AFDC stratum. (i) The agency 
must complete case eligibility reviews for AFDC ineligible and overpaid 
error cases caused by ineligible individuals and report the findings 
electronically through the system prescribed by CMS within 105 days of 
the end of the review month for which those cases were reviewed for 90 
percent of the total reviews; within 125 days of the end of the review 
month for which those cases were reviewed for 95 percent of the total 
reviews; and within 150 days of the end of the review month for which 
those cases were reviewed for 100 percent of the total reviews.
    (ii) The agency must report findings electronically through the 
system prescribed by CMS for 100 percent of the State agency-reported 
eligible individuals within 30 days after the final timeframe required 
by the AFDC program as specified in program regulations at 45 CFR 
205.40(b)(2)(ii).
    (3) Negative case eligibility reviews. The agency must submit a 
monthly progress report on negative case reviews completed during the 
month unless the agency has an approved superior system in effect. The 
agency must submit a report on its findings by June 30 of each year for 
the previous April-September sampling period and by December 31, for the 
October-March sampling period.
    (4) Payment reviews. (i) The agency must submit payment review 
findings electronically through the system prescribed by CMS.
    (ii) The agency must complete payment review findings for 100 
percent of the active case reviews in its sample and report the findings 
within 60 days after the first day of the month in which the claims 
collection process begins. The agency must wait 5 months after the end 
of each review month before associating the amount of claims paid for 
each case for services furnished during the review month unless 
retrospective sampling is elected.
    (iii) The agency must make any necessary corrections to claims 
payments during the month the claim is paid and the following month. CMS 
will take necessary action to reject any State adjustment adversely 
affecting the error rate, for example, by not paying claims on error 
cases.
    (5) Summary of reviews and findings. The agency must submit summary 
reports of the findings for all active cases in the 6-month sample by 
July 31 of each year for the previous April-September sampling period 
and by January 31 for the October-March sampling period. These summary 
reports must include findings changed in the Federal re-review process.
    (6) Other data and reports. The agency must report other requested 
data and reports in a manner prescribed by CMS.



Sec. 431.818  Access to records: MEQC program.

    (a) The agency, upon written request, must mail to the HHS staff all 
records, including complete local agency eligibility case files or 
legible copies and all other documents pertaining to its MEQC reviews to 
which the State has access, including information available under part 
435, subpart I, of this chapter.
    (b) The agency must mail requested records within 10 working days of 
receipt of a request, unless the State has an alternate method of 
submitting these records that is approved by CMS or has received, on an 
as-needed basis, approval from CMS to extend this timeframe by 3 
additional working days to allow for exceptional circumstances.

[[Page 56]]



Sec. 431.820  Corrective action under the MEQC program.

    The agency must--
    (a) Take action to correct any active or negative case action errors 
found in the sample cases;
    (b) Take administrative action to prevent or reduce the incidence of 
those errors; and
    (c) By September 15 each year, submit to CMS a report on its error 
rate analysis and a corrective action plan based on that analysis. The 
agency must submit revisions to the plan within 60 days of 
identification of additional error-prone areas, other significant 
changes in the error rate (that is, changes that the State experiences 
that increase or decrease its error rate and necessitate immediate 
corrective action or discontinuance of corrective actions that 
effectively control the cause of the error rate change), or changes in 
planned corrective action.



Sec. 431.822  Resolution of differences in State and Federal case eligibility or payment findings.

    (a) When a difference exists between State and Federal case 
eligibility or payment findings, the Regional Office will notify the 
agency by a difference letter.
    (b) The agency must return the difference letter to the Regional 
Office within 28 calendar days of the date of the letter indicating 
either agreement with the Federal finding or reasons for disagreement 
and if the agency desires a conference to resolve the difference. This 
period may be shortened if the Regional Office finds that it is 
necessary to do so in order to meet a case completion deadline, and the 
State still has a reasonable period of time in which to respond to the 
letter. If the agency fails to submit the difference letter indicating 
its agreement or disagreement with the Federal findings within the 28 
calendar days (or the shorter period designated as described above), the 
Federal findings will be sustained.
    (c) If the Regional Office disagrees with the agency's response, a 
difference conference will be scheduled within 20 days of the request of 
the agency. If a difference cannot be resolved, the State may request a 
direct presentation of its position to the Regional Administrator. The 
Regional Administrator has final authority for resolving the difference.

   Medicaid Quality Control (MQC) Claims Processing Assessment System

    Source: Sections 431.830 through 431.836 appear at 55 FR 22170, May 
31, 1990, unless otherwise noted.



Sec. 431.830  Basic elements of the Medicaid quality control (MQC) claims processing assessment system.

    An agency must--
    (a) Operate the MQC claims processing assessment system in 
accordance with the policies, sampling methodology, review procedures, 
reporting forms, requirements, and other instructions established by 
CMS.
    (b) Identify deficiencies in the claims processing operations.
    (c) Measure cost of deficiencies;
    (d) Provide data to determine appropriate corrective action;
    (e) Provide an assessment of the State's claims processing or that 
of its fiscal agent;
    (f) Provide for a claim-by-claim review where justifiable by data; 
and
    (g) Produce an audit trail that can be reviewed by CMS or an outside 
auditor.



Sec. 431.832  Reporting requirements for claims processing assessment systems.

    (a) The agency must submit reports and data specified in paragraph 
(b) of this section to CMS, in the form and at the time specified by 
CMS.
    (b) Except when CMS authorizes less stringent reporting, States must 
submit:
    (1) A monthly report on claims processing reviews sampled and or 
claims processing reviews completed during the month;
    (2) A summary report on findings for all reviews in the 6-month 
sample to be submitted by the end of the 3rd month following the 
scheduled completion of reviews for that 6 month period; and
    (3) Other data and reports as required by CMS.

[[Page 57]]



Sec. 431.834  Access to records: Claims processing assessment systems.

    The agency, upon written request, must provide HHS staff with access 
to all records pertaining to its MQC claims processing assessment system 
reviews to which the State has access, including information available 
under part 435, subpart J, of this chapter.



Sec. 431.836  Corrective action under the MQC claims processing assessment system.

    The agency must--
    (a) Take action to correct those errors identified through the 
claims processing assessment system review and, if cost effective, to 
recover those funds erroneously spent;
    (b) Take administrative action to prevent and reduce the incidence 
of those errors; and
    (c) By August 31 of each year, submit to CMS a report of its error 
analysis and a corrective action plan on the reviews conducted since the 
cut-off-date of the previous corrective action plan.

                     Federal Financial Participation



Secs. 431.861-431.864  [Reserved]



Sec. 431.865  Disallowance of Federal financial participation for erroneous State payments (for annual assessment periods ending after July 1, 1990).

    (a) Purpose and applicability--
    (1) Purpose. This section establishes rules and procedures for 
disallowing Federal financial participation (FFP) in erroneous medical 
assistance payments due to eligibility and beneficiary liability errors, 
as detected through the Medicaid eligibility quality control (MEQC) 
program required under Sec. 431.806 in effect on and after July 1, 1990.
    (2) Applicability. This section applies to all States except Puerto 
Rico, Guam, the Virgin Islands, the Northern Mariana Islands, and 
American Samoa beginning July 1, 1990.
    (b) Definitions. For purposes of this section--
    Administrator means the Administrator, Centers for Medicare & 
Medicaid Services or his or her designee.
    Annual assessment period means the 12-month period October 1 through 
September 30 and includes two 6-month sample periods (October-March and 
April-September).
    Beneficiary liability means--
    (1) The amount of excess income that must be offset with incurred 
medical expenses to gain eligibility; or
    (2) The amount of payment a recipient must make toward the cost of 
services.
    Erroneous payments means the Medicaid payment that was made for an 
individual or family under review who--
    (1) Was ineligible for the review month or, if full month coverage 
is not provided, at the time services were received;
    (2) Was ineligible to receive a service provided during the review 
month; or
    (3) Had not properly met enrollee liability requirements prior to 
receiving Medicaid services.
    (4) The term does not include payments made for care and services 
covered under the State plan and furnished to children during a 
presumptive eligibility period as described in Sec. 435.1102 of this 
chapter.
    National mean error rate means the payment weighted average of the 
eligibility payment error rates for all States.
    National standard means a 3-percent eligibility payment error rate.
    State payment error rate means the ratio of erroneous payments for 
medical assistance to total expenditures for medical assistance (less 
payments to Supplemental Security Income beneficiaries in section 1634 
contract States and payments for children eligible for foster care and 
adoption assistance under title IV-E of the Act) for cases under review 
under the MEQC system for each assessment period.
    Technical error means an error in an eligibility condition that, if 
corrected, would not result in a difference in the amount of medical 
assistance paid. These errors include work incentive program 
requirements, assignment of social security numbers, the requirement for 
a separate Medicaid application, monthly reporting requirements, 
assignment of rights to third party benefits, and failure to apply for 
benefits for which the family or individual is not eligible. Errors 
other than those listed in this definition, identified by

[[Page 58]]

CMS in subsequent instructions, or approved by CMS are not technical 
errors.
    (c) Setting of State's payment error rate. (1) Each State must, for 
each annual assessment period, have a payment error rate no greater than 
3 percent or be subject to a disallowance of FFP.
    (2) A payment error rate for each State is determined by CMS for 
each annual assessment period by computing the statistical estimate of 
the ratio of erroneous payments for medical assistance made on behalf of 
individuals or cases in the sample for services received during the 
review month to total expenditures for medical assistance for that State 
made on behalf of individuals or cases in the sample for services 
received during the review month. This ratio incorporates the findings 
of a federally re-reviewed subsample of the State's review findings and 
is projected to the universe of total medical assistance payments for 
calculating the amount of disallowance under paragraph (d)6) of this 
section.
    (3) The State's payment error rate does not include payments made on 
behalf of individuals whose eligibility determinations were made 
exclusively by the Social Security Administration under an agreement 
under section 1634 of the Act or children found eligible for foster care 
and adoption assistance under title IV-E of the Act.
    (4) The amount of erroneous payments is determined as follows:
    (i) For ineligible cases resulting from excess resources, the amount 
of error is the lesser of--
    (A) The amount of the payment made on behalf of the family or 
individual for the review month; or
    (B) The difference between the actual amount of countable resources 
of the family or individual for the review month and the State's 
applicable resources standard.
    (ii) For ineligible cases resulting from other than excess 
resources, the amount of error is the total amount of medical assistance 
payments made for the individual or family under review for the review 
month.
    (iii) For erroneous payments resulting from failure to properly meet 
beneficiary liability, the amount of error is the lesser of--
    (A) The amount of payments made on behalf of the family or 
individual for the review month; or
    (B) The difference between the correct amount of beneficiary 
liability and the amount of beneficiary liability met by the individual 
or family for the review month.
    (iv) The amount of payments made for services provided during the 
review month for which the individual or family was not eligible.
    (5) In determining the amount of erroneous payments, errors caused 
by technical errors are not included.
    (6) If a State fails to cooperate in completing a valid MEQC sample 
or individual reviews in a timely and appropriate fashion as required, 
CMS will establish the State's payment error rate based on either--
    (i) A special sample or audit;
    (ii) The Federal subsample; or
    (iii) Other arrangements as the Administrator may prescribe.
    (7) When it is necessary for CMS to exercise the authority in 
paragraph (c)(6) of this section, the amount that would otherwise be 
payable to the State under title XIX of the Act is reduced by the full 
costs incurred by CMS in making these determinations. CMS may make these 
determinations either directly or under contractual or other 
arrangements.
    (d) Computation of anticipated error rate. (1) Before the beginning 
of each quarter, CMS will project the anticipated medical assistance 
payment error rate for each State for that quarter. The anticipated 
error rate is the lower of the weighted average error rate of the two 
most recent 6-month review periods or the error rate of the most recent 
6-month review period. In either case, cases in the review periods must 
have been completed by the State and CMS. If a State fails to provide 
CMS with information needed to project anticipated excess erroneous 
expenditures, CMS will assign the State an error rate as prescribed in 
paragraph (c)(6) of this section.
    (2) If the State believes that the anticipated error rate 
established in accordance with paragraph (d)(1) of this section is based 
on erroneous data, the State may submit evidence that demonstrates the 
data were erroneous. If

[[Page 59]]

the State satisfactorily demonstrates that CMS's data were erroneous, 
the State's anticipated error rate will be adjusted accordingly. 
Submittal of evidence is subject to the following conditions:
    (i) The State must inform CMS of its intent to submit evidence at 
least 70 days prior to the beginning of the quarter.
    (ii) The State may request copies of data that CMS used to compute 
its anticipated error rate within 7 days of receiving notification of 
its projected error rate.
    (iii) The State has up to 40 days before the quarter begins to 
present the evidence.
    (iv) The evidence is restricted to documentation of suspected CMS 
data entry errors, processing errors, and resolutions of Federal 
subsample difference cases subsequent to calculation of the error rate 
projection as contained in the original notice to the State.
    (v) The State may not submit other evidence, such as that consisting 
of revisions to State errors as a result of changes to the original 
State review findings submitted to CMS.
    (vi) The State may not submit evidence challenging the error rate 
computational methodology.
    (3) Based on the anticipated error rate established in paragraph 
(d)(1) or (d)(2) of this section, CMS reduces its estimate of the 
State's requirements for FFP for medical assistance for the quarter by 
the percentage by which the anticipated payment error rate exceeds the 
3-percent national standard. This reduction is applied against CMS's 
total estimate of FFP for medical assistance expenditures (less payments 
to Supplemental Security Income beneficiaries in 1634 contract States 
and payments to children found eligible for foster care and adoption 
assistance under title IV-E of the Act) prior to any other required 
reductions. The reduction is noted on the State's grant award for the 
quarter and does not constitute a disallowance, and, therefore, is not 
appealable.
    (4) After the end of each quarter, an adjustment to the reduction 
will be made based on the State's actual expenditures.
    (5) After the actual payment error rate has been established for 
each annual assessment period, CMS will compute the actual amount of the 
disallowance and adjust the FFP payable to each State based on the 
difference between the amounts previously withheld for each of the 
quarters during the appropriate assessment period and the amount that 
should have been withheld based on the State's actual final error rate. 
If CMS determines that the amount withheld for the period exceeds the 
amount of the actual disallowance, the excess amount withheld will be 
returned to the States through the normal grant awards process within 30 
days of the date the actual disallowance is calculated.
    (6) CMS will compute the amount to be withheld or disallowed as 
follows:
    (i) Subtract the 3-percent national standard from the State's 
anticipated or actual payment error rate percentage.
    (ii) If the difference is greater than zero, the Federal medical 
assistance funds for the period, excluding payments for those 
individuals whose eligibility for Medicaid was determined exclusively by 
the Social Security Administration under a section 1634 agreement and 
children found eligible for foster care and adoption assistance under 
title IV-E of the Act, are multiplied by that percentage. This product 
is the amount of the disallowance or withholding.
    (7) A State's payment error rate for an annual assessment period is 
the weighted average of the payment error rates in the two 6-month 
review periods comprising the annual assessment period.
    (8) The weights are established as the percent of the total annual 
payments, excluding payments for those individuals whose eligibility for 
Medicaid was determined exclusively by the Social Security 
Administration under a section 1634 agreement and children found 
eligible for foster care and adoption assistance under title IV-E of the 
Act, that occur in each of the 6-month periods.
    (e) Notice to States and showing of good faith. (1) When the actual 
payment error rate data are finalized for each annual assessment period 
ending after

[[Page 60]]

July 1, 1990, CMS will establish each State's error rate and the amount 
of any disallowance. States that have error rates above the national 
standard will be notified by letter of their error rates and the amount 
of the disallowance.
    (i) The State has 65 days from the date of receipt of this 
notification to show that this disallowance should not be made because 
it failed to meet the national standard despite a good faith effort to 
do so.
    (ii) If CMS is satisfied that the State did not meet the national 
standard despite a good faith effort, CMS may reduce the funds being 
disallowed in whole or in part as it finds appropriate under the 
circumstances shown by the State.
    (iii) A finding that a State did not meet the national standard 
despite a good faith effort will be limited to extraordinary 
circumstances.
    (iv) The burden of establishing that a good faith effort was made 
rests entirely with the State.
    (2) Some examples of circumstances under which CMS may find that a 
State did not meet the national standard despite a good faith effort 
are--
    (i) Disasters such as fire, flood, or civil disorders that--
    (A) Require the diversion of significant personnel normally assigned 
to Medicaid eligibility administration; or
    (B) Destroyed or delayed access to significant records needed to 
make or maintain accurate eligibility determinations;
    (ii) Strikes of State staff or other government or private personnel 
necessary to the determination of eligibility or processing of case 
changes;
    (iii) Sudden and unanticipated workload changes that result from 
changes in Federal law and regulation, or rapid, unpredictable caseload 
growth in excess of, for example, 15 percent for a 6-month period;
    (iv) State actions resulting from incorrect written policy 
interpretations to the State by a Federal official reasonably assumed to 
be in a position to provide that interpretation; and
    (v) The State has taken the action it believed was needed to meet 
the national standard, but the national standard was not met. CMS will 
consider request for a waiver under this criterion only if a State has 
achieved an error rate for the sample period that (after reducing the 
error rate by taking into account the cases determined by CMS to be in 
error as a result of conditions listed in paragraphs (e)(2) (i) through 
(iv) of this section) is less than its error rate for the preceding 
sample year and does not exceed the national mean error rate for the 
sample period under review (unless that national mean error rate is at 
or below the 3-percent national standard). If the agency has met this 
error reduction requirement or had error rates of 3 percent or below for 
the prior two review periods, and its error rate for the review period 
under consideration is less than one-third above the national standard, 
CMS will evaluate a request for a good faith waiver based on the 
following factors:
    (A) The State has fully met the performance standards in the 
operation of a quality control system in accordance with Federal 
regulations and CMS guidelines (e.g., adherence to Federal case 
completion timeliness requirements and verification standards).
    (B) The State has achieved substantial performance in the 
formulation of error reduction initiatives based on the following 
processes:
    (1) Performance of an accurate and thorough statistical and program 
analysis for error reduction which utilized quality control and other 
data:
    (2) The translation of such analysis into specific and appropriate 
error reduction practices for major error elements; and
    (3) The use of monitoring systems to verify that the error reduction 
initiatives were implemented at the local office level.
    (C) The State has achieved substantial performance in the operation 
of the following systems supported by evidence of the timely utilization 
of their outputs in the determination of case eligibility:
    (1) The operation of the Income and Eligibility Verification System 
in accordance with the requirements of parts 431 and 435 of this 
chapter, and
    (2) The operation of systems that interface with Social Security 
data and, where State laws do not restrict

[[Page 61]]

agency access, records from agencies responsible for motor vehicles, 
vital statistics, and State or local income and property taxes (where 
these taxes exist).
    (D) The State has achieved substantial performance in the use of the 
following accountability mechanisms to ensure that agency staff adhere 
to error reduction initiatives. The following are minimum requirements:
    (1) Accuracy of eligibility and liability determinations and timely 
processing of case actions are used as quantitative measures of employee 
performance and reflected in performance standards and appraisal forms:
    (2) Selective second-party case reviews are conducted. The second-
party review results are periodically reported to higher level 
management, as well as supervisors and workers and are used in 
performance standards and appraisal forms; and
    (3) Regular operational reviews of local offices are performed by 
the State to evaluate the offices' effectiveness in meeting error 
reduction goals with periodic monitoring to ensure that review 
recommendations have been implemented.
    (vi) A State that meets the performance standards specified in 
paragraphs (e)(2)(v) (A) through (D) of this section will be considered 
for a full or partial waiver of its disallowance amount. The State must 
submit only specific documentation that verifies that the necessary 
actions were accomplished. For example, a State could submit worker 
performance standards reflecting timeliness and case accuracy as 
quantitative measures of performance.
    (3) The failure of a State to act upon necessary legislative changes 
or to obtain budget authorization for needed resources is not a basis 
for finding that a State failed to meet the national standard despite a 
good faith effort.
    (f) Disallowance subject to appeal. (1) If a State does not agree 
with a disallowance imposed under paragraph (e) of this section, it may 
appeal to the Departmental Appeals Board within 30 days from the date of 
the final disallowance notice from CMS. The regular procedures for an 
appeal of a disallowance will apply, including review by the Appeals 
Board under 45 CFR part 16.
    (2) This appeal provision, as it applies to MEQC disallowances, is 
not applicable to the Administrator's decision on a State's waiver 
request provided for under paragraph (e) of this section.

[55 FR 22171, May 31, 1990, as amended at 61 FR 38398, July 24, 1996; 66 
FR 2666, Jan. 11, 2001]



PART 432--STATE PERSONNEL ADMINISTRATION--Table of Contents




                      Subpart A--General Provisions

Sec.
432.1 Basis and purpose.
432.2 Definitions.
432.10 Standards of personnel administration.

  Subpart B--Training Programs; Subprofessional and Volunteer Programs

432.30 Training programs: General requirements.
432.31 Training and use of subprofessional staff.
432.32 Training and use of volunteers.

              Subpart C--Staffing and Training Expenditures

432.45 Applicability of provisions in subpart.
432.50 FFP: Staffing and training costs.
432.55 Reporting training and administrative costs.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45199, Sept. 29, 1978, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 432.1  Basis and purpose.

    This part prescribes regulations to implement section 1902(a)(4) of 
the Act, which relates to a merit system of State personnel 
administration and training and use of subprofessional staff and 
volunteers in State Medicaid programs, and section 1903(a), rates of FFP 
for Medicaid staffing and training costs. It also prescribes 
regulations, based on the general administrative authority in section 
1902(a)(4), for State training programs for all staff.



Sec. 432.2  Definitions.

    As used in this part--

[[Page 62]]

    Community service aides means subprofessional staff, employed in a 
variety of positions, whose duties are an integral part of the agency's 
responsibility for planning, administration, and for delivery of health 
services.
    Directly supporting staff means secretarial, stenographic, and 
copying personnel and file and records clerks who provide clerical 
services that directly support the responsibilities of skilled 
professional medical personnel, who are directly supervised by the 
skilled professional medical personnel, and who are in an employer-
employee relationship with the Medicaid agency.
    Fringe benefits means the employer's share of premiums for workmen's 
compensation, employees' retirement, unemployment compensation, health 
insurance, and similar expenses.
    Full-time training means training that requires employees to be 
relieved of all responsibility for performance of current agency work to 
participate in a training program.
    Part-time training means training that allows employees to continue 
full-time in their agency jobs or requires only partial reduction of 
work activities to participate in the training activity.
    Skilled professional medical personnel means physicians, dentists, 
nurses, and other specialized personnel who have professional education 
and training in the field of medical care or appropriate medical 
practice and who are in an employer-employee relationship with the 
Medicaid agency. It does not include other nonmedical health 
professionals such as public administrators, medical analysts, 
lobbyists, senior managers or administrators of public assistance 
programs or the Medicaid program.
    Staff of other public agencies means skilled professional medical 
personnel and directly supporting staff who are employed in State or 
local agencies other than the Medicaid agency who perform duties that 
directly relate to the administration of the Medicaid program.
    Subprofessional staff means persons performing tasks that demand 
little or no formal education; a high school diploma; or less than 4 
years of college.
    Supporting staff means secretarial, stenographic, clerical, and 
other subprofessional staff whose activities are directly necessary to 
the carrying out of the functions which are the responsibility of 
skilled professional medical personnel, as defined in this section.
    Training program means a program of educational activities based on 
the agency's training needs and aimed at insuring that agency staff 
acquire the knowledge and skills necessary to perform their jobs.
    Volunteer means a person who contributes personal service to the 
community through the agency's program but is not a replacement or 
substitute for paid staff.

[43 FR 45199, Sept. 29, 1978, as amended at 50 FR 46663, Nov. 12, 1985; 
50 FR 49389, Dec. 2, 1985]



Sec. 432.10  Standards of personnel administration.

    (a) State plan requirement. A State plan must provide that the 
requirements of paragraphs (c) through (h) of this section are met.
    (b) Terms. In this section, ``standards'' refer to those specified 
in paragraph (c) of this section.
    (c) Methods of personnel administration. Methods of personnel 
administration must be established and maintained, in the Medicaid 
agency and in local agencies administering the propgram, in conformity 
with:
    (1) [Reserved]
    (2) 5 CFR part 900, subpart F, Administration of the Standards for 
Merit System of Personnel Administration.
    (d) Compliance of local jurisdictions. The Medicaid agency must have 
in effect methods to assure compliance with the standards by local 
jurisdictions included in the plan.
    (e) Review and adequacy of State laws, regulations, and policies. 
The agency must--
    (1) Assure that the U.S. Civil Service Commission has determined the 
adequacy of current State laws, regulations, and policy statements that 
effect methods of personnel administration in conformity with the 
standards, and
    (2) Submit any changes in them to the Commission for review.
    (f) Statements of acceptance by local agencies. If the Medicaid 
agency changes from a State-administered to a State-supervised, locally 
administered program, it must obtain statements of

[[Page 63]]

acceptance of the standards from the local agencies.
    (g) Affirmative action plan. The Medicaid agency must have in effect 
an affirmative action plan for equal employment opportunity, that 
includes specific action steps and timetables to assure that 
opportunity, and meets all other requirements of 45 CFR 70.4.\1\
---------------------------------------------------------------------------

    \1\ Editorial Note: The regulations formerly contained in 45 CFR 
70.4 were revised and reissued by the Office of Personnel Management at 
5 CFR Part 900, (Subpart F).

    (h) Submittal of requested materials. The Medicaid agency must 
submit to HHS, upon request, copies of the affirmative action plan and 
of the State and local materials that assure compliance with the 
---------------------------------------------------------------------------
standards.

[43 FR 45199, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



  Subpart B--Training Programs; Subprofessional and Volunteer Programs



Sec. 432.30  Training programs: General requirements.

    (a) A State plan must provide for a program of training for Medicaid 
agency personnel. (See also Secs. 432.31 and 432.32 for training 
programs for subprofessional staff and for volunteers.)
    (b) The program must--
    (1) Include initial inservice training for newly appointed staff, 
and continuing training opportunities to improve the operation of the 
program;
    (2) Be related to job duties performed or to be performed by the 
persons trained; and
    (3) Be consistent with the program objectives of the agency.



Sec. 432.31  Training and use of subprofessional staff.

    (a) State plan requirement. A State plan must provide for the 
training and effective use of subprofessional staff as community service 
aides, in accordance with the requirements of this section.
    (b) Recruitment and selection. The Medicaid agency must have methods 
of recruitment and selection that afford opportunity for full-time or 
part-time employment of persons of low income, including:
    (1) Young, middle-aged, and older persons;
    (2) Physically and mentally disabled; and
    (3) Recipients.
    (c) Merit system. Subprofessional positions must be subject to merit 
system requirements except where special exemption is approved on the 
basis of a State alternative plan for employment of disadvantaged 
persons.
    (d) Staffing plan. The agency staffing plan must include the kinds 
of jobs that subprofessional staff can perform.
    (e) Career service. The agency must have a career service program 
that allows persons:
    (1) To enter employment at the subprofessional level; and
    (2) To progress to positions of increasing responsibility and 
reward:
    (i) In accordance with their abilities; and
    (ii) Through work experience and pre-service and in-service 
training.
    (f) Training, supervision and supportive services. The agency must 
have an organized training program, supervision, and supportive services 
for subprofessional staff.
    (g) Progressive expansion. The agency must provide for annual 
increase in the number of subprofessional staff until:
    (1) An appropriate ratio of subprofessional and professional staff 
has been achieved; and
    (2) There is maximum use of subprofessional staff as community aides 
in the operation of the program.



Sec. 432.32  Training and use of volunteers.

    (a) State plan requirement. A State plan must provide for the 
training and use of non-paid or partially paid volunteers in accordance 
with the requirements of this section.
    (b) Functions of volunteers. The Medicaid agency must make use of 
volunteers in:
    (1) Providing services to applicants and recipients; and
    (2) Assisting any advisory committees established by the agency.

As used in this paragraph, ``partially paid volunteers'' means 
volunteers who

[[Page 64]]

are reimbursed only for actual expenses incurred in giving service, 
without regard to the value of the service or the time required to 
provide it.
    (c) Staffing. The agency must designate a position whose incumbent 
is responsible for:
    (1) The development, organization, and administration of the 
volunteer program; and
    (2) Coordination of the program with related functions.
    (d) Recruitment, selection, training, and supervision. The agency 
must have:
    (1) Methods of recruitment and selection that assure participation 
of volunteers of all income levels, in planning capacities and service 
provision; and
    (2) A program of organized training and supervision of volunteers.
    (e) Reimbursement of expenses. The agency must--
    (1) Reimburse volunteers for actual expenses incurred in providing 
services; and
    (2) Assure that no volunteer is deprived of the opportunity to serve 
because of the expenses involved.
    (f) Progressive expansion. The agency must provide for annual 
increase in the number of volunteers used until the volunteer program is 
adequate for the achievement of the agency's service goals.



              Subpart C--Staffing and Training Expenditures



Sec. 432.45  Applicability of provisions in subpart.

    The rates of FFP specified in this subpart C do not apply to State 
personnel who conduct survey activities and certify facilities for 
participation in Medicaid, as provided for under section 1902(a)(33)(B) 
of the Act.

[50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]



Sec. 432.50  FFP: Staffing and training costs.

    (a) Availability of FFP. FFP is available in expenditures for salary 
or other compensation, fringe benefits, travel, per diem, and training, 
at rates determined on the basis of the individual's position, as 
specified in paragraph (b) of this section.
    (b) Rates of FFP. (1) For skilled professional medical personnel and 
directly supporting staff of the Medicaid agency or of other public 
agencies (as defined in Sec. 432.2), the rate is 75 percent.
    (2) For personnel engaged directly in the operation of mechanized 
claims processing and information retrieval systems, the rate is 75 
percent.
    (3) For personnel engaged in the design, development, or 
installation of mechanized claims processing and information retrieval 
systems, the rate is 50 percent for training and 90 percent for all 
other costs specified in paragraph (a) of this section.
    (4) [Reserved]
    (5) For personnel administering family planning services and 
supplies, the rate is 90 percent.
    (6) For all other staff of the Medicaid agency or other public 
agencies providing services to the Medicaid agency, and for training and 
other expenses of volunteers, the rate is 50 percent.
    (c) Application of rates. (1) FFP is prorated for staff time that is 
split among functions reimbursed at different rates.
    (2) Rates of FFP in excess of 50 percent apply only to those 
portions of the individual's working time that are spent carrying out 
duties in the specified areas for which the higher rate is authorized.
    (3) The allocation of personnel and staff costs must be based on 
either the actual percentages of time spent carrying out duties in the 
specified areas, or another methodology approved by CMS.
    (d) Other limitations for FFP rate for skilled professional medical 
personnel and directly supporting staff--(1) Medicaid agency personnel 
and staff. The rate of 75 percent FFP is available for skilled 
professional medical personnel and directly supporting staff of the 
Medicaid agency if the following criteria, as applicable, are met:
    (i) The expenditures are for activities that are directly related to 
the administration of the Medicaid program, and as such do not include 
expenditures for medical assistance;
    (ii) The skilled professional medical personnel have professional 
education and training in the field of medical care or appropriate 
medical practice. ``Professional education and training''

[[Page 65]]

means the completion of a 2-year or longer program leading to an 
academic degree or certificate in a medically related profession. This 
is demonstrated by possession of a medical license, certificate, or 
other document issued by a recognized National or State medical 
licensure or certifying organization or a degree in a medical field 
issued by a college or university certified by a professional medical 
organization. Experience in the administration, direction, or 
implementation of the Medicaid program is not considered the equivalent 
of professional training in a field of medical care.
    (iii) The skilled professional medical personnel are in positions 
that have duties and responsibilities that require those professional 
medical knowledge and skills.
    (iv) A State-documented employer-employee relationship exists 
between the Medicaid agency and the skilled professional medical 
personnel and directly supporting staff; and
    (v) The directly supporting staff are secretarial, stenographic, and 
copying personnel and file and records clerks who provide clerical 
services that are directly necessary for the completion of the 
professional medical responsibilities and functions of the skilled 
professional medical staff. The skilled professional medical staff must 
directly supervise the supporting staff and the performance of the 
supporting staff's work.
    (2) Staff of other public agencies. The rate of 75 percent FFP is 
available for staff of other public agencies if the requirements 
specified in paragraph (d)(1) of this section are met and the public 
agency has a written agreement with the Medicaid agency to verify that 
these requirements are met.
    (e) Limitations on FFP rates for staff in mechanized claims 
processing and information retrieval systems. The special matching rates 
for persons working on mechanized claims processing and information 
retrieval systems (paragraphs (b)(2) and (3) of this section) are 
applicable only if the design, development and installation, or the 
operation, have been approved by the Administrator in accordance with 
part 433, subchapter C, of this chapter.

[43 FR 45199, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 
50 FR 46663, Nov. 12, 1985]



Sec. 432.55  Reporting training and administrative costs.

    (a) Scope. This section identifies activities and costs to be 
reported as training or administrative costs on quarterly estimate and 
expenditure reports to CMS.
    (b) Activities and costs to be reported on training expenditures. 
(1) For fulltime training (with no assigned agency duties): Salaries, 
fringe benefits, dependency allowances, travel, tuition, books, and 
educational supplies.
    (2) For part-time training: Travel, per diem, tuition, books and 
educational supplies.
    (3) For State and local Medicaid agency staff development personnel 
(including supporting staff) assigned fulltime training functions: 
Salaries, fringe benefits, travel, and per diem. Costs for staff 
spending less than full time on training for the Medicaid program must 
be allocated between training and administration in accordance with 
Sec. 433.34 of this subchapter.
    (4) For experts engaged to develop or conduct special programs: 
Salary, fringe benefits, travel, and per diem.
    (5) For agency training activities directly related to the program: 
Use of space, postage, teaching supplies, and purchase or development of 
teaching materials and equipment, for example, books and audiovisual 
aids.
    (6) For field instruction in Medicaid: Instructors' salaries and 
fringe benefits, rental of space, travel, clerical assistance, teaching 
materials and equipment such as books and audiovisual aids.
    (c) Activities and costs not to be reported as training 
expenditures. The following activities are to be reported as 
administrative costs:
    (1) Salaries of supervisors (day-to-day supervision of staff is not 
a training activity); and
    (2) Cost of employing students on a temporary basis, for instance, 
during summer vacation.

[43 FR 45199, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979]

[[Page 66]]



PART 433--STATE FISCAL ADMINISTRATION--Table of Contents




Sec.
433.1 Purpose.

    Subpart A--Federal Matching and General Administration Provisions

433.8 [Reserved]
433.10 Rates of FFP for program services.
433.11 Enhanced FMAP rate for children.
433.15 Rates of FFP for administration.
433.32 Fiscal policies and accountability.
433.34 Cost allocation.
433.35 Equipment--Federal financial participation.
433.36 Liens and recoveries.
433.37 Reporting provider payments to Internal Revenue Service.
433.38 Interest charge on disallowed claims for FFP.
433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.

     Subpart B--General Administrative Requirements State Financial 
                              Participation

433.50 Basis, scope, and applicability.
433.51 Public funds as the State share of financial participation.
433.52 General definitions.
433.53 State plan requirements.
433.54 Bona fide donations.
433.55 Health care-related taxes defined.
433.56 Classes of health care services and providers defined.
433.57 General rules regarding revenues from provider-related donations 
          and health care-related taxes.
433.58 Provider-related donations and health care-related taxes during a 
          State's transition period.
433.60 Limitations on level of FFP in State expenditures from provider-
          related donations and health care-related taxes during the 
          transition period.
433.66 Permissible provider-related donations after the transition 
          period.
433.67 Limitations on level of FFP for permissible provider-related 
          donations.
433.68 Permissible health care-related taxes after the transition 
          period.
433.70 Limitations on level of FFP for revenues from health care-related 
          taxes after the transition period.
433.72 Waiver provisions applicable to health care-related taxes.
433.74 Reporting requirements.

   Subpart C--Mechanized Claims Processing and Information Retrieval 
                                 Systems

433.110 Basis, purpose, and applicability.
433.111 Definitions.
433.112 FFP for design, development, installation or enhancement of 
          mechanized claims processing and information retrieval 
          systems.
433.113 Reduction of FFP for failure to operate a system and obtain 
          initial approval.
433.114 Procedures for obtaining initial approval; notice of decision.
433.116 FFP for operation of mechanized claims processing and 
          information retrieval systems.
433.117 Initial approval of replacement systems.
433.119 Conditions for reapproval; notice of decision.
433.120 Procedures for reduction of FFP after reapproval review.
433.121 Reconsideration of the decision to reduce FFP after reapproval 
          review.
433.122 Reapproval of a disapproved system.
433.123 Notification of changes in system requirements, performance 
          standards or other conditions for approval or reapproval.
433.127 Termination of FFP for failure to provide access to claims 
          processing and information retrieval systems.
433.130 Waiver of conditions of initial operation and approval.
433.131 Waiver for noncompliance with conditions of approval and 
          reapproval.

                    Subpart D--Third Party Liability

433.135 Basis and purpose.
433.136 Definitions.
433.137 State plan requirements.
433.138 Identifying liable third parties.
433.139 Payment of claims.
433.140 FFP and repayment of Federal share.

                    Assignment of Rights to Benefits

433.145 Assignment of rights to benefits--State plan requirements.
433.146 Rights assigned; assignment method.
433.147 Cooperation in establishing paternity and in obtaining medical 
          support and payments and in identifying and providing 
          information to assist in pursuing third parties who may be 
          liable to pay.
433.148 Denial or termination of eligibility.

              Cooperative Agreements and Incentive Payments

433.151 Cooperative agreements and incentive payments--State plan 
          requirements.
433.152 Requirements for cooperative agreements for third party 
          collections.
433.153 Incentive payments to States and political subdivisions.
433.154 Distribution of collections.

Subpart E [Reserved]

    Subpart F--Refunding of Federal Share of Medicaid Overpayment to 
                                Providers

433.300 Basis.

[[Page 67]]

433.302 Scope of subpart.
433.304 Definitions.
433.310 Applicability of requirements.
433.312 Basic requirements for refunds.
433.316 When discovery of overpayment occurs and its significance.
433.318 Overpayments involving providers who are bankrupt or out of 
          business.
433.320 Procedures for refunds to CMS.
433.322 Maintenance of records.

    Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 1302).

    Source: 43 FR 45201, Sept. 29, 1978, unless otherwise noted.



Sec. 433.1  Purpose.

    This part specifies the rates of FFP for services and 
administration, and prescribes requirements, prohibitions, and FFP 
conditions relating to State fiscal activities.



    Subpart A--Federal Matching and General Administration Provisions



Sec. 433.8  [Reserved]



Sec. 433.10  Rates of FFP for program services.

    (a) Basis. Sections 1903(a)(1), 1903(g), and 1905(b) provide for 
payments to States, on the basis of a Federal medical assistance 
percentage, for part of their expenditures for services under an 
approved State plan.
    (b) Federal medical assistance percentage (FMAP)--Computations. The 
FMAP is determined by the formula described in section 1905(b) of the 
Act. Under the formula, if a State's per capita income is equal to the 
national average per capita income, the Federal share is 55 percent. If 
a State's per capita income exceeds the national average, the Federal 
share is lower, with a statutory minimum of 50 percent. If a State's per 
capita income is lower than the national average, the Federal share is 
increased, with a statutory maximum of 83 percent. The formula used in 
determining the State and Federal share is as follows:

State Share = [(State per capita income) \2\/(National per capita 
income) \2\] x 45 percent
Federal share=100 percent minus the State share (with a minimum of 50 
percent and a maximum of 83 percent)

The formula provides for squaring both the State and national average 
per capita incomes; this procedure magnifies any difference between the 
State's income and the national average. Consequently, Federal matching 
to lower income States is increased, and Federal matching to higher 
income States is decreased, within the statutory 50-83 percent limits. 
The FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa is set by statute at 50 percent and is 
subject to dollar limitations specified in section 1108 of the Act.
    (c) Special provisions. (1) Under section 1903(a)(5) of the Act, the 
Federal share of State expenditures for family planning services is 90 
percent.
    (2) Under section 1905(b), the Federal share of State expenditures 
for services provided through Indian Health Service facilities is 100 
percent.
    (3) Under section 1903(g), the FMAP is reduced if the State does not 
have an effective program to control use of institutional services.
    (4) Under section 1905(b) of the Social Security Act, the Federal 
share of State expenditures described in Sec. 433.11(a) for services 
provided to children, is the enhanced FMAP rate determined in accordance 
with Sec. 457.622(b) of this chapter, subject to the conditions 
explained in Sec. 433.11(b).

[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48559, Oct. 1, 1981; 
51 FR 41350, Nov. 14, 1986; 54 FR 21066, May 16, 1989; 66 FR 2666, Jan. 
11, 2001]



Sec. 433.11  Enhanced FMAP rate for children.

    (a) Subject to the conditions in paragraph (b) of this section, the 
enhanced FMAP determined in accordance with Sec. 457.622 of this chapter 
will be used to determine the Federal share of State expenditures, 
except any expenditures pursuant to section 1923 of the Act for payments 
to disproportionate share hospitals for--
    (1) Services provided to optional targeted low-income children 
described in Sec. 435.4 or Sec. 436.3 of this chapter; and
    (2) Services provided to children born before October 1, 1983, with 
or without group health coverage or other health

[[Page 68]]

insurance coverage, who would be described in section 1902(l)(1)(D) of 
the Act (poverty-level-related children's groups) if--
    (i) They had been born on or after that date; and
    (ii) They would not qualify for medical assistance under the State 
plan in effect on March 31, 1997.
    (b) Enhanced FMAP is not available if--
    (1) A State adopts income and resource standards and methodologies 
for purposes of determining a child's eligibility under the Medicaid 
State plan that are more restrictive than those applied under policies 
of the State plan (as described in the definition of optional targeted 
low-income children at Sec. 435.4 of this chapter) in effect on June 1, 
1997; or
    (2) No funds are available in the State's title XXI allotment, as 
determined under part 457, subpart F of this chapter for the quarter 
enhanced FMAP is claimed; or
    (3) The State fails to maintain a valid method of identifying 
services provided on behalf of children listed in paragraph (a) of this 
section.

[66 FR 2666, Jan. 11, 2001]



Sec. 433.15  Rates of FFP for administration.

    (a) Basis. Section 1903(a) (2) through (5) and (7) of the Act 
provide for payments to States, on the basis of specified percentages, 
for part of their expenditures for administration of an approved State 
plan.
    (b) Activities and rates. (1) [Reserved]
    (2) Administration of family planning services: 90 percent. (Section 
1903 (a)(5); 42 CFR 432.50(b)(5).)
    (3) Design, development, or installation of mechanized claims 
processing and information retrieval systems: 90 percent. (Section 
1903(a)(3)(A)(i); 42 CFR part 433, subpart C, and Sec. 432.50 (b)(3).)
    (4) Operation of mechanized claims processing and information 
retrieval systems: 75 percent. (Section 1903(a) (3)(B); 42 CFR part 433, 
subpart C and Sec. 432.50(b)(2).)
    (5) Compensation and training of skilled professional medical 
personnel and staff directly supporting those personnel if the criteria 
specified in Sec. 432.50 (c) and (d) are met: 75 percent. (Section 
1903(a)(2); 42 CFR 432.50(b)(1).)
    (6)(i) Funds expended for the performance of medical and utilization 
review by a QIO under a contract entered into under section 1902(d) of 
the Act: 75 percent (section 1903(a)(3)(C) of the Act).
    (ii) If a State contracts for medical and utilization review with 
any individual or organization not designated under Part B of Title XI 
of the Act, funds expended for such review will be reimbursed as 
provided in paragraph (b)(7) of this section.
    (7) All other activities the Secretary finds necessary for proper 
and efficient administration of the State plan: 50 percent. (Section 
1903(a)(7).) (See also Sec. 455.300 of this subchapter for FFP at 90 
percent for State Medicaid fraud control units under section 
1903(a)(6).)
    (8) Nurse aide training and competency evaluation programs and 
competency evaluation programs described in 1919(e)(1) of the Act: for 
calendar quarters beginning on or after July 1, 1988 and before July 1, 
1990: The lesser of 90% or the Federal medical assistance percentage 
plus 25 percentage points; for calendar quarters beginning on or after 
October 1, 1990: 50%. (Section 1903(a)(2)(B) of the Act.)
    (9) Preadmission screening and annual resident review (PASARR) 
activities conducted by the State: 75 percent. (Sections 1903(a)(2)(C) 
and 1919(e)(7); 42 CFR part 483, subparts C and E.)

[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 
46 FR 54744, Nov. 4, 1981; 50 FR 15327, Apr. 17, 1985; 50 FR 46664, Nov. 
12, 1985; 56 FR 48918, Sept. 26, 1991; 57 FR 56506, Nov. 30, 1992]



Sec. 433.32  Fiscal policies and accountability.

    A State plan must provide that the Medicaid agency and, where 
applicable, local agencies administering the plan will--
    (a) Maintain an accounting system and supporting fiscal records to 
assure that claims for Federal funds are in accord with applicable 
Federal requirements;
    (b) Retain records for 3 years from date of submission of a final 
expenditure report;

[[Page 69]]

    (c) Retain records beyond the 3-year period if audit findings have 
not been resolved; and
    (d) Retain records for nonexpendable property acquired under a 
Federal grant for 3 years from the date of final disposition of that 
property.

[44 FR 17935, Mar. 23, 1979]



Sec. 433.34  Cost allocation.

    A State plan under Title XIX of the Social Security Act must provide 
that the single or appropriate Agency will have an approved cost 
allocation plan on file with the Department in accordance with the 
requirements contained in subpart E of 45 CFR part 95. Subpart E also 
sets forth the effect on FFP if the requirements contained in that 
subpart are not met.

[47 FR 17490, Apr. 23, 1982]



Sec. 433.35  Equipment--Federal financial participation.

    Claims for Federal financial participation in the cost of equipment 
under the Medicaid Program are determined in accordance with subpart G 
of 45 CFR part 95. Requirements concerning the management and 
disposition of equipment under the Medicaid Program are also prescribed 
in subpart G of 45 CFR part 95.

[47 FR 41564, Sept. 21, 1982]



Sec. 433.36  Liens and recoveries.

    (a) Basis and purpose. This section implements sections 1902(a)(18) 
and 1917(a) and (b) of the Act, which describe the conditions under 
which an agency may impose a lien against a recipient's property, and 
when an agency may make an adjustment or recover funds in satisfaction 
of the claim against the individual's estate or real property.
    (b) Definition of property. For purposes of this section, 
``property'' includes the homestead and all other personal and real 
property in which the recipient has a legal interest.
    (c) State plan requirement. If a State chooses to impose a lien 
against an individual's real property (or as provided in paragraph 
(g)(1) of this section, personal property), the State plan must provide 
that the provisions of paragraphs (d) through (i) of this section are 
met.
    (d) Procedures. The State plan must specify the process by which the 
State will determine that an institutionalized individual cannot 
reasonably be expected to be discharged from the medical institution and 
return home as provided in paragraph (g)(2)(ii) of this section. The 
description of the process must include the type of notice to be given 
the individual, the process by which the individual will be given the 
opportunity for a hearing, the hearing procedures, and by whom and on 
what basis the determination that the individual cannot reasonably be 
expected to be discharged from the institution will be made. The notice 
to the individual must explain what is meant by the term lien, and that 
imposing a lien does not mean that the individual will lose ownership of 
the home.
    (e) Definitions. The State plan must define the following terms used 
in this section:
    (1) Individual's home.
    (2) Equity interest in home.
    (3) Residing in the home for at least 1 (or 2) year(s).
    (4) On a continuing basis.
    (5) Discharge from the medical institution and return home.
    (6) Lawfully residing.
    (f) Exception. The State plan must specify the criteria by which a 
son or daughter can establish to the agency's satisfaction that he or 
she has been providing care which permitted the individual to reside at 
home rather than in an institution, as provided in paragraph 
(h)(2)(iii)(B) of this section.
    (g) Lien provisions--(1) Incorrect payments. The agency may place a 
lien against an individual's property, both personal and real, before 
his or her death because of Medicaid claims paid or to be paid on behalf 
of that individual following a court judgement which determined that 
benefits were incorrectly paid for that individual.
    (2) Correct payments. Except as provided in paragraph (g)(3) of this 
section, the agency may place a lien against the real property of an 
individual at any age before his or her death because of Medicaid claims 
paid or to be paid for that individual when--

[[Page 70]]

    (i) An individual is an inpatient of a medical institution and must, 
as a condition of receiving services in the institution under the State 
plan, apply his or her income to the cost of care as provided in 
Secs. 435.725, 435.832 and 436.832; and
    (ii) The agency determines that he or she cannot reasonably be 
expected to be discharged and return home. The agency must notify the 
individual of its intention to make that determination and provide an 
opportunity for a hearing in accordance with State established 
procedures before the determination is made. The notice to an individual 
must include an explanation of liens and the effect on an individual's 
ownership of property.
    (3) Restrictions on placing liens. The agency may not place a lien 
on an individual's home under paragraph (g)(2) of this section if any of 
the following individuals is lawfully residing in the home:
    (i) The spouse;
    (ii) The individual's child who is under age 21 or blind or disabled 
as defined in the State plan; or
    (iii) The individual's sibling (who has an equity interest in the 
home, and who was residing in the individual's home for at least one 
year immediately before the date the individual was admitted to the 
medical institution).
    (4) Termination of lien. Any lien imposed on an individual's real 
property under paragraph (g)(2) of this section will dissolve when that 
individual is discharged from the medical institution and returns home.
    (h) Adjustments and recoveries. (1) The agency may make an 
adjustment or recover funds for Medicaid claims correctly paid for an 
individual as follows:
    (i) From the estate of any individual who was 65 years of age or 
older when he or she received Medicaid; and
    (ii) From the estate or upon sale of the property subject to a lien 
when the individual is institutionalized as described in paragraph 
(g)(2) of this section.
    (2) The agency may make an adjustment or recovery under paragraph 
(h)(1) of this section only:
    (i) After the death of the individual's surviving spouse; and
    (ii) When the individual has no surviving child under age 21 or 
blind or disabled as defined in the State plan; and
    (iii) In the case of liens placed on an individual's home under 
paragraph (g)(2) of this section, when there is no--
    (A) Sibling of the individual residing in the home, who has resided 
there for at least one year immediately before the date of the 
individual's admission to the institution, and has resided there on a 
continuous basis since that time; or
    (B) Son or daughter of the individual residing in the home, who has 
resided there for at least two years immediately before the date of the 
individual's admission to the institution, has resided there on a 
continuous basis since that time, and can establish to the agency's 
satisfaction that he or she has been providing care which permitted the 
individual to reside at home rather than in an institution.
    (i) Prohibition of reduction of money payments. No money payment 
under another program may be reduced as a means of recovering Medicaid 
claims incorrectly paid.

[43 FR 45201, Sept. 29, 1978, as amended at 47 FR 43647, Oct. 1, 1982; 
47 FR 49847, Nov. 3, 1982]



Sec. 433.37  Reporting provider payments to Internal Revenue Service.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes requirements concerning--
    (1) Identification of providers; and
    (2) Compliance with the information reporting requirements of the 
Internal Revenue Code.
    (b) Identification of providers. A State plan must provide for the 
identification of providers by--
    (1) Social security number if--
    (i) The provider is in solo practice; or
    (ii) The provider is not in solo practice but billing is by the 
individual practitioner; or
    (2) Employer identification number for all other providers.
    (c) Compliance with section 6041 of the Internal Revenue Code. The 
plan must provide that the Medicaid agency complies with the information 
reporting requirements of section 6041 of the Internal Revenue Code (26 
U.S.C. 6041).

[[Page 71]]

Section 6041 requires the filing of annual information returns showing 
amounts paid to providers, who are identified by name, address, and 
social security number or employer identification number.



Sec. 433.38  Interest charge on disallowed claims for FFP.

    (a) Basis and scope. This section is based on section 1903(d)(5) of 
the Act, which requires that the Secretary charge a State interest on 
the Federal share of claims that have been disallowed but have been 
retained by the State during the administrative appeals process under 
section 1116(d) of the Act and the Secretary later recovers after the 
administrative appeals process has been completed. This section does not 
apply to--
    (1) Claims that have been deferred by the Secretary and disallowed 
within the time limits of Sec. 430.40 of this chapter. Deferral of 
claims for FFP; or
    (2) Claims for expenditures that have never been paid on a grant 
award; or
    (3) Disallowances of any claims for services furnished before 
October 1, 1980, regardless of the date of the claim submitted to CMS.
    (b) General principles. (1) CMS will charge a State interest on FFP 
when--
    (i) CMS has notified the Medicaid agency under 45 CFR 74.304 that a 
State claim for FFP is not allowable;
    (ii) The agency has appealed the disallowance to the Grant Appeals 
Board under 45 CFR Part 16 and has chosen to retain the FFP during the 
administrative appeals process in accordance with paragraph (c)(2) of 
this section; and
    (iii)(A) The Board has made a final determination upholding part or 
all of the disallowance; (B) the agency has withdrawn its appeal on all 
or part of the disallowance; or (C) the agency has reversed its decision 
to retain the funds without withdrawing its appeal and the Board upholds 
all or part of the disallowance.
    (2) If the courts overturn, in whole or in part, a Board decision 
that has sustained a disallowance, CMS will return the principal and the 
interest collected on the funds that were disallowed, upon the 
completion of all judicial appeals.
    (3) Unless an agency decides to withdraw its appeal on part of the 
disallowance and therefore returns only that part of the funds on which 
it has withdrawn its appeal, any decision to retain or return disallowed 
funds must apply to the entire amount in dispute.
    (4) If the agency elects to have CMS recover the disputed amount, it 
may not reverse that election.
    (c) State procedures. (1) If the Medicaid agency has appealed a 
disallowance to the Board and wishes to retain the disallowed funds 
until the Board issues a final determination, the agency must notify the 
CMS Regional Administrator in writing of its decision to do so.
    (2) The agency must mail its notice to the CMS Regional 
Administrator within 30 days of the date of receipt of the notice of the 
disallowance, as established by the certified mail receipt accompanying 
the notices.
    (3) If the agency withdraws either its decision to retain the FFP or 
its appeal on all or part of the FFP or both, the agency must notify CMS 
in writing.
    (4) If the agency does not notify the CMS Regional Administrator 
within the time limit set forth in paragraph (c)(2) of this section. CMS 
will recover the amount of the disallowed funds from the next possible 
Medicaid grant award to the State.
    (d) Amount of interest charged. (1) If the agency retains funds that 
later become subject to an interest charge under paragraph (b) of this 
section, CMS will offset from the next Medicaid grant award to the State 
the amount of the funds subject to the interest charge, plus interest on 
that amount.
    (2) The interest charge is at the rate CMS determines to be the 
average of the bond equivalent of the weekly 90-day Treasury bill 
auction rates during the period for which interest will be charged.
    (e) Duration of interest. (1) The interest charge on the amount of 
disallowed FFP retained by the agency will begin on the date of the 
disallowance notice and end--
    (i) On the date of the final determination by the Board;

[[Page 72]]

    (ii) On the date CMS receives written notice from the State that it 
is withdrawing its appeal on all of the disallowed funds; or
    (iii) If the agency withdraws its appeal on part of the funds, on 
(A) the date CMS receives written notice from the agency that it is 
withdrawing its appeal on a specified part of the disallowed funds for 
the part on which the agency withdraws its appeal; and (B) the date of 
the final determination by the Board on the part for which the agency 
pursues its appeal; or
    (iv) The date CMS receives written notice from the agency that it no 
longer chooses to retain the funds.
    (2) CMS will not charge interest on FFP retained by an agency for 
more than 12 months for disallowances of FFP made between October 1, 
1980 and August 13, 1981.

[48 FR 29485, June 27, 1983]



Sec. 433.40  Treatment of uncashed or cancelled (voided) Medicaid checks.

    (a) Purpose. This section provides the rules to ensure that States 
refund the Federal portion of uncashed or cancelled (voided) checks 
under title XIX.
    (b) Definitions. As used in this section--
    Cancelled (voided) check means a Medicaid check issued by a State or 
fiscal agent which prior to its being cashed is cancelled (voided) by 
the State or fiscal agent, thus preventing disbursement of funds.
    Check means a check or warrant that a State or local agency uses to 
make a payment.
    Fiscal agent means an entity that processes or pays vendor claims 
for the Medicaid State agency.
    Uncashed check means a Medicaid check issued by a State or fiscal 
agent which has not been cashed by the payee.
    Warrant means an order by which the State agency or local agency 
without the authority to issue checks recognizes a claim. Presentation 
of a warrant by the payee to a State officer with authority to issue 
checks will result in release of funds due.
    (c) Refund of Federal financial participation (FFP) for uncashed 
checks--(1) General provisions. If a check remains uncashed beyond a 
period of 180 days from the date it was issued; i.e., the date of the 
check, it will no longer be regarded as an allowable program 
expenditure. If the State has claimed and received FFP for the amount of 
the uncashed check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the State 
must identify those checks which remain uncashed beyond a period of 180 
days after issuance. The State agency must refund all FFP that it 
received for uncashed checks by adjusting the Quarterly Statement of 
Expenditures for that quarter. If an uncashed check is cashed after the 
refund is made, the State may file a claim. The claim will be considered 
to be an adjustment to the costs for the quarter in which the check was 
originally claimed. This claim will be paid if otherwise allowed by the 
Act and the regulations issued pursuant to the Act.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (c)(2) of this section, the amount will be disallowed.
    (d) Refund of FFP for cancelled (voided) checks--(1) General 
provision. If the State has claimed and received FFP for the amount of a 
cancelled (voided) check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the State 
agency must identify those checks which were cancelled (voided). The 
State must refund all FFP that it received for cancelled (voided) checks 
by adjusting the Quarterly Statement of Expenditures for that quarter.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (d)(2) of this section, the amount will be disallowed.

[51 FR 36227, Oct. 9, 1986]



     Subpart B--General Administrative Requirements State Financial 
                              Participation

    Source: 57 FR 55138, Nov. 24, 1992, unless otherwise noted.



Sec. 433.50  Basis, scope, and applicability.

    (a) Basis. This subpart interprets and implements--

[[Page 73]]

    (1) Section 1902(a)(2) of the Act, which requires States to share in 
the cost of medical assistance expenditures and permits both State and 
local governments to participate in the financing of the non-Federal 
portion of medical assistance expenditures.
    (2) Section 1903(a) of the Act, which requires the Secretary to pay 
each State an amount equal to the Federal medical assistance percentage 
of the total amount expended as medical assistance under the State's 
plan.
    (3) Section 1903(w) of the Act, which specifies the treatment of 
revenues from provider-related donations and health care-related taxes 
in determining a State's medical assistance expenditures for which 
Federal financial participation (FFP) is available under the Medicaid 
program.
    (b) Scope. This subpart--
    (1) Specifies State plan requirements for State financial 
participation in expenditures for medical assistance.
    (2) Defines provider-related donations and health care-related taxes 
that may be received without a reduction in FFP.
    (3) Specifies rules for revenues received from provider-related 
donations and health care-related taxes during a transition period.
    (4) Establishes limitations on FFP when States receive funds from 
provider-related donations and revenues generated by health care-related 
taxes.
    (c) Applicability. The provisions of this subpart apply to the 50 
States and the District of Columbia, but not to any State whose entire 
Medicaid program is operated under a waiver granted under section 1115 
of the Act.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]



Sec. 433.51  Public funds as the State share of financial participation.

    (a) Public funds may be considered as the State's share in claiming 
FFP if they meet the conditions specified in paragraphs (b) and (c) of 
this section.
    (b) The public funds are appropriated directly to the State or local 
Medicaid agency, or transferred from other public agencies (including 
Indian tribes) to the State or local agency and under its administrative 
control, or certified by the contributing public agency as representing 
expenditures eligible for FFP under this section.
    (c) The public funds are not Federal funds, or are Federal funds 
authorized by Federal law to be used to match other Federal funds.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]



Sec. 433.52  General definitions.

    As used in this subpart--
    Entity related to a health care provider means--
    (1) An organization, association, corporation, or partnership formed 
by or on behalf of a health care provider;
    (2) An individual with an ownership or control interest in the 
provider, as defined in section 1124(a)(3) of the Act;
    (3) An employee, spouse, parent, child, or sibling of the provider, 
or of a person with an ownership or control interest in the provider, as 
defined in section 1124(a)(3) of the Act; or
    (4) A supplier of health care items or services or a supplier to 
providers of health care items or services.
    Health care provider means the individual or entity that receives 
any payment or payments for health care items or services provided.
    Provider-related donation means a donation or other voluntary 
payment (in cash or in kind) made directly or indirectly to a State or 
unit of local government by or on behalf of a health care provider, an 
entity related to such a health care provider, or an entity providing 
goods or services to the State for administration of the State's 
Medicaid plan.
    (1) Donations made by a health care provider to an organization, 
which in turn donates money to the State, may be considered to be a 
donation made indirectly to the State by a health care provider.
    (2) When an organization receives less than 25 percent of its 
revenues from providers and/or provider-related entities, its donations 
will not generally be presumed to be provider-related donations. Under 
these circumstances, a provider-related donation to an organization will 
not be considered a donation made indirectly to the State. However, if 
the donations from providers to an organization are subsequently 
determined to be indirect

[[Page 74]]

donations to the State or unit of local government for administration of 
the State's Medicaid program, then such donations will be considered to 
be health care related.
    (3) When the organization receives more than 25 percent of its 
revenue from donations from providers or provider-related entities, the 
organization always will be considered as acting on behalf of health 
care providers if it makes a donation to the State. The amount of the 
organization's donation to the State, in a State fiscal year, that will 
be considered health care related, will be based on the percentage of 
donations the organization received from the providers during that 
period.



Sec. 433.53  State plan requirements.

    A State plan must provide that--
    (a) State (as distinguished from local) funds will be used both for 
medical assistance and administration;
    (b) State funds will be used to pay at least 40 percent of the non-
Federal share of total expenditures under the plan; and
    (c) State and Federal funds will be apportioned among the political 
subdivisions of the State on a basis that assures that--
    (1) Individuals in similar circumstances will be treated similarly 
throughout the State; and
    (2) If there is local financial participation, lack of funds from 
local sources will not result in lowering the amount, duration, scope, 
or quality of services or level of administration under the plan in any 
part of the State.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]



Sec. 433.54  Bona fide donations.

    (a) A bona fide donation means a provider-related donation, as 
defined in Sec. 433.52, made to the State or unit of local government, 
that has no direct or indirect relationship, as described in paragraph 
(b) of this section, to Medicaid payments made to--
    (1) The health care provider;
    (2) Any related entity providing health care items and services; or
    (3) Other providers furnishing the same class of items or services 
as the provider or entity.
    (b) Provider-related donations will be determined to have no direct 
or indirect relationship to Medicaid payments if those donations are not 
returned to the individual provider, the provider class, or related 
entity under a hold harmless provision or practice, as described in 
paragraph (c) of this section.
    (c) A hold harmless practice exists if any of the following applies:
    (1) The amount of the payment received (other than under title XIX 
of the Act) is positively correlated either to the amount of the 
donation or to the difference between the amount of the donation and the 
amount of the payment received under the State plan;
    (2) All or any portion of the payment made under Medicaid to the 
donor, the provider class, or any related entity, varies based only on 
the amount of the total donation received; or
    (3) The State or other unit of local government receiving the 
donation provides for any payment, offset, or waiver that guarantees to 
return any portion of the donation to the provider.
    (d) CMS will presume provider-related donations to be bona fide if 
the voluntary payments, including, but not limited to, gifts, 
contributions, presentations or awards, made by or on behalf of 
individual health care providers to the State, county, or any other unit 
of local government does not exceed--
    (1) $5,000 per year in the case of an individual provider donation; 
or
    (2) $50,000 per year in the case of a donation from any health care 
organizational entity.
    (e) To the extent that a donation presumed to be bona fide contains 
a hold harmless provision, as described in paragraph (c) of this 
section, it will not be considered a bona fide donation. When provider-
related donations are not bona fide, CMS will deduct this amount from 
the State's medical assistance expenditures before calculating FFP. This 
offset will apply to all years the State received such donations and any 
subsequent fiscal year in which a similar donation is received.



Sec. 433.55  Health care-related taxes defined.

    (a) A health care-related tax is a licensing fee, assessment, or 
other mandatory payment that is related to--

[[Page 75]]

    (1) Health care items or services;
    (2) The provision of, or the authority to provide, the health care 
items or services; or
    (3) The payment for the health care items or services.
    (b) A tax will be considered to be related to health care items or 
services under paragraph (a)(1) of this section if at least 85 percent 
of the burden of the tax revenue falls on health care providers.
    (c) A tax is considered to be health care related if the tax is not 
limited to health care items or services, but the treatment of 
individuals or entities providing or paying for those health care items 
or services is different than the tax treatment provided to other 
individuals or entities.
    (d) A health care-related tax does not include payment of a criminal 
or civil fine or penalty, unless the fine or penalty was imposed instead 
of a tax.
    (e) Health care insurance premiums and health maintenance 
organization premiums paid by an individual or group to ensure coverage 
or enrollment are not considered to be payments for health care items 
and services for purposes of determining whether a health care-related 
tax exists.



Sec. 433.56  Classes of health care services and providers defined.

    (a) For purposes of this subpart, each of the following will be 
considered as a separate class of health care items or services:
    (1) Inpatient hospital services;
    (2) Outpatient hospital services;
    (3) Nursing facility services (other than services of intermediate 
care facilities for the mentally retarded);
    (4) Intermediate care facility services for the mentally retarded, 
and similar services furnished by community-based residences for the 
mentally retarded, under a waiver under section 1915(c) of the Act, in a 
State in which, as of December 24, 1992, at least 85 percent of such 
facilities were classified as ICF/MRs prior to the grant of the waiver;
    (5) Physician services;
    (6) Home health care services;
    (7) Outpatient prescription drugs;
    (8) Services of health maintenance organizations and health insuring 
organizations;
    (9) Ambulatory surgical center services, as described for purposes 
of the Medicare program in section 1832(a)(2)(F)(i) of the Social 
Security Act. These services are defined to include facility services 
only and do not include surgical procedures;
    (10) Dental services;
    (11) Podiatric services;
    (12) Chiropractic services;
    (13) Optometric/optician services;
    (14) Psychological services;
    (15) Therapist services, defined to include physical therapy, speech 
therapy, occupational therapy, respiratory therapy, audiological 
services, and rehabilitative specialist services;
    (16) Nursing services, defined to include all nursing services, 
including services of nurse midwives, nurse practitioners, and private 
duty nurses;
    (17) Laboratory and x-ray services, defined as services provided in 
a licensed, free-standing laboratory or x-ray facility. This definition 
does not include laboratory or x-ray services provided in a physician's 
office, hospital inpatient department, or hospital outpatient 
department;
    (18) Emergency ambulance services; and
    (19) Other health care items or services not listed above on which 
the State has enacted a licensing or certification fee, subject to the 
following:
    (i) The fee must be broad based and uniform or the State must 
receive a waiver of these requirements;
    (ii) The payer of the fee cannot be held harmless; and
    (iii) The aggregate amount of the fee cannot exceed the State's 
estimated cost of operating the licensing or certification program.
    (b) Taxes that pertain to each class must apply to all items and 
services within the class, regardless of whether the items and services 
are furnished by or through a Medicaid-certified or licensed provider.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993]



Sec. 433.57  General rules regarding revenues from provider-related donations and health care-related taxes.

    Effective January 1, 1992, CMS will deduct from a State's 
expenditures for medical assistance, before calculating

[[Page 76]]

FFP, funds from provider-related donations and revenues generated by 
health care-related taxes received by a State or unit of local 
government, in accordance with the requirements, conditions, and 
limitations of this subpart, if the donations and taxes are not--
    (a) Donations and taxes that meet the requirements specified in 
Sec. 433.58, except for certain revenue received during a specified 
transition period;
    (b) Permissible provider-related donations, as specified in 
Sec. 433.66(b); or
    (c) Health care-related taxes, as specified in Sec. 433.68(b).



Sec. 433.58  Provider-related donations and health care-related taxes during a State's transition period.

    (a) General rule. During the State's transition period specified in 
paragraph (b) of this section, a State may receive certain provider-
related donations and health care-related taxes without a reduction in 
FFP. These provider-related donations and health care-related taxes must 
meet the conditions specified in this section and are subject to 
limitations specified in Sec. 433.60.
    (b) Transition periods for States. (1) Except as provided in 
paragraph (b)(2) of this section, the provisions of this section apply 
for the period beginning January 1, 1992 and ending--
    (i) September 30, 1992, for States whose State fiscal year begins on 
or before July 1, 1992; or
    (ii) December 31, 1992, for States whose State fiscal year begins 
after July 1, 1992.
    (2) The provisions of this section apply for the period beginning 
January 1, 1992 and ending June 30, 1993 for States that--
    (i) Are not scheduled to have a regular legislative session in 
calendar year 1992;
    (ii) Are not scheduled to have a regular legislative session in 
calendar year 1993; or
    (iii) Had enacted a health care-related tax program on November 4, 
1991.
    (c) Provider-related donations during the transition period. Subject 
to the limitations specified in Sec. 433.60, a State may receive, 
without a reduction in FFP, provider-related donations described in 
paragraph (d)(3) of this section during the applicable transition 
period.
    (d) Permissible donations. To be permissible donations, the 
donations must be--
    (1) Bona fide donations, as defined in Sec. 433.54;
    (2) Donations made by a hospital, clinic, or similar entity (such as 
a Federally-qualified health center) for the direct costs of State or 
local agency personnel who are stationed at that facility to determine 
the eligibility (including eligibility redeterminations) of individuals 
for Medicaid and/or to provide outreach services to eligible (or 
potentially eligible) Medicaid individuals. Direct costs of outstationed 
eligibility workers refers to the costs of training, salaries and fringe 
benefits associated with each outstationed worker and similar allocated 
costs of State or local agency support staff, and a prorated cost of 
outreach activities applicable to the outstationed workers at these 
sites. The prorated costs of outreach activities will be calculated 
taking the percent of State outstationed eligibility workers at a 
facility to total outstationed eligibility workers in the State, and 
multiplying the percent by the total cost of outreach activities in the 
State. Costs for such items as State agency overhead and provider office 
space are not allowable for this purpose; or
    (3) Provider-related donations, even if the donations do not qualify 
under the provisions of paragraph (d) (1) or (2) of this section, that 
meet the following conditions:
    (i) The donation program was in effect on September 30, 1991, 
described in State plan amendments or related documents submitted to CMS 
by that date, or substantiated by written documentary evidence (as 
described in paragraph (e) of this section) that was in existence as of 
that date; and
    (ii) The donation program is applicable to the State's fiscal year 
1992, as demonstrated by written documentary evidence as described in 
paragraph (e) of this section.
    (e) Written documentary evidence. The State must have written 
documentation, which was in existence on September 30, 1991, of a 
donation program described in paragraph (d)(3) of this

[[Page 77]]

section that includes the dollar amounts it received in State fiscal 
year 1992 and the amounts it intended to receive, as evidenced by one or 
more of the following:
    (1) Reference to a donation program in a State plan amendment or 
related documents, including a satisfactory response, as determined by 
CMS, to a CMS request for additional information;
    (2) State budget documents identifying the amounts States expected 
to be received in donations;
    (3) Written agreements with the parties donating the funds; and/or
    (4) Other written documents that identify amounts that the States 
planned to receive in donations from specified organizations during that 
period.
    (f) Application of rules to State fiscal year 1993. For any portion 
of a State's fiscal year 1993 that occurs during the transition period, 
the State may receive, without a reduction in FFP, the amount of 
provider-related donations that it received in the corresponding period 
in State fiscal year 1992, including the 5 days after the end of that 
period, subject to the limitations specified in Sec. 433.60(a).
    (g) Health care-related taxes during the transition period. (1) 
Subject to the limitations specified in Sec. 433.60, States may receive, 
without a reduction in FFP, health care-related taxes during the State's 
transition period if:
    (i) The health care-related taxes are broad-based and uniformly 
imposed, and the taxpayer will not be held harmless, as specified in 
Sec. 433.68; or
    (ii) The health care-related taxes are imposed under--
    (A) A tax program that was in effect as of November 22, 1991; or
    (B) Legislation or regulations that were enacted or adopted as of 
November 22, 1991.
    (2) A State may not modify health care-related taxes in existence as 
of November 22, 1991, without a reduction of FFP, unless the 
modification only--
    (i) Extends a tax program that was scheduled to expire before the 
end of the State's transition period;
    (ii) Makes technical changes that do not alter the rate of the tax 
or the base of the tax (for example, the providers on which the tax is 
imposed) and do not otherwise increase the proceeds of the tax;
    (iii) Decreases the rate of the tax, without altering the base of 
the tax; or
    (iv) Modifies the tax program to bring it into compliance with 
Sec. 433.68(f).

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993, as amended at 58 
FR 43180, Aug. 13, 1993]



Sec. 433.60  Limitations on level of FFP in State expenditures from provider-related donations and health care-related taxes during the transition period.

    (a) Maximum amounts. The maximum amount of total provider-related 
donations, as specified in Sec. 433.58(d)(3), and health care-related 
taxes that a State may receive without a reduction in FFP during a State 
fiscal year in the State's transition period specified in Sec. 433.58(b) 
is calculated by multiplying--
    (1) The State's total medical assistance expenditures for the fiscal 
year; by
    (2) The greater of:
    (i) 25 percent; or
    (ii) The ``State base percentage'' (as described in paragraph (b) of 
this section).
    (b) State base percentage.
    (1) The State's base percentage is calculated by dividing the amount 
of the provider-related donations and health care-related taxes 
identified in Sec. 433.58 and estimated by CMS to be received in the 
State's fiscal year 1992 by the total non-Federal share of medical 
assistance expenditures (including administrative costs) in that fiscal 
year based on the best available CMS data.
    (2) In calculating the amount of taxes specified in paragraph (b)(1) 
of this section, taxes (including the tax rate or base) that were not in 
effect for the entire State fiscal year, but for which legislation or 
regulations imposing such taxes were enacted or adopted as of November 
22, 1991, will be estimated as if they were in effect for the entire 
fiscal year.
    (c) Deductions before calculating FFP. Before calculating FFP, CMS 
will deduct from a State's medical assistance expenditures the total 
amount of any provider-related donations described in Sec. 433.58(d)(3), 
and health care-related

[[Page 78]]

taxes in excess of the limit calculated under paragraph (a) of this 
section.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]



Sec. 433.66  Permissible provider-related donations after the transition period.

    (a) General rule. (1) Except as specified in paragraph (a)(2) of 
this section, subsequent to the end of a State's transition period, as 
defined in Sec. 433.58(b), a State may receive revenues from provider-
related donations without a reduction in FFP, only in accordance with 
the requirements of this section.
    (2) The provisions of this section relating to provider-related 
donations for outstationed eligibility workers are effective on October 
1, 1992, whether or not the State's transition period continues beyond 
that date.
    (b) Permissible donations. Subject to the limitations specified in 
Sec. 433.67, a State may receive, without a reduction in FFP, provider-
related donations that meet at least one of the following requirements:
    (1) The donations must be bona fide donations, as defined in 
Sec. 433.54; or
    (2) The donations are made by a hospital, clinic, or similar entity 
(such as a Federally-qualified health center) for the direct costs of 
State or local agency personnel who are stationed at the facility to 
determine the eligibility (including eligibility redeterminations) of 
individuals for Medicaid or to provide outreach services to eligible (or 
potentially eligible) Medicaid individuals. Direct costs of outstationed 
eligibility workers refers to the costs of training, salaries and fringe 
benefits associated with each outstationed worker and similar allocated 
costs of State or local agency support staff, and a prorated cost of 
outreach activities applicable to the outstationed workers at these 
sites. The prorated costs of outreach activities will be calculated 
taking the percent of State outstationed eligibility workers at a 
facility to total outstationed eligibility workers in the State, and 
multiplying the percent by the total cost of outreach activities in the 
State. Costs for such items as State agency overhead and provider office 
space are not allowable for this purpose.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993]



Sec. 433.67  Limitations on level of FFP for permissible provider-related donations.

    (a)(1) Limitations on bona fide donations. There are no limitations 
on the amount of bona fide provider-related donations that a State may 
receive without a reduction in FFP, as long as the bona fide donations 
meet the requirements of Sec. 433.66(b)(1).
    (2) Limitations on donations for outstationed eligibility workers. 
Effective October 1, 1992, regardless of when a State's transition 
period ends, the maximum amount of provider-related donations for 
oustationed eligibility workers, as described in Sec. 433.66(b)(2), that 
a State may receive without a reduction in FFP may not exceed 10 percent 
of a State's medical assistance administrative costs (both the Federal 
and State share), excluding the costs of family planning activities. The 
10 percent limit for provider-related donations for outstationed 
eligibility workers is not included in the limit in effect through 
September 30, 1995, for health care-related taxes as described in 
Sec. 433.70.
    (b) Calculation of FFP. CMS will deduct from a State's quarterly 
medical assistance expenditures, before calculating FFP, any provider-
related donations received in that quarter that do not meet the 
requirements of Sec. 433.66(b)(1) and provider donations for 
outstationed eligibility workers in excess of the limits specified under 
paragraph (a)(2) of this section.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993]



Sec. 433.68  Permissible health care-related taxes after the transition period.

    (a) General rule. Beginning on the day after a State's transition 
period, as defined in Sec. 433.58(b), ends, a State may receive health 
care-related taxes, without a reduction in FFP, only in accordance with 
the requirements of this section.

[[Page 79]]

    (b) Permissible health care-related taxes. Subject to the 
limitations specified in Sec. 433.70, a State may receive, without a 
reduction in FFP, health care-related taxes if all of the following are 
met:
    (1) The taxes are broad based, as specified in paragraph (c) of this 
section;
    (2) The taxes are uniformly imposed throughout a jurisdiction, as 
specified in paragraph (d) of this section; and
    (3) The tax program does not violate the hold harmless provisions 
specified in paragraph (f) of this section.
    (c) Broad based health care-related taxes. (1) A health care-related 
tax will be considered to be broad based if the tax is imposed on at 
least all health care items or services in the class or providers of 
such items or services furnished by all non-Federal, non-public 
providers in the State, and is imposed uniformly, as specified in 
paragraph (d) of this section.
    (2) If a health care-related tax is imposed by a unit of local 
government, the tax must extend to all items or services or providers 
(or to all providers in a class) in the area over which the unit of 
government has jurisdiction.
    (3) A State may request a waiver from CMS of the requirement that a 
tax program be broad based, in accordance with the procedures specified 
in Sec. 433.72. Waivers from the uniform and broad-based requirements 
will automatically be granted in cases of variations in licensing and 
certification fees for providers if the amount of such fees is not more 
than $1,000 annually per provider and the total amount raised by the 
State from the fees is used in the administration of the licensing or 
certification program.
    (d) Uniformly imposed health care-related taxes. A health care-
related tax will be considered to be imposed uniformly even if it 
excludes Medicaid or Medicare payments (in whole or in part), or both; 
or, in the case of a health care-related tax based on revenues or 
receipts with respect to a class of items or services (or providers of 
items or services), if it excludes either Medicaid or Medicare revenues 
with respect to a class of items or services, or both. The exclusion of 
Medicaid revenues must be applied uniformly to all providers being 
taxed.
    (1) A health care-related tax will be considered to be imposed 
uniformly if it meets any one of the following criteria:
    (i) If the tax is a licensing fee or similar tax imposed on a class 
of health care services (or providers of those health care items or 
services), the tax is the same amount for every provider furnishing 
those items or services within the class.
    (ii) If the tax is a licensing fee or similar tax imposed on a class 
of health care items or services (or providers of those items or 
services) on the basis of the number of beds (licensed or otherwise) of 
the provider, the amount of the tax is the same for each bed of each 
provider of those items or services in the class.
    (iii) If the tax is imposed on provider revenue or receipts with 
respect to a class of items or services (or providers of those health 
care items or services), the tax is imposed at a uniform rate for all 
services (or providers of those items or services) in the class on all 
the gross revenues or receipts, or on net operating revenues relating to 
the provision of all items or services in the State, unit, or 
jurisdiction. Net operating revenue means gross charges of facilities 
less any deducted amounts for bad debts, charity care, and payer 
discounts.
    (iv) The tax is imposed on items or services on a basis other than 
those specified in paragraphs (d)(1) (i) through (iii) of this section, 
e.g., an admission tax, and the State establishes to the satisfaction of 
the Secretary that the amount of the tax is the same for each provider 
of such items or services in the class.
    (2) A tax imposed with respect to a class of health care items or 
services will not be considered to be imposed uniformly if it meets 
either one of the following two criteria:
    (i) The tax provides for credits, exclusions, or deductions which 
have as its purpose, or results in, the return to providers of all, or a 
portion, of the tax paid, and it results, directly or indirectly, in a 
tax program in which--

[[Page 80]]

    (A) The net impact of the tax and payments is not generally 
redistributive, as specified in paragraph (e) of this section; and
    (B) The amount of the tax is directly correlated to payments under 
the Medicaid program.
    (ii) The tax holds taxpayers harmless for the cost of the tax, as 
described in paragraph (f) of this section.
    (3) If a tax does not meet the criteria specified in paragraphs 
(d)(1)(i) through (iv) of this section, but the State establishes that 
the tax is imposed uniformly in accordance with the procedures for a 
waiver specified in Sec. 433.72, the tax will be treated as a uniform 
tax.
    (e) Generally redistributive. A tax will be considered to be 
generally redistributive if it meets the requirements of this paragraph. 
If the State desires waiver of only the broad-based tax requirement, it 
must demonstrate compliance with paragraph (e)(1) of this section. If 
the State desires waiver of the uniform tax requirement, whether or not 
the tax is broad-based, it must demonstrate compliance with paragraph 
(e)(2) of this section.
    (1) Waiver of broad-based requirement only. This test is applied on 
a per class basis to a tax that is imposed on all revenues but excludes 
certain providers. For example, a tax that is imposed on all revenues 
(including Medicare and Medicaid) but excludes teaching hospitals would 
have to meet this test. This test cannot be used when a State excludes 
any or all Medicaid revenue from its tax in addition to the exclusion of 
providers, since the test compares the proportion of Medicaid revenue 
being taxed under the proposed tax with the proportion of Medicaid 
revenue being taxed under a broad-based tax.
    (i) A State seeking waiver of the broad-based tax requirement only 
must demonstrate that its proposed tax plan meets the requirement that 
its plan is generally redistributive by:
    (A) Calculating the proportion of the tax revenue applicable to 
Medicaid if the tax were broad based and applied to all providers or 
activities within the class (called P1);
    (B) Calculating the proportion of the tax revenue applicable to 
Medicaid under the tax program for which the State seeks a waiver 
(called P2); and
    (C) Calculating the value of P1/P2.
    (ii) If the State demonstrates to the Secretary's satisfaction that 
the value of P1/P2 is at least 1, CMS will automatically approve the 
waiver request.
    (iii) If a tax is enacted and in effect prior to August 13, 1993, 
and the State demonstrates to the Secretary's satisfaction that the 
value of P1/P2 is at least 0.90, CMS will review the waiver request. 
Such a waiver will be approved only if the following two criteria are 
met:
    (A) The value of P1/P2 is at least 0.90; and
    (B) The tax excludes or provides credits or deductions only to one 
or more of the following providers of items and services within the 
class to be taxed:
    (1) Providers that furnish no services within the class in the 
State;
    (2) Providers that do not charge for services within the class;
    (3) Rural hospitals (defined as any hospital located outside of an 
urban area as defined in Sec. 412.62(f)(1)(ii) of this chapter);
    (4) Sole community hospitals as defined in Sec. 412.92(a) of this 
chapter;
    (5) Physicians practicing primarily in medically underserved areas 
as defined in section 1302(7) of the Public Health Service Act;
    (6) Financially distressed hospitals if:
    (i) A financially distressed hospital is defined by the State law;
    (ii) The State law specifies reasonable standards for determining 
financially distressed hospitals, and these standards are applied 
uniformly to all hospitals in the State; and
    (iii) No more than 10 percent of nonpublic hospitals in the State 
are exempt from the tax;
    (7) Psychiatric hospitals; or
    (8) Hospitals owned and operated by HMOs.
    (iv) If a tax is enacted and in effect after August 13, 1993, and 
the State demonstrates to the Secretary's satisfaction that the value of 
P1/P2 is at least 0.95, CMS will review the waiver request. Such a 
waiver request will be approved only if the following two criteria are 
met:
    (A) The value of P1/P2 is at least 0.95; and

[[Page 81]]

    (B) The tax complies with the provisions of 
Sec. 433.68(e)(1)(iii)(B).
    (2) Waiver of uniform tax requirement. This test is applied on a per 
class basis to all taxes that are not uniform. This includes those taxes 
that are neither broad based (as specified in Sec. 433.68(c)) nor 
uniform (as specified in Sec. 433.68(d)).
    (i) A State seeking waiver of the uniform tax requirement (whether 
or not the tax is broad based) must demonstrate that its proposed tax 
plan meets the requirement that its plan is generally redistributive by:
    (A) Calculating, using ordinary least squares, the slope (designated 
as (B) (that is. the value of the x coefficient) of two linear 
regressions, in which the dependent variable is each provider's 
percentage share of the total tax paid by all taxpayers during a 12-
month period, and the independent variable is the taxpayer's ``Medicaid 
Statistic''. The term ``Medicaid Statistic'' means the number of the 
provider's taxable units applicable to the Medicaid program during a 12-
month period. If, for example, the State imposed a tax based on provider 
charges, the amount of a provider's Medicaid charges paid during a 12-
month period would be its ``Medicaid Statistic''. If the tax were based 
on provider inpatient days, the number of the provider's Medicaid days 
during a 12-month period would be its ``Medicaid Statistic''. For the 
purpose of this test, it is not relevant that a tax program exempts 
Medicaid from the tax.
    (B) Calculating the slope (designated as B1) of the linear 
regression, as described in paragraph (e)(2)(i) of this section, for the 
State's tax program, if it were broad based and uniform.
    (C) Calculating the slope (designated as B2) of the linear 
regression, as described in paragraph (e)(2)(i) of this section, for the 
State's tax program, as proposed.
    (ii) If the State demonstrates to the Secretary's satisfaction that 
the value of B1/B2 is at least 1, CMS will automatically approve the 
waiver request.
    (iii) If the State demonstrates to the Secretary's satisfaction that 
the value of B1/B2 is at least 0.95, CMS will review the waiver request. 
Such a waiver will be approved only if the following two criteria are 
met:
    (A) The value of B1/B2 is at least 0.95; and
    (B) The tax excludes or provides credits or deductions only to one 
or more of the following providers of items and services within the 
class to be taxes:
    (1) Providers that furnish no services within the class in the 
State;
    (2) Providers that do not charge for services within the class;
    (3) Rural hospitals (defined as any hospital located outside of an 
urban area as defined in Sec. 412.62(f)(1)(ii) of this chapter;
    (4) Sole community hospitals as defined in Sec. 412.92(a) of this 
chapter;
    (5) Physicians practicing primarily in medically underserved areas 
as defined in section 1302(7) of the Public Health Service Act;
    (6) Financially distressed hospitals if:
    (i) A financially distressed hospital is defined by the State law;
    (ii) The State law specifies reasonable standards for determining 
financially distressed hospitals, and these standards are applied 
uniformly to all hospitals in the State; and
    (iii) No more than 10 percent of nonpublic hospitals in the State 
are exempt from the tax;
    (7) Psychiatric hospitals; or
    (8) Providers or payers with tax rates that vary based exclusively 
on regions, but only if the regional variations are coterminous with 
preexisting political (and not special purpose) boundaries. Taxes within 
each regional boundary must meet the broad-based and uniformity 
requirements as specified in paragraphs (c) and (d) of this section.
    (iv) A B1/B2 value of 0.70 will be applied to taxes that vary based 
exclusively on regional variations, and enacted and in effect prior to 
November 24, 1992, to permit such variations.
    (f) Hold harmless. A taxpayer will be considered to be held harmless 
under a tax program if any of the following conditions applies:
    (1) The State (or other unit of government) imposing the tax 
provides directly or indirectly for a non-Medicaid payment to those 
providers or others paying the tax and the amount of the payment is 
positively correlated to either the amount of the tax or to the 
difference between the Medicaid payment and the total tax cost.

[[Page 82]]

    (2) All or any portion of the Medicaid payment to the taxpayer 
varies based only on the amount of the total tax payment.
    (3) The State (or other unit of local government) imposing the tax 
provides, directly or indirectly, for any payment, offset, or waiver 
that guarantees to hold taxpayers harmless for all or a portion of the 
tax.
    (i) An indirect guarantee will be determined to exist under a two 
prong ``guarantee'' test. This specific hold harmless test is effective 
September 13, 1993. In this instance, if the health care-related tax or 
taxes on each health care class are applied at a rate that produces 
revenues less than or equal to 6 percent of the revenues received by the 
taxpayer, the tax or taxes are permissible under this test. When the tax 
or taxes are applied at a rate that produces revenues in excess of 6 
percent of the revenue received by the taxpayer, CMS will consider a 
hold harmless provision to exist if 75 percent or more of the taxpayers 
in the class receive 75 percent or more of their total tax costs back in 
enhanced Medicaid payments or other State payments. The second prong of 
the hold harmless test is applied in the aggregate to all health care 
taxes applied to each class. If this standard is violated, the amount of 
tax revenue to be offset from medical assistance expenditures is the 
total amount of the taxpayers' revenues received by the State.
    (ii) If, as of August 13, 1993, a State has enacted a tax in excess 
of 6 percent that does not meet the requirements in paragraph (f)(3)(i) 
of this section, CMS will not disallow funds received by the State 
resulting from the tax if the State modifies the tax to comply with this 
requirement by September 13, 1993. If, by September 13, 1993, the tax is 
not modified, funds received by States on or after September 13, 1993 
will be disallowed.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43181, Aug. 13, 1993; 
62 FR 53572, Oct. 15, 1997]



Sec. 433.70  Limitations on level of FFP for revenues from health care-related taxes after the transition period.

    (a) Limitations. (1) Subsequent to the end of a State's transition 
period (as defined in Sec. 433.58(b)), and extending through September 
30, 1995, the maximum amount of health care-related taxes specified in 
Sec. 433.68 that a State may receive during a State fiscal year (or 
portion thereof), without a reduction in FFP, is limited to--
    (i) The greater of 25 percent or the State base percentage as 
described in Sec. 433.60(b); multiplied by
    (ii) The State's share of total medical assistance expenditures for 
the State fiscal year, less all health care-related taxes other than 
those described in Sec. 433.68 that are deducted separately pursuant to 
paragraph (b) of this section.
    (2) Beginning October 1, 1995, there is no limitation on the amount 
of health care-related taxes that a State may receive without a 
reduction in FFP, as long as the health care-related taxes meet the 
requirements specified in Sec. 433.68.
    (b) Calculation of FFP. CMS will deduct from a State's medical 
assistance expenditures, before calculating FFP, revenues from health 
care-related taxes that do not meet the requirements of Sec. 433.68 and 
any health care-related taxes in excess of the limits specified in 
paragraph (a)(1) of this section.



Sec. 433.72  Waiver provisions applicable to health care-related taxes.

    (a) Bases for requesting waiver. (1) A State may submit to CMS a 
request for a waiver if a health care-related tax does not meet any or 
all of the following:
    (i) The tax does not meet the broad based criteria specified in 
Sec. 433.68c); and/or
    (ii) The tax is not imposed uniformly but meets the criteria 
specified in Sec. 433.68(d)(2) or (d)(3).
    (2) When a tax that meets the criteria specified in paragraph (a)(1) 
of this section is imposed on more than one class of health care items 
or services, a separate waiver must be obtained for each class of health 
care items and services subject to the tax.
    (b) Waiver conditions. In order for CMS to approve a waiver request 
that would permit a State to receive tax revenue (within specified 
limitations) without a reduction in FFP, the State

[[Page 83]]

must demonstrate, to CMS's satisfaction, that its tax program meets all 
of the following requirements:
    (1) The net impact of the tax and any payments made to the provider 
by the State under the Medicaid program is generally redistributive, as 
described in Sec. 433.68(e);
    (2) The amount of the tax is not directly correlated to Medicaid 
payments; and
    (3) The tax program does not fall within the hold harmless 
provisions specified in Sec. 433.68(f).
    (c) Effective date. A waiver will be effective:
    (1) The date of enactment of the tax for programs in existence prior 
to August 13, 1993 or;
    (2) For tax programs commencing on or after August 13, 1993, on the 
first day in the quarter in which the waiver is received by CMS.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec. 433.74  Reporting requirements.

    (a) Beginning with the first quarter of Federal fiscal year 1993, 
each State must submit to CMS quarterly summary information on the 
source and use of all provider-related donations (including all bona 
fide and presumed-to-be bona fide donations) received by the State or 
unit of local government, and health care-related taxes collected. Each 
State must also provide any additional information requested by the 
Secretary related to any other donations made by, or any taxes imposed 
on, health care providers. States' reports must present a complete, 
accurate, and full disclosure of all of their donation and tax programs 
and expenditures.
    (b) Each State must provide the summary information specified in 
paragraph (a) of this section on a quarterly basis in accordance with 
procedures established by CMS.
    (c) Each State must maintain, in readily reviewable form, supporting 
documentation that provides a detailed description and legal basis for 
each donation and tax program being reported, as well as the source and 
use of all donations received and taxes collected. This information must 
be made available to Federal reviewers upon request.
    (d) If a State fails to comply with the reporting requirements 
contained in this section, future grant awards will be reduced by the 
amount of FFP CMS estimates is attributable to the sums raised by tax 
and donation programs as to which the State has not reported properly, 
until such time as the State complies with the reporting requirements. 
Deferrals and/or disallowances of equivalent amounts may also be imposed 
with respect to quarters for which the State has failed to report 
properly. Unless otherwise prohibited by law, FFP for those expenditures 
will be released when the State complies with all reporting 
requirements.



   Subpart C--Mechanized Claims Processing and Information Retrieval 
                                 Systems



Sec. 433.110  Basis, purpose, and applicability.

    (a) This subpart implements the following sections of the Act:
    (1) Section 1903(a)(3) of the Act, which provides for FFP in State 
expenditures for the design, development, or installation of mechanized 
claims processing and information retrieval systems and for the 
operation of certain systems. Additional HHS regulations and CMS 
procedures for implementing these regulations are in 45 CFR part 74, 45 
CFR part 95, subpart F, and part 11, State Medicaid Manual; and
    (2) Section 1903(r) of the Act, which--(i) Requires reductions in 
FFP otherwise due a State under section 1903(a) if a State fails to meet 
certain deadlines for operating a mechanized claims processing and 
information retrieval system or if the system fails to meet certain 
conditions of approval or conditions of reapproval;
    (ii) Requires a Federal performance review at least every three 
years of the mechanized claims processing and information retrieval 
systems; and
    (iii) Allows waivers of conditions of approval, conditions of 
reapproval, and FFP reductions under certain circumstances.
    (b) The requirements under section 1903(r) of the Act do not apply 
to Puerto Rico, Guam, the Virgin Islands,

[[Page 84]]

American Samoa and the Northern Mariana Islands.

[50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989]



Sec. 433.111  Definitions.

    For purposes of this section:
    (a) The following terms are defined at 45 CFR part 95, subpart F 
Sec. 95.605:

``Advance Planning Document''; ``Design'' or ``System Design''; 
``Development''; ``Enhancement''; ``Hardware''; ``Installation''; 
``Operation''; and, ``Software''.

    (b) ``Mechanized claims processing and information retrieval 
system'' or ``system'' means the system of software and hardware used to 
process Medicaid claims from providers of medical care and services for 
the medical care and services furnished to recipients under the medical 
assistance program and to retrieve and produce service utilization and 
management information required by the Medicaid single State agency and 
Federal Government for program administration and audit purposes. The 
system consists of
    (1) Required subsystems specified in the State Medicaid Manual;
    (2) Required changes to the required system or subsystem that are 
published in accordance with Sec. 433.123 of this subpart and specified 
in the State Medicaid Manual; and
    (3) Approved enhancements to the system. Eligibility determination 
systems are not part of mechanized claims processing and information 
retrieval systems or enhancements to those systems.

[51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989]



Sec. 433.112  FFP for design, development, installation or enhancement of mechanized claims processing and information retrieval systems.

    (a) FFP is available at the 90 percent rate in State expenditures 
for the design, development, installation, or enhancement of a 
mechanized claims processing and information retrieval system only if 
the APD is approved by CMS prior to the State's expenditure of funds for 
these purposes.
    (b) CMS will approve the system described in the APD if the 
following conditions are met:
    (1) CMS determines the system is likely to provide more efficient, 
economical, and effective administration of the State plan.
    (2) The system meets the system requirements and performance 
standards in Part 11 of the State Medicaid Manual, as periodically 
amended.
    (3) The system is compatible with the claims processing and 
information retrieval systems used in the administration of Medicare for 
prompt eligibility verification and for processing claims for persons 
eligible for both programs.
    (4) The system supports the data requirements of quality improvement 
organizations established under Part B of title XI of the Act.
    (5) The State owns any software that is designed, developed, 
installed or improved with 90 percent FFP.
    (6) The Department has a royalty free, non-exclusive, and 
irrevocable license to reproduce, publish, or otherwise use and 
authorize others to use, for Federal Government purposes, software, 
modifications to software, and documentation that is designed, 
developed, installed or enhanced with 90 percent FFP.
    (7) The costs of the system are determined in accordance with 45 CFR 
74.171.
    (8) The Medicaid agency agrees in writing to use the system for the 
period of time specified in the advance planning document approved by 
CMS or for any shorter period of time that CMS determines justifies the 
Federal funds invested.
    (9) The agency agrees in writing that the information in the system 
will be safeguarded in accordance with subpart F, part 431 of this 
subchapter.
    (c) Eligibility determination systems are not part of mechanized 
claims processing and information retrieval systems and are not eligible 
for 75 percent FFP under this subpart. These systems are also not 
eligible for 90 percent FFP for any APD approved after November 13, 
1989.

[43 FR 45201, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 
45 FR 14213, Mar. 5, 1980; 50 FR 30846, July 30, 1985; 51 FR 45330, Dec. 
18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 55 FR 
4375, Feb. 7, 1990]

[[Page 85]]



Sec. 433.113  Reduction of FFP for failure to operate a system and obtain initial approval.

    (a) Except as waived under Sec. 433.130 or 433.131, FFP will be 
reduced as specified in paragraph (b) of this section unless the 
Medicaid agency has in continuous operation a mechanized claims 
processing and information retrieval system that meets the following 
conditions:
    (1) The APD for the system was approved by CMS;
    (2) The system is operational by September 30, 1985; and
    (3) The system is initially approved by the last day of the fourth 
quarter that begins after the date the system became operational as 
determined by CMS.
    (b) CMS will reduce FFP in expenditures for compensation and 
training of skilled professional medical personnel and support staff 
under section 1903(a)(2) of the Act, and for general administration 
under section 1903(a)(7) of the Act, by the following increments applied 
separately to those two categories of expenditures:
    (1) Five percentage points for the first two quarters beginning 
after a deadline in paragraph (a) of this section;
    (2) An additional five percentage points during each additional two-
quarter period, through the quarter in which the State achieves 
compliance with the conditions for initial operation or initial approval 
of an operating system. FFP reductions will not exceed 25 percentage 
points for each type of reduction.
    (c) The amount of FFP (determined under section 1903(a)(3)(B)) that 
would be available retroactively for operating a system that later 
receives initial approval will be reduced by CMS by the same percentage 
points for the identical periods of time described in subparagraph 
(b)(1) of this section, until the system is initially approved. No 
reduction will be made after the first quarter during which the system 
is initially approved.

[50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989]



Sec. 433.114  Procedures for obtaining initial approval; notice of decision.

    (a) To obtain initial approval, the Medicaid agency must inform CMS 
in writing that the system meets the conditions specified in 
Sec. 433.116(c) through (h).
    (b) If CMS disapproves the system, or determines that the system met 
requirements for initial approval on a date later than the date required 
under Sec. 433.113(a)(3), the notice will include--
    (1) The findings of fact upon which the determination was made; and
    (2) The procedures for appeal of the determination in the context of 
a reconsideration of the resulting disallowance, to the Departmental 
Appeals Board.

[50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989]



Sec. 433.116  FFP for operation of mechanized claims processing and information retrieval systems.

    (a) Subject to 42 CFR 433.113(c), FFP is available at 75 percent of 
expenditures for operation of a mechanized claims processing and 
information retrieval system approved by CMS, from the first day of the 
calendar quarter after the date the system met the conditions of initial 
approval, as established by CMS (including a retroactive adjustment of 
FFP if necessary to provide the 75 percent rate beginning on the first 
day of that calendar quarter). Subject to 45 CFR 95.611(a), the State 
shall obtain prior written approval from CMS when it plans to acquire 
ADP equipment or services, when it anticipates the total acquisition 
costs will exceed thresholds, and meets other conditions of the subpart.
    (b) CMS will approve the system operation if the conditions 
specified in paragraphs (c) through (h) of this section are met.
    (c) The conditions of Sec. 433.112(b) (1) through (4) and (7) 
through (9), as periodically modified under Sec. 433.112(b)(2), must be 
met.
    (d) The system must have been operating continuously during the 
period for which FFP is claimed.
    (e) The system must provide individual notices, within 45 days of 
the payment of claims, to all or a sample

[[Page 86]]

group of the persons who received services under the plan.
    (f) The notice required by paragraph (e) of this section--
    (1) Must specify--
    (i) The service furnished;
    (ii) The name of the provider furnishing the service;
    (iii) The date on which the service was furnished; and
    (iv) The amount of the payment made under the plan for the service; 
and
    (2) Must not specify confidential services (as defined by the State) 
and must not be sent if the only service furnished was confidential.
    (g) The system must provide both patient and provider profiles for 
program management and utilization review purposes.
    (h) If the State has a Medicaid fraud control unit certified under 
section 1903(q) of the Act and Sec. 455.300 of this chapter, the 
Medicaid agency must have procedures to assure that information on 
probable fraud or abuse that is obtained from, or developed by, the 
system is made available to that unit. (See Sec. 455.21 of this chapter 
for State plan requirements.)

[45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, 
July 30, 1985; 55 FR 4375, Feb. 7, 1990]



Sec. 433.117  Initial approval of replacement systems.

    (a) A replacement system must meet all conditions of initial 
approval of a mechanized claims processing and information retrieval 
system.
    (b) The agency must submit a APD that includes--
    (1) The date the replacement system will be in operation; and
    (2) A plan for orderly transition from the system being replaced to 
the replacement system.
    (c) FFP is available at--
    (1) 90 percent in expenditures for design, development, and 
installation in accordance with the provisions of Sec. 433.112; and
    (2) 75 percent in expenditures for operation of an approved 
replacement system in accordance with the provisions of Sec. 433.116(b) 
through (h), from the date that the system met the conditions of initial 
approval, as established by CMS.
    (d) FFP is available at 75 percent in expenditures for the operation 
of an approved system that is being replaced (or at a reduced rate 
determined under Sec. 433.120 of this subpart for a system that has been 
disapproved) until the replacement system is in operation and approved.

[50 FR 30847, July 30, 1985]



Sec. 433.119  Conditions for reapproval; notice of decision.

    (a) CMS will review at least once every three years each system 
operation initially approved under Sec. 433.114 and reapprove it for FFP 
at 75 percent of expenditures if the following conditions are met:
    (1) The system meets the conditions of Sec. 433.112(b) (1), (3), 
(4), and (7) through (9).
    (2) The system meets the conditions of Sec. 433.116 (d) through (h).
    (3) The system meets the performance standards for reapproval and 
the system requirements in part 11 of the State Medicaid Manual as 
periodically amended.
    (4) Automated eligibility determination systems approved or 
operating on or before November 13, 1989, will not qualify for FFP at 75 
percent of expenditures after November 13, 1989.
    (b) CMS may review an entire system operation or focus its review on 
parts of the operation. However, at a minimum, CMS will review 
standards, system requirements and other conditions of reapproval that 
have demonstrated weakness in a previous review or reviews.
    (c) CMS will issue to each Medicaid agency, by the end of the first 
quarter after the review period, a written notice informing the agency 
whether its system is reapproved or disapproved. If the system is 
disapproved, the notice will also include--
    (1) CMS's decision to reduce FFP for system operations, and the 
percentage to which it is reduced, beginning with the next calender 
quarter;
    (2) The findings of fact upon which the determination was made; and
    (3) A statement that State claims in excess of the reduced FFP rate 
will be

[[Page 87]]

disallowed and that any such disallowance will be appealable to the 
Departmental Appeals Board.

[54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990]



Sec. 433.120  Procedures for reduction of FFP after reapproval review.

    (a) If CMS determines after the reapproval review that the system no 
longer meets the conditions of reapproval in Sec. 433.119, CMS will 
reduce FFP for system operations for at least four quarters. However, no 
system will be subject to reduction of FFP for at least the first four 
quarters after the quarter in which the system is initially approved as 
eligible for 75 percent FFP.
    (b) CMS will reduce FFP in expenditures for system operations from 
75 percent to no more than 70 percent and no less than 50 percent; 
however, CMS will not reduce FFP by more than 10 percentage points in 
any four-quarter period. The percentage to which the FFP is reduced will 
depend primarily on the following criteria:
    (1) The number of conditions judged unsatisfactory;
    (2) The extent to which conditions were not met;
    (3) The significance of the unsatisfactory conditions in overall 
mechanized claims processing and information retrieval system 
operations; and
    (4) The actual and potential program impact attributable to the 
unsatisfactory conditions.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



Sec. 433.121  Reconsideration of the decision to reduce FFP after reapproval review.

    (a) The agency may appeal to the Departmental Appeals Board under 45 
CFR part 16, a disallowance concerning a reduction in FFP claimed for 
system operation caused by a disapproval of the State's system. If the 
Board finds such a disallowance to be appropriate, the discretionary 
determination to reduce FFP by a particular percentage amount (instead 
of by a lesser percentage) is not subject to review by the Board unless 
the percentage reduction exceeds the range authorized by section 
1903(r)(4)(B) of the Act.
    (b) The decisions concerning whether to restore any FFP 
retroactively and the actual number of quarters for which FFP will be 
restored under Sec. 433.122 of this subpart are not subject to 
administrative appeal to the Departmental Appeals Board under 45 CFR 
part 16.
    (c) An agency's request for a reconsideration before the Board under 
paragraph (a) of this section does not delay implementation of the 
reduction in FFP. However, any reduction is subject to retroactive 
adjustment if required by the Board's determination on reconsideration.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 
55 FR 1820, Jan. 19, 1990]



Sec. 433.122  Reapproval of a disapproved system.

    When FFP has been reduced under Sec. 433.120(a), and CMS determines 
upon subsequent review that the system meets all current performance 
standards, system requirements and other conditions of reapproval, the 
following provisions apply:
    (a) CMS will resume FFP in expenditures for system operations at the 
75 percent level beginning with the quarter following the review 
determination that the system again meets conditions of reapproval.
    (b) CMS may retroactively waive a reduction of FFP in expenditures 
for system operations if CMS determines that the waiver could improve 
the administration of the State Medicaid plan. However, CMS cannot waive 
this reduction for any quarter before the fourth quarter immediately 
preceding the quarter in which CMS issues the determination (as part of 
the review process) stating that the system is reapproved.

[54 FR 41974, Oct. 13, 1989]



Sec. 433.123  Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.

    (a) Whenever CMS modifies system requirements or other conditions 
for approval under Sec. 433.112 or Sec. 433.116, CMS will--

[[Page 88]]

    (1) Publish a notice in the Federal Register making available the 
proposed changes for public comment;
    (2) Respond in a subsequent Federal Register notice to comments 
received; and
    (3) Issue the new or modified requirements or conditions in the 
State Medicaid Manual.
    (b) For changes in system requirements or other conditions for 
approval, CMS will allow an appropriate period for Medicaid agencies to 
meet the requirement determining this period on the basis of the 
requirement's complexity and other relevant factors.
    (c) Whenever CMS modifies performance standards and other conditions 
for reapproval under Sec. 433.119, CMS will notify Medicaid agencies at 
least one calendar quarter before the review period to which the new or 
modified standards or conditions apply.


[57 FR 38782, Aug. 27, 1992]



Sec. 433.127  Termination of FFP for failure to provide access to claims processing and information retrieval systems.

    CMS will terminate FFP at any time if the Medicaid agency fails to 
provide State and Federal representatives with full access to the 
system, including on-site inspection. CMS may request such access at any 
time to determine whether the conditions in this subpart are being met.

[43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 
and 30848, July 30, 1985]



Sec. 433.130  Waiver of conditions of initial operation and approval.

    (a) CMS will waive requirements for initial operation and approval 
of systems under Sec. 433.113 for a State meeting the requirements of 
paragraph (b) of this section and that had a 1976 population of less 
than one million and made total Federal and State Medicaid expenditures 
of less than $100 million in fiscal year 1976. Population figures are 
those reported by the Bureau of the Census. Expenditures for fiscal year 
1976 are those reported by the State for that year.
    (b) To be eligible for this waiver, the agency must submit its 
reasons to CMS in writing and demonstrate to CMS's satisfaction that a 
system will not significantly improve the efficiency of the 
administration of the State plan.
    (c) If CMS denies the waiver request, the notice of denial will 
include--
    (1) The findings of fact upon which the denial was made; and
    (2) The procedures for appeal of the denial.
    (d) If CMS determines, after granting a waiver, that a system would 
significantly improve the administration of the State Medicaid program, 
CMS may withdraw the waiver and require that a State obtain initial 
approval of a system within two years of the date of waiver withdrawal.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



 433.131  Waiver for noncompliance with conditions of approval and reapproval.

    If a State is unable to comply with the conditions of approval or of 
reapproval and the noncompliance will cause a percentum reduction in 
FFP, CMS will waive the FFP reduction in the following circumstances:
    (a) Good cause. If CMS determines that good cause existed, CMS will 
waive the FFP reduction attributable to those items for which the good 
cause existed. A waiver of FFP consequences of the failure to meet the 
conditions of approval or reapproval based upon good cause will not 
extend beyond two consecutive quarters.
    (b) Circumstances beyond the control of a State. The State must 
satisfactorily explain the circumstances that are beyond its control. 
When CMS grants the waiver, CMS will also defer all other system 
deadlines for the same length of time that the waiver applies.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



                    Subpart D--Third Party Liability

    Source: 45 FR 8984, Feb. 11, 1980, unless otherwise noted.



Sec. 433.135  Basis and purpose.

    This subpart implements sections 1902(a)(25), 1902(a)(45), 
1903(d)(2), 1903(o), 1903(p), and 1912 of the Act by setting

[[Page 89]]

forth State plan requirements concerning--
    (a) The legal liability of third parties to pay for services 
provided under the plan;
    (b) Assignment to the State of an individual's rights to third party 
payments; and
    (c) Cooperative agreements between the Medicaid agency and other 
entities for obtaining third party payments.

[50 FR 46664, Nov. 12, 1985]



Sec. 433.136  Definitions.

    For purposes of this subpart--
    Private insurer means:
    (1) Any commercial insurance company offering health or casualty 
insurance to individuals or groups (including both experience-rated 
insurance contracts and indemnity contracts);
    (2) Any profit or nonprofit prepaid plan offering either medical 
services or full or partial payment for services included in the State 
plan; and
    (3) Any organization administering health or casualty insurance 
plans for professional associations, unions, fraternal groups, employer-
employee benefit plans, and any similar organization offering these 
payments or services, including self-insured and self-funded plans.
    Third party means any individual, entity or program that is or may 
be liable to pay all or part of the expenditures for medical assistance 
furnished under a State plan.
    Title IV-D agency means the organizational unit in the State that 
has the responsibility for administering or supervising the 
administration of a State plan for child support enforcement under title 
IV-D of the Act.

[49 FR 8984, Feb. 11, 1980, as amended at 50 FR 46664, Nov. 12, 1985; 50 
FR 49389, Dec. 2, 1985]



Sec. 433.137  State plan requirements.

    (a) A State plan must provide that the requirements of Secs. 433.138 
and 433.139 are met for identifying third parties liable for payment of 
services under the plan and for payment of claims involving third 
parties.
    (b) A State plan must provide that--
    (1) The requirements of Secs. 433.145 through 433.148 are met for 
assignment of rights to benefits, cooperation with the agency in 
obtaining medical support or payments, and cooperation in identifying 
and providing information to assist the State in pursuing any liable 
third parties; and
    (2) The requirements of Secs. 433.151 through 433.154 are met for 
cooperative agreements and incentive payments for third party 
collections.
    (c) The requirements of paragraph (b)(1) of this section relating to 
assignment of rights to benefits and cooperation in obtaining medical 
support or payments and paragraph (b)(2) of this section are effective 
for medical assistance furnished on or after October 1, 1984. The 
requirements of paragraph (b)(1) of this section relating to cooperation 
in identifying and providing information to assist the State in pursuing 
liable third parties are effective for medical assistance furnished on 
or after July 1, 1986.

[50 FR 46665, Nov. 12, 1985, as amended at 55 FR 48606, Nov. 21, 1990; 
55 FR 52130, Dec. 19, 1990; 60 FR 35502, July 10, 1995]



Sec. 433.138  Identifying liable third parties.

    (a) Basic provisions. The agency must take reasonable measures to 
determine the legal liability of the third parties who are liable to pay 
for services furnished under the plan. At a minimum, such measures must 
include the requirements specified in paragraphs (b) through (k) of this 
section, unless waived under paragraph (l) of this section.
    (b) Obtaining health insurance information: Initial application and 
redetermination processes for Medicaid eligibility. (1) If the Medicaid 
agency determines eligibility for Medicaid, it must, during the initial 
application and each redetermination process, obtain from the applicant 
or recipient such health insurance information as would be useful in 
identifying legally liable third party resources so that the agency may 
process claims under the third party liability payment procedures 
specified in Sec. 433.139 (b) through (f). Health insurance information 
may include, but is not limited to, the name of the policy holder, his 
or her relationship to the applicant or recipient, the social security 
number (SSN) of the policy holder,

[[Page 90]]

and the name and address of insurance company and policy number.
    (2) If Medicaid eligibility is determined by the Federal agency 
administering the supplemental security income program under title XVI 
in accordance with a written agreement under section 1634 of the Act, 
the Medicaid agency must take the following action. It must enter into 
an agreement with CMS or must have, prior to February 1, 1985, executed 
a modified section 1634 agreement that is still in effect to provide 
for--
    (i) Collection, from the applicant or recipient during the initial 
application and each redetermination process, of health insurance 
information in the form and manner specified by the Secretary; and
    (ii) Transmittal of the information to the Medicaid agency.
    (3) If Medicaid eligibility is determined by any other agency in 
accordance with a written agreement, the Medicaid agency must modify the 
agreement to provide for--
    (i) Collection, from the applicant or recipient during the initial 
application and each redetermination process, of such health insurance 
information as would be useful in identifying legally liable third party 
resources so that the Medicaid agency may process claims under the third 
party liability payment procedures specified in Sec. 433.139 (b) through 
(f). Health insurance information may include, but is not limited to, 
those elements described in paragraph (b)(1) of this section; and
    (ii) Transmittal of the information to the Medicaid agency.
    (c) Obtaining other information. Except as provided in paragraph (l) 
of this section, the agency must, for the purpose of implementing the 
requirements in paragraphs (d)(1)(ii) and (d)(4)(i) of this section, 
incorporate into the eligibility case file the names and SSNs of absent 
or custodial parents of Medicaid recipients to the extent such 
information is available.
    (d) Exchange of data. Except as provided in paragraph (l) of this 
section, to obtain and use information for the purpose of determining 
the legal liability of the third parties so that the agency may process 
claims under the third party liability payment procedures specified in 
Sec. 433.139(b) through (f), the agency must take the following actions:
    (1) Except as specified in paragraph (d)(2) of this section, as part 
of the data exchange requirements under Sec. 435.945 of this chapter, 
from the State wage information collection agency (SWICA) defined in 
Sec. 435.4 of this chapter and from the SSA wage and earnings files data 
as specified in Sec. 435.948(a)(2) of this chapter, the agency must--
    (i) Use the information that identifies Medicaid recipients that are 
employed and their employer(s); and
    (ii) Obtain and use, if their names and SSNs are available to the 
agency under paragraph (c) of this section, information that identifies 
employed absent or custodial parents of recipients and their 
employer(s).
    (2) If the agency can demonstrate to CMS that it has an alternate 
source of information that furnishes information as timely, complete and 
useful as the SWICA and SSA wage and earnings files in determining the 
legal liability of third parties, the requirements of paragraph (d)(1) 
of this section are deemed to be met.
    (3) The agency must request, as required under 
Sec. 435.948(a)(6)(i), from the State title IV-A agency, information not 
previously reported that identifies those Medicaid recipients that are 
employed and their employer(s).
    (4) Except as specified in paragraph (d)(5) of this section, the 
agency must attempt to secure agreements (to the extent permitted by 
State law) to provide for obtaining--
    (i) From State Workers' Compensation or Industrial Accident 
Commission files, information that identifies Medicaid recipients and, 
(if their names and SSNs were available to the agency under paragraph 
(c) of this section) absent or custodial parents of Medicaid recipients 
with employment-related injuries or illnesses; and
    (ii) From State Motor Vehicle accident report files, information 
that identifies those Medicaid recipients injured in motor vehicle 
accidents, whether injured as pedestrians, drivers, passengers, or 
bicyclists.

[[Page 91]]

    (5) If unable to secure agreements as specified in paragraph (d)(4) 
of this section, the agency must submit documentation to the regional 
office that demonstrates the agency made a reasonable attempt to secure 
these agreements. If CMS determines that a reasonable attempt was made, 
the requirements of paragraph (d)(4) of this section are deemed to be 
met.
    (e) Diagnosis and trauma code edits. (1) Except as specified under 
paragraph (e)(2) or (l) of this section, or both, the agency must take 
action to identify those paid claims for Medicaid recipients that 
contain diagnosis codes 800 through 999 International Classification of 
Disease, 9th Revision, Clinical Modification, Volume 1 (ICD-9-CM) 
inclusive, for the purpose of determining the legal liability of third 
parties so that the agency may process claims under the third party 
liability payment procedures specified in Sec. 433.139(b) through (f).
    (2) The agency may exclude code 994.6, Motion Sickness, from the 
edits required under paragraph (e)(1) of this section.
    (f) Data exchanges and trauma code edits: Frequency. Except as 
provided in paragraph (l) of this section, the agency must conduct the 
data exchanges required in paragraphs (d)(1) and (d)(3) of this section 
in accordance with the intervals specified in Sec. 435.948 of this 
chapter, and diagnosis and trauma edits required in paragraphs (d)(4) 
and (e) of this section on a routine and timely basis. The State plan 
must specify the frequency of these activities.
    (g) Followup procedures for identifying legally liable third party 
resources. Except as provided in paragraph (l) of this section, the 
State must meet the requirements of this paragraph.
    (1) SWICA, SSA wage and earnings files, and title IV-A data 
exchanges. With respect to information obtained under paragraphs (d)(1) 
through (d)(3) of this section--
    (i) Except as specified in Sec. 435.952(d) of this chapter, within 
45 days, the agency must followup (if appropriate) on such information 
in order to identify legally liable third party resources and 
incorporate such information into the eligibility case file and into its 
third party data base and third party recovery unit so the agency may 
process claims under the third party liability payment procedures 
specified in Sec. 433.139 (b) through (f); and
    (ii) The State plan must describe the methods the agency uses for 
meeting the requirements of paragraph (g)(1)(i) of this section.
    (2) Health insurance information and workers' compensation data 
exchanges. With respect to information obtained under paragraphs (b) and 
(d)(4)(i) of this section--
    (i) Within 60 days, the agency must followup on such information (if 
appropriate) in order to identify legally liable third party resources 
and incorporate such information into the eligibility case file and into 
its third party data base and third party recovery unit so the agency 
may process claims under the third party liability payment procedures 
specified in Sec. 433.139 (b) through (f); and
    (ii) The State plan must describe the methods the agency uses for 
meeting the requirements of paragraph (g)(2)(i) of this section.
    (3) State motor vehicle accident report file data exchanges. With 
respect to information obtained under paragraph (d)(4)(ii) of this 
section--
    (i) The State plan must describe the methods the agency uses for 
following up on such information in order to identify legally liable 
third party resources so the agency may process claims under the third 
party liability payment procedures specified in Sec. 433.139 (b) through 
(f);
    (ii) After followup, the agency must incorporate all information 
that identifies legally liable third party resources into the 
eligibility case file and into its third party data base and third party 
recovery unit; and
    (iii) The State plan must specify timeframes for incorporation of 
the information.
    (4) Diagnosis and trauma code edits. With respect to the paid claims 
identified under paragraph (e) of this section--
    (i) The State plan must describe the methods the agency uses to 
follow up on such claims in order to identify legally liable third party 
resources so the agency may process claims under

[[Page 92]]

the third party liability payment procedures specified in Sec. 433.139 
(b) through (f) (Methods must include a procedure for periodically 
identifying those trauma codes that yield the highest third party 
collections and giving priority to following up on those codes.);
    (ii) After followup, the agency must incorporate all information 
that identifies legally liable third party resources into the 
eligibility case file and into its third party data base and third party 
recovery unit; and
    (iii) The State plan must specify the timeframes for incorporation 
of the information.
    (h) Obtaining other information and data exchanges: Safeguarding 
information. (1) The agency must safeguard information obtained from and 
exchanged under this section with other agencies in accordance with the 
requirements set forth in part 431, subpart F of this chapter.
    (2) Before requesting information from, or releasing information to 
other agencies to identify legally liable third party resources under 
paragraph (d) of this section the agency must execute data exchange 
agreements with those agencies. The agreements, at a minimum, must 
specify--
    (i) The information to be exchanged;
    (ii) The titles of all agency officials with the authority to 
request third party information;
    (iii) The methods, including the formats to be used, and the timing 
for requesting and providing the information;
    (iv) The safeguards limiting the use and disclosure of the 
information as required by Federal or State law or regulations; and
    (v) The method the agency will use to reimburse reasonable costs of 
furnishing the information if payment is requested.
    (i) Reimbursement. The agency must, upon request, reimburse an 
agency for the reasonable costs incurred in furnishing information under 
this section to the Medicaid agency.
    (j) Reports. The agency must provide such reports with respect to 
the data exchanges and trauma code edits set forth in paragraphs (d)(1) 
through (d)(4) and paragraph (e) of this section, respectively, as the 
Secretary prescribes for the purpose of determining compliance under 
Sec. 433.138 and evaluating the effectiveness of the third party 
liability identification system. However, if the State is not meeting 
the provisions of paragraph (e) of this section because it has been 
granted a waiver of those provisions under paragraph (l) of this 
section, it is not required to provide the reports required in this 
paragraph.
    (k) Integration with the State mechanized claims processing and 
information retrieval system. Basic requirement--Development of an 
action plan. (1) If a State has a mechanized claims processing and 
information retrieval system approved by CMS under subpart C of this 
part, the agency must have an action plan for pursuing third party 
liability claims and the action plan must be integrated with the 
mechanized claims processing and information retrieval system.
    (2) The action plan must describe the actions and methodologies the 
State will follow to--
    (i) Identify third parties;
    (ii) Determine the liability of third parties;
    (iii) Avoid payment of third party claims as required in 
Sec. 433.139;
    (iv) Recover reimbursement from third parties after Medicaid claims 
payment as required in Sec. 433.139; and,
    (v) Record information and actions relating to the action plan.
    (3) The action plan must be consistent with the conditions for 
reapproval set forth in Sec. 433.119. The portion of the plan which is 
integrated with MMIS is monitored in accordance with those conditions 
and if the conditions are not met; it is subject to FFP reduction in 
accordance with procedures set forth in Sec. 433.120. The State is not 
subject to any other penalty as a result of other monitoring, quality 
control, or auditing requirements for those items in the action plan.
    (4) The agency must submit its action plan to the CMS Regional 
Office within 120 days from the date CMS issues implementing 
instructions for the State Medicaid Manual. If a State does not have an 
approved MMIS on the date of issuance of the State Medicaid Manual but 
subsequently implements an MMIS, the State must submit its action plan 
within 90 days from

[[Page 93]]

the date the system is operational. The CMS Regional Office approves or 
disapproves the action plan.
    (l) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements to determine third party liability 
found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), 
(g)(3), and (g)(4) of this section if the State determines the activity 
to be not cost-effective. An activity would not be cost-effective if the 
cost of the required activity exceeds the third party liability 
recoupment and the required activity accomplishes, at the same or at a 
higher cost, the same objective as another activity that is being 
performed by the State.
    (i) The agency must submit a request for waiver of the requirement 
in writing to the CMS regional office.
    (ii) The request must contain adequate documentation to establish 
that to meet a requirement specified by the agency is not cost-
effective. Examples of documentation are claims recovery data and a 
State analysis documenting a cost-effective alternative that 
accomplished the same task.
    (iii) The agency must agree, if a waiver is granted, to notify CMS 
of any event that occurs that changes the conditions upon which the 
waiver was approved.
    (2) CMS will review a State's request to have a requirement 
specified under paragraph (l)(1) of this section waived and will request 
additional information from the State, if necessary. CMS will notify the 
State of its approval or disapproval determination within 30 days of 
receipt of a properly documented request.
    (3) CMS may rescind a waiver at any time that it determines that the 
agency no longer meets the criteria for approving the waiver. If the 
waiver is rescinded, the agency has 6 months from the date of the 
rescission notice to meet the requirement that had been waived.

[52 FR 5975, Feb. 27, 1987, as amended at 54 FR 8741, Mar. 2, 1989; 55 
FR 1432, Jan. 16, 1990; 55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, 
1995]



Sec. 433.139  Payment of claims.

    (a) Basic provisions. (1) For claims involving third party liability 
that are processed on or after May 12, 1986, the agency must use the 
procedures specified in paragraphs (b) through (f) of this section.
    (2) The agency must submit documentation of the methods (e.g., cost 
avoidance, pay and recover later) it uses for payment of claims 
involving third party liability to the CMS Regional Office.
    (b) Probable liability is established at the time claim is filed. 
Except as provided in paragraph (e) of this section--
    (1) If the agency has established the probable existence of third 
party liability at the time the claim is filed, the agency must reject 
the claim and return it to the provider for a determination of the 
amount of liability. The establishment of third party liability takes 
place when the agency receives confirmation from the provider or a third 
party resource indicating the extent of third party liability. When the 
amount of liability is determined, the agency must then pay the claim to 
the extent that payment allowed under the agency's payment schedule 
exceeds the amount of the third party's payment.
    (2) The agency may pay the full amount allowed under the agency's 
payment schedule for the claim and then seek reimbursement from any 
liable third party to the limit of legal liability if the claim is for 
labor and delivery and postpartum care. (Costs associated with the 
inpatient hospital stay for labor and delivery and postpartum care must 
be cost-avoided.)
    (3) The agency must pay the full amount allowed under the agency's 
payment schedule for the claim and seek reimbursement from any liable 
third party to the limit of legal liability (and for purposes of 
paragraph (b)(3)(ii) of this section, from a third party, if the third 
party liability is derived from an absent parent whose obligation to pay 
support is being enforced by the State title IV-D agency), consistent 
with paragraph (f) of this section if--
    (i) The claim is prenatal care for pregnant women, or preventive 
pediatric services (including early and periodic screening, diagnosis 
and treatment services provided for under part 441, subpart B of this 
chapter), that is covered under the State plan; or

[[Page 94]]

    (ii) The claim is for a service covered under the State plan that is 
provided to an individual on whose behalf child support enforcement is 
being carried out by the State title IV-D agency. The agency prior to 
making any payment under this section must assure that the following 
requirements are met:
    (A) The State plan specifies whether or not providers are required 
to bill the third party.
    (B) The provider certifies that before billing Medicaid, if the 
provider has billed a third party, the provider has waited 30 days from 
the date of the service and has not received payment from the third 
party.
    (C) The State plan specifies the method used in determining the 
provider's compliance with the billing requirements.
    (c) Probable liability is not established or benefits are not 
available at the time claim is filed. If the probable existence of third 
party liability cannot be established or third party benefits are not 
available to pay the recipient's medical expenses at the time the claim 
is filed, the agency must pay the full amount allowed under the agency's 
payment schedule.
    (d) Recovery of reimbursement. (1) If the agency has an approved 
waiver under paragraph (e) of this section to pay a claim in which the 
probable existence of third party liability has been established and 
then seek reimbursement, the agency must seek recovery of reimbursement 
from the third party to the limit of legal liability within 60 days 
after the end of the month in which payment is made unless the agency 
has a waiver of the 60-day requirement under paragraph (e) of this 
section.
    (2) Except as provided in paragraph (e) of this section, if the 
agency learns of the existence of a liable third party after a claim is 
paid, or benefits become available from a third party after a claim is 
paid, the agency must seek recovery of reimbursement within 60 days 
after the end of the month it learns of the existence of the liable 
third party or benefits become available.
    (3) Reimbursement must be sought unless the agency determines that 
recovery would not be cost effective in accordance with paragraph (f) of 
this section.
    (e) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements in paragraphs (b)(1), (d)(1), and 
(d)(2) of this section, if it determines that the requirement is not 
cost-effective. An activity would not be cost-effective if the cost of 
the required activity exceeds the third party liability recoupment and 
the required activity accomplishes, at the same or at a higher cost, the 
same objective as another activity that is being performed by the State.
    (i) The agency must submit a request for waiver of the requirement 
in writing to the CMS regional office.
    (ii) The request must contain adequate documentation to establish 
that to meet a requirement specified by the agency is not cost-
effective. Examples of documentation are costs associated with billing, 
claims recovery data, and a State analysis documenting a cost-effective 
alternative that accomplishes the same task.
    (iii) The agency must agree, if a waiver is granted, to notify CMS 
of any event that occurs that changes the conditions upon which the 
waiver was approved.
    (2) CMS will review a State's request to have a requirement 
specified under paragraph (e)(1) of this section waived and will request 
additional information from the State, if necessary. CMS will notify the 
State of its approval or disapproval determination within 30 days of 
receipt of a properly documented request.
    (3) CMS may rescind the waiver at any time that it determines that 
the State no longer meets the criteria for approving the waiver. If the 
waiver is rescinded, the agency has 6 months from the date of the 
rescission notice to meet the requirement that had been waived.
    (4) An agency requesting a waiver of the requirements specifically 
concerning either the 60-day limit in paragraph (d)(1) or (d)(2) of this 
section must submit documentation of written agreement between the 
agency and the third party, including Medicare fiscal

[[Page 95]]

intermediaries and carriers, that extension of the billing requirement 
is agreeable to all parties.
    (f) Suspension or termination of recovery of reimbursement. (1) An 
agency must seek reimbursement from a liable third party on all claims 
for which it determines that the amount it reasonably expects to recover 
will be greater than the cost of recovery. Recovery efforts may be 
suspended or terminated only if they are not cost effective.
    (2) The State plan must specify the threshold amount or other 
guideline that the agency uses in determining whether to seek recovery 
of reimbursement from a liable third party, or describe the process by 
which the agency determines that seeking recovery of reimbursement would 
not be cost effective.
    (3) The State plan must also specify the dollar amount or period of 
time for which it will accumulate billings with respect to a particular 
liable third party in making the decision whether to seek recovery of 
reimbursement.

[50 FR 46665, Nov. 12, 1985, as amended at 51 FR 16319, May 2, 1986; 60 
FR 35503, July 10, 1995; 62 FR 23140, Apr. 29, 1997]



Sec. 433.140  FFP and repayment of Federal share.

    (a) FFP is not available in Medicaid payments if--
    (1) The agency failed to fulfill the requirements of Secs. 433.138 
and 433.139 with regard to establishing liability and seeking 
reimbursement from a third party;
    (2) The agency received reimbursement from a liable third party; or
    (3) A private insurer would have been obligated to pay for the 
service except that its insurance contract limits or excludes payments 
if the individual is eligible for Medicaid.
    (b) FFP is available at the 50 percent rate for the agency's 
expenditures in carrying out the requirements of this subpart.
    (c) If the State receives FFP in Medicaid payments for which it 
receives third party reimbursement, the State must pay the Federal 
government a portion of the reimbursement determined in accordance with 
the FMAP for the State. This payment may be reduced by the total amount 
needed to meet the incentive payment in Sec. 433.153.

                    Assignment of Rights to Benefits



Sec. 433.145  Assignment of rights to benefits--State plan requirements.

    (a) A State plan must provide that, as a condition of eligibility, 
each legally able applicant or recipient is required to:
    (1) Assign to the Medicaid agency his or her rights, or the rights 
of any other individual eligible under the plan for whom he or she can 
legally make an assignment, to medical support and to payment for 
medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902(l)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and
    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) A State plan must provide that the requirements for assignments, 
cooperation in establishing paternity and obtaining support, and 
cooperation in identifying and providing information to assist the State 
in pursuing any liable third party under Secs. 433.146 through 433.148 
are met.
    (c) A State plan must provide that the assignment of rights to 
benefits obtained from an applicant or recipient is effective only for 
services that are reimbursed by Medicaid.

[55 FR 48606, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993]



Sec. 433.146  Rights assigned; assignment method.

    (a) Except as specified in paragraph (b) of this section, the agency 
must require the individual to assign to the State--

[[Page 96]]

    (1) His own rights to any medical care support available under an 
order of a court or an administrative agency, and any third party 
payments for medical care; and
    (2) The rights of any other individual eligible under the plan, for 
whom he can legally make an assignment.
    (b) Assignment of rights to benefits may not include assignment of 
rights to Medicare benefits.
    (c) If assignment of rights to benefits is automatic because of 
State law, the agency may substitute such an assignment for an 
individual executed assignment, as long as the agency informs the 
individual of the terms and consequences of the State law.



Sec. 433.147  Cooperation in establishing paternity and in obtaining medical support and payments and in identifying and providing information to assist in 
          pursuing third parties who may be liable to pay.

    (a) Scope of requirement. The agency must require the individual who 
assigns his or her rights to cooperate in--
    (1) Establishing paternity of a child born out of wedlock and 
obtaining medical support and payments for himself or herself and any 
other person for whom the individual can legally assign rights, except 
that individuals described in section 1902(l)(1)(A) of the Act (poverty 
level pregnant women) are exempt from these requirements involving 
paternity and obtaining medical support and payments from, or derived 
from, the father of the child born out of wedlock; and
    (2) Identifying and providing information to assist the Medicaid 
agency in pursuing third parties who may be liable to pay for care and 
services under the plan.
    (b) Essentials of cooperation. As part of a cooperation, the agency 
may require an individual to--
    (1) Appear at a State or local office designated by the agency to 
provide information or evidence relevant to the case;
    (2) Appear as a witness at a court or other proceeding;
    (3) Provide information, or attest to lack of information, under 
penalty of perjury;
    (4) Pay to the agency any support or medical care funds received 
that are covered by the assignment of rights; and
    (5) Take any other reasonable steps to assist in establishing 
paternity and securing medical support and payments, and in identifying 
and providing information to assist the State in pursuing any liable 
third party.
    (c) Waiver of cooperation for good cause. The agency must waive the 
requirements in paragraphs (a) and (b) of this section if it determines 
that the individual has good cause for refusing to cooperate.
    (1) With respect to establishing paternity of a child born out of 
wedlock or obtaining medical care support and payments, or identifying 
or providing information to assist the State in pursuing any liable 
third party for a child for whom the individual can legally assign 
rights, the agency must find the cooperation is against the best 
interests of the child, in accordance with factors specified for the 
Child Support Enforcement Program at 45 CFR part 232. If the State title 
IV-A agency has made a finding that good cause for refusal to cooperate 
does or does not exist, the Medicaid agency must adopt that finding as 
its own for this purpose.
    (2) With respect to obtaining medical care support and payments for 
an individual and identifying and providing information to assist in 
pursuing liable third parties in any case not covered by paragraph 
(c)(1) of this section, the agency must find that cooperation is against 
the best interests of the individual or the person to whom Medicaid is 
being furnished because it is anticipated that cooperation will result 
in reprisal against, and cause physical or emotional harm to, the 
individual or other person.
    (d) Procedures for waiving cooperation. With respect to establishing 
paternity, obtaining medical care support and payments, or identifying 
and providing information to assist the State in pursuing liable third 
parties for a child for whom the individual can legally assign rights, 
the agency must use the procedures specified for the Child Support 
Enforcement Program at 45 CFR part 232. With respect to obtaining 
medical care support and payments or to identifying and providing 
information to assist the State in pursuing liable third

[[Page 97]]

parties for any other individual, the agency must adopt procedures 
similar to those specified in 45 CFR part 232, excluding those 
procedures applicable only to children.

[45 FR 8984, Feb. 11, 1980, as amended at 55 FR 48606, Nov. 21, 1990; 58 
FR 4907, Jan. 19, 1993]



Sec. 433.148  Denial or termination of eligibility.

    In administering the assignment of rights provision, the agency 
must:
    (a) Deny or terminate eligibility for any applicant or recipient 
who--
    (1) Refuses to assign his own rights or those of any other 
individual for whom he can legally make an assignment; or
    (2) Refuses to cooperate as required under Sec. 433.147(a) unless 
cooperation has been waived;
    (b) Provide Medicaid to any individual who--
    (1) Cannot legally assign his own rights; and
    (2) Would otherwise be eligible for Medicaid but for the refusal, by 
a person legally able to assign his rights, to assign his rights or to 
cooperate as required by this subpart; and
    (c) In denying or terminating eligibility, comply with the notice 
and hearing requirements of part 431, subpart E of this subchapter.

              Cooperative Agreements and Incentive Payments



Sec. 433.151  Cooperative agreements and incentive payments--State plan requirements.

    For medical assistance furnished on or after October 1, 1984--
    (a) A State plan must provide for entering into written cooperative 
agreements for enforcement of rights to and collection of third party 
benefits with at least one of the following entities: The State title 
IV-D agency, any appropriate agency of any State, and appropriate courts 
and law enforcement officials. The agreements must be in accordance with 
the provisions of Sec. 433.152.
    (b) A State plan must provide that the requirements for making 
incentive payments and for distributing third party collections 
specified in Secs. 433.153 and 433.154 are met.

[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]



Sec. 433.152  Requirements for cooperative agreements for third party collections.

    (a) Except as specified in paragraph (b) of this section, the State 
agency may develop the specific terms of cooperative agreements with 
other agencies as it determines appropriate for individual 
circumstances.
    (b) Agreements with title IV-D agencies must specify that the 
Medicaid agency will--
    (1) Meet the requirements of the Office of Child Support Enforcement 
for cooperative agreements under 45 CFR Part 306; and
    (2) Provide reimbursement to the IV-D agency only for those child 
support services performed that are not reimbursable by the Office of 
Child Support Enforcement under title IV-D of the Act and that are 
necessary for the collection of amounts for the Medicaid program.

[50 FR 46666, Nov. 12, 1985]



Sec. 433.153  Incentive payments to States and political subdivisions.

    (a) When payments are required. The agency must make an incentive 
payment to a political subdivision, a legal entity of the subdivision 
such as a prosecuting or district attorney or a friend of the court, or 
another State that enforces and collects medical support and payments 
for the agency.
    (b) Amount and source of payment. The incentive payment must equal 
15 percent of the amount collected, and must be made from the Federal 
share of that amount.
    (c) Payment to two or more jurisdictions. If more than one State or 
political subdivision is involved in enforcing and collecting support 
and payments:
    (1) The agency must pay all of the incentive payment to the 
political subdivision, legal entity of the subdivision, or another State 
that collected medical support and payments at the request of the 
agency.

[[Page 98]]

    (2) The political subdivision, legal entity or other State that 
receives the incentive payment must then divide the incentive payment 
equally with any other political subdivisions, legal entities, or other 
States that assisted in the collection, unless an alternative allocation 
is agreed upon by all jurisdictions involved.



Sec. 433.154  Distribution of collections.

    The agency must distribute collections as follows--
    (a) To itself, an amount equal to State Medicaid expenditures for 
the individual on whose right the collection was based.
    (b) To the Federal Government, the Federal share of the State 
Medicaid expenditures, minus any incentive payment made in accordance 
with Sec. 433.153.
    (c) To the recipient, any remaining amount. This amount must be 
treated as income or resources under part 435 or part 436 of this 
subchapter, as appropriate.

Subpart E [Reserved]



   Subpart F--Refunding of Federal Share of Medicaid Overpayments to 
                                Providers

    Source: 54 FR 5460, Feb. 3, 1989, unless otherwise noted.



Sec. 433.300  Basis.

    This subpart implements--
    (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly 
Federal payments to the States under title XIX (Medicaid) of the Act are 
to be reduced or increased to make adjustment for prior overpayments or 
underpayments that the Secretary determines have been made.
    (b) Section 1903(d)(2) (C) and (D) of the Act, which provides that a 
State has 60 days from discovery of an overpayment for Medicaid services 
to recover or attempt to recover the overpayment from the provider 
before adjustment in the Federal Medicaid payment to the State is made; 
and that adjustment will be made at the end of the 60 days, whether or 
not recovery is made, unless the State is unable to recover from a 
provider because the overpayment is a debt that has been discharged in 
bankruptcy or is otherwise uncollectable.
    (c) Section 1903(d)(3) of the Act, which provides that the Secretary 
will consider the pro rata Federal share of the net amount recovered by 
a State during any quarter to be an overpayment.



Sec. 433.302  Scope of subpart.

    This subpart sets forth the requirements and procedures under which 
States have 60 days following discovery of overpayments made to 
providers for Medicaid services to recover or attempt to recover that 
amount before the States must refund the Federal share of these 
overpayments to CMS, with certain exceptions.



Sec. 433.304  Definitions.

    As used in this subpart--
    Abuse (in accordance with Sec. 455.2) means provider practices that 
are inconsistent with sound fiscal, business, or medical practices, and 
result in an unnecessary cost to the Medicaid program, or in 
reimbursement for services that are not medically necessary or that fail 
to meet professionally recognized standards for health care.
    Discovery (or discovered) means identification by any State Medicaid 
agency official or other State official, the Federal Government, or the 
provider of an overpayment, and the communication of that overpayment 
finding or the initiation of a formal recoupment action without notice 
as described in Sec. 433.316.
    Fraud (in accordance with Sec. 455.2) means an intentional deception 
or misrepresentation made by a person with the knowledge that the 
deception could result in some unauthorized benefit to himself or some 
other person. It includes any act that constitutes fraud under 
applicable Federal or State law.
    Overpayment means the amount paid by a Medicaid agency to a provider 
which is in excess of the amount that is allowable for services 
furnished under section 1902 of the Act and which is required to be 
refunded under section 1903 of the Act.

[[Page 99]]

    Provider (in accordance with Sec. 400.203) means any individual or 
entity furnishing Medicaid services under a provider agreement with the 
Medicaid agency.
    Recoupment means any formal action by the State or its fiscal agent 
to initiate recovery of an overpayment without advance official notice 
by reducing future payments to a provider.
    Third party (in accordance with Sec. 433.136) means an individual, 
entity, or program that is or may be liable to pay for all or part of 
the expenditures for medical assistance furnished under a State plan.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]



Sec. 433.310  Applicability of requirements.

    (a) General rule. Except as provided in paragraphs (b) and (c) of 
this section, the provisions of this subpart apply to--
    (1) Overpayments made to providers that are discovered by the State;
    (2) Overpayments made to providers that are initially discovered by 
the provider and made known to the State agency; and
    (3) Overpayments that are discovered through Federal reviews.
    (b) Third party payments and probate collections. The requirements 
of this subpart do not apply to--
    (1) Cases involving third party liability because, in these 
situations, recovery is sought for a Medicaid payment that would have 
been made had another party not been legally responsible for payment; 
and
    (2) Probate collections from the estates of deceased Medicaid 
recipients, as they represent the recovery of payments properly made 
from resources later determined to be available to the State.
    (c) Unallowable costs paid under rate-setting systems. (1) 
Unallowable costs for a prior year paid to an institutional provider 
under a rate-setting system that a State recovers through an adjustment 
to the per diem rate for a subsequent period do not constitute 
overpayments that are subject to the requirements of this subpart.
    In such cases, the State is not required to refund the Federal share 
explicitly related to the original overpayment in accordance with the 
regulations in this subpart. Refund of the Federal share occurs when the 
State claims future expenditures made to the provider at a reduced rate.
    (2) Unallowable costs for a prior year paid to an institutional 
provider under a rate-setting system that a State seeks to recover in a 
lump sum, by an installment repayment plan, or through reduction of 
future payments to which the provider would otherwise be entitled 
constitute overpayments that are subject to the requirements of this 
subpart.
    (d) Recapture of depreciation upon gain on the sale of assets. 
Depreciation payments are considered overpayments for purposes of this 
subpart if a State requires their recapture in a discrete amount(s) upon 
gain on the sale of assets.



Sec. 433.312  Basic requirements for refunds.

    (a) Basic rules. (1) Except as provided in paragraph (b) of this 
section, the Medicaid agency has 60 days from the date of discovery of 
an overpayment to a provider to recover or seek to recover the 
overpayment before the Federal share must be refunded to CMS.
    (2) The agency must refund the Federal share of overpayments at the 
end of the 60-day period following discovery in accordance with the 
requirements of this subpart, whether or not the State has recovered the 
overpayment from the provider.
    (b) Exception. The agency is not required to refund the Federal 
share of an overpayment made to a provider when the State is unable to 
recover the overpayment amount because the provider has been determined 
bankrupt or out of business in accordance with Sec. 433.318.
    (c) Applicability. (1) The requirements of this subpart apply to 
overpayments made to Medicaid providers that occur and are discovered in 
any quarter that begins on or after October 1, 1985.
    (2) The date upon which an overpayment occurs is the date upon which 
a State, using its normal method of reimbursement for a particular class 
of

[[Page 100]]

provider (e.g., check, interfund transfer), makes the payment involving 
unallowable costs to a provider.



Sec. 433.316  When discovery of overpayment occurs and its significance.

    (a) General rule. The date on which an overpayment is discovered is 
the beginning date of the 60-calendar day period allowed a State to 
recover or seek to recover an overpayment before a refund of the Federal 
share of an overpayment must be made to CMS.
    (b) Requirements for notification. Unless a State official or fiscal 
agent of the State chooses to initiate a formal recoupment action 
against a provider without first giving written notification of its 
intent, a State Medicaid agency official or other State official must 
notify the provider in writing of any overpayment it discovers in 
accordance with State agency policies and procedures and must take 
reasonable actions to attempt to recover the overpayment in accordance 
with State law and procedures.
    (c) Overpayments resulting from situations other than fraud or 
abuse. An overpayment resulting from a situation other than fraud or 
abuse is discovered on the earliest of--
    (1) The date on which any Medicaid agency official or other State 
official first notifies a provider in writing of an overpayment and 
specifies a dollar amount that is subject to recovery;
    (2) The date on which a provider initially acknowledges a specific 
overpaid amount in writing to the medicaid agency; or
    (3) The date on which any State official or fiscal agent of the 
State initiates a formal action to recoup a specific overpaid amount 
from a provider without having first notified the provider in writing.
    (d) Overpayments resulting from fraud or abuse. An overpayment that 
results from fraud or abuse is discovered on the date of the final 
written notice of the State's overpayment determination that a Medicaid 
agency official or other State official sends to the provider.
    (e) Overpayments identified through Federal reviews. If a Federal 
review at any time indicates that a State has failed to identify an 
overpayment or a State has identified an overpayment but has failed to 
either send written notice of the overpayment to the provider that 
specified a dollar amount subject to recovery or initiate a formal 
recoupment from the provider without having first notified the provider 
in writing, CMS will consider the overpayment as discovered on the date 
that the Federal official first notifies the State in writing of the 
overpayment and specifies a dollar amount subject to recovery.
    (f) Effect of changes in overpayment amount. Any adjustment in the 
amount of an overpayment during the 60-day period following discovery 
(made in accordance with the approved State plan, Federal law and 
regulations governing Medicaid, and the appeals resolution process 
specified in State administrative policies and procedures) has the 
following effect on the 60-day recovery period:
    (1) A downward adjustment in the amount of an overpayment subject to 
recovery that occurs after discovery does not change the original 60-day 
recovery period for the outstanding balance.
    (2) An upward adjustment in the amount of an overpayment subject to 
recovery that occurs during the 60-day period following discovery does 
not change the 60-day recovery period for the original overpayment 
amount. A new 60-day period begins for the incremental amount only, 
beginning with the date of the State's written notification to the 
provider regarding the upward adjustment.
    (g) Effect of partial collection by State. A partial collection of 
an overpayment amount by the State from a provider during the 60-day 
period following discovery does not change the 60-day recovery period 
for the original overpayment amount due to CMS.
    (h) Effect of administrative or judicial appeals. Any appeal rights 
extended to a provider do not extend the date of discovery.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]

[[Page 101]]



Sec. 433.318  Overpayments involving providers who are bankrupt or out of business.

    (a) Basic rules. (1) The agency is not required to refund the 
Federal share of an overpayment made to a provider as required by 
Sec. 433.312(a) to the extent that the State is unable to recover the 
overpayment because the provider has been determined bankrupt or out of 
business in accordance with the provisions of this section.
    (2) The agency must notify the provider that an overpayment exists 
in any case involving a bankrupt or out-of-business provider and, if the 
debt has not been determined uncollectable, take reasonable actions to 
recover the overpayment during the 60-day recovery period in accordance 
with policies prescribed by applicable State law and administrative 
procedures.
    (b) Overpayment debts that the State need not refund. Overpayments 
are considered debts that the State is unable to recover within the 60-
day period following discovery if the following criteria are met:
    (1) The provider has filed for bankruptcy, as specified in paragraph 
(c) of this section; or
    (2) The provider has gone out of business and the State is unable to 
locate the provider and its assets, as specified in paragraph (d) of 
this section.
    (c) Bankruptcy. The agency is not required to refund to CMS the 
Federal share of an overpayment at the end of the 60-day period 
following discovery, if--
    (1) The provider has filed for bankruptcy in Federal court at the 
time of discovery of the overpayment or the provider files a bankruptcy 
petition in Federal court before the end of the 60-day period following 
discovery; and
    (2) The State is on record with the court as a creditor of the 
petitioner in the amount of the Medicaid overpayment.
    (d) Out of business. (1) The agency is not required to refund to CMS 
the Federal share of an overpayment at the end of the 60-day period 
following discovery if the provider is out of business on the date of 
discovery of the overpayment or if the provider goes out of business 
before the end of the 60-day period following discovery.
    (2) A provider is considered to be out of business on the effective 
date of a determination to that effect under State law. The agency must-
-
    (i) Document its efforts to locate the party and its assets. These 
efforts must be consistent with applicable State policies and 
procedures; and
    (ii) Make available an affidavit or certification from the 
appropriate State legal authority establishing that the provider is out 
of business and that the overpayment cannot be collected under State law 
and procedures and citing the effective date of that determination under 
State law.
    (3) A provider is not out of business when ownershp is transferred 
within the State unless State law and procedures deem a provider that 
has transferred ownership to be out of business and preclude collection 
of the overpayment from the provider.
    (e) Circumstances requiring refunds. If the 60-day recovery period 
has expired before an overpayment is found to be uncollectable under the 
provisions of this section, if the State recovers an overpayment amount 
under a court-approved discharge of bankruptcy, or if a bankruptcy 
petition is denied, the agency must refund the Federal share of the 
overpayment in accordance with the procedures specified in Sec. 433.320.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]



Sec. 433.320  Procedures for refunds to CMS.

    (a) Basic requirements. (1) The agency must refund the Federal share 
of overpayments that are subject to recovery to CMS through a credit on 
its Quarterly Statement of Expenditures (Form CMS-64).
    (2) The Federal share of overpayments subject to recovery must be 
credited on the Form CMS-64 report submitted for the quarter in which 
the 60-day period following discovery, established in accordance with 
Sec. 433.316, ends.
    (3) A credit on the Form CMS-64 must be made whether or not the 
overpayment has been recovered by the State from the provider.
    (b) Effect of reporting collections and submitting reduced 
expenditure claims. (1) The State is not required to refund the

[[Page 102]]

Federal share of an overpayment when the State reports a collection or 
submits an expenditure claim reduced by a discrete amount to recover an 
overpayment prior to the end of the 60-day period following discovery.
    (2) The State is not required to report on the Form CMS-64 any 
collections made on overpayment amounts for which the Federal share has 
been refunded previously.
    (3) If a State has refunded the Federal share of an overpayment as 
required under this subpart and the State subsequently makes recovery by 
reducing future provider payments by a discrete amount, the State need 
not reflect that reduction in its claim for Federal financial 
participation.
    (c) Reclaiming overpayment amounts previously refunded to CMS. If 
the amount of an overpayment is adjusted downward after the agency has 
credited CMS with the Federal share, the agency may reclaim the amount 
of the downward adjustment on the Form CMS-64. Under this provision--
    (1) Downward adjustment to an overpayment amount previously credited 
to CMS is allowed only if it is properly based on the approved State 
plan, Federal law and regulations governing Medicaid, and the appeals 
resolution processes specified in State administrative policies and 
procedures.
    (2) The 2-year filing limit for retroactive claims for Medicaid 
expenditures does not apply. A downward adjustment is not considered a 
retroactive claim but rather a reclaiming of costs previously claimed.
    (d) Expiration of 60-day recovery period. If an overpayment has not 
been determined uncollectable in accordance with the requirements of 
Sec. 433.318 at the end of the 60-day period following discovery of the 
overpayment, the agency must refund the Federal share of the overpayment 
to CMS in accordance with the procedures specified in paragraph (a) of 
this section.
    (e) Court-approved discharge of bankruptcy. If the State recovers 
any portion of an overpayment under a court-approved discharge of 
bankruptcy, the agency must refund to CMS the Federal share of the 
overpayment amount collected on the next quarterly expenditure report 
that is due to CMS for the period that includes the date on which the 
collection occurs.
    (f) Bankruptcy petition denied. If a provider's petition for 
bankruptcy is denied in Federal court, the agency must credit CMS with 
the Federal share of the overpayment on the later of--
    (1) The Form CMS-64 submission due to CMS immediately following the 
date of the decision of the court; or
    (2) The Form CMS-64 submission for the quarter in which the 60-day 
period following discovery of the overpayment ends.
    (g) Reclaim of refunds. (1) If a provider is determined bankrupt or 
out of business under this section after the 60-day period following 
discovery of the overpayment ends and the State has not been able to 
make complete recovery, the agency may reclaim the amount of the Federal 
share of any unrecovered overpayment amount previously refunded to CMS. 
CMS allows the reclaim of a refund by the agency if the agency submits 
to CMS documentation that it has made reasonable efforts to obtain 
recovery.
    (2) If the agency reclaims a refund of the Federal share of an 
overpayment--
    (i) In bankruptcy cases, the agency must submit to CMS a statement 
of its efforts to recover the overpayment during the period before the 
petition for bankruptcy was filed; and
    (ii) In out-of-business cases, the agency must submit to CMS a 
statement of its efforts to locate the provider and its assets and to 
recover the overpayment during any period before the provider is found 
to be out of business in accordance with Sec. 433.318.
    (h) Supporting reports. The agency must report the following 
information to support each Quarterly Statement of Expenditures Form 
CMS-64:
    (1) Amounts of overpayments not collected during the quarter but 
refunded because of the expiration of the 60-day period following 
discovery;
    (2) Upward and downward adjustments to amounts credited in previous 
quarters;
    (3) Amounts of overpayments collected under court-approved 
discharges of bankruptcy;
    (4) Amounts of previously reported overpayments to providers 
certified as

[[Page 103]]

bankrupt or out of business during the quarter; and
    (5) Amounts of overpayments previously credited and reclaimed by the 
State.



Sec. 433.322  Maintenance of records.

    The Medicaid agency must maintain a separate record of all 
overpayment activities for each provider in a manner that satisfies the 
retention and access requirements of 45 CFR part 74, subpart D.



PART 434--CONTRACTS--Table of Contents




                      Subpart A--General Provisions

Sec.
434.1 Basis and scope.
434.2 Definitions.
434.4 State plan requirement.
434.6 General requirements for all contracts and subcontracts.

     Subpart B--Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions

434.10 Contracts with fiscal agents.
434.12 Contracts with private nonmedical institutions.
434.14 [Reserved]

                          Subpart C [Reserved]



         Subpart D--Contracts With Health Insuring Organizations

434.40 Contract requirements.

                          Subpart E [Reserved]



               Subpart F--Federal Financial Participation

434.70 Conditions for Federal Financial Participation (FFP).
434.76 Costs under fiscal agent contracts.
434.78 Right to reconsideration of disallowance.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 48 FR 54020, Nov. 30, 1983, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 434.1  Basis and scope.

    (a) Statutory basis. This part is based on section 1902(a)(4) of the 
Act, which requires that the State plan provide for methods of 
administration that the Secretary finds necessary for the proper and 
efficient operation of the plan.
    (b) Scope. This part sets forth the requirements for contracts with 
certain organizations for furnishing Medicaid services or processing or 
paying Medicaid claims, or enchancing the agency's capability for 
effective administration of the program.

[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 67 
FR 41095, June 14, 2002]



Sec. 434.2  Definitions.

    As used in this part, unless the context indicates otherwise--
    Fiscal agent means an entity that processes or pays vendor claims 
for the agency.
    Health care projects grant center means an entity that--
    (a) Is supported in whole or in part by Federal project grant 
financial assistance; and
    (b) Provides or arranges for medical services to recipients.
    Private nonmedical institution means an institution (such as a 
child-care facility or a maternity home) that--
    (a) Is not, as a matter of regular business, a health insuring 
organization or a community health care center;
    (b) Provides medical care to its residents through contracts or 
other arrangements with medical providers; and
    (c) Receives capitation payments from the Medicaid agency, under a 
nonrisk contract, for its residents who are eligible for Medicaid.
    Professional management service or consultant firm means a firm that 
performs management services such as auditing or staff training, or 
carries out studies or provides consultation aimed at improving State 
Medicaid operations, for example, with respect to reimbursement formulas 
or accounting systems.

[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 52 
FR 22322, June 11, 1987; 55 FR 51295, Dec. 13, 1990; 67 FR 41095, June 
14, 2002]



Sec. 434.4  State plan requirement.

    If the State plan provides for contracts of the types covered by 
this part, the plan must also provide for

[[Page 104]]

meeting the applicable requirements of this part.



Sec. 434.6  General requirements for all contracts and subcontracts.

    (a) Contracts. All contracts under this part must--
    (1) Include provisions that define a sound and complete procurement 
contract, as required by 45 CFR part 74;
    (2) Identify the population covered by the contract;
    (3) Specify any procedures for enrollment or reenrollment of the 
covered population;
    (4) Specify the amount, duration, and scope of medical services to 
be provided or paid for;
    (5) Provide that the agency and HHS may evaluate through inspection 
or other means, the quality, appropriateness and timeliness of services 
performed under the contract;
    (6) Specify procedures and criteria for terminating the contract, 
including a requirement that the contractor promptly supply all 
information necessary for the reimbursement of any outstanding Medicaid 
claims;
    (7) Provide that the contractor maintains an appropriate record 
system for services to enrolled recipients;
    (8) Provide that the contractor safeguards information about 
recipients as required by part 431, subpart F of this chapter;
    (9) Specify any activities to be performed by the contractor that 
are related to third party liability requirements in part 433, subpart D 
of this chapter;
    (10) Specify which functions may be subcontracted; and
    (11) Provide that any subcontracts meet the requirements of 
paragraph (b) of this section.
    (b) Subcontracts. All subcontracts must be in writing and fulfill 
the requirements of this part that are appropriate to the service or 
activity delegated under the subcontract.
    (c) Continued responsibility of contractor. No subcontract 
terminates the legal responsibility of the contractor to the agency to 
assure that all activities under the contract are carried out.

[48 FR 54020, Nov. 30, 1983, as amended at 67 FR 41095, June 14, 2002]



     Subpart B--Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions



Sec. 434.10  Contracts with fiscal agents.

    Contracts with fiscal agents must--
    (a) Meet the requirements of Sec. 434.6;
    (b) Include termination procedures that require the contractors to 
supply promptly all material necessary for continued operation of 
payment and related systems. This material includes--
    (1) Computer programs;
    (2) Data files;
    (3) User and operation manuals, and other documentation;
    (4) System and program documentation; and
    (5) Training programs for Medicaid agency staff, their agents or 
designated representatives in the operation and maintenance of the 
system;
    (c) Offer to the State one or both of the following options, if the 
fiscal agent or the fiscal agent's subcontractor has a proprietary right 
to material specified in paragraph (b) of this section:
    (1) Purchasing the material; or
    (2) Purchasing the use of the material through leasing or other 
means; and
    (d) State that payment to providers will be made in accordance with 
part 447 of this chapter.



Sec. 434.12  Contracts with private nonmedical institutions.

    Contracts with private nonmedical institutions must--
    (a) Meet the requirements of Sec. 434.6;
    (b) Specify a capitation fee based on the cost of the services 
provided, in accordance with the reimbursement requirements prescribed 
in part 447 of this chapter; and
    (c) Specify when the capitation fee must be paid.

[[Page 105]]



Sec. 434.14  [Reserved]



                          Subpart C [Reserved]



  



         Subpart D--Contracts With Health Insuring Organizations



Sec. 434.40  Contract requirements.

    (a) Contracts with health insuring organizations that are not 
subject to the requirements in section 1903(m)(2)(A) must:
    (1) Meet the general requirements for all contracts and subcontracts 
specified in Sec. 434.6;
    (2) Specify that the contractor assumes at least part of the 
underwriting risk and;
    (i) If the contractor assumes the full underwriting risk, specify 
that payment of the capitation fees to the contractor during the 
contract period constitutes full payment by the agency for the cost of 
medical services provided under the contract;
    (ii) If the contractor assumes less than the full underwriting risk, 
specify how the risk is apportioned between the agency and the 
contractor;
    (3) Specify whether the contractor returns to the agency part of any 
savings remaining after the allowable costs are deducted from the 
capitations fees, and if savings are returned, the apportionment between 
agency and the contractor; and
    (4) Specify the extent, if any, to which the contractor may obtain 
reinsurance of a portion of the underwriting risk.
    (b) The contract must--
    (1) Specify that the capitation fee will not exceed the limits set 
forth under part 447 of this chapter.
    (2) Specify that, except as permitted under paragraph (b) of this 
section, the capitation fee paid on behalf of each recipient may not be 
renegotiated--
    (i) During the contract period if the contract period is 1 year or 
less; or
    (ii) More often than annually if the contract period is for more 
than 1 year.
    (3) Specify that the capitation fee will not include any amount for 
recoupment of any specific losses suffered by the contractor for risks 
assumed under the same contract or a prior contract with the agency; and
    (4) Specify the actuarial basis for computation of the capitation 
fee.
    (c) The capitation fee may be renegotiated more frequently than 
annually for recipients who are not enrolled at the time of 
renegotiation or if the renegotiation is required by changes in Federal 
or State law.

[55 FR 51295, Dec. 13, 1990]



                          Subpart E [Reserved]



  



               Subpart F--Federal Financial Participation

    Source: 48 FR 54020, Nov. 20, 1983, unless otherwise noted. 
Redesignated at 55 FR 51295, Dec. 13, 1990.



Sec. 434.70  Conditions for Federal Financial Participation (FFP).

    (a) Basic requirements. FFP is available only for periods during 
which the contract--
    (1) Meets the requirements of this part;
    (2) Meets the applicable requirements of 45 CFR part 74; and
    (3) Is in effect.
    (b) Basis for withholding. CMS may withhold FFP for any period 
during which the State fails to meet the State plan requirements of this 
part.

[67 FR 41095, June 14, 2002]



Sec. 434.76  Costs under fiscal agent contracts.

    Under each contract with a fiscal agent--
    (a) The amount paid to the provider of medical services is a medical 
assistance cost; and
    (b) The amount paid to the contractor for performing the agreed-upon 
functions is an administrative cost.



Sec. 434.78  Right to reconsideration of disallowance.

    A Medicaid agency dissatisfied with a disallowance of FFP under this 
subpart may request and will be granted reconsideration in accordance 
with 45 CFR part 16.

[[Page 106]]



PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA--Table of Contents




              Subpart A--General Provisions and Definitions

Sec.
435.2 Purpose and applicability.
435.3 Basis.
435.4 Definitions and use of terms.
435.10 State plan requirements.

        Subpart B--Mandatory Coverage of the Categorically Needy

435.100 Scope.

               Mandatory Coverage of Families and Children

435.110 Individuals receiving aid to families with dependent children.
435.112 Families terminated from AFDC because of increased earnings or 
          hours of employment.
435.113 Individuals who are ineligible for AFDC because of requirements 
          that do not apply under title XIX of the Act.
435.114 Individuals who would be eligible for AFDC except for increased 
          OASDI income under Pub. L. 92-336 (July 1, 1972).
435.115 Individuals deemed to be receiving AFDC.

  Mandatory Coverage of Pregnant Women, Children under 8, and Newborn 
                                Children

435.116 Qualified pregnant women and children who are not qualified 
          family members.
435.117 Newborn children.

             Mandatory Coverage of Qualified Family Members

435.119 Qualified family members.

           Mandatory Coverage of the Aged, Blind, and Disabled

435.120 Individuals receiving SSI.
435.121 Individuals in States using more restrictive requirements for 
          Medicaid than the SSI requirements.
435.122 Individuals who are ineligible for SSI or optional State 
          supplements because of requirements that do not apply under 
          title XIX of the Act.
435.130 Individuals receiving mandatory State supplements.
435.131 Individuals eligible as essential spouses in December 1973.
435.132 Institutionalized individuals who were eligible in December 
          1973.
435.133 Blind and disabled individuals eligible in December 1973.
435.134 Individuals who would be eligible except for the increase in 
          OASDI benefits under Pub. L. 92-336 (July 1, 1972).
435.135 Individuals who become ineligible for cash assistance as a 
          result of OASDI cost-of-living increases received after April 
          1977.
435.136 State agency implementation requirements for one-time notice and 
          annual review system.
435.137 Disabled widows and widowers who would be eligible for SSI 
          except for the increase in disability benefits resulting from 
          elimination of the reduction under Pub. L. 98-31.
435.138 Disabled widows and widowers aged 60 through 64 who would be 
          eligible for SSI benefits except for receipt of early social 
          security benefits.

                  Mandatory Coverage of Certain Aliens

435.139 Coverage for certain aliens.

   Mandatory Coverage of Adoption Assistance and Foster Care Children

435.145 Children for whom adoption assistance or foster care maintenance 
          payments are made.

                  Mandatory Coverage of Special Groups

435.170 Pregnant women eligible for extended coverage.

         Subpart C--Options for Coverage as Categorically Needy

435.200 Scope.
435.201 Individuals included in optional groups.

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled

435.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
435.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
435.212 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
435.217 Individuals receiving home and community-based services.

              Options for Coverage of Families and Children

435.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.
435.221 [Reserved]
435.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.

[[Page 107]]

435.223 Individuals who would be eligible for AFDC if coverage under the 
          State's AFDC plan were as broad as allowed under title IV-A.
435.225 Individuals under age 19 who would be eligible for Medicaid if 
          they were in a medical institution.
435.227 Individuals under age 21 who are under State adoption assistance 
          agreements.
435.229 Optional targeted low-income children.

          Options for Coverage of the Aged, Blind, and Disabled

435.230 Aged, blind, and disabled individuals in States that use more 
          restrictive requirements for Medicaid than SSI requirements: 
          Optional coverage.
435.232 Individuals receiving only optional State supplements.
435.234 Individuals receiving only optional State supplements in States 
          using more restrictive eligibility requirements than SSI and 
          certain States using SSI criteria.
435.236 Individuals in institutions who are eligible under a special 
          income level.

           Subpart D--Optional Coverage of the Medically Needy

435.300 Scope.
435.301 General rules.
435.308 Medically needy coverage of individuals under age 21.
435.310 Medically needy coverage of specified relatives.
435.320 Medically needy coverage of the aged in States that cover 
          individuals receiving SSI.
435.322 Medically needy coverage of the blind in States that cover 
          individuals receiving SSI.
435.324 Medically needy coverage of the disabled in States that cover 
          individuals receiving SSI.
435.326 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
435.330 Medically needy coverage of the aged, blind, and disabled in 
          States using more restrictive eligibility requirements for 
          Medicaid than those used under SSI.
435.340 Protected medically needy coverage for blind and disabled 
          individuals eligible in December 1973.
435.350 Coverage for certain aliens.

               Subpart E--General Eligibility Requirements

435.400 Scope.
435.401 General rules.
435.402 [Reserved]
435.403 State residence.
435.404 Applicant's choice of category.
435.406 Citizenship and alienage.
435.408 Categories of aliens who are permanently residing in the United 
          States under color of law.

           Subpart F--Categorical Requirements for Eligibility

435.500 Scope.

                               Dependency

435.510 Determination of dependency.

                                   Age

435.520 Age requirements for the aged.
435.522 Determination of age.

                                Blindness

435.530 Definition of blindness.
435.531 Determinations of blindness.

                               Disability

435.540 Definition of disability.
435.541 Determinations of disability.

    Subpart G--General Financial Eligibility Requirements and Options

435.600 Scope.
435.601 Application of financial eligibility methodologies.
435.602 Financial responsibility of relatives and other individuals.
435.604 [Reserved]
435.606 [Reserved]
435.608 Applications for other benefits.
435.610 Assignment of rights to benefits.
435.622 Individuals in institutions who are eligible under a special 
          income level.
435.631 General requirements for determining income eligibility in 
          States using more restrictive requirements for Medicaid than 
          SSI.
435.640 Protected Medicaid eligibility for individuals eligible in 
          December 1973.

  Subpart H--Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy

435.700 Scope.
435.725 Post-eligibility treatment of income of institutionalized 
          individuals in SSI States: Application of patient income to 
          the cost of care.
435.726 Post-eligibility treatment of income of individuals receiving 
          home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.
435.733 Post-eligibility treatment of income of institutionalized 
          individuals in States using more restrictive requirements than 
          SSI: Application of patient income to the cost of care.
435.735 Post-eligibility treatment of income and resources of 
          individuals receiving

[[Page 108]]

          home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.

     Subpart I--Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy

435.800 Scope.

                     Medically Needy Income Standard

435.811 Medically needy income standard: General requirements.
435.814 Medically needy income standard: State plan requirements.

                   Medically Needy Income Eligibility

435.831 Income eligibility.
435.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

                    Medically Needy Resource Standard

435.840 Medically needy resource standard: General requirements.
435.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

435.845 Medically needy resource eligibility.
435.850-435.852 [Reserved]

      Subpart J--Eligibility in the States and District of Columbia

435.900 Scope.

                    General Methods of Administration

435.901 Consistency with objectives and statutes.
435.902 Simplicity of administration.
435.903 Adherence of local agencies to State plan requirements.
435.904 Establishment of outstation locations to process applications 
          for certain low-income eligibility groups.

                              Applications

435.905 Availability of program information.
435.906 Opportunity to apply.
435.907 Written application.
435.908 Assistance with application.
435.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.
435.910 Use of social security number.

                  Determination of Medicaid Eligibility

435.911 Timely determination of eligibility.
435.912 Notice of agency's decision concerning eligibility.
435.913 Case documentation.
435.914 Effective date.

                Redeterminations of Medicaid Eligibility

435.916 Periodic redeterminations of Medicaid eligibility.
435.919 Timely and adequate notice concerning adverse actions.
435.920 Verification of SSNs.

                           Furnishing Medicaid

435.930 Furnishing Medicaid.

            Income and Eligibility Verification Requirements

435.940 Basis and scope.
435.945 General requirements.
435.948 Requesting information.
435.952 Use of information.
435.953 Identifying items of information to use.
435.955 Additional requirements regarding information released by a 
          Federal agency.
435.960 Standardized formats for furnishing and obtaining information to 
          verifying income and eligibility.
435.965 Delay of effective date.

               Subpart K--Federal Financial Participation

435.1000 Scope.

 FFP in Expenditures for Determining Eligibility and Providing Services

435.1001 FFP for administration.
435.1002 FFP for services.
435.1003 FFP for redeterminations.
435.1004 Recipients overcoming certain conditions of eligibility.

                           Limitations on FFP

435.1005 Recipients in institutions eligible under a special income 
          standard.
435.1006 Recipients of optional State supplements only.
435.1007 Categorically needy, medically needy, and qualified Medicare 
          beneficiaries.
435.1008 Institutionalized individuals.
435.1009 Definitions relating to institutional status.

                   Requirements for State Supplements

435.1010 Requirement for mandatory State supplements.
435.1011 Requirement for maintenance of optional State supplement 
          expenditures.

            Subpart L--Option for Coverage of Special Groups

435.1100 Basis and scope.

                  Presumptive Eligibility for Children

435.1101 Definitions related to presumptive eligibility for children.
435.1102 General rules.


[[Page 109]]


    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45204, Sept. 29, 1978, unless otherwise noted.



              Subpart A--General Provisions and Definitions



Sec. 435.2  Purpose and applicability.

    This part sets forth, for the 50 States, the District of Columbia, 
the Northern Mariana Islands, and American Samoa--
    (a) The eligibility provisions that a State plan must contain;
    (b) The mandatory and optional groups of individuals to whom 
Medicaid is provided under a State plan;
    (c) The eligibility requirements and procedures that the Medicaid 
agency must use in determining and redetermining eligibility, and 
requirements it may not use;
    (d) The availability of FFP for providing Medicaid and for 
administering the eligibility provisions of the plan; and
    (e) Other requirements concerning eligibility determinations, such 
as use of an institutionalized individual's income for the cost of care.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 
51 FR 41350, Nov. 14, 1986]



Sec. 435.3  Basis.

    (a) This part implements the following sections of the Act and 
public laws that mandate eligibility requirements and standards:

402(a)(22) Eligibility of deemed recipients of AFDC who receive zero 
          payments because of recoupment of overpayments.
402(a)(37) Eligibility of individuals who lose AFDC eligibility due to 
          increased earnings.
414(g) Eligibility of certain individuals participating in work 
          supplementation programs.
473(b) Eligibility of children in foster care and adopted children who 
          are deemed AFDC recipients.
1619(b) Benefits for blind individuals or those with disabling 
          impairments whose income equals or exceeds a specific SSI 
          limit.
1634(b) Preservation of benefit status for disabled widows and widowers 
          who lost SSI benefits because of 1983 changes in actuarial 
          reduction formula.
1634(d) Individuals who lose eligibility for SSI benefits due to 
          entitlement to early widow's or widower's social security 
          disability benefits under section 202(e) or (f) of the Act.
1902(a)(8) Opportunity to apply; assistance must be furnished promptly.
1902(a)(10) Required and optional groups.
1902(a)(12) Determination of blindness.
1902(a)(17) Standards for determining eligibility: flexibility in the 
          application of income eligibility standards.
1902(a)(19) Safeguards for simplicity of administration and best 
          interests of recipients.
1902(a)(34) Three-month retroactive eligibility.
1902(a) (second paragraph after (47)) Eligibility despite increased 
          monthly insurance benefits under title II.
1902(a)(55) Mandatory use of outstation locations other than welfare 
          offices to receive and initially process applications of 
          certain low-income pregnant women, infants, and children under 
          age 19.
1902(b) Prohibited conditions for eligibility: Age requirement of more 
          that 65 years;
    State residence requirements excluding individuals who reside in the 
state; and
    Citizenship requirement excluding United States citizens.
1902(e) Four-month continued eligibility for families ineligible because 
          of increased hours or income from employment.
1902(e)(2) Minimum eligibility period for recipient enrolled in an HMO.
1902(e)(3) Optional coverage of certain disabled children being cared 
          for at home.
1902(e)(4) Eligibility of newborn children of Medicaid eligible women.
1902(e)(5) Eligibility of pregnant woman for extended coverage for 
          specified postpartum period after pregnancy ends.
1902(f) State option to restrict Medicaid eligibility for aged, blind, 
          or disabled individuals to those who would have been eligible 
          under State plan in effect in January 1972.
1902(j) Medicaid program in American Samoa.
1903(f) Income limitations for medically needy and individuals covered 
          by State supplement eligibility requirements.
1903(v) Payment for emergency services under Medicaid provided to 
          aliens.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
          to certain institutionalized individuals.
1905(a) (second sentence) Definition of essential person.
1905(a)(i)-(viii) List of eligible individuals.
1905(d)(2) Definition of resident of an intermediate care facility for 
          the mentally retarded.
1905(j) Definition of State supplementary payment.

[[Page 110]]

1905(k) Eligibility of essential spouses of eligible individuals.
1905(n) Definition of qualified pregnant woman and child.
1912(a) Conditions of eligibility.
1915(c) Home or community-based services.
1915(d) Home or community-based services for individuals age 65 or 
          older.
412(e)(5) of Immigration and Nationality Act--Eligibility of certain 
          refugees.
Pub. L. 93-66, section 230 Deemed eligibility of certain essential 
          persons.
Pub. L. 93-66, section 231 Deemed eligibility of certain persons in 
          medical institutions.
Pub. L. 93-66, section 232 Deemed eligibility of certain blind and 
          disabled medically indigent persons.
Pub. L. 93-233, section 13(c) Deemed eligibility of certain individuals 
          receiving mandatory State supplementary payments.
Pub. L. 94-566, section 503 Deemed eligibility of certain individuals 
          who would be eligible for supplemental security income 
          benefits but for cost-of-living increases in social security 
          benefits.
Pub. L. 96-272, section 310(b)(1) Continued eligibility of certain 
          recipients of Veterans Administration pensions.
Pub. L. 99-509, section 9406 Payment for emergency medical services 
          provided to aliens.
Pub. L. 99-603, section 201 Aliens granted legalized status under 
          section 245A of the Immigration and Nationality Act (8 U.S.C. 
          1255a) may under certain circumstances be eligible for 
          Medicaid.
Pub. L. 99-603, section 302 Aliens granted legalized status under 
          section 210 of the Immigration and Nationality Act may under 
          certain circumstances be eligible for Medicaid (8 U.S.C. 
          1160).
Pub. L. 99-603, section 303 Aliens granted legal status under section 
          210A of the Immigration and Nationality Act may under certain 
          circumstances be eligible for Medicaid (8 U.S.C. 1161).

    (b) This part implements the following other provisions of the Act 
or public laws that establish additional State plan requirements:

1618 Requirement for operation of certain State supplementation 
          programs.
Pub. L. 93-66, section 212(a) Required mandatory minimum State 
          supplementation of SSI benefits programs.

[52 FR 43071, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 
FR 36819, Sept. 7, 1990; 55 FR 48607, Nov. 21, 1990; 57 FR 29155, June 
30, 1992; 59 FR 48809, Sept. 23, 1994]



Sec. 435.4  Definitions and use of terms.

    As used in this part--
    AABD means aid to the aged, blind, and disabled under title XVI of 
the Act;
    AB means aid to the blind under title X of the Act;
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    Categorically needy refers to families and children, aged, blind, or 
disabled individuals, and pregnant women, described under subparts B and 
C of this part who are eligible for Medicaid. Subpart B of this part 
describes the mandatory eligibility groups who, generally, are receiving 
or deemed to be receiving cash assistance under the Act. These mandatory 
groups are specified in sections 1902(a)(10)(A)(i), 1902(e), 1902(f), 
and 1928 of the Act. Subpart C of this part describes the optional 
eligibility groups of individuals who, generally, meet the categorical 
requirements or income or resource requirements that are the same as or 
less restrictive than those of the cash assistance programs and who are 
not receiving cash payments. These optional groups are specified in 
sections 1902(a)(10)(A)(ii), 1902(e), and 1902(f) of the Act.
    Families and children refers to eligible members of families with 
children who are financially eligible under AFDC or medically needy 
rules and who are deprived of parental support or care as defined under 
the AFDC program (see 45 CFR 233.90, 233.100). In addition, this group 
includes individuals under age 21 who are not deprived of parental 
support or care but are financially eligible under AFDC rules or 
medically needy rules (see optional coverage group, Sec. 435.222). It 
does not include individuals under age 21 whose eligibility for Medicaid 
is based on blindness or disability--for these individuals, SSI rules 
govern;
    Mandatory State supplement means a cash payment a State is required 
to make under section 212, Pub. L. 93-66 (July 9, 1973) to an aged, 
blind, or disabled individual. Its purpose is to provide an individual 
with the same amount of cash assistance he was receiving under OAA, AB, 
APTD, or

[[Page 111]]

AABD if his SSI payment is less than that amount;
    Medically needy refers to families, children, aged, blind, or 
disabled individuals, and pregnant women listed under subpart D of this 
part who are not listed in subparts B and C of this part as 
categorically needy but who may be eligible for Medicaid under this part 
because their income and resources are within limits set by the State 
under its Medicaid plan (including persons whose income and resources 
fall within these limits after their incurred expenses for medical or 
remedial care are deducted) (Specific financial requirements for 
determining eligibility of the medically needy appear in subpart I of 
this part.);
    OAA means old age assistance under title I of the Act;
    OASDI means old age, survivors, and disability insurance under title 
II of the Act;
    Optional State supplement means a cash payment made by a State, 
under section 1616 of the Act, to an aged, blind, or disabled 
individual;
    Optional targeted low-income child means a child under age 19 who 
meets the financial and categorical standards described below.
    (1) Financial need. An optional targeted low-income child:
    (i) Has a family income at or below 200 percent of the Federal 
poverty line for a family of the size involved; and
    (ii) Resides in a State with no Medicaid applicable income level (as 
defined at Sec. 457.10 of this chapter); or
    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined at Sec. 457.10 of this chapter) and has family income that 
either:
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points; or
    (B) Does not exceed the income level specified for such child to be 
eligible for medical assistance under the policies of the State plan 
under title XIX on June 1, 1997.
    (2) No other coverage and State maintenance of effort. An optional 
targeted low-income child is not covered under a group health plan or 
health insurance coverage, or would not be eligible for Medicaid under 
the policies of the State plan in effect on March 31, 1997; except that, 
for purposes of this standard--
    (i) A child shall not be considered to be covered by health 
insurance coverage based on coverage offered by the State under a 
program in operation prior to July 1, 1997 if that program received no 
Federal financial participation;
    (ii) A child shall not be considered to be covered under a group 
health plan or health insurance coverage if the child did not have 
reasonable geographic access to care under that coverage.
    (3) For purposes of this section, policies of the State plan a under 
title XIX plan include policies under a Statewide demonstration project 
under section 1115(a) of the Act other than a demonstration project that 
covered an expanded group of eligible children but that either--
    (i) Did not provide inpatient hospital coverage; or
    (ii) Limited eligibility to children previously enrolled in 
Medicaid, imposed premiums as a condition of initial or continued 
enrollment, and did not impose a general time limit on eligibility.
    SSI means supplemental security income under title XVI of the Act.
    SWICA means the State Wage Information Collection Agency under 
section 1137(a) of the Act. It is the State agency administering the 
State unemployment compensation law; a separate agency administering a 
quarterly wage reporting system; or a State agency administering an 
alternative system which has been determined by the Secretary of Labor, 
in consultation with the Secretary of Agriculture and the Secretary of 
Health and Human Services, to be as effective and timely in providing 
employment related income and eligibility data.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 
46 FR 6909, Jan. 22, 1981; 46 FR 47984, Sept. 30, 1981; 51 FR 7211, Feb. 
28, 1986; 58 FR 4925, Jan. 19, 1993; 66 FR 2666, Jan. 11, 2001]



Sec. 435.10  State plan requirements.

    A State plan must--
    (a) Provide that the requirements of this part are met; and

[[Page 112]]

    (b) Specify the groups to whom Medicaid is provided, as specified in 
subparts B, C, and D of this part, and the conditions of eligibility for 
individuals in those groups.



        Subpart B--Mandatory Coverage of the Categorically Needy



Sec. 435.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.

               Mandatory Coverage of Families and Children



Sec. 435.110  Individuals receiving aid to families with dependent children.

    (a) A Medicaid agency must provide Medicaid to individuals receiving 
AFDC.
    (b) For purposes of this section, an individual is receiving AFDC if 
his needs are included in determining the amount of the AFDC payment. 
This includes an individual whose presence in the home is considered 
essential to the well-being of a recipient (see 45 CFR 233.20(a)(2)(vi)) 
and who could be a recipient under the State's AFDC plan if that plan 
were as broad as allowed under the Act for FFP.



Sec. 435.112  Families terminated from AFDC because of increased earnings or hours of employment.

    (a) If a family loses AFDC solely because of increased income from 
employment or increased hours of employment, the agency must continue to 
provide Medicaid for 4 months to all members of the family if--
    (1) The family received AFDC in any 3 or more months during the 6-
month period immediately before the month in which it became ineligible 
for AFDC; and
    (2) At least one member of the family is employed throughout the 4-
month period, although this need not be the same member for the whole 
period.
    (b) The 4 calendar month period begins on the date AFDC is 
terminated. If AFDC benefits are terminated retroactively, the 4 
calendar month period also begins retroactively with the first month in 
which AFDC was erroneously paid.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



Sec. 435.113  Individuals who are ineligible for AFDC because of requirements that do not apply under title XIX of the Act.

    The agency must provide Medicaid to:
    (a) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act;
    (1) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (2) Grandparents;
    (3) Legal guardians;
    (4) Alien sponsors who are not organizations; and
    (5) Siblings.
    (b) [Reserved]

[58 FR 4926, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec. 435.114  Individuals who would be eligible for AFDC except for increased OASDI income under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving AFDC; or
    (2) He would have been eligible for AFDC if he had applied, and the 
Medicaid plan covered this optional group; or
    (3) He would have been eligible for AFDC if he were not in a medical 
institution or intermediate care facility, and the Medicaid plan covered 
this optional group.
    (b) The individual would currently be eligible for AFDC except that 
the increase in OASDI under Pub. L. 92-336 raised his income over the 
limit allowed under AFDC. This includes an individual who--
    (1) Meets all current AFDC requirements except for the requirement 
to file an application; or

[[Page 113]]

    (2) Would meet all current AFDC requirements if he were not in a 
medical institution or intermediate care facility, and the current 
Medicaid plan covers this optional group.



Sec. 435.115  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--
    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E of the Act, whether or not adoption assistance is being 
provided or an interlocutory or other judicial decree of adoption has 
been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of the child or spousal 
support collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals who are eligible for extended Medicaid lose this coverage if 
they move to another State during the 4-month period. However, if they 
move back to and reestablish residence in the State in which they have 
extended coverage, they are eligible for any of the months remaining in 
the 4-month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in

[[Page 114]]

income or changes in other circumstances and the other changes in income 
or circumstances cannot alone or in combination result in termination 
without the change in support.
    (2) In cases of increases in the amounts of both support collections 
and earned income, eligibility under this section does not preclude 
eligibility under 45 CFR 233.20(a)(14) or section 1925 of the Social 
Security Act (which was added by section 303(a) of the Family Support 
Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting from both 
an increase in the amount of the support collection and from an increase 
in earned income must run concurrently.

[46 FR 47985, Sept. 30, 1981, as amended at 52 FR 43071, Nov. 9, 1987; 
55 FR 48607, Nov. 21, 1990; 59 FR 59376, Nov. 17, 1994]

  Mandatory Coverage of Pregnant Women, Children Under 8, and Newborn 
                                Children



Sec. 435.116  Qualified pregnant women and children who are not qualified family members.

    (a) The agency must provide Medicaid to a pregnant woman whose 
pregnancy has been medically verified and who--
    (1) Would be eligible for an AFDC cash payment (or would be eligible 
for an AFDC cash payment if coverage under the State's AFDC plan 
included an AFDC-unemployed parents program) if her child had been born 
and was living with her in the month of payment;
    (2) Is a member of a family that would be eligible for an AFDC cash 
payment if the State's AFDC plan included an AFDC-unemployed parents 
program; or
    (3) Meets the income and resource requirements of the State's 
approved AFDC plan. In determining whether the woman meets the AFDC 
income and resource requirements, the unborn child or children are 
considered members of the household, and the woman's family is treated 
as though deprivation exists.
    (b) The provisions of paragraphs (a) (1) and (2) of this section are 
effective October 1, 1984. The provisions of paragraph (a)(3) of this 
section are effective July 1, 1986.
    (c) The agency must provide Medicaid to children who meet all of the 
following criteria:
    (1) They are born after September 30, 1983;
    (2) Effective October 1, 1988, they are under age 6 (or if 
designated by the State, any age that exceeds age 6 but does not exceed 
age 8), and effective October 1, 1989, they are under age 7 (or if 
designated by the State, any age that exceeds age 7 but does not exceed 
age 8); and
    (3) They meet the income and resource requirements of the State's 
approved AFDC plan.

[52 FR 43071, Nov. 9, 1987, as amended at 55 FR 48607, Nov. 21, 1990; 58 
FR 48614, Sept. 17, 1993]



Sec. 435.117  Newborn children.

    (a) The agency must provide categorically needy Medicaid eligibility 
to a child born to a woman who is eligible as categorically needy and is 
receiving Medicaid on the date of the child's birth. The child is deemed 
to have applied and been found eligible for Medicaid on the date of 
birth and remains eligible as categorically needy for one year so long 
as the woman remains eligible as categorically needy and the child is a 
member of the woman's household. If the mother's basis of eligibility 
changes to medically needy, the child is eligible as medically needy 
under Sec. 435.301(b)(1)(iii).
    (b) The requirements under paragraph (a) of this section apply to 
children born on or after October 1, 1984.

[52 FR 43071, Nov. 9, 1987]

             Mandatory Coverage of Qualified Family Members



Sec. 435.119  Qualified family members.

    (a) Definition. A qualified family member is any member of a family, 
including pregnant women and children eligible for Medicaid under 
Sec. 435.116 of this subpart, who would be receiving AFDC cash benefits 
on the basis of the unemployment of the principal wage earner under 
section 407 of the Act had the State not chosen to place time limits on 
those benefits as permitted under section 407(b)(2)(B)(i) of the Act.

[[Page 115]]

    (b) State plan requirement. The State plan must provide that the 
State makes Medicaid available to any individual who meets the 
definition of ``qualified family member'' as specified in paragraph (a) 
of this section.
    (c) Applicability. The provisions in this section are applicable in 
the 50 States and the District of Columbia from October 1, 1990, through 
September 30, 1998. The provisions are applicable in American Samoa from 
October 1, 1992, through September 30, 1998.

[58 FR 48614, Sept. 17, 1993]

           Mandatory Coverage of the Aged, Blind, and Disabled



Sec. 435.120  Individuals receiving SSI.

    Except as allowed under Sec. 435.121, the agency must provide 
Medicaid to aged, blind, and disabled individuals or couples who are 
receiving or are deemed to be receiving SSI. This includes individuals 
who are--
    (a) Receiving SSI pending a final determination of blindness or 
disability;
    (b) Receiving SSI under an agreement with the Social Security 
Administration to dispose of resources that exceed the SSI dollar limits 
on resources; or
    (c) Receiving benefits under section 1619(a) of the Act or in 
section 1619(b) status (blind individuals or those with disabling 
impairments whose income equals or exceeds a specific Supplemental 
Security Income limit). (Regulations at 20 CFR 416.260 through 416.269 
contain requirements governing determinations of eligibility under this 
provision.) For purposes of this paragraph (c), this mandatory 
categorically needy group of individuals includes those qualified 
severely impaired individuals defined in section 1905(q) of the Act.

[55 FR 33705, Aug. 17, 1990]



Sec. 435.121  Individuals in States using more restrictive requirements for Medicaid than the SSI requirements.

    (a) Basic eligibility group requirements. (1) If the agency does not 
provide Medicaid under Sec. 435.120 to aged, blind, and disabled 
individuals who are SSI recipients, the agency must provide Medicaid to 
aged, blind, and disabled individuals who meet eligibility requirements 
that are specified in this section.
    (2) Except to the extent provided in paragraph (a)(3) of this 
section, the agency may elect to apply more restrictive eligibility 
requirements to the aged, blind, and disabled that are more restrictive 
than those of the SSI program. The more restrictive requirements may be 
no more restrictive than those requirements contained in the State's 
Medicaid plan in effect on January 1, 1972. If any of the State's 1972 
Medicaid plan requirements were more liberal than of the SSI program, 
the State must use the SSI requirement instead of the more liberal 
requirements, except to the extent the State elects to use more liberal 
criteria under Sec. 435.601.
    (3) The agency must not apply a more restrictive requirement under 
the provisions of paragraph (a)(2) of this section if:
    (i) The requirement conflicts with the requirements of section 1924 
of the Act, which governs the eligibility and post-eligibility treatment 
of income and resources of institutionalized individuals with community 
spouses;
    (ii) The requirement conflicts with a more liberal requirement which 
the agency has elected to use under Sec. 435.601; or
    (iii) The more restrictive requirement conflicts with a more liberal 
requirement the State has elected to use under Sec. 435.234(c) in 
determining eligibility for State supplementary payments.
    (b) Mandatory coverage. If the agency chooses to apply more 
restrictive requirements than SSI to aged, blind, or disabled 
individuals, it must provide Medicaid to:
    (1) Individuals who meet the requirements of section 1619(b)(3) of 
the Act even though they may not continue to meet the requirements of 
this section; and
    (2) Qualified Medicare beneficiaries described in section 1905(p) of 
the Act and qualified working disabled individuals described in section 
1905(s) of the Act without consideration of the more restrictive 
eligibility requirements specified in this section.
    (3) Individuals who:
    (i) Qualify for benefits under section 1619(a) or are in eligibility 
status under

[[Page 116]]

section 1619(b)(1) of the Act as determined by SSA; and
    (ii) Were eligible for Medicaid under the more restrictive criteria 
in the State's approved Medicaid plan in the reference month--the month 
immediately preceding the first month in which they became eligible 
under section 1619(a) or (b)(1) of the Act. ``Were eligible for 
Medicaid'' means that individuals were issued Medicaid cards by the 
State for the reference month. Under this provision, the reference month 
for determining Medicaid eligibility for all individuals under section 
1619 of the Act is the month immediately preceding the first month of 
the most recent period of eligibility under section 1619 of the Act.
    (c) Group composition. The agency may apply more restrictive 
requirements only to the aged, to the blind, to the disabled, or to any 
combination of these groups. For example, the agency may apply more 
restrictive requirements to the aged and disabled under this provision 
and provide Medicaid to all blind individuals who are SSI recipients.
    (d) Nonfinancial conditions. The agency may apply more restrictive 
requirements that are nonfinancial conditions of eligibility. For 
example, the agency may use a more restrictive definition of disability 
or may limit eligibility of the disabled to individuals age 18 and 
older, or both. If the agency limits eligibility of disabled individuals 
to individuals age 18 or older, it must provide Medicaid to individuals 
under age 18 who receive SSI benefits and who would be eligible to 
receive AFDC under the State's approved plan if they did not receive 
SSI. If the agency imposed an age limit for disabled individuals under 
its 1972 approved State plan but does not use that limit, it must apply 
the same nonfinancial requirement to individuals under age 18 that it 
applies to disabled individuals age 18 and older.
    (e) Financial conditions. (1) The agency may apply more restrictive 
requirements that are financial conditions of eligibility.
    (2) Any income eligibility standards that the agency applies must:
    (i) Equal the income standard (or Federal Benefit Rate (FBR)) that 
would be used under SSI based on an individual's living arrangement; or
    (ii) Be a more restrictive standard which is no more restrictive 
than that under the approved State's January 1, 1972 Medicaid plan.
    (3) If the categorically needy income standard established under 
paragraph (e)(2) of this section is less than the optional categorically 
needy standard established under Sec. 435.230, the agency must provide 
Medicaid to all aged, blind, and disabled individuals who have income 
equal to or below the higher standard.
    (4) In a State that does not have a medically needy program that 
covers aged, blind, and disabled individuals, the agency must allow 
individuals to deduct from income incurred medical and remedial expenses 
(that is, spend down) to become eligible under this section. However, 
individuals with income above the categorically needy standards may only 
spend down to the standard selected by the State under paragraph (e)(2) 
of this section which applies to the individual's living arrangement.
    (5) In a State that elects to provide medically needy coverage to 
aged, blind, and disabled individuals, the agency must allow individuals 
to deduct from income incurred medical and remedial care expenses (spend 
down) to become categorically needy when they are SSI recipients 
(including individuals deemed to be SSI recipients under Secs. 435.135, 
435.137, and 435.138), eligible spouses of SSI recipients, State 
supplement recipients, and individuals who are eligible for a supplement 
but who do not receive supplementary payments. Such persons may only 
spend down to the standard selected by the State under paragraph (e)(2) 
of this section. Individuals who are not SSI recipients, eligible 
spouses of SSI recipients, State supplement recipients, or individuals 
who are eligible for a supplement must spend down to the State's 
medically needy income standards for aged, blind, and disabled 
individuals in order to become Medicaid eligible.
    (f) Deductions from income. (1) In addition to any income disregards 
specified

[[Page 117]]

in the approved State plan in accordance with Sec. 435.601(b), the 
agency must deduct from income:
    (i) SSI payments;
    (ii) State supplementary payments that meet the conditions specified 
in Secs. 435.232 and 435.234; and
    (iii) Expenses incurred by the individual or financially responsible 
relatives for necessary medical and remedial services that are 
recognized under State law and are not subject to payment by a third 
party, unless the third party is a public program of a State or 
political subdivision of a State. These expenses include Medicare and 
other health insurance premiums, deductions and coinsurance charges, and 
copayments or deductibles imposed under Sec. 447.51 or Sec. 447.53 of 
this chapter. The agency may set reasonable limits on the amounts of 
incurred medical expenses that are deducted.
    (2) For purposes of counting income with respect to individuals who 
are receiving benefits under section 1619(a) f the Act or are in section 
1619(b)(1) of the Act status but who do not meet the requirements of 
paragraph (b)(3)(ii) of this section, the agency may disregard some or 
all of the amount of the individual's income that is in excess of the 
SSI Federal benefit rate under section 1611(b) of the Act.

[58 FR 4926, Jan. 19, 1993]



Sec. 435.122  Individuals who are ineligible for SSI or optional State supplements because of requirements that do not apply under title XIX of the Act.

    If an agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or optional State supplements, it must provide 
Medicaid to individuals who would be eligible for SSI or optional State 
supplements except for an eligibility requirement used in those programs 
that is specifically prohibited under title XIX.

[47 FR 43648, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]



Sec. 435.130  Individuals receiving mandatory State supplements.

    The agency must provide Medicaid to individuals receiving mandatory 
State supplements.



Sec. 435.131  Individuals eligible as essential spouses in December 1973.

    (a) The agency must provide Medicaid to any person who was eligible 
for Medicaid in December 1973 as an essential spouse of an aged, blind, 
or disabled individual who was receiving cash assistance, if the 
conditions in paragraph (b) of this section are met. An ``essential 
spouse'' is defined in section 1905(a) of the Act as one who is living 
with the individual; whose needs were included in determining the amount 
of cash payment to the individual under OAA, AB, APTD, or AABD; and who 
is determined essential to the individual's well-being.
    (b) The agency must continue Medicaid if--
    (1) The aged, blind, or disabled individual continues to meet the 
December 1973 eligibility requirements of the applicable State cash 
assistance plan; and
    (2) The essential spouse continues to meet the conditions that were 
in effect in December 1973 under the applicable cash assistance plan for 
having his needs included in computing the payment to the aged, blind, 
or disabled individual.



Sec. 435.132  Institutionalized individuals who were eligible in December 1973.

    The agency must provide Medicaid to individuals who were eligible 
for Medicaid in December 1973, or any part of that month, as inpatients 
of medical institutions or residents of intermediate care facilities 
that were participating in the Medicaid program and who--
    (a) For each consecutive month after December 1973--
    (1) Continue to meet the requirements for Medicaid eligibility that 
were in effect under the State's plan in December 1973 for 
institutionalized individuals; and
    (2) Remain institutionalized; and
    (b) Are determined by the State or a professional standards review 
organization to continue to need institutional care.



Sec. 435.133  Blind and disabled individuals eligible in December 1973.

    The agency must provide Medicaid to individuals who--

[[Page 118]]

    (a) Meet all current requirements for Medicaid eligibility except 
the criteria for blindness or disability;
    (b) Were eligible for Medicaid in December 1973 as blind or disabled 
individuals, whether or not they were receiving cash assistance in 
December 1973; and
    (c) For each consecutive month after December 1973, continue to meet 
the criteria for blindness or disability and the other conditions of 
eligibility used under the Medicaid plan in December 1973.



Sec. 435.134  Individuals who would be eligible except for the increase in OASDI benefits under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving OAA, AB, APTD, or AABD; or
    (2) He would have been eligible for one of those programs except 
that he had not applied, and the Medicaid plan covered this optional 
group; or
    (3) He would have been eligible for one of those programs if he were 
not in a medical institution or intermediate care facility, and the 
Medicaid plan covered this optional group.
    (b) The individual would currently be eligible for SSI or a State 
supplement except that the increase in OASDI under Pub. L. 92-336 raised 
his income over the limit allowed under SSI. This includes an individual 
who--
    (1) Meets all current SSI requirements except for the requirement to 
file an application; or
    (2) Would meet all current SSI requirements if he were not in a 
medical institution or intermediate care facility, and the State's 
Medicaid plan covers this optional group.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



Sec. 435.135  Individuals who become ineligible for cash assistance as a result of OASDI cost-of-living increases received after April 1977.

    (a) If an agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, it must provide Medicaid 
to individuals who--
    (1) Are receiving OASDI;
    (2) Were eligible for and receiving SSI or State supplements but 
became ineligible for those payments after April 1977; and
    (3) Would still be eligible for SSI or State supplements if the 
amount of OASDI cost-of-living increases paid under section 215(i) of 
the Act, after the last month after April 1977 for which those 
individuals were both eligible for and received SSI or a State 
supplement and were entitled to OASDI, were deducted from current OASDI 
benefits.
    (b) Cost-of-living increases include the increases received by the 
individual or his or her financially responsible spouse or other family 
member (e.g., a parent).
    (c) If the agency adopts more restrictive eligibility requirements 
than those under SSI, it must provide Medicaid to individuals specified 
in paragraph (a) of this section on the same basis as Medicaid is 
provided to individuals continuing to receive SSI or State supplements. 
If the individual incurs enough medical expenses to reduce his or her 
income to the financial eligibility standard for the categorically 
needy, the agency must cover that individual as categorically needy. In 
determining the amount of his or her income, the agency may deduct the 
cost-of-living increases paid under section 215(i) after the last month 
after April 1977 for which that individual was both eligible for and 
received SSI or a State supplement and was entitled to OASDI, up to the 
amount that made him or her ineligible for SSI.

[51 FR 12330, Apr. 10, 1986]



Sec. 435.136  State agency implementation requirements for one-time notice and annual review system.

    An agency must--
    (a) Provide a one-time notice of potential Medicaid eligibility 
under Sec. 435.135 to all individuals who meet the requirements of 
Sec. 435.135 (a) or (c) who were not receiving Medicaid as of March 9, 
1984; and
    (b) Establish an annual review system to identify individuals who 
meet the requirements of Sec. 435.135 (a) or (c)

[[Page 119]]

and who lose categorically needy eligibility for Medicaid because of a 
loss of SSI. States without medically needy programs must send notices 
of potential eligibility for Medicaid to these individuals for 3 
consecutive years following their identification through the annual 
review system.

[51 FR 12330, Apr. 10, 1986]



Sec. 435.137  Disabled widows and widowers who would be eligible for SSI except for the increase in disability benefits resulting from elimination of the 
          reduction factor under Pub. L. 98-21.

    (a) If the agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, the agency much provide 
Medicaid to disabled widows and widowers who--
    (1) Became ineligible for SSI or a mandatory or optional State 
supplement as a result of the elimination of the additional reduction 
factor for disabled widows and widowers under age 60 required by section 
134 of Pub. L. 98-21, and for purposes of title XIX, are deemed to be 
title XVI payment recipients under section 1634(b) of the Social 
Security Act; and
    (2) Meet the conditions of paragraphs (b) and (e) of this section.
    (b) The individuals must meet the following conditions:
    (1) They were entitled to monthly OASDI benefits under title II of 
the Act for December 1983:
    (2) They were entitled to and received widow's or widower's 
disability benefits under section 202(e) or (f) of the Act for January 
1984;
    (3) They became ineligible for SSI or a mandatory or optional State 
supplement in the first month in which the increase under Pub. L. 98-21 
was paid (and in which a retroactive payment for that increase for prior 
months was not made);
    (4) They have been continously entitled to widow's or widower's 
disability benefits under section 202(e) or (f) from the first month 
that the increase under Pub. L. 98-21 was received; and
    (5) They would be eligible for SSI benefits or a mandatory or 
optional State supplement if the amount of the increase under Pub. L. 
98-21 and subsequent cost-of-living adjustments in widow's or widower's 
benefits under section 215(i) of the Act were deducted from their 
income.
    (c) If the agency adopts more restrictive requirements than those 
under SSI, it must provide Medicaid to individuals specified in 
paragraph (a) of this section on the same basis as Medicaid is provided 
to individuals continuing to receive SSI or a mandatory or optional 
State supplement. The State must consider the individuals specified in 
paragraph (a) of this section to have no more income than the SSI 
Federal benefit rate if the individual was eligible for SSI in the month 
prior to the first month in which the increase under Public Law 98-21 
was paid (and in which retroactive payments for that increase for prior 
months was not being made), and the individual would be eligible for SSI 
except for the amount of the increase under Public Law 98-21 and 
subsequent cost-of-living adjustments in his or her widow's or widower's 
benefits under section 215(i) of the Act. The State must consider 
individuals who qualify under paragraph (a) of this section on the basis 
of loss of a mandatory or optional State supplementary payment, rather 
than the loss of SSI, to have no more income than the relevant SSP rate. 
If the State's income eligibility level is lower than the SSP or SSI 
Federal benefit rates, individuals qualifying under paragraph (a) of 
this section who are deemed to have income at either the SSP rate or the 
SSI Federal benefit rate may further reduce their countable income by 
incurring medical expenses in the amount by which their income exceeds 
the State's income eligibility standard. When the individual has reduced 
his or her income by this amount, he or she will be eligible for 
Medicaid as categorically needy.
    (d) The agency must notify each individual who may be eligible for 
Medicaid under this section of his or her potential eligibility, in 
accordance with instructions issued by the Secretary.
    (e)(1) Except as provided in paragraph (e)(2) of this section, the 
provisions of this section apply only to those individuals who filed a 
written application for Medicaid on or before June 30, 1988, to obtain 
protected Medicaid coverage.

[[Page 120]]

    (2) Individuals who may be eligible under this section residing in 
States that use a more restrictive income standard than that of the SSI 
program, under section 1902(f) of the Act, have up to six months after 
the State sends notice pursuant to the District Court's order in Darling 
v. Bowen (685 F. Supp. 1125 (W.D.Mo. 1988) to file a written application 
to obtain protected Medicaid coverage.

[55 FR 48607, Nov. 21, 1990]



Sec. 435.138  Disabled widows and widowers aged 60 through 64 who would be eligible for SSI except for early receipt of social security benefits.

    (a) If the agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, the agency must provide 
Medicaid to disabled widows and widowers who--
    (1) Are at least age 60;
    (2) Are not entitled to hospital insurance benefits under Medicare 
Part A; and
    (3) Become ineligible for SSI or a State supplement because of 
mandatory application (under section 1611(e)(2)) for and receipt of 
widow's or widower's social security disability benefits under section 
202(e) or (f) (or any other provision of section 202 if they are also 
eligible for benefits under subsections (e) or (f)) of the Act.
    For purposes of title XIX, individuals who meet these requirements 
are deemed to be title XVI payment recipients under section 1634(d) of 
the Act.
    (b) If the agency adopts more restrictive eligibility requirements 
than those under SSI, it must provide Medicaid to individuals specified 
in paragraph (a) of this section on the same basis as Medicaid is 
provided to individuals continuing to receive SSI or a mandatory or 
optional State supplement. If the individual incurs enough medical 
expenses to reduce his or her income to the financial eligibility 
standard for the categorically needy under the State's more restrictive 
eligibility criteria, the agency must cover the individual as 
categorically needy. In determining the amount of his or her income, the 
agency may deduct all, part, or none of the amount of the social 
security disability benefits that made him or her ineligible for SSI or 
a State supplement, up to the amount that made him or her ineligible for 
SSI.
    (c) Individuals who may be eligible under this section must file a 
written application for Medicaid. Medicaid coverage may begin no earlier 
than July 1, 1988.
    (d) The agency must determine whether individuals may be eligible 
for Medicaid under this section.

[55 FR 48608, Nov. 21, 1990]

                  Mandatory Coverage of Certain Aliens



Sec. 435.139  Coverage for certain aliens.

    The agency must provide services necessary for the treatment of an 
emergency medical condition, as defined in Sec. 440.255(c) of this 
chapter, to those aliens described in Sec. 435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]

   Mandatory Coverage of Adoption Assistance and Foster Care Children



Sec. 435.145  Children for whom adoption assistance or foster care maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28665, July 1, 1982. Redesignated at 55 FR 48607, Nov. 21, 1990. 
Redesignated at 58 FR 48614, Sept. 17, 1993]

                  Mandatory Coverage of Special Groups



Sec. 435.170  Pregnant women eligible for extended coverage.

    (a) The agency must provide categorically needy Medicaid eligibility 
for an extended period following termination of pregnancy to women who, 
while pregnant, applied for, were eligible for, and received Medicaid 
services on the day that their pregnancy ends. This period extends from 
the last day of pregnancy through the end of the month in which a 60-day 
period, beginning on the last day of the pregnancy, ends. Eligibility 
must be provided regardless of changes in the woman's financial 
circumstances that may occur

[[Page 121]]

within this extended period. These women are eligible for the extended 
period for all services under the plan that are pregnancy-related (as 
defined in Sec. 440.210(c)(1) of this subchapter).
    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48608, Nov. 21, 1990]



         Subpart C--Options for Coverage as Categorically Needy



Sec. 435.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec. 435.201  Individuals included in optional groups.

    (a) The agency may choose to cover as optional categorically needy 
any group or groups of the following individuals who are not receiving 
cash assistance and who meet the appropriate eligibility criteria for 
groups specified in the separate sections of this subpart:
    (1) Aged individuals (65 years of age of older);
    (2) Blind individuals (as defined in Sec. 435.530);
    (3) Disabled individuals (as defined in Sec. 435.541);
    (4) Individuals under age 21 (or, at State option, under age 20, 19, 
or 18) or reasonable classifications of these individuals;
    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent (or would, 
if needy, be dependent) as specified in Sec. 435.510; and
    (6) Pregnant women.
    (b) If the agency provides Medicaid to any individual in an optional 
group specified in paragraph (a) of this section, the agency must 
provide Medicaid to all individuals who apply and are found eligible to 
be members of that group.
    (c) States that elect to use more restrictive eligibility 
requirements for Medicaid than the SSI requirements for any group or 
groups of aged, blind, and disabled individuals under Sec. 435.121 must 
apply the specific requirements of Sec. 435.230 in establishing 
eligibility of these groups of individuals as optional categorically 
needy.

[58 FR 4927, Jan. 19, 1993]

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled



Sec. 435.210  Individuals who meet the income and resource requirements of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec. 435.201 (a)(1) through (a)(3) and (a)(5) 
and (a)(6) who are not mandatory categorically needy, who meet the 
income and resource requirements of the appropriate cash assistance 
program for their status (that is, the State's approved AFDC plan or 
SSI, or optional State supplements in States that provide Medicaid to 
optional State supplement recipients).

[58 FR 4927, Jan. 19, 1993]



Sec. 435.211  Individuals who would be eligible for cash assistance if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec. 435.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, AFDC or SSI, or optional State supplements in 
States that provide Medicaid to optional State supplement recipients) 
because of lower income standards used under the program to determine 
eligibility for institutionalized individuals; but
    (b) Would be eligible for aid or assistance under the State's 
approved AFDC plan, SSI, or an optional State supplement as specified in 
Secs. 435.232 and 435.234 if they were not institutionalized.

[58 FR 4927, Jan. 19, 1993]



Sec. 435.212  Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.

    The State agency may provide that a recipient who is enrolled in an 
MCO or PCCM and who becomes ineligible for Medicaid is considered to 
continue to be eligible--

[[Page 122]]

    (a) For a period specified by the agency, ending no later than 6 
months from the date of enrollment; and
    (b) Except for family planning services (which the recipient may 
obtain from any qualified provider) only for services furnished to him 
or her as an MCO enrollee.

[56 FR 8849, Mar. 1, 1991, as amended at 67 FR 41095, June 14, 2002]



Sec. 435.217  Individuals receiving home and community-based services.

    The agency may provide Medicaid to any group or groups of 
individuals in the community who meet the following requirements:
    (a) The group would be eligible for Medicaid if institutionalized.
    (b) In the absence of home and community-based services under a 
waiver granted under part 441--
    (1) Subpart G of this subchapter, the group would otherwise require 
the level of care furnished in a hospital, NF, or an ICF/MR; or
    (2) Subpart H of this subchapter, the group would otherwise require 
the level of care furnished in an NF and are age 65 or older.
    (c) The group receives the waivered services.

[57 FR 29155, June 30, 1992]

              Options for Coverage of Families and Children



Sec. 435.220  Individuals who would meet the income and resource requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec. 435.201 (a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's 
approved AFDC plan if their work-related child care costs were paid from 
their earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4927, Jan. 19, 1993]



Sec. 435.221  [Reserved]



Sec. 435.222  Individuals under age 21 who meet the income and resource requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or, 
at State option, under age 20, 19, or 18); or reasonable categories of 
these individuals as specified in paragraph (b) of this section, who are 
not receiving cash assistance under any program but who meet the income 
and resource requirements of the State's approved AFDC plan.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals of the same age placed in foster homes or private 
institutions by private nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (4) Individuals under age 21 receiving active treatment as 
inpatients in pyschiatric facilities or programs, if inpatient 
psychiatric services for individuals under 21 are provided under the 
plan.

[46 FR 47985, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
58 FR 4927, Jan. 19, 1993]



Sec. 435.223  Individuals who would be eligible for AFDC if coverage under the State's AFDC plan were as broad as allowed under title IV-A.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec. 435.210 (a)(4), (a)(5), and (a)(6) who:

[[Page 123]]

    (1) Would be eligible for AFDC if the State's AFDC plan included 
individuals whose coverage under title IV-A is optional (for example, 
Medicaid may be provided to members of families with an unemployed 
parent even though AFDC is not available to them under the State's AFDC 
plan); or
    (2) Would be eligible for AFDC if the State's AFDC plan did not 
contain eligibility requirements more restrictive than, or in addition 
to, those required under title IV-A.
    (b) The agency may cover any AFDC optional group without covering 
all such groups.

[46 FR 47985, Sept. 30, 1981, as amended at 58 FR 4927, Jan. 19, 1993]



Sec. 435.225  Individuals under age 19 who would be eligible for Medicaid if they were in a medical institution.

    (a) The agency may provide Medicaid to children 18 years of age or 
younger who qualify under section 1614(a) of the Act, who would be 
eligible for Medicaid if they were in a medical institution, and who are 
receiving, while living at home, medical care that would be provided in 
a medical institution.
    (b) If the agency elects the option provided by paragraph (a) of 
this section, it must determine, in each case, that the following 
conditions are met:
    (1) The child requires the level of care provided in a hospital, 
SNF, or ICF.
    (2) It is appropriate to provide that level of care outside such an 
institution.
    (3) The estimated Medicaid cost of care outside an institution is no 
higher than the estimated Medicaid cost of appropriate institutional 
care.
    (c) The agency must specify in its State plan the method by which it 
determines the cost-effectiveness of caring for disabled children at 
home.

[55 FR 48608, Nov. 21, 1990]



Sec. 435.227  Individuals under age 21 who are under State adoption assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and the adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance, has 
determined cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the title IV-E foster care program were used without 
employing the threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraphs (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid before the adoption assistance agreement was 
entered into.

[55 FR 48608, Nov. 21, 1990]



Sec. 435.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined in Sec. 435.4; or
    (b) Reasonable categories of these individuals.

[66 FR 2667, Jan. 11, 2001]

[[Page 124]]

          Options for Coverage of the Aged, Blind, and Disabled



Sec. 435.230  Aged, blind, and disabled individuals in States that use more restrictive requirements for Medicaid than SSI requirements: Optional coverage.

    (a) Basic optional coverage rule. If the agency elects the option 
under Sec. 435.121 to provide mandatory eligibility for aged, blind, and 
disabled SSI recipients using more restrictive requirements than those 
used under SSI, the agency may provide eligibility as optional 
categorically needy to additional individuals who meet the requirements 
of this section.
    (b) Group composition. Subject to the conditions specified in 
paragraphs (d) and (e) of this section, the agency may provide Medicaid 
to individuals who:
    (1) Meet the nonfinancial criteria that the State has elected to 
apply under Sec. 435.121;
    (2) Meet the resource requirements that the State has elected to 
apply under Sec. 435.121; and
    (3) Meet the income eligibility standards specified in paragraph (c) 
of this section.
    (c) Criteria for income standards. The agency may provide Medicaid 
to the following individuals who meet the requirements of paragraphs 
(b)(1) and (b)(2) of this section:
    (1) Individuals who are financially eligible for but not receiving 
SSI benefits and who, before deduction of incurred medical and remedial 
expenses, meet the State's more restrictive eligibility requirements 
described in Sec. 435.121;
    (2) Individuals who meet the income standards of the following 
eligibility groups:
    (i) Individuals who would be eligible for cash assistance except for 
institutional status described in Sec. 435.211;
    (ii) Individuals who are enrolled in an HMO or other entity and who 
are deemed to continue to be Medicaid eligible for a period specified by 
the agency up to 6 months from the date of enrollment and who became 
ineligible during the specified enrollment period, as described in 
Sec. 435.212;
    (iii) Individuals receiving home and community-based waiver services 
described in Sec. 435.217;
    (iv) Individuals receiving only optional State supplements described 
in Sec. 435.234;
    (v) Institutionalized individuals with income below a special income 
level described in Sec. 435.236;
    (vi) Aged and disabled individuals who have income below 100 percent 
of the Federal poverty level described in section 1905(m) of the Act.
    (3) Individuals who qualify for special status under Secs. 435.135 
and 435.138, and with respect to whom the State elects to disregard some 
or the maximum amount of title II payments permitted to be disregarded 
under those sections.
    (d) Use of more liberal methods. The agency may elect to apply more 
liberal methods of counting income and resources that are approved for 
this eligibility group under the provisions of Sec. 435.601.

[58 FR 4928, Jan. 19, 1993]



Sec. 435.232  Individuals receiving only optional State supplements.

    (a) If the agency provides Medicaid to individuals receiving SSI 
under Sec. 435.120, it may provide Medicaid, in one or more of the 
following classifications, to individuals who receive only an optional 
State supplement that meets the conditions specified in paragraph (b) of 
this section and who would be eligible for SSI except for the level of 
their income.
    (1) All aged individuals.
    (2) All blind individuals.
    (3) All disabled individuals.
    (4) Only aged individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (5) Only blind individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (6) Only disabled individuals in domiciliary facilities or other 
group living arrangements as defined under SSI.
    (7) Individuals receiving a federally administered optional State 
supplement that meets the conditions specified in this section.
    (8) Individuals in additional classifications specified by the 
Secretary for federally administered supplementary payments under 20 CFR 
416.2020(d).
    (9) Reasonable groups of individuals, as specified by the State, 
receiving

[[Page 125]]

State-administered supplementary payments.
    (b) Payments under the optional supplement program must be--
    (1) Based on need and paid in cash on a regular basis;
    (2) Equal to the difference between the individual's countable 
income and the income standard used to determine eligibility for 
supplement. Countable income is income remaining after deductions 
required under SSI or, at State option, more liberal deductions are made 
(see Sec. 435.1006 for limitations on FFP in Medicaid expenditures for 
individuals receiving optional State supplements); and
    (3) Available to all individuals in each classification in paragraph 
(a) of this section and available on a statewide basis. However, the 
plan may provide for variations in the income standard by political 
subdivision according to cost-of-living differences.

[43 FR 45204, Sept. 29, 1978. Redesignated and amended at 58 FR 4928, 
Jan. 19, 1993]



Sec. 435.234  Individuals receiving only optional State supplements in States using more restrictive eligibility requirements than SSI and certain States using 
          SSI criteria.

    (a) In States using more restrictive eligibility requirements than 
SSI or in States that use SSI criteria but do not have section 1616 or 
1634 agreements with the Social Security Administration for eligibility 
determinations, the agency may provide Medicaid to individuals specified 
in paragraph (b) of this section who receive only a State supplement if 
the State supplement meets the conditions specified in paragraph (c) of 
this section.
    (b) The agency may provide Medicaid to all individuals receiving 
only State supplements if, except for their income, the individuals meet 
the more restrictive eligibility requirements under Sec. 435.121 or SSI 
criteria, or to one or more of the following classifications of 
individuals who meet these criteria:
    (1) All aged individuals.
    (2) All blind individuals.
    (3) All disabled individuals.
    (4) Only aged individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (5) Only blind individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (6) Only disabled individuals in domiciliary facilities or other 
group living arrangements as defined under SSI.
    (7) Individuals receiving a Federally-administered optional State 
supplement that meets the conditions specified in this section.
    (8) Individuals in additional classifications specified by the 
Secretary.
    (9) Reasonable groups of individuals, as specified by the State, 
receiving State-administered supplementary payments.
    (c) Payments under the optional supplement program must be:
    (1) Based on need and paid in cash on a regular basis;
    (2) Equal to the difference between the individual's countable 
income and the income standard used to determine eligibility for 
supplements. Countable income is income remaining after deductions are 
applied. The income deductions may be more restrictive than required 
under SSI (see Sec. 435.1006 for limitations on FFP in Medicaid 
expenditures for individuals receiving optional State supplements); and
    (3) Available to all individuals in each classification in paragraph 
(b) of this section and available on a statewide basis. However, the 
plan may provide for variations in the income standard by political 
subdivision according to cost-of-living differences.

[58 FR 4928, Jan. 19, 1993]



Sec. 435.236  Individuals in institutions who are eligible under a special income level.

    (a) If the agency provides Medicaid under Sec. 435.211 to 
individuals in institutions who would be eligible for AFDC, SSI, or 
State supplements except for their institutional status, it may also 
cover aged, blind, and disabled individuals in institutions who--
    (1) Because of their income, would not be eligible for SSI or State 
supplements if they were not institutionalized; but
    (2) Have income below a level specified in the plan under 
Sec. 435.722. (See Sec. 435.1005 for limitations on FFP in Medicaid 
expenditures for individuals specified in this section.)

[[Page 126]]

    (b) The agency may cover individuals under this section whether or 
not the State pays optional supplements.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980. 
Redesignated at 58 FR 4928, Jan. 19, 1993]



           Subpart D--Optional Coverage of the Medically Needy



Sec. 435.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec. 435.301  General rules.

    (a) An agency may provide Medicaid to individuals specified in this 
subpart who:
    (1) Either:
    (i) Have income that meets the applicable standards in Secs. 435.811 
and 435.814; or
    (ii) If their income is more than allowed under the standard, have 
incurred medical expenses at least equal to the difference between their 
income and the applicable income standard; and
    (2) Have resources that meet the applicable standards in 
Secs. 435.840 and 435.843.
    (b) If the agency chooses this option, the following provisions 
apply:
    (1) The agency must provide Medicaid to the following individuals 
who meet the requirements of paragraph (a) of this section:
    (i) All pregnant women during the course of their pregnancy who, 
except for income and resources, would be eligible for Medicaid as 
mandatory or optional categorically needy under subparts B or C of this 
part;
    (ii) All individuals under 18 years of age who, except for income 
and resources, would be eligible for Medicaid as mandatory categorically 
needy under subpart B of this part;
    (iii) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and is receiving Medicaid on 
the date of the child's birth. The child is deemed to have applied and 
been found eligible for Medicaid on the date of birth and remains 
eligible as medically needy for one year so long as the woman remains 
eligible and the child is a member of the woman's household. If the 
woman's basis of eligibility changes to categorically needy, the child 
is eligible as categorically needy under Sec. 435.117. The woman is 
considered to remain eligible if she meets the spend-down requirements 
in any consecutive budget period following the birth of the child.
    (iv) Women who, while pregnant, applied for, were eligible for, and 
received Medicaid services as medically needy on the day that their 
pregnancy ends. The agency must provide medically needy eligibility to 
these women for an extended period following termination of pregnancy. 
This period extends from the last day of the pregnancy through the end 
of the month in which a 60-day period, beginning on the last day of 
pregnancy, ends. Eligibility must be provided, regardless of changes in 
the woman's financial circumstances that may occur within this extended 
period. These women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined in 
Sec. 440.210(c)(1) of this subchapter).
    (2) The agency may provide Medicaid to any of the following groups 
of individuals;
    (i) Individuals under age 21 (Sec. 435.308).
    (ii) Specified relatives (Sec. 435.310).
    (iii) Aged (Sec. 435.330.320 and 435.330).
    (iv) Blind (Secs. 435.322, 435.330 and 435.340).
    (v) Disabled (Secs. 435.324, 435.330, and 435.340).
    (3) If the agency provides Medicaid to any individual in a group 
specified in paragraph (b)(2) of this section, the agency must provide 
Medicaid to all individuals eligible to be members of that group.

[46 FR 47986, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 
52 FR 48438, Dec. 22, 1987; 55 FR 48609, Nov. 21, 1990; 58 FR 4929, Jan. 
19, 1993]



Sec. 435.308  Medically needy coverage of individuals under age 21.

    (a) If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals under age 21 (or, at State option, under 
age 20, 19, or 18), as specified in paragraph (b) of this section:
    (1) Who would not be covered under the mandatory medically needy 
group

[[Page 127]]

of individuals under 18 under Sec. 435.301(b)(1)(ii); and
    (2) Who meet the income and resource requirements of subpart I of 
this part.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals placed in foster homes or private institutions by private 
nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. When the agency covers such individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47986, Sept. 30, 1981, as amended at 58 FR 4929, Jan. 19, 1993]



Sec. 435.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, as defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified in Sec. 435.510.

[58 FR 4929, Jan. 19, 1993]



Sec. 435.320  Medically needy coverage of the aged in States that cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to 
individuals who--
    (a) Are 65 years of age and older, as specified in Sec. 435.520; and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47986, Sept. 30, 1981]



Sec. 435.322  Medically needy coverage of the blind in States that cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to blind 
individuals who meet--
    (a) The requirements for blindness, as specified in Secs. 435.530 
and 435.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47986, Sept. 30, 1981]



Sec. 435.324  Medically needy coverage of the disabled in States that cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to disabled 
individuals who meet--
    (a) The requirements for disability, as specified in Secs. 435.540 
and 435.541; and
    (b) The income and resource requirements of Subpart I of this part.

[46 FR 47986, Sept. 30, 1981; 46 FR 54743, Nov. 11, 1981]



Sec. 435.326  Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.

    If the agency provides Medicaid to the categorically needy under 
Sec. 435.212, it may provide it under the same rules to medically needy 
recipients who are enrolled in MCOs or PCCMs.

[67 FR 41095, June 14, 2002]

[[Page 128]]



Sec. 435.330  Medically needy coverage of the aged, blind, and disabled in States using more restrictive eligibility requirements for Medicaid than those used 
          under SSI.

    (a) If an agency provides Medicaid as categorically needy only to 
those aged, blind, or disabled individuals who meet more restrictive 
requirements than used under SSI and elects to cover the medically 
needy, it may provide Medicaid as medically needy to those aged, blind, 
or disabled individuals who:
    (1) Do not qualify for Medicaid as categorically needy under 
Sec. 435.121 or Sec. 435.230; and
    (2) If applying as blind or disabled, meet the definition of 
blindness or disability established under Sec. 435.121.
    (b) Except as specified in paragraph (c) of this section, the agency 
must apply to individuals covered under the option of this section the 
same financial and nonfinancial requirements that are applied to 
individuals covered as categorically needy under Secs. 435.121 and 
435.230.
    (c) In determining the financial eligibility of individuals who are 
considered as medically needy under this section, the agency must apply 
the financial eligibility requirements of subparts G and I of this part.

[58 FR 4929, Jan. 19, 1993]



Sec. 435.340  Protected medically needy coverage for blind and disabled individuals eligible in December 1973.

    If an agency provides Medicaid to the medically needy, it must cover 
individuals who--
    (a) Where eligible as medically needy under the Medicaid plan in 
December 1973 on the basis of the blindness or disability criteria of 
the AB, APTD, or AABD plan;
    (b) For each consecutive month after December 1973, continue to 
meet--
    (1) Those blindness or disability criteria; and
    (2) The eligibility requirements for the medically needy under the 
December 1973 Medicaid plan; and
    (c) Meet the current requirements for eligibility as medically needy 
under the Medicaid plan except for blindness or disability criteria.

[46 FR 47987, Sept. 30, 1981]



Sec. 435.350  Coverage for certain aliens.

    If an agency provides Medicaid to the medically needy, it must 
provide the services necessary for the treatment of an emergency medical 
condition, as defined in Sec. 440.255(c) of this chapter, to those 
aliens described in Sec. 435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]



               Subpart E--General Eligibility Requirements



Sec. 435.400  Scope.

    This subpart prescribes general requirements for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part.



Sec. 435.401  General rules.

    (a) A Medicaid agency may not impose any eligibility requirement 
that is prohibited under Title XIX of the Act.
    (b) The agency must base any optional group covered under subparts B 
and C of this part on reasonable classifications that do not result in 
arbitrary or inequitable treatment of individuals and groups and that 
are consistent with the objectives of Title XIX.
    (c) The agency must not use requirements for determining eligibility 
for optional coverage groups that are--
    (1) For families and children, more restrictive than those used 
under the State's AFDC plan; and
    (2) For aged, blind, and disabled individuals, more restrictive than 
those used under SSI, except for individuals receiving an optional State 
supplement as specified in Sec. 435.230 or individuals in categories 
specified by the agency under Sec. 435.121.



Sec. 435.402  [Reserved]



Sec. 435.403  State residence.

    (a) Requirement. The agency must provide Medicaid to eligible 
residents of the State, including residents who are absent from the 
State. The conditions under which payment for services is provided to 
out-of-State residents are set forth in Sec. 431.52 of this chapter.

[[Page 129]]

    (b) Definition. For purposes of this section--Institution has the 
same meaning as Institution and Medical institution, as defined in 
Sec. 435.1009 of this chapter. For purposes of State placement, the term 
also includes foster care homes, licensed as set forth in 45 CFR 
1355.20, and providing food, shelter and supportive services to one or 
more persons unrelated to the proprietor.
    (c) Incapability of indicating intent. For purposes of this section, 
an individual is considered incapable of indicating intent if the 
individual--
    (1) Has an I.Q. of 49 or less or has a mental age of 7 or less, 
based on tests acceptable to the mental retardation agency in the State:
    (2) Is judged legally incompetent; or
    (3) Is found incapable of indicating intent based on medical 
documentation obtained from a physician, psychologist, or other person 
licensed by the State in the field of mental retardation.
    (d) Who is a State resident. A resident of a State is any individual 
who:
    (1) Meets the conditions in paragraphs (e) through (i) of this 
section; or
    (2) Meets the criteria specified in an interstate agreement under 
paragraph (k) of this section.
    (e) Placement by a State in an out-of-State institution--(1) General 
rule. Any agency of the State, including an entity recognized under 
State law as being under contract with the State for such purposes, that 
arranges for an individual to be placed in an institution located in 
another State, is recognized as acting on behalf of the State in making 
a placement. The State arranging or actually making the placement is 
considered as the individual's State of residence.
    (2) Any action beyond providing information to the individual and 
the individual's family would constitute arranging or making a State 
placement. However, the following actions do not constitute State 
placement:
    (i) Providing basic information to individuals about another State's 
Medicaid program, and information about the availability of health care 
services and facilities in another State.
    (ii) Assisting an individual in locating an institution in another 
State, provided the individual is capable of indicating intent and 
independently decides to move.
    (3) When a competent individual leaves the facility in which the 
individual is placed by a State, that individual's State of residence 
for Medicaid purposes is the State where the individual is physically 
located.
    (4) Where a placement is initiated by a State because the State 
lacks a sufficient number of appropriate facilities to provide services 
to its residents, the State making the placement is the individual's 
State of residence for Medicaid purposes.
    (f) Individuals receiving a State supplementary payment (SSP). For 
individuals of any age who are receiving an SSP, the State of residence 
is the State paying the SSP.
    (g) Individuals receiving Title IV-E payments. For individuals of 
any age who are receiving Federal payments for foster care and adoption 
assistance under title IV-E of the Social Security Act, the State of 
residence is the State where the child lives.
    (h) Individuals under Age 21. (1) For any individual who is 
emancipated from his or her parents or who is married and capable of 
indicating intent, the State of residence is the State where the 
individual is living with the intention to remain there permanently or 
for an indefinite period.
    (2) For any individual not residing in an institution as defined in 
paragraph (b) whose Medicaid eligibility is based on blindness or 
disability, the State of residence is the State in which the individual 
is living.
    (3) For any other non-institutionalized individual not subject to 
paragraph (h)(1) or (h)(2) of this section, the State of residence is 
determined in accordance with 45 CFR 233.40, the rules governing 
residence under the AFDC program.
    (4) For any institutionalized individual who is neither married nor 
emancipated, the State of residence is--
    (i) The parent's or legal guardian's State of residence at the time 
of placement (if a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the parent's); or

[[Page 130]]

    (ii) The current State of residence of the parent or legal guardian 
who files the application if the individual is institutionalized in that 
State (if a legal guardian has been appointed and parental rights are 
terminated, the State or residence of the guardian is used instead of 
the parent's).
    (iii) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (i) Individuals Age 21 and over. (1) For any individual not residing 
in an institution as defined in paragraph (b), the State of residence is 
the State where the individual is--
    (i) Living with the intention to remain there permanently or for an 
indefinite period (or if incapable of stating intent, where the 
individual is living); or
    (ii) Living and which the individual entered with a job commitment 
or seeking employment (whether or not currently employed).
    (2) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--
    (i) That of the parent applying for Medicaid on the individual's 
behalf, if the parents reside in separate States (if a legal guardian 
has been appointed and parental rights are terminated, the State of 
residence of the guardian is used instead of the parent's);
    (ii) The parent's or legal guardian's State of residence at the time 
of placement (if a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the parent's); or
    (iii) The current State of residence of the parent or legal guardian 
who files the application if the individual is institutionalized in that 
State (if a legal guardian has been appointed and parental rights are 
terminated, the State of residence of the guardian is used instead of 
the parent's).
    (iv) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (3) For any institutionalized individual who became incapable of 
indicating intent at or after age 21, the State of residence is the 
State in which the individual is physically present, except where 
another State makes a placement.
    (4) For any other institutionalized individual, the State of 
residence is the State where the individual is living with the intention 
to remain there permanently or for an indefinite period.
    (j) Specific prohibitions. (1) The agency may not deny Medicaid 
eligibility because an individual has not resided in the State for a 
specified period.
    (2) The agency may not deny Medicaid eligibility to an individual in 
an institution, who satisfies the residency rules set forth in this 
section, on the grounds that the individual did not establish residence 
in the State before entering the institution.
    (3) The agency may not deny or terminate a resident's Medicaid 
eligibility because of that person's temporary absence from the State if 
the person intends to return when the purpose of the absence has been 
accomplished, unless another State has determined that the person is a 
resident there for purposes of Medicaid.
    (k) Interstate agreements. A State may have a written agreement with 
another State setting forth rules and procedures resolving cases of 
disputed residency. These agreements may establish criteria other than 
those specified in paragraphs (c) through (i) of this section, but must 
not include criteria that result in loss of residency in both States or 
that are prohibited by paragraph (j) of this section. The agreements 
must contain a procedure for providing Medicaid to individuals pending 
resolution of the case. States may use interstate agreeements for 
purposes other than cases of disputed residency to facilitate 
administration of the program, and to facilitate the placement and 
adoption of title IV-E individuals when the child and his or her 
adoptive parent(s) move into another State.
    (l) Continued Medicaid for institutionalized recipients. If an 
agency is providing Medicaid to an institutionalized

[[Page 131]]

recipient who, as a result of this section, would be considered a 
resident of a different State--
    (1) The agency must continue to provide Medicaid to that recipient 
from June 24, 1983 until July 5, 1984, unless it makes arrangements with 
another State of residence to provide Medicaid at an earlier date: and
    (2) Those arrangements must not include provisions prohibited by 
paragraph (h) of this section.
    (m) Cases of disputed residency. Where two or more States cannot 
resolve which State is the State of residence, the State where the 
individual is physically located is the State of residence.

[49 FR 13531, Apr. 5, 1984, as amended at 55 FR 48609, Nov. 21, 1990]



Sec. 435.404  Applicant's choice of category.

    The agency must allow an individual who would be eligible under more 
than one category to have his eligibility determined for the category he 
selects.



Sec. 435.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--
    (1) Citizens; or
    (2) Aliens lawfully admitted for permanent residence or permanently 
residing in the United States under color of law as defined in 
Sec. 435.408 of this part;
    (3) Aliens granted lawful temporary resident status under sections 
245A and 210A of the Immigration and Nationality Act if the individual 
is aged, blind, or disabled as defined in section 1614(a)(1) of the Act, 
under 18 years of age, or a Cuban/Haitian entrant as defined in section 
501(e)(1) and (2)(A) of Public Law 96-422; or
    (4) Aliens granted lawful temporary resident status under section 
210 of the Immigration and Nationality Act unless the alien would, but 
for the 5-year bar to receipt of AFDC contained in such section, be 
eligible for AFDC.
    (b) The agency must only provide emergency services (as defined for 
purposes of section 1916(a)(2)(D) of the Social Security Act), and 
services for pregnant women as defined in section 1916(a)(2)(B) of the 
Social Security Act to otherwise eligible residents of the United States 
not described in paragraph (a)(3) and (a)(4) of this section who have 
been granted lawful temporary or lawful permanent resident status under 
sections 245A, 210 or 210A of the Immigration and Nationality Act for 
five years from the date lawful temporary resident status was granted.
    (c) The agency must provide payment for the services described in 
Sec. 440.255(c) of this chapter to residents of the State who otherwise 
meet the eligibility requirements of the State plan (except for receipt 
of AFDC, SSI, or State Supplementary payments and the presentation of a 
social security number) but who do not meet the requirements of 
paragraphs (a) and (b) of this section.
    (d) The limitations on eligibility set forth in paragraph (b) of 
this section do not apply after 5 years from the date an alien was 
granted lawful temporary resident status under sections 245A, 210 and 
210A of the INA.

[55 FR 36819, Sept. 7, 1990, as amended at 56 FR 10807, Mar. 14, 1991]



Sec. 435.408  Categories of aliens who are permanently residing in the United States under color of law.

    This section describes aliens that the agency must accept as 
permanently residing in the United States under color of law and who may 
be eligible for Medicaid.
    (a) An individual may be eligible for Medicaid if the individual is 
an alien residing in the United States with the knowledge and permission 
of the Immigration and Naturalization Services (INS) and the INS does 
not contemplate enforcing the alien's departure. The INS does not 
contemplate enforcing an alien's departure if it is the policy or 
practice of INS not to enforce the departure of aliens in the same 
category, or if from all the facts and circumstances in a particular 
case it appears that INS is otherwise permitting the alien to reside in 
the United States indefinitely, as determined by verifying the alien's 
status with INS.
    (b) Aliens who are permanently residing in the United States under 
color of law are listed below. None of the categories includes 
applicants for an Immigration and Naturalization Service status other 
than those applicants listed in paragraph (b)(6) of this section or

[[Page 132]]

those covered under paragraph (b)(16) of this section. None of the 
categories allows Medicaid eligibility for nonimmigrants: for example, 
students or visitors. Also listed are the most commonly used documents 
that the INS provides to aliens in these categories.
    (1) Aliens admitted to the United States pursuant to 8 U.S.C. 
1153(a)(7), (section 203(a)(7) of the Immigration and Nationality Act). 
Ask for a copy of INS Form I-94 endorsed ``Refugee-Conditional Entry'';
    (2) Aliens, including Cuban/Haitian entrants, paroled in the United 
States pursuant to 8 U.S.C. 1182(d)(5) (section 212(d)(5) of the 
Immigration and Nationality Act). Ask for a copy of INS Form I-94 with 
notation that the alien was paroled pursuant to section 212(d)(5) of the 
Immigration and Nationality Act. For Cuban/Haitian entrants, ask for a 
copy of INS Form I-94 stamped Cuban/Haitian entrant (Status Pending) 
reviewable January 15, 1981. (Although the forms bear this notation. 
Cuban/Haitian entrants are admitted under section 212(d)(5) of the 
Immigration and Nationality Act);
    (3) Aliens residing in the United States pursuant to an indefinite 
stay of deportation. Ask for an Immigration and Naturalization Service 
letter with this information or INS Form I-94 with such a notation;
    (4) Aliens residing in the United States pursuant to an indefinite 
voluntary departure. Ask for an Immigration and Naturalization Service 
letter or INS Form I-94 showing that voluntary departure has been 
granted for an indefinite time period;
    (5) Aliens on whose behalf an immediate relative petition has been 
approved and their families covered by the petition who are entitled to 
voluntary departure (under 8 CFR 242.5(a)(2)(vi)) and whose departure 
the Immigration and Naturalization Service does not contemplate 
enforcing. Ask for a copy of INS Form I-94 or Form I-210 or a letter 
showing that status;
    (6) Aliens who have filed applications for adjustment of status 
pursuant to section 245 of the Immigration and Nationality Act (8 U.S.C. 
1255) that the Immigration and Naturalization Service has accepted as 
``properly filed'' (within the meaning of 8 CFR 245.2(a) (1) or (2)) and 
whose departure the Immigration and Naturalization service does not 
contemplate enforcing. Ask for a copy of INS Form I-94 or I-181 or a 
passport appropriately stamped;
    (7) Aliens granted stays of deportation by court order, statute or 
regulation, or by individual determination of the Immigration and 
Naturalization Service pursuant to section 106 of the Immigration and 
Nationality Act (8 U.S.C. 1105a) or relevant Immigration and 
Naturalization Service instructions, whose departure that agency does 
not contemplate enforcing. Ask for a copy of INS Form I-94 or a letter 
from the Immigration and Naturalization Service, or a copy of a court 
order establishing the alien's status;
    (8) Aliens granted asylum pursuant to section 208 of the Immigration 
and Nationality Act (8 U.S.C. 1158). Ask for a copy of INS Form I-94 and 
a letter establishing this status;
    (9) Aliens admitted as refugees pursuant to section 207 of the 
Immigration and Nationality Act (8 U.S.C. 1157) or section 203(a)(7) of 
the Immigration and Nationality Act (8 U.S.C. 1153(a)(7)). Ask for a 
copy of INS Form I-94 properly endorsed;
    (10) Aliens granted voluntary departure pursuant to section 242(b) 
of the Immigration and Nationality Act (8 U.S.C. 1252(b)) or 8 CFR 242.5 
whose departure the Immigration and Nationality Service does not 
contemplate enforcing. Ask for a Form I-94 or Form I-210 bearing a 
departure date;
    (11) Aliens granted deferred action status pursuant to Immigration 
and Naturalization Service Operations Instruction 103.1(a)(ii) prior to 
June 15, 1984 or Sec. 242.1(a)(22) issued June 15, 1984 and later. Ask 
for a copy of INS Form I-210 or a letter showing that departure has been 
deferred;
    (12) Aliens residing in the United States under orders of 
supervision pursuant to section 242 of the Immigration and Nationality 
Act (8 U.S.C. 1252(d)). Ask for a copy of Form I-220 B;
    (13) Aliens who have entered and continuously resided in the United 
States since before January 1, 1972 (or any date established by section 
249 of the Immigration and Nationality Act, 8

[[Page 133]]

U.S.C. 1259). Ask for any proof establishing this entry and continuous 
residence;
    (14) Aliens granted suspension of deportation pursuant to section 
244 of the Immigration and Naturalization Act (8 U.S.C. 1254) and whose 
departure the Immigration and Naturalization Service does not 
contemplate enforcing. Ask for an order from an immigration judge 
showing that deportation has been withheld;
    (15) Aliens whose deportation has been withheld pursuant to section 
243(h) of the Immigration and Nationality Act (8 U.S.C. 1253(h)). Ask 
for an order from an immigration judge showing that deportation has been 
withheld; or
    (16) Any other aliens living in the United States with the knowledge 
and permission of the Immigration and Naturalization Service and whose 
departure that agency does not contemplate enforcing. (Including 
permanent non-immigrants as established by Public Law 99-239, and 
persons granted Extended Voluntary Departure due to conditions in the 
alien's home country based on a determination by the Secretary of 
State).

[55 FR 36819, Sept. 7, 1990, as amended at 56 FR 10807, Mar. 14, 1991; 
58 FR 4907, Jan. 19, 1993]



           Subpart F--Categorical Requirements for Eligibility



Sec. 435.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part.

                               Dependency



Sec. 435.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures set forth under the 
State's AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4929, Jan. 19, 1993]

                                   Age



Sec. 435.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4929, Jan. 19, 1993]



Sec. 435.522  Determination of age.

    (a) Except as specified in paragraphs (b) and (c) of this section, 
in determining age, the agency must use the common-law method (under 
which an age reached the day before the anniversary of birth).
    (b) For families and children, the agency must use the popular usage 
method (under which an age is reached on the anniversary of birth), if 
this method is used under the State's AFDC plan.
    (c) For aged, blind, or disabled individuals, the agency must use 
the popular usage method, if the plan provides under Sec. 435.121, 
Sec. 435.230, or Sec. 435.330, for coverage of aged, blind, or disabled 
individuals who meet more restrictive eligibility requirements than 
those under SSI.
    (d) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4929, Jan. 19, 1993]

                                Blindness



Sec. 435.530  Definition of blindness.

    (a) Definition. The agency must use the same definition of blindness 
as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Secs. 435.130 through 435.134, the agency 
must use the definition of blindness that was used under the Medicaid 
plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility under Sec. 435.121, if the definition is no more restrictive 
than that used

[[Page 134]]

under the Medicaid plan on January 1, 1972.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec. 435.531  Determinations of blindness.

    (a) Except as specified in paragraph (b) of this section, in 
determining blindness--
    (1) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine him, unless 
both of the applicant's eyes are missing;
    (2) The examiner must submit a report of examination to the Medicaid 
agency; and
    (3) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (i) Whether the individual meets the definition of blindness; and
    (ii) Whether and when re-examinations are necessary for periodic 
redeterminations of eligibility, as required under Sec. 435.916 of this 
part.
    (b) If an agency provides Medicaid to individuals receiving SSI on 
the basis of blindness, this section does not apply for those 
individuals.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979]

                               Disability



Sec. 435.540  Definition of disability.

    (a) Definition. The agency must use the same definition of 
disability as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Secs. 435.130 through 435.134, the agency 
must use the definition of disability that was used under the Medicaid 
plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility under Sec. 435.121, if the definition is no more restrictive 
than that used under the Medicaid plan on January 1, 1972.
    (b) State plan requirements. The State plan must contain the 
definition of disability.



Sec. 435.541  Determinations of disability.

    (a) Determinations made by SSA. The following rules and those under 
paragraph (b) of this section apply where an individual has applied for 
Medicaid on the basis of disability.
    (1) If the agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act, the agency may not 
make a determination of disability when the only application is filed 
with SSA.
    (2) The agency may not make an independent determination of 
disability if SSA has made a disability determination within the time 
limits set forth in Sec. 435.911 on the same issues presented in the 
Medicaid application. A determination of eligibility for SSI payments 
based on disability that is made by SSA automatically confers Medicaid 
eligibility, as provided for under Sec. 435.909.
    (b) Effect of SSA determinations. (1) Except in the circumstances 
specified in paragraph (c)(3) of this section--
    (i) An SSA disability determination is binding on an agency until 
the determination is changed by SSA.
    (ii) If the SSA determination is changed, the new determination is 
also binding on the agency.
    (2) The agency must refer to SSA all applicants who allege new 
information or evidence affecting previous SSA determinations of 
ineligibility based upon disability for reconsideration or reopening of 
the determination, except in cases specified in paragraph (c)(4) of this 
section.
    (c) Determinations made by the Medicaid agency. The agency must make 
a determination of disability in accordance with the requirements of 
this section if any of the following circumstances exist:
    (1) The individual applies for Medicaid as a non-cash recipient and 
has not applied to SSA for SSI cash benefits, whether or not a State has 
a section 1634 agreement with SSA; or an individual applies for Medicaid 
and has applied to SSA for SSI benefits and is found ineligible for SSI 
for a reason other than disability.
    (2) The individual applies both to SSA for SSI and to the State 
Medicaid agency for Medicaid, the State agency has a section 1634 
agreement with SSA,

[[Page 135]]

and SSA has not made an SSI disability determination within 90 days from 
the date of the individual's application for Medicaid.
    (3) The individual applies to SSA for SSI and to the State Medicaid 
agency for Medicaid, the State does not have a section 1634 agreement 
with SSA, and either the State uses more restrictive criteria than SSI 
for determining Medicaid eligibility under its section 1902(f) option 
or, in the case of a State that uses SSI criteria, SSA has not made an 
SSI disability determination in time for the State to comply with the 
Medicaid time limit for making a prompt determination on an individual's 
application for Medicaid.
    (4) The individual applies for Medicaid as a non-cash recipient, 
whether or not the State has a section 1634 agreement with SSA, and--
    (i) Alleges a disabling condition different from, or in addition to, 
that considered by SSA in making its determination; or
    (ii) Alleges more than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination and alleges a new period of 
disability which meets the durational requirements of the Act, and has 
not applied to SSA for a determination with respect to these 
allegations.
    (iii) Alleges less than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination, alleges a new period of 
disability which meets the durational requirements of the Act, and--
    (A) Has applied to SSA for reconsideration or reopening of its 
disability decision and SSA refused to consider the new allegations; 
and/or
    (B) He or she no longer meets the nondisability requirements for SSI 
but may meet the State's nondisability requirements for Medicaid 
eligibility.
    (d) Basis for determinations. The agency must make a determination 
of disability as provided in paragraph (c) of this section--
    (1) On the basis of the evidence required under paragraph (e) of 
this section; and
    (2) In accordance with the requirements for evaluating that evidence 
under the SSI program specified in 20 CFR 416.901 through 416.998.
    (e) Medical and nonmedical evidence. The agency must obtain a 
medical report and other nonmedical evidence for individuals applying 
for Medicaid on the basis of disability. The medical report and 
nonmedical evidence must include diagnosis and other information in 
accordance with the requirements for evidence applicable to disability 
determinations under the SSI program specified in 20 CFR part 416, 
subpart I.
    (f) Disability review teams--(1) Function. A review team must review 
the medical report and other evidence required under paragraph (e) of 
this section and determine on behalf of the agency whether the 
individual's condition meets the definition of disability.
    (2) Composition. The review team must be composed of a medical or 
psychological consultant and another individual who is qualified to 
interpret and evaluate medical reports and other evidence relating to 
the individual's physical or mental impairments and, as necessary, to 
determine the capacities of the individual to perform substantial 
gainful activity, as specified in 20 CFR part 416, subpart J.
    (3) Periodic reexaminations. The review team must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required under Sec. 435.916 of this part, using the 
principles set forth in 20 CFR 416.989 and 416.990. If a State uses the 
same definition of disability as SSA, as provided for under 
Sec. 435.540, and a recipient is Medicaid eligible because he or she 
receives SSI, this paragraph (f)(3) does not apply. The reexamination 
will be conducted by SSA.

[54 FR 50761, Dec. 11, 1989]



    Subpart G--General Financial Eligibility Requirements and Options



Sec. 435.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically and medically needy individuals 
specified in

[[Page 136]]

subparts B, C, and D of this part. Subparts H and I of this part 
prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec. 435.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the AFDC, SSI, or State supplement programs, or, for aged, blind, and 
disabled individuals in States that use more restrictive criteria than 
SSI, the methodologies established in accordance with the requirements 
of Secs. 435.121 and 435.230.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section or in Sec. 435.121 
in determining financial eligibility of individuals as categorically and 
medically needy, the agency must apply the financial methodologies and 
requirements of the cash assistance program that is most closely 
categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec. 435.602.
    (d) Use of less restrictive methodologies than those under cash 
assistance programs. (1) At State option, and subject to the conditions 
of paragraphs (d)(2) through (d)(5) of this section, the agency may 
apply income and resource methodologies that are less restrictive than 
the cash assistance methodologies in determining eligibility of the 
following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group under Sec. 435.116;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i)(IV), 1902(a)(10)(A)(i)(VI), and 
1902(a)(10)(A)(i)(VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act;
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act; 
and
    (vi) Aged, blind, and disabled individuals in States using more 
restrictive eligibility requirements than SSI under groups established 
under Secs. 435.121 and 435.230.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals described in paragraph (d)(1) of this 
section may be less restrictive, but no more restrictive (except in 
States using more restrictive requirements than SSI), than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind, or disabled, or AFDC related) within an eligibility group. For 
example, if the agency chooses to apply less restrictive income or 
resource methodology to an eligibility group of aged individuals, it 
must apply that methodology to all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded in Sec. 435.602, in determining financial 
eligibility of individuals, the agency will apply the cash assistance 
financial methodologies and requirements, unless the agency chooses to 
apply less restrictive income and resource methodologies in accordance 
with paragraph (d) of this section.

[[Page 137]]

    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will be used; and
    (ii) The eligibility group or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec. 435.602  Financial responsibility of relatives and other individuals.

    (a) Basic requirements. Subject to the provisions of paragraphs (b) 
and (c) of this section, in determining financial responsibility of 
relatives and other persons for individuals under Medicaid, the agency 
must apply the following requirements and methodologies:
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under age 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies that apply include considering the income and resources of 
parents or spouses whose income and resources would be considered if the 
individual under age 21 were dependent under the State's approved AFDC 
plan, whether or not they are actually contributed, except as specified 
under paragraphs (c) and (d) of this section. These requirements and 
methodologies must be applied in accordance with the provisions of the 
State's approved AFDC plan.
    (3) When a couple ceases to live together, the agency must count 
only the income of the individual spouse in determining his or her 
eligibility, beginning the first month following the month the couple 
ceases to live together.
    (4) In the case of eligible institutionalized spouses who are aged, 
blind, and disabled and who have shared the same room in a title XIX 
Medicaid institution, the agency has the option of considering these 
couples as eligible couples for purposes of counting income and 
resources or as eligible individuals, whichever is more advantageous to 
the couple.
    (b) Requirements for States using more restrictive requirements. 
Subject to the provisions of paragraph (c) of this section, in 
determining financial eligibility of aged, blind, or disabled 
individuals in States that apply eligibility requirements more 
restrictive than those used under SSI, the agency must apply:
    (1) The requirements and methodologies for financial responsibility 
of relatives used under the SSI program; or
    (2) More extensive requirements for relative responsibility than 
specified in Sec. 435.602(a) but no more extensive than the requirements 
under the Medicaid plan in effect on January 1, 1972.
    (c) Use of less restrictive methodologies. The agency may apply 
income and resources methodologies that are less restrictive than those 
used under the cash assistance programs as specified in the State 
Medicaid plan in accordance with Sec. 435.601(d).
    (d) [Reserved]

[58 FR 4930, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec. 435.604  [Reserved]



Sec. 435.606  [Reserved]



Sec. 435.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and recipients to take all necessary steps to obtain any 
annuities, pensions, retirement, and disability benefits to which they 
are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, retirement and disability benefits include, 
but are not limited to, veterans' compensation and pensions, OASDI 
benefits, railroad retirement benefits, and unemployment compensation.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4931, Jan. 19, 1993]



Sec. 435.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and recipients to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;

[[Page 138]]

    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902 (1)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and
    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for the 
assignment of rights to medical support and other payments and 
cooperation in obtaining medical support and payments are effective for 
medical assistance furnished on or after October 1, 1984. The 
requirement for cooperation in identifying and providing information for 
pursuing liable third parties is effective for medical assistance 
furnished on or after July 1, 1988.

[55 FR 48609, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993. 
Redesignated at 58 FR 4931, Jan. 19, 1993]



Sec. 435.622  Individuals in institutions who are eligible under a special income level.

    (a) If an agency, under Sec. 435.231, provides Medicaid to 
individuals in medical institutions, nursing facilities, and 
intermediate care facilities for the mentally retarded who would not be 
eligible for SSI or State supplements if they were not 
institutionalized, the agency must use income standards based on the 
greater need for financial assistance that the individuals would have if 
they were not in the institution. The standards may vary by the level of 
institutional care needed by the individual (hospital, nursing facility, 
or intermediate level care for the mentally retarded), or by other 
factors related to individual needs. (See Sec. 435.1005 for FFP limits 
on income standards established under this section.)
    (b) In determining the eligibility of individuals under the income 
standards established under this section, the agency must not take into 
account income that would be disregarded in determining eligibility for 
SSI or for an optional State supplement.
    (c) The agency must apply the income standards established under 
this section effective with the first day of a period of not less than 
30 consecutive days of institutionalization.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
53 FR 3595, Feb. 8, 1988. Redesignated and amended at 58 FR 4932, Jan. 
19, 1993]



Sec. 435.631  General requirements for determining income eligibility in States using more restrictive requirements for Medicaid than SSI.

    (a) Income eligibility methods. In determining income eligibility of 
aged, blind, and disabled individuals in a State using more restrictive 
eligibility requirements than SSI, the agency must use the methods for 
treating income elected under Secs. 435.121 and 435.230, under 
Sec. 435.601. The methods used must be comparable for all individuals 
within each category of individuals under Sec. 435.121 and each category 
of individuals within each optional categorically needy group included 
under Sec. 435.230 and for each category of individuals under the 
medically needy option described under Sec. 435.800.
    (b) Categorically needy versus medically needy eligibility. (1) 
Individuals who have income equal to, or below, the categorically needy 
income standards described in Secs. 435.121 and 435.230 are 
categorically needy in States that include the medically needy under 
their plans.
    (2) Categorically needy eligibility in States that do not include 
the medically needy is determined in accordance with the provisions of 
Sec. 435.121 (e)(4) and (e)(5).

[58 FR 4932, Jan. 19, 1993]

[[Page 139]]



Sec. 435.640  Protected Medicaid eligibility for individuals eligible in December 1973.

    In determining whether individuals continue to meet the income 
requirements used in December 1973, for purposes of determining 
eligibility under Secs. 435.131, 435.132, and 435.133, the agency must 
deduct increased OASDI payments to the same extent that these deductions 
were in effect in December 1973. These deductions are required by 
section 306 of the Social Security Amendments of 1972 (Pub. L. 92-603) 
and section 1007 of Pub. L. 91-172 (enacted Dec. 30, 1969), modified by 
section 304 of Pub. L. 92-603.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4932, Jan. 19, 1993]



  Subpart H--Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy



Sec. 435.700  Scope.

    This subpart prescribes specific financial requirements for 
determining the post-eligibility treatment of income of categorically 
needy individuals, including requirements for applying patient income to 
the cost of care.

[58 FR 4931, Jan. 19, 1993]



Sec. 435.725  Post-eligibility treatment of income of institutionalized individuals in SSI States: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income,
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities.
    (1) Individuals receiving cash assistance under SSI or AFDC who are 
eligible for Medicaid under Sec. 435.110 or Sec. 435.120.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid under Sec. 435.211.
    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, under Sec. 435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. In reducing its payment to the institution, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income, as determined under paragraph (e) of 
this section. Income that was disregarded in determining eligibility 
must be considered in this process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home, if the agency provides 
Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability,

[[Page 140]]

used to determine eligibility for an optional State supplement for an 
individual in his own home, if the agency provides Medicaid to optional 
State supplement recipients under Sec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec. 435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under 
Sec. 435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (3) For single individuals and couples, an amount (in addition to 
the personal needs allowance) for maintenance of the individual's or 
couple's home if--
    (i) The amount is deducted for not more than a 6-month period; and
    (ii) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project monthly income for a prospective period not to exceed 6 months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and on medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
48 FR 5735, Feb. 8, 1983; 53 FR 3595, Feb. 8, 1988; 55 FR 33705, Aug. 
17, 1990; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]

[[Page 141]]



Sec. 435.726  Post-eligibility treatment of income of individuals receiving home and community-based services furnished under a waiver: Application of patient 
          income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid under Sec. 435.217 and are receiving home and community-based 
services furnished under a waiver of Medicaid requirements specified in 
part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.
    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the highest 
of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home, if the agency provides 
Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement recipients 
under Sec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Secs. 435.811 and 435.814, if the agency 
provides Medicaid under the medically needy coverage option.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's AFDC plan or 
the medically needy income standard established under Sec. 435.811 for a 
family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.

[46 FR 48539, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37715, July 
25, 1994]



Sec. 435.733  Post-eligibility treatment of income of institutionalized individuals in States using more restrictive requirements than SSI: Application of 
          patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.

[[Page 142]]

    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities:
    (1) Individuals receiving cash assistance under AFDC who are 
eligible for Medicaid under Sec. 435.110 and individuals eligible under 
Sec. 435.121.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid under Sec. 435.211.
    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, under Sec. 435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the higher of--
    (i) The more restrictive income standard established under 
Sec. 435.121; or
    (ii) The amount of the medically needy income standard for one 
person established under Sec. 435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under 
Sec. 435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project total

[[Page 143]]

monthly income for a prospective period not to exceed 6 months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses that may be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24884, Apr. 11, 1980, as amended at 48 FR 5735, Feb. 8, 1983; 53 
FR 3596, Feb. 8, 1988; 55 FR 33705, Aug. 17, 1990; 56 FR 8850, 8854, 
Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]



Sec. 435.735  Post-eligibility treatment of income and resources of individuals receiving home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid under Sec. 435.217, and are eligible for home and community-
based services furnished under a waiver of State plan requirements 
specified in part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.
    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the higher 
of--
    (i) The more restrictive income standard established under 
Sec. 435.121; or
    (ii) The medically needy standard for an individual.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under 
Sec. 435.811 for a family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.

[46 FR 48540, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37716, July 
25, 1994]

[[Page 144]]



     Subpart I--Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy



Sec. 435.800  Scope.

    This subpart prescribes specific financial requirements for 
determining the eligibility of medically needy individuals under subpart 
D of this part.

[58 FR 4932, Jan. 19, 1993]

                     Medically Needy Income Standard



Sec. 435.811  Medically needy income standard: General requirements.

    (a) Except as provided in paragraph (d)(2) of this section, to 
determine eligibility of medically needy individuals, a Medicaid agency 
must use a single income standard under this subpart that meets the 
requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. Subject to the limitations specified in 
paragraph (e) of this section. The standard may not diminish by an 
increase in the number of persons in the assistance unit. For example, 
if the income level in the standard for an assistance unit of two is set 
at $400, the income level in the standard for an assistance unit of 
three may not be less than $400.
    (c) In States that do not use more restrictive requirements than 
SSI, the income standard must be set at an amount that is no lower than 
the lowest income standards used under the cash assistance programs that 
are related to the State's covered medically needy eligibility group or 
groups of individuals under Sec. 435.301. The amount of the income 
standard is subject to the limitations specified in paragraph (e) of 
this section.
    (d) In States that use more restrictive requirements for aged, 
blind, and disabled individuals than SSI:
    (1) For all individuals except aged, blind, and disabled 
individuals, the income standard must be set in accordance with 
paragraph (c) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy income standard that is more restrictive than the 
single income standard set under paragraph (c) of this section. However, 
the amount of the more restrictive separate standard for aged, blind, or 
disabled individuals must be no lower than the higher of the lowest 
categorically needy income standard currently applied under the State's 
more restrictive criteria under Sec. 435.121 or the medically needy 
income standard in effect under the State's Medicaid plan on January 1, 
1972. The amount of the income standard is subject to the limitations 
specified in paragraph (e) of this section.
    (e) The income standards specified in paragraphs (c) and (d) of this 
section must not exceed the maximum dollar amount of income allowed for 
purposes of FFP under Sec. 435.1007.
    (f) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4932, Jan. 19, 1993]



Sec. 435.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

                   Medically Needy Income Eligibility



Sec. 435.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency may include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec. 435.914. The budget period can begin no earlier than the first 
month in the retroactive period in which the individual received covered 
services. This provision applies to all medically needy individuals 
except in groups for whom criteria more restrictive than that used in 
the SSI program apply.
    (3) If the agency elects to begin the first budget period for the 
medically

[[Page 145]]

needy in any month of the 3-month period prior to the date of the 
application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must deduct the 
following amounts from income to determine the individual's countable 
income.
    (1) For individuals under age 21 and caretaker relatives, the agency 
must deduct amounts that would be deducted in determining eligibility 
under the State's AFDC plan.
    (2) For aged, blind, or disabled individuals in States covering all 
SSI recipients, the agency must deduct amounts that would be deducted in 
determining eligibility under SSI. However, the agency must also deduct 
the highest amounts from income that would be deducted in determining 
eligibility for optional State supplements if these supplements are paid 
to all individuals who are receiving SSI or would be eligible for SSI 
except for their income.
    (3) For aged, blind, or disabled individuals in States using income 
requirements more restrictive than SSI, the agency must deduct amounts 
that are no more restrictive than those used under the Medicaid plan on 
January 1, 1972 and no more liberal than those used in determining 
eligibility under SSI or an optional State supplement. However, the 
amounts must be at least the same as those that would be deducted in 
determining eligibility, under Sec. 435.121, of the categorically needy.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard under Sec. 435.814, the individual or 
family is eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f), and (g) of this section and deduct those expenses 
in accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g), in determining incurred medical expenses to be deducted 
from income, the agency must include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed under Sec. 447.51 or Sec. 447.53 of 
this subchapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration, or scope of services.
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g), in determining incurred medical expenses to be deducted 
from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or unpaid, to the 
extent that the expenses have not been deducted previously in 
establishing eligibility;
    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such

[[Page 146]]

budget period and any of the 3 preceding months, whether paid or unpaid, 
to the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income in 
establishing eligibility, to the extent that such expenses are unpaid 
and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses to be deducted from 
income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the State and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application (except States using more restrictive 
eligibility criteria under the option in section 1902(f) of the Act must 
deduct incurred expenses regardless of when the expenses were incurred); 
and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section in the order prescribed under one of the following three 
options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of expense or service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed limitations on amounts, duration, 
or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance or 
deductible charges, the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.
    (i) Eligibility based on incurred medical expenses.
    (1) Whether a State elects partial or full month coverage, an 
individual who is expected to contribute a portion of his or her income 
toward the costs of institutional care or home and community-based 
services under Secs. 435.725,

[[Page 147]]

435.726, 435.733, 435.735 or 435.832 is eligible on the first day of the 
applicable budget (spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses under 
Secs. 435.725, 435.726, 435.733, 435.735 or 435.832 greater than the 
individual's contributable income determined under these sections.
    (2) At the end of the prospective period specified in paragraphs 
(f)(2) and (f)(3) of this section, and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, in 
States that elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, in 
States that elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. To the extent necessary to prevent the transfer of an 
individual's spenddown liability to the Medicaid program, States must 
reduce the amount of provider charges that would otherwise be 
reimbursable under Medicaid.

[59 FR 1672, Jan. 12, 1994]



Sec. 435.832  Post-eligibility treatment of income of institutionalized individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
diability.
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability,

[[Page 148]]

used to determine eligibility for an optional State supplement for an 
individual in his own home, if the agency provides Medicaid to optional 
State supplement recipients under Sec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec. 435.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (B) The medically needy income standard established under 
Sec. 435.811.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24886, Apr. 11, 1980, as amended at 46 FR 47988, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3596, Feb. 8, 1988; 53 FR 5344, Feb. 23, 
1988; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4933, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec. 435.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, a 
Medicaid agency must use a single resource standard that meets the 
requirements of this section.
    (b) In States that do not use more restrictive criteria than SSI for 
aged, blind, and disabled individuals, the resource standard must be 
established at an amount that is no lower than the lowest resource 
standard used under the cash assistance programs that relate to the 
State's covered medically needy eligibility group or groups of 
individuals under Sec. 435.301.
    (c) In States using more restrictive requirements than SSI:

[[Page 149]]

    (1) For all individuals except aged, blind, and disabled 
individuals, the resource standard must be set in accordance with 
paragraph (b) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy resource standard that is more restrictive than 
the single resource standard set under paragraph (b) of this section. 
However, the amount of the more restrictive separate standard for aged, 
blind, or disabled individuals must be no lower than the higher of the 
lowest categorically needy resource standard currently applied under the 
State's more restrictive criteria under Sec. 435.121 or the medically 
needy resource standard in effect under the State's Medicaid plan on 
January 1, 1972.
    (d) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource standard for an assistance 
unit of three may not be less than that set for a unit of two.

[58 FR 4933, Jan. 19, 1993]



Sec. 435.843  Medically needy resource standard: State plan requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec. 435.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must:
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives in Sec. 435.602.
    (b) Deduct the amounts that would be deducted in determining 
resource eligibility for the medically needy group as provided for in 
Sec. 435.601 or under the criteria of States using more restrictive 
criteria than SSI as provided for in Sec. 435.121. In determining the 
amount of an individual's resources for Medicaid eligibility, States 
must count amounts of resources that otherwise would not be counted 
under the conditional eligibility provisions of the SSI or AFDC 
programs.
    (c) Apply the resource standard specified under Sec. 435.840.

[58 FR 4933, Jan. 19, 1993]



Secs. 435.850-435.852  [Reserved]



      Subpart J--Eligibility in the States and District of Columbia

    Source: 44 FR 17937, Mar. 23, 1979, unless otherwise noted.



Sec. 435.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.

                    General Methods of Administration



Sec. 435.901  Consistency with objectives and statutes.

    The Medicaid agency's standards and methods for determining 
eligibility must be consistent with the objectives of the program and 
with the rights of individuals under the United States Constitution, the 
Social Security Act, title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act of 1973, and all other relevant provisions 
of Federal and State laws.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec. 435.902  Simplicity of administration.

    The agency's policies and procedures must ensure that eligibility is 
determined in a manner consistent with simplicity of administration and 
the best interests of the applicant or recipient.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec. 435.903  Adherence of local agencies to State plan requirements.

    The agency must--
    (a) Have methods to keep itself currently informed of the adherence 
of

[[Page 150]]

local agencies to the State plan provisions and the agency's procedures 
for determining eligibility; and
    (b) Take corrective action to ensure their adherence.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec. 435.904  Establishment of outstation locations to process applications for certain low-income eligibility groups.

    (a) State plan requirements. The Medicaid State plan must specify 
that the requirements of this section are met.
    (b) Opportunity to apply. The agency must provide an opportunity for 
the following groups of low-income pregnant women, infants, and children 
under age 19 to apply for Medicaid at outstation locations other than 
AFDC offices:
    (1) The groups of pregnant women or infants with incomes up to 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(IV) of the Act;
    (2) The group of children age 1 up to age 6 with incomes at 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(VI) of the Act;
    (3) The group of children age 6 up to age 19 born after September 
30, 1983, with incomes up to 100 percent of the Federal poverty level as 
specified under section 1902(a)(10)(A)(i)(VII) of the Act; and
    (4) The groups of pregnant women or infants, children age 1 up to 
age 6, and children age 6 up to age 19, who are not eligible as a 
mandatory group, with incomes up to 185 percent of the Federal poverty 
level as specified under section 1902(a)(10)(A)(ii)(IX) of the Act.
    (c) Outstation locations: general requirements.
    (1) The agency must establish either--
    (i) Outstation locations at each disproportionate share hospital, as 
defined in section 1923(a)(1)(A) of the Act, and each Federally-
qualified health center, as defined in section 1905(1)(2)(B) of the Act, 
participating in the Medicaid program and providing services to 
Medicaid-eligible pregnant women and children; or
    (ii) Other outstation locations, which include at least some, 
disproportionate share hospitals and federally-qualified health centers, 
as specified under an alternative State plan that is submitted to and 
approved by CMS if the following conditions are met:
    (A) The State must demonstrate that the alternative plan for 
outstationing is equally effective as, or more effective than, a plan 
that would meet the requirements of paragraph (c)(1)(i) of this section 
in enabling the individuals described in paragraph (b) of this section 
to apply for and receive Medicaid; and
    (B) The State must provide assurances that the level of staffing and 
funding committed by the State under the alternative plan equals or 
exceeds the level of staffing and funding under a plan that would meet 
the requirements of establishing the outstation locations at the sites 
specified in paragraph (c)(1)(i) of this section.
    (2) The agency must establish outstation locations at Indian health 
clinics operated by a tribe or tribal organization as these clinics are 
specifically included in the definition of Federally-qualified health 
centers under section 1905(l)(2)(B) of the Act and are also included in 
the definition of rural health clinics under part 491, subpart A of this 
chapter.
    (3) The agency may establish additional outstation locations at any 
other site where potentially eligible pregnant women or children receive 
services--for example, at school-linked service centers and family 
support centers. These additional sites may also include sites other 
than the main outstation location of those Federally-qualified health 
centers or disproportionate share hospitals providing services to 
Medicaid-eligible pregnant women and to children and that operate more 
than one site.
    (4) The agency may, at its option, enter into reciprocal agreements 
with neighboring States to ensure that the groups described in paragraph 
(b) of this section who customarily receive services in a neighboring 
State have the opportunity to apply at outstation locations specified in 
paragraphs (c)(l) and (2) of this section.

[[Page 151]]

    (d) Outstation functions. (1) The agency must provide for the 
receipt and initial processing of Medicaid applications from the 
designated eligibility groups at each outstation location.
    (2) ``Initial processing'' means taking applications, assisting 
applicants in completing the application, providing information and 
referrals, obtaining required documentation to complete processing of 
the application, assuring that the information contained on the 
application form is complete, and conducting any necessary interviews. 
It does not include evaluating the information contained on the 
application and the supporting documentation nor making a determination 
of eligibility or ineligibility.
    (3) The agency may, at its option, allow appropriate State 
eligibility workers assigned to outstation locations to evaluate the 
information contained on the application and the supporting 
documentation and make a determination of eligibility if the workers are 
authorized to determine eligibility for the agency which determines 
Medicaid eligibility under Sec. 431.10 of this subchapter.
    (e) Staffing. (1) Except for outstation locations that are 
infrequently used by the low-income eligibility groups, the State agency 
must have staff available at each outstation location during the regular 
office operating hours of the State Medicaid agency to accept 
applications and to assist applicants with the application process.
    (2) The agency may station staff at one outstation location or 
rotate staff among several locations as workload and staffing 
availability dictate.
    (3) The agency may use State employees, provider or contractor 
employees, or volunteers who have been properly trained to staff 
outstation locations under the following conditions:
    (i) State outstation intake staff may perform all eligibility 
processing functions, including the eligibility determination, if the 
staff is authorized to do so at the regular Medicaid intake office.
    (ii) Provider or contractor employees and volunteers may perform 
only initial processing functions as defined in paragraph (d)(2) of this 
section.
    (4) Provider and contractor employees and volunteers are subject to 
the confidentiality of information rules specified in part 431, subpart 
F, of this subchapter, to the prohibition against reassignment of 
provider claims specified in Sec. 447.10 of this subchapter, and to all 
other State or Federal laws concerning conflicts of interest.
    (5) At locations that are infrequently used by the designated low-
income eligibility groups, the State agency may use volunteers, provider 
or contractor employees, or its own eligibility staff, or telephone 
assistance.
    (i) The agency must display a notice in a prominent place at the 
outstation location advising potential applicants of when outstation 
intake workers will be available.
    (ii) The notice must include a telephone number that applicants may 
call for assistance.
    (iii) The agency must comply with Federal and State laws and 
regulations governing the provision of adequate notice to persons who 
are blind or deaf or who are unable to read or understand the English 
language.

[59 FR 48809, Sept. 23, 1994]

                              Applications



Sec. 435.905  Availability of program information.

    (a) The agency must furnish the following information in written 
form, and orally as appropriate, to all applicants and to all other 
individuals who request it:
    (1) The eligibility requirements.
    (2) Available Medicaid services.
    (3) The rights and responsibilities of applicants and recipients.
    (b) The agency must publish in quantity and make available bulletins 
or pamphlets that explain the rules governing eligibility and appeals in 
simple and understandable terms.

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980]



Sec. 435.906  Opportunity to apply.

    The agency must afford an individual wishing to do so the 
opportunity to apply for Medicaid without delay.

[[Page 152]]



Sec. 435.907  Written application.

    (a) The agency must require a written application from the 
applicant, an authorized representative, or, if the applicant is 
incompetent or incapacitated, someone acting responsibly for the 
applicant.
    (b) Subject to the conditions specified in paragraph (c) of this 
section, the application must be on a form prescribed by the agency and 
signed under a penalty of perjury.
    (c) The application form used at outstation locations for low-income 
pregnant women, infants, and children specified in Sec. 435.904 must not 
be the application form used to apply for AFDC. The application form 
(including any computerized application form) for these designated 
eligibility groups may be--
    (1) A Medicaid-only form prescribed by the agency specifically for 
the designated eligibility groups;
    (2) An existing Medicaid-only application; or
    (3) A multiple-program application that contains clearly 
identifiable Medicaid-only sections or parts.

[59 FR 48810, Sept. 23, 1994]



Sec. 435.908  Assistance with application.

    The agency must allow an individual or individuals of the 
applicant's choice to accompany, assist, and represent the applicant in 
the application process or a redetermination of eligibility.



Sec. 435.909  Automatic entitlement to Medicaid following a determination of eligibility under other programs.

    The agency must not require a separate application for Medicaid from 
an individual, if--
    (a) The individual receives AFDC; or
    (b) The agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act for determining 
Medicaid eligibility; and--
    (1) The individual receives SSI;
    (2) The individual receives a mandatory State supplement under 
either a federally-administered or State-administered program; or
    (3) The individual receives an optional State supplement and the 
agency provides Medicaid to recipients of optional supplements under 
Sec. 435.230.



Sec. 435.910  Use of social security number.

    (a) The agency must require, as a condition of eligibility, that 
each individual (including children) requesting Medicaid services 
furnish each of his or her social security numbers (SSNs).
    (b) The agency must advise the applicant of--
    (1) [Reserved]
    (2) The statute or other authority under which the agency is 
requesting the applicant's SSN; and
    (3) The uses the agency will make of each SSN, including its use for 
verifying income, eligibility, and amount of medical assistance payments 
under Secs. 435.940 through 435.960.
    (c)-(d) [Reserved]
    (e) If an applicant cannot recall his SSN or SSNs or has not been 
issued a SSN the agency must--
    (1) Assist the applicant in completing an application for an SSN;
    (2) Obtain evidence required under SSA regulations to establish the 
age, the citizenship or alien status, and the true identity of the 
applicant; and
    (3) Either send the application to SSA or, if there is evidence that 
the applicant has previously been issued a SSN, request SSA to furnish 
the number.
    (f) The agency must not deny or delay services to an otherwise 
eligible applicant pending issuance or verification of the individual's 
SSN by SSA.
    (g) The agency must verify each SSN of each applicant and recipient 
with SSA, as prescribed by the Commissioner, to insure that each SSN 
furnished was issued to that individual, and to determine whether any 
others were issued.
    (h) Exception. (1) A State may give a Medicaid identification number 
to an applicant who, because of well established religious objections, 
refuses to obtain a Social Security Number (SSN). The identification 
number may be either an SSN obtained by the State on the applicant's 
behalf or another unique identifier.
    (2) The term well established religious objections means that the 
applicant--

[[Page 153]]

    (i) Is a member of a recognized religious sect or division of the 
sect; and
    (ii) Adheres to the tenets or teachings of the sect or division of 
the sect and for that reason is conscientiously opposed to applying for 
or using a national identification number.
    (3) A State may use the Medicaid identification number established 
by the State to the same extent as an SSN is used for purposes described 
in paragraph (b)(3) of this section.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986; 66 
FR 2667, Jan. 11, 2001]

                  Determination of Medicaid Eligibility



Sec. 435.911  Timely determination of eligibility.

    (a) The agency must establish time standards for determining 
eligibility and inform the applicant of what they are. These standards 
may not exceed--
    (1) Ninety days for applicants who apply for Medicaid on the basis 
of disability; and
    (2) Forty-five days for all other applicants.
    (b) The time standards must cover the period from the date of 
application to the date the agency mails notice of its decision to the 
applicant.
    (c) The agency must determine eligibility within the standards 
except in unusual circumstances, for example--
    (1) When the agency cannot reach a decision because the applicant or 
an examining physician delays or fails to take a required action, or
    (2) When there is an administrative or other emergency beyond the 
agency's control.
    (d) The agency must document the reasons for delay in the 
applicant's case record.
    (e) The agency must not use the time standards--
    (1) As a waiting period before determining eligibility; or
    (2) As a reason for denying eligibility (because it has not 
determined eligibility within the time standards).

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
54 FR 50762, Dec. 11, 1989]



Sec. 435.912  Notice of agency's decision concerning eligibility.

    The agency must send each applicant a written notice of the agency's 
decision on his application, and, if eligibility is denied, the reasons 
for the action, the specific regulation supporting the action, and an 
explanation of his right to request a hearing. (See subpart E of part 
431 of this subchapter for rules on hearings.)

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]



Sec. 435.913  Case documentation.

    (a) The agency must include in each applicant's case record facts to 
support the agency's decision on his application.
    (b) The agency must dispose of each application by a finding of 
eligibility or ineligibility, unless--
    (1) There is an entry in the case record that the applicant 
voluntarily withdrew the application, and that the agency sent a notice 
confirming his decision;
    (2) There is a supporting entry in the case record that the 
applicant has died; or
    (3) There is a supporting entry in the case record that the 
applicant cannot be located.



Sec. 435.914  Effective date.

    (a) The agency must make eligibility for Medicaid effective no later 
than the third month before the month of application if the individual--
    (1) Received Medicaid services, at any time during that period, of a 
type covered under the plan; and
    (2) Would have been eligible for Medicaid at the time he received 
the services if he had applied (or someone had applied for him), 
regardless of whether the individual is alive when application for 
Medicaid is made.
    (b) The agency may make eligiblity for Medicaid effective on the 
first day of a month if an individual was eligible at any time during 
that month.
    (c) The State plan must specify the date on which eligibility will 
be made effective.

[[Page 154]]

                Redeterminations of Medicaid Eligibility



Sec. 435.916  Periodic redeterminations of Medicaid eligibility.

    (a) The agency must redetermine the eligibility of Medicaid 
recipients, with respect to circumstances that may change, at least 
every 12 months, however--
    (1) The agency may consider blindness as continuing until the review 
physician under Sec. 435.531 determines that a recipient's vision has 
improved beyond the definition of blindness contained in the plan; and
    (2) The agency may consider disability as continuing until the 
review team under Sec. 435.541 determines that a recipient's disability 
no longer meets the definition of disability contained in the plan.
    (b) Procedures for reporting changes. The agency must have 
procedures designed to ensure that recipients make timely and accurate 
reports of any change in circumstances that may affect their 
eligibility.
    (c) Agency action on information about changes. (1) The agency must 
promptly redetermine eligibility when it receives information about 
changes in a recipient's circumstances that may affect his eligibility.
    (2) If the agency has information about anticipated changes in a 
recipient's circumstances, it must redetermine eligibility at the 
appropriate time based on those changes.



Sec. 435.919  Timely and adequate notice concerning adverse actions.

    (a) The agency must give recipients timely and adequate notice of 
proposed action to terminate, discontinue, or suspend their eligibility 
or to reduce or discontinue services they may receive under Medicaid.
    (b) The notice must meet the requirements of subpart E of part 431 
of this subchapter.

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
51 FR 7211, Feb. 28, 1986]



Sec. 435.920  Verification of SSNs.

    (a) In redetermining eligibility, the agency must review case 
records to determine whether they contain the recipient's SSN or, in the 
case of families, each family member's SSN.
    (b) If the case record does not contain the required SSNs, the 
agency must require the recipient to furnish them and meet other 
requirements of Sec. 435.910.
    (c) For any recipient whose SSN was established as part of the case 
record without evidence required under the SSA regulations as to age, 
citizenship, alien status, or true identity, the agency must obtain 
verification of these factors in accordance with Sec. 435.910.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]

                           Furnishing Medicaid



Sec. 435.930  Furnishing Medicaid.

    The agency must--
    (a) Furnish Medicaid promptly to recipients without any delay caused 
by the agency's administrative procedures;
    (b) Continue to furnish Medicaid regularly to all eligible 
individuals until they are found to be ineligible; and
    (c) Make arrangements to assist applicants and recipients to get 
emergency medical care whenever needed, 24 hours a day and 7 days a 
week.

            Income and Eligibility Verification Requirements

    Source: Sections 435.940 through 935.965 appear at 51 FR 7211, Feb. 
28, 1986, unless otherwise noted.



Sec. 435.940  Basis and scope.

    (a) Section 1137 of the Act requires certain Federally-funded, 
State-administered public assistance programs to establish procedures 
for obtaining, using and verifying information relevant to 
determinations as to eligibility and the amount of assistance. Section 
1902(a)(4) of the Act allows the Secretary to prescribe methods of 
administration found necessary for the proper and efficient operation of 
a State's Medicaid plan.
    (b) The agency must maintain information, as enumerated in 
Sec. 435.960, to exchange for the purpose of enabling any agency or 
program referenced in Sec. 435.945(b) to verify income, eligibility of, 
and the amount of assistance for its applicants and recipients.

[[Page 155]]



Sec. 435.945  General requirements.

    (a) The agency must request and use information timely in accordance 
with Secs. 435.948, 435.952, and 435.953 of this subpart for verifying 
Medicaid eligibility and the amount of medical assistance payments.
    (b) The agency must furnish timely to other agencies in the State 
and in other States and to Federal programs income, eligibility and 
medical assistance payment information for verifying eligibility or 
benefit amounts for the programs listed in Sec. 435.948(a)(6) of this 
subpart. In addition, the agency must furnish income and eligibility 
information to--
    (1) The child support enforcement program under part D of title IV 
of the Act; and
    (2) SSA for old age, survivors and disability benefits under title 
II and for SSI benefits under title XVI of the Act.
    (c) The agency must, upon request, reimburse another agency listed 
in Sec. 435.948(a)(6) of this subpart or paragraph (b) of this section 
for reasonable costs incurred in furnishing information, including new 
developmental costs associated with furnishing the information to 
another agency.
    (d) The agency must inform all applicants in writing at the time of 
application that the agency will obtain and use information available to 
it under section 1137 of the Act to verify income, eligibility and the 
correct amount of medical assistance payments. The agency must give each 
recipient the same notice when it redetermines eligibility. The 
requirements in this paragraph do not apply in the case of applicants or 
recipients whose eligibility is determined by AFDC or by SSA under 
section 1634 of the Act.
    (e) The agency must report as the Secretary prescribes for the 
purposes of determining compliance with Secs. 431.305, 431.800, 435.910, 
435.919 and 435.940 through 435.965 of this chapter and of evaluating 
the effectiveness of the income and eligibility verification system.
    (f) The agency must execute written agreements with other agencies 
before releasing data to or requesting data from, those agencies. The 
agreements, at a minimum, must specify:
    (1) The information to be exchanged;
    (2) The titles of all agency officials with the authority to request 
income and eligibility information;
    (3) The methods, including the formats to be used, and the timing 
for requesting and providing the information (see also paragraph (f)(6) 
of this section);
    (4) The safeguards limiting the use and disclosure of the 
information as required by Federal or State law or regulations;
    (5) The method, if any, the agency will use to reimburse reasonable 
costs of furnishing the information; and
    (6) In the case of an agreement between a SWICA or a UC agency and 
the Medicaid agency, that the Medicaid agency will obtain information on 
applicants at least twice monthly; and
    (7) In the case of an agreement between any Federal agency and the 
Medicaid agency for data on individuals, provisions relating to--
    (i) Purpose and legal authority;
    (ii) Justification and expected results;
    (iii) Records description (including specific identification of the 
system of records, the number of records, what data elements will be 
included in the match, and projected starting and completion dates);
    (iv) Notice procedures;
    (v) Verification procedures;
    (vi) Disposition of matched items;
    (vii) Security procedures;
    (viii) Records usage, duplication and redisclosure restrictions;
    (ix) Records accuracy assessments; and
    (x) Access by the Comptroller General.
    (g) SWICA that does not use the quarterly wages reported by 
employers as required by Section 1137 of the Act of unemployment 
insurance benefit calculations must maintain wage information that:
    (1) Contains the SSN, full name, wages earned for the period of the 
report, and an identifier of the employer;
    (2) Includes all employers covered by the States' UC law;
    (3) Accumulates earnings reported by employers for no longer periods 
than calendar quarters;
    (4) Is reported to the SWICA within 30 days after the end of the 
quarter;

[[Page 156]]

    (5) Is machine readable; and
    (6) Is accessible to agencies in other States that have executed 
agreements as required in Sec. 435.945(f) of this chapter and to SSA for 
use in making eligibility or benefit determinations under Title II or 
XVI of the Act.

[51 FR 7211, Feb. 28, 1986, as amended at 52 FR 5977, Feb. 27, 1987; 54 
FR 8741, Mar. 2, 1989; 57 FR 46097, Oct. 7, 1992; 59 FR 4254, Jan. 31, 
1994]



Sec. 435.948  Requesting information.

    (a) Except as provided in paragraphs (d), (e), and (f) of this 
section, the agency must request information from the sources specified 
in this paragraph for verifying Medicaid eligibility and the correct 
amount of medical assistance payments for each applicant (unless 
obviously ineligible on the face of his or her application) and 
recipient. The agency must request--
    (1) State wage information maintained by the SWICA during the 
application period and at least on a quarterly basis;
    (2) Information about net earnings from self-employment, wage and 
payment of retirement income, maintained by SSA and available under 
Section 6103(l)(7)(A) of the Internal Revenue Code of 1954, for 
applicants during the application period and for recipients for whom the 
information has not previously been requested;
    (3) Information about benefit and other eligibility related 
information available from SSA under titles II and XVI of the Social 
Security Act for applicants during the application period and for 
recipients for whom the information has not previously been requested;
    (4) Unearned income information from the Internal Revenue Service 
available under Section 6103(l)(7)(B) of the Internal Revenue Code of 
1954, during the application period and at least yearly;
    (5) Unemployment compensation information maintained by the agency 
administering State unemployment compensation laws (under the provisions 
of section 3304 of the Internal Revenue Code and section 303 of the Act) 
as follows:
    (i) For an applicant, during the application period and at least for 
each of the three subsequent months;
    (ii) For a recipient that reports a loss of employment, at the time 
the recipient reports that loss and for at least each of the three 
subsequent months.
    (iii) For an applicant or a recipient who is found to be receiving 
unemployment compensation benefits, at least for each month until the 
benefits are reported to be exhausted.
    (6) Any additional income, resource, or eligibility information 
relevant to determinations concerning eligibility or correct amount of 
medical assistance payments available from agencies in the State or 
other States administering the following programs as provided in the 
agency's State plan:
    (i) AFDC;
    (ii) Medicaid;
    (iii) State-administered supplementary payment programs under 
Section 1616(a) of the Act;
    (iv) SWICA;
    (v) Unemployment compensation;
    (vi) Food stamps; and
    (vii) Any State program administered under a plan approved under 
Title I (assistance to the aged), X (aid to the blind), XIV (aid to the 
permanently and totally disabled), or XVI (aid to the aged, blind, and 
disabled in Puerto Rico, Guam, and the Virgin Islands) of the Act.
    (b) The agency must request information on applicants from the 
sources listed in paragraph (a)(1) through (a)(5) of this section at the 
first opportunity provided by these sources following the receipt of the 
application. If an applicant cannot provide an SSN at application, the 
agency must request the information at the next available opportunity 
after receiving the SSN.
    (c) The agency must request the information required in paragraph 
(a) of this section by SSN, using each SSN furnished by the individual 
or received through verification.
    (d) Exception: In cases where the individual is institutionalized, 
the agency needs to obtain and use information from SWICA only during 
the application period and on a yearly basis, and from unemployment 
compensation agencies only during the application

[[Page 157]]

period. An individual is institutionalized for purposes of this section 
when he or she is required to apply his or her income to the cost of 
medical care as required by Secs. 435.725, 435.733, and 435.832.
    (e) Exception: Alternate sources. (1) The Secretary may, upon 
application from a State agency, permit an agency to request and use 
income information from a source or sources alternative to those listed 
in paragraph (a) of this section. The agency must demonstrate to the 
Secretary that the alternative source(s) is as timely, complete and 
useful for verifying eligibility and benefit amounts. The Secretary will 
consult with the Secretary of Agriculture and the Secretary of Labor 
before determining whether an agency may use an alternate source.
    (2) The agency must continue to meet the requirements of this 
section unless the Secretary has approved the request.
    (f) Exception: If the agency administering the the AFDC program, or 
SSA under section 1634 of the Act, determines the eligibility of an 
applicant or recipient, the requirements of this section do not apply to 
that applicant or recipient.



Sec. 435.952  Use of information.

    (a) Except as provided under Sec. 435.953, the agency must review 
and compare against the case file all information received under 
Secs. 435.940 through 435.960 to determine whether it affects the 
applicant's or recipient's eligibility or amount of medical assistance 
payment. The agency also must independently verify the information if 
required by Sec. 435.955 or if determined appropriate by agency 
experience.
    (b) For applicants, if the information is received during the 
application period, it must be used, to the extent possible, making 
eligibility determinations. If it is received after the eligibility 
determination, it must be used as specified for recipients in paragraphs 
(c) and (d) of this section.
    (c) Except as specified in Sec. 435.953 of this subpart and 
paragraph (d) of this section, for recipients, the agency must, within 
45 days of receipt of an item of information, request verification (if 
appropriate), determine whether the information affects eligibility or 
the amount of medical assistance payment, and either initiate a notice 
of case action to advise the recipient of any adverse action the agency 
intends to take or make an entry in the casefile that no further action 
is necessary.
    (d) Subject to paragraph (e) of this section, if the agency does not 
receive requested third party verification within the 45-day period 
after receipt of information, the agency may determine whether the 
information affects eligibility or correct amount of medical assistance 
payment after the 45-day period. However, the agency must make any 
delayed determinations permitted under this paragraph--
    (1) Promptly, as required by Sec. 435.916, if the verification is 
received before the next redetermination; or
    (2) In conjunction with the next redetermination if no verification 
is received before that redetermination.
    (e) The number of determinations delayed beyond 45 days from receipt 
of an item of information (as permitted by paragraph (d) of this 
section) must not exceed twenty percent of the number of items of 
information for which verification was requested.
    (f) The agency must use appropriate procedures to monitor the 
timeliness requirements of this section.
    (g) The requirements of this section do not relieve the agency of 
its responsibility for determinations of erroneous payments or the 
agency's liability for those erroneous payments, as defined in subpart P 
of part 431 of this chapter.

[51 FR 7211, Feb. 28, 1986, as amended at 53 FR 6648, March 2, 1988; 54 
FR 8741, Mar. 2, 1989; 59 FR 4255, Jan. 31, 1994]



Sec. 435.953  Identifying items of information to use.

    (a) With respect to information received on recipients under 
Secs. 435.940 through 435.960, the agency may either review and compare 
against the case file all items of information received or it may 
identify (target) separately for each data source the information items 
that are most likely to be most productive in identifying and preventing 
ineligibility and incorrect payments.
    (b) An agency that wishes to exclude categories of information items 
must

[[Page 158]]

submit for the Secretary's approval a follow-up plan describing the 
categories that it proposes to exclude. For each category, the agency 
must provide a reasonable justification that follow-up is not cost-
effective; a formal cost/benefit analysis is not required.
    (c) If an agency receives an item of unemployment compensation 
information from the Internal Revenue Service or earnings information 
from SSA that duplicates an item of information previously received from 
another source and followed up, the agency may exclude that information 
item without justification.
    (d) An agency may submit a follow-up plan or alter its plan at any 
time by notifying the Secretary and submitting the necessary 
justification. The Secretary approves or disapproves categories of items 
to be excluded under the plan within 60 days of its submission. The 
categories approved by the Secretary constitute an approved agency 
follow-up plan for IEVS.


[54 FR 8742, Mar. 2, 1989]



Sec. 435.955  Additional requirements regarding information released by a Federal agency.

    (a) Unless waived under paragraph (d) of this section, based on 
information received from a computerized data match in which information 
on an individual is provided to the agency by a Federal agency, the 
agency may not terminate, deny, suspend, or reduce medical assistance to 
that individual until it has taken appropriate steps to verify the 
information independently. The agency must independently verify 
information relating to--
    (1) The amount of the income and resource that generated the income 
involved;
    (2) Whether the applicant or recipient actually has (or had) access 
to the resource or income (or both) for his or her own use;
    (3) The period or periods when the individual actually has (or had) 
access to the resource or income or both.
    (b) The agency must verify the information by either
    (1) Requesting the entity from which the information originally came 
to verify the fact and amount of income or resource; or
    (2) Sending the applicant or recipient a letter informing that 
individual of the information received and asking him or her to respond 
within a specified period. The letter must clearly explain the 
information the agency has and its possible relevance to the 
individual's past or future eligibility, and be as neutral in tone as 
possible.
    (c)(1) If the original source of the income or resource or the 
applicant or recipient verifies the information, and the agency intends 
to reduce, suspend, terminate or deny medical assistance based on the 
information, the agency must send the applicant or recipient a notice of 
the action to be taken and include information on the right to appeal 
and opportunity for a hearing under Secs. 431.200 through 431.246 of 
this chapter (see also Sec. 435.912 and Sec. 435.919).
    (2) If the applicant or recipient fails to respond after reasonable 
attempts to contact him or her, the agency must proceed to deny, 
terminate, reduce or suspend medical assistance based on the applicant's 
or recipient's failure to cooperate.
    (3) If the applicant or recipient disputes the information, the 
agency must obtain evidence (from the source of the data, applicant, 
recipient, or otherwise) to substantiate any negative case action it may 
take.
    (d) The independent verification requirement concerning a category 
of data received from a Federal benefit agency may be waived if the 
Federal agency's Data Integrity Board approves the waiver. The Federal 
benefit agency involved in the data exchange will develop the request by 
petitioning its Data Integrity Board for a waiver of independent 
verification by a Medicaid State agency. The State agency must furnish 
the Federal agency with any information it needs to seek the Data 
Integrity Board's approval of the waiver.
    (e) In accordance with the Federal agency's procedures, the agency 
must provide data on the costs and benefits of the matching program to 
the Federal agency from which it receives information on individuals.
    (f) In accordance with the Federal agency's procedures, the agency 
must

[[Page 159]]

certify to the Federal agency that it will not take adverse action 
against an individual until the information has been independently 
verified and until 10 days (or sooner if permitted by Sec. 431.213 or 
Sec. 431.214) after the individual has been notified of the findings and 
given an opportunity to contest.
    (g) In accordance with the Federal agency's procedures for renewals 
of matching programs, the agency must certify to the Federal agency that 
the terms of the agreement have been followed.

[59 FR 4255, Jan. 31, 1994]



Sec. 435.960  Standardized formats for furnishing and obtaining information to verifying income and eligibility.

    (a) The agency must maintain for all applicants and recipients 
within an agency file the SSN, surname and other data elements in a 
format that at a minimum allows the agency to furnish and to obtain 
eligibility and income information from the agencies or programs 
referenced in Sec. 435.945(b) and Sec. 435.948(a).
    (b) The format to be used will be prescribed by--
    (1) CMS when the agency furnishes information to, or requests 
information from, any Federal or State agency, except SSA and the 
Internal Revenue Service as specified in paragraphs (b) (2) and (3), 
respectively;
    (2) The Commissioner of Social Security when the agency requests 
information from SSA; and
    (3) The Commissioner of Internal Revenue when the agency requests 
information from the Internal Revenue Service.

[52 FR 5977, Feb. 27, 1987]



Sec. 435.965  Delay of effective date.

    (a) If the agency submits, by May 29, 1986, a plan describing a good 
faith effort to come into compliance with the requirements of section 
1137 of the Act and of Secs. 435.910 and 435.940 through 435.960 of this 
subpart, the Secretary may, after consultation with the Secretary of 
Agriculture and the Secretary of Labor, grant a delay in the effective 
date of Secs. 435.910 and 435.940 through 435.960, but not beyond 
September 30, 1986.
    (b) The Secretary may not grant a delay of the effective date of 
section 1137(c) of the Act, which is implemented by Sec. 435.955 (a) and 
(c). (The provisions of these statutory and regulation sections require 
the agency to follow certain procedures before taking any adverse 
actions based on information from the Internal Revenue Service 
concerning unearned income.)



               Subpart K--Federal Financial Participation



Sec. 435.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP in Expenditures for Determining Eligibility and Providing Services



Sec. 435.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45204, Sept. 29, 1978, as amended at 66 FR 2667, Jan. 11, 2001]



Sec. 435.1002  FFP for services.

    (a) Except for the limitations and conditions specified in 
Secs. 435.1007, 435.1008, and 438.814 of this chapter FFP is available 
in expenditures for Medicaid services for all recipients whose coverage 
is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
recipients who were eligible for Medicaid in the month in which the 
medical care or services

[[Page 160]]

were provided except that, for recipients who establish eligibility for 
Medicaid by deducting incurred medical expenses from income, FFP is not 
available for expenses that are the recipient's liability. (See 
Sec. 435.914 and Sec. 436.901 of this subchapter for regulations on 
retroactive eligibility for Medicaid.)
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
66 FR 2667, Jan. 11, 2001; 67 FR 41095, June 14, 2002]



Sec. 435.1003  FFP for redeterminations.

    (a) If the Social Security Administration (SSA) notifies an agency 
that a recipient has been determined ineligible for SSI, FFP is 
available in Medicaid expenditures for services to the recipient as 
follows:
    (1) If the agency receives the SSA notice by the 10th day of the 
month, FFP is available under this section only through the end of the 
month unless the recipient requests a hearing under subpart E, part 431 
of this subchapter.
    (2) If the agency receives the SSA notice after the 10th day of the 
month, FFP is available only through the end of the following month, 
unless the recipient requests a hearing under subpart E, part 431 of 
this subchapter.
    (3) If a recipient requests a hearing, FFP is available as specified 
in subpart E, part 431 of this subchapter.
    (b) The agency must take prompt action to determine eligibility 
after receiving the SSA notice.
    (c) When a change in Federal law affects the eligibility of 
substantial numbers of Medicaid recipients, the Secretary may waive the 
otherwise applicable FFP requirements and redetermination time limits of 
this section, in order to provide a reasonable time to complete such 
redeterminations. The Secretary will designate an additional amount of 
time beyond that allowed under paragraphs (a) and (b) of this section, 
within which FFP will be available, to perform large numbers of 
redeterminations arising from a change in Federal law.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
62 FR 1685, Jan. 13, 1997]



Sec. 435.1004  Recipients overcoming certain conditions of eligibility.

    (a) FFP is available, as specified in paragraph (b) of this section, 
in expenditures for services provided to recipients who are overcoming 
certain eligibility conditions, including blindness, disability, 
continued absence or incapacity of a parent, or unemployment of a 
parent.
    (b) FFP is available for a period not to exceed--
    (1) The period during which a recipient of AFDC, SSI or an optional 
State supplement continues to receive cash payments while these 
conditions are being overcome; or
    (2) For recipients eligible for Medicaid only and recipients of 
AFDC, SSI or an optional State supplement who do not continue to receive 
cash payments, the second month following the month in which the 
recipient's Medicaid eligibility would have been terminated.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]

                           Limitations on FFP



Sec. 435.1005  Recipients in institutions eligible under a special income standard.

    For recipients in institutions whose Medicaid eligibility is based 
on a special income standard established under Sec. 435.236, FFP is 
available in expenditures for services provided to those individuals 
only if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual in his own 
home who has no income or resources.

[58 FR 4933, Jan. 19, 1993]

[[Page 161]]



Sec. 435.1006  Recipients of optional State supplements only.

    FFP is available in expenditures for services provided to 
individuals receiving optional State supplements but not receiving SSI, 
if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual who has no 
income and resources.

[45 FR 24887, Apr. 11, 1980]



Sec. 435.1007  Categorically needy, medically needy, and qualified Medicare beneficiaries.

    (a) FFP is available in expenditures for covered services provided 
to categorically needy recipients, medically needy recipients, and 
qualified Medicare beneficiaries, subject to the restrictions contained 
in subpart K of this part and as provided in paragraphs (b) and (e) of 
this section. However, the restrictions listed in paragraphs (b) and (e) 
of this section do not apply to expenditures for medical assistance made 
on behalf of qualified Medicare beneficiaries under section 1905(p) of 
the Act; individuals receiving Medicaid as categorically needy under 
section 1902(a)(10)(A)(i) (I), (II), (III), (IV), (V), (VI), or (VII) 
and section 1902(a)(10)(A)(ii) (I), (IX), or (X) and section 1905(u) of 
the Act; individuals who are eligible to receive benefits (or would be 
eligible for those benefits if they were not in a medical institution); 
and any individuals deemed to be members of the groups identified in 
this sentence.
    (b) Except as provided in paragraphs (c) and (d) of this section, 
FFP is not available in State expenditures for individuals (including 
the medically needy) whose annual income after deductions specified in 
Sec. 435.831(a) and (c) exceeds the following amounts, rounded to the 
next higher multiple of $100.
    (c) In the case of a family consisting only of two individuals, both 
of whom are adults and at least one of whom is aged, blind, or disabled, 
the State of California may use the amount of the AFDC payment most 
frequently made to a family of one adult and two children for purposes 
of computing the 133\1/3\ percent limitation (under the authority of 
section 4106 of Public Law 100-230).
    (d) For purposes of paragraph (b)(1) of this section, a State that 
as of June 1, 1989, has in its State plan (as defined in section 
2373(c)(5) of Public Law 98-369 as amended by section 9 of Public Law 
100-93) an amount for individuals that was reasonably related to 133\1/
3\ percent of the highest amount of AFDC which would ordinarily be paid 
to a family of two without income or resources may use an amount based 
upon a reasonable relationship to such an AFDC standard for a family of 
two.
    (e) FFP is not available in expenditures for services provided to 
categorically needy and medically needy recipients subject to the FFP 
limits if their annual income, after the cash assistance income 
deductions and any income disregards in the State plan authorized under 
section 1902(r)(2) of the Act are applied, exceeds the 133\1/3\ percent 
limitation described under paragraphs (b), (c), and (d) of this section.
    (f) A State may use the less restrictive income methodologies 
included under its State plan as authorized under Sec. 435.601 in 
determining whether a family's income exceeds the limitation described 
in paragraph (b) of this section.

[58 FR 4933, Jan. 19, 1993, as amended at 66 FR 2321, 2667, Jan. 11, 
2001]



Sec. 435.1008  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec. 435.1009; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services under Sec. 440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
tuberculosis or mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not

[[Page 162]]

considered to be a patient in that institution. However, such an 
individual who is under age 22 and has been receiving inpatient 
psychiatric services under Sec. 440.160 of this subchapter is considered 
to be a patient in the institution until he is unconditionally released 
or, if earlier, the date he reaches age 22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13199, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985]



Sec. 435.1009  Definitions relating to institutional status.

    For purposes of FFP, the following definitions apply:
    Active treatment in intermediate care facilities for the mentally 
retarded means treatment that meets the requirements specified in the 
standard concerning active treatment for intermediate care facilities 
for persons with mental retardation under Sec. 483.440(a) of this 
subchapter.
    Child-care institution means a nonprofit private child-care 
institution, or a public child-care institution that accommodates no 
more than twenty-five children, which is licensed by the State in which 
it is situated, or has been approved by the agency of the State 
responsible for licensing or approval of institutions of this type, as 
meeting the standards established for licensing. The term does not 
include detention facilities, forestry camps, training schools or any 
other facility operated primarily for the detention of children who are 
determined to be delinquent.
    In an institution refers to an individual who is admitted to live 
there and receive treatment or services provided there that are 
appropriate to his requirements.
    Inmate of a public institution means a person who is living in a 
public institution. An individual is not considered an inmate if--
    (a) He is in a public educational or vocational training institution 
for purposes of securing education or vocational training; or
    (b) He is in a public institution for a temporary period pending 
other arrangements appropriate to his needs.
    Inpatient means a patient who has been admitted to a medical 
institution as an inpatient on recommendation of a physician or dentist 
and who--
    (1) Receives room, board and professional services in the 
institution for a 24 hour period or longer, or
    (2) Is expected by the institution to receive room, board and 
professional services in the institution for a 24 hour period or longer 
even though it later develops that the patient dies, is discharged or is 
transferred to another facility and does not actually stay in the 
institution for 24 hours.
    Institution means an establishment that furnishes (in single or 
multiple facilities) food, shelter, and some treatment or services to 
four or more persons unrelated to the proprietor.
    Institution for mental diseases means a hospital, nursing facility, 
or other institution of more than 16 beds that is primarily engaged in 
providing diagnosis, treatment or care of persons with mental diseases, 
including medical attention, nursing care and related services. Whether 
an institution is an institution for mental diseases is determined by 
its overall character as that of a facility established and maintained 
primarily for the care and treatment of individuals with mental 
diseases, whether or not it is licensed as such. An institution for the 
mentally retarded is not an institution for mental diseases.
    Institution for the mentally retarded or persons with related 
conditions means an institution (or distinct part of an institution) 
that--
    (a) Is primarily for the diagnosis, treatment, or rehabilitation of 
the mentally retarded or persons with related conditions; and
    (b) Provides, in a protected residential setting, ongoing 
evaluation, planning, 24-hour supervision, coordination, and integration 
of health or rehabilitative services to help each individual function at 
his greatest ability.
    Institution for tuberculosis means an institution that is primarily 
engaged in providing diagnosis, treatment, or care of persons with 
tuberculosis, including medical attention, nursing care, and related 
services. Whether an institution is an institution for tuberculosis is 
determined by its overall character as that of a facility established 
and maintained primarily for

[[Page 163]]

the care and treatment of tuberculosis, whether or not it is licensed as 
such.
    Medical institution means an institution that--
    (a) Is organized to provide medical care, including nursing and 
convalescent care;
    (b) Has the necessary professional personnel, equipment, and 
facilities to manage the medical, nursing, and other health needs of 
patients on a continuing basis in accordance with accepted standards;
    (c) Is authorized under State law to provide medical care; and
    (d) Is staffed by professional personnel who are responsible to the 
institution for professional medical and nursing services. The services 
must include adequate and continual medical care and supervision by a 
physician; registered nurse or licensed practical nurse supervision and 
services and nurses' aid services, sufficient to meet nursing care 
needs; and a physician's guidance on the professional aspects of 
operating the institution.
    Outpatient means a patient of an organized medical facility or 
distinct part of that facility who is expected by the facility to 
receive, and who does receive, professional services for less than a 24-
hour period regardless of the hour of admission, whether or not a bed is 
used or whether or not the patient remains in the facility past 
midnight.
    Patient means an individual who is receiving needed professional 
services that are directed by a licensed practitioner of the healing 
arts toward maintenance, improvement, or protection of health, or 
lessening of illness, disability, or pain.
    Persons with related conditions means individuals who have a severe, 
chronic disability that meets all of the following conditions:
    (a) It is attributable to--
    (1) Cerebral palsy or epilepsy; or
    (2) Any other condition, other than mental illness, found to be 
closely related to mental retardation because this condition results in 
impairment of general intellectual functioning or adaptive behavior 
similar to that of mentally retarded persons, and requires treatment or 
services similar to those required for these persons.
    (b) It is manifested before the person reaches age 22.
    (c) It is likely to continue indefinitely.
    (d) It results in substantial functional limitations in three or 
more of the following areas of major life activity:
    (1) Self-care.
    (2) Understanding and use of language.
    (3) Learning.
    (4) Mobility.
    (5) Self-direction.
    (6) Capacity for independent living.
    Public institution means an institution that is the responsibility 
of a governmental unit or over which a governmental unit exercises 
administrative control. The term ``public institution'' does not include
    (a) A medical institution as defined in this section;
    (b) An intermediate care facility as defined in Secs. 440.140 and 
440.150 of this chapter;
    (c) A publicly operated community residence that serves no more than 
16 residents, as defined in this section; or
    (d) A child-care institution as defined in this section with respect 
to
    (1) Children for whom foster care maintenance payments are made 
under title IV-E of the Act; and
    (2) Children receiving AFDC--foster care under title IV-A of the 
Act.
    Publicly operated community residence that serves no more than 16 
residents is defined in 20 CFR 416.231(b)(6)(i). A summary of that 
definition is repeated here for the information of readers.
    (a) In general, a publicly operated community residence means--
    (1) It is publicly operated as defined in 20 CFR 416.231(b)(2).
    (2) It is designed or has been changed to serve no more than 16 
residents and it is serving no more than 16; and
    (3) It provides some services beyond food and shelter such as social 
services, help with personal living activities, or training in 
socialization and life skills. Occasional medical or remedial care may 
also be provided as defined in 45 CFR 228.1; and
    (b) A publicly operated community residence does not include the 
following facilities, even though they accommodate 16 or fewer 
residents:

[[Page 164]]

    (1) Residential facilities located on the grounds of, or immediately 
adjacent to, any large institution or multiple purpose complex.
    (2) Educational or vocational training institutions that primarily 
provide an approved, accredited, or recognized program to individuals 
residing there.
    (3) Correctional or holding facilities for individuals who are 
prisoners, have been arrested or detained pending disposition of 
charges, or are held under court order as material witnesses or 
juveniles.
    (4) Hospitals, nursing facilities, and intermediate care facilities 
for the mentally retarded.

[43 FR 45204, Sept. 29, 1978, as amended at 47 FR 28655, July 1, 1982; 
47 FR 31532, July 20, 1982; 51 FR 19181, May 28, 1986; 52 FR 47934, Dec. 
17, 1987; 53 FR 657, Jan. 11, 1988; 53 FR 20495, June 3, 1988; 56 FR 
8854, Mar. 1, 1991; 56 FR 23022, May 20, 1991; 59 FR 56233, Nov. 10, 
1994]

                   Requirements for State Supplements



Sec. 435.1010  Requirement for mandatory State supplements.

    (a) Except as specified in paragraph (b) of this section, FFP is not 
available in Medicaid expenditures in any quarter in which the State 
does not have in effect an agreement with the Secretary under section 
212 of Pub. L. 93-66 (July 9, 1973) for minimum mandatory State 
supplements of the basic SSI benefit.
    (b) This section does not apply to any State that meets the 
conditions of section 212(f) of Pub. L. 93-66.



Sec. 435.1011  Requirement for maintenance of optional State supplement expenditures.

    (a) This section applies to States that make optional State 
supplement payments under section 1616(a) of the Act and mandatory 
supplement payments under section 212(a) of Pub. L. 93-66.
    (b) FFP in Medicaid expenditures is not available during any period 
in which the State does not have in effect an agreement with the 
Secretary under section 1618 of the Act to maintain its supplementary 
payments.

[43 FR 45204, Sept. 29, 1978, as amended at 55 FR 48609, Nov. 21, 1990]



            Subpart L--Option for Coverage of Special Groups

    Source: 66 FR 2667, Jan. 11, 2001, unless otherwise noted.



Sec. 435.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.
    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec. 435.1101  Definitions related to presumptive eligibility for children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or
    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved

[[Page 165]]

plan and is eligible to receive payments under the approved plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under title XIX, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter).

[66 FR 2667, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec. 435.1102  General rules.

    (a) The agency may provide services to children under age 19 during 
one or more periods of presumptive eligibility following a determination 
by a qualified entity that the child's estimated gross family income or, 
at the State's option, the child's estimated family income after 
applying simple disregards, does not exceed the applicable income 
standard.
    (b) If the agency elects to provide services to children during a 
period of presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a regular 
Medicaid application form;
    (iii) Within five working days after the date that the determination 
is made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last day of the following month, the child's presumptive eligibility 
will end on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application; 
and
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and

[[Page 166]]

    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency;
    (3) Provide all services covered under the plan, including EPSDT; 
and
    (4) Allow determinations of presumptive eligibility to be made by 
qualified entities on a Statewide basis.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.



PART 436--ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS--Table of Contents




              Subpart A--General Provisions and Definitions

Sec.
436.1 Purpose and applicability.
436.2 Basis.
436.3 Definitions and use of terms.
436.10 State plan requirements.

        Subpart B--Mandatory Coverage of the Categorically Needy

436.100 Scope.
436.110 Individuals receiving cash assistance.
436.111 Individuals who are not eligible for cash assistance because of 
          a requirement not applicable under Medicaid.
436.112 Individuals who would be eligible for cash assistance except for 
          increased OASDI under Pub. L. 92-336 (July 1, 1972).
436.114 Individuals deemed to be receiving AFDC.
436.116 Families terminated from AFDC because of increased earnings or 
          hours of employment.
436.118 Children for whom adoption assistance or foster care maintenance 
          payments are made.
436.120 Qualified pregnant women and children who are not qualified 
          family members.
436.121 Qualified family members.
436.122 Pregnant women eligible for extended coverage.
436.124 Newborn children.
436.128 Coverage for certain qualified aliens.

         Subpart C--Options for Coverage as Categorically Needy

436.200 Scope.
436.201 Individuals included in optional groups.

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women

436.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
436.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
436.212 Individuals who would be eligible for cash assistance if the 
          State plan for OAA, AFDC, AB, APTD, or AABD were as broad as 
          allowed under the Act.
436.217 Individuals receiving home and community-based services.
436.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.
436.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.
436.224 Individuals under age 21 who are under State adoption assistance 
          agreements.
436.229 Optional targeted low-income children.

          Options for Coverage of the Aged, Blind, and Disabled

436.230 Essential spouses of aged, blind, or disabled individuals 
          receiving cash assistance.

           Subpart D--Optional Coverage of the Medically Needy

436.300 Scope.
436.301 General rules.
436.308 Medically needy coverage of individuals under age 21.
436.310 Medically needy coverage of specified relatives.
436.320 Medically needy coverage of the aged.
436.321 Medically needy coverage of the blind.
436.322 Medically needy coverage of the disabled.
436.330 Coverage for certain aliens.

               Subpart E--General Eligibility Requirements

436.400 Scope.
436.401 General rules.
436.402 [Reserved]
436.403 State residence.
436.404 Applicant's choice of category.
436.406 Citizenship and alienage.
436.408 Categories of aliens who are permanently residing in the United 
          States under color of law.

      Subpart F--Categorical Requirements for Medicaid Eligibility

436.500 Scope.

[[Page 167]]

                               Dependency

436.510 Determination of dependency.

                                   Age

436.520 Age requirements for the aged.
436.522 Determination of age.

                                Blindness

436.530 Definition of blindness.
436.531 Determination of blindness.

                               Disability

436.540 Definition of disability.
436.541 Determination of disability.

    Subpart G--General Financial Eligibility Requirements and Options

436.600 Scope.
436.601 Application of financial eligibility methodologies.
436.602 Financial responsibility of relatives and other individuals.
436.604 [Reserved]
436.606 [Reserved]
436.608 Applications for other benefits.
436.610 Assignment of rights to benefits.

Subpart H [Reserved]

        Subpart I--Financial Requirements for the Medically Needy

436.800 Scope.

                     Medically Needy Income Standard

436.811 Medically needy income standard: General requirements.
436.814 Medically needy income standard: State plan requirements.

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses

436.831 Income eligibility.
436.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

                    Medically Needy Resource Standard

436.840 Medically needy resource standard: General requirements.
436.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

436.845 Medically needy resource eligibility.

   Subpart J--Eligibility in Guam, Puerto Rico, and the Virgin Islands

436.900 Scope.
436.901 General requirements.
436.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.

            Subpart K--Federal Financial Participation (FFP)

436.1000 Scope.

 FFP for Expenditures for Determining Eligibility and Providing Services

436.1001 FFP for administration.
436.1002 FFP for services.
436.1003 Recipients overcoming certain conditions of eligibility.
436.1004 Institutionalized individuals.
436.1005 Definitions relating to institutional status.

            Subpart L--Option for Coverage of Special Groups

436.1100 Basis and scope.

                  Presumptive Eligibility for Children

436.1101 Definitions related to presumptive eligibility for children.
436.1102 General rules.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45218, Sept. 29, 1978, unless otherwise noted.



              Subpart A--General Provisions and Definitions



Sec. 436.1  Purpose and applicability.

    This part sets forth, for Guam, Puerto Rico, and the Virgin Islands-
-
    (a) The eligibility provisions that a State plan must contain;
    (b) The mandatory and optional groups of individuals to whom 
Medicaid is provided under a State plan;
    (c) The eligibility requirements and procedures that a Medicaid 
agency must use in determining and redetermining eligibility, and 
requirements it may not use; and
    (d) The availability of FFP for providing Medicaid and for 
administering the eligibility provisions of the plan.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]



Sec. 436.2  Basis.

    This part implements the following sections of the Act and public 
laws that state requirements and standards for eligibility:


[[Page 168]]


402(a)(22) Eligibility of deemed recipients of AFDC who receive zero 
          payments because of recoupment of overpayments.
402(a)(37) Eligibility of individuals who lose AFDC eligibility due to 
          increased earnings.
414(g) Eligibility of certain individuals participating in work 
          supplementation programs.
473(b) Eligibility of children in foster care and adopted children who 
          are deemed AFDC recipients.
1902(a)(8) Opportunity to apply; assistance must be furnished promptly.
1902(a)(10) Required and optional groups.
1902(a)(12) Determination of blindness.
1902(a)(16) Out-of-State care for State residents.
1902(a)(17) Standards for determining eligibility; flexibility in the 
          application of income eligibility standards.
1902(a)(19) Safeguards for simplicity of administration and best 
          interests of recipients.
1902(a)(34) Three-month retroactive eligibility.
1902(a) (second paragraph after (47)) Eligibility despite increased 
          monthly insurance benefits under title II.
1902(a)(55) Mandatory use of outstation locations other than welfare 
          offices to receive and initially process applications of 
          certain low-income pregnant women, infants, and children under 
          age 19.
1902(b) Prohibited conditions for eligibility:
    Age requirements of more than 65 years;
    State residence requirements excluding individuals who reside in the 
State; and
    Citizenship requirement excluding United States citizens.
1902(e) Four-month continued eligibility for families ineligible because 
          of increased hours or income from employment.
1902(e)(2) Minimum eligibility period for recipients enrolled in HMO.
1902(e)(3) Optional coverage of certain disabled children at home.
1902(e)(4) Eligibility of newborn children of Medicaid-eligible women.
1902(e)(5) Eligibility of pregnant women for extended coverage for a 
          specified period after pregnancy ends.
1903(v) Payment for emergency services under Medicaid provided to 
          aliens.
1905(a) (i)-(viii) List of eligible individuals.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
          to certain institutionalized individuals.
1905(a) (second sentence) Definition f essential person.
1905(d)(2) Definition of resident of an intermediate care facility for 
          the mentally retarded.
1905(n) Definition of qualified pregnant woman and child.
1912(a) Conditions of eligibility.
1915(c) Home or community based services.
1915(d) Home and community-based services for individuals age 65 or 
          older.
412(e)(5) of Immigration and Nationality Act-Eligibility of certain 
          refugees.
Pub. L. 93-66, section 230 Deemed eligibility of certain essential 
          persons.
Pub. L. 93-66, section 231 Deemed eligibility of certain persons in 
          medical institutions.
Pub. L. 93-66, section 232 Deemed eligibility of certain blind and 
          disabled medically indigent persons.
Pub. L. 96-272, section 310(b)(1) Continued eligibility of certain 
          recipients of Veterans Administration pensions.
Pub. L. 99-509, section 9406 Payment for emergency medical services 
          provided to aliens.
Pub. L. 99-603, section 201 Aliens granted legalized status under 
          section 245A of the Immigration and Nationality Act (8 U.S.C. 
          1255a) may under certain circumstances be eligible for 
          Medicaid.
Pub. L. 99-603, section 302 Aliens granted legalized status under 
          section 210 of the Immigration and Nationality Act may under 
          certain circumstances be eligible for Medicaid (8 U.S.C. 
          1160).
Pub. L. 99-603, section 303 Aliens granted legal status under section 
          210A of the Immigration and Nationality Act may under certain 
          circumstances be eligible for Medicaid (8 U.S.C. 1161).

[52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 
FR 36820, Sept. 7, 1990; 55 FR 48609, Nov. 21, 1990; 57 FR 29155, June 
30, 1992; 59 FR 48811, Sept. 23, 1994]



Sec. 436.3  Definitions and use of terms.

    As used in this part--
    AABD means aid to the aged, blind, and disabled under title XVI of 
the Act;
    AB means aid to the blind under title X of the Act;
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    Categorically needy refers to families and children, aged, blind or 
disabled individuals, and pregnant women listed under subparts B and C 
of this part who are eligible for Medicaid. Subpart B of this part 
describes the mandatory eligibility groups who, generally, are receiving 
or deemed to be receiving cash assistance under the Act. These mandatory 
groups are specified in sections 1902(a)(10)(A)(i) and 1902(e) of the 
Act. Subpart C of this part describes the optional eligibility groups of 
individuals

[[Page 169]]

who, generally, meet the categorical requirements that are the same as 
or less restrictive than those of the cash assistance programs but are 
not receiving cash payments. These optional groups are specified in 
sections 1902(a)(10)(A)(ii) and 1902(e) of the Act.
    Families and children refers to eligible members of families with 
children who are financially eligible under AFDC or medically needy 
rules and who are deprived of parental support or care as defined under 
the AFDC program (see 45 CFR 233.90; 233.100). In addition, this group 
includes individuals under age 21 who are not deprived of parental 
support or care but who are financially eligible under AFDC or medically 
needy rules (see optional coverage group, Sec. 436.222);
    Medically needy means families, children, aged, blind, or disabled 
individuals, and pregnant women listed in subpart D of this part who are 
not listed in subparts B and C of this part as categorically needy but 
who may be eligible for Medicaid under this part because their income 
and resources are within limits set by the State under its Medicaid plan 
(including persons whose income and resources fall within these limits 
after their incurred expenses for medical or remedial care are 
deducted). (Specific financial requirements for determining eligibility 
of the medically needy appear in subpart I of this part.)
    OAA means old age assistance under title I of the Act;
    OASDI means old age, survivors, and disability insurance under Title 
II of the Act.
    Optional targeted low-income child means a child under age 19 who 
meets the financial and categorical standards described below.
    (1) Financial need. An optional targeted low-income child:
    (i) Has a family income at or below 200 percent of the Federal 
poverty line for a family of the size involved;
    (ii) Resides in a State with no Medicaid applicable income level (as 
defined in Sec. 457.10 of this chapter); or,
    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined in Sec. 457.10) and has family income that either:
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points (expressed as a 
percentage of the Federal poverty line); or
    (B) Does not exceed the income level specified for such child to be 
eligible for medical assistance under the policies of the State plan 
under title XIX on June 1, 1997.
    (2) No other coverage and State maintenance of effort. An optional 
targeted low-income child is not covered under a group health plan or 
health insurance coverage, or would not be eligible for Medicaid under 
the policies of the State plan in effect on March 31, 1997; except that, 
for purposes of this standard--
    (i) A child shall not be considered to be covered by health 
insurance coverage based on coverage offered by the State under a 
program in operation prior to July 1, 1997 if that program received no 
Federal financial participation;
    (ii) A child shall not be considered to be covered under a group 
health plan or health insurance coverage if the child did not have 
reasonable geographic access to care under that coverage.
    (3) For purposes of this section, policies of the State plan under 
title XIX plan include policies under a Statewide demonstration project 
under section 1115(a) of the Act other than a demonstration project that 
covered an expanded group of eligible children but that either--
    (i) Did not provide inpatient hospital coverage; or
    (ii) Limited eligibility to children previously enrolled in 
Medicaid, imposed premiums as a condition of initial or continued 
enrollment, and did not impose a general time limit on eligibility.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47989, Sept. 30, 1981; 58 FR 4934, Jan. 19, 1993; 66 FR 2668, Jan. 
11, 2001]



Sec. 436.10  State plan requirements.

    A State plan must--
    (a) Provide that the requirements of this part are met; and
    (b) Specify the groups to whom Medicaid is provided, as specified in 
subparts B, C, and D of this part, and the conditions of eligibility for 
individuals in those groups.

[[Page 170]]



        Subpart B--Mandatory Coverage of the Categorically Needy



Sec. 436.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.



Sec. 436.110  Individuals receiving cash assistance.

    (a) A Medicaid agency must provide Medicaid to individuals receiving 
cash assistance under OAA, AFDC, AB, APTD, or AABD.
    (b) For purposes of this section, an individual is receiving cash 
assistance if his needs are considered in determining the amount of the 
payment. This includes an individual whose presence in the home is 
considered essential to the well-being of a recipient under the State's 
plan for OAA, AFDC, AB, APTD, or AABD if that plan were as broad as 
allowed under the Act for FFP.



Sec. 436.111  Individuals who are not eligible for cash assistance because of a requirement not applicable under Medicaid.

    (a) The agency must provide Medicaid to individuals who would be 
eligible for OAA, AB, APTD, or AABD except for an eligibility 
requirement used in those programs that is specifically prohibited under 
title XIX of the Act.
    (b) The agency also must provide Medicaid to:
    (1) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act:
    (i) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (ii) Grandparents
    (iii) Legal guardians;
    (iv) Aliens sponsors who are not organizations; and
    (v) Siblings.
    (2) [Reserved]

[58 FR 4934, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec. 436.112  Individuals who would be eligible for cash assistance except for increased OASDI under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving cash assistance; or
    (2) He would have been eligible for cash assistance if he had 
applied, and the Medicaid plan covered this optional group; or
    (3) He would have been eligible for cash assistance if he were not 
in a medical institution or intermediate care facility, and the Medicaid 
plan covered this optional group.
    (b) The individual would currently be eligible for cash assistance 
except that the increase in OASDI under Pub. L. 92-336 raised his income 
over the limit allowed under the cash assistance program. This includes 
an individual who--
    (1) Meets all current requirements for cash assistance except for 
the requirement to file an application; or
    (2) Would meet all current requirements for cash assistance if he 
were not in a medical institution or intermediate care facility, and the 
Medicaid plan covers this optional group.



Sec. 436.114  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--

[[Page 171]]

    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E of the Act, whether or not adoption assistance is being 
provided or an interlocutory or other judicial decree of adoption has 
been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of a child or spousal support 
collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals who are eligible for extended Medicaid lose this coverage if 
they move to another State during the 4-month period. However, if they 
move back to and reestablish residence in the State in which they have 
extended coverage, they are eligible for any of the months remaining in 
the 4-month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in income or changes in other 
circumstances and the other changes in income or circumstances cannot 
alone or in combination result in termination without the change in 
support.
    (2) In cases of increases in the amounts of both the support 
collections and earned income, eligibility under this section does not 
preclude eligibility under 45 CFR 233.20(a)(14) or section 1925 of the 
Social Security Act (which was added by section 303(a) of the Family 
Support Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting 
from both an increase in the amount of the support collection and from 
an increase in earned income must run concurrently.

[46 FR 47989, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 
52 FR 48438, Dec. 22, 1987; 55 FR 48610, Nov. 21, 1990; 59 FR 59377, 
Nov. 17, 1994]

[[Page 172]]



Sec. 436.116  Families terminated from AFDC because of increased earnings or hours of employment.

    (a) If a family loses AFDC solely because of increased income from 
employment or increased hours of employment, the agency must continue to 
provide Medicaid for 4 months to all members of the family if--
    (1) The family received AFDC in any 3 or more months during the 6-
month period immediately before the month in which it became ineligible 
for AFDC; and
    (2) At least one member of the family is employed throughout the 4-
month period, although this need not be the same member for the whole 
period.
    (b) The 4 calendar month period begins on the date AFDC is 
terminated. If AFDC benefits are terminated retroactively, the 4 
calendar month period also begins retroactively with the first month in 
which AFDC was erroneously paid.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]



Sec. 436.118  Children for whom adoption assistance or foster care maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28656, July 1, 1982]



Sec. 436.120  Qualified pregnant women and children who are not qualified family members.

    (a) The Medicaid agency must provide Medicaid to a pregnant woman 
whose pregnancy has been medically verified and who--
    (1) Would be eligible for an AFDC cash payment (or would be eligible 
for an AFDC cash payment if coverage under the State's AFDC plan 
included the AFDC-unemployed parents program) if her child had been born 
and was living with her in the month of payment;
    (2) Is a member of a family that would be eligible for an AFDC cash 
payment if the State's AFDC plan included an AFDC-unemployed parents 
program; or
    (3) Meets the income and resource requirements of the State's 
approved AFDC plan. In determining whether the woman meets the AFDC 
income and resource requirements, the unborn child or children are 
considered members of the household, and the woman's family is treated 
as though deprivation exists.
    (b) The provisions of paragraphs (a) (1) and (2) of this section are 
effective October 1, 1984. The provisions of paragraph (a)(3) of this 
section are effective July 1, 1986.
    (c) The agency must provide Medicaid to children who meet all of the 
following criteria:
    (1) They are born after September 30, 1983;
    (2) Effective October 1, 1988, they are under age 6 (or if 
designated by the State, any age that exceeds age 6 but does not exceed 
age 8), and effective October 1, 1989 they are under age 7 (or if 
designated by the State, any age that exceeds age 7 but does not exceed 
age 8); and
    (3) They meet the income and resource requirements of the State's 
approved AFDC plan.

[52 FR 43072, Nov. 9, 1987, as amended at 55 FR 48610, Nov. 21, 1990; 58 
FR 48614, Sept. 17, 1993]



Sec. 436.121  Qualified family members.

    (a) Definition. A qualified family member is any member of a family, 
including pregnant women and children eligible for Medicaid under 
Sec. 436.120 of this subpart, who would be receiving AFDC cash benefits 
on the basis of the unemployment of the principal wage earner under 
section 407 of the Act had the State not chosen to place time limits on 
those benefits as permitted under section 407(b)(2)(B)(i) of the Act.
    (b) State plan requirement. The State plan must provide that the 
State makes Medicaid available to any individual who meets the 
definition of ``qualified family member'' as specified in paragraph (a) 
of this section.
    (c) Applicability. The provisions in this section are applicable 
from October 1, 1992, through September 30, 1998.


[58 FR 48614, Sept. 17, 1993]

[[Page 173]]



Sec. 436.122  Pregnant women eligible for extended coverage.

    (a) The Medicaid agency must provide categorically needy Medicaid 
eligibility for an extended period following termination of pregnancy to 
women who, while pregnant, applied for, were eligible for, and received 
Medicaid services on the day that their pregnancy ends. This period 
extends from the last day of pregnancy through the end of the month in 
which a 60-day period, beginning on the last day of the pregnancy, ends. 
Eligibility must be provided, regardless of changes in the woman's 
financial circumstances that may occur within this extended period. 
These pregnant women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined in 
Sec. 440.210(c)(1) of this subchapter).
    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48610, Nov. 21, 1990]



Sec. 436.124  Newborn children.

    (a) The Medicaid agency must provide categorically needy Medicaid 
eligibility to a child born to a woman who is eligible for and receiving 
Medicaid on the date of the child's birth. The child is deemed to have 
applied and been found eligible for Medicaid on the date of birth and 
remains eligible as categorically needy for one year so long as the 
woman remains eligible and the child is a member of the woman's 
household. If the mother's basis of eligibility changes to medically 
needy, the child is eligible as medically needy under 
Sec. 436.301(b)(1)(iii).
    (b) The requirements under paragraph (a) of this section apply to 
children born on or after October 1, 1984.

[52 FR 43073, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987]



Sec. 436.128  Coverage for certain qualified aliens.

    The agency must provide the services necessary for the treatment of 
an emergency medical condition as defined in Sec. 440.255(c) of this 
chapter to those aliens described in Sec. 436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



         Subpart C--Options for Coverage as Categorically Needy



Sec. 436.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec. 436.201  Individuals included in optional groups.

    (a) The agency may choose to cover as optional categorically needy 
any group or groups of the following individuals who are not receiving 
cash assistance and who meet the appropriate eligibility criteria for 
groups specified in the separate sections of this subpart:
    (1) Aged individuals (65 years of age or older);
    (2) Blind individuals (as defined in Sec. 436.530);
    (3) Disabled individuals (as defined in Sec. 436.541);
    (4) Individuals under age 21 (or, at State option), under age 20, 
19, or 18) or reasonable classifications of these individuals;
    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent) as 
specified in Sec. 436.510;
    (6) Pregnant women; and
    (7) Essential spouses specified under Sec. 436.230.
    (b) If the agency provides Medicaid to any individual in an optional 
group specified in paragraph (a) of this section, the agency must 
provide Medicaid to all individuals who apply and are found eligible to 
be members of that group.

[58 FR 4934, Jan. 19, 1993]

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women



Sec. 436.210  Individuals who meet the income and resource requirements of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified under Sec. 436.201(a)(1), (a)(2), (a)(3), (a)(5), 
and (a)(6) who are not mandatory categorically needy and

[[Page 174]]

who meet the income and resource requirements of the appropriate cash 
assistance program for their status (that is, OAA, AFDC, AB, APTD, or 
AABD).

[58 FR 4935, Jan. 19, 1993]



Sec. 436.211  Individuals who would be eligible for cash assistance if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec. 436.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, OAA, AFDC, AB, APTD, or AABD) because of lower 
income standards used under the program to determine eligibility for 
institutionalized individuals; but
    (b) Would be eligible for aid or assistance under the State's 
approved plan under OAA, AFDC, AB, APTD, or AABD if they were not 
institutionalized.

[58 FR 4935, Jan. 19, 1993]



Sec. 436.212  Individuals who would be eligible for cash assistance if the State plan for OAA, AFDC, AB, APTD, or AABD were as broad as allowed under the Act.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec. 436.201(a) who:
    (1) Would be eligible for OAA, AFDC, AB, APTD, or AABD if the 
State's plan under those programs included individuals whose coverage 
under title I, IV-A, X, XIV, or XVI of the Act is optional (for example, 
the agency may provide Medicaid to individuals who are 18 years of age 
and who are attending secondary school full-time and are expected to 
complete their education before age 19, even though the State's AFDC 
plan does not include them); or
    (2) Would qualify for OAA, AFDC, AB, APTD, or AABD if the State's 
plan under those programs did not contain eligibility requirements more 
restrictive than, or in addition to, those required under the 
appropriate title of the Act. (For example, the agency may provide 
Medicaid to individuals who would meet the Federal definition of 
disability, 45 CFR 233.80, but who do not meet the State's more 
restrictive definitions.)
    (b) The agency may cover one or more optional groups under any of 
the titles of the Act without covering all such groups.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47990, Sept. 30, 1981; 58 FR 4935, Jan. 19, 1993]



Sec. 436.217  Individuals receiving home and community-based services.

    The agency may provide Medicaid to any group or groups of 
individuals in the community who meet the following requirements:
    (a) The group would be eligible for Medicaid if institutionalized.
    (b) In the absence of home and community-based services under a 
waiver granted under part 441--
    (1) Subpart G of this subchapter, the group would otherwise require 
the level of care furnished in a hospital, NF, or an ICF/MR; or
    (2) Subpart H of this subchapter, the group would otherwise require 
the level of care furnished in a NF and are age 65 or older.
    (c) The group receives the waivered services.

[57 FR 29155, June 30, 1992]



Sec. 436.220  Individuals who would meet the income and resource requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec. 436.201(a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's AFDC 
plan if their work-related child care costs were paid from their 
earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4935, Jan. 19, 1993]



Sec. 436.222  Individuals under age 21 who meet the income and resource requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or 
at State

[[Page 175]]

option, under age 20, 19, or 18) or reasonable categories of these 
individuals as specified in paragraph (b) of this section, who are not 
receiving cash assistance but who meet the income and resource 
requirements of the State's approved AFDC plan.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals of the same age in foster homes or private institutions by 
private nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]



Sec. 436.224  Individuals under age 21 who are under State adoption assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance has 
determined, cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the foster care program were used without employing the 
threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraph (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid before the adoption assistance agreement was 
entered into.

[55 FR 48610, Nov. 21, 1990]



Sec. 436.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined in Sec. 436.3; or
    (b) Reasonable categories of these individuals.

[66 FR 2668, Jan. 11, 2001]

          Options for Coverage of the Aged, Blind, and Disabled



Sec. 436.230  Essential spouses of aged, blind, or disabled individuals receiving cash assistance.

    The agency may provide Medicaid to the spouse of an individual 
receiving OAA, AB, APTD, or AABD, if--
    (a) The spouse is living with the individual receiving cash 
assistance;
    (b) The cash assistance agency has determined that the spouse is 
essential to the well-being of the individual and

[[Page 176]]

has considered the spouse's needs in determining the amount of cash 
assistance provided to the individual.



           Subpart D--Optional Coverage of the Medically Needy



Sec. 436.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec. 436.301  General rules.

    (a) A Medicaid agency may provide Medicaid to individuals specified 
in this subpart who:
    (1) Either:
    (i) Have income that meets the standard in Sec. 436.811; or
    (ii) If their income is more than allowed under the standard, have 
incurred medical expenses at least equal to the difference between their 
income and the applicable income standards; and
    (2) Have resources that meet the standard in Secs. 436.840 and 
436.843.
    (b) If the agency chooses this option, the following provisions 
apply:
    (1) The agency must provide Medicaid to the following individuals 
who meet the requirements of paragraph (a) of this section:
    (i) All pregnant women during the course of their pregnancy who, 
except for income and resources, would be eligible for Medicaid as 
mandatory or optional categorically needy under subparts B and C of this 
part;
    (ii) All individuals under 18 years of age who, except for income 
and resources, would be eligible for Medicaid as mandatory categorically 
needy under subpart B of this part;
    (iii) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and receiving Medicaid on the 
date of the child's birth. The child is deemed to have applied and been 
found eligible for Medicaid on the date of birth and remains eligible as 
medically needy for ne year so long as the woman remains eligible and 
the child is a member of the woman's household. If the woman's basis of 
eligibility changes to categorically needy, the child is eligible as 
categorically needy under Sec. 436.124. The woman is considered to 
remain eligible if she meets the spend-down requirements in any 
consecutive budget period following the birth of the child.
    (iv) Women who, while pregnant, applied for, were eligible for, and 
received Medicaid services as medically needed on the day that their 
pregnancy ends. The agency must provide medically needy eligibility to 
these women for an extended period following termination of pregnancy. 
This period begins on the last day of the pregnancy and extends through 
the end of the month in which a 60-day period following termination of 
pregnancy ends. Eligibility must be provided, regardless of changes in 
the women's financial circumstances that may occur within this extended 
period. These women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined in 
Sec. 440.210(c)(1) of this subchapter).
    (2) The agency may provide Medicaid to any or all of the following 
groups of individuals:
    (i) Individuals under age 21 (Sec. 436.308).
    (ii) Specified relatives (Sec. 436.310).
    (iii) Aged (Sec. 436.320).
    (iv) Blind (Sec. 436.321).
    (v) Disabled (Sec. 436.322).
    (3) If the agency provides Medicaid to any individual in a group 
specified in paragraph (b)(2) of this section, the agency must provide 
Medicaid to all individuals eligible to be members of that group.

[46 FR 47990, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
52 FR 43073, Nov. 9, 1987; 55 FR 48610, Nov. 21, 1990; 58 FR 4935, Jan. 
19, 1993]



Sec. 436.308  Medically needy coverage of individuals under age 21.

    (a) If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals under age 21 (or at State option, under 
age 20, 19, or 18) as specified in paragraph (b) of this section:
    (1) Who would not be covered under the mandatory medically needy 
group of individuals under 18 under Sec. 436.301(b)(1)(ii); and
    (2) Who meet the income and resource requirements of subpart I of 
this part.
    (b) The agency may cover all individuals in paragraph (a) of this 
section or

[[Page 177]]

individuals in reasonable classifications. Examples of reasonable 
classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals placed in foster homes or private institutions by private 
nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. When the agency covers such individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]



Sec. 436.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and in 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified in Sec. 436.510.

[58 FR 4936, Jan. 19, 1993]



Sec. 436.320  Medically needy coverage of the aged.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals who--
    (a) Are 65 years of age and older, as provided for in Sec. 436.520; 
and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47991, Sept. 30, 1981]



Sec. 436.321  Medically needy coverage of the blind.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to blind individuals who meet--
    (a) The requirements for blindness, as specified in Secs. 436.530 
and 436.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec. 436.322  Medically needy coverage of the disabled.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to disabled individuals who meet--
    (a) The requirements for disability, as specified in Secs. 436.540 
and 436.541; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec. 436.330  Coverage for certain aliens.

    If an agency provides Medicaid to the medically needy, it must 
provide the services necessary for the treatment of an emergency medical 
condition, as defined in Sec. 440.255(c) of this chapter to those aliens 
described in Sec. 436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



               Subpart E--General Eligibility Requirements



Sec. 436.400  Scope.

    This subpart prescribes general requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of the part.



Sec. 436.401  General rules.

    (a) The agency may not impose any eligibility requirement that is 
prohibited under title XIX.
    (b) The agency must base any optional group covered under subparts B

[[Page 178]]

and C of this part on reasonable classifications that do not result in 
arbitrary or inequitable treatment of individuals and groups and are 
consistent with the objectives of title XIX.
    (c) The agency must not use requirements for determining eligibility 
for optional coverage groups that are more restrictive than those used 
under the State plans for OAA, AFDC, AB, APTD, or AABD.



Sec. 436.402  [Reserved]



Sec. 436.403  State residence.

    (a) Requirement. The agency must provide Medicaid to eligible 
residents of the State, including residents who are absent from the 
State. The conditions under which payment for service is provided to 
out-of-State residents are set forth in Sec. 431.52 of this chapter.
    (b) Definition. For purposes of this section--Institution has the 
same meaning as Institution and Medical institution, as defined in 
Sec. 435.1009 of this chapter. For purposes of State placement, the term 
also includes ``foster care homes'', licensed as set forth in 45 CFR 
1355.20, and providing food, shelter and supportive services to one or 
more persons unrelated to the proprietor.
    (c) Incapability of indicating intent. For purposes of this section, 
an individual is considered incapable of indicating intent if the 
individual--
    (1) Has an I.Q. of 49 or less or has a mental age of 7 or less, 
based on tests acceptable to the mental retardation agency in the State;
    (2) Is judged legally incompetent; or
    (3) Is found incapable of indicating intent based on medical 
documentation obtained from a physician, psychologist, or other person 
licensed by the State in the field of mental retardation.
    (d) Who is a State resident. A resident of a State is any individual 
who:
    (1) Meets the conditions in paragraphs (e) through (h) of this 
section; or
    (2) Meets the criteria specified in an interstate agreement under 
paragraph (j) of this section.
    (e) Placement by a State in an out-of-state institution--(1) General 
rule. Any agency of the State, including an entity recognized under 
State law as being under contract with the State for such purposes, that 
arranges for an individual to be placed in an institution located in 
another State, is recognized as acting on behalf of the State in making 
a placement. The State arranging or actually making the placement is 
considered as the individual's State of residence.
    (2) Any action beyond providing information to the individual and 
the individual's family would constitute arranging or making a State 
placement. However, the following actions do not constitute State 
placement:
    (i) Providing basic information to individuals about another State's 
Medicaid program, and information about the availability of health care 
services and facilities in another State.
    (ii) Assisting an individual in locating an institution in another 
State provided the individual is capable of indicating intent and 
independently decides to move.
    (3) When a competent individual leaves the facility in which the 
individual is placed by a State, that individual's State of residency 
for Medicaid purposes is the State where the individual is physically 
located.
    (4) Where placement is initiated by a State because the State lacks 
a sufficient number of appropriate facilities to provide services to its 
residents, the State making the placement is the individual's State of 
residence for Medicaid purposes.
    (f) Individuals receiving title IV-E payments. For individuals of 
any age who are receiving Federal payment for foster care and adoption 
assistance under title IV-E of the Social Security Act, the State of 
residence is the State where the child lives.
    (g) Individuals under age 21. (1) For any individual who is 
emancipated from his or her parents or who is married and capable of 
indicating intent, the State of residence is the State where the 
individual is living with the intention to remain there permanently or 
for an indefinite period.
    (2) For any individual not residing in an institution as defined in 
paragraph (b) whose Medicaid eligibility is based on blindness or 
disability, the State of residence is the State in which the individual 
is living.

[[Page 179]]

    (3) For any other non-institutionalized individual not subject to 
paragraph (h)(1) or (h)(2) of this section, the State of residence is 
determined in accordance with 45 CFR 233.40, the rules governing 
residence under the AFDC program.
    (4) For any institutionalized individual who is neither married nor 
emancipated, the State of residence is--
    (i) The parents' or legal guardian's current State of residence at 
the time of placement; or
    (ii) The current State of residence of the parent or legal guardian 
who files the application, if the individual is institutionalized in 
that State. If a legal guardian has been appointed and the parental 
rights are terminated, the State of residence of the guardian is used 
instead of the parent's.
    (iii) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (h) Individuals age 21 and over. (1) For any individual not residing 
in an institution as defined in paragraph (b), the State of residence is 
the State where the individual is--
    (i) Living with the intention to remain there permanently or for an 
indefinite period (or if incapable of stating intent, where the 
individual is living); or
    (ii) Living and which the individual entered with a job commitment 
or seeking employment (whether or not currently employed).
    (2) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--
    (i) That of the parents applying for Medicaid on the individual's 
behalf, if the parents reside in separate States;
    (ii) The parent's or legal guardian's State of residence at the time 
of placement; or
    (iii) The current State of residence of the parent or legal guardian 
who files the application, if the individual is institutionalized in 
that State. If a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the legal parent's.
    (iv) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (3) For any institutionalized individual who became incapable of 
indicating intent at or after age 21, the State of residence is the 
State in which the individual is physically present, except where 
another State makes a placement.
    (4) For any other institutionalized individual, the State of 
residence is the State where the individual is living with the intention 
to remain there permanently or for an indefinite period.
    (i) Specific prohibitions. (1) The agency may not deny Medicaid 
eligibility because an individual has not resided in the State for a 
specified period.
    (2) The agency may not deny Medicaid eligibility to an individual in 
an institution, who satisfies the residency rules set forth in this 
section, on the grounds that the individual did not establish residence 
in the State before entering the institution.
    (3) The agency may not deny or terminate a resident's Medicaid 
eligibility because of that person's temporary absence from the State if 
the person intends to return when the purpose of the absence has been 
accomplished, unless another State has determined that the person is a 
resident there for purposes of Medicaid.
    (j) Interstate agreements. A State may have a written agreement with 
another State setting forth rules and procedures resolving cases of 
disputed residency. These agreements may establish criteria other than 
those specified in paragraphs (c) through (h) of this section, but must 
not include criteria that result in loss of residency in both States or 
that are prohibited by paragraph (i) of this section. The agreements 
must contain a procedure for providing Medicaid to individuals pending 
resolution of the case.

States may use interstate agreements for purposes other than cases of 
disputed residency to facilitate administration of the program, and to 
facilitate the placement and adoption of

[[Page 180]]

title IV-E individuals when the child and his or her adoptive parent(s) 
move into another State.
    (k) Continued Medicaid for institutionalized recipients. An agency 
is providing Medicaid to an institutionalized recipient who, as a result 
of this section, would be considered a resident of a different State--
    (1) The agency must continue to provide Medicaid to that recipient 
from June 24, 1983 until July 5, 1984 unless it makes arrangements with 
another State of residence to provide Medicaid at an earlier date; and
    (2) Those arrangements must not include provisions prohibited by 
paragraph (g) of this section.
    (l) Cases of disputed residency. Where two or more States cannot 
resolve which State is the State of residence, the State where the 
individual is physically located is the State of residence.

[49 FR 13533, Apr. 5, 1984, as amended at 55 FR 48610, Nov. 21, 1990]



Sec. 436.404  Applicant's choice of category.

    The agency must allow an individual who would be eligible under more 
than one category to have his eligibility determined for the category he 
selects.



Sec. 436.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--
    (1) Citizens; or
    (2) Aliens lawfully admitted for permanent residence or permanently 
residing in the United States under color of law, as defined in 
Sec. 436.408 of this part;
    (3) Aliens granted lawful temporary resident status under sections 
245A and 210A of the Immigration and Nationality Act if the individual 
is aged, blind, or disabled as defined in section 1614(a)(1) of the Act, 
under 18 years of age, or a Cuban/Haitian entrant as defined in section 
501 (e)(1) and (2)(A) of Pub. L. 96-422; or
    (4) Aliens granted lawful temporary resident status under section 
210 of the Immigration and Nationality Act unless the alien would, but 
for the 5-year bar to receipt of AFDC contained in such section, be 
eligible for AFDC.
    (b) The agency must only provide emergency services (as defined for 
purposes of section 1916(a)(2)(D) of the Social Security Act), and 
services for pregnant women as defined in section 1916(a)(2)(B) of the 
Social Security Act to otherwise eligible residents of the United States 
not described in paragraphs (a)(3) and (a)(4) of this section who have 
been granted lawful temporary or lawful permanent resident status under 
section 245A, 210 or 210A of the Immigration and Nationality Act for 
five years from the date lawful temporary resident status was granted.
    (c) The agency must provide payment for the services described in 
Sec. 440.255 to residents of the State who otherwise meet the 
eligibility requirements of the State plan (except for receipt of AFDC, 
SSI, or State Supplementary payments and the presentation of a social 
security number) but who do not meet the requirements of paragraph (a) 
of this section.
    (d) The limitations on eligibility set forth in paragraph (b) of 
this section do not apply after 5 years from the date this alien was 
granted lawful temporary resident status.

[55 FR 36820, Sept. 7, 1990]



Sec. 436.408  Categories of aliens who are permanently residing in the United States under color of law.

    This section describes aliens that the agency must accept as 
permanently residing in the United States under color of law and who may 
be eligible for Medicaid.
    (a) An individual may be eligible for Medicaid if the individual is 
an alien residing in the United States with the knowledge and permission 
of the Immigration and Naturalization Services (INS) and the INS does 
not contemplate enforcing the alien's departure. The INS does not 
contemplate enforcing the alien's departure if it is the policy or 
practice of INS not to enforce the departure of aliens in the same 
category, or if from all the facts and circumstances in the case it 
appears that INS is otherwise permitting the alien to reside in the 
United States idefinitely, as determined by verifying the alien's status 
with INS.
    (b) Aliens who are permanently residing in the United States under 
color of

[[Page 181]]

law are listed below. None of the categories includes applicants for an 
Immigration and Naturalization Service status other than those 
applicants listed in paragraph (b)(6) of this section, or those covered 
under paragraph (b)(16) of this section. None of the categories allows 
Medicaid eligibility for nonimmigrants: for example, students or 
visitors. Also listed are the most common documents that the INS 
provides to aliens in these categories.
    (1) Aliens admitted to the United States pursuant to 8 U.S.C. 
1153(a)(7), (section 203(a)(7) of the Immigration and Nationality Act). 
Ask for a copy of INS Form I-94 endorsed ``Refugee-conditional Entry'';
    (2) Aliens, including Cuban/Haitian entrants, paroled in the United 
States pursuant to 8 U.S.C. 1182(d)(5) section 212(d)(5) of the 
Immigration and Nationality Act). Ask for a copy of INS Form I-94 with 
notation that the alien was paroled pursuant to section 212(d)(5) of the 
Immigration and Nationality Act. For Cuban/Haitian entrants ask for a 
copy of INS Form I-94 stamped Cuban/Haitian entrant (Status Pending) 
reviewable January 15, 1981. (Although the forms bear this notation, 
Cuban/Haitian entrants are admitted under section 212(d)(5) of the 
Immigration and Nationality Act.);
    (3) Aliens residing in the United States pursuant to an indefinite 
stay of deportation. Ask for an Immigration and Naturalization Service 
letter with this information or INS Form I-94 with such a notation;
    (4) Aliens residing in the United States pursuant to an indefinite 
voluntary departure. Ask for an Immigration and Naturalization Service 
letter or INS Form I-94 showing that a voluntary departure has been 
granted for an indefinite time period;
    (5) Aliens on whose behalf an immediate relative petition has been 
approved and their families covered by the petition who are entitled to 
voluntary departure (under 8 CFR 242.5(a)(2)(vi)) and whose departure 
the Immigration and Naturalization Service does not contemplate 
enforcing. Ask for a copy of INS Form I-94 or INS Form I-210 or a letter 
showing this status;
    (6) Aliens who have filed applications for adjustment of status 
pursuant to section 245 of the Immigration and Nationality Act (8 U.S.C. 
1255) that the Immigration and Naturalization Service has accepted as 
``properly filed'' (within the meaning of 8 CFR 245.2(a)(1) or (2)) and 
whose departure the Immigration and Naturalization Service does not 
contemplate enforcing. Ask for a copy of INS Form I-94 or I-181 or a 
passport properly endorsed;
    (7) Aliens granted stays of deportation by court order, statute or 
regulation, or by individual determination of the Immigration and 
Naturalization Service pursuant to section 106 of the Immigration and 
Nationality Act (8 U.S.C. 1105a) or relevant Immigration and 
Naturalization Service instructions, whose departure that agency does 
not contemplate enforcing. Ask for a copy of INS Form I-94 or a letter 
from the Immigration and Naturalization Service, or a copy of a court 
order establishing the aliens's status;
    (8) Aliens granted asylum pursuant to section 208 of the Immigration 
and Nationality Act (8 U.S.C. 1158). Ask for a copy of INS Form I-94 and 
a letter establishing this status;
    (9) Aliens admitted as refugees pursuant to section 207 of the 
Immigration and Nationality Act (8 U.S.C. 1157) or section 203(a)(7) of 
the Immigration and Nationality Act (8 U.S.C. 1153(a)(7)). Ask for a 
copy of INS Form I-94 properly endorsed;
    (10) Aliens granted voluntary departure pursuant to section 242(b) 
of the Immigration and Nationality Act (8 U.S.C. 1252(b)) or 8 CFR 242.5 
whose departure the Immigration and Naturalization Service does not 
contemplate enforcing. Ask for a copy of INS Form I-94 or I-210 bearing 
a departure date;
    (11) Aliens granted deferred action status pursuant to Immigration 
and Naturalization Service Operations Instruction 103.1(a)(ii) prior to 
June 15, 1984 or Sec. 242.1(a)(22) issued June 15, 1984 and later. Ask 
for a copy of INS Form I-210 or a letter showing that departure has been 
deferred;
    (12) Aliens residing in the United States under orders of 
supervision pursuant to section 242 of the Immigration

[[Page 182]]

and Nationality Act (8 U.S.C. 1152(d)). Ask for a copy of Form I-220 B;
    (13) Aliens who have entered and continuously resided in the United 
States since before January 1, 1972 (or any date established by section 
249 of the Immigration and Nationality Act, 8 U.S.C. 1259). Ask for any 
proof establishing this entry and continuous residence;
    (14) Aliens granted suspension of deportation pursuant to section 
244 of the Immigration and Nationality Act (8 U.S.C. 1254) and whose 
departure the Immigration and Naturalization Service does not 
contemplate enforcing. Ask for an order from the Immigration judge;
    (15) Aliens whose deportation has been withheld pursuant to section 
243(h) of the Immigration and Nationality Act (8 U.S.C. 1253(h)). Ask 
for an order from an immigration judge showing that deportation has been 
withheld; or
    (16) Any other aliens living in the United States with the knowledge 
and permission of the Immigration and Naturalization Service and whose 
departure that agency does not contemplate enforcing, including 
permanent non-immigrants as established by Public Law 99-239, and 
persons granted Extended Voluntary Departure due to conditions in the 
alien's home country based on a determination by the Secretary of State.

[55 FR 36821, Sept. 7, 1990, as amended at 56 FR 10807, Mar. 14, 1991; 
58 FR 4908, Jan. 19, 1993]



      Subpart F--Categorical Requirements for Medicaid Eligibility



Sec. 436.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part.

                               Dependency



Sec. 436.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures used under the State's 
AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4936, Jan. 19, 1993]

                                   Age



Sec. 436.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4936, Jan. 19, 1993]



Sec. 436.522  Determination of age.

    (a) In determining age, the agency must use the common law method 
(under which an age is reached the day before the anniversary of birth) 
or the popular usage method (under which a specific age is reached on 
the anniversary of birth), whichever is used under the corresponding 
State plan for OAA, AFDC, AB, APTD, or AABD.
    (b) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4936, Jan. 19, 1993]

                                Blindness



Sec. 436.530  Definition of blindness.

    (a) Definition. The agency must use the definition of blindness that 
is used in the State plan for AB or AABD.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec. 436.531  Determination of blindness.

    In determining blindness--
    (a) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine him, unless 
both of the applicant's eyes are missing;
    (b) The examiner must submit a report of examination to the Medicaid 
agency; and

[[Page 183]]

    (c) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (1) Whether the individual meets the definition of blindness; and
    (2) Whether and when reexaminations are necessary for periodic 
redeterminations of eligibility, as required under Sec. 435.916 of this 
subchapter. Blindness is considered to continue until the reviewing 
physician determines that the recipient's vision no longer meets the 
definition.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]

                               Disability



Sec. 436.540  Definition of disability.

    (a) Definition. The agency must use the definition of permanent and 
total disability that is used in the State plan for APTD or AABD. (See 
45 CFR 233.80(a)(1) for the Federal recommended definition of permanent 
and total disability.)
    (b) State plan requirement. The State plan must contain the 
definition of permanent and total disability.



Sec. 436.541  Determination of disability.

    (a) Basic requirements. (1) At a minimum, the agency must use the 
review team, information, and evidence requirements specified in 
paragraph (b) through (d) of this section in making a determination of 
disability.
    (2) If the requirements or determining disability under the State's 
APTD or AABD program are more restrictive than the minimum requirements 
specified in this section, the agency must use the requirements applied 
under the APTD or AABD program.
    (b) The agency must obtain a medical report and a social history for 
individuals applying for Medicaid on the basis of disability. The 
medical report must include a diagnosis based on medical evidence. The 
social history must contain enough information to enable the agency to 
determine disability.
    (c) A physician and social worker, qualified by professional 
training and experience, must review the medical report and social 
history and determine on behalf of the agency whether the individual 
meets the definition of disability. The physician must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required under Sec. 435.916 of this subchapter.
    (d) In subsequently determining disability, the physician and social 
worker must review reexamination reports and the social history and 
determine whether the individual continues to meet the definition. 
Disability is considered to continue until this determination is made.

[54 FR 50762, Dec. 11, 1989]



    Subpart G--General Financial Eligibility Requirements and Options



Sec. 436.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part. Subparts H and I of this 
part prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec. 436.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the OAA, AFDC, AB, APTD, and AABD programs.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section, in determining 
financial eligibility of individuals as categorically and medically 
needy, the agency must apply the cash assistance financial methodologies 
and requirements of the cash assistance program that is most closely 
categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec. 436.602.

[[Page 184]]

    (d) Use of less restrictive methodologies than under cash assistance 
program. (1) At State option, and subject to the conditions of 
paragraphs (d)(2) through (d)(5) of this section, the agency may apply 
income and resource methodologies that are less restrictive than the 
cash assistance methodologies in determining financial eligibility of 
the following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group under Sec. 436.120;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i) (IV), (VI), and (VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act; and
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals under paragraph (c)(1) of this section 
may be less restrictive, but no more restrictive, than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind, or disabled, or AFDC-related) within each eligibility group. 
For example, if the agency chooses to apply a less restrictive income or 
resource methodology to aged individuals, it must apply that methodology 
to an eligibility group of all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded by Sec. 436.602 in determining financial 
eligibility of individuals, the agency will apply the cash assistance 
financial methodologies and requirements, unless the agency chooses to 
apply less restrictive income and resource methodologies, in accordance 
with paragraph (d) of this section.
    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will used; and
    (ii) The eligibility groups or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec. 436.602  Financial responsibility of relatives and other individuals.

    (a) Subject to the provisions of paragraphs (b) and (c) of this 
section, in determining financial responsibility of relatives and other 
persons for individuals under Medicaid, the agency must use the 
following financial eligibility requirements and methodologies.
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies include considering the income and resources of parents or 
spouses whose income and resources would be considered if the individual 
under age 21 were dependent under the State's approved AFDC plan, 
whether or not they are actually contributed. These requirements and 
methodologies must be applied in accordance with provisions of the 
State's approved AFDC plan.

[[Page 185]]

    (3) When a couple ceases to live together, the agency must count 
only the income and resources of the individual in determining his or 
her eligibility, beginning the first month following the month the 
couple ceases to live together.
    (b) The agency may apply income and resource methodologies that are 
less restrictive than the cash assistance methodologies as specified in 
the State plan in accordance with Sec. 436.601(d).
    (c) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec. 436.604  [Reserved]



Sec. 436.606  [Reserved]



Sec. 436.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and recipients to take all necessary steps to obtain any 
annuities, pensions, and retirement and disability benefits to which 
they are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, and retirement and disability benefits 
include, but are not limited to, veterans' compensation and pensions, 
OASDI benefits, railroad retirement benefits, and unemployment 
compensation.

[43 FR 45218, Sept. 29, 1978. Redesignated at 58 FR 4937, Jan. 19, 1993]



Sec. 436.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and recipients to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902(l)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and
    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for assignment 
of rights to medical support and other payments and cooperation in 
obtaining medical support and payments are effective for medical 
assistance furnished on or after October 1, 1984. The requirement for 
cooperation in identifying and providing information for pursuing liable 
third parties is effective for medical assistance furnished on or after 
July 1, 1986.

[55 FR 48610, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990, as amended at 
58 FR 4908, Jan. 19, 1993. Redesignated at 58 FR 4937, Jan. 19, 1993]

Subpart H [Reserved]



        Subpart I--Financial Requirements for the Medically Needy



Sec. 436.800  Scope.

    This subpart prescribes financial requirements for determining the 
eligibility of medically needy individuals under subpart D of this part.

                     Medically Needy Income Standard



Sec. 436.811  Medically needy income standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
agency must use a single income standard for all covered medically needy 
groups that meets the requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. The standard may not diminish by the number of 
persons in the unit (for example, if the income level in the standard 
for an assistance unit of two is set at $400, the income level in the 
standard for an assistance unit of three may not be less than $400).

[[Page 186]]

    (c) The income standard must be set at an amount that is no lower 
than the lowest income standard used on or after January 1, 1966, to 
determine eligibility under the cash assistance programs that are 
related to the State's covered medically needy group or groups of 
individuals under Sec. 436.301.
    (d) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4938, Jan. 19, 1993]



Sec. 436.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses



Sec. 436.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency must include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec. 435.914. The budget period can begin no earlier then the first 
month in the retroactive period in which the individual received covered 
services.
    (3) If the agency elects to begin the first budget period for the 
medically needy in any month of the 3-month period prior to the date of 
application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must, to determine 
countable income, deduct amounts that would be deducted in determining 
eligibility under the State's approved plan for OAA, AFDC, AB, APTD, or 
AABD.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard under Sec. 436.814, the individual is 
eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f) and (g) of this section and deduct those expenses in 
accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed under Sec. 447.51 or Sec. 447.53 of 
this chapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration or scope of services;
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or unpaid, to the 
extent that the expenses have not been deducted previously in 
establishing eligibility;

[[Page 187]]

    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such budget period and any of the 3 preceding months, whether paid or 
unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income, to the 
extent that such expenses are unpaid and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Are carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses to be deducted from 
income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the agency and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application; and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section, in the order prescribed under one of the following three 
options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed agency limitations on amount, 
duration, or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance, or 
deductibles charges the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.
    (i) Eligibility based on incurred medical expenses.
    (1) Whether a State elects partial or full month coverage, an 
individual who

[[Page 188]]

is expected to contribute a portion of his or her income toward the 
costs of institutional care or home and community-based services under 
Sec. 436.832 is eligible on the first day of the applicable budget 
(spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses under 
Sec. 436.832 greater than the individual's contributable income 
determined under this section.
    (2) At the end of the prospective period specified in paragraph 
(f)(2) or (f)(3) of this section and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, if 
agencies elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, if 
agencies elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. Therefore, to the extent necessary to prevent the 
transfer of an individual's spenddown liability to the Medicaid program, 
States must reduce the amount of provider charges that would otherwise 
be reimbursable under Medicaid.

[59 FR 1674, Jan. 12, 1994]



Sec. 436.832  Post-eligibility treatment of income of institutionalized individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, or disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the higher of--
    (i) The amount of the highest need standard for an individual 
without income and resources under the State's approved plan for OAA, 
AFDC, AB, APTD, or AABD; or

[[Page 189]]

    (ii) The amount of the highest medically needy income standard for 
one person established under Sec. 436.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
Medicaid plan, as provided for in Sec. 436.811.
    (B) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24888, Apr. 11, 1980, as amended at 46 FR 47991, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3597, Feb. 8, 1988; 56 FR 8851, 8854, 
Mar. 1, 1991; 58 FR 4938, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec. 436.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
Medicaid agency must use a single resource standard that is set at an 
amount that is no lower than the lowest resource standard used on or 
after January 1, 1966, to determine eligibility under the cash 
assistance programs that are related to the State's covered medically 
needy group or groups of individuals under Sec. 436.301.
    (b) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource level in the standard for an 
assistance unit of three may not be less than that set for an assistance 
unit of two.

[58 FR 4938, Jan. 19, 1993]

[[Page 190]]



Sec. 436.843  Medically needy resource standard: State plan requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec. 436.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must--
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives under Sec. 436.602;
    (b) Consider only resources available during the period for which 
income is computed under Sec. 436.831(a);
    (c) Deduct the value of resources that would be deducted in 
determining eligibility under the State's plan for OAA, AFDC, AB, APTD, 
or AABD or under the State's less restrictive financial methodology 
specified in the State Medicaid plan in accordance with Sec. 436.601. In 
determining the amount of an individual's resources for Medicaid 
eligibility, States must count amounts of resources that otherwise would 
not be counted under the conditional eligibility provisions of the AFDC 
program.
    (d) Apply the resource standards established under Sec. 436.840.

[43 FR 45218, Sept. 29, 1978, as amended at 46 FR 47992, Sept. 30, 1981; 
58 FR 4938, Jan. 19, 1993]



   Subpart J--Eligibility in Guam, Puerto Rico, and the Virgin Islands

    Source: 44 FR 17939, Mar. 23, 1979, unless otherwise noted.



Sec. 436.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.



Sec. 436.901  General requirements.

    The Medicaid agency must comply with all the requirements of part 
435, subpart J, of this subchapter, except those specified in 
Sec. 435.909.



Sec. 436.909  Automatic entitlement to Medicaid following a determination of eligibility under other programs.

    The agency may not require a separate application for Medicaid from 
an individual if the individual receives cash assistance under a State 
plan for OAA, AFDC, AB, APTD, or AABD.



            Subpart K--Federal Financial Participation (FFP)



Sec. 436.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP for Expenditures for Determining Eligibility and Providing Services



Sec. 436.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45218, Sept. 29, 1978, as amended at 66 FR 2668, Jan. 11, 2001]



Sec. 436.1002  FFP for services.

    (a) FFP is available in expenditures for Medicaid services for all 
recipients whose coverage is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
recipients who were eligible for Medicaid in the month in which the 
medical care or services

[[Page 191]]

were provided, except that, for recipients who establish eligibility for 
Medicaid by deducting incurred medical expenses from income, FFP is not 
available for expenses that are the recipient's liability.
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17940, Mar. 23, 1979; 
66 FR 2669, Jan. 11, 2001]



Sec. 436.1003  Recipients overcoming certain conditions of eligibility.

    FFP is available for a temporary period specified in the State plan 
in expenditures for services provided to recipients who are overcoming 
certain eligibility conditions, including blindness, disability, 
continued absence or incapacity of a parent, or unemployment of a 
parent.

[45 FR 24888, Apr. 11, 1980]



Sec. 436.1004  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec. 435.1009; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services under Sec. 440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not considered to be a patient in 
that institution. However, such an individual who is under age 22 and 
has been receiving inpatient pyschiatric services under Sec. 440.160 of 
this subchapter is considered to be a patient in the institution until 
he is unconditionally released or, if earlier, the date he reaches age 
22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13200, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985]



Sec. 436.1005  Definitions relating to institutional status.

    For purposes of FFP, the definitions in Sec. 435.1009 of this 
subchapter apply to this part.



            Subpart L--Option for Coverage of Special Groups

    Source: 66 FR 2669, Jan. 11, 2001, unless otherwise noted.



Sec. 436.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.
    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec. 436.1101  Definitions related to presumptive eligibility period for children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or

[[Page 192]]

    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under this title, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter.)

[66 FR 2669, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec. 436.1102  General rules.

    (a) The agency may provide services to children under age 19 during 
one or more periods of presumptive eligibility following a determination 
made by a qualified entity that the child's estimated gross family 
income or, at the State's option, the child's estimated family income 
after applying simple disregards, does not exceed the applicable income 
standard.
    (b) If the agency elects to provide services to children during a 
period of presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a Medicaid 
application form;
    (iii) Within 5 working days after the date that the determination is 
made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last

[[Page 193]]

day of the following month, the child's presumptive eligibility will end 
on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application; 
and
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and
    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency; and
    (3) Provide all services covered under the plan, including EPSDT.
    (4) Allow determinations of presumptive eligibility to be made by 
qualified entities on a Statewide basis.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.



PART 438--MANAGED CARE--Table of Contents




                      Subpart A--General Provisions

Sec.
438.1 Basis and scope.
438.2 Definitions.
438.6 Contract requirements.
438.8 Provisions that apply to PIHPs and PAHPs.
438.10 Information requirements.
438.12 Provider discrimination prohibited.



                    Subpart B--State Responsibilities

438.50 State Plan requirements.
438.52 Choice of MCOs, PIHPs, PAHPs, and PCCMs.
438.56 Disenrollment: Requirements and limitations.
438.58 Conflict of interest safeguards.
438.60 Limit on payment to other providers.
438.62 Continued services to recipients.
438.66 Monitoring procedures.



               Subpart C--Enrollee Rights and Protections

438.100 Enrollee rights.
438.102 Provider-enrollee communications.
438.104 Marketing activities.
438.106 Liability for payment.
438.108 Cost sharing.
438.114 Emergency and poststabilization services.
438.116 Solvency standards.



        Subpart D--Quality Assessment and Performance Improvement

438.200 Scope.
438.202 State responsibilities.
438.204 Elements of State quality strategies.

                            Access Standards

438.206 Availability of services.
438.207 Assurances of adequate capacity and services.
438.208 Coordination and continuity of care.
438.210 Coverage and authorization of services.

                    Structure and Operation Standards

438.214 Provider selection.
438.218 Enrollee information.
438.224 Confidentiality.
438.226 Enrollment and disenrollment.
438.228 Grievance systems.
438.230 Subcontractual relationships and delegation.

                  Measurement and Improvement Standards

438.236 Practice guidelines.
438.240 Quality assessment and performance improvement program.
438.242 Health information systems.

Subpart E [Reserved]



                       Subpart F--Grievance System

438.400 Statutory basis and definitions.
438.402 General requirements.
438.404 Notice of action.
438.406 Handling of grievances and appeals.
438.408 Resolution and notification: Grievances and appeals.
438.410 Expedited resolution of appeals.
438.414 Information about the grievance system to providers and 
          subcontractors.
438.416 Recordkeeping and reporting requirements.
438.420 Continuation of benefits while the MCO or PIHP appeal and the 
          State fair hearing are pending.
438.424 Effectuation of reversed appeal resolutions.

Subpart G [Reserved]

[[Page 194]]



             Subpart H--Certifications and Program Integrity

438.600 Statutory basis.
438.602 Basic rule.
438.604 Data that must be certified.
438.606 Source, content, and timing of certification.
438.608 Program integrity requirements.
438.610 Prohibited affiliations with individuals debarred by Federal 
          agencies.



                          Subpart I--Sanctions

438.700 Basis for imposition of sanctions.
438.702 Types of intermediate sanctions.
438.704 Amounts of civil money penalties.
438.706 Special rules for temporary management.
438.708 Termination of an MCO or PCCM contract.
438.710 Due process: Notice of sanction and pre-termination hearing.
438.722 Disenrollment during termination hearing process.
438.724 Notice to CMS.
438.726 State plan requirement.
438.730 Sanction by CMS: Special rules for MCOs.



        Subpart J--Conditions for Federal Financial Participation

438.802 Basic requirements.
438.806 Prior approval.
438.808 Exclusion of entities.
438.810 Expenditures for enrollment broker services.
438.812 Costs under risk and nonrisk contracts.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 67 FR 41095, June 14, 2002, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 438.1  Basis and scope.

    (a) Statutory basis. This part is based on sections 1902(a)(4), 
1903(m), 1905(t), and 1932 of the Act.
    (1) Section 1902(a)(4) requires that States provide for methods of 
administration that the Secretary finds necessary for proper and 
efficient operation of the State plan. The application of the 
requirements of this part to PIHPs and PAHPs that do not meet the 
statutory definition of an MCO or a PCCM is under the authority in 
section 1902(a)(4).
    (2) Section 1903(m) contains requirements that apply to 
comprehensive risk contracts.
    (3) Section 1903(m)(2)(H) provides that an enrollee who loses 
Medicaid eligibility for not more than 2 months may be enrolled in the 
succeeding month in the same MCO or PCCM if that MCO or PCCM still has a 
contract with the State.
    (4) Section 1905(t) contains requirements that apply to PCCMs.
    (5) Section 1932--
    (i) Provides that, with specified exceptions, a State may require 
Medicaid recipients to enroll in MCOs or PCCMs;
    (ii) Establishes the rules that MCOs, PCCMs, the State, and the 
contracts between the State and those entities must meet, including 
compliance with requirements in sections 1903(m) and 1905(t) of the Act 
that are implemented in this part;
    (iii) Establishes protections for enrollees of MCOs and PCCMs;
    (iv) Requires States to develop a quality assessment and performance 
improvement strategy;
    (v) Specifies certain prohibitions aimed at the prevention of fraud 
and abuse;
    (vi) Provides that a State may not enter into contracts with MCOs 
unless it has established intermediate sanctions that it may impose on 
an MCO that fails to comply with specified requirements; and
    (vii) Makes other minor changes in the Medicaid program.
    (b) Scope. This part sets forth requirements, prohibitions, and 
procedures for the provision of Medicaid services through MCOs, PIHPs, 
PAHPs, and PCCMs. Requirements vary depending on the type of entity and 
on the authority under which the State contracts with the entity. 
Provisions that apply only when the contract is under a mandatory 
managed care program authorized by section 1932(a)(1)(A) of the Act are 
identified as such.



Sec. 438.2  Definitions.

    As used in this part--
    Capitation payment means a payment the State agency makes 
periodically to a contractor on behalf of each recipient

[[Page 195]]

enrolled under a contract for the provision of medical services under 
the State plan. The State agency makes the payment regardless of whether 
the particular recipient receives services during the period covered by 
the payment.
    Comprehensive risk contract means a risk contract that covers 
comprehensive services, that is, inpatient hospital services and any of 
the following services, or any three or more of the following services:
    (1) Outpatient hospital services.
    (2) Rural health clinic services.
    (3) FQHC services.
    (4) Other laboratory and X-ray services.
    (5) Nursing facility (NF) services.
    (6) Early and periodic screening, diagnostic, and treatment (EPSDT) 
services.
    (7) Family planning services.
    (8) Physician services.
    (9) Home health services.
    Federally qualified HMO means an HMO that CMS has determined is a 
qualified HMO under section 1310(d) of the PHS Act.
    Health care professional means a physician or any of the following: 
a podiatrist, optometrist, chiropractor, psychologist, dentist, 
physician assistant, physical or occupational therapist, therapist 
assistant, speech-language pathologist, audiologist, registered or 
practical nurse (including nurse practitioner, clinical nurse 
specialist, certified registered nurse anesthetist, and certified nurse 
midwife), licensed certified social worker, registered respiratory 
therapist, and certified respiratory therapy technician.
    Health insuring organization (HIO) means a county operated entity, 
that in exchange for capitation payments, covers services for 
recipients--
    (1) Through payments to, or arrangements with, providers;
    (2) Under a comprehensive risk contract with the State; and
    (3) Meets the following criteria--
    (i) First became operational prior to January 1, 1986; or
    (ii) Is described in section 9517(e)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as amended by section 4734 of the Omnibus 
Budget Reconciliation Act of 1990).
    Managed care organization (MCO) means an entity that has, or is 
seeking to qualify for, a comprehensive risk contract under this part, 
and that is--
    (1) A Federally qualified HMO that meets the advance directives 
requirements of subpart I of part 489 of this chapter; or
    (2) Any public or private entity that meets the advance directives 
requirements and is determined to also meet the following conditions:
    (i) Makes the services it provides to its Medicaid enrollees as 
accessible (in terms of timeliness, amount, duration, and scope) as 
those services are to other Medicaid recipients within the area served 
by the entity.
    (ii) Meets the solvency standards of Sec. 438.116.
    Nonrisk contract means a contract under which the contractor--
    (1) Is not at financial risk for changes in utilization or for costs 
incurred under the contract that do not exceed the upper payment limits 
specified in Sec. 447.362 of this chapter; and
    (2) May be reimbursed by the State at the end of the contract period 
on the basis of the incurred costs, subject to the specified limits.
    Prepaid ambulatory health plan (PAHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Does not provide or arrange for, and is not otherwise 
responsible for the provision of any inpatient hospital or institutional 
services for its enrollees; and
    (3) Does not have a comprehensive risk contract.
    Prepaid inpatient health plan (PIHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Provides, arranges for, or otherwise has responsibility for the 
provision of any inpatient hospital or institutional services for its 
enrollees; and

[[Page 196]]

    (3) Does not have a comprehensive risk contract.
    Primary care means all health care services and laboratory services 
customarily furnished by or through a general practitioner, family 
physician, internal medicine physician, obstetrician/gynecologist, or 
pediatrician, to the extent the furnishing of those services is legally 
authorized in the State in which the practitioner furnishes them.
    Primary care case management means a system under which a PCCM 
contracts with the State to furnish case management services (which 
include the location, coordination and monitoring of primary health care 
services) to Medicaid recipients.
    Primary care case manager (PCCM) means a physician, a physician 
group practice, an entity that employs or arranges with physicians to 
furnish primary care case management services or, at State option, any 
of the following:
    (1) A physician assistant.
    (2) A nurse practitioner.
    (3) A certified nurse-midwife.
    Risk contract means a contract under which the contractor--
    (1) Assumes risk for the cost of the services covered under the 
contract; and
    (2) Incurs loss if the cost of furnishing the services exceeds the 
payments under the contract.



Sec. 438.6  Contract requirements.

    (a) Regional office review. The CMS Regional Office must review and 
approve all MCO, PIHP, and PAHP contracts, including those risk and 
nonrisk contracts that, on the basis of their value, are not subject to 
the prior approval requirement in Sec. 438.806.
    (b) Entities eligible for comprehensive risk contracts. A State 
agency may enter into a comprehensive risk contract only with the 
following:
    (1) An MCO.
    (2) The entities identified in section 1903(m)(2)(B)(i), (ii), and 
(iii) of the Act.
    (3) Community, Migrant, and Appalachian Health Centers identified in 
section 1903(m)(2)(G) of the Act. Unless they qualify for a total 
exemption under section 1903(m)(2)(B) of the Act, these entities are 
subject to the regulations governing MCOs under this part.
    (4) An HIO that arranges for services and became operational before 
January 1986.
    (5) An HIO described in section 9517(c)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as added by section 4734(2) of the Omnibus 
Budget Reconciliation Act of 1990).
    (c) Payments under risk contracts.
    (1) Terminology. As used in this paragraph, the following terms have 
the indicated meanings:
    (i) Actuarially sound capitation rates means capitation rates that--
    (A) Have been developed in accordance with generally accepted 
actuarial principles and practices;
    (B) Are appropriate for the populations to be covered, and the 
services to be furnished under the contract; and
    (C) Have been certified, as meeting the requirements of this 
paragraph (c), by actuaries who meet the qualification standards 
established by the American Academy of Actuaries and follow the practice 
standards established by the Actuarial Standards Board.
    (ii) Adjustments to smooth data means adjustments made, by cost-
neutral methods, across rate cells, to compensate for distortions in 
costs, utilization, or the number of eligibles.
    (iii) Cost neutral means that the mechanism used to smooth data, 
share risk, or adjust for risk will recognize both higher and lower 
expected costs and is not intended to create a net aggregate gain or 
loss across all payments.
    (iv) Incentive arrangement means any payment mechanism under which a 
contractor may receive additional funds over and above the capitation 
rates it was paid for meeting targets specified in the contract.
    (v) Risk corridor means a risk sharing mechanism in which States and 
contractors share in both profits and losses under the contract outside 
of predetermined threshold amount, so that after an initial corridor in 
which the contractor is responsible for all losses or retains all 
profits, the State contributes a portion toward any additional losses, 
and receives a portion of any additional profits.

[[Page 197]]

    (2) Basic requirements. (i) All payments under risk contracts and 
all risk-sharing mechanisms in contracts must be actuarially sound.
    (ii) The contract must specify the payment rates and any risk-
sharing mechanisms, and the actuarial basis for computation of those 
rates and mechanisms.
    (3) Requirements for actuarially sound rates. In setting actuarially 
sound capitation rates, the State must apply the following elements, or 
explain why they are not applicable:
    (i) Base utilization and cost data that are derived from the 
Medicaid population, or if not, are adjusted to make them comparable to 
the Medicaid population.
    (ii) Adjustments made to smooth data and adjustments to account for 
factors such as medical trend inflation, incomplete data, MCO, PIHP, or 
PAHP administration (subject to the limits in paragraph (c)(4)(ii) of 
this section), and utilization;
    (iii) Rate cells specific to the enrolled population, by--
    (A) Eligibility category;
    (B) Age;
    (C) Gender;
    (D) Locality/region; and
    (E) Risk adjustments based on diagnosis or health status (if used).
    (iv) Other payment mechanisms and utilization and cost assumptions 
that are appropriate for individuals with chronic illness, disability, 
ongoing health care needs, or catastrophic claims, using risk 
adjustment, risk sharing, or other appropriate cost-neutral methods.
    (4) Documentation. The State must provide the following 
documentation:
    (i) The actuarial certification of the capitation rates.
    (ii) An assurance (in accordance with paragraph (c)(3) of this 
section) that all payment rates are--
    (A) Based only upon services covered under the State plan (or costs 
directly related to providing these services, for example, MCO, PIHP, or 
PAHP administration).
    (B) Provided under the contract to Medicaid-eligible individuals.
    (iii) The State's projection of expenditures under its previous 
year's contract (or under its FFS program if it did not have a contract 
in the previous year) compared to those projected under the proposed 
contract.
    (iv) An explanation of any incentive arrangements, or stop-loss, 
reinsurance, or any other risk-sharing methodologies under the contract.
    (5) Special contract provisions. (i) Contract provisions for 
reinsurance, stop-loss limits or other risk-sharing methodologies must 
be computed on an actuarially sound basis.
    (ii) If risk corridor arrangements result in payments that exceed 
the approved capitation rates, these excess payments will not be 
considered actuarially sound to the extent that they result in total 
payments that exceed the amount Medicaid would have paid, on a fee-for-
service basis, for the State plan services actually furnished to 
enrolled individuals, plus an amount for MCO, PIHP, or PAHP 
administrative costs directly related to the provision of these 
services.
    (iii) Contracts with incentive arrangements may not provide for 
payment in excess of 105 percent of the approved capitation payments 
attributable to the enrollees or services covered by the incentive 
arrangement, since such total payments will not be considered to be 
actuarially sound.
    (iv) For all incentive arrangements, the contract must provide that 
the arrangement is--
    (A) For a fixed period of time;
    (B) Not to be renewed automatically;
    (C) Made available to both public and private contractors;
    (D) Not conditioned on intergovernmental transfer agreements; and
    (E) Necessary for the specified activities and targets.
    (v) If a State makes payments to providers for graduate medical 
education (GME) costs under an approved State plan, the State must 
adjust the actuarially sound capitation rates to account for the GME 
payments to be made on behalf of enrollees covered under the contract, 
not to exceed the aggregate amount that would have been paid under the 
approved State plan for FFS. States must first establish actuarially 
sound capitation rates prior to making adjustments for GME.
    (d) Enrollment discrimination prohibited. Contracts with MCOs, 
PIHPs,

[[Page 198]]

PAHPs, and PCCMs must provide as follows:
    (1) The MCO, PIHP, PAHP, or PCCM accepts individuals eligible for 
enrollment in the order in which they apply without restriction (unless 
authorized by the Regional Administrator), up to the limits set under 
the contract.
    (2) Enrollment is voluntary, except in the case of mandatory 
enrollment programs that meet the conditions set forth in 
Sec. 438.50(a).
    (3) The MCO, PIHP, PAHP, or PCCM will not, on the basis of health 
status or need for health care services, discriminate against 
individuals eligible to enroll.
    (4) The MCO, PIHP, PAHP, or PCCM will not discriminate against 
individuals eligible to enroll on the basis of race, color, or national 
origin, and will not use any policy or practice that has the effect of 
discriminating on the basis of race, color, or national origin.
    (e) Services that may be covered. An MCO, PIHP, or PAHP contract may 
cover, for enrollees, services that are in addition to those covered 
under the State plan, although the cost of these services cannot be 
included when determining the payment rates under Sec. 438.6(c).
    (f) Compliance with contracting rules. All contracts under this 
subpart must:
    (1) Comply with all applicable Federal and State laws and 
regulations including title VI of the Civil Rights Act of 1964; title IX 
of the Education Amendments of 1972 (regarding education programs and 
activities); the Age Discrimination Act of 1975; the Rehabilitation Act 
of 1973; and the Americans with Disabilities Act; and
    (2) Meet all the requirements of this section.
    (g) Inspection and audit of financial records. Risk contracts must 
provide that the State agency and the Department may inspect and audit 
any financial records of the entity or its subcontractors.
    (h) Physician incentive plans. (1) MCO, PIHP, and PAHP contracts 
must provide for compliance with the requirements set forth in 
Secs. 422.208 and 422.210 of this chapter.
    (2) In applying the provisions of Secs. 422.208 and 422.210 of this 
chapter, references to ``M+C organization'', ``CMS'', and ``Medicare 
beneficiaries'' must be read as references to ``MCO, PIHP, or PAHP'', 
``State agency'' and ``Medicaid recipients'', respectively.
    (i) Advance directives. (1) All MCO and PIHP contracts must provide 
for compliance with the requirements of Sec. 422.128 of this chapter for 
maintaining written policies and procedures for advance directives.
    (2) All PAHP contracts must provide for compliance with the 
requirements of Sec. 422.128 of this chapter for maintaining written 
policies and procedures for advance directives if the PAHP includes, in 
its network, any of those providers listed in Sec. 489.102(a) of this 
chapter.
    (3) The MCO, PIHP, or PAHP subject to this requirement must provide 
adult enrollees with written information on advance directives policies, 
and include a description of applicable State law.
    (4) The information must reflect changes in State law as soon as 
possible, but no later than 90 days after the effective date of the 
change.
    (j) Special rules for certain HIOs. Contracts with HIOs that began 
operating on or after January 1, 1986, and that the statute does not 
explicitly exempt from requirements in section 1903(m) of the Act, are 
subject to all the requirements of this part that apply to MCOs and 
contracts with MCOs. These HIOs may enter into comprehensive risk 
contracts only if they meet the criteria of paragraph (a) of this 
section.
    (k) Additional rules for contracts with PCCMs. A PCCM contract must 
meet the following requirements:
    (1) Provide for reasonable and adequate hours of operation, 
including 24-hour availability of information, referral, and treatment 
for emergency medical conditions.
    (2) Restrict enrollment to recipients who reside sufficiently near 
one of the manager's delivery sites to reach that site within a 
reasonable time using available and affordable modes of transportation.
    (3) Provide for arrangements with, or referrals to, sufficient 
numbers of physicians and other practitioners to ensure that services 
under the contract can be furnished to enrollees promptly and without 
compromise to quality of care.

[[Page 199]]

    (4) Prohibit discrimination in enrollment, disenrollment, and re-
enrollment, based on the recipient's health status or need for health 
care services.
    (5) Provide that enrollees have the right to disenroll from their 
PCCM in accordance with Sec. 438.56(c).
    (l) Subcontracts. All subcontracts must fulfill the requirements of 
this part that are appropriate to the service or activity delegated 
under the subcontract.
    (m) Choice of health professional. The contract must allow each 
enrollee to choose his or her health professional to the extent possible 
and appropriate.



Sec. 438.8  Provisions that apply to PIHPs and PAHPs.

    (a) The following requirements and options apply to PIHPs, PIHP 
contracts, and States with respect to PIHPs, to the same extent that 
they apply to MCOs, MCO contracts, and States for MCOs.
    (1) The contract requirements of Sec. 438.6, except for requirements 
that pertain to HIOs.
    (2) The information requirements in Sec. 438.10.
    (3) The provision against provider discrimination in Sec. 438.12.
    (4) The State responsibility provisions of subpart B of this part 
except Sec. 438.50.
    (5) The enrollee rights and protection provisions in subpart C of 
this part.
    (6) The quality assessment and performance improvement provisions in 
subpart D of this part to the extent that they are applicable to 
services furnished by the PIHP.
    (7) The grievance system provisions in subpart F of this part.
    (8) The certification and program integrity protection provisions 
set forth in subpart H of this part.
    (b) The following requirements and options for PAHPs apply to PAHPs, 
PAHP contracts, and States.
    (1) The contract requirements of Sec. 438.6, except requirements 
for--
    (i) HIOs.
    (ii) Advance directives (unless the PAHP includes any of the 
providers listed in Sec. 489.102) of this chapter.
    (2) All applicable portions of the information requirements in 
Sec. 438.10.
    (3) The provision against provider discrimination in Sec. 438.12.
    (4) The State responsibility provisions of subpart B of this part 
except Sec. 438.50.
    (5) The provisions on enrollee rights and protections in subpart C 
of this part.
    (6) Designated portions of subpart D of this part.
    (7) An enrollee's right to a State fair hearing under subpart E of 
part 431 of this chapter.



Sec. 438.10  Information requirements.

    (a) Terminology. As used in this section, the following terms have 
the indicated meanings:
    Enrollee means a Medicaid recipient who is currently enrolled in an 
MCO, PIHP, PAHP, or PCCM in a given managed care program.
    Potential enrollee means a Medicaid recipient who is subject to 
mandatory enrollment or may voluntarily elect to enroll in a given 
managed care program, but is not yet an enrollee of a specific MCO, 
PIHP, PAHP, or PCCM.
    (b) Basic rules. (1) Each State, enrollment broker, MCO, PIHP, PAHP, 
and PCCM must provide all enrollment notices, informational materials, 
and instructional materials relating to enrollees and potential 
enrollees in a manner and format that may be easily understood.
    (2) The State must have in place a mechanism to help enrollees and 
potential enrollees understand the State's managed care program.
    (3) Each MCO and PIHP must have in place a mechanism to help 
enrollees and potential enrollees understand the requirements and 
benefits of the plan.
    (c) Language. The State must do the following:
    (1) Establish a methodology for identifying the prevalent non-
English languages spoken by enrollees and potential enrollees throughout 
the State. ``Prevalent'' means a non-English language spoken by a 
significant number or percentage of potential enrollees and enrollees in 
the State.
    (2) Make available written information in each prevalent non-English 
language.

[[Page 200]]

    (3) Require each MCO, PIHP, PAHP, and PCCM to make its written 
information available in the prevalent non-English languages in its 
particular service area.
    (4) Make oral interpretation services available and require each 
MCO, PIHP, PAHP, and PCCM to make those services available free of 
charge to each potential enrollee and enrollee. This applies to all non-
English languages, not just those that the State identifies as 
prevalent.
    (5) Notify enrollees and potential enrollees, and require each MCO, 
PIHP, PAHP, and PCCM to notify its enrollees--
    (i) That oral interpretation is available for any language and 
written information is available in prevalent languages; and
    (ii) How to access those services.
    (d) Format. (1) Written material must--
    (i) Use easily understood language and format; and
    (ii) Be available in alternative formats and in an appropriate 
manner that takes into consideration the special needs of those who, for 
example, are visually limited or have limited reading proficiency.
    (2) All enrollees and potential enrollees must be informed that 
information is available in alternative formats and how to access those 
formats.
    (e) Information for potential enrollees. (1) The State or its 
contracted representative must provide the information specified in 
paragraph (e)(2) of this section to each potential enrollee as follows:
    (i) At the time the potential enrollee first becomes eligible to 
enroll in a voluntary program, or is first required to enroll in a 
mandatory enrollment program.
    (ii) Within a timeframe that enables the potential enrollee to use 
the information in choosing among available MCOs, PIHP, PAHPs, or PCCMs.
    (2) The information for potential enrollees must include the 
following:
    (i) General information about--
    (A) The basic features of managed care;
    (B) Which populations are excluded from enrollment, subject to 
mandatory enrollment, or free to enroll voluntarily in the program; and
    (C) MCO, PIHP, PAHP, and PCCM responsibilities for coordination of 
enrollee care;
    (ii) Information specific to each MCO, PIHP, PAHP, or PCCM program 
operating in potential enrollee's service area. A summary of the 
following information is sufficient, but the State must provide more 
detailed information upon request:
    (A) Benefits covered.
    (B) Cost sharing, if any.
    (C) Service area.
    (D) Names, locations, telephone numbers of, and non-English language 
spoken by current contracted providers, and including identification of 
providers that are not accepting new patients. For MCOs, PIHPs, and 
PAHPs, this includes at a minimum information on primary care 
physicians, specialists, and hospitals.
    (E) Benefits that are available under the State plan but are not 
covered under the contract, including how and where the enrollee may 
obtain those benefits, any cost sharing, and how transportation is 
provided. For a counseling or referral service that the MCO, PIHP, PAHP, 
or PCCM does not cover because of moral or religious objections, the 
State must provide information about where and how to obtain the 
service.
    (f) General information for all enrollees of MCOs, PIHPs, PAHPs, and 
PCCMs. Information must be furnished to MCO, PIHP, PAHP, and PCCM 
enrollees as follows:
    (1) The State must notify all enrollees of their disenrollment 
rights, at a minimum, annually. For States that choose to restrict 
disenrollment for periods of 90 days or more, States must send the 
notice no less than 60 days before the start of each enrollment period.
    (2) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must notify all enrollees of their right to request and 
obtain the information listed in paragraph (f)(6) of this section and, 
if applicable, paragraphs (g) and (h) of this section, at least once a 
year.
    (3) The State, its contracted representative, or the MCO, PIHP, 
PAHP,

[[Page 201]]

or PCCM must furnish to each of its enrollees the information specified 
in paragraph (f)(6) of this section and, if applicable, paragraphs (g) 
and (h) of this section, within a reasonable time after the MCO, PIHP, 
PAHP, or PCCM receives, from the State or its contracted representative, 
notice of the recipient's enrollment.
    (4) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must give each enrollee written notice of any change (that 
the State defines as ``significant'') in the information specified in 
paragraphs (f)(6) of this section and, if applicable, paragraphs (g) and 
(h) of this section, at least 30 days before the intended effective date 
of the change.
    (5) The MCO, PIHP, and, when appropriate, the PAHP or PCCM, must 
make a good faith effort to give written notice of termination of a 
contracted provider, within 15 days after receipt or issuance of the 
termination notice, to each enrollee who received his or her primary 
care from, or was seen on a regular basis by, the terminated provider.
    (6) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must provide the following information to all enrollees:
    (i) Names, locations, telephone numbers of, and non-English 
languages spoken by current contracted providers in the enrollee's 
service area, including identification of providers that are not 
accepting new patients. For MCOs, PIHPs, and PAHPs this includes, at a 
minimum, information on primary care physicians, specialists, and 
hospitals.
    (ii) Any restrictions on the enrollee's freedom of choice among 
network providers.
    (iii) Enrollee rights and protections, as specified in Sec. 438.100.
    (iv) Information on grievance and fair hearing procedures, and for 
MCO and PIHP enrollees, the information specified in Sec. 438.10(g)(1), 
and for PAHP enrollees, the information specified in Sec. 438.10(h).
    (v) The amount, duration, and scope of benefits available under the 
contract in sufficient detail to ensure that enrollees understand the 
benefits to which they are entitled.
    (vi) Procedures for obtaining benefits, including authorization 
requirements.
    (vii) The extent to which, and how, enrollees may obtain benefits, 
including family planning services, from out-of-network providers.
    (viii) The extent to which, and how, after-hours and emergency 
coverage are provided, including:
    (A) What constitutes emergency medical condition, emergency 
services, and poststabilization services, with reference to the 
definitions in Sec. 438.114(a).
    (B) The fact that prior authorization is not required for emergency 
services.
    (C) The process and procedures for obtaining emergency services, 
including use of the 911-telephone system or its local equivalent.
    (D) The locations of any emergency settings and other locations at 
which providers and hospitals furnish emergency services and 
poststabilization services covered under the contract.
    (E) The fact that, subject to the provisions of this section, the 
enrollee has a right to use any hospital or other setting for emergency 
care.
    (ix) The poststabilization care services rules set forth at 
Sec. 422.113(c) of this chapter.
    (x) Policy on referrals for specialty care and for other benefits 
not furnished by the enrollee's primary care provider.
    (xi) Cost sharing, if any.
    (xii) How and where to access any benefits that are available under 
the State plan but are not covered under the contract, including any 
cost sharing, and how transportation is provided. For a counseling or 
referral service that the MCO, PIHP, PAHP, or PCCM does not cover 
because of moral or religious objections, the MCO, PIHP, PAHP, or PCCM 
need not furnish information on how and where to obtain the service. The 
State must provide information on how and where to obtain the service.
    (g) Specific information requirements for enrollees of MCOs and 
PIHPs. In addition to the requirements in Sec. 438.10(f), the State, its 
contracted representative, or the MCO and PIHP must provide the 
following information to their enrollees:

[[Page 202]]

    (1) Grievance, appeal, and fair hearing procedures and timeframes, 
as provided in Secs. 438.400 through 438.424, in a State-developed or 
State-approved description, that must include the following:
    (i) For State fair hearing--
    (A) The right to hearing;
    (B) The method for obtaining a hearing; and
    (C) The rules that govern representation at the hearing.
    (ii) The right to file grievances and appeals.
    (iii) The requirements and timeframes for filing a grievance or 
appeal.
    (iv) The availability of assistance in the filing process.
    (v) The toll-free numbers that the enrollee can use to file a 
grievance or an appeal by phone.
    (vi) The fact that, when requested by the enrollee--
    (A) Benefits will continue if the enrollee files an appeal or a 
request for State fair hearing within the timeframes specified for 
filing; and
    (B) The enrollee may be required to pay the cost of services 
furnished while the appeal is pending, if the final decision is adverse 
to the enrollee.
    (vii) Any appeal rights that the State chooses to make available to 
providers to challenge the failure of the organization to cover a 
service.
    (2) Advance directives, as set forth in Sec. 438.6(i)(2).
    (3) Additional information that is available upon request, including 
the following:
    (i) Information on the structure and operation of the MCO or PIHP.
    (ii) Physician incentive plans as set forth in Sec. 438.6(h) of this 
chapter.
    (h) Specific information for PAHPs. The State, its contracted 
representative, or the PAHP must provide the following information to 
their enrollees:
    (1) The right to a State fair hearing, including the following:
    (i) The right to a hearing.
    (ii) The method for obtaining a hearing.
    (iii) The rules that govern representation.
    (2) Advance directives, as set forth in Sec. 438.6(i)(2), to the 
extent that the PAHP includes any of the providers listed in 
Sec. 489.102(a) of this chapter.
    (3) Upon request, physician incentive plans as set forth in 
Sec. 438.6(h).
    (i) Special rules: States with mandatory enrollment under State plan 
authority--(1) Basic rule. If the State plan provides for mandatory 
enrollment under Sec. 438.50, the State or its contracted representative 
must provide information on MCOs and PCCMs (as specified in paragraph 
(i)(3) of this section), either directly or through the MCO or PCCM.
    (2) When and how the information must be furnished. The information 
must be furnished as follows:
    (i) For potential enrollees, within the timeframe specified in 
Sec. 438.10(e)(1).
    (ii) For enrollees, annually and upon request.
    (iii) In a comparative, chart-like format.
    (3) Required information. Some of the information is the same as the 
information required for potential enrollees under paragraph (e) of this 
section and for enrollees under paragraph (f) of this section. However, 
all of the information in this paragraph is subject to the timeframe and 
format requirements of paragraph (i)(2) of this section, and includes 
the following for each contracting MCO or PCCM in the potential enrollee 
and enrollee's service area:
    (i) The MCO's or PCCM's service area.
    (ii) The benefits covered under the contract.
    (iii) Any cost sharing imposed by the MCO or PCCM.
    (iv) To the extent available, quality and performance indicators, 
including enrollee satisfaction.



Sec. 438.12  Provider discrimination prohibited.

    (a) General rules. (1) An MCO, PIHP, or PAHP may not discriminate 
for the participation, reimbursement, or indemnification of any provider 
who is acting within the scope of his or her license or certification 
under applicable State law, solely on the basis of that license or 
certification. If an MCO, PIHP, or PAHP declines to include individual 
or groups of providers in its network, it must give the affected 
providers written notice of the reason for its decision.
    (2) In all contracts with health care professionals, an MCO, PIHP, 
or PAHP

[[Page 203]]

must comply with the requirements specified in Sec. 438.214.
    (b) Construction. Paragraph (a) of this section may not be construed 
to--
    (1) Require the MCO, PIHP, or PAHP to contract with providers beyond 
the number necessary to meet the needs of its enrollees;
    (2) Preclude the MCO, PIHP, or PAHP from using different 
reimbursement amounts for different specialties or for different 
practitioners in the same specialty; or
    (3) Preclude the MCO, PIHP, or PAHP from establishing measures that 
are designed to maintain quality of services and control costs and are 
consistent with its responsibilities to enrollees.



                    Subpart B--State Responsibilities



Sec. 438.50  State Plan requirements.

    (a) General rule. A State plan that requires Medicaid recipients to 
enroll in managed care entities must comply with the provisions of this 
section, except when the State imposes the requirement--
    (1) As part of a demonstration project under section 1115 of the 
Act; or
    (2) Under a waiver granted under section 1915(b) of the Act.
    (b) State plan information. The plan must specify--
    (1) The types of entities with which the State contracts;
    (2) The payment method it uses (for example, whether fee-for-service 
or capitation);
    (3) Whether it contracts on a comprehensive risk basis; and
    (4) The process the State uses to involve the public in both design 
and initial implementation of the program and the methods it uses to 
ensure ongoing public involvement once the State plan has been 
implemented.
    (c) State plan assurances. The plan must provide assurances that the 
State meets applicable requirements of the following statute and 
regulations:
    (1) Section 1903(m) of the Act, for MCOs and MCO contracts.
    (2) Section 1905(t) of the Act, for PCCMs and PCCM contracts.
    (3) Section 1932(a)(1)(A) of the Act, for the State's option to 
limit freedom of choice by requiring recipients to receive their 
benefits through managed care entities.
    (4) This part, for MCOs and PCCMs.
    (5) Part 434 of this chapter, for all contracts.
    (6) Section 438.6(c), for payments under any risk contracts, and 
Sec. 447.362 of this chapter for payments under any nonrisk contracts.
    (d) Limitations on enrollment. The State must provide assurances 
that, in implementing the State plan managed care option, it will not 
require the following groups to enroll in an MCO or PCCM:
    (1) Recipients who are also eligible for Medicare.
    (2) Indians who are members of Federally recognized tribes, except 
when the MCO or PCCM is--
    (i) The Indian Health Service; or
    (ii) An Indian health program or Urban Indian program operated by a 
tribe or tribal organization under a contract, grant, cooperative 
agreement or compact with the Indian Health Service.
    (3) Children under 19 years of age who are--
    (i) Eligible for SSI under title XVI;
    (ii) Eligible under section 1902(e)(3) of the Act;
    (iii) In foster care or other out-of-home placement;
    (iv) Receiving foster care or adoption assistance; or
    (v) Receiving services through a family-centered, community-based, 
coordinated care system that receives grant funds under section 
501(a)(1)(D) of title V, and is defined by the State in terms of either 
program participation or special health care needs.
    (e) Priority for enrollment. The State must have an enrollment 
system under which recipients already enrolled in an MCO or PCCM are 
given priority to continue that enrollment if the MCO or PCCM does not 
have the capacity to accept all those seeking enrollment under the 
program.
    (f) Enrollment by default. (1) For recipients who do not choose an 
MCO or PCCM during their enrollment period, the State must have a 
default enrollment process for assigning those recipients to contracting 
MCOs and PCCMs.

[[Page 204]]

    (2) The process must seek to preserve existing provider-recipient 
relationships and relationships with providers that have traditionally 
served Medicaid recipients. If that is not possible, the State must 
distribute the recipients equitably among qualified MCOs and PCCMs 
available to enroll them, excluding those that are subject to the 
intermediate sanction described in Sec. 438.702(a)(4).
    (3) An ``existing provider-recipient relationship'' is one in which 
the provider was the main source of Medicaid services for the recipient 
during the previous year. This may be established through State records 
of previous managed care enrollment or fee-for-service experience, or 
through contact with the recipient.
    (4) A provider is considered to have ``traditionally served'' 
Medicaid recipients if it has experience in serving the Medicaid 
population.



Sec. 438.52  Choice of MCOs, PIHPs, PAHPs, and PCCMs.

    (a) General rule. Except as specified in paragraphs (b) and (c) of 
this section, a State that requires Medicaid recipients to enroll in an 
MCO, PIHP, PAHP, or PCCM must give those recipients a choice of at least 
two entities.
    (b) Exception for rural area residents. (1) Under any of the 
following programs, and subject to the requirements of paragraph (b)(2) 
of this section, a State may limit a rural area resident to a single 
MCO, PIHP, PAHP, or PCCM system:
    (i) A program authorized by a plan amendment under section 1932(a) 
of the Act.
    (ii) A waiver under section 1115 of the Act.
    (iii) A waiver under section 1915(b) of the Act.
    (2) A State that elects the option provided under paragraph (b)(1) 
of this section, must permit the recipient--
    (i) To choose from at least two physicians or case managers; and
    (ii) To obtain services from any other provider under any of the 
following circumstances:
    (A) The service or type of provider (in terms of training, 
experience, and specialization) is not available within the MCO, PIHP, 
PAHP, or PCCM network.
    (B) The provider is not part of the network, but is the main source 
of a service to the recipient, provided that--
    (1) The provider is given the opportunity to become a participating 
provider under the same requirements for participation in the MCO, PIHP, 
PAHP, or PCCM network as other network providers of that type.
    (2) If the provider chooses not to join the network, or does not 
meet the necessary qualification requirements to join, the enrollee will 
be transitioned to a participating provider within 60 days (after being 
given an opportunity to select a provider who participates).
    (C) The only plan or provider available to the recipient does not, 
because of moral or religious objections, provide the service the 
enrollee seeks.
    (D) The recipient's primary care provider or other provider 
determines that the recipient needs related services that would subject 
the recipient to unnecessary risk if received separately (for example, a 
cesarean section and a tubal ligation) and not all of the related 
services are available within the network.
    (E) The State determines that other circumstances warrant out-of-
network treatment.
    (3) As used in this paragraph, ``rural area'' is any area other than 
an ``urban area'' as defined in Sec. 412.62(f)(1)(ii) of this chapter.
    (c) Exception for certain health insuring organizations (HIOs). The 
State may limit recipients to a single HIO if--
    (1) The HIO is one of those described in section 1932(a)(3)(C) of 
the Act; and
    (2) The recipient who enrolls in the HIO has a choice of at least 
two primary care providers within the entity.
    (d) Limitations on changes between primary care providers. For an 
enrollee of a single MCO, PIHP, PAHP, or HIO under paragraph (b)(2) or 
(b)(3) of this section, any limitation the State imposes on his or her 
freedom to change between primary care providers may be no more 
restrictive than the limitations on disenrollment under Sec. 438.56(c).



Sec. 438.56  Disenrollment: Requirements and limitations.

    (a) Applicability. The provisions of this section apply to all 
managed care

[[Page 205]]

arrangements whether enrollment is mandatory or voluntary and whether 
the contract is with an MCO, a PIHP, a PAHP, or a PCCM.
    (b) Disenrollment requested by the MCO, PIHP, PAHP, or PCCM. All 
MCO, PIHP, PAHP, and PCCM contracts must--(1) Specify the reasons for 
which the MCO, PIHP, PAHP, or PCCM may request disenrollment of an 
enrollee;
    (2) Provide that the MCO, PIHP, PAHP, or PCCM may not request 
disenrollment because of an adverse change in the enrollee's health 
status, or because of the enrollee's utilization of medical services, 
diminished mental capacity, or uncooperative or disruptive behavior 
resulting from his or her special needs (except when his or her 
continued enrollment in the MCO, PIHP, PAHP, or PCCM seriously impairs 
the entity's ability to furnish services to either this particular 
enrollee or other enrollees); and
    (3) Specify the methods by which the MCO, PIHP, PAHP, or PCCM 
assures the agency that it does not request disenrollment for reasons 
other than those permitted under the contract.
    (c) Disenrollment requested by the enrollee. If the State chooses to 
limit disenrollment, its MCO, PIHP, PAHP, and PCCM contracts must 
provide that a recipient may request disenrollment as follows:
    (1) For cause, at any time.
    (2) Without cause, at the following times:
    (i) During the 90 days following the date of the recipient's initial 
enrollment with the MCO, PIHP, PAHP, or PCCM, or the date the State 
sends the recipient notice of the enrollment, whichever is later.
    (ii) At least once every 12 months thereafter.
    (iii) Upon automatic reenrollment under paragraph (g) of this 
section, if the temporary loss of Medicaid eligibility has caused the 
recipient to miss the annual disenrollment opportunity.
    (iv) When the State imposes the intermediate sanction specified in 
Sec. 438.702(a)(3).
    (d) Procedures for disenrollment-- (1) Request for disenrollment. 
The recipient (or his or her representative) must submit an oral or 
written request--
    (i) To the State agency (or its agent); or
    (ii) To the MCO, PIHP, PAHP, or PCCM, if the State permits MCOs, 
PIHP, PAHPs, and PCCMs to process disenrollment requests.
    (2) Cause for disenrollment. The following are cause for 
disenrollment:
    (i) The enrollee moves out of the MCO's, PIHP's, PAHP's, or PCCM's 
service area.
    (ii) The plan does not, because of moral or religious objections, 
cover the service the enrollee seeks.
    (iii) The enrollee needs related services (for example a cesarean 
section and a tubal ligation) to be performed at the same time; not all 
related services are available within the network; and the enrollee's 
primary care provider or another provider determines that receiving the 
services separately would subject the enrollee to unnecessary risk.
    (iv) Other reasons, including but not limited to, poor quality of 
care, lack of access to services covered under the contract, or lack of 
access to providers experienced in dealing with the enrollee's health 
care needs.
    (3) MCO, PIHP, PAHP, or PCCM action on request. (i) An MCO, PIHP, 
PAHP, or PCCM may either approve a request for disenrollment or refer 
the request to the State.
    (ii) If the MCO, PIHP, PAHP, PCCM, or State agency (whichever is 
responsible) fails to make a disenrollment determination so that the 
recipient can be disenrolled within the timeframes specified in 
paragraph (e)(1) of this section, the disenrollment is considered 
approved.
    (4) State agency action on request. For a request received directly 
from the recipient, or one referred by the MCO, PIHP, PAHP, or PCCM, the 
State agency must take action to approve or disapprove the request based 
on the following:
    (i) Reasons cited in the request.
    (ii) Information provided by the MCO, PIHP, PAHP, or PCCM at the 
agency's request.
    (iii) Any of the reasons specified in paragraph (d)(2) of this 
section.
    (5) Use of the MCO, PIHP, PAHP, or PCCM grievance procedures. (i) 
The

[[Page 206]]

State agency may require that the enrollee seek redress through the MCO, 
PIHP, PAHP, or PCCM's grievance system before making a determination on 
the enrollee's request.
    (ii) The grievance process, if used, must be completed in time to 
permit the disenrollment (if approved) to be effective in accordance 
with the timeframe specified in Sec. 438.56(e)(1).
    (iii) If, as a result of the grievance process, the MCO, PIHP, PAHP, 
or PCCM approves the disenrollment, the State agency is not required to 
make a determination.
    (e) Timeframe for disenrollment determinations. (1) Regardless of 
the procedures followed, the effective date of an approved disenrollment 
must be no later than the first day of the second month following the 
month in which the enrollee or the MCO, PIHP, PAHP, or PCCM files the 
request.
    (2) If the MCO, PIHP, PAHP, or PCCM or the State agency (whichever 
is responsible) fails to make the determination within the timeframes 
specified in paragraph (e)(1) of this section, the disenrollment is 
considered approved.
    (f) Notice and appeals. A State that restricts disenrollment under 
this section must take the following actions:
    (1) Provide that enrollees and their representatives are given 
written notice of disenrollment rights at least 60 days before the start 
of each enrollment period.
    (2) Ensure access to State fair hearing for any enrollee 
dissatisfied with a State agency determination that there is not good 
cause for disenrollment.
    (g) Automatic reenrollment: Contract requirement. If the State plan 
so specifies, the contract must provide for automatic reenrollment of a 
recipient who is disenrolled solely because he or she loses Medicaid 
eligibility for a period of 2 months or less.



Sec. 438.58  Conflict of interest safeguards.

    (a) As a condition for contracting with MCOs, PIHPs, or PAHPs, a 
State must have in effect safeguards against conflict of interest on the 
part of State and local officers and employees and agents of the State 
who have responsibilities relating to the MCO, PIHP, or PAHP contracts 
or the default enrollment process specified in Sec. 438.50(f).
    (b) These safeguards must be at least as effective as the safeguards 
specified in section 27 of the Office of Federal Procurement Policy Act 
(41 U.S.C. 423).



Sec. 438.60  Limit on payment to other providers.

    The State agency must ensure that no payment is made to a provider 
other than the MCO, PIHP, or PAHP for services available under the 
contract between the State and the MCO, PIHP, or PAHP, except when these 
payments are provided for in title XIX of the Act, in 42 CFR, or when 
the State agency has adjusted the capitation rates paid under the 
contract, in accordance with Sec. 438.6(c)(5)(v), to make payments for 
graduate medical education.



Sec. 438.62  Continued services to recipients.

    The State agency must arrange for Medicaid services to be provided 
without delay to any Medicaid enrollee of an MCO, PIHP, PAHP, or PCCM 
whose contract is terminated and for any Medicaid enrollee who is 
disenrolled from an MCO, PIHP, PAHP, or PCCM for any reason other than 
ineligibility for Medicaid.



Sec. 438.66  Monitoring procedures.

    The State agency must have in effect procedures for monitoring the 
MCO's, PIHP's, or PAHP's operations, including, at a minimum, operations 
related to the following:
    (a) Recipient enrollment and disenrollment.
    (b) Processing of grievances and appeals.
    (c) Violations subject to intermediate sanctions, as set forth in 
subpart I of this part.
    (d) Violations of the conditions for FFP, as set forth in subpart J 
of this part.
    (e) All other provisions of the contract, as appropriate.



               Subpart C--Enrollee Rights and Protections



Sec. 438.100  Enrollee rights.

    (a) General rule. The State must ensure that--

[[Page 207]]

    (1) Each MCO and PIHP has written policies regarding the enrollee 
rights specified in this section; and
    (2) Each MCO, PIHP, PAHP, and PCCM complies with any applicable 
Federal and State laws that pertain to enrollee rights, and ensures that 
its staff and affiliated providers take those rights into account when 
furnishing services to enrollees.
    (b) Specific rights-- (1) Basic requirement. The State must ensure 
that each managed care enrollee is guaranteed the rights as specified in 
paragraphs (b)(2) and (b)(3) of this section.
    (2) An enrollee of an MCO, PIHP, PAHP, or PCCM has the following 
rights: The right to --
    (i) Receive information in accordance with Sec. 438.10.
    (ii) Be treated with respect and with due consideration for his or 
her dignity and privacy.
    (iii) Receive information on available treatment options and 
alternatives, presented in a manner appropriate to the enrollee's 
condition and ability to understand. (The information requirements for 
services that are not covered under the contract because of moral or 
religious objections are set forth in Sec. 438.10(f)(6)(xiii).)
    (iv) Participate in decisions regarding his or her health care, 
including the right to refuse treatment.
    (v) Be free from any form of restraint or seclusion used as a means 
of coercion, discipline, convenience or retaliation, as specified in 
other Federal regulations on the use of restraints and seclusion.
    (vi) If the privacy rule, as set forth in 45 CFR parts 160 and 164 
subparts A and E, applies, request and receive a copy of his or her 
medical records, and request that they be amended or corrected, as 
specified in 45 CFR Sec. 164.524 and 164.526.
    (3) An enrollee of an MCO, PIHP, or PAHP (consistent with the scope 
of the PAHP's contracted services) has the right to be furnished health 
care services in accordance with Secs. 438.206 through 438.210.
    (c) Free exercise of rights. The State must ensure that each 
enrollee is free to exercise his or her rights, and that the exercise of 
those rights does not adversely affect the way the MCO, PIHP, PAHP, or 
PCCM and its providers or the State agency treat the enrollee.
    (d) Compliance with other Federal and State laws. The State must 
ensure that each MCO, PIHP, PAHP, and PCCM complies with any other 
applicable Federal and State laws (such as: title VI of the Civil Rights 
Act of 1964 as implemented by regulations at 45 CFR part 80; the Age 
Discrimination Act of 1975 as implemented by regulations at 45 CFR part 
91; the Rehabilitation Act of 1973; and titles II and III of the 
Americans with Disabilities Act; and other laws regarding privacy and 
confidentiality).



Sec. 438.102  Provider-enrollee communications.

    (a) General rules. (1) An MCO, PIHP, or PAHP may not prohibit, or 
otherwise restrict, a health care professional acting within the lawful 
scope of practice, from advising or advocating on behalf of an enrollee 
who is his or her patient, for the following:
    (i) The enrollee's health status, medical care, or treatment 
options, including any alternative treatment that may be self-
administered.
    (ii) Any information the enrollee needs in order to decide among all 
relevant treatment options.
    (iii) The risks, benefits, and consequences of treatment or 
nontreatment.
    (iv) The enrollee's right to participate in decisions regarding his 
or her health care, including the right to refuse treatment, and to 
express preferences about future treatment decisions.
    (2) Subject to the information requirements of paragraph (b) of this 
section, an MCO, PIHP, or PAHP that would otherwise be required to 
provide, reimburse for, or provide coverage of, a counseling or referral 
service because of the requirement in paragraph (a)(1) of this section 
is not required to do so if the MCO, PIHP, or PAHP objects to the 
service on moral or religious grounds.
    (b) Information requirements: MCO, PIHP, and PAHP responsibility. 
(1) An MCO, PIHP, or PAHP that elects the option provided in paragraph 
(a)(2) of this section must furnish information

[[Page 208]]

about the services it does not cover as follows:
    (i) To the State--
    (A) With its application for a Medicaid contract; and
    (B) Whenever it adopts the policy during the term of the contract.
    (ii) Consistent with the provisions of Sec. 438.10--
    (A) To potential enrollees, before and during enrollment; and
    (B) To enrollees, within 90 days after adopting the policy with 
respect to any particular service. (Although this timeframe would be 
sufficient to entitle the MCO, PIHP, or PAHP to the option provided in 
paragraph (a)(2) of this section, the overriding rule in 
Sec. 438.10(f)(4) requires the State, its contracted representative, or 
MCO, PIHP, or PAHP to furnish the information at least 30 days before 
the effective date of the policy.)
    (2) As specified in Sec. 438.10(e) and (f), the information that 
MCOs, PIHPs, and PAHPs must furnish to enrollees and potential enrollees 
does not include how and where to obtain the service excluded under 
paragraph (a)(2) of this section.
    (c) Information requirements: State responsibility. For each service 
excluded by an MCO, PIHP, or PAHP under paragraph (a)(2) of this 
section, the State must provide information on how and where to obtain 
the service, as specified in Sec. 438.10(e)(2)(ii) and (f)(6)(xii).
    (d) Sanction. An MCO that violates the prohibition of paragraph 
(a)(1) of this section is subject to intermediate sanctions under 
subpart I of this part.



Sec. 438.104  Marketing activities.

    (a) Terminology. As used in this section, the following terms have 
the indicated meanings:
    Cold-call marketing means any unsolicited personal contact by the 
MCO, PIHP, PAHP, or PCCM with a potential enrollee for the purpose of 
marketing as defined in this paragraph.
    Marketing means any communication, from an MCO, PIHP, PAHP, or PCCM 
to a Medicaid recipient who is not enrolled in that entity, that can 
reasonably be interpreted as intended to influence the recipient to 
enroll in that particular MCO's, PIHP's, PAHP's, or PCCM's Medicaid 
product, or either to not enroll in, or to disenroll from, another 
MCO's, PIHP's, PAHP's, or PCCM's Medicaid product.
    Marketing materials means materials that--
    (1) Are produced in any medium, by or on behalf of an MCO, PIHP, 
PAHP, or PCCM; and
    (2) Can reasonably be interpreted as intended to market to potential 
enrollees.
    MCO, PIHP, PAHP, or PCCM include any of the entity's employees, 
affiliated providers, agents, or contractors.
    (b) Contract requirements. Each contract with an MCO, PIHP, PAHP, or 
PCCM must comply with the following requirements:
    (1) Provide that the entity--
    (i) Does not distribute any marketing materials without first 
obtaining State approval;
    (ii) Distributes the materials to its entire service area as 
indicated in the contract;
    (iii) Complies with the information requirements of Sec. 438.10 to 
ensure that, before enrolling, the recipient receives, from the entity 
or the State, the accurate oral and written information he or she needs 
to make an informed decision on whether to enroll;
    (iv) Does not seek to influence enrollment in conjunction with the 
sale or offering of any private insurance; and
    (v) Does not, directly or indirectly, engage in door-to-door, 
telephone, or other cold-call marketing activities.
    (2) Specify the methods by which the entity assures the State agency 
that marketing, including plans and materials, is accurate and does not 
mislead, confuse, or defraud the recipients or the State agency. 
Statements that will be considered inaccurate, false, or misleading 
include, but are not limited to, any assertion or statement (whether 
written or oral) that--
    (i) The recipient must enroll in the MCO, PIHP, PAHP, or PCCM in 
order to obtain benefits or in order to not lose benefits; or
    (ii) The MCO, PIHP, PAHP, or PCCM is endorsed by CMS, the Federal or 
State government, or similar entity.
    (c) State agency review. In reviewing the marketing materials 
submitted by the entity, the State must consult with the Medical Care 
Advisory Committee

[[Page 209]]

established under Sec. 431.12 of this chapter or an advisory committee 
with similar membership.



Sec. 438.106  Liability for payment.

    Each MCO, PIHP, and PAHP must provide that its Medicaid enrollees 
are not held liable for any of the following:
    (a) The MCO's, PIHP's, or PAHP's debts, in the event of the entity's 
insolvency.
    (b) Covered services provided to the enrollee, for which--
    (1) The State does not pay the MCO, PIHP, or PAHP; or
    (2) The State, or the MCO, PIHP, or PAHP does not pay the individual 
or health care provider that furnishes the services under a contractual, 
referral, or other arrangement.
    (c) Payments for covered services furnished under a contract, 
referral, or other arrangement, to the extent that those payments are in 
excess of the amount that the enrollee would owe if the MCO, PIHP, or 
PAHP provided the services directly.



Sec. 438.108  Cost sharing.

    The contract must provide that any cost sharing imposed on Medicaid 
enrollees is in accordance with Secs. 447.50 through 447.60 of this 
chapter.



Sec. 438.114  Emergency and poststabilization services.

    (a) Definitions. As used in this section--
    Emergency medical condition means a medical condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
that a prudent layperson, who possesses an average knowledge of health 
and medicine, could reasonably expect the absence of immediate medical 
attention to result in the following:
    (1) Placing the health of the individual (or, with respect to a 
pregnant woman, the health of the woman or her unborn child) in serious 
jeopardy.
    (2) Serious impairment to bodily functions.
    (3) Serious dysfunction of any bodily organ or part.
    Emergency services means covered inpatient and outpatient services 
that are as follows:
    (1) Furnished by a provider that is qualified to furnish these 
services under this title.
    (2) Needed to evaluate or stabilize an emergency medical condition.
    Poststabilization care services means covered services, related to 
an emergency medical condition that are provided after an enrollee is 
stabilized in order to maintain the stabilized condition, or, under the 
circumstances described in paragraph (e) of this section, to improve or 
resolve the enrollee's condition.
    (b) Coverage and payment: General rule. The following entities are 
responsible for coverage and payment of emergency services and 
poststabilization care services.
    (1) The MCO, PIHP, or PAHP.
    (2) The PCCM that has a risk contract that covers these services.
    (3) The State, in the case of a PCCM that has a fee-for-service 
contract.
    (c) Coverage and payment: Emergency services. (1) The entities 
identified in paragraph (b) of this section--
    (i) Must cover and pay for emergency services regardless of whether 
the provider that furnishes the services has a contract with the MCO, 
PIHP, PAHP, or PCCM; and
    (ii) May not deny payment for treatment obtained under either of the 
following circumstances:
    (A) An enrollee had an emergency medical condition, including cases 
in which the absence of immediate medical attention would not have had 
the outcomes specified in paragraphs (1), (2), and (3) of the definition 
of emergency medical condition in paragraph (a) of this section.
    (B) A representative of the MCO, PIHP, PAHP, or PCCM instructs the 
enrollee to seek emergency services.
    (2) A PCCM must--
    (i) Allow enrollees to obtain emergency services outside the primary 
care case management system regardless of whether the case manager 
referred the enrollee to the provider that furnishes the services; and
    (ii) Pay for the services if the manager's contract is a risk 
contract that covers those services.
    (d) Additional rules for emergency services. (1) The entities 
specified in paragraph (b) of this section may not--

[[Page 210]]

    (i) Limit what constitutes an emergency medical condition with 
reference to paragraph (a) of this section, on the basis of lists of 
diagnoses or symptoms; and
    (ii) Refuse to cover emergency services based on the emergency room 
provider, hospital, or fiscal agent not notifying the enrollee's primary 
care provider, MCO, or applicable State entity of the enrollee's 
screening and treatment within 10 calendar days of presentation for 
emergency services.
    (2) An enrollee who has an emergency medical condition may not be 
held liable for payment of subsequent screening and treatment needed to 
diagnose the specific condition or stabilize the patient.
    (3) The attending emergency physician, or the provider actually 
treating the enrollee, is responsible for determining when the enrollee 
is sufficiently stabilized for transfer or discharge, and that 
determination is binding on the entities identified in paragraph (b) of 
this section as responsible for coverage and payment.
    (e) Coverage and payment: Poststabilization care services. 
Poststabilization care services are covered and paid for in accordance 
with provisions set forth at Sec. 422.113(c) of this chapter. In 
applying those provisions, reference to ``M+C organization'' must be 
read as reference to the entities responsible for Medicaid payment, as 
specified in paragraph (b) of this section.
    (f) Applicability to PIHPs and PAHPs. To the extent that services 
required to treat an emergency medical condition fall within the scope 
of the services for which the PIHP or PAHP is responsible, the rules 
under this section apply.



Sec. 438.116  Solvency standards.

    (a) Requirement for assurances (1) Each MCO, PIHP, and PAHP that is 
not a Federally qualified HMO (as defined in section 1310 of the Public 
Health Service Act) must provide assurances satisfactory to the State 
showing that its provision against the risk of insolvency is adequate to 
ensure that its Medicaid enrollees will not be liable for the MCO's, 
PIHP's, or PAHP's debts if the entity becomes insolvent.
    (2) Federally qualified HMOs, as defined in section 1310 of the 
Public Health Service Act, are exempt from this requirement.
    (b) Other requirements--(1) General rule. Except as provided in 
paragraph (b)(2) of this section, an MCO, PIHP, and PAHP must meet the 
solvency standards established by the State for private health 
maintenance organizations, or be licensed or certified by the State as a 
risk-bearing entity.
    (2) Exception. Paragraph (b)(1) of this section does not apply to an 
MCO, PIHP, or PAHP that meets any of the following conditions:
    (i) Does not provide both inpatient hospital services and physician 
services.
    (ii) Is a public entity.
    (iii) Is (or is controlled by) one or more Federally qualified 
health centers and meets the solvency standards established by the State 
for those centers.
    (iv) Has its solvency guaranteed by the State.



        Subpart D--Quality Assessment and Performance Improvement



Sec. 438.200  Scope.

    This subpart implements section 1932(c)(1) of the Act and sets forth 
specifications for quality assessment and performance improvement 
strategies that States must implement to ensure the delivery of quality 
health care by all MCOs, PIHPs, and PAHPs. It also establishes standards 
that States, MCOs, PIHPs, and PAHPs must meet.



Sec. 438.202  State responsibilities.

    Each State contracting with an MCO or PIHP must do the following:
    (a) Have a written strategy for assessing and improving the quality 
of managed care services offered by all MCOs and PIHPs.
    (b) Obtain the input of recipients and other stakeholders in the 
development of the strategy and make the strategy available for public 
comment before adopting it in final.
    (c) Ensure that MCOs, PIHPs, and PAHPs comply with standards 
established by the State, consistent with this subpart.

[[Page 211]]

    (d) Conduct periodic reviews to evaluate the effectiveness of the 
strategy, and update the strategy periodically, as needed.
    (e) Submit to CMS the following:
    (1) A copy of the initial strategy, and a copy of the revised 
strategy whenever significant changes are made.
    (2) Regular reports on the implementation and effectiveness of the 
strategy.



Sec. 438.204  Elements of State quality strategies.

    At a minimum, State strategies must include the following:
    (a) The MCO and PIHP contract provisions that incorporate the 
standards specified in this subpart.
    (b) Procedures that--
    (1) Assess the quality and appropriateness of care and services 
furnished to all Medicaid enrollees under the MCO and PIHP contracts, 
and to individuals with special health care needs.
    (2) Identify the race, ethnicity, and primary language spoken of 
each Medicaid enrollee. States must provide this information to the MCO 
and PIHP for each Medicaid enrollee at the time of enrollment.
    (3) Regularly monitor and evaluate the MCO and PIHP compliance with 
the standards.
    (c) For MCOs and PIHPs, any national performance measures and levels 
that may be identified and developed by CMS in consultation with States 
and other relevant stakeholders.
    (d) Arrangements for annual, external independent reviews of the 
quality outcomes and timeliness of, and access to, the services covered 
under each MCO and PIHP contract.
    (e) For MCOs, appropriate use of intermediate sanctions that, at a 
minimum, meet the requirements of subpart I of this part.
    (f) An information system that supports initial and ongoing 
operation and review of the State's quality strategy.
    (g) Standards, at least as stringent as those in the following 
sections of this subpart, for access to care, structure and operations, 
and quality measurement and improvement.

                            Access Standards



Sec. 438.206  Availability of services.

    (a) Basic rule. Each State must ensure that all services covered 
under the State plan are available and accessible to enrollees of MCOs, 
PIHPs, and PAHPs.
    (b) Delivery network. The State must ensure, through its contracts, 
that each MCO, and each PIHP and PAHP consistent with the scope of the 
PIHP's or PAHP's contracted services, meets the following requirements:
    (1) Maintains and monitors a network of appropriate providers that 
is supported by written agreements and is sufficient to provide adequate 
access to all services covered under the contract. In establishing and 
maintaining the network, each MCO, PIHP, and PAHP must consider the 
following:
    (i) The anticipated Medicaid enrollment.
    (ii) The expected utilization of services, taking into consideration 
the characteristics and health care needs of specific Medicaid 
populations represented in the particular MCO, PIHP, and PAHP.
    (iii) The numbers and types (in terms of training, experience, and 
specialization) of providers required to furnish the contracted Medicaid 
services.
    (iv) The numbers of network providers who are not accepting new 
Medicaid patients.
    (v) The geographic location of providers and Medicaid enrollees, 
considering distance, travel time, the means of transportation 
ordinarily used by Medicaid enrollees, and whether the location provides 
physical access for Medicaid enrollees with disabilities.
    (2) Provides female enrollees with direct access to a women's health 
specialist within the network for covered care necessary to provide 
women's routine and preventive health care services. This is in addition 
to the enrollee's designated source of primary care if that source is 
not a women's health specialist.
    (3) Provides for a second opinion from a qualified health care 
professional within the network, or arranges for the enrollee to obtain 
one outside the network, at no cost to the enrollee.

[[Page 212]]

    (4) If the network is unable to provide necessary services, covered 
under the contract, to a particular enrollee, the MCO, PIHP, or PAHP 
must adequately and timely cover these services out of network for the 
enrollee, for as long as the MCO, PIHP, or PAHP is unable to provide 
them.
    (5) Requires out-of-network providers to coordinate with the MCO or 
PIHP with respect to payment and ensures that cost to the enrollee is no 
greater than it would be if the services were furnished within the 
network.
    (6) Demonstrates that its providers are credentialed as required by 
Sec. 438.214.
    (c) Furnishing of services. The State must ensure that each MCO, 
PIHP, and PAHP contract complies with the requirements of this 
paragraph.
    (1) Timely access. Each MCO, PIHP, and PAHP must do the following:
    (i) Meet and require its providers to meet State standards for 
timely access to care and services, taking into account the urgency of 
the need for services.
    (ii) Ensure that the network providers offer hours of operation that 
are no less than the hours of operation offered to commercial enrollees 
or comparable to Medicaid fee-for-service, if the provider serves only 
Medicaid enrollees.
    (iii) Make services included in the contract available 24 hours a 
day, 7 days a week, when medically necessary.
    (iv) Establish mechanisms to ensure compliance by providers.
    (v) Monitor providers regularly to determine compliance.
    (vi) Take corrective action if there is a failure to comply.
    (2) Cultural considerations. Each MCO, PIHP, and PAHP participates 
in the State's efforts to promote the delivery of services in a 
culturally competent manner to all enrollees, including those with 
limited English proficiency and diverse cultural and ethnic backgrounds.



Sec. 438.207  Assurances of adequate capacity and services.

    (a) Basic rule. The State must ensure, through its contracts, that 
each MCO, PIHP, and PAHP gives assurances to the State and provides 
supporting documentation that demonstrates that it has the capacity to 
serve the expected enrollment in its service area in accordance with the 
State's standards for access to care under this subpart.
    (b) Nature of supporting documentation. Each MCO, PIHP, and PAHP 
must submit documentation to the State, in a format specified by the 
State to demonstrate that it complies with the following requirements:
    (1) Offers an appropriate range of preventive, primary care, and 
specialty services that is adequate for the anticipated number of 
enrollees for the service area.
    (2) Maintains a network of providers that is sufficient in number, 
mix, and geographic distribution to meet the needs of the anticipated 
number of enrollees in the service area.
    (c) Timing of documentation. Each MCO, PIHP, and PAHP must submit 
the documentation described in paragraph (b) of this section as 
specified by the State, but no less frequently than the following:
    (1) At the time it enters into a contract with the State.
    (2) At any time there has been a significant change (as defined by 
the State) in the MCO's, PIHP's, or PAHP's operations that would affect 
adequate capacity and services, including--
    (i) Changes in MCO, PIHP, or PAHP services, benefits, geographic 
service area or payments; or
    (ii) Enrollment of a new population in the MCO, PIHP, or PAHP.
    (d) State review and certification to CMS. After the State reviews 
the documentation submitted by the MCO, PIHP, or PAHP, the State must 
certify to CMS that the MCO, PIHP, or PAHP has complied with the State's 
requirements for availability of services, as set forth in Sec. 438.206.
    (e) CMS' right to inspect documentation. The State must make 
available to CMS, upon request, all documentation collected by the State 
from the MCO, PIHP, or PAHP.



Sec. 438.208  Coordination and continuity of care.

    (a) Basic requirement--(1) General rule. Except as specified in 
paragraphs (a)(2) and (a)(3) of this section, the State must ensure 
through its contracts,

[[Page 213]]

that each MCO, PIHP, and PAHP complies with the requirements of this 
section.
    (2) PIHP and PAHP exception. For PIHPs and PAHPs, the State 
determines, based on the scope of the entity's services, and on the way 
the State has organized the delivery of managed care services, whether a 
particular PIHP or PAHP is required to--
    (i) Meet the primary care requirement of paragraph (b)(1) of this 
section; and
    (ii) Implement mechanisms for identifying, assessing, and producing 
a treatment plan for an individual with special health care needs, as 
specified in paragraph (c) of this section.
    (3) Exception for MCOs that serve dually eligible enrollees. (i) For 
each MCO that serves enrollees who are also enrolled in and receive 
Medicare benefits from a Medicare+Choice plan, the State determines to 
what extent the MCO must meet the primary care coordination, 
identification, assessment, and treatment planning provisions of 
paragraphs (b) and (c) of this section with respect to dually eligible 
individuals.
    (ii) The State bases its determination on the services it requires 
the MCO to furnish to dually eligible enrollees.
    (b) Primary care and coordination of health care services for all 
MCO, PIHP, and PAHP enrollees. Each MCO, PIHP, and PAHP must implement 
procedures to deliver primary care to and coordinate health care service 
for all MCO, PIHP, and PAHP enrollees. These procedures must meet State 
requirements and must do the following:
    (1) Ensure that each enrollee has an ongoing source of primary care 
appropriate to his or her needs and a person or entity formally 
designated as primarily responsible for coordinating the health care 
services furnished to the enrollee.
    (2) Coordinate the services the MCO, PIHP, or PAHP furnishes to the 
enrollee with the services the enrollee receives from any other MCO, 
PIHP, or PAHP.
    (3) Share with other MCOs, PIHPs, and PAHPs serving the enrollee 
with special health care needs the results of its identification and 
assessment of that enrollee's needs to prevent duplication of those 
activities.
    (4) Ensure that in the process of coordinating care, each enrollee's 
privacy is protected in accordance with the privacy requirements in 45 
CFR parts 160 and 164 subparts A and E, to the extent that they are 
applicable.
    (c) Additional services for enrollees with special health care 
needs--(1) Identification. The State must implement mechanisms to 
identify persons with special health care needs to MCOs, PIHPs and 
PAHPs, as those persons are defined by the State. These identification 
mechanisms--
    (i) Must be specified in the State's quality improvement strategy in 
Sec. 438.202; and
    (ii) May use State staff, the State's enrollment broker, or the 
State's MCOs,
    PIHPs and PAHPs.
    (2) Assessment. Each MCO, PIHP, and PAHP must implement mechanisms 
to assess each Medicaid enrollee identified by the State (through the 
mechanism specified in paragraph (c)(1) of this section) and identified 
to the MCO, PIHP, and PAHP by the State as having special health care 
needs in order to identify any ongoing special conditions of the 
enrollee that require a course of treatment or regular care monitoring. 
The assessment mechanisms must use appropriate health care 
professionals.
    (3) Treatment plans. If the State requires MCOs, PIHPs, and PAHPs to 
produce a treatment plan for enrollees with special health care needs 
who are determined through assessment to need a course of treatment or 
regular care monitoring, the treatment plan must be--
    (i) Developed by the enrollee's primary care provider with enrollee 
participation, and in consultation with any specialists caring for the 
enrollee;
    (ii) Approved by the MCO, PIHP, or PAHP in a timely manner, if this 
approval is required by the MCO, PIHP, or PAHP; and
    (iii) In accord with any applicable State quality assurance and 
utilization review standards.
    (4) Direct access to specialists. For enrollees with special health 
care needs determined through an assessment by

[[Page 214]]

appropriate health care professionals (consistent with 
Sec. 438.208(c)(2)) to need a course of treatment or regular care 
monitoring, each MCO, PIHP, and PAHP must have a mechanism in place to 
allow enrollees to directly access a specialist (for example, through a 
standing referral or an approved number of visits) as appropriate for 
the enrollee's condition and identified needs.



Sec. 438.210  Coverage and authorization of services.

    (a) Coverage. Each contract with an MCO, PIHP, or PAHP must do the 
following:
    (1) Identify, define, and specify the amount, duration, and scope of 
each service that the MCO, PIHP, or PAHP is required to offer.
    (2) Require that the services identified in paragraph (a)(1) of this 
section be furnished in an amount, duration, and scope that is no less 
than the amount, duration, and scope for the same services furnished to 
beneficiaries under fee-for-service Medicaid, as set forth in 
Sec. 440.230.
    (3) Provide that the MCO, PIHP, or PAHP--
    (i) Must ensure that the services are sufficient in amount, 
duration, or scope to reasonably be expected to achieve the purpose for 
which the services are furnished.
    (ii) May not arbitrarily deny or reduce the amount, duration, or 
scope of a required service solely because of diagnosis, type of 
illness, or condition of the beneficiary;
    (iii) May place appropriate limits on a service--
    (A) On the basis of criteria applied under the State plan, such as 
medical necessity; or
    (B) For the purpose of utilization control, provided the services 
furnished can reasonably be expected to achieve their purpose, as 
required in paragraph (a)(3)(i) of this section; and
    (4) Specify what constitutes ``medically necessary services'' in a 
manner that--
    (i) Is no more restrictive than that used in the State Medicaid 
program as indicated in State statutes and regulations, the State Plan, 
and other State policy and procedures; and
    (ii) Addresses the extent to which the MCO, PIHP, or PAHP is 
responsible for covering services related to the following:
    (A) The prevention, diagnosis, and treatment of health impairments.
    (B) The ability to achieve age-appropriate growth and development.
    (C) The ability to attain, maintain, or regain functional capacity.
    (b) Authorization of services. For the processing of requests for 
initial and continuing authorizations of services, each contract must 
require--
    (1) That the MCO, PIHP, or PAHP and its subcontractors have in 
place, and follow, written policies and procedures.
    (2) That the MCO, PIHP, or PAHP--
    (i) Have in effect mechanisms to ensure consistent application of 
review criteria for authorization decisions; and
    (ii) Consult with the requesting provider when appropriate.
    (3) That any decision to deny a service authorization request or to 
authorize a service in an amount, duration, or scope that is less than 
requested, be made by a health care professional who has appropriate 
clinical expertise in treating the enrollee's condition or disease.
    (c) Notice of adverse action. Each contract must provide for the 
MCO, PIHP, or PAHP to notify the requesting provider, and give the 
enrollee written notice of any decision by the MCO, PIHP, or PAHP to 
deny a service authorization request, or to authorize a service in an 
amount, duration, or scope that is less than requested. For MCOs and 
PIHPs, the notice must meet the requirements of Sec. 438.404, except 
that the notice to the provider need not be in writing.
    (d) Timeframe for decisions. Each MCO, PIHP, or PAHP contract must 
provide for the following decisions and notices:
    (1) Standard authorization decisions. For standard authorization 
decisions, provide notice as expeditiously as the enrollee's health 
condition requires and within State-established timeframes that may not 
exceed 14 calendar days following receipt of the request for service, 
with a possible extension of up to 14 additional calendar days, if--

[[Page 215]]

    (i) The enrollee, or the provider, requests extension; or
    (ii) The MCO, PIHP, or PAHP justifies (to the State agency upon 
request) a need for additional information and how the extension is in 
the enrollee's interest.
    (2) Expedited authorization decisions. (i) For cases in which a 
provider indicates, or the MCO, PIHP, or PAHP determines, that following 
the standard timeframe could seriously jeopardize the enrollee's life or 
health or ability to attain, maintain, or regain maximum function, the 
MCO, PIHP, or PAHP must make an expedited authorization decision and 
provide notice as expeditiously as the enrollee's health condition 
requires and no later than 3 working days after receipt of the request 
for service.
    (ii) The MCO, PIHP, or PAHP may extend the 3 working days time 
period by up to 14 calendar days if the enrollee requests an extension, 
or if the MCO, PIHP, or PAHP justifies (to the State agency upon 
request) a need for additional information and how the extension is in 
the enrollee's interest.
    (e) Compensation for utilization management activities. Each 
contract must provide that, consistent with Sec. 438.6(h), and 
Sec. 422.208 of this chapter, compensation to individuals or entities 
that conduct utilization management activities is not structured so as 
to provide incentives for the individual or entity to deny, limit, or 
discontinue medically necessary services to any enrollee.

                    Structure and Operation Standards



Sec. 438.214  Provider selection.

    (a) General rules. The State must ensure, through its contracts, 
that each MCO, PIHP, or PAHP implements written policies and procedures 
for selection and retention of providers and that those policies and 
procedures include, at a minimum, the requirements of this section.
    (b) Credentialing and recredentialing requirements. (1) Each State 
must establish a uniform credentialing and recredentialing policy that 
each MCO, PIHP, and PAHP must follow.
    (2) Each MCO, PIHP, and PAHP must follow a documented process for 
credentialing and recredentialing of providers who have signed contracts 
or participation agreements with the MCO, PIHP, or PAHP.
    (c) Nondiscrimination. MCO, PIHP, and PAHP provider selection 
policies and procedures, consistent with Sec. 438.12, must not 
discriminate against particular providers that serve high-risk 
populations or specialize in conditions that require costly treatment.
    (d) Excluded providers. MCOs, PIHPs, and PAHPs may not employ or 
contract with providers excluded from participation in Federal health 
care programs under either section 1128 or section 1128A of the Act.
    (e) State requirements. Each MCO, PIHP, and PAHP must comply with 
any additional requirements established by the State.

[67 FR 41095, June 14, 2002; 67 FR 54532, Aug. 22, 2002]



Sec. 438.218  Enrollee information.

    The requirements that States must meet under Sec. 438.10 constitute 
part of the State's quality strategy at Sec. 438.204.



Sec. 438.224  Confidentiality.

    The State must ensure, through its contracts, that (consistent with 
subpart F of part 431 of this chapter), for medical records and any 
other health and enrollment information that identifies a particular 
enrollee, each MCO, PIHP, and PAHP uses and discloses such individually 
identifiable health information in accordance with the privacy 
requirements in 45 CFR parts 160 and 164, subparts A and E, to the 
extent that these requirements are applicable.



Sec. 438.226  Enrollment and disenrollment.

    The State must ensure that each MCO, PIHP, and PAHP contract 
complies with the enrollment and disenrollment requirements and 
limitations set forth in Sec. 438.56.



Sec. 438.228  Grievance systems.

    (a) The State must ensure, through its contracts, that each MCO and 
PIHP has in effect a grievance system that meets the requirements of 
subpart F of this part.
    (b) If the State delegates to the MCO or PIHP responsibility for 
notice of action under subpart E of part 431 of this

[[Page 216]]

chapter, the State must conduct random reviews of each delegated MCO or 
PIHP and its providers and subcontractors to ensure that they are 
notifying enrollees in a timely manner.



Sec. 438.230  Subcontractual relationships and delegation.

    (a) General rule. The State must ensure, through its contracts, that 
each MCO, PIHP, and PAHP--
    (1) Oversees and is accountable for any functions and 
responsibilities that it delegates to any subcontractor; and
    (2) Meets the conditions of paragraph (b) of this section.
    (b) Specific conditions. (1) Before any delegation, each MCO, PIHP, 
and PAHP evaluates the prospective subcontractor's ability to perform 
the activities to be delegated.
    (2) There is a written agreement that--
    (i) Specifies the activities and report responsibilities delegated 
to the subcontractor; and
    (ii) Provides for revoking delegation or imposing other sanctions if 
the subcontractor's performance is inadequate.
    (3) The MCO, PIHP, or PAHP monitors the subcontractor's performance 
on an ongoing basis and subjects it to formal review according to a 
periodic schedule established by the State, consistent with industry 
standards or State MCO laws and regulations.
    (4) If any MCO, PIHP, or PAHP identifies deficiencies or areas for 
improvement, the MCO, PIHP, or PAHP and the subcontractor take 
corrective action.

                  Measurement and Improvement Standards



Sec. 438.236  Practice guidelines.

    (a) Basic rule: The State must ensure, through its contracts, that 
each MCO and, when applicable, each PIHP and PAHP meets the requirements 
of this section.
    (b) Adoption of practice guidelines. Each MCO and, when applicable, 
each PIHP and PAHP adopts practice guidelines that meet the following 
requirements:
    (1) Are based on valid and reliable clinical evidence or a consensus 
of health care professionals in the particular field.
    (2) Consider the needs of the MCO's, PIHP's, or PAHP's enrollees.
    (3) Are adopted in consultation with contracting health care 
professionals.
    (4) Are reviewed and updated periodically as appropriate.
    (c) Dissemination of guidelines. Each MCO, PIHP, and PAHP 
disseminates the guidelines to all affected providers and, upon request, 
to enrollees and potential enrollees.
    (d) Application of guidelines. Decisions for utilization management, 
enrollee education, coverage of services, and other areas to which the 
guidelines apply are consistent with the guidelines.



Sec. 438.240  Quality assessment and performance improvement program.

    (a) General rules. (1) The State must require, through its 
contracts, that each MCO and PIHP have an ongoing quality assessment and 
performance improvement program for the services it furnishes to its 
enrollees.
    (2) CMS, in consultation with States and other stakeholders, may 
specify performance measures and topics for performance improvement 
projects to be required by States in their contracts with MCOs and 
PIHPs.
    (b) Basic elements of MCO and PIHP quality assessment and 
performance improvement programs. At a minimum, the State must require 
that each MCO and PIHP comply with the following requirements:
    (1) Conduct performance improvement projects as described in 
paragraph (d) of this section. These projects must be designed to 
achieve, through ongoing measurements and intervention, significant 
improvement, sustained over time, in clinical care and nonclinical care 
areas that are expected to have a favorable effect on health outcomes 
and enrollee satisfaction.
    (2) Submit performance measurement data as described in paragraph 
(c) of this section.
    (3) Have in effect mechanisms to detect both underutilization and 
overutilization of services.
    (4) Have in effect mechanisms to assess the quality and 
appropriateness of

[[Page 217]]

care furnished to enrollees with special health care needs.
    (c) Performance measurement. Annually each MCO and PIHP must--
    (1) Measure and report to the State its performance, using standard 
measures required by the State including those that incorporate the 
requirements of Sec. 438.204(c) and Sec. 438.240(a)(2);
    (2) Submit to the State, data specified by the State, that enables 
the State to measure the MCO's or PIHP's performance; or
    (3) Perform a combination of the activities described in paragraphs 
(c)(1) and (c)(2) of this section.
    (d) Performance improvement projects. (1) MCOs and PIHPs must have 
an ongoing program of performance improvement projects that focus on 
clinical and nonclinical areas, and that involve the following:
    (i) Measurement of performance using objective quality indicators.
    (ii) Implementation of system interventions to achieve improvement 
in quality.
    (iii) Evaluation of the effectiveness of the interventions.
    (iv) Planning and initiation of activities for increasing or 
sustaining improvement.
    (2) Each MCO and PIHP must report the status and results of each 
project to the State as requested, including those that incorporate the 
requirements of Sec. 438.240(a)(2). Each performance improvement project 
must be completed in a reasonable time period so as to generally allow 
information on the success of performance improvement projects in the 
aggregate to produce new information on quality of care every year.
    (e) Program review by the State. (1) The State must review, at least 
annually, the impact and effectiveness of each MCO's and PIHP's quality 
assessment and performance improvement program. The review must include-
-
    (i) The MCO's and PIHP's performance on the standard measures on 
which it is required to report; and
    (ii) The results of each MCO's and PIHP's performance improvement 
projects.
    (2) The State may require that an MCO or PIHP have in effect a 
process for its own evaluation of the impact and effectiveness of its 
quality assessment and performance improvement program.



Sec. 438.242  Health information systems.

    (a) General rule. The State must ensure, through its contracts, that 
each MCO and PIHP maintains a health information system that collects, 
analyzes, integrates, and reports data and can achieve the objectives of 
this subpart. The system must provide information on areas including, 
but not limited to, utilization, grievances and appeals, and 
disenrollments for other than loss of Medicaid eligibility.
    (b) Basic elements of a health information system. The State must 
require, at a minimum, that each MCO and PIHP comply with the following:
    (1) Collect data on enrollee and provider characteristics as 
specified by the State, and on services furnished to enrollees through 
an encounter data system or other methods as may be specified by the 
State.
    (2) Ensure that data received from providers is accurate and 
complete by--
    (i) Verifying the accuracy and timeliness of reported data;
    (ii) Screening the data for completeness, logic, and consistency; 
and
    (iii) Collecting service information in standardized formats to the 
extent feasible and appropriate.
    (3) Make all collected data available to the State and upon request 
to CMS, as required in this subpart.

Subpart E [Reserved]



                       Subpart F--Grievance System



Sec. 438.400  Statutory basis and definitions.

    (a) Statutory basis. This subpart is based on sections 1902(a)(3), 
1902(a)(4), and 1932(b)(4) of the Act.
    (1) Section 1902(a)(3) requires that a State plan provide an 
opportunity for a fair hearing to any person whose claim for assistance 
is denied or not acted upon promptly.
    (2) Section 1902(a)(4) requires that the State plan provide for 
methods of administration that the Secretary finds necessary for the 
proper and efficient operation of the plan.

[[Page 218]]

    (3) Section 1932(b)(4) requires Medicaid managed care organizations 
to establish internal grievance procedures under which Medicaid 
enrollees, or providers acting on their behalf, may challenge the denial 
of coverage of, or payment for, medical assistance.
    (b) Definitions. As used in this subpart, the following terms have 
the indicated meanings:
    Action means--
    In the case of an MCO or PIHP--
    (1) The denial or limited authorization of a requested service, 
including the type or level of service;
    (2) The reduction, suspension, or termination of a previously 
authorized service;
    (3) The denial, in whole or in part, of payment for a service;
    (4) The failure to provide services in a timely manner, as defined 
by the State;
    (5) The failure of an MCO or PIHP to act within the timeframes 
provided in Sec. 438.408(b); or
    (6) For a resident of a rural area with only one MCO, the denial of 
a Medicaid enrollee's request to exercise his or her right, under 
Sec. 438.52(b)(2)(ii), to obtain services outside the network.
    Appeal means a request for review of an action, as ``action'' is 
defined in this section.
    Grievance means an expression of dissatisfaction about any matter 
other than an action, as ``action'' is defined in this section. The term 
is also used to refer to the overall system that includes grievances and 
appeals handled at the MCO or PIHP level and access to the State fair 
hearing process. (Possible subjects for grievances include, but are not 
limited to, the quality of care or services provided, and aspects of 
interpersonal relationships such as rudeness of a provider or employee, 
or failure to respect the enrollee's rights.)



Sec. 438.402  General requirements.

    (a) The grievance system. Each MCO and PIHP must have a system in 
place for enrollees that includes a grievance process, an appeal 
process, and access to the State's fair hearing system.
    (b) Filing requirements--(1) Authority to file. (i) An enrollee may 
file a grievance and an MCO or PIHP level appeal, and may request a 
State fair hearing.
    (ii) A provider, acting on behalf of the enrollee and with the 
enrollee's written consent, may file an appeal. A provider may file a 
grievance or request a State fair hearing on behalf of an enrollee, if 
the State permits the provider to act as the enrollee's authorized 
representative in doing so.
    (2) Timing. The State specifies a reasonable timeframe that may be 
no less than 20 days and not to exceed 90 days from the date on the 
MCO's or PIHP's notice of action. Within that timeframe--
    (i) The enrollee or the provider may file an appeal; and
    (ii) In a State that does not require exhaustion of MCO and PIHP 
level appeals, the enrollee may request a State fair hearing.
    (3) Procedures. (i) The enrollee may file a grievance either orally 
or in writing and, as determined by the State, either with the State or 
with the MCO or the PIHP.
    (ii) The enrollee or the provider may file an appeal either orally 
or in writing, and unless he or she requests expedited resolution, must 
follow an oral filing with a written, signed, appeal.



Sec. 438.404  Notice of action.

    (a) Language and format requirements. The notice must be in writing 
and must meet the language and format requirements of Sec. 438.10(c) and 
(d) to ensure ease of understanding.
    (b) Content of notice. The notice must explain the following:
    (1) The action the MCO or PIHP or its contractor has taken or 
intends to take.
    (2) The reasons for the action.
    (3) The enrollee's or the provider's right to file an MCO or PIHP 
appeal.
    (4) If the State does not require the enrollee to exhaust the MCO or 
PIHP level appeal procedures, the enrollee's right to request a State 
fair hearing.
    (5) The procedures for exercising the rights specified in this 
paragraph.
    (6) The circumstances under which expedited resolution is available 
and how to request it.
    (7) The enrollee's right to have benefits continue pending 
resolution of the appeal, how to request that benefits be continued, and 
the circumstances

[[Page 219]]

under which the enrollee may be required to pay the costs of these 
services.
    (c) Timing of notice. The MCO or PIHP must mail the notice within 
the following timeframes:
    (1) For termination, suspension, or reduction of previously 
authorized Medicaid-covered services, within the timeframes specified in 
Secs. 431.211, 431.213, and 431.214 of this chapter.
    (2) For denial of payment, at the time of any action affecting the 
claim.
    (3) For standard service authorization decisions that deny or limit 
services, within the timeframe specified in Sec. 438.210(d)(1).
    (4) If the MCO or PIHP extends the timeframe in accordance with 
Sec. 438.210(d)(1), it must--
    (i) Give the enrollee written notice of the reason for the decision 
to extend the timeframe and inform the enrollee of the right to file a 
grievance if he or she disagrees with that decision; and
    (ii) Issue and carry out its determination as expeditiously as the 
enrollee's health condition requires and no later than the date the 
extension expires.
    (5) For service authorization decisions not reached within the 
timeframes specified in Sec. 438.210(d) (which constitutes a denial and 
is thus an adverse action), on the date that the timeframes expire.
    (6) For expedited service authorization decisions, within the 
timeframes specified in Sec. 438.210(d).



Sec. 438.406  Handling of grievances and appeals.

    (a) General requirements. In handling grievances and appeals, each 
MCO and each PIHP must meet the following requirements:
    (1) Give enrollees any reasonable assistance in completing forms and 
taking other procedural steps. This includes, but is not limited to, 
providing interpreter services and toll-free numbers that have adequate 
TTY/TTD and interpreter capability.
    (2) Acknowledge receipt of each grievance and appeal.
    (3) Ensure that the individuals who make decisions on grievances and 
appeals are individuals--
    (i) Who were not involved in any previous level of review or 
decision-making; and
    (ii) Who, if deciding any of the following, are health care 
professionals who have the appropriate clinical expertise, as determined 
by the State, in treating the enrollee's condition or disease.
    (A) An appeal of a denial that is based on lack of medical 
necessity.
    (B) A grievance regarding denial of expedited resolution of an 
appeal.
    (C) A grievance or appeal that involves clinical issues.
    (b) Special requirements for appeals. The process for appeals must:
    (1) Provide that oral inquiries seeking to appeal an action are 
treated as appeals (to establish the earliest possible filing date for 
the appeal) and must be confirmed in writing, unless the enrollee or the 
provider requests expedited resolution.
    (2) Provide the enrollee a reasonable opportunity to present 
evidence, and allegations of fact or law, in person as well as in 
writing. (The MCO or PIHP must inform the enrollee of the limited time 
available for this in the case of expedited resolution.)
    (3) Provide the enrollee and his or her representative opportunity, 
before and during the appeals process, to examine the enrollee's case 
file, including medical records, and any other documents and records 
considered during the appeals process.
    (4) Include, as parties to the appeal--
    (i) The enrollee and his or her representative; or
    (ii) The legal representative of a deceased enrollee's estate.



Sec. 438.408  Resolution and notification: Grievances and appeals.

    (a) Basic rule. The MCO or PIHP must dispose of each grievance and 
resolve each appeal, and provide notice, as expeditiously as the 
enrollee's health condition requires, within State-established 
timeframes that may not exceed the timeframes specified in this section.
    (b) Specific timeframes-- (1) Standard disposition of grievances. 
For standard disposition of a grievance and notice to the affected 
parties, the timeframe is established by the State but may not

[[Page 220]]

exceed 90 days from the day the MCO or PIHP receives the grievance.
    (2) Standard resolution of appeals. For standard resolution of an 
appeal and notice to the affected parties, the State must establish a 
timeframe that is no longer than 45 days from the day the MCO or PIHP 
receives the appeal. This timeframe may be extended under paragraph (c) 
of this section.
    (3) Expedited resolution of appeals. For expedited resolution of an 
appeal and notice to affected parties, the State must establish a 
timeframe that is no longer than 3 working days after the MCO or PIHP 
receives the appeal. This timeframe may be extended under paragraph (c) 
of this section.
    (c) Extension of timeframes--(1) The MCO or PIHP may extend the 
timeframes from paragraph (b) of this section by up to 14 calendar days 
if--
    (i) The enrollee requests the extension; or
    (ii) The MCO or PIHP shows (to the satisfaction of the State agency, 
upon its request) that there is need for additional information and how 
the delay is in the enrollee's interest.
    (2) Requirements following extension. If the MCO or PIHP extends the 
timeframes, it must--for any extension not requested by the enrollee, 
give the enrollee written notice of the reason for the delay.
    (d) Format of notice-- (1) Grievances. The State must establish the 
method MCOs and PIHPs will use to notify an enrollee of the disposition 
of a grievance.
    (2) Appeals. (i) For all appeals, the MCO or PIHP must provide 
written notice of disposition.
    (ii) For notice of an expedited resolution, the MCO or PIHP must 
also make reasonable efforts to provide oral notice.
    (e) Content of notice of appeal resolution. The written notice of 
the resolution must include the following:
    (1) The results of the resolution process and the date it was 
completed.
    (2) For appeals not resolved wholly in favor of the enrollees--
    (i) The right to request a State fair hearing, and how to do so;
    (ii) The right to request to receive benefits while the hearing is 
pending, and how to make the request; and
    (iii) That the enrollee may be held liable for the cost of those 
benefits if the hearing decision upholds the MCO's or PIHP's action.
    (f) Requirements for State fair hearings--(1) Availability. The 
State must permit the enrollee to request a State fair hearing within a 
reasonable time period specified by the State, but not less than 20 or 
in excess of 90 days from whichever of the following dates applies--
    (i) If the State requires exhaustion of the MCO or PIHP level appeal 
procedures, from the date of the MCO's or PIHP's notice of resolution; 
or
    (ii) If the State does not require exhaustion of the MCO or PIHP 
level appeal procedures and the enrollee appeals directly to the State 
for a fair hearing, from the date on the MCO's or PIHP's notice of 
action.
    (2) Parties. The parties to the State fair hearing include the MCO 
or PIHP as well as the enrollee and his or her representative or the 
representative of a deceased enrollee's estate.



Sec. 438.410  Expedited resolution of appeals.

    (a) General rule. Each MCO and PIHP must establish and maintain an 
expedited review process for appeals, when the MCO or PIHP determines 
(for a request from the enrollee) or the provider indicates (in making 
the request on the enrollee's behalf or supporting the enrollee's 
request) that taking the time for a standard resolution could seriously 
jeopardize the enrollee's life or health or ability to attain, maintain, 
or regain maximum function.
    (b) Punitive action. The MCO or PIHP must ensure that punitive 
action is neither taken against a provider who requests an expedited 
resolution or supports an enrollee's appeal.
    (c) Action following denial of a request for expedited resolution. 
If the MCO or PIHP denies a request for expedited resolution of an 
appeal, it must--
    (1) Transfer the appeal to the timeframe for standard resolution in 
accordance with Sec. 438.408(b)(2);
    (2) Make reasonable efforts to give the enrollee prompt oral notice 
of the denial, and follow up within two calendar days with a written 
notice.

[[Page 221]]



Sec. 438.414  Information about the grievance system to providers and subcontractors.

    The MCO or PIHP must provide the information specified at 
Sec. 438.10(g)(1) about the grievance system to all providers and 
subcontractors at the time they enter into a contract.



Sec. 438.416  Recordkeeping and reporting requirements.

    The State must require MCOs and PIHPs to maintain records of 
grievances and appeals and must review the information as part of the 
State quality strategy.



Sec. 438.420  Continuation of benefits while the MCO or PIHP appeal and the State fair hearing are pending.

    (a) Terminology. As used in this section, ``timely'' filing means 
filing on or before the later of the following:
    (1) Within ten days of the MCO or PIHP mailing the notice of action.
    (2) The intended effective date of the MCO's or PIHP's proposed 
action.
    (b) Continuation of benefits. The MCO or PIHP must continue the 
enrollee's benefits if--
    (1) The enrollee or the provider files the appeal timely;
    (2) The appeal involves the termination, suspension, or reduction of 
a previously authorized course of treatment;
    (3) The services were ordered by an authorized provider;
    (4) The original period covered by the original authorization has 
not expired; and
    (5) The enrollee requests extension of benefits.
    (c) Duration of continued or reinstated benefits. If, at the 
enrollee's request, the MCO or PIHP continues or reinstates the 
enrollee's benefits while the appeal is pending, the benefits must be 
continued until one of following occurs:
    (1) The enrollee withdraws the appeal.
    (2) Ten days pass after the MCO or PIHP mails the notice, providing 
the resolution of the appeal against the enrollee, unless the enrollee, 
within the 10-day timeframe, has requested a State fair hearing with 
continuation of benefits until a State fair hearing decision is reached.
    (3) A State fair hearing Office issues a hearing decision adverse to 
the enrollee.
    (4) The time period or service limits of a previously authorized 
service has been met.
    (d) Enrollee responsibility for services furnished while the appeal 
is pending. If the final resolution of the appeal is adverse to the 
enrollee, that is, upholds the MCO's or PIHP's action, the MCO or PIHP 
may recover the cost of the services furnished to the enrollee while the 
appeal is pending, to the extent that they were furnished solely because 
of the requirements of this section, and in accordance with the policy 
set forth in Sec. 431.230(b) of this chapter.



Sec. 438.424  Effectuation of reversed appeal resolutions.

    (a) Services not furnished while the appeal is pending. If the MCO 
or PIHP, or the State fair hearing officer reverses a decision to deny, 
limit, or delay services that were not furnished while the appeal was 
pending, the MCO or PIHP must authorize or provide the disputed services 
promptly, and as expeditiously as the enrollee's health condition 
requires.
    (b) Services furnished while the appeal is pending. If the MCO or 
PIHP, or the State fair hearing officer reverses a decision to deny 
authorization of services, and the enrollee received the disputed 
services while the appeal was pending, the MCO or the PIHP or the State 
must pay for those services, in accordance with State policy and 
regulations.

Subpart G [Reserved]



             Subpart H--Certifications and Program Integrity



Sec. 438.600  Statutory basis.

    This subpart is based on sections 1902(a)(4), 1902(a)(19), 1903(m), 
and 1932(d)(1) of the Act.
    (a) Section 1902(a)(4) requires that the State plan provide for 
methods of administration that the Secretary finds necessary for the 
proper and efficient operation of the plan.

[[Page 222]]

    (b) Section 1902(a)(19) requires that the State plan provide the 
safeguards necessary to ensure that eligibility is determined and 
services are provided in a manner consistent with simplicity of 
administration and the best interests of the recipients.
    (c) Section 1903(m) establishes conditions for payments to the State 
with respect to contracts with MCOs.
    (d) Section 1932(d)(1) prohibits MCOs and PCCMs from knowingly 
having certain types of relationships with individuals excluded under 
Federal regulations from participating in specified activities, or with 
affiliates of those individuals.



Sec. 438.602  Basic rule.

    As a condition for receiving payment under the Medicaid managed care 
program, an MCO, PCCM, PIHP, or PAHP must comply with the applicable 
certification, program integrity and prohibited affiliation requirements 
of this subpart.



Sec. 438.604  Data that must be certified.

    (a) Data certifications. When State payments to an MCO or PIHP are 
based on data submitted by the MCO or PIHP, the State must require 
certification of the data as provided in Sec. 438.606. The data that 
must be certified include, but are not limited to, enrollment 
information, encounter data, and other information required by the State 
and contained in contracts, proposals, and related documents.
    (b) Additional certifications. Certification is required, as 
provided in Sec. 438.606, for all documents specified by the State.



Sec. 438.606  Source, content, and timing of certification.

    (a) Source of certification. For the data specified in Sec. 438.604, 
the data the MCO or PIHP submits to the State must be certified by one 
of the following:
    (1) The MCO's or PIHP's Chief Executive Officer.
    (2) The MCO's or PIHP's Chief Financial Officer.
    (3) An individual who has delegated authority to sign for, and who 
reports directly to, the MCO's or PIHP's Chief Executive Officer or 
Chief Financial Officer.
    (b) Content of certification. The certification must attest, based 
on best knowledge, information, and belief, as follows:
    (1) To the accuracy, completeness and truthfulness of the data.
    (2) To the accuracy, completeness and truthfulness of the documents 
specified by the State.
    (c) Timing of certification. The MCO or PIHP must submit the 
certification concurrently with the certified data.



Sec. 438.608  Program integrity requirements.

    (a) General requirement. The MCO or PIHP must have administrative 
and management arrangements or procedures, including a mandatory 
compliance plan, that are designed to guard against fraud and abuse.
    (b) Specific requirements. The arrangements or procedures must 
include the following:
    (1) Written policies, procedures, and standards of conduct that 
articulate the organization's commitment to comply with all applicable 
Federal and State standards.
    (2) The designation of a compliance officer and a compliance 
committee that are accountable to senior management.
    (3) Effective training and education for the compliance officer and 
the organization's employees.
    (4) Effective lines of communication between the compliance officer 
and the organization's employees.
    (5) Enforcement of standards through well-publicized disciplinary 
guidelines.
    (6) Provision for internal monitoring and auditing.
    (7) Provision for prompt response to detected offenses, and for 
development of corrective action initiatives relating to the MCO's or 
PIHP's contract.



Sec. 438.610  Prohibited affiliations with individuals debarred by Federal agencies.

    (a) General requirement. An MCO, PCCM, PIHP, or PAHP may not 
knowingly have a relationship of the type described in paragraph (b) of 
this section with the following:

[[Page 223]]

    (1) An individual who is debarred, suspended, or otherwise excluded 
from participating in procurement activities under the Federal 
Acquisition Regulation or from participating in nonprocurement 
activities under regulations issued under Executive Order No. 12549 or 
under guidelines implementing Executive Order No. 12549.
    (2) An individual who is an affiliate, as defined in the Federal 
Acquisition Regulation, of a person described in paragraph (a)(1) of 
this section.
    (b) Specific requirements. The relationships described in this 
paragraph are as follow:
    (1) A director, officer, or partner of the MCO, PCCM, PIHP, or PAHP.
    (2) A person with beneficial ownership of five percent or more of 
the MCO's, PCCM's, PIHP's, or PAHP's equity.
    (3) A person with an employment, consulting or other arrangement 
with the MCO, PCCM, PIHP, or PAHP for the provision of items and 
services that are significant and material to the MCO's, PCCM's, PIHP's, 
or PAHP's obligations under its contract with the State.
    (c) Effect of Noncompliance. If a State finds that an MCO, PCCM, 
PIHP, or PAHP is not in compliance with paragraphs (a) and (b) of this 
section, the State:
    (1) Must notify the Secretary of the noncompliance.
    (2) May continue an existing agreement with the MCO, PCCM, PIHP, or 
PAHP unless the Secretary directs otherwise.
    (3) May not renew or otherwise extend the duration of an existing 
agreement with the MCO, PCCM, PIHP, or PAHP unless the Secretary 
provides to the State and to Congress a written statement describing 
compelling reasons that exist for renewing or extending the agreement.
    (d) Consultation with the Inspector General. Any action by the 
Secretary described in paragraphs (c)(2) or (c)(3) of this section is 
taken in consultation with the Inspector General.



                          Subpart I--Sanctions



Sec. 438.700  Basis for imposition of sanctions.

    (a) Each State that contracts with an MCO must, and each State that 
contracts with a PCCM may, establish intermediate sanctions, as 
specified in Sec. 438.702, that it may impose if it makes any of the 
determinations specified in paragraphs (b) through (d) of this section. 
The State may base its determinations on findings from onsite surveys, 
enrollee or other complaints, financial status, or any other source.
    (b) A State determines whether an MCO acts or fails to act as 
follows:
    (1) Fails substantially to provide medically necessary services that 
the MCO is required to provide, under law or under its contract with the 
State, to an enrollee covered under the contract.
    (2) Imposes on enrollees premiums or charges that are in excess of 
the premiums or charges permitted under the Medicaid program.
    (3) Acts to discriminate among enrollees on the basis of their 
health status or need for health care services. This includes 
termination of enrollment or refusal to reenroll a recipient, except as 
permitted under the Medicaid program, or any practice that would 
reasonably be expected to discourage enrollment by recipients whose 
medical condition or history indicates probable need for substantial 
future medical services.
    (4) Misrepresents or falsifies information that it furnishes to CMS 
or to the State.
    (5) Misrepresents or falsifies information that it furnishes to an 
enrollee, potential enrollee, or health care provider.
    (6) Fails to comply with the requirements for physician incentive 
plans, as set forth (for Medicare) in Secs. 422.208 and 422.210 of this 
chapter.
    (c) A State determines whether an MCO, PIHP, PAHP or PCCM has 
distributed directly, or indirectly through any agent or independent 
contractor, marketing materials that have not been approved by the State 
or that contain false or materially misleading information.

[[Page 224]]

    (d) A State determines whether--
    (1) An MCO has violated any of the other requirements of 
sections1903(m) or 1932 of the Act, and any implementing regulations;
    (2) A PCCM has violated any of the other applicable requirements of 
sections 1932 or 1905(t)(3) of the Act and any implementing regulations;
    (3) For any of the violations under paragraphs (d)(1) and (d)(2) of 
this section, only the sanctions specified in Sec. 438.702, paragraphs 
(a)(3), (a)(4), and (a)(5) may be imposed.



Sec. 438.702  Types of intermediate sanctions.

    (a) The types of intermediate sanctions that a State may impose 
under this subpart include the following:
    (1) Civil money penalties in the amounts specified in Sec. 438.704.
    (2) Appointment of temporary management for an MCO as provided in 
Sec. 438.706.
    (3) Granting enrollees the right to terminate enrollment without 
cause and notifying the affected enrollees of their right to disenroll.
    (4) Suspension of all new enrollment, including default enrollment, 
after the effective date of the sanction.
    (5) Suspension of payment for recipients enrolled after the 
effective date of the sanction and until CMS or the State is satisfied 
that the reason for imposition of the sanction no longer exists and is 
not likely to recur.
    (b) State agencies retain authority to impose additional sanctions 
under State statutes or State regulations that address areas of 
noncompliance specified in Sec. 438.700, as well as additional areas of 
noncompliance. Nothing in this subpart prevents State agencies from 
exercising that authority.



Sec. 438.704  Amounts of civil money penalties.

    (a) General rule. The limit on, or the maximum civil money penalty 
the State may impose varies depending on the nature of the MCO's or 
PCCM's action or failure to act, as provided in this section.
    (b) Specific limits. (1) The limit is $25,000 for each determination 
under the following paragraphs of Sec. 438.700:
    (i) Paragraph (b)(1) (Failure to provide services).
    (ii) Paragraph (b)(5) (Misrepresentation or false statements to 
enrollees, potential enrollees, or health care providers).
    (iii) Paragraph (b)(6) (Failure to comply with physician incentive 
plan requirements).
    (iv) Paragraph (c) (Marketing violations).
    (2) The limit is $100,000 for each determination under paragraph 
(b)(3) (discrimination) or (b)(4) (Misrepresentation or false statements 
to CMS or the State) of Sec. 438.700.
    (3) The limit is $15,000 for each recipient the State determines was 
not enrolled because of a discriminatory practice under paragraph (b)(3) 
of Sec. 438.700. (This is subject to the overall limit of $100,000 under 
paragraph (b)(2) of this section).
    (c) Specific amount. For premiums or charges in excess of the 
amounts permitted under the Medicaid program, the maximum amount of the 
penalty is $25,000 or double the amount of the excess charges, whichever 
is greater. The State must deduct from the penalty the amount of 
overcharge and return it to the affected enrollees.



Sec. 438.706  Special rules for temporary management.

    (a) Optional imposition of sanction. The State may impose temporary 
management only if it finds (through onsite survey, enrollee complaints, 
financial audits, or any other means) that--
    (1) There is continued egregious behavior by the MCO, including but 
not limited to behavior that is described in Sec. 438.700, or that is 
contrary to any requirements of sections 1903(m) and 1932 of the Act; or
    (2) There is substantial risk to enrollees' health; or
    (3) The sanction is necessary to ensure the health of the MCO's 
enrollees--
    (i) While improvements are made to remedy violations under 
Sec. 438.700; or
    (ii) Until there is an orderly termination or reorganization of the 
MCO.
    (b) Required imposition of sanction. The State must impose temporary 
management (regardless of any other sanction that may be imposed) if it

[[Page 225]]

finds that an MCO has repeatedly failed to meet substantive requirements 
in section 1903(m) or section 1932 of the Act, or this subpart. The 
State must also grant enrollees the right to terminate enrollment 
without cause, as described in Sec. 438.702(a)(3), and must notify the 
affected enrollees of their right to terminate enrollment.
    (c) Hearing. The State may not delay imposition of temporary 
management to provide a hearing before imposing this sanction.
    (d) Duration of sanction. The State may not terminate temporary 
management until it determines that the MCO can ensure that the 
sanctioned behavior will not recur.



Sec. 438.708  Termination of an MCO or PCCM contract.

    A State has the authority to terminate an MCO or PCCM contract and 
enroll that entity's enrollees in other MCOs or PCCMs, or provide their 
Medicaid benefits through other options included in the State plan, if 
the State determines that the MCO or PCCM has failed to do either of the 
following:
    (a) Carry out the substantive terms of its contract; or
    (b) Meet applicable requirements in sections 1932, 1903(m), and 
1905(t) of the Act.



Sec. 438.710  Due process: Notice of sanction and pre-termination hearing.

    (a) Notice of sanction. Except as provided in Sec. 438.706(c), 
before imposing any of the intermediate sanctions specified in this 
subpart, the State must give the affected entity timely written notice 
that explains the following:
    (1) The basis and nature of the sanction.
    (2) Any other due process protections that the State elects to 
provide.
    (b) Pre-termination hearing-- (1) General rule. Before terminating 
an MCO or PCCM contract under Sec. 438.708, the State must provide the 
entity a pre-termination hearing.
    (2) Procedures. The State must do the following:
    (i) Give the MCO or PCCM written notice of its intent to terminate, 
the reason for termination, and the time and place of the hearing;
    (ii) After the hearing, give the entity written notice of the 
decision affirming or reversing the proposed termination of the contract 
and, for an affirming decision, the effective date of termination; and
    (iii) For an affirming decision, give enrollees of the MCO or PCCM 
notice of the termination and information, consistent with Sec. 438.10, 
on their options for receiving Medicaid services following the effective 
date of termination.



Sec. 438.722  Disenrollment during termination hearing process.

    After a State notifies an MCO or PCCM that it intends to terminate 
the contract, the State may do the following:
    (a) Give the entity's enrollees written notice of the State's intent 
to terminate the contract.
    (b) Allow enrollees to disenroll immediately without cause.



Sec. 438.724  Notice to CMS.

    (a) The State must give the CMS Regional Office written notice 
whenever it imposes or lifts a sanction for one of the violations listed 
in Sec. 438.700.
    (b) The notice must--
    (1) Be given no later than 30 days after the State imposes or lifts 
a sanction; and
    (2) Specify the affected MCO, the kind of sanction, and the reason 
for the State's decision to impose or lift a sanction.



Sec. 438.726  State plan requirement.

    (a) The State plan must include a plan to monitor for violations 
that involve the actions and failures to act specified in this part and 
to implement the provisions of this part.
    (b) A contract with an MCO must provide that payments provided for 
under the contract will be denied for new enrollees when, and for so 
long as, payment for those enrollees is denied by CMS under section 
438.730(e).



Sec. 438.730  Sanction by CMS: Special rules for MCOs

    (a) Basis for sanction. (1) A State agency may recommend that CMS 
impose the denial of payment sanction

[[Page 226]]

specified in paragraph (e) of this section on an MCO with a contract 
under this part if the agency determines that the MCO acts or fails to 
act as specified in Sec. 438.700(b)(1) through (b)(6).
    (b) Effect of an Agency Determination. (1) The State agency's 
determination becomes CMS's determination for purposes of section 
1903(m)(5)(A) of the Act unless CMS reverses or modifies it within 15 
days.
    (2) When the agency decides to recommend imposing the sanction 
described in paragraph (e) of this section, this recommendation becomes 
CMS's decision, for purposes of section 1903(m)(5)(B)(ii) of the Act, 
unless CMS rejects this recommendation within 15 days.
    (c) Notice of sanction. If the State agency's determination becomes 
CMS's determination under section (b)(2), the State agency takes the 
following actions:
    (1) Gives the MCO written notice of the nature and basis of the 
proposed sanction;
    (2) Allows the MCO 15 days from the date it receives the notice to 
provide evidence that it has not acted or failed to act in the manner 
that is the basis for the recommended sanction;
    (3) May extend the initial 15-day period for an additional 15 days 
if--
    (i) the MCO submits a written request that includes a credible 
explanation of why it needs additional time;
    (ii) the request is received by CMS before the end of the initial 
period; and
    (iii) CMS has not determined that the MCO's conduct poses a threat 
to an enrollee's health or safety.
    (d) Informal reconsideration. (1) If the MCO submits a timely 
response to the notice of sanction, the State agency--
    (i) Conducts an informal reconsideration that includes review of the 
evidence by a State agency official who did not participate in the 
original recommendation;
    (ii) Gives the MCO a concise written decision setting forth the 
factual and legal basis for the decision; and
    (iii) Forwards the decision to CMS.
    (2) The agency decision under paragraph (d)(1)(ii) of this section 
becomes CMS's decision unless CMS reverses or modifies the decision 
within 15 days from date of receipt by CMS.
    (3) If CMS reverses or modifies the State agency decision, the 
agency sends the MCO a copy of CMS's decision.
    (e) Denial of payment. (1) CMS, based upon the recommendation of the 
agency, may deny payment to the State for new enrollees of the HMO under 
section 1903(m)(5)(B)(ii) of the Act in the following situations:
    (i) If a CMS determination that an MCO has acted or failed to act, 
as described in paragraphs (b)(1) through (b)(6) of Sec. 438.700, is 
affirmed on review under paragraph (d) of this section.
    (ii) If the CMS determination is not timely contested by the MCO 
under paragraph (c) of this section.
    (2) Under Sec. 438.726(b), CMS's denial of payment for new enrollees 
automatically results in a denial of agency payments to the HMO for the 
same enrollees. (A new enrollee is an enrollee that applies for 
enrollment after the effective date in paragraph (f)(1) of this 
section.)
    (f) Effective date of sanction. (1) If the MCO does not seek 
reconsideration, a sanction is effective 15 days after the date the MCO 
is notified under paragraph (b) of this section of the decision to 
impose the sanction.
    (2) If the MCO seeks reconsideration, the following rules apply:
    (i) Except as specified in paragraph (d)(2)(ii) of this section, the 
sanction is effective on the date specified in CMS's reconsideration 
notice.
    (ii) If CMS, in consultation with the State agency, determines that 
the MCO's conduct poses a serious threat to an enrollee's health or 
safety, the sanction may be made effective earlier than the date of the 
agency's reconsideration decision under paragraph (c)(1)(ii) of this 
section.
    (g) CMS's role. (1) CMS retains the right to independently perform 
the functions assigned to the State agency under paragraphs (a) through 
(d) of this section.
    (2) At the same time that the agency sends notice to the MCO under 
paragraph (c)(1)(i) of this section, CMS forwards a copy of the notice 
to the OIG.
    (3) CMS conveys the determination described in paragraph (b) of this 
section to the OIG for consideration of

[[Page 227]]

possible imposition of civil money penalties under section 1903(m)(5)(A) 
of the Act and part 1003 of this title. In accordance with the 
provisions of part 1003, the OIG may impose civil money penalties on the 
MCO in addition to, or in place of, the sanctions that may be imposed 
under this section.



        Subpart J--Conditions for Federal Financial Participation



Sec. 438.802  Basic requirements.

    FFP is available in expenditures for payments under an MCO contract 
only for the periods during which the contract--
    (a) Meets the requirements of this part; and
    (b) Is in effect.



Sec. 438.806  Prior approval.

    (a) Comprehensive risk contracts. FFP is available under a 
comprehensive risk contract only if--
    (1) The Regional Office has confirmed that the contractor meets the 
definition of an MCO or is one of the entities described in paragraphs 
(b)(2) through (b)(5) of Sec. 438.6; and
    (2) The contract meets all the requirements of section 1903(m)(2)(A) 
of the Act, the applicable requirements of section 1932 of the Act, and 
the implementing regulations in this part.
    (b) MCO contracts. Prior approval by CMS is a condition for FFP 
under any MCO contract that extends for less than one full year or that 
has a value equal to, or greater than, the following threshold amounts:
    (1) For 1998, the threshold is $1,000,000.
    (2) For subsequent years, the amount is increased by the percentage 
increase in the consumer price index for all urban consumers.
    (c) FFP is not available in an MCO contract that does not have prior 
approval from CMS under paragraph (b) of this section.



Sec. 438.808  Exclusion of entities.

    (a) General rule. FFP is available in payments under MCO contracts 
only if the State excludes from the contracts any entities described in 
paragraph (b) of this section.
    (b) Entities that must be excluded. (1) An entity that could be 
excluded under section 1128(b)(8) of the Act as being controlled by a 
sanctioned individual.
    (2) An entity that has a substantial contractual relationship as 
defined in Sec. 431.55(h)(3) of this chapter, either directly or 
indirectly, with an individual convicted of certain crimes as described 
in section 1128(b)(8)(B) of the Act.
    (3) An entity that employs or contracts, directly or indirectly, for 
the furnishing of health care, utilization review, medical social work, 
or administrative services, with one of the following:
    (i) Any individual or entity excluded from participation in Federal 
health care programs under either section 1128 or section 1128A of the 
Act.
    (ii) Any entity that would provide those services through an 
excluded individual or entity.



Sec. 438.810  Expenditures for enrollment broker services.

    (a) Terminology. As used in this section--
    Choice counseling means activities such as answering questions and 
providing information (in an unbiased manner) on available MCO, PIHP or 
PCCM delivery system options, and advising on what factors to consider 
when choosing among them and in selecting a primary care provider;
    Enrollment activities means activities such as distributing, 
collecting, and processing enrollment materials and taking enrollments 
by phone or in person;
    Enrollment broker means an individual or entity that performs choice 
counseling or enrollment activities, or both, and;
    Enrollment services means choice counseling, or enrollment 
activities, or both.
    (b) Conditions that enrollment brokers must meet. State expenditures 
for the use of enrollment brokers are considered necessary for the 
proper and efficient operation of the State plan and thus eligible for 
FFP only if the broker and its subcontractors meet the following 
conditions:
    (1) Independence. The broker and its subcontractors are independent 
of any

[[Page 228]]

MCO, PIHP, PAHP, PCCM, or other health care provider in the State in 
which they provide enrollment services. A broker or subcontractor is not 
considered ``independent'' if it--
    (i) Is an MCO, PIHP, PAHP, PCCM or other health care provider in the 
State;
    (ii) Is owned or controlled by an MCO, PIHP, PAHP, PCCM, or other 
health care provider in the State; or
    (iii) Owns or controls an MCO, PIHP, PAHP, PCCM or other health care 
provider in the State.
    (2) Freedom from conflict of interest. The broker and its 
subcontractor are free from conflict of interest. A broker or 
subcontractor is not considered free from conflict of interest if any 
person who is the owner, employee, or consultant of the broker or 
subcontractor or has any contract with them--
    (i) Has any direct or indirect financial interest in any entity or 
health care provider that furnishes services in the State in which the 
broker or subcontractor provides enrollment services;
    (ii) Has been excluded from participation under title XVIII or XIX 
of the Act;
    (iii) Has been debarred by any Federal agency; or
    (iv) Has been, or is now, subject to civil money penalties under the 
Act.
    (c) Approval. The initial contract or memorandum of agreement (MOA) 
for services performed by the broker has been reviewed and approved by 
CMS.



Sec. 438.812  Costs under risk and nonrisk contracts.

    (a) Under a risk contract, the total amount the State agency pays 
for carrying out the contract provisions is a medical assistance cost.
    (b) Under a nonrisk contract--
    (1) The amount the State agency pays for the furnishing of medical 
services to eligible recipients is a medical assistance cost; and
    (2) The amount the State agency pays for the contractor's 
performance of other functions is an administrative cost.



PART 440--SERVICES: GENERAL PROVISIONS--Table of Contents




                         Subpart A--Definitions

Sec.
440.1 Basis and purpose.
440.2 Specific definitions; definitions of services for FFP purposes.
440.10 Inpatient hospital services, other than services in an 
          institution for mental diseases.
440.20 Outpatient hospital services and rural health clinic services.
440.30 Other laboratory and X-ray services.
440.40 Nursing facility services for individuals age 21 or older (other 
          than services in an institution for mental disease), EPSDT, 
          and family planning services and supplies.
440.50 Physicians' services and medical and surgical services of a 
          dentist.
440.60 Medical or other remedial care provided by licensed 
          practitioners.
440.70 Home health services.
440.80 Private duty nursing services.
440.90 Clinic services.
440.100 Dental services.
440.110 Physical therapy, occupational therapy, and services for 
          individuals with speech, hearing, and language disorders.
440.120 Prescribed drugs, dentures, prosthetic devices, and eyeglasses.
440.130 Diagnostic, screening, preventive, and rehabilitative services.
440.140 Inpatient hospital services, nursing facility services, and 
          intermediate care facility services for individuals age 65 or 
          older in institutions for mental diseases.
440.150 Intermediate care facility (ICF/MR) services.
440.155 Nursing facility services, other than in institutions for mental 
          diseases.
440.160 Inpatient pyschiatric services for individuals under age 21.
440.165 Nurse-midwife services.
440.166 Nurse practitioner services.
440.167 Personal care services.
440.168 Primary care case management services.
440.170 Any other medical or remedial care recognized under State law 
          and specified by the Secretary.
440.180 Home or community-based services.
440.181 Home and community-based services for individuals age 65 or 
          older.
440.185 Respiratory care for ventilator-dependent individuals.

      Subpart B--Requirements and Limits Applicable to All Services

440.200 Basis, purpose, and scope.

[[Page 229]]

440.210 Required services for the categorically needy.
440.220 Required services for the medically needy.
440.225 Optional services.
440.230 Sufficiency of amount, duration, and scope.
440.240 Comparability of services for groups.
440.250 Limits on comparability of services.
440.255 Limited services available to certain aliens.
440.260 Methods and standards to assure quality of services.
440.270 Religious objections.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45224, Sept. 29, 1978, unless otherwise noted.



                         Subpart A--Definitions



Sec. 440.1  Basis and purpose.

    This subpart interprets and implements the following sections of the 
Act:

    1905(a) Services included in the term ``medical assistance.''
    1905 (c), (d), (f) through (i), (l), and (m) Definitions of 
institutions and services that are included in the term ``medical 
assistance.''
    1913 ``Swing-bed'' services. (See Secs. 447.280 and 482.66 of this 
chapter for related provisions on ``swing-bed'' services.)
    1915(c) Home and community-based services listed as ``medical 
assistance'' and furnished under waivers under that section to 
individuals who would otherwise require the level of care furnished in a 
hospital, NF, or ICF/MR.
    1915(d) Home and community-based services listed as ``medical 
assistance'' and furnished under waivers under that section to 
individuals age 65 or older who would otherwise require the level of 
care furnished in a NF.

[57 FR 29155, June 30, 1992, as amended at 61 FR 38398, July 24, 1996]



Sec. 440.2  Specific definitions; definitions of services for FFP purposes.

    (a) Specific definitions.
    Inpatient means a patient who has been admitted to a medical 
institution as an inpatient on recommendation of a physician or dentist 
and who--
    (1) Receives room, board and professional services in the 
institution for a 24 hour period or longer, or
    (2) Is expected by the institution to receive room, board and 
professional services in the institution for a 24 hour period or longer 
even though it later develops that the patient dies, is discharged or is 
transferred to another facility and does not actually stay in the 
institution for 24 hours.
    Outpatient means a patient of an organized medical facility, or 
distinct part of that facility who is expected by the facility to 
receive and who does receive professional services for less than a 24-
hour period regardless of the hour of admission, whether or not a bed is 
used, or whether or not the patient remains in the facility past 
midnight.
    Patient means an individual who is receiving needed professional 
services that are directed by a licensed practitioner of the healing 
arts toward the maintenance, improvement, or protection of health, or 
lessening of illness, disability, or pain. (See also Sec. 435.1009 of 
this subchapter for definitions relating to institutional care.)
    (b) Definitions of services for FFP purposes. Except as limited in 
part 441, FFP is available in expenditures under the State plan for 
medical or remedial care and services as defined in this subpart.

[43 FR 45224, Sept. 29, 1978, as amended at 52 FR 47934, Dec. 17, 1987]



Sec. 440.10  Inpatient hospital services, other than services in an institution for mental diseases.

    (a) Inpatient hospital services means services that--
    (1) Are ordinarily furnished in a hospital for the care and 
treatment of inpatients;
    (2) Are furnished under the direction of a physician or dentist; and
    (3) Are furnished in an institution that--
    (i) Is maintained primarily for the care and treatment of patients 
with disorders other than mental diseases;
    (ii) Is licensed or formally approved as a hospital by an officially 
designated authority for State standard-setting;
    (iii) Meets the requirements for participation in Medicare as a 
hospital; and
    (iv) Has in effect a utilization review plan, applicable to all 
Medicaid patients, that meets the requirements of Sec. 482.30 of this 
chapter, unless a waiver has been granted by the Secretary.

[[Page 230]]

    (b) Inpatient hospital services do not include SNF and ICF services 
furnished by a hospital with a swing-bed approval.

[47 FR 21050, May 17, 1982, as amended at 47 FR 31532, July 20, 1982; 51 
FR 22041, June 17, 1986, 52 FR 47934, Dec. 17, 1987; 60 FR 61486, Nov. 
30, 1995]



Sec. 440.20  Outpatient hospital services and rural health clinic services.

    (a) Outpatient hospital services means preventive, diagnostic, 
therapeutic, rehabilitative, or palliative services that--
    (1) Are furnished to outpatients;
    (2) Are furnished by or under the direction of a physician or 
dentist; and
    (3) Are furnished by an institution that--
    (i) Is licensed or formally approved as a hospital by an officially 
designated authority for State standard-setting; and
    (ii) Meets the requirements for participation in Medicare as a 
hospital; and
    (4) May be limited by a Medicaid agency in the following manner: A 
Medicaid agency may exclude from the definition of ``outpatient hospital 
services'' those types of items and services that are not generally 
furnished by most hospitals in the State.
    (b) Rural health clinic services. If nurse practitioners or 
physician assistants (as defined in Sec. 481.1 of this chapter) are not 
prohibited by State law from furnishing primary health care, ``rural 
health clinic services'' means the following services when furnished by 
a rural health clinic that has been certified in accordance with part 
491 of this chapter.
    (1) Services furnished by a physician within the scope of practice 
of his profession under State law, if the physician performs the 
services in the clinic or the services are furnished away from the 
clinic and the physician has an agreement with the clinic providing that 
he will be paid by it for such services.
    (2) Services furnished by a physician assistant, nurse practitioner, 
nurse midwife or other specialized nurse practitioner (as defined in 
Secs. 405.2401 and 491.2 of this chapter) if the services are furnished 
in accordance with the requirements specified in Sec. 405.2414(a) of 
this chapter.
    (3) Services and supplies that are furnished as an incident to 
professional services furnished by a physician, physician assistant, 
nurse practitioner, nurse midwife, or specialized nurse practitioner. 
(See Secs. 405.2413 and 405.2415 of this chapter for the criteria for 
determining whether services and supplies are included under this 
paragraph.)
    (4) Part-time or intermittent visiting nurse care and related 
medical supplies (other than drugs and biologicals) if:
    (i) The clinic is located in an area in which the Secretary has 
determined that there is a shortage of home health agencies (see 
Sec. 405.2417 of this chapter):
    (ii) The services are furnished by a registered nurse or licensed 
practical nurse or a licensed vocational nurse employed by, or otherwise 
compensated for the services by, the clinic;
    (iii) The services are furnished under a written plan of treatment 
that is established and reviewed at least every 60 days by a supervising 
physician of the clinic or that is established by a physician, physician 
assistant, nurse practitioner, nurse midwife, or specialized nurse 
practitioner and reviewed and approved at least every 60 days by a 
supervising physician of the clinic; and
    (iv) The services are furnished to a homebound recipient. For 
purposes of visiting nurse care, a ``homebound'' recipient means one who 
is permanently or temporarily confined to his place of residence because 
of a medical or health condition. He may be considered homebound if he 
leaves the place of residence infrequently. For this purpose, ``place of 
residence'' does not include a hospital or a skilled nursing facility.
    (c) Other ambulatory services furnished by a rural health clinic. If 
the State plan covers rural health clinic services, other ambulatory 
services means ambulatory services other than rural health clinic 
services, as defined in paragraph (b) of this section, that are 
otherwise included in the plan and meet specific State plan requirements 
for furnishing those services. Other ambulatory services furnishd by a 
rural health clinic are not subject to the physician supervision 
requirements

[[Page 231]]

specified in Sec. 491.8(b) of this chapter, unless required by State law 
or the State plan.

[43 FR 45224, Sept. 29, 1978, as amended at 47 FR 21050, May 17, 1982; 
52 FR 47934, Dec. 17, 1987; 60 FR 61486, Nov. 30, 1995]



Sec. 440.30  Other laboratory and X-ray services.

    Other laboratory and X-ray services means professional and technical 
laboratory and radiological services--
    (a) Ordered and provided by or under the direction of a physician or 
other licensed practioner of the healing arts within the scope of his 
practice as defined by State law or ordered by a physician but provided 
by referral laboratory;
    (b) Provided in an office or similar facility other than a hospital 
outpatient department or clinic; and
    (c) Furnished by a laboratory that meets the requirements of part 
493 of this chapter.

[46 FR 42672, Aug. 24, 1981, as amended at 57 FR 7135, Feb. 28, 1992]



Sec. 440.40  Nursing facility services for individuals age 21 or older (other than services in an institution for mental disease), EPSDT, and family planning 
          services and supplies.

    (a) Nursing facility services. (1) ``Nursing facility services for 
individuals age 21 or older, other than services in an institution for 
mental diseases'', means services that are--
    (i) Needed on a daily basis and required to be provided on an 
inpatient basis under Secs. 409.31 through 409.35 of this chapter.
    (ii) Provided by--
    (A) A facility or distinct part of a facility that is certified to 
meet the requirements for participation under subpart C of part 442 of 
this chapter, as evidenced by a valid agreement between the Medicaid 
agency and the facility for providing nursing facility services and 
making payments for services under the plan; or
    (B) If specified in the State plan, a swing-bed hospital that has an 
approval from CMS to furnish skilled nursing facility services in the 
Medicare program; and
    (iii) Ordered by and provided under the direction of a physician.
    (2) Nursing facility services include services provided by any 
facility located on an Indian reservation and certified by the Secretary 
as meeting the requirements of subpart B of part 483 of this chapter.
    (b) EPSDT. ``Early and periodic screening and diagnosis and 
treatment'' means--
    (1) Screening and diagnostic services to determine physical or 
mental defects in recipients under age 21; and
    (2) Health care, treatment, and other measures to correct or 
ameliorate any defects and chronic conditions discovered. (See subpart B 
of part 441 of this chapter.)
    (c) Family planning services and supplies for individuals of child-
bearing age. [Reserved]

[59 FR 56233, Nov. 10, 1994; 60 FR 50117, Sept. 28, 1995, as amended at 
61 FR 59198, Nov. 21, 1996]



Sec. 440.50  Physicians' services and medical and surgical services of a dentist.

    (a) ``Physicians' services,'' whether furnished in the office, the 
recipient's home, a hospital, a skilled nursing facility, or elsewhere, 
means services furnished by a physician--
    (1) Within the scope of practice of medicine or osteopathy as 
defined by State law; and
    (2) By or under the personal supervision of an individual licensed 
under State law to practice medicine or osteopathy.
    (b) ``Medical and surgical services of a dentist'' means medical and 
surgical services furnished, on or after January 1, 1988, by a doctor of 
dental medicine or dental surgery if the services are services that--
    (1) If furnished by a physician, would be considered physician's 
services.
    (2) Under the law of the State where they are furnished, may be 
furnished either by a physician or by a doctor of dental medicine or 
dental surgery; and
    (3) Are furnished by a doctor of dental medicine or dental surgery 
who is authorized to furnish those services in the State in which he or 
she furnished the services.

[56 FR 8851, Mar. 1, 1991]

[[Page 232]]



Sec. 440.60  Medical or other remedial care provided by licensed practitioners.

    (a) ``Medical care or any other type remedial care provided by 
licensed practitioners'' means any medical or remedial care or services, 
other than physicians' services, provided by licensed practitioners 
within the scope of practice as defined under State law.
    (b) Chiropractors' services include only services that--
    (1) Are provided by a chiropractor who is licensed by the State and 
meets standards issued by the Secretary under Sec. 405.232(b) of this 
chapter; and
    (2) Consists of treatment by means of manual manipulation of the 
spine that the chiropractor is legally authorized by the State to 
perform.



Sec. 440.70  Home health services.

    (a) ``Home health services'' means the services in paragraph (b) of 
this section that are provided to a recipient--
    (1) At his place of residence, as specified in paragraph (c) of this 
section; and
    (2) On his or her physician's orders as part of a written plan of 
care that the physician reviews every 60 days, except as specified in 
paragraph (b)(3) of this section.
    (b) Home health services include the following services and items. 
Those listed in paragraphs (b) (1), (2) and (3) of this section are 
required services; those in paragraph (b)(4) of this section are 
optional.
    (1) Nursing service, as defined in the State Nurse Practice Act, 
that is provided on a part-time or intermittent basis by a home health 
agency as defined in paragraph (d) of this section, or if there is no 
agency in the area, a registered nurse who--
    (i) Is currently licensed to practice in the State;
    (ii) Receives written orders from the patient's physician;
    (iii) Documents the care and services provided; and
    (iv) Has had orientation to acceptable clinical and administrative 
recordkeeping from a health department nurse.
    (2) Home health aide service provided by a home health agency,
    (3) Medical supplies, equipment, and appliances suitable for use in 
the home.
    (i) A recipient's need for medical supplies, equipment, and 
appliances must be reviewed by a physician annually.
    (ii) Frequency of further physician review of a recipient's 
continuing need for the items is determined on a case-by-case basis, 
based on the nature of the item prescribed;
    (4) Physical therapy, occupational therapy, or speech pathology and 
audiology services, provided by a home health agency or by a facility 
licensed by the State to provide medical rehabilitation services. (See 
Sec. 441.15 of this subchapter.)
    (c) A recipient's place of residence, for home health services, does 
not include a hospital, nursing facility, or intermediate care facility 
for the mentally retarded, except for home health services in an 
intermediate care facility for the mentally retarded that are not 
required to be provided by the facility under subpart I of part 483. For 
example, a registered nurse may provide short-term care for a recipient 
in an intermediate care facility for the mentally retarded during an 
acute illness to avoid the recipient's transfer to a nursing facility.
    (d) ``Home health agency'' means a public or private agency or 
organization, or part of an agency or organization, that meets 
requirements for participation in Medicare, including the capitalization 
requirements under Sec. 489.28 of this chapter.
    (e) A ``facility licensed by the State to provide medical 
rehabilitation services'' means a facility that--
    (1) Provides therapy services for the primary purpose of assisting 
in the rehabilitation of disabled individuals through an integrated 
program of--
    (i) Medical evaluation and services; and
    (ii) Psychological, social, or vocational evaluation and services; 
and
    (2) Is operated under competent medical supervision either--
    (i) In connection with a hospital; or

[[Page 233]]

    (ii) As a facility in which all medical and related health services 
are prescribed by or under the direction of individuals licensed to 
practice medicine or surgery in the State.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980; 
62 FR 47902, Sept. 11, 1997; 63 FR 310, Jan. 5, 1998]



Sec. 440.80  Private duty nursing services.

    Private duty nursing services means nursing services for recipients 
who require more individual and continuous care than is available from a 
visiting nurse or routinely provided by the nursing staff of the 
hospital or skilled nursing facility. These services are provided--
    (a) By a registered nurse or a licensed practical nurse;
    (b) Under the direction of the recipient's physician; and
    (c) To a recipient in one or more of the following locations at the 
option of the State--
    (1) His or her own home;
    (2) A hospital; or
    (3) A skilled nursing facility.

[52 FR 47934, Dec. 17, 1987]



Sec. 440.90  Clinic services.

    Clinic services means preventive, diagnostic, therapeutic, 
rehabilitative, or palliative services that are furnished by a facility 
that is not part of a hospital but is organized and operated to provide 
medical care to outpatients. The term includes the following services 
furnished to outpatients:
    (a) Services furnished at the clinic by or under the direction of a 
physician or dentist.
    (b) Services furnished outside the clinic, by clinic personnel under 
the direction of a physician, to an eligible individual who does not 
reside in a permanent dwelling or does not have a fixed home or mailing 
address.

[56 FR 8851, Mar. 1, 1991, as amended at 60 FR 61486, Nov. 30, 1995]



Sec. 440.100  Dental services.

    (a) ``Dental services'' means diagnostic, preventive, or corrective 
procedures provided by or under the supervision of a dentist in the 
practice of his profession, including treatment of--
    (1) The teeth and associated structures of the oral cavity; and
    (2) Disease, injury, or impairment that may affect the oral or 
general health of the recipient.
    (b) ``Dentist'' means an individual licensed to practice dentistry 
or dental surgery.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980]



Sec. 440.110  Physical therapy, occupational therapy, and services for individuals with speech, hearing, and language disorders.

    (a) Physical therapy. (1) Physical therapy means services prescribed 
by a physician or other licensed practitioner of the healing arts within 
the scope of his or her practice under State law and provided to a 
recipient by or under the direction of a qualified physical therapist. 
It includes any necessary supplies and equipment.
    (2) A ``qualified physical therapist'' is an individual who is--
    (i) A graduate of a program of physical therapy approved by both the 
Committee on Allied Health Education and Accreditation of the American 
Medical Association and the American Physical Therapy Association or its 
equivalent; and
    (ii) Where applicable, licensed by the State.
    (b) Occupational therapy. (1) Occupational therapy means services 
prescribed by a physician or other licensed practitioner of the healing 
arts within the scope of his or her practice under State law and 
provided to a recipient by or under the direction of a qualified 
occupational therapist. It includes any necessary supplies and 
equipment.
    (2) A ``qualified occupation therapist'' is an individual who is--
    (i) Registered by the American Occupational Therapy Association; or
    (ii) A graduate of a program in occupational therapy approved by the 
Committee on Allied Health Education and Accreditation of the American 
Medical Association and engaged in the supplemental clinical experience 
required before registration by the American Occupational Therapy 
Association.
    (c) Services for individuals with speech, hearing, and language 
disorders. (1) Services for individuals with speech, hearing,

[[Page 234]]

and language disorders means diagnostic, screening, preventive, or 
corrective services provided by or under the direction of a speech 
pathologist or audiologist, for which a patient is referred by a 
physician or other licensed practitioner of the healing arts within the 
scope of his or her practice under State law. It includes any necessary 
supplies and equipment.
    (2) A ``speech pathologist or audiologist'' is an individual who--
    (i) Has a certificate of clinical competence from the American 
Speech and Hearing Association;
    (ii) Has completed the equivalent educational requirements and work 
experience necessary for the certificate; or
    (iii) Has completed the academic program and is acquiring supervised 
work experience to qualify for the certificate.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980; 
56 FR 8854, Mar. 1, 1991; 60 FR 19861, Apr. 21, 1995]



Sec. 440.120  Prescribed drugs, dentures, prosthetic devices, and eyeglasses.

    (a) ``Prescribed drugs'' means simple or compound substances or 
mixtures of substances prescribed for the cure, mitigation, or 
prevention of disease, or for health maintenance that are--
    (1) Prescribed by a physician or other licensed practitioner of the 
healing arts within the scope of this professional practice as defined 
and limited by Federal and State law;
    (2) Dispensed by licensed pharmacists and licensed authorized 
practitioners in accordance with the State Medical Practice Act; and
    (3) Dispensed by the licensed pharmacist or practitioner on a 
written prescription that is recorded and maintained in the pharmacist's 
or practitioner's records.
    (b) ``Dentures'' are artificial structures made by or under the 
direction of a dentist to replace a full or partial set of teeth.
    (c) ``Prosthetic devices'' means replacement, corrective, or 
supportive devices prescribed by a physician or other licensed 
practitioner of the healing arts within the scope of his practice as 
defined by State law to--
    (1) Artificially replace a missing portion of the body;
    (2) Prevent or correct physical deformity or malfunction; or
    (3) Support a weak or deformed portion of the body.
    (d) ``Eyeglasses'' means lenses, including frames, and other aids to 
vision prescribed by a physician skilled in diseases of the eye or an 
optometrist.



Sec. 440.130  Diagnostic, screening, preventive, and rehabilitative services.

    (a) ``Diagnostic services,'' except as otherwise provided under this 
subpart, includes any medical procedures or supplies recommended by a 
physician or other licensed practitioner of the healing arts, within the 
scope of his practice under State law, to enable him to identify the 
existence, nature, or extent of illness, injury, or other health 
deviation in a recipient.
    (b) ``Screening services'' means the use of standardized tests given 
under medical direction in the mass examination of a designated 
population to detect the existence of one or more particular diseases or 
health deviations or to identify for more definitive studies individuals 
suspected of having certain diseases.
    (c) ``Preventive services'' means services provided by a physician 
or other licensed practitioner of the healing arts within the scope of 
his practice under State law to--
    (1) Prevent disease, disability, and other health conditions or 
their progression;
    (2) Prolong life; and
    (3) Promote physical and mental health and efficiency.
    (d) ``Rehabilitative services,'' except as otherwise provided under 
this subpart, includes any medical or remedial services recommended by a 
physician or other licensed practitioner of the healing arts, within the 
scope of his practice under State law, for maximum reduction of physical 
or mental disability and restoration of a recipient to his best possible 
functional level.

[[Page 235]]



Sec. 440.140  Inpatient hospital services, nursing facility services, and intermediate care facility services for individuals age 65 or older in institutions 
          for mental diseases.

    (a) Inpatient hospital services. ``Inpatient hospital services for 
individuals age 65 or older in institutions for mental diseases'' means 
services provided under the direction of a physician for the care and 
treatment of recipients in an institution for mental diseases that meets 
the requirements specified in Sec. 482.60(b), (c), and (e) of this 
chapter and--
    (1) Meets the requirements for utilization review in Sec. 482.30(a), 
(b), (d), and (e) of this chapter; or
    (2) Has been granted a waiver of those utilization review 
requirements under section 1903(i)(4) of the Act and subpart H of part 
456 of this chapter.
    (b) Nursing facility services. ``Nursing facility services for 
individuals age 65 or older in institutions for mental diseases'' means 
nursing facility services as defined in Sec. 440.40 and in subpart B of 
part 483 of this chapter that are provided in institutions for mental 
diseases, as defined in Sec. 435.1009 of this chapter.

[59 FR 56234, Nov. 10, 1994]



Sec. 440.150  Intermediate care facility (ICF/MR) services.

    (a) ``ICF/MR services'' means those items and services furnished in 
an intermediate care facility for the mentally retarded if the following 
conditions are met:
    (1) The facility fully meets the requirements for a State license to 
provide services that are above the level of room and board;
    (2) The primary purpose of the ICF/MR is to furnish health or 
rehabilitative services to persons with mental retardation or persons 
with related conditions;
    (3) The ICF/MR meets the standards specified in subpart I of part 
483 of this chapter.
    (4) The recipient with mental retardation for whom payment is 
requested is receiving active treatment, as specified in Sec. 483.440 of 
this chapter.
    (5) The ICF/MR has been certified to meet the requirements of 
subpart C of part 442 of this chapter, as evidenced by a valid agreement 
between the Medicaid agency and the facility for furnishing ICF/MR 
services and making payments for these services under the plan.
    (b) ICF/MR services may be furnished in a distinct part of a 
facility other than an ICF/MR if the distinct part--
    (1) Meets all requirements for an ICF/MR, as specified in subpart I 
of part 483 of this chapter;
    (2) Is clearly an identifiable living unit, such as an entire ward, 
wing, floor or building;
    (3) Consists of all beds and related services in the unit;
    (4) Houses all recipients for whom payment is being made for ICF/MR 
services; and
    (5) Is approved in writing by the survey agency.

[59 FR 56234, Nov. 10, 1994]



Sec. 440.155  Nursing facility services, other than in institutions for mental diseases.

    (a) ``Nursing facility services, other than in an institution for 
mental diseases'' means services provided in a facility that--
    (1) Fully meets the requirements for a State license to provide, on 
a regular basis, health-related services to individuals who do not 
require hospital care, but whose mental or physical condition requires 
services that--
    (i) Are above the level of room and board; and
    (ii) Can be made available only through institutional facilities;
    (2) Has been certified to meet the requirements of subpart C of part 
442 of this chapter as evidenced by a valid agreement between the 
Medicaid agency and the facility for providing nursing facility services 
and making payments for services under the plan; and
    (b) ``Nursing facility services'' include services--
    (1) Considered appropriate by the State and provided by a religious 
nonmedical institution as defined in Sec. 440.170(b); or
    (2) Provided by a facility located on an Indian reservation that--
    (i) Furnishes, on a regular basis, health-related services; and

[[Page 236]]

    (ii) Is certified by the Secretary to meet the standards in subpart 
E of part 442 of this chapter.
    (c) ``Nursing facility services'' may include services provided in a 
distinct part of a facility other than a nursing facility if the 
distinct part--
    (1) Meets all requirements for a nursing facility;
    (2) Is an identifiable unit, such as an entire ward or contiguous 
ward, a wing, floor, or building;
    (3) Consists of all beds and related facilities in the unit;
    (4) Houses all recipients for whom payment is being made for nursing 
facility services, except as provided in paragraph (d) of this section;
    (5) Is clearly identified; and
    (6) Is approved in writing by the survey agency.
    (d) If a State includes as nursing facility services those services 
provided by a distinct part of a facility other than a nursing facility, 
it may not require transfer of a recipient within or between facilities 
if, in the opinion of the attending physician, it might be harmful to 
the physical or mental health of the recipient.
    (e) Nursing facility services may include services provided in a 
swing-bed hospital that has an approval to furnish nursing facility 
services.

[59 FR 56234, Nov. 10, 1994, as amended at 64 FR 67052, Nov. 30, 1999]



Sec. 440.160  Inpatient psychiatric services for individuals under age 21.

    ``Inpatient psychiatric services for individuals under age 21'' 
means services that--
    (a) Are provided under the direction of a physician;
    (b) Are provided by--
    (1) A psychiatric hospital or an inpatient psychiatric program in a 
hospital, accredited by the Joint Commission on Accreditation of 
Healthcare Organizations, or
    (2) A psychiatric facility which is accredited by the Joint 
Commission on Accreditation of Healthcare Organizations, the Council on 
Accreditation of Services for Families and Children, the Commission on 
Accreditation of Rehabilitation Facilities, or by any other accrediting 
organization, with comparable standards, that is recognized by the 
State.
    (c) Meet the requirements in Sec. 441.151 of this subchapter.

[63 FR 64198, Nov. 19, 1998]



Sec. 440.165  Nurse-midwife service.

    (a) ``Nurse-midwife services'' means services that--
    (1) Are furnished by a nurse-midwife within the scope of practice 
authorized by State law or regulation and, in the case of inpatient or 
outpatient hospital services or clinic services, are furnished by or 
under the direction of a nurse-midwife to the extent permitted by the 
facility; and
    (2) Unless required by State law or regulations or a facility, are 
reimbursed without regard to whether the nurse-midwife is under the 
supervision of, or associated with, a physician or other health care 
provider. (See Sec. 441.21 of this chapter for provisions on independent 
provider agreements for nurse-midwives.)
    (b) ``Nurse-midwife'' means a registered professional nurse who 
meets the following requirements:
    (1) Is currently licensed to practice in the State as a registered 
professional nurse.
    (2) Is legally authorized under State law or regulations to practice 
as a nurse-midwife.
    (3) Except as provided in paragraph (b)(4) of this section, has 
completed a program of study and clinical experience for nurse-midwives, 
as specified by the State.
    (4) If the State does not specify a program of study and clinical 
experience that nurse-midwives must complete to practice in that State, 
meets one of the following conditions:
    (i) Is currently certified as a nurse-midwife by the American 
College of Nurse-Midwives (ACNM or by the ACNM Certification Council, 
Inc. (ACC).
    (ii) Has satisfactorily completed a formal education program (of at 
least one academic year) that, upon completion qualifies the nurse to 
take the certification examination offered by the American College of 
Nurse-Midwives (ACNM) or by the ACNM Certification Council, Inc. (ACC).

[[Page 237]]

    (iii) Has successfully completed a formal educational program for 
preparing registered nurses to furnish gynecological and obstetrical 
care to women during pregnancy, delivery, and the postpartum period, and 
care to normal newborns, and was practicing as a nurse-midwife for a 
total of 12 months during any 18-month period from August 8, 1976 to 
July 16, 1982.

[47 FR 21050, May 17, 1982; 47 FR 23448, May 28, 1982, as amended at 55 
FR 48611, Nov. 21, 1990; 61 FR 61486, Nov. 30, 1996]



Sec. 440.166  Nurse practitioner services.

    (a) Definition of nurse practitioner services. Nurse practitioner 
services means services that are furnished by a registered professional 
nurse who meets a State's advanced educational and clinical practice 
requirements, if any, beyond the 2 to 4 years of basic nursing education 
required of all registered nurses.
    (b) Requirements for certified pediatric nurse practitioner. The 
practitioner must be a registered professional nurse who meets the 
requirements specified in either paragraphs (b)(1) or (b)(2) of this 
section.
    (1) If the State specifies qualifications for pediatric nurse 
practitioners, the practitioner must--
    (i) Be currently licensed to practice in the State as a registered 
professional nurse; and
    (ii) Meet the State requirements for qualification of pediatric 
nurse practitioners in the State in which he or she furnishes the 
services.
    (2) If the State does not specify, by specialty, qualifications for 
pediatric nurse practitioners, but the State does define qualifications 
for nurses in advanced practice or general nurse practitioners, the 
practitioner must--
    (i) Meet qualifications for nurses in advanced practice or general 
nurse practitioners as defined by the State; and
    (ii) Have a pediatric nurse practice limited to providing primary 
health care to persons less than 21 years of age.
    (c) Requirements for certified family nurse practitioner. The 
practitioner must be a registered professional nurse who meets the 
requirements specified in either paragraph (c)(1) or (c)(2) of this 
section.
    (1) If the State specifies qualifications for family nurse 
practitioners, the practitioner must--
    (i) Be currently licensed to practice in the State as a registered 
professional nurse; and
    (ii) Meet the State requirements for qualification of family nurse 
practitioners in the State in which he or she furnishes the services.
    (2) If the State does not specify, by specialty, qualifications for 
family nurse practitioners, but the State does define qualifications for 
nurses in advanced practice or general nurse practitioners, the 
practitioner must--
    (i) Meet qualifications for nurses in advanced practice or general 
nurse practitioners as defined by the State; and
    (ii) Have a family nurse practice limited to providing primary 
health care to individuals and families.
    (d) Payment for nurse practitioner services. The Medicaid agency 
must reimburse nurse practitioners for their services in accordance with 
Sec. 441.22(c) of this subchapter.

[60 FR 19861, Apr. 21, 1995]



Sec. 440.167  Personal care services.

    Unless defined differently by a State agency for purposes of a 
waiver granted under part 441, subpart G of this chapter--
    (a) Personal care services means services furnished to an individual 
who is not an inpatient or resident of a hospital, nursing facility, 
intermediate care facility for the mentally retarded, or institution for 
mental disease that are--
    (1) Authorized for the individual by a physician in accordance with 
a plan of treatment or (at the option of the State) otherwise authorized 
for the individual in accordance with a service plan approved by the 
State;
    (2) Provided by an individual who is qualified to provide such 
services and who is not a member of the individual's family; and
    (3) Furnished in a home, and at the State's option, in another 
location.

[[Page 238]]

    (b) For purposes of this section, family member means a legally 
responsible relative.

[42 FR 47902, Sept. 11, 1997]



Sec. 440.168  Primary care case management services.

    (a) Primary care case management services means case management 
related services that--
    (1) Include location, coordination, and monitoring of primary health 
care services; and
    (2) Are provided under a contract between the State and either of 
the following:
    (i) A PCCM who is a physician or may, at State option, be a 
physician assistant, nurse practitioner, or certified nurse-midwife.
    (ii) A physician group practice, or an entity that employs or 
arranges with physicians to furnish the services.
    (b) Primary care case management services may be offered by the 
State--
    (1) As a voluntary option under the State plan; or
    (2) On a mandatory basis under section 1932 (a)(1) of the Act or 
under section 1915(b) or section 1115 waiver authority.

[67 FR 41115, June 14, 2002]



Sec. 440.170  Any other medical care or remedial care recognized under State law and specified by the Secretary.

    (a) Transportation. (1) ``Transportation'' includes expenses for 
transportation and other related travel expenses determined to be 
necessary by the agency to secure medical examinations and treatment for 
a recipient.
    (2) Transportation, as defined in this section, is furnished only by 
a provider to whom a direct vendor payment can appropriately be made by 
the agency. If other arrangements are made to assure transportation 
under Sec. 431.53 of this subchapter, FFP is available as an 
administrative cost.
    (3) ``Travel expenses'' include--
    (i) The cost of transportation for the recipient by ambulance, 
taxicab, common carrier, or other appropriate means;
    (ii) The cost of meals and lodging en route to and from medical 
care, and while receiving medical care; and
    (iii) The cost of an attendant to accompany the recipient, if 
necessary, and the cost of the attendant's transportation, meals, 
lodging, and, if the attendant is not a member of the recipient's 
family, salary.
    (b) Services furnished in a religious nonmedical health care 
institution. Services furnished in a religious nonmedical health care 
institution are services furnished in an institution that:
    (1) Is an institution that is described in (c)(3) of section 501 of 
the Internal Revenue Code of 1986 and is exempt from taxes under section 
501(a) of that section.
    (2) Is lawfully operated under all applicable Federal, State, and 
local laws and regulations.
    (3) Furnishes only nonmedical nursing items and services to patients 
who choose to rely solely upon a religious method of healing and for 
whom the acceptance of medical health services would be inconsistent 
with their religious beliefs.
    (4) Furnishes nonmedical items and services exclusively through 
nonmedical nursing personnel who are experienced in caring for the 
physical needs of nonmedical patients.
    (5) Furnishes these nonmedical items and services to inpatients on a 
24-hour basis.
    (6) Does not furnish, on the basis of its religious beliefs, through 
its personnel or otherwise, medical items and services (including any 
medical screening, examination, diagnosis, prognosis, treatment, or the 
administration of drugs) for its patients.
    (7) Is not owned by, is not under common ownership with, or does not 
have an ownership interest of 5 percent or more in, a provider of 
medical treatment or services and is not affiliated with a provider of 
medical treatment or services or with an individual who has an ownership 
interest or 5 percent or more in a provider of medical treatment or 
services. Permissible affiliations are described in paragraph (c) of 
this section.
    (8) Has in effect a utilization review plan that meets the following 
criteria:
    (i) Provides for the review of admissions to the institution, 
duration of

[[Page 239]]

stays, cases of continuous extended duration, and items and services 
furnished by the institution.
    (ii) Requires that the reviews be made by a committee of the 
institution that included the individuals responsible for overall 
administration and for supervision of nursing personnel at the 
institution.
    (iii) Provides that records be maintained of the meetings, 
decisions, and actions of the utilization review committee.
    (iv) Meets other requirements as CMS finds necessary to establish an 
effective utilization review plan.
    (9) Provides information CMS may require to implement section 1821 
of the Act, including information relating to quality of care and 
coverage determinations.
    (10) Meets other requirements as CMS finds necessary in the interest 
of the health and safety of patients who receive services in the 
institution. These requirements are the conditions of participation 
found at part 403, subpart G of this chapter.
    (c) Affiliations. An affiliation is permissible for purposes of 
paragraph (b)(7) of this section if it is between one of the following:
    (1) An individual serving as an uncompensated director, trustee, 
officer, or other member of the governing body of an RNHCI and a 
provider of medical treatment or services.
    (2) An individual who is a director, trustee, officer, employee, or 
staff member of an RNHCI and an another individual, with whom he or she 
has a family relationship, who is affiliated with (or has an ownership 
interest in) a provider of medical treatment or services.
    (3) The RNHCI and an individual or entity furnishing goods or 
services as a vendor to both providers of medical treatment or services 
and RNHCIs.
    (d) Skilled nursing facility services for individuals under age 21. 
``Skilled nursing facility services for individuals under 21'' means 
those services specified in Sec. 440.40 that are provided to recipients 
under 21 years of age.
    (e) Emergency hospital services. ``Emergency hospital services'' 
means services that--
    (1) Are necessary to prevent the death or serious impairment of the 
health of a recipient; and
    (2) Because of the threat to the life or health of the recipient 
necessitate the use of the most accessible hospital available that is 
equipped to furnish the services, even if the hospital does not 
currently meet--
    (i) The conditions for participation under Medicare; or
    (ii) The definitions of inpatient or outpatient hospital services 
under Secs. 440.10 and 440.20.
    (f) [Reserved]
    (g) Critical access hospital (CAH). (1) CAH services means services 
that (i) are furnished by a provider that meet the requirements for 
participation in Medicare as a CAH (see subpart F of part 485 of this 
chapter), and (ii) are of a type that would be paid for by Medicare when 
furnished to a Medicare beneficiary.
    (2) Inpatient CAH services do not include nursing facility services 
furnished by a CAH with a swing-bed approval.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
46 FR 48540, Oct. 1, 1981; 58 FR 30671, May 26, 1993; 62 FR 46037, Aug. 
29, 1997; 64 FR 67051, Nov. 30, 1999]



Sec. 440.180  Home or community-based services.

    (a) Description and requirements for services. ``Home or community-
based services'' means services, not otherwise furnished under the 
State's Medicaid plan, that are furnished under a waiver granted under 
the provisions of part 441, subpart G of this chapter.
    (1) These services may consist of any or all of the services listed 
in paragraph (b) of this section, as those services are defined by the 
agency and approved by CMS.
    (2) The services must meet the standards specified in 
Sec. 441.302(a) of this chapter concerning health and welfare 
assurances.
    (3) The services are subject to the limits on FFP described in 
Sec. 441.310 of this chapter.
    (b) Included services. Home or community-based services may include 
the following services, as they are defined by the agency and approved 
by CMS:
    (1) Case management services.

[[Page 240]]

    (2) Homemaker services.
    (3) Home health aide services.
    (4) Personal care services.
    (5) Adult day health services.
    (6) Habilitation services.
    (7) Respite care services.
    (8) Day treatment or other partial hospitalization services, 
psychosocial rehabilitation services and clinic services (whether or not 
furnished in a facility) for individuals with chronic mental illness, 
subject to the conditions specified in paragraph (d) of this section.
    (9) Other services requested by the agency and approved by CMS as 
cost effective and necessary to avoid institutionalization.
    (c) Expanded habilitation services, effective October 1, 1997--(1) 
General rule. Expanded habilitation services are those services 
specified in paragraph (c)(2) of this section.
    (2) Services included. The agency may include as expanded 
habilitation services the following services:
    (i) Prevocational services, which means services that prepare an 
individual for paid or unpaid employment and that are not job-task 
oriented but are, instead, aimed at a generalized result. These services 
may include, for example, teaching an individual such concepts as 
compliance, attendance, task completion, problem solving and safety. 
Prevocational services are distinguishable from noncovered vocational 
services by the following criteria:
    (A) The services are provided to persons who are not expected to be 
able to join the general work force or participate in a transitional 
sheltered workshop within one year (excluding supported employment 
programs).
    (B) If the recipients are compensated, they are compensated at less 
than 50 percent of the minimum wage;
    (C) The services include activities which are not primarily directed 
at teaching specific job skills but at underlying habilitative goals 
(for example, attention span, motor skills); and
    (D) The services are reflected in a plan of care directed to 
habilitative rather than explicit employment objectives.
    (ii) Educational services, which means special education and related 
services (as defined in sections 602(16) and (17) of the Education of 
the Handicapped Act) (20 U.S.C. 1401 (16 and 17)) to the extent they are 
not prohibited under paragraph (c)(3)(i) of this section.
    (iii) Supported employment services, which facilitate paid 
employment, that are--
    (A) Provided to persons for whom competitive employment at or above 
the minimum wage is unlikely and who, because of their disabilities, 
need intensive ongoing support to perform in a work setting;
    (B) Conducted in a variety of settings, particularly worksites in 
which persons without disabilities are employed; and
    (C) Defined as any combination of special supervisory services, 
training, transportation, and adaptive equipment that the State 
demonstrates are essential for persons to engage in paid employment and 
that are not normally required for nondisabled persons engaged in 
competitive employment.
    (3) Services not included. The following services may not be 
included as habilitation services:
    (i) Special education and related services (as defined in sections 
602(16) and (17) of the Education of the Handicapped Act) (20 U.S.C. 
1401 (16) and (17)) that are otherwise available to the individual 
through a local educational agency.
    (ii) Vocational rehabilitation services that are otherwise available 
to the individual through a program funded under section 110 of the 
Rehabilitation Act of 1973 (29 U.S.C. 730).
    (d) Services for the chronically mentally ill--(1) Services 
included. Services listed in paragraph (b)(8) of this section include 
those provided to individuals who have been diagnosed as being 
chronically mentally ill, for which the agency has requested approval as 
part of either a new waiver request or a renewal and which have been 
approved by CMS on or after October 21, 1986.
    (2) Services not included. Any home and community-based service, 
including those indicated in paragraph (b)(8) of this section, may not 
be included in home and community-based service waivers for the 
following individuals:

[[Page 241]]

    (i) For individuals aged 22 through 64 who, absent the waiver, would 
be institutionalized in an institution for mental diseases (IMD); and, 
therefore, subject to the limitation on IMDs specified in 
Sec. 435.1008(a)(2) of this subchapter.
    (ii) For individuals, not meeting the age requirements described in 
paragraph (d)(2)(i) of this section, who, absent the waiver, would be 
placed in an IMD in those States that have not opted to include the 
benefits defined in Sec. 440.140 or Sec. 440.160.

[59 FR 37716, July 25, 1994, as amended at 65 FR 60107, Oct. 10, 2000]



Sec. 440.181  Home and community-based services for individuals age 65 or older.

    (a) Description of services-- Home and community-based services for 
individuals age 65 or older means services, not otherwise furnished 
under the State's Medicaid plan, or services already furnished under the 
State's Medicaid plan but in expanded amount, duration, or scope, which 
are furnished to individuals age 65 or older under a waiver granted 
under the provisions of part 441, subpart H of this subchapter. Except 
as provided in Sec. 441.310, the services may consist of any of the 
services listed in paragraph (b) of this section that are requested by 
the State, approved by CMS, and furnished to eligible recipients. 
Service definitions for each service in paragraph (b) of this section 
must be approved by CMS.
    (b) Included services. (1) Case management services.
    (2) Homemaker services.
    (3) Home health aide services.
    (4) Personal care services.
    (5) Adult day health services.
    (6) Respite care services.
    (7) Other medical and social services requested by the Medicaid 
agency and approved by CMS, which will contribute to the health and 
well-being of individuals and their ability to reside in a community-
based care setting.

[57 FR 29156, June 30, 1992]



Sec. 440.185  Respiratory care for ventilator-dependent individuals.

    (a) ``Respiratory care for ventilator-dependent individuals'' means 
services that are not otherwise available under the State's Medicaid 
plan, provided on a part-time basis in the recipient's home by a 
respiratory therapist or other health care professional trained in 
respiratory therapy (as determined by the State) to an individual who--
    (1) Is medically dependent on a ventilator for life support at least 
6 hours per day;
    (2) Has been so dependent for at least 30 consecutive days (or the 
maximum number of days authorized under the State plan, whichever is 
less) as an inpatient in one or more hospitals, NFs, or ICFs/MR;
    (3) Except for the availability of respiratory care services, would 
require respiratory care as an inpatient in a hospital, NF, or ICF/MR 
and would be eligible to have payment made for inpatient care under the 
State plan;
    (4) Has adequate social support services to be cared for at home;
    (5) Wishes to be cared for at home; and
    (6) Receives services under the direction of a physician who is 
familiar with the technical and medical components of home ventilator 
support, and who has medically determined that in-home care is safe and 
feasible for the individual.
    (b) For purposes of paragraphs (a)(4) and (5) of this section, a 
recipient's home does not include a hospital, NF, ICF/MR or other 
institution as defined in Sec. 435.1009.

[59 FR 37717, July 25, 1994]



      Subpart B--Requirements and Limits Applicable to All Services



Sec. 440.200  Basis, purpose, and scope.

    (a) This subpart implements the following statutory requirements--
    (1) Section 1902(a)(10), regarding comparability of services for 
groups of recipients, and the amount, duration, and scope of services 
described in section 1905(a) of the Act that the State plan must provide 
for recipients;
    (2) Section 1902(a)(22)(D), which provides for standards and methods 
to assure quality of services;
    (3) Section 1903(v)(1), which provides that no payment may be made 
to a State under this section for medical assistance furnished to an 
alien who is

[[Page 242]]

not lawfully admitted for permanent residence or otherwise permanently 
residing in the United States under color of law;
    (4) Section 1903(v)(2) which provides that FFP will be available for 
services necessary to treat an emergency medical condition of an alien 
not described in paragraph (a)(3) of this section if that alien 
otherwise meets the eligibility requirements of the State plan;
    (5) Section 1907 on observance of religious beliefs;
    (6) Section 1915 on exceptions to section 1902(a)(10) and waivers of 
other requirements of section 1902 of the Act; and
    (7) Sections 245A(h), 210 and 210A of the Immigration and 
Nationality Act which provide that certain aliens who are legalized may 
be eligible for Medicaid.
    (b) The requirements and limits of this subpart apply for all 
services defined in subpart A of this part.

[55 FR 36822, Sept. 7, 1990]



Sec. 440.210  Required services for the categorically needy.

    (a) A State plan must specify that, at a minimum, categorically 
needy recipients are furnished the following services:
    (1) The services defined in Secs. 440.10 through 440.50, 440.70, and 
(to the extent nurse-midwives and nurse practitioners are authorized to 
practice under State law or regulation) the services defined in 
Secs. 440.165 and 440.166, respectively.
    (2) Pregnancy-related services and services for other conditions 
that might complicate the pregnancy.
    (i) Pregnancy-related services are those services that are necessary 
for the health of the pregnant woman and fetus, or that have become 
necessary as a result of the woman having been pregnant. These include, 
but are not limited to, prenatal care, delivery, postpartum care, and 
family planning services.
    (ii) Services for other conditions that might complicate the 
pregnancy include those for diagnoses, illnesses, or medical conditions 
which might threaten the carrying of the fetus to full term or the safe 
delivery of the fetus; and
    (3) For women who, while pregnant, applied for, were eligible for, 
and received Medicaid services under the plan, all services under the 
plan that are pregnancy-related for an extended postpartum period. The 
postpartum period begins on the last day of pregnancy and extends 
through the end of the month in which the 60-day period following 
termination of pregnancy ends.
    (b) A State plan must specify that eligible aliens as defined in 
Secs. 435.406(a) and 436.406(a) of this subchapter will receive at least 
the services provided in paragraph (a) of this section.
    (c) A State plan must specify that aliens not defined in 
Secs. 435.406(a) and 436.406(a) of this subchapter will only be provided 
the limited services specified in Sec. 440.255.

[56 FR 24010, May 28, 1991, as amended at 60 FR 19862, Apr. 21, 1995]



Sec. 440.220  Required services for the medically needy.

    (a) A State plan that includes the medically needy must specify that 
the medically needy are provided, as a minimum, the following services:
    (1) Prenatal care and delivery services for pregnant women.
    (2) Ambulatory services, as defined in the State plan, for:
    (i) Individuals under age 18; and
    (ii) Groups of individuals entitled to institutional services.
    (3) Home health services (Sec. 440.70) to any individual entitled to 
skilled nursing facility services.
    (4) If the State plan includes services in an institution for mental 
diseases (Sec. 440.140 or Sec. 440.160) or in an intermediate care 
facility for the mentally retarded (Sec. 440.150(c)) for any group of 
medically needy, either of the following sets of services to each of the 
medically needy groups:
    (i) The services contained in Secs. 440.10 through 440.50 and (to 
the extent nurse-midwives are authorized to practice under State law or 
regulation) Sec. 440.165; or
    (ii) The services contained in any seven of the sections in 
Secs. 440.10 through 440.165.
    (5) For women who, while pregnant, applied for, were eligible as 
medically

[[Page 243]]

needy for, and received Medicaid services under the plan, services under 
the plan that are pregnancy-related (as defined in Sec. 440.210(a)(2)(i) 
of this subpart) for an extended postpartum period. The postpartum 
period begins on the last day of pregnancy and extends through the end 
of the month in which the 60-day period following termination of 
pregnancy ends.
    (b) A State plan must specify that eligible aliens as defined in 
Secs. 435.406(a) and 436.406(a) of this subchapter will receive at least 
the services provided in paragraphs (a)(4) (i) and (ii) of this section.
    (c) A State plan must specify that aliens defined in 
Secs. 435.406(b), 435.406(c), 436.406(b) and 436.406(c) of this 
subchapter will only be provided the limited services specified in 
Sec. 440.255.

[56 FR 24011, May 28, 1991, as amended at 58 FR 4938, Jan. 19, 1993]



Sec. 440.225  Optional services.

    Any of the services defined in subpart A of this part that are not 
required under Secs. 440.210 and 440.220 may be furnished under the 
State plan at the State's option.

[60 FR 19862, Apr. 21, 1995]



Sec. 440.230  Sufficiency of amount, duration, and scope.

    (a) The plan must specify the amount, duration, and scope of each 
service that it provides for--
    (1) The categorically needy; and
    (2) Each covered group of medically needy.
    (b) Each service must be sufficient in amount, duration, and scope 
to reasonably achieve its purpose.
    (c) The Medicaid agency may not arbitrarily deny or reduce the 
amount, duration, or scope of a required service under Secs. 440.210 and 
440.220 to an otherwise eligible recipient solely because of the 
diagnosis, type of illness, or condition.
    (d) The agency may place appropriate limits on a service based on 
such criteria as medical necessity or on utilization control procedures.

[46 FR 47993, Sept. 30, 1981]



Sec. 440.240  Comparability of services for groups.

    Except as limited in Sec. 440.250--
    (a) The plan must provide that the services available to any 
categorically needy recipient under the plan are not less in amount, 
duration, and scope than those services available to a medically needy 
recipient; and
    (b) The plan must provide that the services available to any 
individual in the following groups are equal in amount, duration, and 
scope for all recipients within the group:
    (1) The categorically needy.
    (2) A covered medically needy group.

[46 FR 47993, Sept. 30, 1981]



Sec. 440.250  Limits on comparability of services.

    (a) Skilled nursing facility services (Sec. 440.40(a)) may be 
limited to recipients age 21 or older.
    (b) Early and periodic screening, diagnosis, and treatment 
(Sec. 440.40(b)) must be limited to recipients under age 21.
    (c) Family planning services and supplies must be limited to 
recipients of childbearing age, including minors who can be considered 
sexually active and who desire the services and supplies.
    (d) If covered under the plan, services to recipients in 
institutions for mental diseases (Sec. 440.140) must be limited to those 
age 65 or older.
    (e) If covered under the plan, inpatient psychiatric services 
(Sec. 440.160) must be limited to recipients under age 22 as specified 
in Sec. 441.151(c) of this subchapter.
    (f) If Medicare benefits under Part B of title XVIII are made 
available to recipients through a buy-in agreement or payment of 
premiums, or part or all of the deductibles, cost sharing or similar 
charges, they may be limited to recipients who are covered by the 
agreement or payment.
    (g) If services in addition to those offered under the plan are made 
available under a contract between the agency or political subdivision 
and an organization providing comprehensive health services, those 
additional services may be limited to recipients who reside in the 
geographic area served by the contracting organization and who elect to 
receive services from it.

[[Page 244]]

    (h) Ambulatory services for the medically needy (Sec. 440.220(a)(2)) 
may be limited to:
    (1) Individuals under age 18; and
    (2) Groups of individuals entitled to institutional services.
    (i) Services provided under an exception to requirements allowed 
under Sec. 431.54 may be limited as provided under that exception.
    (j) If CMS has approved a waiver of Medicaid requirements under 
Sec. 431.55, services may be limited as provided by the waiver.
    (k) If the agency has been granted a waiver of the requirements of 
Sec. 440.240 (Comparability of services) in order to provide for home or 
community-based services under Secs. 440.180 or 440.181, the services 
provided under the waiver need not be comparable for all individuals 
within a group.
    (l) If the agency imposes cost sharing on recipients in accordance 
with 447.53, the imposition of cost sharing on an individual who is not 
exempted by one of the conditions in section 447.53(b) shall not require 
the State to impose copayments on an individual who is eligible for such 
exemption.
    (m) Eligible legalized aliens who are not in the exempt groups 
described in Secs. 435.406(a) and 436.406(a), and considered 
categorically needy or medically needy must be furnished only emergency 
services (as defined in Sec. 440.255), and services for pregnant women 
as defined in section 1916(a)(2)(B) of the Social Security Act for 5 
years from the date the alien is granted lawful temporary resident 
status.
    (n) Aliens who are not lawful permanent residents, permanently 
residing in the United States under color of law, or granted lawful 
status under section 245A, 210 or 210A of the Immigration and 
Nationality Act, who, otherwise meet the eligibility requirements of the 
State plan (except for receipt of AFDC, SSI or a State Supplementary 
payment) must be furnished only those services necessary to treat an 
emergency medical condition of the alien as defined in Sec. 440.255(c).
    (o) If the agency makes respiratory care services available under 
Sec. 440.185, the services need not be made available in equal amount, 
duration, and scope to any individual not eligible for coverage under 
that section. However, the services must be made available in equal 
amount, duration, and scope to all individuals eligible for coverage 
under that section.
    (p) A State may provide a greater amount, duration, or scope of 
services to pregnant women than it provides under its plan to other 
individuals who are eligible for Medicaid, under the following 
conditions:
    (1) These services must be pregnancy-related or related to any other 
condition which may complicate pregnancy, as defined in 
Sec. 440.210(a)(2) of this subpart; and
    (2) These services must be provided in equal amount, duration, and 
scope to all pregnant women covered under the State plan.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
46 FR 48541, Oct. 1, 1981; 48 FR 5735, Jan. 8, 1983; 51 FR 22041, June 
17, 1986; 55 FR 36822, Sept. 7, 1990; 56 FR 24011, May 28, 1991; 57 FR 
29156, June 30, 1992; 58 FR 4939, Jan. 19, 1993; 59 FR 37717, July 25, 
1994]



Sec. 440.255  Limited services available to certain aliens.

    (a) FFP for services. FFP is available for services provided to 
aliens described in this section which are necessary to treat an 
emergency medical condition as defined in paragraphs (b)(1) and (c) or 
services for pregnant women described in paragraph (b)(2).
    (b) Legalized aliens eligible only for emergency services and 
services for pregnant women. Aliens granted lawful temporary resident 
status, or lawful permanent resident status under sections 245A, 210 or 
210A of the Immigration and Nationality Act, who are not in one of the 
exempt groups described in Secs. 435.406(a)(3) and 436.406(a)(3) and who 
meet all other requirements for Medicaid will be eligible for the 
following services--
    (1) Emergency services required after the sudden onset of a medical 
condition manifesting itself by acute symptoms of sufficient severity 
(including severe pain) such that the absence of immediate medical 
attention could reasonably be expected to result in:
    (i) Placing the patient's health in serious jeopardy;

[[Page 245]]

    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part.
    (2) Services for pregnant women which are included in the approved 
State plan. These services include routine prenatal care, labor and 
delivery, and routine post-partum care. States, at their option, may 
provide additional plan services for the treatment of conditions which 
may complicate the pregnancy or delivery.
    (c) Effective January 1, 1987, aliens who are not lawfully admitted 
for permanent residence in the United States or permanently residing in 
the United States under the color of law must receive the services 
necessary to treat the condition defined in paragraph (1) of this 
section if--
    (1) The alien has, after sudden onset, a medical condition 
(including emergency labor and delivery) manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such that the 
absence of immediate medical attention could reasonably be expected to 
result in:
    (i) Placing the patient's health in serious jeopardy;
    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part, and
    (2) The alien otherwise meets the requirements in Secs. 435.406(c) 
and 436.406(c) of this subpart.

[55 FR 36823, Sept. 7, 1990; 56 FR 10807, Mar. 14, 1991]



Sec. 440.260  Methods and standards to assure quality of services.

    The plan must include a description of methods and standards used to 
assure that services are of high quality.



Sec. 440.270  Religious objections.

    (a) Except as specified in paragraph (b) of this section, the agency 
may not require any individual to undergo any medical service, 
diagnosis, or treatment or to accept any other health service provided 
under the plan if the individual objects, or in the case of a child, a 
parent or guardian objects, on religious grounds.
    (b) If a physical examination is necessary to establish eligibility 
based on disability or blindness, the agency may not find an individual 
eligible for Medicaid unless he undergoes the examination.



PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC SERVICES--Table of Contents




Sec.
441.1 Purpose.

                      Subpart A--General Provisions

441.10 Basis.
441.11 Continuation of FFP for institutional services.
441.12 Inpatient hospital tests.
441.13 Prohibitions on FFP: Institutionalized individuals.
441.15 Home health services.
441.16 Home health agency requirements for surety bonds; Prohibition on 
          FFP.
441.17 Laboratory services.
441.20 Family planning services.
441.21 Nurse-midwife services.
441.22 Nurse practitioner services.
441.25 Prohibition on FFP for certain prescribed drugs.
441.30 Optometric services.
441.35 Organ transplants.
441.40 End-stage renal disease.

   Subpart B--Early and Periodic Screening, Diagnosis, and Treatment 
                   (EPSDT) of Individuals Under Age 21

441.50 Basis and purpose.
441.55 State plan requirements.
441.56 Required activities.
441.57 Discretionary services.
441.58 Periodicity schedule.
441.59 Treatment of requests for EPSDT screening services.
441.60 Continuing care.
441.61 Utilization of providers and coordination with related programs.
441.62 Transportation and scheduling assistance.

 Subpart C--Medicaid for Individuals Age 65 or Over in Institutions for 
                             Mental Diseases

441.100 Basis and purpose.
441.101 State plan requirements.
441.102 Plan of care for institutionalized recipients.
441.103 Alternate plans of care.
441.105 Methods of administration.

[[Page 246]]

441.106 Comprehensive mental health program.

 Subpart D--Inpatient Psychiatric Services for Individuals Under Age 21 
                  in Psychiatric Facilities or Programs

441.150 Basis and purpose.
441.151 General requirements.
441.152 Certification of need for services.
441.153 Team certifying need for services.
441.154 Active treatment.
441.155 Individual plan of care.
441.156 Team developing individual plan of care.
441.180 Maintenance of effort: General rule.
441.181 Maintenance of effort: Explanation of terms and requirements.
441.182 Maintenance of effort: Computation.

                          Subpart E--Abortions

441.200 Basis and purpose.
441.201 Definition.
441.202 General rule.
441.203 Life of the mother would be endangered.
441.204-441.205 [Reserved]
441.206 Documentation needed by the Medicaid agency.
441.207 Drugs and devices and termination of ectopic pregnancies.
441.208 Recordkeeping requirements.

                        Subpart F--Sterilizations

441.250 Applicability.
441.251 Definitions.
441.252 State plan requirements.
441.253 Sterilization of a mentally competent individual aged 21 or 
          older.
441.254 Mentally incompetent or instititionalized individuals.
441.255 Sterilization by hysterectomy.
441.256 Additional condition for Federal financial participation (FFP).
441.257 Informed consent.
441.258 Consent form requirements.
441.259 Review of regulations.

Appendix to Subpart F--Required Consent Form

    Subpart G--Home and Community-Based Services: Waiver Requirements

441.300 Basis and purpose.
441.301 Contents of request for a waiver.
441.302 State assurances.
441.303 Supporting documentation required.
441.304 Duration of a waiver.
441.305 Replacement of recipients in approved waiver programs.
441.306 Cooperative arrangements with the Maternal and Child Health 
          program.
441.307 Notification of a waiver termination.
441.308 Hearings procedures for waiver terminations.
441.310 Limits on Federal financial participation (FFP).

Subpart H--Home and Community-Based Services Waivers for Individuals Age 
                    65 or Older: Waiver Requirements

441.350 Basis and purpose.
441.351 Contents of a request for a waiver.
441.352 State assurances.
441.353 Supporting documentation required.
441.354 Aggregate projected expenditure limit (APEL).
441.355 Duration, extension, and amendment of a waiver.
441.356 Waiver termination.
441.357 Hearing procedures for waiver denials.
441.360 Limits on Federal financial participation (FFP).
441.365 Periodic evaluation, assessment, and review.

       Subpart I--Community Supported Living Arrangements Services

441.400 Basis and purpose.
441.402 State plan requirements.
441.404 Minimum protection requirements.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45229, Sept. 29, 1978, unless otherwise noted.



Sec. 441.1  Purpose.

    This part sets forth State plan requirements and limits on FFP for 
specific services defined in part 440 of this subchapter. Standards for 
payments for services provided in intermediate care facilities and 
skilled nursing facilities are set forth in part 442 of this subchapter.



                      Subpart A--General Provisions



Sec. 441.10  Basis.

    This subpart is based on the following sections of the Act which 
state requirements and limits on the services specified or provide 
Secretarial authority to prescribe regulations relating to services:
    (a) Section 1102 for end-stage renal disease (Sec. 441.40).
    (b) Section 1138(b) for organ procurement organization services 
(Sec. 441.13(c)).
    (c) Sections 1902(a)(10)(A) and 1905(a)(21) for nurse practitioner 
services (Sec. 441.22).

[[Page 247]]

    (d) Sections 1902(a)(10)(D) and 1905(a)(7) for home health services 
(Sec. 441.15).
    (e) Section 1903(i)(1) for organ transplant procedures 
(Sec. 441.35).
    (f) Section 1903(i)(5) for certain prescribed drugs (Sec. 441.25).
    (g) Section 1903(i)(6) for prohibition (except in emergency 
situations) of FFP in expenditures for inpatient hospital tests that are 
not ordered by the attending physician or other licensed practitioner 
(Sec. 441.12).
    (h) Section 1903(i)(18) for the requirement that each home health 
agency provide the Medicaid agency with a surety bond (Sec. 441.16).
    (i) Section 1905(a)(4)(C) for family planning (Sec. 441.20).
    (j) Sections 1905 (a)(12) and (e) for optometric services 
(Sec. 441.30).
    (k) Section 1905(a)(17) for nurse-midwife services (Sec. 441.21).
    (l) Section 1905(a) (following (a)(24)) for prohibition of FFP in 
expenditures for certain services (Sec. 441.13).

[60 FR 19862, Apr. 21, 1995, as amended at 63 FR 310, Jan. 5, 1998]



Sec. 441.11  Continuation of FFP for institutional services.

    (a) Basic conditions for continuation of FFP. FFP may be continued 
for up to 30 days after the effective date of termination or expiration 
of a provider agreement, if the following conditions are met:
    (1) The Medicaid payments are for recipients admitted to the 
facility before the effective date of termination or expiration.
    (2) The State agency is making reasonable efforts to transfer those 
recipients to other facilities or to alternate care.
    (b) When the 30-day period begins. The 30-day period begins on one 
of the following:
    (1) The effective date of termination of the facility's provider 
agreement by CMS;
    (2) The effective date of termination of the facility's Medicaid 
provider agreement by the Medicaid agency on its own volition; or
    (3) In the case of an ICF/MR, the later of--
    (i) The effective date of termination or nonrenewal of the 
facility's provider agreement by the Medicaid agency on its own 
volition; or
    (ii) The date of issuance of an administrative hearing decision that 
upholds the agency's termination or nonrenewal action.
    (c) Services for which FFP may be continued. FFP may be continued 
for any of the following services, as defined in subpart A of part 440 
of this chapter:
    (1) Inpatient hospital services.
    (2) Inpatient hospital services for individuals age 65 or older in 
an institution for mental diseases.
    (3) Nursing facility services for individuals age 21 or older.
    (4) Nursing facility services for individuals age 65 or older in an 
institution for mental diseases.
    (5) Inpatient psychiatric services for individuals under age 21.
    (6) Nursing facility services for individuals under 21.
    (7) Intermediate care facility services for the mentally retarded.

[59 FR 56234, Nov. 10, 1994]



Sec. 441.12  Inpatient hospital tests.

    Except in an emergency situation (see Sec. 440.170(e)(1) of this 
chapter for definition), FFP is not available in expenditures for 
inpatient hospital tests unless the tests are specifically ordered by 
the attending physician or other licensed practitioner, acting within 
the scope of practice as defined under State law, who is responsible for 
the diagnosis or treatment of a particular patient's condition.

[46 FR 48554, Oct. 1, 1981]



Sec. 441.13  Prohibitions on FFP: Institutionalized individuals.

    (a) FFP is not available in expenditures for services for--
    (1) Any individual who is in a public institution, as defined in 
Sec. 435.1009 of this subchapter; or
    (2) Any individual who is under age 65 and is in an institution for 
mental diseases, except an individual who is under age 22 and receiving 
inpatient psychiatric services under subpart D of this part.
    (b) With the exception of active treatment services (as defined in 
Sec. 483.440(a) of this chapter for residents

[[Page 248]]

of ICFs/MR and in Sec. 441.154 for individuals under age 21 receiving 
inpatient psychiatric services), payments to institutions for the 
mentally retarded or persons with related conditions and to psychiatric 
facilities or programs providing inpatient psychiatric services to 
individuals under age 21 may not include reimbursement for formal 
educational services or for vocational services. Formal educational 
services relate to training in traditional academic subjects. Subject 
matter rather than setting, time of day, or class size determines 
whether a service is educational. Traditional academic subjects include, 
but are not limited to, science, history, literature, foreign languages, 
and mathematics. Vocational services relate to organized programs that 
are directly related to the preparation of individuals for paid or 
unpaid employment. An example of vocational services is time-limited 
vocational training provided as a part of a regularly scheduled class 
available to the general public.
    (c) FFP is not available in expenditures for services furnished by 
an organ procurement organization on or after April 1, 1988, that does 
not meet the requirements of part 485, subpart D of this chapter.

[43 FR 45229, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986; 
53 FR 6549, Mar. 1, 1988; 57 FR 54709, Nov. 20, 1992]



Sec. 441.15  Home health services.

    With respect to the services defined in Sec. 440.70 of this 
subchapter, a State plan must provide that--
    (a) Home health services include, as a minimum--
    (1) Nursing services;
    (2) Home health aide services; and
    (3) Medical supplies, equipment, and appliances.
    (b) The agency provides home health services to--
    (1) Categorically needy recipients age 21 or over;
    (2) Categorically needy recipients under age 21, if the plan 
provides skilled nursing facility services for them; individuals; and
    (3) Medically needy recipients to whom skilled nursing facility 
services are provided under the plan.
    (c) The eligibility of a recipient to receive home health services 
does not depend on his need for or discharge from institutional care.
    (d) The agency providing home health services meets the 
capitalization requirements included in Sec. 489.28 of this chapter.

[43 FR 45229, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
63 FR 310, Jan. 5, 1998]



Sec. 441.16  Home health agency requirements for surety bonds; Prohibition on FFP.

    (a) Definitions. As used in this section, unless the context 
indicates otherwise--
    Assets includes but is not limited to any listing that identifies 
Medicaid recipients to whom home health services were furnished by a 
participating or formerly participating HHA.
    Participating home health agency means a ``home health agency'' 
(HHA) as that term is defined at Sec. 440.70(d) of this subchapter.
    Surety bond means one or more bonds issued by one or more surety 
companies under 31 U.S.C. 9304 to 9308 and 31 CFR parts 223, 224, and 
225, provided the bond otherwise meets the requirements of this section.
    Uncollected overpayment means an ``overpayment,'' as that term is 
defined under Sec. 433.304 of this subchapter, plus accrued interest, 
for which the HHA is responsible, that has not been recouped by the 
Medicaid agency within a time period determined by the Medicaid agency.
    (b) Prohibition. FFP is not available in expenditures for home 
health services under Sec. 440.70 of this subchapter unless the home 
health agency furnishing these services meets the surety bond 
requirements of paragraphs (c) through (l) of this section.
    (c) Basic requirement. Except as provided in paragraph (d) of this 
section, each HHA that is a Medicaid participating HHA or that seeks to 
become a Medicaid participating HHA must--
    (1) Obtain a surety bond that meets the requirements of this section 
and instructions issued by the Medicaid agency; and
    (2) Furnish a copy of the surety bond to the Medicaid agency.

[[Page 249]]

    (d) Requirement waived for Government-operated HHAs. An HHA operated 
by a Federal, State, local, or tribal government agency is deemed to 
have provided the Medicaid agency with a comparable surety bond under 
State law, and is therefore exempt from the requirements of this section 
if, during the preceding 5 years, the HHA has not had any uncollected 
overpayments.
    (e) Parties to the bond. The surety bond must name the HHA as 
Principal, the Medicaid agency as Obligee, and the surety company (and 
its heirs, executors, administrators, successors and assignees, jointly 
and severally) as Surety.
    (f) Authorized Surety and exclusion of surety companies. An HHA may 
obtain a surety bond required under this section only from an authorized 
Surety.
    (1) An authorized Surety is a surety company that--
    (i) Has been issued a Certificate of Authority by the U.S. 
Department of the Treasury in accordance with 31 U.S.C. 9304 to 9308 and 
31 CFR parts 223, 224, and 225 as an acceptable surety on Federal bonds 
and the Certificate has neither expired nor been revoked;
    (ii) Has not been determined by the Medicaid agency to be an 
unauthorized Surety for the purpose of an HHA obtaining a surety bond 
under this section; and
    (iii) Meets other conditions, as specified by the Medicaid agency.
    (2) The Medicaid agency may determine that a surety company is an 
unauthorized Surety under this section--
    (i) If, upon request by the Medicaid agency, the surety company 
fails to furnish timely confirmation of the issuance of, and the 
validity and accuracy of information appearing on, a surety bond that an 
HHA presents to the Medicaid agency that shows the surety company as 
Surety on the bond;
    (ii) If, upon presentation by the Medicaid agency to the surety 
company of a request for payment on a surety bond and of sufficient 
evidence to establish the surety company's liability on the bond, the 
surety company fails to timely pay the Medicaid agency in full the 
amount requested up to the face amount of the bond; or
    (iii) For other good cause.
    (3) The Medicaid agency must specify the manner by which public 
notification of a determination under paragraph (f)(2) of this section 
is given and the effective date of the determination.
    (4) A determination by the Medicaid agency that a surety company is 
an unauthorized Surety under paragraph (f)(2) of this section--
    (i) Has effect only within the State; and
    (ii) Is not a debarment, suspension, or exclusion for the purposes 
of Executive Order No. 12549 (3 CFR 1986 Comp., p. 189).
    (g) Amount of the bond.
    (1) Basic rule. The amount of the surety bond must be $50,000 or 15 
percent of the annual Medicaid payments made to the HHA by the Medicaid 
agency for home health services furnished under this subchapter for 
which FFP is available, whichever is greater.
    (2) Computation of the 15 percent: Participating HHA. The 15 percent 
is computed by the Medicaid agency on the basis of Medicaid payments 
made to the HHA for the most recent annual period for which information 
is available as specified by the Medicaid agency.
    (3) Computation of 15 percent: An HHA that seeks to become a 
participating HHA by obtaining assets or ownership interest. For an HHA 
that seeks to become a participating HHA by purchasing the assets or the 
ownership interest of a participating or formerly participating HHA, the 
15 percent is computed on the basis of Medicaid payments made by the 
Medicaid agency to the participating or formerly participating HHA for 
the most recent annual period as specified by the Medicaid agency.
    (4) Computation of 15 percent: Change of ownership. For an HHA that 
undergoes a change of ownership (as ``change of ownership'' is defined 
by the State Medicaid agency) the 15 percent is computed on the basis of 
Medicaid payments made by the Medicaid agency to the HHA for the most 
recent annual period as specified by the Medicaid agency.
    (5) An HHA that seeks to become a participating HHA without 
obtaining assets or ownership interest. For an HHA that seeks to become 
a participating HHA without purchasing the assets or the ownership 
interest of a participating or

[[Page 250]]

formerly participating HHA, the 15 percent computation does not apply.
    (6) Exception to the basic rule. If an HHA's overpayment in the most 
recent annual period exceeds 15 percent, the State Medicaid agency may 
require the HHA to secure a bond in an amount up to or equal to the 
amount of the overpayment, provided the amount of the bond is not less 
than $50,000.
    (7) Expiration of the 15 percent provision. For an annual surety 
bond, or for a rider on a continuous surety bond, that is required to be 
submitted on or after June 1, 2005, notwithstanding any reference in 
this section to 15 percent as a basis for determining the amount of the 
bond, the amount of the bond or rider, as applicable, must be $50,000 or 
such amount as the Medicaid agency specifies in accordance with 
paragraph (g)(6) of this section, whichever amount is greater.
    (h) Additional requirements of the surety bond. The surety bond that 
an HHA obtains under this section must meet the following additional 
requirements:
    (1) The bond must guarantee that, upon written demand by the 
Medicaid agency to the Surety for payment under the bond and the 
Medicaid agency furnishing to the Surety sufficient evidence to 
establish the Surety's liability under the bond, the Surety will timely 
pay the Medicaid agency the amount so demanded, up to the stated amount 
of the bond.
    (2) The bond must provide that the Surety is liable for uncollected 
overpayments, as defined in paragraph (a), provided such uncollected 
overpayments are determined during the term of the bond and regardless 
of when the overpayments took place. Further, the bond must provide that 
the Surety remains liable if the HHA fails to furnish a subsequent 
annual bond that meets the requirements of this subpart or fails to 
furnish a rider for a year for which a rider is required to be 
submitted, or if the HHA's provider agreement terminates and that the 
Surety's liability shall be based on the last bond or rider in effect 
for the HHA, which shall then remain in effect for an additional 2-year 
period.
    (3) The bond must provide that the Surety's liability to the 
Medicaid agency is not extinguished by any of the following:
    (i) Any action by the HHA or the Surety to terminate or limit the 
scope or term of the bond. The Surety's liability may be extinguished, 
however, when--
    (A) The Surety furnishes the Medicaid agency with notice of such 
action not later than 10 days after receiving notice from the HHA of 
action by the HHA to terminate or limit the scope of the bond, or not 
later than 60 days before the effective date of such action by the 
Surety; or
    (B) The HHA furnishes the Medicaid agency with a new bond that meets 
the requirements of both this section and the Medicaid agency.
    (ii) The Surety's failure to continue to meet the requirements of 
paragraph (f)(1) of this section or the Medicaid agency's determination 
that the surety company is an unauthorized surety under paragraph (f)(2) 
of this section.
    (iii) Termination of the HHA's provider agreement described under 
Sec. 431.107 of this subchapter.
    (iv) Any action by the Medicaid agency to suspend, offset, or 
otherwise recover payments to the HHA.
    (v) Any action by the HHA to--
    (A) Cease operation;
    (B) Sell or transfer any assets or ownership interest;
    (C) File for bankruptcy; or
    (D) Fail to pay the Surety.
    (vi) Any fraud, misrepresentation, or negligence by the HHA in 
obtaining the surety bond or by the Surety (or by the Surety's agent, if 
any) in issuing the surety bond, except that any fraud, 
misrepresentation, or negligence by the HHA in identifying to the Surety 
(or to the Surety's agent) the amount of Medicaid payments upon which 
the amount of the surety bond is determined shall not cause the Surety's 
liability to the Medicaid agency to exceed the amount of the bond.
    (vii) The HHA's failure to exercise available appeal rights under 
Medicaid or to assign such rights to the Surety (provided the Medicaid 
agency permits such rights to be assigned).
    (4) The bond must provide that actions under the bond may be brought 
by the Medicaid agency or by an agent that the Medicaid agency 
designates.

[[Page 251]]

    (i) Term and type of bond. (1) Initial term: Each participating HHA 
that is not exempted by paragraph (d) of this section must submit to the 
State Medicaid agency a surety bond for a term beginning January 1, 
1998. If an annual bond is submitted for the initial term it must be 
effective for an annual period specified by the State Medicaid agency.
    (2) Type of bond. The type of bond required to be submitted by an 
HHA, under this section, may be either--
    (i) An annual bond (that is, a bond that specifies an effective 
annual period that corresponds to an annual period specified by the 
Medicaid agency); or
    (ii) A continuous bond (that is, a bond that remains in full force 
and effect from term to term unless it is terminated or canceled as 
provided for in the bond or as otherwise provided by law) that is 
updated by the Surety for a particular period, via the issuance of a 
``rider,'' when the bond amount changes. For the purposes of this 
section, ``Rider'' means a notice issued by a Surety that a change to a 
bond has occurred or will occur. If the HHA has submitted a continuous 
bond and there is no increase or decrease in the bond amount, no action 
is necessary by the HHA to submit a rider as long as the continuous bond 
remains in full force and effect.
    (3) HHA that seeks to become a participating HHA.
    (i) An HHA that seeks to become a participating HHA must submit a 
surety bond before a provider agreement described under Sec. 431.107 of 
this subchapter can be entered into.
    (ii) An HHA that seeks to become a participating HHA through the 
purchase or transfer of assets or ownership interest of a participating 
or formerly participating HHA must also ensure that the surety bond is 
effective from the date of such purchase or transfer.
    (4) Change of ownership. An HHA that undergoes a change of ownership 
(as ``change of ownership'' is defined by the State Medicaid agency) 
must submit the surety bond to the State Medicaid agency by such time 
and for such term as is specified in the instructions of the State 
Medicaid agency.
    (5) Government-operated HHA that loses its waiver. A government-
operated HHA that, as of January 1, 1998, meets the criteria for waiver 
of the requirements of this section but thereafter is determined by the 
Medicaid agency to not meet such criteria, must submit a surety bond to 
the Medicaid agency within 60 days after it receives notice from the 
Medicaid agency that it does not meet the criteria for waiver.
    (6) Change of Surety. An HHA that obtains a replacement surety bond 
from a different Surety to cover the remaining term of a previously 
obtained bond must submit the new surety bond to the Medicaid agency 
within 60 days (or such earlier date as the Medicaid agency may specify) 
of obtaining the bond from the new Surety for a term specified by the 
Medicaid agency.
    (j) Effect of failure to obtain, maintain, and timely file a surety 
bond.
    (1) The Medicaid agency must terminate the HHA's provider agreement 
if the HHA fails to obtain, file timely, and maintain a surety bond in 
accordance with this section and the Medicaid agency's instructions.
    (2) The Medicaid agency must refuse to enter into a provider 
agreement with an HHA if an HHA seeking to become a participating HHA 
fails to obtain and file timely a surety bond in accordance with this 
section and instructions issued by the State Medicaid agency.
    (k) Evidence of compliance.
    (1) The Medicaid agency may at any time require an HHA to make a 
specific showing of being in compliance with the requirements of this 
section and may require the HHA to submit such additional evidence as 
the Medicaid agency considers sufficient to demonstrate the HHA's 
compliance.
    (2) The Medicaid agency may terminate the HHA's provider agreement 
or refuse to enter into a provider agreement if an HHA fails to timely 
furnish sufficient evidence at the Medicaid agency's request to 
demonstrate compliance with the requirements of this section.
    (l) Surety's standing to appeal Medicaid determinations. The 
Medicaid agency must establish procedures for granting appeal rights to 
Sureties.

[[Page 252]]

    (m) Effect of conditions of payment. If a Surety has paid the 
Medicaid agency an amount on the basis of liability incurred under a 
bond obtained by an HHA under this section, and the Medicaid agency 
subsequently collects from the HHA, in whole or in part, on such 
overpayment that was the basis for the Surety's liability, the Medicaid 
agency must reimburse the Surety such amount as the Medicaid agency 
collected from the HHA, up to the amount paid by the Surety to the 
Medicaid agency, provided the Surety has no other liability under the 
bond.

[63 FR 310, Jan. 5, 1998, as amended at 63 FR 10731, Mar. 4, 1998; 63 FR 
29654, June 1, 1998; 63 FR 41170, July 31, 1998]



Sec. 441.17  Laboratory services.

    (a) The plan must provide for payment of laboratory services as 
defined in Sec. 440.30 of this subchapter if provided by--
    (1) An independent laboratory that meets the requirements for 
participation in the Medicare program found in Sec. 405.1316 of this 
chapter;
    (2) A hospital-based laboratory that meets the requirements for 
participation in the Medicare program found in Sec. 482.27 of this 
chapter;
    (3) A rural health clinic, as defined in Sec. 491.9 of this chapter; 
or
    (4) A skilled nursing facility--based clinical laboratory, as 
defined in Sec. 405.1128(a) of this chapter.
    (b) Except as provided under paragraph (c), if a laboratory or other 
entity is requesting payment under Medicaid for testing for the presence 
of the human immunodeficiency virus (HIV) antibody or for the isolation 
and identification of the HIV causative agent as described in 
Sec. 405.1316(f) (2) and (3) of this chapter, the laboratory records 
must contain the name and other identification of the person from whom 
the specimen was taken.
    (c) An agency may choose to approve the use of alternative 
identifiers, in place of the requirement for patient's name, in 
paragraph (b) of this section for HIV antibody or causative agent 
testing of Medicaid recipients.

[54 FR 48647, Dec. 2, 1988. Redesignated at 63 FR 310, Jan. 5, 1998.]



Sec. 441.20  Family planning services.

    For recipients eligible under the plan for family planning services, 
the plan must provide that each recipient is free from coercion or 
mental pressure and free to choose the method of family planning to be 
used.



Sec. 441.21  Nurse-midwife services.

    If a State plan, under Sec. 440.210 or 440.220 of this subchapter, 
provides for nurse-midwife services, as defined in Sec. 440.165, the 
plan must provide that the nurse-midwife may enter into an independent 
provider agreement, without regard to whether the nurse-midwife is under 
the supervision of, or associated with, a physician or other health care 
provider.

[47 FR 21051, May 17, 1982]



Sec. 441.22  Nurse practitioner services.

    With respect to nurse practitioner services that meet the definition 
of Sec. 440.166(a) and the requirements of either Sec. 440.166(b) or 
Sec. 440.166(c), the State plan must meet the following requirements:
    (a) Provide that nurse practitioner services are furnished to the 
categorically needy.
    (b) Specify whether those services are furnished to the medically 
needy.
    (c) Provide that services furnished by a nurse practitioner, 
regardless of whether the nurse practitioner is under the supervision 
of, or associated with, a physician or other health care provider, may--
    (1) Be reimbursed by the State Medicaid agency through an 
independent provider agreement between the State and the nurse 
practitioner; or
    (2) Be paid through the employing provider.

[60 FR 19862, Apr. 21, 1995]



Sec. 441.25  Prohibition on FFP for certain prescribed drugs.

    (a) FFP is not available in expenditures for the purchase or 
administration of any drug product that meets all of the following 
conditions:
    (1) The drug product was approved by the Food and Drug 
Administration (FDA) before October 10, 1962.
    (2) The drug product is available only through prescription.

[[Page 253]]

    (3) The drug product is the subject of a notice of opportunity for 
hearing issued under section 505(e) of the Federal Food, Drug, and 
Cosmetic Act and published in the Federal Register on a proposed order 
of FDA to withdraw its approval for the drug product because it has 
determined that the product is less than effective for all its labeled 
indications.
    (4) The drug product is presently not subject to a determination by 
FDA, made under its efficacy review program (see 21 CFR 310.6 for an 
explanation of this program), that there is a compelling justification 
of the drug product's medical need.
    (b) FFP is not available in expenditures for the purchase or 
administration of any drug product that is identical, related, or 
similar, as defined in 21 CFR 310.6, to a drug product that meets the 
conditions of paragraph (a) of this section.

[46 FR 48554, Oct. 1, 1981]



Sec. 441.30  Optometric services.

    The plan must provide for payment of optometric services as 
physician services, whether furnished by an optometrist or a physician, 
if--
    (a) The plan does not provide for payment for services provided by 
an optometrist, except for eligibility determinations under 
Secs. 435.531 and 436.531 of this subchapter, but did provide for those 
services at an earlier period; and
    (b) The plan specifically provides that physicians' services include 
services an optometrist is legally authorized to perform.



Sec. 441.35  Organ transplants.

    (a) FFP is available in expenditures for services furnished in 
connection with organ transplant procedures only if the State plan 
includes written standards for the coverage of those procedures, and 
those standards provide that--
    (1) Similarly situated individuals are treated alike; and
    (2) Any restriction on the practitioners or facilities that may 
provide organ transplant procedures is consistent with the accessibility 
of high quality care to individuals eligible for the procedures under 
the plan.
    (b) Nothing in paragraph (a) permits a State to provide, under its 
plan, services that are not reasonable in amount, duration, and scope to 
achieve their purpose.

[56 FR 8851, Mar. 1, 1991]



Sec. 441.40  End-stage renal disease.

    FFP in expenditures for services described in subpart A of part 440 
is available for facility treatment of end-stage renal disease only if 
the facility has been approved by the Secretary to furnish those 
services under Medicare. This requirement for approval of the facility 
does not apply under emergency conditions permitted under Medicare (see 
Sec. 482.2 of this chapter).

[43 FR 45229, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986]



   Subpart B--Early and Periodic Screening, Diagnosis, and Treatment 
                   (EPSDT) of Individuals Under Age 21

    Source: 49 FR 43666, Oct. 31, 1984, unless otherwise noted.



Sec. 441.50  Basis and purpose.

    This subpart implements sections 1902(a)(43) and 1905(a)(4)(B) of 
the Social Security Act, by prescribing State plan requirements for 
providing early and periodic screening and diagnosis of eligible 
Medicaid recipients under age 21 to ascertain physical and mental 
defects, and providing treatment to correct or ameliorate defects and 
chronic conditions found.



Sec. 441.55  State plan requirements.

    A State plan must provide that the Medicaid agency meets the 
requirements of Secs. 441.56-441.62, with respect to EPSDT services, as 
defined in Sec. 440.40(b) of this subchapter.



Sec. 441.56  Required activities.

    (a) Informing. The agency must--
    (1) Provide for a combination of written and oral methods designed 
to inform effectively all EPSDT eligible individuals (or their families) 
about the EPSDT program.

[[Page 254]]

    (2) Using clear and nontechnical language, provide information about 
the following--
    (i) The benefits of preventive health care;
    (ii) The services available under the EPSDT program and where and 
how to obtain those services;
    (iii) That the services provided under the EPSDT program are without 
cost to eligible individuals under 18 years of age, and if the agency 
chooses, to those 18 or older, up to age 21, except for any enrollment 
fee, premium, or similar charge that may be imposed on medically needy 
recipients; and
    (iv) That necessary transportation and scheduling assistance 
described in Sec. 441.62 of this subpart is available to the EPSDT 
eligible individual upon request.
    (3) Effectively inform those individuals who are blind or deaf, or 
who cannot read or understand the English language.
    (4) Provide assurance to CMS that processes are in place to 
effectively inform individuals as required under this paragraph, 
generally, within 60 days of the individual's initial Medicaid 
eligibility determination and in the case of families which have not 
utilized EPSDT services, annually thereafter.
    (b) Screening. (1) The agency must provide to eligible EPSDT 
recipients who request it, screening (periodic comprehensive child 
health assessments); that is, regularly scheduled examinations and 
evaluations of the general physical and mental health, growth, 
development, and nutritional status of infants, children, and youth. 
(See paragraph (c)(3) of this section for requirements relating to 
provision of immunization at the time of screening.) As a minimum, these 
screenings must include, but are not limited to:
    (i) Comprehensive health and developmental history.
    (ii) Comprehensive unclothed physical examination.
    (iii) Appropriate vision testing.
    (iv) Appropriate hearing testing.
    (v) Appropriate laboratory tests.
    (vi) Dental screening services furnished by direct referral to a 
dentist for children beginning at 3 years of age. An agency may request 
from CMS an exception from this age requirement (within an outer limit 
of age 5) for a two year period and may request additional two year 
exceptions. If an agency requests an exception, it must demonstrate to 
CMS's satisfaction that there is a shortage of dentists that prevents 
the agency from meeting the age 3 requirement.
    (2) Screening services in paragraph (b)(1) of this section must be 
provided in accordance with reasonable standards of medical and dental 
practice determined by the agency after consultation with recognized 
medical and dental organizations involved in child health care.
    (c) Diagnosis and treatment. In addition to any diagnostic and 
treatment services included in the plan, the agency must provide to 
eligible EPSDT recipients, the following services, the need for which is 
indicated by screening, even if the services are not included in the 
plan--
    (1) Diagnosis of and treatment for defects in vision and hearing, 
including eyeglasses and hearing aids;
    (2) Dental care, at as early an age as necessary, needed for relief 
of pain and infections, restoration of teeth and maintenance of dental 
health; and
    (3) Appropriate immunizations. (If it is determined at the time of 
screening that immunization is needed and appropriate to provide at the 
time of screening, then immunization treatment must be provided at that 
time.)
    (d) Accountability. The agency must maintain as required by 
Secs. 431.17 and 431.18--
    (1) Records and program manuals;
    (2) A description of its screening package under paragraph (b) of 
this section; and
    (3) Copies of rules and policies describing the methods used to 
assure that the informing requirement of paragraph (a)(1) of this 
section is met.
    (e) Timeliness. With the exception of the informing requirements 
specified in paragraph (a) of this section, the agency must set 
standards for the timely provision of EPSDT services which meet 
reasonable standards of medical and dental practice, as determined by 
the agency after consultation with recognized medical and dental 
organizations involved in child health

[[Page 255]]

care, and must employ processes to ensure timely initiation of 
treatment, if required, generally within an outer limit of 6 months 
after the request for screening services.

[49 FR 43666, Oct. 31, 1984; 49 FR 45431, Nov. 16, 1984]



Sec. 441.57  Discretionary services.

    Under the EPSDT program, the agency may provide for any other 
medical or remedial care specified in part 440 of this subchapter, even 
if the agency does not otherwise provide for these services to other 
recipients or provides for them in a lesser amount, duration, or scope.



Sec. 441.58  Periodicity schedule.

    The agency must implement a periodicity schedule for screening 
services that--
    (a) Meets reasonable standards of medical and dental practice 
determined by the agency after consultation with recognized medical and 
dental organizations involved in child health care;
    (b) Specifies screening services applicable at each stage of the 
recipient's life, beginning with a neonatal examination, up to the age 
at which an individual is no longer eligible for EPSDT services; and
    (c) At the agency's option, provides for needed screening services 
as determined by the agency, in addition to the otherwise applicable 
screening services specified under paragraph (b) of this section.



Sec. 441.59  Treatment of requests for EPSDT screening services.

    (a) The agency must provide the screening services described in 
Sec. 441.56(b) upon the request of an eligible recipient.
    (b) To avoid duplicate screening services, the agency need not 
provide requested screening services to an EPSDT eligible if written 
verification exists that the most recent age-appropriate screening 
services, due under the agency's periodicity schedule, have already been 
provided to the eligible.



Sec. 441.60  Continuing care.

    (a) Continuing care provider. For purposes of this subpart, a 
continuing care provider means a provider who has an agreement with the 
Medicaid agency to provide reports as required under paragraph (b) of 
this section and to provide at least the following services to eligible 
EPSDT recipients formally enrolled with the provider:
    (1) With the exception of dental services required under 
Sec. 441.56, screening, diagnosis, treatment, and referral for follow-up 
services as required under this subpart.
    (2) Maintenance of the recipient's consolidated health history, 
including information received from other providers.
    (3) Physicians' services as needed by the recipient for acute, 
episodic or chronic illnesses or conditions.
    (4) At the provider's option, provision of dental services required 
under Sec. 441.56 or direct referral to a dentist to provide dental 
services required under Sec. 441.56(b)(1)(vi). The provider must specify 
in the agreement whether dental services or referral for dental services 
are provided. If the provider does not choose to provide either service, 
then the provider must refer recipients to the agency to obtain those 
dental services required under Sec. 441.56.
    (5) At the provider's option, provision of all or part of the 
transportation and scheduling assistance as required under Sec. 441.62. 
The provider must specify in the agreement the transportation and 
scheduling assistance to be furnished. If the provider does not choose 
to provide some or all of the assistance, then the provider must refer 
recipients to the agency to obtain the transportation and scheduling 
assistance required under Sec. 441.62.
    (b) Reports. A continuing care provider must provide to the agency 
any reports that the agency may reasonably require.
    (c) State monitoring. If the State plan provides for agreements with 
continuing care providers, the agency must employ methods described in 
the State plan to assure the providers' compliance with their 
agreements.
    (d) Effect of agreement with continuing care providers. Subject to 
the requirements of paragraphs (a), (b), and (c) of this section, CMS 
will deem the agency to meet the requirements of this subpart with 
respect to all EPSDT eligible

[[Page 256]]

recipients formally enrolled with the continuing care provider. To be 
formally enrolled, a recipient or recipient's family agrees to use one 
continuing care provider to be a regular source of the described set of 
services for a stated period of time. Both the recipient and the 
provider must sign statements that reflect their obligations under the 
continuing care arrangement.
    (e) If the agreement in paragraph (a) of this section does not 
provide for all or part of the transportation and scheduling assistance 
required under Sec. 441.62, or for dental service under Sec. 441.56, the 
agency must provide for those services to the extent they are not 
provided for in the agreement.



Sec. 441.61  Utilization of providers and coordination with related programs.

    (a) The agency must provide referral assistance for treatment not 
covered by the plan, but found to be needed as a result of conditions 
disclosed during screening and diagnosis. This referral assistance must 
include giving the family or recipient the names, addresses, and 
telephone numbers of providers who have expressed a willingness to 
furnish uncovered services at little or no expense to the family.
    (b) The agency must make available a variety of individual and group 
providers qualified and willing to provide EPSDT services.
    (c) The agency must make appropriate use of State health agencies, 
State vocational rehabilitation agencies, and Title V grantees (Maternal 
and Child Health/Crippled Children's Services). Further, the agency 
should make use of other public health, mental health, and education 
programs and related programs, such as Head Start, Title XX (Social 
Services) programs, and the Special Supplemental Food Program for Women, 
Infants and Children (WIC), to ensure an effective child health program.



Sec. 441.62  Transportation and scheduling assistance.

    The agency must offer to the family or recipient, and provide if the 
recipient requests--
    (a) Necessary assistance with transportation as required under 
Sec. 431.53 of this chapter; and
    (b) Necessary assistance with scheduling appointments for services.



 Subpart C--Medicaid for Individuals Age 65 or Over in Institutions for 
                             Mental Diseases

    Source: 44 FR 17940, Mar. 23, 1979, unless otherwise noted.



Sec. 441.100  Basis and purpose.

    This subpart implements section 1905(a)(14) of the Act, which 
authorizes State plans to provide for inpatient hospital services, 
skilled nursing services, and intermediate care facility services for 
individuals age 65 or older in an institution for mental diseases, and 
sections 1902(a)(20)(B) and (C) and 1902(a)(21), which prescribe the 
conditions a State must meet to offer these services. (See Sec. 431.620 
of this subchapter for regulations implementing section 1902(a)(20)(A), 
which prescribe interagency requirements related to these services.)



Sec. 441.101  State plan requirements.

    A State plan that includes Medicaid for individuals age 65 or older 
in institutions for mental diseases must provide that the requirements 
of this subpart are met.



Sec. 441.102  Plan of care for institutionalized recipients.

    (a) The Medicaid agency must provide for a recorded individual plan 
of treatment and care to ensure that institutional care maintains the 
recipient at, or restores him to, the greatest possible degree of health 
and independent functioning.
    (b) The plan must include--
    (1) An initial review of the recipient's medical, psychiatric, and 
social needs--
    (i) Within 90 days after approval of the State plan provision for 
services in institutions for mental disease; and
    (ii) After that period, within 30 days after the date payments are 
initiated for services provided a recipient.
    (2) Periodic review of the recipient's medical, psychiatric, and 
social needs;

[[Page 257]]

    (3) A determination, at least quarterly, of the recipient's need for 
continued institutional care and for alternative care arrangements;
    (4) Appropriate medical treatment in the institution; and
    (5) Appropriate social services.



Sec. 441.103  Alternate plans of care.

    (a) The agency must develop alternate plans of care for each 
recipient age 65 or older who would otherwise need care in an 
institution for mental diseases.
    (b) These alternate plans of care must--
    (1) Make maximum use of available resources to meet the recipient's 
medical, social, and financial needs; and
    (2) In Guam, Puerto Rico, and the Virgin Islands, make available 
appropriate social services authorized under sections 3(a)(4) (i) and 
(ii) or 1603(a)(4)(A) (i) and (ii) of the Act.



Sec. 441.105  Methods of administration.

    The agency must have methods of administration to ensure that its 
responsibilities under this subpart are met.



Sec. 441.106  Comprehensive mental health program.

    (a) If the plan includes services in public institutions for mental 
diseases, the agency must show that the State is making satisfactory 
progress in developing and implementing a comprehensive mental health 
program.
    (b) The program must--
    (1) Cover all ages;
    (2) Use mental health and public welfare resources; including--
    (i) Community mental health centers;
    (ii) Nursing homes; and
    (iii) Other alternatives to public institutional care; and
    (3) Include joint planning with State authorities.
    (c) The agency must submit annual progress reports within 3 months 
after the end of each fiscal year in which Medicaid is provided under 
this subpart.



 Subpart D--Inpatient Psychiatric Services for Individuals Under Age 21 
                  in Psychiatric Facilities or Programs



Sec. 441.150  Basis and purpose.

    This subpart specifies requirements applicable if a State provides 
inpatient psychiatric services to individuals under age 21, as defined 
in Sec. 440.160 of this subchapter and authorized under section 1905 
(a)(16) and (h) of the Act.



Sec. 441.151  General requirements.

    (a) Inpatient psychiatric services for individuals under age 21 must 
be:
    (1) Provided under the direction of a physician;
    (2) Provided by--
    (i) A psychiatric hospital or an inpatient psychiatric program in a 
hospital, accredited by the Joint Commission on Accreditation of 
Healthcare Organizations; or
    (ii) A psychiatric facility that is not a hospital and is accredited 
by the Joint Commission on Accreditation of Healthcare Organizations, 
the Commission on Accreditation of Rehabilitation Facilities, the 
Council on Accreditation of Services for Families and Children, or by 
any other accrediting organization with comparable standards that is 
recognized by the State.
    (3) Provided before the individual reaches age 21, or, if the 
individual was receiving the services immediately before he or she 
reached age 21, before the earlier of the following--
    (i) The date the individual no longer requires the services; or
    (ii) The date the individual reaches 22; and
    (4) Certified in writing to be necessary in the setting in which the 
services will be provided (or are being provided in emergency 
circumstances) in accordance with Sec. 441.152.
    (b) Inpatient psychiatric services furnished in a psychiatric 
residential treatment facility as defined in Sec. 483.352 of this 
chapter, must satisfy all requirements in subpart G of part 483 of this 
chapter governing the use of restraint and seclusion.

[66 FR 7160, Jan. 22, 2001]

[[Page 258]]



Sec. 441.152  Certification of need for services.

    (a) A team specified in Sec. 441.154 must certify that--
    (1) Ambulatory care resources available in the community do not meet 
the treatment needs of the recipient;
    (2) Proper treatment of the recipient's psychiatric condition 
requires services on an inpatient basis under the direction of a 
physician; and
    (3) The services can reasonably be expected to improve the 
recipient's condition or prevent further regression so that the services 
will no longer be needed.
    (b) The certification specified in this section and in Sec. 441.153 
satisfies the utilization control requirement for physician 
certification in Secs. 456.60, 456.160, and 456.360 of this subchapter.

[43 FR 45229, Sept. 29, 1978, as amended at 61 FR 38398, July 24, 1996]



Sec. 441.153  Team certifying need for services.

    Certification under Sec. 441.152 must be made by terms specified as 
follows:
    (a) For an individual who is a recipient when admitted to a facility 
or program, certification must be made by an independent team that--
    (1) Includes a physician;
    (2) Has competence in diagnosis and treatment of mental illness, 
preferably in child psychiatry; and
    (3) Has knowledge of the individual's situation.
    (b) For an individual who applies for Medicaid while in the facility 
of program, the certification must be--
    (1) Made by the team responsible for the plan of care as specified 
in Sec. 441.156; and
    (2) Cover any period before application for which claims are made.
    (c) For emergency admissions, the certification must be made by the 
team responsible for the plan of care (Sec. 441.156) within 14 days 
after admission.



Sec. 441.154  Active treatment.

    Inpatient psychiatric services must involve ``active treatment'', 
which means implementation of a professionally developed and supervised 
individual plan of care, described in Sec. 441.155 that is--
    (a) Developed and implemented no later than 14 days after admission; 
and
    (b) Designed to achieve the recipient's discharge from inpatient 
status at the earliest possible time.



Sec. 441.155  Individual plan of care.

    (a) ``Individual plan of care'' means a written plan developed for 
each recipient in accordance with Secs. 456.180 and 456.181 of this 
chapter, to improve his condition to the extent that inpatient care is 
no longer necessary.
    (b) The plan of care must--
    (1) Be based on a diagnostic evaluation that includes examination of 
the medical, psychological, social, behavioral and developmental aspects 
of the recipient's situation and reflects the need for inpatient 
psychiatric care;
    (2) Be developed by a team of professionals specified under 
Sec. 441.156 in consultation with the recipient; and his parents, legal 
guardians, or others in whose care he will be released after discharge;
    (3) State treatment objectives;
    (4) Prescribe an integrated program of therapies, activities, and 
experiences designed to meet the objectives; and
    (5) Include, at an appropriate time, post-discharge plans and 
coordination of inpatient services with partial discharge plans and 
related community services to ensure continuity of care with the 
recipient's family, school, and community upon discharge.
    (c) The plan must be reviewed every 30 days by the team specified in 
Sec. 441.156 to--
    (1) Determine that services being provided are or were required on 
an inpatient basis, and
    (2) Recommend changes in the plan as indicated by the recipient's 
overall adjustment as an inpatient.
    (d) The development and review of the plan of care as specified in 
this section satisfies the utilization control requirements for--
    (1) Recertification under Secs. 456.60(b), 456.160(b), and 
456.360(b) of this subchapter; and
    (2) Establishment and periodic review of the plan of care under 
Secs. 456.80, 456.180, and 456.380 of this subchapter.

[43 FR 45229, Sept. 29, 1978, as amended at 46 FR 48560, Oct. 1, 1981; 
61 FR 38398, July 24, 1996]

[[Page 259]]



Sec. 441.156  Team developing individual plan of care.

    (a) The individual plan of care under Sec. 441.155 must be developed 
by an interdisciplinary team of physicians and other personnel who are 
employed by, or provide services to patients in, the facility.
    (b) Based on education and experience, preferably including 
competence in child psychiatry, the team must be capable of--
    (1) Assessing the recipient's immediate and long-range therapeutic 
needs, developmental priorities, and personal strengths and liabilities;
    (2) Assessing the potential resources of the recipient's family;
    (3) Setting treatment objectives; and
    (4) Prescribing therapeutic modalities to achieve the plan's 
objectives.
    (c) The team must include, as a minimum, either--
    (1) A Board-eligible or Board-certified psychiatrist;
    (2) A clinical psychologist who has a doctoral degree and a 
physician licensed to practice medicine or osteopathy; or
    (3) A physician licensed to practice medicine or osteopathy with 
specialized training and experience in the diagnosis and treatment of 
mental diseases, and a psychologist who has a master's degree in 
clinical psychology or who has been certified by the State or by the 
State psychological association.
    (d) The team must also include one of the following:
    (1) A psychiatric social worker.
    (2) A registered nurse with specialized training or one year's 
experience in treating mentally ill individuals.
    (3) An occupational therapist who is licensed, if required by the 
State, and who has specialized training or one year of experience in 
treating mentally ill individuals.
    (4) A psychologist who has a master's degree in clinical psychology 
or who has been certified by the State or by the State psychological 
association.



Sec. 441.180  Maintenance of effort: General rule.

    FFP is available only if the State maintains fiscal effort as 
prescribed under this subpart.



Sec. 441.181  Maintenance of effort: Explanation of terms and requirements.

    (a) For purposes of Sec. 441.182:
    (1) The base year is the 4-quarter period ending December 31, 1971.
    (2) Quarterly per capita non-Federal expenditures are expenditures 
for inpatient psychiatric services determined by reimbursement 
principles under Medicare. (See part 405, subpart D.)
    (3) The number of individuals receiving inpatient psychiatric 
services in the current quarter means--
    (i) The number of individuals receiving services for the full 
quarter; plus
    (ii) The full quarter composite number of individuals receiving 
services for less than a full quarter.
    (4) In determining the per capita expenditures for the base year, 
the Medicaid agency must compute the number of individuals receiving 
services in a manner similar to that in paragraph (a)(3) of this 
section.
    (5) Non-Federal expenditures means the total amount of funds 
expended by the State and its political subdivisions, excluding Federal 
funds received directly or indirectly from any source.
    (6) Expenditures for the current calendar quarter exclude Federal 
funds received directly or indirectly from any source.
    (b) As a basis for determining the correct amount of Federal 
payments, each State must submit estimated and actual cost data and 
other information necessary for this purpose in the form and at the 
times specified in this subchapter and by CMS guidelines.
    (c) The agency must have on file adequate records to substantiate 
compliance with the requirements of Sec. 441.182 and to ensure that all 
necessary adjustments have been made.
    (d) Facilities that did not meet the requirements of Secs. 441.151-
441.156 in the base year, but are providing inpatient psychiatric 
services under those sections in the current quarter, must be included 
in the maintenance of effort computation if, during the base year, they 
were--
    (1) Providing inpatient psychiatric services for individuals under 
age 21; and
    (2) Receiving State aid.

[[Page 260]]



Sec. 441.182  Maintenance of effort: Computation.

    (a) For expenditures for inpatient psychiatric services for 
individuals under age 21, in any calendar quarter, FFP is available only 
to the extent that the total State Medicaid expenditures in the current 
quarter for inpatient psychiatric services and outpatient psychiatric 
treatment for individuals under age 21 exceed the sum of the following:
    (1) The total number of individuals receiving inpatient psychiatric 
services in the current quarter times the average quarterly per capita 
non-Federal expenditures for the base year; and
    (2) The average non-Federal quarterly expenditures for the base year 
for outpatient psychiatric services for individuals under age 21.
    (b) FFP is available for 100 percent of the increase in expenditures 
over the base year period, but may not exceed the Federal medical 
assistance percentage times the expenditures under this subpart for 
inpatient psychiatric services for individuals under age 21.



                          Subpart E--Abortions



Sec. 441.200  Basis and purpose.

    This subpart implements section 402 of Pub. L. 97-12, and subsequent 
laws that appropriate funds for the Medicaid program, including section 
204 of Pub. L. 98-619. All of these laws prohibit the use of Federal 
funds to pay for abortions except when continuation of the pregnancy 
would endanger the mother's life.

[52 FR 47935, Dec. 17, 1987]



Sec. 441.201  Definition.

    As used in this subpart, ``physician'' means a doctor of medicine or 
osteopathy who is licensed to practice in the State.

[52 FR 47935, Dec. 17, 1987]



Sec. 441.202  General rule.

    FFP is not available in expenditures for an abortion unless the 
conditions specified in Secs. 441.203 and 441.206 are met.

[52 FR 47935, Dec. 17, 1987]



Sec. 441.203  Life of the mother would be endangered.

    FFP is available in expenditures for an abortion when a physician 
has found, and certified in writing to the Medicaid agency, that on the 
basis of his professional judgment, the life of the mother would be 
endangered if the fetus were carried to term. The certification must 
contain the name and address of the patient.



Secs. 441.204-441.205  [Reserved]



Sec. 441.206  Documentation needed by the Medicaid agency.

    FFP is not available in any expenditures for abortions or other 
medical procedures otherwise provided for under Sec. 441.203 if the 
Medicaid agency has paid without first having received the 
certifications and documentation specified in that section.

[52 FR 47935, Dec. 17, 1987]



Sec. 441.207  Drugs and devices and termination of ectopic pregnancies.

    FFP is available in expenditures for drugs or devices to prevent 
implantation of the fertilized ovum and for medical procedures necessary 
for the termination of an ectopic pregnancy.



Sec. 441.208  Recordkeeping requirements.

    Medicaid agencies must maintain copies of the certifications and 
documentation specified in Sec. 441.203 for 3 years under the 
recordkeeping requirements at 45 CFR 74.20.

[52 FR 47935, Dec. 17, 1987]



                        Subpart F--Sterilizations

    Source: 43 FR 52171, Nov. 8, 1978, unless otherwise noted.



Sec. 441.250  Applicability.

    This subpart applies to sterilizations and hysterectomies reimbursed 
under Medicaid.



Sec. 441.251  Definitions.

    As used in this subpart:
    Hysterectomy means a medical procedure or operation for the purpose 
of removing the uterus.

[[Page 261]]

    Institutionalized individual means an individual who is (a) 
involuntarily confined or detained, under a civil or criminal statute, 
in a correctional or rehabilitative facility, including a mental 
hospital or other facility for the care and treatment of mental illness; 
or (b) confined, under a voluntary commitment, in a mental hospital or 
other facility for the care and treatment of mental illness.
    Mentally incompetent individual means an individual who has been 
declared mentally incompetent by a Federal, State, or local court of 
competent jurisdiction for any purpose, unless the individual has been 
declared competent for purposes which include the ability to consent to 
sterilization.
    Sterilization means any medical procedure, treatment, or operation 
for the purpose of rendering an individual permanently incapable of 
reproducing.



Sec. 441.252  State plan requirements.

    A State plan must provide that the Medicaid agency will make payment 
under the plan for sterilization procedures and hysterectomies only if 
all the requirements of this subpart were met.



Sec. 441.253  Sterilization of a mentally competent individual aged 21 or older.

    FFP is available in expenditures for the sterilization of an 
individual only if--
    (a) The individual is at least 21 years old at the time consent is 
obtained;
    (b) The individual is not a mentally incompetent individual;
    (c) The individual has voluntarily given informed consent in 
accordance with all the requirements precribed in Secs. 441.257 and 
441.258; and
    (d) At least 30 days, but not more than 180 days, have passed 
between the date of informed consent and the date of the sterilization, 
except in the case of premature delivery or emergency abdominal surgery. 
An individual may consent to be sterilized at the time of a premature 
delivery or emergency abdominal surgery, if at least 72 hours have 
passed since he or she gave informed consent for the sterilization. In 
the case of premature delivery, the informed consent must have been 
given at least 30 days before the expected date of delivery.



Sec. 441.254  Mentally incompetent or institutionalized individuals.

    FFP is not available for the sterilization of a mentally incompetent 
or institutionalized individual.



Sec. 441.255  Sterilization by hysterectomy.

    (a) FFP is not available in expenditures for a hysterectomy if--
    (1) It was performed solely for the purpose of rendering an 
individual permanently incapable of reproducing; or
    (2) If there was more than one purpose to the procedure, it would 
not have been performed but for the purpose of rendering the individual 
permanently incapable of reproducing.
    (b) FFP is available in expenditures for a hysterectomy not covered 
by paragraph (a) of this section only under the conditions specified in 
paragraph (c), (d), or (e) of this section.
    (c) FFP is available if--
    (1) The person who secured authorization to perform the hysterectomy 
has informed the individual and her representative, if any, orally and 
in writing, that the hysterectomy will make the individual permanently 
incapable of reproducing; and
    (2) The individual or her representative, if any, has signed a 
written acknowledgment of receipt of that information.
    (d) Effective on March 8, 1979 or any date thereafter through the 
date of publication of these regulations at the option of the State, FFP 
is available if--
    (1) The individual--
    (i) Was already sterile before the hysterectomy; or
    (ii) Requires a hysterectomy because of a life-threatening emergency 
situation in which the physician determines that prior acknowledgment is 
not possible; and
    (2) The physician who performs the hysterectomy--
    (i) Certifies in writing that the individual was already sterile at 
the time of the hysterectomy, and states the cause of the sterility; or
    (ii) Certifies in writing that the hysterectomy was performed under 
a

[[Page 262]]

life-threatening emergency situation in which he or she determined prior 
acknowledgment was not possible. He or she must also include a 
description of the nature of the emergency.
    (e) Effective March 8, 1979, or any date thereafter through the date 
of publication of these regulations at the option of the State, FFP is 
available for hysterectomies performed during a period of an 
individual's retroactive Medicaid eligibility if the physician who 
performed the hysterectomy certifies in writing that--
    (1) The individual was informed before the operation that the 
hysterectomy would make her permanently incapable of reproducing; or
    (2) One of the conditions in paragraph (d)(1) of this section was 
met. The physician must supply the information specified in paragraph 
(d)(2) of this section.

[47 FR 33702, Aug. 4, 1982]



Sec. 441.256  Additional condition for Federal financial participation (FFP).

    (a) FFP is not available in expenditures for any sterilization or 
hysterectomy unless the Medicaid agency, before making payment, obtained 
documentation showing that the requirements of this subpart were met. 
This documentation must include a consent from, an acknowledgement of 
receipt of hysterectomy information or a physician's certification under 
Sec. 441.255(d)(2), as applicable.
    (b) With regard to the requirements of Sec. 441.255(d) for 
hysterectomies performed from March 8, 1979 through November 2, 1982, 
FFP is available in expenditures for those services if the documentation 
showing that the requirements of that paragraph were met is obtained by 
the Medicaid agency before submitting a claim for FFP for that 
procedure.

[47 FR 33702, Aug. 4, 1982]



Sec. 441.257  Informed consent.

    (a) Informing the individual. For purposes of this subpart, an 
individual has given informed consent only if--
    (1) The person who obtained consent for the sterilization procedure 
offered to answer any questions the individual to be sterilized may have 
concerning the procedure, provided a copy of the consent form and 
provided orally all of the following information or advice to the 
individual to be sterilized:
    (i) Advice that the individual is free to withhold or withdraw 
consent to the procedure at any time before the sterilization without 
affecting the right to future care or treatment and without loss or 
withdrawal of any federally funded program benefits to which the 
individual might be otherwise entitled.
    (ii) A description of available alternative methods of family 
planning and birth control.
    (iii) Advice that the sterilization procedure is considered to be 
irreversible.
    (iv) A thorough explanation of the specific sterilization procedure 
to be performed.
    (v) A full description of the discomforts and risks that may 
accompany or follow the performing of the procedure, including an 
explanation of the type and possible effects of any anesthetic to be 
used.
    (vi) A full description of the benefits or advantages that may be 
expected as a result of the sterilization.
    (vii) Advice that the sterilization will not be performed for at 
least 30 days, except under the circumstances specified in 
Sec. 441.253(c).
    (2) Suitable arrangements were made to insure that the information 
specified in paragraph (a)(1) of this section was effectively 
communicated to any individual who is blind, deaf, or otherwise 
handicapped;
    (3) An interpreter was provided if the individual to be sterilized 
did not understand the language used on the consent form or the language 
used by the person obtaining consent;
    (4) The individual to be sterilized was permitted to have a witness 
of his or her choice present when consent was obtained;
    (5) The consent form requirements of Sec. 441.258 were met; and
    (6) Any additional requirement of State or local law for obtaining 
consent, except a requirement for spousal consent, was followed.
    (b) When informed consent may not be obtained. Informed consent may 
not be obtained while the individual to be sterilized is--
    (1) In labor or childbirth;

[[Page 263]]

    (2) Seeking to obtain or obtaining an abortion; or
    (3) Under the influence of alcohol or other substances that affect 
the individual's state of awareness.



Sec. 441.258  Consent form requirements.

    (a) Content of consent form. The consent form must be a copy of the 
form appended to this subpart or another form approved by the Secretary.
    (b) Required signatures. The consent form must be signed and dated 
by--
    (1) The individual to be sterilized;
    (2) The interpreter, if one was provided;
    (3) The person who obtained the consent; and
    (4) The physician who performed the sterilization procedure.
    (c) Required certifications. (1) The person securing the consent 
must certify, by signing the consent form, that
    (i) Before the individual to be sterilized signed the consent form, 
he or she advised the individual to be sterilized that no Federal 
benefits may be withdrawn because of the decision not to be sterilized;
    (ii) He or she explained orally the requirements for informed 
consent as set forth on the consent form; and
    (iii) To the best of his or her knowledge and belief, the individual 
to be sterilized appeared mentally competent and knowingly and 
voluntarily consented to be sterilized.
    (2) The physician performing the sterilization must certify, by 
signing the consent form, that:
    (i) Shortly before the performance of sterilization, he or she 
advised the individual to be sterilized that no Federal benefits may be 
withdrawn because of the decision not to be sterilized;
    (ii) He or she explained orally the requirements for informed 
consent as set forth on the consent form; and
    (iii) To the best of his or her knowledge and belief, the individual 
appeared mentally competent and knowingly and voluntarily consented to 
be sterilized.

Except in the case of premature delivery or emergency abdominal surgery, 
the physician must further certify that at least 30 days have passed 
between the date of the individual's signature on the consent form and 
the date upon which the sterilization was performed.
    (3) In the case of premature delivery or emergency abdominal surgery 
performed within 30 days of consent, the physician must certify that the 
sterilization was performed less than 30 days, but not less than 72 
hours after informed consent was obtained because of premature delivery 
or emergency abdominal surgery and--
    (i) In the case of premature delivery, must state the expected date 
of delivery; or
    (ii) In the case of abdominal surgery, must describe the emergency.
    (4) If an interpreter is provided, the interpreter must certify that 
he or she translated the information and advice presented orally and 
read the consent form and explained its contents to the individual to be 
sterilized and that, to the best of the interpreter's knowledge and 
belief, the individual understood what the interpreter told him or her.



Sec. 441.259  Review of regulations.

    The Secretary will request public comment on the operation of this 
subpart not later than 3 years after its effective date.

        Appendix to Subpart F of Part 441--Required Consent Form

    Notice: Your decision at any time not to be sterilized will not 
result in the withdrawal or withholding of any benefits provided by 
programs or projects receiving Federal funds.

                        consent to sterilization

    I have asked for and received information about sterilization from 
(doctor or clinic). When I first asked for the information, I was told 
that the decision to be sterilized is completely up to me. I was told 
that I could decide not to be sterilized. If I decide not to be 
sterilized, my decision will not affect my right to future care or 
treatment. I will not lose any help or benefits from programs receiving 
Federal funds, such as A.F.D.C. or Medicaid that I am now getting or for 
which I may become eligible.
    I understand that the sterilization must be considered permanent and 
not reversible. I have decided that I do not want to become pregnant, 
bear children or father children.
    I was told about those temporary methods of birth control that are 
available and could be provided to me which will allow me to

[[Page 264]]

bear or father a child in the future. I have rejected these alternatives 
and chosen to be sterilized.
    I understand that I will be sterilized by an operation known as a --
----------. The discomforts, risks and benefits associated with the 
operation have been explained to me. All my questions have been answered 
to my satisfaction.
    I understand that the operation will not be done until at least 30 
days after I sign this form. I understand that I can change my mind at 
any time and that my decision at any time not to be sterilized will not 
result in the withholding of any benefits or medical services provided 
by Federally funded programs.
    I am at least 21 years of age and was born on (Day) (Month) (Year).
    I, ------------, hereby consent of my own free will to be sterilized 
by ------------ by a method called ------------. My consent expires 180 
days from the date of my signature below.
    I also consent to the release of this form and other medical records 
about the operation to:
    Representatives of the Department of Health and Human Services or
    Employees of programs or projects funded by that Department but only 
for determining if Federal laws were observed.
    I have received a copy of this form. (Signature) (Date) (Month) 
(Day) (Year).
    You are requested to supply the following information, but it is not 
required: (Race and ethnicity designation (please check)) Black (not of 
Hispanic origin); Hispanic; Asian or Pacific Islander; American Indian 
or Alaskan native; or White (not of Hispanic origin).

                         interpreter's statement

    If an interpreter is provided to assist the individual to be 
sterilized:
    I have translated the information and advice presented orally to the 
individual to be sterilized by the person obtaining this consent. I have 
also read him/her the consent form in ------------ ------------ language 
and explained its contents to him/her. To the best of my knowledge and 
belief he/she understood this explanation. (Interpreter) (Date).

                  statement of person obtaining consent

    Before (name of individual) signed the consent form, I explained to 
him/her the nature of the sterilization operation ------------, the fact 
that it is intended to be a final and irreversible procedure and the 
discomforts, risks and benefits associated with it.
    I counseled the individual to be sterilized that alternative methods 
of birth control are available which are temporary. I explained that 
sterilization is different because it is permanent.
    I informed the individual to be sterilized that his/her consent can 
be withdrawn at any time and that he/she will not lose any health 
services or any benefits provided by Federal funds.
    To the best of my knowledge and belief the individual to be 
sterilized is at least 21 years old and appears mentally competent. He/
She knowingly and voluntarily requested to be sterilized and appears to 
understand the nature and consequence of the procedure. (Signature of 
person obtaining consent) (Date) (Facility) (Address).

                          physician's statement

    Shortly before I performed a sterilization operation upon (Name of 
individual to be sterilized) on (Date of sterilization) (operation), I 
explained to him/her the nature of the sterilization operation (specify 
type of operation), the fact that it is intended to be a final and 
irreversible procedure and the discomforts, risks and benefits 
associated with it.
    I counseled the individual to be sterilized that alternative methods 
of birth control are available which are temporary. I explained that 
sterilization is different because it is permanent.
    I informed the individual to be sterilized that his/her consent can 
be withdrawn at any time and that he/she will not lose any health 
services or benefits provided by Federal funds.
    To the best of my knowledge and belief the individual to be 
sterilized is at least 21 years old and appears mentally competent. He/
She knowingly and voluntarily requested to be sterilized and appeared to 
understand the nature and consequences of the procedure.
    (Instructions for use of alternative final paragraphs: Use the first 
paragraph below except in the case of premature delivery or emergency 
abdominal surgery where the sterilization is performed less than 30 days 
after the date of the individual's signature on the consent form. In 
those cases, the second paragraph below must be used. Cross out the 
paragraph which is not used.)
    (1) At least 30 days have passed between the date of the 
individual's signature on this consent form and the date the 
sterilization was performed.
    (2) This sterilization was performed less than 30 days but more than 
72 hours after the date of the individual's signature on this consent 
form because of the following circumstances (check applicable box and 
fill in information requested): Premature delivery.
    Individual's expected date of delivery: ------------
    {time}  Emergency abdominal surgery: (describe circumstances):------
------ (Physician) (Date).

[[Page 265]]



    Subpart G--Home and Community-Based Services: Waiver Requirements

    Source: 46 FR 48541, Oct. 1, 1981, unless otherwise noted.



Sec. 441.300  Basis and purpose.

    Section 1915(c) of the Act permits States to offer, under a waiver 
of statutory requirements, an array of home and community-based services 
that an individual needs to avoid institutionalization. Those services 
are defined in Sec. 440.180 of this subchapter. This subpart describes 
what the Medicaid agency must do to obtain a waiver.



Sec. 441.301  Contents of request for a waiver.

    (a) A request for a waiver under this section must consist of the 
following:
    (1) The assurances required by Sec. 441.302 and the supporting 
documentation required by Sec. 441.303.
    (2) When applicable, requests for waivers of the requirements of 
section 1902(a)(1), section 1902(a)(10)(B), or section 
1902(a)(10)(C)(i)(III) of the Act, which concern respectively, statewide 
application of Medicaid, comparability of services, and income and 
resource rules applicable to medically needy individuals living in the 
community.
    (3) A statement explaining whether the agency will refuse to offer 
home or community-based services to any recipient if the agency can 
reasonably expect that the cost of the services would exceed the cost of 
an equivalent level of care provided in--
    (i) A hospital (as defined in Sec. 440.10 of this chapter);
    (ii) A NF (as defined in section 1919(a) of the Act); or
    (iii) An ICF/MR (as defined in Sec. 440.150 of this chapter), if 
applicable.
    (b) If the agency furnishes home and community-based services, as 
defined in Sec. 440.180 of this subchapter, under a waiver granted under 
this subpart, the waiver request must--
    (1) Provide that the services are furnished--
    (i) Under a written plan of care subject to approval by the Medicaid 
agency;
    (ii) Only to recipients who are not inpatients of a hospital, NF, or 
ICF/MR; and
    (iii) Only to recipients who the agency determines would, in the 
absence of these services, require the Medicaid covered level of care 
provided in--
    (A) A hospital (as defined in Sec. 440.10 of this chapter);
    (B) A NF (as defined in section 1919(a) of the Act); or
    (C) An ICF/MR (as defined in Sec. 440.150 of this chapter);
    (2) Describe the qualifications of the individual or individuals who 
will be responsible for developing the individual plan of care;
    (3) Describe the group or groups of individuals to whom the services 
will be offered;
    (4) Describe the services to be furnished so that each service is 
separately defined. Multiple services that are generally considered to 
be separate services may not be consolidated under a single definition. 
Commonly accepted terms must be used to describe the service and 
definitions may not be open ended in scope. CMS will, however, allow 
combined service definitions (bundling) when this will permit more 
efficient delivery of services and not compromise either a recipient's 
access to or free choice of providers.
    (5) Provide that the documentation requirements regarding individual 
evaluation, specified in Sec. 441.303(c), will be met; and
    (6) Be limited to one of the following target groups or any subgroup 
thereof that the State may define:
    (i) Aged or disabled, or both.
    (ii) Mentally retarded or developmentally disabled, or both.
    (iii) Mentally ill.

[46 FR 48541, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 59 
FR 37717, July 25, 1994; 65 FR 60107, Oct. 10, 2000]



Sec. 441.302  State assurances.

    Unless the Medicaid agency provides the following satisfactory 
assurances to CMS, CMS will not grant a waiver under this subpart and 
may terminate a waiver already granted:
    (a) Health and Welfare--Assurance that necessary safeguards have 
been taken to protect the health and welfare

[[Page 266]]

of the recipients of the services. Those safeguards must include--
    (1) Adequate standards for all types of providers that provide 
services under the waiver;
    (2) Assurance that the standards of any State licensure or 
certification requirements are met for services or for individuals 
furnishing services that are provided under the waiver; and
    (3) Assurance that all facilities covered by section 1616(e) of the 
Act, in which home and community-based services will be provided, are in 
compliance with applicable State standards that meet the requirements of 
45 CFR Part 1397 for board and care facilities.
    (b) Financial accountability-- The agency will assure financial 
accountability for funds expended for home and community-based services, 
provide for an independent audit of its waiver program (except as CMS 
may otherwise specify for particular waivers), and it will maintain and 
make available to HHS, the Comptroller General, or other designees, 
appropriate financial records documenting the cost of services provided 
under the waiver, including reports of any independent audits conducted.
    (c) Evaluation of need. Assurance that the agency will provide for 
the following:
    (1) Initial evaluation. An evaluation of the need for the level of 
care provided in a hospital, a NF, or an ICF/MR when there is a 
reasonable indication that a recipient might need the services in the 
near future (that is, a month or less) unless he or she receives home or 
community-based services. For purposes of this section, ``evaluation'' 
means a review of an individual recipient's condition to determine--
    (i) If the recipient requires the level of care provided in a 
hospital as defined in Sec. 440.10 of this subchapter, a NF as defined 
in section 1919(a) of the Act, or an ICF/MR as defined by Sec. 440.150 
of this subchapter; and
    (ii) That the recipient, but for the provision of waiver services, 
would otherwise be institutionalized in such a facility.
    (2) Periodic reevaluations. Reevaluations, at least annually, of 
each recipient receiving home or community-based services to determine 
if the recipient continues to need the level of care provided and would, 
but for the provision of waiver services, otherwise be institutionalized 
in one of the following institutions:
    (i) A hospital;
    (ii) A NF; or
    (iii) An ICF/MR.
    (d) Alternatives--Assurance that when a recipient is determined to 
be likely to require the level of care provided in a hospital, NF, or 
ICF/MR, the recipient or his or her legal representative will be--
    (1) Informed of any feasible alternatives available under the 
waiver; and
    (2) Given the choice of either institutional or home and community-
based services.
    (e) Average per capita expenditures. Assurance that the average per 
capita fiscal year expenditures under the waiver will not exceed 100 
percent of the average per capita expenditures that would have been made 
in the fiscal year for the level of care provided in a hospital, NF, or 
ICF/MR under the State plan had the waiver not been granted.
    (1) These expenditures must be reasonably estimated and documented 
by the agency.
    (2) The estimate must be on an annual basis and must cover each year 
of the waiver period.
    (f) Actual total expenditures. Assurance that the agency's actual 
total expenditures for home and community-based and other Medicaid 
services under the waiver and its claim for FFP in expenditures for the 
services provided to recipients under the waiver will not, in any year 
of the waiver period, exceed 100 percent of the amount that would be 
incurred by the State's Medicaid program for these individuals, absent 
the waiver, in--
    (1) A hospital;
    (2) A NF; or
    (3) An ICF/MR.
    (g) Institutionalization absent waiver. Assurance that, absent the 
waiver, recipients in the waiver would receive the appropriate type of 
Medicaid-funded institutional care (hospital, NF, or ICF/MR) that they 
require.
    (h) Reporting. Assurance that annually, the agency will provide CMS 
with information on the waiver's impact. The information must be 
consistent

[[Page 267]]

with a data collection plan designed by CMS and must address the 
waiver's impact on--
    (1) The type, amount, and cost of services provided under the State 
plan; and
    (2) The health and welfare of recipients.
    (i) Habilitation services. Assurance that prevocational, 
educational, or supported employment services, or a combination of these 
services, if provided as habilitation services under the waiver, are--
    (1) Not otherwise available to the individual through a local 
educational agency under section 602 (16) and (17) of the Education of 
the Handicapped Act (20 U.S.C. 1401 (16 and 17)) or as services under 
section 110 of the Rehabilitation Act of 1973 (29 U.S.C. 730); and
    (2) Furnished as part of expanded habilitation services, if the 
State has requested and received CMS's approval under a waiver or an 
amendment to a waiver.
    (j) Day treatment or partial hospitalization, psychosocial 
rehabilitation services, and clinic services for individuals with 
chronic mental illness. Assurance that FFP will not be claimed in 
expenditures for waiver services including, but not limited to, day 
treatment or partial hospitalization, psychosocial rehabilitation 
services, and clinic services provided as home and community-based 
services to individuals with chronic mental illnesses if these 
individuals, in the absence of a waiver, would be placed in an IMD and 
are--
    (1) Age 22 to 64;
    (2) Age 65 and older and the State has not included the optional 
Medicaid benefit cited in Sec. 440.140; or
    (3) Age 21 and under and the State has not included the optional 
Medicaid benefit cited in Sec. 440.160.

[50 FR 10026, Mar. 13, 1985, as amended at 59 FR 37717, July 25, 1994; 
65 FR 60107, Oct. 10, 2000]



Sec. 441.303  Supporting documentation required.

    The agency must furnish CMS with sufficient information to support 
the assurances required by Sec. 441.302. Except as CMS may otherwise 
specify for particular waivers, the information must consist of the 
following:
    (a) A description of the safeguards necessary to protect the health 
and welfare of recipients. This information must include a copy of the 
standards established by the State for facilities that are covered by 
section 1616(e) of the Act.
    (b) A description of the records and information that will be 
maintained to support financial accountability.
    (c) A description of the agency's plan for the evaluation and 
reevaluation of recipients, including--
    (1) A description of who will make these evaluations and how they 
will be made;
    (2) A copy of the evaluation form to be used; and if it differs from 
the form used in placing recipients in hospitals, NFs, or ICFs/MR, a 
description of how and why it differs and an assurance that the outcome 
of the new evaluation form is reliable, valid, and fully comparable to 
the form used for hospital, NF, or ICF/MR placement;
    (3) The agency's procedure to ensure the maintenance of written 
documentation on all evaluations and reevaluations; and
    (4) The agency's procedure to ensure reevaluations of need at 
regular intervals.
    (d) A description of the agency's plan for informing eligible 
recipients of the feasible alternatives available under the waiver and 
allowing recipients to choose either institutional services or home and 
community-based services.
    (e) An explanation of how the agency will apply the applicable 
provisions regarding the post-eligibility treatment of income and 
resources of those individuals receiving home and community-based 
services who are eligible under a special income level (included in 
Sec. 435.217 of this chapter).
    (f) An explanation with supporting documentation satisfactory to CMS 
of how the agency estimated the average per capita expenditures for 
services.
    (1) The annual average per capita expenditure estimate of the cost 
of home and community-based and other Medicaid services under the waiver 
must not exceed the estimated annual average per capita expenditures of 
the cost of services in the absence of a waiver. The estimates are to be 
based on the following equation:

[[Page 268]]

D+D' [le] G+G'.

The symbol ``[le]'' means that the result of the left side of the 
          equation must be less than or equal to the result of the right 
          side of the equation.
D = the estimated annual average per capita Medicaid cost for home and 
          community-based services for individuals in the waiver 
          program.
D' = the estimated annual average per capita Medicaid cost for all other 
          services provided to individuals in the waiver program.
G = the estimated annual average per capita Medicaid cost for hospital, 
          NF, or ICF/MR care that would be incurred for individuals 
          served in the waiver, were the waiver not granted.
G' = the estimated annual average per capita Medicaid costs for all 
          services other than those included in factor G for individuals 
          served in the waiver, were the waiver not granted.

    (2) For purposes of the equation, the prime factors include the 
average per capita cost for all State plan services and expanded EPSDT 
services provided that are not accounted for in other formula values.
    (3) In making estimates of average per capita expenditures for a 
waiver that applies only to individuals with a particular illness (for 
example, acquired immune deficiency syndrome) or condition (for example, 
chronic mental illness) who are inpatients in or who would require the 
level of care provided in hospitals as defined by Sec. 440.10, NFs as 
defined in section 1919(a) of the Act, or ICFs/MR, the agency may 
determine the average per capita expenditures for these individuals 
absent the waiver without including expenditures for other individuals 
in the affected hospitals, NFs, or ICFs/MR.
    (4) In making estimates of average per capita expenditures for a 
separate waiver program that applies only to individuals identified 
through the preadmission screening annual resident review (PASARR) 
process who are developmentally disabled, inpatients of a NF, and 
require the level of care provided in an ICF/MR as determined by the 
State on the basis of an evaluation under Sec. 441.303(c), the agency 
may determine the average per capita expenditures that would have been 
made in a fiscal year for those individuals based on the average per 
capita expenditures for inpatients in an ICF/MR. When submitting 
estimates of institutional costs without the waiver, the agency may use 
the average per capita costs of ICF/MR care even though the 
deinstitutionalized developmentally disabled were inpatients of NFs.
    (5) For persons diverted rather than deinstitutionalized, the 
State's evaluation process required by Sec. 441.303(c) must provide for 
a more detailed description of their evaluation and screening procedures 
for recipients to ensure that waiver services will be limited to persons 
who would otherwise receive the level of care provided in a hospital, 
NF, or ICF/MR, as applicable.
    (6) The State must indicate the number of unduplicated beneficiaries 
to which it intends to provide waiver services in each year of its 
program. This number will constitute a limit on the size of the waiver 
program unless the State requests and the Secretary approves a greater 
number of waiver participants in a waiver amendment.
    (7) In determining the average per capita expenditures that would 
have been made in a waiver year, for waiver estimates that apply to 
persons with mental retardation or related conditions, the agency may 
include costs of Medicaid residents in ICFs/MR that have been terminated 
on or after November 5, 1990.
    (8) In submitting estimates for waivers that include personal 
caregivers as a waiver service, the agency may include a portion of the 
rent and food attributed to the unrelated personal caregiver who resides 
in the home or residence of the recipient covered under the waiver. The 
agency must submit to CMS for review and approval the method it uses to 
apportion the costs of rent and food. The method must be explained fully 
to CMS. A personal caregiver provides a waiver service to meet the 
recipient's physical, social, or emotional needs (as opposed to services 
not directly related to the care of the recipient; that is, housekeeping 
or chore services). FFP for live-in caregivers is not available if the 
recipient lives in the caregiver's home or in a residence that is owned 
or leased by the caregiver.
    (9) In submitting estimates for waivers that apply to individuals 
with mental retardation or a related condition,

[[Page 269]]

the agency may adjust its estimate of average per capita expenditures to 
include increases in expenditures for ICF/MR care resulting from 
implementation of a PASARR program for making determinations for 
individuals with mental retardation or related conditions on or after 
January 1, 1989.
    (10) For a State that has CMS approval to bundle waiver services, 
the State must continue to compute separately the costs and utilization 
of the component services that make up the bundled service to support 
the final cost and utilization of the bundled service that will be used 
in the cost-neutrality formula.
    (g) The State, at its option, may provide for an independent 
assessment of its waiver that evaluates the quality of care provided, 
access to care, and cost-neutrality. The results of the assessment 
should be submitted to CMS at least 90 days prior to the expiration date 
of the approved waiver-period and cover the first 24 or 48 months of the 
waiver. If a State chooses to provide for an independent assessment, FFP 
is available for the costs attributable to the independent assessment.
    (h) For States offering habilitation services that include 
prevocational, educational, or supported employment services, or a 
combination of these services, consistent with the provisions of 
Sec. 440.180(c) of this chapter, an explanation of why these services 
are not available as special education and related services under 
sections 602 (16) and (17) of the Education of the Handicapped Act (20 
U.S.C. 1401 (16 and 17)) or as services under section 110 of the 
Rehabilitation Act of 1973 (29 U.S.C. section 730);
    (i) For States offering home and community-based services for 
individuals diagnosed as chronically mentally ill, an explanation of why 
these individuals would not be placed in an institution for mental 
diseases (IMD) absent the waiver, and the age group of these 
individuals.

[46 FR 48532, Oct. 1, 1981, as amended at 50 FR 10027, Mar. 13, 1985; 50 
FR 25080, June 17, 1985; 59 FR 37718, July 25, 1994]



Sec. 441.304  Duration of a waiver.

    (a) The effective date for a new waiver of Medicaid requirements to 
provide home and community-based services approved under this subpart is 
established by CMS prospectively on or after the date of approval and 
after consultation with the State agency. The initial approved waiver 
continues for a 3-year period from the effective date. If the agency 
requests it, the waiver may be extended for additional periods unless--
    (1) CMS's review of the prior waiver period shows that the 
assurances required by Sec. 441.302 were not met; and
    (2) CMS is not satisfied with the assurances and documentation 
provided by the State in regard to the extension period.
    (b) CMS will determine whether a request for extension of an 
existing waiver is actually an extension request or a request for a new 
waiver. If a State submits an extension request that would add a new 
group to the existing group of recipients covered under the waiver (as 
defined under Sec. 441.301(b)(6)), CMS will consider it to be two 
requests: One as an extension request for the existing group, and the 
other as a new waiver request for the new group. Waivers may be extended 
for additional 5-year periods.
    (c) CMS may grant a State an extension of its existing waiver for up 
to 90 days to permit the State to document more fully the satisfaction 
of statutory and regulatory requirements needed to approve a new waiver 
request. CMS will consider this option when it requests additional 
information on a new waiver request submitted by a State to extend its 
existing waiver or when CMS disapproves a State's request for extension.
    (d) If CMS finds that an agency is not meeting one or more of the 
requirements for a waiver contained in this subpart, the agency is given 
a notice of CMS's findings and an opportunity for a hearing to rebut the 
findings. If CMS determines that the agency is not in compliance with 
this subpart after the notice and any hearing, CMS may terminate the 
waiver. For example, a State submits to CMS a waiver request for home 
and community-based services that includes an estimate of the 
expenditures that would be incurred if the services were provided to the 
covered individuals in a hospital, NF, or

[[Page 270]]

ICF/MR in the absence of the waiver. CMS approves the waiver. At the end 
of the waiver year, the State submits to CMS a report of its actual 
expenditures under the waiver. CMS finds that the actual expenditures 
under the waiver exceed 100 percent of the State's approved estimate of 
expenditures for these individuals in a hospital, NF, or ICF/MR in the 
absence of the waiver. CMS next requires the State to amend its 
estimates for subsequent waiver year(s). CMS then compares the revised 
estimates with the State's actual experience to determine if the revised 
estimates are reasonable. CMS may terminate the waiver if the revised 
estimates indicate that the waiver is not cost-neutral or that the 
revised estimates are unreasonable.

[50 FR 10028, Mar. 13, 1985; 50 FR 25080, June 17, 1985, as amended at 
59 FR 37719, July 25, 1994]



Sec. 441.305  Replacement of recipients in approved waiver programs.

    (a) Regular waivers. A State's estimate of the number of individuals 
who may receive home and community-based services must include those who 
will replace recipients who leave the program for any reason. A State 
may replace recipients who leave the program due to death or loss of 
eligibility under the State plan without regard to any federally-imposed 
limit on utilization, but must maintain a record of recipients replaced 
on this basis.
    (b) Model waivers. (1) The number of individuals who may receive 
home and community-based services under a model waiver may not exceed 
200 recipients at any one time.
    (2) The agency may replace any individuals who die or become 
ineligible for State plan services to maintain a count up to the number 
specified by the State and approved by CMS within the 200-maximum limit.

[59 FR 37719, July 25, 1994]



Sec. 441.306  Cooperative arrangements with the Maternal and Child Health program.

    Whenever appropriate, the State agency administering the plan under 
Medicaid may enter into cooperative arrangements with the State agency 
responsible for administering a program for children with special health 
care needs under the Maternal and Child Health program (Title V of the 
Act) in order to ensure improved access to coordinated services to meet 
the children's needs.

[59 FR 37720, July 25, 1994]



Sec. 441.307  Notification of a waiver termination.

    (a) If a State chooses to terminate its waiver before the initial 3-
year period or 5-year renewal period expires, it must notify CMS in 
writing 30 days before terminating services to recipients.
    (b) If CMS or the State terminates the waiver, the State must notify 
recipients of services under the waiver in accordance with Sec. 431.210 
of this subchapter and notify them 30 days before terminating services.

[46 FR 48541, Oct. 1, 1981. Redesignated at 59 FR 37719, July 25, 1994, 
as amended at 65 FR 60107, Oct. 10, 2000]



Sec. 441.308  Hearings procedures for waiver terminations.

    The procedures specified in subpart D of part 430 of this chapter 
are applicable to State requests for hearings on terminations.

[50 FR 10028, Mar. 13, 1985. Redesignated at 59 FR 37720, July 25, 1994]



Sec. 441.310  Limits on Federal financial participation (FFP).

    (a) FFP for home and community-based services listed in Sec. 440.180 
of this chapter is not available in expenditures for the following:
    (1) Services provided in a facility subject to the health and 
welfare requirements described in Sec. 441.302(a) during any period in 
which the facility is found not to be in compliance with the applicable 
State standards described in that section.
    (2) The cost of room and board except when provided as--
    (i) Part of respite care services in a facility approved by the 
State that is not a private residence; or
    (ii) For waivers that allow personal caregivers as providers of 
approved waiver services, a portion of the rent and food that may be 
reasonably attributed to the unrelated caregiver who resides in the same 
household with the

[[Page 271]]

waiver recipient. FFP for a live-in caregiver is not available if the 
recipient lives in the caregiver's home or in a residence that is owned 
or leased by the provider of Medicaid services (the caregiver). For 
purposes of this provision, ``board'' means 3 meals a day or any other 
full nutritional regimen and does not include meals provided as part of 
a program of adult day health services as long as the meals provided do 
not constitute a ``full'' nutritional regimen.
    (3) Prevocational, educational, or supported employment services, or 
any combination of these services, as part of habilitation services that 
are--
    (i) Provided in approved waivers that include a definition of 
``habilitation services'' but which have not included prevocational, 
educational, and supported employment services in that definition; or
    (ii) Otherwise available to the recipient under either special 
education and related services as defined in section 602(16) and (17) of 
the Education of the Handicapped Act (20 U.S.C. 1401(16) and (17)) or 
vocational rehabilitation services available to the individual through a 
program funded under section 110 of the Rehabilitation Act of 1973 (29 
U.S.C. 730).
    (4) For waiver applications and renewals approved on or after 
October 21, 1986, home and community-based services provided to 
individuals aged 22 through 64 diagnosed as chronically mentally ill who 
would be placed in an institution for mental diseases. FFP is also not 
available for such services provided to individuals aged 65 and over and 
21 and under as an alternative to institutionalization in an IMD if the 
State does not include the appropriate optional Medicaid benefits 
specified at Secs. 440.140 and 440.160 of this chapter in its State 
plan.
    (b) FFP is available for expenditures for expanded habilitation 
services, as described in Sec. 440.180 of this chapter, if the services 
are included under a waiver or waiver amendment approved by CMS.

[59 FR 37720, July 25, 1994, as amended at 65 FR 60107, Oct. 10, 2000]



Subpart H--Home and Community-Based Services Waivers for Individuals Age 
                    65 or Older: Waiver Requirements

    Source: 57 FR 29156, June 30, 1992, unless otherwise noted.



Sec. 441.350  Basis and purpose.

    Section 1915(d) of the Act permits States to offer, under a waiver 
of statutory requirements, home and community-based services not 
otherwise available under Medicaid to individuals age 65 or older, in 
exchange for accepting an aggregate limit on the amount of expenditures 
for which they claim FFP for certain services furnished to these 
individuals. The home and community-based services that may be furnished 
are listed in Sec. 440.181 of this subchapter. This subpart describes 
the procedures the Medicaid agency must follow to request a waiver.



Sec. 441.351  Contents of a request for a waiver.

    A request for a waiver under this section must meet the following 
requirements:
    (a) Required signatures. The request must be signed by the Governor, 
the Director of the Medicaid agency or the Director of the larger State 
agency of which the Medicaid agency is a component or any official of 
the Medicaid agency to whom this authority has been delegated. A request 
from any other agency of State government will not be accepted.
    (b) Assurances and supporting documentation. The request must 
provide the assurances required by Sec. 441.352 of this part and the 
supporting documentation required by Sec. 441.353.
    (c) Statement for sections of the Act. The request must provide a 
statement as to whether waiver of section 1902(a)(1), 1902(a)(10)(B), or 
1902(a)(10)(C)(i)(III) of the Act is requested. If the State requests a 
waiver of section 1902(a)(1) of the Act, the waiver must clearly specify 
the geographic areas or political subdivisions in which the services 
will be offered. The State must indicate whether it is requesting a 
waiver of one or all of these sections. The State may request

[[Page 272]]

a waiver of any one of the sections cited above.
    (d) Identification of services. The request must identify all 
services available under the approved State plan, which are also 
included in the APEL and which are identified under Sec. 440.181, and 
any limitations that the State has imposed on the provision of any 
service. The request must also identify and describe each service 
specified in Sec. 440.181 of this subchapter to be furnished under the 
waiver, and any additional services to be furnished under the authority 
of Sec. 440.181(b)(7). Descriptions of additional services must explain 
how each additional service included under Sec. 440.181(b)(7) will 
contribute to the health and well-being of the recipients and to their 
ability to reside in a community-based setting.
    (e) Recipients served. The request must provide that the home and 
community-based services described in Sec. 440.181 of this subchapter, 
are furnished only to individuals who--
    (1) Are age 65 or older;
    (2) Are not inpatients of a hospital, NF, or ICF/MR; and
    (3) The agency determines would be likely to require the care 
furnished in a NF under Medicaid.
    (f) Plan of care. The request must provide that the home and 
community-based services described in Sec. 440.181 of this subchapter, 
are furnished under a written plan of care based on an assessment of the 
individual's health and welfare needs and developed by qualified 
individuals for each recipient under the waiver. The qualifications of 
the individual or individuals who will be responsible for developing the 
individual plan of care must be described. Each plan of care must 
contain, at a minimum, the medical and other services to be provided, 
their frequency, and the type of provider to furnish them. Plans of care 
must be subject to the approval of the Medicaid agency.
    (g) Medicaid agency review. The request must assure that the State 
agency maintain and exercise its authority to review (at a minimum) a 
valid statistical sample of each month's plans of care. When the 
services in a plan do not comport with the stated disabilities and needs 
of the recipient, the agency must implement immediate corrective action 
procedures to ensure that the needs of the recipient are adequately 
addressed.
    (h) Groups served. The request must describe the group or groups of 
individuals to whom the services will be offered.
    (i) Assurances regarding amount expended. The request must assure 
that the total amount expended by the State under the plan for 
individuals age 65 or older during a waiver year for medical assistance 
with respect to NF, home health, private duty nursing, personal care, 
and home and community-based services described in Secs. 440.180 and 
440.181 of this subchapter and furnished as an alternative to NF care 
will not exceed the aggregate projected expenditure limit (APEL) defined 
in Sec. 441.354.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec. 441.351 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget.



Sec. 441.352  State assurances.

    Unless the Medicaid agency provides the following satisfactory 
assurances to CMS, CMS will not grant a waiver under this subpart and 
may terminate a waiver already granted.
    (a) Health and welfare. The agency must assure that necessary 
safeguards have been taken to protect the health and welfare of the 
recipients of services by assuring that the following conditions are 
met:
    (1) Adequate standards for all types of providers that furnish 
services under the waiver are met. (These standards must be reasonably 
related to the requirements of the waiver service to be furnished.)
    (2) The standards of any State licensure or certification 
requirements are met for services or for individuals furnishing services 
under the waiver.
    (3) All facilities covered by section 1616(e) of the Act, in which 
home and community-based services are furnished, are in compliance with 
applicable State standards that meet the requirements of 45 CFR part 
1397 for board and care facilities.
    (4) Physician reviews of prescribed psychotropic drugs (when 
prescribed

[[Page 273]]

for purposes of behavior control of waiver recipients) occur at least 
every 30 days.
    (b) Financial accountability. The agency must assure financial 
accountability for funds expended for home and community-based services. 
The State must provide for an independent audit f its waiver program. 
The performance of a single financial audit, in accordance with the 
Single Audit Act of 1984 (Pub. L. 98-502, enacted on October 19, 1984), 
is deemed to satisfy the requirement for an independent audit. The 
agency must maintain and make available to HHS, the Comptroller General, 
or other designees, appropriate financial records documenting the cost 
of services furnished to individuals age 65 or older under the waiver 
and the State plan, including reports of any independent audits 
conducted.
    (c) Evaluation of need. The agency must provide for an initial 
evaluation (and periodic reevaluations) of the need for the level of 
care furnished in a NF when there is a reasonable indication that 
individuals age 65 or older might need those services in the near 
future, but for the availability of home and community-based services. 
The procedures used to assess level of care for a potential waiver 
recipient must be at least as stringent as any existing State procedures 
applicable to individuals entering a NF. The qualifications of 
individuals performing the waiver assessment must be as high as those of 
individuals assessing the need for NF care, and the assessment 
instrument itself must be the same as any assessment instrument used to 
establish level of care of prospective inpatients in NFs. A periodic 
reevaluation of the level of care must be performed. The period of 
reevaluation of level of care cannot extend beyond 1 year.
    (d) Expenditures. The agency must assure that the total amount 
expended by the State for medical assistance with respect to NF, home 
health, private duty nursing, personal care services, home and 
community-based services furnished under a section 1915(c) waiver 
granted under Subpart G of this part to individuals age 65 or older, and 
the home and community-based services approved and furnished under a 
section 1915(d) waiver for individuals age 65 or older during a waiver 
year will not exceed the APEL, calculated in accordance with 
Sec. 441.354.
    (e) Reporting. The agency must assure that it will provide CMS 
annually with information on the waiver's impact. The information must 
be consistent with a reasonable data collection plan designed by CMS and 
must address the waiver's impact on--
    (1) The type, amount, and cost of services furnished under the State 
plan; and
    (2) The health and welfare of recipients of the services described 
in Sec. 440.181 of this chapter.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec. 441.352 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget.



Sec. 441.353  Supporting documentation required.

    The agency must furnish CMS with sufficient information to support 
the assurances required under Sec. 441.352, in order to meet the 
requirement that the assurances are satisfactory. At a minimum, this 
information must consist of the following:
    (a) Safeguards. A description of the safeguards necessary to protect 
the health and welfare of recipients.
    This information must include:
    (1) A copy of the standards established by the State for facilities 
(in which services will be furnished) that are covered by section 
1616(e) of the Act.
    (2) The minimum educational or professional qualifications of the 
providers of the services.
    (3) A description of the administrative oversight mechanisms 
established by the State to ensure quality of care.
    (b) Records. A description of the records and information that are 
maintained by the agency and by providers of services to support 
financial accountability, information regarding how the State meets the 
requirement for financial accountability, and an explanation of how the 
State assures that there is an audit trail for State and Federal funds 
expended for section 1915(d) home and community-based

[[Page 274]]

waiver services. If the State has an approved Medicaid Management 
Information System (MMIS), this system must be used to process 
individual claims data and account for funds expended for services 
furnished under the waiver.
    (c) Evaluation and reevaluation of recipients. A description of the 
agency's plan for the evaluation and reevaluation of recipients' level 
of care, including the following:
    (1) A description of who makes these evaluations and how they are 
made.
    (2) A copy of the evaluation instrument.
    (3) The agency's procedure to assure the maintenance of written 
documentation on all evaluations and reevaluations and copies of the 
forms. In accordance with regulations at 45 CFR part 74, written 
documentation of all evaluations and reevaluations must be maintained 
for a minimum period of 3 years.
    (4) The agency's procedure to assure reevaluations of need at 
regular intervals.
    (5) The intervals at which reevaluations occur, which may be no less 
frequent than for institutionalized individuals at comparable levels of 
care.
    (6) The procedures and criteria used for evaluation and reevaluation 
of waiver recipients must be the same or more stringent than those used 
for individuals served in NFs.
    (d) Alternatives available. A description of the agency's plan for 
informing eligible recipients of the feasible alternatives available 
under the waiver and allowing recipients to choose either institutional 
or home and community-based services must be submitted to CMS. A copy of 
the forms or documentation used by the agency to verify that this choice 
has been offered and that recipients of waiver services, or their legal 
representatives, have been given the free choice of the providers of 
both waiver and State plan services must also be available for CMS 
review. The Medicaid agency must provide an opportunity for a fair 
hearing, under 42 CFR part 431, subpart E, to recipients who are not 
given the choice of home or community-based services as an alternative 
to institutional care in a NF or who are denied the service(s) or the 
providers of their choice.
    (e) Post-eligibility of income. An explanation of how the agency 
applies the applicable provisions regarding the post-eligibility 
treatment of income and resources of those individuals receiving home 
and community-based services who are eligible under a special income 
level (included in Sec. 435.217 of this subchapter).

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec. 441.353 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget.



Sec. 441.354  Aggregate projected expenditure limit (APEL).

    (a) Definitions. For purposes of this section, the term base year 
means--
    (1) Federal fiscal year (FFY) 1987 (that is, October 1, 1986 through 
September 30, 1987); or
    (2) In the case of a State which did not report expenditures on the 
basis of age categories during FFY 1987, the base year means FFY 1989 
(that is, October 1, 1988 through September 30, 1989).
    (b) General. (1) The total amount expended by the State for medical 
assistance with respect to NF, home and community-based services under 
the waiver, home health services, personal care services, private duty 
nursing services, and services furnished under a waiver under subpart G 
of this part to individuals age 65 or older furnished as an alternative 
to care in an SNF or ICF (NF effective October 1, 1990), may not exceed 
the APEL calculated in accordance with paragraph (c) of this section.
    (2) In applying for a waiver under this subpart, the agency must 
clearly identify the base year it intends to use.
    (3) The State may make a preliminary calculation of the expenditure 
limit at the time of the waiver approval; however, CMS makes final 
calculations of the aggregate limit after base data have been verified 
and accepted.
    (4) All base year and waiver year data are subject to final cost 
settlement within 2 years from the end of the base or waiver year 
involved.
    (c) Formula for calculating APEL. Except as provided in paragraph 
(d) of

[[Page 275]]

this section, the formula for calculating the APEL follows:

APEL=P x (1+Y) + V x (1+Z), where
P=The aggregate amount of the State's medical assistance under title XIX 
          for SNF and ICF (NF effective October 1, 1990) services 
          furnished to individuals who have reached age 65, defined as 
          the total medical assistance payments (Federal and State) 
          reported on line 6 of form CMS 64 (as adjusted) for SNF 
          services, ICF-other services, and mental health facility 
          services for the base year, multiplied by the ratio of 
          expenditures for SNF and ICF-other services for the aged to 
          total expenditures for these services as reported on form CMS 
          2082 for the base year.
Q=The market basket index for SNF and ICF (NF effective October 1, 1990) 
          services for the waiver year involved, defined as the total 
          SNF Input Price Index used in the Medicare program, identified 
          as the third quarter data available from CMS's Office of 
          National Cost Estimates in August preceding the start of the 
          fiscal year.
R=The SNF Input Price Index for the base year.
S=The number of residents in the State in the waiver year involved who 
          have reached age 65, defined as the number of aged Medicare 
          beneficiaries in the State, equal to the Mid-Period Enrollment 
          in HI or SMI in that State on July 1 preceding the start of 
          the fiscal year.
T=The number of aged Medicare beneficiaries in the State who are 
          enrolled in either the HI or SMI programs in the base year, as 
          defined in S, above.
U=The number of years beginning after the base year and ending on the 
          last day of the waiver year involved.
V=The aggregate amount of the State's medical assistance under title XIX 
          in the base year for home and community-based services for 
          individuals who have reached age 65, defined as the total 
          medical assistance payments (Federal and State) reported on 
          line 6 of form CMS 64 (as adjusted) for home health, personal 
          care, and home and community-based services waivers, which 
          provide services as an alternative to care in a SNF or ICF (NF 
          effective October 1, 1990), increased by an estimate 
          (acceptable to CMS) of expenditures for private duty nursing 
          services, multiplied by the ratio of expenditures for home 
          health services for the aged to total expenditures for home 
          health services, as reported on form CMS 2082, for the base 
          year.
W=The market basket index for home and community-based services for the 
          waiver year involved, defined as the Home Agency Input Price 
          Index, used in the Medicare program identified as the third 
          quarter data available from CMS's Office of National Cost 
          Estimates in August preceding the start of the fiscal year.
X=The Home Health Agency Input Price Index for the base year.
Y=The greater of--
    (Ux.07), or (Q/R)-1+(S/T)-1+(Ux.02).
Z=The greater of--
    (Ux.07), or (W/X)-1+(S/T)-1++(Ux.02).

    (d) Amendment of the APEL. The State may request amendment of its 
APEL to reflect an increase in the aggregate amount of medical 
assistance for NF services and for services included in the calculation 
of the APEL as required by paragraph (c) of this section when the 
increase is directly attributable to legislation enacted on or after 
December 22, 1987, which amends title XIX of the Act. Costs attributable 
to laws enacted before December 22, 1987 will not be considered. Because 
the APEL for each year of the waiver is computed separately from the 
APEL for any other waiver year, a separate amendment must be submitted 
for each year in which the State chooses to raise its APEL. 
Documentation specific to the waiver year involved must be submitted to 
CMS.



Sec. 441.355  Duration, extension, and amendment of a waiver.

    (a) Effective dates and extension periods. (1) The effective date 
for a waiver of Medicaid requirements to furnish home and community-
based services to individuals age 65 or older under this subpart is 
established by CMS prospectively on the first day of the FFY following 
the date on which the waiver is approved.
    (2) The initial waiver is approved for a 3-year period from the 
effective date. Subsequent renewals are approved for 5-year periods.
    (3) If the agency requests it, the waiver may be extended for an 
additional 5-year period if CMS's review of the prior period shows that 
the assurances required by Sec. 441.352 were met.
    (4) The agency may request that waiver modifications be made 
effective retroactive to the first day of the waiver year in which the 
amendment is submitted, unless the amendment involves substantive 
change. Substantive changes may include, but are not limited to, 
addition of services under the waiver, a change in the qualifications

[[Page 276]]

of service providers, or a change in the eligible population.
    (5) A request for an amendment that involves a substantive change is 
given a prospective effective date, but this date need not coincide with 
the start of the next FFY.
    (b) Extension or new waiver request. CMS determines whether a 
request for extension of an existing waiver is actually an extension 
request, or a request for a new waiver. Generally, if a State's 
extension request proposes a substantive change in services furnished, 
eligible population, service area, statutory sections waived, or 
qualifications of service providers, CMS considers it a new waiver 
request.
    (c) Reconsideration of denial. A determination of CMS to deny a 
request for a waiver (or for extension of a waiver) under this subpart 
may be reconsidered in accordance with Sec. 441.357.
    (d) Existing waiver effectiveness after denial. If CMS denies a 
request for an extension of an existing waiver under this subpart:
    (1) The existing waiver remains in effect for a period of not less 
than 90 days after the date on which CMS denies the request, or, if the 
State seeks reconsideration in accordance with Sec. 441.357, the date on 
which a final determination is made with respect to that review.
    (2) CMS calculates an APEL for the period for which the waiver 
remains in effect, and this calculation is used to pro-rate the limit 
according to the number of days to which it applies.



Sec. 441.356  Waiver termination.

    (a) Termination by the State. If a State chooses to terminate its 
waiver before an approved program is due to expire, the following 
conditions apply:
    (1) The State must notify CMS in writing at least 30 days before 
terminating services to recipients.
    (2) The State must notify recipients of services under the waiver at 
least 30 days before terminating services in accordance with 
Sec. 431.210 of this chapter.
    (3) CMS continues to apply the APEL described in Sec. 441.354 
through the end of the waiver year, but this limit is not applied in 
subsequent years.
    (4) The State may not decrease the services available under the 
approved State plan to individuals age 65 or older by an amount that 
violates the comparability of service requirements set forth in 
Sec. 440.240 of this chapter.
    (b) Termination by CMS. (1) If CMS finds, during an approved waiver 
period, that an agency is not meeting one or more of the requirements 
for a waiver contained in this subpart, CMS notifies the agency in 
writing of its findings and grants an opportunity for a hearing in 
accordance with Sec. 441.357. If CMS determines that the agency is not 
in compliance with this subpart after the notice and any hearing, CMS 
may terminate the waiver.
    (2) If CMS terminates the waiver, the following conditions apply:
    (i) The State must notify recipients of services under the waiver at 
least 30 days before terminating services in accordance with 
Sec. 431.210 of this chapter.
    (ii) CMS continues to apply the APEL in Sec. 441.354 of this 
subpart, but the limit is prorated according to the number of days in 
the fiscal year during which waiver services were offered. The limit 
expires concurrently with the termination of home and community-based 
services under the waiver.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec. 441.356 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget.



Sec. 441.357  Hearing procedures for waiver denials.

    The procedures specified in Sec. 430.18 of this subchapter apply to 
State requests for hearings on denials, renewals, or amendments of 
waivers for home and community-based services for individuals age 65 or 
older.



Sec. 441.360  Limits on Federal financial participation (FFP).

    FFP for home and community-based services listed in Sec. 440.181 of 
this subchapter is not available in expenditures for the following:
    (a) Services furnished in a facility subject to the health and 
welfare requirements described in Sec. 441.352(a) during any period in 
which the facility is found not to be in compliance with the applicable 
State requirements described in that section.

[[Page 277]]

    (b) The cost of room and board except when furnished as part of 
respite care services in a facility, approved by the State, that is not 
a private residence. For purposes of this subpart, ``board'' means three 
meals a day or any other full nutritional regimen. ``Board'' does not 
include meals, which do not comprise a full nutritional regimen, 
furnished as part of adult day health services.
    (c) The portion of the cost of room and board attributed to 
unrelated, live-in personal caregivers when the waiver recipient lives 
in the caregiver's home or a residence owned or leased by the provider 
of the Medicaid services (the caregiver).
    (d) Services that are not included in the approved State plan and 
not approved as waiver services by CMS.
    (e) Services furnished to recipients who are ineligible under the 
terms of the approved waiver.
    (f) Services furnished by a provider when either the services or the 
provider do not meet the standards that are set by the State and 
included in the approved waiver.
    (g) Services furnished to a recipient by his or her spouse.



Sec. 441.365  Periodic evaluation, assessment, and review.

    (a) Purpose. This section prescribes requirements for periodic 
evaluation, assessment, and review of the care and services furnished to 
individuals receiving home and community-based waiver services under 
this subpart.
    (b) Evaluation and assessment review team. (1) A review team, as 
described in paragraphs (b)(2) and (c) of this section, must 
periodically evaluate and assess the care and services furnished to 
recipients under this subpart. The review team must be created by the 
State agency directly, or (through interagency agreement) by other 
departments of State government (such as the Department of Health or the 
Agency on Aging).
    (2) Each review team must consist of at least one physician or 
registered nurse, and at least one other individual with health and 
social service credentials who the State believes is qualified to 
properly evaluate and assess the care and services provided under the 
waiver. If there is no physician on the review team, the Medicaid agency 
must ensure that a physician is available to provide consultation to the 
review team.
    (3) For waiver services furnished to individuals who have been found 
to be likely to require the level of care furnished in a NF that is also 
an IMD, each review team must have a psychiatrist or physician and other 
appropriate mental health or social service personnel who are 
knowledgeable about geriatric mental illness.
    (c) Financial interests and employment of review team members. (1) 
No member of a review team may have a financial interest in or be 
employed by any entity that furnishes care and services under the waiver 
to a recipient whose care is under review.
    (2) No physician member of a review team may evaluate or assess the 
care of a recipient for whom he or she is the attending physician.
    (3) No individual who serves as case manager, caseworker, benefit 
authorizer, or any similar position, may serve as member of a review 
team that evaluates and assesses care furnished to a recipient with whom 
he or she has had a professional relationship.
    (d) Number and location of review teams. A sufficient number of 
teams must be located within the State so that onsite inspections can be 
made at appropriate intervals at sites where waiver recipients receive 
care and services.
    (e) Frequency of periodic evaluations and assessments. Periodic 
evaluations and assessments must be conducted at least annually for each 
recipient under the waiver. The review team and the agency have the 
option to determine the frequency of further periodic evaluations and 
assessments, based on the quality of services and access to care being 
furnished under the waiver and the condition of patients receiving care 
and services.
    (f) Notification before inspection. No provider of care and services 
under the waiver may be notified in advance of a periodic evaluation, 
assessment, and review. However, when a recipient receives services in 
his own home or the home of a relative, notification must be provided to 
the residents of the

[[Page 278]]

household at least 48 hours in advance. The recipient must have an 
opportunity to decline access to the home. If the recipient declines 
access to his or her own home, or the home of a relative, the review is 
limited solely to the review of the provider's records. If the recipient 
is incompetent, the head of the household has the authority to decline 
access to the home.
    (g) Personal contact with and observation of recipients and review 
of records. (1) For recipients of care and services under a waiver, the 
review team's evaluation and assessment must include--
    (i) A review of each recipient's medical record, the evaluation and 
reevaluation required by Sec. 441.353(c), and the plan of care under 
which the waiver and other services are furnished; and
    (ii) If the records described in paragraph (g)(1)(i) of this section 
are inadequate or incomplete, personal contact and observation of each 
recipient.
    (2) The review team may personally contact and observe any recipient 
whose care the team evaluates and assesses.
    (3) The review team may consult with both formal and informal 
caregivers when the recipient's records are inadequate or incomplete and 
when any apparent discrepancy exists between services required by the 
recipient and services furnished under the waiver.
    (h) Determinations by the review team. The review team must 
determine in its evaluation and assessment whether--
    (1) The services included in the plan of care are adequate to meet 
the health and welfare needs of each recipient;
    (2) The services included in the plan of care have been furnished to 
the recipient as planned;
    (3) It is necessary and in the interest of the recipient to continue 
receiving services through the waiver program; and
    (4) It is feasible to meet the recipient's health and welfare needs 
through the waiver program.
    (i) Other information considered by review team. When making 
determinations, under paragraph (h) of this section, for each recipient, 
the review team must consider the following information and may consider 
other information as it deems necessary:
    (1) Whether the medical record, the determination of level of care, 
and the plan of care are consistent, and whether all ordered services 
have been furnished and properly recorded.
    (2) Whether physician review of prescribed psychotropic medications 
(when required for behavior control) has occurred at least every 30 
days.
    (3) Whether tests or observations of each recipient indicated by his 
or her medical record are made at appropriate times and properly 
recorded.
    (4) Whether progress notes entered in the record by formal and 
informal caregivers are made as required and appear to be consistent 
with the observed condition of the recipient.
    (5) Whether reevaluations of the recipient's level of care have 
occurred at least as frequently as would be required if that individual 
were served in a NF.
    (6) Whether the recipient receives adequate care and services, 
based, at a minimum, on the following when observations are necessary 
(the requirements for the necessity of observations are set forth in new 
Sec. 441.365(g)(3)):
    (i) Cleanliness.
    (ii) Absence of bedsores.
    (iii) Absence of signs of malnutrition or dehydration.
    (7) Whether the recipient needs any service that is not included in 
the plan of care, or if included, is not being furnished by formal or 
informal caregivers under the waiver or through arrangements with 
another public or private source of assistance.
    (8) Determination as to whether continued home and community-based 
services are required by the recipient to avoid the likelihood of 
placement in a NF.
    (j) Submission of review team's results. The review team must submit 
to the Medicaid agency the results of its periodic evaluation, 
assessment and review of the care of the recipient:
    (1) Within 1 month of the completion of the review.
    (2) Immediately upon its determination that conditions exist that 
may constitute a threat to the life or health of a recipient.
    (k) Agency's action. The Medicaid agency must establish and adhere 
to

[[Page 279]]

procedures for taking appropriate action in response to the findings 
reported by the review team. These procedures must provide for immediate 
response to any finding that the life or health of a recipient may be 
jeopardized.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec. 441.365 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget.



       Subpart I--Community Supported Living Arrangements Services

    Source: 56 FR 48114, Sept. 24, 1991, unless otherwise noted.



Sec. 441.400  Basis and purpose.

    This subpart implements section 1905(a)(24) of the Act, which adds 
community supported living arrangements services to the list of services 
that States may provide as medical assistance under title XIX (to the 
extent and as defined in section 1930 of the Act), and section 
1930(h)(1)(B) of the Act, which specifies minimum protection 
requirements that a State which provides community supported living 
arrangements services as an optional Medicaid service to developmentally 
disabled individuals must meet to ensure the health, safety and welfare 
of those individuals.



Sec. 441.402  State plan requirements.

    If a State that is eligible to provide community supported living 
arrangements services as an optional Medicaid service to developmentally 
disabled individuals provides such services, the State plan must specify 
that it complies with the minimum protection requirements in 
Sec. 441.404.



Sec. 441.404  Minimum protection requirements.

    To be eligible to provide community supported living arrangements 
services to developmentally disabled individuals, a State must assure, 
through methods other than reliance on State licensure processes or the 
State quality assurance programs described under section 1930(d) of the 
Act, that:
    (a) Individuals receiving community supported living arrangements 
services are protected from neglect, physical and sexual abuse, and 
financial exploitation;
    (b) Providers of community supported living arrangements services--
    (1) Do not use individuals who have been convicted of child or 
client abuse, neglect, or mistreatment, or of a felony involving 
physical harm to an individual; and
    (2) Take all reasonable steps to determine whether applicants for 
employment by the provider have histories indicating involvement in 
child or client abuse, neglect, or mistreatment, or a criminal record 
involving physical harm to an individual;
    (c) Providers of community supported living arrangements services 
are not unjustly enriched as a result of abusive financial arrangements 
(such as owner lease-backs) with developmentally disabled clients; and
    (d) Providers of community supported living arrangements services, 
or the relatives of such providers, are not named beneficiaries of life 
insurance policies purchased by or on behalf of developmentally disabled 
clients.



PART 442--STANDARDS FOR PAYMENT TO NURSING FACILITIES AND INTERMEDIATE CARE FACILITIES FOR THE MENTALLY RETARDED--Table of Contents




                      Subpart A--General Provisions

Sec.
442.1 Basis and purpose.
442.2 Terms.

                     Subpart B--Provider Agreements

442.10 State plan requirement.
442.12 Provider agreement: General requirements.
442.13 Effective date of provider agreement.
442.14 Effect of change of ownership.
442.15 Duration of agreement for ICFs/MR.
442.16 Extension of agreement for ICFs/MR.
442.30 Agreement as evidence of certification.
442.40 Availability of FFP during appeals for ICFs/MR.
442.42 FFP under a retroactive provider agreement following appeal.

[[Page 280]]

                   Subpart C--Certification of ICFs/MR

442.100 State plan requirements.
442.101 Obtaining certification.
442.105 Certification of ICFs/MR with deficiencies: General provisions.
442.109 Certification period for ICFs/MR: General provisions.
442.110 Certification period for ICFs/MR with standard-level 
          deficiencies.
442.117 Termination of certification for ICFs/MR whose deficiencies pose 
          immediate jeopardy.
442.118 Denial of payments for new admissions to an ICF/MR.
442.119 Duration of denial of payments and subsequent termination of an 
          ICF/MR.

Subparts D-F [Reserved]

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302), 
unless otherwise noted.

    Source: 43 FR 45233, Sept. 29, 1978, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 442.1  Basis and purpose.

    (a) This part states requirements for provider agreements for 
facility certification relating to the provision of services furnished 
by nursing facilities and intermediate care facilities for the mentally 
retarded. This part is based on the following sections of the Act:

    Section 1902(a)(4), administrative methods for proper and efficient 
operation of the State plan;
    Section 1902(a)(27), provider agreements;
    Section 1902(a)(28), nursing facility standards;
    Section 1902(a)(33)(B), State survey agency functions; Section 
1902(i), circumstances and procedures for denial of payment and 
termination of provider agreements in certain cases;
    Section 1905(c), definition of nursing facility;
    Section 1905(d), definition of intermediate care facility for the 
mentally retarded;
    Section 1905 (f), definition of nursing facility services;
    Section 1910, certification and approval of ICFs/MR and of RHCs;
    Section 1913, hospital providers of nursing facility services;
    Section 1919 (g) and (h), survey, certification and enforcement of 
nursing facilities; and
    Section 1922, correction and reduction plans for intermediate care 
facilities for the mentally retarded.

    (b) Section 431.610 of this subchapter contains requirements for 
designating the State licensing agency to survey these facilities and 
for certain survey agency responsibilities.

[43 FR 45233, Sept. 29, 1978, as amended at 47 FR 31533, July 20, 1982; 
59 FR 56235, Nov. 10, 1994]



Sec. 442.2  Terms.

    In this part--
    Facility refers to a nursing facility, and an intermediate care 
facility for the mentally retarded or persons with related conditions 
(ICF/MR).
    Facility, and any specific type of facility referred to, may include 
a distinct part of a facility as specified in Sec. 440.40 or 
Sec. 440.150 of this subchapter.
    Immediate jeopardy means a situation in which immediate corrective 
action is necessary because the provider's noncompliance with one or 
more requirements of participation or conditions of participation has 
caused, or is likely to cause, serious injury, harm, impairment, or 
death to an individual receiving care in a facility.
    New admission means the admission of a Medicaid recipient who has 
never been in the facility or, if previously admitted, had been 
discharged or had voluntarily left the facility. The term does not 
include the following:
    (a) Individuals who were in the facility before the effective date 
of denial of payment for new admissions, even if they become eligible 
for Medicaid after that date.
    (b) If the approved State plan includes payments for reserved beds, 
individuals who, after a temporary absence from the facility, are 
readmitted to beds reserved for them in accordance with Sec. 447.40(a) 
of this chapter.

[43 FR 45233, Sept. 29, 1978, as amended at 51 FR 24491, July 3, 1986; 
53 FR 1993, Jan. 25, 1988; 54 FR 5358, Feb. 2, 1989; 56 FR 48865, Sept. 
26, 1991; 59 FR 56235, Nov. 10, 1994]



                     Subpart B--Provider Agreements



Sec. 442.10  State plan requirement.

    A State plan must provide that requirements of this subpart are met.

[[Page 281]]



Sec. 442.12  Provider agreement: General requirements.

    (a) Certification and recertification. Except as provided in 
paragraph (b) of this section, a Medicaid agency may not execute a 
provider agreement with a facility for nursing facility services nor 
make Medicaid payments to a facility for those services unless the 
Secretary or the State survey agency has certified the facility under 
this part to provide those services. (See Sec. 442.101 for certification 
by the Secretary or by the State survey agency).
    (b) Exception. The certification requirement of paragraph (a) of 
this section does not apply with respect to religious nonmedical 
institutions as defined in Sec. 440.170(b) of this chapter.
    (c) Conformance with certification condition. An agreement must be 
in accordance with the certification provisions set by the Secretary or 
the survey agency under subpart C of this part for ICFs/MR or subpart E 
of part 488 of this chapter for NFs.
    (d) Denial for good cause. (1) If the Medicaid agency has adequate 
documentation showing good cause, it may refuse to execute an agreement, 
or may cancel an agreement, with a certified facility.
    (2) A provider agreement is not a valid agreement for purposes of 
this part even though certified by the State survey agency, if the 
facility fails to meet the civil rights requirements set forth in 45 CFR 
parts 80, 84, and 90.

[45 FR 22936, Apr. 4, 1980, as amended at 56 FR 48865, Sept. 26, 1991; 
59 FR 56235, Nov. 10, 1994; 64 FR 67052, Nov. 30, 1999]



Sec. 442.13  Effective date of provider agreement.

    The effective date of a provider agreement with an NF or ICF/MR is 
determined in accordance with the rules set forth in Sec. 431.108.

[62 FR 43936, Aug. 18, 1997]



Sec. 442.14  Effect of change of ownership.

    (a) Assignment of agreement. When there is a change of ownership, 
the Medicaid agency must automatically assign the agreement to the new 
owner.
    (b) Conditions that apply to assigned agreements. An assigned 
agreement is subject to all applicable statutes and regulations and to 
the terms and conditions under which it was originally issued, 
including, but not limited to, the following:
    (1) Any existing plan of correction.
    (2) Any expiration date for ICFs/MR.
    (3) Compliance with applicable health and safety requirements.
    (4) Compliance with the ownership and financial interest disclosure 
requirements of Secs. 455.104 and 455.105 of this chapter.
    (5) Compliance with civil rights requirements set forth in 45 CFR 
parts 80, 84, and 90.
    (6) Compliance with any additional requirements imposed by the 
Medicaid agency.

[45 FR 22936, Apr. 4, 1980, as amended at 53 FR 20495, June 3, 1988; 59 
FR 56235, Nov. 10, 1994]



Sec. 442.15  Duration of agreement for ICFs/MR.

    (a) Except as specified under Sec. 442.16, the duration of an 
agreement may not exceed 12 months.
    (b) The agreement must be for the same duration as the certification 
period set by the survey agency. However, if the Medicaid agency has 
adequate documentation showing good cause, it may make an agreement for 
less than this period.
    (c) FFP is available for services provided by a facility for up to 
30 days after its agreement expires or terminates under the conditions 
specified in Sec. 441.11 of this subchapter.

[43 FR 45233, Sept. 29, 1978, as amended at 47 FR 31532, July 20, 1982; 
59 FR 56235, Nov. 10, 1994]



Sec. 442.16  Extension of agreement for ICFs/MR.

    A Medicaid agency may extend a provider agreement for a single 
period of up to 2 months beyond the original expiration date specified 
in the agreement if it receives written notice from the survey agency, 
before the expiration date of the agreement, that extension will not 
jeopardize the patients' health and safety, and--
    (a) Is needed to prevent irreparable harm to the facility or 
hardship to the recipients in the facility; or

[[Page 282]]

    (b) Is needed because it is impracticable to determine, before the 
expiration date, whether the facility meets certification requirements.

[43 FR 45233, Sept. 29, 1978, as amended at 52 FR 32551, Aug. 28, 1987; 
53 FR 20495, June 3, 1988; 59 FR 56235, Nov. 10, 1994]



Sec. 442.30  Agreement as evidence of certification.

    (a) Under Secs. 440.40(a) and 440.150 of this chapter, FFP is 
available in expenditures for NF and ICF/MR services only if the 
facility has been certified as meeting the requirements for Medicaid 
participation, as evidenced by a provider agreement executed under this 
part. An agreement is not valid evidence that a facility has met those 
requirements if CMS determines that--
    (1) The survey agency failed to apply the applicable requirements 
under subpart B of part 483 of this chapter for NFs or subpart I of part 
483 of this chapter, which set forth the conditions of participation for 
ICFs/MR.
    (2) The survey agency failed to follow the rules and procedures for 
certification set forth in subpart C of this part, subpart E of part 
488, and Sec. 431.610 of this subchapter;
    (3) The survey agency failed to perform any of the functions 
specified in Sec. 431.610(g) of this subchapter relating to evaluating 
and acting on information about the facility and inspecting the 
facility;
    (4) The agency failed to use the Federal standards, and the forms, 
methods and procedures prescribed by CMS as required under 
Sec. 431.610(f)(1) or Sec. 488.318(b) of this chapter, for determining 
the qualifications of providers; or
    (5) The survey agency failed to adhere to the following principles 
in determining compliance:
    (i) The survey process is the means to assess compliance with 
Federal health, safety and quality standards;
    (ii) The survey process uses resident outcomes as the primary means 
to establish the compliance status of facilities. Specifically, 
surveyors will directly observe the actual provision of care and 
services to residents, and the effects of that care, to assess whether 
the care provided meets the needs of individual residents;
    (iii) Surveyors are professionals who use their judgment, in concert 
with Federal forms and procedures, to determine compliance;
    (iv) Federal procedures are used by all surveyors to ensure uniform 
and consistent application and interpretation of Federal requirements;
    (v) Federal forms are used by all surveyors to ensure proper 
recording of findings and to document the basis for the findings.
    (6) The survey agency failed to assess in a systematic manner a 
facility's actual provision of care and services to residents and 
effects of that care on residents.
    (7) Required elements of the NF survey process fails to include all 
of the following:
    (i) An entrance conference;
    (ii) A resident-centered tour of facility;
    (iii) An in-depth review of a sample of residents including 
observation, interview and record review;
    (iv) Observation of the preparation and administration of drugs for 
a sample of residents;
    (v) Evaluation of a facility's meals, dining areas and eating 
assistance procedures;
    (vi) Formulation of a deficiency statement based on the 
incorporation of all appropriate findings onto the survey report form;
    (vii) An exit conference; and
    (viii) Follow-up surveys as appropriate.
    (8) The agreement's terms and conditions do not meet the 
requirements of this subpart.
    (b) The Administrator will make the determination under paragraph 
(a) of this section through onsite surveys, other Federal reviews, State 
certification records, or reports he may require from the Medicaid or 
survey agency.
    (c) If the Administrator disallows a State's claim for FFP because 
of a determination under paragraph (a) of this section, the State is 
entitled upon request to reconsideration of the disallowance under 45 
CFR part 16.

[43 FR 45233, Sept. 29, 1978, as amended at 51 FR 21558, June 13, 1986; 
53 FR 20495, June 3, 1988; 53 FR 23101, June 17, 1988; 56 FR 48865, 
Sept. 26, 1991; 59 FR 56235, Nov. 10, 1994]

[[Page 283]]



Sec. 442.40  Availability of FFP during appeals for ICFs/MR.

    (a) Definitions. As used in this section--
    Effective date of expiration means the date of expiration originally 
specified in the provider agreement, or the later date specified if the 
agreement is extended under Sec. 442.16; and
    Effective date of termination means a date earlier than the 
expiration date, set by the Medicaid agency when continuing 
participation until the expiration date is not justified, because the 
facility no longer meets the requirements for participation.
    (b) Scope, applicability, and effective date--(1) Scope. This 
section sets forth the extent of FFP in State Medicaid payments to an 
ICF/MR after its provider agreement has been terminated or has expired 
and not been renewed.
    (2) Applicability. (i) This section and Sec. 442.42 apply only when 
the Medicaid agency, of its own volition, terminates or does not a renew 
a provider agreement, and only when the survey agency certifies that 
there is no jeopardy to recipient health and safety. When the survey 
agency certifies that there is jeopardy to recipient health and safety, 
or when it fails to certify that there is no jeopardy, FFP ends on the 
effective date of termination or expiration.
    (ii) When the State acts under instructions from CMS, FFP ends on 
the date specified by CMS (CMS instructs the State to terminate the 
Medicaid provider agreement when CMS in validating a State survey agency 
certification, determines that an ICF/MR does not meet the requirements 
for participation.)
    (3) Effective date. This section and Sec. 442.42 apply to 
terminations or expirations that are effective on or after September 28, 
1987. For terminations or nonrenewals that were effective before that 
date, FFP may continue for up to 120 days from September 28, 1987, or 12 
months from the effective date of termination or nonrenewal, whichever 
is earlier.
    (c) Basic rules. (1) Except as provided in paragraphs (d) and (e) of 
this section, FFP in payments to an ICF/MR ends on the effective date of 
termination of the facility's provider agreement, or if the agreement is 
not terminated, on the effective date of expiration.
    (2) If State law, or a Federal or State court order or injunction, 
requires the agency to extend the provider agreement or continue 
payments to a facility after the dates specified in paragraph (d) of 
this section, FFP is not available in those payments.
    (d) Exception: Continuation of FFP after termination or expiration 
of provider agreement--(1) Conditions for continuation. FFP is available 
after the effective date of termination or expiration only if--
    (i) The evidentiary hearing required under Sec. 431.153 of this 
chapter is provided by the State agency after the effective date of 
termination or expiration (or, if begun before termination or 
expiration, is not completed until after that date); and
    (ii) Termination or nonrenewal action is based on a survey agency 
certification that there is no jeopardy to recipients' health and 
safety.
    (2) Extent of continuation. FFP is available only through the 
earlier of the following:
    (i) The date of issuance of an administrative hearing decision that 
upholds the agency's termination or nonrenewal action.
    (ii) The 120th day after the effective date of termination of the 
facility's provider agreement or, if the agreement is not terminated, 
the 120th day after the effective date of expiration. (If a hearing 
decision that upholds the facility is issued after the end of the 120-
day period, when FFP has already been discontinued, the rules of 
Sec. 442.42 on retroactive agreements apply).
    (e) Applicability of Sec. 441.11. If FFP is continued during appeal 
under paragraph (d) of this section, the 30-day period provided by 
Sec. 441.11 of this chapter would not begin to run until issuance of a 
hearing decision that upholds the agency's termination or nonrenewal 
action.

[52 FR 32551, Aug. 28, 1987, as amended at 56 FR 48865, Sept. 26, 1991; 
59 FR 56236, Nov. 10, 1994]



Sec. 442.42  FFP under a retroactive provider agreement following appeal.

    (a) Basic rule. Except as specified in paragraph (b) of this 
section, if an NF

[[Page 284]]

or ICF/MR prevails on appeal from termination or, in the case of an ICF/
MR, nonrenewal of a provider agreement, and the State issues a 
retroactive agreement, FFP is available beginning with the retroactive 
effective date, which must be determined in accordance with Sec. 442.13.
    (b) Exception. This rule does not apply if CMS determines, under 
Sec. 442.30, that the agreement is not valid evidence that the facility 
meets the requirements for participation. This exclusion applies even if 
the State issues the new agreement as the result of an administrative 
hearing decision favorable to the facility or under a Federal or State 
court order.

[52 FR 32551, Aug. 28, 1987, as amended at 59 FR 56236, Nov. 10, 1994]



                   Subpart C--Certification of ICFs/MR



Sec. 442.100  State plan requirements.

    A State plan must provide that the requirements of this subpart and 
part 483 are met.

[53 FR 20495, June 3, 1988]



Sec. 442.101  Obtaining certification.

    (a) This section states the requirements for obtaining notice of an 
ICF/MR's certification before a Medicaid agency executes a provider 
agreement under Sec. 442.12.
    (b) The agency must obtain notice of certification from the 
Secretary for an ICF/MR located on an Indian reservation.
    (c) The agency must obtain notice of certification from the survey 
agency for all other ICFs/MR.
    (d) The notice must indicate that one of the following provisions 
pertains to the ICF/MR:
    (1) An ICF/MR meets the conditions of participation set forth in 
subpart I of part 483 of this chapter.
    (2) The ICF/MR has been granted a waiver or variance by CMS or the 
survey agency under subpart I of part 483 of this chapter.
    (3) An ICF/MR has been certified with standard-level deficiencies 
and
    (i) All conditions of participation are found met; and
    (ii) The facility submits an acceptable plan of correction covering 
the remaining deficiencies, subject to other limitations specified in 
Sec. 442.105.
    (e) The failure to meet one or more of the applicable conditions of 
participation is cause for termination or non-renewal of the ICF/MR 
provider agreement.

[56 FR 48866, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
59 FR 56236, Nov. 10, 1994]



Sec. 442.105  Certification of ICFs/MR with deficiencies: General provisions.

    If a survey agency finds a facility deficient in meeting the 
standards for ICFs/MR, as specified under subpart I of part 483 of this 
chapter, the agency may certify the facility for Medicaid purposes under 
the following conditions:
    (a) The agency finds that the facility's deficiencies, individually 
or in combination, do not jeopardize the patient's health and safety, 
nor seriously limit the facility's capacity to give adequate care.
    (b) The agency finds acceptable the facility's written plan for 
correcting the deficiencies.
    (c) If a facility was previously certified with a deficiency and has 
a different deficiency at the time of the next survey, the agency 
documents that the facility--
    (1) Was unable to stay in compliance with the standard for ICFs/MR 
for reasons beyond its control, or despite intensive efforts to comply; 
and
    (2) Is making the best use of its resources to furnish adequate 
care.
    (d) If a facility has the same deficiency it had under the prior 
certification, the agency documents that the facility--
    (1) Did achieve compliance with the standard for ICFs/MR at some 
time during the prior certification period;
    (2) Made a good faith effort, as judged by the survey agency, to 
stay in compliance; and
    (3) Again became out of compliance for reasons beyond its control.

[56 FR 48866, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
57 FR 54712, Nov. 20, 1992; 59 FR 56236, Nov. 10, 1994]

[[Page 285]]



Sec. 442.109  Certification period for ICFs/MR: General provisions.

    (a) A survey agency may certify a facility that fully meets 
applicable requirements for up to 12 months.
    (b) The survey agency may notify the Medicaid agency that the term 
of a provider agreement may be extended up to 2 months after the 
expiration date of the agreement under the conditions specified in 
Sec. 442.16.

[43 FR 45233, Sept. 29, 1978. Redesignated at 53 FR 1993, Jan. 25, 1988, 
and amended at 59 FR 56236, Nov. 10, 1994]



Sec. 442.110  Certification period for ICFs/MR with standard-level deficiencies.

    (a) Facilities with deficiencies may be certified under Sec. 442.105 
for the period specified in either paragraph (b) or (c) of this section.
    (b) The survey agency may certify a facility for a period that ends 
no later than 60 days after the last day specified in the plan for 
correcting deficiencies. The certification period must not exceed 12 
months, including the period allowed for corrections.
    (c) The survey agency may certify a facility for up to 12 months 
with a condition that the certification will be automatically canceled 
on a specified date within the certification period unless--
    (1) The survey agency finds that all deficiencies have been 
satisfactorily corrected; or
    (2) The survey agency finds and notifies the Medicaid agency that 
the facility has made substantial progress in correcting the 
deficiencies and has a new plan for correction that is acceptable.

The automatic cancellation date must be no later than 60 days after the 
last day specified in the plan for correction of deficiencies under 
Sec. 442.105.

[43 FR 45233, Sept. 29, 1978. Redesignated and amended at 53 FR 1993, 
Jan. 25, 1988; 59 FR 56236, Nov. 10, 1994]



Sec. 442.117  Termination of certification for ICFs/MR whose deficiencies pose immediate jeopardy.

    (a) A survey agency must terminate a facility's certification if it 
determines that--
    (1) The facility no longer meets conditions of participation for 
ICFs/MR as specified in subpart I of part 483 of this chapter.
    (2) The facility's deficiencies pose immediate jeopardy to 
residents' health and safety.
    (b) Subsequent to a certification of a facility's noncompliance, the 
Medicaid agency must, in terminating the provider agreement, follow the 
appeals process specified in part 431, subpart D of this chapter.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]



Sec. 442.118  Denial of payments for new admissions to an ICF/MR.

    (a) Basis for denial of payments. The Medicaid agency may deny 
payment for new admissions to an ICF/MR that no longer meets the 
applicable conditions of participation specified under subpart I of part 
483 of this chapter.
    (b) Agency procedures. Before denying payments for new admissions, 
the Medicaid agency must comply with the following requirements:
    (1) Provide the facility up to 60 days to correct the cited 
deficiencies and comply with conditions of participation for ICFs/MR.
    (2) If at the end of the specified period the facility has not 
achieved compliance, give the facility notice of intent to deny payment 
for new admissions, and opportunity for an informal hearing.
    (3) If the facility requests a hearing, provide an informal hearing 
that includes--
    (i) The opportunity for the facility to present, before a State 
Medicaid official who was not involved in making the initial 
determination, evidence or documentation, in writing or in person, to 
refute the decision that the facility is out of compliance with the 
conditions of participation for ICFs/MR.
    (ii) A written decision setting forth the factual and legal bases 
pertinent to a resolution of the dispute.
    (4) If the decision of the informal hearing is to deny payments for 
new admissions, provide the facility and the public, at least 15 days 
before the effective date of the sanction, with a notice

[[Page 286]]

that includes the effective date and the reasons for the denial of 
payments.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]



Sec. 442.119  Duration of denial of payments and subsequent termination of an ICF/MR.

    (a) Period of denial. The denial of payments for new admissions will 
continue for 11 months after the month it was imposed unless, before the 
end of that period, the Medicaid agency finds that--
    (1) The facility has corrected the deficiencies or is making a good 
faith effort to achieve compliance with the conditions of participation 
for ICFs/MR; or
    (2) The deficiencies are such that it is necessary to terminate the 
facility's provider agreement.
    (b) Subsequent termination. The Medicaid agency must terminate a 
facility's provider agreement--
    (1) Upon the agency's finding that the facility has been unable to 
achieve compliance with the conditions of participation for ICFs/MR 
during the period that payments for new admissions have been denied;
    (2) Effective the day following the last day of the denial of 
payments period; and
    (3) In accordance with the procedures for appeal of terminations set 
forth in subpart D of part 431 of this chapter.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]

Subparts D-F [Reserved]



PART 447--PAYMENTS FOR SERVICES--Table of Contents




                 Subpart A--Payments: General Provisions

Sec.
447.1 Purpose.
447.10 Prohibition against reassignment of provider claims.
447.15 Acceptance of State payment as payment in full.
447.20 Provider restrictions: State plan requirements.
447.21 Reduction of payments to providers.
447.25 Direct payments to certain recipients for physicians' or 
          dentists' services.
447.30 Withholding the Federal share of payments to Medicaid providers 
          to recover Medicare overpayments.
447.31 Withholding Medicare payments to recover Medicaid overpayments.
447.40 Payments for reserving beds in institutions.
447.45 Timely claims payment.
447.46 Timely claims payment by MCOs.

                              Cost Sharing

447.50 Cost sharing: Basis and purpose.

         Enrollment Fee, Premium or Similar Cost Sharing Charge

447.51 Requirements and options.
447.52 Minimum and maximum income-related charges.

   Deductible, Coinsurance, Co-Payment or Similar Cost-Sharing Charge

447.53 Applicability; specification; multiple charges.
447.54 Maximum allowable charges.
447.55 Standard co-payment.
447.56 Income-related charges.
447.57 Restrictions on payments to providers.
447.58 Payments to prepaid capitation organizations.

                     Federal Financial Participation

447.59 FFP: Conditions relating to cost-sharing.
447.60 Cost-sharing requirements for services furnished by MCOs.
447.88 Options for claiming FFP payment for section 1920A presumptive 
          eligibility medical assistance payments.

             Subpart B--Payment Methods: General Provisions

447.200 Basis and purpose.
447.201 State plan requirements.
447.202 Audits.
447.203 Documentation of payment rates.
447.204 Encouragement of provider participation.
447.205 Public notice of changes in Statewide methods and standards for 
          setting payment rates.

 Subpart C--Payment For Inpatient Hospital and Long-Term Care Facility 
                                Services

447.250 Basis and purpose.

                              Payment Rates

447.251 Definitions.
447.252 State plan requirements.
447.253 Other requirements.
447.255 Related information.
447.256 Procedures for CMS action on assurances and State plan 
          amendments.

[[Page 287]]

                     Federal Financial Participation

447.257 FFP: Conditions relating to institutional reimbursement.

                              Upper Limits

447.271 Upper limits based on customary charges.
447.272 Inpatient services: Application of upper payment limits.

                           Swing-Bed Hospitals

447.280 Hospital providers of NF services (swing-bed hospitals).

Subpart D [Reserved]

       Subpart E--Payment Adjustments for Hospitals That Serve a 
             Disproportionate Number of Low-Income Patients

447.296 Limitations on aggregate payments for disproportionate share 
          hospitals for the period January 1, 1992 through September 30, 
          1992.
447.297 Limitations on aggregate payments for disproportionate share 
          hospitals beginning October 1, 1992.
447.298 State disproportionate share hospital allotments.
447.299 Reporting requirements.

Subpart F--Payment Methods for Other Institutional and Noninstitutional 
                                Services

447.300 Basis and purpose.
447.301 Definitions.
447.302 State plan requirements.
447.304 Adherence to upper limits; FFP.

                 Outpatient Hospital and Clinic Services

447.321 Outpatient hospital and clinic services: Application of upper 
          payment limits.

                Other Inpatient and Outpatient Facilities

447.325 Other inpatient and outpatient facility services: Upper limits 
          of payment.

                                  Drugs

447.331 Drugs: Aggregate upper limits of payment.
447.332 Upper limits for multiple source drugs.
447.333 State plan requirements, findings and assurances.
447.334 Upper limits for drugs furnished as part of services.
447.342 [Reserved]

                        Prepaid Capitation Plans

447.362 Upper limits of payment: Nonrisk contract.

                      Rural Health Clinic Services

447.371 Services furnished by rural health clinics.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45253, Sept. 29, 1978, unless otherwise noted.



                 Subpart A--Payments: General Provisions



Sec. 447.1  Purpose.

    This subpart prescribes State plan requirements, FFP limitations and 
procedures concerning payments made by State Medicaid agencies for 
Medicaid services.



Sec. 447.10  Prohibition against reassignment of provider claims.

    (a) Basis and purpose. This section implements section 1902(a)(32) 
of the Act which prohibits State payments for Medicaid services to 
anyone other than a provider or recipient, except in specified 
circumstances.
    (b) Definitions. For purposes of this section:
    Facility means an institution that furnishes health care services to 
inpatients.
    Factor means an individual or an organization, such as a collection 
agency or service bureau, that advances money to a provider for accounts 
receivable that the provider has assigned, sold or transferred to the 
individual organization for an added fee or a deduction of a portion of 
the accounts receivable. Factor does not include a business 
representative as described in paragraph (f) of this section.
    Organized health care delivery system means a public or private 
organization for delivering health services. It includes, but is not 
limited to, a clinic, a group practice prepaid capitation plan, and a 
health maintenance organization.
    (c) State plan requirements. A State plan must provide that the 
requirements of paragraphs (d) through (h) of this section are met.
    (d) Who may receive payment. Payment may be made only--
    (1) To the provider; or

[[Page 288]]

    (2) To the recipient if he is a noncash recipient eligible to 
receive the payment under Sec. 447.25; or
    (3) In accordance with paragraphs (e), (f), and (g) of this section.
    (e) Reassignments. Payment may be made in accordance with a 
reassignment from the provider to a government agency or reassignment by 
a court order.
    (f) Business agents. Payment may be made to a business agent, such 
as a billing service or an accounting firm, that furnishes statements 
and receives payments in the name of the provider, if the agent's 
compensation for this service is--
    (1) Related to the cost of processing the billing;
    (2) Not related on a percentage or other basis to the amount that is 
billed or collected; and
    (3) Not dependent upon the collection of the payment.
    (g) Individual practitioners. Payment may be made to--
    (1) The employer of the practitioner, if the practitioner is 
required as a condition of employment to turn over his fees to the 
employer;
    (2) The facility in which the service is provided, if the 
practitioner has a contract under which the facility submits the claim; 
or
    (3) A foundation, plan, or similar organization operating an 
organized health care delivery system, if the practitioner has a 
contract under which the organization submits the claim.
    (h) Prohibition of payment to factors. Payment for any service 
furnished to a recipient by a provider may not be made to or through a 
factor, either directly or by power of attorney.

[43 FR 45253, Sept. 29, 1978, as amended at 46 FR 42672, Aug. 24, 1981; 
61 FR 38398, July 24, 1996]



Sec. 447.15  Acceptance of State payment as payment in full.

    A State plan must provide that the Medicaid agency must limit 
participation in the Medicaid program to providers who accept, as 
payment in full, the amounts paid by the agency plus any deductible, 
coinsurance or copayment required by the plan to be paid by the 
individual. However, the provider may not deny services to any eligible 
individual on account of the individual's inability to pay the cost 
sharing amount imposed by the plan in accordance with Sec. 431.55(g) or 
Sec. 447.53. The previous sentence does not apply to an individual who 
is able to pay. An individual's inability to pay does not eliminate his 
or her liability for the cost sharing charge.

[50 FR 23013, May 30, 1985]



Sec. 447.20  Provider restrictions: State plan requirements.

    A State plan must provide for the following:
    (a) In the case of an individual who is eligible for medical 
assistance under the plan for service(s) for which a third party or 
parties is liable for payment, if the total amount of the established 
liability of the third party or parties for the service is--
    (1) Equal to or greater than the amount payable under the State plan 
(which includes, when applicable, cost-sharing payments provided for in 
Secs. 447.53 through 447.56), the provider furnishing the service to the 
individual may not seek to collect from the individual (or any 
financially responsible relative or representative of that individual) 
any payment amount for that service; or
    (2) Less than the amount payable under the State plan (including 
cost sharing payments set forth in Secs. 447.53 through 447.56), the 
provider furnishing the service to that individual may collect from the 
individual (or any financially responsible relative or representative of 
the individual) an amount which is the lesser of--
    (i) Any cost-sharing payment amount imposed upon the individual 
under Secs. 447.53 through 447.56; or
    (ii) An amount which represents the difference between the amount 
payable under the State plan (which includes, where applicable, cost-
sharing payments provided for in Secs. 447.53 through 447.56) and the 
total of the established third party liability for the services.
    (b) A provider may not refuse to furnish services covered under the 
plan to

[[Page 289]]

an individual who is eligible for medical assistance under the plan on 
account of a third party's potential liability for the service(s).

[55 FR 1433, Jan. 16, 1990]



Sec. 447.21  Reduction of payments to providers.

    If a provider seeks to collect from an individual (or any 
financially responsible relative or representative of that individual) 
an amount that exceeds an amount specified under Sec. 447.20(a)--
    (a) The Medicaid agency may provide for a reduction of any payment 
amount otherwise due to the provider in addition to any other sanction 
available to the agency; and
    (b) The reduction may be equal to up to three times the amount that 
the provider sought to collect in violation of Sec. 447.20(a).

[55 FR 1433, Jan. 16, 1990]



Sec. 447.25  Direct payments to certain recipients for physicians' or dentists' services.

    (a) Basis and purpose. This section implements section 1905(a) of 
the Act by prescribing requirements applicable to States making direct 
payments to certain recipients for physicians' or dentists' services.
    (b) State plan requirements. Except for groups specified in 
paragraph (c) of this section, a State may make direct payments to 
recipients for physicians' or dentists' services. If it does so, the 
State plan must--
    (1) Provide for direct payments; and
    (2) Specify the conditions under which payments are made.
    (c) Federal financial participation. No FFP is available in 
expenditures for direct payment for physicians' or dentists' services to 
any recipient--
    (1) Who is receiving assistance under the State's approved plan 
under title I, IV-A, X, XIV or XVI (AABD) of the Act; or
    (2) To whom supplemental security benefits are being paid under 
title XVI of the Act; or
    (3) Who is receiving or eligible for a State supplementary payment 
or would be eligible if he were not in a medical institution, and who is 
eligible for Medicaid as a categorically needy recipient.
    (d) Federal requirements. (1) Direct payments to recipients under 
this section are an alternative to payments directly to providers and 
are subject to the same conditions; for example, the State's reasonable 
charge schedules are applicable.
    (2) Direct payments must be supported by providers' bills for 
services.



Sec. 447.30  Withholding the Federal share of payments to Medicaid providers to recover Medicare overpayments.

    (a) Basis and purpose. This section implements section 1914 of the 
Act, which provides for withholding the Federal share of Medicaid 
payments to a provider if the provider has not arranged to repay 
Medicare overpayments or has failed to provide information to determine 
the amount of the overpayments. The intent of the statute and 
regulations is to facilitate the recovery of Medicare overpayments. The 
provision enables recovery of overpayments when institutions have 
reduced participation in Medicare or when physicians and suppliers have 
submitted few or no claims under Medicare, thus not receiving enough in 
Medicare reimbursement to permit offset of the overpayment.
    (b) When withholding occurs. The Federal share of Medicaid payments 
may be withheld from any provider specified in paragraph (c) of this 
section to recover Medicare overpayments that CMS has been unable to 
collect if the provider participates in Medicaid and--
    (1) The provider has not made arrangements satisfactory to CMS to 
repay the Medicare overpayment; or
    (2) CMS has been unable to collect information from the provider to 
determine the existence or amount of Medicare overpayment.
    (c) The Federal share of Medicaid payments may be withheld with 
respect to the following providers:
    (1) An institutional provider that has or previously had in effect a 
Medicare provider agreement under section 1866 of the Act; and
    (2) A Medicaid provider who has previously accepted Medicare payment 
on the basis of an assignment under section 1842(b)(3)(B)(ii) of the 
Act; and during the 12 month period preceding the quarter in which the 
Federal share

[[Page 290]]

is to be withheld for a Medicare overpayment, submitted no claims under 
Medicare or submitted claims which total less than the amount of 
overpayment.
    (d) Order to reduce State payment.
    (1) CMS may, at its discretion, issue an order to the Medicaid 
agency of any State that is using the provider's services, to reduce its 
payment to the provider by the amount specified in paragraph (f) of this 
section.
    (2) The order to reduce payment to the provider will remain in 
effect until--
    (i) The Medicaid agency determines that the overpayment has been 
completely recovered; or
    (ii) CMS terminates the order.
    (3) CMS may withhold FFP from any State that does not comply with 
the order specified in paragraph (d)(1) of this section to reduce 
payment to the provider and claims FFP for the expenditure on its 
quarterly expenditure report.
    (e) Notice of withholding. (1) Before the Federal share of payments 
may be withheld under this section, CMS will notify the provider and the 
Medicaid agency of each State that CMS believes may use the overpaid 
provider's services under Medicaid.
    (2) The notice will include the instruction to reduce State 
payments, as provided under paragraph (d) of this section.
    (3) CMS will send the notice referred to in paragraph (e)(1) by 
certified mail, return receipt requested.
    (4) Each Medicaid agency must identify the amount of payment due the 
provider under Medicaid and give that information to CMS in the next 
quarterly expenditure report.
    (5) The Medicaid agency may appeal any disallowance of FFP resulting 
from the withholding decision to the Grant Appeals Board, in accordance 
with 45 CFR part 16.
    (f) Amount to be withheld. CMS may require the Medicaid agency to 
reduce the Federal share of its payment to the provider by the lesser of 
the following amounts.
    (1) The Federal matching share of payments to the provider, or
    (2) The total Medicare overpayment to the provider.
    (g) Effective date of withholding. Withholding of payment will 
become effective no less than 60 days after the day on which the agency 
receives notice of withholding.
    (h) Duration of withholding. No Federal funds are available in 
expenditures for services that are furnished by a provider specified in 
paragraph (c) of this section from the date on which the withholding 
becomes effective until the termination of withholding under paragraph 
(i) of this section.
    (i) Termination of withholding.
    (1) CMS will terminate the order to reduce State payment if it 
determines that any of the following has occurred:
    (i) The Medicare overpayment is completely recovered:
    (ii) The institution or person makes an agreement satisfactory to 
CMS to repay the overpayment; or
    (iii) CMS determines that there is no overpayment based on newly 
acquired evidence or a subsequent audit.
    (2) CMS will notify each State that previously received a notice 
ordering the withholding that the withholding has been terminated.
    (j) Procedures for restoring excess withholding. If an amount 
ultimately determined to be in excess of the Medicare overpayment is 
withheld, CMS will restore any excess funds withheld.
    (k) Recovery of funds from Medicaid agency. A provider is not 
entitled to recover from the Medicaid agency the amount of payment 
withheld by the agency in accordance with a CMS order issued under 
paragraph (d) of this section.

[50 FR 19688, May 10, 1985; 50 FR 23307, June 3, 1985]



Sec. 447.31  Withholding Medicare payments to recover Medicaid overpayments.

    (a) Basis and purpose. Section 1885 of the Act provides authority 
for CMS to withhold Medicare payments to a Medicaid provider in order to 
recover Medicaid overpayments to the provider. Section 405.377 of this 
chapter sets forth the Medicare rules implementing section 1885, and 
specifies under what circumstances withholding will occur and the 
providers that are subject to withholding. This section establishes

[[Page 291]]

the procedures that the Medicaid agency must follow when requesting that 
CMS withhold Medicare payments.
    (b) Agency notice to providers. (1) Before the agency requests 
recovery of a Medicaid overpayment through Medicare, the agency must 
send either or both of the following notices, in addition to that 
required under paragraph (b)(2) of this section, to the provider.
    (i) Notice that--
    (A) There has been an overpayment;
    (B) Repayment is required; and
    (C) The overpayment determination is subject to agency appeal 
procedures, but we may withhold Medicare payments while an appeal is in 
progress.
    (ii) Notice that--
    (A) Information is needed to determine the amount of overpayment if 
any; and
    (B) The provider has at least 30 days in which to supply the 
information to the agency.
    (2) Notice that, 30 days or later from the date of the notice, the 
agency intends to refer the case to CMS for withholding of Medicare 
payments.
    (3) The agency must send all notices to providers by certified mail, 
return receipt requested.
    (c) Documentation to be submitted to CMS. The agency must submit the 
following information or documentation to CMS (unless otherwise 
specified) with the request for withholding of Medicare payments.
    (1) A statement of the reason that withholding is requested.
    (2) The amount of overpayment, type of overpayment, date the 
overpayment was determined, and the closing date of the pertinent cost 
reporting period (if applicable).
    (3) The quarter in which the overpayment was reported on the 
quarterly expenditure report (Form CMS 64).
    (4) As needed, and upon request from CMS, the names and addresses of 
the provider's officers and owners for each period that there is an 
outstanding overpayment.
    (5) A statement of assurance that the State agency has met the 
notice requirements under paragraph (b) of this section.
    (6) As needed, and upon request for CMS, copies of notices (under 
paragraph (b) of this section), and reports of contact or attempted 
contact with the provider concerning the overpayment, including any 
reduction or suspension of Medicaid payments made with respect to that 
overpayment.
    (7) A copy of the provider's agreement with the agency under 
Sec. 431.107 of this chapter.
    (d) Notification to terminate withholding. (1) If an agency has 
requested withholding under this section, it must notify CMS if any of 
the following occurs:
    (i) The Medicaid provider makes an agreement satisfactory to the 
agency to repay the overpayment;
    (ii) The Medicaid overpayment is completely recovered; or
    (iii) The agency determines that there is no overpayment, based on 
newly acquired evidence or subsequent audit.
    (2) Upon receipt of notification from the State agency, CMS will 
terminate withholding.
    (e) Accounting for returned overpayment. The agency must treat as a 
recovered overpayment the amounts received from CMS to offset Medicaid 
overpayments.
    (f) Procedures for restoring excess withholding. The agency must 
establish procedures satisfactory to CMS to assure the return to the 
provider of amounts withheld under this section that are ultimately 
determined to be in excess of overpayments. Those procedures are subject 
to CMS review.

[50 FR 19689, May 10, 1985, as amended at 61 FR 63749, Dec. 2, 1996]



Sec. 447.40  Payments for reserving beds in institutions.

    (a) The Medicaid agency may make payments to reserve a bed during a 
recipient's temporary absence from an inpatient facility, if--
    (1) The State plan provides for such payments and specifies any 
limitations on the policy; and
    (2) Absences for purposes other than required hospitalization (which 
cannot be anticipated and planned) are included in the patient's plan of 
care.
    (b) An agency that pays for reserved beds in an inpatient facility 
may pay less for a reserved bed than an occupied

[[Page 292]]

bed if there is a cost differential between the two beds. (Section 1102 
of the Act.)

[43 FR 45253, Sept. 29, 1978, as amended at 51 FR 24491, July 3, 1986]



Sec. 447.45  Timely claims payment.

    (a) Basis and purpose. This section implements section 1902(a)(37) 
of the Act by specifying--
    (1) State plan requirements for--
    (i) Timely processing of claims for payment;
    (ii) Prepayment and postpayment claims reviews; and
    (2) Conditions under which the Administrator may grant waivers of 
the time requirements.
    (b) Definitions. Claim means (1) a bill for services, (2) a line 
item of service, or (3) all services for one recipient within a bill.
    Clean claim means one that can be processed without obtaining 
additional information from the provider of the service or from a third 
party. It includes a claim with errors originating in a State's claims 
system. It does not include a claim from a provider who is under 
investigation for fraud or abuse, or a claim under review for medical 
necessity.
    A shared health facility means any arrangement in which--
    (1) Two or more health care practitioners practice their professions 
at a common physical location;
    (2) The practitioners share common waiting areas, examining rooms, 
treatment rooms, or other space, the services of supporting staff, or 
equipment;
    (3) The practitioners have a person (who may himself be a 
practitioner)--
    (i) Who is in charge of, controls, manages, or supervises 
substantial aspects of the arrangement or operation for the delivery of 
health or medical services at the common physical location other than 
the direct furnishing of professional health care services by the 
practitioners to their patients; or
    (ii) Who makes available to the practitioners the services of 
supporting staff who are not employees of the practitioners; and
    (iii) Who is compensated in whole or in part, for the use of the 
common physical location or related support services, on a basis related 
to amounts charged or collected for the services rendered or ordered at 
the location or on any basis clearly unrelated to the value of the 
services provided by the person; and
    (4) At least one of the practitioners received payments on a fee-
for-service basis under titles V, XVIII, and XIX in an amount exceeding 
$5,000 for any one month during the preceding 12 months or in an 
aggregate amount exceeding $40,000 during the preceding 12 months.

The term does not include a provider of services (as specified in 
Sec. 489.2(b) of this chapter), a health maintenance organization (as 
defined in section 1301(a) of the Public Health Service Act), a hospital 
cooperative shared services organization meeting the requirements of 
section 501(e) of the Internal Revenue Code of 1954, or any public 
entity.
    Third party is defined in Sec. 433.135 of this chapter.
    (c) State plan requirements. A State plan must (1) provide that the 
requirements of paragraphs (d), (e)(2), (f) and (g) of this section are 
met; and
    (2) Specify the definition of a claim, as provided in paragraph (b) 
of this section, to be used in meeting the requirements for timely 
claims payment. The definition may vary by type of service (e.g., 
physician service, hospital service).
    (d) Timely processing of claims. (1) The Medicaid agency must 
require providers to submit all claims no later than 12 months from the 
date of service.
    (2) The agency must pay 90 percent of all clean claims from 
practitioners, who are in individual or group practice or who practice 
in shared health facilities, within 30 days of the date of receipt.
    (3) The agency must pay 99 percent of all clean claims from 
practitioners, who are in individual or group practice or who practice 
in shared health facilities, within 90 days of the date of receipt.
    (4) The agency must pay all other claims within 12 months of the 
date of receipt, except in the following circumstances:
    (i) This time limitation does not apply to retroactive adjustments 
paid to providers who are reimbursed under

[[Page 293]]

a retrospective payment system, as defined in Sec. 447.272 of this part.
    (ii) If a claim for payment under Medicare has been filed in a 
timely manner, the agency may pay a Medicaid claim relating to the same 
services within 6 months after the agency or the provider receives 
notice of the disposition of the Medicare claim.
    (iii) The time limitation does not apply to claims from providers 
under investigation for fraud or abuse.
    (iv) The agency may make payments at any time in accordance with a 
court order, to carry out hearing decisions or agency corrective actions 
taken to resolve a dispute, or to extend the benefits of a hearing 
decision, corrective action, or court order to others in the same 
situation as those directly affected by it.
    (5) The date of receipt is the date the agency receives the claim, 
as indicated by its date stamp on the claim.
    (6) The date of payment is the date of the check or other form of 
payment.
    (e) Waivers. (1) The Administrator may waive the requirements of 
paragraphs (d) (2) and (3) of this section upon request by an agency if 
he finds that the agency has shown good faith in trying to meet them. In 
deciding whether the agency has shown good faith, the Administrator will 
consider whether the agency has received an unusually high volume of 
claims which are not clean claims, and whether the agency is making 
diligent efforts to implement an automated claims processing and 
information retrieval system.
    (2) The agency's request for a waiver must contain a written plan of 
correction specifying all steps it will take to meet the requirements of 
this section.
    (3) The Administrator will review each case and if he approves a 
waiver, will specify its expiration date, based on the State's 
capability and efforts to meet the requirements of this section.
    (f) Prepayment and postpayment claims review. (1) For all claims, 
the agency must conduct prepayment claims review consisting of--
    (i) Verification that the recipient was included in the eligibility 
file and that the provider was authorized to furnish the service at the 
time the service was furnished;
    (ii) Checks that the number of visits and services delivered are 
logically consistent with the recipient's characteristics and 
circumstances, such as type of illness, age, sex, service location;
    (iii) Verification that the claim does not duplicate or conflict 
with one reviewed previously or currently being reviewed;
    (iv) Verification that a payment does not exceed any reimbursement 
rates or limits in the State plan; and
    (v) Checks for third party liability within the requirements of 
Sec. 433.137 of this chapter.
    (2) The agency must conduct post-payment claims review that meets 
the requirements of parts 455 and 456 of this chapter, dealing with 
fraud and utilization control.
    (g) Reports. The agency must provide any reports and documentation 
on compliance with this section that the Administrator may require.


(Secs. 1102 and 1902(a)(37) of the Social Security Act (42 U.S.C. 1302, 
1396a(a)(37)))

[44 FR 30344, May 25, 1979, as amended at 55 FR 1434, Jan. 16, 1990]



Sec. 447.46  Timely claims payment by MCOs.

    (a) Basis and scope. This section implements section 1932(f) of the 
Act by specifying the rules and exceptions for prompt payment of claims 
by MCOs.
    (b) Definitions. ``Claim'' and ``clean claim'' have the meaning 
given those terms in Sec. 447.45.
    (c) Contract requirements. (1) Basic rule. A contract with an MCO 
must provide that the organization will meet the requirements of 
Secs. 447.45(d)(2) and (d)(3), and abide by the specifications of 
Secs. 447.45(d)(5) and (d)(6).
    (2) Exception. The MCO and its providers may, by mutual agreement, 
establish an alternative payment schedule.
    (3) Alternative schedule. Any alternative schedule must be 
stipulated in the contract.

[67 FR 41115, June 14, 2002]

[[Page 294]]

                              Cost Sharing



Sec. 447.50  Cost sharing: Basis and purpose.

    (a) Section 1902(a)(14) of the Act permits States to require certain 
recipients to share some of the costs of Medicaid by imposing upon them 
such payments as enrollment fees, premiums, deductibles, coinsurance, 
co-payments, or similar cost sharing charges. For States that impose 
cost sharing payments, Secs. 447.51 through 447.59 prescribe State plan 
requirements and options for cost sharing, specify the standards and 
conditions under which States may impose cost sharing, set forth minimum 
amounts and the methods for determining maximum amounts, and prescribe 
conditions for FFP that relate to cost sharing requirements.

         enrollment fee, premium or similar cost sharing charge



Sec. 447.51  Requirements and options.

    (a) The plan must provide that the Medicaid agency does not impose 
any enrollment fee, premium, or similar charge upon categorically needy 
individuals, as defined in Secs. 435.4 and 436.3 of this subchapter, for 
any services available under the plan.
    (b) The plan may impose an enrollment fee, premium, or similar 
charge on medically needy individuals, as defined in Secs. 435.4 and 
436.3 of this subchapter, for any services available under the plan.
    (c) For each charge imposed under paragraph (b) of this section, the 
plan must specify--
    (1) The amount of the charge;
    (2) The period of liability for the charge; and
    (3) The consequences for an individual who does not pay.
    (d) The plan must provide that any charge imposed under paragraph 
(b) of this section is related to total gross family income as set forth 
under Sec. 447.52.



Sec. 447.52  Minimum and maximum income-related charges.

    For the purpose of relating the amount of an enrollment fee, 
premium, or similar charge to total gross family income, as required 
under Sec. 447.51(d), the following rules apply:
    (a) Minimum charge. A charge of at least $1.00 per month is imposed 
on each--
    (1) One- or two-person family with monthly gross income of $150 or 
less;
    (2) Three- or four-person family with monthly gross income of $300 
or less; and
    (3) Five- or more-person family with monthly gross income of $350 or 
less.
    (b) Maximum charge. Any charge related to gross family income that 
is above the minimum listed in paragraph (a) of this section may not 
exceed the standards shown in the following table:

                         Maximum Monthly Charge
------------------------------------------------------------------------
                                                        Family size
                                                 -----------------------
         Gross family income (per month)                           5 or
                                                  1 or 2  3 or 4   more
------------------------------------------------------------------------
$150 or less....................................      $1      $1      $1
$151 or $200....................................       2       1       1
$201 to $250....................................       3       1       1
$251 to $300....................................       4       1       1
$301 to $350....................................       5       2       1
$351 to $400....................................       6       3       2
$401 to $450....................................       7       4       3
$451 to $500....................................       8       5       4
$501 to $550....................................       9       6       5
$551 to $600....................................      10       7       6
$601 to $650....................................      11       8       7
$651 to $700....................................      12       9       8
$701 to $750....................................      13      10       9
$751 to $800....................................      14      11      10
$801 to $850....................................      15      12      11
$851 to $900....................................      16      13      12
$901 to $950....................................      17      14      13
$951 to $1,000..................................      18      15      14
More than $1,000................................      19      16      15
------------------------------------------------------------------------

    (c) Income-related charges. The agency must impose an appropriately 
higher charge for each higher level of family income, within the maximum 
amounts specified in paragraph (b) of this section.

[43 FR 45253, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980]

   deductible, coinsurance, co-payment or similar cost-sharing charge



Sec. 447.53  Applicability; specification; multiple charges.

    (a) Basic requirements. Except as specified in paragraph (b) of this 
section, the plan may impose a nominal deductible, coinsurance, 
copayment, or similar charge upon categorically and medically needy 
individuals for any service under the plan.

[[Page 295]]

    (b) Exclusions from cost sharing. The plan may not provide for 
impositions of a deductible, coinsurance, copayment, or similar charge 
upon categorically or medically needy individuals for the following:
    (1) Children. Services furnished to individuals under 18 years of 
age (and, at the option of the State, individuals under 21, 20, or 19 
years of age, or any reasonable category of individuals 18 years of age 
or over but under 21) are excluded from cost sharing.
    (2) Pregnant women. Services furnished to pregnant women if such 
services related to the pregnancy, or to any other medical condition 
which may complicate the pregnancy are excluded from cost sharing 
obligations. These services include routine prenatal care, labor and 
delivery, routine post-partum care, family planning services, 
complications of pregnancy or delivery likely to affect the pregnancy, 
such as hypertension, diabetes, urinary tract infection, and services 
furnished during the postpartum period for conditions or complications 
related to the pregnancy. The postpartum period is the immediate 
postpartum period which begins on the last day of pregnancy and extends 
through the end of the month in which the 60-day period following 
termination of pregnancy ends. States may further exclude from cost 
sharing all services furnished to pregnant women if they desire.
    (3) Institutionalized individuals. Services furnished to any 
individual who is an inpatient in a hospital, long-term care facility, 
or other medical institution if the individual is required (pursuant to 
Sec. 435.725, Sec. 435,733, Sec. 435.832, or Sec. 436.832), as a 
condition of receiving services in the institution, to spend all but a 
minimal amount of his income required for personal needs, for medical 
care costs are excluded from cost sharing.
    (4) Emergency services. Services provided in a hospital, clinic, 
office, or other facility that is equipped to furnish the required care, 
after the sudden onset of a medical condition manifesting itself by 
acute symptoms of sufficient severity (including severe pain) that the 
absence of immediate medical attention could reasonably be expected to 
result in--
    (i) Placing the patient's health in serious jeopardy;
    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part.
    (5) Family planning. Family planning services and supplies furnished 
to individuals of child-bearing age are excluded from cost sharing.
    (c) Prohibition against multiple charges. For any service, the plan 
may not impose more than one type of charge referred to in paragraph (a) 
of this section.
    (d) State plan specifications. For each charge imposed under this 
section, the plan must specify--
    (1) The service for which the charge is made;
    (2) The amount of the charge;
    (3) The basis for determining the charge;
    (4) The basis for determining whether an individual is unable to pay 
the charge and the means by which such an individual will be identified 
to providers; and
    (5) The procedures for implementing and enforcing the exclusions 
from cost sharing found in paragraph (b) of this section.
    (e) No provider may deny services, to an individual who is eligible 
for the services, on account of the individual's inability to pay the 
cost sharing.

[43 FR 45253, Sept. 29, 1978, as amended at 47 FR 21051, May 17, 1982; 
48 FR 5736, Jan. 8, 1983; 50 FR 23013, May 30, 1985; 55 FR 48611, Nov. 
21, 1990; 55 FR 52130, Dec. 19, 1990; 67 FR 41116, June 14, 2002]



Sec. 447.54  Maximum allowable charges.

    (a) Non-institutional services. Except as specified in paragraph 
(b), for non-institutional services, the plan must provide that--
    (1) Any deductible it imposes does not exceed $2.00 per month per 
family for each period of Medicaid eligibility. For example, if Medicaid 
eligibility is certified for a 3-month period, the maximum deductible 
which may be imposed on a family for that period of eligibility is 
$6.00;
    (2) Any coinsurance rate it imposes does not exceed 5 percent of the 
payment the agency makes for the services; and

[[Page 296]]

    (3) Any co-payments it imposes do not exceed the amounts shown in 
the following table:

------------------------------------------------------------------------
                                                                Maximum
                                                               copayment
               States payment for the service                 chargeable
                                                                  to
                                                               recipient
------------------------------------------------------------------------
$10 or less.................................................        $.50
$10.01 to $25...............................................        1.00
$25.01 to $50...............................................        2.00
$50.01 or more..............................................        3.00
------------------------------------------------------------------------

    (b) Waiver of the requirement that cost sharing amounts be nominal. 
Upon approval from CMS, the requirement that cost sharing charges must 
be nominal may be waived, in accordance with section 431.55(g) for 
nonemergency services furnished in a hospital emergency room.
    (c) Institutional services. For institutional services, the plan 
must provide that the maximum deductible, coinsurance or co-payment 
charge for each admission does not exceed 50 percent of the payment the 
agency makes for the first day of care in the institution.
    (d) Cumulative maximum. The plan may provide for a cumulative 
maximum amount for all deductible, coinsurance or co-payment charges 
that it imposes on any family during a specified period of time.

[48 FR 5736, Jan. 8, 1983]



Sec. 447.55  Standard co-payment.

    (a) The plan may provide for a standard, or fixed, co-payment amount 
for any service.
    (b) This standard copayment amount for any service may be determined 
by applying the maximum co-payment amounts specified in Sec. 447.54 (a) 
and (b) to the agency's average or typical payment for that service. For 
example, if the agency's typical payment for prescribed drugs is $4 to 
$5 per prescription, the agency might set a standard copayment of $0.50 
per prescription.



Sec. 447.56  Income-related charges.

    Subject to the maximum allowable charges specified in Sec. 447.54 
(a) and (b), the plan may provide for income-related deductible, 
coinsurance or co-payment charges. For example, an agency may impose a 
higher charge on medically needy recipients than it imposes upon 
categorically needy recipients.



Sec. 447.57  Restrictions on payments to providers.

    (a) The plan must provide that the agency does not increase the 
payment it makes to any provider to offset uncollected amounts for 
deductibles, coinsurance, copayments or similar charges that the 
provider has waived or are uncollectable, except as permitted under 
paragraph (b) of this section.
    (b) For those providers that the agency reimburses under Medicare 
reasonable cost reimbursement principles, in accordance with subpart B 
of this part, an agency may increase its payment to offset uncollected 
deductible, coinsurance, copayment, or similar charges that are bad 
debts of providers.



Sec. 447.58  Payments to prepaid capitation organizations.

     If the agency contracts with a prepaid capitation organization that 
does not impose the agency's deductibles, coinsurance, co-payments or 
similar charges on its recipient members, the plan must provide that the 
agency calculates its payments to the organization as if those cost 
sharing charges were collected.

[48 FR 5736, Jan. 8, 1983, as amended at 67 FR 41116, June 14, 2002]

                     federal financial participation



Sec. 447.59  FFP: Conditions relating to cost sharing.

    No FFP in the State's expenditures for services is available for--
    (a) Any cost sharing amounts that recipients should have paid as 
enrollment fees, premiums, deductibles, coinsurance, copayments, or 
similar charges under Secs. 447.50 through 447.58 (except for amounts 
that the agency pays as bad debts of providers under Sec. 447.57); and
    (b) Any amounts paid by the agency on behalf of ineligible 
individuals, whether or not the individual had paid any required premium 
or enrollment fee.



Sec. 447.60  Cost-sharing requirements for services furnished by MCOs.

    Contracts with MCOs must provide that any cost-sharing charges the 
MCO

[[Page 297]]

imposes on Medicaid enrollees are in accordance with the requirements 
set forth in Secs. 447.50 and 447.53 through 447.58 for cost-sharing 
charges imposed by the State agency.

[67 FR 41116, June 14, 2002]



Sec. 447.88  Options for claiming FFP payment for section 1920A presumptive eligibility medical assistance payments.

    (a) The FMAP rate for medical assistance payments made available to 
a child during a presumptive eligibility period under section 1920A of 
the Act is the regular FMAP under title XIX, based on the category of 
medical assistance; that is, the enhanced FMAP is not available for 
section 1920A presumptive eligibility expenditures.
    (b) States have the following 3 options for identifying Medicaid 
section 1920A presumptive eligibility expenditures and the application 
of payments for those expenditures:
    (1) A State may identify Medicaid section 1920A presumptive 
eligibility expenditures in the quarter expended with no further 
adjustment based on the results of a subsequent actual eligibility 
determination (if any).
    (2) A State may identify Medicaid section 1920A presumptive 
eligibility expenditures in the quarter expended but may adjust reported 
expenditures based on results of the actual eligibility determination 
(if any) to reflect the actual eligibility status of the individual, if 
other than presumptively eligible.
    (3) A State may elect to delay submission of claims for payments of 
section 1920A presumptive eligibility expenditures until after the 
actual eligibility determination (if any) is made and, at that time 
identify such expenditures based on the actual eligibility status of 
individuals if other than presumptively eligible. At that time, the 
State would, as appropriate, recategorize the medical assistance 
expenditures made during the section 1920A presumptive eligibility 
period based on the results of the actual eligibility determination, and 
claim them appropriately.

[65 FR 33622, May 24, 2000]



             Subpart B--Payment Methods: General Provisions



Sec. 447.200  Basis and purpose.

    This subpart prescribes State plan requirements for setting payment 
rates to implement, in part, section 1902(a)(30) of the Act, which 
requires that payments for services be consistent with efficiency, 
economy, and quality of care.

[46 FR 48560, Oct. 1, 1981]



Sec. 447.201  State plan requirements.

    (a) A State plan must provide that the requirements in this subpart 
are met.
    (b) The plan must describe the policy and the methods to be used in 
setting payment rates for each type of service included in the State's 
Medicaid program.



Sec. 447.202  Audits.

    The Medicaid agency must assure appropriate audit of records if 
payment is based on costs of services or on a fee plus cost of 
materials.



Sec. 447.203  Documentation of payment rates.

    (a) The agency must maintain documentation of payment rates and make 
it available to HHS upon request.
    (b) The agency must record, in State manuals or other official 
files, the following information for increases in payment rates for 
individual practitioner services:
    (1) An estimate of the percentile of the range of customary charges 
to which the revised payment structure equates and a description of the 
methods used to make the estimate.
    (2) An estimate of the composite average percentage increase of the 
revised payment rates over the preceding rates.



Sec. 447.204  Encouragement of provider participation.

    The agency's payments must be sufficient to enlist enough providers 
so that services under the plan are available to recipients at least to 
the extent that those services are available to the general population.

[[Page 298]]



Sec. 447.205  Public notice of changes in Statewide methods and standards for setting payment rates.

    (a) When notice is required. Except as specified in paragraph (b) of 
this section, the agency must provide public notice of any significant 
proposed change in its methods and standards for setting payment rates 
for services.
    (b) When notice is not required. Notice is not required if--
    (1) The change is being made to conform to Medicare methods or 
levels of reimbursement;
    (2) The change is required by court order; or
    (3) The change is based on changes in wholesalers' or manufacturers' 
prices of drugs or materials, if the agency's reimbursement system is 
based on material cost plus a professional fee.
    (c) Content of notice. The notice must--
    (1) Describe the proposed change in methods and standards;
    (2) Give an estimate of any expected increase or decrease in annual 
aggregate expenditures;
    (3) Explain why the agency is changing its methods and standards;
    (4) Identify a local agency in each county (such as the social 
services agency or health department) where copies of the proposed 
changes are available for public review;
    (5) Give an address where written comments may be sent and reviewed 
by the public; and
    (6) If there are public hearings, give the location, date and time 
for hearings or tell how this information may be obtained.
    (d) Publication of notice. The notice must--
    (1) Be published before the proposed effective date of the change; 
and
    (2) Appear as a public announcement in one of the following 
publications:
    (i) A State register similar to the Federal Register.
    (ii) The newspaper of widest circulation in each city with a 
population of 50,000 or more.
    (iii) The newspaper of widest circulation in the State, if there is 
no city with a population of 50,000 or more.

[46 FR 58680, Dec. 3, 1981; 47 FR 8567, Mar. 1, 1982, as amended at 48 
FR 56057, Dec. 19, 1983]



 Subpart C--Payment for Inpatient Hospital and Long-Term Care Facility 
                                Services

    Source: 46 FR 47971, Sept. 30, 1981, unless otherwise noted.



Sec. 447.250  Basis and purpose.

    (a) This subpart implements section 1902(a)(13)(A) of the Act, which 
requires that the State plan provide for payment for hospital and long-
term care facility services through the use of rates that the State 
finds, and makes assurances satisfactory to the Secretary, are 
reasonable and adequate to meet the costs that must be incurred by 
efficiently and economically operated facilities to provide services in 
conformity with State and Federal laws, regulations, and quality and 
safety standards.
    (b) Section 447.253(a)(2) implements section 1902(a)(30) of the Act, 
which requires that payments be consistent with efficiency, economy, and 
quality of care;
    (c) Sections 447.253 (c) and (d) implement sections 1902(a)(13)(B) 
and 1902(a)(13)(C) of the Act, which require a State Medicaid agency to 
make certain assurances to the Secretary regarding increases in payments 
resulting solely from changes in ownerships of hospitals, NFs, and ICFs/
MR.
    (d) Section 447.271 implements section 1903(i)(3) of the Act, which 
requires that payments for inpatient hospital services not exceed the 
hospital's customary charges.
    (e) Section 447.280 implements section 1913(b) of the Act, which 
concerns reimbursement for long-term care services furnished by swing-
bed hospitals.

[48 FR 56057, Dec. 19, 1983, as amended at 57 FR 43921, Sept. 23, 1992]

                              Payment Rates



Sec. 447.251  Definitions.

    For the purposes of this subpart--
    Long-term care facility services means intermediate care facility 
services for the mentally retarded (ICF/MR) and nursing facility (NF) 
services.
    Provider means an institution that furnishes inpatient hospital 
services or

[[Page 299]]

an institution that furnishes long-term care facility services.

[46 FR 47971, Sept. 30, 1981, as amended at 54 FR 5359, Feb. 2, 1989; 56 
FR 48867, Sept. 26, 1991]



Sec. 447.252  State plan requirements.

    (a) The plan must provide that the requirements of this subpart are 
met.
    (b) The plan must specify comprehensively the methods and standards 
used by the agency to set payment rates in a manner consistent with 
Sec. 430.10 of this chapter.
    (c) If the agency chooses to apply the cost limits established under 
Medicare (see Sec. 413.30 of this chapter) on an individual provider 
basis, the plan must specify this requirement.

(Approved by the Office of Management and Budget under control number 
0938-0193)

[48 FR 56058, Dec. 19, 1983, as amended at 51 FR 34833, Sept. 30, 1986]



Sec. 447.253  Other requirements.

    (a) State assurances. In order to receive CMS approval of a State 
plan change in payment methods and standards, the Medicaid agency must 
make assurances satisfactory to CMS that the requirements set forth in 
paragraphs (b) through (i) of this section are being met, must submit 
the related information required by Sec. 447.255 of this subpart, and 
must comply with all other requirements of this subpart.
    (b) Findings. Whenever the Medicaid agency makes a change in its 
methods and standards, but not less often than annually, the agency must 
make the following findings:
    (1) Payment rates. (i) The Medicaid agency pays for inpatient 
hospital services and long-term care facility services through the use 
of rates that are reasonable and adequate to meet the costs that must be 
incurred by efficiently and economically operated providers to provide 
services in conformity with applicable State and Federal laws, 
regulations, and quality and safety standards.
    (ii) With respect to inpatient hospital services--
    (A) The methods and standards used to determine payment rates take 
into account the situation of hospitals which serve a disproportionate 
number of low income patients with special needs;
    (B) If a State elects in its State plan to cover inappropriate level 
of care services (that is, services furnished to hospital inpatients who 
require a lower covered level of care such as skilled nursing or 
intermediate care services) under conditions similar to those described 
in section 1861(v)(1)(G) of the Act, the methods and standards used to 
determine payment rates must specify that the payments for this type of 
care must be made at rates lower than those for inpatient hospital level 
of care services, reflecting the level of care actually received, in a 
manner consistent with section 1861(v)(1)(G) of the Act; and
    (C) The payment rates are adequate to assure that recipients have 
reasonable access, taking into account geographic location and 
reasonable travel time, to inpatient hospital services of adequate 
quality.
    (iii) With respect to nursing facility services--
    (A) Except for preadmission screening for individuals with mental 
illness and mental retardation under Sec. 483.20(f) of this Chapter, the 
methods and standards used to determine payment rates take into account 
the costs of complying with the requirements of part 483 subpart B of 
this chapter;
    (B) The methods and standards used to determine payment rates 
provide for an appropriate reduction to take into account the lower 
costs (if any) of the facility for nursing care under a waiver of the 
requirement in Sec. 483.30(c) of this Chapter to provide licensed nurses 
on a 24-hour basis;
    (C) The State establishes procedures under which the data and 
methodology used in establishing payment rates are made available to the 
public.
    (2) Upper payment limits. The agency's proposed payment rate will 
not exceed the upper payment limits as specified in Sec. 447.272.
    (c) Changes in ownership of hospitals. In determining payment when 
there has been a sale or transfer of the assets of a hospital, the 
State's methods and standards must provide that payment rates can 
reasonably be expected not to increase in the aggregate solely as a 
result of changes of ownership, more

[[Page 300]]

than the payments would increase under Medicare under Secs. 413.130, 
413.134, 413.153, and 413.157 of this chapter, insofar as these sections 
affect payments for depreciation, interest on capital indebtedness, 
return on equity capital (if applicable), acquisition costs for which 
payments were previously made to prior owners, and the recapture of 
depreciation.
    (d) Changes in ownership of NFs and ICFs/MR. In determining payment 
when there has been a sale or transfer of assets of an NF or ICF/MR, the 
State's methods and standards must provide the following depending upon 
the date of the transfer.
    (1) For transfers on or after July 18, 1984 but before October 1, 
1985, the State's methods and standards must provide that payment rates 
can reasonably be expected not to increase in the aggregate, solely as 
the result of a change in ownership, more than payments would increase 
under Medicare under Secs. 413.130, 413.134, 413.153 and 413.157 of this 
chapter, insofar as these sections affect payment for depreciation, 
interest on capital indebtedness, return on equity capital (if 
applicable), acquisition costs for which payments were previously made 
to prior owners, and the recapture of depreciation.
    (2) For transfers on or after October 1, 1985, the State's methods 
and standards must provide that the valuation of capital assets for 
purposes of determining payment rates for NFs and ICFs/MR is not to 
increase (as measured from the date of acquisition by the seller to the 
date of the change of ownership) solely as a result of a change of 
ownership, by more than the lesser of--
    (i) One-half of the percentage increase (as measured from the date 
of acquisition by the seller to the date of the change of ownership, or, 
if necessary, as extrapolated retrospectively by the Secretary) in the 
Dodge construction index applied in the aggregate with respect to those 
facilities that have undergone a change of ownership during the fiscal 
year; or
    (ii) One-half of the percentage increase (as measured from the date 
of acquisition by the seller to the date of the change of ownership) in 
the Consumer Price Index for All Urban Consumers (CPI-U) (United States 
city average) applied in the aggregate with respect to those facilities 
that have undergone a change of ownership during the fiscal year.
    (e) Provider appeals. The Medicaid agency must provide an appeals or 
exception procedure that allows individual providers an opportunity to 
submit additional evidence and receive prompt administrative review, 
with respect to such issues as the agency determines appropriate, of 
payment rates.
    (f) Uniform cost reporting. The Medicaid agency must provide for the 
filing of uniform cost reports by each participating provider.
    (g) Audit requirements. The Medicaid agency must provide for 
periodic audits of the financial and statistical records of 
participating providers.
    (h) Public notice. The Medicaid agency must provide that it has 
complied with the public notice requirements in Sec. 447.205 of this 
part when it is proposing significant changes to its methods or 
standards for setting payment rates for inpatient hospital or LTC 
facility services.
    (i) Rates paid. The Medicaid agency must pay for inpatient hospital 
and long term care services using rates determined in accordance with 
methods and standards specified in an approved State plan.

[48 FR 56057, Dec. 19, 1983, as amended at 52 FR 28147, July 28, 1987; 
54 FR 5359, Feb. 2, 1989; 57 FR 43921, Sept. 23, 1992]



Sec. 447.255  Related information.

    The Medicaid agency must submit, with the assurances described in 
Sec. 447.253(a), the following information:
    (a) The amount of the estimated average proposed payment rate for 
each type of provider (hospital, ICF/MR, or nursing facility), and the 
amount by which that estimated average rate increased or decreased 
relative to the average payment rate in effect for each type or provider 
for the immediately preceding rate period;
    (b) An estimate of the short-term and, to the extent feasible, long-
term effect the change in the estimated average rate will have on--
    (1) The availability of services on a Statewide and geographic area 
basis;

[[Page 301]]

    (2) The type of care furnished;
    (3) The extent of provider participation; and
    (4) The degree to which costs are covered in hospitals that serve a 
disproportionate number of low income patients with special needs.

[48 FR 56058, Dec. 19, 1983, as amended at 54 FR 5359, Feb. 2, 1989; 56 
FR 48867, Sept. 26, 1991; 57 FR 43924, Sept. 23, 1992; 57 FR 46431, Oct. 
8, 1992]



Sec. 447.256  Procedures for CMS action on assurances and State plan amendments.

    (a) Criteria for approval. (1) CMS approval action on State plans 
and State plan amendments, is taken in accordance with subpart B of part 
430 of this chapter and sections 1116, 1902(b) and 1915(f) of the Act.
    (2) In the case of State plan and plan amendment changes in payment 
methods and standards, CMS bases its approval on the acceptability of 
the Medicaid agency's assurances that the requirements of Sec. 447.253 
have been met, and the State's compliance with the other requirements of 
this subpart.
    (b) Time limit. CMS will send a notice to the agency of its 
determination as to whether the assurances regarding a State plan 
amendment are acceptable within 90 days of the date CMS receives the 
assurances described in Sec. 447.253, and the related information 
described in Sec. 447.255 of this subpart. If CMS does not send a notice 
to the agency of its determination within this time limit and the 
provisions in paragraph (a) of this section are met, the assurances and/
or the State plan amendment will be deemed accepted and approved.
    (c) Effective date. A State plan amendment that is approved will 
become effective not earlier than the first day of the calendar quarter 
in which an approvable amendment is submitted in accordance with 
Sec. 430.20 of this chapter and 447.253.

[48 FR 56058, Dec. 19, 1983, as amended at 52 FR 28147, July 28, 1987]

                     Federal Financial Participation



Sec. 447.257  FFP: Conditions relating to institutional reimbursement.

    FFP is not available for a State's expenditures for hospital 
inpatient or long-term care facility services that are in excess of the 
amounts allowable under this subpart.

[52 FR 28147, July 28, 1987]

                              Upper Limits



Sec. 447.271  Upper limits based on customary charges.

    (a) Except as provided in paragraph (b) of this section, the agency 
may not pay a provider more for inpatient hospital services under 
Medicaid than the provider's customary charges to the general public for 
the services.
    (b) The agency may pay a public provider that provides services free 
or at a nominal charge at the same rate that would be used if the 
provider's charges were equal to or greater than its costs.



Sec. 447.272  Inpatient services: Application of upper payment limits.

    (a) Scope. This section applies to rates set by the agency to pay 
for inpatient services furnished by hospitals, NFs, and ICFs/MR within 
one of the following categories:
    (1) State government-owned or operated facilities (that is, all 
facilities that are either owned or operated by the State).
    (2) Non-State government-owned or operated facilities (that is, all 
government facilities that are neither owned nor operated by the State).
    (3) Privately-owned and operated facilities.
    (b) General rules. (1) Upper payment limit refers to a reasonable 
estimate of the amount that would be paid for the services furnished by 
the group of facilities under Medicare payment principles in subchapter 
B of this chapter.
    (2) Except as provided in paragraph (c) of this section, aggregate 
Medicaid payments to a group of facilities within one of the categories 
described in paragraph (a) of this section may not exceed the upper 
payment limit described in paragraph (b)(1) of this section.
    (c) Exceptions--(1) Indian Health Services and tribal facilities. 
The limitation in paragraph (b) of this section does not apply to Indian 
Health Services facilities and tribal facilities that are

[[Page 302]]

funded through the Indian Self-Determination and Education Assistance 
Act (Public Law 93-638).
    (2) Disproportionate share hospitals. The limitation in paragraph 
(b) of this section does not apply to payment adjustments made under 
section 1923 of the Act that are made under a State plan to hospitals 
found to serve a disproportionate number of low-income patients with 
special needs as provided in section 1902(a)(13)(A)(iv) of the Act. 
Disproportionate share hospital (DSH) payments are subject to the 
following limits:
    (i) The aggregate DSH limit using the Federal share of the DSH limit 
under section 1923(f) of the Act.
    (ii) The hospital-specific DSH limit in section 1923(g) of the Act.
    (iii) The aggregate DSH limit for institutions for mental disease 
(IMDs) under section 1923(h) of the Act.
    (d) Compliance dates. Except as permitted under paragraph (e) of 
this section, a State must comply with the upper payment limit described 
in paragraph (b)(1) of this section by one of the following dates:
    (1) For non-State government-owned or operated hospitals--March 19, 
2002.
    (2) For all other facilities--March 13, 2001.
    (e) Transition periods--(1) Definitions. For purposes of this 
paragraph, the following definitions apply:
    (i) Transition period refers to the period of time beginning March 
13, 2001 through the end of one of the schedules permitted under 
paragraph (e)(2)(ii) of this section.
    (ii) UPL stands for the upper payment limit described in paragraph 
(b)(1) of this section for the referenced year.
    (iii) X stands for the payments to a specific group of providers 
described in paragraphs (a)(2) and (a)(3) of this section in State FY 
2000 that exceeded the amount that would have been under the upper 
payment limit described in paragraph (b) of this section if that limit 
had been applied to that year.
    (2) General rules. (i) The amount that a State's payment exceeded 
the upper payment limit described in paragraph (b) of this section must 
not increase.
    (ii) A State with an approved State plan amendment payment provision 
effective on one of the following dates and that makes payments that 
exceed the upper payment limit described in paragraph (b) of this 
section to providers described in paragraphs (a)(2) and (a)(3) of this 
section may follow the respective transition schedule:
    (A) For State plan provisions that are effective after September 30, 
1999 and were approved before January 22, 2001, payments may exceed the 
upper payment limit in paragraph (b) of this section until September 30, 
2002.
    (B) For approved plan provisions that are effective after October 1, 
1992 and before October 1, 1999, payments during the transition period 
may not exceed the following--
    (1) For State FY 2003: State FY 2003 UPL + .75X.
    (2) For State FY 2004: State FY 2004 UPL + .50X.
    (3) For State FY 2005: State FY 2005 UPL + .25X.
    (4) For State FY 2006; State FY 2006 UPL.
    (C) For approved plan provisions that are effective on or before 
October 1, 1992, payments during the transition period may not exceed 
the following:
    (1) For State FY 2004: State FY 2004 UPL + .85X.
    (2) For State FY 2005: State FY 2005 UPL + .70X.
    (3) For State FY 2006: State FY 2006 UPL + .55X.
    (4) For State FY 2007: State FY 2007 UPL + .40X.
    (5) For State FY 2008: State FY 2008 UPL + .25X.
    (6) For the portion of State FY 2009 before October 1, 2008: State 
FY 2009 UPL + .10X.
    (7) Beginning October 1, 2008: UPL described in paragraph (b) of 
this section.
    (D) For State plan provisions that were effective after September 
30, 1999, submitted to CMS before March 13, 2001, and approved by CMS 
after January 21, 2001, payments may exceed the limit in paragraph (b) 
of this section until the later of November 5, 2001, or 1 year from the 
approved effective date of the State plan provision.
    (iii) When State FY 2003 begins after September 30, 2002, the 
reduction schedule in paragraphs (e)(2)(ii)(C)(1) through 
(e)(2)(ii)(C)(7) will begin on State FY 2003.

[[Page 303]]

    (iv) If a State meets the criteria in paragraph (e)(2)(ii) of this 
section and its State plan amendment expires before the end of the 
applicable transition period, the State may continue making payments 
that exceed the UPL described in paragraph (b) of this section in 
accordance with the applicable transition schedule described in 
paragraph (e)(2)(ii) of this section.
    (v) A State with an approved State plan amendment payment provision 
that makes payments up to 150 percent of the UPL described in paragraph 
(b)(1) of this section to providers described in paragraph (a)(2) of 
this section does not qualify for a transition period.
    (f) Reporting requirements for payments during the transition 
periods. States that are eligible for a transition period described in 
paragraph (e) of this section, and that make payments that exceed the 
upper payment limit under paragraph (b)(1) of this section, must report 
annually the following information to CMS:
    (1) The total Medicaid payments made to each facility for services 
furnished during the entire State fiscal year.
    (2) A reasonable estimate of the amount that would be paid for the 
services furnished by the facility under Medicare payment principles.

[66 FR 3175, Jan. 12, 2001, as amended at 66 FR 46399, Sept. 5, 2001; 67 
FR 2610, Jan. 18, 2002]

                           Swing-Bed Hospitals



Sec. 447.280  Hospital providers of NF services (swing-bed hospitals).

    (a) General rule. If the State plan provides for NF services 
furnished by a swing-bed hospital, as specified in Secs. 440.40(a) and 
440.150(f) of this chapter, the methods and standards used to determine 
payment rates for routine NF services must--
    (1) Provide for payment at the average rate per patient day paid to 
NFs, as applicable, for routine services furnished during the previous 
calendar year; or
    (2) Meet the State plan and payment requirements described in this 
subpart, as applicable.
    (b) Application of the rule. The payment methodology used by a State 
to set payment rates for routine NF services must apply to all swing-bed 
hospitals in the State.

[59 FR 56237, Nov. 10, 1994]

Subpart D [Reserved]



       Subpart E--Payment Adjustments for Hospitals That Serve a 
             Disproportionate Number of Low-Income Patients

    Source: 57 FR 55143, Nov. 24, 1992, unless otherwise noted.



Sec. 447.296  Limitations on aggregate payments for disproportionate share hospitals for the period January 1, 1992 through September 30, 1992.

    (a) The provisions of this section apply to the 50 States and the 
District of Columbia, but not to any State whose entire Medicaid program 
is operated under a waiver granted under section 1115 of the Act.
    (b) For the period January 1, 1992 through September 30, 1992, FFP 
is available for aggregate payments to hospitals that serve a 
disproprotionate number of low-income patients with special needs only 
if the payments are made in accordance with sections 1902(a)(13)(A) and 
1923 of the Act, and with one of the following:
    (1) An approved State plan in effect as of September 30, 1991.
    (2) A State plan amendment submitted to CMS by September 30, 1991.
    (3) A State plan amendment, or modification thereof, submitted to 
CMS between October 1, 1991 and November 26, 1991, if the amendment, or 
modification thereof, was intended to limit the State's definition of 
disproportionate share hospitals to those hospitals with Medicaid 
inpatient utilization rates or low-income utilization rates (as defined 
in section 1923 (b) of the Act) at or above the statewide arithmetic 
mean.
    (4) A methodology for disproportionate share hospital payments that 
was established and in effect as of September 30, 1991, or in accordance 
with a

[[Page 304]]

State law enacted or State regulation adopted as of September 30, 1991.
    (5) A State plan amendment submitted to CMS by September 30, 1992 
that increases aggregate disproportionate share hospitals payments in 
order to meet the minimum payment adjustments required by section 
1923(c)(1) of the Act. The minimum payment adjustment is the amount 
required by the Medicare methodology described in section 1923(c)(1) of 
the Act for those hospitals that satisfy the minimum Federal definition 
of a disproportionate share hospital in section 1923(b) of the Act.
    (6) A State plan amendment submitted to CMS by September 30, 1992 
that provides for a redistribution of disproportionate share hospital 
payments within the State without raising total payments compared to the 
previously approved State plan. CMS will approve the amendment only if 
the State submits written documentation that demonstrates to CMS that 
the aggregate payments that will be made after the redistribution are no 
greater than those payments made before the redistribution.
    (7) A State plan amendment submitted to CMS by September 30, 1992 
that provides for a reduction in disproportionate share hospital 
payments.



Sec. 447.297  Limitations on aggregate payments for disproportionate share hospitals beginning October 1, 1992.

    (a) Applicability. The provisions of this section apply to the 50 
States and the District of Columbia, but not to any State whose entire 
Medicaid program is operated under a waiver granted under section 1115 
of the Act.
    (b) National payment target. The national payment target for 
disproportionate share hospital (DSH) payments for any Federal fiscal 
year is equal to 12 percent of the total medical assistance expenditures 
that will be made during the Federal fiscal year under State plans, 
excluding administrative costs. A preliminary national expenditure 
target will be published by CMS prior to October 1 of each year. This 
preliminary national expenditure target will be superseded by a final 
national expenditure target published by April 1 of each Federal fiscal 
year, as specified in paragraph (d) of this section.
    (c) State disproportionate share hospital allotments. Prior to 
October 1 of each Federal fiscal year, CMS will publish in the Federal 
Register preliminary State DSH allotments for each State. These 
preliminary State DSH allotments will be determined using the most 
current applicable actual and estimated State expenditure information as 
reported to CMS and adjusted by CMS as may be necessary using the 
methodology described in Sec. 447.298. CMS will publish final State DSH 
allotments by April 1 of each Federal fiscal year, as described in 
paragraph (d) of this section.
    (d) Final national disproportionate share hospitals expenditure 
target and State disproportionate share hospitals allotments.
    (1) CMS will revise the preliminary national expenditure target and 
the preliminary State DSH allotments by April 1 of each Federal fiscal 
year. The final national DSH expenditure target and State DSH allotments 
will be based on the most current applicable actual and estimated 
expenditure information reported to CMS and adjusted by CMS as may be 
necessary immediately prior to the April 1 publication date. The final 
national expenditure target and State DSH allotments will not be 
recalculated for that Federal fiscal year based upon any subsequent 
actual or estimated expenditure information reported to CMS.
    (2) If CMS determines that at any time a State has exceeded its 
final DSH allotment for a Federal fiscal year, FFP attributable to the 
excess DSH expenditures will be disallowed.
    (3) If a State's actual DSH expenditures applicable to a Federal 
fiscal year are less than its final State DSH allotment for that Federal 
fiscal year, the State is permitted, to the extent allowed by its 
approved State plan, to make additional DSH expenditures applicable to 
that Federal fiscal year up to the amount of its final DSH allotment for 
that Federal fiscal year.
    (e) Publication of limits.
    (1) Before the beginning of each Federal fiscal year, CMS will 
publish in the Federal Register--

[[Page 305]]

    (i) A preliminary national DSH expenditure target for the Federal 
fiscal year; and
    (ii) A preliminary DSH allotment for each State for the Federal 
fiscal year.
    (2) The final national DSH expenditure target and State DSH 
allotments will be published in the Federal Register by April 1 of each 
Federal fiscal year.

[57 FR 55143, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec. 447.298  State disproportionate share hospital allotments.

    (a) Calculation of State's base allotment for Federal fiscal year 
1993.
    (1) For Federal fiscal year 1993, CMS will calculate for each State 
a DSH allotment, using the State's ``base allotment.'' The State's base 
allotment is the greater of:
    (i) The total amount of the State's projected DSH payments for 
Federal fiscal year 1992 under the State plan applicable to Federal 
fiscal year 1992, calculated in accordance with paragraph (a)(2) of this 
section; or
    (ii) $1,000,000.
    (2) In calculating the State's DSH payments applicable to Federal 
fiscal year 1992, CMS will derive amounts from payments applicable to 
the period of October 1, 1991, through September 30, 1992, under State 
plans or plan amendments that meet the requirements specified in 
Sec. 447.296(b). The calculation will not include--
    (i) DSH payment adjustments made by the State applicable to the 
period October 1, 1991 through December 31, 1991 under State plans or 
plan amendments that do not meet the criteria described in Sec. 447.296; 
and
    (ii) Retroactive DSH payments made in 1992 that are not applicable 
to Federal fiscal year 1992.
    (3) CMS will calculate a percentage for each State by dividing the 
DSH base allotment by the total unadjusted medical assistance 
expenditures, excluding administrative costs, made during Federal fiscal 
year 1992. On the basis of this percentage, CMS will classify each State 
as a ``high-DSH'' or ``low-DSH'' State.
    (i) If the State's base allotment exceeded 12 percent of its total 
unadjusted medical assistance expenditures made under the State plan in 
Federal fiscal year 1992, CMS will classify the State as a ``high-DSH'' 
State.
    (ii) If the State's base allotment was 12 percent or less of its 
total unadjusted medical assistance expenditures made under the State 
plan in Federal fiscal year 1992, CMS will classify the State as a 
``low-DSH'' State.
    (b) State disproportionate share hospital allotments for Federal 
fiscal year 1993. (1) For Federal fiscal year 1993, CMS will calculate a 
DSH allotment for each low-DSH State that equals the State's base 
allotment described under paragraph (a) of this section, increased by 
State growth, as specified in paragraph (d) of this section.
    (2) For high-DSH States, the dollar amount of DSH payments in 
Federal fiscal year 1993 may not exceed the dollar amount of DSH 
payments applicable to Federal fiscal year 1992 (that is, the State base 
allotment).
    (c) State disproportionate share hospital allotment for Federal 
fiscal years 1994 and after. For Federal fiscal years 1994 and after--
    (1) For low-DSH States, CMS will calculate the DSH allotment for 
each Federal fiscal year by increasing the prior year's State DSHs 
allotment by--
    (i) State growth, as specified in paragraph (d) of this section; and
    (ii) A supplemental amount, if applicable, as described in paragraph 
(e) of this section.
    (2) For high-DSH States, the dollar amount of DSH payments 
applicable to any Federal fiscal year may not exceed the dollar amount 
of payments applicable to Federal fiscal year 1992 (that is, the State 
base allotment). This payment limitation will apply until the Federal 
fiscal year in which the State's DSH payments applicable to that Federal 
fiscal year, expressed as a percentage of the State's total unadjusted 
medical assistance expenditures in that Federal fiscal year, equal 12 
percent or less. When a high-DSH State's percentage equals 12 percent or 
less, the State will be reclassified as a low-DSH State.
    (d) State growth. (1) The State growth for a State in a Federal 
fiscal year is equal to the product of--
    (i) The growth factor that is CMS's projected percentage increase in 
the

[[Page 306]]

State's total unadjusted medical assistance expenditures (including 
administrative costs) relative to the corresponding amount in the 
previous year; and
    (ii) The State's prior year DSH allotment.
    (2) If the growth factor is zero or is negative, the State growth is 
zero.
    (3) If a low-DSH State experiences a level of negative growth to the 
extent that its previous Federal fiscal year's DSH allotment would be 
more than 12 percent of its current Federal fiscal year's total 
unadjusted medical assistance expenditures (excluding administrative 
costs), the low-DSH State's previous year's DSH allotment will be 
reduced to the extent necessary to maintain the individual low-DSH 
State's 12-percent limit and that amount will become the low-DSH State's 
DSH allotment for the current Federal fiscal year. In no Federal fiscal 
year will a low-DSH State's DSH allotment be allowed to exceed its 
individual State 12-percent limit.
    (e) Supplemental amount available for low-DSH States.
    (1) A supplemental amount is the State's share of a pool of money 
(referred to as a redistribution pool).
    (2) CMS will calculate the redistribution pool for the appropriate 
Federal fiscal year by subtracting from the projected national DSH 
expenditure target the following:
    (i) The total of the State DSH base allotments for all high-DSH 
States;
    (ii) The total of the previous year's State DSH allotments for all 
low-DSH States;
    (iii) The State growth amount for all low-DSH States; and
    (iv) The total amount of additional DSH payment adjustments made in 
order to meet the minimum payment adjustments required under section 
1923(c)(l) of the Act, which are made in accordance with 
Sec. 447.296(b)(5).
    (3) CMS will determine the percent of the redistribution pool for 
each low-DSH State on the basis of each State's relative share of the 
total unadjusted medical assistance expenditures for the Federal fiscal 
year compared to the total unadjusted medical assistance expenditures 
for the Federal fiscal year projected to be made by all low-DSH States. 
The percent of the redistribution pool that each State will receive is 
equal to the State's total unadjusted medical assistance expenditures 
divided by the total unadjusted medical assistance expenditures for all 
low-DSH States.
    (4) CMS will not provide any low-DSH State a supplemental amount 
that would result in the State's total DSH allotment exceeding 12 
percent of its projected total unadjusted medical assistance 
expenditures. CMS will reallocate any supplemental amounts not allocated 
to States because of this 12-percent limitation to other low-DSH States 
in accordance with the percentage determined in paragraph (e)(3) of this 
section.
    (5) CMS will not reallocate to low-DSH States the difference between 
any State's actual DSH expenditures applicable to a Federal fiscal year 
and its State DSH allotment applicable to that Federal fiscal year. 
Thus, any unspent DSH allotment may not be reallocated.
    (f) Special provision. Any increases in a State's aggregate 
disproportionate payments, that are made to meet the minimum payment 
requirements specified in Sec. 447.296(b)(5), may exceed the State base 
allotment to the extent such increases are made to satisfy the minimum 
payment requirement. In such cases, CMS will adjust the State's base 
allotment in the subsequent Federal fiscal year to include the increased 
minimum payments.

[57 FR 55143, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec. 447.299  Reporting requirements.

    (a) Beginning with the first quarter of Federal fiscal year 1993, 
each State must submit to CMS the quarterly aggregate amount of its 
disproportionate share hospital payments made to each individual public 
and private provider or facility. States' reports must present a 
complete, accurate, and full disclosure of all of their DSH programs and 
expenditures.
    (b) Each State must report the aggregate information specified under 
paragraph (a) of this section on a quarterly basis in accordance with 
procedures established by CMS.
    (c) Each State must maintain, in readily reviewable form, supporting

[[Page 307]]

documentation that provides a detailed description of each DSH program, 
the legal basis of each DSH program, and the amount of DSH payments made 
to each individual public and private provider or facility each quarter. 
This information must be made available to Federal reviewers upon 
request.
    (d) If a State fails to comply with the reporting requirements 
contained in this section, future grant awards will be reduced by the 
amount of FFP CMS estimates is attributable to the expenditures made to 
the disproportionate share hospitals as to which the State has not 
reported properly, until such time as the State complies with the 
reporting requirements. Deferrals and/or disallowances of equivalent 
amounts may also be imposed with respect to quarters for which the State 
has failed to report properly. Unless otherwise prohibited by law, FFP 
for those expenditures will be released when the State complies with all 
reporting requirements.



Subpart F--Payment Methods for Other Institutional and Noninstitutional 
                                Services

    Source: 43 FR 45253, Sept. 29, 1978, unless otherwise noted. 
Redesignated at 46 FR 47973, Sept. 30, 1981. Redesignated at 58 FR 6095, 
Jan. 26, 1993.



Sec. 447.300  Basis and purpose.

    In this subpart, Secs. 447.302 through 447.334 and 447.361 implement 
section 1902(a)(30) of the Act, which requires that payments be 
consistent with efficiency, economy and quality of care. Section 447.371 
implements section 1902(a)(13)(F) of the Act, which requires that the 
State plan provide for payment for rural health clinic services in 
accordance with regulations prescribed by the Secretary.

[46 FR 48560, Oct. 1, 1981, as amended at 61 FR 38398, July 24, 1996]



Sec. 447.301  Definitions.

    For the purposes of this subpart--
    Brand name means any registered trade name commonly used to identify 
a drug.
    Estimated acquisition cost means the agency's best estimate of the 
price generally and currently paid by providers for a drug marketed or 
sold by a particular manufacturer or labeler in the package size of drug 
most frequently purchased by providers.
    Multiple source drug means a drug marketed or sold by two or more 
manufacturers or labelers or a drug marketed or sold by the same 
manufacturer or labeler under two or more different proprietary names or 
both under a proprietary name and without such a name.

[52 FR 28657, July 31, 1987]



Sec. 447.302  State plan requirements.

    A State plan must provide that the requirements of this subpart are 
met.

[46 FR 48560, Oct. 1, 1981]



Sec. 447.304  Adherence to upper limits; FFP.

    (a) The Medicaid agency must not pay more than the upper limits 
described in this subpart.
    (b) In the case of payments made under the plan for deductibles and 
coinsurance payable on an assigned Medicare claim for noninstitutional 
services, those payments may be made only up to the reasonable charge 
under Medicare.
    (c) FFP is not available for a State's expenditures for services 
that are in excess of the amounts allowable under this subpart.
    Note: The Secretary may waive any limitation on reimbursement 
imposed by subpart F of this part for experiments conducted under 
section 402 of Pub. L. 90-428, Incentives for Economy Experimentation, 
as amended by section 222(b) of Pub. L. 92-603, and under section 222(a) 
of Pub. L. 92-603.

[46 FR 48560, Oct. 1, 1981; 46 FR 54744, Nov. 4, 1981, as amended at 66 
FR 3176, Jan. 12, 2001]

                 Outpatient Hospital and Clinic Services



Sec. 447.321  Outpatient hospital and clinic services: Application of upper payment limits.

    (a) Scope. This section applies to rates set by the agency to pay 
for outpatient services furnished by hospitals and clinics within one of 
the following categories:
    (1) State government-owned or operated facilities (that is, all 
facilities

[[Page 308]]

that are either owned or operated by the State).
    (2) Non-State government-owned or operated facilities (that is, all 
government facilities that are neither owned nor operated by the State).
    (3) Privately-owned and operated facilities.
    (b) General rules. (1) Upper payment limit refers to a reasonable 
estimate of the amount that would be paid for the services furnished by 
the group of facilities under Medicare payment principles in subchapter 
B of this chapter.
    (2) Except as provided in paragraph (c) of this section, aggregate 
Medicaid payments to a group of facilities within one of the categories 
described in paragraph (a) of this section may not exceed the upper 
payment limit described in paragraph (b)(1) of this section.
    (c) Exception--Indian Health Services and tribal facilities. The 
limitation in paragraph (b) of this section does not apply to Indian 
Health Services facilities and tribal facilities that are funded through 
the Indian Self-Determination and Education Assistance Act (Public Law 
93-638).
    (d) Compliance dates. Except as permitted under paragraph (e) of 
this section, a State must comply with the upper payment limit described 
in paragraph (b)(1) of this section by one of the following dates:
    (1) For non-State government-owned or operated hospitals--March 19, 
2002.
    (2) For all other facilities--March 13, 2001.
    (e) Transition periods--(1) Definitions. For purposes of this 
paragraph, the following definitions apply:
    (i) Transition period refers to the period of time beginning March 
13, 2001 through the end of one of the schedules permitted under 
paragraph (e)(2)(ii) of this section.
    (ii) UPL stands for the upper payment limit described in paragraph 
(b)(1) of this section for the referenced year.
    (iii) X stands for the payments to a specific group of providers 
described in paragraph (a) of this section in State FY 2000 that 
exceeded the amount that would have been under the upper payment limit 
described in paragraph (b) of this section if that limit had been 
applied to that year.
    (2) General rules. (i) The amount that a State's payment exceeded 
the upper payment limit described in paragraph (b) of this section must 
not increase.
    (ii) A State with an approved State plan amendment payment provision 
effective on one of the following dates and that makes payments that 
exceed the upper payment limit described in paragraph (b) of this 
section to providers described in paragraph (a) of this section may 
follow the respective transition schedule:
    (A) For State plan provisions that are effective after September 30, 
1999 and were approved before January 22, 2001, payments may exceed the 
upper payment limit in paragraph (b) of this section until September 30, 
2002.
    (B) For approved plan provisions that are effective after October 1, 
1992 and before October 1, 1999, payments during the transition period 
may not exceed the following--
    (1) For State FY 2003: State FY 2003 UPL + .75X.
    (2) For State FY 2004: State FY 2004 UPL + .50X.
    (3) For State FY 2005: State FY 2005 UPL + .25X.
    (4) For State FY 2006; State FY 2006 UPL.
    (C) For approved plan provisions that are effective on or before 
October 1, 1992, payments during the transition period may not exceed 
the following:
    (1) For State FY 2004: State FY 2004 UPL + .85X.
    (2) For State FY 2005: State FY 2005 UPL + .70X.
    (3) For State FY 2006: State FY 2006 UPL + .55X.
    (4) For State FY 2007: State FY 2007 UPL + .40X.
    (5) For State FY 2008: State FY 2008 UPL + .25X.
    (6) For the portion of State FY 2009 before October 1, 2008: State 
FY 2009 UPL + .10X.
    (7) Beginning October 1, 2008: UPL described in paragraph (b) of 
this section.

[[Page 309]]

    (D) For State plan provisions that were effective after September 
30, 1999, submitted to CMS before March 13, 2001, and approved by CMS 
after January 21, 2001, payments may exceed the limit in paragraph (b) 
of this section until the later of November 5, 2001, or 1 year from the 
approved effective date of the State plan provision.
    (iii) When State FY 2003 begins after September 30, 2002, the 
reduction schedule in paragraphs (e)(2)(ii)(C)(1) through 
(e)(2)(ii)(C)(7) will begin on State FY 2003.
    (iv) If a State meets the criteria in paragraph (e)(2)(ii) of this 
section and its State plan amendment expires before the end of the 
applicable transition period, the State may continue making payments 
that exceed the UPL described in paragraph (b) of this section in 
accordance with the applicable transition schedule described in 
paragraph (e)(2)(ii) of this section.
    (v) A State with an approved State plan amendment payment provision 
that makes payments up to 150 percent of the UPL described in paragraph 
(b)(1) of this section to providers described in paragraph (a)(2) of 
this section does not qualify for a transition period.
    (f) Reporting requirements for payments during the transition 
periods. States that are eligible for a transition period described in 
paragraph (e) of this section, and that make payments that exceed the 
limit under paragraph (b)(1) of this section, must report annually the 
following information to CMS:
    (1) The total Medicaid payments made to each facility for services 
furnished during the entire State fiscal year.
    (2) A reasonable estimate of the amount that would be paid for the 
services furnished by the facility under Medicare payment principles.

[66 FR 3176, Jan. 12, 2001, as amended at 66 FR 46399, Sept. 5, 2001; 67 
FR 2611, Jan. 18, 2002]

                Other Inpatient and Outpatient Facilities



Sec. 447.325  Other inpatient and outpatient facility services: Upper limits of payment.

    The agency may pay the customary charges of the provider but must 
not pay more than the prevailing charges in the locality for comparable 
services under comparable circumstances.

                                  Drugs



Sec. 447.331  Drugs: Aggregate upper limits of payment.

    (a) Multiple source drugs. Except for brand name drugs that are 
certified in accordance with paragraph (c) of this section, the agency 
payment for multiple source drugs must not exceed, the amount that would 
result from the application of the specific limits established in 
accordance with Sec. 447.332. If a specific limit has not been 
established under Sec. 447.332, then the rule for ``other drugs'' set 
forth in paragraph (b) applies.
    (b) Other drugs. The agency payments for brand name drugs certified 
in accordance with paragraph (c) of this section and drugs other than 
multiple source drugs for which a specific limit has been established 
under Sec. 447.332 must not exceed in the aggregate, payment levels that 
the agency has determined by applying the lower of the--
    (1) Estimated acquisition costs plus reasonable dispensing fees 
established by the agency; or
    (2) Providers' usual and customary charges to the general public.
    (c) Certification of brand name drugs. (1) The upper limit for 
payment for multiple source drugs for which a specific limit has been 
established under Sec. 447.332 does not apply if a physician certifies 
in his or her own handwriting that a specific brand is medically 
necessary for a particular recipient.
    (2) The agency must decide what certification form and procedure are 
used.

[[Page 310]]

    (3) A checkoff box on a form is not acceptable but a notation like 
``brand necessary'' is allowable.
    (4) The agency may allow providers to keep the certification forms 
if the forms will be available for inspection by the agency or HHS.

[52 FR 28657, July 31, 1987]



Sec. 447.332  Upper limits for multiple source drugs.

    (a) Establishment and issuance of a listing. (1) CMS will establish 
listings that identify and set upper limits for multiple source drugs 
that meet the following requirements:
    (i) All of the formulations of the drug approved by the Food and 
Drug Administration (FDA) have been evaluated as therapeutically 
equivalent in the most current edition of their publication, Approved 
Drug Products with Therapeutic Equivalence Evaluations (including 
supplements or in successor publications).
    (ii) At least three suppliers list the drug (which has been 
classified by the FDA as category ``A'' in its publication, Approved 
Drug Products with Therapeutic Equivalence Evaluations, including 
supplements or in successor publications) based on all listings 
contained in current editions (or updates) of published compendia of 
cost information for drugs available for sale nationally.
    (2) CMS publishes the list of multiple source drugs for which upper 
limits have been established and any revisions to the list in Medicaid 
program instructions.
    (3) CMS will identify the sources used in compiling these lists.
    (b) Specific upper limits. The agency's payments for multiple source 
drugs identified and listed in accordance with paragraph (a) of this 
section must not exceed, in the aggregate, payment levels determined by 
applying for each drug entity a reasonable dispensing fee established by 
the agency plus an amount established by CMS that is equal to 150 
percent of the published price for the least costly therapeutic 
equivalent (using all available national compendia) that can be 
purchased by pharmacists in quantities of 100 tablets or capsules (or, 
if the drug is not commonly available in quantities of 100, the package 
size commonly listed) or, in the case of liquids, the commonly listed 
size.

[52 FR 28658, July 31, 1987]



Sec. 447.333  State plan requirements, findings and assurances.

    (a) State plan. The State plan must describe comprehensively the 
agency's payment methodology for prescription drugs.
    (b) Findings and assurances. Upon proposing significant State plan 
changes in payments for prescription drugs, and at least annually for 
multiple source drugs and triennially for all other drugs, the agency 
must make the following findings and assurances:
    (1) Findings. The agency must make the following separate and 
distinct findings:
    (i) In the aggregate, its Medicaid expenditures for multiple source 
drugs, identified and listed in accordance with Sec. 447.332(a) of this 
subpart, are in accordance with the upper limits specified in 
Sec. 447.332(b) of this subpart; and
    (ii) In the aggregate, its Medicaid expenditures for all other drugs 
are in accordance with Sec. 447.331 of this subpart.
    (2) Assurances. The agency must make assurances satisfactory to CMS 
that the requirements set forth in Secs. 447.331 and 447.332 concerning 
upper limits and in paragraph (b)(1) of this section concerning agency 
findings are met.
    (c) Recordkeeping. The agency must maintain and make available to 
CMS, upon request, data, mathematical or statistical computations, 
comparisons, and any other pertinent records to support its findings and 
assurances.

[52 FR 28658, July 31, 1987]



Sec. 447.334  Upper limits for drugs furnished as part of services.

    The upper limits for payment for prescribed drugs in this subpart 
also apply to payment for drugs provided as part of skilled nursing 
facility services and intermediate care facility services and under 
prepaid capitation arrangements.

[[Page 311]]



Sec. 447.342  [Reserved]

                        Prepaid Capitation Plans



Sec. 447.362  Upper limits of payment: Nonrisk contract.

    Under a nonrisk contract, Medicaid payments to the contractor may 
not exceed--
    (a) What Medicaid would have paid, on a fee-for-service basis, for 
the services actually furnished to recipients: plus
    (b) The net savings of administrative costs the Medicaid agency 
achieves by contracting with the plan instead of purchasing the services 
on a fee-for-service basis.

[48 FR 54025, Nov. 30, 1983]

                      Rural Health Clinic Services



Sec. 447.371  Services furnished by rural health clinics.

    The agency must pay for rural health clinic services, as defined in 
Sec. 440.20(b) of this subchapter, and for other ambulatory services 
furnished by a rural health clinic, as defined in Sec. 440.20(c) of this 
subchapter, as follows:
    (a) For provider clinics, the agency must pay the reasonable cost of 
rural health clinic services and other ambulatory services on the basis 
of the cost reimbursement principles in part 413 of this chapter. For 
purposes of this section, a provider clinic is an integral part of a 
hospital, skilled nursing facility, or home health agency that is 
participating in Medicare and is licensed, governed, and supervised with 
other departments of the facility.
    (b) For clinics other than provider clinics that do not offer any 
ambulatory services other than rural health clinic services, the agency 
must pay for rural health clinic services at the reasonable cost rate 
per visit determined by a Medicare carrier under Secs. 405.2426 through 
405.2429 of this chapter.
    (c) For clinics other than provider clinics that do offer ambulatory 
services other than rural health clinic services, the agency must pay 
for the other ambulatory services by one of the following methods:
    (1) The agency may pay for other ambulatory services and rural 
health clinic services at a single rate per visit that is based on the 
cost of all services furnished by the clinic. The rate must be 
determined by a Medicare carrier under Secs. 405.2426 through 405.2429 
of this chapter.
    (2) The agency may pay for other ambulatory services at a rate set 
for each service by the agency. The rate must not exceed the upper 
limits in this subpart. The agency must pay for rural health clinic 
services at the Medicare reimbursement rate per visit, as specified in 
Sec. 405.2426 of this chapter.
    (3) The agency may pay for dental services at a rate per visit that 
is based on the cost of dental services furnished by the clinic. The 
rate must be determined by a Medicare carrier under Secs. 405.2426 
through 405.2429 of this chapter. The agency must pay for ambulatory 
services other than dental services under paragraph (c) (1) or (2) of 
this section.
    (d) For purposes of paragraph (c) (1) and (3) of this section, 
``visit'' means a face-to-face encounter between a clinic patient and 
any health professional whose services are reimbursed under the State 
plan. Encounters with more than one health professional, and multiple 
encounters with the same health professional, that take place on the 
same day and at a single location constitute a single visit, except when 
the patient, after the first encounter, suffers illness or injury 
requiring additional diagnosis or treatment.

[43 FR 45253, Sept. 29, 1978, as amended at 51 FR 34833, Sept. 30, 1986]



PART 455--PROGRAM INTEGRITY: MEDICAID--Table of Contents




Sec.
455.1 Basis and scope.
455.2 Definitions.
455.3 Other applicable regulations.

  Subpart A--Medicaid Agency Fraud Detection and Investigation Program

455.12 State plan requirement.
455.13 Methods for identification, investigation, and referral.
455.14 Preliminary investigation.
455.15 Full investigation.
455.16 Resolution of full investigation.
455.17 Reporting requirements.
455.18 Provider's statements on claims forms.
455.19 Provider's statement on check.

[[Page 312]]

455.20 Recipient verification procedure.
455.21 Cooperation with State Medicaid fraud control units.
455.23 Withholding of payments in cases of fraud or willful 
          misrepresentation.

   Subpart B--Disclosure of Information by Providers and Fiscal Agents

455.100 Purpose.
455.101 Definitions.
455.102 Determination of ownership or control percentages.
455.103 State plan requirement.
455.104 Disclosure by providers and fiscal agents: Information on 
          ownership and control.
455.105 Disclosure by providers: Information related to business 
          transactions.
455.106 Disclosure by providers: Information on persons convicted of 
          crimes.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 43 FR 45262, Sept. 29, 1978, unless otherwise noted.



Sec. 455.1  Basis and scope.

    This part sets forth requirements for a State fraud detection and 
investigation program, and for disclosure of information on ownership 
and control.
    (a) Under the authority of sections 1902(a)(4), 1903(i)(2), and 1909 
of the Social Security Act, Subpart A provides State plan requirements 
for the identification, investigation, and referral of suspected fraud 
and abuse cases. In addition, the subpart requires that the State--
    (1) Report fraud and abuse information to the Department; and
    (2) Have a method to verify whether services reimbursed by Medicaid 
were actually furnished to recipients.
    (b) Subpart B implements sections 1124, 1126, 1902(a)(36), 
1903(i)(2), and 1903(n) of the Act. It requires that providers and 
fiscal agents must agree to disclose ownership and control information 
to the Medicaid State agency.

[51 FR 34787, Sept. 30, 1986]



Sec. 455.2  Definitions.

    As used in this part unless the context indicates otherwise--
    Abuse means provider practices that are inconsistent with sound 
fiscal, business, or medical practices, and result in an unnecessary 
cost to the Medicaid program, or in reimbursement for services that are 
not medically necessary or that fail to meet professionally recognized 
standards for health care. It also includes recipient practices that 
result in unnecessary cost to the Medicaid program.
    Conviction or Convicted means that a judgment of conviction has been 
entered by a Federal, State, or local court, regardless of whether an 
appeal from that judgment is pending.
    Exclusion means that items or services furnished by a specific 
provider who has defrauded or abused the Medicaid program will not be 
reimbursed under Medicaid.
    Fraud means an intentional deception or misrepresentation made by a 
person with the knowledge that the deception could result in some 
unauthorized benefit to himself or some other person. It includes any 
act that constitutes fraud under applicable Federal or State law.
    Furnished refers to items and services provided directly by, or 
under the direct supervision of, or ordered by, a practitioner or other 
individual (either as an employee or in his or her own capacity), a 
provider, or other supplier of services. (For purposes of denial of 
reimbursement within this part, it does not refer to services ordered by 
one party but billed for and provided by or under the supervision of 
another.)
    Practitioner means a physician or other individual licensed under 
State law to practice his or her profession.
    Suspension means that items or services furnished by a specified 
provider who has been convicted of a program-related offense in a 
Federal, State, or local court will not be reimbursed under Medicaid.

[48 FR 3755, Jan. 27, 1983, as amended at 50 FR 37375, Sept. 13, 1985; 
51 FR 34788, Sept. 30, 1986]



Sec. 455.3  Other applicable regulations.

    Part 1002 of this title sets forth the following:
    (a) State plan requirements for excluding providers for fraud and 
abuse, and suspending practitioners convicted of program-related crimes.
    (b) The limitations on FFP for services furnished by excluded 
providers or suspended practitioners.

[[Page 313]]

    (c) The requirements and procedures for reinstatement after 
exclusion or suspension.
    (d) Requirements for the establishment and operation of State 
Medicaid fraud control units and the rates of FFP for their fraud 
control activities.

[51 FR 34788, Sept. 30, 1986]



  Subpart A--Medicaid Agency Fraud Detection and Investigation Program



Sec. 455.12  State plan requirement.

    A State plan must meet the requirements of Secs. 455.13 through 
455.23.

[52 FR 48817, Dec. 28, 1987]



Sec. 455.13  Methods for identification, investigation, and referral.

    The Medicaid agency must have--
    (a) Methods and criteria for identifying suspected fraud cases;
    (b) Methods for investigating these cases that--
    (1) Do not infringe on the legal rights of persons involved; and
    (2) Afford due process of law; and
    (c) Procedures, developed in cooperation with State legal 
authorities, for referring suspected fraud cases to law enforcement 
officials.

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3755, Jan. 27, 1983]



Sec. 455.14  Preliminary investigation.

    If the agency receives a complaint of Medicaid fraud or abuse from 
any source or identifies any questionable practices, it must conduct a 
preliminary investigation to determine whether there is sufficient basis 
to warrant a full investigation.

[48 FR 3756, Jan. 27, 1983]



Sec. 455.15  Full investigation.

    If the findings of a preliminary investigation give the agency 
reason to believe that an incident of fraud or abuse has occurred in the 
Medicaid program, the agency must take the following action, as 
appropriate:
    (a) If a provider is suspected of fraud or abuse, the agency must--
    (1) In States with a State Medicaid fraud control unit certified 
under subpart C of part 1002 of this title , refer the case to the unit 
under the terms of its agreement with the unit entered into under 
Sec. 1002.309 of this title; or
    (2) In States with no certified Medicaid fraud control unit, or in 
cases where no referral to the State Medicaid fraud control unit is 
required under paragraph (a)(1) of this section, conduct a full 
investigation or refer the case to the appropriate law enforcement 
agency.
    (b) If there is reason to believe that a recipient has defrauded the 
Medicaid program, the agency must refer the case to an appropriate law 
enforcement agency.
    (c) If there is reason to believe that a recipient has abused the 
Medicaid program, the agency must conduct a full investigation of the 
abuse.

[48 FR 3756, Jan. 27, 1983, as amended at 51 FR 34788, Sept. 30, 1986]



Sec. 455.16  Resolution of full investigation.

    A full investigation must continue until--
    (a) Appropriate legal action is initiated;
    (b) The case is closed or dropped because of insufficient evidence 
to support the allegations of fraud or abuse; or
    (c) The matter is resolved between the agency and the provider or 
recipient. This resolution may include but is not limited to--
    (1) Sending a warning letter to the provider or recipient, giving 
notice that continuation of the activity in question will result in 
further action;
    (2) Suspending or terminating the provider from participation in the 
Medicaid program;
    (3) Seeking recovery of payments made to the provider; or
    (4) Imposing other sanctions provided under the State plan.

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3756, Jan. 27, 1983]



Sec. 455.17  Reporting requirements.

    The agency must report the following fraud or abuse information to 
the appropriate Department officials at intervals prescribed in 
instructions.
    (a) The number of complaints of fraud and abuse made to the agency

[[Page 314]]

that warrant preliminary investigation.
    (b) For each case of suspected provider fraud and abuse that 
warrants a full investigation--
    (1) The provider's name and number;
    (2) The source of the complaint;
    (3) The type of provider;
    (4) The nature of the complaint;
    (5) The approximate range of dollars involved; and
    (6) The legal and administrative disposition of the case, including 
actions taken by law enforcement officials to whom the case has been 
referred.

(Approved by the Office of Management and Budget under control number 
0938-0076)

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3756, Jan. 27, 1983]



Sec. 455.18  Provider's statements on claims forms.

    (a) Except as provided in Sec. 455.19, the agency must provide that 
all provider claims forms be imprinted in boldface type with the 
following statements, or with alternate wording that is approved by the 
Regional CMS Administrator:
    (1) ``This is to certify that the foregoing information is true, 
accurate, and complete.''
    (2) ``I understand that payment of this claim will be from Federal 
and State funds, and that any falsification, or concealment of a 
material fact, may be prosecuted under Federal and State laws.''
    (b) The statements may be printed above the claimant's signature or, 
if they are printed on the reverse of the form, a reference to the 
statements must appear immediately preceding the claimant's signature.



Sec. 455.19  Provider's statement on check.

    As an alternative to the statements required in Sec. 455.18, the 
agency may print the following wording above the claimant's endorsement 
on the reverse of checks or warrants payable to each provider: ``I 
understand in endorsing or depositing this check that payment will be 
from Federal and State funds and that any falsification, or concealment 
of a material fact, may be prosecuted under Federal and State laws.''



Sec. 455.20  Recipient verification procedure.

    (a) The agency must have a method for verifying with recipients 
whether services billed by providers were received.
    (b) In States receiving Federal matching funds for a mechanized 
claims processing and information retrieval system under part 433, 
subpart C, of this subchapter, the agency must provide prompt written 
notice as required by Sec. 433.116 (e) and (f).

[48 FR 3756, Jan. 27, 1983, as amended at 56 FR 8854, Mar. 1, 1991]



Sec. 455.21  Cooperation with State Medicaid fraud control units.

    In a State with a Medicaid fraud control unit established and 
certified under subpart C of this part,
    (a) The agency must--
    (1) Refer all cases of suspected provider fraud to the unit;
    (2) If the unit determines that it may be useful in carrying out the 
unit's responsibilities, promptly comply with a request from the unit 
for--
    (i) Access to, and free copies of, any records or information kept 
by the agency or its contractors;
    (ii) Computerized data stored by the agency or its contractors. 
These data must be supplied without charge and in the form requested by 
the unit; and
    (iii) Access to any information kept by providers to which the 
agency is authorized access by section 1902(a)(27) of the Act and 
Sec. 431.107 of this subchapter. In using this information, the unit 
must protect the privacy rights of recipients; and
    (3) On referral from the unit, initiate any available administrative 
or judicial action to recover improper payments to a provider.
    (b) The agency need not comply with specific requirements under this 
subpart that are the same as the responsibilities placed on the unit 
under subpart D of this part.



Sec. 455.23  Withholding of payments in cases of fraud or willful misrepresentation.

    (a) Basis for withholding. The State Medicaid agency may withhold 
Medicaid payments, in whole or in part, to

[[Page 315]]

a provider upon receipt of reliable evidence that the circumstances 
giving rise to the need for a withholding of payments involve fraud or 
willful misrepresentation under the Medicaid program. The State Medicaid 
agency may withhold payments without first notifying the provider of its 
intention to withhold such payments. A provider may request, and must be 
granted, administrative review where State law so requires.
    (b) Notice of withholding. The State agency must send notice of its 
withholding of program payments within 5 days of taking such action. The 
notice must set forth the general allegations as to the nature of the 
withholding action, but need not disclose any specific information 
concerning its ongoing investigation. The notice must:
    (1) State that payments are being withheld in accordance with this 
provision;
    (2) State that the withholding is for a temporary period, as stated 
in paragraph (c) of this section, and cite the circumstances under which 
withholding will be terminated;
    (3) Specify, when appropriate, to which type or types of Medicaid 
claims withholding is effective; and
    (4) Inform the provider of the right to submit written evidence for 
consideration by the agency.
    (c) Duration of withholding. All withholding of payment actions 
under this section will be temporary and will not continue after:
    (1) The agency or the prosecuting authorities determine that there 
is insufficient evidence of fraud or willful misrepresentation by the 
provider; or
    (2) Legal proceedings related to the provider's alleged fraud or 
willful misrepresentation are completed.

[52 FR 48817, Dec. 28, 1987]



   Subpart B--Disclosure of Information by Providers and Fiscal Agents

    Source: 44 FR 41644, July 17, 1979, unless otherwise noted.



Sec. 455.100  Purpose.

    This subpart implements sections 1124, 1126, 1902(a)(38), 
1903(i)(2), and 1903(n) of the Social Security Act. It sets forth State 
plan requirements regarding--
    (a) Disclosure by providers and fiscal agents of ownership and 
control information; and
    (b) Disclosure of information on a provider's owners and other 
persons convicted of criminal offenses against Medicare, Medicaid, or 
the title XX services program.

The subpart also specifies conditions under which the Administrator will 
deny Federal financial participation for services furnished by providers 
or fiscal agents who fail to comply with the disclosure requirements.



Sec. 455.101  Definitions.

    Agent means any person who has been delegated the authority to 
obligate or act on behalf of a provider.
    Disclosing entity means a Medicaid provider (other than an 
individual practitioner or group of practitioners), or a fiscal agent.
    Other disclosing entity means any other Medicaid disclosing entity 
and any entity that does not participate in Medicaid, but is required to 
disclose certain ownership and control information because of 
participation in any of the programs established under title V, XVIII, 
or XX of the Act. This includes:
    (a) Any hospital, skilled nursing facility, home health agency, 
independent clinical laboratory, renal disease facility, rural health 
clinic, or health maintenance organization that participates in Medicare 
(title XVIII);
    (b) Any Medicare intermediary or carrier; and
    (c) Any entity (other than an individual practitioner or group of 
practitioners) that furnishes, or arranges for the furnishing of, 
health-related services for which it claims payment under any plan or 
program established under title V or title XX of the Act.
    Fiscal agent means a contractor that processes or pays vendor claims 
on behalf of the Medicaid agency.
    Group of practitioners means two or more health care practitioners 
who practice their profession at a common location (whether or not they 
share common facilities, common supporting staff, or common equipment).

[[Page 316]]

    Indirect ownership interest means an ownership interest in an entity 
that has an ownership interest in the disclosing entity. This term 
includes an ownership interest in any entity that has an indirect 
ownership interest in the disclosing entity.
    Managing employee means a general manager, business manager, 
administrator, director, or other individual who exercises operational 
or managerial control over, or who directly or indirectly conducts the 
day-to-day operation of an institution, organization, or agency.
    Ownership interest means the possession of equity in the capital, 
the stock, or the profits of the disclosing entity.
    Person with an ownership or control interest means a person or 
corporation that--
    (a) Has an ownership interest totaling 5 percent or more in a 
disclosing entity;
    (b) Has an indirect ownership interest equal to 5 percent or more in 
a disclosing entity;
    (c) Has a combination of direct and indirect ownership interests 
equal to 5 percent or more in a disclosing entity;
    (d) Owns an interest of 5 percent or more in any mortgage, deed of 
trust, note, or other obligation secured by the disclosing entity if 
that interest equals at least 5 percent of the value of the property or 
assets of the disclosing entity;
    (e) Is an officer or director of a disclosing entity that is 
organized as a corporation; or
    (f) Is a partner in a disclosing entity that is organized as a 
partnership.
    Significant business transaction means any business transaction or 
series of transactions that, during any one fiscal year, exceed the 
lesser of $25,000 and 5 percent of a provider's total operating 
expenses.
    Subcontractor means--
    (a) An individual, agency, or organization to which a disclosing 
entity has contracted or delegated some of its management functions or 
responsibilities of providing medical care to its patients; or
    (b) An individual, agency, or organization with which a fiscal agent 
has entered into a contract, agreement, purchase order, or lease (or 
leases of real property) to obtain space, supplies, equipment, or 
services provided under the Medicaid agreeement.
    Supplier means an individual, agency, or organization from which a 
provider purchases goods and services used in carrying out its 
responsibilities under Medicaid (e.g., a commercial laundry, a 
manufacturer of hospital beds, or a pharmaceutical firm).
    Wholly owned supplier means a supplier whose total ownership 
interest is held by a provider or by a person, persons, or other entity 
with an ownership or control interest in a provider.

[44 FR 41644, July 17, 1979, as amended at 51 FR 34788, Sept. 30, 1986]



Sec. 455.102  Determination of ownership or control percentages.

    (a) Indirect ownership interest. The amount of indirect ownership 
interest is determined by multiplying the percentages of ownership in 
each entity. For example, if A owns 10 percent of the stock in a 
corporation which owns 80 percent of the stock of the disclosing entity, 
A's interest equates to an 8 percent indirect ownership interest in the 
disclosing entity and must be reported. Conversely, if B owns 80 percent 
of the stock of a corporation which owns 5 percent of the stock of the 
disclosing entity, B's interest equates to a 4 percent indirect 
ownership interest in the disclosing entity and need not be reported.
    (b) Person with an ownership or control interest. In order to 
determine percentage of ownership, mortgage, deed of trust, note, or 
other obligation, the percentage of interest owned in the obligation is 
multiplied by the percentage of the disclosing entity's assets used to 
secure the obligation. For example, if A owns 10 percent of a note 
secured by 60 percent of the provider's assets, A's interest in the 
provider's assets equates to 6 percent and must be reported. Conversely, 
if B owns 40 percent of a note secured by 10 percent of the provider's 
assets, B's interest in the provider's assets equates to 4 percent and 
need not be reported.



Sec. 455.103  State plan requirement.

    A State plan must provide that the requirements of Secs. 455.104 
through 455.106 are met.

[[Page 317]]



Sec. 455.104  Disclosure by providers and fiscal agents: Information on ownership and control.

    (a) Information that must be disclosed. The Medicaid agency must 
require each disclosing entity to disclose the following information in 
accordance with paragraph (b) of this section:
    (1) The name and address of each person with an ownership or control 
interest in the disclosing entity or in any subcontractor in which the 
disclosing entity has direct or indirect ownership of 5 percent or more;
    (2) Whether any of the persons named, in compliance with paragraph 
(a)(1) of this section, is related to another as spouse, parent, child, 
or sibling.
    (3) The name of any other disclosing entity in which a person with 
an ownership or control interest in the disclosing entity also has an 
ownership or control interest. This requirement applies to the extent 
that the disclosing entity can obtain this information by requesting it 
in writing from the person. The disclosing entity must--
    (i) Keep copies of all these requests and the responses to them;
    (ii) Make them available to the Secretary or the Medicaid agency 
upon request; and
    (iii) Advise the Medicaid agency when there is no response to a 
request.
    (b) Time and manner of disclosure. (1) Any disclosing entity that is 
subject to periodic survey and certification of its compliance with 
Medicaid standards must supply the information specified in paragraph 
(a) of this section to the State survey agency at the time it is 
surveyed. The survey agency must promptly furnish the information to the 
Secretary and the Medicaid agency.
    (2) Any disclosing entity that is not subject to periodic survey and 
certification and has not supplied the information specified in 
paragraph (a) of this section to the Secretary within the prior 12-month 
period, must submit the information to the Medicaid agency before 
entering into a contract or agreement to participate in the program. The 
Medicaid agency must promptly furnish the information to the Secretary.
    (3) Updated information must be furnished to the Secretary or the 
State survey or Medicaid agency at intervals between recertification or 
contract renewals, within 35 days of a written request.
    (c) Provider agreements and fiscal agent contracts. A Medicaid 
agency shall not approve a provider agreement or a contract with a 
fiscal agent, and must terminate an existing agreement or contract, if 
the provider or fiscal agent fails to disclose ownership or control 
information as required by this section.
    (d) Denial of Federal financial participation (FFP). FFP is not 
available in payments made to a provider or fiscal agent that fails to 
disclose ownership or control information as required by this section.



Sec. 455.105  Disclosure by providers: Information related to business transactions.

    (a) Provider agreements. A Medicaid agency must enter into an 
agreement with each provider under which the provider agrees to furnish 
to it or to the Secretary on request, information related to business 
transactions in accordance with paragraph (b) of this section.
    (b) Information that must be submitted. A provider must submit, 
within 35 days of the date on a request by the Secretary or the Medicaid 
agency, full and complete information about--
    (1) The ownership of any subcontractor with whom the provider has 
had business transactions totaling more than $25,000 during the 12-month 
period ending on the date of the request; and
    (2) Any significant business transactions between the provider and 
any wholly owned supplier, or between the provider and any 
subcontractor, during the 5-year period ending on the date of the 
request.
    (c) Denial of Federal financial participation (FFP). (1) FFP is not 
available in expenditures for services furnished by providers who fail 
to comply with a request made by the Secretary or the Medicaid agency 
under paragraph (b) of this section or under Sec. 420.205 of this 
chapter (Medicare requirements for disclosure).
    (2) FFP will be denied in expenditures for services furnished during 
the

[[Page 318]]

period beginning on the day following the date the information was due 
to the Secretary or the Medicaid agency and ending on the day before the 
date on which the information was supplied.



Sec. 455.106  Disclosure by providers: Information on persons convicted of crimes.

    (a) Information that must be disclosed. Before the Medicaid agency 
enters into or renews a provider agreement, or at any time upon written 
request by the Medicaid agency, the provider must disclose to the 
Medicaid agency the identity of any person who:
    (1) Has ownership or control interest in the provider, or is an 
agent or managing employee of the provider; and
    (2) Has been convicted of a criminal offense related to that 
person's involvement in any program under Medicare, Medicaid, or the 
title XX services program since the inception of those programs.
    (b) Notification to Inspector General. (1) The Medicaid agency must 
notify the Inspector General of the Department of any disclosures made 
under paragraph (a) of this section within 20 working days from the date 
it receives the information.
    (2) The agency must also promptly notify the Inspector General of 
the Department of any action it takes on the provider's application for 
participation in the program.
    (c) Denial or termination of provider participation. (1) The 
Medicaid agency may refuse to enter into or renew an agreement with a 
provider if any person who has an ownership or control interest in the 
provider, or who is an agent or managing employee of the provider, has 
been convicted of a criminal offense related to that person's 
involvement in any program established under Medicare, Medicaid or the 
title XX Services Program.
    (2) The Medicaid agency may refuse to enter into or may terminate a 
provider agreement if it determines that the provider did not fully and 
accurately make any disclosure required under paragraph (a) of this 
section.



PART 456--UTILIZATION CONTROL--Table of Contents




                      Subpart A--General Provisions

Sec.
456.1 Basis and purpose of part.
456.2 State plan requirements.
456.3 Statewide surveillance and utilization control program.
456.4 Responsibility for monitoring the utilization control program.
456.5 Evaluation criteria.
456.6 Review by State medical agency of appropriateness and quality of 
          services.

          Subpart B--Utilization Control: All Medicaid Services

456.21 Scope.
456.22 Sample basis evaluation of services.
456.23 Post-payment review process.

                Subpart C--Utilization Control: Hospitals

456.50 Scope.
456.51 Definitions.

                     Certification of Need for Care

456.60 Certification and recertification of need for inpatient care.

                              Plan of Care

456.80 Individual written plan of care.

            Utilization Review (UR) Plan: General Requirement

456.100 Scope.
456.101 UR plan required for inpatient hospital services.

                  UR Plan: Administrative Requirements

456.105 UR committee required.
456.106 Organization and composition of UR committee; disqualification 
          from UR committee membership.

                   UR Plan: Informational Requirements

456.111 Recipient information required for UR.
456.112 Records and reports.
456.113 Confidentiality.

                  UR Plan: Review of Need for Admission

456.121 Admission review required.
456.122 Evaluation criteria for admission review.
456.123 Admission review process.
456.124 Notification of adverse decision.
456.125 Time limits for admission review.
456.126 Time limits for final decision and notification of adverse 
          decision.
456.127 Pre-admission review.
456.128 Initial continued stay review date.

[[Page 319]]

456.129 Description of methods and criteria: Initial continued stay 
          review date; close professional scrutiny; length of stay 
          modification.

               UR Plan: Review of Need for Continued Stay

456.131 Continued stay review required.
456.132 Evaluation criteria for continued stay.
456.133 Subsequent continued stay review dates.
456.134 Description of methods and criteria: Subsequent continued stay 
          review dates; length of stay modification.
456.135 Continued stay review process.
456.136 Notification of adverse decision.
456.137 Time limits for final decision and notification of adverse 
          decision.

                UR Plan: Medical Care Evaluation Studies

456.141 Purpose and general description.
456.142 UR plan requirements for medical care evaluation studies.
456.143 Content of medical care evaluation studies.
456.144 Data sources for studies.
456.145 Number of studies required to be performed.

            Subpart D--Utilization Control: Mental Hospitals

456.150 Scope.
456.151 Definitions.

                     Certification of Need for Care

456.160 Certification and recertification of need for inpatient care.

    Medical, Psychiatric, and Social Evaluations and Admission Review

456.170 Medical, psychiatric, and social evaluations.
456.171 Medicaid agency review of need for admission.

                              Plan of Care

456.180 Individual written plan of care.
456.181 Reports of evaluations and plans of care.

            Utilization Review (UR) Plan: General Requirement

456.200 Scope.
456.201 UR plan required for inpatient mental hospital services.

                  UR Plan: Administrative Requirements

456.205 UR committee required.
456.206 Organization and composition of UR committee; disqualification 
          from UR committee membership.

                   UR Plan: Informational Requirements

456.211 Recipient information required for UR.
456.212 Records and reports.
456.213 Confidentiality.

               UR Plan: Review of Need for Continued Stay

456.231 Continued stay review required.
456.232 Evaluation criteria for continued stay.
456.233 Initial continued stay review date.
456.234 Subsequent continued stay review dates.
456.235 Description of methods and criteria: Continued stay review 
          dates; length of stay modification.
456.236 Continued stay review process.
456.237 Notification of adverse decision.
456.238 Time limits for final decision and notification of adverse 
          decision.

                UR Plan: Medical Care Evaluation Studies

456.241 Purpose and general description.
456.242 UR plan requirements for medical care evaluation studies.
456.243 Content of medical care evaluation studies.
456.244 Data sources for studies.
456.245 Number of studies required to be performed.

Subpart E [Reserved]

      Subpart F--Utilization Control: Intermediate Care Facilities

456.350 Scope.
456.351 Definition.

                     Certification of Need for Care

456.360 Certification and recertification of need for inpatient care.

   Medical, Psychological, and Social Evaluations and Admission Review

456.370 Medical, psychological, and social evaluations.
456.371 Exploration of alternative services.
456.372 Medicaid agency review of need for admission.

                              Plan of Care

456.380 Individual written plan of care.
456.381 Reports of evaluations and plans of care.

            Utilization Review (UR) Plan: General Requirement

456.400 Scope.
456.401 State plan UR requirements and options; UR plan required for 
          intermediate care facility services.

[[Page 320]]

                  UR Plan: Administrative Requirements

456.405 Description of UR review function: How and when.
456.406 Description of UR review function: Who performs UR; 
          disqualification from performing UR.
456.407 UR responsibilities of administrative staff.

                   UR Plan: Informational Requirements

456.411 Recipient informtion required for UR.
456.412 Records and reports.
456.413 Confidentiality.

               UR Plan: Review of Need for Continued Stay

456.431 Continued stay review required.
456.432 Evaluation criteria for continued stay.
456.433 Initial continued stay review date.
456.434 Subsequent continued stay review dates.
456.435 Description of methods and criteria: Continued stay review 
          dates.
456.436 Continued stay review process.
456.437 Notification of adverse decision.
456.438 Time limits for notification of adverse decision.

Subpart G--Inpatient Psychiatric Services for Individuals Under Age 21: 
                 Admission and Plan of Care Requirements

456.480 Scope.
456.481 Admission certification and plan of care.
456.482 Medical, psychiatric, and social evaluations.

  Subpart H--Utilization Review Plans: FFP, Waivers, and Variances for 
                     Hospitals and Mental Hospitals

456.500 Purpose.
456.501 UR plans as a condition for FFP.

                     UR Plan: Waiver of Requirements

456.505 Applicability of waiver.
456.506 Waiver options for Medicaid agency.
456.507 Review and granting of waiver requests.
456.508 Withdrawal of waiver.

        UR Plan: Remote Facility Variances from Time Requirements

456.520 Definitions.
456.521 Conditions for granting variance requests.
456.522 Content of request for variance.
456.523 Revised UR plan.
456.524 Notification of Administrator's action and duration of variance.
456.525 Request for renewal of variance.

   Subpart I--Inspections of Care in Intermediate Care Facilities and 
                    Institutions for Mental Diseases

456.600 Purpose.
456.601 Definitions.
456.602 Inspection team.
456.603 Financial interests and employment of team members.
456.604 Physician team member inspecting care of recipients.
456.605 Number and location of teams.
456.606 Frequency of inspections.
456.607 Notification before inspection.
456.608 Personal contact with and observation of recipients and review 
          of records.
456.609 Determinations by team.
456.610 Basis for determinations.
456.611 Reports on inspections.
456.612 Copies of reports.
456.613 Action on reports.
456.614 Inspections by utilization review committee.

  Subpart J--Penalty for Failure To Make a Satisfactory Showing of An 
           Effective Institutional Utilization Control Program

456.650 Basis, purpose, and scope.
456.651 Definitions.
456.652 Requirements for an effective utilization control program.
456.653 Acceptable reasons for not meeting requirements for annual on-
          site review.
456.654 Requirements for content of showings and procedures for 
          submittal.
456.655 Validation of showings.
456.656 Reductions in FFP.
456.657 Computation of reductions in FFP.

     Subpart K--Drug Use Review (DUR) Program and Electronic Claims 
              Management System for Outpatient Drug Claims

456.700 Scope.
456.702 Definitions.
456.703 Drug use review program.
456.705 Prospective drug review.
456.709 Retrospective drug use review.
456.711 Educational program.
456.712 Annual report.
456.714 DUR/surveillance and utilization review relationship.
456.716 DUR Board.
456.719 Funding for DUR program.
456.722 Electronic claims management system.
456.725 Funding of ECM system.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302), 
unless otherwise noted.

    Source: 43 FR 45266, Sept. 29, 1978, unless otherwise noted.

[[Page 321]]



                      Subpart A--General Provisions



Sec. 456.1  Basis and purpose of part.

    (a) This part prescribes requirements concerning control of the 
utilization of Medicaid services including--
    (1) A statewide program of control of the utilization of all 
Medicaid services; and
    (2) Specific requirements for the control of the utilization of 
Medicaid services in institutions.
    (3) Specific requirements for an outpatient drug use review program.
    (b) The requirements in this part are based on the following 
sections of the Act. Table 1 shows the relationship between these 
sections of the Act and the requirements in this part.
    (1) Methods and procedures to safeguard against unnecessary 
utilization of care and services. Section 1902(a)(30) requires that the 
State plan provide methods and procedures to safeguard against 
unnecessary utilization of care and services.
    (2) Penalty for failure to have an effective program to control 
utilization of institutional services. Section 1903(g)(1) provides for a 
reduction in the amount of Federal Medicaid funds paid to a State for 
long-stay inpatient services if the State does not make a showing 
satisfactory to the Secretary that it has an effective program of 
control over utilization of those services. This penalty provision 
applies to inpatient services in hospitals, mental hospitals, and 
intermediate care facilities (ICF's). Specific requirements are:
    (i) Under section 1903(g)(1)(A), a physician must certify at 
admission, and a physician (or physician assistant or nurse practitioner 
under the supervision of a physician) must periodically recertify, the 
individual's need for inpatient care.
    (ii) Under section 1903(g)(1)(B), services must be furnished under a 
plan established and periodically evaluated by a physician.
    (iii) Under section 1903(g)(1)(C), the State must have in effect a 
continuous program of review of utilization of care and services under 
section 1902(a)(30) whereby each admission is reviewed or screened in 
accordance with criteria established by medical and other professional 
personnel.
    (iv) Under section 1903(g)(1)(D), the State must have an effective 
program under sections 1902(a) (26) and (31) of review of care in 
intermediate care facilities and mental hospitals. This must include 
evaluation at least annually of the professional management of each 
case.
    (3) Medical review in mental hospitals. Section 1902(a)(26)(A) 
requires that the plan provide for a program of medical review that 
includes a medical evaluation of each individual's need for care in a 
mental hospital, a plan of care, and, where applicable, a plan of 
rehabilitation.
    (4) Independent professional review in intermediate care facilities. 
Section 1902(a)(31)(A) requires that the plan provide for a program of 
independent professional review that includes a medical evaluation of 
each individual's need for intermediate care and a written plan of 
service.
    (5) Inspection of care and services in institutions. Sections 
1902(a)(26) (B) and (C) and 1902(a)(31) (B) and (C) require that the 
plan provide for periodic inspections and reports, by a team of 
professional persons, of the care being provided to each recipient in 
institutions for mental diseases (IMD's), and ICF's participating in 
Medicaid.
    (6) Denial of FFP for failure to have specified utilization review 
procedures. Section 1903(i)(4) provides that FFP is not available in a 
State's expenditures for hospital or mental hospital services unless the 
institution has in effect a utilization review plan that meets Medicare 
requirements. However, the Secretary may waive this requirement if the 
Medicaid agency demonstrates to his satisfaction that it has utilization 
review procedures superior in effectiveness to the Medicare procedures.
    (7) State health agency guidance on quality and appropriateness of 
care and services. Section 1902(a)(33)(A) requires that the plan provide 
that the State health or other appropriate medical agency establish a 
plan for review, by professional health personnel, of the 
appropriateness and quality of Medicaid services to provide guidance to 
the Medicaid agency and the State licensing agency in administering the 
Medicaid program.

[[Page 322]]

    (8) Drug use review program. Section 1927(g) of the Act provides 
that, for payment to be made under section 1903 of the Act for covered 
outpatient drugs, the State must have in operation, by not later than 
January 1, 1993, a drug use review (DUR) program. It also requires that 
each State provide, either directly or through a contract with a private 
organization, for the establishment of a DUR Board.

                                 Table 1
 [This table relates the regulations in this part to the sections of the
                      Act on which they are based.]
Subpart A--General........................  1902(a)(30)
                                            1902(a)(33)(A)
Subpart B--Utilization Control: All         1902(a)(30)
 Medicaid Services.
Subpart C--Utilization Control: Hospitals
  Certification of need for care..........  1903(g)(1)(A)
  Plan of care............................  1903(g)(1)(B)
  Utilization review plan (including        1902(a)(30)
   admission review).                       1903(g)(1)(C)
                                            1903(i)(4)
Subpart D--Utilization Control: Mental
 Hospitals
  Certification of need for care..........  1903(g)(1)(A)
  Medical evaluation and admission review.  1902(a)(26)(A)
                                            1903(g)(1)(C)
  Plan of care............................  1902(a)(26)(A)
                                            1903(g)(1)(B)
  Admission and plan of care requirements   1902(a)(26)(A)
   for individuals under 21.                1903(g)(1) (B), (C)
  Utilization review plan.................  1902(a)(30)
                                            1903(g)(1)(C)
                                            1903(i)(4)
Subpart F--Utilization Control:
 Intermediate Care Facilities
  Certification of need for care..........  1903(g)(1)(A)
  Medical evaluation and admission review.  1902(a)(31)(A)
                                            1903(g)(1)(C)
  Plan of care............................  1902(a)(31)(A)
                                            1903(g)(1)(B)
  Utilization review plan.................  1902(a)(30)
                                            1903(g)(1)(C)
                                            1903(i)(4)
Subpart G--Inpatient Psychiatric Services   1905 (a)(16) and (h)
 for Individuals Under Age 21: Admission
 and Plan of Care Requirements.
Subpart H--Utilization Review Plans: FFP,   ............................
 Waivers, and Variances for Hospitals and
 Mental Hospitals..
Subpart I--Inspections of Care in           ............................
 Intermediate Care Facilities and
 Institutions for Mental Diseases..
Subpart J--Penalty for Failure To Make a    1903(g)
 Satisfactory Showing of An Effective
 Institutional Utilization Control Program.
Subpart K--Drug Use Review (DUR) Program    1927(g) and (h)
 and Electronic Claims Management System
 for Outpatient Drug Claims.
------------------------------------------------------------------------


[43 FR 45266, Sept. 29, 1978, as amended at 46 FR 48561, Oct. 1, 1981; 
57 FR 49408, Nov. 2, 1992; 61 FR 38398, July 24, 1996]



Sec. 456.2  State plan requirements.

    (a) A State plan must provide that the requirements of this part are 
met.
    (b) These requirements may be met by the agency by:
    (1) Assuming direct responsibility for assuring that the 
requirements of this part are met; or
    (2) Deeming of medical and utilization review requirements if the 
agency contracts with a QIO to perform that review, which in the case of 
inpatient acute care review will also serve as the initial determination 
for QIO medical necessity and appropriateness review for patients who 
are dually entitled to benefits under Medicare and Medicaid.
    (c) In accordance with Sec. 431.15 of this subchapter, FFP will be 
available for expenses incurred in meeting the requirements of this 
part.

[46 FR 48566, Oct. 1, 1981, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986]



Sec. 456.3  Statewide surveillance and utilization control program.

    The Medicaid agency must implement a statewide surveillance and 
utilization control program that--
    (a) Safeguards against unnecessary or inappropriate use of Medicaid 
services and against excess payments;
    (b) Assesses the quality of those services;
    (c) Provides for the control of the utilization of all services 
provided under the plan in accordance with subpart B of this part; and
    (d) Provides for the control of the utilization of inpatient 
services in accordance with subparts C through I of this part.



Sec. 456.4  Responsibility for monitoring the utilization control program.

    (a) The agency must--
    (1) Monitor the statewide utilization control program;
    (2) Take all necessary corrective action to ensure the effectiveness 
of the program;
    (3) Establish methods and procedures to implement this section;
    (4) Keep copies of these methods and procedures on file; and
    (5) Give copies of these methods and procedures to all staff 
involved in carrying out the utilization control program.

[[Page 323]]



Sec. 456.5  Evaluation criteria.

    The agency must establish and use written criteria for evaluating 
the appropriateness and quality of Medicaid services. This section does 
not apply to services in hospitals and mental hospitals. For these 
facilities, see the following sections: Secs. 456.122 and 456.132 of 
subpart C; and Sec. 456.232 of subpart D.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.6  Review by State medical agency of appropriateness and quality of services.

    (a) The Medicaid agency must have an agreement with the State health 
agency or other appropriate State medical agency, under which the health 
or medical agency is responsible for establishing a plan for the review 
by professional health personnel of the appropriateness and quality of 
Medicaid services.
    (b) The purpose of this review plan is to provide guidance to the 
Medicaid agency in the administration of the State plan and, where 
applicable, to the State licensing agency described in Sec. 431.610.



          Subpart B--Utilization Control: All Medicaid Services



Sec. 456.21  Scope.

    This subpart prescribes utilization control requirements applicable 
to all services provided under a State plan.



Sec. 456.22  Sample basis evaluation of services.

    To promote the most effective and appropriate use of available 
services and facilities the Medicaid agency must have procedures for the 
on-going evaluation, on a sample basis, of the need for and the quality 
and timeliness of Medicaid services.



Sec. 456.23  Post-payment review process.

    The agency must have a post-payment review process that--
    (a) Allows State personnel to develop and review--
    (1) Recipient utilization profiles;
    (2) Provider service profiles; and
    (3) Exceptions criteria; and
    (b) Identifies exceptions so that the agency can correct 
misutilization practices of recipients and providers.



                Subpart C--Utilization Control: Hospitals



Sec. 456.50  Scope.

    This subpart prescribes requirements for control of utilization of 
inpatient hospital services, including requirements concerning--
    (a) Certification of need for care;
    (b) Plan of care; and
    (c) Utilization review plans.



Sec. 456.51  Definitions.

    As used in this subpart:
    Inpatient hospital services--
    (a) Include--
    (1) Services provided in an institution other than an institution 
for mental disease, as defined in Sec. 440.10;
    (2) [Reserved]
    (3) Services provided in specialty hospitals and
    (b) Exclude services provided in mental hospitals. Utilization 
control requirements for mental hospitals appear in subpart D.
    Medical care appraisal norms or norms means numerical or statistical 
measures of usually observed performance.
    Medical care criteria or criteria means predetermined elements 
against which aspects of the quality of a medical service may be 
compared. These criteria are developed by health professionals relying 
on their expertise and the professional health care literature.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986]

                     Certification of Need for Care



Sec. 456.60  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that inpatient services in a hospital are or were needed.
    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in a hospital, before the 
Medicaid agency authorizes payment.

[[Page 324]]

    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec. 491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that inpatient services in a hospital are needed.
    (2) Recertifications must be made at least every 60 days after 
certification.

[46 FR 48561, Oct. 1, 1981]

                              Plan of Care



Sec. 456.80  Individual written plan of care.

    (a) Before admission to a hospital or before authorization for 
payment, a physician and other personnel involved in the care of the 
individual must establish a written plan of care for each applicant or 
recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Social services;
    (vi) Diet;
    (4) Plans for continuing care, as appropriate; and
    (5) Plans for discharge, as appropriate.
    (c) Orders and activities must be developed in accordance with 
physician's instructions.
    (d) Orders and activities must be reviewed and revised as 
appropriate by all personnel involved in the care of an individual.
    (e) A physician and other personnel involved in the recipient's case 
must review each plan of care at least every 60 days.

            Utilization Review (UR) Plan: General Requirement



Sec. 456.100  Scope.

    Sections 456.101 through 456.145 of this subpart prescribe 
requirements for a written utilization review (UR) plan for each 
hospital providing Medicaid services. Sections 456.105 and 456.106 
prescribe administrative requirements: Secs. 456.111 through 456.113 
prescribe informational requirements; Secs. 456.121 through 456.129 
prescribe requirements for admission review; Secs. 456.131 through 
456.137 prescribe requirements for continued stay review; and 
Secs. 456.141 through 456.145 prescribe requirements for medical care 
evaluation studies.



Sec. 456.101  UR plan required for inpatient hospital services.

    (a) A State plan must provide that each hospital furnishing 
inpatient services under the plan has in effect a written UR plan that 
provides for review of each recipient's need for the services that the 
hospital furnishes him.
    (b) Each written hospital UR plan must meet the requirements under 
Secs. 456.101 through 456.145.

                  UR Plan: Administrative Requirements



Sec. 456.105  UR committee required.

    The UR plan must--
    (a) Provide for a committee to perform UR required under this 
subpart;
    (b) Describe the organization, composition, and functions of this 
committee; and
    (c) Specify the frequency of meetings of the committee.



Sec. 456.106  Organization and composition of UR committee; disqualification from UR committee membership.

    (a) For the purpose of this subpart, ``UR committee'' includes any 
group organized under paragraphs (b) and (c) of this section.
    (b) The UR committee must be composed of two or more physicians, and 
assisted by other professional personnel.
    (c) The UR committee must be constituted as--
    (1) A committee of the hospital staff;
    (2) A group outside the hospital staff, established by the local 
medical or osteopathic society and at least some of the hospitals and 
SNFs in the locality;

[[Page 325]]

    (3) A group capable of performing utilization review, established 
and organized in a manner approved by the Secretary.
    (d) The UR committee may not include any individual who--
    (1) Is directly responsible for the care of the patient whose care 
is being reviewed; or
    (2) Has a financial interest in any hospital.

                   UR Plan: Informational Requirements



Sec. 456.111  Recipient information required for UR.

    The UR plan must provide that each recipient's record includes 
information needed for the UR committee to perform UR required under 
this subpart. This information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (d) The plan of care required under Sec. 456.70.
    (e) Initial and subsequent continued stay review dates described 
under Secs. 456.128 and 456.133.
    (f) Date of operating room reservation, if applicable.
    (g) Justification of emergency admission, if applicable.
    (h) Reasons and plan for continued stay, if the attending physician 
believes continued stay is necessary.
    (i) Other supporting material that the committee believes 
appropriate to be included in the record.



Sec. 456.112  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the committee; and
    (b) The type and frequency of committee reports and arrangements for 
their distribution to appropriate individuals.



Sec. 456.113  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

                UR Plan: Review of Need for Admission \1\
---------------------------------------------------------------------------

    \1\ The Department was enjoined in 1975 in the case of American 
Medical Assn. et al. v. Weinberger, 395 F. Supp. 515 (N.D. Ill., 1975), 
aff'd., 522 F2d 921 (7th cir., 1975) from implementing the admission 
review requirements contained in Secs. 456.121-456.127. This case was 
dismissed on the condition that these requirements be revised. They are 
presently being revised, and will not be in force until that revision is 
completed.
---------------------------------------------------------------------------



Sec. 456.121  Admission review required.

    The UR plan must provide for a review of each recipient's admission 
to the hospital to decide whether it is needed, in accordance with the 
requirements of Secs. 456.122 through 456.129.



Sec. 456.122  Evaluation criteria for admission review.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for admission; and
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec. 456.123  Admission review process.

    The UR plan must provide that--
    (a) Admission review is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup, or designee evaluates the admission 
against the criteria developed under Sec. 456.122 and applies close 
professional scrutiny to cases selected under Sec. 456.129(b);
    (c) If the committee, subgroup, or designee finds that the admission 
is needed, the committee assigns an initial continued stay review date 
in accordance with Sec. 456.128;
    (d) If the committee, subgroup, or designee finds that the admission 
does

[[Page 326]]

not meet the criteria, the committee or a subgroup that includes at 
least one physician reviews the case to decide the need for admission;
    (e) If the committee or subgroup making the review under paragraph 
(d) of this section finds that the admission is not needed, it notifies 
the recipient's attending physician and gives him an opportunity to 
present his views before it makes a final decision on the need for the 
continued stay;
    (f) If the attending physician does not present additional 
information or clarification of the need for the admission, the decision 
of the committee or subgroup is final; and
    (g) If the attending physician presents additional information or 
clarification, at least two physician members of the committee review 
the need for the admission. If they find that the admission is not 
needed, their decision if final.



Sec. 456.124  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for admission under Sec. 456.123 (e) through (g) is 
sent to--
    (a) The hospital administrator;
    (b) The attending physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.



Sec. 456.125  Time limits for admission review.

    Except as required under Sec. 456.127, the UR plan must provide that 
review of each recipient's admission to the hospital is conducted--
    (a) Within one working day after admission, for an individual who is 
receiving Medicaid at that time; or
    (b) Within one working day after the hospital is notified of the 
application for Medicaid, for an individual who applies while in the 
hospital.



Sec. 456.126  Time limits for final decision and notification of adverse decision.

    Except as required under Sec. 456.127, the UR plan must provide that 
the committee makes a final decision on a recipient's need for admission 
and gives notice of an adverse final decision--
    (a) Within two working days after admission, for an individual who 
is receiving Medicaid at that time; or
    (b) Within two working days after the hospital is notified of the 
application for Medicaid, for an individual who applies while in the 
hospital.



Sec. 456.127  Pre-admission review.

    The UR plan must provide for review and final decision prior to 
admission for certain providers or categories of admissions that the UR 
committee designates under Sec. 456.142(b) (4)(iii) to receive pre-
admission review.



Sec. 456.128  Initial continued stay review date.

    The UR plan must provide that--
    (a) When a recipient is admitted to the hospital under the admission 
review requirements of this subpart, the committee assigns a specified 
date by which the need for his continued stay will be reviewed;
    (b) The committee bases its assignment of the initial continued stay 
review date on--
    (1) The methods and criteria required to be described under 
Sec. 456.129;
    (2) The individual's condition; and
    (3) The individual's projected discharge date;
    (c)(1) The committee uses any available appropriate regional medical 
care appraisal norms, such as those developed by abstracting services or 
third party payors, to assign the initial continued stay review date;
    (2) These regional norms are based on current and statistically 
valid data on duration of stay in hospitals for patients whose 
characteristics, such as age and diagnosis, are similar to those of the 
individual whose case is being reviewed;
    (3) If the committee uses norms to assign the initial continued stay 
review date, the number of days between the individual's admission and 
the initial continued stay review date is no greater than the number of 
days reflected in the 50th percentile of the norms. However, the 
committee may assign a later review date if it documents that the later 
date is more appropriate; and

[[Page 327]]

    (d) The committee ensures that the initial continued stay review 
date is recorded in the individual's record.



Sec. 456.129  Description of methods and criteria: Initial continued stay review date; close professional scrutiny; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign the initial continued stay review date under 
Sec. 456.128.
    (b) The methods that the committee uses to select categories of 
admission to receive close professional scrutiny under Sec. 456.123(b); 
and
    (c) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.

               UR Plan: Review of Need for Continued Stay



Sec. 456.131  Continued stay review required.

    The UR plan must provide for a review of each recipient's continued 
stay in the hospital to decide whether it is needed, in accordance with 
the requirements of Secs. 456.132 through 456.137.



Sec. 456.132  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for continued stay.
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec. 456.133  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The committee assigns subsequent continued stay review dates in 
accordance with Secs. 456.128 and 456.134(a);
    (b) The committee assigns a subsequent review date each time it 
decides under Sec. 456.135 that the continued stay is needed; and
    (c) The committee ensures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec. 456.134  Description of methods and criteria: Subsequent continued stay review dates; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign subsequent continued stay review dates under 
Sec. 456.133; and
    (b) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.



Sec. 456.135  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup or designee reviews a recipient's 
continued stay on or before the expiration of each assigned continued 
stay review date;
    (c) For each continued stay of a recipient in the hospital, the 
committee, subgroup or designee reviews and evaluates the documentation 
described under Sec. 456.111 against the criteria developed under 
Sec. 456.132 and applies close professional scrutiny to cases selected 
under Sec. 456.129(b);
    (d) If the committee, subgroup, or designee finds that a recipient's 
continued stay in the hospital is needed, the committee assigns a new 
continued stay review date in accordance with Sec. 456.133;
    (e) If the committee, subgroup, or designee finds that a continued 
stay case does not meet the criteria, the committee or a subgroup that 
includes at least one physician reviews the case to decide the need for 
continued stay;
    (f) If the committee or subgroup making the review under paragraph 
(e) of this section finds that a continued stay is not needed, it 
notifies the recipient's attending physician and gives him an 
opportunity to present his reviews before it makes a final decision on 
the need for the continued stay;

[[Page 328]]

    (g) If the attending physician does not present additional 
information or clarification of the need for the continued stay, the 
decision of the committee or subgroup is final; and
    (h) If the attending physician presents additional information or 
clarification, at least two physician members of the committee review 
the need for the continued stay. If they find that the recipient no 
longer needs inpatient hospital services, their decision is final.



Sec. 456.136  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec. 456.135 (f) through 
(h) is sent to--
    (a) The hospital administrator;
    (b) The attending physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.



Sec. 456.137  Time limits for final decision and notification of adverse decision.

    The UR plan must provide that--
    (a) The committee makes a final decision on a recipient's need for 
continued stay and gives notice under Sec. 456.136 of an adverse final 
decision within 2 working days after the assigned continued stay review 
dates, except as required under paragraph (b) of this section.
    (b) If the committee makes an adverse final decision on a 
recipient's need for continued stay before the assigned review date, the 
committee gives notice under Sec. 456.136 within 2 working days after 
the date of the final decision.

                UR Plan: Medical Care Evaluation Studies



Sec. 456.141  Purpose and general description.

    (a) The purpose of medical care evaluation studies is to promote the 
most effective and efficient use of available health facilities and 
services consistent with patient needs and professionally recognized 
standards of health care.
    (b) Medical care evaluation studies--
    (1) Emphasize identification and analysis of patterns of patient 
care; and
    (2) Suggest appropriate changes needed to maintain consistently high 
quality patient care and effective and efficient use of services.



Sec. 456.142  UR plan requirements for medical care evaluation studies.

    (a) The UR plan must describe the methods that the committee uses to 
select and conduct medical care evaluation studies under paragraph 
(b)(1) of this section.
    (b) The UR plan must provide that the UR committee--
    (1) Determines the methods to be used in selecting and conducting 
medical care evaluation studies in the hospital;
    (2) Documents for each study--
    (i) Its results; and
    (ii) How the results have been used to make changes to improve the 
quality of care and promote more effective and efficient use of 
facilities and services;
    (3) Analyzes its findings for each study; and
    (4) Takes action as needed to--
    (i) Correct or investigate further any deficiencies or problems in 
the review process for admissions or continued stay cases;
    (ii) Recommend more effective and efficient hospital care 
procedures; or
    (iii) Designate certain providers or categories of admissions for 
review prior to admission.



Sec. 456.143  Content of medical care evaluation studies.

    Each medical care evaluation study must--
    (a) Identify and analyze medical or administrative factors related 
to the hospital's patient care;
    (b) Include analysis of at least the following:
    (1) Admissions;
    (2) Durations of stay;
    (3) Ancillary services furnished, including drugs and biologicals;
    (4) Professional services performed in the hospital; and
    (c) If indicated, contain recommendations for changes beneficial to 
patients, staff, the hospital, and the community.

[[Page 329]]



Sec. 456.144  Data sources for studies.

    Data that the committee uses to perform studies must be obtained 
from one or more of the following sources:
    (a) Medical records or other appropriate hospital data;
    (b) External organizations that compile statistics, design profiles, 
and produce other comparative data;
    (c) Cooperative endeavors with--
    (1) QIOs;
    (2) Fiscal agents;
    (3) Other service providers; or
    (4) Other appropriate agencies.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 43198, Dec. 1, 1986]



Sec. 456.145  Number of studies required to be performed.

    The hospital must, at least, have one study in progress at any time 
and complete one study each calendar year.



            Subpart D--Utilization Control: Mental Hospitals



Sec. 456.150  Scope.

    This subpart prescribes requirements for control of utilization of 
inpatient services in mental hospitals, including requirements 
concerning--
    (a) Certification of need for care;
    (b) Medical evaluation and admission review;
    (c) Plan of care; and
    (d) Utilization review plans.



Sec. 456.151  Definitions.

    As used in this subpart:
    Medical care appraisal norms or norms means numerical or statistical 
measures of usually observed performance.
    Medical care criteria or criteria means predetermined elements 
against which aspects of the quality of a medical service may be 
compared. These criteria are developed by health professionals relying 
on their expertise and the professional health care literature.

                     Certification of Need for Care



Sec. 456.160  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that inpatient services in a mental hospital are or were 
needed.
    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in a mental hospital, before 
the Medicaid agency authorizes payment.
    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec. 491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that inpatient services in a mental hospital are needed.
    (2) Recertification must be made at least every 60 days after 
certification.

[46 FR 48561, Oct. 1, 1981]

    Medical, Psychiatric, and Social Evaluations and Admission Review



Sec. 456.170  Medical, psychiatric, and social evaluations.

    (a) Before admission to a mental hospital or before authorization 
for payment, the attending physician or staff physician must make a 
medical evaluation of each applicant's or recipient's need for care in 
the hospital; and appropriate professional personnel must make a 
psychiatric and social evaluation.
    (b) Each medical evaluation must include--
    (1) Diagnoses;
    (2) Summary of present medical findings;
    (3) Medical history;
    (4) Mental and physical functional capacity;
    (5) Prognoses; and
    (6) A recommendation by a physician concerning--
    (i) Admission to the mental hospital; or
    (ii) Continued care in the mental hospital for individuals who apply 
for Medicaid while in the mental hospital.



Sec. 456.171  Medicaid agency review of need for admission.

    Medical and other professional personnel of the Medicaid agency or 
its designees must evaluate each applicant's or recipient's need for 
admission by reviewing and assessing the evaluations required by 
Sec. 456.170.

[[Page 330]]

                              Plan of Care



Sec. 456.180  Individual written plan of care.

    (a) Before admission to a mental hospital or before authorization 
for payment, the attending physician or staff physician must establish a 
written plan of care for each applicant or recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Objectives;
    (4) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Therapies;
    (vi) Social services;
    (vii) Diet; and
    (viii) Special procedures recommended for the health and safety of 
the patient;
    (5) Plans for continuing care, including review and modification to 
the plan of care; and
    (6) Plans for discharge.
    (c) The attending or staff physician and other personnel involved in 
the recipient's care must review each plan of care at least every 90 
days.



Sec. 456.181  Reports of evaluations and plans of care.

    A written report of each evaluation and plan of care must be entered 
in the applicant's or recipient's record--
    (a) At the time of admission; or
    (b) If the individual is already in the facility, immediately upon 
completion of the evaluation or plan.

           Utilization Review (UR) Plan: General Requirements



Sec. 456.200  Scope.

    Sections 456.201 through 456.245 of this subpart prescribe 
requirements for a written utilization review (UR) plan for each mental 
hospital providing Medicaid services. Sections 456.205 and 456.206 
prescribe administrative requirements; Secs. 456.211 through 456.213 
prescribe informational requirements; Secs. 456.231 through 456.238 
prescribe requirements for continued stay review; and Secs. 456.241 
through 456.245 prescribe requirements for medical care evaluation 
studies.



Sec. 456.201  UR plan required for inpatient mental hospital services.

    (a) The State plan must provide that each mental hospital furnishing 
inpatient services under the plan has in effect a written UR plan that 
provides for review of each recipient's need for the services that the 
mental hospital furnishes him.
    (b) Each written mental hospital UR plan must meet the requirements 
under Secs. 456.201 through 456.245.

                  UR Plan: Administrative Requirements



Sec. 456.205  UR committee required.

    The UR plan must--
    (a) Provide for a committee to perform UR required under this 
subpart;
    (b) Describe the organization, composition, and functions of this 
committee; and
    (c) Specify the frequency of meetings of the committee.



Sec. 456.206  Organization and composition of UR committee; disqualification from UR committee membership.

    (a) For the purpose of this subpart, ``UR committee'' includes any 
group organized under paragraphs (b) and (c) of this section.
    (b) The UR committee must be composed of two or more physicians, one 
of whom is knowledgeable in the diagnosis and treatment of mental 
diseases, and assisted by other professional personnel.
    (c) The UR committee must be constituted as--
    (1) A committee of the mental hospital staff;
    (2) A group outside the mental hospital staff, established by the 
local medical or osteopathic society and at least some of the hospitals 
and SNFs in the locality; or
    (3) A group capable of performing utilization review, established 
and organized in a manner approved by the Secretary.

[[Page 331]]

    (d) The UR committee may not include any individual who--
    (1) Is directly responsible for the care of patients whose care is 
being reviewed; or
    (2) Has a financial interest in any mental hospital.

                   UR Plan: Informational Requirements



Sec. 456.211  Recipient information required for UR.

    The UR plan must provide that each recipient's record includes 
information needed to perform UR required under this subpart. This 
information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (d) The plan of care required under Sec. 456.172.
    (e) Initial and subsequent continued stay review dates described 
under Secs. 456.233 and 456.234.
    (f) Reasons and plan for continued stay, if the attending physician 
believes continued stay is necessary.
    (g) Other supporting material that the committee believes 
appropriate to be included in the record.



Sec. 456.212  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the committee; and
    (b) The type and frequency of committee reports and arrangements for 
their distribution to appropriate individuals.



Sec. 456.213  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

               UR Plan: Review of Need for Continued Stay



Sec. 456.231  Continued stay review required.

    The UR plan must provide for a review of each recipient's continued 
stay in the mental hospital to decide whether it is needed, in 
accordance with the requirements of Secs. 456.232 through 456.238.



Sec. 456.232  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for continued stay.
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec. 456.233  Initial continued stay review date.

    The UR plan must provide that--
    (a) When a recipient is admitted to the mental hospital under 
admission review requirements of this subpart, the committee assigns a 
specified date by which the need for his continued stay will be 
reviewed;
    (b) If an individual applies for Medicaid while in the mental 
hospital, the committee assigns the initial continued stay review date 
within 1 working day after the mental hospital is notified of the 
application for Medicaid;
    (c) The committee bases its assignment of the initial continued stay 
review date on--
    (1) The methods and criteria required to be described under 
Sec. 456.235(a);
    (2) The individual's condition; and
    (3) The individual's projected discharge date;
    (d)(1) The committee uses any available appropriate regional medical 
care appraisal norms, such as those developed by abstracting services or 
third party payors, to assign the initial continued stay review date;
    (2) These norms are based on current and statistically valid data on 
duration of stay in mental hospitals for patients whose characteristics, 
such as age and diagnosis, are similar to those of the individual whose 
need for continued stay is being reviewed;
    (3) If the committee uses norms to assign the initial continued stay 
review date, the number of days between

[[Page 332]]

the individual's admission and the initial continued stay review date is 
no greater than the number of days reflected in the 50th percentile of 
the norms. However, the committee may assign a later review date if it 
documents that the later date is more appropriate;
    (e) The initial continued stay review date is not in any case later 
than 30 days after admission of the individual or notice to the mental 
hospital of his application for Medicaid; and
    (f) The committee insures that the initial continued stay review 
date is recorded in the individual's record.



Sec. 456.234  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The committee assigns subsequent continued stay review dates in 
accordance with Secs. 456.235(a) and 456.233;
    (b) The committee assigns a subsequent continued stay review date at 
least every 90 days each time it decides under Sec. 456.236 that the 
continued stay is needed; and
    (c) The committee insures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec. 456.235  Description of methods and criteria: Continued stay review dates; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign initial and subsequent continued stay review 
dates under Secs. 456.233 and 456.234 of this subpart; and
    (b) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.



Sec. 456.236  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup or designee reviews a recipient's 
continued stay on or before the expiration of each assigned continued 
stay review date;
    (c) For each continued stay of a recipient in the mental hospital, 
the committee, subgroup or designee reviews and evaluates the 
documentation described under Sec. 456.211 against the criteria 
developed under Sec. 456.232 and applies close professional scrutiny to 
cases described under Sec. 456.232(b).
    (d) If the committee, subgroup or designee finds that a recipient's 
continued stay in the mental hospital is needed, the committee assigns a 
new continued stay review date in accordance with Sec. 456.234;
    (e) If the committee, subgroup or designee finds that a continued 
stay case does not meet the criteria, the committee or a subgroup that 
includes at least one physician reviews the case to decide the need for 
continued stay;
    (f) If the committee or subgroup making the review under paragraph 
(e) of this section finds that a continued stay is not needed, it 
notifies the recipient's attending or staff physician and gives him an 
opportunity to present his views before it makes a final decision on the 
need for the continued stay;
    (g) If the attending or staff physician does not present additional 
information or clarification of the need for the continued stay, the 
decision of the committee or subgroup is final; and
    (h) If the attending or staff physician presents additional 
information or clarification, at least two physician members of the 
committee, one of whom is knowledgeable in the treatment of mental 
diseases, review the need for the continued stay. If they find that the 
recipient no longer needs inpatient mental hospital services, their 
decision is final.



Sec. 456.237  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec. 456.236 (f) through 
(h) is sent to--
    (a) The hospital administrator;
    (b) The attending or staff physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.

[[Page 333]]



Sec. 456.238  Time limits for final decision and notification of adverse decision.

    The UR plan must provide that--
    (a) The committee makes a final decision on a recipient's need for 
continued stay and gives notice under Sec. 456.237 of an adverse 
decision within 2 working days after the assigned continued stay review 
date, except as required under paragraph (b) of this section.
    (b) If the committee makes an adverse final decision on a 
recipient's need for continued stay before the assigned review date, the 
committee gives notice under Sec. 456.237 within 2 working days after 
the date of the final decision.

                UR Plan: Medical Care Evaluation Studies



Sec. 456.241  Purpose and general description.

    (a) The purpose of medical care evaluation studies is to promote the 
most effective and efficient use of available health facilities and 
services consistent with patient needs and professionally recognized 
standards of health care.
    (b) Medical care evaluation studies--
    (1) Emphasize identification and analysis of patterns of patient 
care; and
    (2) Suggest appropriate changes needed to maintain consistently high 
quality patient care and effective and efficient use of services.



Sec. 456.242  UR plan requirements for medical care evaluation studies.

    (a) The UR plan must describe the methods that the committee uses to 
select and conduct medical care evaluation studies under paragraph 
(b)(1) of this section.
    (b) The UR plan must provide that the UR committee--
    (1) Determines the methods to be used in selecting and conducting 
medical care evaluation studies in the mental hospital;
    (2) Documents for each study--
    (i) Its results; and
    (ii) How the results have been used to make changes to improve the 
quality of care and promote more effective and efficient use of 
facilities and services;
    (3) Analyzes its findings for each study; and
    (4) Takes action as needed to--
    (i) Correct or investigate further any deficiencies or problems in 
the review process; or
    (ii) Recommend more effective and efficient hospital care 
procedures.



Sec. 456.243  Content of medical care evaluation studies.

    Each medical care evaluation study must--
    (a) Identify and analyze medical or administrative factors related 
to the mental hospital's patient care;
    (b) Include analysis of at least the following:
    (1) Admissions.
    (2) Durations of stay.
    (3) Ancillary services furnished, including drugs and biologicals.
    (4) Professional services performed in the hospital; and
    (c) If indicated, contain recommendations for change beneficial to 
patients, staff, the hospital, and the community.



Sec. 456.244  Data sources for studies.

    Data that the committee uses to perform studies must be obtained 
from one or more of the following sources:
    (a) Medical records or other appropriate hospital data.
    (b) External organizations that compile statistics, design profiles, 
and produce other comparative data.
    (c) Cooperative endeavors with--
    (1) QIOs;
    (2) Fiscal agents;
    (3) Other service providers; or
    (4) Other appropriate agencies.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 43198, Dec. 1, 1986]



Sec. 456.245  Number of studies required to be performed.

    The mental hospital must, at least, have one study in progress at 
any time and complete one study each calendar year.

Subpart E [Reserved]

[[Page 334]]



      Subpart F--Utilization Control: Intermediate Care Facilities



Sec. 456.350  Scope.

    This subpart prescribes requirements for control of utilization of 
intermediate care facility (ICF) services including requirements 
concerning--
    (a) Certification of need for care;
    (b) Medical evaluation and admission review;
    (c) Plan of care; and
    (d) Utilization review plans.



Sec. 456.351  Definition.

    As used in this subpart:
    Intermediate care facility services means those items and services 
furnished in an intermediate care facility as defined in Secs. 440.140 
and 440.150 of this subchapter, but excludes those services if they are 
provided in religious nonmedical institutions as defined in 
Sec. 440.170(b) of this chapter.

[43 FR 45266, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]

                     Certification of Need for Care



Sec. 456.360  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that ICF services are or were needed.
    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in an ICF, before the 
Medicaid agency authorizes payment.
    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec. 491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that ICF services are needed.
    (2) Recertification must be made at least--
    (i) Every 12 months after certification in an institution for the 
mentally retarded or persons with related conditions; and
    (ii) Every 60 days after certification in an ICF other than an 
institution for the mentally retarded or persons with related 
conditions.

[46 FR 48561, Oct. 1, 1981, as amended at 50 FR 33034, Aug. 16, 1985]

   Medical, Psychological, and Social Evaluations and Admission Review



Sec. 456.370  Medical, psychological, and social evaluations.

    (a) Before admission to an ICF or before authorization for payment, 
an interdisciplinary team of health professionals must make a 
comprehensive medical and social evaluation and, where appropriate, a 
psychological evaluation of each applicant's or recipient's need for 
care in the ICF.
    (b) In an institution for the mentally retarded or persons with 
related conditions, the team must also make a psychological evaluation 
of need for care. The psychological evaluation must be made before 
admission or authorization of payment, but not more than three months 
before admission.
    (c) Each evaluation must include--
    (1) Diagnoses;
    (2) Summary of present medical, social, and where appropriate, 
developmental findings;
    (3) Medical and social family history;
    (4) Mental and physical functional capacity;
    (5) Prognoses;
    (6) Kinds of services needed;
    (7) Evaluation by an agency worker of the resources available in the 
home, family and community; and
    (8) A recommendation concerning--
    (i) Admission to the ICF; or
    (ii) Continued care in the ICF for individuals who apply for 
Medicaid while in the ICF.



Sec. 456.371  Exploration of alternative services.

    If the comprehensive evaluation recommends ICF services for an 
applicant or recipient whose needs could be met by alternative services 
that are currently unavailable, the facility must enter this fact in the 
recipient's record and begin to look for alternative services.

[[Page 335]]



Sec. 456.372  Medicaid agency review of need for admission.

    Medical and other professional personnel of the Medicaid agency or 
its designees must evaluate each applicant's or recipient's need for 
admission by reviewing and assessing the evaluations required by 
Sec. 456.370.

                              Plan of Care



Sec. 456.380  Individual written plan of care.

    (a) Before admission to an ICF or before authorization for payment, 
a physician must establish a written plan of care for each applicant or 
recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Objectives;
    (4) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Therapies;
    (vi) Social services;
    (vii) Diet; and
    (viii) Special procedures designed to meet the objectives of the 
plan of care;
    (5) Plans for continuing care, including review and modification of 
the plan of care; and
    (6) Plans for discharge.
    (c) The team must review each plan of care at least every 90 days.



Sec. 456.381  Reports of evaluations and plans of care.

    A written report of each evaluation and plan of care must be entered 
in the applicant's or recipient's record--
    (a) At the time of admission; or
    (b) If the individual is already in the ICF, immediately upon 
completion of the evaluation or plan.

            Utilization Review (UR) Plan: General Requirement



Sec. 456.400  Scope.

    Sections 456.401 through 456.438 of this subpart prescribe 
requirements for a written utilization review (UR) plan for each ICF 
providing Medicaid services. Sections 456.405 through 456.407 prescribe 
administrative requirements; Secs. 456.411 through 456.413 prescribe 
informational requirements; and Secs. 456.431 through 456.438 prescribe 
requirements for continued stay review.



Sec. 456.401  State plan UR requirements and options; UR plan required for intermediate care facility services.

    (a) The State plan must provide that--
    (1) UR is performed for each ICF that furnishes inpatient services 
under the plan;
    (2) Each ICF has on file a written UR plan that provides for review 
of each recipient's need for the services that the ICF furnishes him; 
and
    (3) Each written ICF UR plan meets requirements under Secs. 456.401 
through 456.438.
    (b) The State plan must specify the method used to perform UR, which 
may be--
    (1) Review conducted by the facility;
    (2) Direct review in the facility by individuals--
    (i) Employed by the medical assistance unit of the Medicaid agency; 
or
    (ii) Under contract to the Medicaid agency; or
    (3) Any other method.

                  UR Plan: Administrative Requirements



Sec. 456.405  Description of UR review function: How and when.

    The UR plan must include a written description of--
    (a) How UR is performed in the ICF; and
    (b) When UR is performed.



Sec. 456.406  Description of UR review function: Who performs UR; disqualification from performing UR.

    (a) The UR plan must include a written description of who performs 
UR in the ICF.
    (b) UR must be performed using a method specified under 
Sec. 456.401(b) by a group of professional personnel that includes--
    (1) At least one physician;
    (2) In an ICF that cares primarily for mental patients, at least one 
individual

[[Page 336]]

knowledgeable in the treatment of mental diseases; and
    (3) In an institution for the mentally retarded, a least one 
individual knowledgeable in the treatment of mental retardation.
    (c) The group performing UR may not include any individual who--
    (1) Is directly responsible for the care of the recipient whose care 
is being reviewed;
    (2) Is employed by the ICF; or
    (3) Has a financial interest in any ICF.



Sec. 456.407  UR responsibilities of administrative staff.

    The UR plan must describe--
    (a) The UR support responsibilities of the ICF's administrative 
staff; and
    (b) Procedures used by the staff for taking needed corrective 
action.

                   UR Plan: Informational Requirements



Sec. 456.411  Recipient information required for UR.

    The UR plan must provide that each recipient's record include 
information needed to perform UR required under this subpart. This 
information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) The name of the qualified mental retardation professional (as 
defined under Sec. 442.401 of this subchapter), if applicable.
    (d) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (e) The plan of care required under Sec. 456.372;
    (f) Initial and subsequent continued stay review dates described 
under Secs. 456.433 and 456.434.
    (g) Reasons and plan for continued stay, if the attending physician 
or qualified mental retardation professional believes continued stay is 
necessary.
    (h) Other supporting material that the UR group believes appropriate 
to be included in the record.



Sec. 456.412  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the group performing UR; 
and
    (b) The type and frequency of reports made by the UR group, and 
arrangements for distribution of the reports to appropriate individuals.



Sec. 456.413  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

               UR Plan: Review of Need for Continued Stay



Sec. 456.431  Continued stay review required.

    (a) The UR plan must provide for a review of each recipients 
continued stay in the ICF at least every 6 months to decide whether it 
is needed.
    (b) The UR plan requirement for continued stay review may be met by-
-
    (1) Reviews that are performed in accordance with the requirements 
of Secs. 456.432 through 456.437; or
    (2) Reviews that meet on-site inspection requirements under subpart 
I if--
    (i) The composition of the independent professional review team 
under subpart I meets the requirements of Sec. 456.406; and
    (ii) Reviews are conducted as frequently as required under 
Secs. 456.433 and 456.434.



Sec. 456.432  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The group performing UR develops written criteria to assess the 
need for continued stay.
    (b) The group develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec. 456.433  Initial continued stay review date.

    The UR plan must provide that--

[[Page 337]]

    (a) When a recipient is admitted to the ICF under admission review 
requirements of this subpart, the group performing UR assigns a 
specified date by which the need for his continued stay will be 
reviewed;
    (b) The group performing UR bases its assignment of the initial 
continued stay review date on the methods and criteria required to be 
described under Sec. 456.435(a);
    (c) The initial continued stay review date is--
    (1) Not later than 6 months after admission; or
    (2) Earlier than 6 months after admission, if indicated at the time 
of admission; and
    (d) The group performing UR insures that the initial continued stay 
review date is recorded in the recipient's record.



Sec. 456.434  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The group performing UR assigns subsequent continued stay review 
dates in accordance with Sec. 456.435.
    (b) The group assigns a subsequent continued stay review date each 
time it decides under Sec. 456.436 that the continued stay is needed--
    (1) At least every 6 months; or
    (2) More frequently than every six months if indicated at the time 
of continued stay review; and
    (c) The group insures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec. 456.435  Description of methods and criteria: Continued stay review dates.

    The UR plan must describe the methods and criteria that the group 
performing UR uses to assign initial and subsequent continued stay 
review dates under Secs. 456.433 and 456.434.



Sec. 456.436  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The group performing UR; or
    (2) A designee of the UR group;
    (b) The group or its designee reviews a recipient's continued stay 
on or before the expiration of each assigned continued stay review date.
    (c) For each continued stay of a recipient in the ICF, the group or 
its designee reviews and evaluates the documentation described under 
Sec. 456.411 against the criteria developed under Sec. 456.432 and 
applies close professional scrutiny to cases described under 
Sec. 456.432(b);
    (d) If the group or its designee finds that a recipient's continued 
stay in the ICF is needed, the group assigns a new continued stay review 
date in accordance with Sec. 456.434;
    (e) If the group or its designee finds that a continued stay case 
does not meet the criteria, the group or a subgroup that includes at 
least one physician reviews the case to decide the need for continued 
stay;
    (f) If the group or subgroup making the review under paragraph (e) 
of this section finds that a continued stay is not needed, it notifies 
the recipient's attending physician or, in institutions for the mentally 
retarded, the recipient's qualified mental retardation professional, 
within 1 working day of its decision, and gives him 2 working days from 
the notification date to present his views before it makes a final 
decision on the need for the continued stay;
    (g) If the attending physician or qualified mental retardation 
professional does not present additional information or clarification of 
the need for the continued stay, the decision of the UR group is final;
    (h) If the attending physician or qualified mental retardation 
professional presents additional information or clarification, the need 
for continued stay is reviewed by--
    (1) The physician member(s) of the UR group, in cases involving a 
medical determination; or
    (2) The UR group, in cases not involving a medical determination; 
and
    (i) If the individuals performing the review under paragraph (h) of 
this section find that the recipient no longer needs ICF services, their 
decision is final.

[[Page 338]]



Sec. 456.437  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec. 456.436 (g) through 
(i) is sent to--
    (a) The ICF administrator;
    (b) The attending physician;
    (c) The qualified mental retardation professional, if applicable;
    (d) The Medicaid agency;
    (e) The recipient; and
    (f) If possible, the next of kin or sponsor.



Sec. 456.438  Time limits for notification of adverse decision.

    The UR plan must provide that the group gives notice under 
Sec. 456.437 of an adverse decision not later than 2 days after the date 
of the final decision.



Subpart G--Inpatient Psychiatric Services for Individuals Under Age 21: 
                 Admission and Plan of Care Requirements



Sec. 456.480  Scope.

    This subpart concerns admission and plan of care requirements that 
apply to inpatient psychiatric services for individuals under age 21 in 
hospitals, mental hospitals, and intermediate care facilities.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.481  Admission certification and plan of care.

    If a facility provides inpatient psychiatric services to a recipient 
under age 21--
    (a) The admission certification by the review team required in 
Sec. 441.152 satisfies the requirement for physician certification of 
need for care in Secs. 456.60, 456.160, and 456.360; and
    (b) The development and review of the plan of care required in 
Sec. 441.154 satisfies the requirement for physician recertification of 
need for care in the sections cited in paragraph (a) and the requirement 
for establishment and periodic review of the plan of care in 
Secs. 456.80, 456.180, and 456.380.
    (c) The plan of care must be established by the team described in 
Sec. 441.156.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.482  Medical, psychiatric, and social evaluations.

    If a facility provides inpatient psychiatric services to a recipient 
under age 21, the medical, psychiatric, and social evaluations required 
by Secs. 456.170, and 456.370 must be made by the team described in 
Sec. 441.153.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



  Subpart H--Utilization Review Plans: FFP, Waivers, and Variances for 
                     Hospitals and Mental Hospitals



Sec. 456.500  Purpose.

    For hospitals and mental hospitals, this subpart--
    (a) Prescribes conditions for the availability of FFP relating to UR 
plans;
    (b) Prescribes conditions for granting a waiver of UR plan 
requirements; and
    (c) Prescribes conditions for granting a variance in UR plan 
requirements for remote facilities.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.501  UR plans as a condition for FFP.

    (a) Except when waived under Secs. 456.505 through 456.508, FFP is 
not available in expenditures for Medicaid services furnished by a 
hospital or mental hospital unless the facility has in effect a UR plan 
that meets the utilization review requirements for Medicare under 
section 1861(k) of the Act.
    (b) A facility that participates in Medicare and Medicaid must use 
the same UR standards and procedures and review committee for Medicaid 
as it uses for Medicare.
    (c) A facility that does not participate in Medicare must meet the 
UR plan requirements in subpart C or D of this part, which are 
equivalent to the Medicare UR plan requirements in

[[Page 339]]

Sec. Sec. 405.1137, 482.30, and 482.60 of this chapter.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 22042, June 17, 1986; 
61 FR 38399, July 24, 1996]

                     UR Plan: Waiver of Requirements



Sec. 456.505  Applicability of waiver.

    The Administrator may waive the UR plan requirements of subparts C 
or D of this part, except for provisions relating to disqualification of 
UR committee members under Sec. 456.106 of subpart C, and Sec. 456.206 
of subpart D, if the Medicaid agency--
    (a) Applies for a waiver; and
    (b) Demonstrates to the Administrator's satisfaction that it has in 
operation specific UR procedures that are superior in their 
effectiveness to the UR plan requirements under subpart C or D of this 
part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.506  Waiver options for Medicaid agency.

    (a) The agency may apply for a waiver at any time it has the 
procedures referred to under Sec. 456.505(b) in operation at least--
    (1) On a demonstration basis; or
    (2) In any part of the State.
    (b) Any hospital or mental hospital participating under the plan 
that is not covered by a waiver must continue to meet all the UR plan 
requirements under subpart C or D of this part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.507  Review and granting of waiver requests.

    (a) When the agency applies for a waiver, the Administrator will 
assess the agency's UR procedures and grant the waiver if he determines 
that the procedures meet criteria he establishes.
    (b) The Administrator will review and evaluate each waiver between 1 
and 2 years after he has granted it and between 1 and 2 years 
periodically thereafter.



Sec. 456.508  Withdrawal of waiver.

    (a) The Administrator will withdraw a waiver if he determines that 
State procedures are no longer superior in their effectiveness to the 
procedures required for UR plans under subpart C or D of this part.
    (b) If a waiver is withdrawn by the Administrator, each hospital or 
mental hospital covered by the waiver must meet all the UR plan 
requirements under subpart C or D of this part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]

        UR Plan: Remote Facility Variances from Time Requirements



Sec. 456.520  Definitions.

    As used in Secs. 456.521 through 456.525 of this subpart:
    Available physician or other professional personnel means an 
individual who--
    (a) Is professionally qualified;
    (b) Is not precluded from participating in UR under Sec. 456.107 of 
subpart C; or Sec. 456.207 of subpart D; and
    (c) Is not precluded from effective participation in UR because he 
requires more than approximately 1 hour to travel between the remote 
facility and his place of work.
    Remote facility means a facility located in an area that does not 
have enough available physicians or other professional personnel to 
perform UR as required under subparts C or D of this part, and for which 
the State requests a variance.
    Variance means permission granted by the Administrator to the 
Medicaid agency for a specific remote facility to use time periods 
different from those specified for the start and completion of reviews 
of all cases under the following sections: Secs. 456.125, 456.126, 
456.136, and 456.137 of subpart C; and Sec. 456.238 of subpart D.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]

[[Page 340]]



Sec. 456.521  Conditions for granting variance requests.

    (a) Except as described under paragraph (b) of this section, the 
administrator may grant a variance for a specific remote facility if the 
agency submits concurrently--
    (1) A request for the variance that documents to his satisfaction 
that the facility is unable to meet the time requirements for which the 
variance is requested; and
    (2) A revised UR plan for the facility.
    (b) The Administrator will not grant a variance if the remote 
facility is operating under a UR plan waiver that the Secretary has 
granted or is considering under Secs. 456.505 through 456.508.



Sec. 456.522  Content of request for variance.

    The agency's request for a variance must include--
    (a) The name, location, and type of the remote facility;
    (b) The number of total patient admissions and the average daily 
patient census at the facility in the 6 months preceding the request;
    (c) The number of Medicare and Medicaid patient admissions and the 
average daily Medicare and Medicaid patient census at the facility in 
the 6 months preceding the request;
    (d) The name and location of each hospital, mental hospital, and ICF 
located within a 50-mile radius of the facility;
    (e) The distance and average travel time between the remote facility 
and each facility listed in paragraph (e) of this section;
    (f) Documentation by the facility of its attempts to obtain the 
services of available physicians or other professional personnel, or 
both;
    (g) The names of all physicians on the active staff, and the names 
of all other professional personnel on the staff whose availability is 
relevant to the request;
    (h) The practice locations of available physicians and the estimated 
number of available professional personnel whose availability is 
relevant to the request;
    (i) Documentation by the facility of its inability to perform UR 
within the time requirements for which the variance is requested and its 
good faith efforts to comply with the UR plan requirements of subpart C 
or D of this part;
    (j) An assurance by the facility that it will continue its good 
faith efforts to meet the UR plan requirements of subpart C or D of this 
part; and
    (k) A statement of whether a planning or conditional PSRO exists in 
the area where the facility is located.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.523  Revised UR plan.

    (a) The revised UR plan for the remote facility must specify the 
methods and procedures that the facility will use if a variance is 
granted to insure that it--
    (1) Maintains effective and timely control over the utilization of 
services; and
    (2) Conducts reviews in a way that improves the quality of care 
provided to patients.
    (b) The revised UR plan for the remote facility is the basis for 
validation of UR under sec. 1903(g)(2) of the Act for the period when a 
variance is in effect.



Sec. 456.524  Notification of Administrator's action and duration of variance.

    (a) The Administrator--
    (1) Will notify the agency of the action he takes on its request for 
a variance; and
    (2) Will specify the period of time, not to exceed 1 year, for which 
the variance may be granted.
    (b) When it receives the Administrator's notification, the agency 
must promptly notify the remote facility of his action.



Sec. 456.525  Request for renewal of variance.

    (a) The agency must submit a request for renewal of a variance to 
the Administrator at least 30 days before the variance expires.
    (b) The renewal request must contain the information required under 
Sec. 456.522.
    (c) The renewal request must show, to the Administrator's 
satisfaction, that the remote facility continues to

[[Page 341]]

meet the requirements of Secs. 456.521 through 456.523.



   Subpart I--Inspections of Care in Intermediate Care Facilities and 
                    Institutions for Mental Diseases



Sec. 456.600  Purpose.

    This subpart prescribes requirements for periodic inspections of 
care and services intermediate care facilities (ICF's), and institutions 
for mental diseases (IMD's).

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.601  Definitions.

    For purposes of this subpart--
    Facility means an institution for mental diseases, or an 
intermediate care facility.
    Intermediate care facility includes institutions for the mentally 
retarded or persons with related conditions but excludes religious 
nonmedical institutions as defined in Sec. 440.170(b) of this chapter.
    Institution for mental diseases includes a mental hospital, a 
psychiatric facility, and a intermediate care facility that primarily 
cares for mental patients.
    Psychiatric facility includes a facility or program that provides 
inpatient psychiatric services for individuals under 21, as specified in 
Sec. 441.151 of this chapter, but does not include psychiatric wards in 
acute care hospitals.

[44 FR 56337, Oct. 1, 1979, as amended at 61 FR 38399, July 24, 1996; 64 
FR 67052, Nov. 30, 1999]



Sec. 456.602  Inspection team.

    (a) A team, as described in this section and Sec. 456.603 must 
periodically inspect the care and services provided to recipients in 
each facility.
    (b) Each team conducting periodic inspections must have a least one 
member who is at physician or registered nurse and other appropriate 
health and social service personnel.
    (c) For an IMD other than an ICF, each team must have a psychiatrist 
or physician knowledgeable about mental institutions and other 
appropriate mental health and social service personnel.
    (d) For an ICF that primarily cares for mental patients, each team 
must have at least one member who knows the problems and needs of 
mentally retarded individuals.
    (e) For an institution for the mentally retarded or persons with 
related conditions, each team must have at least one member who knows 
the problems and needs of mentally retarded individuals.
    (f) For ICFs primarily serving individuals 65 years of age or older, 
each team must have at least one member who knows the problems and needs 
of those individuals.
    (g) If there is no physician on the team, the Medicaid agency must 
insure that a physician is available to provide consultation to the 
team.
    (h) If a team has one or more physicians, it must be supervised by a 
physician.



Sec. 456.603  Financial interests and employment of team members.

    (a) Except as provided in paragraph (b) of this section--
    (1) [Reserved]
    (2) No member of a team that reviews care in an ICF may have a 
financial interest in or be employed by any ICF.
    (b) A member of a team that reviews care in an IMD or an institution 
for the mentally retarded or persons with related conditions--
    (1) May not have a financial interest in any institution of that 
same type but may have a financial interest in other facilities or 
institutions; and
    (2) May not review care in an institution where he is employed but 
may review care in any other facility or institution.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.604  Physician team member inspecting care of recipients.

    No physician member of a team may inspect the care of a recipient 
for whom he is the attending physician.



Sec. 456.605  Number and location of teams.

    There must be a sufficient number of teams so located within the 
State that

[[Page 342]]

onsite inspections can be made at appropriate intervals in each facility 
caring for recipients.



Sec. 456.606  Frequency of inspections.

    The team and the agency must determine, based on the quality of care 
and services being provided in a facility and the condition of 
recipients in the facility, at what intervals inspections will be made. 
However, the team must inspect the care and services provided to each 
recipient in the facility at least annually.



Sec. 456.607  Notification before inspection.

    No facility may be notified of the time of inspection more than 48 
hours before the scheduled arrival of the team.



Sec. 456.608  Personal contact with and observation of recipients and review of records.

    (a) For recipients under age 21 in psychiatric facilities and 
recipients in ICFs, other than those described in paragraph (b) of this 
section, the team's inspection must include--
    (1) Personal contact with and observation of each recipient; and
    (2) Review of each recipient's medical record.
    (b) For recipients age 65 or older in IMDs, the team's inspection 
must include--
    (1) Review of each recipient's medical record; and
    (2) If the record does not contain complete reports of periodic 
assessments required by Sec. 441.102 of this subchapter or, if such 
reports are inadequate, personal contact with and observation of each 
recipient

[43 FR 45266, Sept. 29, 1978, as amended at 44 FR 17940, Mar. 23, 1979; 
61 FR 38399, July 24, 1996]



Sec. 456.609  Determinations by team.

    The team must determine in its inspection whether--
    (a) The services available in the facility are adequate to--
    (1) Meet the health needs of each recipient, and the rehabilitative 
and social needs of each recipient in an ICF; and
    (2) Promote his maximum physical, mental, and psychosocial 
functioning.
    (b) It is necessary and desirable for the recipient to remain in the 
facility;
    (c) It is feasible to meet the recipient's health needs and, in an 
ICF, the recipient's rehabilitative needs, through alternative 
institutional or noninstitutional services; and
    (d) Each recipient under age 21 in a psychiatric facility and each 
recipient in an institution for the mentally retarded or persons with 
related conditions is receiving active treatment as defined in 
Sec. 441.154 of this subchapter.



Sec. 456.610  Basis for determinations.

    In making the determinations on adequacy of services and related 
matters under Sec. 456.609 for each recipient, the team may consider 
such items as whether--
    (a) The medical evaluation, any required social and psychological 
evaluations, and the plan of care are complete and current; the plan of 
care and, where required, the plan of rehabilitation are followed; and 
all ordered services, including dietary orders, are provided and 
properly recorded;
    (b) The attending physician reviews prescribed medications--
    (1) At least every 30 days in psychiatric facilities, and mental 
hospitals; and
    (2) At least quarterly in ICFs;
    (c) Tests or observations of each recipient indicated by his 
medication regimen are made at appropriate times and properly recorded;
    (d) Physician, nurse, and other professional progress notes are made 
as required and appear to be consistent with the observed condition of 
the recipient;
    (e) The recipient receives adequate services, based on such 
observations as--
    (1) Cleanliness;
    (2) Absence of bedsores;
    (3) Absence of signs of malnutrition or dehydration; and
    (4) Apparent maintenance of maximum physical, mental, and 
psychosocial funtion;
    (f) In an ICF, the recipient receives adequate rehabilitative 
services, as evidenced by--
    (1) A planned program of activities to prevent regression; and

[[Page 343]]

    (2) Progress toward meeting objectives of the plan of care;
    (g) The recipient needs any service that is not furnished by the 
facility or through arrangements with others; and
    (h) The recipient needs continued placement in the facility or there 
is an appropriate plan to transfer the recipient to an alternate method 
of care.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.611  Reports on inspections.

    (a) The team must submit a report promptly to the agency on each 
inspection.
    (b) The report must contain the observations, conclusions, and 
recommendations of the team concerning--
    (1) The adequacy, appropriateness, and quality of all services 
provided in the facility or through other arrangements, including 
physician services to recipients; and
    (2) Specific findings about individual recipients in the facility.
    (c) The report must include the dates of the inspection and the 
names and qualifications of the members of the team.

[43 FR 45266, Sept. 29, 1978, as amended at 44 FR 56337, Oct. 1, 1979]



Sec. 456.612  Copies of reports.

    The agency must send a copy of each inspection report to--
    (a) The facility inspected;
    (b) The facility's utilization review committee;
    (c) The agency responsible for licensing, certification, or approval 
of the facility for purposes of Medicare and Medicaid; and
    (d) Other State agencies that use the information in the reports to 
perform their official function, including, if inspection reports 
concern IMD's, the appropriate State mental health authorities.



Sec. 456.613  Action on reports.

    The agency must take corrective action as needed based on the report 
and recommendations of the team submitted under this subpart.



Sec. 456.614  Inspections by utilization review committee.

    A utilization review committee under subparts C through F of this 
part may conduct the periodic inspections required by this subpart if--
    (a) The committee is not based in the facility being reviewed; and
    (b) The composition of the committee meets the requirements of this 
subpart.



  Subpart J--Penalty for Failure To Make a Satisfactory Showing of an 
           Effective Institutional Utilization Control Program

    Authority: Secs. 1102 and 1903(g) of the Social Security Act (42 
U.S.C. 1302 and 1396 b(g)).

    Source: 44 FR 56338, Oct. 1, 1979, unless otherwise noted.



Sec. 456.650  Basis, purpose and scope.

    (a) Basis. Section 1903(g) of the Act requires that FFP for long-
stay inpatient services at a level of care be reduced, by a specified 
formula, for any quarter in which a State fails to make a satisfactory 
showing that it has an effective program of utilization control for that 
level of care.
    (b) Purpose. This subpart specifies--
    (1) What States must do to make a satisfactory showing;
    (2) How the Administrator will determine whether reductions will be 
imposed; and
    (3) How the required reductions will be implemented.
    (c) Scope. The reductions required by this subpart do not apply to--
    (1) Services provided under a contract with a health maintenance 
organization; or
    (2) Facilities in which a QIO is performing medical and utilization 
reviews under contract with the Medicaid agency in accordance with 
Sec. 431.630 of this chapter.

[44 FR 56338, Oct. 1, 1979, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986]



Sec. 456.651  Definitions.

    For purposes of this subpart--
    Facility, with respect to inpatient psychiatric services for 
individuals

[[Page 344]]

under 21, includes a psychiatric program as specified in Sec. 441.151 of 
this chapter.
    Level of care means one of the following types of inpatient 
services: hospital, mental hospital, intermediate care facility, or 
psychiatric services for individuals under 21.
    Long-stay services means services provided to a recipient after a 
total of 60 days of inpatient stay (90 in the case of mental hospital 
services) during a 12-month period beginning July 1, not counting days 
of stay paid for wholly or in part by Medicare.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec. 456.652  Requirements for an effective utilization control program.

    (a) General requirements. In order to avoid a reduction in FFP, the 
Medicaid agency must make a satisfactory showing to the Administrator, 
in each quarter, that it has met the following requirements for each 
recipient:
    (1) Certification and recertification of the need for inpatient 
care, as specified in Secs. 456.60, 456.160, 456.360 and 456.481.
    (2) A plan of care established and periodically reviewed and 
evaluated by a physician, as specified in Secs. 456.80, 456.180, and 
456.481.
    (3) A continuous program of utilization review under which the 
admission of each recipient is reviewed or screened in accordance with 
section 1903(g)(1)(C) of the Act; and
    (4) A regular program of reviews, including medical evaluations, and 
annual on-site reviews of the care of each recipient, as specified in 
Secs. 456.170, and 456.482 and subpart I of this part.
    (b) Annual on-site review requirements. (1) An agency meets the 
quarterly on-site review requirements of paragraph (a)(4) of this 
section for a quarter if it completes on-site reviews of each recipient 
in every facility in the State, and in every State-owned facility 
regardless of location, by the end of the quarter in which a review is 
required under paragraph (b)(2) of this section.
    (2) An on-site review is required in a facility by the end of a 
quarter if the facility entered the Medicaid program during the same 
calendar quarter 1 year earlier or has not been reviewed since the same 
calendar quarter 1 year earlier. If there is no Medicaid recipient in 
the facility on the day a review is scheduled, the review is not 
required until the next quarter in which there is a Medicaid recipient 
in the facility.
    (3) If a facility is not reviewed in the quarter in which it is 
required to be reviewed under paragraph (b)(2) of this section, it will 
continue to require a review in each subsequent quarter until the review 
is performed.
    (4) The requirement for an on-site review in a given quarter is not 
affected by the addition or deletion of a level of care in a facility's 
provider agreement.
    (c) Facilities without valid provider agreements. The requirements 
of paragraphs (a) and (b) of this section apply with respect to 
recipients for whose care the agency intends to claim FFP even if the 
recipients receive care in a facility whose provider agreement has 
expired or been terminated.

[44 FR 56338, Oct. 1, 1979, as amended at 46 FR 48561, Oct. 1, 1981; 61 
FR 38399, July 24, 1996]



Sec. 456.653  Acceptable reasons for not meeting requirements for annual on-site review.

    The Administrator will find an agency's showing satisfactory, even 
if it failed to meet the annual review requirements of 
Sec. 456.652(a)(4), if--
    (a) The agency demonstrates that--
    (1) It completed reviews by the end of the quarter in at least 98 
percent of all facilities requiring review by the end of the quarter;
    (2) It completed reviews by the end of the quarter in all facilities 
with 200 or more certified Medicaid beds requiring review by the end of 
the quarter; and
    (3) With respect to all unreviewed facilities, the agency exercised 
good faith and due diligence by attempting to review those facilities 
and would have succeeded but for events beyond its control which it 
could not have reasonably anticipated; or
    (b) The agency demonstrates that it failed to meet the standard in 
paragraph (a) (1) and (2) of this section by the close of the quarter 
for technical reasons, but met the standard within 30 days after the 
close of the quarter. Technical reasons are circumstances within the 
agency's control.

[[Page 345]]

    (c) Facilities that are reviewed under paragraph (b) of this 
section, after the quarter in which they were due for review, retain 
their original anniversary quarter due date for purposes of subsequent 
reviews.



Sec. 456.654  Requirements for content of showings and procedures for submittal.

    (a) An agency's showing for a quarter must--
    (1) Include a certification by the agency that the requirements of 
Sec. 456.652(a) (1) through (4) were met during the quarter for each 
level of care or, if applicable, a certification of the reasons the 
annual on-site review requirements of Sec. 456.652(a)(4) were not met in 
any facilities;
    (2) For all mental hospitals, intermediate care facilities, and 
facilities providing inpatient psychiatric services for individuals 
under 21, participating in Medicaid any time during the 12-month period 
ending on the last day of the quarter, list each facility by level of 
care, name, address and provider number;
    (3) For each facility entering or leaving the program during the 12-
month period ending on the last day of the quarter, list the beginning 
or ending dates of the provider agreement and supply a copy of the 
provider agreement;
    (4) If review has been contracted to a QIO under Sec. 431.630 of 
this chapter, list the date the QIO contracted for review.
    (5) List all dates of on-site reviews completed by review teams 
anytime during the 12-month period ending on the last day of the 
quarter;
    (6) For all facilities in which an on-site review was required but 
not conducted, list the facility by name, address and provider number;
    (7) For each on-site review in a mental hospital, intermediate care 
facility that primarily cares for mental patients, or inpatient 
psychiatric facility, list the name and qualifications of one team 
member who is a physician; and
    (8) For each on-site review in an intermediate care facility that 
does not primarily care for mental patients, list the name and 
qualifications of one team member who is either a physician or 
registered nurse.
    (b) The quarterly showing must be in the form prescribed by the 
Administrator.
    (c) The quarterly showing must be postmarked or received within 30 
days after the close of the quarter for which it is made, unless the 
agency demonstrates good cause for later submittal and the showing is 
postmarked or received within 45 days after the close of the quarter. 
Good cause means unanticipated circumstances beyond the agency's 
control.

[44 FR 56338, Oct. 1, 1979, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986; 61 FR 38399, July 24, 1996]



Sec. 456.655  Validation of showings.

    (a) The Administrator will periodically validate showings submitted 
under Sec. 456.654. Validation procedures will include on-site sample 
surveys of institutions and surveys at the Medicaid agencies.
    (b) The Administrator will not find an agency's showing satisfactory 
if the information obtained through his validation procedures 
demonstrates, that any of the requirements of Sec. 456.652(a) (1) 
through (4) were not met during the quarter for which the showing was 
made.



Sec. 456.656  Reductions in FFP.

    (a) If the Administrator determines an agency's showing does not 
meet each of the requirements of this sub-part, he will give the agency 
30 days notice before making the required reduction.
    (b) If the Administrator determines that a showing for any quarter 
is unsatisfactory on its face, he will make the required reduction in 
the grant award based on the Quarterly Medicaid Statement of 
Expenditures for the Medical Assistance Program for that quarter. (This 
form CMS-64 is described in Sec. 430.30(c) of this chapter.)
    (c) If the Administrator finds a showing satisfactory on its face, 
but after validation determines the showing to be unsatisfactory, he 
will notify the agency of any required reduction in FFP no later than 
the first day of the fourth calendar quarter following the calendar 
quarter for which the showing

[[Page 346]]

was made. Any required reduction will be made by amending or adjusting 
the agency's grant award.
    (d) The agency may request reconsideration of a reduction in 
accordance with the procedures specified in 45 CFR part 16.



Sec. 456.657  Computation of reductions in FFP.

    (a) For each level of care specified in a provider agreement, and 
for each quarter for which a satisfactory showing is not made, the 
amount of the reduction in FFP is computed as follows:
    (1) For each level of care, the number of recipients who received 
services in facilities that did not meet the requirements of this 
subpart is divided by the total number of recipients who received 
services in facilities for which a showing was required under this 
subpart. If any of the requirements specified in Sec. 456.652(a)(1) 
through (4) were not met for any recipient in a facility, the reduction 
will be computed on the total number of recipients in that facility at 
the level of care in question.
    (2) The fraction obtained in paragraph (a)(1) of this section is 
multiplied by one-third.
    (3) The product obtained in paragraph (a)(2) of this section is 
multiplied by the Federal Medical Assistance Percentage (FMAP).
    (4) The product obtained in paragraph (a)(3) of this section is 
multiplied by the agency payments for longstay services furnished during 
the quarter at that level of care.
    (b) If any of the data required to compute the amount of the 
reduction in FFP are unavailable, the Administrator will substitute an 
estimate. If the agency determines the exact data to the satisfaction of 
the Administrator, the estimate may later be adjusted. If the number of 
recipients in individual facilities is not available, the fraction 
specified in paragraph (a)(1) of this section will be estimated, for 
each level of care, by dividing the number of facilities in which the 
requirements were not met by the total number of facilities for which a 
showing is required under this subpart.



     Subpart K--Drug Use Review (DUR) Program and Electronic Claims 
              Management System for Outpatient Drug Claims

    Source: 57 FR 49408, Nov. 2, 1992, unless otherwise noted.



Sec. 456.700  Scope.

    This subpart prescribes requirements for--
    (a) An outpatient DUR program that includes prospective drug review, 
retrospective drug use review, and an educational program;
    (b) The establishment, composition, and functions of a State DUR 
Board; and
    (c) An optional point-of-sale electronic claims management system 
for processing claims for covered outpatient drugs.



Sec. 456.702  Definitions.

    For purposes of this subpart--
    Abuse is defined as in Sec. 455.2 of this chapter.
    Adverse medical result means a clinically significant undesirable 
effect, experienced by a patient, due to a course of drug therapy.
    Appropriate and medically necessary means drug prescribing and 
dispensing that is in conformity with the predetermined standards 
established in accordance with Sec. 456.703.
    Criteria is defined as in Sec. 466.1 of this chapter.
    Fraud is defined as in Sec. 455.2 of this chapter.
    Gross overuse means repetitive overutilization without therapeutic 
benefit.
    Inappropriate and medically unnecessary means drug prescribing and 
dispensing not in conformity with the definition of appropriate and 
medically necessary.
    Overutilization means use of a drug in a quantity, strength, or 
duration that is greater than necessary to achieve a desired therapeutic 
goal or that puts the recipient at risk of a clinically significant 
undesirable effect, or both.
    Predetermined standards means criteria and standards that have been 
established in accordance with the requirements of Sec. 456.703.

[[Page 347]]

    Standards is defined as in Sec. 466.1 of this chapter.
    Underutilization means use of a drug by a recipient in insufficient 
quantity, strength, or duration to achieve a desired therapeutic goal or 
that puts the recipient at risk of a clinically significant undesired 
effect, or both.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]



Sec. 456.703  Drug use review program.

    (a) General. Except as provided in paragraphs (b) and (c) of this 
section, in order for FFP to be paid or made available under section 
1903 of the Act for covered outpatient drugs, the State must have in 
operation, by not later than January 1, 1993, a DUR program consisting 
of prospective drug review, retrospective drug use review, and an 
educational program that meets the requirements of this subpart. The 
goal of the State's DUR program must be to ensure appropriate drug 
therapy, while permitting sufficient professional prerogatives to allow 
for individualized drug therapy.
    (b) Exception for drugs dispensed to certain nursing facility 
residents. Prospective drug review and retrospective drug use review 
(including interventions and education) under the DUR program are not 
required for drugs dispensed to residents of nursing facilities that are 
in compliance with the drug regimen review procedures set forth in part 
483 of this chapter. This does not preclude the State agency from making 
such drugs subject to prospective DUR or retrospective DUR or both, 
provided the State agency makes the drugs subject to all the 
requirements of this subpart applicable to the respective review.
    (c) Exemption for certain covered outpatient drugs dispensed by 
hospitals and health maintenance organizations.
    (1) The State plan must provide that covered outpatient drugs 
dispensed by a hospital using drug formulary systems and billed to the 
plan at no more than the hospital's purchasing costs are not subject to 
the requirements of this subpart. Individual hospitals requesting this 
exemption must provide assurances to the State agency that they meet the 
requirements specified in section 1927(j)(2) of the Act.
    (2) The State plan must provide that covered outpatient drugs 
dispensed by health maintenance organizations are not subject to the 
requirements of this subpart.
    (d) Use of predetermined standards. A DUR program must assess drug 
use information against predetermined standards.
    (e) Source of predetermined standards. The predetermined standards 
must be--
    (1) Developed directly by the State or its contractor;
    (2) Obtained by the State through contracts with commercial vendors 
of DUR services;
    (3) Obtained by the State from independent organizations, such as 
the United States Pharmacopeial Convention, or entities receiving 
funding from the Public Health Service, CMS, or State agencies; or
    (4) Any combination of paragraphs (e)(1) through (e)(3) of this 
section.
    (f) Requirements for predetermined standards. The predetermined 
standards used in the DUR program must meet the following requirements:
    (1) The source materials for their development are consistent with 
peer-reviewed medical literature (that is, scientific, medical, and 
pharmaceutical publications in which original manuscripts are published 
only after having been critically reviewed by unbiased independent 
experts) and the following compendia:
    (i) American Hospital Formulary Service Drug Information;
    (ii) United States Pharmacopeia-Drug Information;
    (iii) American Medical Association Drug Evaluations.
    (2) Differences between source materials were resolved by physicians 
and pharmacists developing consensus solutions. The consensus process 
means the reliance, by the criteria developers, on the expertise of 
physicians and pharmacists to evaluate differences in criteria source 
materials and to come to agreement on how differences should be 
resolved.
    (3) They are non-proprietary and readily available to providers of 
services. Systems and algorithms using the predetermined standards may 
remain proprietary.

[[Page 348]]

    (4) They are clinically-based and scientifically valid.
    (5) The review based on clinical criteria uses predetermined 
standards to determine the population at risk of a clinically 
significant adverse medical result and applies standards, appropriate to 
this population, across providers and patients to determine the provider 
outliers whose prescribing, dispensing, or consumption practices may not 
conform to accepted standards of care. Various statistical measures 
(including mean, range, or other measures at the discretion of the 
State) may be applied to these data. Standards may be considered in 
deciding if an in-depth review is needed to determine whether to 
intervene once the potential therapeutic problems have been identified 
through the use of clinical criteria.
    (6) They have been tested against claims data prior to adoption in 
order to validate the level of possibly significant therapeutic problems 
without undue levels of false positives.
    (7) The predetermined standards for prospective and retrospective 
DUR are compatible.
    (8) They are subjected to ongoing evaluation and modification either 
as a result of actions by their developer or as a result of 
recommendations by the DUR Board.
    (g) Access to predetermined standards. Upon their adoption, 
predetermined standards must be available to the public. Pharmacists and 
physicians must be informed of the existence of predetermined standards 
and of how they can obtain copies of them.
    (h) Confidentiality of patient related data. In implementing the DUR 
program, the agency must establish, in regulations or through other 
means, policies concerning confidentiality of patient related data that 
are consistent with applicable Federal confidentiality requirements at 
part 431, subpart F of this chapter; the State Pharmacy Practice Act; 
and the guidelines adopted by the State Board of Pharmacy or other 
relevant licensing bodies.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]



Sec. 456.705  Prospective drug review.

    (a) General. Except as provided in Secs. 456.703 (b) and (c), the 
State plan must provide for a review of drug therapy before each 
prescription is filled or delivered to a recipient, and applicable State 
law (including State Board policy incorporated in the State law by 
reference) must establish standards for counseling of the recipient or 
the recipient's caregiver. The State must provide pharmacies with 
detailed information as to what they must do to comply with prospective 
DUR requirements, including guidelines on counseling, profiling, and 
documentation of prospective DUR activities by the pharmacists. The 
pharmacies, in turn, must provide this information to their pharmacists. 
This information is to be based on guidelines provided by this subpart 
and by other sources that the State may specify.
    (b) Point-of-sale or point-of-distribution review. Except as 
provided in Secs. 456.703 (b) and (c), the State plan must provide for 
point-of-sale or point-of-distribution review of drug therapy using 
predetermined standards before each prescription is filled or delivered 
to the recipient or the recipient's caregiver. The review must include 
screening to identify potential drug therapy problems of the following 
types:
    (1) Therapeutic duplication, that is, the prescribing and dispensing 
of two or more drugs from the same therapeutic class such that the 
combined daily dose puts the recipient at risk of an adverse medical 
result or incurs additional program costs without additional therapeutic 
benefit.
    (2) Drug-disease contraindication, that is, the potential for, or 
the occurrence of--
    (i) An undesirable alteration of the therapeutic effect of a given 
drug because of the presence, in the patient for whom it is prescribed, 
of a disease condition; or
    (ii) An adverse effect of the drug on the patient's disease 
condition.
    (3) Adverse drug-drug interaction, that is, the potential for, or 
occurrence of, a clinically significant adverse medical effect as a 
result of the recipient using two or more drugs together.
    (4) Incorrect drug dosage, that is, the dosage lies outside the 
daily dosage

[[Page 349]]

specified in predetermined standards as necessary to achieve therapeutic 
benefit. Dosage is the strength multiplied by the quantity dispensed 
divided by day's supply.
    (5) Incorrect duration of drug treatment, that is, the number of 
days of prescribed therapy exceeds or falls short of the recommendations 
contained in the predetermined standards.
    (6) Drug-allergy interactions, that is, the significant potential 
for, or the occurrence of, an allergic reaction as a result of drug 
therapy.
    (7) Clinical abuse/misuse, that is, the occurrence of situations 
referred to in the definitions of abuse, gross overuse, overutilization, 
and underutilization, as defined in Sec. 456.702, and incorrect dosage 
and incorrect duration, as defined in paragraphs (b)(4) and (b)(5) of 
this section, respectively.
    (c) Drug counseling. (1) As part of the prospective drug review 
program, standards for counseling by pharmacists of recipients or the 
recipients' caregivers must be established by State law or other method 
that is satisfactory to the State agency. A State agency's counseling 
standards must address special situations where the patient or the 
patient's representative, is not readily available to receive the offer 
to counsel or the actual counseling, for example, prescriptions 
delivered offsite or through the mail. The State agency, at a minimum, 
must also address the following issues in their counseling standards:
    (i) Whether the offer to counsel is required for new prescriptions 
only, or for both new and refill prescriptions;
    (ii) Whether pharmacists must make the offer to counsel or auxiliary 
personnel are authorized to make the offer;
    (iii) Whether only a patient's refusal of the offer to counsel must 
be documented, or whether documentation of all offers is required;
    (iv) Whether documentation of counseling is required; and
    (v) Whether counseling is required in situations where the patient's 
representative is not readily available to receive a counseling offer or 
the counseling itself.
    (2) The standards must meet the following requirements:
    (i) They must require pharmacists to offer to counsel (in person, 
whenever practicable, or through access to a telephone service that is 
toll-free for long-distance calls) each recipient or recipient's 
caregiver who presents a prescription. A pharmacist whose primary 
patient population is accessible through a local measured or toll-free 
exchange need not be required to offer toll-free service. Mail order 
pharmacies are required to provide toll-free telephone service for long 
distance calls.
    (ii) They need not require a pharmacist to provide consultation when 
a Medicaid recipient or the recipient's caregiver refuses that 
consultation.
    (iii) They must specify what documentation by the pharmacy of 
refusal of the offer of counseling is required.
    (3) The standards must specify that the counseling include those 
matters listed in paragraphs (c)(3)(i) through (c)(3)(viii) of this 
section that, in the exercise of his or her professional judgement 
(consistent with State law regarding the provision of such information), 
the pharmacist considers significant as well as other matters the 
pharmacist considers significant.
    (i) The name and description of the medication;
    (ii) The dosage form, dosage, route of administration, and duration 
of drug therapy;
    (iii) Special directions and precautions for preparation, 
administration, and use by the patient;
    (iv) Common severe side or adverse effects or interactions and 
therapeutic contraindications that may be encountered, including their 
avoidance, and the action required if they occur;
    (v) Techniques for self-monitoring drug therapy;
    (vi) Proper storage;
    (vii) Prescription refill information; and
    (viii) Action to be taken in the event of a missed dose.
    (d) Profiling. The State agency must require that, in the case of 
Medicaid recipients, the pharmacist make a reasonable effort to obtain, 
record, and maintain patient profiles containing, at a minimum, the 
information listed in paragraphs (d)(1) through (d)(3) of this section.

[[Page 350]]

    (1) Name, address, telephone number, date of birth (or age), and 
gender of the patient;
    (2) Individual history, if significant, including disease state or 
states, known allergies and drug reactions, and a comprehensive list of 
medications and relevant devices; and
    (3) Pharmacist's comments relevant to the individual's drug therapy.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]



Sec. 456.709  Retrospective drug use review.

    (a) General. The State plan must provide for a retrospective DUR 
program for ongoing periodic examination (no less frequently than 
quarterly) of claims data and other records in order to identify 
patterns of fraud, abuse, gross overuse, or inappropriate or medically 
unnecessary care among physicians, pharmacists, and Medicaid recipients, 
or associated with specific drugs or groups of drugs. This examination 
must involve pattern analysis, using predetermined standards, of 
physician prescribing practices, drug use by individual patients and, 
where appropriate, dispensing practices of pharmacies. This program must 
be provided through the State's mechanized drug claims processing and 
information retrieval systems approved by CMS (that is, the Medicaid 
Management Information System (MMIS)) or an electronic drug claims 
processing system that is integrated with MMIS. States that do not have 
MMIS systems may use existing systems provided that the results of the 
examination of drug claims as described in this section are integrated 
within their existing system.
    (b) Use of predetermined standards. Retrospective DUR includes, but 
is not limited to, using predetermined standards to monitor for the 
following:
    (1) Therapeutic appropriateness, that is, drug prescribing and 
dispensing that is in conformity with the predetermined standards.
    (2) Overutilization and underutilization, as defined in 
Sec. 456.702.
    (3) Appropriate use of generic products, that is, use of such 
products in conformity with State product selection laws.
    (4) Therapeutic duplication as described in Sec. 456.705(b)(1).
    (5) Drug-disease contraindication as described in 
Sec. 456.705(b)(2).
    (6) Drug-drug interaction as described in Sec. 456.705(b)(3).
    (7) Incorrect drug dosage as described in Sec. 456.705(b)(4).
    (8) Incorrect duration of drug treatment as described in 
Sec. 456.705(b)(5).
    (9) Clinical abuse or misuse as described in Sec. 456.705(b)(7).



Sec. 456.711  Educational program.

    The State plan must provide for ongoing educational outreach 
programs that, using DUR Board data on common drug therapy problems, 
educate practitioners on common drug therapy problems with the aim of 
improving prescribing and dispensing practices. The program may be 
established directly by the DUR Board or through contracts with 
accredited health care educational institutions, State medical societies 
or State pharmacists associations/societies, or other organizations. The 
program must include the interventions listed in paragraphs (a) through 
(d) of this section. The DUR Board determines the content of education 
regarding common therapy problems and the circumstances in which each of 
the interventions is to be used.
    (a) Dissemination of information to physicians and pharmacists in 
the State concerning the duties and powers of the DUR Board and the 
basis for the standards required by Sec. 456.705(c) for use in assessing 
drug use.
    (b) Written, oral, or electronic reminders containing patient-
specific or drug-specific information (or both) and suggested changes in 
prescribing or dispensing practices. These reminders must be conveyed in 
a manner designed to ensure the privacy of patient-related information.
    (c) Face-to-face discussions, with follow up discussions when 
necessary, between health care professionals expert in appropriate drug 
therapy and selected prescribers and pharmacists who have been targeted 
for educational intervention on optimal prescribing, dispensing, or 
pharmacy care practices.
    (d) Intensified review or monitoring of selected prescribers or 
dispensers.

[[Page 351]]



Sec. 456.712  Annual report.

    (a) DUR Board report. The State must require the DUR Board to 
prepare and submit an annual DUR report to the Medicaid agency that 
contains information specified by the State.
    (b) Medicaid agency report. The Medicaid agency must prepare and 
submit, on an annual basis, a report to the Secretary that incorporates 
the DUR Board's report and includes the following information:
    (1) A description of the nature and scope of the prospective drug 
review program.
    (2) A description of how pharmacies performing prospective DUR 
without computers are expected to comply with the statutory requirement 
for written criteria.
    (3) Detailed information on the specific criteria and standards in 
use. After the first annual report, information regarding only new or 
changed criteria must be provided and deleted criteria must be 
identified.
    (4) A description of the steps taken by the State to include in the 
prospective and retrospective DUR program drugs dispensed to residents 
of a nursing facility that is not in compliance with the drug regimen 
review procedures set forth in part 483 of this chapter. After the first 
annual report, only changes must be reported.
    (5) A description of the actions taken by the State Medicaid agency 
and the DUR Board to ensure compliance with the requirements for 
predetermined standards at Sec. 456.703(f) and with the access to the 
predetermined standards requirement at Sec. 456.703(g). After the first 
annual report, only changes must be reported.
    (6) A description of the nature and scope of the retrospective DUR 
program.
    (7) A summary of the educational interventions used and an 
assessment of the effect of these educational interventions on the 
quality of care.
    (8) A description of the steps taken by the State Agency to monitor 
compliance by pharmacies with the prospective DUR counseling 
requirements contained in Federal and State laws and regulations. After 
the first annual report, only changes must be reported.
    (9) Clear statements of purpose that delineate the respective goals, 
objectives, and scopes of responsibility of the DUR and surveillance and 
utilization (SUR) functions. These statements must clarify the working 
relationships between DUR and SUR functions and other entities such as 
the Medicaid Fraud Control Unit and State Board of Pharmacy. The annual 
report also must include a statement delineating how functional 
separation will be maintained between the fraud and abuse activities and 
the educational activities. After the first annual report, only changes 
must be reported.
    (10) An estimate of the cost savings generated as a result of the 
DUR program. This report must identify costs of DUR and savings to the 
Medicaid drug program attributable to prospective and retrospective DUR.



Sec. 456.714  DUR/surveillance and utilization review relationship.

    (a) The retrospective DUR requirements in this subpart parallel a 
portion of the surveillance and utilization review (SUR) requirements in 
subpart A of this part and in part 455 of this chapter.
    (b) A State agency may direct DUR staffs to limit review activities 
to those that focus on what constitutes appropriate and medically 
necessary care to avoid duplication of activities relating to fraud and 
abuse under the SUR program.

[59 FR 48825, Sept. 23, 1994]



Sec. 456.716  DUR Board.

    (a) State DUR Board requirement and member qualifications. Each 
State must establish, either directly or through a contract with a 
private organization, a DUR Board. The DUR Board must include health 
care professionals who have recognized knowledge and expertise in at 
least one of the following:
    (1) Clinically appropriate prescribing of covered outpatient drugs.
    (2) Clinically appropriate dispensing and monitoring of covered 
outpatient drugs.
    (3) Drug use review, evaluation, and intervention.
    (4) Medical quality assurance.
    (b) Board composition. At least one-third but not more than 51 
percent of

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the DUR Board members must be physicians, and at least one-third of the 
Board members must be pharmacists. These physicians and pharmacists must 
be actively practicing and licensed.
    (c) Medicaid agency/DUR Board relationship. The Medicaid agency is 
ultimately responsible for ensuring that the DUR program is operational 
and conforms with the requirements of this subpart. The agency has the 
authority to accept or reject the recommendations or decisions of the 
DUR Board.
    (d) DUR Board activities. The State agency must ensure that the 
operational tasks involved in carrying out the DUR Board activities set 
forth at section 1927(g)(3)(C) of the Act are assigned, limited only by 
the requirements of section 1927(g)(3)(C) of the Act, based on 
consideration of operational requirements and on where the necessary 
expertise resides. Except as limited by the requirements of section 
1927(g)(3)(C) of the Act, the State agency may alter the suggested 
working relationships set forth in this paragraph.
    (1) Application of predetermined standards: Board's activities. The 
DUR Board should perform the following activities:
    (i) Review and make recommendations on predetermined standards 
submitted to it by the Medicaid agency or the agency's contractor.
    (ii) Evaluate the use of the predetermined standards, including 
assessing the operational effect of the predetermined standards in use, 
and make recommendations to the Medicaid agency or the agency's 
contractor concerning modification or elimination of existing 
predetermined standards or the addition of new ones.
    (iii) Recommend guidelines governing written predetermined standards 
that pharmacies not using approved software must use in conducting 
prospective DUR.
    (2) Application of predetermined standards: Medicaid agency role. 
The Medicaid agency or its contractor should perform the following 
activities:
    (i) Submit predetermined standards to the DUR Board for its review 
and recommendations before the Medicaid agency applies them to drug 
claims data.
    (ii) If prospective DUR is conducted using an electronic claims 
management (ECM) system, apply software approved by the Board.
    (iii) If prospective DUR is not conducted through an ECM system, as 
part of general compliance monitoring, ensure that Medicaid 
participating pharmacies conduct prospective drug review that screens 
for the potential drug therapy problems listed in section 1927(g)(2)(A) 
of the Act.
    (3) Retrospective DUR: Board's activities. The DUR Board should 
perform the following activities:
    (i) Review and make recommendations on predetermined standards 
submitted to it by the Medicaid agency or the agency's contractor.
    (ii) Make recommendations to the Medicaid agency or the agency's 
contractor concerning modification or elimination of existing 
predetermined standards or the addition of new ones.
    (4) Retrospective DUR: Medicaid agency role. The Medicaid agency or 
its contractor should apply the predetermined standards to drug claims 
data in order to generate reports that identify patterns of fraud, 
abuse, gross overuse, or inappropriate or medically unnecessary care.
    (5) Education program (including interventions): Board's activities. 
The DUR Board must perform the following activities:
    (i) Identify and develop educational topics if education of 
practitioners on common drug therapy problems is needed to improve 
prescribing or dispensing practices.
    (ii) Make recommendations as to which mix of the interventions set 
forth in Secs. 456.711 (a) through (d) would most effectively lead to 
improvement in the quality of drug therapy. The DUR board 
recommendations must be based upon an in-depth review of the results of 
the application of predetermined standards against claims data reports, 
must be appropriate based upon program experience, and must match the 
educational program with the drug therapy problems identified.
    (iii) Periodically re-evaluate and, if necessary, modify the 
interventions.
    (6) Education program (including interventions): Medicaid agency's 
role. The Medicaid agency or its contractor

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should perform the following activities.
    (i) Apply predetermined standards to drug claims data to generate 
reports that provide the basis for retrospective education and 
interventions and furnish those reports to the Board.
    (ii) Carry out the educational programs and interventions specified 
by the Board.
    (e) Funding for the Board. FFP is available for expenses associated 
with the operation of the DUR Board in carrying out its 
responsibilities, and payment is made under procedures established in 
part 433 of this chapter as follows:
    (1) If the requirements for skilled professional medical personnel 
at Sec. 432.50 of this chapter are met, at the rate of 75 percent.
    (2) If the requirements for skilled professional medical personnel 
at Sec. 432.50 of this chapter are not met, at the rate specified in 
Sec. 456.719.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48825, Sept. 23, 1994]



Sec. 456.719  Funding for DUR program.

    FFP is available for sums that the Secretary determines are 
attributable to the Statewide adoption of a DUR program as described in 
this subpart, and payment is made under procedures established in part 
433 of this chapter as follows:
    (a) For funds expended by the State during calendar years 1991 
through 1993, at the rate of 75 percent.
    (b) For funds expended by the State after December 31, 1993, at the 
rate of 50 percent.



Sec. 456.722  Electronic claims management system.

    (a) Point-of-sale system. Each Medicaid agency, at its option, may 
establish, as its principal (but not necessarily exclusive) means of 
processing claims for covered outpatient drugs, a point-of-sale 
electronic claims management (ECM) system to perform on-line, real-time 
(that is, immediate) eligibility verifications, claims data capture, 
adjudication of claims, and to assist pharmacists and other authorized 
persons (including dispensing physicians) in applying for and receiving 
payment. The State determines who must participate in an ECM system and 
who may decline to do so. If the State exercises this option and wishes 
to receive FFP for its ECM system, the system must meet the functional 
and additional procurement and system requirements in paragraphs (b) and 
(c) of this section.
    (b) Functional requirements. The ECM system developed by the State 
must include at least the on-line, real-time capabilities specified in 
paragraphs (b)(1) through (3) of this section. The real-time requirement 
for prescriptions filled for nursing facilities and prescriptions filled 
by mail order dispensers may be waived by the State to permit claims to 
be processed in the batch mode at the end of the day or other time 
mutually agreed to by the nursing facility or mail order dispenser and 
Medicaid agency.
    (1) Eligibility verification, including identification of the 
following:
    (i) Third-party payers.
    (ii) Recipients in managed care programs.
    (iii) Recipients and providers in restricted service programs (for 
example, lock-in and lock-out).
    (iv) Properly enrolled providers.
    (2) Claims data capture, including the following:
    (i) Transfer of claims information from the pharmacy to the Medicaid 
agency or the Medicaid agency's contractor.
    (ii) Identification of prescriber.
    (iii) Minimum data set (as defined in Part 11 of the State Medicaid 
Manual).
    (3) Claims adjudication, including the following:
    (i) Performing all edits and audits contained in the State's 
Medicaid Management Information System (MMIS) applicable to prescription 
drugs.
    (ii) Notifying the pharmacist (or other authorized person, such as 
the dispensing physician) about the claim status.
    (iii) Taking steps up to, but not including, payment of the claim.
    (c) Additional requirements. In order to receive FFP for its ECM 
system, the State must meet the following requirements:
    (1) The ECM system must be acquired through applicable competitive 
procurement process in the State and

[[Page 354]]

must be the most cost-effective telecommunications network and automatic 
data processing services and equipment. The procurement must meet the 
procurement requirements set forth in 45 CFR part 74, subpart P, and 
appendix G-O of OMB circular A-102. The request for proposal (RFP) may 
be substituted for the advance planning and implementation documents 
otherwise required by part 433 of this chapter, 45 CFR 95.205, and 45 
CFR part 307. A cost-benefit analysis must accompany the RFP. If in its 
advance planning document, a State establishes that a separate 
procurement is not cost-effective, modification of an existing fiscal 
agent contract will be acceptable. In this case, procurement of network 
services and equipment (but not software modifications) must be 
competitively procured.
    (2) States wishing to do prospective DUR as part of their ECM must 
do the following:
    (i) Submit a cost benefit analysis showing the cost-effectiveness of 
such a system. A State's decisions as to who must participate in the ECM 
system and who may decline to do so must be included in the cost-benefit 
analysis.
    (ii) Establish a central State-wide electronic repository for 
capturing, storing, and updating data for all prescriptions dispensed 
and for providing access to such data by all authorized participants.
    (iii) Design the system to assess data for a review of drug therapy 
before each prescription is filled or delivered to a Medicaid recipient. 
The type of review conducted must meet the requirements for prospective 
drug review set forth in Sec. 456.705.
    (3) ECM is considered a subsystem and must be fully integrated with 
the remainder of the State's MMIS. In addition, information about ECM 
claims must be part of the single comprehensive utilization and 
management reporting system used by the DUR program.



Sec. 456.725  Funding of ECM system.

    (a) For funds expended during calendar quarters in fiscal years 1991 
and 1992 and attributable to the design, development, and implementation 
of an on-line, real-time claims management system (that is, the most 
cost-effective telecommunications network and automatic data processing 
services and equipment) that meets the requirements of Sec. 456.722, FFP 
is available at a matching rate of 90 percent. After fiscal year 1992, 
ECM subsystems are funded at the standard applicable MMIS enhanced 
rates, subject to the requirements of part 433, subpart A of this 
chapter.
    (b) FFP is available at a matching rate of 75 percent for funds 
expended for the following:
    (1) Telecommunications equipment and other equipment to directly 
access MMIS files.
    (2) Telecommunications equipment (such as modems and point of sale 
terminals) furnished to providers.
    (3) Operational costs including telecommunications network costs, 
provided that the ECM system includes eligibility verification systems, 
electronic claims capture, claims adjudication (except for payment), and 
a claims data process that is integrated into a single comprehensive 
utilization and information reporting system.

[[Page 355]]



    SUBCHAPTER D--STATE CHILDREN'S HEALTH INSURANCE PROGRAMS (SCHIPs)



PART 457--ALLOTMENTS AND GRANTS TO STATES--Table of Contents




Subpart A--Introduction; State Plans for Child Health Insurance Programs 
                         and Outreach Strategies

Sec.
457.1 Program description.
457.2 Basis and scope of subchapter D.
457.10 Definitions and use of terms.
457.30 Basis, scope, and applicability of subpart A.
457.40 State program administration.
457.50 State plan.
457.60 Amendments.
457.65 Effective date and duration of State plans and plan amendments.
457.70 Program options.
457.80 Current State child health insurance coverage and coordination.
457.90 Outreach.
457.110 Enrollment assistance and information requirements.
457.120 Public involvement in program development.
457.125 Provision of child health assistance to American Indian and 
          Alaska Native children.
457.130 Civil rights assurance.
457.135 Assurance of compliance with other provisions.
457.140 Budget.
457.150 CMS review of State plan material.
457.160 Notice and timing of CMS action on State plan material.
457.170 Withdrawal process.

 Subpart B--General Administration--Reviews and Audits; Withholding for 
  Failure to Comply; Deferral and Disallowance of Claims; Reduction of 
                        Federal Medical Payments

457.200 Program reviews.
457.202 Audits.
457.203 Administrative and judicial review of action on State plan 
          material.
457.204 Withholding of payment for failure to comply with Federal 
          requirements.
457.206 Administrative appeals under SCHIP.
457.208 Judicial review.
457.210 Deferral of claims for FFP.
457.212 Disallowance of claims for FFP.
457.216 Treatment of uncashed or canceled (voided) SCHIP checks.
457.218 Repayment of Federal funds by installments.
457.220 Public funds as the State share of financial participation.
457.222 FFP for equipment.
457.224 FFP: Conditions relating to cost sharing.
457.226 Fiscal policies and accountability.
457.228 Cost allocation.
457.230 FFP for State ADP expenditures.
457.232 Refunding of Federal share of SCHIP overpayments to providers 
          and referral of allegations of waste, fraud or abuse of the 
          Office of Inspector General.
457.236 Audit of records.
457.238 Documentation of payment rates.

      Subpart C--State Plan Requirements: Eligibility, Screening, 
                      Applications, and Enrollment

457.300 Basis, scope, and applicability.
457.301 Definitions and use of terms.
457.305 State plan provisions.
457.310 Targeted low-income child.
457.320 Other eligibility standards.
457.340 Application for and enrollment in a separate child health 
          program.
457.350 Eligibility screening and facilitation of Medicaid enrollment.
457.353 Monitoring and evaluation of screening process.
457.355 Presumptive eligibility.
457.380 Eligibility verification.

        Subpart D--State Plan Requirements: Coverage and Benefits

457.401 Basis, scope, and applicability.
457.402 Definition of child health assistance.
457.410 Health benefits coverage options.
457.420 Benchmark health benefits coverage.
457.430 Benchmark-equivalent health benefits coverage.
457.431 Actuarial report for benchmark-equivalent coverage.
457.440 Existing comprehensive State-based coverage.
457.450 Secretary-approved coverage.
457.470 Prohibited coverage.
457.475 Limitations on coverage: Abortions.
457.480 Preexisting condition exclusions and relation to other laws.
457.490 Delivery and utilization control systems.
457.495 State assurance of access to care and procedures to assure 
          quality and appropriateness of care.

 Subpart E--State Plan Requirements: Enrollee Financial Responsibilities

457.500 Basis, scope, and applicability.
457.505 General State plan requirements.
457.510 Premiums, enrollment fees, or similar fees: State plan 
          requirements.

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457.515 Co-payments, coinsurance, deductibles, or similar cost-sharing 
          charges: State plan requirements.
457.520 Cost sharing for well-baby and well-child care services.
457.525 Public schedule.
457.530 General cost-sharing protection for lower income children.
457.535 Cost-sharing protection to ensure enrollment of American Indians 
          and Alaska Natives.
457.540 Cost-sharing charges for children in families with incomes at or 
          below 150 percent of the FPL.
457.555 Maximum allowable cost-sharing charges on targeted low-income 
          children in families with income from 101 to 150 percent of 
          the FPL.
457.560 Cumulative cost-sharing maximum.
457.570 Disenrollment protections.

                      Subpart F--Payment to States

457.600 Purpose and basis of this subpart.
457.602 Applicability.
457.606 Conditions for State allotments and Federal payments for a 
          fiscal year.
457.608 Process and calculation of State allotments for a fiscal year.
457.610 Period of availability for State allotments for a fiscal year.
457.614 General payment process.
457.616 Application and tracking of payments against the fiscal year 
          allotments.
457.618 Ten percent limit on certain State Children's Health Insurance 
          Program expenditures.
457.622 Rate of FFP for State expenditures.
457.626 Prevention of duplicate payments.
457.628 Other applicable Federal regulations.
457.630 Grants procedures.

        Subpart G--Strategic Planning, Reporting, and Evaluation

457.700 Basis, scope, and applicability.
457.710 State plan requirements: Strategic objectives and performance 
          goals.
457.720 State plan requirement: State assurance regarding data 
          collection, records, and reports.
457.740 State expenditures and statistical reports.
457.750 Annual report.

                   Subpart H--Substitution of Coverage

457.800 Basis, scope, and applicability.
457.805 State plan requirements: Procedures to address substitution 
          under group health plans.
457.810 Premium assistance programs: Required protections against 
          substitution.

                      Subpart I--Program Integrity

457.900 Basis, scope, and applicability.
457.902 Definitions.
457.910 State program administration.
457.915 Fraud detection and investigation.
457.925 Preliminary investigation.
457.930 Full investigation, resolution, and reporting requirements.
457.935 Sanctions and related penalties.
457.940 Procurement standards.
457.945 Certification for contracts and proposals.
457.950 Contract and payment requirements including certification of 
          payment-related information.
457.955 Conditions necessary to contract as a managed care entity (MCE).
457.960 Reporting changes in eligibility and redetermining eligibility.
457.965 Documentation.
457.980 Verification of enrollment and provider services received.
457.985 Integrity of professional advice to enrollees.

            Subpart J--Allowable Waivers: General Provisions

457.1000 Basis, scope, and applicability.
457.1003 CMS review of waiver requests.
457.1005 Cost-effective coverage through a community-based health 
          delivery system.
457.1010 Purchase of family coverage.
457.1015 Cost-effectiveness.

 Subpart K--State Plan Requirements: Applicant and Enrollee Protections

457.1100 Basis, scope and applicability.
457.1110 Privacy protections.
457.1120 State plan requirement: Description of review process.
457.1130 Program specific review process: Matters subject to review.
457.1140 Program specific review process: Core elements of review.
457.1150 Program specific review process: Impartial review.
457.1160 Program specific review process: Time frames.
457.1170 Program specific review process: Continuation of enrollment.
457.1180 Program specific review process: Notice.
457.1190 Application of review procedures when States offer premium 
          assistance for group health plans.

    Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302).

    Source: 65 FR 33622, May 24, 2000, unless otherwise noted.

[[Page 357]]



Subpart A--Introduction; State Plans for Child Health Insurance Programs 
                         and Outreach Strategies

    Source: 66 FR 2670, Jan. 11, 2001, unless otherwise noted.



Sec. 457.1  Program description.

    Title XXI of the Social Security Act, enacted in 1997 by the 
Balanced Budget Act, authorizes Federal grants to States for provision 
of child health assistance to uninsured, low-income children. The 
program is jointly financed by the Federal and State governments and 
administered by the States. Within broad Federal rules, each State 
decides eligible groups, types and ranges of services, payment levels 
for benefit coverage, and administrative and operating procedures.



Sec. 457.2  Basis and scope of subchapter D.

    (a) Basis. This subchapter implements title XXI of the Act, which 
authorizes Federal grants to States for the provision of child health 
assistance to uninsured, low-income children.
    (b) Scope. The regulations in subchapter D set forth State plan 
requirements, standards, procedures, and conditions for obtaining 
Federal financial participation (FFP) to enable States to provide health 
benefits coverage to targeted low-income children, as defined at 
Sec. 457.310.



Sec. 457.10  Definitions and use of terms.

    For purposes of this part the following definitions apply:
    American Indian/Alaska Native (AI/AN) means--
    (1) A member of a Federally recognized Indian tribe, band, or group;
    (2) An Eskimo or Aleut or other Alaska Native enrolled by the 
Secretary of the Interior pursuant to the Alaska Native Claims 
Settlement Act, 43 U.S.C. 1601 et. seq.; or
    (3) A person who is considered by the Secretary of the Interior to 
be an Indian for any purpose.
    Applicant means a child who has filed an application (or who has an 
application filed on their behalf) for health benefits coverage through 
the State Children's Health Insurance Program. A child is an applicant 
until the child receives coverage through SCHIP.
    Child means an individual under the age of 19.
    Child health assistance means payment for part or all of the cost of 
health benefits coverage provided to targeted low-income children for 
the services listed at Sec. 457.402.
    Combination program means a program under which a State implements 
both a Medicaid expansion program and a separate child health program.
    Cost sharing means premium charges, enrollment fees, deductibles, 
coinsurance, copayments, or other similar fees that the enrollee has 
responsibility for paying.
    Creditable health coverage has the meaning given the term 
``creditable coverage'' at 45 CFR 146.113 and includes coverage that 
meets the requirements of Sec. 457.410 and is provided to a targeted 
low-income child.
    Emergency medical condition means a medical condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
such that a prudent layperson, with an average knowledge of health and 
medicine, could reasonably expect the absence of immediate medical 
attention to result in--
    (1) Serious jeopardy to the health of the individual or, in the case 
of a pregnant woman, the health of a woman or her unborn child;
    (2) Serious impairment of bodily function; or
    (3) Serious dysfunction of any bodily organ or part.
    Emergency services means health care services that are--
    (1) Furnished by any provider qualified to furnish such services; 
and (2) Needed to evaluate, treat, or stabilize an emergency medical 
condition.
    Enrollee means a child who receives health benefits coverage through 
SCHIP.
    Enrollment cap means a limit, established by the State in its State 
plan, on the total number of children permitted to enroll in a State's 
separate child health program.
    Family income means income as determined by the State for a family 
as defined by the State.

[[Page 358]]

    Federal fiscal year starts on the first day of October each year and 
ends on the last day of the following September.
    Fee-for-service entity has the meaning assigned in Sec. 457.902.
    Group health insurance coverage has the meaning assigned at 45 CFR 
144.103.
    Group health plan has the meaning assigned at 45 CFR 144.103.
    Health benefits coverage means an arrangement under which enrolled 
individuals are protected from some or all liability for the cost of 
specified health care services.
    Health care services means any of the services, devices, supplies, 
therapies, or other items listed in Sec. 457.402.
    Health insurance coverage has the meaning assigned at 45 CFR 
144.103.
    Health insurance issuer has the meaning assigned at 45 CFR 144.103.
    Health maintenance organization (HMO) plan has the meaning assigned 
at Sec. 457.420.
    Health services initiatives means activities that protect the public 
health, protect the health of individuals, improve or promote a State's 
capacity to deliver public health services, or strengthen the human and 
material resources necessary to accomplish public health goals relating 
to improving the health of children (including targeted low-income 
children and other low-income children).
    Joint application has the meaning assigned at Sec. 457.301.
    Low-income child means a child whose family income is at or below 
200 percent of the poverty line for the size of the family involved.
    Managed care entity (MCE) means an entity that enters into a 
contract to provide services in a managed care delivery system, 
including but not limited to managed care organizations, prepaid health 
plans, and primary care case managers.
    Medicaid applicable income level means, with respect to a child, the 
effective income level (expressed as a percentage of the poverty line) 
specified under the policies of the State plan under title XIX of the 
Act (including for these purposes, a section 1115 waiver authorized by 
the Secretary or under the authority of section 1902(r)(2) of the Act) 
as of March 31, 1997 for the child to be eligible for medical assistance 
under either section 1902(l)(2) or 1905(n)(2) of the Act.
    Medicaid expansion program means a program under which a State 
receives Federal funding to expand Medicaid eligibility to optional 
targeted low-income children.
    Optional targeted low-income child has the meaning assigned at 
Sec. 435.4 (for States) and Sec. 436.3 (for Territories) of this 
chapter.
    Period of presumptive eligibility has the meaning assigned at 
Sec. 457.301.
    Poverty line/Federal poverty level means the poverty guidelines 
updated annually in the Federal Register by the U.S. Department of 
Health and Human Services under authority of 42 U.S.C. 9902(2).
    Preexisting condition exclusion has the meaning assigned at 45 CFR 
144.103.
    Premium assistance program means a component of a separate child 
health program, approved under the State plan, under which a State pays 
part or all of the premiums for a SCHIP enrollee or enrollees' group 
health insurance coverage or coverage under a group health plan.
    Presumptive income standard has the meaning assigned at 
Sec. 457.301.
    Public agency has the meaning assigned in Sec. 457.301.
    Qualified entity has the meaning assigned at Sec. 457.301.
    Separate child health program means a program under which a State 
receives Federal funding from its title XXI allotment to provide child 
health assistance through obtaining coverage that meets the requirements 
of section 2103 of the Act and Sec. 457.402.
    State means all States, the District of Columbia, Puerto Rico, the 
U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana 
Islands. The Territories are excluded from this definition for purposes 
of Sec. 457.740.
    State Children's Health Insurance Program (SCHIP) means a program 
established and administered by a State, jointly funded with the Federal 
government, to provide child health assistance to uninsured, low-income 
children through a separate child health program, a Medicaid expansion 
program, or a combination program.

[[Page 359]]

    State health benefits plan has the meaning assigned in Sec. 457.301.
    State plan means the title XXI State child health plan.
    Targeted low-income child has the meaning assigned in Sec. 457.310.
    Uncovered or uninsured child means a child who does not have 
creditable health coverage.
    Well-baby and well-child care services means regular or preventive 
diagnostic and treatment services necessary to ensure the health of 
babies, children and adolescents as defined by the State. For purposes 
of cost sharing, the term has the meaning assigned at Sec. 457.520.



Sec. 457.30  Basis, scope, and applicability of subpart A.

    (a) Statutory basis. This subpart implements the following sections 
of the Act:
    (1) Section 2101(b), which requires that the State submit a State 
plan.
    (2) Section 2102(a), which sets forth requirements regarding the 
contents of the State plan.
    (3) Section 2102(b), which relates to eligibility standards and 
methodologies.
    (4) Section 2102(c), which requires that the State plan include a 
description of the procedures to be used by the State to accomplish 
outreach and coordination with other health insurance programs.
    (5) Section 2106, which specifies the process for submission, 
approval, and amendment of State plans.
    (6) Section 2107(c), which requires that the State plan include a 
description of the process used to involve the public in the design and 
implementation of the plan.
    (7) Section 2107(d), which requires that the State plan include a 
description of the budget for the plan.
    (8) Section 2107(e), which provides that certain provisions of title 
XIX and title XI of the Act apply under title XXI in the same manner 
that they apply under title XIX.
    (b) Scope. This subpart sets forth provisions governing the 
administration of SCHIP, the general requirements for a State plan, and 
a description of the process for review of a State plan or plan 
amendment.
    (c) Applicability. This subpart applies to all States that request 
Federal financial participation to provide child health assistance under 
title XXI.



Sec. 457.40  State program administration.

    (a) Program operation. The State must implement its program in 
accordance with the approved State plan, any approved State plan 
amendments, the requirements of title XXI and title XIX (as 
appropriate), and the requirements in this chapter. CMS monitors the 
operation of the approved State plan and plan amendments to ensure 
compliance with the requirements of title XXI, title XIX (as 
appropriate) and this chapter.
    (b) State authority to submit State plan. A State plan or plan 
amendment must be signed by the State Governor, or signed by an 
individual who has been delegated authority by the Governor to submit 
it.
    (c) State program officials. The State must identify in the State 
plan or State plan amendment, by position or title, the State officials 
who are responsible for program administration and financial oversight.
    (d) State legislative authority. The State plan must include an 
assurance that the State will not claim expenditures for child health 
assistance prior to the time that the State has legislative authority to 
operate the State plan or plan amendment as approved by CMS.



Sec. 457.50  State plan.

    The State plan is a comprehensive written statement, submitted by 
the State to CMS for approval, that describes the purpose, nature, and 
scope of the State's SCHIP and gives an assurance that the program is 
administered in conformity with the specific requirements of title XXI, 
title XIX (as appropriate), and the regulations in this chapter. The 
State plan contains all information necessary for CMS to determine 
whether the plan can be approved to serve as a basis for Federal 
financial participation (FFP) in the State program.



Sec. 457.60  Amendments.

    A State may seek to amend its approved State plan in whole or in 
part

[[Page 360]]

at any time through the submission of an amendment to CMS. When the 
State plan amendment has a significant impact on the approved budget, 
the amendment must include an amended budget that describes the State's 
planned expenditures for a 1-year period. A State must amend its State 
plan whenever necessary to reflect--
    (a) Changes in Federal law, regulations, policy interpretations, or 
court decisions that affect provisions in the approved State plan;
    (b) Changes in State law, organization, policy, or operation of the 
program that affect the following program elements described in the 
State plan:
    (1) Eligibility standards, enrollment caps, and disenrollment 
policies as described in Sec. 457.305.
    (2) Procedures to prevent substitution of private coverage as 
described in Sec. 457.805, and in Sec. 457.810 for premium assistance 
programs.
    (3) The type of health benefits coverage offered, consistent with 
the options described in Sec. 457.410.
    (4) Addition or deletion of specific categories of benefits covered 
under the State plan.
    (5) Basic delivery system approach as described in Sec. 457.490.
    (6) Cost-sharing as described in Sec. 457.505.
    (7) Screen and enroll procedures, and other Medicaid coordination 
procedures as described in Sec. 457.350.
    (8) Review procedures as described in Sec. 457.1120.
    (9) Other comparable required program elements.
    (c) Changes in the source of the State share of funding, except for 
changes in the type of non-health care related revenues used to generate 
general revenue.

[66 FR 2670, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec. 457.65  Effective date and duration of State plans and plan amendments.

    (a) Effective date in general. Except as otherwise limited by this 
section--
    (1) A State plan or plan amendment takes effect on the day specified 
in the plan or plan amendment, but no earlier than October 1, 1997.
    (2) The effective date may be no earlier than the date on which the 
State begins to incur costs to implement its State plan or plan 
amendment.
    (3) A State plan amendment that takes effect prior to submission of 
the amendment to CMS may remain in effect only until the end of the 
State fiscal year in which the State makes it effective, or, if later, 
the end of the 90-day period following the date on which the State makes 
it effective, unless the State submits the amendment to CMS for approval 
before the end of that State fiscal year or that 90-day period.
    (b) Amendments relating to eligibility or benefits. A State plan 
amendment that eliminates or restricts eligibility or benefits may not 
be in effect for longer than a 60-day period, unless the amendment is 
submitted to CMS before the end of that 60-day period. The amendment may 
not take effect unless--
    (1) The State certifies that it has provided prior public notice of 
the proposed change in a form and manner provided under applicable State 
law; and
    (2) The public notice was published before the requested effective 
date of the change.
    (c) Amendments relating to cost sharing. A State plan amendment that 
implements cost-sharing charges, increases existing cost-sharing 
charges, or increases the cumulative cost-sharing maximum as set forth 
at Sec. 457.560 is considered an amendment that restricts benefits and 
must meet the requirements in paragraph (b) of this section.
    (d) Amendments relating to enrollment procedures. A State plan 
amendment that implements a required period of uninsurance, increases 
the length of existing required periods of uninsurance, or institutes or 
extends the use of waiting lists, enrollments caps or closed enrollment 
periods is considered an amendment that restricts eligibility and must 
meet the requirements in paragraph (b) of this section.
    (e) Amendments relating to the source of State funding. A State plan 
amendment that changes the source of the State share of funding can take 
effect no earlier than the date of submission of the amendment.
    (f) Continued approval. An approved State plan continues in effect 
unless--

[[Page 361]]

    (1) The State adopts a new plan by obtaining approval under 
Sec. 457.60 of an amendment to the State plan;
    (2) Withdraws its plan in accordance with Sec. 457.170(b); or
    (3) The Secretary finds substantial noncompliance of the plan with 
the requirements of the statute or regulations.



Sec. 457.70  Program options.

    (a) Health benefits coverage options. A State may elect to obtain 
health benefits coverage under its plan through--
    (1) A separate child health program;
    (2) A Medicaid expansion program; or
    (3) A combination program.
    (b) State plan requirement. A State must include in the State plan 
or plan amendment a description of the State's chosen program option.
    (c) Medicaid expansion program requirements. A State plan under 
title XXI for a State that elects to obtain health benefits coverage 
through its Medicaid plan must--
    (1) Meet the requirements of--
    (i) Subpart A;
    (ii) Subpart B (to the extent that the State claims administrative 
costs under title XXI);
    (iii) Subpart F (with respect to determination of the allotment for 
purposes of the enhanced matching rate, determination of the enhanced 
matching rate, and payment of any claims for administrative costs under 
title XXI only);
    (iv) Subpart G; and
    (v) Subpart J (if the State claims administrative costs under title 
XXI and seeks a waiver of limitations on such claims based on a 
community based health delivery system).
    (2) Be consistent with the State's Medicaid State plan, or an 
approvable amendment to that plan, as required under title XIX.
    (d) Separate child health program requirements. A State that elects 
to obtain health benefits coverage under its plan through a separate 
child health program must meet all the requirements of part 457.
    (e) Combination program requirements. A State that elects to obtain 
health benefits coverage through both a separate child health program 
and a Medicaid expansion program must meet the requirements of 
paragraphs (c) and (d) of this section.



Sec. 457.80  Current State child health insurance coverage and coordination.

    A State plan must include a description of--
    (a) The extent to which, and manner in which, children in the State, 
including targeted low-income children and other classes of children, by 
income level and other relevant factors, currently have creditable 
health coverage (as defined in Sec. 457.10) and, if sufficient 
information is available, whether the creditable health coverage they 
have is under public health insurance programs or health insurance 
programs that involve public-private partnerships;
    (b) Current State efforts to provide or obtain creditable health 
coverage for uncovered children, including the steps the State is taking 
to identify and enroll all uncovered children who are eligible to 
participate in public health insurance programs and health insurance 
programs that involve public-private partnerships; and
    (c) Procedures the State uses to accomplish coordination of SCHIP 
with other public and private health insurance programs, sources of 
health benefits coverage for children, and relevant child health 
programs, such as title V, that provide health care services for low-
income children. Such procedures include those designed to--
    (1) Increase the number of children with creditable health coverage;
    (2) Assist in the enrollment in SCHIP of children determined 
ineligible for Medicaid; and
    (3) Ensure that only eligible targeted low-income children are 
covered under SCHIP, such as those procedures required under 
Secs. 457.350 and 457.353, as applicable.



Sec. 457.90  Outreach.

    (a) Procedures required. A State plan must include a description of 
procedures used to inform families of children likely to be eligible for 
child health assistance under the plan or under other public or private 
health coverage programs of the availability of the programs, and to 
assist them in

[[Page 362]]

enrolling their children in one of the programs.
    (b) Examples. Outreach strategies may include but are not limited to 
the following:
    (1) Education and awareness campaigns, including targeted mailings 
and information distribution through various organizations.
    (2) Enrollment simplification, such as simplified or joint 
application forms.
    (3) Application assistance, including opportunities to apply for 
child health assistance under the plan through community-based 
organizations and in combination with other benefits and services 
available to children.



Sec. 457.110  Enrollment assistance and information requirements.

    (a) Information disclosure. The State must make accurate, easily 
understood, linguistically appropriate information available to families 
of potential applicants, applicants and enrollees, and provide 
assistance to these families in making informed decisions about their 
health plans, professionals, and facilities.
    (b) Required information. The State must make available to potential 
applicants and provide applicants and enrollees the following 
information in a timely manner:
    (1) Types of benefits, and amount, duration and scope of benefits 
available under the program.
    (2) Cost-sharing requirements as described in Sec. 457.525.
    (3) Names and locations of current participating providers.
    (4) If an enrollment cap is in effect or the State is using a 
waiting list, a description of the procedures relating to the cap or 
waiting list, including the process for deciding which children will be 
given priority for enrollment, how children will be informed of their 
status on a waiting list and the circumstances under which enrollment 
will reopen.
    (5) Information on physician incentive plans as required by 
Sec. 457.985.
    (6) Review processes available to applicants and enrollees as 
described in the State plan pursuant to Sec. 457.1120.



Sec. 457.120  Public involvement in program development.

    A State plan must include a description of the method the State uses 
to--
    (a) Involve the public in both the design and initial implementation 
of the program;
    (b) Ensure ongoing public involvement once the State plan has been 
implemented; and
    (c) Ensure interaction with Indian Tribes and organizations in the 
State on the development and implementation of the procedures required 
at Sec. 457.125.



Sec. 457.125  Provision of child health assistance to American Indian and Alaska Native children.

    (a) Enrollment. A State must include in its State plan a description 
of procedures used to ensure the provision of child health assistance to 
American Indian and Alaska Native children.
    (b) Exemption from cost sharing. The procedures required by 
paragraph (a) of this section must include an exemption from cost 
sharing for American Indian and Alaska Native children in accordance 
with Sec. 457.535.



Sec. 457.130  Civil rights assurance.

    The State plan must include an assurance that the State will comply 
with all applicable civil rights requirements, including title VI of the 
Civil Rights Act of 1964, title II of the Americans with Disabilities 
Act of 1990, section 504 of the Rehabilitation Act of 1973, the Age 
Discrimination Act of 1975, 45 CFR part 80, part 84, and part 91, and 28 
CFR part 35.



Sec. 457.135  Assurance of compliance with other provisions.

    The State plan must include an assurance that the State will comply, 
under title XXI, with the following provisions of titles XIX and XI of 
the Social Security Act:
    (a) Section 1902(a)(4)(C) (relating to conflict of interest 
standards).
    (b) Paragraphs (2), (16) and (17) of section 1903(i) (relating to 
limitations on payment).
    (c) Section 1903(w) (relating to limitations on provider donations 
and taxes).

[[Page 363]]

    (d) Section 1132 (relating to periods within which claims must be 
filed).



Sec. 457.140  Budget.

    The State plan, or plan amendment that has a significant impact on 
the approved budget, must include a budget that describes the State's 
planned expenditures for a 1-year period. The budget must describe--
    (a) Planned use of funds, including--
    (1) Projected amount to be spent on health services;
    (2) Projected amount to be spent on administrative costs, such as 
outreach, child health initiatives, and evaluation; and
    (3) Assumptions on which the budget is based, including cost per 
child and expected enrollment; and
    (b) Projected sources of non-Federal plan expenditures, including 
any requirements for cost sharing by enrollees.



Sec. 457.150  CMS review of State plan material.

    (a) Basis for action. CMS reviews each State plan and plan amendment 
to determine whether it meets or continues to meet the requirements for 
approval under relevant Federal statutes, regulations, and guidelines 
furnished by CMS to assist in the interpretation of these regulations.
    (b) Action on complete plan. CMS approves or disapproves the State 
plan or plan amendment only in its entirety.
    (c) Authority. The CMS Administrator exercises delegated authority 
to review and then to approve or disapprove the State plan or plan 
amendment, or to determine that previously approved material no longer 
meets the requirements for approval. The Administrator does not make a 
final determination of disapproval without first consulting the 
Secretary.
    (d) Initial submission. The Administrator designates an official to 
receive the initial submission of State plans.
    (e) Review process. (1) The Administrator designates an individual 
to coordinate CMS's review for each State that submits a State plan.
    (2) CMS notifies the State of the identity of the designated 
individual in the first correspondence relating to that plan, and at any 
time there is a change in the designated individual.
    (3) In the temporary absence of the designated individual during 
regular business hours, an alternate individual will act in place of the 
designated individual.



Sec. 457.160  Notice and timing of CMS action on State plan material.

    (a) Notice of final determination. The Administrator provides 
written notification to the State of the approval or disapproval of a 
State plan or plan amendment.
    (b) Timing. (1) A State plan or plan amendment will be considered 
approved unless CMS, within 90 calendar days after receipt of the State 
plan or plan amendment in the CMS central office, sends the State--
    (i) Written notice of disapproval; or
    (ii) Written notice of additional information it needs in order to 
make a final determination.
    (2) A State plan or plan amendment is considered received when the 
designated official or individual, as determined in Sec. 457.150(d) and 
(e), receives an electronic, fax or paper copy of the complete material.
    (3) If CMS requests additional information, the 90-day review period 
for CMS action on the State plan or plan amendment--
    (i) Stops on the day CMS sends a written request for additional 
information or the next business day if the request is sent on a Federal 
holiday or weekend; and
    (ii) Resumes on the next calendar day after the CMS designated 
individual receives an electronic, fax, or hard copy from the State of 
all the requested additional information, unless the information is 
received after 5 p.m. eastern standard time on a day prior to a non-
business day or any time on a non-business day, in which case the review 
period resumes on the following business day.
    (4) The 90-day review period cannot stop or end on a non-business 
day. If the 90th calendar day falls on a non-business day, CMS will 
consider the 90th day to be the next business day.
    (5) CMS may send written notice of its need for additional 
information as many times as necessary to obtain the

[[Page 364]]

complete information necessary to review the State plan or plan 
amendment.



Sec. 457.170  Withdrawal process.

    (a) Withdrawal of proposed State plans or plan amendments. A State 
may withdraw a proposed State plan or plan amendment, or any portion of 
a proposed State plan or plan amendment, at any time during the review 
process by providing written notice to CMS of the withdrawal.
    (b) Withdrawal of approved State plans. A State may request 
withdrawal of an approved State plan by submitting a State plan 
amendment to CMS in accordance with Sec. 457.60.



 Subpart B--General Administration--Reviews and Audits; Withholding for 
  Failure to Comply; Deferral and Disallowance of Claims; Reduction of 
                        Federal Medical Payments



Sec. 457.200  Program reviews.

    (a) Review of State and local administration of the SCHIP plan. In 
order to determine whether the State is complying with the Federal 
requirements and the provisions of its plan, CMS reviews State and local 
administration of the SCHIP plan through analysis of the State's 
policies and procedures, on-site reviews of selected aspects of agency 
operation, and examination of samples of individual case records.
    (b) Action on review findings. If Federal or State reviews reveal 
serious problems with respect to compliance with any Federal or State 
plan requirement, the State must correct its practice accordingly.



Sec. 457.202  Audits.

    (a) Purpose. The Department's Office of Inspector General (OIG) 
periodically audits State operations in order to determine whether --
    (1) The program is being operated in a cost-efficient manner; and
    (2) Funds are being properly expended for the purposes for which 
they were appropriated under Federal and State law and regulations.
    (b) Reports. (1) The OIG releases audit reports simultaneously to 
State officials and the Department's program officials.
    (2) The reports set forth OIG opinion and recommendations regarding 
the practices it reviewed, and the allowability of the costs it audited.
    (3) Cognizant officials of the Department make final determinations 
on all audit findings.
    (c) Action on audit exceptions. (1) Concurrence or clearance. The 
State agency has the opportunity of concurring in the exceptions or 
submitting additional facts that support clearance of the exceptions.
    (2) Appeal. Any exceptions that are not disposed of under paragraph 
(c)(1) of this section are included in a disallowance letter that 
constitutes the Department's final decision unless the State requests 
reconsideration by the Appeals Board. (Specific rules are set forth in 
Sec. 457.212.)
    (3) Adjustment. If the decision by the Board requires an adjustment 
of FFP, either upward or downward, a subsequent grant award promptly 
reflects the amount of increase or decrease.



Sec. 457.203  Administrative and judicial review of action on State plan material.

    (a) Request for reconsideration. Any State dissatisfied with the 
Administrator's action on State plan material under Sec. 457.150 may, 
within 60 days after receipt of the notice of final determination 
provided under Sec. 457.160(a), request that the Administrator 
reconsider whether the State plan or plan amendment conforms with the 
requirements for approval.
    (b) Notice of hearing. Within 30 days after receipt of the request, 
the Administrator notifies the State of the time and place of a hearing 
to be held for the purpose of reconsideration.
    (c) Hearing procedures. The hearing procedures set forth in part 
430, subpart D of this chapter govern a hearing requested under this 
section.
    (d) Effect of hearing decision. CMS does not delay the denial of 
Federal funds, if required by the Administrator's original 
determination, pending a hearing decision. If the Administrator

[[Page 365]]

determines that his or her original decision was incorrect, CMS will pay 
the State a lump sum equal to any funds incorrectly denied.

[66 FR 2674, Jan. 11, 2001]



Sec. 457.204  Withholding of payment for failure to comply with Federal requirements.

    (a) Basis for withholding. CMS withholds payments to the State, in 
whole or in part, only if, after giving the State notice, a reasonable 
opportunity for correction, and an opportunity for a hearing, the 
Administrator finds--
    (1) That the plan is in substantial noncompliance with the 
requirements of title XXI of the Act; or
    (2) That the State is conducting its program in substantial 
noncompliance with either the State plan or the requirements of title 
XXI of the Act. (Hearings are generally not called until a reasonable 
effort has been made to resolve the issues through conferences and 
discussions. These efforts may be continued even if a date and place 
have been set for the hearing.)
    (b) Noncompliance of the plan. A question of noncompliance of a 
State plan may arise from an unapprovable change in the approved State 
plan or the failure of the State to change its approved plan to conform 
to a new Federal requirement for approval of State plans.
    (c) Noncompliance in practice. A question of noncompliance in 
practice may arise from the State's failure to actually comply with a 
Federal requirement, regardless of whether the plan itself complies with 
that requirement.
    (d) Notice, reasonable opportunity for correction, and 
implementation of withholding. If the Administrator makes a finding of 
noncompliance under paragraph (a) of this section, the following steps 
apply:
    (1) Preliminary notice. The Administrator provides a preliminary 
notice to the State--
    (i) Of the findings of noncompliance;
    (ii) The proposed enforcement actions to withhold payments; and
    (iii) If enforcement action is proposed, that the State has a 
reasonable opportunity for correction, described in paragraph (d)(2) of 
this section, before the Administrator takes final action.
    (2) Opportunity for corrective action. If enforcement actions are 
proposed, the State must submit evidence of corrective action related to 
the findings of noncompliance to the Administrator within 30 days from 
the date of the preliminary notification. Corrective action is action to 
ensure that the plan is, and will be, administered consistent with 
applicable law and regulations, to ameliorate past deficiencies in plan 
administration, or to ensure that enrollees will be treated equitably.
    (3) Final notice. Taking into account any evidence submitted by the 
State under paragraph (d)(2) of this section, the Administrator makes a 
final determination related to the findings of noncompliance, and 
provides a final notice to the State--
    (i) Of the final determination on the findings of noncompliance;
    (ii) If enforcement action is appropriate--
    (A) No further payments will be made to the State (or that payments 
will be made only for those portions or aspects of the programs that are 
not affected by the noncompliance); and
    (B) The total or partial withholding will continue until the 
Administrator is satisfied that the State's plan and practice are, and 
will continue to be, in compliance with Federal requirements.
    (4) Hearing. An opportunity for a hearing will be provided to the 
State prior to withholding under paragraph (d)(5) of this section.
    (5) Withholding. CMS withholds payments, in whole or in part, until 
the Administrator is satisfied regarding the State's compliance.

[65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001]



Sec. 457.206  Administrative appeals under SCHIP.

    Three distinct types of determinations are subject to Departmental 
reconsideration upon request by a State.
    (a) Compliance with Federal requirements. A determination that a 
State's plan or proposed plan amendments, or its practice under the plan 
do not meet (or continue to meet) Federal requirements are subject to 
the hearing provisions of 42 CFR part 430, subpart D of this chapter.

[[Page 366]]

    (b) FFP in State SCHIP expenditures. Disallowances of FFP in State 
SCHIP expenditures (mandatory grants) are subject to Departmental 
reconsideration by the Departmental Appeals Board (the Board) in 
accordance with procedures set forth in 45 CFR part 16.
    (c) Discretionary grants disputes. Determinations listed in 45 CFR 
part 16, appendix A, pertaining to discretionary grants, such as grants 
for special demonstration projects under Section 1115 of the Act, that 
may be awarded to an SCHIP agency, are subject to reconsideration by the 
Departmental Grant Appeals Board.



Sec. 457.208  Judicial review.

    (a) Right to judicial review. Any State dissatisfied with the 
Administrator's final determination on approvability of plan material 
(Sec. 457.203) or compliance with Federal requirements (Sec. 457.204) 
has a right to judicial review.
    (b) Petition for review. (1) The State must file a petition for 
review with the U.S. Court of Appeals for the circuit in which the State 
is located, within 60 days after it is notified of the determination.
    (2) After the clerk of the court files a copy of the petition with 
the Administrator, the Administrator files in the court the record of 
the proceedings on which the determination was based.
    (c) Court action. (1) The court is bound by the Administrator's 
findings of fact, if they are supported by substantial evidence.
    (2) The court has jurisdiction to affirm the Administrator's 
decision, to set it aside in whole or in part, or, for good cause, to 
remand the case for additional evidence.
    (d) Response to remand. (1) If the court remands the case, the 
Administrator may make new or modified findings of fact and may modify 
his or her previous determination.
    (2) The Administrator certifies to the court the transcript and 
record of the further proceedings.
    (e) Review by the Supreme Court. The judgment of the appeals court 
is subject to review by the U.S. Supreme Court upon certiorari or 
certification, as provided in 28 U.S.C. 1254.

[65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001]



Sec. 457.210  Deferral of claims for FFP.

    (a) Requirements for deferral. Payment of a claim or any portion of 
a claim for FFP is deferred only if--
    (1) The Regional Administrator or the Administrator questions its 
allowability and needs additional information in order to resolve the 
question; and
    (2) CMS takes action to defer the claim (by excluding the claimed 
amount from the grant award) within 60 days after the receipt of a 
Quarterly Statement of Expenditures (prepared in accordance with CMS 
instructions) that includes that claim.
    (b) Notice of deferral and State's responsibility. (1) Within 15 
days of the action described in paragraph (a)(2) of this section, the 
Regional Administrator sends the State a written notice of deferral 
that--
    (i) Identifies the type and amount of the deferred claim and 
specifies the reason for deferral; and
    (ii) Requests the State to make available all the documents and 
materials the CMS regional office believes are necessary to determine 
the allowability of the claim.
    (2) It is the responsibility of the State to establish the 
allowability of a deferred claim.
    (c) Handling of documents and materials. (1) Within 60 days (or 
within 120 days if the State requests an extension) after receipt of the 
notice of deferral, the State must make available to the CMS regional 
office, in readily reviewable form, all requested documents and 
materials except any that it identifies as not being available.
    (2) CMS regional office staff initiates review within 30 days after 
receipt of the documents and materials.
    (3) If the Regional Administrator finds that the materials are not 
in readily reviewable form or that additional information is needed, he 
or she promptly notifies the State that it has 15 days to submit the 
readily reviewable or additional materials.
    (4) If the State does not provide the necessary materials within 15 
days, the Regional Administrator disallows the claim.
    (5) The Regional Administrator has 90 days, after all documentation 
is available in readily reviewable form, to

[[Page 367]]

determine the allowability of the claim.
    (6) If the Regional Administrator cannot complete review of the 
material within 90 days, CMS pays the claim, subject to a later 
determination of allowability.
    (d) Effect of decision to pay a deferred claim. Payment of a 
deferred claim under paragraph (c)(6) of this section does not preclude 
a subsequent disallowance based on the results of an audit or financial 
review. (If there is a subsequent disallowance, the State may request 
reconsideration as provided in paragraph (e)(2) of this section.)
    (e) Notice and effect of decision on allowability. (1) The Regional 
Administrator or the Administrator gives the State written notice of his 
or her decision to pay or disallow a deferred claim.
    (2) If the decision is to disallow, the notice informs the State of 
its right to reconsideration in accordance with 45 CFR part 16.



Sec. 457.212  Disallowance of claims for FFP.

    (a) Notice of disallowance and of right to reconsideration. When the 
Regional Administrator or the Administrator determines that a claim or 
portion of claim is not allowable, he or she promptly sends the State a 
disallowance letter that includes the following, as appropriate:
    (1) The date or dates on which the State's claim for FFP was made.
    (2) The time period during which the expenditures in question were 
made or claimed to have been made.
    (3) The date and amount of any payment or notice of deferral.
    (4) A statement of the amount of FFP claimed, allowed, and 
disallowed and the manner in which these amounts were computed.
    (5) Findings of fact on which the disallowance determination is 
based or a reference to other documents previously furnished to the 
State or included with the notice (such as a report of a financial 
review or audit) that contain the findings of fact on which the 
disallowance determination is based.
    (6) Pertinent citations to the law, regulations, guides and 
instructions supporting the action taken.
    (7) A request that the State make appropriate adjustment in a 
subsequent expenditure report.
    (8) Notice of the State's right to request reconsideration of the 
disallowance and the time allowed to make the request.
    (9) A statement indicating that the disallowance letter is the 
Department's final decision unless the State requests reconsideration 
under paragraph (b)(2) of this section.
    (b) Reconsideration of FFP disallowance. (1) The Departmental 
Appeals Board reviews disallowances of FFP under title XXI.
    (2) A State may request reconsideration with a request to the Chair, 
Departmental Appeals Board, within 30 days after receipt of the 
disallowance letter, which must include--
    (i) A copy of the disallowance letter;
    (ii) A statement of the amount in dispute; and
    (iii) A brief statement of why the disallowance is wrong.
    (c) Reconsideration procedures. The reconsideration procedures are 
those set forth in 45 CFR part 16.
    (d) Implementation of decisions. If the reconsideration decision 
requires an adjustment of FFP, either upward or downward, a subsequent 
grant award promptly reflects the amount of increase or decrease.



Sec. 457.216  Treatment of uncashed or canceled (voided) SCHIP checks.

    (a) Purpose. This section provides rules to ensure that States 
refund the Federal portion of uncashed or canceled (voided) checks under 
title XXI.
    (b) Definitions. As used in this section--
    Canceled (voided) check means an SCHIP check issued by a State or 
fiscal agent that prior to its being cashed is canceled (voided) by the 
State or fiscal agent, thus preventing disbursement of funds.
    Fiscal agent means an entity that processes or pays vendor claims 
for the SCHIP agency.
    Uncashed check means an SCHIP check issued by a State or fiscal 
agent that has not been cashed by the payee.

[[Page 368]]

    Warrant means an order by which the SCHIP agency or local agency 
without the authority to issue checks recognizes a claim. Presentation 
of a warrant by the payee to a State officer with authority to issue 
checks will result in release of funds due.
    (c) Refund of Federal financial participation (FFP) for uncashed 
checks--(1) General provisions. If a check remains uncashed beyond a 
period of 180 days from the date it was issued; that is, the date of the 
check, it is no longer regarded as an allowable program expenditure. If 
the State has claimed and received FFP for the amount of the uncashed 
check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the State 
agency must identify those checks that remain uncashed beyond a period 
of 180 days after issuance. The SCHIP agency must refund all FFP that it 
received for uncashed checks by adjusting the Quarterly Statement of 
Expenditures for that quarter. If an uncashed check is cashed after the 
refund is made, the State may file a claim. The claim will be considered 
to be an adjustment to the costs for the quarter in which the check was 
originally claimed. This claim will be paid if otherwise allowed by the 
Act and the regulations issued in accordance with the Act.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (c)(2) of this section, the amount will be disallowed.
    (d) Refund of FFP for canceled (voided) checks--(1) General 
provisions. If the State has claimed and received FFP for the amount of 
a canceled (voided) check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the SCHIP 
agency must identify those checks that were canceled (voided). The State 
must refund all FFP that it received for canceled (voided) checks by 
adjusting the Quarterly Statement of Expenditures for that quarter.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (d)(2) of this section, the amount will be disallowed.



Sec. 457.218  Repayment of Federal funds by installments.

    (a) Basic conditions. When Federal payments have been made for 
claims that are later found to be unallowable, the State may repay the 
Federal Funds by installments if the following conditions are met:
    (1) The amount to be repaid exceeds 2\1/2\ percent of the estimated 
or actual annual State share for the State SCHIP program; and
    (2) The State has given the Regional Administrator written notice, 
before total repayment was due, of its intent to repay by installments.
    (b) Annual State share determination. CMS determines whether the 
amount to be repaid exceeds 2\1/2\ percent of the annual State share as 
follows:
    (1) If the State SCHIP program is ongoing, CMS uses the annual 
estimated State share of State SCHIP expenditures. This is the sum of 
the estimated State shares for four consecutive quarters, beginning with 
the quarter in which the first installment is to be paid, as shown on 
the State's latest CMS-21B form.
    (2) If the State SCHIP program has been terminated by Federal law or 
by the State, CMS uses the actual State share. The actual State share is 
that shown on the State's Quarterly Statement of Expenditures reports 
for the last four quarters before the program was terminated.
    (c) Repayment amounts, schedules, and procedures--(1) Repayment 
amount. The repayment amount may not include any amount previously 
approved for installment repayment.
    (2) Repayment schedule. The number of quarters allowed for repayment 
is determined on the basis of the ratio of the repayment amount to the 
annual State share of State SCHIP expenditures. The higher the ratio of 
the total repayment amount is to the annual State share, the greater the 
number of quarters allowed, as follows:

------------------------------------------------------------------------
                                                             Number of
 Total repayment amount as percentage of State share of     quarters to
           annual expenditures for State SCHIP            make repayment
------------------------------------------------------------------------
2.5 pct. or less........................................               1
Greater than 2.5, but not greater than 5................               2
Greater than 5, but not greater than 7.5................               3
Greater than 7.5, but not greater than 10...............               4
Greater than 10, but not greater than 15................               5

[[Page 369]]

 
Greater than 15, but not greater than 20................               6
Greater than 20, but not greater than 25................               7
Greater than 25, but not greater than 30................               8
Greater than 30, but not greater than 47.5..............               9
Greater than 47.5, but not greater than 65..............              10
Greater than 65, but not greater than 82.5..............              11
Greater than 82.5, but not greater than 100.............              12
------------------------------------------------------------------------

    (3) Quarterly repayment amounts. The quarterly repayment amounts for 
each of the quarters in the repayment schedule may not be less than the 
following percentages of the estimated State share of the annual 
expenditures for SCHIP:

------------------------------------------------------------------------
                                                             Repayment
                                                            installment
                                                            may not be
           For each of the following quarters                less than
                                                               these
                                                            percentages
------------------------------------------------------------------------
1 to 4..................................................             2.5
5 to 8..................................................             5.0
9 to 12.................................................            17.5
------------------------------------------------------------------------

    (4) Extended schedule. The repayment schedule may be extended beyond 
12 quarterly installments if the total repayment amount exceeds 100 
percent of the estimated State share of annual expenditures. In these 
circumstances, the repayment schedule in paragraph (c)(2) of this 
section is followed for repayment of the amount equal to 100 percent of 
the annual State share. The remaining amount of the repayment is in 
quarterly amounts equal to not less than 17.5 percent of the estimated 
State share of annual expenditures.
    (5) Repayment process. Repayment is accomplished through adjustment 
in the quarterly grants over the period covered by the repayment 
schedule. If the State chooses to repay amounts representing higher 
percentages during the early quarters, any corresponding reduction in 
required minimum percentages is applied first to the last scheduled 
payment, then to the next to the last payment, and so forth as 
necessary.
    (6) Offsetting of retroactive claims. (i) The amount of a 
retroactive claim to be paid a State is offset against any amounts to 
be, or already being, repaid by the State in installments. Under this 
provision, the State may choose to:
    (A) Suspend payments until the retroactive claim due the State has, 
in fact, been offset; or
    (B) Continue payments until the reduced amount of its debt 
(remaining after the offset), has been paid in full. This second option 
would result in a shorter payment period.
    (ii) A retroactive claim for the purpose of this regulation is a 
claim applicable to any period ending 12 months or more before the 
beginning of the quarter in which CMS would pay that claim.

[65 FR 33622, May 24, 2000; 65 FR 38027, June 19, 2000; 65 FR 52042, 
Aug. 28, 2000]



Sec. 457.220  Public funds as the State share of financial participation.

    (a) Public funds may be considered as the State's share in claiming 
FFP if they meet the conditions specified in paragraphs (b) and (c) of 
this section.
    (b) The public funds are appropriated directly to the State or local 
SCHIP agency, or transferred from other public agencies (including 
Indian tribes) to the State or local agency and under its administrative 
control, or certified by the contributing public agency as representing 
expenditures eligible for FFP under this section.
    (c) The public funds are not Federal funds, or are Federal funds 
authorized by the Federal law to be used to match other Federal funds.



Sec. 457.222  FFP for equipment.

    Claims for Federal financial participation in the cost of equipment 
under SCHIP are determined in accordance with subpart G of 45 CFR part 
95. Requirements concerning the management and disposition of equipment 
under SCHIP are also prescribed in subpart G of 45 CFR part 95.



Sec. 457.224  FFP: Conditions relating to cost sharing.

    (a) No FFP is available for the following amounts, even when related 
to services or benefit coverage which is or could be provided under a 
State SCHIP program--
    (1) Any cost sharing amounts that beneficiaries should have paid as 
enrollment fees, premiums, deductibles, coinsurance, copayments, or 
similar charges.

[[Page 370]]

    (2) Any amounts paid by the agency for health benefits coverage or 
services furnished to individuals who would not be eligible for that 
coverage or those services under the approved State child health plan, 
whether or not the individual paid any required premium or enrollment 
fee.
    (b) The amount of expenditures under the State child health plan 
must be reduced by the amount of any premiums and other cost-sharing 
received by the State.



Sec. 457.226  Fiscal policies and accountability.

    A State plan must provide that the SCHIP agency and, where 
applicable, local agencies administering the plan will--
    (a) Maintain an accounting system and supporting fiscal records to 
assure that claims for Federal funds are in accord with applicable 
Federal requirements;
    (b) Retain records for 3 years from date of submission of a final 
expenditure report;
    (c) Retain records beyond the 3-year period if audit findings have 
not been resolved; and
    (d) Retain records for nonexpendable property acquired under a 
Federal grant for 3 years from the date of final disposition of that 
property.



Sec. 457.228  Cost allocation.

    A State plan must provide that the single or appropriate SCHIP 
Agency will have an approved cost allocation plan on file with the 
Department in accordance with the requirements contained in subpart E of 
45 CFR part 95. Subpart E also sets forth the effect on FFP if the 
requirements contained in that subpart are not met.



Sec. 457.230  FFP for State ADP expenditures.

    FFP is available for State ADP expenditures for the design, 
development, or installation of mechanized claims processing and 
information retrieval systems and for the operation of certain systems. 
Additional HHS regulations and CMS procedures regarding the availability 
of FFP for ADP expenditures are in 45 CFR part 74, 45 CFR part 95, 
subpart F, and part 11, State Medicaid Manual.



Sec. 457.232  Refunding of Federal Share of SCHIP overpayments to providers and referral of allegations of waste, fraud or abuse to the Office of Inspector 
          General.

    (a) Quarterly Federal payments to the States under title XXI (SCHIP) 
of the Act are to be reduced or increased to make adjustment for prior 
overpayments or underpayments that the Secretary determines have been 
made.
    (b) The Secretary will consider the pro rata Federal share of the 
net amount recovered by a State during any quarter to be an overpayment.
    (c) Allegations or indications of waste fraud and abuse with respect 
to the SCHIP program shall be referred promptly to the Office of 
Inspector General.



Sec. 457.236  Audits.

    The SCHIP agency must assure appropriate audit of records on costs 
of provider services.



Sec. 457.238  Documentation of payment rates.

    The SCHIP agency must maintain documentation of payment rates and 
make it available to HHS upon request.



      Subpart C--State Plan Requirements: Eligibility, Screening, 
                      Applications, and Enrollment

    Source: 66 FR 2675, Jan. 11, 2001, unless otherwise noted.



Sec. 457.300  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements --
    (1) Section 2102 of the Act, which relates to eligibility standards 
and methodologies, coordination with other health insurance programs, 
and outreach and enrollment efforts to identify and enroll children who 
are eligible to participate in other public health insurance programs;
    (2) Section 2105(c)(6)(B) of the Act, which relates to the 
prohibition against expenditures for child health assistance provided to 
children eligible for coverage under other Federal

[[Page 371]]

health care programs other than programs operated or financed by the 
Indian Health Service; and
    (3) Section 2110(b) of the Act, which provides a definition of 
targeted low-income child.
    (b) Scope. This subpart sets forth the requirements relating to 
eligibility standards and to screening, application and enrollment 
procedures.
    (c) Applicability. The requirements of this subpart apply to child 
health assistance provided under a separate child health program. 
Regulations relating to eligibility, screening, applications and 
enrollment that are applicable to a Medicaid expansion program are found 
at Sec. 431.636, Sec. 435.4, Sec. 435.229, Sec. 435.1102, Sec. 436.3, 
Sec. 436.229, and Sec. 436.1102 of this chapter.



Sec. 457.301  Definitions and use of terms.

    As used in this subpart--
    Joint application means a form used to apply for the separate child 
health program that, when transmitted to the Medicaid agency following a 
screening that shows the child is potentially eligible for Medicaid, may 
also be used to apply for Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a separate child health 
program application has been filed, the day on which a decision is made 
on that application; or
    (2) In the case of a child on whose behalf an application for the 
separate child health program has not been filed, the last day of the 
month following the month in which the determination of presumptive 
eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish eligibility of a child of the age involved.
    Public agency means a State, county, city or other type of municipal 
agency, including a public school district, transportation district, 
irrigation district, or any other type of public entity.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under this title, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.

[[Page 372]]

    State health benefits plan means a health insurance coverage plan 
that is offered or organized by the State government on behalf of State 
employees or other public agency employees within the State. The term 
does not include a plan in which the State provides no contribution 
toward the cost of coverage and in which no State employees participate, 
or a plan that provides coverage only for a specific type of care, such 
as dental or vision care.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec. 457.305  State plan provisions.

    The State plan must include a description of--
    (a) The standards, consistent with Secs. 457.310 and 457.320, used 
to determine the eligibility of children for coverage under the State 
plan.
    (b) The State's policies governing enrollment and disenrollment; 
processes for screening applicant children for and, if eligible, 
facilitating their enrollment in Medicaid; and processes for 
implementing waiting lists and enrollment caps (if any).



Sec. 457.310  Targeted low-income child.

    (a) Definition. A targeted low-income child is a child who meets the 
standards set forth below and the eligibility standards established by 
the State under Sec. 457.320.
    (b) Standards. A targeted low-income child must meet the following 
standards:
    (1) Financial need standard. A targeted low-income child:
    (i) Has a family income at or below 200 percent of the Federal 
poverty line for a family of the size involved;
    (ii) Resides in a State with no Medicaid applicable income level or;
    (iii) Resides in a State that has a Medicaid applicable income level 
and has family income that either--
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points; or
    (B) Does not exceed the income level specified for such child to be 
eligible for medical assistance under policies of the State plan under 
title XIX on June 1, 1997.
    (2) No other coverage standard. A targeted low-income child must not 
be--
    (i) Found eligible or potentially eligible for Medicaid under 
policies of the State plan (determined through either the Medicaid 
application process or the screening process described at Sec. 457.350); 
or
    (ii) Covered under a group health plan or under health insurance 
coverage, as defined in section 2791 of the Public Health Service Act, 
unless the plan or health insurance coverage program has been in 
operation since before July 1, 1997 and is administered by a State that 
receives no Federal funds for the program's operation. A child is not 
considered covered under a group health plan or health insurance 
coverage if the child does not have reasonable geographic access to care 
under that plan.
    (3) For purposes of this section, policies of the State plan under 
title XIX plan include policies under a Statewide demonstration project 
under section 1115(a) of the Act other than a demonstration project that 
covered an expanded group of eligible children but that either--
    (i) Did not provide inpatient hospital coverage; or
    (ii) Limited eligibility to children previously enrolled in 
Medicaid, imposed premiums as a condition of initial or continued 
enrollment, and did not impose a general time limit on eligibility.
    (c) Exclusions. Notwithstanding paragraph (a) of this section, the 
following groups are excluded from the definition of targeted low-income 
children:
    (1) Children eligible for certain State health benefits coverage. 
(i) A targeted low-income child may not be eligible for health benefits 
coverage under a State health benefits plan in the State on the basis of 
a family member's employment with a public agency, even if the family 
declines to accept the coverage.
    (ii) A child is considered eligible for health benefits coverage 
under a State health benefits plan if a more than nominal contribution 
to the cost of health benefits coverage under a State health benefits 
plan is available from the State or public agency with respect

[[Page 373]]

to the child or would have been available from those sources on November 
8, 1999. A contribution is considered more than nominal if the State or 
public agency makes a contribution toward the cost of an employee's 
dependent(s) that is $10 per family, per month, more than the State or 
public agency's contribution toward the cost of covering the employee 
only.
    (2) Residents of an institution. A child must not be--
    (i) An inmate of a public institution as defined at Sec. 435.1009 of 
this chapter; or
    (ii) A patient in an institution for mental diseases, as defined at 
Sec. 435.1009 of this chapter, at the time of initial application or any 
redetermination of eligibility.



Sec. 457.320  Other eligibility standards.

    (a) Eligibility standards. To the extent consistent with title XXI 
of the Act and except as provided in paragraph (b) of this section, the 
State plan may adopt eligibility standards for one or more groups of 
children related to--
    (1) Geographic area(s) served by the plan;
    (2) Age (up to, but not including, age 19);
    (3) Income;
    (4) Resources;
    (5) Spenddowns;
    (6) Disposition of resources;
    (7) Residency, in accordance with paragraph (d) of this section;
    (8) Disability status, provided that such standards do not restrict 
eligibility;
    (9) Access to, or coverage under, other health coverage; and
    (10) Duration of eligibility, in accordance with paragraph (e) of 
this section.
    (b) Prohibited eligibility standards. In establishing eligibility 
standards and methodologies, a State may not--
    (1) Cover children with a higher family income without covering 
children with a lower family income within any defined group of covered 
targeted low-income children;
    (2) Deny eligibility based on a preexisting medical condition;
    (3) Discriminate on the basis of diagnosis;
    (4) Require any family member who is not requesting services to 
provide a social security number (including those family members whose 
income or resources might be used in making the child's eligibility 
determination);
    (5) Exclude American Indian or Alaska Native children based on 
eligibility for, or access to, medical care funded by the Indian Health 
Service;
    (6) Exclude individuals based on citizenship or nationality, to the 
extent that the children are U.S. citizens, U.S. nationals or qualified 
aliens, (as defined at section 431 of the Personal Responsibility and 
Work Opportunity Reconciliation Act (PRWORA) of 1996, as amended by the 
BBA of 1997, except to the extent that section 403 of PRWORA precludes 
them from receiving Federal means-tested public benefits); or
    (7) Violate any other Federal laws or regulations pertaining to 
eligibility for a separate child health program under title XXI.
    (c) Self-declaration of citizenship. In establishing eligibility for 
coverage under a separate child health plan, a State may accept self-
declaration of citizenship (including nationals of the U.S.), provided 
that the State has implemented effective, fair, and nondiscriminatory 
procedures for ensuring the integrity of its application process.
    (d) Residency. The State may establish residency requirements, 
except that a State may not--
    (1) Impose a durational residency requirement;
    (2) Preclude the following individuals from declaring residence in a 
State--
    (i) A non-institutionalized child who is not a ward of the State, if 
the child is physically located in that State, including as a result of 
the parent's or caretaker's employment in that State;
    (ii) An institutionalized child who is not a ward of a State, if the 
State is the State of residence of the child's custodial parent's or 
caretaker at the time of placement;
    (iii) A child who is a ward of a State, regardless of the child's 
physical location; or
    (iv) A child whose custodial parent or caretaker is involved in work 
of a transient nature, if the State is the parent's or caretaker's home 
State.
    (e) Duration of eligibility. (1) The State may not impose a lifetime 
cap or other

[[Page 374]]

time limit on the eligibility of an individual applicant or enrollee, 
based on the length of time such applicant or enrollee has received 
benefits under the State's separate child health program.
    (2) Eligibility must be redetermined at least every 12 months.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec. 457.340  Application for and enrollment in a separate child health program.

    (a) Application assistance. A State must afford families an 
opportunity to apply for child health assistance without delay, provided 
that the State has not reached an approved enrollment cap, and offer 
assistance to families in understanding and completing applications and 
in obtaining any required documentation.
    (b) Use of social security number. A State may require a social 
security number for each individual requesting services consistent with 
the requirements at Sec. 435.910(b), (e), (f), and (g) of this chapter.
    (c) Notice of rights and responsibilities. A State must inform 
applicants at the time of application, in writing and orally if 
appropriate, about the application and eligibility requirements, the 
time frame for determining eligibility, and the right to review of 
eligibility determinations as described in Sec. 457.1130.
    (d) Timely determinations of eligibility. (1) The agency must 
promptly determine eligibility and issue a notice of decision within the 
time standards established, except in circumstances that are beyond the 
agency's control.
    (2) A State must establish time standards for determining 
eligibility. These standards may not exceed forty-five calendar days 
(excluding days during which the application has been suspended, 
pursuant to Sec. 457.350(f)(1)).
    (3) In applying the time standards, the State must define ``date of 
application'' and must count each calendar day from the date of 
application to the day the agency mails or otherwise provides notice of 
its eligibility decision.
    (e) Notice of decision concerning eligibility. A State must provide 
each applicant or enrollee a written notice of any decision on the 
application or other determination concerning eligibility.
    (1) If eligibility is approved, the notice must include information 
on the enrollee's rights and responsibilities under the program, 
including the opportunity for review of matters described in 
Sec. 457.1130.
    (2) If eligibility is denied, suspended or terminated, the State 
must provide notice in accordance with Sec. 457.1180. In the case of a 
suspension or termination of eligibility, the State must provide 
sufficient notice to enable the child's parent or caretaker to take any 
appropriate actions that may be required to allow coverage to continue 
without interruption.
    (f) Effective date of eligibility. A State must specify a method for 
determining the effective date of eligibility for its separate child 
health program, which can be determined based on the date of application 
or through any other reasonable method.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec. 457.350  Eligibility screening and facilitation of Medicaid enrollment.

    (a) State plan requirement. The State plan must include a 
description of--
    (1) The screening procedures that the State will use, at intake and 
any follow-up eligibility determination, including any periodic 
redetermination, to ensure that only targeted low-income children are 
furnished child health assistance under the plan; and
    (2) The procedures that the State will use to ensure that the 
Medicaid application and enrollment process is initiated and that 
Medicaid enrollment is facilitated for children found, through the 
screening process, to be potentially eligible for Medicaid.
    (b) Screening objectives. A State must use screening procedures to 
identify, at a minimum, any applicant or enrollee who is potentially 
eligible for Medicaid under one of the poverty-level-related groups 
described in section 1902(l) of the Act, section 1931 of the Act, or a 
Medicaid demonstration project approved under section 1115 of the Act, 
applying whichever standard and corresponding methodology generally 
results in a higher income eligibility

[[Page 375]]

level for the age group of the child being screened.
    (c) Income eligibility test. To identify the children described in 
paragraph (b) of this section, a State must either initially apply the 
gross income test described in paragraph (c)(1) of this section and then 
use an adjusted income test described in paragraph (c)(2) of this 
section for applicants whose gross income is above the appropriate 
Medicaid income standard, or use only the adjusted income test.
    (1) Initial gross income test. Under this test, a State initially 
screens for Medicaid eligibility by comparing gross family income to the 
appropriate Medicaid income standard.
    (2) Adjusted income test. Under this test, a State screens for 
Medicaid eligibility by comparing adjusted family income to the 
appropriate Medicaid income standard. The State must apply Medicaid 
standards and methodologies relating to income for the particular 
Medicaid eligibility group, including all income exclusions and 
disregards, except those that apply only in very limited circumstances.
    (d) Resource eligibility test. (1) If a State applies a resource 
test for children under the Medicaid eligibility group used for 
screening purposes as described in paragraph (b) of this section and a 
child has been determined potentially income eligible for Medicaid, the 
State must also screen for Medicaid eligibility by comparing family 
resources to the appropriate Medicaid resource standard.
    (2) In conducting the screening, the State must apply Medicaid 
standards and methodologies related to resources for the particular 
Medicaid eligibility group, including all resource exclusions and 
disregards, except those that apply only in very limited circumstances.
    (e) Children found potentially ineligible for Medicaid. If a State 
uses a screening procedure other than a full determination of Medicaid 
eligibility under all possible eligibility groups, and the screening 
process reveals that the child does not appear to be eligible for 
Medicaid, the State must provide the child's family with the following 
in writing:
    (1) A statement that based on a limited review, the child does not 
appear eligible for Medicaid, but Medicaid eligibility can only be 
determined based on a full review of a Medicaid application under all 
Medicaid eligibility groups;
    (2) Information about Medicaid eligibility and benefits; and
    (3) Information about how and where to apply for Medicaid under all 
eligibility groups.
    (4) The State will determine the written format and timing of the 
information regarding Medicaid eligibility, benefits, and the 
application process required under this paragraph (e).
    (f) Children found potentially eligible for Medicaid. If the 
screening process reveals that the child is potentially eligible for 
Medicaid, the State must establish procedures in coordination with the 
Medicaid agency that facilitate enrollment in Medicaid and avoid 
duplicative requests for information and documentation and must--
    (1) Except as provided in Sec. 457.355, find the child ineligible, 
provisionally ineligible, or suspend the child's application for the 
separate child health program unless and until a completed Medicaid 
application for that child is denied, or the child's circumstances 
change, and promptly transmit the separate child health application to 
the Medicaid agency as provided in paragraph (f)(3)(ii) of this section; 
and
    (2) If a State uses a joint application for its Medicaid and 
separate child health programs, promptly transmit the application, or 
the information obtained through the application, and all relevant 
documentation to the Medicaid agency; or
    (3) If a State does not use a joint application for its Medicaid and 
separate child health programs:
    (i) Promptly inform the child's parent or caretaker in writing and, 
if appropriate, orally that the child has been found likely to be 
eligible for Medicaid; provide the family with a Medicaid application 
and offer information about what, if any, further information, 
documentation, or other steps are needed to complete the Medicaid 
application process; and offer assistance in completing the application 
process;
    (ii) Promptly transmit the separate child health program 
application; or

[[Page 376]]

the information obtained through the application, and all other relevant 
information and documentation, including the results of the screening 
process, to the Medicaid agency for a final determination of Medicaid 
eligibility in accordance with the requirements of Secs. 431.636 and 
457.1110 of this chapter; or
    (4) Establish other effective and efficient procedures, in 
coordination with the Medicaid agency, as described and approved in the 
State plan that ensure that children who are screened as potentially 
eligible for Medicaid are able to apply for Medicaid without delay and, 
if eligible, are enrolled in Medicaid in a timely manner; and
    (5) Determine or redetermine eligibility for the separate child 
health program, if--
    (i) The State is notified pursuant to Sec. 431.636 of this chapter 
that the child has been found ineligible for Medicaid, consistent with 
the time standards established pursuant to Sec. 457.340(c); or
    (ii) The State is notified prior to the final Medicaid eligibility 
determination that the child's circumstances have changed and another 
screening shows that the child is not likely to be eligible for 
Medicaid.
    (g) Informed application decisions. To enable a family to make an 
informed decision about applying for Medicaid or completing the Medicaid 
application process, a State must provide the child's family with 
information, in writing, about--
    (1) The State's Medicaid program, including the benefits covered, 
and restrictions on cost sharing; and
    (2) Eligibility rules that prohibit children who have been screened 
eligible for Medicaid from being enrolled in a separate child health 
program, other than provisional temporary enrollment while a final 
Medicaid eligibility determination is being made.
    (3) The State will determine the written format and timing of the 
information regarding Medicaid eligibility, benefits, and the 
application process required under this paragraph (g).
    (h) Waiting lists, enrollment caps and closed enrollment. The State 
must establish procedures to ensure that--
    (1) The procedures developed in accordance with this section have 
been followed for each child applying for a separate child health 
program before placing the child on a waiting list or otherwise 
deferring action on the child's application for the separate child 
health program; and
    (2) Families are informed that a child may be eligible for Medicaid 
if circumstances change while the child is on a waiting list for 
separate child health program.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec. 457.353  Monitoring and evaluation of screening process.

    States must monitor and establish a mechanism to evaluate the screen 
and enroll process described at Sec. 457.350 to ensure that children who 
are screened potentially eligible for Medicaid are enrolled in Medicaid, 
if eligible, and that children who are found ineligible for Medicaid are 
enrolled in the separate child health program, if eligible.



Sec. 457.355  Presumptive eligibility.

    (a) General rule. Consistent with subpart D of this part, the State 
may pay costs of coverage under a separate child health program, during 
a period of presumptive eligibility for children applying for coverage 
under the separate child health program, pending the screening process 
and a final determination of eligibility (including applicants found 
through screening to be potentially eligible for Medicaid)
    (b) Expenditures for coverage during a period of presumptive 
eligibility. Expenditures for coverage during a period of presumptive 
eligibility implemented in accordance with Sec. 435.1102 of this chapter 
may be considered as expenditures for child health assistance under the 
plan.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec. 457.380  Eligibility verification.

    (a) The State must establish procedures to ensure the integrity of 
the eligibility determination process.
    (b) A State may establish reasonable eligibility verification 
mechanisms to promote enrollment of eligible children

[[Page 377]]

and may permit applicants and enrollees to demonstrate that they meet 
eligibility requirements through self-declaration or affirmation except 
that a State may permit self-declaration of citizenship only if the 
State has effective, fair and non-discriminatory procedures to ensure 
the integrity of the application process in accordance with 
Sec. 457.320(c).



        Subpart D--State Plan Requirements: Coverage and Benefits

    Source: 66 FR 2678, Jan. 11, 2001, unless otherwise noted.



Sec. 457.401  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2102(a)(7) of the Act, which requires that States make 
assurances relating to, the quality and appropriateness of care, and 
access to covered services;
    (2) Section 2103 of the Act, which outlines coverage requirements 
for children's health insurance;
    (3) Section 2109 of the Act, which describes the relation of the 
SCHIP program to other laws;
    (4) Section 2110(a) of the Act, which describes child health 
assistance; and
    (5) Section 2110(c) of the Act, which contains definitions 
applicable to this subpart.
    (b) Scope. This subpart sets forth requirements for health benefits 
coverage and child health assistance under a separate child health plan.
    (c) Applicability. The requirements of this subpart apply to child 
health assistance provided under a separate child health program and do 
not apply to a Medicaid expansion program.



Sec. 457.402  Definition of child health assistance.

    For the purpose of this subpart, the term ``child health 
assistance'' means payment for part or all of the cost of health 
benefits coverage provided to targeted low-income children for the 
following services:
    (a) Inpatient hospital services.
    (b) Outpatient hospital services.
    (c) Physician services.
    (d) Surgical services.
    (e) Clinic services (including health center services) and other 
ambulatory health care services.
    (f) Prescription drugs and biologicals and the administration of 
these drugs and biologicals, only if these drugs and biologicals are not 
furnished for the purpose of causing, or assisting in causing, the 
death, suicide, euthanasia, or mercy killing of a person.
    (g) Over-the-counter medications.
    (h) Laboratory and radiological services.
    (i) Prenatal care and pre-pregnancy family planning services and 
supplies.
    (j) Inpatient mental health services, other than services described 
in paragraph (r) of this section but including services furnished in a 
State-operated mental hospital and including residential or other 24-
hour therapeutically planned structured services.
    (k) Outpatient mental health services, other than services described 
in paragraph (s) of this section but including services furnished in a 
State-operated mental hospital and including community-based services.
    (l) Durable medical equipment and other medically-related or 
remedial devices (such as prosthetic devices, implants, eyeglasses, 
hearing aids, dental devices and adaptive devices).
    (m) Disposable medical supplies.
    (n) Home and community-based health care services and related 
supportive services (such as home health nursing services, personal 
care, assistance with activities of daily living, chore services, day 
care services, respite care services, training for family members and 
minor modification to the home.)
    (o) Nursing care services (such as nurse practitioner services, 
nurse midwife services, advanced practice nurse services, private duty 
nursing, pediatric nurse services and respiratory care services) in a 
home, school, or other setting.
    (p) Abortion only if necessary to save the life of the mother or if 
the pregnancy is the result of rape or incest.
    (q) Dental services.
    (r) Inpatient substance abuse treatment services and residential 
substance abuse treatment services.
    (s) Outpatient substance abuse treatment services.

[[Page 378]]

    (t) Case management services.
    (u) Care coordination services.
    (v) Physical therapy, occupational therapy, and services for 
individuals with speech, hearing and language disorders.
    (w) Hospice care.
    (x) Any other medical, diagnostic, screening, preventive, 
restorative, remedial, therapeutic, or rehabilitative services (whether 
in a facility, home, school, or other setting) if recognized by State 
law and only if the service is--
    (1) Prescribed by or furnished by a physician or other licensed or 
registered practitioner within the scope of practice as defined by State 
law;
    (2) Performed under the general supervision or at the direction of a 
physician; or
    (3) Furnished by a health care facility that is operated by a State 
or local government or is licensed under State law and operating within 
the scope of the license.
    (y) Premiums for private health care insurance coverage.
    (z) Medical transportation.
    (aa) Enabling services (such as transportation, translation, and 
outreach services) only if designed to increase the accessibility of 
primary and preventive health care services for eligible low-income 
individuals.
    (bb) Any other health care services or items specified by the 
Secretary and not excluded under this subchapter.



Sec. 457.410  Health benefits coverage options.

    (a) Types of health benefits coverage. States may choose to obtain 
any of the following four types of health benefits coverage:
    (1) Benchmark coverage in accordance with Sec. 457.420.
    (2) Benchmark-equivalent coverage in accordance with Sec. 457.430.
    (3) Existing comprehensive State-based coverage in accordance with 
Sec. 457.440.
    (4) Secretary-approved coverage in accordance with Sec. 457.450.
    (b) Required coverage. Regardless of the type of health benefits 
coverage, described at paragraph (a) of this section, that the State 
chooses to obtain, the State must obtain coverage for--
    (1) Well-baby and well-child care services as defined by the State;
    (2) Age-appropriate immunizations in accordance with the 
recommendations of the Advisory Committee on Immunization Practices 
(ACIP); and
    (3) Emergency services as defined in Sec. 457.10.



Sec. 457.420  Benchmark health benefits coverage.

    Benchmark coverage is health benefits coverage that is substantially 
equal to the health benefits coverage in one of the following benefit 
plans:
    (a) Federal Employees Health Benefit Plan (FEHBP). The standard Blue 
Cross/Blue Shield preferred provider option service benefit plan that is 
described in, and offered to Federal employees under, 5 U.S.C. 8903(1).
    (b) State employee plan. A health benefits plan that is offered and 
generally available to State employees in the State.
    (c) Health maintenance organization (HMO) plan. A health insurance 
coverage plan that is offered through an HMO (as defined in section 
2791(b)(3) of the Public Health Service Act) and has the largest insured 
commercial, non-Medicaid enrollment in the State.



Sec. 457.430  Benchmark-equivalent health benefits coverage.

    (a) Aggregate actuarial value. Benchmark-equivalent coverage is 
health benefits coverage that has an aggregate actuarial value 
determined in accordance with Sec. 457.431 that is at least actuarially 
equivalent to the coverage under one of the benchmark packages specified 
in Sec. 457.420.
    (b) Required coverage. In addition to the coverage required under 
Sec. 457.410(b), benchmark-equivalent health benefits coverage must 
include coverage for the following categories of services:
    (1) Inpatient and outpatient hospital services.
    (2) Physicians' surgical and medical services.
    (3) Laboratory and x-ray services.
    (c) Additional coverage. (1) In addition to the categories of 
services in paragraph (b) of this section, benchmark-equivalent coverage 
may include coverage for any additional services specified in 
Sec. 457.402.

[[Page 379]]

    (2) If the benchmark coverage package used by the State for purposes 
of comparison in establishing the aggregate actuarial value of the 
benchmark-equivalent coverage package includes coverage for prescription 
drugs, mental health services, vision services or hearing services, then 
the actuarial value of the coverage for each of these categories of 
service in the benchmark-equivalent coverage package must be at least 75 
percent of the value of the coverage for such a category or service in 
the benchmark plan used for comparison by the State.
    (3) If the benchmark coverage package does not cover one of the 
categories of services in paragraph (c)(2) of this section, then the 
benchmark-equivalent coverage package may, but is not required to, 
include coverage for that category of service.



Sec. 457.431  Actuarial report for benchmark-equivalent coverage.

    (a) To obtain approval for benchmark-equivalent health benefits 
coverage described under Sec. 457.430, the State must submit to CMS an 
actuarial report that contains an actuarial opinion that the health 
benefits coverage meets the actuarial requirements under Sec. 457.430. 
The report must also specify the benchmark coverage used for comparison.
    (b) The actuarial report must state that it was prepared--
    (1) By an individual who is a member of the American Academy of 
Actuaries;
    (2) Using generally accepted actuarial principles and methodologies 
of the American Academy of Actuaries;
    (3) Using a standardized set of utilization and price factors;
    (4) Using a standardized population that is representative of 
privately insured children of the age of those expected to be covered 
under the State plan;
    (5) Applying the same principles and factors in comparing the value 
of different coverage (or categories of services);
    (6) Without taking into account any differences in coverage based on 
the method of delivery or means of cost control or utilization used; and
    (7) Taking into account the ability of a State to reduce benefits by 
considering the increase in actuarial value of health benefits coverage 
offered under the State plan that results from the limitations on cost 
sharing (with the exception of premiums) under that coverage.
    (c) The actuary who prepares the opinion must select and specify the 
standardized set and population to be used under paragraphs (b)(3) and 
(b)(4) of this section.
    (d) The State must provide sufficient detail to explain the basis of 
the methodologies used to estimate the actuarial value or, if requested 
by CMS, to replicate the State's result.



Sec. 457.440  Existing comprehensive State-based coverage.

    (a) General requirements. Existing comprehensive State-based health 
benefits is coverage that--
    (1) Includes coverage of a range of benefits;
    (2) Is administered or overseen by the State and receives funds from 
the State;
    (3) Is offered in the State of New York, Florida or Pennsylvania; 
and
    (4) Was offered as of August 5, 1997.
    (b) Modifications. A State may modify an existing comprehensive 
State-based coverage program described in paragraph (a) of this section 
if--
    (1) The program continues to include a range of benefits;
    (2) The State submits an actuarial report demonstrating that the 
modification does not reduce the actuarial value of the coverage under 
the program below the lower of either--
    (i) The actuarial value of the coverage under the program as of 
August 5, 1997; or
    (ii) The actuarial value of a benchmark benefit package as described 
in Sec. 457.430 evaluated at the time the modification is requested.



Sec. 457.450  Secretary-approved coverage.

    Secretary-approved coverage is health benefits coverage that, in the 
determination of the Secretary, provides appropriate coverage for the 
population of targeted low-income children covered under the program. 
Secretary-approved coverage, for which no

[[Page 380]]

actuarial analysis is required, may include, but is not limited to the 
following:
    (a) Coverage that is the same as the coverage provided to children 
under the Medicaid State plan.
    (b) Comprehensive coverage for children offered by the State under a 
Medicaid demonstration project approved by the Secretary under section 
1115 of the Act.
    (c) Coverage that either includes the full Early and Periodic 
Screening, Diagnosis, and Treatment (EPSDT) benefit or that the State 
has extended to the entire Medicaid population in the State.
    (d) Coverage that includes benchmark health benefits coverage, as 
specified in Sec. 457.420, plus any additional coverage.
    (e) Coverage that is the same as the coverage provided under 
Sec. 457.440.
    (f) Coverage, including coverage under a group health plan purchased 
by the State, that the State demonstrates to be substantially equivalent 
to or greater than coverage under a benchmark health benefits plan, as 
specified in Sec. 457.420, through use of a benefit-by-benefit 
comparison which demonstrates that coverage for each benefit meets or 
exceeds the corresponding coverage under the benchmark health benefits 
plan.

[66 FR 33823, June 25, 2001]



Sec. 457.470  Prohibited coverage.

    A State is not required to provide health benefits coverage under 
the plan for an item or service for which payment is prohibited under 
title XXI even if any benchmark health benefits plan includes coverage 
for that item or service.



Sec. 457.475  Limitations on coverage: Abortions.

    (a) General rule. FFP under title XXI is not available in 
expenditures for an abortion, or in expenditures for the purchase of 
health benefits coverage that includes coverage of abortion services 
unless the abortion services meet the conditions specified in paragraph 
(b) of this section.
    (b) Exceptions. (1) Life of mother. FFP is available in expenditures 
for abortion services when a physician has found that the abortion is 
necessary to save the life of the mother.
    (2) Rape or incest. FFP is available in expenditures for abortion 
services performed to terminate a pregnancy resulting from an act of 
rape or incest.
    (c) Partial Federal funding prohibited. (1) FFP is not available to 
a State for any amount expended under the title XXI plan to assist in 
the purchase, in whole or in part, of health benefits coverage that 
includes coverage of abortions other than those specified in paragraph 
(b) of this section.
    (2) If a State wishes to have managed care entities provide 
abortions in addition to those specified in paragraph (b) of this 
section, those abortions must be provided under a separate contract 
using non-Federal funds. A State may not set aside a portion of the 
capitated rate paid to a managed care entity to be paid with State-only 
funds, or append riders, attachments or addenda to existing contracts 
with managed care entities to separate the additional abortion services 
from the other services covered by the contract.
    (3) Nothing in this section affects the expenditure by a State, 
locality, or private person or entity of State, local, or private funds 
(other than those expended under the State plan) for any abortion 
services or for health benefits coverage that includes coverage of 
abortion services.



Sec. 457.480  Preexisting condition exclusions and relation to other laws.

    (a) Preexisting condition exclusions. (1) Except as permitted under 
paragraph (a)(2) of this section, the State may not permit the 
imposition of any pre-existing condition exclusion for covered services 
under the State plan.
    (2) If the State obtains health benefits coverage through payment or 
a contract for health benefits coverage under a group health plan or 
group health insurance coverage, the State may permit the imposition of 
a pre-existing condition exclusion but only to the extent that the 
exclusion is permitted under the applicable provisions of part 7 of 
subtitle B of title I of the Employee Retirement Income Security Act of 
1974 (ERISA) and title XXVII of the Public Health Service Act.

[[Page 381]]

    (b) Relation of title XXI to other laws. (1) ERISA. Nothing in this 
title affects or modifies section 514 of ERISA with respect to a group 
health plan as defined by section 2791(a)(1) of the Public Health 
Service Act.
    (2) Health Insurance Portability and Accountability Act (HIPAA). 
Health benefits coverage provided under a State plan and coverage 
provided as a cost-effective alternative, as described in subpart J of 
this part, is creditable coverage for purposes of part 7 of subtitle B 
of title II of ERISA, title XXVII of the Public Health Service Act, and 
subtitle K of the Internal Revenue Code of 1986.
    (3) Mental Health Parity Act (MHPA). Health benefits coverage under 
a group health plan provided under a State plan must comply with the 
requirements of the MHPA of 1996 regarding parity in the application of 
annual and lifetime dollar limits to mental health benefits in 
accordance with 45 CFR 146.136.
    (4) Newborns and Mothers Health Protection Act (NMHPA). Health 
benefits coverage under a group health plan provided under a State plan 
must comply with the requirements of the NMHPA of 1996 regarding 
requirements for minimum hospital stays for mothers and newborns in 
accordance with 45 CFR 146.130 and 148.170.



Sec. 457.490  Delivery and utilization control systems.

    A State that elects to obtain health benefits coverage through a 
separate child health program must include in its State plan a 
description of the child health assistance provided under the plan for 
targeted low-income children, including a description of the proposed 
methods of delivery and utilization control systems. A State must--
    (a) Describe the methods of delivery of child health assistance 
including the choice of financing and the methods for assuring delivery 
of the insurance products and delivery of health care services covered 
by such products to the enrollees, including any variations; and
    (b) Describe utilization control systems designed to ensure that 
enrollees receiving health care services under the State plan receive 
only appropriate and medically necessary health care consistent with the 
benefit package described in the approved State plan.



Sec. 457.495  State assurance of access to care and procedures to assure quality and appropriateness of care.

    A State plan must include a description of the methods that a State 
uses for assuring the quality and appropriateness of care provided under 
the plan, including how the State will assure:
    (a) Access to well-baby care, well-child care, well-adolescent care 
and childhood and adolescent immunizations.
    (b) Access to covered services, including emergency services as 
defined at Sec. 457.10.
    (c) Appropriate and timely procedures to monitor and treat enrollees 
with chronic, complex, or serious medical conditions, including access 
to an adequate number of visits to specialists experienced in treating 
the specific medical condition and access to out-of-network providers 
when the network is not adequate for the enrollee's medical condition.
    (d) That decisions related to the prior authorization of health 
services are completed as follows:
    (1) In accordance with the medical needs of the patient, within 14 
days after receipt of a request for services. A possible extension of up 
to 14 days may be permitted if the enrollee requests the extension or if 
the physician or health plan determines that additional information is 
needed; or
    (2) In accordance with existing State law regarding prior 
authorization of health services.

[66 FR 2678, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



 Subpart E--State Plan Requirements: Enrollee Financial Responsibilities

    Source: 66 FR 2681, Jan. 11, 2001, unless otherwise noted.



Sec. 457.500  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements--

[[Page 382]]

    (1) Section 2101(a) of the Act, which provides that the purpose of 
title XXI is to provide funds to States to enable them to initiate and 
expand the provision of child health assistance to uninsured, low-income 
children in an effective and efficient manner; and
    (2) Section 2103(e) of the Act, which sets forth provisions 
regarding State plan requirements and options for cost sharing.
    (b) Scope. This subpart consists of provisions relating to the 
imposition under a separate child health program of cost-sharing charges 
including enrollment fees, premiums, deductibles, coinsurance, 
copayments, and similar cost-sharing charges.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs.



Sec. 457.505  General State plan requirements.

    The State plan must include a description of--
    (a) The amount of premiums, deductibles, coinsurance, copayments, 
and other cost sharing imposed;
    (b) The methods, including the public schedule, the State uses to 
inform enrollees, applicants, providers and the general public of the 
cost-sharing charges, the cumulative cost-sharing maximum, and any 
changes to these amounts;
    (c) The disenrollment protections as required under Sec. 457.570;
    (d) In the case of coverage obtained through premium assistance for 
group health plans--
    (1) The procedures the State uses to ensure that eligible children 
are not charged copayments, coinsurance, deductibles or similar fees on 
well-baby and well-child care services described at Sec. 457.520, and 
that any cost sharing complies with the requirements of this subpart;
    (2) The procedures to ensure that American Indian and Alaska Native 
children are not charged premiums, copayments, coinsurance, deductibles, 
or similar fees in accordance with Sec. 457.535;
    (3) The procedures to ensure that eligible children are not charged 
cost sharing in excess of the cumulative cost-sharing maximum specified 
in Sec. 457.560.
    (e) Procedures that do not primarily rely on a refund given by the 
State for overpayment on behalf of an eligible child to ensure 
compliance with this subpart.

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.510  Premiums, enrollment fees, or similar fees: State plan requirements.

    When a State imposes premiums, enrollment fees, or similar fees on 
enrollees, the State plan must describe--
    (a) The amount of the premium, enrollment fee or similar fee imposed 
on enrollees;
    (b) The time period for which the charge is imposed;
    (c) The group or groups that are subject to the premiums, enrollment 
fees, or similar charges;
    (d) The consequences for an enrollee or applicant who does not pay a 
charge, and the disenrollment protections adopted by the State in 
accordance with Sec. 457.570; and
    (e) The methodology used to ensure that total cost-sharing liability 
for a family does not exceed the cumulative cost-sharing maximum 
specified in Sec. 457.560.



Sec. 457.515  Co-payments, coinsurance, deductibles, or similar cost-sharing charges: State plan requirements.

    To impose copayments, coinsurance, deductibles or similar charges on 
enrollees, the State plan must describe--
    (a) The service for which the charge is imposed;
    (b) The amount of the charge;
    (c) The group or groups of enrollees that may be subject to the 
cost-sharing charge;
    (d) The consequences for an enrollee who does not pay a charge, and 
the disenrollment protections adopted by the State in accordance with 
Sec. 457.570;
    (e) The methodology used to ensure that total cost-sharing liability 
for a family does not exceed the cumulative cost-sharing maximum 
specified in Sec. 457.560; and
    (f) An assurance that enrollees will not be held liable for cost-
sharing amounts for emergency services that

[[Page 383]]

are provided at a facility that does not participate in the enrollee's 
managed care network beyond the copayment amounts specified in the State 
plan for emergency services as defined in Sec. 457.10.



Sec. 457.520  Cost sharing for well-baby and well-child care services.

    (a) A State may not impose copayments, deductibles, coinsurance or 
other cost sharing with respect to the well-baby and well-child care 
services covered under the State plan in either the managed care 
delivery setting or the fee-for-service delivery setting.
    (b) For the purposes of this subpart, at a minimum, any of the 
following services covered under the State plan will be considered well-
baby and well-child care services:
    (1) All healthy newborn physician visits, including routine 
screening, whether provided on an inpatient or outpatient basis.
    (2) Routine physical examinations as recommended and updated by the 
American Academy of Pediatrics (AAP) ``Guidelines for Health Supervision 
III'' and described in ``Bright Futures: Guidelines for Health 
Supervision of Infants, Children and Adolescents.''
    (3) Laboratory tests associated with the well-baby and well-child 
routine physical examinations as described in paragraph (b)(2) of this 
section.
    (4) Immunizations and related office visits as recommended and 
updated by the Advisory Committee on Immunization Practices (ACIP).
    (5) Routine preventive and diagnostic dental services (such as oral 
examinations, prophylaxis and topical fluoride applications, sealants, 
and x-rays) as described in the most recent guidelines issued by the 
American Academy of Pediatric Dentistry (AAPD).



Sec. 457.525  Public schedule.

    (a) The State must make available to the groups in paragraph (b) of 
this section a public schedule that contains the following information:
    (1) Current cost-sharing charges.
    (2) Enrollee groups subject to the charges.
    (3) Cumulative cost-sharing maximums.
    (4) Mechanisms for making payments for required charges.
    (5) The consequences for an applicant or an enrollee who does not 
pay a charge, including the disenrollment protections required by 
Sec. 457.570.
    (b) The State must make the public schedule available to the 
following groups:
    (1) Enrollees, at the time of enrollment and reenrollment after a 
redetermination of eligibility, and when cost-sharing charges and 
cumulative cost-sharing maximums are revised.
    (2) Applicants, at the time of application.
    (3) All participating providers.
    (4) The general public.



Sec. 457.530  General cost-sharing protection for lower income children.

    The State may vary premiums, deductibles, coinsurance, copayments or 
any other cost sharing based on family income only in a manner that does 
not favor children from families with higher income over children from 
families with lower income.



Sec. 457.535  Cost-sharing protection to ensure enrollment of American Indians and Alaska Natives.

    States may not impose premiums, deductibles, coinsurance, copayments 
or any other cost-sharing charges on children who are American Indians 
or Alaska Natives, as defined in Sec. 457.10.



Sec. 457.540  Cost-sharing charges for children in families with incomes at or below 150 percent of the FPL.

    The State may impose premiums, enrollment fees, deductibles, 
copayments, coinsurance, cost sharing and other similar charges for 
children whose family income is at or below 150 percent of the FPL as 
long as--
    (a) Aggregate monthly enrollment fees, premiums, or similar charges 
imposed on a family are less than or equal to the maximum amounts 
permitted under Sec. 447.52 of this chapter for a Medicaid eligible 
family of the same size and income;
    (b) Any copayments, coinsurance, deductibles or similar charges for 
children whose family income is at or below 100 percent of the FPL are 
equal to or less than the amounts permitted under Sec. 447.54 of this 
chapter;

[[Page 384]]

    (c) For children whose family income is from 101 percent to 150 
percent of the FPL, any copayments, coinsurance, deductibles or similar 
charges are equal to or less than the maximum amounts permitted under 
Sec. 457.555;
    (d) The State does not impose more than one type of cost-sharing 
charge (deductible, copayment, or coinsurance) on a service;
    (e) The State only imposes one copayment based on the total cost of 
services furnished during one office visit; and
    (f) Aggregate annual cost sharing of all types, with respect to all 
targeted low-income children in a family, does not exceed the maximum 
permitted under Sec. 457.560(a).

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.555  Maximum allowable cost-sharing charges on targeted low-income children in families with income from 101 to 150 percent of the FPL.

    (a) Non-institutional services. For targeted low-income children 
whose family income is from 101 to 150 percent of the FPL, the State 
plan must provide that for non-institutional services, including 
emergency services--
    (1) Any copayment or similar charge the State imposes under a fee-
for-service delivery system does not exceed the following amounts:

------------------------------------------------------------------------
                                                               Maximum
                                                                amount
       Total cost of services provided during a visit         chargeable
                                                             to enrollee
------------------------------------------------------------------------
$15.00 or less.............................................        $1.00
$15.01 to $40..............................................         2.00
$40.01 to $80..............................................         3.00
$80.01 or more.............................................         5.00
------------------------------------------------------------------------

    (2) Any copayment that the State imposes for services provided by a 
managed care organization may not exceed $5.00 per visit;
    (3) Any coinsurance rate the State imposes may not exceed 5 percent 
of the payment the State directly or through contract makes for the 
service; and
    (4) Any deductible the State imposes may not exceed $3.00 per month, 
per family for each period of eligibility.
    (b) Institutional services. For targeted low-income children whose 
family income is from 101 to 150 percent of the FPL, the maximum 
deductible, coinsurance or copayment charge for each institutional 
admission may not exceed 50 percent of the payment the State would make 
under the Medicaid fee-for-service system for the first day of care in 
the institution.
    (c) Institutional emergency services. Any copayment that the State 
imposes on emergency services provided by an institution may not exceed 
$5.00.
    (d) Nonemergency use of the emergency room. For targeted low-income 
children whose family income is from 101 to 150 percent of the FPL, the 
State may charge up to twice the charge for non-institutional services, 
up to a maximum amount of $10.00, for services furnished in a hospital 
emergency room if those services are not emergency services as defined 
in Sec. 457.10.
    (e) Standard copayment amount. For targeted low-income children 
whose family income is from 101 to 150 percent of the FPL, a standard 
copayment amount for any service may be determined by applying the 
maximum copayment amounts specified in paragraphs (a), (b), and (c) of 
this section to the State's average or typical payment for that service.



Sec. 457.560  Cumulative cost-sharing maximum.

    (a) A State may not impose premiums, enrollment fees, copayments, 
coinsurance, deductibles, or similar cost-sharing charges that, in the 
aggregate, exceed 5 percent of a family's total income for the length of 
a child's eligibility period in the State.
    (b) The State must inform the enrollee's family in writing and 
orally if appropriate of their individual cumulative cost-sharing 
maximum amount at the time of enrollment and reenrollment.

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.570  Disenrollment protections.

    (a) The State must give enrollees reasonable notice of and an 
opportunity to pay past due premiums, copayments, coinsurance, 
deductibles or similar fees prior to disenrollment.
    (b) The disenrollment process must afford the enrollee an 
opportunity to

[[Page 385]]

show that the enrollee's family income has declined prior to 
disenrollment for non payment of cost-sharing charges, and in the event 
that such a showing indicates that the enrollee may have become eligible 
for Medicaid or for a lower level of cost sharing, the State must 
facilitate enrolling the child in Medicaid or adjust the child's cost-
sharing category as appropriate.
    (c) The State must provide the enrollee with an opportunity for an 
impartial review to address disenrollment from the program in accordance 
with Sec. 457.1130(a)(3).



                      Subpart F--Payments to States



Sec. 457.600  Purpose and basis of this subpart.

    This subpart interprets and implements--
    (a) Section 2104 of the Act which specifies the total allotment 
amount available for allotment to each State for child health assistance 
for fiscal years 1998 through 2007, the formula for determining each 
State allotment for a fiscal year, including the Commonwealth and 
Territories, and the amounts of payments for expenditures that are 
applied to reduce the State allotments.
    (b) Section 2105 of the Act which specifies the provisions for 
making payment to States, the limitations and conditions on such 
payments, and the calculation of the enhanced Federal medical assistance 
percentage.



Sec. 457.602  Applicability.

    The provisions of this subpart apply to the 50 States and the 
District of Columbia, and the Commonwealths and Territories.



Sec. 457.606  Conditions for State allotments and Federal payments for a fiscal year.

    (a) Basic conditions. In order to receive a State allotment for a 
fiscal year, a State must have a State child health plan submitted in 
accordance with section 2106 of the Act, and
    (1) For fiscal years 1998 and 1999, the State child health plan must 
be approved before October 1, 1999;
    (2) For fiscal years after 1999, the State child health plan must be 
approved by the end of the fiscal year;
    (3) An allotment for a fiscal year is not available to a State prior 
to the beginning of the fiscal year; and
    (4) Federal payments out of an allotment are based on State 
expenditures which are allowable under the approved State child health 
plan.
    (b) Federal payments for States' Children's Health Insurance Program 
(SCHIP) expenditures under an approved State child health plan are --
    (1) Limited to the amount of available funds remaining in State 
allotments calculated in accordance with the allotment process and 
formula specified in Secs. 457.608 and 457.610, and payment process in 
Secs. 457.614 and 457.616.
    (2) Available based on a percentage of State SCHIP expenditures, at 
a rate equal to the enhanced Federal medical assistance percentage 
(FMAP) for each fiscal year, calculated in accordance with Sec. 457.622.
    (3) Available through the grants process specified in Sec. 457.630.



Sec. 457.608  Process and calculation of State allotments for a fiscal year.

    (a) General--(1) State allotments for a fiscal year are determined 
by CMS for each State and the District of Columbia with an approved 
State child health plan, as described in paragraph (e) of this section, 
and for each Commonwealth and Territory, as described in paragraph (f) 
of this section.
    (2) In order to determine each State allotment, CMS determines the 
national total allotment amount for each fiscal year available to the 50 
States and the District of Columbia, as described in paragraph (c) of 
this section, and the total allotment amount available for each fiscal 
year for allotment to the Commonwealths and Territories, as described in 
paragraph (d) of this section.
    (3) The amount of allotments redistributed under section 2104(f) of 
the Act will not be applied or taken into account in determining the 
amounts of a fiscal year allotment for a State and the District of 
Columbia under this section.

[[Page 386]]

    (b) Definition of Proportion. As used in this section, proportion 
means the amount of the allotment for a State or the District of 
Columbia for a fiscal year, divided by the national total allotment 
amount available for allotment to all States and the District of 
Columbia, as specified in paragraph (c) of this section, for that fiscal 
year.
    (c) National total allotment amount for the 50 States and the 
District of Columbia. (1) The national total allotment amount available 
for allotment to the 50 States and the District of Columbia is 
determined by subtracting the following amounts in the following order 
from the total appropriation specified in section 2104(a) of the Act for 
the fiscal year --
    (i) The total allotment amount available for allotment for each 
fiscal year to the Commonwealths and Territories, as determined in 
paragraph (d)(1) of this section;
    (ii) The total amount of the grant for the fiscal year for children 
with Type I Diabetes under Section 4921 of Public Law 105-33. This is 
$30,000,000 for each of the fiscal years 1998 through 2002; and
    (iii) The total amount of the grant for the fiscal year for diabetes 
programs for Indians under Section 4922 of Public Law 105-33. This is 
$30,000,000 for each of the fiscal years 1998 through 2002.
    (2) The following formula illustrates the calculation of the 
national total allotment amount available for allotment to the 50 States 
and the District of Columbia for a fiscal year:

ATA = S2104(a)-T2104(c)-
D4921-D4922

ATA = National total allotment amount available for allotment 
to the 50 States and the District of Columbia for the fiscal year.
S2104(a) = Total appropriation for the fiscal year indicated 
in Section 2104(a) of the Act.
T2104(c) = Total allotment amount for a fiscal year available 
for allotment to the Commonwealths and Territories; as determined under 
paragraph (d)(1) of this section.
D4921 = Amount of total grant for children with Type I 
Diabetes under Section 4921 of Public Law 105-33. This is $30,000,000 
for each of the fiscal years 1998 through 2002.

    (d) Total allotment amount available to the Commonwealths and 
Territories. (1) General. The total allotment amount available to all 
the Commonwealths and Territories for a fiscal year is equal to .25 
percent of the total appropriation for the fiscal year indicated in 
section 2104(a) of the Act, plus the additional amount for the fiscal 
year specified in paragraph (d)(2) of this section.
    (2) Additional amounts for allotment to the Commonwealths and 
Territories. The following amounts are available for allotment to the 
Commonwealths and Territories for the indicated fiscal years in addition 
to the amount specified in paragraph (d)(1) of this section: For FY 
1999, $32 million; for each of FY 2000 and FY 2001, $34.2 million; for 
each fiscal year FY 2002 through 2004, $25.2 million; for each fiscal 
year FY 2005 and FY 2006, $32.4 million; and for FY 2007, $40 million. 
The additional amount for allotment for FY 1999 for the Commonwealths 
and Territories was provided under Public Law 105-277. The additional 
amounts for allotment for FY 2000 through FY 2007 were provided for the 
Commonwealths and Territories under section 702 of Public Law 106-113.
    (e) Determination of State allotments for a fiscal year. (1) 
General. The allotment for a State and the District of Columbia for a 
fiscal year is the product of:
    (i) The proportion for the State or the District of Columbia for the 
fiscal year, as defined in paragraph (b) of this section, and determined 
after application of the provisions of paragraphs (e)(2) and (3), 
related to the preadjusted proportion, and the floors, ceilings, and 
reconciliation process, respectively; and
    (ii)(A) The national total allotment amount available for allotment 
for the fiscal year, as specified in paragraph (c) of this section. The 
State and the District of Columbia's allotment for a fiscal year is 
determined in accordance with the following general formula:

SAi = Pi x ATA

SAi = Allotment for a State or District of Columbia for a 
fiscal year.
Pi = Proportion for a State or District of Columbia for a 
fiscal year.

[[Page 387]]

ATA = Total amount available for allotment to the 50 States 
and the District of Columbia for the fiscal year.

    (B) There are two steps for determining the proportion for a State 
and the District of Columbia. The first step determines the preadjusted 
proportions, and is described under paragraph (e)(2) of this section. 
The first step applies in determining the proportion for all fiscal 
years. The second step applies floors and ceilings and, if necessary, 
applies a reconciliation to the preadjusted proportion. The second step 
is described in paragraph (e)(3) of this section. The second step 
applies in determining the proportion only for FY 2000 and subsequent 
fiscal years. For FY 1998 and FY 1999, the preadjusted proportion is the 
State or District of Columbia's proportion for the fiscal year.
    (2) Determination of the Preadjusted Proportions for a Fiscal Year. 
(i)The methodology for determining the State preadjusted proportion, 
referring to the determination of the proportion before the application 
of floors and ceilings and reconciliation for a fiscal year is in 
accordance with the following formula:

PPi = (Ci x SCFi)/ 
[Sigma](Ci xx SCFi)

PPi = Preadjusted proportion for a State or District of 
Columbia for a fiscal year.
Ci = Number of children in a State (section 2104(b)(1)(A)(I) 
of the Act) for a fiscal year. This number is based on the number of 
low-income children for a State for a fiscal year and the number of low-
income children for a State for a fiscal year with no health insurance 
coverage for the fiscal year determined on the basis of the arithmetic 
average of the number of such children as reported and defined in the 3 
most recent March supplements to the Current Population Survey (CPS) of 
the Bureau of the Census, and for FY 2000 and subsequent fiscal years, 
officially available before the beginning of the calendar year in which 
the fiscal year begins. For FY 1998 and FY 1999, the availability of the 
CPS data obtained from the Bureau of the Census is as specified in 
paragraphs (e)(4) and (5) of this section, respectively. (section 
2104(b)(2)(B) of the Act).

    (ii) For each of the fiscal years 1998 and 1999, the number of 
children is equal to the number of low-income children in the State for 
the fiscal year with no health insurance coverage. For fiscal year 2000, 
the number of children is equal to the sum of 75 percent of the number 
of low-income children in the State for the fiscal year with no health 
insurance coverage and 25 percent of the number of low-income children 
in the State for the fiscal year. For fiscal years 2001 and thereafter, 
the number of children is equal to the sum of 50 percent of the number 
of low-income children in the State for the fiscal year with no health 
insurance coverage and 50 percent of the number of low-income children 
in the State for the fiscal year. (section 2104(b)(2)(A) of the Act).

    SCFi = State cost factor for a State (section 
2104(b)(1)(A)(ii) of the Act). For a fiscal year, this is equal to: .15 
+ .85 x (Wi/WN) (section 2104(b)(3)(A) of the 
Act).
Wi = The annual average wages per employee for a State for 
such year (section 2104(b)(3)(A)(ii)(I) of the Act).
WN = The annual average wages per employee for the 50 States 
and the District of Columbia (section 2104(b)(3)(A)(ii)(II) of the Act). 
The annual average wages per employee for a State or for all States and 
the District of Columbia for a fiscal year is equal to the average of 
such wages for employees in the health services industry (SIC 80), as 
reported by the Bureau of Labor Statistics of the Department of Labor 
for each of the most recent 3 years, and for FY 2000 and subsequent 
fiscal years, finally available before the beginning of the calendar 
year in which the fiscal year begins. For FY 1998 and FY 1999, the 
availability of the wage data obtained from the Bureau of Labor 
Statistics is as specified in paragraphs (e)(4) and (5), respectively. 
(section 2104(b)(3)(B) of the Act).
[Sigma](Ci x SCFi) = The sum of the products of 
(Ci x SCFi) for each State (section 2104(b)(1)(B) 
of the Act).

[[Page 388]]

ATA = Total amount available for allotment to the 50 States 
and the District of Columbia for the fiscal year as determined under 
paragraph (c) of this section.

    (3) Application of floors and ceilings and reconciliation in 
determining proportion. (i) Floors and ceilings in proportions. The 
preadjusted State proportions for a fiscal year are subject to the 
application of floors and ceilings in paragraphs (e)(3)(i)(A) and (B) of 
this section..
    (A) The proportion floors, or minimum proportions, that apply in 
determining a State's proportion for the fiscal year are:
    (1) $2,000,000 divided by the total of the amount available 
nationally;
    (2) 90 percent of the State's proportion for the previous fiscal 
year; and
    (3) 70 percent of the State's proportion for FY 1999.
    (B) The proportion ceiling, or maximum proportion, for a fiscal year 
that applies in determining the State's fiscal year proportion is 145 
percent of the State's proportion for FY 1999.
    (ii) Reconciliation of State proportions. If, after the application 
of the floors and ceilings in paragraph (e)(3)(i), the sum of the 
States' proportions is not equal to one, the Secretary will reconcile 
the States' proportions by applying either paragraph (e)(3)(i)(A) or (B) 
of this paragraph, as appropriate, such that the sum of the proportions 
after reconciliation equals one. If, after the application of the floors 
and ceilings in paragraph (e)(3)(i), the sum of the States' proportions 
is equal to one, no reconciliation is necessary, and the States' 
proportions will be the same as the preadjusted proportions determined 
under paragraph (e)(2) of this section.
    (A) If, after the application of the floors and ceilings under 
paragraphs (e)(3)(i)(A) and (B) of this section, the sum of the States' 
proportions is greater than one, the Secretary will establish a maximum 
percentage increase in States' proportions, such that when applied to 
the States' proportions, the sum of the proportions is exactly equal to 
one.
    (B) If, after the application of the floors and ceilings under 
paragraphs (e)(3)(i)(A) and (B), the sum of the proportions is less than 
one, the Secretary will increase States' proportions (as computed before 
the application of the floors under paragraph (e)(3)(i)(A)) in a pro 
rata manner (but not to exceed the 145 percent ceiling computed under 
paragraph (e)(3)(i)(B)), such that when applied to the States' 
proportions, the sum of the proportions is exactly equal to one.
    (4) Data used for calculating the FY 1998 SCHIP allotments. The FY 
1998 SCHIP allotments were calculated in accordance with the methodology 
described in paragraphs (e)(1) and (2) of this section, using the most 
recent official and final data that were available from the Bureau of 
the Census and the Bureau of Labor Statistics, respectively, prior to 
the September 1 before the beginning of FY 1998 (that is, through August 
31, 1997). In particular, through August 31, 1997, the only official 
data available on the numbers of children were data from the 3 March 
CPSs conducted in March 1994, 1995, and 1996 that reflected data for the 
3 calendar years 1993, 1994, and 1995.
    (5) Data used for calculating the FY 1999 SCHIP allotments. In 
accordance with section 101(f) of Public Law 105-277, the FY 1999 
allotments were calculated in accordance with the methodology described 
in paragraph (e)(2) of this section, using the same data as were used in 
calculating the FY 1998 SCHIP allotments.
    (f) Methodology for determining the Commonwealth and Territory 
allotments for a fiscal year. The total amount available for the 
Commonwealths and Territories for each fiscal year, as determined under 
paragraph (d) of this section, is allotted to each Territory and 
Commonwealth below which has an approved State child health plan. These 
allotments are in the proportion that the following percentages for each 
Commonwealth Territory bear to the sum of such percentages, as specified 
in section 2104(c)(2) of the Act:

Puerto Rico--91.6%
Guam--3.5%
Virgin Islands--2.6%
American Samoa--1.2%
Northern Mariana Islands--1.1%

    (g) Reserved State allotments for a fiscal year. (1) For FY 2000 and 
subsequent fiscal years, CMS determines and publishes the State reserved 
allotments for

[[Page 389]]

a fiscal year for each State, the District of Columbia, and 
Commonwealths and Territories in the Federal Register based on the most 
recent official and final data available before the beginning of the 
calendar year in which the fiscal year begins for the number of children 
and the State cost factor.
    (2) For FY 1998 and FY 1999, CMS determined and published the State 
reserved allotments using the available data described in paragraphs 
(e)(4) and (e)(5) of this section, respectively, on the basis of the 
statutory allotment formula as it existed prior to the enactment of 
Public Law 106-113.
    (3) If all States, the District of Columbia, and the Commonwealths 
and Territories have approved State child health plans in place prior to 
the beginning of the fiscal year, as appropriate, CMS may publish the 
allotments as final in the Federal Register, without the need for 
publication as reserved allotments.
    (h) Final allotments. (1) Final State allotments for FY 1998 and FY 
1999 for each State, the District of Columbia, and the Commonwealths and 
Territories are determined by CMS based only on those States, the 
District of Columbia, and the Commonwealths and Territories that have 
approved State child health plans by the end of fiscal year 1999, in 
accordance with the formula and methodology specified in paragraphs (a) 
through (g) of this section.
    (2) Final State allotments for a fiscal year after FY 1999 for each 
State, the District of Columbia, and the Commonwealths and Territories 
are determined by CMS based only on those States, the District of 
Columbia, and the Commonwealths and Territories that have approved State 
child health plans by the end of the fiscal year, in accordance with the 
formula and methodology specified in paragraphs (a) through (g) of this 
section.
    (3) CMS determines and publishes the States' final fiscal year 
allotments in the Federal Register based on the same data, with respect 
to the number of children and State cost factor, as were used in 
determining the reserved allotments for the fiscal year.



Sec. 457.610  Period of availability for State allotments for a fiscal year.

    The amount of a final allotment for a fiscal year, as determined 
under Sec. 457.608(h) and reduced to reflect certain Medicaid 
expenditures in accordance with Sec. 457.616, remains available until 
expended for Federal payments based on expenditures claimed during a 3-
year period of availability, beginning with the fiscal year of the final 
allotment and ending with the end of the second fiscal year following 
the fiscal year.



Sec. 457.614  General payment process.

    (a) A State may make claims for Federal payment based on 
expenditures incurred by the State prior to or during the period of 
availability related to that fiscal year.
    (b) In order to receive Federal financial participation (FFP) for a 
State's claims for payment for the State's expenditures, a State must --
    (1) Submit budget estimates of quarterly funding requirements for 
Medicaid and the State Children's Health Insurance Programs; and
    (2) Submit an expenditure report.
    (c) Based on the State's quarterly budget estimates, CMS --
    (1) Issues an advance grant to a State as described in Sec. 457.630;
    (2) Tracks and applies Federal payments claimed quarterly by each 
State, the District of Columbia, and each Commonwealth and Territory to 
ensure that payments do not exceed the applicable allotments for the 
fiscal year; and
    (3) Track and apply relevant State, District of Columbia, 
Commonwealth and Territory expenditures reported each quarter against 
the 10 percent limit on expenditures other than child health assistance 
for standard benefit package, on a fiscal year basis as specified in 
Sec. 457.618.



Sec. 457.616  Application and tracking of payments against the fiscal year allotments.

    (a) Categories of payments applied to reduce the State allotments. 
In accordance with the principles described in

[[Page 390]]

paragraph (c) of this section, the following categories of payments are 
applied to reduce the State allotments for a fiscal year:
    (1) Payments made to the State for expenditures claimed during the 
fiscal year under its title XIX Medicaid program, to the extent the 
payments were made on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act for expenditures attributable to 
children described in section 1905(u)(2) of the Act.
    (2) Payments made to the State for expenditures claimed during the 
fiscal year under its title XIX Medicaid program, to the extent the 
payments were made on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act for expenditures attributable to 
children described in section 1905(u)(3) of the Act.
    (3) Payments made to a State under section 1903(a) of the Act for 
expenditures claimed by the State during a fiscal year that are 
attributable to the provision of medical assistance to a child during a 
presumptive eligibility period under section 1920A of the Act.
    (4) Payments made to a State under its title XXI State Children's 
Health Insurance Program with respect to section 2105(a) of the Act for 
expenditures claimed by the State during a fiscal year.
    (b) Application of principles. CMS applies the principles in 
paragraph (c) of this section to --
    (1) Coordinate the application of the payments made to a State for 
the State's expenditures claimed under the Medicaid and State Children's 
Health Insurance programs against the State allotment for a fiscal year;
    (2) Determine the order of these payments in that application; and
    (3) Determine the application of payments against multiple State 
Child Health Insurance Program fiscal year allotments.
    (c) Principles for applying Federal payments against the allotment. 
CMS--
    (1) Applies the payments attributable to Medicaid expenditures 
specified in paragraphs (a)(1) through (a)(3) of this section, against 
the State child health plan allotment for a fiscal year before State 
child health plan expenditures specified in paragraph (a)(4) of this 
section are applied.
    (2) Applies the payments attributable to Medicaid and State child 
health plan expenditures specified in paragraph (a) of this section 
against the applicable allotments for a fiscal year based on the quarter 
in which the expenditures are claimed by the State.
    (3) Applies payments against the State allotments for a fiscal year 
in a manner that is consistent for all States.
    (4) Applies payments attributable to Medicaid expenditures specified 
in paragraphs (a)(1) through (a)(3) of this section, in an order that 
maximizes Federal reimbursement for States. Expenditures for which the 
enhanced FMAP is available are applied before expenditures for which the 
regular FMAP is available.
    (5) Applies payments for expenditures against State Child Health 
Insurance Program fiscal year allotments in the least administratively 
burdensome, and most effective and efficient manner; payments are 
applied on a quarterly basis as they are claimed by the State, and are 
applied to reduce the earliest fiscal year State allotments before the 
payments are applied to reduce later fiscal year allotments.
    (6) Subject to paragraphs (c)(6)(i) and (ii) of this section, 
applies payments for expenditures for a fiscal year's allotment against 
a subsequent fiscal year's allotment; however, the subsequent fiscal 
year's allotment must be available at the time of application. For 
example, if the allotment for fiscal year 1998 has been fully expended, 
payments for expenditures claimed in fiscal year 1998 are carried over 
for application against the fiscal year 1999 allotment when it becomes 
available.
    (i) In accordance with Sec. 457.618, the amount of non-primary 
expenditures that are within the 10 percent limit for the fiscal year 
for which they are claimed may be applied against a fiscal year 
allotment or allotments available in a subsequent fiscal year.
    (ii) In accordance with Sec. 457.618, the amounts of non-primary 
expenditures that exceed the 10 percent limit for the fiscal year for 
which they are claimed may not be applied against a fiscal

[[Page 391]]

year allotment or allotments available in a subsequent fiscal year.
    (7) Carries over unexpended amounts of a State's allotment for a 
fiscal year for use in subsequent fiscal years through the end of the 3-
year period of availability. For example, if the amounts of the fiscal 
year 1998 allotment are not fully expended by the end of fiscal year 
1998, these amounts are carried over to fiscal year 1999 and are 
available to provide FFP for expenditures claimed by the State for that 
fiscal year.
    (d) Amount of Federal payment for expenditures claimed. The amount 
of the Federal payment for expenditures claimed by a State, District of 
Columbia, or the Commonwealths and Territories is determined by the 
enhanced FMAP applicable to the fiscal year in which the State paid the 
expenditure. For example, Federal payment for an expenditure paid by a 
State in fiscal year 1998 that was carried over to fiscal year 1999 (in 
accordance with paragraph(c)(6) of this section), because the State 
exceeded its fiscal year 1998 allotment, is available at the fiscal year 
1998 enhanced FMAP rate.



Sec. 457.618  Ten percent limit on certain State Children's Health Insurance Program expenditures.

    (a) Expenditures. (1) Primary expenditures are expenditures under a 
State plan for child health assistance to targeted low-income children 
in the form of a standard benefit package, and Medicaid expenditures 
claimed during the fiscal year to the extent Federal payments made for 
these expenditures on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act that are used to calculate the 
10 percent limit.
    (2) Non-primary expenditures are other expenditures under a State 
plan. Subject to the 10 percent limit described in paragraph (c) of this 
section, a State may receive Federal funds at the enhanced FMAP for 4 
categories of non-primary expenditures:
    (i) Administrative expenditures;
    (ii) Outreach;
    (iii) Health initiatives; and
    (iv) Certain other child health assistance.
    (b) Federal payment. Federal payment will not be available based on 
a State's non-primary expenditures for a fiscal year which exceed the 10 
percent limit of the total of expenditures under the plan, as specified 
in paragraph (c) of this section.
    (c) 10 Percent Limit. The 10 percent limit is --
    (1) Applied on an annual fiscal year basis;
    (2) Calculated based on the total computable expenditures claimed by 
the State on quarterly expenditure reports submitted for a fiscal year. 
Expenditures claimed on a quarterly report for a different fiscal year 
may not be used in the calculation; and
    (3) Calculated using the following formula:

    L10% = (a1+ u2+ u3)/9;

L10% = 10 Percent Limit for a fiscal year
a1 = Total computable amount of expenditures for the fiscal year under 
    section 2105(a)(1) of the Act for which Federal payments are 
    available at the enhanced FMAP described in Section 2105(b) of the 
    Act;
u2 = Total computable expenditures for medical assistance for which 
    Federal payments are made during the fiscal year based on the 
    enhanced FMAP described in sections 1905(b) and 2105(b) of the Act 
    for individuals described in section 1905(u)(2) of the Act; and
u3 = Total computable expenditures for medical assistance for which 
    Federal payments are made during the fiscal year based on the 
    enhanced FMAP described in sections 1905(b) and 2105(b) of the Act 
    for individuals described in section 1905(u)(3) of the Act.

    (d) The expenditures under section 2105(a)(2) of the Act that are 
subject to the 10 percent limit are applied --
    (1) On an annual fiscal year basis; and
    (2) Against the 10 percent limit in the fiscal year for which the 
State submitted a quarterly expenditure report including the 
expenditures. Expenditures claimed on a quarterly report for one fiscal 
year may not be applied against the 10 percent limit for any other 
fiscal year.

[[Page 392]]

    (e)(1) The 10 percent limit for a fiscal year, as calculated under 
paragraph (c)(3) of this section, may be no greater than 10 percent of 
the total computable amount (determined under paragraph (e)(2) of this 
section) of the State allotment or allotments available in that fiscal 
year. Therefore, the 10 percent limit is the lower of the amount 
calculated under paragraph (c)(3) of this section, and 10 percent of the 
total computable amount of the State allotment available in that fiscal 
year.
    (2) As used in paragraph (e)(1) of this section, the total 
computable amount of a State's allotment for a fiscal year is determined 
by dividing the State's allotment for the fiscal year by the State's 
enhanced FMAP for the year. For example, if a State allotment for a 
fiscal year is $65 million and the enhanced FMAP rate for the fiscal 
year is 65 percent, the total computable amount of the allotment for the 
fiscal year is $100 million ($65 million/.65). In this example, the 10 
percent limit may be no greater than a total computable amount of $10 
million (10 percent of $100 million).



Sec. 457.622  Rate of FFP for State expenditures.

    (a) Basis. Sections 1905(b), 2105(a) and 2105(b) of the Act provides 
for payments to States from the States' allotments for a fiscal year, as 
determined under Sec. 457.608, for part of the cost of expenditures for 
services and administration made under an approved State child health 
assistance plan. The rate of payment is generally the enhanced Federal 
medical assistance percentage described below.
    (b) Enhanced Federal medical assistance percentage (Enhanced FMAP)-- 
Computations. The enhanced FMAP is the lower of the following:
    (1) 70 percent of the regular FMAP determined under section 1905(b) 
of the Act, plus 30 percentage points; or
    (2) 85 percent.
    (c) Conditions for availability of enhanced FMAP based on a State's 
expenditures--The enhanced FMAP is available for payments based on a 
State's expenditures claimed under the State's title XXI program from 
the State's fiscal year allotment only under the following conditions:
    (1) The State has an approved title XXI State child health plan;
    (2) The expenditures are allowable under the State's approved title 
XXI State child health plan;
    (3) State allotment amounts are available in the fiscal year, that 
is, the State's allotment or allotments (as reduced in accordance with 
Sec. 457.616) remain available for a fiscal year and have not been fully 
expended.
    (4) Expenditures claimed against the 10 percent limit are within the 
State's 10 percent limit for the fiscal year.
    (5) The State is in compliance with the maintenance of effort 
requirements of Section 2105(d)(1) of the Act.
    (d) Categories of expenditures for which enhanced FMAP are 
available. Except as otherwise provided below, the enhanced FMAP is 
available with respect to the following States' expenditures:
    (1) Child health assistance under the plan for targeted low-income 
children in the form of providing health benefits coverage that meets 
the requirements of section 2103 of the Act; and
    (2) Subject to the 10 percent limit provisions under 
Sec. 457.618(a)(2), the following expenditures:
    (i) Payment for other child health assistance for targeted low-
income children;
    (ii) Expenditures for health services initiatives under the State 
child health assistance plan for improving the health of children 
(including targeted low-income children);
    (iii) Expenditures for outreach activities; and
    (iv) Other reasonable costs incurred by the State to administer the 
State child health assistance plan.
    (e) SCHIP administrative expenditures and SCHIP related title XIX 
administrative expenditures. (1) General rule. Allowable title XXI 
administrative expenditures should support the operation of the State 
child health assistance plan. In general, FFP for administration under 
title XXI is not available for costs of activities related to the 
operation of other programs.
    (2) Exception. FFP is available under title XXI, at the enhanced FFP 
rate, for Medicaid administrative expenditures attributable to the 
provision of medical assistance to children described in sections 
1905(u)(2) and

[[Page 393]]

1905(u)(3), and during the presumptive eligibility period described in 
section 1920A of the Act, to the extent that the State does not claim 
those costs under the Medicaid program.
    (3) FFP is not available in expenditures for administrative 
activities for items or services included within the scope of another 
claimed expenditure.
    (4) FFP is available in expenditures for activities defined in 
sections 2102(c)(1) and 2105(a)(2)(C) of the Act as outreach to families 
of children likely to be eligible for child health assistance under the 
plan or under other public or private health coverage programs to inform 
these families of the availability of, and to assist them in enrolling 
their children in such a program.
    (5) FFP is available in administrative expenditures for activities 
specified in sections 2102(c)(2) of the Act as coordination of the 
administration of the State Children's Health Insurance Program with 
other public and private health insurance programs. FFP would not be 
available for the costs of administering the other public and private 
health insurance programs. Coordination activities must be distinguished 
from other administrative activities common among different programs.



Sec. 457.626  Prevention of duplicate payments.

    (a) General rule. No payment shall be made to a State for 
expenditures for child health assistance under its State child health 
plan to the extent that:
    (1) A non-governmental health insurer would have been obligated to 
pay for those services but for a provision of its insurance contract 
that has the effect of limiting or excluding those obligations based on 
the actual or potential eligibility of the individual for child health 
assistance under the State child health insurance plan.
    (2) Payment has been made or can reasonably be expected to be made 
promptly under any other Federally operated or financed health insurance 
or benefits program, other than a program operated or financed by the 
Indian Health Service.
    (b) Definitions. As used in paragraph (a) of this section --
    Non-governmental health insurer includes any health insurance 
issuer, group health plan, or health maintenance organization, as those 
terms are defined in 45 CFR 144.103, which is not part of, or wholly 
owned by, a governmental entity.
    Prompt payment can reasonably be expected when payment is required 
by applicable statute, or under an approved State plan.
    Programs operated or financed by the Indian Health Service means 
health programs operated by the Indian Health Service, or Indian tribe 
or tribal organization pursuant to a contract, grant, cooperative 
agreement or compact with the Indian Health Service under the authority 
of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450, et seq.), or by an urban Indian organization in accordance with a 
grant or contract with the Indian Health Service under the authority of 
title V of the Indian Health Care Improvement Act (25 U.S.C. 1601, et 
seq.).



Sec. 457.628  Other applicable Federal regulations.

    Other regulations applicable to SCHIP programs include the 
following:
    (a) HHS regulations in 42 CFR Subpart B--433.51-433.74 sources of 
non-Federal share and Health Care-Related Taxes and Provider-Related 
Donations; these regulations apply to States' SCHIPs in the same manner 
as they apply to States' Medicaid programs.
    (b) HHS Regulations in 45 CFR subtitle A:

Part 16--Procedures of the Departmental Appeals Board.
Part 74--Administration of Grants (except as specifically excepted).
Part 80--Nondiscrimination Under Programs Receiving Federal Assistance 
    Through the Department of Health and Human Services: Effectuation of 
    title VI of the Civil Rights Act of 1964.
Part 81--Practice and Procedure for Hearings Under 45 CFR part 80.
Part 84--Nondiscrimination on the Basis of Handicap in Programs and 
    activities Receiving or Benefiting From Federal Financial 
    Assistance.

[[Page 394]]

Part 95--General Administration--grant programs (public assistance and 
    medical assistance).



Sec. 457.630  Grants procedures.

    (a) General provisions. Once CMS has approved a State child health 
plan, CMS makes quarterly grant awards to the State to cover the Federal 
share of expenditures for child health assistance, other child health 
assistance, special health initiatives, outreach and administration.
    (1) For fiscal year 1998, a State must submit a budget request in an 
appropriate format for the 4 quarters of the fiscal year. CMS bases the 
grant awards for the 4 quarters of fiscal year 1998 based on the State's 
budget requests for those quarters.
    (2) For fiscal years after 1998, a State must submit a budget 
request in an appropriate format for the first 3 quarters of the fiscal 
year. CMS bases the grant awards for the first 3 quarters of the fiscal 
year on the State's budget requests for those quarters.
    (3) For fiscal years after 1998, a State must also submit a budget 
request for the fourth quarter of the fiscal year. The amount of this 
quarter's grant award is based on the difference between a State's final 
allotment for the fiscal year, and the total of the grants for the first 
3 quarters that were already issued in order to ensure that the total of 
all grant awards for the fiscal year are equal to the State's final 
allotment for that fiscal year.
    (4) The amount of the quarterly grant is determined on the basis of 
information submitted by the State (in quarterly estimate and quarterly 
expenditure reports) and other pertinent information. This information 
must be submitted by the State through the Medicaid Budget and 
Expenditure System (MBES) for the Medicaid program, and through the 
Child Health Budget and Expenditure System (CBES) for the title XXI 
program.
    (b) Quarterly estimates. The State Children's Health Insurance 
Program agency must submit Form CMS-21B (State Children's Health 
Insurance Program Budget Report for State Children's Health Insurance 
Program State expenditures) to the CMS central office (with a copy to 
the CMS regional office) 45 days before the beginning of each quarter.
    (c) Expenditure reports. (1) The State must submit Form CMS-64 
(Quarterly Medicaid Statement of Expenditures for the Medical Assistance 
Program) and Form CMS-21 (Quarterly State Children's Health Insurance 
Program Statement of Expenditures for title XXI), to central office 
(with a copy to the regional office) not later than 30 days after the 
end of the quarter.
    (2) This report is the State's accounting of actual recorded 
expenditures. This disposition of Federal funds may not be reported on 
the basis of estimates.
    (d) Additional required information. A State must provide CMS with 
the following information regarding the administration of the title XXI 
program:
    (1) Name and address of the State Agency/organization administering 
the program;
    (2) The employer identification number (EIN); and
    (3) A State official contact name and telephone number.
    (e) Grant award. (1) Computation by CMS. Regional office staff 
analyzes the State's estimates and sends a recommendation to the central 
office. Central office staff considers the State's estimates, the 
regional office recommendations and any other relevant information, 
including any adjustments to be made under paragraph (e)(2) of this 
section, and computes the grant.
    (2) Content of award. The grant award computation form shows the 
estimate of expenditures for the ensuing quarter, and the amounts by 
which that estimate is increased or decreased because of an increase or 
overestimate for prior quarters, or for any of the following reasons:
    (i) Penalty reductions imposed by law.
    (ii) Deferrals or disallowances.
    (iii) Interest assessments.
    (iv) Mandated adjustments such as those required by Section 1914 of 
the Act.
    (3) Effect of award. The grant award authorizes the State to draw 
Federal funds as needed to pay the Federal share of disbursements.

[[Page 395]]

    (4) Draw procedure. The draw is through a commercial bank and the 
Federal Reserve system against a continuing letter of credit certified 
to the Secretary of the Treasury in favor of the State payee. (The 
letter of credit payment system was established in accordance with 
Treasury Department regulations--Circular No.1075.)
    (f) General administrative requirements. With the following 
exceptions, the provisions of 45 CFR part 74, that establish uniform 
administrative requirements and cost principles, apply to all grants 
made to States under this subpart:
    (1) Subpart G--Matching and Cost Sharing; and
    (2) Subpart I--Financial Report Requirement.



        Subpart G--Strategic Planning, Reporting, and Evaluation

    Source: 66 FR 2683, Jan. 11, 2001, unless otherwise noted.



Sec. 457.700  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements--
    (1) Sections 2107(a), (b) and (d) of the Act, which set forth 
requirements for strategic planning, reports, and program budgets; and
    (2) Section 2108 of the Act, which sets forth provisions regarding 
annual reports and evaluation.
    (b) Scope. This subpart sets forth requirements for strategic 
planning, monitoring, reporting and evaluation under title XXI.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs and Medicaid expansion programs.



Sec. 457.710  State plan requirements: Strategic objectives and performance goals.

    (a) Plan description. A State plan must include a description of--
    (1) The strategic objectives as described in paragraph (b) of this 
section;
    (2) The performance goals as described in paragraph (c) of this 
section; and
    (3) The performance measurements, as described in paragraph (d) of 
this section, that the State has established for providing child health 
assistance to targeted low-income children under the plan and otherwise 
for maximizing health benefits coverage for other low-income children 
and children generally in the State.
    (b) Strategic objectives. The State plan must identify specific 
strategic objectives relating to increasing the extent of creditable 
health coverage among targeted low-income children and other low-income 
children.
    (c) Performance goals. The State plan must specify one or more 
performance goals for each strategic objective identified.
    (d) Performance measurements. The State plan must describe how 
performance under the plan is--
    (1) Measured through objective, independently verifiable means; and
    (2) Compared against performance goals.
    (e) Core elements. The State's strategic objectives, performance 
goals and performance measures must include a common core of national 
performance goals and measures consistent with the data collection, 
standard methodology, and verification requirements, as developed by the 
Secretary.



Sec. 457.720  State plan requirement: State assurance regarding data collection, records, and reports.

    A State plan must include an assurance that the State collects data, 
maintains records, and furnishes reports to the Secretary, at the times 
and in the standardized format the Secretary may require to enable the 
Secretary to monitor State program administration and compliance and to 
evaluate and compare the effectiveness of State plans under title XXI.



Sec. 457.740  State expenditures and statistical reports.

    (a) Required quarterly reports. A State must submit reports to CMS 
that contain quarterly program expenditures and statistical data no 
later than 30 days after the end of each quarter of the Federal fiscal 
year. A State must collect required data beginning on the date of 
implementation of the approved State plan. Territories are exempt

[[Page 396]]

from the definition of ``State'' for purposes of the required quarterly 
reporting under this section. The quarterly reports must include data 
on--
    (1) Program expenditures;
    (2) The number of children enrolled in the title XIX Medicaid 
program, the separate child health program, and the Medicaid expansion 
program, as applicable, as of the last day of each quarter of the 
Federal fiscal year; and
    (3) The number of children under 19 years of age who are enrolled in 
the title XIX Medicaid program, the separate child health program, and 
in the Medicaid expansion program, as appropriate, by the following 
categories:
    (i) Age (under 1 year of age, 1 through 5 years of age, 6 through 12 
years of age, and 13 through 18 years of age).
    (ii) Gender, race, and ethnicity.
    (iii) Service delivery system (managed care, fee-for-service, and 
primary care case management).
    (iv) Family income as a percentage of the Federal poverty level as 
described in paragraph (b) of this section.
    (b) Reportable family income categories. (1) A State that does not 
impose cost sharing or a State that imposes cost sharing based on a 
fixed percentage of income must report by two family income categories:
    (i) At or below 150 percent of FPL.
    (ii) Over 150 percent of FPL.
    (2) A State that imposes a different level or percentage of cost 
sharing at different poverty levels must report by poverty level 
categories that match the poverty level categories used for purposes of 
cost sharing.
    (c) Required unduplicated counts. Thirty days after the end of the 
Federal fiscal year, the State must submit an unduplicated count for the 
Federal fiscal year of children who were enrolled in the Medicaid 
program, the separate child health program, and the Medicaid expansion 
program, as appropriate, by age, gender, race, ethnicity, service 
delivery system, and poverty level categories described in paragraphs 
(a) and (b) of this section.



Sec. 457.750  Annual report.

    (a) Report required for each Federal fiscal year. A State must 
report to CMS by January 1 following the end of each Federal fiscal 
year, on the results of the State's assessment of the operation of the 
State plan.
    (b) Contents of annual report. In the annual report required under 
paragraph (a) of this section, a State must--
    (1) Describe the State's progress in reducing the number of 
uncovered, low-income children and; in meeting other strategic 
objectives and performance goals identified in the State plan; and 
provide information related to a core set of national performance goals 
and measures as developed by the Secretary;
    (2) Report on the effectiveness of the State's policies for 
discouraging the substitution of public coverage for private coverage;
    (3) Identify successes and barriers in State plan design and 
implementation, and the approaches the State is considering to overcome 
these barriers;
    (4) Describe the State's progress in addressing any specific issues 
(such as outreach) that the State plan proposed to periodically monitor 
and assess;
    (5) Provide an updated budget for a 3-year period that describes 
those elements required in Sec. 457.140, including any changes in the 
sources of the non-Federal share of State plan expenditures;
    (6) Identify the total State expenditures for family coverage and 
total number of children and adults, respectively, covered by family 
coverage during the preceding Federal fiscal year;
    (7) Describe the State's current income standards and methodologies 
for its Medicaid expansion program, separate child health program, and 
title XIX Medicaid program, as appropriate.
    (c) Methodology for estimate of number of uninsured, low-income 
children. (1) To report on the progress made in reducing the number of 
uninsured, low-income children as required in paragraph (b) of this 
section, a State must choose a methodology to establish an initial 
baseline estimate of the number of low-income children who are uninsured 
in the State.
    (i) A State may base the estimate on data from--
    (A) The March supplement to the Current Population Survey (CPS);
    (B) A State-specific survey;
    (C) A statistically adjusted CPS; or

[[Page 397]]

    (D) Another appropriate source.
    (ii) If the State does not base the estimate on data from the March 
supplement to the CPS, the State must submit a description of the 
methodology used to develop the initial baseline estimate and the 
rationale for its use.
    (2) The State must provide an annual estimate of changes in the 
number of uninsured in the State using--
    (i) The same methodology used in establishing the initial baseline; 
or
    (ii) Another methodology based on new information that enables the 
State to establish a new baseline.
    (3) If a new methodology is used, the State must also provide annual 
estimates based on either the March supplement to the CPS or the 
methodology used to develop the initial baseline.

[66 FR 2683, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



                   Subpart H--Substitution of Coverage

    Source: 66 FR 2684, Jan. 11, 2001, unless otherwise noted.



Sec. 457.800  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements section 
2102(b)(3)(C) of the Act, which provides that the State plan must 
include a description of procedures the State uses to ensure that health 
benefits coverage provided under the State plan does not substitute for 
coverage under group health plans.
    (b) Scope. This subpart sets forth State plan requirements relating 
to substitution of coverage in general and specific requirements 
relating to substitution of coverage under premium assistance programs.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs.



Sec. 457.805  State plan requirement: Procedures to address substitution under group health plans.

    The State plan must include a description of reasonable procedures 
to ensure that health benefits coverage provided under the State plan 
does not substitute for coverage provided under group health plans as 
defined at Sec. 457.10.



Sec. 457.810  Premium assistance programs: Required protections against substitution.

    A State that operates a premium assistance program, as defined at 
Sec. 457.10, must provide the protections against substitution of SCHIP 
coverage for coverage under group health plans specified in this 
section. The State must describe these protections in the State plan; 
and report on results of monitoring of substitution in its annual 
reports.
    (a) Minimum period without coverage under a group health plan. For 
health benefits coverage provided through premium assistance for group 
health plans, the following rules apply:
    (1) An enrollee must not have had coverage under a group health plan 
for a period of at least 6 months prior to enrollment in a premium 
assistance program. A State may not require a minimum period without 
coverage under a group health plan that exceeds 12 months.
    (2) States may permit reasonable exceptions to the requirement for a 
minimum period without coverage under a group health plan for--
    (i) Involuntary loss of coverage under a group health plan, due to 
employer termination of coverage for all employees and dependents;
    (ii) Economic hardship;
    (iii) Change to employment that does not offer dependent coverage; 
or
    (iv) Other reasons proposed by the State and approved as part of the 
State plan.
    (3) The requirement for a minimum period without coverage under a 
group health plan does not apply to a child who, within the previous 6 
months, has received coverage under a group health plan through Medicaid 
under section 1906 of the Act.
    (4) The Secretary may waive the 6-month waiting period requirement 
described in this section at her discretion.
    (b) Employer contribution. For health benefits coverage obtained 
through premium assistance for group health plans, the employee who is 
eligible for the coverage must apply for the full

[[Page 398]]

premium contribution available from the employer.
    (c) Cost effectiveness. In establishing cost effectiveness--
    (1) The State's cost for coverage for children under premium 
assistance programs must not be greater than the cost of other SCHIP 
coverage for these children; and
    (2) The State may base its demonstration of cost effectiveness on an 
assessment of the cost of coverage for children under premium assistance 
programs to the cost of other SCHIP coverage for these children, done on 
a case-by-case basis, or on the cost of premium assisted coverage in the 
aggregate.
    (d) State evaluation. The State must evaluate and report in the 
annual report (in accordance with Sec. 457.750(b)(2)) the amount of 
substitution that occurs as a result of premium assistance programs and 
the effect of those programs on access to coverage.



                      Subpart I--Program Integrity

    Source: 66 FR 2685, Jan. 11, 2001, unless otherwise noted.



Sec. 457.900  Basis, scope and applicability.

    (a) Statutory basis. This subpart implements--
    (1) Section 2101(a) of the Act, which provides that the purpose of 
title XXI is to provide funds to States to enable them to initiate and 
expand the provision of child health assistance to uninsured, low-income 
children in an effective and efficient manner; and
    (2) Section 2107(e) of the Act, which provides that certain title 
XIX and title XI provisions, including the following, apply to States 
under title XXI in the same manner as they apply to a State under title 
XIX:
    (i) Section 1902(a)(4)(C) of the Act, relating to conflict of 
interest standards.
    (ii) Paragraphs (2), (16), and (17), of section 1903(i) of the Act, 
relating to limitations on payment.
    (iii) Section 1903(w) of the Act, relating to limitations on 
provider taxes and donations.
    (iv) Section 1124 of the Act, relating to disclosure of ownership 
and related information.
    (v) Section 1126 of the Act, relating to disclosure of information 
about certain convicted individuals.
    (vi) Section 1128 of the Act, relating to exclusions.
    (vii) Section 1128A of the Act, relating to civil monetary 
penalties.
    (viii) Section 1128B(d) of the Act, relating to criminal penalties 
for certain additional charges.
    (ix) Section 1132 of the Act, relating to periods within which 
claims must be filed.
    (b) Scope. This subpart sets forth requirements, options, and 
standards for program integrity assurances that must be included in the 
approved State plan.
    (c) Applicability. This subpart applies to separate child health 
programs. Medicaid expansion programs are subject to the program 
integrity rules and requirements specified under title XIX.



Sec. 457.902  Definitions

    As used in this subpart--
    Actuarially sound principles means generally accepted actuarial 
principles and practices that are applied to determine aggregate 
utilization patterns, are appropriate for the population and services to 
be covered, and have been certified by actuaries who meet the 
qualification standards established by the Actuarial Standards Board.
    Fee-for-service entity means any individual or entity that furnishes 
services under the program on a fee-for-service basis, including health 
insurance services.



Sec. 457.910  State program administration.

    The State's child health program must include--
    (a) Methods of administration that the Secretary finds necessary for 
the proper and efficient operation of the separate child health program; 
and
    (b) Safeguards necessary to ensure that--
    (1) Eligibility will be determined appropriately in accordance with 
subpart C of this part; and
    (2) Services will be provided in a manner consistent with 
administrative simplification and with the provisions of subpart D of 
this part.

[[Page 399]]



Sec. 457.915  Fraud detection and investigation.

    (a) State program requirements. The State must establish procedures 
for ensuring program integrity and detecting fraudulent or abusive 
activity. These procedures must include the following:
    (1) Methods and criteria for identifying suspected fraud and abuse 
cases.
    (2) Methods for investigating fraud and abuse cases that--
    (i) Do not infringe on legal rights of persons involved; and
    (ii) Afford due process of law.
    (b) State program integrity unit. The State may establish an 
administrative agency responsible for monitoring and maintaining the 
integrity of the separate child health program.
    (c) Program coordination. The State must develop and implement 
procedures for referring suspected fraud and abuse cases to the State 
program integrity unit (if such a unit is established) and to 
appropriate law enforcement officials. Law enforcement officials include 
the--
    (1) U.S. Department of Health and Human Services Office of Inspector 
General (OIG);
    (2) U.S. Attorney's Office, Department of Justice (DOJ);
    (3) Federal Bureau of Investigation (FBI); and
    (4) State Attorney General's office.



Sec. 457.925  Preliminary investigation.

    If the State agency receives a complaint of fraud or abuse from any 
source or identifies questionable practices, the State agency must 
conduct a preliminary investigation or take otherwise appropriate action 
within a reasonable period of time to determine whether there is 
sufficient basis to warrant a full investigation.



Sec. 457.930  Full investigation, resolution, and reporting requirements.

    The State must establish and implement effective procedures for 
investigating and resolving suspected and apparent instances of fraud 
and abuse. Once the State determines that a full investigation is 
warranted, the State must implement procedures including, but not 
limited to the following:
    (a) Cooperate with and refer potential fraud and abuse cases to the 
State program integrity unit, if such a unit exists.
    (b) Conduct a full investigation.
    (c) Refer the fraud and abuse case to appropriate law enforcement 
officials.



Sec. 457.935  Sanctions and related penalties.

    (a) A State may not make payments for any item or service furnished, 
ordered, or prescribed under a separate child health program to any 
provider who has been excluded from participating in the Medicare and 
Medicaid programs.
    (b) The following provisions and their corresponding regulations 
apply to a State under title XXI, in the same manner as these provisions 
and regulations apply to a State under title XIX:
    (1) Part 455, subpart B of this chapter.
    (2) Section 1124 of the Act pertaining to disclosure of ownership 
and related information.
    (3) Section 1126 of the Act pertaining to disclosure by 
institutions, organizations, and agencies of owners and certain other 
individuals who have been convicted of certain offenses.
    (4) Section 1128 of the Act pertaining to exclusions.
    (5) Section 1128A of the Act pertaining to civil monetary penalties.
    (6) Section 1128B of the Act pertaining to criminal penalties for 
acts involving Federal health care programs.
    (7) Section 1128E of the Act pertaining to the reporting of final 
adverse actions on liability findings made against health care 
providers, suppliers, and practitioners under the health care fraud and 
abuse data collection program.



Sec. 457.940  Procurement standards.

    (a) A State must submit to CMS a written assurance that title XXI 
services will be provided in an effective and efficient manner. The 
State must submit the assurance--
    (1) With the initial State plan; or
    (2) For States with approved plans, with the first request to amend 
the approved plan.
    (b) A State must--
    (1) Provide for free and open competition, to the maximum extent 
practical,

[[Page 400]]

in the bidding of all procurement contracts for coverage or other 
services in accordance with the procurement requirements of 45 CFR 74.43 
or 45 CFR 92.36, as applicable; or
    (2) Use payment rates based on public or private payment rates for 
comparable services for comparable populations, consistent with 
principles of actuarial soundness as defined at Sec. 457.902.
    (c) A State may establish higher rates than permitted under 
paragraph (b) of this section if such rates are necessary to ensure 
sufficient provider participation, provider access, or to enroll 
providers who demonstrate exceptional efficiency or quality in the 
provision of services.
    (d) All contracts under this part must include provisions that 
define a sound and complete procurement contract, as required by 45 CFR 
part 74 or 45 CFR part 92, as applicable.
    (e) The State must provide to CMS, if requested, a description of 
the manner in which rates were developed in accordance with the 
requirements of paragraphs (b) or (c) of this section.

[66 FR 2685, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.945  Certification for contracts and proposals.

    Entities that contract with the State under a separate child health 
program must certify the accuracy, completeness, and truthfulness of 
information in contracts and proposals, including information on 
subcontractors, and other related documents, as specified by the State.



Sec. 457.950  Contract and payment requirements including certification of payment-related information.

    (a) Managed care entity (MCE). A State that makes payments to an MCE 
under a separate child health program, based on data submitted by the 
MCE, must ensure that its contract requires the MCE to provide--
    (1) Enrollment information and other information required by the 
State;
    (2) An attestation to the accuracy, completeness, and truthfulness 
of claims and payment data, under penalty of perjury;
    (3) Access for the State, CMS, and the HHS Office of the Inspector 
General to enrollee health claims data and payment data, in conformance 
with the appropriate privacy protections in the State; and
    (4) A guarantee that the MCE will not avoid costs for services 
covered in its contract by referring enrollees to publicly supported 
health care resources.
    (b) Fee-for-service entities. A State that makes payments to fee-
for-service entities under a separate child health program must--
    (1) Establish procedures to ensure that the entity certifies and 
attests that information on claim forms is truthful, accurate, and 
complete;
    (2) Ensure that fee-for-service entities understand that payment and 
satisfaction of the claims will be from Federal and State funds, and 
that any false claims may be prosecuted under applicable Federal or 
State laws; and
    (3) Require, as a condition of participation, that fee-for-service 
entities provide the State, CMS and/or the HHS Office of the Inspector 
General with access to enrollee health claims data, claims payment data 
and related records.



Sec. 457.955  Conditions necessary to contract as a managed care entity (MCE).

    (a) The State must assure that any entity seeking to contract as an 
MCE under a separate child health program has administrative and 
management arrangements or procedures designed to safeguard against 
fraud and abuse.
    (b) The State must ensure that the arrangements or procedures 
required in paragraph (a) of this section--
    (1) Enforce MCE compliance with all applicable Federal and State 
standards;
    (2) Prohibit MCEs from conducting any unsolicited personal contact 
with a potential enrollee by an employee or agent of a managed care 
entity for the purpose of influencing the individual to enroll with the 
entity; and
    (3) Include a mechanism for the MCE to report to the State, to CMS, 
or to the Office of Inspector General (OIG) as appropriate, information 
on violations of law by subcontractors or enrollees of an MCE and other 
individuals.

[[Page 401]]

    (c) With respect to enrollees, the reporting requirement in 
paragraph (b)(3) of this section applies only to information on 
violations of law that pertain to enrollment in the plan, or the 
provision of, or payment for, health services.
    (d) The State may inspect, evaluate, and audit MCEs at any time, as 
necessary, in instances where the State determines that there is a 
reasonable possibility of fraudulent and abusive activity.



Sec. 457.960  Reporting changes in eligibility and redetermining eligibility.

    If the State requires reporting of changes in circumstances that may 
affect the enrollee's eligibility for child health assistance, the State 
must:
    (a) Establish procedures to ensure that enrollees make timely and 
accurate reports of any such change; and
    (b) Promptly redetermine eligibility when the State has information 
about these changes.



Sec. 457.965  Documentation.

    The State must include in each applicant's record facts to support 
the State's determination of the applicant's eligibility for SCHIP.



Sec. 457.980  Verification of enrollment and provider services received.

    The State must establish and maintain systems to identify, report, 
and verify the accuracy of claims for those enrolled children who meet 
requirements of section 2105(a) of the Act, where enhanced Federal 
medical assistance percentage computations apply.

[66 FR 2685, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.985  Integrity of professional advice to enrollees.

    The State must ensure through its contracts for coverage and 
services that its contractors comply with--
    (a) Section 422.206(a) of this chapter, which prohibits interference 
with health care professionals' advice to enrollees and requires that 
professionals provide information about treatment in an appropriate 
manner; and
    (b) Sections 422.208 and 422.210 of this chapter, which place 
limitations on physician incentive plans, and information disclosure 
requirements related to those physician incentive plans, respectively.



            Subpart J--Allowable Waivers: General Provisions

    Source: 66 FR 2686, Jan. 11, 2001, unless otherwise noted.



Sec. 457.1000  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2105(c)(2)(B) of the Act, which sets forth the 
requirements to permit a State to exceed the 10 percent cost limit on 
expenditures other than benefit expenditures; and
    (2) Section 2105(c)(3) of the Act, which permits the purchase of 
family coverage.
    (b) Scope. This subpart sets forth requirements for obtaining a 
waiver under title XXI.
    (c) Applicability. This subpart applies to separate child health 
programs; and applies to Medicaid expansion programs when the State 
claims administrative costs under title XXI and seeks a waiver of 
limitations on such claims for use of a community-based health delivery 
system. This subpart does not apply to demonstrations requested under 
section 1115 of the Act.

[66 FR 2686, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec. 457.1003  CMS review of waiver requests.

    CMS will review the waiver requests under this subpart using the 
same time frames used for State plan amendments, as specified in 
Sec. 457.160.



Sec. 457.1005  Cost-effective coverage through a community-based health delivery system.

    (a) Availability of waiver. The Secretary may waive the requirements 
of Sec. 457.618 (the 10 percent limit on expenditures not used for 
health benefits coverage for targeted low-income children, that meets 
the requirements of Sec. 457.410) in order to provide child health 
assistance to targeted low-income children under the State plan through 
a cost-effective, community-based health care delivery system, such

[[Page 402]]

as through contracts with health centers receiving funds under section 
330 of the Public Health Service Act or with hospitals such as those 
that receive disproportionate share payment adjustments under section 
1886(c)(5)(F) or section 1923 of the Act.
    (b) Requirements for obtaining a waiver. To obtain a waiver for 
cost-effective coverage through a community-based health delivery 
system, a State must demonstrate that--
    (1) The coverage meets all of the requirements of this part, 
including subpart D and subpart E.
    (2) The cost of such coverage, on an average per child basis, does 
not exceed the cost of coverage under the State plan.
    (c) Three-year approval period. An approved waiver remains in effect 
for no more than 3 years.
    (d) Application of cost savings. If the cost of coverage of a child 
under a community-based health delivery system is equal to or less than 
the cost of coverage of a child under the State plan, the State may use 
the difference in the cost of coverage for each child enrolled in a 
community-based health delivery system for--
    (1) Other child health assistance, health services initiatives, or 
outreach; or
    (2) Any reasonable costs necessary to administer the State's 
program.



Sec. 457.1010  Purchase of family coverage.

    A State may purchase family coverage that includes coverage for 
targeted low-income children if the State establishes that--
    (a) Purchase of family coverage is cost-effective under the 
standards described in Sec. 457.1015;
    (b) The State does not purchase the coverage if it would otherwise 
substitute for health insurance coverage that would be provided to 
targeted, low-income children but for the purchase of family coverage; 
and
    (c) The coverage for the family otherwise meets the requirements of 
this part.



Sec. 457.1015  Cost-effectiveness.

    (a) Definition. For purposes of this subpart, ``cost-effective'' 
means that the State's cost of purchasing family coverage that includes 
coverage for targeted low-income children is equal to or less than the 
State's cost of obtaining coverage under the State plan only for the 
eligible targeted low-income children involved.
    (b) Cost comparisons. A State may demonstrate cost-effectiveness by 
comparing the cost of coverage for the family to the cost of coverage 
only for the targeted low-income children under the health benefits 
package offered by the State under the State plan for which the child is 
eligible.
    (c) Individual or aggregate basis. (1) The State may base its 
demonstration of the cost-effectiveness of family coverage on an 
assessment of the cost of family coverage for individual families, done 
on a case-by-case basis, or on the cost of family coverage in the 
aggregate.
    (2) The State must assess cost-effectiveness in its initial request 
for a waiver and then annually.
    (3) For any State that chooses the aggregate cost method, if an 
annual assessment of the cost-effectiveness of family coverage in the 
aggregate reveals that it is not cost-effective, the State must assess 
cost-effectiveness on a case-by-case basis.
    (d) Reports on family coverage. A State with a waiver under this 
section must include in its annual report pursuant to Sec. 457.750, the 
cost of family coverage purchased under the waiver, and the number of 
children and adults, respectively, covered under family coverage 
pursuant to the waiver.



 Subpart K--State Plan Requirements: Applicant and Enrollee Protections

    Source: 66 FR 2687, Jan. 11, 2001, unless otherwise noted.



Sec. 457.1100  Basis, scope and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2101(a) of the Act, which states that the purpose of 
title XXI of the Act is to provide funds to States to enable them to 
initiate and expand the provision of child health assistance to

[[Page 403]]

uninsured, low-income children in an effective and efficient manner;
    (2) Section 2102(a)(7)(B) of the Act, which requires that the State 
plan include a description of the methods used to assure access to 
covered services, including emergency services;
    (3) Section 2102(b)(2) of the Act, which requires that the State 
plan include a description of methods of establishing and continuing 
eligibility and enrollment; and
    (4) Section 2103 of the Act, which outlines coverage requirements 
for a State that provides child health assistance through a separate 
child health program.
    (b) Scope. This subpart sets forth minimum standards for privacy 
protection and for procedures for review of matters relating to 
eligibility, enrollment, and health services.
    (c) Applicability. This subpart only applies to a separate child 
health program.



Sec. 457.1110  Privacy protections.

    The State must ensure that, for individual medical records and any 
other health and enrollment information maintained with respect to 
enrollees, that identifies particular enrollees (in any form), the State 
establishes and implements procedures to--
    (a) Abide by all applicable Federal and State laws regarding 
confidentiality and disclosure, including those laws addressing the 
confidentiality of information about minors and the privacy of minors, 
and privacy of individually identifiable health information;
    (b) Comply with subpart F of part 431 of this chapter;
    (c) Maintain the records and information in a timely and accurate 
manner;
    (d) Specify and make available to any enrollee requesting it--
    (1) The purposes for which information is maintained or used; and
    (2) To whom and for what purposes the information will be disclosed 
outside the State;
    (e) Except as provided by Federal and State law, ensure that each 
enrollee may request and receive a copy of records and information 
pertaining to the enrollee in a timely manner and that an enrollee may 
request that such records or information be supplemented or corrected.



Sec. 457.1120  State plan requirement: Description of review process.

    (a) The State must have one of the following review processes:
    (1) Program specific review. A process that meets the requirements 
of Secs. 457.1130, 457.1140, 457.1150, 457.1160, 457.1170, and 457.1180; 
or
    (2) Statewide Standard Review. A process that complies with State 
review requirements currently in effect for all health insurance issuers 
(as defined in section 2791 of the Public Health Service Act) in the 
State.
    (b) The State plan must include a description of the State's review 
process.

[66 FR 33824, June 25, 2001]



Sec. 457.1130  Program specific review process: Matters subject to review.

    (a) Eligibility or enrollment matter. A State must ensure that an 
applicant or enrollee has an opportunity for review, consistent with 
Secs. 457.1140 and 457.1150, of a--
    (1) Denial of eligibility;
    (2) Failure to make a timely determination of eligibility; and
    (3) Suspension or termination of enrollment, including disenrollment 
for failure to pay cost sharing.
    (b) Health services matter. A State must ensure that an enrollee has 
an opportunity for external review of a--
    (1) Delay, denial, reduction, suspension, or termination of health 
services, in whole or in part, including a determination about the type 
or level of services; and
    (2) Failure to approve, furnish, or provide payment for health 
services in a timely manner.
    (c) Exception. A State is not required to provide an opportunity for 
review of a matter described in paragraph (a) or (b) of this section if 
the sole basis for the decision is a provision in the State plan or in 
Federal or State law requiring an automatic change in eligibility, 
enrollment, or a change in coverage under the health benefits package 
that affects all applicants or enrollees or a group of applicants or 
enrollees without regard to their individual circumstances.

[[Page 404]]



Sec. 457.1140  Program specific review process: Core elements of review.

    In adopting the procedures for review of matters described in 
Sec. 457.1130, a State must ensure that--
    (a) Reviews are conducted by an impartial person or entity in 
accordance with Sec. 457.1150;
    (b) Review decisions are timely in accordance with Sec. 457.1160;
    (c) Review decisions are written; and
    (d) Applicants and enrollees have an opportunity to--
    (1) Represent themselves or have representatives of their choosing 
in the review process;
    (2) Timely review their files and other applicable information 
relevant to the review of the decision;
    (3) Fully participate in the review process, whether the review is 
conducted in person or in writing, including by presenting supplemental 
information during the review process; and
    (4) Receive continued enrollment in accordance with Sec. 457.1170.



Sec. 457.1150  Program specific review process: Impartial review.

    (a) Eligibility or enrollment matter. The review of a matter 
described in Sec. 457.1130(a) must be conducted by a person or entity 
who has not been directly involved in the matter under review.
    (b) Health services matter. The State must ensure that an enrollee 
has an opportunity for an independent external review of a matter 
described in Sec. 457.1130(b). External review must be conducted by the 
State or a contractor other than the contractor responsible for the 
matter subject to external review.



Sec. 457.1160  Program specific review process: Time frames.

    (a) Eligibility or enrollment matter. A State must complete the 
review of a matter described in Sec. 457.1130(a) within a reasonable 
amount of time. In setting time frames, the State must consider the need 
for expedited review when there is an immediate need for health 
services.
    (b) Health services matter. The State must ensure that reviews are 
completed in accordance with the medical needs of the patient. If the 
medical needs of the patient do not dictate a shorter time frame, the 
review must be completed within the following time frames:
    (1) Standard timeframe. A State must ensure that external review, as 
described in Sec. 457.1150(b), is completed within 90 calendar days of 
the date an enrollee requests internal (if available) or external 
review. If both internal and external review are available to the 
enrollee, both types of review must be completed within the 90 calendar 
day period.
    (2) Expedited timeframe. A State must ensure that external review, 
as described in Sec. 457.1150(b), is completed within 72 hours of the 
time an enrollee requests external review, if the enrollee's physician 
or health plan determines that operating under the standard time frame 
could seriously jeopardize the enrollee's life or health or ability to 
attain, maintain or regain maximum function. If the enrollee has access 
to internal and external review, then each level of review may take no 
more than 72 hours. The State may extend the 72-hour time frame by up to 
14 calendar days, if the enrollee requests an extension.



Sec. 457.1170  Program specific review process: Continuation of enrollment.

    A State must ensure the opportunity for continuation of enrollment 
pending the completion of review of a suspension or termination of 
enrollment, including a decision to disenroll for failure to pay cost 
sharing.



Sec. 457.1180  Program specific review process: Notice.

    A State must provide enrollees and applicants timely written notice 
of any determinations required to be subject to review under 
Sec. 457.1130 that includes the reasons for the determination, an 
explanation of applicable rights to review of that determination, the 
standard and expedited time frames for review, the manner in which a 
review can be requested, and the circumstances under which enrollment 
may continue pending review.

[[Page 405]]



Sec. 457.1190  Application of review procedures when States offer premium assistance for group health plans.

    A State that has a premium assistance program through which it 
provides coverage under a group health plan that does not meet the 
requirements of a program specific review or a Statewide standard 
review, as described in Sec. 457.1120, must give applicants and 
enrollees the option to obtain health benefits coverage other than 
through that group health plan. The State must provide this option at 
initial enrollment and at each redetermination of eligibility.

[66 FR 2686, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]

[[Page 406]]



   SUBCHAPTER E--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)



PART 460--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)--Table of Contents




                Subpart A--Basis, Scope, and Definitions

Sec.
460.2 Basis.
460.4 Scope and purpose.
460.6 Definitions.

       Subpart B--PACE Organization Application and Waiver Process

460.10 Purpose.
460.12 Application requirements.
460.14 Priority consideration.
460.16 Special consideration.
460.18 CMS evaluation of applications.
460.20 Notice of CMS determination.
460.22 Service area designation.
460.24 Limit on number of PACE program agreements.
460.26 Submission and evaluation of waiver requests.
460.28 Notice of CMS determination on waiver requests.

                    Subpart C--PACE Program Agreement

460.30 Program agreement requirement.
460.32 Content and terms of PACE program agreement.
460.34 Duration of PACE program agreement.

       Subpart D--Sanctions, Enforcement Actions, and Termination

460.40 Violations for which CMS may impose sanctions.
460.42 Suspension of enrollment or payment by CMS.
460.46 Civil money penalties.
460.48 Additional actions by CMS or the State.
460.50 Termination of PACE program agreement.
460.52 Transitional care during termination.
460.54 Termination procedures.

               Subpart E--PACE Administrative Requirements

460.60 PACE organizational structure.
460.62 Governing body.
460.64 Personnel qualifications.
460.66 Training.
460.68 Program integrity.
460.70 Contracted services.
460.71 Oversight of direct participant care.
460.72 Physical environment.
460.74 Infection control.
460.76 Transportation services.
460.78 Dietary services.
460.80 Fiscal soundness.
460.82 Marketing.

                        Subpart F--PACE Services

460.90 PACE benefits under Medicare and Medicaid.
460.92 Required services.
460.94 Required services for Medicare participants.
460.96 Excluded services.
460.98 Service delivery.
460.100 Emergency care.
460.102 Multidisciplinary team.
460.104 Participant assessment.
460.106 Plan of care.

                      Subpart G--Participant Rights

460.110 Bill of rights.
460.112 Specific rights to which a participant is entitled.
460.114 Restraints.
460.116 Explanation of rights.
460.118 Violation of rights.
460.120 Grievance process.
460.122 PACE organization's appeals process.
460.124 Additional appeal rights under Medicare or Medicaid.

        Subpart H--Quality Assessment and Performance Improvement

460.130 General rule.
460.132 Quality assessment and performance improvement plan.
460.134 Minimum requirements for quality assessment and performance 
          improvement program.
460.136 Internal quality assessment and performance improvement 
          activities.
460.138 Committees with community input.
460.140 Additional quality assessment activities.

           Subpart I--Participant Enrollment and Disenrollment

460.150 Eligibility to enroll in a PACE program.
460.152 Enrollment process.
460.154 Enrollment agreement.
460.156 Other enrollment procedures.
460.158 Effective date of enrollment.
460.160 Continuation of enrollment.
460.162 Voluntary disenrollment.
460.164 Involuntary disenrollment.

[[Page 407]]

460.166 Effective date of disenrollment.
460.168 Reinstatement in other Medicare and Medicaid programs.
460.170 Reinstatement in PACE.
460.172 Documentation of disenrollment.

                           Subpart J--Payment

460.180 Medicare payment to PACE organizations.
460.182 Medicaid payment.
460.184 Post-eligibility treatment of income.
460.186 PACE premiums.

                   Subpart K--Federal/State Monitoring

460.190 Monitoring during trial period.
460.192 Ongoing monitoring after trial period.
460.194 Corrective action.
460.196 Disclosure of review results.

      Subpart L--Data Collection, Record Maintenance, and Reporting

460.200 Maintenance of records and reporting of data.
460.202 Participant health outcomes data.
460.204 Financial recordkeeping and reporting requirements.
460.208 Financial statements.
460.210 Medical records.

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

    Source: 64 FR 66279, Nov. 24, 1999, unless otherwise noted.

    Effective Date Note: At 67 FR 61504, Oct. 1, 2002, in part 460, 
revise all references to ``multidisciplinary'' to read 
``interdisciplinary'', effective Oct. 31, 2002.



                Subpart A--Basis, Scope, and Definitions



Sec. 460.2  Basis.

    This part implements sections 1894, 1905(a), and 1934 of the Act, 
which authorize the following:
    (a) Medicare payments to, and coverage of benefits under, PACE.
    (b) The establishment of PACE as a State option under Medicaid to 
provide for Medicaid payments to, and coverage of benefits under, PACE.



Sec. 460.4  Scope and purpose.

    (a) General. This part sets forth the following:
    (1) The requirements that an entity must meet to be approved as a 
PACE organization that operates a PACE program under Medicare and 
Medicaid.
    (2) How individuals may qualify to enroll in a PACE program.
    (3) How Medicare and Medicaid payments will be made for PACE 
services.
    (4) Provisions for Federal and State monitoring of PACE programs.
    (5) Procedures for sanctions and terminations.
    (b) Program purpose. PACE provides pre-paid, capitated, 
comprehensive health care services designed to meet the following 
objectives:
    (1) Enhance the quality of life and autonomy for frail, older 
adults.
    (2) Maximize dignity of, and respect for, older adults.
    (3) Enable frail, older adults to live in the community as long as 
medically and socially feasible.
    (4) Preserve and support the older adult's family unit.



Sec. 460.6  Definitions.

    As used in this part, unless the context indicates otherwise, the 
following definitions apply:
    Contract year means the term of a PACE program agreement, which is a 
calendar year, except that a PACE organization's initial contract year 
may be from 12 to 23 months, as determined by CMS.
    Medicare beneficiary means an individual who is entitled to Medicare 
Part A benefits or enrolled under Medicare Part B, or both.
    Medicaid participant means an individual determined eligible for 
Medicaid who is enrolled in a PACE program.
    Medicare participant means a Medicare beneficiary who is enrolled in 
a PACE program.
    PACE stands for programs of all-inclusive care for the elderly.
    PACE center means a facility operated by a PACE organization where 
primary care is furnished to participants.
    PACE organization means an entity that has in effect a PACE program 
agreement to operate a PACE program under this part.
    PACE program agreement means an agreement between a PACE 
organization, CMS, and the State administering agency for the operation 
of a PACE program.
    Participant means an individual who is enrolled in a PACE program.

[[Page 408]]

    Services includes both items and services.
    State administering agency means the State agency responsible for 
administering the PACE program agreement.
    Trial period means the first 3 contract years in which a PACE 
organization operates under a PACE program agreement, including any 
contract year during which the entity operated under a PACE 
demonstration waiver program.



       Subpart B--PACE Organization Application and Waiver Process



Sec. 460.10  Purpose.

    This subpart sets forth application requirements for an entity that 
seeks approval from CMS as a PACE organization.

    Effective Date Note: At 67 FR 61504, Oct. 1, 2002, Sec. 460.10 was 
revised, effective Oct. 31, 2002. For the convenience of the user, the 
revised text is set forth as follows:

Sec. 460.10  Purpose.

    This subpart sets forth the application requirements for an entity 
that seeks approval from CMS as a PACE organization and the process by 
which a PACE organization may request waiver of certain regulatory 
requirements. The purpose of the waivers is to provide for reasonable 
flexibility in adapting the PACE model to the needs of particular 
organizations (such as those in rural areas).



Sec. 460.12  Application requirements.

    (a) General. (1) An individual authorized to act for the entity must 
submit to CMS a complete application that describes how the entity meets 
all requirements in this part.
    (2) CMS evaluates only complete applications from entities located 
in States with approved State plan amendments electing PACE as an 
optional Medicaid benefit.
    (3) CMS accepts applications from entities that seek approval as 
PACE organizations beginning on February 22, 2000 except for the 
following:
    (i) Beginning on November 24, 1999, CMS accepts applications from 
entities that meet the requirements for priority consideration in 
processing of applications, as provided in Sec. 460.14.
    (ii) Beginning on January 10, 2000, CMS accepts applications from 
entities that meet the requirements for special consideration in 
processing applications, as provided in Sec. 460.16.
    (b) State assurance. An entity's application must be accompanied by 
an assurance from the State administering agency of the State in which 
the program is located indicating that the State--
    (1) Considers the entity to be qualified to be a PACE organization; 
and
    (2) Is willing to enter into a PACE program agreement with the 
entity.

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.12 was 
amended by removing and reserving paragraph (a)(2), effective Oct. 31, 
2002.



Sec. 460.14  Priority consideration.

    Until August 5, 2000, CMS gives priority consideration in processing 
applications for PACE organization status to an entity that meets either 
of the following criteria:
    (a) Is operating under PACE demonstration waivers under one of the 
following authorities:
    (1) Section 603(c) of the Social Security Amendments of 1983, as 
extended by section 9220 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985.
    (2) Section 9412(b) of the Omnibus Budget Reconciliation Act of 
1986.
    (b) Has applied to operate under a PACE demonstration under section 
9412(b) of the Omnibus Budget Reconciliation Act of 1986 as of May 1, 
1997.



Sec. 460.16  Special consideration.

    Until August 5, 2000, CMS gives special consideration in processing 
applications to an entity that meets the following conditions:
    (a) Indicated, by May 1, 1997, a specific intent to become a PACE 
organization through formal activities.
    (b) Includes documentation of its formal activities.



Sec. 460.18  CMS evaluation of applications.

    CMS evaluates an application for approval as a PACE organization on 
the basis of the following information:
    (a) Information contained in the application.
    (b) Information obtained through onsite visits conducted by CMS or 
the State administering agency.

[[Page 409]]

    (c) Information obtained by the State administering agency.



Sec. 460.20  Notice of CMS determination.

    (a) Time limit for notification of determination. Within 90 days 
after an entity submits a complete application to CMS, CMS takes one of 
the following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of the 
basis for the denial and the process for requesting reconsideration of 
the denial.
    (3) Requests additional information needed to make a final 
determination.
    (b) Additional information requested. If CMS requests from an entity 
additional information needed to make a final determination, within 90 
days after CMS receives all requested information from the entity, CMS 
takes one of the following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of the 
basis for the denial and the process for requesting reconsideration of 
the denial.
    (c) Deemed approval. An application is deemed approved if CMS fails 
to act on the application within 90 days after one of the following 
dates:
    (1) The date the application is submitted by the organization.
    (2) The date CMS receives all requested additional information.
    (d) Date of submission. For purposes of the 90-day time limit 
described in this section, the date that an application is submitted to 
CMS is the date on which the application is delivered to the address 
designated by CMS.



Sec. 460.22  Service area designation.

    (a) An entity must state in its application the service area it 
proposes for its program.
    (b) CMS, in consultation with the State administering agency, may 
exclude from designation an area that is already covered under another 
PACE program agreement to avoid unnecessary duplication of services and 
avoid impairing the financial and service viability of an existing 
program.



Sec. 460.24  Limit on number of PACE program agreements.

    (a) Numerical limit. Except as specified in paragraph (b) of this 
section, CMS does not permit the number of PACE organizations with which 
agreements are in effect under this part or under section 9412(b) of the 
Omnibus Budget Reconciliation Act of 1986, to exceed the following:
    (1) As of August 5, 1997--40.
    (2) As of each succeeding August 5, the numerical limit for the 
preceding year plus 20, without regard to the actual number of 
agreements in effect on a previous anniversary date. (For example, the 
limit is 60 on August 5, 1998 and 80 on August 5, 1999.)
    (b) Exception. The numerical limit does not apply to a private, for-
profit PACE organization that meets the following conditions:
    (1) Is operating under a demonstration project waiver under section 
1894(h) and 1934(h) of the Act.
    (2) Was operating under a waiver and subsequently qualifies for PACE 
organization status in accordance with sections 1894(a)(3)(B)(ii) and 
1934(a)(3)(B)(ii) of the Act.



Sec. 460.26  Submission and evaluation of waiver requests.

    (a) A PACE organization must submit its waiver request through the 
State administering agency for initial review. The State administering 
agency forwards waiver requests to CMS along with any concerns or 
conditions regarding the waiver.
    (b) CMS evaluates a waiver request from a PACE organization on the 
basis of the following information:
    (1) The adequacy of the description and rationale for the waiver 
provided by the PACE organization, including any additional information 
requested by CMS.
    (1) Information obtained by CMS and the State administering agency 
in on-site reviews and monitoring of the PACE organization.
    (c) Requirements related to the following principles may not be 
waived:
    (1) A focus on frail elderly qualifying individuals who require the 
level of care provided in a nursing facility.

[[Page 410]]

    (2) The delivery of comprehensive, integrated acute and long-term 
care services.
    (3) An interdisciplinary team approach to care management and 
service delivery.
    (4) Capitated, integrated financing that allows the provider to pool 
payments received from public and private programs and individuals.
    (5) The assumption by the provider of full financial risk.

[67 FR 61505, Oct. 1, 2002]

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.26 was 
added, effective Oct. 31, 2002.



Sec. 460.28  Notice of CMS determination on waiver requests.

    (a) Time limit for notification of determination. Within 90 days 
after receipt of a waiver request, CMS takes one of the following 
actions:
    (1) Approves the request.
    (2) Denies the request and notifies the PACE organization in writing 
of the basis for the denial.
    (b) Date of receipt. For purposes of the 90-day time limit described 
in this section, the date that a waiver request is received by CMS from 
the State administering agency is the date on which the request is 
delivered to the address designated by CMS.
    (c) Waiver approval. (1) A waiver request is deemed approved if CMS 
fails to act on the request within 90 days after the date the waiver 
request is received by CMS.
    (2) CMS may withdraw approval of a waiver for good cause.

[67 FR 61505, Oct. 1, 2002]

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.28 was 
added, effective Oct. 31, 2002.



                    Subpart C--PACE Program Agreement



Sec. 460.30  Program agreement requirement.

    (a) A PACE organization must have an agreement with CMS and the 
State administering agency for the operation of a PACE program by the 
PACE organization under Medicare and Medicaid.
    (b) The agreement must be signed by an authorized official of the 
PACE organization.

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.30 was 
amended by revising paragraph (b) and adding paragraph (c), effective 
Oct. 31, 2002. For the convenience of the user, the revised and added 
text is set forth as follows:

Sec. 460.30  Program agreement requirement.

                                * * * * *

    (b) The agreement must be signed by an authorized official of CMS, 
the PACE organization and the State administering agency.
    (c) CMS may only sign program agreements with PACE organizations 
that are located in States with approved State plan amendments electing 
PACE as an optional benefit under their Medicaid State plan.



Sec. 460.32  Content and terms of PACE program agreement.

    (a) Required content. A PACE program agreement must include the 
following information:
    (1) A designation of the service area of the organization's program. 
The area may be identified by county, zip code, street boundaries, 
census tract, block, or tribal jurisdictional area, as applicable. CMS 
and the State administering agency must approve any change in the 
designated service area.
    (2) The organization's commitment to meet all applicable 
requirements under Federal, State, and local laws and regulations, 
including provisions of the Civil Rights Act, the Age Discrimination 
Act, and the Americans With Disabilities Act.
    (3) The effective date and term of the agreement.
    (4) A description of the organizational structure of the PACE 
organization and information on administrative contacts, including the 
following:
    (i) Name and phone number of the program director.
    (ii) Name of all governing body members.
    (iii) Name and phone number of a contact person for the governing 
body.
    (5) A participant bill of rights approved by CMS and an assurance 
that the rights and protections will be provided.

[[Page 411]]

    (6) A description of the process for handling participant grievances 
and appeals.
    (7) A statement of the organization's policies on eligibility, 
enrollment, voluntary disenrollment, and involuntary disenrollment.
    (8) A description of services available to participants.
    (9) A description of the organization's quality assessment and 
performance improvement program.
    (10) A statement of the levels of performance required by CMS on 
standard quality measures.
    (11) A statement of the data and information required by CMS and the 
State administering agency to be collected on participant care.
    (12) The capitation rates for Medicare and Medicaid.
    (13) A description of procedures that the organization will follow 
if the PACE program agreement is terminated.
    (b) Optional content. (1) An agreement may provide additional 
requirements for individuals to qualify as PACE program eligible 
individuals, in accordance with Sec. 460.150(b)(4).
    (2) An agreement may contain any additional terms and conditions 
agreed to by the parties if the terms and conditions are consistent with 
sections 1894 and 1934 of the Act and regulations in this part.



Sec. 460.34  Duration of PACE program agreement.

    An agreement is effective for a contract year, but may be extended 
for additional contract years in the absence of a notice by a party to 
terminate.



       Subpart D--Sanctions, Enforcement Actions, and Termination



Sec. 460.40  Violations for which CMS may impose sanctions.

    In addition to other remedies authorized by law, CMS may impose any 
of the sanctions specified in Secs. 460.42 and 460.46 if CMS determines 
that a PACE organization commits any of the following violations:
    (a) Fails substantially to provide to a participant medically 
necessary items and services that are covered PACE services, if the 
failure has adversely affected (or has substantial likelihood of 
adversely affecting) the participant.
    (b) Involuntarily disenrolls a participant in violation of 
Sec. 460.164.
    (c) Discriminates in enrollment or disenrollment among Medicare 
beneficiaries or Medicaid recipients, or both, who are eligible to 
enroll in a PACE program, on the basis of an individual's health status 
or need for health care services.
    (d) Engages in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment, except as 
permitted by Sec. 460.150, by Medicare beneficiaries or Medicaid 
recipients whose medical condition or history indicates a need for 
substantial future medical services.
    (e) Imposes charges on participants enrolled under Medicare or 
Medicaid for premiums in excess of the premiums permitted.
    (f) Misrepresents or falsifies information that is furnished--
    (1) To CMS or the State under this part; or
    (2) To an individual or any other entity under this part.
    (g) Prohibits or otherwise restricts a covered health care 
professional from advising a participant who is a patient of the 
professional about the participant's health status, medical care, or 
treatment for the participant's condition or disease, regardless of 
whether the PACE program provides benefits for that care or treatment, 
if the professional is acting within his or her lawful scope of 
practice.
    (h) Operates a physician incentive plan that does not meet the 
requirements of section 1876(i)(8) of the Act.
    (i) Employs or contracts with any individual who is excluded from 
participation in Medicare or Medicaid under section 1128 or section 
1128A of the Act (or with any entity that employs or contracts with that 
individual) for the provision of health care, utilization review, 
medical social work, or administrative services.



Sec. 460.42  Suspension of enrollment or payment by CMS.

    (a) Enrollment. If a PACE organization commits one or more 
violations specified in Sec. 460.40, CMS may suspend

[[Page 412]]

enrollment of Medicare beneficiaries after the date CMS notifies the 
organization of the violation.
    (b) Payment. If a PACE organization commits one or more violations 
specified in Sec. 460.40, for individuals enrolled after the date CMS 
notifies the PACE organization of the violation, CMS may take the 
following actions:
    (1) Suspend Medicare payment to the PACE organization.
    (2) Deny payment to the State for medical assistance for services 
furnished under the PACE program agreement.
    (c) Term of suspension. A suspension or denial of payment remains in 
effect until CMS is satisfied that the following conditions are met:
    (1) The PACE organization has corrected the cause of the violation.
    (2) The violation is not likely to recur.



Sec. 460.46  Civil money penalties.

    (a) CMS may impose civil money penalties up to the following maximum 
amounts:
    (1) For each violation regarding enrollment or disenrollment 
specified in Sec. 460.40 (c) or (d), $100,000 plus $15,000 for each 
individual not enrolled as a result of the PACE organization's 
discrimination in enrollment or disenrollment or practice that would 
deny or discourage enrollment.
    (2) For each violation regarding excessive premiums specified in 
Sec. 460.40(e), $25,000 plus double the excess amount above the 
permitted premium charged a participant by the PACE organization. (The 
excess amount charged is deducted from the penalty and returned to the 
participant).
    (3) For each misrepresentation or falsification of information, 
specified in Sec. 460.40(f)(1), $100,000.
    (4) For any other violation specified in Sec. 460.40, $25,000.
    (b) The provisions of section 1128A of the Act (other than 
subsections (a) and (b)) apply to a civil money penalty under this 
section in the same manner as they apply to a civil money penalty or 
proceeding under section 1128A(a).



Sec. 460.48  Additional actions by CMS or the State.

    After consultation with the State administering agency, if CMS 
determines that the PACE organization is not in substantial compliance 
with requirements in this part, CMS or the State administering agency 
may take one or more of the following actions:
    (a) Condition the continuation of the PACE program agreement upon 
timely execution of a corrective action plan.
    (b) Withhold some or all payments under the PACE program agreement 
until the organization corrects the deficiency.
    (c) Terminate the PACE program agreement.



Sec. 460.50  Termination of PACE program agreement.

    (a) Termination of agreement by CMS or State. CMS or a State 
administering agency may terminate at any time a PACE program agreement 
for cause, including, but not limited to the circumstances in paragraphs 
(b) or (c) of this section.
    (b) Termination due to uncorrected deficiencies. CMS or the State 
administering agency may terminate a PACE program agreement if CMS or 
the State administering agency determines that both of the following 
circumstances exist:
    (1) Either--
    (i) There are significant deficiencies in the quality of care 
furnished to participants; or
    (ii) The PACE organization failed to comply substantially with 
conditions for a PACE program or PACE organization under this part, or 
with terms of its PACE program agreement.
    (2) Within 30 days of the date of the receipt of written notice of a 
determination made under paragraph (b)(1) of this section, the PACE 
organization failed to develop and successfully initiate a plan to 
correct the deficiencies, or failed to continue implementation of the 
plan of correction.
    (c) Termination due to health and safety risk. CMS or a State 
administering agency may terminate a PACE program agreement if CMS or 
the State administering agency determines that the PACE organization 
cannot ensure

[[Page 413]]

the health and safety of its participants. This determination may result 
from the identification of deficiencies that CMS or the State 
administering agency determines cannot be corrected.
    (d) Termination of agreement by PACE organization. A PACE 
organization may terminate an agreement after timely notice to CMS, the 
State administering agency, and participants, as follows:
    (1) To CMS and the State administering agency, 90 days before 
termination.
    (2) To participants, 60 days before termination.



Sec. 460.52  Transitional care during termination.

    (a) The PACE organization must develop a detailed written plan for 
phase-down in the event of termination, which describes how the 
organization plans to take the following actions:
    (1) Inform participants, the community, CMS and the State 
administering agency in writing about termination and transition 
procedures.
    (2) Assist participants to obtain reinstatement of conventional 
Medicare and Medicaid benefits.
    (3) Transition participants' care to other providers.
    (4) Terminate marketing and enrollment activities.
    (b) An entity whose PACE program agreement is in the process of 
being terminated must provide assistance to each participant in 
obtaining necessary transitional care through appropriate referrals and 
making the participant's medical records available to new providers.



Sec. 460.54  Termination procedures.

    (a) Except as provided in paragraph (b) of this section, if CMS 
terminates an agreement with a PACE organization, it furnishes the PACE 
organization with the following:
    (1) A reasonable opportunity to develop and implement a corrective 
action plan to correct the deficiencies that were the basis of CMS's 
determination that cause exists for termination.
    (2) Reasonable notice and opportunity for hearing (including the 
right to appeal an initial determination) before terminating the 
agreement.
    (b) CMS may terminate an agreement without invoking the procedures 
described in paragraph (a) of this section if CMS determines that a 
delay in termination, resulting from compliance with these procedures 
before termination, would pose an imminent and serious risk to the 
health of participants enrolled with the organization.



               Subpart E--PACE Administrative Requirements



Sec. 460.60  PACE organizational structure.

    (a) A PACE organization must be, or be a distinct part of, one of 
the following:
    (1) An entity of city, county, State, or Tribal government.
    (2) A private not-for-profit entity organized for charitable 
purposes under section 501(c)(3) of the Internal Revenue Code of 1986. 
The entity may be a corporation, a subsidiary of a larger corporation, 
or a department of a corporation.
    (b) Program director. The organization must employ a program 
director who is responsible for oversight and administration of the 
entity.
    (c) Medical director. The organization must employ a medical 
director who is responsible for the delivery of participant care, for 
clinical outcomes, and for the implementation, as well as oversight, of 
the quality assessment and performance improvement program.
    (d) Organizational chart. (1) The PACE organization must have a 
current organizational chart showing officials in the PACE organization 
and relationships to any other organizational entities.
    (2) The chart for a corporate entity must indicate the PACE 
organization's relationship to the corporate board and to any parent, 
affiliate, or subsidiary corporate entities.
    (3) A PACE organization planning a change in organizational 
structure must notify CMS and the State administering agency, in 
writing, at least 60 days before the change takes effect.
    (4) Changes in organizational structure must be approved in advance 
by

[[Page 414]]

CMS and the State administering agency.
    (5) Changes in organizational structure approved by CMS and the 
State administering agency must be forwarded to the consumer advisory 
committee described in Sec. 460.62(c) of this part for dissemination to 
participants as appropriate.

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, in Sec. 460.60, 
paragraphs (b) and (c) were revised, effective Oct. 31, 2002. For the 
convenience of the user, the revised text is set forth as follows:

Sec. 460.60  PACE organizational structure.

                                * * * * *

    (b) Program director. The organization must employ, or contract with 
in accordance with Sec. 460.70, a program director who is responsible 
for oversight and administration of the entity.
    (c) Medical director. The organization must employ, or contract with 
in accordance with Sec. 460.70, a medical director who is responsible 
for the delivery of participant care, for clinical outcomes, and for the 
implementation, as well as oversight, of the quality assessment and 
performance improvement program.

                                * * * * *



Sec. 460.62  Governing body.

    (a) Governing body. A PACE organization must be operating under the 
control of an identifiable governing body (for example, a board of 
directors) or a designated person functioning as a governing body with 
full legal authority and responsibility for the following:
    (1) Governance and operation of the organization.
    (2) Development of policies consistent with the mission.
    (3) Management and provision of all services, including the 
management of contractors.
    (4) Establishment of personnel policies that address adequate notice 
of termination by employees or contractors with direct patient care 
responsibilities.
    (5) Fiscal operations.
    (6) Development of policies on participant health and safety, 
including a comprehensive, systemic operational plan to ensure the 
health and safety of participants.
    (7) Quality assessment and performance improvement program.
    (b) Community representation. A PACE organization must ensure 
community representation on issues related to participant care. This may 
be achieved by having a community representative on the governing body.
    (c) Consumer advisory committee. A PACE organization must establish 
a consumer advisory committee to provide advice to the governing body on 
matters of concern to participants. Participants and representatives of 
participants must constitute a majority of the membership of this 
committee.



Sec. 460.64  Personnel qualifications.

    (a) General qualification requirements. Except as specified in 
paragraphs (b) and (c) of this section, each member of the staff 
(employee or contractor) of the PACE organization must meet the 
following conditions:
    (1) Be legally authorized (currently licensed or, if applicable, 
certified or registered) to practice in the State in which he or she 
performs the function or actions.
    (2) Only act within the scope of his or her authority to practice.
    (b) Federally-defined qualifications for physician. (1) A physician 
must meet the qualifications and conditions in Sec. 410.20 of this 
chapter.
    (2) A primary care physician must have a minimum of 1 year's 
experience working with a frail or elderly population.
    (c) Qualifications when no State licensing laws, State 
certification, or registration requirements exist. If there are no State 
licensing laws, State certification, or registration applicable to the 
profession, the following requirements must be met:
    (1) Registered nurse. A registered nurse must meet the following 
requirements:
    (i) Be a graduate of a school of professional nursing.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (2) Social worker. A social worker must meet the following 
requirements:

[[Page 415]]

    (i) Have a master's degree in social work from an accredited school 
of social work.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (3) Physical therapist. A physical therapist must meet the following 
requirements:
    (i) Be a graduate of a physical therapy curriculum approved by one 
of the following:
    (A) The American Physical Therapy Association.
    (B) The Committee on Allied Health Education and Accreditation of 
the American Medical Association.
    (C) The Council on Medical Education of the American Medical 
Association and the American Physical Therapy Association.
    (D) Other equivalent organizations approved by the Secretary.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (4) Occupational therapist. An occupational therapist must meet the 
following requirements:
    (i) Be a graduate of an occupational therapy curriculum accredited 
jointly by the Committee on Allied Health Education and Accreditation of 
the American Medical Association and the American Occupational Therapy 
Association or other equivalent organizations approved by the Secretary.
    (ii) Be eligible for the National Registration Examination of the 
American Occupational Therapy Association.
    (iii) Have 2 years of appropriate experience as an occupational 
therapist and have achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that the determination of proficiency does not apply 
with respect to persons initially licensed by a State or seeking initial 
qualification as an occupational therapist after December 31, 1977.
    (iv) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (5) Recreation therapist or activities coordinator. A recreation 
therapist or activities coordinator must have 2 years experience in a 
social or recreational program providing and coordinating services for a 
frail or elderly population within the last 5 years, one of which was 
full-time in a patient activities program in a health care setting.
    (6) Dietitian. A dietitian must meet the following requirements:
    (i) Have a baccalaureate or advanced degree from an accredited 
college with major studies in food and nutrition or dietetics.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (7) Drivers. A PACE center driver must meet the following 
requirements:
    (i) Have a valid driver's license to operate a van or bus in the 
State of operation.
    (ii) Be capable of, and experienced in, transporting individuals 
with special mobility needs.



Sec. 460.66  Training.

    (a) The PACE organization must provide training to maintain and 
improve the skills and knowledge of each staff member with respect to 
the individual's specific duties that results in his or her continued 
ability to demonstrate the skills necessary for the performance of the 
position.
    (b) The PACE organization must develop a training program for each 
personal care attendant to establish the individual's competency in 
furnishing personal care services and specialized skills associated with 
specific care needs of individual participants.



Sec. 460.68  Program integrity.

    (a) Persons with criminal convictions. A PACE organization must not 
employ individuals or contract with organizations or individuals--
    (1) Who have been excluded from participation in the Medicare or 
Medicaid programs;
    (2) Who have been convicted of criminal offenses related to their 
involvement in Medicaid, Medicare, other health insurance or health care 
programs, or social service programs under title XX of the Act; or
    (3) In any capacity where an individual's contact with participants 
would pose a potential risk because the individual has been convicted of 
physical, sexual, drug, or alcohol abuse.

[[Page 416]]

    (b) Direct or indirect interest in contracts. Except as provided in 
paragraph (c) of this section, no member of the PACE organization's 
governing body or any immediate family member may have a direct or 
indirect interest in any contract that supplies any administrative or 
care-related service or materials to the PACE organization.
    (c) Waiver. (1) CMS and the State administering agency may waive the 
requirement in paragraph (b) of this section for PACE organizations in 
the following communities:
    (i) Rural.
    (ii) Tribal.
    (iii) Urban Indian.
    (2) If an applicant seeking approval as a PACE organization believes 
a waiver under this paragraph is warranted, it must include a request 
for the waiver in its application that meets the following requirements:
    (i) Identifies the rural, tribal, or urban Indian community.
    (ii) Establishes recusal restrictions for each member of the PACE 
organization governing body or immediate family member to which the 
exception would apply.
    (iii) Establishes a process to record recusal actions on a case-by-
case basis.
    (iv) Establishes a process to make available to the public the 
general recusal restrictions and record of actions.
    (3) CMS and the State administering agency may grant a waiver if 
they determine the following:
    (i) There is insufficient availability in the PACE organization's 
service area of individuals who could meet the requirement.
    (ii) The proposed alternative does not adversely affect the 
availability of care or the quality of care that is provided to 
participants.
    (d) Disclosure requirements. A PACE organization must have a formal 
process in place to gather information related to paragraphs (a) and (b) 
of this section and must be able to respond in writing to a request for 
information from CMS within a reasonable amount of time.

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.68 was 
amended by revising paragraph (b), and paragraph (c) was removed and 
reserved, effective Oct. 31, 2002. For the convenience of the user, the 
revised text is set forth as follows:

Sec. 460.68  Program integrity.

                                * * * * *

    (b) Direct or indirect interest in contracts. No member of the PACE 
organization's governing body or any immediate family member may have a 
direct or indirect interest in any contract that supplies any 
administrative or care-related service or materials to the PACE 
organization.

                                * * * * *



Sec. 460.70  Contracted services.

    (a) General rule. The PACE organization must have a written contract 
with each outside organization, agency, or individual that furnishes 
administrative or care-related services not furnished directly by the 
PACE organization except for emergency services as described in 
Sec. 460.100.
    (b) Contract requirements. A contract between a PACE organization 
and a contractor must meet the following requirements:
    (1) The PACE organization must contract only with an entity that 
meets all applicable Federal and State requirements, including, but not 
limited to, the following:
    (i) An organizational contractor, such as a hospital, must meet 
Medicare or Medicaid participation requirements.
    (ii) A practitioner or supplier must meet Medicare or Medicaid 
requirements applicable to the services it furnishes.
    (iii) A contractor must comply with the requirements of this part 
with respect to service delivery, participant rights, and quality 
assessment and performance improvement activities.
    (2) A contractor must be accessible to participants, located either 
within or near the PACE organization's service area.
    (3) A PACE organization must designate an official liaison to 
coordinate activities between contractors and the organization.
    (c) List of contractors. A current list of contractors must be on 
file at the PACE center and a copy must be provided to anyone upon 
request.

[[Page 417]]

    (d) Copies of signed contracts. The PACE organization must furnish a 
copy of each signed contract for inpatient care to CMS and the State 
administering agency.
    (e) Content of contract. Each contract must be in writing and 
include the following information:
    (1) Name of contractor.
    (2) Services furnished.
    (3) Payment rate and method.
    (4) Terms of the contract, including beginning and ending dates, 
methods of extension, renegotiation, and termination.
    (5) Contractor agreement to do the following:
    (i) Furnish only those services authorized by the PACE 
multidisciplinary team.
    (ii) Accept payment from the PACE organization as payment in full, 
and not bill participants, CMS, the State administering agency, or 
private insurers.
    (iii) Hold harmless CMS, the State, and PACE participants if the 
PACE organization does not pay for services performed by the contractor 
in accordance with the contract.
    (iv) Not assign the contract or delegate duties under the contract 
unless it obtains prior written approval from the PACE organization.
    (v) Submit reports required by the PACE organization.

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, in Sec. 460.70, 
paragraphs (b)(1)(i) and (e)(2) were revised, and paragraphs (e)(5)(vi) 
through (ix) and (f) were added, effective Oct. 31, 2002. For the 
convenience of the user, the revised and added text is set forth as 
follows:

Sec. 460.70  Contracted services.

                                * * * * *

    (b) * * *
    (1) * * *
    (i) An institutional contractor, such as a hospital or skilled 
nursing facility, must meet Medicare or Medicaid participation 
requirements.

                                * * * * *

    (e) * * *
    (1) * * *
    (2) Services furnished (including work schedule if appropriate).

                                * * * * *

    (5) * * *

                                * * * * *

    (vi) Agree to perform all the duties related to its position as 
specified in this part.
    (vii) Participate in interdisciplinary team meeting as required.
    (viii) Agree to be accountable to the PACE organization.
    (ix) Cooperate with the competency evaluation program and direct 
participant care requirements specified in Sec. 460.71.
    (f) Contracting with another entity to furnish PACE Center services. 
(1) A PACE organization may only contract for PACE Center services if it 
is fiscally sound as defined in Sec. 460.80(a) of this part and has 
demonstrated competence with the PACE model as evidenced by successful 
monitoring by CMS and the State administering agency.
    (2) The PACE organization retains responsibility for all 
participants and may only contract for the PACE Center services 
identified in Sec. 460.98(d).



Sec. 460.71  Oversight of direct participant care.

    (a) The PACE organization must ensure that all employees and 
contracted staff furnishing care directly to participants demonstrate 
the skills necessary for performance of their position.
    (1) The PACE organization must provide each employee and all 
contracted staff with an orientation. The orientation must include at a 
minimum the organization's mission, philosophy, policies on participant 
rights, emergency plan, ethics, the PACE benefit, and any policies 
related to the job duties of specific staff.
    (2) The PACE organization must develop a competency evaluation 
program that identifies those skills, knowledge, and abilities that must 
be demonstrated by direct participant care staff (employees and 
contractors).
    (3) The competency program must be evidenced as completed before 
performing participant care and on an ongoing basis by qualified 
professionals.
    (4) The PACE organization must designate a staff member to oversee 
these activities for employees and work with the PACE contractor liaison 
to ensure compliance by contracted staff.

[[Page 418]]

    (b) The PACE organization must develop a program to ensure that all 
staff furnishing direct participant care services meet the following 
requirements:
    (1) Comply with any State or Federal requirements for direct patient 
care staff in their respective settings.
    (2) Comply with the requirements of Sec. 460.68(a) regarding persons 
with criminal convictions.
    (3) Have verified current certifications or licenses for their 
respective positions.
    (4) Are free of communicable diseases.
    (5) Have been oriented to the PACE program.
    (6) Agree to abide by the philosophy, practices, and protocols of 
the PACE organiztion.

[67 FR 61505, Oct. 1, 2002]

    Effective Date Note: At 67 FR 61505, Oct. 1, 2002, Sec. 460.71 was 
added, effective Oct. 31, 2002.



Sec. 460.72  Physical environment.

    (a) Space and equipment--(1) Safe design. A PACE center must meet 
the following requirements:
    (i) Be designed, constructed, equipped, and maintained to provide 
for the physical safety of participants, personnel, and visitors.
    (ii) Ensure a safe, sanitary, functional, accessible, and 
comfortable environment for the delivery of services that protects the 
dignity and privacy of the participant.
    (2) Primary care clinic. The PACE center must include sufficient 
suitable space and equipment to provide primary medical care and 
suitable space for team meetings, treatment, therapeutic recreation, 
restorative therapies, socialization, personal care, and dining.
    (3) Equipment maintenance. A PACE organization must establish, 
implement, and maintain a written plan to ensure that all equipment is 
maintained in accordance with the manufacturer's recommendations.
    (b) Fire Safety. (1) Except as provided in paragraph (b)(2) of this 
section, a PACE center must meet the occupancy provisions of the 1997 
edition of the Life Safety Code of the National Fire Protection 
Association (which is incorporated by reference) that apply to the type 
of setting in which the center is located. Incorporation by reference of 
the Life Safety Code, 1997 edition, was approved by the Director of the 
Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. 
The Life Safety Code is available for inspection at the Office of the 
Federal Register, 800 North Capitol Street, N.W., Washington, D.C. 
Copies of the Life Safety Code may be obtained from the National Fire 
Protection Code (NFPA), 1 Batterymarch Park, P.O. Box 9101, Quincy, MA 
02269-9101. If any changes in the Life Safety Code, 1997 edition, are 
also to be incorporated by reference, notice to that effect will be 
published in the Federal Register.
    (2) Exceptions. (i) The Life Safety Code provisions do not apply in 
a State in which CMS determines that a fire and safety code imposed by 
State law adequately protects participants and staff.
    (ii) CMS may waive specific provisions of the Life Safety Code that, 
if rigidly applied, would result in unreasonable hardship on the center, 
but only if the waiver does not adversely affect the health and safety 
of the participants and staff.
    (c) Emergency and disaster preparedness--(1) Procedures. The PACE 
organization must establish, implement, and maintain documented 
procedures to manage medical and nonmedical emergencies and disasters 
that are likely to threaten the health or safety of the participants, 
staff, or the public.
    (2) Emergencies defined. Emergencies include, but are not limited, 
to the following:
    (i) Fire.
    (ii) Equipment, water, or power failure.
    (iii) Care-related emergencies.
    (iv) Natural disasters likely to occur in the organization's 
geographic area. (An organization is not required to develop emergency 
plans for natural disasters that typically do not affect its geographic 
location.)
    (3) Emergency training. A PACE organization must provide appropriate 
training and periodic orientation to all staff (employees and 
contractors) and participants to ensure that staff demonstrate a 
knowledge of emergency

[[Page 419]]

procedures, including informing participants what to do, where to go, 
and whom to contact in case of an emergency.
    (4) Availability of emergency equipment. Emergency equipment, 
including easily portable oxygen, airways, suction, and emergency drugs, 
along with staff who know how to use the equipment, must be on the 
premises of every center at all times and be immediately available. The 
organization must have a documented plan to obtain emergency medical 
assistance from sources outside the center when needed.
    (5) Annual test of emergency and disaster plan. At least annually, a 
PACE organization must actually test, evaluate, and document the 
effectiveness of its emergency and disaster plans.



Sec. 460.74  Infection control.

    (a) Standard procedures. The PACE organization must follow accepted 
policies and standard procedures with respect to infection control, 
including at least the standard precautions developed by the Centers for 
Disease Control and Prevention.
    (b) Infection control plan. The PACE organization must establish, 
implement, and maintain a documented infection control plan that meets 
the following requirements:
    (1) Ensures a safe and sanitary environment.
    (2) Prevents and controls the transmission of disease and infection.
    (c) Contents of infection control plan. The infection control plan 
must include, but is not limited to, the following:
    (1) Procedures to identify, investigate, control, and prevent 
infections in every center and in each participant's place of residence.
    (2) Procedures to record any incidents of infection.
    (3) Procedures to analyze the incidents of infection to identify 
trends and develop corrective actions related to the reduction of future 
incidents.



Sec. 460.76  Transportation services.

    (a) Safety, accessibility, and equipment. A PACE organization's 
transportation services must be safe, accessible, and equipped to meet 
the needs of the participant population.
    (b) Maintenance of vehicles. (1) If the PACE organization owns, 
rents, or leases transportation vehicles, it must maintain these 
vehicles in accordance with the manufacturer's recommendations.
    (2) If a contractor provides transportation services, the PACE 
organization must ensure that the vehicles are maintained in accordance 
with the manufacturer's recommendations.
    (c) Communication with PACE center. The PACE organization must 
ensure that transportation vehicles are equipped to communicate with the 
PACE center.
    (d) Training. The PACE organization must train all transportation 
personnel (employees and contractors) in the following:
    (1) Managing the special needs of participants.
    (2) Handling emergency situations.
    (e) Changes in care plan. As part of the multidisciplinary team 
process, PACE organization staff (employees and contractors) must 
communicate relevant changes in a participant's care plan to 
transportation personnel.



Sec. 460.78  Dietary services.

    (a) Meal requirements. (1) Except as specified in paragraphs (a)(2) 
or (a)(3) of this section, the PACE organization must provide each 
participant with a nourishing, palatable, well-balanced meal that meets 
the daily nutritional and special dietary needs of each participant. 
Each meal must meet the following requirements:
    (i) Be prepared by methods that conserve nutritive value, flavor, 
and appearance.
    (ii) Be prepared in a form designed to meet individual needs.
    (iii) Be prepared and served at the proper temperature.
    (2) The PACE organization must provide substitute foods or 
nutritional supplements that meet the daily nutritional and special 
dietary needs of any participant who has any of the following problems:
    (i) Refuses the food served.
    (ii) Cannot tolerate the food served.
    (iii) Does not eat adequately.
    (3) The PACE organization must provide nutrition support to meet the

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daily nutritional needs of a participant, if indicated by his or her 
medical condition or diagnosis. Nutrition support consists of tube 
feedings, total parenteral nutrition, or peripheral parenteral 
nutrition.
    (b) Sanitary conditions. The PACE organization must do the 
following:
    (1) Procure foods (including nutritional supplements and nutrition 
support items) from sources approved, or considered satisfactory, by 
Federal, State, Tribal, or local authorities with jurisdiction over the 
service area of the organization.
    (2) Store, prepare, distribute, and serve foods (including 
nutritional supplements and nutrition support items) under sanitary 
conditions.
    (3) Dispose of garbage and refuse properly.



Sec. 460.80  Fiscal soundness.

    (a) Fiscally sound operation. A PACE organization must have a 
fiscally sound operation, as demonstrated by the following:
    (1) Total assets greater than total unsubordinated liabilities.
    (2) Sufficient cash flow and adequate liquidity to meet obligations 
as they become due.
    (3) A net operating surplus or a financial plan for maintaining 
solvency that is satisfactory to CMS and the State administering agency.
    (b) Insolvency plan. The organization must have a documented plan in 
the event of insolvency, approved by CMS and the State administering 
agency, which provides for the following:
    (1) Continuation of benefits for the duration of the period for 
which capitation payment has been made.
    (2) Continuation of benefits to participants who are confined in a 
hospital on the date of insolvency until their discharge.
    (3) Protection of participants from liability for payment of fees 
that are the legal obligation of the PACE organization.
    (c) Arrangements to cover expenses. (1) A PACE organization must 
demonstrate that it has arrangements to cover expenses in the amount of 
at least the sum of the following in the event it becomes insolvent:
    (i) One month's total capitation revenue to cover expenses the month 
before insolvency.
    (ii) One month's average payment to all contractors, based on the 
prior quarter's average payment, to cover expenses the month after the 
date it declares insolvency or ceases operations.
    (2) Arrangements to cover expenses may include, but are not limited 
to, the following:
    (i) Insolvency insurance or reinsurance.
    (ii) Hold harmless arrangement.
    (iii) Letters of credit, guarantees, net worth, restricted State 
reserves, or State law provisions.



Sec. 460.82  Marketing.

    (a) Information that a PACE organization must include in its 
marketing materials. (1) A PACE organization must inform the public 
about its program and give prospective participants the following 
written information:
    (i) An adequate description of the PACE organization's enrollment 
and disenrollment policies and requirements.
    (ii) PACE enrollment procedures.
    (iii) Description of benefits and services.
    (iv) Premiums.
    (v) Other information necessary for prospective participants to make 
an informed decision about enrollment.
    (2) Marketing information must be free of material inaccuracies, 
misleading information, or misrepresentations.
    (b) Approval of marketing information. (1) CMS must approve all 
marketing information before distribution by the PACE organization, 
including any revised or updated material.
    (2) CMS reviews initial marketing information as part of an entity's 
application for approval as a PACE organization, and approval of the 
application includes approval of marketing information.
    (3) Once a PACE organization is under a PACE program agreement, any 
revisions to existing marketing information and new information are 
subject to the following:

[[Page 421]]

    (i) Time period for approval. CMS approves or disapproves marketing 
information within 45 days after CMS receives the information from the 
organization.
    (ii) Deemed approval. Marketing information is deemed approved, and 
the organization can distribute it, if CMS and the State administering 
agency do not disapprove the marketing material within the 45-day review 
period.
    (c) Special language requirements. A PACE organization must furnish 
printed marketing materials to prospective and current participants as 
specified below:
    (1) In English and in any other principal languages of the 
community.
    (2) In Braille, if necessary.
    (d) Information on restriction of services. (1) Marketing materials 
must inform a potential participant that he or she must receive all 
needed health care, including primary care and specialist physician 
services (other than emergency services), from the PACE organization or 
from an entity authorized by the PACE organization.
    (2) All marketing materials must state clearly that PACE 
participants may be fully and personally liable for the costs of 
unauthorized or out-of-PACE program agreement services.
    (e) Prohibited marketing practices. A PACE organization must ensure 
that its employees or its agents do not use prohibited marketing 
practices which includes the following:
    (1) Discrimination of any kind, except that marketing may be 
directed to individuals eligible for PACE by reason of their age.
    (2) Activities that could mislead or confuse potential participants, 
or misrepresent the PACE organization, CMS, or the State administering 
agency.
    (3) Gifts or payments to induce enrollment.
    (4) Contracting outreach efforts to individuals or organizations 
whose sole responsibility involves direct contact with the elderly to 
solicit enrollment.
    (5) Unsolicited door-to-door marketing.
    (f) Marketing Plan. A PACE organization must establish, implement, 
and maintain a documented marketing plan with measurable enrollment 
objectives and a system for tracking its effectiveness.



                        Subpart F--PACE Services



Sec. 460.90  PACE benefits under Medicare and Medicaid.

    If a Medicare beneficiary or Medicaid recipient chooses to enroll in 
a PACE program, the following conditions apply:
    (a) Medicare and Medicaid benefit limitations and conditions 
relating to amount, duration, scope of services, deductibles, 
copayments, coinsurance, or other cost-sharing do not apply.
    (b) The participant, while enrolled in a PACE program, must receive 
Medicare and Medicaid benefits solely through the PACE organization.



Sec. 460.92  Required services.

    The PACE benefit package for all participants, regardless of the 
source of payment, must include the following:
    (a) All Medicaid-covered services, as specified in the State's 
approved Medicaid plan.
    (b) Multidisciplinary assessment and treatment planning.
    (c) Primary care, including physician and nursing services.
    (d) Social work services.
    (e) Restorative therapies, including physical therapy, occupational 
therapy, and speech-language pathology services.
    (f) Personal care and supportive services.
    (g) Nutritional counseling.
    (h) Recreational therapy.
    (i) Transportation.
    (j) Meals.
    (k) Medical specialty services including, but not limited to the 
following:
    (1) Anesthesiology.
    (2) Audiology.
    (3) Cardiology.
    (4) Dentistry.
    (5) Dermatology.
    (6) Gastroenterology.
    (7) Gynecology.
    (8) Internal medicine.
    (9) Nephrology.
    (10) Neurosurgery.
    (11) Oncology.
    (12) Ophthalmology.
    (13) Oral surgery.
    (14) Orthopedic surgery.

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    (15) Otorhinolaryngology.
    (16) Plastic surgery.
    (17) Pharmacy consulting services.
    (18) Podiatry.
    (19) Psychiatry.
    (20) Pulmonary disease.
    (21) Radiology.
    (22) Rheumatology.
    (23) General surgery.
    (24) Thoracic and vascular surgery.
    (25) Urology.
    (l) Laboratory tests, x-rays and other diagnostic procedures.
    (m) Drugs and biologicals.
    (n) Prosthetics, orthotics, durable medical equipment, corrective 
vision devices, such as eyeglasses and lenses, hearing aids, dentures, 
and repair and maintenance of these items.
    (o) Acute inpatient care, including the following:
    (1) Ambulance.
    (2) Emergency room care and treatment room services.
    (3) Semi-private room and board.
    (4) General medical and nursing services.
    (5) Medical surgical/intensive care/coronary care unit.
    (6) Laboratory tests, x-rays and other diagnostic procedures.
    (7) Drugs and biologicals.
    (8) Blood and blood derivatives.
    (9) Surgical care, including the use of anesthesia.
    (10) Use of oxygen.
    (11) Physical, occupational, respiratory therapies, and speech-
language pathology services.
    (12) Social services.
    (p) Nursing facility care.
    (1) Semi-private room and board.
    (2) Physician and skilled nursing services.
    (3) Custodial care.
    (4) Personal care and assistance.
    (5) Drugs and biologicals.
    (6) Physical, occupational, recreational therapies, and speech-
language pathology, if necessary.
    (7) Social services.
    (8) Medical supplies and appliances.
    (q) Other services determined necessary by the multidisciplinary 
team to improve and maintain the participant's overall health status.



Sec. 460.94  Required services for Medicare participants.

    (a) Except for Medicare requirements that are waived for the PACE 
program, as specified in paragraph (b) of this section, the PACE benefit 
package for Medicare participants must include the following services:
    (1) The scope of hospital insurance benefits described in part 409 
of this chapter.
    (2) The scope of supplemental medical insurance benefits described 
in part 410 of this chapter.
    (b) Waivers of Medicare coverage requirements. The following 
Medicare requirements are waived for purposes of the PACE program and do 
not apply:
    (1) The provisions of subpart F of part 409 of this chapter that 
limit coverage of institutional services.
    (2) The provisions of subparts G and H of part 409 of this chapter, 
and parts 412 through 414 of this chapter that relate to payment for 
benefits.
    (3) The provisions of subparts D and E of part 409 of this chapter 
that limit coverage of extended care services or home health services.
    (4) The provisions of subpart D of part 409 of this chapter that 
impose a 3-day prior hospitalization requirement for coverage of 
extended care services.
    (5) Sections 411.15(g) and (k) of this chapter that may prevent 
payment for PACE program services to PACE participants.



Sec. 460.96  Excluded services.

    The following services are excluded from coverage under PACE:
    (a) Any service that is not authorized by the multidisciplinary 
team, even if it is a required service, unless it is an emergency 
service.
    (b) In an inpatient facility, private room and private duty nursing 
services (unless medically necessary), and nonmedical items for personal 
convenience such as telephone charges and radio or television rental 
(unless specifically authorized by the multidisciplinary team as part of 
the participant's plan of care).
    (c) Cosmetic surgery, which does not include surgery that is 
required for improved functioning of a malformed part

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of the body resulting from an accidental injury or for reconstruction 
following mastectomy.
    (d) Experimental medical, surgical, or other health procedures.
    (e) Services furnished outside of the United States, except as 
follows:
    (1) In accordance with Secs. 424.122 through 424.124 of this 
chapter.
    (2) As permitted under the State's approved Medicaid plan.



Sec. 460.98  Service delivery.

    (a) Plan. A PACE organization must establish and implement a written 
plan to furnish care that meets the needs of each participant in all 
care settings 24 hours a day, every day of the year.
    (b) Provision of services. (1) The PACE organization must furnish 
comprehensive medical, health, and social services that integrate acute 
and long-term care.
    (2) These services must be furnished in at least the PACE center, 
the home, and inpatient facilities.
    (3) The PACE organization may not discriminate against any 
participant in the delivery of required PACE services based on race, 
ethnicity, national origin, religion, sex, age, mental or physical 
disability, or source of payment.
    (c) Minimum services furnished at each PACE center. At a minimum, 
the following services must be furnished at each PACE center:
    (1) Primary care, including physician and nursing services.
    (2) Social services.
    (3) Restorative therapies, including physical therapy and 
occupational therapy.
    (4) Personal care and supportive services.
    (5) Nutritional counseling.
    (6) Recreational therapy.
    (7) Meals.
    (d) Center operation. (1) A PACE organization must operate at least 
one PACE center either in, or contiguous to, its defined service area 
with sufficient capacity to allow routine attendance by participants.
    (2) A PACE organization must ensure accessible and adequate services 
to meet the needs of its participants. If necessary, a PACE organization 
must increase the number of PACE centers, staff, or other PACE services.
    (3) If a PACE organization operates more than one center, each 
center must offer the full range of services and have sufficient staff 
to meet the needs of participants.
    (e) Center attendance. The frequency of a participant's attendance 
at a center is determined by the multidisciplinary team, based on the 
needs and preferences of each participant.



Sec. 460.100  Emergency care.

    (a) Written plan. A PACE organization must establish and maintain a 
written plan to handle emergency care. The plan must ensure that CMS, 
the State, and PACE participants are held harmless if the PACE 
organization does not pay for emergency services.
    (b) Emergency care. Emergency care is appropriate when services are 
needed immediately because of an injury or sudden illness and the time 
required to reach the PACE organization or one of its contract 
providers, would cause risk of permanent damage to the participant's 
health. Emergency services include inpatient and outpatient services 
that meet the following requirements:
    (1) Are furnished by a qualified emergency services provider, other 
than the PACE organization or one of its contract providers, either in 
or out of the PACE organization's service area.
    (2) Are needed to evaluate or stabilize an emergency medical 
condition.
    (c) An emergency medical condition means a condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
such that a prudent layperson, with an average knowledge of health and 
medicine, could reasonably expect the absence of immediate medical 
attention to result in the following:
    (1) Serious jeopardy to the health of the participant.
    (2) Serious impairment to bodily functions.
    (3) Serious dysfunction of any bodily organ or part.
    (d) Explanation to participant. The organization must ensure that 
the participant or caregiver, or both, understand when and how to get 
access to emergency services.
    (e) On-call providers. The plan must provide for the following:

[[Page 424]]

    (1) An on-call provider, available 24-hours per day to address 
participant questions about emergency services and respond to requests 
for authorization of urgently needed out-of-network services and post 
stabilization care services following emergency services.
    (2) Coverage of urgently needed out-of-network and post-
stabilization care services when either of the following conditions are 
met:
    (i) The services are preapproved by the PACE organization.
    (ii) The services are not preapproved by the PACE organization 
because the PACE organization did not respond to a request for approval 
within 1 hour after being contacted or cannot be contacted for approval.



Sec. 460.102  Multidisciplinary team.

    (a) Basic requirement. A PACE organization must meet the following 
requirements:
    (1) Establish a multidisciplinary team at each center to 
comprehensively assess and meet the individual needs of each 
participant.
    (2) Assign each participant to a multidisciplinary team functioning 
at the PACE center that the participant attends.
    (b) Composition of multidisciplinary team. The multidisciplinary 
team must be composed of at least the following members:
    (1) Primary care physician.
    (2) Registered nurse.
    (3) Social worker.
    (4) Physical therapist.
    (5) Occupational therapist.
    (6) Recreational therapist or activity coordinator.
    (7) Dietitian.
    (8) PACE center manager.
    (9) Home care coordinator.
    (10) Personal care attendant or his or her representative.
    (11) Driver or his or her representative.
    (c) Primary care physician. (1) Primary medical care must be 
furnished to a participant by a PACE primary care physician.
    (2) Each primary care physician is responsible for the following:
    (i) Managing a participant's medical situations.
    (ii) Overseeing a participant's use of medical specialists and 
inpatient care.
    (d) Responsibilities of multidisciplinary team. (1) The 
multidisciplinary team is responsible for the initial assessment, 
periodic reassessments, plan of care, and coordination of 24 hour care 
delivery.
    (2) Each team member is responsible for the following:
    (i) Regularly informing the multidisciplinary team of the medical, 
functional, and psychosocial condition of each participant.
    (ii) Remaining alert to pertinent input from other team members, 
participants, and caregivers.
    (iii) Documenting changes in a participant's condition in the 
participant's medical record.
    (3) Except as specified in paragraph (g) of this section, the 
members of the multidisciplinary team must serve primarily PACE 
participants.
    (e) Exchange of information between team members. The PACE 
organization must establish, implement, and maintain documented internal 
procedures governing the exchange of information between team members, 
contractors, and participants and their caregivers consistent with the 
requirements for confidentiality in Sec. 460.200(e).
    (f) Organization employees. Except as specified in paragraph (g) of 
this section, at least the following members of the multidisciplinary 
team must be employees of the PACE organization:
    (1) Primary care physician.
    (2) Registered nurse.
    (3) Social worker.
    (4) Recreational therapist or activity coordinator.
    (5) PACE center manager.
    (6) Home care coordinator.
    (7) PACE center personal care attendant.
    (g) Waivers. (1) CMS and the State administering agency may waive 
either or both of the following:
    (i) The requirement in paragraph (d)(3) of this section that members 
of the multidisciplinary team must serve primarily PACE participants.
    (ii) The requirement in paragraph (f)(1) of this section that the 
primary care physician must be an employee of the PACE organization.

[[Page 425]]

    (2) If an applicant seeking approval as a PACE organization believes 
a waiver under this paragraph is warranted, it must include a request 
for the waiver in its application and describe in detail the 
circumstances supporting the request.
    (3) CMS and the State administering agency may grant a waiver if 
they determine the following:
    (i) There is insufficient availability in the PACE organization's 
service area of individuals who meet the requirements, or State 
licensing laws make it inappropriate for the organization to employ 
physicians.
    (ii) The proposed alternative does not adversely affect the 
availability of care or the quality of care that is furnished to 
participants.

    Effective Date Note: At 67 FR 61506, Oct. 1, 2002, Sec. 460.102, 
paragraph (d)(2)(iii) was revised, paragraph (d)(3) was amended by 
removing ``Except as specified in paragraph (g) of this section'' and 
paragraphs (f) and (g) were removed, effective Oct. 31, 2002. For the 
convenience of the user, the revised text is set forth as follows:

Sec. 460.102  Interdisciplinary team.

                                * * * * *

    (d) * * *
    (2) * * *

                                * * * * *

    (iii) Documenting changes of a participant's condition in the 
participant's medical record consistent with documentation polices 
established by the medical director.

                                * * * * *



Sec. 460.104  Participant assessment.

    (a) Initial comprehensive assessment--(1) Basic requirement. The 
multidisciplinary team must conduct an initial comprehensive assessment 
on each participant. The assessment must be completed promptly following 
enrollment.
    (2) As part of the initial comprehensive assessment, each of the 
following members of the multidisciplinary team must evaluate the 
participant in person, at appropriate intervals, and develop a 
discipline-specific assessment of the participant's health and social 
status:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Social worker.
    (iv) Physical therapist or occupational therapist, or both.
    (v) Recreational therapist or activity coordinator.
    (vi) Dietitian.
    (vii) Home care coordinator.
    (3) At the recommendation of individual team members, other 
professional disciplines (for example, speech-language pathology, 
dentistry, or audiology) may be included in the comprehensive assessment 
process.
    (4) Comprehensive assessment criteria. The comprehensive assessment 
must include, but is not limited to, the following:
    (i) Physical and cognitive function and ability.
    (ii) Medication use.
    (iii) Participant and caregiver preferences for care.
    (iv) Socialization and availability of family support.
    (v) Current health status and treatment needs.
    (vi) Nutritional status.
    (vii) Home environment, including home access and egress.
    (viii) Participant behavior.
    (ix) Psychosocial status.
    (x) Medical and dental status.
    (xi) Participant language.
    (b) Development of plan of care. The multidisciplinary team must 
promptly consolidate discipline-specific assessments into a single plan 
of care for each participant through discussion in team meetings and 
consensus of the entire multidisciplinary team. In developing the plan 
of care, female participants must be informed that they are entitled to 
choose a qualified specialist for women's health services from the PACE 
organization's network to furnish routine or preventive women's health 
services.
    (c) Periodic reassessment--(1) Semiannual reassessment. On at least 
a semiannual basis, or more often if a participant's condition dictates, 
the following members of the multidisciplinary team must conduct an in-
person reassessment:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Social worker.

[[Page 426]]

    (iv) Recreational therapist or activity coordinator.
    (v) Other team members actively involved in the development or 
implementation of the participant's plan of care, for example, home care 
coordinator, physical therapist, occupational therapist, or dietitian.
    (2) Annual reassessment. On at least an annual basis, the following 
members of the multidisciplinary team must conduct an in-person 
reassessment:
    (i) Physical therapist or occupational therapist, or both.
    (ii) Dietitian.
    (iii) Home care coordinator.
    (3) Reassessment based on change in participant status or at the 
request of the participant or designated representative. If the health 
or psychosocial status of a participant changes or if a participant (or 
his or her designated representative) believes that the participant 
needs to initiate, eliminate, or continue a particular service, the 
members of the multidisciplinary team, listed in paragraph (a)(2) of 
this section, must conduct an in-person reassessment.
    (i) The PACE organization must have explicit procedures for timely 
resolution of requests by a participant or his or her designated 
representative to initiate, eliminate, or continue a particular service.
    (ii) Except as provided in paragraph (c)(3)(iii) of this section, 
the multidisciplinary team must notify the participant or designated 
representative of its decision to approve or deny the request from the 
participant or designated representative as expeditiously as the 
participant's condition requires, but no later than 72 hours after the 
date the multidisciplinary team receives the request for reassessment.
    (iii) The multidisciplinary team may extend the 72-hour timeframe 
for notifying the participant or designated representative of its 
decision to approve or deny the request by no more than 5 additional 
days for either of the following reasons:
    (A) The participant or designated representative requests the 
extension.
    (B) The team documents its need for additional information and how 
the delay is in the interest of the participant.
    (iv) The PACE organization must explain any denial of a request to 
the participant or the participant's designated representative orally 
and in writing. The PACE organization must provide the specific reasons 
for the denial in understandable language.
    (v) If the participant or designated representative is dissatisfied 
with the decision on the request, the PACE organization is responsible 
for the following:
    (A) Informing the participant or designated representative of his or 
her right to appeal the decision as specified in Sec. 460.122.
    (B) Describing both the standard and expedited appeals processes, 
including the right to, and conditions for, obtaining expedited 
consideration of an appeal of a denial of services as specified in 
Sec. 460.122.
    (C) Describing the right to, and conditions for, continuation of 
appealed services through the period of an appeal as specified in 
Sec. 460.122(e).
    (D) If the multidisciplinary team fails to provide the participant 
with timely notice of the resolution of the request or does not furnish 
the services required by the revised plan of care, this failure 
constitutes an adverse decision, and the participant's request must be 
automatically processed by the PACE organization as an appeal in 
accordance with Sec. 460.122.
    (d) Changes to plan of care. Team members who conduct a reassessment 
must meet the following requirements:
    (1) Reevaluate the participant's plan of care.
    (2) Discuss any changes in the plan with the multidisciplinary team.
    (3) Obtain approval of the revised plan from the multidisciplinary 
team and the participant (or designated representative).
    (4) Furnish any services included in the revised plan of care as a 
result of a reassessment to the participant as expeditiously as the 
participant's health condition requires.
    (e) Documentation. Multidisciplinary team members must document all 
assessment and reassessment information in the participant's medical 
record.

[[Page 427]]



Sec. 460.106  Plan of care.

    (a) Basic requirement. The multidisciplinary team must promptly 
develop a comprehensive plan of care for each participant.
    (b) Content of plan of care. The plan of care must meet the 
following requirements:
    (1) Specify the care needed to meet the participant's medical, 
physical, emotional, and social needs, as identified in the initial 
comprehensive assessment.
    (2) Identify measurable outcomes to be achieved.
    (c) Implementation of the plan of care. (1) The team must implement, 
coordinate, and monitor the plan of care whether the services are 
furnished by PACE employees or contractors.
    (2) The team must continuously monitor the participant's health and 
psychosocial status, as well as the effectiveness of the plan of care, 
through the provision of services, informal observation, input from 
participants or caregivers, and communications among members of the 
multidisciplinary team and other providers.
    (d) Evaluation of plan of care. On at least a semi-annual basis, the 
multidisciplinary team must reevaluate the plan of care, including 
defined outcomes, and make changes as necessary.
    (e) Participant and caregiver involvement in plan of care. The team 
must develop, review, and reevaluate the plan of care in collaboration 
with the participant or caregiver, or both, to ensure that there is 
agreement with the plan of care and that the participant's concerns are 
addressed.
    (f) Documentation. The team must document the plan of care, and any 
changes made to it, in the participant's medical record.



                      Subpart G--Participant Rights



Sec. 460.110  Bill of rights.

    (a) Written bill of rights. A PACE organization must have a written 
participant bill of rights designed to protect and promote the rights of 
each participant. Those rights include, at a minimum, the ones specified 
in Sec. 460.112.
    (b) Explanation of rights. The organization must inform a 
participant upon enrollment, in writing, of his or her rights and 
responsibilities, and all rules and regulations governing participation.
    (c) Protection of rights. The organization must protect and provide 
for the exercise of the participant's rights.



Sec. 460.112  Specific rights to which a participant is entitled.

    (a) Respect and nondiscrimination. Each participant has the right to 
considerate, respectful care from all PACE employees and contractors at 
all times and under all circumstances. Each participant has the right 
not to be discriminated against in the delivery of required PACE 
services based on race, ethnicity, national origin, religion, sex, age, 
mental or physical disability, or source of payment. Specifically, each 
participant has the right to the following:
    (1) To receive comprehensive health care in a safe and clean 
environment and in an accessible manner.
    (2) To be treated with dignity and respect, be afforded privacy and 
confidentiality in all aspects of care, and be provided humane care.
    (3) Not to be required to perform services for the PACE 
organization.
    (4) To have reasonable access to a telephone.
    (5) To be free from harm, including physical or mental abuse, 
neglect, corporal punishment, involuntary seclusion, excessive 
medication, and any physical or chemical restraint imposed for purposes 
of discipline or convenience and not required to treat the participant's 
medical symptoms.
    (6) To be encouraged and assisted to exercise rights as a 
participant, including the Medicare and Medicaid appeals processes as 
well as civil and other legal rights.
    (7) To be encouraged and assisted to recommend changes in policies 
and services to PACE staff.
    (b) Information disclosure. Each PACE participant has the right to 
receive accurate, easily understood information and to receive 
assistance in making informed health care decisions. Specifically, each 
participant has the following rights:
    (1) To be fully informed in writing of the services available from 
the PACE

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organization, including identification of all services that are 
delivered through contracts, rather than furnished directly by the PACE 
organization at the following times:
    (i) Before enrollment.
    (ii) At enrollment.
    (iii) When there is a change in services.
    (2) To have the enrollment agreement, described in Sec. 460.154, 
fully explained in a manner understood by the participant.
    (3) To examine, or upon reasonable request, to be assisted to 
examine the results of the most recent review of the PACE organization 
conducted by CMS or the State administering agency and any plan of 
correction in effect.
    (c) Choice of providers. Each participant has the right to a choice 
of health care providers, within the PACE organization's network, that 
is sufficient to ensure access to appropriate high-quality health care. 
Specifically, each participant has the right to the following:
    (1) To choose his or her primary care physician and specialists from 
within the PACE network.
    (2) To request that a qualified specialist for women's health 
services furnish routine or preventive women's health services.
    (3) To disenroll from the program at any time.
    (d) Access to emergency services. Each participant has the right to 
access emergency health care services when and where the need arises 
without prior authorization by the PACE multidisciplinary team.
    (e) Participation in treatment decisions. Each participant has the 
right to participate fully in all decisions related to his or her 
treatment. A participant who is unable to participate fully in treatment 
decisions has the right to designate a representative. Specifically, 
each participant has the following rights:
    (1) To have all treatment options explained in a culturally 
competent manner and to make health care decisions, including the right 
to refuse treatment, and be informed of the consequences of the 
decisions.
    (2) To have the PACE organization explain advance directives and to 
establish them, if the participant so desires, in accordance with 
Secs. 489.100 and 489.102 of this chapter.
    (3) To be fully informed of his or her health and functional status 
by the multidisciplinary team.
    (4) To participate in the development and implementation of the plan 
of care.
    (5) To request a reassessment by the multidisciplinary team.
    (6) To be given reasonable advance notice, in writing, of any 
transfer to another treatment setting and the justification for the 
transfer (that is, due to medical reasons or for the participant's 
welfare, or that of other participants). The PACE organization must 
document the justification in the participant's medical record.
    (f) Confidentiality of health information. Each participant has the 
right to communicate with health care providers in confidence and to 
have the confidentiality of his or her individually identifiable health 
care information protected. Each participant also has the right to 
review and copy his or her own medical records and request amendments to 
those records. Specifically, each participant has the following rights:
    (1) To be assured of confidential treatment of all information 
contained in the health record, including information contained in an 
automated data bank.
    (2) To be assured that his or her written consent will be obtained 
for the release of information to persons not otherwise authorized under 
law to receive it.
    (3) To provide written consent that limits the degree of information 
and the persons to whom information may be given.
    (g) Complaints and appeals. Each participant has the right to a fair 
and efficient process for resolving differences with the PACE 
organization, including a rigorous system for internal review by the 
organization and an independent system of external review. Specifically, 
each participant has the following rights:
    (1) To be encouraged and assisted to voice complaints to PACE staff 
and outside representatives of his or her

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choice, free of any restraint, interference, coercion, discrimination, 
or reprisal by the PACE staff.
    (2) To appeal any treatment decision of the PACE organization, its 
employees, or contractors through the process described in Sec. 460.122.



Sec. 460.114  Restraints.

    (a) The PACE organization must limit use of restraints to the least 
restrictive and most effective method available. The term restraint 
includes either a physical restraint or a chemical restraint.
    (1) A physical restraint is any manual method or physical or 
mechanical device, materials, or equipment attached or adjacent to the 
participant's body that he or she cannot easily remove that restricts 
freedom of movement or normal access to one's body.
    (2) A chemical restraint is a medication used to control behavior or 
to restrict the participant's freedom of movement and is not a standard 
treatment for the participant's medical or psychiatric condition.
    (b) If the multidisciplinary team determines that a restraint is 
needed to ensure the participant's physical safety or the safety of 
others, the use must meet the following conditions:
    (1) Be imposed for a defined, limited period of time, based upon the 
assessed needs of the participant.
    (2) Be imposed in accordance with safe and appropriate restraining 
techniques.
    (3) Be imposed only when other less restrictive measures have been 
found to be ineffective to protect the participant or others from harm.
    (4) Be removed or ended at the earliest possible time.
    (c) The condition of the restrained participant must be continually 
assessed, monitored, and reevaluated.



Sec. 460.116  Explanation of rights.

    (a) Written policies. A PACE organization must have written policies 
and implement procedures to ensure that the participant, his or her 
representative, if any, and staff understand these rights.
    (b) Explanation of rights. The PACE organization must fully explain 
the rights to the participant and his or her representative, if any, at 
the time of enrollment in a manner understood by the participant.
    (c) Display. The PACE organization must meet the following 
requirements:
    (1) Write the participant rights in English and in any other 
principal languages of the community.
    (2) Display the participant rights in a prominent place in the PACE 
center.



Sec. 460.118  Violation of rights.

    The PACE organization must have established documented procedures to 
respond to and rectify a violation of a participant's rights.



Sec. 460.120  Grievance process.

    For purposes of this part, a grievance is a complaint, either 
written or oral, expressing dissatisfaction with service delivery or the 
quality of care furnished.
    (a) Process to resolve grievances. A PACE organization must have a 
formal written process to evaluate and resolve medical and nonmedical 
grievances by participants, their family members, or representatives.
    (b) Notification to participants. Upon enrollment, and at least 
annually thereafter, the PACE organization must give a participant 
written information on the grievance process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
grievance process must include written procedures for the following:
    (1) How a participant files a grievance.
    (2) Documentation of a participant's grievance.
    (3) Response to, and resolution of, grievances in a timely manner.
    (4) Maintenance of confidentiality of a participant's grievance.
    (d) Continuing care during grievance process. The PACE organization 
must continue to furnish all required services to the participant during 
the grievance process.
    (e) Explaining the grievance process. The PACE organization must 
discuss with and provide to the participant in writing the specific 
steps, including timeframes for response, that will be taken to resolve 
the participant's grievance.

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    (f) Analyzing grievance information. The PACE organization must 
maintain, aggregate, and analyze information on grievance proceedings. 
This information must be used in the PACE organization's internal 
quality assessment and performance improvement program.



Sec. 460.122  PACE organization's appeals process.

    For purposes of this section, an appeal is a participant's action 
taken with respect to the PACE organization's noncoverage of, or 
nonpayment for, a service.
    (a) PACE organization's written appeals process. The PACE 
organization must have a formal written appeals process, with specified 
timeframes for response, to address noncoverage or nonpayment of a 
service.
    (b) Notification of participants. Upon enrollment, at least annually 
thereafter, and whenever the multidisciplinary team denies a request for 
services or payment, the PACE organization must give a participant 
written information on the appeals process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
appeals process must include written procedures for the following:
    (1) Timely preparation and processing of a written denial of 
coverage or payment as provided in Sec. 460.104(c)(3).
    (2) How a participant files an appeal.
    (3) Documentation of a participant's appeal.
    (4) Appointment of an appropriately credentialed and impartial third 
party who was not involved in the original action and who does not have 
a stake in the outcome of the appeal to review the participant's appeal.
    (5) Responses to, and resolution of, appeals as expeditiously as the 
participant's health condition requires, but no later than 30 calendar 
days after the organization receives an appeal.
    (6) Maintenance of confidentiality of appeals.
    (d) Notification. A PACE organization must give all parties involved 
in the appeal the following:
    (1) Appropriate written notification.
    (2) A reasonable opportunity to present evidence related to the 
dispute, in person, as well as in writing.
    (e) Services furnished during appeals process. During the appeals 
process, the PACE organization must meet the following requirements:
    (1) For a Medicaid participant, continue to furnish the disputed 
services until issuance of the final determination if the following 
conditions are met:
    (i) The PACE organization is proposing to terminate or reduce 
services currently being furnished to the participant.
    (ii) The participant requests continuation with the understanding 
that he or she may be liable for the costs of the contested services if 
the determination is not made in his or her favor.
    (2) Continue to furnish to the participant all other required 
services, as specified in subpart F of this part.
    (f) Expedited appeals process. (1) A PACE organization must have an 
expedited appeals process for situations in which the participant 
believes that his or her life, health, or ability to regain maximum 
function would be seriously jeopardized, absent provision of the service 
in dispute.
    (2) Except as provided in paragraph (f)(3) of this section, the PACE 
organization must respond to the appeal as expeditiously as the 
participant's health condition requires, but no later than 72 hours 
after it receives the appeal.
    (3) The PACE organization may extend the 72-hour timeframe by up to 
14 calendar days for either of the following reasons:
    (i) The participant requests the extension.
    (ii) The organization justifies to the State administering agency 
the need for additional information and how the delay is in the interest 
of the participant.
    (g) Determination in favor of participant. A PACE organization must 
furnish the disputed service as expeditiously as the participant's 
health condition requires if a determination is made in favor of the 
participant on appeal.

[[Page 431]]

    (h) Determination adverse to participant. For a determination that 
is wholly or partially adverse to a participant, at the same time the 
decision is made, the PACE organization must notify the following:
    (1) CMS.
    (2) The State administering agency.
    (3) The participant.
    (i) Analyzing appeals information. A PACE organization must 
maintain, aggregate, and analyze information on appeal proceedings and 
use this information in the organization's internal quality assessment 
and performance improvement program.



Sec. 460.124  Additional appeal rights under Medicare or Medicaid.

    A PACE organization must inform a participant in writing of his or 
her appeal rights under Medicare or Medicaid managed care, or both, 
assist the participant in choosing which to pursue if both are 
applicable, and forward the appeal to the appropriate external entity.



        Subpart H--Quality Assessment and Performance Improvement



Sec. 460.130  General rule.

    (a) A PACE organization must develop, implement, maintain, and 
evaluate an effective, data-driven quality assessment and performance 
improvement program.
    (b) The program must reflect the full range of services furnished by 
the PACE organization.
    (c) A PACE organization must take actions that result in 
improvements in its performance in all types of care.



Sec. 460.132  Quality assessment and performance improvement plan.

    (a) Basic rule. A PACE organization must have a written quality 
assessment and performance improvement plan.
    (b) Annual review. The PACE governing body must review the plan 
annually and revise it, if necessary.
    (c) Minimum plan requirements. At a minimum, the plan must specify 
how the PACE organization proposes to meet the following requirements:
    (1) Identify areas to improve or maintain the delivery of services 
and patient care.
    (2) Develop and implement plans of action to improve or maintain 
quality of care.
    (3) Document and disseminate to PACE staff and contractors the 
results from the quality assessment and performance improvement 
activities.



Sec. 460.134  Minimum requirements for quality assessment and performance improvement program.

    (a) Minimum program requirements. A PACE organization's quality 
assessment and performance improvement program must include, but is not 
limited to, the use of objective measures to demonstrate improved 
performance with regard to the following:
    (1) Utilization of PACE services, such as decreased inpatient 
hospitalizations and emergency room visits.
    (2) Caregiver and participant satisfaction.
    (3) Outcome measures that are derived from data collected during 
assessments, including data on the following:
    (i) Physiological well being.
    (ii) Functional status.
    (iii) Cognitive ability.
    (iv) Social/behavioral functioning.
    (v) Quality of life of participants.
    (4) Effectiveness and safety of staff-provided and contracted 
services, including the following:
    (i) Competency of clinical staff.
    (ii) Promptness of service delivery.
    (iii) Achievement of treatment goals and measurable outcomes.
    (5) Nonclinical areas, such as grievances and appeals, 
transportation services, meals, life safety, and environmental issues.
    (b) Basis for outcome measures. Outcome measures must be based on 
current clinical practice guidelines and professional practice standards 
applicable to the care of PACE participants.
    (c) Minimum levels of performance. The PACE organization must meet 
or exceed minimum levels of performance, established by CMS and the 
State administering agency, on standardized quality measures, such as 
influenza immunization rates, which are specified in the PACE program 
agreement.

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    (d) Accuracy of data. The PACE organization must ensure that all 
data used for outcome monitoring are accurate and complete.



Sec. 460.136  Internal quality assessment and performance improvement activities.

    (a) Quality assessment and performance improvement requirements. A 
PACE organization must do the following:
    (1) Use a set of outcome measures to identify areas of good or 
problematic performance.
    (2) Take actions targeted at maintaining or improving care based on 
outcome measures.
    (3) Incorporate actions resulting in performance improvement into 
standards of practice for the delivery of care and periodically track 
performance to ensure that any performance improvements are sustained 
over time.
    (4) Set priorities for performance improvement, considering 
prevalence and severity of identified problems, and give priority to 
improvement activities that affect clinical outcomes.
    (5) Immediately correct any identified problem that directly or 
potentially threatens the health and safety of a PACE participant.
    (b) Quality assessment and performance improvement coordinator. A 
PACE organization must designate an individual to coordinate and oversee 
implementation of quality assessment and performance improvement 
activities.
    (c) Involvement in quality assessment and performance improvement 
activities. (1) A PACE organization must ensure that all 
multidisciplinary team members, PACE staff, and contract providers are 
involved in the development and implementation of quality assessment and 
performance improvement activities and are aware of the results of these 
activities.
    (2) The quality improvement coordinator must encourage a PACE 
participant and his or her caregivers to be involved in quality 
assessment and performance improvement activities, including providing 
information about their satisfaction with services.



Sec. 460.138  Committees with community input.

    A PACE organization must establish one or more committees, with 
community input, to do the following:
    (a) Evaluate data collected pertaining to quality outcome measures.
    (b) Address the implementation of, and results from, the quality 
assessment and performance improvement plan.
    (c) Provide input related to ethical decisionmaking, including end-
of-life issues and implementation of the Patient Self-Determination Act.



Sec. 460.140  Additional quality assessment activities.

    A PACE organization must meet external quality assessment and 
reporting requirements, as specified by CMS or the State administering 
agency, in accordance with Sec. 460.202.



           Subpart I--Participant Enrollment and Disenrollment



Sec. 460.150  Eligibility to enroll in a PACE program.

    (a) General rule. To enroll in a PACE program, an individual must 
meet eligibility requirements specified in this section. To continue to 
be eligible for PACE, an individual must meet the annual recertification 
requirements specified in Sec. 460.160.
    (b) Basic eligibility requirements. To be eligible to enroll in 
PACE, an individual must meet the following requirements:
    (1) Be 55 years of age or older.
    (2) Be determined by the State administering agency to need the 
level of care required under the State Medicaid plan for coverage of 
nursing facility services, which indicates that the individual's health 
status is comparable to the health status of individuals who have 
participated in the PACE demonstration waiver programs.
    (3) Reside in the service area of the PACE organization.
    (4) Meet any additional program specific eligibility conditions 
imposed under the PACE program agreement. These additional conditions 
may not

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modify the requirements of paragraph (b)(1) through (b)(3) of this 
section.
    (c) Other eligibility requirements. (1) At the time of enrollment, 
an individual must be able to live in a community setting without 
jeopardizing his or her health or safety.
    (2) The criteria used to determine if an individual's health or 
safety would be jeopardized by living in a community setting must be 
specified in the program agreement.
    (d) Eligibility under Medicare and Medicaid. Eligibility to enroll 
in a PACE program is not restricted to an individual who is either a 
Medicare beneficiary or Medicaid recipient. A potential PACE enrollee 
may be, but is not required to be, any or all of the following:
    (1) Entitled to Medicare Part A.
    (2) Enrolled under Medicare Part B.
    (3) Eligible for Medicaid.



Sec. 460.152  Enrollment process.

    (a) Intake process. Intake is an intensive process during which PACE 
staff members make one or more visits to a potential participant's place 
of residence and the potential participant makes one or more visits to 
the PACE center. At a minimum, the intake process must include the 
following activities:
    (1) The PACE staff must explain to the potential participant and his 
or her representative or caregiver the following information:
    (i) The PACE program, using a copy of the enrollment agreement 
described in Sec. 460.154, specifically references the elements of the 
agreement including but not limited to Sec. 460.154(e), (i) through (m), 
and (r).
    (ii) The requirement that the PACE organization would be the 
participant's sole service provider and clarification that the PACE 
organization guarantees access to services, but not to a specific 
provider.
    (iii) A list of the employees of the PACE organization who furnish 
care and the most current list of contracted health care providers under 
Sec. 460.70(c).
    (iv) Monthly premiums, if any.
    (v) Any Medicaid spenddown obligations.
    (2) The potential participant must sign a release to allow the PACE 
organization to obtain his or her medical and financial information and 
eligibility status for Medicare and Medicaid.
    (3) The State administering agency must assess the potential 
participant, including any individual who is not eligible for Medicaid, 
to ensure that he or she needs the level of care required under the 
State Medicaid plan for coverage of nursing facility services, which 
indicates that the individual's health status is comparable to the 
health status of individuals who have participated in the PACE 
demonstration waiver programs.
    (4) PACE staff must assess the potential participant to ensure that 
he or she can be cared for appropriately in a community setting and that 
he or she meets all requirements for PACE eligibility specified in this 
part.
    (b) Denial of Enrollment. If a prospective participant is denied 
enrollment because his or her health or safety would be jeopardized by 
living in a community setting, the PACE organization must meet the 
following requirements:
    (1) Notify the individual in writing of the reason for the denial.
    (2) Refer the individual to alternative services, as appropriate.
    (3) Maintain supporting documentation of the reason for the denial.
    (4) Notify CMS and the State administering agency and make the 
documentation available for review.



Sec. 460.154  Enrollment agreement.

    If the potential participant meets the eligibility requirements and 
wants to enroll, he or she must sign an enrollment agreement which 
contains, at a minimum, the following information:
    (a) Applicant's name, sex, and date of birth.
    (b) Medicare beneficiary status (Part A, Part B, or both) and 
number, if applicable.
    (c) Medicaid recipient status and number, if applicable.
    (d) Other health insurance information, if applicable.
    (e) Conditions for enrollment and disenrollment in PACE.
    (f) Description of participant premiums, if any, and procedures for 
payment of premiums.

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    (g) Notification that a Medicaid participant and a participant who 
is eligible for both Medicare and Medicaid are not liable for any 
premiums, but may be liable for any applicable spenddown liability under 
Secs. 435.121 and 435.831 of this chapter and any amounts due under the 
post-eligibility treatment of income process under Sec. 460.184.
    (h) Notification that a Medicare participant may not disenroll from 
PACE at a social security office.
    (i) Notification that enrollment in PACE results in disenrollment 
from any other Medicare or Medicaid prepayment plan or optional benefit. 
Electing enrollment in any other Medicare or Medicaid prepayment plan or 
optional benefit, including the hospice benefit, after enrolling as a 
PACE participant is considered a voluntary disenrollment from PACE.
    (j) Information on the consequences of subsequent enrollment in 
other optional Medicare or Medicaid programs following disenrollment 
from PACE.
    (k) Description of PACE services available, including all Medicare 
and Medicaid covered services, and how services are obtained from the 
PACE organization.
    (l) Description of the procedures for obtaining emergency and 
urgently needed out-of-network services.
    (m) The participant bill of rights.
    (n) Information on the process for grievances and appeals and 
Medicare/Medicaid phone numbers for use in appeals.
    (o) Notification of a participant's obligation to inform the PACE 
organization of a move or lengthy absence from the organization's 
service area.
    (p) An acknowledgment by the applicant or representative that he or 
she understands the requirement that the PACE organization must be the 
applicant's sole service provider.
    (q) A statement that the PACE organization has an agreement with CMS 
and the State administering agency that is subject to renewal on a 
periodic basis and, if the agreement is not renewed, the program will be 
terminated.
    (r) The applicant's authorization for disclosure and exchange of 
personal information between CMS, its agents, the State administering 
agency, and the PACE organization.
    (s) The effective date of enrollment.
    (t) The applicant's signature and the date.



Sec. 460.156  Other enrollment procedures.

    (a) Items a PACE organization must give a participant upon 
enrollment. After the participant signs the enrollment agreement, the 
PACE organization must give the participant the following:
    (1) A copy of the enrollment agreement.
    (2) A PACE membership card.
    (3) Emergency information to be posted in his or her home 
identifying the individual as a PACE participant and explaining how to 
access emergency services.
    (4) Stickers for the participant's Medicare and Medicaid cards, as 
applicable, which indicate that he or she is a PACE participant and 
include the phone number of the PACE organization.
    (b) Submittal of participant information to CMS and the State. The 
PACE organization must submit participant information to CMS and the 
State administering agency, in accordance with established procedures.
    (c) Changes in enrollment agreement information. If there are 
changes in the enrollment agreement information at any time during the 
participant's enrollment, the PACE organization must meet the following 
requirements:
    (1) Give an updated copy of the information to the participant.
    (2) Explain the changes to the participant and his or her 
representative or caregiver in a manner they understand.



Sec. 460.158  Effective date of enrollment.

    A participant's enrollment in the program is effective on the first 
day of the calendar month following the date the PACE organization 
receives the signed enrollment agreement.



Sec. 460.160  Continuation of enrollment.

    (a) Duration of enrollment. Enrollment continues until the 
participant's death, regardless of changes in health status, unless 
either of the following actions occur:
    (1) The participant voluntarily disenrolls.

[[Page 435]]

    (2) The participant is involuntarily disenrolled, as described in 
Sec. 460.164.
    (b) Annual recertification requirement. At least annually, the State 
administering agency must reevaluate whether a participant needs the 
level of care required under the State Medicaid plan for coverage of 
nursing facility services.
    (1) Waiver of annual requirement. (i) The State administering agency 
may permanently waive the annual recertification requirement for a 
participant if it determines that there is no reasonable expectation of 
improvement or significant change in the participant's condition because 
of the severity of a chronic condition or the degree of impairment of 
functional capacity.
    (ii) The PACE organization must retain in the participant's medical 
record the documentation of the reason for waiving the annual 
recertification requirement.
    (2) Deemed continued eligibility. If the State administering agency 
determines that a PACE participant no longer meets the State Medicaid 
nursing facility level of care requirements, the participant may be 
deemed to continue to be eligible for the PACE program until the next 
annual reevaluation, if, in the absence of continued coverage under this 
program, the participant reasonably would be expected to meet the 
nursing facility level of care requirement within the next 6 months.
    (3) Continued eligibility criteria. (i) The State administering 
agency, in consultation with the PACE organization, makes a 
determination of continued eligibility based on a review of the 
participant's medical record and plan of care.
    (ii) The criteria used to make the determination of continued 
eligibility must be specified in the program agreement.



Sec. 460.162  Voluntary disenrollment.

    A PACE participant may voluntarily disenroll from the program 
without cause at any time.



Sec. 460.164  Involuntary disenrollment.

    (a) Reasons for involuntary disenrollment. A participant may be 
involuntarily disenrolled for any of the following reasons:
    (1) The participant fails to pay, or to make satisfactory 
arrangements to pay, any premium due the PACE organization after a 30-
day grace period.
    (2) The participant engages in disruptive or threatening behavior, 
as described in paragraph (b) of this section.
    (3) The participant moves out of the PACE program service area or is 
out of the service area for more than 30 consecutive days, unless the 
PACE organization agrees to a longer absence due to extenuating 
circumstances.
    (4) The participant is determined to no longer meet the State 
Medicaid nursing facility level of care requirements and is not deemed 
eligible.
    (5) The PACE program agreement with CMS and the State administering 
agency is not renewed or is terminated.
    (6) The PACE organization is unable to offer health care services 
due to the loss of State licenses or contracts with outside providers.
    (b) Disruptive or threatening behavior. For purposes of this 
section, a participant who engages in disruptive or threatening behavior 
refers to a participant who exhibits either of the following:
    (1) A participant whose behavior jeopardizes his or her health or 
safety, or the safety of others; or
    (2) A participant with decision-making capacity who consistently 
refuses to comply with his or her individual plan of care or the terms 
of the PACE enrollment agreement.
    (c) Documentation of disruptive or threatening behavior. If a PACE 
organization proposes to disenroll a participant who is disruptive or 
threatening, the organization must document the following information in 
the participant's medical record:
    (1) The reasons for proposing to disenroll the participant.
    (2) All efforts to remedy the situation.
    (d) Noncompliant behavior. (1) A PACE organization may not disenroll 
a PACE participant on the grounds that the participant has engaged in 
noncompliant behavior if the behavior is related to a mental or physical 
condition of the participant, unless the participant's behavior 
jeopardizes his or her health or safety, or the safety of others.

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    (2) For purposes of this section, noncompliant behavior includes 
repeated noncompliance with medical advice and repeated failure to keep 
appointments.
    (e) State administering agency review and final determination. 
Before an involuntary disenrollment is effective, the State 
administering agency must review it and determine in a timely manner 
that the PACE organization has adequately documented acceptable grounds 
for disenrollment.



Sec. 460.166  Effective date of disenrollment.

    (a) In disenrolling a participant, the PACE organization must take 
the following actions:
    (1) Use the most expedient process allowed under Medicare and 
Medicaid procedures, as set forth in the PACE program agreement.
    (2) Coordinate the disenrollment date between Medicare and Medicaid 
(for a participant who is eligible for both Medicare and Medicaid).
    (3) Give reasonable advance notice to the participant.
    (b) Until the date enrollment is terminated, the following 
requirements must be met:
    (1) PACE participants must continue to use PACE organization 
services and remain liable for any premiums.
    (2) The PACE organization must continue to furnish all needed 
services.



Sec. 460.168  Reinstatement in other Medicare and Medicaid programs.

    To facilitate a participant's reinstatement in other Medicare and 
Medicaid programs after disenrollment, the PACE organization must do the 
following:
    (a) Make appropriate referrals and ensure medical records are made 
available to new providers in a timely manner.
    (b) Work with CMS and the State administering agency to reinstate 
the participant in other Medicare and Medicaid programs for which the 
participant is eligible.



Sec. 460.170  Reinstatement in PACE.

    (a) A previously disenrolled participant may be reinstated in a PACE 
program.
    (b) If the reason for disenrollment is failure to pay the premium 
and the participant pays the premium before the effective date of 
disenrollment, the participant is reinstated in the PACE program with no 
break in coverage.



Sec. 460.172  Documentation of disenrollment.

    A PACE organization must meet the following requirements:
    (a) Have a procedure in place to document the reasons for all 
voluntary and involuntary disenrollments.
    (b) Make documentation available for review by CMS and the State 
administering agency.
    (c) Use the information on voluntary disenrollments in the PACE 
organization's internal quality assessment and performance improvement 
program.



                           Subpart J--Payment



Sec. 460.180  Medicare payment to PACE organizations.

    (a) Principle of payment. Under a PACE program agreement, CMS makes 
a prospective monthly payment to the PACE organization of a capitation 
amount for each Medicare participant in a payment area based on the rate 
it pays to a Medicare+Choice organization.
    (b) Determination of rate. (1) The PACE program agreement specifies 
the monthly capitation amount for each year applicable to a PACE 
organization.
    (2) Except as specified in paragraph (b)(4) of this section, the 
monthly capitation amount is based on the aged Part A and Part B payment 
rates established for purposes of payment to Medicare+Choice 
organizations. As used in this section, ``Medicare+Choice rates'' means 
the Part A and Part B rates calculated by CMS for making payment to 
Medicare+Choice organizations under section 1853 of the Act.
    (3) The rates specified in paragraph (b)(2) of this section are 
adjusted by a frailty factor necessary to ensure comparability between 
PACE participants and the reference population in the Medicare system. 
The factor is specified in the PACE program agreement.

[[Page 437]]

    (4) For Medicare participants who require ESRD services, the monthly 
capitation amount is based on the Medicare+Choice State ESRD rate. The 
monthly rate is adjusted by a factor to recognize the frailer and older 
ESRD population being served by the PACE organization. The PACE program 
agreement specifies this factor.
    (5) CMS may adjust the monthly capitation amount to take into 
account other factors CMS determines to be appropriate.
    (6) The monthly capitation payment is a fixed amount, regardless of 
changes in the participant's health status.
    (7) The monthly capitation payment amount is an all-inclusive 
payment for Medicare benefits provided to participants. A PACE 
organization must not seek any additional payment from Medicare. The 
only additional payment that a PACE organization may collect from, or on 
behalf of, a Medicare participant for PACE services is the following:
    (i) Any applicable premium amount specified in Sec. 460.186.
    (ii) Any charge permitted under paragraph (d) of this section when 
Medicare is not the primary payer.
    (iii) Any payment from the State, as specified in Sec. 460.182, for 
a participant who is eligible for both Medicare and Medicaid.
    (iv) Payment with respect to any applicable spenddown liability 
under Secs. 435.121 and 435.831 of this chapter and any amount due under 
the post-eligibility treatment of income process under Sec. 460.184 for 
a participant who is eligible for both Medicare and Medicaid.
    (8) CMS computes the Medicare monthly capitation payment amount 
under a PACE program agreement so that the total payment level for all 
participants is less than the projected payment under Medicare for a 
comparable population not enrolled under a PACE program.
    (c) Adjustments to payments. If the actual number of Medicare 
participants differs from the estimated number of participants on which 
the amount of the prospective monthly payment was based, CMS adjusts 
subsequent monthly payments to account for the difference.
    (d) Application of Medicare secondary payer provisions. (1) Basic 
rule. CMS does not pay for services to the extent that Medicare is not 
the primary payer under part 411 of this chapter.
    (2) Responsibilities of the PACE organization. The PACE organization 
must do the following:
    (i) Identify payers that are primary to Medicare under part 411 of 
this chapter.
    (ii) Determine the amounts payable by those payers.
    (iii) Coordinate benefits to Medicare participants with the benefits 
of the primary payers.
    (3) Charges to other entities. The PACE organization may charge 
other individuals or entities for PACE services covered under Medicare 
for which Medicare is not the primary payer, as specified in paragraphs 
(d)(4) and (5) of this section.
    (4) Charge to other insurers or the participant. If a Medicare 
participant receives from a PACE organization covered services that are 
also covered under State or Federal workers' compensation, any no-fault 
insurance, or any liability insurance policy or plan, including a self-
insured plan, the PACE organization may charge any of the following:
    (i) The insurance carrier, the employer, or any other entity that is 
liable for payment for the services under part 411 of this chapter.
    (ii) The Medicare participant, to the extent that he or she has been 
paid by the carrier, employer, or other entity.
    (5) Charge to group health plan (GHP) or large group health plan 
(LGHP). If Medicare is not the primary payer for services that a PACE 
organization furnished to a Medicare participant who is covered under a 
GHP or LGHP, the organization may charge the following:
    (i) GHP or LGHP for those services.
    (ii) Medicare participant to the extent that he or she has been paid 
by the GHP or LGHP for those services.



Sec. 460.182  Medicaid payment.

    (a) Under a PACE program agreement, the State administering agency 
makes a prospective monthly payment

[[Page 438]]

to the PACE organization of a capitation amount for each Medicaid 
participant.
    (b) The monthly capitation payment amount is negotiated between the 
PACE organization and the State administering agency, and specified in 
the PACE program agreement. The amount represents the following:
    (1) Is less than the amount that would otherwise have been paid 
under the State plan if the participants were not enrolled under the 
PACE program.
    (2) Takes into account the comparative frailty of PACE participants.
    (3) Is a fixed amount regardless of changes in the participant's 
health status.
    (4) Can be renegotiated on an annual basis.
    (c) The PACE organization must accept the capitation payment amount 
as payment in full for Medicaid participants and may not bill, charge, 
collect, or receive any other form of payment from the State 
administering agency or from, or on behalf of, the participant, except 
as follows:
    (1) Payment with respect to any applicable spenddown liability under 
Secs. 435.121 and 435.831 of this chapter and any amounts due under the 
post-eligibility treatment of income process under Sec. 460.184.
    (2) Medicare payment received from CMS or from other payers, in 
accordance with Sec. 460.180(d).
    (d) State procedures for the enrollment and disenrollment of 
participants in the State's system, including procedures for any 
adjustment to account for the difference between the estimated number of 
participants on which the prospective monthly payment was based and the 
actual number of participants in that month, are included in the PACE 
program agreement.



Sec. 460.184  Post-eligibility treatment of income.

    (a) A State may provide for post-eligibility treatment of income for 
Medicaid participants in the same manner as a State treats post-
eligibility income for individuals receiving services under a waiver 
under section 1915(c) of the Act.
    (b) Post-eligibility treatment of income is applied as it is under a 
waiver of section 1915(c) of the Act, as specified in Secs. 435.726 and 
435.735 of this chapter, and section 1924 of the Act.



Sec. 460.186  PACE premiums.

    The amount that a PACE organization can charge a participant as a 
monthly premium depends on the participant's eligibility under Medicare 
and Medicaid, as follows:
    (a) Medicare Parts A and B. For a participant who is entitled to 
Medicare Part A, enrolled under Medicare Part B, but not eligible for 
Medicaid, the premium equals the Medicaid capitation amount.
    (b) Medicare Part A only. For a participant who is entitled to 
Medicare Part A, not enrolled under Medicare Part B, and not eligible 
for Medicaid, the premium equals the Medicaid capitation amount plus the 
Medicare Part B capitation rate.
    (c) Medicare Part B only. For a participant who is enrolled only 
under Medicare Part B and not eligible for Medicaid, the premium equals 
the Medicaid capitation amount plus the Medicare Part A capitation rate.
    (d) Medicaid, with or without Medicare. A PACE organization may not 
charge a premium to a participant who is eligible for both Medicare and 
Medicaid, or who is only eligible for Medicaid.



                   Subpart K--Federal/State Monitoring



Sec. 460.190  Monitoring during trial period.

    (a) Trial period review. During the trial period, CMS, in 
cooperation with the State administering agency, conducts comprehensive 
annual reviews of the operations of a PACE organization to ensure 
compliance with the requirements of this part.
    (b) Scope of review. The review includes the following:
    (1) An onsite visit to the PACE organization, which may include, but 
is not limited to, the following:
    (i) Review of participants' charts.
    (ii) Interviews with staff.
    (iii) Interviews with participants and caregivers.
    (iv) Interviews with contractors.

[[Page 439]]

    (v) Observation of program operations, including marketing, 
participant services, enrollment and disenrollment procedures, 
grievances, and appeals.
    (2) A comprehensive assessment of an organization's fiscal 
soundness.
    (3) A comprehensive assessment of the organization's capacity to 
furnish all PACE services to all participants.
    (4) Any other elements that CMS or the State administering agency 
find necessary.



Sec. 460.192  Ongoing monitoring after trial period.

    (a) At the conclusion of the trial period, CMS, in cooperation with 
the State administering agency, continues to conduct reviews of a PACE 
organization, as appropriate, taking into account the quality of care 
furnished and the organization's compliance with all of the requirements 
of this part.
    (b) Reviews include an on-site visit at least every 2 years.



Sec. 460.194  Corrective action.

    (a) A PACE organization must take action to correct deficiencies 
identified during reviews.
    (b) CMS or the State administering agency monitors the effectiveness 
of corrective actions.
    (c) Failure to correct deficiencies may result in sanctions or 
termination, as specified in subpart D of this part.



Sec. 460.196  Disclosure of review results.

    (a) CMS and the State administering agency promptly report the 
results of reviews under Secs. 460.190 and 460.192 to the PACE 
organization, along with any recommendations for changes to the 
organization's program.
    (b) CMS and the State administering agency make the results of 
reviews available to the public upon request.
    (c) The PACE organization must post a notice of the availability of 
the results of the most recent review and any plans of correction or 
responses related to the most recent review.
    (d) The PACE organization must make the review results available for 
examination in a place readily accessible to participants.



      Subpart L--Data Collection, Record Maintenance, and Reporting



Sec. 460.200  Maintenance of records and reporting of data.

    (a) General rule. A PACE organization must collect data, maintain 
records, and submit reports as required by CMS and the State 
administering agency.
    (b) Access to data and records. A PACE organization must allow CMS 
and the State administering agency access to data and records including, 
but not limited to, the following:
    (1) Participant health outcomes data.
    (2) Financial books and records.
    (3) Medical records.
    (4) Personnel records.
    (c) Reporting. A PACE organization must submit to CMS and the State 
administering agency all reports that CMS and the State administering 
agency require to monitor the operation, cost, quality, and 
effectiveness of the program and establish payment rates.
    (d) Safeguarding data and records. A PACE organization must 
establish written policies and implement procedures to safeguard all 
data, books, and records against loss, destruction, unauthorized use, or 
inappropriate alteration.
    (e) Confidentiality of health information. A PACE organization must 
establish written policies and implement procedures to do the following:
    (1) Safeguard the privacy of any information that identifies a 
particular participant. Information from, or copies of, records may be 
released only to authorized individuals. Original medical records are 
released only in accordance with Federal or State laws, court orders, or 
subpoenas.
    (2) Maintain complete records and relevant information in an 
accurate and timely manner.
    (3) Grant each participant timely access, upon request, to review 
and copy his or her own medical records and to request amendments to 
those records.
    (4) Abide by all Federal and State laws regarding confidentiality 
and disclosure for mental health records, medical records, and other 
participant health information.

[[Page 440]]

    (f) Retention of records. (1) A PACE organization must retain 
records for the longest of the following periods:
    (i) The period of time specified in State law.
    (ii) Six years from the last entry date.
    (iii) For medical records of disenrolled participants, 6 years after 
the date of disenrollment.
    (2) If litigation, a claim, a financial management review, or an 
audit arising from the operation of the PACE program is started before 
the expiration of the retention period, specified in paragraph (f)(1) of 
this section, the PACE organization must retain the records until the 
completion of the litigation, or resolution of the claims or audit 
findings.



Sec. 460.202  Participant health outcomes data.

    (a) A PACE organization must establish and maintain a health 
information system that collects, analyzes, integrates, and reports data 
necessary to measure the organization's performance, including outcomes 
of care furnished to participants.
    (b) A PACE organization must furnish data and information pertaining 
to its provision of participant care in the manner, and at the time 
intervals, specified by CMS and the State administering agency. The 
items collected are specified in the PACE program agreement.



Sec. 460.204  Financial recordkeeping and reporting requirements.

    (a) Accurate reports. A PACE organization must provide CMS and the 
State administering agency with accurate financial reports that are--
    (1) Prepared using an accrual basis of accounting; and
    (2) Verifiable by qualified auditors.
    (b) Accrual accounting. A PACE organization must maintain an accrual 
accounting recordkeeping system that does the following:
    (1) Accurately documents all financial transactions.
    (2) Provides an audit trail to source documents.
    (3) Generates financial statements.
    (c) Accepted reporting practices. Except as specified under Medicare 
principles of reimbursement, as defined in part 413 of this chapter, a 
PACE organization must follow standardized definitions, accounting, 
statistical, and reporting practices that are widely accepted in the 
health care industry.
    (d) Audit or inspection. A PACE organization must permit CMS and the 
State administering agency to audit or inspect any books and records of 
original entry that pertain to the following:
    (1) Any aspect of services furnished.
    (2) Reconciliation of participants' benefit liabilities.
    (3) Determination of Medicare and Medicaid amounts payable.



Sec. 460.208  Financial statements.

    (a) General rule. (1) Not later than 180 days after the 
organization's fiscal year ends, a PACE organization must submit a 
certified financial statement that includes appropriate footnotes.
    (2) The financial statement must be certified by an independent 
certified public accountant.
    (b) Contents. At a minimum, the certified financial statement must 
consist of the following:
    (1) A certification statement.
    (2) A balance sheet.
    (3) A statement of revenues and expenses.
    (4) A source and use of funds statement.
    (c) Quarterly financial statement--(1) During trial period. A PACE 
organization must submit a quarterly financial statement throughout the 
trial period within 45 days after the last day of each quarter of the 
PACE organization's fiscal year.
    (2) After trial period. If CMS or the State administering agency 
determines that an organization's performance requires more frequent 
monitoring and oversight due to concerns about fiscal soundness, CMS or 
the State administering agency may require a PACE organization to submit 
monthly or quarterly financial statements, or both.



Sec. 460.210  Medical records.

    (a) Maintenance of medical records. (1) A PACE organization must 
maintain a single, comprehensive medical record for each participant, in 
accordance with accepted professional standards.

[[Page 441]]

    (2) The medical record for each participant must meet the following 
requirements:
    (i) Be complete.
    (ii) Accurately documented.
    (iii) Readily accessible.
    (iv) Systematically organized.
    (v) Available to all staff.
    (vi) Maintained and housed at the PACE center where the participant 
receives services.
    (b) Content of medical records. At a minimum, the medical record 
must contain the following:
    (1) Appropriate identifying information.
    (2) Documentation of all services furnished, including the 
following:
    (i) A summary of emergency care and other inpatient or long-term 
care services.
    (ii) Services furnished by employees of the PACE center.
    (iii) Services furnished by contractors and their reports.
    (3) Multidisciplinary assessments, reassessments, plans of care, 
treatment, and progress notes that include the participant's response to 
treatment.
    (4) Laboratory, radiological and other test reports.
    (5) Medication records.
    (6) Hospital discharge summaries, if applicable.
    (7) Reports of contact with informal support (for example, 
caregiver, legal guardian, or next of kin).
    (8) Enrollment Agreement.
    (9) Physician orders.
    (10) Discharge summary and disenrollment justification, if 
applicable.
    (11) Advance directives, if applicable.
    (12) A signed release permitting disclosure of personal information.
    (13) Accident and incident reports.
    (c) Transfer of medical records. The organization must promptly 
transfer copies of medical record information between treatment 
facilities.
    (d) Authentication of medical records. (1) All entries must be 
legible, clear, complete, and appropriately authenticated and dated.
    (2) Authentication must include signatures or a secured computer 
entry by a unique identifier of the primary author who has reviewed and 
approved the entry.

[[Page 442]]



             SUBCHAPTER F--QUALITY IMPROVEMENT ORGANIZATIONS



PART 475--QUALITY IMPROVEMENT ORGANIZATIONS--Table of Contents




                      Subpart A--General Provisions

Sec.
475.1 Definitions.

Subpart B [Reserved]

     Subpart C--Utilization and Quality Control Quality Improvement 
                              Organizations

475.100 Scope and applicability.
475.101 Eligibility requirements for QIO contracts.
475.102 Eligibility of physician-sponsored organizations.
475.103 Eligibility of physician-access organizations.
475.104 Requirements for demonstrating ability to perform review.
475.105 Prohibition against contracting with health care facilities.
475.106 Prohibition against contracting with payor organizations.
475.107 QIO contract award.

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



                      Subpart A--General Provisions



Sec. 475.1  Definitions.

    For purposes of this part:
    Five percent or more owner means a person (including, where 
appropriate, a corporation) who:
    (a) Has an ownership interest of 5 percent or more;
    (b) Has an indirect ownership interest equal to 5 percent or more;
    (c) Has a combination of direct and indirect ownership interests 
(the possession of equity in the capital, the stock, or the profits of 
an entity) equal to 5 percent or more; or
    (d) Is the owner of an interest of 5 percent or more in any 
obligation secured by an entity, if the interest equals at least 5 
percent of the value of the property or assets of the entity.
    Health care facility means an institution that directly provides or 
supplies health care services for which payment may be made in whole or 
in part under Title XVIII of the Act. A health care facility may be a 
hospital, skilled nursing facility, home health agency, free-standing 
ambulatory surgical center, or outpatient facility or any other entity 
which provides or supplies direct care to Medicare beneficiaries.
    Managing employee means a general manager, business manager, 
administrator, director or other individual who exercises operational or 
managerial control over the entity or organization, or who, directly or 
indirectly, conducts the day-to-day operations of the entity or 
organization.
    Payor organization means any organization, other than a self-insured 
employer, which makes payments directly or indirectly to health care 
practitioners or providers whose health care services are reviewed by 
the organization or would be reviewed by the organization if it entered 
into a QIO contract. ``Payor organization'' also means any organization 
which is affiliated with any entity which makes payments as described 
above, by virtue of the organization having two or more governing body 
members who are also either governing body members, officers, partners, 
5 percent or more owners or managing employees in a health maintenance 
organization or competitive medical plan.
    Physician means:
    (1) A doctor of medicine or osteopathy licensed under State law to 
practice medicine, surgery, or osteopathy in the State in which the QIO 
is located;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice medicine, surgery, or osteopathy 
in the QIO area; and
    (3) An individual licensed to practice medicine in American Samoa, 
the Northern Mariana Islands, and the Trust Territory of the Pacific 
Islands.

[43 FR 32085, July 24, 1978, as amended at 49 FR 7206, Feb. 27, 1984. 
Redesignated at 50 FR 15327, Apr. 17, 1985, and amended at 50 FR 15328, 
Apr. 17, 1985; 51 FR 43197, Dec. 1, 1986. Redesignated at 64 FR 66279, 
Nov. 24, 1999]

Subpart B [Reserved]

[[Page 443]]



     Subpart C--Utilization and Quality Control Quality Improvement 
                              Organizations

    Source: 49 FR 7207, Feb. 27, 1984, unless otherwise noted. 
Redesignated at 50 FR 15327, Apr. 17, 1985, and further redesignated at 
64 FR 66279, Nov. 24, 1999.



Sec. 475.100  Scope and applicability.

    This subpart implements sections 1152 and 1153(b) of the Social 
Security Act as amended by the Peer Review Improvement Act of 1982 (Pub. 
L. 97-248). It defines the types of organizations eligible to become 
QIOs and establishes certain limitations and priorities regarding QIO 
contracting.



Sec. 475.101  Eligibility requirements for QIO contracts.

    In order to be eligible for a QIO contract an organization must--
    (a) Be either a physician-sponsored organization as described in 
Sec. 462.102; or a physician-access organization as described in 
Sec. 462.103; and
    (b) Demonstrate its ability to perform review as set forth in 
Sec. 462.104.



Sec. 475.102  Eligibility of physician-sponsored organizations.

    (a) In order to be eligible for designation as a physician-sponsored 
QIO, an organization must meet the following conditions:
    (1) Be composed of a substantial number of the licensed doctors of 
medicine and osteopathy practicing medicine or surgery in the review 
area and who are representative of the physicians practicing in the 
area.
    (2) Not be a health care facility, health care facility association, 
or health care facility affiliate, as specified in Sec. 462.105.
    (b) In order to meet the requirements of paragraph (a)(1) of this 
section, an organization must state and have documentation in its files 
showing that it is composed of at least 10 percent of the licensed 
doctors of medicine and osteopathy practicing medicine or surgery in the 
review area.
    (c) In order to meet the requirements or paragraph (a)(2) of this 
section, an organization must--
    (1) State and have documentation in its files demonstrating that it 
is composed of at least 20 percent of the licensed doctors of medicine 
and osteopathy practicing medicine or surgery in the review area; or
    (2) If the organization is not composed of at least 20 percent of 
the licensed doctors of medicine and osteopathy practicing medicine or 
surgery in the review area, then the organization must demonstrate in 
its contract proposal, through letters of support from physicians or 
physician organizations, or through other means, that it is 
representative of the area physicians.
    (d) Organizations that meet the requirements in paragraph (a) of 
this section will receive, during the contract evaluation process, a set 
number of bonus points.

[49 FR 7207, Feb. 27, 1984. Redesignated and amended at 50 FR 15327, 
15328, Apr. 17, 1985, and further redesignated at 64 FR 66279, Nov. 24, 
1999]



Sec. 475.103  Eligibility of physician-access organizations.

    (a) In order to be eligible for designation as a physician-access 
QIO, an organization must meet the following conditions:
    (1) Have available to it, by arrangement or otherwise, the services 
of a sufficient number of licensed doctors of medicine or osteopathy 
practicing medicine or surgery in the review area to assure adequate 
peer review of the services provided by the various medical specialties 
and subspecialties.
    (2) Not be a health care facility, health care facility association, 
or health care facility affiliate, as specified in Sec. 462.105.
    (b) An organization meets the requirements of paragraph (a)(1) of 
this section if it demonstrates--
    (1) That it has available to it at least one physician in every 
generally recognized specialty; and
    (2) The existence of an arrangement or arrangements with physicians 
under which the physicians would conduct review for the organization.

[50 FR 15328, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999]

[[Page 444]]



Sec. 475.104  Requirements for demonstrating ability to perform review.

    (a) A physician-sponsored or physician-access organization will be 
found capable of conducting review if CMS determines that the 
organization is able to set quantifiable performance objectives and 
perform the utilization and quality review functions established under 
section 1154 of the Social Security Act in an efficient and effective 
manner.
    (b) CMS will determine that the organization is capable of 
conducting utilization and quality review if--
    (1) The organization's proposed review system is adequate; and
    (2) The organization has available sufficient resources (including 
access to medical review skills) to implement that system; and
    (3) The organization's quantifiable objectives are acceptable.
    (c) CMS may consider prior similar review experience in making 
determinations under paragraph (b) of this section.
    (d) A State government that operates a Medicaid program will be 
considered incapable of performing utilization and quality review 
functions in an effective manner, unless the State demonstrates to the 
satisfaction of CMS that it will act with complete independence and 
objectivity.



Sec. 475.105  Prohibition against contracting with health care facilities.

    (a) Basic rule. Except as permitted under paragraph (b) of this 
section, the following are not eligible for QIO contracts:
    (1) A health care facility in the QIO area.
    (2) An association of health care facilities in the QIO area.
    (3) A health care facility affiliate; that is, an organization in 
which more than 20 percent of the members of the governing body are also 
either a governing body member, officer, partner, five percent or more 
owner, or managing employee in a health care facility or association of 
health care facilities in the QIO area.
    (b) Exceptions. Effective November 15, 1984, the prohibition stated 
in paragraph (a) of this section will not apply to a payor organization 
if CMS determines under Sec. 462.106 that there is no other eligible 
organization available.
    (c) Subcontracting. A QIO must not subcontract with a facility to 
conduct any review activities except for the review of the quality of 
care.

[50 FR 15328, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 475.106  Prohibition against contracting with payor organizations.

    Payor organizations are not eligible to become QIOs for the area in 
which they make payments until November 15, 1984. If no QIO contract for 
an area is awarded before November 15, 1984, a payor organization will 
be determined eligible by CMS, if an eligible organization that is not a 
payor organization is unavailable at that time. CMS may determine the 
unavailability of nonpayor organizations based on the lack of response 
to an appropriate Request for Proposal.

[50 FR 15328, Apr. 17, 1985]



Sec. 475.107  QIO contract award.

    CMS, in awarding QIO contracts, will take the following actions--
    (a) Identify from among all proposals submitted in response to an 
RFP for a given QIO area all proposals submitted by organizations that 
meet the requirements of Sec. 462.102 or Sec. 462.103;
    (b) Identify from among all proposals identified in paragraph (a) of 
this section all proposals that set forth minimally acceptable plans in 
accordance with the requirements of Sec. 462.104 and the RFPs;
    (c) Assign bonus points not to exceed 10% of the total points 
available to all physician-sponsored organizations identified in 
paragraph (b) of this section, consistent with statute; and
    (d) Subject to the limitations established by Secs. 462.105 and 
462.106, award the contract for the given QIO area to the selected 
organization for a period of two years.

[49 FR 7207, Feb. 27, 1984. Redesignated and amended at 50 FR 15327, 
15328, Apr. 17, 1985, and further redesignated at 64 FR 66279, Nov. 24, 
1999]

[[Page 445]]



PART 476--UTILIZATION AND QUALITY CONTROL REVIEW--Table of Contents




                      Subpart A--General Provisions

Sec.
476.1 Definitions.

Subpart B [Reserved]

 Subpart C--Review Responsibilities of Utilization and Quality Control 
                Quality Improvement Organizations (QIOs)

                           General Provisions

476.70 Statutory bases and applicability.
476.71 QIO review requirements.
476.72 Review of the quality of care of risk-basis health maintenance 
          organizations and competitive medical plans.
476.73 Notification of QIO designation and implementation of review.
476.74 General requirements for the assumption of review.
476.76 Cooperation with health care facilities.
476.78 Responsibilities of health care facilities.
476.80 Coordination with Medicare fiscal intermediaries and carriers.
476.82 Continuation of functions not assumed by QIOs.

                          QIO Review Functions

476.83 Initial denial determinations.
476.84 Changes as a result of DRG validation.
476.85 Conclusive effect of QIO initial denial determinations and 
          changes as a result of DRG validations.
476.86 Correlation of Title XI functions with Title XVIII functions.
476.88 Examination of the operations and records of health care 
          facilities and practitioners.
476.90 Lack of cooperation by a health care facility or practitioner.
476.93 Opportunity to discuss proposed initial denial determination and 
          changes as a result of a DRG validation.
476.94 Notice of QIO initial denial determination and changes as a 
          result of a DRG validation.
476.96 Review period and reopening of initial denial determinations and 
          changes as a result of DRG validations.
476.98 Reviewer qualifications and participation.
476.100 Use of norms and criteria.
476.102 Involvement of health care practitioners other than physicians.
476.104 Coordination of activities.

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

    Source: 44 FR 32081, June 4, 1979, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.



                      Subpart A--General Provisions



Sec. 476.1  Definitions.

    As used in this part, unless the context indicates otherwise:
    Active staff privileges means: (a) That a physician is authorized on 
a regular, rather than infrequent or courtesy, basis: (1) to order the 
admission of patients to a facility; (2) to perform diagnostic services 
in a facility; or (3) to care for and treat patients in a facility; or 
(b) that a health care practitioner other than a physician is authorized 
on a regular, rather than infrequent or courtesy, basis to order the 
admission of patients to a facility.
    Admission review means a review and determination by a QIO of the 
medical necessity and appropriateness of a patient's admission to a 
specific facility.
    Continued stay review means QIO review that is performed after 
admission review and during a patient's hospitalization to determine the 
medical necessity and appropriateness of continuing the patient's stay 
at a hospital level of care.
    Criteria means predetermined elements of health care, developed by 
health professionals relying on professional expertise, prior 
experience, and the professional literature, with which aspects of the 
quality, medical necessity, and appropriateness of a health care service 
may be compared.
    Diagnosis related group (DRG) means a system for classifying 
inpatient hospital discharges. DRGs are used for purposes of determining 
payment to hospitals for inpatient hospital services under the Medicare 
prospective payment system.
    DRG validation means a part of the prospective payment system in 
which a QIO validates that DRG assignments are based on the correct 
diagnostic and procedural information.
    Elective, when applied to admission or to a health care service, 
means an admission or a service that can be delayed without substantial 
risk to the health of the individual.

[[Page 446]]

    Five percent or more owner means a person (including, where 
appropriate, a corporation) who:
    (a) Has an ownership interest of 5 percent or more;
    (b) Has an indirect ownership interest equal to 5 percent or more;
    (c) Has a combination of direct and indirect ownership interests 
(the possession of equity in the capital, the stock, or the profits of 
an entity) equal to five percent or more; or
    (d) Is the owner of an interest of five percent or more in any 
obligation secured by an entity, if the interest equals at least five 
percent of the value of the property or assets of the entity.
    Health care facility or facility means an organization involved in 
the delivery of health care services for which reimbursement may be made 
in whole or in part under Title XVIII of the Act.
    Health care practitioners other than physicians means those health 
professionals who do not hold a doctor of medicine or doctor of 
osteopathy degree, who meet all applicable State or Federal requirements 
for practice of their professions, and who are in active practice.
    Hospital means a health care institution or distinct part of a 
health care institution, as defined in Section 1861(e)-(g) of the Act, 
other than a a religious nonmedical institution as defined in 
Sec. 440.170(b) of this chapter.
    Initial denial determination means an initial negative decision by a 
QIO, regarding the medical necessity, quality, or appropriateness of 
health care services furnished, or proposed to be furnished, to a 
patient.
    Major clinical area means medicine, surgery, pediatrics, obstetrics 
and gynecology, or psychiatry.
    Major procedure means a diagnostic or therapeutic procedure which 
involves a surgical or anesthetic risk or requires highly trained 
personnel or special facilities or equipment.
    Non-facility organization means a corporate entity that (1) is not a 
health care facility; (2) is not a 5 percent or more owner of a 
facility; and (3) is not owned by one or more health care facilities or 
association of facilities in the QIO area.
    Norm means a pattern of performance in the delivery of health care 
services that is typical for a specified group.
    Norms means numerical or statistical measures of average observed 
performance in the delivery of health care services.
    Outliers means those cases that have either an extremely long length 
of stay or extraordinarily high costs when compared to most discharges 
classified in the same DRG.
    Peer review means review by health care practitioners of services 
ordered or furnished by other practitioners in the same professional 
field.
    Physician means a doctor of medicine or osteopathy or another 
individual who is authorized under State or Federal law to practice 
medicine and surgery, or osteopathy. This includes medical officers in 
American Samoa, the Northern Mariana Islands, and the Trust Territory of 
the Pacific Islands.
    Practitioner means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients.
    Preadmission certification means a favorable determination, 
transmitted to the hospital and the fiscal intermediary, approving the 
patient's admission for payment purposes.
    Preadmission review means review prior to a patient's admission to a 
hospital to determine, for payment purposes, the reasonableness, medical 
necessity and appropriateness of placement at an acute level of care.
    Preprocedure review means review of a surgical or other invasive 
procedure prior to the conduct of the procedure.
    QIO review means review performed in fulfillment of a contract with 
CMS, either by the QIO or its subcontractors.
    Profile means aggregated data in formats that display patterns of 
health care services over a defined period of time.
    Profile analysis means review and analysis of profiles to identify 
and consider patterns of health care services.
    Quality review study means an assessment conducted by or for a QIO 
of a patient care problem for the purpose of improving patient care 
through peer analysis, intervention, resolution of the problem and 
follow-up.

[[Page 447]]

    Regional norms, criteria, and standards means norms, criteria, and 
standards that apply to a geographic division which is larger than a QIO 
area.
    Retrospective review means review that is conducted after services 
are provided to a patient. The review is focused on determining the 
appropriateness, necessity, quality, and reasonableness of health care 
services provided.
    Review responsibility means (1) the responsibility of the QIO to 
perform review functions prescribed under Part B of Title XI of the Act 
and the Social Security Amendments of 1983 (Pub. L. No. 98-21) and the 
regulations of this part; (2) the responsibility to fulfill the terms 
and meet the objectives set forth in the negotiated contract between CMS 
and the QIO; and (3) the authority of a QIO to make conclusive initial 
denial determinations regarding the medical necessity and 
appropriateness of health care and changes as a result of DRG 
validations.
    Skilled nursing facility (SNF) means a health care institution or 
distinct part of an institution that (a) is primarily engaged in 
providing skilled nursing care or rehabilitative services to injured, 
disabled, or sick persons, and (b) has an agreement to participate in 
Medicare or Medicaid or both, and (c) is not a religious nonmedical 
institution as defined in Sec. 440.170(b) of this chapter
    Standards means professionally developed expressions of the range of 
acceptable variation from a norm or criterion.
    Subcontractor means a facility or a non-facility organization under 
contract with a QIO to perform QIO review functions.
    Working day means any one of at least five days of each week 
(excluding, at the option of each QIO, legal holidays) on which the 
necessary personnel are available to perform review.

[44 FR 32081, June 4, 1979, as amended at 45 FR 67545, Oct. 10, 1980; 46 
FR 48569, Oct. 1, 1981. Redesignated and amended at 50 FR 15328, 15329, 
Apr. 17, 1985; 51 FR 43197, Dec. 1, 1986. Redesignated at 64 FR 66279, 
Nov. 24, 1999, as amended at 64 FR 67052, Nov. 30, 1999]

Subpart B [Reserved]



 Subpart C--Review Responsibilities of Utilization and Quality Control 
                Quality Improvement Organizations (QIOs)

    Source: 50 FR 15330, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.

                           General Provisions



Sec. 476.70  Statutory bases and applicability.

    (a) Statutory basis. Sections 1154, 1866(a)(1)(F) and 1886(f)(2) of 
the Act require that a QIO review those services furnished by 
physicians, other health care professionals, providers and suppliers as 
specified in its contract with the Secretary. Section 1154(a)(4) of the 
Act requires QIOs, or, in certain circumstances, non-QIO entities, to 
perform quality of care reviews of services furnished under risk-basis 
contracts by health maintenance organizations (HMOs) and competitive 
medical plans (CMPs) that are covered under subpart C of part 417 of 
this chapter.
    (b) Applicability. The regulations in this subpart apply to review 
conducted by a QIO and its subcontractors. Section 466.72 of this part 
also applies, for purposes of quality of care reviews under section 
1154(a)(4) of the Act, to non-QIO entities that enter into contracts to 
perform reviews of services furnished under risk-basis contracts by HMOs 
and CMPs under subpart C of part 417 of this chapter.

[52 FR 37457, Oct. 7, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 476.71  QIO review requirements.

    (a) Scope of QIO review. In its review, the QIO must determine (in 
accordance with the terms of its contract)--
    (1) Whether the services are or were reasonable and medically 
necessary for the diagnosis and treatment of illness or injury or to 
improve functioning of a malformed body member, or (with respect to 
pneumococcal vaccine) for prevention of illness or (in the case of 
hospice care) for the palliation and management of terminal illness;
    (2) Whether the quality of the services meets professionally 
recognized standards of health care;

[[Page 448]]

    (3) Whether those services furnished or proposed to be furnished on 
an inpatient basis could, consistent with the provisions of appropriate 
medical care, be effectively furnished more economically on an 
outpatient basis or in an inpatient health care facility of a different 
type;
    (4) Through DRG validation, the validity of diagnostic and 
procedural information supplied by the hospital;
    (5) The completeness, adequacy and quality of hospital care 
provided;
    (6) The medical necessity, reasonableness and appropriateness of 
hospital admissions and discharges;
    (7) The medical necessity, reasonableness and appropriateness of 
inpatient hospital care for which additional payment is sought under the 
outlier provisions of Secs. 412.82 and 412.84 of this chapter; and
    (8) Whether a hospital has misrepresented admission or discharge 
information or has taken an action that results in--
    (i) The unnecessary admission of an individual entitled to benefits 
under part A;
    (ii) Unnecessary multiple admissions of an individual; or
    (iii) Other inappropriate medical or other practices with respect to 
beneficiaries or billing for services furnished to beneficiaries.
    (b) Payment determinations. On the basis of the review specified 
under paragraphs (a) (1), (3), (6), (7), and (8) of this section, the 
QIO must determine whether payment may be made for these services. A QIO 
may grant a period of not more than two days (grace days) for the 
purpose of arranging post discharge care when the provider did not know 
or could not reasonably be expected to have known that payment for the 
service(s) would not be made under the Medicare program as specified in 
Sec. 405.330(b).
    (c) Other duties and functions. (1) The QIO must review at least a 
random sample of hospital discharges each quarter and submit new 
diagnostic and procedural information to the Medicare fiscal 
intermediary or carrier if it determines that the information submitted 
by the hospital was incorrect.
    (2) As directed by CMS, the QIO must review changes in DRG and LTC-
DRG assignments made by the intermediary under the provisions of 
Secs. 412.60(d) and 412.513(c) of this chapter that result in the 
assignment of a higher-weighted DRG or a different LTC-DRG. The QIO's 
review must verify that the diagnostic and procedural information 
supplied by the hospital is substantiated by the information in the 
medical record.
    (d) Coordination of sanction activities. The QIO must carry out the 
responsibilities specified in subpart C of part 1004 of this title 
regarding imposition of sanctions on providers and practitioners who 
violate their statutory obligations under section 1156 of the Act.

[52 FR 37457, Oct. 7, 1987; 52 FR 47003, Dec. 11, 1987, as amended at 59 
FR 45402, Sept. 1, 1994. Redesignated at 64 FR 66279, Nov. 24, 1999; 67 
FR 56056, Aug. 30, 2002]



Sec. 476.72  Review of the quality of care of risk-basis health maintenance organizations and competitive medical plans.

    (a) (1) For purposes of a review under section 1154(a)(4) of the 
Act, a QIO must determine whether the quality of services (including 
both inpatient and outpatient services) provided by an HMO or CMP meets 
professionally recognized standards of health care, including whether 
appropriate health care services have not been provided or have been 
provided in inappropriate settings.
    (2) Paragraph (a)(1) of this section will not apply with respect to 
a contract year if another entity has been awarded a contract to perform 
those reviews under section 1154(a)(4)(C) of the Act.
    (b) For purposes of reviews under this section, non-QIO entities 
selected to perform these reviews under section 1154(a)(4)(C) of the Act 
are subject to the requirements of paragraph (a)(1) of this section and-
-
    (1) Part 476 of this chapter regarding acquisition, protection, and 
disclosure of peer review information; and
    (2) Part 1004 of Chapter V regarding a QIO's responsibilities, and 
sanctions on health care practitioners and providers.

[52 FR 37457, Oct. 7, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999]

[[Page 449]]



Sec. 476.73  Notification of QIO designation and implementation of review.

    (a) Notice of CMS's decision. CMS sends written notification of a 
QIO contract award to the State survey agency and Medicare fiscal 
intermediaries and carriers. The notification includes the effective 
dates of the QIO contract and specifies the area and types of health 
care facilities to be reviewed by the QIO. The QIO must make a similar 
notification when review responsibilities are subcontracted.
    (b) Notification to health care facilities and the public. As 
specified in its contract with CMS, the QIO must--
    (1) Provide, to each health care facility scheduled to come under 
review, a timely written notice that specifies the date and manner in 
which the QIO proposes to implement review, and the information to be 
furnished by the facility to each Medicare beneficiary upon admission as 
specified in Sec. 466.78(b)(3) of this part.
    (2) Publish, in at least one local newspaper of general circulation 
in the QIO area, a notice that states the date the QIO will assume 
review responsibilities and lists each area health care facility to be 
under review. The QIO must indicate that its plan for the review of 
health care services as approved in its contract with CMS is available 
for public inspection in the QIO's business office and give the address, 
telephone number and usual hours of business.

[50 FR 15330, Apr. 17, 1985. Redesignated at 52 FR 37457, Oct. 7, 1987, 
and further redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 476.74  General requirements for the assumption of review.

    (a) A QIO must assume review responsibility in accordance with the 
schedule, functions and negotiated objectives specified in its contract 
with CMS.
    (b) A QIO must notify the appropriate Medicare fiscal intermediary 
or carrier of its assumption of review in specific health care 
facilities no later than five working days after the day that review is 
assumed in the facility.
    (c) A QIO must maintain and make available for public inspection at 
its principal business office--
    (1) A copy of each agreement with Medicare fiscal intermediaries and 
carriers;
    (2) A copy of its currently approved review plan that includes the 
QIO's method for implementing review; and
    (3) Copies of all subcontracts for the conduct of review.
    (d) A QIO must not subcontract with a facility to conduct any review 
activities except for the review of the quality of care. The QIO may 
subcontract with a non-facility organization to conduct review in a 
facility.
    (e) If required by CMS, a QIO is responsible for compiling 
statistics based on the criteria contained in Sec. 405.332 of this 
chapter and making limitation of liability determinations on excluded 
coverage of certain services that are made under section 1879 of the 
Act. If required by CMS, QIOs must also notify a provider of these 
determinations. These determinations and further appeals are governed by 
the reconsideration and appeals procedures in part 405, subpart G of 
this chapter for Medicare Part A related determinations and part 405, 
subpart H of this chapter for Medicare Part B related determinations.
    (f) A QIO must make its responsibilities under its contract with 
CMS, primary to all other interests and activities that the QIO 
undertakes.



Sec. 476.76  Cooperation with health care facilities.

    Before implementation of review, a QIO must make a good faith effort 
to discuss the QIO's administrative and review procedures with each 
involved health care facility.



Sec. 476.78  Responsibilities of health care facilities.

    (a) Every hospital seeking payment for services furnished to 
Medicare beneficiaries must maintain a written agreement with a QIO 
operating in the area in which the hospital is located. These agreements 
must provide for the QIO review specified in Sec. 466.71.
    (b) Cooperation with QIOs. Health care facilities that submit 
Medicare claims must cooperate in the assumption and conduct of QIO 
review. Facilities must--

[[Page 450]]

    (1) Allocate adequate space to the QIO for its conduct of review at 
the times the QIO is conducting review.
    (2) Provide patient care data and other pertinent data to the QIO at 
the time the QIO is collecting review information that is required for 
the QIO to make its determinations. The facility must photocopy and 
deliver to the QIO all required information within 30 days of a request. 
QIOs pay hospitals paid under the prospective payment system for the 
costs of photocopying records requested by the QIO in accordance with 
the payment rate determined under the methodology described in paragraph 
(c) of this section and for first class postage for mailing the records 
to the QIO. When the QIO does post-admission, preprocedure review, the 
facility must provide the necessary information before the procedure is 
performed, unless it must be performed on an emergency basis.
    (3) Inform Medicare beneficiaries at the time of admission, in 
writing, that the care for which Medicare payment is sought will be 
subject to QIO review and indicate the potential outcomes of that 
review. Furnishing this information to the patient does not constitute 
notice, under Sec. 405.332(a) of this chapter, that can support a 
finding that the beneficiary knew the services were not covered.
    (4) When the facility has issued a written determination in 
accordance with Sec. 412.42(c)(3) of this chapter that a beneficiary no 
longer requries inpatient hospital care, it must submit a copy of its 
determination to the QIO within 3 working days.
    (5) Assure, in accordance with the provisions of its agreement with 
the QIO, that each case subject to preadmission review has been reviewed 
and approved by the QIO before admission to the hospital or a timely 
request has been made for QIO review.
    (6)(i) Agree to accept financial liability for any admission subject 
to preadmission review that was not reviewed by the QIO and is 
subsequently determined to be inappropriate or not medically necessary.
    (ii) The provisions of paragraph (b)(6)(i) of this section do not 
apply if a facility, in accordance with its agreement with a QIO, makes 
a timely request for preadmission review and the QIO does not review the 
case timely. Cases of this type are subject to retrospective prepayment 
review under paragraph (b)(7) of this section.
    (7) Agree that, if the hospital admits a case subject to 
preadmission review without certification, the case must receive 
retrospective prepayment review, according to the review priority 
established by the QIO.
    (c) Photocopying reimbursement methodology for prospective payment 
system hospitals. Hospitals subject to the prospective payment system 
are paid for the photocopying costs that are directly attributable to 
the hospitals' responsibility to the QIOs to provide photocopies of 
requested hospital records. The payment is in addition to payment 
already provided for these costs under other provisions of the Social 
Security Act and is based on a fixed amount per page as determined by 
CMS as follows:
    (1) Step one. CMS adds the annual salary of a photocopy machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB Circular A-76.
    (2) Step two. CMS divides the amount determined in paragraph (c)(1) 
of this section by the number of pages that can be reasonably expected 
to be made annually by the photocopy machine operator to establish the 
labor cost per page.
    (3) CMS adds to the per-page labor cost determined in paragraph 
(c)(2) of this section the per-page costs of supplies.
    (d) Appeals. Reimbursement for the costs of photocopying and mailing 
records for QIO review is an additional payment to hospitals under the 
prospective system, as specified in Sec. 412.115 of this chapter. Thus, 
appeals concerning these costs are subject to the review process 
specified in part 405, subpart R of this chapter.

[50 FR 15330, Apr. 17, 1985, as amended at 57 FR 47787, Oct. 20, 1992; 
59 FR 45402, Sept. 1, 1994. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 476.80  Coordination with Medicare fiscal intermediaries and carriers.

    (a) Procedures for agreements. The Medicare fiscal intermediary or 
carrier must have a written agreement with

[[Page 451]]

the QIO. The QIO must take the initiative with the fiscal intermediary 
or carrier in developing the agreement. The following steps must be 
taken in developing the agreement.
    (1) The QIO and the fiscal intermediary or carrier must negotiate in 
good faith in an effort to reach written agreement. If they cannot reach 
agreement, CMS will assist them in resolving matters in dispute.
    (2) The QIO must incorporate its administrative procedures into an 
agreement with the fiscal intermediary or carrier and obtain approval 
from CMS, before it makes conclusive determinations for the Medicare 
program, unless CMS finds that the fiscal intermediary or carrier has--
    (i) Refused to negotiate in good faith or in a timely manner, or
    (ii) Insisted on including in the agreement, provisions that are 
outside the scope of its authority under the Act.
    (b) Content of agreement. The agreement must include procedures for-
-
    (1) Informing the appropriate Medicare fiscal intermediaries and 
carriers of--
    (i) Changes as a result of DRG validations and revisions as a result 
of the review of these changes; and
    (ii) Initial denial determinations and revisions of these 
determinations as a result of reconsideration, or reopening all 
approvals and denials with respect to cases subject to preadmission 
review, and outlier claims in hospitals under a prospective payment 
system for health care services and items;
    (2) Exchanging data or information;
    (3) Modifying the procedures when additional review responsibility 
is authorized by CMS; and
    (4) Any other matters that are necessary for the coordination of 
functions.
    (c) Action by CMS. (1) Within the time specified in its contract, 
the QIO must submit to CMS for approval its agreement with the Medicare 
fiscal intermediaries and carriers, or if an agreement has not been 
established, the QIO's proposed administrative procedures, including any 
comments by the Medicare fiscal intermediaries and carriers.
    (2) If CMS approves the agreement or the administrative procedures 
(after a finding by CMS as specified in paragraph (a)(2) of this 
section), the QIO may begin to make determinations under its contract 
with CMS.
    (3) If CMS disapproves the agreement or procedures, it will--
    (i) Notify the QIO and the appropriate fiscal agents in writing, 
stating the reasons for disapproval; and
    (ii) Require the QIO and fiscal intermediary or carrier to revise 
its agreements or procedures.
    (d) Modification of agreements. Agreements or procedures may be 
modified, with CMS's approval--
    (1) Through a revised agreement with the fiscal intermediary or 
carrier, or
    (2) In the case of procedures, by the QIO, after providing 
opportunity for comment by the fiscal intermediary or carrier.
    (e) Role of the fiscal intermediary. (1) The fiscal intermediary 
will not pay any claims for those cases which are subject to 
preadmission review by the QIO, until it receives notice that the QIO 
has approved the admission after preadmission or retrospective review.
    (2) A QIO's determination that an admission is medically necessary 
is not a guarantee of payment by the fiscal intermediary. Medicare 
coverage requirements must also be applied.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 476.82  Continuation of functions not assumed by QIOs.

    Any of the duties and functions under Part B of Title XI of the Act 
for which a QIO has not assumed responsibility under its contract with 
CMS must be performed in the manner and to the extent otherwise provided 
for under the Act or in regulations.

                          QIO Review Functions



Sec. 476.83  Initial denial determinations.

    A determination by a QIO that the health care services furnished or 
proposed to be furnished to a patient are not medically necessary, are 
not reasonable, or are not at the appropriate

[[Page 452]]

level of care, is an initial denial determination and is appealable 
under part 473 of this chapter.



Sec. 476.84  Changes as a result of DRG validation.

    A provider or practitioner may obtain a review by a QIO under part 
473 of this chapter for changes in diagnostic and procedural coding that 
resulted in a change in DRG assignment as a result of QIO validation 
activities.



Sec. 476.85  Conclusive effect of QIO initial denial determinations and changes as a result of DRG validations.

    A QIO initial denial determination or change as a result of DRG 
validation is final and binding unless, in accordance with the 
procedures in part 473--
    (a) The initial denial determination is reconsidered and revised; or
    (b) The change as a result of DRG validation is reviewed and 
revised.



Sec. 476.86  Correlation of Title XI functions with Title XVIII functions.

    (a) Payment determinations. (1) QIO initial denial determinations 
under this part with regard to the reasonableness, medical necessity, 
and appropriateness of placement at an acute level of patient care as 
are also conclusive for payment purposes with regard to the following 
medical issues:
    (i) Whether inpatient care furnished in a psychiatric hospital meets 
the requirements of Sec. 424.14 of this chapter.
    (ii) Whether payment for inpatient hospital or SNF care beyond 20 
consecutive days is precluded under Sec. 489.50 of this chapter because 
of failure to perform review of long-stay cases.
    (iii) Whether the care furnished was custodial care or care not 
reasonable and necessary and, as such, excluded under Sec. 405.310(g) or 
Sec. 405.310(k) of this chapter.
    (iv) Whether the care was appropriately furnished in the inpatient 
or outpatient setting.
    (2) Reviews with respect to determinations listed in paragraph 
(a)(1) of this section must not be conducted, for purposes of payment, 
by Medicare fiscal intermediaries or carriers except as outlined in 
paragraph (c) of this section.
    (3) QIOs make determinations as to the appropriateness of the 
location in which procedures are performed. A procedure may be medically 
necessary but denied if the QIO determines that it could, consistent 
with the provision of appropriate medical care, be effectively provided 
more economically on an outpatient basis or in an inpatient health care 
facility of a different type.
    (4) QIO determinations as to whether the provider and the 
beneficiary knew or could reasonably be expected to have known that the 
services described in paragraph (a)(1) of this section were excluded are 
also conclusive for payment purposes.
    (b) Utilization review activities. QIO review activities to 
determine whether inpatient hospital or SNF care services are reasonable 
and medically necessary and are furnished at the appropriate level of 
care fulfill the utilization review requirements set forth in 
Secs. 405.1035, 405.1042, and 405.1137 of this chapter.
    (c) Coverage. Nothing in paragraphs (a) (1) and (3) of this section 
will be construed as precluding CMS or a Medicare fiscal intermediary or 
carrier, in the proper exercise of its duties and functions, from 
reviewing claims to determine:
    (1) In the case of items or services not reviewed by a QIO, whether 
they meet coverage requirements of Title XVIII relating to medical 
necessity, reasonableness, or appropriateness of placement at an acute 
level of patient care. However, if a coverage determination pertains to 
medical necessity, reasonableness, or appropriateness of placement at an 
acute level of patient care, the fiscal intermediary or carrier must use 
a QIO to make a determination on those issues if a QIO is conducting 
review in the area and must abide by the QIO's determination.
    (2) Whether any claim meets coverage requirements of Title XVIII 
relating to issues other than medical necessity, reasonableness or 
appropriateness of placement at an acute level of patient care.

[[Page 453]]

    (d) Payment. Medicare fiscal intermediaries and carriers are not 
precluded from making payment determinations with regard to coverage 
determinations made under paragraph (c) of this section.
    (e) Survey, compliance and assistance activities. QIO review and 
monitoring activities fulfill the requirements for compliance and 
assistance activities of State survey agencies under section 1864(a) 
with respect to sections 1861(e)(6), 1861(j)(8), 1861(j)(12), and 
1861(k) of the Act, and activities required of intermediaries and 
carriers under Secs. 421.100(d) and 421.200(f) of this chapter.
    (f) Appeals. The requirements and procedures for QIO review of 
changes as a result of DRG validation and the reconsideration, hearing 
and judicial review of QIO initial denial determinations are set forth 
in part 473 of this chapter.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985, as amended at 
53 FR 6648, Mar. 2, 1988. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 476.88  Examination of the operations and records of health care facilities and practitioners.

    (a) Authorization to examine records. A facility claiming Medicare 
payment must permit a QIO or its subcontractor to examine its operation 
and records (including information on charges) that are pertinent to 
health care services furnished to Medicare beneficiaries and are 
necessary for the QIO or its subcontractor to--
    (1) Perform review functions including, but not limited to--
    (i) DRG validation;
    (ii) Outlier review in facilities under a prospective payment 
system; and
    (iii) Implementation of corrective action and fraud and abuse 
prevention activities;
    (2) Evaluate cases that have been identified as deviating from the 
QIO norms and criteria, or standards; and
    (3) Evaluate the capability of the facility to perform quality 
review functions under a subcontract with the QIO.
    (b) Limitations on access to records. A QIO has access to the 
records of non-Medicare patients if--
    (1) The records relate to review performed under a non-Medicare QIO 
contract and if authorized by those patients in accordance with State 
law; or
    (2) The QIO needs the records to perform its quality review 
responsibilities under the Act and receives authorization from the 
facility or practitioner.
    (c) Conditions of examination. When examining a facility's operation 
or records the QIO must--
    (1) Examine only those operations and records (including information 
on charges) required to fulfill the purposes of paragraph (a) of this 
section;
    (2) Cooperate with agencies responsible for other examination 
functions under Federal or Federally assisted programs in order to 
minimize duplication of effort;
    (3) Conduct the examinations during reasonable hours; and
    (4) Maintain in its principal office written records of the results 
of the examination of the facility.



Sec. 476.90  Lack of cooperation by a health care facility or practitioner.

    (a) If a health care facility or practitioner refuses to allow a QIO 
to enter and perform the duties and functions required under its 
contract with CMS, the QIO may--
    (1) Determine that the health care facility or practitioner has 
failed to comply with the requirements of Sec. 474.30(c) of this chapter 
and report the matter to the HHS Inspector General; or
    (2) Issue initial denial determinations for those claims it is 
unable to review, make the determination that financial liability will 
be assigned to the health care facility, and report the matter to the 
HHS Inspector General.
    (b) If a QIO provides a facility with sufficient notice and a 
reasonable amount of time to respond to a request for information about 
a claim, and if the facility does not respond in a timely manner, the 
QIO will deny the claim.



Sec. 476.93  Opportunity to discuss proposed initial denial determination and changes as a result of a DRG validation.

    Before a QIO reaches an initial denial determination or makes a 
change as a result of a DRG validation, it must--

[[Page 454]]

    (a) Promptly notify the provider or supplier and the patient's 
attending physician (or other attending health care practitioner) of the 
proposed determination or DRG change; and
    (b) Afford an opportunity for the provider or supplier and the 
physician (or other attending health care practitioner) to discuss the 
matter with the QIO physician advisor and to explain the nature of the 
patient's need for health care services, including all factors which 
preclude treatment of the patient as an outpatient or in an alternative 
level of inpatient care.



Sec. 476.94  Notice of QIO initial denial determination and changes as a result of a DRG validation.

    (a) Notice of initial denial determination--(1) Parties to be 
notified. A QIO must provide written notice of an initial denial 
determination to--
    (i) The patient, or if the patient is expected to be unable to 
comprehend the notice, the patient's next of kin, guardian or other 
representative or sponsor;
    (ii) The attending physician, or other attending health care 
practitioner;
    (iii) The facility; and
    (iv) The fiscal intermediary or carrier.
    (2) Timing of the notice. The notice must be delivered to 
beneficiaries in the facility or mailed to those no longer in the 
facility, within the following time periods--
    (i) For admission, on the first working day after the initial denial 
determination;
    (ii) For continued stay (e.g., outliers in facilities under a 
prospective payment system), by the first working day after the initial 
denial determination if the beneficiary is still in the facility, and 
within 3 working days if the beneficiary has been discharged;
    (iii) For preprocedure review, before the procedure is performed;
    (iv) For preadmission review, before admission;
    (v) If identification as a Medicare program patient has been 
delayed, within three working days of identification;
    (vi) For retrospective review, (excluding DRG validation and post 
procedure review), within 3 working days of the initial denial 
determination; and
    (vii) For post-procedure review, within 3 working days of the 
initial denial determination.
    (3) Preadmission review. In the case of preadmission review, the QIO 
must document that the patient and the facility received notice of the 
initial denial determination.
    (b) Notice of changes as a result of a DRG validation. The QIO must 
notify the provider and practitioner of changes to procedural and 
diagnostic information that result in a change of DRG assignment, within 
30 days of the QIO's decision.
    (c) Content of the notice. The notice must be understandable and 
written in plain English and must contain--
    (1) The reason for the initial denial determination or change as a 
result of the DRG validation;
    (2) For day outliers in hospitals, the date on which the stay or 
services in the facility will not be approved as being reasonable and 
medically necessary or appropriate to the patients' health care needs;
    (3) A statement informing each party or his or her representative of 
the right to request in accordance with the provisions of part 473, 
subpart B of this chapter--
    (i) Review of a change resulting from DRG validation; or
    (ii) Reconsideration of the initial denial determination;
    (4) The locations for filing a request for reconsideration or review 
and the time period within which a request must be filed;
    (5) A statement about who is liable for payment of the denied 
services under section 1879 of the Act; and
    (6) A statement concerning the duties and functions of the QIO under 
the Act.
    (d) Notice to payers. The QIO must provide prompt written notice of 
an initial denial determination or changes as a result of a DRG 
validation to the Medicare fiscal intermediary or carrier within the 
same time periods as the notices to the other parties.
    (e) Record of initial denial determination and changes as a result 
of a DRG validation. (1) The QIO must document and preserve a record of 
all initial denial determinations and changes as a result of DRG 
validations for six years

[[Page 455]]

from the date the services in question were provided.
    (2) The documentary record must include--
    (i) The detailed basis for the initial denial determination or 
changes as a result of a DRG validation; and
    (ii) A copy of the determination or change in DRG notices sent to 
all parties and identification of each party and the date on which the 
notice was mailed or delivered.



Sec. 476.96  Review period and reopening of initial denial determinations and changes as a result of DRG validations.

    (a) General timeframe. A QIO or its subcontractor--
    (1) Within one year of the date of the claim containing the service 
in question, may review and deny payment; and
    (2) Within one year of the date of its decision, may reopen an 
initial denial determination or a change as a result of a DRG 
validation.
    (b) Extended timeframes. (1) An initial denial determination or 
change as a result of a DRG validation may be made after one year but 
within four years of the date of the claim containing the service in 
question, if CMS approves.
    (2) A reopening of an initial denial determination or change as a 
result of a DRG validation may be made after one year but within four 
years of the date of the QIO's decision if--
    (i) Additional information is received on the patient's condition;
    (ii) Reviewer error occurred in interpretation or application of 
Medicare coverage policy or review criteria;
    (iii) There is an error apparent on the face of the evidence upon 
which the initial denial or DRG validation was based; or
    (iv) There is a clerical error in the statement of the initial 
denial determination or change as a result of a DRG validation.
    (c) Fraud and abuse. (1) A QIO or its subcontractor may review and 
deny payment anytime there is a finding that the claim for service 
involves fraud or a similar abusive practice that does not support a 
finding of fraud.
    (2) An initial denial determination or change as a result of a DRG 
validation may be reopened and revised anytime there is a finding that 
it was obtained through fraud or a similar abusive practice that does 
not support a finding of fraud.



Sec. 476.98  Reviewer qualifications and participation.

    (a) Peer review by physician. (1) Except as provided in paragraph 
(a)(2) of this section, each person who makes an initial denial 
determination about services furnished or proposed to be furnished by a 
licensed doctor of medicine or osteopathy or by a doctor of dentistry 
must be respectively another licensed doctor of medicine or osteopathy 
or of dentistry with active staff privileges in one or more hospitals in 
the QIO area.
    (2) If a QIO determines that peers are not available to make initial 
denial determinations, a doctor of medicine or osteopathy may make 
denial determinations for services ordered or performed by a doctor in 
any of the three specialties.
    (3) For purposes of paragraph (a)(1) of this section, individuals 
authorized to practice medicine in American Samoa, the Northern Mariana 
Islands, and the Trust Territory of the Pacific Islands as ``medical 
officers'' may make determinations on care ordered or furnished by their 
peers but not on care ordered or furnished by licensed doctors of 
medicine or osteopathy.
    (b) Peer review by health care practitioners other than physicians. 
Health care practitioners other than physicians may review services 
furnished by other practitioners in the same professional field.
    (c) DRG validation review. Decisions about procedural and diagnostic 
information must be made by physicians. Technical coding issues must be 
reviewed by individuals with training and experience in ICD-9-CM coding.
    (d) Persons excluded from review. (1) A person may not review health 
care services or make initial denial determinations or changes as a 
result of DRG validations if he or she, or a member of his or her 
family--
    (i) Participated in developing or executing the beneficiary's 
treatment plan;
    (ii) Is a member of the beneficiary's family; or

[[Page 456]]

    (iii) Is a governing body member, officer, partner, 5 percent or 
more owner, or managing employee in the health care facility where the 
services were or are to be furnished.
    (2) A member of a reviewer's family is a spouse (other than a spouse 
who is legally separated under a decree of divorce or separate 
maintenance), child (including a legally adopted child), grandchild, 
parent, or grandparent.



Sec. 476.100  Use of norms and criteria.

    (a) Use of norms. As specified in its contract, a QIO must use 
national, or where appropriate, regional norms in conducting review to 
achieve QIO contract objectives. However, with regard to determining the 
number of procedures selected for preadmission review, a QIO must use 
national admission norms.
    (b) Use of criteria. In assessing the need for and appropriateness 
of an inpatient health care facility stay, a QIO must apply criteria to 
determine--
    (1) The necessity for facility admission and continued stay (in 
cases of day outliers in hospitals under prospective payment);
    (2) The necessity for surgery and other invasive diagnostic and 
therapeutic procedures; or
    (3) The appropriateness of providing services at a particular health 
care facility or at a particular level of care. The QIO must determine 
whether the beneficiary requires the level of care received or whether a 
lower and less costly level of care would be equally effective.
    (c) Establishment of criteria and standards. For the conduct of 
review a QIO must--
    (1) Establish written criteria based upon typical patterns of 
practice in the QIO area, or use national criteria where appropriate; 
and
    (2) Establish written criteria and standards to be used in 
conducting quality review studies.
    (d) Variant criteria and standards. A QIO may establish specific 
criteria and standards to be applied to certain locations and facilities 
in the QIO area if the QIO determines that--
    (1) The patterns of practice in those locations and facilities are 
substantially different from patterns in the remainder of the QIO area; 
and
    (2) There is a reasonable basis for the difference which makes the 
variation appropriate.



Sec. 476.102  Involvement of health care practitioners other than physicians.

    (a) Basic requirement. Except as provided in paragraph (b) of this 
section, a QIO must meet the following requirements:
    (1) Consult with the peers of the practitioners who furnish the 
services under review if the QIO reviews care and services delivered by 
health care practitioners other than physicians.
    (2) Assure that in determinations regarding medical necessity of 
services or the quality of the services they furnish, these 
practitioners are involved in--
    (i) Developing QIO criteria and standards;
    (ii) Selecting norms to be used; and
    (iii) Developing review mechanisms for care furnished by their 
peers.
    (3) Ensure that an initial denial determination or a change as a 
result of DRG validation of services provided by a health care 
practitioner other than a physician is made by a physician only after 
consultation with a peer of that practitioner. Initial denial 
determinations and changes as a result of DRG validations must be made 
only by a physician or dentist.
    (b) Exception. The requirements of paragraph (a) of this section do 
not apply if--
    (1) The QIO has been unable to obtain a roster of peer practitioners 
available to perform review; or
    (2) The practitioners are precluded from performing review because 
they participated in the treatment of the patient, the patient is a 
relative, or the practitioners have a financial interest in the health 
care facility as described in Sec. 466.98(d).
    (c) Peer involvement in quality review studies. Practitioners must 
be involved in the design of quality review studies, development of 
criteria, and actual conduct of studies involving their peers.
    (d) Consultation with practitioners other than physicians. To the 
extent practicable, a QIO must consult with

[[Page 457]]

nurses and other professional health care practitioners (other than 
physicians defined in 1861(r) (1) and (2) of the Act) and with 
representatives of institutional and noninstitutional providers and 
suppliers with respect to the QIO's responsibility for review.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 476.104  Coordination of activities.

    In order to achieve efficient and economical review, a QIO must 
coordinate its activities (including information exchanges) with the 
activities of--
    (a) Medicare fiscal intermediaries and carriers;
    (b) Other QIOs; and
    (c) Other public or private review organizations as may be 
appropriate.



PART 478--RECONSIDERATIONS AND APPEALS--Table of Contents




Subpart A [Reserved]

     Subpart B--Utilization and Quality Control Quality Improvement 
             Organization (QIO) Reconsiderations and Appeals

Sec.
478.10 Scope.
478.12 Statutory basis.
478.14 Applicability.
478.15 QIO review of changes resulting from DRG validation.
478.16 Right to reconsideration.
478.18 Location for submitting requests for reconsideration.
478.20 Time limits for requesting reconsideration.
478.22 Good cause for late filing of a request for a reconsideration or 
          hearing.
478.24 Opportunity for a party to obtain and submit information.
478.26 Delegation of the reconsideration function.
478.28 Qualifications of a reconsideration reviewer.
478.30 Evidence to be considered by the reconsideration reviewer.
478.32 Time limits for issuance of the reconsidered determination.
478.34 Notice of a reconsidered determination.
478.36 Record of reconsideration.
478.38 Effect of a reconsidered determination.
478.40 Beneficiary's right to a hearing.
478.42 Submitting a request for a hearing.
478.44 Determining the amount in controversy for a hearing.
478.46 Departmental Appeals Board and judicial review.
478.48 Reopening and revision of a reconsidered determination or a 
          hearing decision.

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

Subpart A [Reserved]



     Subpart B--Utilization and Quality Control Quality Improvement 
             Organization (QIO) Reconsiderations and Appeals

    Source: 50 FR 15372, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.



Sec. 478.10  Scope.

    This subpart establishes the requirements and procedures for--
    (a) Reconsiderations conducted by a Utilization and Quality Control 
Quality Improvement Organization (QIO) or its subcontractor of initial 
denial determinations concerning services furnished or proposed to be 
furnished under Medicare;
    (b) Hearings and judicial review of reconsidered determinations; and
    (c) QIO review of a change in diagnostic and procedural coding 
information.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 478.12  Statutory basis.

    (a) Under section 1154 of the Act, a QIO may make an initial 
determination that services furnished or proposed to be furnished are 
not reasonable, necessary, or delivered in the most appropriate setting.
    (b) Under section 1155 of the Act, the following rules apply:
    (1) A Medicare beneficiary, a provider, or an attending practitioner 
who is dissatisfied with an initial denial determination under paragraph 
(a) of this section is entitled to a reconsideration by the QIO that 
made that determination.
    (2) The beneficiary is also entitled to the following:

[[Page 458]]

    (i) A hearing by an administrative law judge if $200 or more is 
still in controversy after a reconsidered determination.
    (ii) Judicial review if $2000 or more is still in controversy after 
a final determination by the Department.
    (c) Under section 1866(a)(1)(F) of the Act, a hospital that is 
reimbursed by the Medicare program must maintain an agreement with a QIO 
under which the QIO reviews the validity of diagnostic information 
furnished by the hospital.

[50 FR 15372, Apr. 17, 1985, as amended at 60 FR 50442, Sept. 29, 1995. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 478.14  Applicability.

    (a) Basic provision. This subpart applies to reconsiderations and 
hearings of a QIO initial denial determination involving the following 
issues:
    (1) Reasonableness of services.
    (2) Medical necessity of services.
    (3) Appropriateness of the inpatient setting in which services were 
furnished or are proposed to be furnished.
    (b) Concurrent appeal. A reconsideration or hearing provided under 
this subpart fulfills the requirements of any other review, hearing, or 
appeal under the Act to which a party may be entitled with respect to 
the same issues.
    (c) Nonapplicability of rules to related determinations. (1) A QIO 
may not reconsider its decision whether to grant grace days.
    (2) Limitation of liability determinations on excluded coverage of 
certain services are made under section 1879 of the Act. Initial 
determinations under section 1879 and further appeals are governed by 
the reconsideration and appeal procedures in part 405, subpart G of this 
chapter for determinations under Medicare Part A, and part 405, subpart 
H of this chapter for determinations under Medicare Part B. References 
in those subparts to initial and reconsidered determinations made by an 
intermediary, carrier or CMS should be read to mean initial and 
reconsidered determinations made by a QIO.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 478.15  QIO review of changes resulting from DRG validation.

    (a) General rules. (1) A provider or practitioner dissatisfied with 
a change to the diagnostic or procedural coding information made by a 
QIO as a result of DRG validation under section 1866(a)(1)(F) of the Act 
is entitled to a review of that change if--
    (i) The change caused an assignment of a different DRG; and
    (ii) Resulted in a lower payment.
    (2) A beneficiary may obtain a review of a QIO DRG coding change 
only if that change results in noncoverage of a furnished service.
    (3) The individual who reviews changes in DRG procedural or 
diagnostic information must be a physician, and the individual who 
reviews changes in DRG coding must be qualified through training and 
experience with ICD-9-CM coding.
    (b) Procedures. Procedures described in Secs. 473.18 through 473.36, 
and 473.48 (a) and (c) for a QIO reconsideration or reopening also apply 
to QIO review of a DRG coding change.
    (c) Finality of review. No additional review or appeal for matters 
governed by paragraph (a) of this section is available.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 478.16  Right to reconsideration.

    A beneficiary, provider or practitioner who is dissatisfied with a 
QIO initial denial determination on one of the issues specified in 
Sec. 473.14(a) has a right to a reconsideration of that determination by 
the QIO that made the initial denial determination.



Sec. 478.18  Location for submitting requests for reconsideration.

    (a) Beneficiaries. Except as provided in paragraph (c) of this 
section concerning requests for expedited reconsideration, a beneficiary 
who wishes to obtain a reconsideration must submit a written request to 
one of the following:
    (1) The QIO or the QIO subcontractor that made the initial 
determination.
    (2) An SSA District Office.
    (3) A Railroad Retirement Board Office, if the beneficiary is a 
railroad retiree.

[[Page 459]]

    (b) Others. A provider, physician or other practitioner that wishes 
to obtain reconsideration must submit a written request to the QIO or 
QIO subcontractor that made the initial determination.
    (c) Expedited reconsideration. A request for an expedited 
reconsideration of a preadmission denial determination must be submitted 
directly to the QIO.



Sec. 478.20  Time limits for requesting reconsideration.

    (a) Basic rules. (1) Except for a request for expedited 
reconsideration as provided in paragraph (c) of this section, or a late 
request with good cause under Sec. 473.22, a dissatisfied party must 
file a request for reconsideration within 60 days after receipt of the 
notice of an initial determination.
    (2) The date of receipt of the notice of the initial determination 
is presumed to be five days after the date on the notice, unless there 
is a reasonable showing to the contrary.
    (3) A request is considered filed on the date it is postmarked.
    (b) Late filing of request. A QIO will accept a request filed after 
60 days after receipt of the notice of the initial determination if the 
QIO finds under the criteria set forth in Sec. 473.22 that there was 
good cause for the party's failure to file a timely request.
    (c) Request for expedited reconsideration. A request for an 
expedited reconsideration under Sec. 473.18(c) must be submitted within 
three days after receipt of the notice of the initial denial 
determination.



Sec. 478.22  Good cause for late filing of a request for a reconsideration or hearing.

    (a) General Rule. In determining whether a party has good cause for 
not filing a request for reconsideration or hearing timely, the QIO or 
ALJ, respectively, must consider the following:
    (1) What circumstances kept the party from making the request on 
time.
    (2) Whether an action by the QIO misled the party.
    (3) Whether the party understood the requirements of the Act as 
affected by amendments to the Act, other legislation, or court 
decisions.
    (b) Examples. Examples of circumstances in which good cause may 
exist include, but are not limited to, the following:
    (1) A party was seriously ill and was prevented from requesting a 
reconsideration in person, through another person, or in writing.
    (2) There was a death or serious illness in a party's immediate 
family.
    (3) Important records were accidentally destroyed or damaged by fire 
or other cause.
    (4) A party made a diligent effort but could not find or obtain 
necessary relevent information within the appropriate time period.
    (5) A party requested additional information to further explain the 
determination within the time limit, and requested reconsideration 
within 60 days of receiving the explanation (or within 30 days for a 
Departmental Appeals Board hearing).
    (6) The QIO gave the party incorrect or incomplete information about 
when and how to request a reconsideration or hearing.
    (7) A party sent the request to another Government agency in good 
faith within the time limit, but the request did not reach an office 
authorized to receive the request until after the time period had 
expired.
    (8) Other unusual or unavoidable circumstances exist that--
    (i) Show that a party could not have known of the need to file 
timely; or
    (ii) Prevented a party from filing timely.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 478.24  Opportunity for a party to obtain and submit information.

    (a) Subject to the rules concerning disclosure of QIO information in 
section 1160 of the Act, at the request of a provider, practitioner or 
beneficiary, the QIO must provide an opportunity for examination of the 
material upon which the initial denial determination was based. The QIO 
may not furnish a provider, practitioner or beneficiary with--

[[Page 460]]

    (1) A record of the QIO deliberation; or
    (2) The identity of the QIO review coordinators, physician advisors, 
or consultants who assisted in the initial denial determination without 
their consent.
    (b) The QIO may require the requester to pay a reasonable fee for 
the reproduction of the material requested.
    (c) The QIO must provide a party with an opportunity to submit new 
evidence before the reconsidered determination is made.



Sec. 478.26  Delegation of the reconsideration function.

    A QIO may delegate the authority to reconsider an initial 
determination to a nonfacility subcontractor, including the organization 
that made the initial determination as a QIO subcontractor.



Sec. 478.28  Qualifications of a reconsideration reviewer.

    A reconsideration reviewer must be someone who is--
    (a) Qualified under Sec. 466.98 of this chapter to make an initial 
determination.
    (b) Not the individual who made the initial denial determination.
    (c) A specialist in the type of services under review, except where 
meeting this requirement would compromise the effectiveness or 
efficiency of QIO review.



Sec. 478.30  Evidence to be considered by the reconsideration reviewer.

    A reconsidered determination must be based on--
    (a) The information that led to the initial determination;
    (b) New information found in the medical records; or
    (c) Additional evidence submitted by a party.



Sec. 478.32  Time limits for issuance of the reconsidered determination.

    (a) Beneficiaries. If a beneficiary files a timely request for 
reconsideration of an initial denial determination, the QIO must 
complete its reconsidered determination and send written notice to the 
beneficiary within the following time limits--
    (1) Within three working days after the QIO receives the request for 
reconsideration if--
    (i) The beneficiary is still an inpatient in a hospital for the stay 
in question when the QIO receives the request for reconsideration; or
    (ii) The initial determination relates to institutional services for 
which admission to the institution is sought, the initial determination 
was made before the patient was admitted to the institution; and a 
request was submitted timely for an expedited reconsideration.
    (2) Within 10 working days after the QIO receives the request for 
reconsideration if the beneficiary is still an inpatient in a SNF for 
the stay in question when the QIO receives the request for 
reconsideration.
    (3) Within 30 working days after the QIO receives the request for 
reconsideration if--
    (i) The initial determination concerns ambulatory or 
noninstitutional services;
    (ii) The beneficiary is no longer an inpatient in a hospital or SNF 
for the stay in question; or
    (iii) The beneficiary does not submit a request for expedited 
reconsideration timely.
    (b) Providers or practitioners. If the provider or practitioner 
files a request for reconsideration of an initial determination, the QIO 
must complete its reconsidered determination and send written notice to 
the provider or practitioner within 30 working days.



Sec. 478.34  Notice of a reconsidered determination.

    (a) Notice to parties. A written notice of a QIO reconsidered 
determination must contain the following;
    (1) The basis for the reconsidered determination.
    (2) A detailed rationale for the reconsidered determination.
    (3) A statement explaining the Medicare payment consequences of the 
reconsidered determination.
    (4) A statement informing the parties of their appeal rights, 
including the information concerning what must be included in the 
request for hearing, the amount in controversy, locations for

[[Page 461]]

submitting a request for an administrative hearing and the time period 
for filing a request.
    (b) Notice to payers. (1) A QIO must provide written notice of its 
reconsidered determination to the appropriate Medicare intermediary or 
carrier within 30 days if the initial determination is modified or 
reversed.
    (2) This notice must contain adequate information to allow the 
intermediary or carrier to locate the claim file. This must include the 
name of the beneficiary, the Health Insurance Claim Number, the name of 
the provider, date of admission, and dates or services for which 
Medicare payment will not be made.



Sec. 478.36  Record of reconsideration.

    (a) QIO requirements. A QIO must maintain the record of its 
reconsideration until the later of the following:
    (1) Four years after the date on the notice of the QIO's 
reconsidered determination.
    (2) Completion of litigation and the passage of the time period for 
filing all appeals.
    (b) Contents of the record. The record of the reconsideration must 
include:
    (1) The initial determination.
    (2) The basis for the initial determination.
    (3) Documentation of the date of the receipt of the request for 
reconsideration.
    (4) The detailed basis for the reconsidered determination.
    (5) Evidence submitted by the parties.
    (6) A copy of the notice of the reconsidered determination that was 
provided to the parties.
    (7) Documentation of the delivery or mailing and, if appropriate, 
the receipt of the notice of the reconsidered determination by the 
parties.
    (c) Confidentiality. The record of a QIO reconsideration is subject 
to prohibitions against disclosure of information as specified in 
section 1160 of the Act.



Sec. 478.38  Effect of a reconsidered determination.

    A QIO reconsidered determination is binding upon all parties to the 
reconsideration unless--
    (a) A hearing is requested in accordance with Sec. 473.40 and a 
final decision rendered; or
    (b) The reconsidered determination is later reopened and revised in 
accordance with Sec. 473.48.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985, as amended at 
62 FR 25855, May 12, 1997; 62 FR 49938, Sept. 24, 1997. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 478.40  Beneficiary's right to a hearing.

    (a) Amount in controversy. If the amount in controversy is at least 
$200, a beneficiary (but not a provider or practitioner) who is 
dissatisfied with a QIO reconsidered determination may obtain a hearing 
by an administrative law judge (ALJ) of the Office of Hearings and 
Appeals of the SSA.
    (b) Subject matter. A beneficiary has a right to a hearing on the 
following issues:
    (1) Reasonableness of the services.
    (2) Medical necessity of the services.
    (3) Appropriateness of the setting in which the services were 
furnished.
    (c) Governing provisions. The provisions of subpart G, 
Reconsiderations and Appeals under the Hospital Insurance Program, of 
part 405 of this chapter apply to hearings and appeals under this 
subpart unless they are inconsistent with specific provisions in this 
subpart. References in subpart G to initial and reconsidered 
determinations made by an intermediary, carrier, or CMS should be read 
to mean initial and reconsidered determinations made by a QIO.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 478.42  Submitting a request for a hearing.

    (a) Where to submit the written request. A beneficiary who wants to 
obtain a hearing under Sec. 473.40 must submit a written request to one 
of the following:
    (1) The office of the QIO or QIO subcontractor that made the initial 
determination.
    (2) A SSA District Office.
    (3) An office of the Office of Hearings and Appeals of SSA.

[[Page 462]]

    (4) An office of the Railroad Retirement Board, in the case of a 
beneficiary who is a railroad retiree.
    (b) Time limit for submitting a request for a hearing. (1) The 
request for a hearing must be filed within 60 days of receipt of the 
notice of the QIO reconsidered determination, unless the time is 
extended for good cause as provided in Sec. 473.22.
    (2) The date of receipt of the notice of the reconsidered 
determination is presumed to be five days after the date on the notice, 
unless there is a reasonable showing to the contrary.
    (3) A request is considered filed on the date it is postmarked.



Sec. 478.44  Determining the amount in controversy for a hearing.

    (a) After an individual appellant has submitted a request for a 
hearing, the ALJ determines the amount in controversy in accordance with 
Sec. 405.740(a) of this chapter for Part A services or Sec. 405.817(a) 
of this chapter for Part B services. When two or more appellants submit 
a request for hearing, the ALJ determines the amount in controversy in 
accordance with Sec. 405.740(b) of this chapter for Part A services and 
Sec. 405.817(b) of this chapter for Part B services.
    (b) If the ALJ determines that the amount in controversy is less 
than $200, the ALJ, without holding a hearing, notifies the parties to 
the hearing that the parties have 15 calendar days to submit additional 
evidence to prove that the amount in controversy is at least $200.
    (c) At the end of the 15-day period, if the ALJ determines that the 
amount in controversy is less than $200, the ALJ, without holding a 
hearing, dismisses the request for a hearing without ruling on the 
substantive issues involved in the appeal and notifies the parties to 
the hearing and the QIO that the QIO reconsidered determination is 
conclusive for Medicare payment purposes.

[50 FR 15372, Apr. 17, 1985, as amended at 59 FR 12184, Mar. 16, 1994. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 478.46  Departmental Appeals Board and judicial review.

    (a) The circumstances under which the DAB will review an ALJ hearing 
decision or dismissal are the same as those set forth at 20 CFR 404.970, 
(``Cases the Appeals Council will review'').
    (b) If $2,000 or more is in controversy, a party may obtain judicial 
review of an Departmental Appeals Board decision, or an ALJ hearing 
decision if a request for review by the Departmental Appeals Board was 
denied, by filing a civil action under the Federal Rules of Civil 
Procedure within 60 days after the date the party received notice of the 
Departmental Appeals Board decision or denial.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996; 
62 FR 25855, May 12, 1997. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 478.48  Reopening and revision of a reconsidered determination or a hearing decision.

    (a) QIO reopenings--(1) General rule. A QIO or QIO subcontractor 
that made a reconsidered determination, or conducted a review of a DRG 
change as described in Sec. 473.15, that is otherwise binding, may 
reopen and revise the reconsidered determination or review, either on 
its own motion or at the request of a party, within one year from the 
date of the reconsidered determination or review.
    (2) Extension of time limit. A QIO or QIO subcontractor may reopen 
and revise its reconsidered determination, or its review of a DRG change 
as described in Sec. 473.15, that is otherwise binding, after one year 
but within four years of the date of the determination or review if--
    (i) The QIO receives new material evidence;
    (ii) The QIO erred in interpretation or application of Medicare 
coverage policy;
    (iii) There is an error apparent on the face of the evidence upon 
which the reconsidered determination was based; or
    (iv) There is a clerical error in the statement of the reconsidered 
determination.
    (b) ALJ and Departmental Appeals Board Reopening--Applicable 
procedures.

[[Page 463]]

The ALJ or the Departmental Appeals Board, whichever made the decision, 
may reopen and revise the decision in accordance with the procedures set 
forth in Sec. 405.750(b) of this chapter, which concerns reopenings and 
revisions under subpart G of part 405 of this chapter.
    (c) Fraud or similar abusive practice. A reconsidered determination, 
a review of a DRG change, or a decision of an ALJ or the Departmental 
Appeals Board may be reopened and revised at any time, if the 
reconsidered determination, review, or decision was obtained through 
fraud or a similar abusive practice that does not support a formal 
finding of fraud.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996; 
62 FR 25855, May 12, 1997. Redesignated at 64 FR 66279, Nov. 24, 1999]



PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE OF PEER REVIEW INFORMATION--Table of Contents




Subpart A [Reserved]

     Subpart B--Utilization and Quality Control Quality Improvement 
                          Organizations (QIOs)

                           General Provisions

Sec.
480.101 Scope and definitions.
480.102 Statutory bases for acquisition and maintenance of information.
480.103 Statutory bases for disclosure of information.
480.104 Procedures for disclosure by a QIO.
480.105 Notice of disclosures made by a QIO.
480.106 Exceptions to QIO notice requirements.
480.107 Limitations on redisclosure.
480.108 Penalties for unauthorized disclosure.
480.109 Applicability of other statutes and regulations.

                        QIO Access to Information

480.111 QIO access to records and information of institutions and 
          practitioners.
480.112 QIO access to records and information of intermediaries and 
          carriers.
480.113 QIO access to information collected for QIO purposes.
480.114 Limitations on data collection.

                          QIO Responsibilities

480.115 Requirements for maintaining confidentiality.
480.116 Notice to individuals and institutions under review.

                Disclosure of Nonconfidential Information

480.120 Information subject to disclosure.
480.121 Optional disclosure of nonconfidential information.

                 Disclosure of Confidential Information

480.130 Disclosure to the Department.
480.131 Access to medical records for the monitoring of QIOs.
480.132 Disclosure of information about patients.
480.133 Disclosure of information about practitioners, reviewers and 
          institutions.
480.134 Verification and amendment of QIO information.
480.135 Disclosure necessary to perform review responsibilities.
480.136 Disclosure to intermediaries and carriers.
480.137 Disclosure to Federal and State enforcement agencies responsible 
          for the investigation or identification of fraud or abuse of 
          the Medicare or Medicaid programs.
480.138 Disclosure for other specified purposes.
480.139 Disclosure of QIO deliberations and decisions.
480.140 Disclosure of quality review study information.
480.141 Disclosure of QIO interpretations on the quality of health care.
480.142 Disclosure of sanction reports.
480.143 QIO involvement in shared health data systems.

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

Subpart A [Reserved]



     Subpart B--Utilization and Quality Control Quality Improvement 
                          Organizations (QIOs)

    Source: 50 FR 15359, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.

                           General Provisions



Sec. 480.101  Scope and definitions.

    (a) Scope. This subpart sets forth the policies and procedures 
governing--
    (1) Disclosure of information collected, acquired or generated by a 
Utilization and Quality Control Quality Improvement Organization (QIO) 
(or

[[Page 464]]

the review component of a QIO subcontractor) in performance of its 
responsibilities under the Act and these regulations; and
    (2) Acquisition and maintenance of information by a QIO to comply 
with its responsibilities under the Act.
    (b) Definitions. As used in this part:
    Abuse means any unlawful conduct relating to items or services for 
which payment is sought under Title XVIII of the Act.
    Aggregate statistical data means any utilization, admission, 
discharge or diagnostic related group (DRG) data arrayed on a 
geographic, institutional or other basis in which the volume and 
frequency of services are shown without identifying any individual.
    Confidential information means any of the following:
    (1) Information that explicitly or implicitly identifies an 
individual patient, practitioner or reviewer.
    (2) Sanction reports and recommendations.
    (3) Quality review studies which identify patients, practitioners or 
institutions.
    (4) QIO deliberations.
    Health care facility or facility means an organization involved in 
the delivery of health care services or items for which reimbursement 
may be made in whole or in part under Title XVIII of the Act.
    Implicitly identify(ies) means data so unique or numbers so small so 
that identification of an individual patient, practitioners or reviewer 
would be obvious.
    Non-facility organization means a corporate entity that: (1) Is not 
a health care facility; (2) is not a 5 percent or more owner of a 
facility; and (3) is not owned by one or more health care facilities in 
the QIO area.
    Patient representative means--(1) an individual designated by the 
patient, in writing, as authorized to request and receive QIO 
information that would otherwise be disclosable to that patient; or (2) 
an individual identified by the QIO in accordance with 
Sec. 476.132(c)(3) when the beneficiary is mentally, physically or 
legally unable to designate a representative.
    Practitioner means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients.
    QIO deliberations means discussions or communications (within a QIO 
or between a QIO and a QIO subcontractor) including, but not limited to, 
review notes, minutes of meetings and any other records of discussions 
and judgments involving review matters regarding QIO review 
responsibilities and appeals from QIO determinations, in which the 
opinions of, or judgment about, a particular individual or institution 
can be discerned.
    QIO information means any data or information collected, acquired or 
generated by a QIO in the exercise of its duties and functions under 
Title XI Part B or Title XVIII of the Act.
    QIO interpretations and generalizations on the quality of health 
care means an assessment of the quality of care furnished by an 
individual provider or group of providers based on the QIO's knowledge 
of the area gained from its medical review experience (e.g., quality 
review studies) and any other information obtained through the QIO's 
review activities.
    QIO review system means the QIO and those organizations and 
individuals who either assist the QIO or are directly responsible for 
providing medical care or for making determinations with respect to the 
medical necessity, appropriate level and quality of health care services 
that may be reimbursed under the Act. The system includes--
    (1) The QIO and its officers, members and employees;
    (2) QIO subcontractors;
    (3) Health care institutions and practitioners whose services are 
reviewed;
    (4) QIO reviewers and supporting staff; and
    (5) Data support organizations.
    Public information means information which has been disclosed to the 
public.
    Quality review study means an assessment, conducted by or for a QIO, 
of a patient care problem for the purpose of improving patient care 
through peer analysis, intervention, resolution of the problem and 
follow-up.
    Quality review study information means all documentation related to 
the quality review study process.

[[Page 465]]

    Reviewer means review coordinator, physician, or other person 
authorized to perform QIO review functions.
    Sanction report means a report filed pursuant to section 1156 of the 
Act and part 474 of this chapter documenting the QIO's determination 
that a practitioner or institution has failed to meet obligations 
imposed by section 1156 of the Act.
    Shared health data system means an agency or other entity authorized 
by Federal or State law that is used by the QIO review system to provide 
information or to conduct or arrange for the collection, processing, and 
dissemination of information on health care services.
    Subcontractor means a facility or a non-facility organization under 
contract with a QIO to perform QIO review functions.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.102  Statutory bases for acquisition and maintenance of information.

    (a) Section 1154(a)(7)(C) of the Act requires QIOs to the extent 
necessary and appropriate to examine the pertinent records of any 
practitioner or provider of health care services for which payment may 
be made under Title XVIII of the Act.
    (b) Section 1154(a)(9) of the Act requires QIOs to collect and 
maintain information necessary to carry out their responsibilities under 
the Act.
    (c) Section 1156(a)(3) of the Act requires health care practitioners 
and providers to maintain evidence of the medical necessity and quality 
of health care services they provide to Medicare patients as required by 
QIOs.



Sec. 480.103  Statutory bases for disclosure of information.

    (a) Section 1154(a)(10) of the Act requires QIOs to exchange 
information with intermediaries and carriers with contracts under 
sections 1816 and 1842 of the Act, other QIOs, and other public or 
private review organizations as appropriate.
    (b) Section 1160 of the Act provides that QIO information must be 
held in confidence and not be disclosed except where--
    (1) Necessary to carry out the purpose of Title XI Part B of the 
Act;
    (2) Specifically permitted or required under this subpart;
    (3) Necessary, and in the manner prescribed under this subpart, to 
assist Federal and State agencies recognized by the Secretary as having 
responsibility for identifying and investigating cases or patterns of 
fraud or abuse;
    (4) Necessary, and in the manner prescribed under the subpart to 
assist Federal or State agencies recognized by the Secretary as having 
responsibility for identifying cases or patterns involving risks to the 
public health;
    (5) Necessary, and in the manner prescribed under this subpart, to 
assist appropriate State agencies having responsibility for licensing or 
certification of providers or practitioners; or
    (6) Necessary, and in the manner prescribed under this subpart to 
assist Federal or State health planning agencies by furnishing them 
aggregate statistical data on a geographical, institutional or other 
basis.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.104  Procedures for disclosure by a QIO.

    (a) Notice to accompany disclosure.
    (1) Any disclosure of information under the authority of this 
subpart is subject to the requirements in Sec. 476.105 relating to the 
providing of a notice of the disclosure.
    (2) Disclosure of confidential information made under the authority 
of this subpart, except as provided in Sec. 476.106, must be accompanied 
by a written statement informing the recipient that the information may 
not be redisclosed except as provided under Sec. 476.107 that limits 
redisclosure.
    (b) QIO interpretations. A QIO may provide a statement of comment, 
analysis, or interpretation to guide the recipient in using information 
disclosed under this subpart.
    (c) Fees. A QIO may charge a fee to cover the cost of providing 
information authorized under this subpart. These

[[Page 466]]

fees may not exceed the amount necessary to recover the cost to the QIO 
for providing the information.
    (d) Format for disclosure of public information. A QIO is required 
to disclose public information (Sec. 476.120(a)(6)) only in the form in 
which it is acquired by the QIO or in the form in which it is maintained 
for QIO use.
    (e) Medicare provider number. A QIO must include the provider 
identification number assigned by the Medicare program on information 
that CMS requests.



Sec. 480.105  Notice of disclosures made by a QIO.

    (a) Notification of the disclosure of nonconfidential information. 
Except as permitted under Sec. 476.106, at least 30 calender days before 
disclosure of nonconfidential information, the QIO must notify an 
identified institution of its intent to disclose information about the 
institution (other than reports routinely submitted to CMS or Medicare 
fiscal intermediaries, or to or from QIO subcontractors, or to or from 
the institution) and provide the institution with a copy of the 
information. The institution may submit comments to the QIO that must be 
attached to the information disclosed if received before disclosure, or 
forwarded separately if received after disclosure.
    (b) Notification of the disclosure of confidential information. (1) 
A QIO must notify the practitioner who has treated a patient, of a 
request for disclosure to the patient or patient representative in 
accordance with the requirements and exceptions to the requirements for 
disclosure specified under Sec. 476.132.
    (2) A QIO must notify a practitioner or institution of the QIO's 
intent to disclose information on the practitioner or institution to an 
investigative or licensing agency (Secs. 476.137 and 476.138) except for 
cases specified in Sec. 476.106 involving fraud or abuse or imminent 
danger to individuals or the public health. The practitioner or 
institution must be notified and provided a copy of the information to 
be disclosed at least 30 calendar days before the QIO discloses the 
identifying information. The QIO must forward with the information any 
comments submitted by the practitioner or institution in response to the 
QIO notice if received before disclosure, or forwarded separately if 
received after disclosure.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.106  Exceptions to QIO notice requirements.

    (a) Imminent danger to individuals or public health. When the QIO 
determines that requested information is necessary to protect against an 
imminent danger to individuals or the public health, the notification 
required in Sec. 476.105 may be sent simultaneously with the disclosure.
    (b) Fraud or Abuse. The notification requirement in Sec. 476.105 
does not apply if--
    (1) The disclosure is made in an investigation of fraud or abuse by 
the Office of the Inspector General or the General Accounting Office; or
    (2) The disclosure is made in an investigation of fraud or abuse by 
any other Federal or State fraud or abuse agency and the investigative 
agency specifies in writing that the information is related to a 
potentially prosecutable criminal offense.



Sec. 480.107  Limitations on redisclosure.

    Persons or organizations that obtain confidential QIO information 
must not further disclose the information to any other person or 
organization except--
    (a) As directed by the QIO to carry out a disclosure permitted or 
required under a particular provision of this part;
    (b) As directed by CMS to carry out specific responsibilities of the 
Secretary under the Act;
    (c) As necessary for CMS to carry out its responsibilities for 
appeals under section 1155 of the Act or for CMS to process sanctions 
under section 1156 of the Act;
    (d) If the health care services furnished to an individual patient 
are reimbursed from more than one source, these sources of reimbursement 
may exchange confidential information as necessary for the payment of 
claims;
    (e) If the information is acquired by the QIO from another source 
and the

[[Page 467]]

receiver of the information is authorized under its own authorities to 
acquire the information directly from the source, the receiver may 
disclose the information in accordance with the source's redisclosure 
rules;
    (f) As necessary for the General Accounting Office to carry out its 
statutory responsibilities;
    (g) Information pertaining to a patient or practitioner may be 
disclosed by that individual provided it does not identify any other 
patient or practitioner;
    (h) An institution may disclose information pertaining to itself 
provided it does not identify an individual patient or practitioner;
    (i) Governmental fraud or abuse agencies and State licensing or 
certification agencies recognized by CMS may disclose information as 
necessary in a judicial, administrative or other formal legal proceeding 
resulting from an investigation conducted by the agency;
    (j) State and local public health officials to carry out their 
responsibilities, as necessary, to protect against a substantial risk to 
the public health; or
    (k) As necessary for the Office of the Inspector General to carry 
out its statutory responsibilities.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.108  Penalties for unauthorized disclosure.

    A person who discloses information not authorized under Title XI 
Part B of the Act or the regulations of this part will, upon conviction, 
be fined no more than $1,000, or be imprisoned for no more than six 
months, or both, and will pay the costs of prosecution.



Sec. 480.109  Applicability of other statutes and regulations.

    The provisions of 42 U.S.C. 290dd-3 and 290ee-3 governing 
confidentiality of alcohol and drug abuse patients' records, and the 
implementing regulations at 42 CFR part 2, are applicable to QIO 
information.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]

                        QIO Access to Information



Sec. 480.111  QIO access to records and information of institutions and practitioners.

    (a) A QIO is authorized to have access to and obtain records and 
information pertinent to the health care services furnished to Medicare 
patients, held by any institution or practitioner in the QIO area. The 
QIO may require the institution or practitioner to provide copies of 
such records or information to the QIO.
    (b) A QIO may obtain non-Medicare patient records relating to review 
performed under a non-Medicare QIO contract if authorized by those 
patients in accordance with State law.
    (c) In accordance with its quality review responsibilities under the 
Act, a QIO may have access to and obtain information from, the records 
of non-Medicare patients if authorized by the institution or 
practitioner.
    (d) A QIO may reimburse for requested information at the rate of 
$.10 per page for photocopying plus first class postage. The 
photocopying amount includes the cost of labor, supplies, equipment, and 
overhead.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 65 FR 83154, Dec. 29, 2000]



Sec. 480.112  QIO access to records and information of intermediaries and carriers.

    A QIO is authorized to have access to and require copies of Medicare 
records or information held by intermediaries or carriers if the QIO 
determines that the records or information are necessary to carry out 
QIO review responsibilities.



Sec. 480.113  QIO access to information collected for QIO purposes.

    (a) Institutions and other entities must disclose to the QIO 
information collected by them for QIO purposes.
    (b) Information collected or generated by institutions or 
practitioners to carry out quality review studies must be disclosed to 
the QIO.



Sec. 480.114  Limitation on data collection.

    A QIO or any agent, organization, or institution acting on its 
behalf, that is

[[Page 468]]

collecting information under authority of this part, must collect only 
that information which is necessary to accomplish the purposes of Title 
XI Part B of the Act in accordance with 44 U.S.C. Chapter 35, 
Coordination of Federal Reporting Services Information Policy.

                          QIO Responsibilities



Sec. 480.115  Requirements for maintaining confidentiality.

    (a) Responsibilities of QIO officers and employees. The QIO must 
provide reasonable physical security measures to prevent unauthorized 
access to QIO information and to ensure the integrity of the 
information, including those measures needed to secure computer files. 
Each QIO must instruct its officers and employees and health care 
institution employees participating in QIO activities of their 
responsibility to maintain the confidentiality of information and of the 
legal penalties that may be imposed for unauthorized disclosure of QIO 
information.
    (b) Responsible individuals within the QIO. The QIO must assign a 
single individual the responsibility for maintaining the system for 
assuring the confidentiality of information within the QIO review 
system. That individual must notify CMS of any violations of these 
regulations.
    (c) Training requirements. The QIO must train participants of the 
QIO review system in the proper handling of confidential information.
    (d) Authorized access. An individual participating in the QIO review 
system on a routine or ongoing basis must not have authorized access to 
confidential QIO information unless that individual--
    (1) Has completed a training program in the handling of QIO 
information in accordance with paragraph (c) of this section or has 
received comparable training from another source; and
    (2) Has signed a statement indicating that he or she is aware of the 
legal penalties for unauthorized disclosure.
    (e) Purging of personal identifiers. (1) The QIO must purge or 
arrange for purging computerized information, patient records and other 
noncomputerized files of all personal identifiers as soon as it is 
determined by CMS that those identifiers are no longer necessary.
    (2) The QIO must destroy or return to the facility from which it was 
collected confidential information generated from computerized 
information, patient records and other noncomputerized files when the 
QIO determines that the maintenance of hard copy is no longer necessary 
to serve the specific purpose for which it was obtained or generated.
    (f) Data system procedures. The QIO must assure that organizations 
and consultants providing data services to the QIO have established 
procedures for maintaining the confidentiality of QIO information in 
accordance with requirements defined by the QIO and consistent with 
procedures established under this part.



Sec. 480.116  Notice to individuals and institutions under review.

    The QIO must establish and implement procedures to provide patients, 
practitioners, and institutions under review with the following 
information--
    (a) The title and address of the person responsible for maintenance 
of QIO information;
    (b) The types of information that will be collected and maintained;
    (c) The general rules governing disclosure of QIO information; and
    (d) The procedures whereby patients, practitioners, and institutions 
may obtain access to information about themselves.

                Disclosure of Nonconfidential Information



Sec. 480.120  Information subject to disclosure.

    Subject to the procedures for disclosure and notice of disclosure 
specified in Secs. 476.104 and 476.105, the QIO must disclose--
    (a) Nonconfidential information to any person upon request, 
including--
    (1) The norms, criteria, and standards it uses for initial screening 
of cases, and for other review activities;
    (2) Winning technical proposals for contracts from the Department, 
and

[[Page 469]]

winning technical proposals for subcontracts under those contracts 
(except for proprietary or business information);
    (3) Copies of documents describing administrative procedures, agreed 
to between the QIO and institutions or between a QIO and the Medicare 
intermediary or Medicare carrier;
    (4) Routine reports submitted by the QIO to CMS to the extent that 
they do not contain confidential information.
    (5) Summaries of the proceedings of QIO regular and other meetings 
of the governing body and general membership except for those portions 
of the summaries involving QIO deliberations, which are confidential 
information and subject to the provisions of Sec. 476.139;
    (6) Public information in its possession;
    (7) Aggregate statiscal information that does not implicitly or 
explicitly identify individual patients, practitioners or reviewers;
    (8) Quality review study information including summaries and 
conclusions from which the identification of patients, practitioners and 
institutions has been deleted; and
    (9) Information describing the characteristics of a quality review 
study, including a study design and methodology.
    (b) Aggregate statistical information that does not implicitly or 
explicitly identify individual patients, practitioners or reviewers, to 
Federal or State health planning agencies (including Health Systems 
Agencies and State Health Planning and Development Agencies) in carrying 
out their health care planning and related activities.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.121  Optional disclosure of nonconfidential information.

    A QIO may, on its own initiative, subject to the notification 
requirements in Sec. 476.105, furnish the information available under 
Sec. 476.120 to any person, agency, or organization.

                 Disclosure of Confidential Information



Sec. 480.130  Disclosure to the Department.

    Except as limited by Secs. 476.139(a) and 476.140 of this subpart, 
QIOs must disclose all information requested by the Department to it in 
the manner and form required.



Sec. 480.131  Access to medical records for the monitoring of QIOs.

    CMS or any person, organization or agency authorized by the 
Department or Federal statute to monitor a QIO will have access to 
medical records maintained by institutions or health care practitioners 
on Medicare patients. The monitor can require copies of the records.



Sec. 480.132  Disclosure of information about patients.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, a QIO must--
    (1) Disclose patient identified information in its possession to the 
identified patient or the patient's representative if--
    (i) The patient or the patient's representative requests the 
information in writing;
    (ii) The request by a patient's representative includes the 
designation, by the patient, of the representative; and
    (iii) All other patient and practitioner identifiers have been 
removed.
    (2) Seek the advice of the attending practitioner that treated the 
patient regarding the appropriateness of direct disclosure to the 
patient 15 days before the QIO provides the requested information. If 
the attending practitioner states that the released information could 
harm the patient, the QIO must act in accordance with paragraph (c)(2) 
of this section. The QIO must make disclosure to the patient or 
patient's representative within 30 calendar days of receipt of the 
request.
    (b) Exceptions. (1) If the request is in connection with an initial 
denial determination under section 1154(a)(3) of the Act, the QIO--
    (i) Need not seek the advice of the practitioner that treated the 
patient

[[Page 470]]

regarding the appropriateness of direct disclosure to the patient; and
    (ii) Must provide only the information used to support that 
determination in accordance with the procedures for disclosure of 
information relating to determinations under Sec. 473.24.
    (2) A QIO must disclose information regarding QIO deliberations only 
as specified in Sec. 476.139(a).
    (3) A QIO must disclose quality review study information only as 
specified in Sec. 476.140.
    (c) Manner of disclosure. (1) The QIO must disclose the patient 
information directly to the patient unless knowledge of the information 
could harm the patient.
    (2) If knowledge of the information could harm the patient, the QIO 
must disclose the information to the patient's designated 
representative.
    (3) If the patient is mentally, physically or legally unable to 
designate a representative, the QIO must disclose the information to a 
person whom the QIO determines is responsible for the patient.

The QIO must first attempt to make that determination based on the 
medical record. If the responsible person is not named in the medical 
record, then the QIO may rely on the attending practitioner for the 
information. If the practitioner is unable to provide a name, then the 
QIO must make a determination based on other reliable information.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.133  Disclosure of information about practitioners, reviewers and institutions.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, the following provisions are required of 
the QIO.
    (1) Disclosure to the identified individual or institution. A QIO 
must disclose, to particular practitioners, reviewers and institutions, 
information about themselves, upon request, and may disclose it to them 
without a request.
    (2) Disclosure to others. (i) A QIO must disclose to an institution, 
upon request, information on a practitioner to the extent that the 
information displays practice or performance patterns of the 
practitioner in that institution.
    (ii) In accordance with section 1160 of the Act, a QIO must disclose 
information that displays practice or performance patterns of a 
practitioner or institution in accordance with the procedures for 
disclosures specified in Secs. 476.137 and 476.138 to--
    (A) Federal and State agencies that are responsible for the 
investigation of fraud and abuse of the Medicare or Medicaid programs, 
and
    (B) Federal and State agencies that are responsible for licensing 
and certification of practitioners and providers.
    (iii) A QIO may disclose to any person, agency or organization, 
information on a particular practitioner or reviewer with the consent of 
that practitioner or reviewer provided that the information does not 
identify other individuals.
    (b) Exceptions. (1) If the request is in connection with an initial 
denial determination or a change resulting from a diagnostic related 
group (DRG) coding validation under Part 466 of this subchapter, the QIO 
must provide only the information used to support that determination in 
accordance with the procedures for disclosure of information relating to 
determinations under Sec. 473.24.
    (2) A QIO must disclose information regarding QIO deliberations only 
as specified in Sec. 476.139(a).
    (3) A QIO must disclose quality review study information only as 
specified in Sec. 476.140.

[50 FR 15359, Apr. 17, 1885, as amended at 52 FR 37458, Oct. 7, 1987; 52 
FR 47004, Dec. 11, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 480.134  Verification and amendment of QIO information.

    (a) A QIO must verify the accuracy of its information concerning 
patients, practitioners, reviewers, and institutions and must permit the 
individual or institution to request an amendment of pertinent 
information that is in the possession of the QIO.
    (b) If the QIO agrees with the request for amendment, the QIO must 
correct the information in its possession. If the information being 
amended has already

[[Page 471]]

been disclosed, the QIO must forward the amended information to the 
requester where it may affect decisions about a particular provider, 
practitioner or case under review.
    (c) If the QIO disagrees with the request for amendment, a notation 
of the request, reasons for the request, and the reasons for refusal 
must be included with the information and attached to any disclosure of 
the information.

[50 FR 15358, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.135  Disclosure necessary to perform review responsibilities.

    (a) Disclosure to conduct review. The QIO must disclose or arrange 
for disclosure of information to individuals and institutions within the 
QIO review system as necessary to fulfill their particular duties and 
functions under Title XI Part B of the Act.
    (b) Disclosure to consultants and subcontractors. The QIO must 
disclose to consultants or subcontractors the information they need to 
provide specified services to the QIO.
    (c) Disclosure to other QIO and medical review boards. The QIO must 
disclose--
    (1) To another QIO, information on patients and practitioners who 
are subject to review by the other QIO; and
    (2) To medical review boards established under section 1881 of the 
Act, confidential information on patients, practitioners and 
institutions receiving or furnishing end stage renal disease services.



Sec. 480.136  Disclosure to intermediaries and carriers.

    (a) Required disclosure. Except as specified in Secs. 476.139(a) and 
476.140 relating to disclosure of QIO deliberations and quality review 
study information, a QIO must disclose to intermediaries and carriers 
QIO information that relates to, or is necessary for, payment of claims 
for Medicare as follows:
    (1) Review determinations and claims forms for health care services, 
furnished in the manner and form agreed to by the QIO and the 
intermediary or carrier.
    (2) Upon request, copies of medical records acquired from 
practitioners or institutions for review purposes.
    (3) QIO information about a particular patient or practitioner if 
the QIO and the intermediary or carrier (or CMS if the QIO and the 
intermediary or carrier cannot agree) determine that the information is 
necessary for the administration of the Medicare program.
    (b) Optional disclosure. The QIO may disclose the information 
specified in paragraph (a) of this section to intermediaries and 
carriers without a request.



Sec. 480.137  Disclosure to Federal and State enforcement agencies responsible for the investigation or identification of fraud or abuse of the Medicare or 
          Medicaid programs.

    (a) Required disclosure. Except as specified in Secs. 476.139(a) and 
476.140 relating to disclosure of QIO deliberations and quality review 
study information, the QIO must disclose confidential information 
relevant to an investigation of fraud or abuse of the Medicare or 
medicaid programs, including QIO medical necessity determinations and 
other information that includes patterns of the practice or performance 
of a practitioner or institution, when a written request is received 
from a State or Federal enforcement agency responsible for the 
investigation or identification of fraud or abuse of the Medicare or 
Medicaid programs that--
    (1) Identifies the name and title of the individual initiating the 
request,
    (2) Identifies the physician or institution about which information 
is requested, and
    (3) States affirmatively that the institution or practitioner is 
currently under investigation for fraud or abuse of the Medicare or 
Medicaid programs and that the information is needed in furtherance of 
that investigation.
    (b) Optional disclosure. The QIO may provide the information 
specified in paragraph (a) of this section to Federal or State fraud and 
abuse enforcement agencies responsible for the investigation or 
identification of fraud or abuse

[[Page 472]]

of the Medicare or Medicaid programs, without a request.

[50 FR 15358, Apr. 17, 1985, as amended at 52 FR 37458, Oct. 7, 1987. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec. 480.138  Disclosure for other specified purposes.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, the following provisions are required of 
the QIO.
    (1) Disclosure to licensing and certification bodies. (i) A QIO must 
disclose confidential information upon request, to State or Federal 
licensing bodies responsible for the professional licensure of a 
practitioner or a particular institution. Confidential information, 
including QIO medical necessity determinations that display the practice 
or performance patterns of that practitioner, must be disclosed by the 
QIO but only to the extent that it is required by the agency to carry 
out a function within the jurisdiction of the agency under Federal or 
State law.
    (ii) A QIO may provide the information specified in paragraph 
(a)(1)(i) of this section to the State or Federal licensing body without 
request.
    (2) Disclosure to State and local public health officials. A QIO 
must disclose QIO information to State and local public health officials 
whenever the QIO determines that the disclosure of the information is 
necessary to protect against a substantial risk to the public health.
    (3) Disclosure to the courts. Patient identified records in the 
possession of a QIO are not subject to subpoena or discovery in a civil 
action, including an administrative, judicial or arbitration proceeding.
    (b) Exceptions. (1) The restriction set forth in paragraph (a)(3) of 
this section does not apply to HHS, including Inspector General, 
administrative subpoenas issued in the course of audits and 
investigations of Department programs, in the course of administrative 
hearings held under the Social Security Act or to disclosures to the 
General Accounting Office as necessary to carry out its statutory 
responsibilities.
    (2) A QIO must disclose information regarding QIO deliberations and 
quality review study information only as specified in Secs. 476.139(a) 
and 476.140.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec. 480.139  Disclosure of QIO deliberations and decisions.

    (a) QIO deliberations. (1) A QIO must not disclose its deliberations 
except to--
    (i) CMS, at the QIO office or at a subcontracted organization;
    (ii) CMS, to the extent that the deliberations are incorporated in 
sanction and appeals reports; or
    (iii) The Office of the Inspector General, and the General 
Accounting Office as necessary to carry out statutory responsibilities.
    (2) QIO deliberations are not disclosable, either in written form or 
through oral testimony, in connection with the administrative hearing or 
review of a beneficiary's claim.
    (b) Reasons for QIO decisions. (1) A QIO may disclose to those who 
have access to QIO information under other provisions of this subpart, 
the reasons for QIO decisions pertaining to that information provided 
that the opinions or judgements of a particular individual or 
practitioner cannot be identified.
    (2) A QIO must disclose, if requested in connection with the 
administrative hearing or review of a beneficiary's claim, the reasons 
for QIO decisions. The QIO must include the detailed facts, findings and 
conclusions supporting the QIO's determination. The QIO must insure that 
the opinions or judgements of a particular individual or practitioner 
cannot be identified through the materials that are disclosed.



Sec. 480.140  Disclosure of quality review study information.

    (a) A QIO must disclose, onsite, quality review study information 
with identifiers of patients, practitioners or institutions to--
    (1) Representatives of authorized licensure, accreditation or 
certification agencies as is required by the agencies in carrying out 
functions which are within the jurisdiction of such agencies under state 
law; to federal and state

[[Page 473]]

agencies responsible for identifying risks to the public health when 
there is substantial risk to the public health; CMS; or to Federal and 
State fraud and abuse enforcement agencies;
    (2) An institution or practitioner, if the information is limited to 
health care services furnished by the institution or practitioner; and
    (3) A medical review board established under section 1881 of the Act 
pertaining to end-stage renal disease facilities, if the information is 
limited to health care services subject to its review.
    (b) A QIO must disclose quality review study information with 
identifiers of patients, practitioners or institutions to the Office of 
the Inspector General and the General Accounting Office as necessary to 
carry out statutory responsibilities.
    (c) A QIO may disclose information offsite from a particular quality 
review study to any institution or practitioner involved in that study, 
provided the disclosed information is limited to that institution or 
practitioner.
    (d) An institution or group of practitioners may redisclose quality 
review study information, if the information is limited to health care 
services they provided.
    (e) Quality review study information with patient identifiers is not 
subject to subpoena or discovery in a civil action, including an 
administrative, judicial or arbitration proceeding. This restriction 
does not apply to HHS, including Inspector General, administrative 
subpoenas issued in the course of audits and investigations of 
Department programs, in the course of administrative hearings held under 
the Social Security Act, or to disclosures to the General Accounting 
Office as necessary to carry out its statutory responsibilities.



Sec. 480.141  Disclosure of QIO interpretations on the quality of health care.

    Subject to the procedures for disclosure and notice of disclosure 
specified in Secs. 476.104 and 476.105, a QIO may disclose to the public 
QIO interpretations and generalizations on the quality of health care 
that identify a particular institution.



Sec. 480.142  Disclosure of sanction reports.

    (a) The QIO must disclose sanction reports directly to the Office of 
the Inspector General and, if requested, to CMS.
    (b) The QIO must upon request, and may without a request, disclose 
sanction reports to State and Federal agencies responsible for the 
identification, investigation or prosecution of cases of fraud or abuse 
in accordance with Sec. 476.137.
    (c) CMS will disclose sanction determinations in accordance with 
part 474 of this chapter.



Sec. 480.143  QIO involvement in shared health data systems.

    (a) Information collected by a QIO. Except as prohibited in 
paragraph (b) of this section, information collected by a QIO may be 
processed and stored by a cooperative health statistics system 
established under the Public Health Service Act (42 U.S.C. 242k) or 
other State or Federally authorized shared data system.
    (b) QIO participation. A QIO may not participate in a cooperative 
health statistics system or other shared health data system if the 
disclosure rules of the system would prevent the QIO from complying with 
the rules of this part.
    (c) Disclosure of QIO information obtained by a shared health data 
system. QIO information must not be disclosed by the shared health data 
system unless--
    (1) The source from which the QIO acquired the information consents 
to or requests disclosure; or
    (2) The QIO requests the disclosure of the information to carry out 
a disclosure permitted under a provision of this part.

[[Page 474]]



                SUBCHAPTER G--STANDARDS AND CERTIFICATION



PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS--Table of Contents




                      Subpart A--General Provisions

Sec.
482.1 Basis and scope.
482.2 Provision of emergency services by nonparticipating hospitals.

                        Subpart B--Administration

482.11 Condition of participation: Compliance with Federal, State and 
          local laws.
482.12 Condition of participation: Governing body.
482.13 Condition of participation: Patients' rights.

                   Subpart C--Basic Hospital Functions

482.21 Condition of participation: Quality assurance.
482.22 Condition of participation: Medical staff.
482.23 Condition of participation: Nursing services.
482.24 Condition of participation: Medical record services.
482.25 Condition of participation: Pharmaceutical services.
482.26 Condition of participation: Radiologic services.
482.27 Condition of participation: Laboratory services.
482.28 Condition of participation: Food and dietetic services.
482.30 Condition of participation: Utilization review.
482.41 Condition of participation: Physical environment.
482.42 Condition of participation: Infection control.
482.43 Condition of participation: Discharge planning.
482.45 Condition of participation: Organ, tissue, and eye procurement.

                  Subpart D--Optional Hospital Services

482.51 Condition of participation: Surgical services.
482.52 Condition of participation: Anesthesia services.
482.53 Condition of participation: Nuclear medicine services.
482.54 Condition of participation: Outpatient services.
482.55 Condition of participation: Emergency services.
482.56 Condition of participation: Rehabilitation services.
482.57 Condition of participation: Respiratory care services.

             Subpart E--Requirements for Specialty Hospitals

482.60 Special provisions applying to psychiatric hospitals.
482.61 Condition of participation: Special medical record requirements 
          for psychiatric hospitals.
482.62 Condition of participation: Special staff requirements for 
          psychiatric hospitals.
482.66 Special requirements for hospital providers of long-term care 
          services (``swing-beds'').

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

    Source: 51 FR 22042, June 17, 1986, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 482.1  Basis and scope.

    (a) Statutory basis. (1) Section 1861(e) of the Act provides that--
    (i) Hospitals participating in Medicare must meet certain specified 
requirements; and
    (ii) The Secretary may impose additional requirements if they are 
found necessary in the interest of the health and safety of the 
individuals who are furnished services in hospitals.
    (2) Section 1861(f) of the Act provides that an institution 
participating in Medicare as a psychiatric hospital must meet certain 
specified requirements imposed on hospitals under section 1861(e), must 
be primarily engaged in providing, by or under the supervision of a 
physician, psychiatric services for the diagnosis and treatment of 
mentally ill persons, must maintain clinical records and other records 
that the Secretary finds necessary, and must meet staffing requirements 
that the Secretary finds necessary to carry out an active program of 
treatment for individuals who are furnished services in the hospital. A 
distinct part of an institution can participate as a psychiatric 
hospital if the institution meets the specified 1861(e) requirements and 
is primarily engaged in providing psychiatric services, and if the

[[Page 475]]

distinct part meets the records and staffing requirements that the 
Secretary finds necessary.
    (3) Sections 1861(k) and 1902(a)(30) of the Act provide that 
hospitals participating in Medicare and Medicaid must have a utilization 
review plan that meets specified requirements.
    (4) Section 1883 of the Act sets forth the requirements for 
hospitals that provide long term care under an agreement with the 
Secretary.
    (5) Section 1905(a) of the Act provides that ``medical assistance'' 
(Medicaid) payments may be applied to various hospital services. 
Regulations interpreting those provisions specify that hospitals 
receiving payment under Medicaid must meet the requirements for 
participation in Medicare (except in the case of medical supervision of 
nurse-midwife services. See Secs. 440.10 and 440.165 of this chapter.).
    (b) Scope. Except as provided in subpart A of part 488 of this 
chapter, the provisions of this part serve as the basis of survey 
activities for the purpose of determining whether a hospital qualifies 
for a provider agreement under Medicare and Medicaid.

[51 FR 22042, June 17, 1986, as amended at 60 FR 50442, Sept. 29, 1995]



Sec. 482.2  Provision of emergency services by nonparticipating hospitals.

    (a) The services of an institution that does not have an agreement 
to participate in the Medicare program may, nevertheless, be reimbursed 
under the program if--
    (1) The services are emergency services; and
    (2) The institution meets the requirements of section 1861(e) (1) 
through (5) and (7) of the Act. Rules applicable to emergency services 
furnished by nonparticipating hospitals are set forth in subpart G of 
part 424 of this chapter.
    (b) Secton 440.170(e) of this chapter defines emergency hospital 
services for purposes of Medicaid reimbursement.

[51 FR 22042, June 17, 1986, as amended at 53 FR 6648, Mar. 2, 1988]



                        Subpart B--Administration



Sec. 482.11  Condition of participation: Compliance with Federal, State and local laws.

    (a) The hospital must be in compliance with applicable Federal laws 
related to the health and safety of patients.
    (b) The hospital must be--
    (1) Licensed; or
    (2) Approved as meeting standards for licensing established by the 
agency of the State or locality responsible for licensing hospitals.
    (c) The hospital must assure that personnel are licensed or meet 
other applicable standards that are required by State or local laws.



Sec. 482.12  Condition of participation: Governing body.

    The hospital must have an effective governing body legally 
responsible for the conduct of the hospital as an institution. If a 
hospital does not have an organized governing body, the persons legally 
responsible for the conduct of the hospital must carry out the functions 
specified in this part that pertain to the governing body.
    (a) Standard: Medical staff. The governing body must:
    (1) Determine, in accordance with State law, which categories of 
practitioners are eligible candidates for appointment to the medical 
staff;
    (2) Appoint members of the medical staff after considering the 
recommendations of the existing members of the medical staff;
    (3) Assure that the medical staff has bylaws;
    (4) Approve medical staff bylaws and other medical staff rules and 
regulations;
    (5) Ensure that the medical staff is accountable to the governing 
body for the quality of care provided to patients;
    (6) Ensure the criteria for selection are individual character, 
competence, training, experience, and judgment; and
    (7) Ensure that under no circumstances is the accordance of staff 
membership or professional privileges

[[Page 476]]

in the hospital dependent solely upon certification, fellowship, or 
membership in a specialty body or society.
    (b) Standard: Chief executive officer. The governing body must 
appoint a chief executive officer who is responsible for managing the 
hospital.
    (c) Standard: Care of patients. In accordance with hospital policy, 
the governing body must ensure that the following requirements are met:
    (1) Every Medicare patient is under the care of:
    (i) A doctor of medicine or osteopathy (This provision is not to be 
construed to limit the authority of a doctor of medicine or osteopathy 
to delegate tasks to other qualified health care personnel to the extent 
recognized under State law or a State's regulatory mechanism.);
    (ii) A doctor of dental surgery or dental medicine who is legally 
authorized to practice dentistry by the State and who is acting within 
the scope of his or her license;
    (iii) A doctor of podiatric medicine, but only with respect to 
functions which he or she is legally authorized by the State to perform;
    (iv) A doctor of optometry who is legally authorized to practice 
optometry by the State in which he or she practices;
    (v) A chiropractor who is licensed by the State or legally 
authorized to perform the services of a chiropractor, but only with 
respect to treatment by means of manual manipulation of the spine to 
correct a subluxation demonstrated by x-ray to exist; and
    (vi) A clinical psychologist as defined in Sec. 410.71 of this 
chapter, but only with respect to clinical psychologist services as 
defined in Sec. 410.71 of this chapter and only to the extent permitted 
by State law.
    (2) Patients are admitted to the hospital only on the recommendation 
of a licensed practitioner permitted by the State to admit patients to a 
hospital. If a Medicare patient is admitted by a practitioner not 
specified in paragraph (c)(1) of this section, that patient is under the 
care of a doctor of medicine or osteopathy.
    (3) A doctor of medicine or osteopathy is on duty or on call at all 
times.
    (4) A doctor of medicine or osteopathy is responsible for the care 
of each Medicare patient with respect to any medical or psychiatric 
problem that--
    (i) is present on admission or develops during hospitalization; and
    (ii) Is not specifically within the scope of practice of a doctor of 
dental surgery, dental medicine, podiatric medicine, or optometry; a 
chiropractor; or clinical psychologist, as that scope is--
    (A) Defined by the medical staff;
    (B) Permitted by State law; and
    (C) Limited, under paragraph (c)(1)(v) of this section, with respect 
to chiropractors.
    (d) Standard: Institutional plan and budget. The institution must 
have an overall institutional plan that meets the following conditions:
    (1) The plan must include an annual operating budget that is 
prepared according to generally accepted accounting principles.
    (2) The budget must include all anticipated income and expenses. 
This provision does not require that the budget identify item by item 
the components of each anticipated income or expense.
    (3) The plan must provide for capital expenditures for at least a 3-
year period, including the year in which the operating budget specified 
in paragraph (d)(2) of this section is applicable.
    (4) The plan must include and identify in detail the objective of, 
and the anticipated sources of financing for, each anticipated capital 
expenditure in excess of $600,000 (or a lesser amount that is 
established, in accordance with section 1122(g)(1) of the Act, by the 
State in which the hospital is located) that relates to any of the 
following:
    (i) Acquisition of land;
    (ii) Improvement of land, buildings, and equipment; or
    (iii) The replacement, modernization, and expansion of buildings and 
equipment.
    (5) The plan must be submitted for review to the planning agency 
designated in accordance with section 1122(b) of the Act, or if an 
agency is not designated, to the appropriate health planning agency in 
the State. (See part 100 of this title.) A capital expenditure

[[Page 477]]

is not subject to section 1122 review if 75 percent of the health care 
facility's patients who are expected to use the service for which the 
capital expenditure is made are individuals enrolled in a health 
maintenance organization (HMO) or competitive medical plan (CMP) that 
meets the requirements of section 1876(b) of the Act, and if the 
Department determines that the capital expenditure is for services and 
facilities that are needed by the HMO or CMP in order to operate 
efficiently and economically and that are not otherwise readily 
accessible to the HMO or CMP because--
    (i) The facilities do not provide common services at the same site;
    (ii) The facilities are not available under a contract of reasonable 
duration;
    (iii) Full and equal medical staff privileges in the facilities are 
not available;
    (iv) Arrangements with these facilities are not administratively 
feasible; or
    (v) The purchase of these services is more costly than if the HMO or 
CMP provided the services directly.
    (6) The plan must be reviewed and updated annually.
    (7) The plan must be prepared--
    (i) Under the direction of the governing body; and
    (ii) By a committee consisting of representatives of the governing 
body, the administrative staff, and the medical staff of the 
institution.
    (e) Standard: Contracted services. The governing body must be 
responsible for services furnished in the hospital whether or not they 
are furnished under contracts. The governing body must ensure that a 
contractor of services (including one for shared services and joint 
ventures) furnishes services that permit the hospital to comply with all 
applicable conditions of participation and standards for the contracted 
services.
    (1) The governing body must ensure that the services performed under 
a contract are provided in a safe and effective manner.
    (2) The hospital must maintain a list of all contracted services, 
including the scope and nature of the services provided.
    (f) Standard: Emergency services. (1) If emergency services are 
provided at the hospital, the hospital must comply with the requirements 
of Sec. 482.55.
    (2) If emergency services are not provided at the hospital, the 
governing body must assure that the medical staff has written policies 
and procedures for appraisal of emergencies, initial treatment, and 
referral when appropriate.

[51 FR 22042, June 17, 1986; 51 FR 27847, Aug. 4, 1986, as amended at 53 
FR 6549, Mar. 1, 1988; 53 FR 18987, May 26, 1988; 56 FR 8852, Mar. 1, 
1991; 56 FR 23022, May 20, 1991; 59 FR 46514, Sept. 8, 1994; 63 FR 
20130, Apr. 23, 1998; 63 FR 33874, June 22, 1998]



Sec. 482.13  Condition of participation: Patients' rights.

    A hospital must protect and promote each patient's rights.
    (a) Standard: Notice of rights. (1) A hospital must inform each 
patient, or when appropriate, the patient's representative (as allowed 
under State law), of the patient's rights, in advance of furnishing or 
discontinuing patient care whenever possible.
    (2) The hospital must establish a process for prompt resolution of 
patient grievances and must inform each patient whom to contact to file 
a grievance. The hospital's governing body must approve and be 
responsible for the effective operation of the grievance process and 
must review and resolve grievances, unless it delegates the 
responsibility in writing to a grievance committee. The grievance 
process must include a mechanism for timely referral of patient concerns 
regarding quality of care or premature discharge to the appropriate 
Utilization and Quality Control Quality Improvement Organization. At a 
minimum:
    (i) The hospital must establish a clearly explained procedure for 
the submission of a patient's written or verbal grievance to the 
hospital.
    (ii) The grievance process must specify time frames for review of 
the grievance and the provision of a response.
    (iii) In its resolution of the grievance, the hospital must provide 
the patient with written notice of its decision that contains the name 
of the hospital contact person, the steps taken on behalf of the patient 
to investigate the

[[Page 478]]

grievance, the results of the grievance process, and the date of 
completion.
    (b) Standard: Exercise of rights. (1) The patient has the right to 
participate in the development and implementation of his or her plan of 
care.
    (2) The patient or his or her representative (as allowed under State 
law) has the right to make informed decisions regarding his or her care. 
The patient's rights include being informed of his or her health status, 
being involved in care planning and treatment, and being able to request 
or refuse treatment. This right must not be construed as a mechanism to 
demand the provision of treatment or services deemed medically 
unnecessary or inappropriate.
    (3) The patient has the right to formulate advance directives and to 
have hospital staff and practitioners who provide care in the hospital 
comply with these directives, in accordance with Sec. 489.100 of this 
part (Definition), Sec. 489.102 of this part (Requirements for 
providers), and Sec. 489.104 of this part (Effective dates).
    (4) The patient has the right to have a family member or 
representative of his or her choice and his or her own physician 
notified promptly of his or her admission to the hospital.
    (c) Standard: Privacy and safety. (1) The patient has the right to 
personal privacy.
    (2) The patient has the right to receive care in a safe setting.
    (3) The patient has the right to be free from all forms of abuse or 
harassment.
    (d) Standard: Confidentiality of patient records. (1) The patient 
has the right to the confidentiality of his or her clinical records.
    (2) The patient has the right to access information contained in his 
or her clinical records within a reasonable time frame. The hospital 
must not frustrate the legitimate efforts of individuals to gain access 
to their own medical records and must actively seek to meet these 
requests as quickly as its recordkeeping system permits.
    (e) Standard: Restraint for acute medical and surgical care. (1) The 
patient has the right to be free from restraints of any form that are 
not medically necessary or are used as a means of coercion, discipline, 
convenience, or retaliation by staff. The term ``restraint'' includes 
either a physical restraint or a drug that is being used as a restraint. 
A physical restraint is any manual method or physical or mechanical 
device, material, or equipment attached or adjacent to the patient's 
body that he or she cannot easily remove that restricts freedom of 
movement or normal access to one's body. A drug used as a restraint is a 
medication used to control behavior or to restrict the patient's freedom 
of movement and is not a standard treatment for the patient's medical or 
psychiatric condition.
    (2) A restraint can only be used if needed to improve the patient's 
well-being and less restrictive interventions have been determined to be 
ineffective.
    (3) The use of a restraint must be--
    (i) Selected only when other less restrictive measures have been 
found to be ineffective to protect the patient or others from harm;
    (ii) In accordance with the order of a physician or other licensed 
independent practitioner permitted by the State and hospital to order a 
restraint. This order must--
    (A) Never be written as a standing or on an as needed basis (that 
is, PRN); and
    (B) Be followed by consultation with the patient's treating 
physician, as soon as possible, if the restraint is not ordered by the 
patient's treating physician;
    (iii) In accordance with a written modification to the patient's 
plan of care;
    (iv) Implemented in the least restrictive manner possible;
    (v) In accordance with safe and appropriate restraining techniques; 
and
    (vi) Ended at the earliest possible time.
    (4) The condition of the restrained patient must be continually 
assessed, monitored, and reevaluated.
    (5) All staff who have direct patient contact must have ongoing 
education and training in the proper and safe use of restraints.
    (f) Standard: Seclusion and restraint for behavior management. (1) 
The patient has the right to be free from seclusion and restraints, of 
any form, imposed as

[[Page 479]]

a means of coercion, discipline, convenience, or retaliation by staff. 
The term ``restraint'' includes either a physical restraint or a drug 
that is being used as a restraint. A physical restraint is any manual 
method or physical or mechanical device, material, or equipment attached 
or adjacent to the patient's body that he or she cannot easily remove 
that restricts freedom of movement or normal access to one's body. A 
drug used as a restraint is a medication used to control behavior or to 
restrict the patient's freedom of movement and is not a standard 
treatment for the patient's medical or psychiatric condition. Seclusion 
is the involuntary confinement of a person in a room or an area where 
the person is physically prevented from leaving.
    (2) Seclusion or a restraint can only be used in emergency 
situations if needed to ensure the patient's physical safety and less 
restrictive interventions have been determined to be ineffective.
    (3) The use of a restraint or seclusion must be--
    (i) Selected only when less restrictive measures have been found to 
be ineffective to protect the patient or others from harm;
    (ii) In accordance with the order of a physician or other licensed 
independent practitioner permitted by the State and hospital to order 
seclusion or restraint. The following requirements will be superseded by 
existing State laws that are more restrictive:
    (A) Orders for the use of seclusion or a restraint must never be 
written as a standing order or on an as needed basis (that is, PRN).
    (B) The treating physician must be consulted as soon as possible, if 
the restraint or seclusion is not ordered by the patient's treating 
physician.
    (C) A physician or other licensed independent practitioner must see 
and evaluate the need for restraint or seclusion within 1 hour after the 
initiation of this intervention.
    (D) Each written order for a physical restraint or seclusion is 
limited to 4 hours for adults; 2 hours for children and adolescents ages 
9 to 17; or 1 hour for patients under 9. The original order may only be 
renewed in accordance with these limits for up to a total of 24 hours. 
After the original order expires, a physician or licensed independent 
practitioner (if allowed under State law) must see and assess the 
patient before issuing a new order.
    (iii) In accordance with a written modification to the patient's 
plan of care;
    (iv) Implemented in the least restrictive manner possible;
    (v) In accordance with safe appropriate restraining techniques; and
    (vi) Ended at the earliest possible time.
    (4) A restraint and seclusion may not be used simultaneously unless 
the patient is--
    (i) Continually monitored face-to-face by an assigned staff member; 
or
    (ii) Continually monitored by staff using both video and audio 
equipment. This monitoring must be in close proximity the patient.
    (5) The condition of the patient who is in a restraint or in 
seclusion must continually be assessed, monitored, and reevaluated.
    (6) All staff who have direct patient contact must have ongoing 
education and training in the proper and safe use of seclusion and 
restraint application and techniques and alternative methods for 
handling behavior, symptoms, and situations that traditionally have been 
treated through the use of restraints or seclusion.
    (7) The hospital must report to CMS any death that occurs while a 
patient is restrained or in seclusion, or where it is reasonable to 
assume that a patient's death is a result of restraint or seclusion.

[64 FR 36088, July 2, 1999]



                   Subpart C--Basic Hospital Functions



Sec. 482.21  Condition of participation: Quality assurance.

    The governing body must ensure that there is an effective, hospital-
wide quality assurance program to evaluate the provision of patient 
care.
    (a) Standard: Clinical plan. The organized, hospital-wide quality 
assurance program must be ongoing and have a written plan of 
implementation.

[[Page 480]]

    (1) All organized services related to patient care, including 
services furnished by a contractor, must be evaluated.
    (2) Nosocomial infections and medication therapy must be evaluated.
    (3) All medical and surgical services performed in the hospital must 
be evaluated as they relate to appropriateness of diagnosis and 
treatment.
    (b) Standard: Medically-related patient care services. The hospital 
must have an ongoing plan, consistent with available community and 
hospital resources, to provide or make available social work, 
psychological, and educational services to meet the medically-related 
needs of its patients.
    (c) Standard: Implementation. The hospital must take and document 
appropriate remedial action to address deficiencies found through the 
quality assurance program. The hospital must document the outcome of the 
remedial action.

[51 FR 22042, June 17, 1986, as amended at 59 FR 64152, Dec. 13, 1994]



Sec. 482.22  Condition of participation: Medical staff.

    The hospital must have an organized medical staff that operates 
under bylaws approved by the governing body and is responsible for the 
quality of medical care provided to patients by the hospital.
    (a) Standard: Composition of the medical staff. The medical staff 
must be composed of doctors of medicine or osteopathy and, in accordance 
with State law, may also be composed of other practitioners appointed by 
the governing body.
    (1) The medical staff must periodically conduct appraisals of its 
members.
    (2) The medical staff must examine credentials of candidates for 
medical staff membership and make recommendations to the governing body 
on the appointment of the candidates.
    (b) Standard: Medical staff organization and accountability. The 
medical staff must be well organized and accountable to the governing 
body for the quality of the medical care provided to patients.
    (1) The medical staff must be organized in a manner approved by the 
governing body.
    (2) If the medical staff has an executive committee, a majority of 
the members of the committee must be doctors of medicine or osteopathy.
    (3) The responsibility for organization and conduct of the medical 
staff must be assigned only to an individual doctor of medicine or 
osteopathy or, when permitted by State law of the State in which the 
hospital is located, a doctor of dental surgery or dental medicine.
    (c) Standard: Medical staff bylaws. The medical staff must adopt and 
enforce bylaws to carry out its responsibilities. The bylaws must:
    (1) Be approved by the governing body.
    (2) Include a statement of the duties and privileges of each 
category of medical staff (e.g., active, courtesy, etc.)
    (3) Describe the organization of the medical staff.
    (4) Describe the qualifications to be met by a candidate in order 
for the medical staff to recommend that the candidate be appointed by 
the governing body.
    (5) Include a requirement that a physical examination and medical 
history be done no more than 7 days before or 48 hours after an 
admission for each patient by a doctor of medicine or osteopathy, or, 
for patients admitted only for oromaxillofacial surgery, by an 
oromaxillofacial surgeon who has been granted such privileges by the 
medical staff in accordance with State law.
    (6) Include criteria for determining the privileges to be granted to 
individual practitioners and a procedure for applying the criteria to 
individuals requesting privileges.
    (d) Standard: Autopsies. The medical staff should attempt to secure 
autopsies in all cases of unusual deaths and of medical-legal and 
educational interest. The mechanism for documenting permission to 
perform an autopsy must be defined. There must be a system for notifying 
the medical staff, and specifically the attending practitioner, when an 
autopsy is being performed.

[51 FR 22042, June 17, 1986, as amended at 59 FR 64152, Dec. 13, 1994]

[[Page 481]]



Sec. 482.23  Condition of participation: Nursing services.

    The hospital must have an organized nursing service that provides 
24-hour nursing services. The nursing services must be furnished or 
supervised by a registered nurse.
    (a) Standard: Organization. The hospital must have a well-organized 
service with a plan of administrative authority and delineation of 
responsibilities for patient care. The director of the nursing service 
must be a licensed registered nurse. He or she is responsible for the 
operation of the service, including determining the types and numbers of 
nursing personnel and staff necessary to provide nursing care for all 
areas of the hospital.
    (b) Standard: Staffing and delivery of care. The nursing service 
must have adequate numbers of licensed registered nurses, licensed 
practical (vocational) nurses, and other personnel to provide nursing 
care to all patients as needed. There must be supervisory and staff 
personnel for each department or nursing unit to ensure, when needed, 
the immediate availability of a registered nurse for bedside care of any 
patient.
    (1) The hospital must provide 24-hour nursing services furnished or 
supervised by a registered nurse, and have a licensed practical nurse or 
registered nurse on duty at all times, except for rural hospitals that 
have in effect a 24-hour nursing waiver granted under Sec. 405.1910(c) 
of this chapter.
    (2) The nursing service must have a procedure to ensure that 
hospital nursing personnel for whom licensure is required have valid and 
current licensure.
    (3) A registered nurse must supervise and evaluate the nursing care 
for each patient.
    (4) The hospital must ensure that the nursing staff develops, and 
keeps current, a nursing care plan for each patient.
    (5) A registered nurse must assign the nursing care of each patient 
to other nursing personnel in accordance with the patient's needs and 
the specialized qualifications and competence of the nursing staff 
available.
    (6) Non-employee licensed nurses who are working in the hospital 
must adhere to the policies and procedures of the hospital. The director 
of nursing service must provide for the adequate supervision and 
evaluation of the clinical activities of non-employee nursing personnel 
which occur within the responsibility of the nursing service.
    (c) Standard: Preparation and administration of drugs. Drugs and 
biologicals must be prepared and administered in accordance with Federal 
and State laws, the orders of the practitioner or practitioners 
responsible for the patient's care as specified under Sec. 482.12(c), 
and accepted standards of practice.
    (1) All drugs and biologicals must be administered by, or under 
supervision of, nursing or other personnel in accordance with Federal 
and State laws and regulations, including applicable licensing 
requirements, and in accordance with the approved medical staff policies 
and procedures.
    (2) All orders for drugs and biologicals must be in writing and 
signed by the practitioner or practitioners responsible for the care of 
the patient as specified under Sec. 482.12(c). When telephone or oral 
orders must be used, they must be--
    (i) Accepted only by personnel that are authorized to do so by the 
medical staff policies and procedures, consistent with Federal and State 
law;
    (ii) Signed or initialed by the prescribing practitioner as soon as 
possible; and
    (iii) Used infrequently.
    (3) Blood transfusions and intravenous medications must be 
administered in accordance with State law and approved medical staff 
policies and procedures. If blood transfusions and intravenous 
medications are administered by personnel other than doctors of medicine 
or osteopathy, the personnel must have special training for this duty.
    (4) There must be a hospital procedure for reporting transfusion 
reactions, adverse drug reactions, and errors in administration of 
drugs.



Sec. 482.24  Condition of participation: Medical record services.

    The hospital must have a medical record service that has 
administrative responsibility for medical records. A

[[Page 482]]

medical record must be maintained for every individual evaluated or 
treated in the hospital.
    (a) Standard: Organization and staffing. The organization of the 
medical record service must be appropriate to the scope and complexity 
of the services performed. The hospital must employ adequate personnel 
to ensure prompt completion, filing, and retrieval of records.
    (b) Standard: Form and retention of record. The hospital must 
maintain a medical record for each inpatient and outpatient. Medical 
records must be accurately written, promptly completed, properly filed 
and retained, and accessible. The hospital must use a system of author 
identification and record maintenance that ensures the integrity of the 
authentification and protects the security of all record entries.
    (1) Medical records must be retained in their original or legally 
reproduced form for a period of at least 5 years.
    (2) The hospital must have a system of coding and indexing medical 
records. The system must allow for timely retrieval by diagnosis and 
procedure, in order to support medical care evaluation studies.
    (3) The hospital must have a procedure for ensuring the 
confidentiality of patient records. In-formation from or copies of 
records may be released only to authorized individuals, and the hospital 
must ensure that unauthorized individuals cannot gain access to or alter 
patient records. Original medical records must be released by the 
hospital only in accordance with Federal or State laws, court orders, or 
subpoenas.
    (c) Standard: Content of record. The medical record must contain 
information to justify admission and continued hospitalization, support 
the diagnosis, and describe the patient's progress and response to 
medications and services.
    (1) All entries must be legible and complete, and must be 
authenticated and dated promptly by the person (identified by name and 
discipline) who is responsible for ordering, providing, or evaluating 
the service furnished.
    (i) The author of each entry must be identifed and must authenticate 
his or her entry.
    (ii) Authentication may include signatures, written initials or 
computer entry.
    (2) All records must document the following, as appropriate:
    (i) Evidence of a physical examination, including a health history, 
performed no more than 7 days prior to admission or within 48 hours 
after admission.
    (ii) Admitting diagnosis.
    (iii) Results of all consultative evaluations of the patient and 
appropriate findings by clinical and other staff involved in the care of 
the patient.
    (iv) Documentation of complications, hospital acquired infections, 
and unfavorable reactions to drugs and anesthesia.
    (v) Properly executed informed consent forms for procedures and 
treatments specified by the medical staff, or by Federal or State law if 
applicable, to require written patient consent.
    (vi) All practitioners' orders, nursing notes, reports of treatment, 
medication records, radiology, and laboratory reports, and vital signs 
and other information necessary to monitor the patient's condition.
    (vii) Discharge summary with outcome of hospitalization, disposition 
of case, and provisions for follow-up care.
    (viii) Final diagnosis with completion of medical records within 30 
days following discharge.



Sec. 482.25  Condition of participation: Pharmaceutical services.

    The hospital must have pharmaceutical services that meet the needs 
of the patients. The institution must have a pharmacy directed by a 
registered pharmacist or a drug storage area under competent 
supervision. The medical staff is responsible for developing policies 
and procedures that minimize drug errors. This function may be delegated 
to the hospital's organized pharmaceutical service.
    (a) Standard: Pharmacy management and administration. The pharmacy 
or drug storage area must be administered in accordance with accepted 
professional principles.
    (1) A full-time, part-time, or consulting pharmacist must be 
responsible

[[Page 483]]

for developing, supervising, and coordinating all the activities of the 
pharmacy services.
    (2) The pharmaceutical service must have an adequate number of 
personnel to ensure quality pharmaceutical services, including emergency 
services.
    (3) Current and accurate records must be kept of the receipt and 
disposition of all scheduled drugs.
    (b) Standard: Delivery of services. In order to provide patient 
safety, drugs and biologicals must be controlled and distributed in 
accordance with applicable standards of practice, consistent with 
Federal and State law.
    (1) All compounding, packaging, and dispensing of drugs and 
biologicals must be under the supervision of a pharmacist and performed 
consistent with State and Federal laws.
    (2) Drugs and biologicals must be kept in a locked storage area.
    (3) Outdated, mislabeled, or otherwise unusable drugs and 
biologicals must not be available for patient use.
    (4) When a pharmacist is not available, drugs and biologicals must 
be removed from the pharmacy or storage area only by personnel 
designated in the policies of the medical staff and pharmaceutical 
service, in accordance with Federal and State law.
    (5) Drugs and biologicals not specifically prescribed as to time or 
number of doses must automatically be stopped after a reasonable time 
that is predetermined by the medical staff.
    (6) Drug administration errors, adverse drug reactions, and 
incompatibilities must be immediately reported to the attending 
physician and, if appropriate, to the hospital-wide quality assurance 
program.
    (7) Abuses and losses of controlled substances must be reported, in 
accordance with applicable Federal and State laws, to the individual 
responsible for the pharmaceutical service, and to the chief executive 
officer, as appropriate.
    (8) Information relating to drug interactions and information of 
drug therapy, side effects, toxicology, dosage, indications for use, and 
routes of administration must be available to the professional staff.
    (9) A formulary system must be established by the medical staff to 
assure quality pharmaceuticals at reasonable costs.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986]



Sec. 482.26  Condition of participation: Radiologic services.

    The hospital must maintain, or have available, diagnostic radiologic 
services. If therapeutic services are also provided, they, as well as 
the diagnostic services, must meet professionally approved standards for 
safety and personnel qualifications.
    (a) Standard: Radiologic services. The hospital must maintain, or 
have available, radiologic services according to needs of the patients.
    (b) Standard: Safety for patients and personnel. The radiologic 
services, particularly ionizing radiology procedures, must be free from 
hazards for patients and personnel.
    (1) Proper safety precutions must be maintained against radiation 
hazards. This includes adequate shielding for patients, personnel, and 
facilities, as well as appropriate storage, use, and disposal of 
radioactive materials.
    (2) Periodic inspection of equipment must be made and hazards 
identified must be promptly corrected.
    (3) Radiation workers must be checked periodically, by the use of 
exposure meters or badge tests, for amount of radiation exposure.
    (4) Radiologic services must be provided only on the order of 
practitioners with clinical privileges or, consistent with State law, of 
other practitioners authorized by the medical staff and the governing 
body to order the services.
    (c) Standard: Personnel. (1) A qualified full-time, part-time, or 
consulting radiologist must supervise the ionizing radiology services 
and must interpret only those radiologic tests that are determined by 
the medical staff to require a radiologist's specialized knowledge. For 
purposes of this section, a radiologist is a doctor of medicine or 
osteopathy who is qualified by education and experience in radiology.
    (2) Only personnel designated as qualified by the medical staff may 
use the radiologic equipment and administer procedures.

[[Page 484]]

    (d) Standard: Records. Records of radiologic services must be 
maintained.
    (1) The radiologist or other practitioner who performs radiology 
services must sign reports of his or her interpretations.
    (2) The hospital must maintain the following for at least 5 years:
    (i) Copies of reports and printouts.
    (ii) Films, scans, and other image records, as appropriate.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986]



Sec. 482.27  Condition of participation: Laboratory services.

    (a) The hospital must maintain, or have available, adequate 
laboratory services to meet the needs of its patients. The hospital must 
ensure that all laboratory services provided to its patients are 
performed in a facility certified in accordance with part 493 of this 
chapter.
    (b) Standard: Adequacy of laboratory services. The hospital must 
have laboratory services available, either directly or through a 
contractual agreement with a certified laboratory that meets 
requirements of part 493 of this chapter.
    (1) Emergency laboratory services must be available 24 hours a day.
    (2) A written description of services provided must be available to 
the medical staff.
    (3) The laboratory must make provision for proper receipt and 
reporting of tissue specimens.
    (4) The medical staff and a pathologist must determine which tissue 
specimens require a macroscopic (gross) examination and which require 
both macroscopic and microscopic examinations.
    (c) Standard: Potentially infectious blood and blood products--(1) 
Potentially HIV infectious blood and blood products are prior 
collections from a donor who tested negative at the time of donation but 
tests repeatedly reactive for the antibody to the human immunodeficiency 
virus (HIV) on a later donation, and the FDA-licensed, more specific 
test or other followup testing recommended or required by FDA is 
positive and the timing of seroconversion cannot be precisely estimated.
    (2) Services furnished by an outside blood bank. If a hospital 
regularly uses the services of an outside blood bank, it must have an 
agreement with the blood bank that governs the procurement, transfer, 
and availability of blood and blood products. The agreement must require 
that the blood bank promptly notify the hospital of the following:
    (i) If it supplied blood and blood products collected from a donor 
who tested negative at the time of donation but tests repeatedly 
reactive for the antibody to HIV on a later donation; and
    (ii) The results of the FDA-licensed, more specific test or other 
followup testing recommended or required by FDA completed within 30 
calendar days after the donor's repeatedly reactive screening test. (FDA 
regulations concerning HIV testing and lookback procedures are set forth 
at 21 CFR 610.45-et seq.)
    (3) Quarantine of blood and blood products pending completion of 
testing. If the blood bank notifies the hospital of the repeatedly 
reactive HIV screening test results as required by paragraph (c)(2)(i) 
of this section, the hospital must determine the disposition of the 
blood or blood product and quarantine all blood and blood products from 
previous donations in inventory.
    (i) If the blood bank notifies the hospital that the result of the 
FDA-licensed, more specific test or other followup testing recommended 
or required by FDA is negative, absent other informative test results, 
the hospital may release the blood and blood products from quarantine.
    (ii) If the blood bank notifies the hospital that the result of the 
FDA-licensed, more specific test or other followup testing recommended 
or required by FDA is positive, the hospital must dispose of the blood 
and blood products in accordance with 21 CFR 606.40 and notify patients 
in accordance with paragraph (c)(4) of this section.
    (4) Patient notification. If the hospital has administered 
potentially HIV infectious blood or blood products (either directly 
through its own blood bank or under an agreement described in paragraph 
(c)(2) of this section) or released such blood or blood products to 
another entity or appropriate individual,

[[Page 485]]

the hospital must take the following actions:
    (i) Promptly make at least three attempts to notify the patient's 
attending physician (that is, the physician of record) or the physician 
who ordered the blood or blood product that potentially HIV infectious 
blood or blood products were transfused to the patient.
    (ii) Ask the physician to immediately notify the patient, or other 
individual as permitted under paragraph (c)(8) of this section, of the 
need for HIV testing and counseling.
    (iii) If the physician is unavailable, declines to make the 
notification, or later informs the hospital that he or she was unable to 
notify the patient, promptly make at least three attempts to notify the 
patient, or other individual as permitted under paragraph (c)(8) of this 
section, of the need for HIV testing and counseling.
    (iv) Document in the patient's medical record the notification or 
attempts to give the required notification.
    (5) Timeframe for notification. The notification effort begins when 
the blood bank notifies the hospital that it received potentially HIV 
infectious blood and blood products and continues for 8 weeks unless--
    (i) The patient is located and notified; or
    (ii) The hospital is unable to locate the patient and documents in 
the patient's medical record the extenuating circumstances beyond the 
hospital's control that caused the notification timeframe to exceed 8 
weeks.
    (6) Content of notification. The notification given under paragraphs 
(c)(4) (ii) and (iii) of this section must include the following 
information:
    (i) A basic explanation of the need for HIV testing and counseling.
    (ii) Enough oral or written information so that the transfused 
patient can make an informed decision about whether to obtain HIV 
testing and counseling.
    (iii) A list of programs or places where the patient can obtain HIV 
testing and counseling, including any requirements or restrictions the 
program may impose.
    (7) Policies and procedures. The hospital must establish policies 
and procedures for notification and documentation that conform to 
Federal, State, and local laws, including requirements for 
confidentiality and medical records.
    (8) Notification to legal representative or relative. If the patient 
has been adjudged incompetent by a State court, the physician or 
hospital must notify a legal representative designated in accordance 
with State law. If the patient is competent, but State law permits a 
legal representative or relative to receive the information on the 
patient's behalf, the physician or hospital must notify the patient or 
his or her legal representative or relative. If the patient is deceased, 
the physician or hospital must continue the notification process and 
inform the deceased patient's legal representative or relative.

[57 FR 7136, Feb. 28, 1992, as amended at 61 FR 47433, Sept. 9, 1996]



Sec. 482.28  Condition of participation: Food and dietetic services.

    The hospital must have organized dietary services that are directed 
and staffed by adequate qualified personnel. However, a hospital that 
has a contract with an outside food management company may be found to 
meet this Condition of participation if the company has a dietitian who 
serves the hospital on a full-time, part-time, or consultant basis, and 
if the company maintains at least the minimum standards specified in 
this section and provides for constant liaison with the hospital medical 
staff for recommendations on dietetic policies affecting patient 
treatment.
    (a) Standard: Organization. (1) The hospital must have a full-time 
employee who--
    (i) Serves as director of the food and dietetic service;
    (ii) Is responsible for the daily management of the dietary 
services; and
    (iii) Is qualified by experience or training.
    (2) There must be a qualified dietitian, full-time, part-time, or on 
a consultant basis.
    (3) There must be administrative and technical personnel competent 
in their respective duties.
    (b) Standard: Diets. Menus must meet the needs of the patients.

[[Page 486]]

    (1) Therapeutic diets must be prescribed by the practitioner or 
practitioners responsible for the care of the patients.
    (2) Nutritional needs must be met in accordance with recognized 
dietary practices and in accordance with orders of the practitioner or 
practitioners responsible for the care of the patients.
    (3) A current therapeutic diet manual approved by the dietitian and 
medical staff must be readily available to all medical, nursing, and 
food service personnel.



Sec. 482.30  Condition of participation: Utilization review.

    The hospital must have in effect a utilization review (UR) plan that 
provides for review of services furnished by the institution and by 
members of the medical staff to patients entitled to benefits under the 
Medicare and Medicaid programs.
    (a) Applicability. The provisions of this section apply except in 
either of the following circumstances:
    (1) A Utilization and Quality Control Quality Improvement 
Organization (QIO) has assumed binding review for the hospital.
    (2) CMS has determined that the UR procedures established by the 
State under title XIX of the Act are superior to the procedures required 
in this section, and has required hospitals in that State to meet the UR 
plan requirements under Secs. 456.50 through 456.245 of this chapter.
    (b) Standard: Composition of utilization review committee. A UR 
committee consisting of two or more practitioners must carry out the UR 
function. At least two of the members of the committee must be doctors 
of medicine or osteopathy. The other members may be any of the other 
types of practitioners specified in Sec. 482.12(c)(1).
    (1) Except as specified in paragraphs (b) (2) and (3) of this 
section, the UR committee must be one of the following:
    (i) A staff committee of the institution;
    (ii) A group outside the institution--
    (A) Established by the local medical society and some or all of the 
hospitals in the locality; or
    (B) Established in a manner approved by CMS.
    (2) If, because of the small size of the institution, it is 
impracticable to have a properly functioning staff committee, the UR 
committee must be established as specified in paragraph (b)(1)(ii) of 
this section.
    (3) The committee's or group's reviews may not be conducted by any 
individual who--
    (i) Has a direct financial interest (for example, an ownership 
interest) in that hospital; or
    (ii) Was professionally involved in the care of the patient whose 
case is being reviewed.
    (c) Standard: Scope and frequency of review. (1) The UR plan must 
provide for review for Medicare and Medicaid patients with respect to 
the medical necessity of--
    (i) Admissions to the institution;
    (ii) The duration of stays; and
    (iii) Professional services furnished, including drugs and 
biologicals.
    (2) Review of admissions may be performed before, at, or after 
hospital admission.
    (3) Except as specified in paragraph (e) of this section, reviews 
may be conducted on a sample basis.
    (4) Hospitals that are paid for inpatient hospital services under 
the prospective payment system set forth in Part 412 of this chapter 
must conduct review of duration of stays and review of professional 
services as follows:
    (i) For duration of stays, these hospitals need review only cases 
that they reasonably assume to be outlier cases based on extended length 
of stay, as described in Sec. 412.80(a)(1)(i) of this chapter; and
    (ii) For professional services, these hospitals need review only 
cases that they reasonably assume to be outlier cases based on 
extraordinarily high costs, as described in Sec. 412.80(a)(1)(ii) of 
this chapter.
    (d) Standard: Determination regarding admissions or continued stays. 
(1) The determination that an admission or continued stay is not 
medically necessary--
    (i) May be made by one member of the UR committee if the 
practitioner or practitioners responsible for the care of the patient, 
as specified of

[[Page 487]]

Sec. 482.12(c), concur with the determination or fail to present their 
views when afforded the opportunity; and
    (ii) Must be made by at least two members of the UR committee in all 
other cases.
    (2) Before making a determination that an admission or continued 
stay is not medically necessary, the UR committee must consult the 
practitioner or practitioners responsible for the care of the patient, 
as specified in Sec. 482.12(c), and afford the practitioner or 
practitioners the opportunity to present their views.
    (3) If the committee decides that admission to or continued stay in 
the hospital is not medically necessary, written notification must be 
given, no later than 2 days after the determination, to the hospital, 
the patient, and the practitioner or practitioners responsible for the 
care of the patient, as specified in Sec. 482.12(c);
    (e) Standard: Extended stay review. (1) In hospitals that are not 
paid under the prospective payment system, the UR committee must make a 
periodic review, as specified in the UR plan, of each current inpatient 
receiving hospital services during a continuous period of extended 
duration. The scheduling of the periodic reviews may--
    (i) Be the same for all cases; or
    (ii) Differ for different classes of cases.
    (2) In hospitals paid under the prospective payment system, the UR 
committee must review all cases reasonably assumed by the hospital to be 
outlier cases because the extended length of stay exceeds the threshold 
criteria for the diagnosis, as described in Sec. 412.80(a)(1)(i). The 
hospital is not required to review an extended stay that does not exceed 
the outlier threshold for the diagnosis.
    (3) The UR committee must make the periodic review no later than 7 
days after the day required in the UR plan.
    (f) Standard: Review of professional services. The committee must 
review professional services provided, to determine medical necessity 
and to promote the most efficient use of available health facilities and 
services.



Sec. 482.41  Condition of participation: Physical environment.

    The hospital must be constructed, arranged, and maintained to ensure 
the safety of the patient, and to provide facilities for diagnosis and 
treatment and for special hospital services appropriate to the needs of 
the community.
    (a) Standard: Buildings. The condition of the physical plant and the 
overall hospital environment must be developed and maintained in such a 
manner that the safety and well-being of patients are assured.
    (1) There must be emergency power and lighting in at least the 
operating, recovery, intensive care, and emergency rooms, and 
stairwells. In all other areas not serviced by the emergency supply 
source, battery lamps and flashlights must be available.
    (2) There must be facilities for emergency gas and water supply.
    (b) Standard: Life safety from fire. (1) Except as provided in 
paragraphs (b)(1)(i) through (b)(1)(iii) of this section, the hospital 
must meet the applicable provisions of the 1985 edition of the Life 
Safety Code of the National Fire Protection Association (which is 
incorporated by reference).\1\
---------------------------------------------------------------------------

    \1\ See footnote to Sec. 405.1134(a) of this chapter.
---------------------------------------------------------------------------

    (i) Any hospital that on November 26, 1982, complied, with or 
without waivers, with the requirements of the 1967 edition of the Life 
Safety Code, or on May 9, 1988, complied with the 1981 edition of the 
Life Safety Code, is considered to be in compliance with this standard 
as long as the facility continues to remain in compliance with that 
edition of the Code.
    (ii) After consideration of State survey agency findings, CMS may 
waive specific provisions of the Life Safety Code which, if rigidly 
applied, would result in unreasonable hardship upon the facility, but 
only if the waiver does not adversely affect the health and safety of 
patients.
    (iii) The provisions of the Life Safety Code do not apply in a State 
where CMS finds that a fire and safety code imposed by State law 
adequately protects patients in hospitals.

[[Page 488]]

    (2) The hospital must have procedures for the proper routine storage 
and prompt disposal of trash.
    (3) The hospital must have written fire control plans that contain 
provisions for prompt reporting of fires; extinguishing fires; 
protection of patients, personnel and guests; evacuation; and 
cooperation with fire fighting authorities.
    (4) The hospital must maintain written evidence of regular 
inspection and approval by State or local fire control agencies.
    (c) Standard: Facilities. The hospital must maintain adequate 
facilities for its services.
    (1) Diagnostic and therapeutic facilities must be located for the 
safety of patients.
    (2) Facilities, supplies, and equipment must be maintained to ensure 
an acceptable level of safety and quality.
    (3) The extent and complexity of facilities must be determined by 
the services offered.
    (4) There must be proper ventilation, light, and temperature 
controls in pharmaceutical, food preparation, and other appropriate 
areas.

[51 FR 22042, June 17, 1986, as amended at 53 FR 11509, Apr. 7, 1988]



Sec. 482.42  Condition of participation: Infection control.

    The hospital must provide a sanitary environment to avoid sources 
and transmission of infections and communicable diseases. There must be 
an active program for the prevention, control, and investigation of 
infections and communicable diseases.
    (a) Standard: Organization and policies. A person or persons must be 
designated as infection control officer or officers to develop and 
implement policies governing control of infections and communicable 
diseases.
    (1) The infection control officer or officers must develop a system 
for identifying, reporting, investigating, and controlling infections 
and communicable diseases of patients and personnel.
    (2) The infection control officer or officers must maintain a log of 
incidents related to infections and communicable diseases.
    (b) Standard: Responsibilities of chief executive officer, medical 
staff, and director of nursing services. The chief executive officer, 
the medical staff, and the director of nursing services must--
    (1) Ensure that the hospital-wide quality assurance program and 
training programs address problems identified by the infection control 
officer or officers; and
    (2) Be responsible for the implementation of successful corrective 
action plans in affected problem areas.



Sec. 482.43  Condition of participation: Discharge planning.

    The hospital must have in effect a discharge planning process that 
applies to all patients. The hospital's policies and procedures must be 
specified in writing.
    (a) Standard: Identification of patients in need of discharge 
planning. The hospital must identify at an early stage of 
hospitalization all patients who are likely to suffer adverse health 
consequences upon discharge if there is no adequate discharge planning.
    (b) Standard: Discharge planning evaluation. (1) The hospital must 
provide a discharge planning evaluation to the patients identified in 
paragraph (a) of this section, and to other patients upon the patient's 
request, the request of a person acting on the patient's behalf, or the 
request of the physician.
    (2) A registered nurse, social worker, or other appropriately 
qualified personnel must develop, or supervise the development of, the 
evaluation.
    (3) The discharge planning evaluation must include an evaluation of 
the likelihood of a patient needing post- hospital services and of the 
availability of the services.
    (4) The discharge planning evaluation must include an evaluation of 
the likelihood of a patient's capacity for self-care or of the 
possibility of the patient being cared for in the environment from which 
he or she entered the hospital.
    (5) The hospital personnel must complete the evaluation on a timely 
basis so that appropriate arrangements for post-hospital care are made 
before discharge, and to avoid unnecessary delays in discharge.

[[Page 489]]

    (6) The hospital must include the discharge planning evaluation in 
the patient's medical record for use in establishing an appropriate 
discharge plan and must discuss the results of the evaluation with the 
patient or individual acting on his or her behalf.
    (c) Standard: Discharge plan. (1) A registered nurse, social worker, 
or other appropriately qualified personnel must develop, or supervise 
the development of, a discharge plan if the discharge planning 
evaluation indicates a need for a discharge plan.
    (2) In the absence of a finding by the hospital that a patient needs 
a discharge plan, the patient's physician may request a discharge plan. 
In such a case, the hospital must develop a discharge plan for the 
patient.
    (3) The hospital must arrange for the initial implementation of the 
patient's discharge plan.
    (4) The hospital must reassess the patient's discharge plan if there 
are factors that may affect continuing care needs or the appropriateness 
of the discharge plan.
    (5) As needed, the patient and family members or interested persons 
must be counseled to prepare them for post-hospital care.
    (d) Standard: Transfer or referral. The hospital must transfer or 
refer patients, along with necessary medical information, to appropriate 
facilities, agencies, or outpatient services, as needed, for followup or 
ancillary care.
    (e) Standard: Reassessment. The hospital must reassess its discharge 
planning process on an on-going basis. The reassessment must include a 
review of discharge plans to ensure that they are responsive to 
discharge needs.

[59 FR 64152, Dec. 13, 1994]



Sec. 482.45  Condition of participation: Organ, tissue, and eye procurement.

    (a) Standard: Organ procurement responsibilities. The hospital must 
have and implement written protocols that:
    (1) Incorporate an agreement with an OPO designated under part 486 
of this chapter, under which it must notify, in a timely manner, the OPO 
or a third party designated by the OPO of individuals whose death is 
imminent or who have died in the hospital. The OPO determines medical 
suitability for organ donation and, in the absence of alternative 
arrangements by the hospital, the OPO determines medical suitability for 
tissue and eye donation, using the definition of potential tissue and 
eye donor and the notification protocol developed in consultation with 
the tissue and eye banks identified by the hospital for this purpose;
    (2) Incorporate an agreement with at least one tissue bank and at 
least one eye bank to cooperate in the retrieval, processing, 
preservation, storage and distribution of tissues and eyes, as may be 
appropriate to assure that all usable tissues and eyes are obtained from 
potential donors, insofar as such an agreement does not interfere with 
organ procurement;
    (3) Ensure, in collaboration with the designated OPO, that the 
family of each potential donor is informed of its options to donate 
organs, tissues, or eyes or to decline to donate. The individual 
designated by the hospital to initiate the request to the family must be 
an organ procurement representative or a designated requestor. A 
designated requestor is an individual who has completed a course offered 
or approved by the OPO and designed in conjunction with the tissue and 
eye bank community in the methodology for approaching potential donor 
families and requesting organ or tissue donation;
    (4) Encourage discretion and sensitivity with respect to the 
circumstances, views, and beliefs of the families of potential donors;
    (5) Ensure that the hospital works cooperatively with the designated 
OPO, tissue bank and eye bank in educating staff on donation issues, 
reviewing death records to improve identification of potential donors, 
and maintaining potential donors while necessary testing and placement 
of potential donated organs, tissues, and eyes take place.
    (b) Standard: Organ transplantation responsibilities. (1) A hospital 
in which organ transplants are performed must be a member of the Organ 
Procurement and Transplantation Network (OPTN) established and operated 
in accordance with section 372 of the Public Health Service (PHS) Act 
(42 U.S.C. 274) and abide by its rules. The term ``rules of the OPTN'' 
means those rules provided

[[Page 490]]

for in regulations issued by the Secretary in accordance with section 
372 of the PHS Act which are enforceable under 42 CFR 121.10. No 
hospital is considered to be out of compliance with section 
1138(a)(1)(B) of the Act, or with the requirements of this paragraph, 
unless the Secretary has given the OPTN formal notice that he or she 
approves the decision to exclude the hospital from the OPTN and has 
notified the hospital in writing.
    (2) For purposes of these standards, the term ``organ'' means a 
human kidney, liver, heart, lung, or pancreas.
    (3) If a hospital performs any type of transplants, it must provide 
organ-transplant-related data, as requested by the OPTN, the Scientific 
Registry, and the OPOs. The hospital must also provide such data 
directly to the Department when requested by the Secretary.

[63 FR 33875, June 22, 1998]



                  Subpart D--Optional Hospital Services



Sec. 482.51  Condition of participation: Surgical services.

    If the hospital provides surgical services, the services must be 
well organized and provided in accordance with acceptable standards of 
practice. If outpatient surgical services are offered the services must 
be consistent in quality with inpatient care in accordance with the 
complexity of services offered.
    (a) Standard: Organization and staffing. The organization of the 
surgical services must be appropriate to the scope of the services 
offered.
    (1) The operating rooms must be supervised by an experienced 
registered nurse or a doctor of medicine or osteopathy.
    (2) Licensed practical nurses (LPNs) and surgical technologists 
(operating room technicians) may serve as ``scrub nurses'' under the 
supervision of a registered nurse.
    (3) Qualified registered nurses may perform circulating duties in 
the operating room. In accordance with applicable State laws and 
approved medical staff policies and procedures, LPNs and surgical 
technologists may assist in circulatory duties under the surpervision of 
a qualified registered nurse who is immediately available to respond to 
emergencies.
    (4) Surgical privileges must be delineated for all practitioners 
performing surgery in accordance with the competencies of each 
practitioner. The surgical service must maintain a roster of 
practitioners specifying the surgical privileges of each practitioner.
    (b) Standard: Delivery of service. Surgical services must be 
consistent with needs and resources. Policies governing surgical care 
must be designed to assure the achievement and maintenance of high 
standards of medical practice and patient care.
    (1) There must be a complete history and physical work-up in the 
chart of every patient prior to surgery, except in emergencies. If this 
has been dictated, but not yet recorded in the patient's chart, there 
must be a statement to that effect and an admission note in the chart by 
the practitioner who admitted the patient.
    (2) A properly executed informed consent form for the operation must 
be in the patient's chart before surgery, except in emergencies.
    (3) The following equipment must be available to the operating room 
suites: call-in-system, cardiac monitor, resuscitator, defibrillator, 
aspirator, and tracheotomy set.
    (4) There must be adequate provisions for immediate post-operative 
care.
    (5) The operating room register must be complete and up-to-date.
    (6) An operative report describing techniques, findings, and tissues 
removed or altered must be written or dictated immediately following 
surgery and signed by the surgeon.



Sec. 482.52  Condition of participation: Anesthesia services.

    If the hospital furnishes anesthesia services, they must be provided 
in a well-organized manner under the direction of a qualified doctor of 
medicine or osteopathy. The service is responsible for all anesthesia 
administered in the hospital.
    (a) Standard: Organization and staffing. The organization of 
anesthesia services must be appropriate to the

[[Page 491]]

scope of the services offered. Anesthesia must be administered only by--
    (1) A qualified anesthesiologist;
    (2) A doctor of medicine or osteopathy (other than an 
anesthesiologist);
    (3) A dentist, oral surgeon, or podiatrist who is qualified to 
administer anesthesia under State law;
    (4) A certified registered nurse anesthetist (CRNA), as defined in 
Sec. 410.69(b) of this chapter, who, unless exempted in accordance with 
paragraph (c)of this section, is under the supervision of the operating 
practitioner or of an anesthesiologist who is immediately available if 
needed; or
    (5) An anesthesiologist's assistant, as defined in Sec. 410.69(b) of 
this chapter, who is under the supervision of an anesthesiologist who is 
immediately available if needed.
    (b) Standard: Delivery of services. Anesthesia services must be 
consistent with needs and resources. Policies on anesthesia procedures 
must include the delineation of preanesthesia and post anesthesia 
responsibilities. The policies must ensure that the following are 
provided for each patient:
    (1) A preanesthesia evaluation by an individual qualified to 
administer anesthesia under paragraph (a) of this section performed 
within 48 hours prior to surgery.
    (2) An intraoperative anesthesia record.
    (3) With respect to inpatients, a postanesthesia followup report by 
the individual who administers the anesthesia that is written within 48 
hours after surgery.
    (4) With respect to outpatients, a postanesthesia evaluation for 
proper anesthesia recovery performed in accordance with policies and 
procedures approved by the medical staff.
    (c) Standard: State exemption. (1) A hospital may be exempted from 
the requirement for physician supervision of CRNAs as described in 
paragraph (a)(4) of this section, if the State in which the hospital is 
located submits a letter to CMS signed by the Governor, following 
consultation with the State's Boards of Medicine and Nursing, requesting 
exemption from physician supervision of CRNAs. The letter from the 
Governor must attest that he or she has consulted with State Boards of 
Medicine and Nursing about issues related to access to and the quality 
of anesthesia services in the State and has concluded that it is in the 
best interests of the State's citizens to opt-out of the current 
physician supervision requirement, and that the opt-out is consistent 
with State law.
    (2) The request for exemption and recognition of State laws, and the 
withdrawal of the request may be submitted at any time, and are 
effective upon submission.

[51 FR 22042, June 17, 1986 as amended at 57 FR 33900, July 31, 1992; 66 
FR 56769, Nov. 13, 2001]



Sec. 482.53  Condition of participation: Nuclear medicine services.

    If the hospital provides nuclear medicine services, those services 
must meet the needs of the patients in accordance with acceptable 
standards of practice.
    (a) Standard: Organization and staffing. The organization of the 
nuclear medicine service must be appropriate to the scope and complexity 
of the services offered.
    (1) There must be a director who is a doctor of medicine or 
osteopathy qualified in nuclear medicine.
    (2) The qualifications, training, functions, and responsibilities of 
nuclear medicine personnel must be specified by the service director and 
approved by the medical staff.
    (b) Standard: Delivery of service. Radioactive materials must be 
prepared, labeled, used, transported, stored, and disposed of in 
accordance with acceptable standards of practice.
    (1) In-house preparation of radiopharmaceuticals is by, or under, 
the direct supervision of an appropriately trained registered pharmacist 
or a doctor of medicine or osteopathy.
    (2) There is proper storage and disposal of radioactive material.
    (3) If laboratory tests are performed in the nuclear medicine 
service, the service must meet the applicable requirement for laboratory 
services specified in Sec. 482.27.
    (c) Standard: Facilities. Equipment and supplies must be appropriate 
for the types of nuclear medicine services offered and must be 
maintained for safe and efficient performance. The equipment must be--

[[Page 492]]

    (1) Maintained in safe operating condition; and
    (2) Inspected, tested, and calibrated at least annually by qualified 
personnel.
    (d) Standard: Records. The hospital must maintain signed and dated 
reports of nuclear medicine interpretations, consultations, and 
procedures.
    (1) The hospital must maintain copies of nuclear medicine reports 
for at least 5 years.
    (2) The practitioner approved by the medical staff to interpret 
diagnostic procedures must sign and date the interpretation of these 
tests.
    (3) The hospital must maintain records of the receipt and 
disposition of radiopharmaceuticals.
    (4) Nuclear medicine services must be ordered only by practitioner 
whose scope of Federal or State licensure and whose defined staff 
privileges allow such referrals.

[51 FR 22042, June 17, 1986, as amended at 57 FR 7136, Feb. 28, 1992]



Sec. 482.54  Condition of participation: Outpatient services.

    If the hospital provides outpatient services, the services must meet 
the needs of the patients in accordance with acceptable standards of 
practice.
    (a) Standard: Organization. Outpatient services must be 
appropriately organized and integrated with inpatient services.
    (b) Standard: Personnel. The hospitals must--
    (1) Assign an individual to be responsible for outpatient services; 
and
    (2) Have appropriate professional and nonprofessional personnel 
available.



Sec. 482.55  Condition of participation: Emergency services.

    The hospital must meet the emergency needs of patients in accordance 
with acceptable standards of practice.
    (a) Standard: Organization and direction. If emergency services are 
provided at the hospital--
    (1) The services must be organized under the direction of a 
qualified member of the medical staff;
    (2) The services must be integrated with other departments of the 
hospital;
    (3) The policies and procedures governing medical care provided in 
the emergency service or department are established by and are a 
continuing responsibility of the medical staff.
    (b) Standard: Personnel. (1) The emergency services must be 
supervised by a qualified member of the medical staff.
    (2) There must be adequate medical and nursing personnel qualified 
in emergency care to meet the written emergency procedures and needs 
anticipated by the facility.



Sec. 482.56  Condition of participation: Rehabilitation services.

    If the hospital provides rehabilitation, physical therapy, 
occupational therapy, audiology, or speech pathology services, the 
services must be organized and staffed to ensure the health and safety 
of patients.
    (a) Standard: Organization and staffing. The organization of the 
service must be appropriate to the scope of the services offered.
    (1) The director of the services must have the necessary knowledge, 
experience, and capabilities to properly supervise and administer the 
services.
    (2) Physical therapy, occupational therapy, or speech therapy, or 
audiology services, if provided, must be provided by staff who meet the 
qualifications specified by the medical staff, consistent with State 
law.
    (b) Standard: Delivery of services. Services must be furnished in 
accordance with a written plan of treatment. Services must be given in 
accordance with orders of practitioners who are authorized by the 
medical staff to order the services, and the orders must be incorporated 
in the patient's record.



Sec. 482.57  Condition of participation: Respiratory care services.

    The hospital must meet the needs of the patients in accordance with 
acceptable standards of practice. The following requirements apply if 
the hospital provides respiratory care service.
    (a) Standard: Organization and Staffing. The organization of the 
respiratory care services must be appropriate to the scope and 
complexity of the services offered.
    (1) There must be a director of respiratory care services who is a 
doctor of medicine or osteopathy with the knowledge experience, and 
capabilities

[[Page 493]]

to supervise and administer the service properly. The director may serve 
on either a full-time or part-time basis.
    (2) There must be adequate numbers of respiratory therapists, 
respiratory therapy technicians, and other personnel who meet the 
qualifications specified by the medical staff, consistent with State 
law.
    (b) Standard: Delivery of Services. Services must be delivered in 
accordance with medical staff directives.
    (1) Personnel qualified to perform specific procedures and the 
amount of supervision required for personnel to carry out specific 
procedures must be designated in writing.
    (2) If blood gases or other laboratory tests are performed in the 
respiratory care unit, the unit must meet the applicable requirements 
for laboratory services specified in Sec. 482.27.
    (3) Services must be provided only on, and in accordance with, the 
orders of a doctor of medicine or osteopathy.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986, as amended at 57 
FR 7136, Feb. 28, 1992]



             Subpart E--Requirements for Specialty Hospitals



Sec. 482.60  Special provisions applying to psychiatric hospitals.

    Psychiatric hospital must--
    (a) Be primarily engaged in providing, by or under the supervision 
of a doctor of medicine or osteopathy, psychiatric services for the 
diagnosis and treatment of mentally ill persons;
    (b) Meet the conditions of participation specified in Secs. 482.1 
through 482.23 and Secs. 482.25 through 482.57;
    (c) Maintain clinical records on all patients, including records 
sufficient to permit CMS to determine the degree and intensity of 
treatment furnished to Medicare beneficiaries, as specified in 
Sec. 482.61; and
    (d) Meet the staffing requirements specified in Sec. 482.62.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986]



Sec. 482.61  Condition of participation: Special medical record requirements for psychiatric hospitals.

    The medical records maintained by a psychiatric hospital must permit 
determination of the degree and intensity of the treatment provided to 
individuals who are furnished services in the institution.
    (a) Standard: Development of assessment/diagnostic data. Medical 
records must stress the psychiatric components of the record, including 
history of findings and treatment provided for the psychiatric condition 
for which the patient is hospitalized.
    (1) The identification data must include the patient's legal status.
    (2) A provisional or admitting diagnosis must be made on every 
patient at the time of admission, and must include the diagnoses of 
intercurrent diseases as well as the psychiatric diagnoses.
    (3) The reasons for admission must be clearly documented as stated 
by the patient and/or others significantly involved.
    (4) The social service records, including reports of interviews with 
patients, family members, and others, must provide an assessment of home 
plans and family attitudes, and community resource contacts as well as a 
social history.
    (5) When indicated, a complete neurological examination must be 
recorded at the time of the admission physical examination.
    (b) Standard: Psychiatric evaluation. Each patient must receive a 
psychiatric evaluation that must--
    (1) Be completed within 60 hours of admission;
    (2) Include a medical history;
    (3) Contain a record of mental status;
    (4) Note the onset of illness and the circumstances leading to 
admission;
    (5) Describe attitudes and behavior;
    (6) Estimate intellectual functioning, memory functioning, and 
orientation; and
    (7) Include an inventory of the patient's assets in descriptive, not 
interpretative, fashion.
    (c) Standard: Treatment plan. (1) Each patient must have an 
individual comprehensive treatment plan that must be based on an 
inventory of the patient's strengths and disabilities. The written plan 
must include--
    (i) A substantiated diagnosis;
    (ii) Short-term and long-range goals;

[[Page 494]]

    (iii) The specific treatment modalities utilized;
    (iv) The responsibilities of each member of the treatment team; and
    (v) Adequate documentation to justify the diagnosis and the 
treatment and rehabilitation activities carried out.
    (2) The treatment received by the patient must be documented in such 
a way to assure that all active therapeutic efforts are included.
    (d) Standard: Recording progress. Progress notes must be recorded by 
the doctor of medicine or osteopathy responsible for the care of the 
patient as specified in Sec. 482.12(c), nurse, social worker and, when 
appropriate, others significantly involved in active treatment 
modalities. The frequency of progress notes is determined by the 
condition of the patient but must be recorded at least weekly for the 
first 2 months and at least once a month thereafter and must contain 
recommendations for revisions in the treatment plan as indicated as well 
as precise assessment of the patient's progress in accordance with the 
original or revised treatment plan.
    (e) Standard: Discharge planning and discharge summary. The record 
of each patient who has been discharged must have a discharge summary 
that includes a recapitulation of the patient's hospitalization and 
recommendations from appropriate services concerning follow-up or 
aftercare as well as a brief summary of the patient's condition on 
discharge.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986]



Sec. 482.62  Condition of participation: Special staff requirements for psychiatric hospitals.

    The hospital must have adequate numbers of qualified professional 
and supportive staff to evaluate patients, formulate written, 
individualized comprehensive treatment plans, provide active treatment 
measures, and engage in discharge planning.
    (a) Standard: Personnel. The hospital must employ or undertake to 
provide adequate numbers of qualified professional, technical, and 
consultative personnel to:
    (1) Evaluate patients;
    (2) Formulate written individualized, comprehensive treatment plans;
    (3) Provide active treatment measures; and
    (4) Engage in discharge planning.
    (b) Standard: Director of inpatient psychiatric services; medical 
staff. Inpatient psychiatric services must be under the supervision of a 
clinical director, service chief, or equivalent who is qualified to 
provide the leadership required for an intensive treatment program. The 
number and qualifications of doctors of medicine and osteopathy must be 
adequate to provide essential psychiatric services.
    (1) The clinical director, service chief, or equivalent must meet 
the training and experience requirements for examination by the American 
Board of Psychiatry and Neurology or the American Osteopathic Board of 
Neurology and Psychiatry.
    (2) The director must monitor and evaluate the quality and 
appropriateness of services and treatment provided by the medical staff.
    (c) Standard: Availability of medical personnel. Doctors of medicine 
or osteopathy and other appropriate professional personnel must be 
available to provide necessary medical and surgical diagnostic and 
treatment services. If medical and surgical diagnostic and treatment 
services are not available within the institution, the institution must 
have an agreement with an outside source of these services to ensure 
that they are immediately available or a satisfactory agreement must be 
established for transferring patients to a general hospital that 
participates in the Medicare program.
    (d) Standard: Nursing services. The hospital must have a qualified 
director of psychiatric nursing services. In addition to the director of 
nursing, there must be adequate numbers of registered nurses, licensed 
practical nurses, and mental health workers to provide nursing care 
necessary under each patient's active treatment program and to maintain 
progress notes on each patient.
    (1) The director of psychiatric nursing services must be a 
registered nurse who has a master's degree in psychiatric or mental 
health nursing, or its equivalent from a school of nursing

[[Page 495]]

accredited by the National League for Nursing, or be qualified by 
education and experience in the care of the mentally ill. The director 
must demonstrate competence to participate in interdisciplinary 
formulation of individual treatment plans; to give skilled nursing care 
and therapy; and to direct, monitor, and evaluate the nursing care 
furnished.
    (2) The staffing pattern must insure the availability of a 
registered professional nurse 24 hours each day. There must be adequate 
numbers of registered nurses, licensed practical nurses, and mental 
health workers to provide the nursing care necessary under each 
patient's active treatment program.
    (e) Standard: Psychological services. The hospital must provide or 
have available psychological services to meet the needs of the patients.
    (f) Standard: Social services. There must be a director of social 
services who monitors and evaluates the quality and appropriateness of 
social services furnished. The services must be furnished in accordance 
with accepted standards of practice and established policies and 
procedures.
    (1) The director of the social work department or service must have 
a master's degree from an accredited school of social work or must be 
qualified by education and experience in the social services needs of 
the mentally ill. If the director does not hold a masters degree in 
social work, at least one staff member must have this qualification.
    (2) Social service staff responsibilities must include, but are not 
limited to, participating in discharge planning, arranging for follow-up 
care, and developing mechanisms for exchange of appropriate, information 
with sources outside the hospital.
    (g) Standard: Therapeutic activities. The hospital must provide a 
therapeutic activities program.
    (1) The program must be appropriate to the needs and interests of 
patients and be directed toward restoring and maintaining optimal levels 
of physical and psychosocial functioning.
    (2) The number of qualified therapists, support personnel, and 
consultants must be adequate to provide comprehensive therapeutic 
activities consistent with each patient's active treatment program.

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986]



Sec. 482.66  Special requirements for hospital providers of long-term care services (``swing-beds'').

    A hospital that has a Medicare provider agreement must meet the 
following requirements in order to be granted an approval from CMS to 
provide post-hospital extended care services, as specified in 
Sec. 409.30 of this chapter, and be reimbursed as a swing-bed hospital, 
as specified in Sec. 413.114 of this chapter:
    (a) Eligibility. A hospital must meet the following eligibility 
requirements:
    (1) The facility has fewer than 100 hospital beds, excluding beds 
for newborns and beds in intensive care type inpatient units (for 
eligibility of hospitals with distinct parts electing the optional 
reimbursement method, see Sec. 413.24(d)(5) of this chapter).
    (2) The hospital is located in a rural area. This includes all areas 
not delineated as ``urbanized'' areas by the Census Bureau, based on the 
most recent census.
    (3) The hospital does not have in effect a 24-hour nursing waiver 
granted under Sec. 488.54(c) of this chapter.
    (4) The hospital has not had a swing-bed approval terminated within 
the two years previous to application.
    (b) Skilled nursing facility services. The facility is substantially 
in compliance with the following skilled nursing facility requirements 
contained in subpart B of part 483 of this chapter.
    (1) Resident rights (Sec. 483.10 (b)(3), (b)(4), (b)(5), (b)(6), 
(d), (e), (h), (i), (j)(1)(vii), (j)(1)(viii), (l), and (m)).
    (2) Admission, transfer, and discharge rights (Sec. 483.12 (a)(1), 
(a)(2), (a)(3), (a)(4), (a)(5), (a)(6), and (a)(7)).
    (3) Resident behavior and facility practices (Sec. 483.13).
    (4) Patient activities (Sec. 483.15(f)).
    (5) Social services (Sec. 483.15(g)).
    (6) Discharge planning (Sec. 483.20(e)).
    (7) Specialized rehabilitative services (Sec. 483.45).

[[Page 496]]

    (8) Dental services (Sec. 483.55).

[51 FR 22042, June 17, 1986; 51 FR 27848, Aug. 4, 1986, as amended at 51 
FR 34833, Sept. 30, 1986; 54 FR 37275, Sept. 7, 1989; 56 FR 54546, Oct. 
22, 1991; 59 FR 45403, Sept. 1, 1994; 65 FR 47052, Aug. 1, 2000]



PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES--Table of Contents




Subpart A [Reserved]

          Subpart B--Requirements for Long Term Care Facilities

Sec.
483.1 Basis and scope.
483.5 Definitions.
483.10 Resident rights.
483.12 Admission, transfer and discharge rights.
483.13 Resident behavior and facility practices.
483.15 Quality of life.
483.20 Resident assessment.
483.25 Quality of care.
483.30 Nursing services.
483.35 Dietary services.
483.40 Physician services.
483.45 Specialized rehabilitative services.
483.55 Dental services.
483.60 Pharmacy services.
483.65 Infection control.
483.70 Physical environment.
483.75 Administration.

Subpart C--Preadmission Screening and Annual Review of Mentally Ill and 
                      Mentally Retarded Individuals

483.100 Basis.
483.102 Applicability and definitions.
483.104 State plan requirement.
483.106 Basic rule.
483.108 Relationship of PASARR to other Medicaid processes.
483.110 Out-of-State arrangements.
483.112 Preadmission screening of applicants for admission to NFs.
483.114 Annual review of NF residents.
483.116 Residents and applicants determined to require NF level of 
          services.
483.118 Residents and applicants determined not to require NF level of 
          services.
483.120 Specialized services.
483.122 FFP for NF services.
483.124 FFP for specialized services.
483.126 Appropriate placement.
483.128 PASARR evaluation criteria.
483.130 PASARR determination criteria.
483.132 Evaluating the need for NF services and NF level of care 
          (PASARR/NF).
483.134 Evaluating whether an individual with mental illness requires 
          specialized services (PASARR/MI).
483.136 Evaluating whether an individual with mental retardation 
          requires specialized services (PASARR/MR).
483.138 Maintenance of services and availability of FFP.

 Subpart D--Requirements That Must Be Met by States and State Agencies: 
              Nurse Aide Training and Competency Evaluation

483.150 Statutory basis; Deemed meeting or waiver of requirements.
483.151 State review and approval of nurse aide training and competency 
          evaluation programs and competency evaluation programs.
483.152 Requirements for approval of a nurse aide training and 
          competency evaluation program.
483.154 Nurse aide competency evaluation.
483.156 Registry of nurse aides.
483.158 FFP for nurse aide training and competency evaluation.

Subpart E--Appeals of Discharges, Transfers, and Preadmission Screening 
           and Annual Resident Review (PASARR) Determinations

483.200 Statutory basis.
483.202 Definitions.
483.204 Provision of a hearing and appeal system.
483.206 Transfers, discharges and relocations subject to appeal.

 Subpart F--Requirements That Must Be Met by States and State Agencies, 
                           Resident Assessment

483.315 Specification of resident assessment instrument.

   Subpart G--Condition of Participation for the Use of Restraint or 
  Seclusion in Psychiatric Residential Treatment Facilities Providing 
       Inpatient Psychiatric Services for Individuals Under Age 21

483.350 Basis and scope.
483.352 Definitions.
483.354 General requirements for psychiatric residential treatment 
          facilities.
483.356 Protection of residents.
483.358 Orders for the use of restraint or seclusion.
483.360 Consultation with treatment team physician.
483.362 Monitoring of the resident in and immediately after restraint.
483.364 Monitoring of the resident in and immediately after seclusion.

[[Page 497]]

483.366 Notification of parent(s) or legal guardian(s).
483.368 Application of time out.
483.370 Postintervention debriefings.
483.372 Medical treatment for injuries resulting from an emergency 
          safety intervention.
483.374 Facility reporting.
483.376 Education and training.

Subpart H [Reserved]

Subpart I--Conditions of Participation for Intermediate Care Facilities 
                        for the Mentally Retarded

483.400 Basis and purpose.
483.405 Relationship to other HHS regulations.
483.410 Condition of participation: Governing body and management.
483.420 Condition of participation: Client protections.
483.430 Condition of participation: Facility staffing.
483.440 Condition of participation: Active treatment services.
483.450 Condition of participation: Client behavior and facility 
          practices.
483.460 Condition of participation: Health care services.
483.470 Condition of participation: Physical environment.
483.480 Condition of participation: Dietetic services.

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

Subpart A [Reserved]



          Subpart B--Requirements for Long Term Care Facilities

    Source: 54 FR 5359, Feb. 2, 1989, unless otherwise noted.



Sec. 483.1  Basis and scope.

    (a) Statutory basis. (1) Sections 1819 (a), (b), (c), and (d) of the 
Act provide that--
    (i) Skilled nursing facilities participating in Medicare must meet 
certain specified requirements; and
    (ii) The Secretary may impose additional requirements (see section 
1819(d)(4)(B)) if they are necessary for the health and safety of 
individuals to whom services are furnished in the facilities.
    (2) Section 1861(l) of the Act requires the facility to have in 
effect a transfer agreement with a hospital.
    (3) Sections 1919 (a), (b), (c), and (d) of the Act provide that 
nursing facilities participating in Medicaid must meet certain specific 
requirements.
    (b) Scope. The provisions of this part contain the requirements that 
an institution must meet in order to qualify to participate as a SNF in 
the Medicare program, and as a nursing facility in the Medicaid program. 
They serve as the basis for survey activities for the purpose of 
determining whether a facility meets the requirements for participation 
in Medicare and Medicaid.

[56 FR 48867, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
60 FR 50443, Sept. 29, 1995]



Sec. 483.5  Definitions.

    For purposes of this subpart--
    Facility means, a skilled nursing facility (SNF) or a nursing 
facility (NF) which meets the requirements of sections 1819 or 1919 (a), 
(b), (c), and (d) of the Act. ``Facility'' may include a distinct part 
of an institution specified in Sec. 440.40 of this chapter, but does not 
include an institution for the mentally retarded or persons with related 
conditions described in Sec. 440.150 of this chapter. For Medicare and 
Medicaid purposes (including eligibility, coverage, certification, and 
payment), the ``facility'' is always the entity which participates in 
the program, whether that entity is comprised of all of, or a distinct 
part of a larger institution. For Medicare, a SNF (see section 
1819(a)(1)), and for Medicaid, a NF (see section 1919(a)(1)) may not be 
an institution for mental diseases as defined in Sec. 435.1009.

[56 FR 48867, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992]



Sec. 483.10  Resident rights.

    The resident has a right to a dignified existence, self-
determination, and communication with and access to persons and services 
inside and outside the facility. A facility must protect and promote the 
rights of each resident, including each of the following rights:
    (a) Exercise of rights. (1) The resident has the right to exercise 
his or her rights as a resident of the facility and

[[Page 498]]

as a citizen or resident of the United States.
    (2) The resident has the right to be free of interference, coercion, 
discrimination, and reprisal from the facility in exercising his or her 
rights.
    (3) In the case of a resident adjudged incompetent under the laws of 
a State by a court of competent jurisdiction, the rights of the resident 
are exercised by the person appointed under State law to act on the 
resident's behalf.
    (4) In the case of a resident who has not been adjudged incompetent 
by the State court, any legal-surrogate designated in accordance with 
State law may exercise the resident's rights to the extent provided by 
State law.
    (b) Notice of rights and services. (1) The facility must inform the 
resident both orally and in writing in a language that the resident 
understands of his or her rights and all rules and regulations governing 
resident conduct and responsibilities during the stay in the facility. 
The facility must also provide the resident with the notice (if any) of 
the State developed under section 1919(e)(6) of the Act. Such 
notification must be made prior to or upon admission and during the 
resident's stay. Receipt of such information, and any amendments to it, 
must be acknowledged in writing;
    (2) The resident or his or her legal representative has the right--
    (i) Upon an oral or written request, to access all records 
pertaining to himself or herself including current clinical records 
within 24 hours (excluding weekends and holidays); and
    (ii) After receipt of his or her records for inspection, to purchase 
at a cost not to exceed the community standard photocopies of the 
records or any portions of them upon request and 2 working days advance 
notice to the facility.
    (3) The resident has the right to be fully informed in language that 
he or she can understand of his or her total health status, including 
but not limited to, his or her medical condition;
    (4) The resident has the right to refuse treatment, to refuse to 
participate in experimental research, and to formulate an advance 
directive as specified in paragraph (8) of this section; and
    (5) The facility must--
    (i) Inform each resident who is entitled to Medicaid benefits, in 
writing, at the time of admission to the nursing facility or, when the 
resident becomes eligible for Medicaid of--
    (A) The items and services that are included in nursing facility 
services under the State plan and for which the resident may not be 
charged;
    (B) Those other items and services that the facility offers and for 
which the resident may be charged, and the amount of charges for those 
services; and
    (ii) Inform each resident when changes are made to the items and 
services specified in paragraphs (5)(i) (A) and (B) of this section.
    (6) The facility must inform each resident before, or at the time of 
admission, and periodically during the resident's stay, of services 
available in the facility and of charges for those services, including 
any charges for services not covered under Medicare or by the facility's 
per diem rate.
    (7) The facility must furnish a written description of legal rights 
which includes--
    (i) A description of the manner of protecting personal funds, under 
paragraph (c) of this section;
    (ii) A description of the requirements and procedures for 
establishing eligibility for Medicaid, including the right to request an 
assessment under section 1924(c) which determines the extent of a 
couple's non-exempt resources at the time of institutionalization and 
attributes to the community spouse an equitable share of resources which 
cannot be considered available for payment toward the cost of the 
institutionalized spouse's medical care in his or her process of 
spending down to Medicaid eligibility levels;
    (iii) A posting of names, addresses, and telephone numbers of all 
pertinent State client advocacy groups such as the State survey and 
certification agency, the State licensure office, the State ombudsman 
program, the protection and advocacy network, and the Medicaid fraud 
control unit; and
    (iv) A statement that the resident may file a complaint with the 
State survey and certification agency concerning resident abuse, 
neglect, misappropriation of resident property in

[[Page 499]]

the facility, and non-compliance with the advance directives 
requirements.
    (8) The facility must comply with the requirements specified in 
subpart I of part 489 of this chapter relating to maintaining written 
policies and procedures regarding advance directives. These requirements 
include provisions to inform and provide written information to all 
adult residents concerning the right to accept or refuse medical or 
surgical treatment and, at the individual's option, formulate an advance 
directive. This includes a written description of the facility's 
policies to implement advance directives and applicable State law. 
Facilities are permitted to contract with other entities to furnish this 
information but are still legally responsible for ensuring that the 
requirements of this section are met. If an adult individual is 
incapacitated at the time of admission and is unable to receive 
information (due to the incapacitating condition or a mental disorder) 
or articulate whether or not he or she has executed an advance 
directive, the facility may give advance directive information to the 
individual's family or surrogate in the same manner that it issues other 
materials about policies and procedures to the family of the 
incapacitated individual or to a surrogate or other concerned persons in 
accordance with State law. The facility is not relieved of its 
obligation to provide this information to the individual once he or she 
is no longer incapacitated or unable to receive such information. 
Follow-up procedures must be in place to provide the information to the 
individual directly at the appropriate time.
    (9) The facility must inform each resident of the name, specialty, 
and way of contacting the physician responsible for his or her care.
    (10) The facility must prominently display in the facility written 
information, and provide to residents and applicants for admission oral 
and written information about how to apply for and use Medicare and 
Medicaid benefits, and how to receive refunds for previous payments 
covered by such benefits.
    (11) Notification of changes. (i) A facility must immediately inform 
the resident; consult with the resident's physician; and if known, 
notify the resident's legal respresentative or an interested family 
member when there is--
    (A) An accident involving the resident which results in injury and 
has the potential for requiring physician intervention;
    (B) A significant change in the resident's physical, mental, or 
psychosocial status (i.e., a deterioration in health, mental, or 
psychosocial status in either life-threatening conditions or clinical 
complications);
    (C) A need to alter treatment significantly (i.e., a need to 
discontinue an existing form of treatment due to adverse consequences, 
or to commence a new form of treatment); or
    (D) A decision to transfer or discharge the resident from the 
facility as specified in Sec. 483.12(a).
    (ii) The facility must also promptly notify the resident and, if 
known, the resident's legal representative or interested family member 
when there is--
    (A) A change in room or roommate assignment as specified in 
Sec. 483.15(e)(2); or
    (B) A change in resident rights under Federal or State law or 
regulations as specified in paragraph (b)(1) of this section.
    (iii) The facility must record and periodically update the address 
and phone number of the resident's legal representative or interested 
family member.
    (c) Protection of resident funds. (1) The resident has the right to 
manage his or her financial affairs, and the facility may not require 
residents to deposit their personal funds with the facility.
    (2) Management of personal funds. Upon written authorization of a 
resident, the facility must hold, safeguard, manage, and account for the 
personal funds of the resident deposited with the facility, as specified 
in paragraphs (c)(3)-(8) of this section.
    (3) Deposit of funds. (i) Funds in excess of $50. The facility must 
deposit any residents' personal funds in excess of $50 in an interest 
bearing account (or accounts) that is separate from any of the 
facility's operating accounts, and that credits all interest earned on 
resident's funds to that account. (In pooled accounts, there must be a 
separate accounting for each resident's share.)

[[Page 500]]

    (ii) Funds less than $50. The facility must maintain a resident's 
personal funds that do not exceed $50 in a non-interest bearing account, 
interest-bearing account, or petty cash fund.
    (4) Accounting and records. The facility must establish and maintain 
a system that assures a full and complete and separate accounting, 
according to generally accepted accounting principles, of each 
resident's personal funds entrusted to the facility on the resident's 
behalf.
    (i) The system must preclude any commingling of resident funds with 
facility funds or with the funds of any person other than another 
resident.
    (ii) The individual financial record must be available through 
quarterly statements and on request to the resident or his or her legal 
representative.
    (5) Notice of certain balances. The facility must notify each 
resident that receives Medicaid benefits--
    (i) When the amount in the resident's account reaches $200 less than 
the SSI resource limit for one person, specified in section 
1611(a)(3)(B) of the Act; and
    (ii) That, if the amount in the account, in addition to the value of 
the resident's other nonexempt resources, reaches the SSI resource limit 
for one person, the resident may lose eligibility for Medicaid or SSI.
    (6) Conveyance upon death. Upon the death of a resident with a 
personal fund deposited with the facility, the facility must convey 
within 30 days the resident's funds, and a final accounting of those 
funds, to the individual or probate jurisdiction administering the 
resident's estate.
    (7) Assurance of financial security. The facility must purchase a 
surety bond, or otherwise provide assurance satisfactory to the 
Secretary, to assure the security of all personal funds of residents 
deposited with the facility.
    (8) Limitation on charges to personal funds. The facility may not 
impose a charge against the personal funds of a resident for any item or 
service for which payment is made under Medicaid or Medicare (except for 
applicable deductible and coinsurance amounts). The facility may charge 
the resident for requested services that are more expensive than or in 
excess of covered services in accordance with Sec. 489.32 of this 
chapter. (This does not affect the prohibition on facility charges for 
items and services for which Medicaid has paid. See Sec. 447.15, which 
limits participation in the Medicaid program to providers who accept, as 
payment in full, Medicaid payment plus any deductible, coinsurance, or 
copayment required by the plan to be paid by the individual.)
    (i) Services included in Medicare or Medicaid payment. During the 
course of a covered Medicare or Medicaid stay, facilities may not charge 
a resident for the following categories of items and services:
    (A) Nursing services as required at Sec. 483.30 of this subpart.
    (B) Dietary services as required at Sec. 483.35 of this subpart.
    (C) An activities program as required at Sec. 483.15(f) of this 
subpart.
    (D) Room/bed maintenance services.
    (E) Routine personal hygiene items and services as required to meet 
the needs of residents, including, but not limited to, hair hygiene 
supplies, comb, brush, bath soap, disinfecting soaps or specialized 
cleansing agents when indicated to treat special skin problems or to 
fight infection, razor, shaving cream, toothbrush, toothpaste, denture 
adhesive, denture cleaner, dental floss, moisturizing lotion, tissues, 
cotton balls, cotton swabs, deodorant, incontinence care and supplies, 
sanitary napkins and related supplies, towels, washcloths, hospital 
gowns, over the counter drugs, hair and nail hygiene services, bathing, 
and basic personal laundry.
    (F) Medically-related social services as required at Sec. 483.15(g) 
of this subpart.
    (ii) Items and services that may be charged to residents' funds. 
Listed below are general categories and examples of items and services 
that the facility may charge to residents' funds if they are requested 
by a resident, if the facility informs the resident that there will be a 
charge, and if payment is not made by Medicare or Medicaid:
    (A) Telephone.
    (B) Television/radio for personal use.
    (C) Personal comfort items, including smoking materials, notions and 
novelties, and confections.
    (D) Cosmetic and grooming items and services in excess of those for 
which

[[Page 501]]

payment is made under Medicaid or Medicare.
    (E) Personal clothing.
    (F) Personal reading matter.
    (G) Gifts purchased on behalf of a resident.
    (H) Flowers and plants.
    (I) Social events and entertainment offered outside the scope of the 
activities program, provided under Sec. 483.15(f) of this subpart.
    (J) Noncovered special care services such as privately hired nurses 
or aides.
    (K) Private room, except when therapeutically required (for example, 
isolation for infection control).
    (L) Specially prepared or alternative food requested instead of the 
food generally prepared by the facility, as required by Sec. 483.35 of 
this subpart.
    (iii) Requests for items and services. (A) The facility must not 
charge a resident (or his or her representative) for any item or service 
not requested by the resident.
    (B) The facility must not require a resident (or his or her 
representative) to request any item or service as a condition of 
admission or continued stay.
    (C) The facility must inform the resident (or his or her 
representative) requesting an item or service for which a charge will be 
made that there will be a charge for the item or service and what the 
charge will be.
    (d) Free choice. The resident has the right to--
    (1) Choose a personal attending physician;
    (2) Be fully informed in advance about care and treatment and of any 
changes in that care or treatment that may affect the resident's well-
being; and
    (3) Unless adjudged incompetent or otherwise found to be 
incapacitated under the laws of the State, participate in planning care 
and treatment or changes in care and treatment.
    (e) Privacy and confidentiality. The resident has the right to 
personal privacy and confidentiality of his or her personal and clinical 
records.
    (1) Personal privacy includes accommodations, medical treatment, 
written and telephone communications, personal care, visits, and 
meetings of family and resident groups, but this does not require the 
facility to provide a private room for each resident;
    (2) Except as provided in paragraph (e)(3) of this section, the 
resident may approve or refuse the release of personal and clinical 
records to any individual outside the facility;
    (3) The resident's right to refuse release of personal and clinical 
records does not apply when--
    (i) The resident is transferred to another health care institution; 
or
    (ii) Record release is required by law.
    (f) Grievances. A resident has the right to--
    (1) Voice grievances without discrimination or reprisal. Such 
grievances include those with respect to treatment which has been 
furnished as well as that which has not been furnished; and
    (2) Prompt efforts by the facility to resolve grievances the 
resident may have, including those with respect to the behavior of other 
residents.
    (g) Examination of survey results. A resident has the right to--
    (1) Examine the results of the most recent survey of the facility 
conducted by Federal or State surveyors and any plan of correction in 
effect with respect to the facility. The facility must make the results 
available for examination in a place readily accessible to residents, 
and must post a notice of their availability; and
    (2) Receive information from agencies acting as client advocates, 
and be afforded the opportunity to contact these agencies.
    (h) Work. The resident has the right to--
    (1) Refuse to perform services for the facility;
    (2) Perform services for the facility, if he or she chooses, when--
    (i) The facility has documented the need or desire for work in the 
plan of care;
    (ii) The plan specifies the nature of the services performed and 
whether the services are voluntary or paid;
    (iii) Compensation for paid services is at or above prevailing 
rates; and
    (iv) The resident agrees to the work arrangement described in the 
plan of care.

[[Page 502]]

    (i) Mail. The resident has the right to privacy in written 
communications, including the right to--
    (1) Send and promptly receive mail that is unopened; and
    (2) Have access to stationery, postage, and writing implements at 
the resident's own expense.
    (j) Access and visitation rights. (1) The resident has the right and 
the facility must provide immediate access to any resident by the 
following:
    (i) Any representative of the Secretary;
    (ii) Any representative of the State:
    (iii) The resident's individual physician;
    (iv) The State long term care ombudsman (established under section 
307(a)(12) of the Older Americans Act of 1965);
    (v) The agency responsible for the protection and advocacy system 
for developmentally disabled individuals (established under part C of 
the Developmental Disabilities Assistance and Bill of Rights Act);
    (vi) The agency responsible for the protection and advocacy system 
for mentally ill individuals (established under the Protection and 
Advocacy for Mentally Ill Individuals Act);
    (vii) Subject to the resident's right to deny or withdraw consent at 
any time, immediate family or other relatives of the resident; and
    (viii) Subject to reasonable restrictions and the resident's right 
to deny or withdraw consent at any time, others who are visiting with 
the consent of the resident.
    (2) The facility must provide reasonable access to any resident by 
any entity or individual that provides health, social, legal, or other 
services to the resident, subject to the resident's right to deny or 
withdraw consent at any time.
    (3) The facility must allow representatives of the State Ombudsman, 
described in paragraph (j)(1)(iv) of this section, to examine a 
resident's clinical records with the permission of the resident or the 
resident's legal representative, and consistent with State law.
    (k) Telephone. The resident has the right to have reasonable access 
to the use of a telephone where calls can be made without being 
overheard.
    (l) Personal property. The resident has the right to retain and use 
personal possessions, including some furnishings, and appropriate 
clothing, as space permits, unless to do so would infringe upon the 
rights or health and safety of other residents.
    (m) Married couples. The resident has the right to share a room with 
his or her spouse when married residents live in the same facility and 
both spouses consent to the arrangement.
    (n) Self-Administration of Drugs. An individual resident may self-
administer drugs if the interdisciplinary team, as defined by 
Sec. 483.20(d)(2)(ii), has determined that this practice is safe.
    (o) Refusal of certain transfers. (1) An individual has the right to 
refuse a transfer to another room within the institution, if the purpose 
of the transfer is to relocate--
    (i) A resident of a SNF from the distinct part of the institution 
that is a SNF to a part of the institution that is not a SNF, or
    (ii) A resident of a NF from the distinct part of the institution 
that is a NF to a distinct part of the institution that is a SNF.
    (2) A resident's exercise of the right to refuse transfer under 
paragraph (o)(1) of this section does not affect the individual's 
eligibility or entitlement to Medicare or Medicaid benefits.

[56 FR 48867, Sept. 26, 1991, as amended at 57 FR 8202, Mar. 6, 1992; 57 
FR 43924, Sept. 23, 1992; 57 FR 53587, Nov. 12, 1992; 60 FR 33293, June 
27, 1995]



Sec. 483.12  Admission, transfer and discharge rights.

    (a) Transfer and discharge--
    (1) Definition: Transfer and discharge includes movement of a 
resident to a bed outside of the certified facility whether that bed is 
in the same physical plant or not. Transfer and discharge does not refer 
to movement of a resident to a bed within the same certified facility.
    (2) Transfer and discharge requirements. The facility must permit 
each resident to remain in the facility, and not transfer or discharge 
the resident from the facility unless--

[[Page 503]]

    (i) The transfer or discharge is necessary for the resident's 
welfare and the resident's needs cannot be met in the facility;
    (ii) The transfer or discharge is appropriate because the resident's 
health has improved sufficiently so the resident no longer needs the 
services provided by the facility;
    (iii) The safety of individuals in the facility is endangered;
    (iv) The health of individuals in the facility would otherwise be 
endangered;
    (v) The resident has failed, after reasonable and appropriate 
notice, to pay for (or to have paid under Medicare or Medicaid) a stay 
at the facility. For a resident who becomes eligible for Medicaid after 
admission to a facility, the facility may charge a resident only 
allowable charges under Medicaid; or
    (vi) The facility ceases to operate.
    (3) Documentation. When the facility transfers or discharges a 
resident under any of the circumstances specified in paragraphs 
(a)(2)(i) through (v) of this section, the resident's clinical record 
must be documented. The documentation must be made by--
    (i) The resident's physician when transfer or discharge is necessary 
under paragraph (a)(2)(i) or paragraph (a)(2)(ii) of this section; and
    (ii) A physician when transfer or discharge is necessary under 
paragraph (a)(2)(iv) of this section.
    (4) Notice before transfer. Before a facility transfers or 
discharges a resident, the facility must--
    (i) Notify the resident and, if known, a family member or legal 
representative of the resident of the transfer or discharge and the 
reasons for the move in writing and in a language and manner they 
understand.
    (ii) Record the reasons in the resident's clinical record; and
    (iii) Include in the notice the items described in paragraph (a)(6) 
of this section.
    (5) Timing of the notice. (i) Except when specified in paragraph 
(a)(5)(ii) of this section, the notice of transfer or discharge required 
under paragraph (a)(4) of this section must be made by the facility at 
least 30 days before the resident is transferred or discharged.
    (ii) Notice may be made as soon as practicable before transfer or 
discharge when--
    (A) the safety of individuals in the facility would be endangered 
under paragraph (a)(2)(iii) of this section;
    (B) The health of individuals in the facility would be endangered, 
under paragraph (a)(2)(iv) of this section;
    (C) The resident's health improves sufficiently to allow a more 
immediate transfer or discharge, under paragraph (a)(2)(ii) of this 
section;
    (D) An immediate transfer or discharge is required by the resident's 
urgent medical needs, under paragraph (a)(2)(i) of this section; or
    (E) A resident has not resided in the facility for 30 days.
    (6) Contents of the notice. The written notice specified in 
paragraph (a)(4) of this section must include the following:
    (i) The reason for transfer or discharge;
    (ii) The effective date of transfer or discharge;
    (iii) The location to which the resident is transferred or 
discharged;
    (iv) A statement that the resident has the right to appeal the 
action to the State;
    (v) The name, address and telephone number of the State long term 
care ombudsman;
    (vi) For nursing facility residents with developmental disabilities, 
the mailing address and telephone number of the agency responsible for 
the protection and advocacy of developmentally disabled individuals 
established under Part C of the Developmental Disabilities Assistance 
and Bill of Rights Act; and
    (vii) For nursing facility residents who are mentally ill, the 
mailing address and telephone number of the agency responsible for the 
protection and advocacy of mentally ill individuals established under 
the Protection and Advocacy for Mentally Ill Individuals Act.
    (7) Orientation for transfer or discharge. A facility must provide 
sufficient preparation and orientation to residents to ensure safe and 
orderly transfer or discharge from the facility.
    (b) Notice of bed-hold policy and readmission--(1) Notice before 
transfer. Before

[[Page 504]]

a nursing facility transfers a resident to a hospital or allows a 
resident to go on therapeutic leave, the nursing facility must provide 
written information to the resident and a family member or legal 
representative that specifies--
    (i) The duration of the bed-hold policy under the State plan, if 
any, during which the resident is permitted to return and resume 
residence in the nursing facility; and
    (ii) The nursing facility's policies regarding bed-hold periods, 
which must be consistent with paragraph (b)(3) of this section, 
permitting a resident to return.
    (2) Bed-hold notice upon transfer. At the time of transfer of a 
resident for hospitalization or therapeutic leave, a nursing facility 
must provide to the resident and a family member or legal representative 
written notice which specifies the duration of the bed-hold policy 
described in paragraph (b)(1) of this section.
    (3) Permitting resident to return to facility. A nursing facility 
must establish and follow a written policy under which a resident, whose 
hospitalization or therapeutic leave exceeds the bed-hold period under 
the State plan, is readmitted to the facility immediately upon the first 
availability of a bed in a semi-private room if the resident--
    (i) Requires the services provided by the facility; and
    (ii) Is eligible for Medicaid nursing facility services.
    (c) Equal access to quality care.
    (1) A facility must establish and maintain identical policies and 
practices regarding transfer, discharge, and the provision of services 
under the State plan for all individuals regardless of source of 
payment;
    (2) The facility may charge any amount for services furnished to 
non-Medicaid residents consistent with the notice requirement in 
Sec. 483.10(b)(5)(i) and (b)(6) describing the charges; and
    (3) The State is not required to offer additional services on behalf 
of a resident other than services provided in the State plan.
    (d) Admissions policy.
    (1) The facility must--
    (i) Not require residents or potential residents to waive their 
rights to Medicare or Medicaid; and
    (ii) Not require oral or written assurance that residents or 
potential residents are not eligible for, or will not apply for, 
Medicare or Medicaid benefits.
    (2) The facility must not require a third party guarantee of payment 
to the facility as a condition of admission or expedited admission, or 
continued stay in the facility. However, the facility may require an 
individual who has legal access to a resident's income or resources 
available to pay for facility care to sign a contract, without incurring 
personal financial liability, to provide facility payment from the 
resident's income or resources.
    (3) In the case of a person eligible for Medicaid, a nursing 
facility must not charge, solicit, accept, or receive, in addition to 
any amount otherwise required to be paid under the State plan, any gift, 
money, donation, or other consideration as a precondition of admission, 
expedited admission or continued stay in the facility. However,--
    (i) A nursing facility may charge a resident who is eligible for 
Medicaid for items and services the resident has requested and received, 
and that are not specified in the State plan as included in the term 
``nursing facility services'' so long as the facility gives proper 
notice of the availability and cost of these services to residents and 
does not condition the resident's admission or continued stay on the 
request for and receipt of such additional services; and
    (ii) A nursing facility may solicit, accept, or receive a 
charitable, religious, or philanthropic contribution from an 
organization or from a person unrelated to a Medicaid eligible resident 
or potential resident, but only to the extent that the contribution is 
not a condition of admission, expedited admission, or continued stay in 
the facility for a Medicaid eligible resident.
    (4) States or political subdivisions may apply stricter admissions 
standards under State or local laws than are specified in this section, 
to prohibit discrimination against individuals entitled to Medicaid.

[56 FR 48869, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992]

[[Page 505]]



Sec. 483.13  Resident behavior and facility practices.

    (a) Restraints. The resident has the right to be free from any 
physical or chemical restraints imposed for purposes of discipline or 
convenience, and not required to treat the resident's medical symptoms.
    (b) Abuse. The resident has the right to be free from verbal, 
sexual, physical, and mental abuse, corporal punishment, and involuntary 
seclusion.
    (c) Staff treatment of residents. The facility must develop and 
implement written policies and procedures that prohibit mistreatment, 
neglect, and abuse of residents and misappropriation of resident 
property.
    (1) The facility must--
    (i) Not use verbal, mental, sexual, or physical abuse, corporal 
punishment, or involuntary seclusion;
    (ii) Not employ individuals who have been--
    (A) Found guilty of abusing, neglecting, or mistreating residents by 
a court of law; or
    (B) Have had a finding entered into the State nurse aide registry 
concerning abuse, neglect, mistreatment of residents or misappropriation 
of their property; and
    (iii) Report any knowledge it has of actions by a court of law 
against an employee, which would indicate unfitness for service as a 
nurse aide or other facility staff to the State nurse aide registry or 
licensing authorities.
    (2) The facility must ensure that all alleged violations involving 
mistreatment, neglect, or abuse, including injuries of unknown source, 
and misappropriation of resident property are reported immediately to 
the administrator of the facility and to other officials in accordance 
with State law through established procedures (including to the State 
survey and certification agency).
    (3) The facility must have evidence that all alleged violations are 
thoroughly investigated, and must prevent further potential abuse while 
the investigation is in progress.
    (4) The results of all investigations must be reported to the 
administrator or his designated representative and to other officials in 
accordance with State law (including to the State survey and 
certification agency) within 5 working days of the incident, and if the 
alleged violation is verified appropriate corrective action must be 
taken.

[56 FR 48870, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992]



Sec. 483.15  Quality of life.

    A facility must care for its residents in a manner and in an 
environment that promotes maintenance or enhancement of each resident's 
quality of life.
    (a) Dignity. The facility must promote care for residents in a 
manner and in an environment that maintains or enhances each resident's 
dignity and respect in full recognition of his or her individuality.
    (b) Self-determination and participation. The resident has the right 
to--
    (1) Choose activities, schedules, and health care consistent with 
his or her interests, assessments, and plans of care;
    (2) Interact with members of the community both inside and outside 
the facility; and
    (3) Make choices about aspects of his or her life in the facility 
that are significant to the resident.
    (c) Participation in resident and family groups. (1) A resident has 
the right to organize and participate in resident groups in the 
facility;
    (2) A resident's family has the right to meet in the facility with 
the families of other residents in the facility;
    (3) The facility must provide a resident or family group, if one 
exists, with private space;
    (4) Staff or visitors may attend meetings at the group's invitation;
    (5) The facility must provide a designated staff person responsible 
for providing assistance and responding to written requests that result 
from group meetings;
    (6) When a resident or family group exists, the facility must listen 
to the views and act upon the grievances and recommendations of 
residents and families concerning proposed policy and operational 
decisions affecting resident care and life in the facility.
    (d) Participation in other activities. A resident has the right to 
participate in

[[Page 506]]

social, religious, and community activities that do not interfere with 
the rights of other residents in the facility.
    (e) Accommodation of needs. A resident has the right to--
    (1) Reside and receive services in the facility with reasonable 
accommodation of individual needs and preferences, except when the 
health or safety of the individual or other residents would be 
endangered; and
    (2) Receive notice before the resident's room or roommate in the 
facility is changed.
    (f) Activities. (1) The facility must provide for an ongoing program 
of activities designed to meet, in accordance with the comprehensive 
assessment, the interests and the physical, mental, and psychosocial 
well-being of each resident.
    (2) The activities program must be directed by a qualified 
professional who--
    (i) Is a qualified therapeutic recreation specialist or an 
activities professional who--
    (A) Is licensed or registered, if applicable, by the State in which 
practicing; and
    (B) Is eligible for certification as a therapeutic recreation 
specialist or as an activities professional by a recognized accrediting 
body on or after October 1, 1990; or
    (ii) Has 2 years of experience in a social or recreational program 
within the last 5 years, 1 of which was full-time in a patient 
activities program in a health care setting; or
    (iii) Is a qualified occupational therapist or occupational therapy 
assistant; or
    (iv) Has completed a training course approved by the State.
    (g) Social Services. (1) The facility must provide medically-related 
social services to attain or maintain the highest practicable physical, 
mental, and psychosocial well-being of each resident.
    (2) A facility with more than 120 beds must employ a qualified 
social worker on a full-time basis.
    (3) Qualifications of social worker. A qualified social worker is an 
individual with--
    (i) A bachelor's degree in social work or a bachelor's degree in a 
human services field including but not limited to sociology, special 
education, rehabilitation counseling, and psychology; and
    (ii) One year of supervised social work experience in a health care 
setting working directly with individuals.
    (h) Environment. The facility must provide--
    (1) A safe, clean, comfortable, and homelike environment, allowing 
the resident to use his or her personal belongings to the extent 
possible;
    (2) Housekeeping and maintenance services necessary to maintain a 
sanitary, orderly, and comfortable interior;
    (3) Clean bed and bath linens that are in good condition;
    (4) Private closet space in each resident room, as specified in 
Sec. 483.70(d)(2)(iv) of this part;
    (5) Adequate and comfortable lighting levels in all areas;
    (6) Comfortable and safe temperature levels. Facilities initially 
certified after October 1, 1990 must maintain a temperature range of 71-
81[deg]F; and
    (7) For the maintenance of comfortable sound levels.

[56 FR 48871, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992]



Sec. 483.20  Resident assessment.

    The facility must conduct initially and periodically a 
comprehensive, accurate, standardized, reproducible assessment of each 
resident's functional capacity.
    (a) Admission orders. At the time each resident is admitted, the 
facility must have physician orders for the resident's immediate care.
    (b) Comprehensive assessments.
    (1) Resident assessment instrument. A facility must make a 
comprehensive assessment of a resident's needs, using the resident 
assessment instrument (RAI) specified by the State. The assessment must 
include at least the following:
    (i) Identification and demographic information.
    (ii) Customary routine.
    (iii) Cognitive patterns.
    (iv) Communication.
    (v) Vision.
    (vi) Mood and behavior patterns.
    (vii) Psychosocial well-being.
    (viii) Physical functioning and structural problems.

[[Page 507]]

    (ix) Continence.
    (x) Disease diagnoses and health conditions.
    (xi) Dental and nutritional status.
    (xii) Skin condition.
    (xiii) Activity pursuit.
    (xiv) Medications.
    (xv) Special treatments and procedures.
    (xvi) Discharge potential.
    (xvii) Documentation of summary information regarding the additional 
assessment performed through the resident assessment protocols.
    (xviii) Documentation of participation in assessment.
    The assessment process must include direct observation and 
communication with the resident, as well as communication with licensed 
and nonlicensed direct care staff members on all shifts.
    (2) When required. Subject to the timeframes prescribed in 
Sec. 413.343(b) of this chapter, a facility must conduct a comprehensive 
assessment of a resident in accordance with the timeframes specified in 
paragraphs (b)(2) (i) through (iii) of this section. The timeframes 
prescribed in Sec. 413.343(b) of this chapter do not apply to CAHs.
    (i) Within 14 calendar days after admission, excluding readmissions 
in which there is no significant change in the resident's physical or 
mental condition. (For purposes of this section, ``readmission'' means a 
return to the facility following a temporary absence for hospitalization 
or for therapeutic leave.)
    (ii) Within 14 calendar days after the facility determines, or 
should have determined, that there has been a significant change in the 
resident's physical or mental condition. (For purposes of this section, 
a ``significant change'' means a major decline or improvement in the 
resident's status that will not normally resolve itself without further 
intervention by staff or by implementing standard disease-related 
clinical interventions, that has an impact on more than one area of the 
resident's health status, and requires interdisciplinary review or 
revision of the care plan, or both.)
    (iii) Not less often than once every 12 months.
    (c) Quarterly review assessment. A facility must assess a resident 
using the quarterly review instrument specified by the State and 
approved by CMS not less frequently than once every 3 months.
    (d) Use. A facility must maintain all resident assessments completed 
within the previous 15 months in the resident's active record and use 
the results of the assessments to develop, review, and revise the 
resident's comprehensive plan f care.
    (e) Coordination. A facility must coordinate assessments with the 
preadmission screening and resident review program under Medicaid in 
part 483, subpart C to the maximum extent practicable to avoid 
duplicative testing and effort.
    (f) Automated data processing requirement. (1) Encoding data. Within 
7 days after a facility completes a resident's assessment, a facility 
must encode the following information for each resident in the facility:
    (i) Admission assessment.
    (ii) Annual assessment updates.
    (iii) Significant change in status assessments.
    (iv) Quarterly review assessments.
    (v) A subset of items upon a resident's transfer, reentry, 
discharge, and death.
    (vi) Background (face-sheet) information, if there is no admission 
assessment.
    (2) Transmitting data. Within 7 days after a facility completes a 
resident's assessment, a facility must be capable of transmitting to the 
State information for each resident contained in the MDS in a format 
that conforms to standard record layouts and data dictionaries, and that 
passes standardized edits defined by CMS and the State.
    (3) Monthly transmittal requirements. A facility must electronically 
transmit, at least monthly, encoded, accurate, complete MDS data to the 
State for all assessments conducted during the previous month, including 
the following:
    (i) Admission assessment.
    (ii) Annual assessment.
    (iii) Significant change in status assessment.
    (iv) Significant correction of prior full assessment.
    (v) Significant correction of prior quarterly assessment.
    (vi) Quarterly review.

[[Page 508]]

    (vii) A subset of items upon a resident's transfer, reentry, 
discharge, and death.
    (viii) Background (face-sheet) information, for an initial 
transmission of MDS data on a resident that does not have an admission 
assessment.
    (4) Data format. The facility must transmit data in the format 
specified by CMS or, for a State which has an alternate RAI approved by 
CMS, in the format specified by the State and approved by CMS.
    (5) Resident-identifiable information. (i) A facility may not 
release information that is resident-identifiable to the public.
    (ii) The facility may release information that is resident-
identifiable to an agent only in accordance with a contract under which 
the agent agrees not to use or disclose the information except to the 
extent the facility itself is permitted to do so.
    (g) Accuracy of assessments. The assessment must accurately reflect 
the resident's status.
    (h) Coordination. A registered nurse must conduct or coordinate each 
assessment with the appropriate participation of health professionals.
    (i) Certification. (1) A registered nurse must sign and certify that 
the assessment is completed.
    (2) Each individual who completes a portion of the assessment must 
sign and certify the accuracy of that portion of the assessment.
    (j) Penalty for falsification. (1) Under Medicare and Medicaid, an 
individual who willfully and knowingly--
    (i) Certifies a material and false statement in a resident 
assessment is subject to a civil money penalty of not more than $1,000 
for each assessment; or
    (ii) Causes another individual to certify a material and false 
statement in a resident assessment is subject to a civil money penalty 
of not more than $5,000 for each assessment.
    (2) Clinical disagreement does not constitute a material and false 
statement.
    (k) Comprehensive care plans. (1) The facility must develop a 
comprehensive care plan for each resident that includes measurable 
objectives and timetables to meet a resident's medical, nursing, and 
mental and psychosocial needs that are identified in the comprehensive 
assessment. The care plan must describer the following--
    (i) The services that are to be furnished to attain or maintain the 
resident's highest practicable physical, mental, and psychosocial well-
being as required under Sec. 483.25; and
    (ii) Any services that would otherwise be required under Sec. 483.25 
but are not provided due to the resident's exercise of rights under 
Sec. 483.10, including the right to refuse treatment under 
Sec. 483.10(b)(4).
    (2) A comprehensive care plan must be--
    (i) Developed within 7 days after completion of the comprehensive 
assessment;
    (ii) Prepared by an interdisciplinary team, that includes the 
attending physician, a registered nurse with responsibility for the 
resident, and other appropriate staff in disciplines as determined by 
the resident's needs, and, to the extent practicable, the participation 
of the resident, the resident's family or the resident's legal 
representative; and
    (iii) Periodically reviewed and revised by a team of qualified 
persons after each assessment.
    (3) The services provided or arranged by the facility must--
    (i) Meet professional standards of quality; and
    (ii) Be provided by qualified persons in accordance with each 
resident's written plan of care.
    (l) Discharge summary. When the facility anticipates discharge a 
resident must have a discharge summary that includes--
    (1) A recapitulation of the resident's stay;
    (2) A final summary of the resident's status to include items in 
paragraph (b)(2) of this section, at the time of the discharge that is 
available for release to authorized persons and agencies, with the 
consent of the resident or legal representative; and
    (3) A post-discharge plan of care that is developed with the 
participation of the resident and his or her family, which will assist 
the resident to adjust to his or her new living environment.

[[Page 509]]

    (m) Preadmission screening for mentally ill individuals and 
individuals with mental retardation. (1) A nursing facility must not 
admit, on or after January 1, 1989, any new resident with--
    (i) Mental illness as defined in paragraph (f)(2)(i) of this 
section, unless the State mental health authority has determined, based 
on an independent physical and mental evaluation performed by a person 
or entity other than the State mental health authority, prior to 
admission,
    (A) That, because of the physical and mental condition of the 
individual, the individual requires the level of services provided by a 
nursing facility; and
    (B) If the individual requires such level of services, whether the 
individual requires specialized services; or
    (ii) Mental retardation, as defined in paragraph (f)(2)(ii) of this 
section, unless the State mental retardation or developmental disability 
authority has determined prior to admission--
    (A) That, because of the physical and mental condition of the 
individual, the individual requires the level of services provided by a 
nursing facility; and
    (B) If the individual requires such level of services, whether the 
individual requires specialized services for mental retardation.
    (2) Definition. For purposes of this section--
    (i) An individual is considered to have mental illness if the 
individual has a serious mental illness as defined in 
Sec. 483.102(b)(1).
    (ii) An individual is considered to be mentally retarded if the 
individual is mentally retarded as defined in Sec. 483.102(b)(3) or is a 
person with a related condition as described in 42 CFR 435.1009.

[56 FR 48871, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
62 FR 67211, Dec. 23, 1997; 63 FR 53307, Oct. 5, 1998; 64 FR 41543, July 
30, 1999]



Sec. 483.25  Quality of care.

    Each resident must receive and the facility must provide the 
necessary care and services to attain or maintain the highest 
practicable physical, mental, and psychosocial well-being, in accordance 
with the comprehensive assessment and plan of care.
    (a) Activities of daily living. Based on the comprehensive 
assessment of a resident, the facility must ensure that--
    (1) A resident's abilities in activities of daily living do not 
diminish unless circumstances of the individual's clinical condition 
demonstrate that diminution was unavoidable. This includes the 
resident's ability to--
    (i) Bathe, dress, and groom;
    (ii) Transfer and ambulate;
    (iii) Toilet;
    (iv) Eat; and
    (v) Use speech, language, or other functional communication systems.
    (2) A resident is given the appropriate treatment and services to 
maintain or improve his or her abilities specified in paragraph (a)(1) 
of this section; and
    (3) A resident who is unable to carry out activities of daily living 
receives the necessary services to maintain good nutrition, grooming, 
and personal and oral hygiene.
    (b) Vision and hearing. To ensure that residents receive proper 
treatment and assistive devices to maintain vision and hearing 
abilities, the facility must, if necessary, assist the resident--
    (1) In making appointments, and
    (2) By arranging for transportation to and from the office of a 
practitioner specializing in the treatment of vision or hearing 
impairment or the office of a professional specializing in the provision 
of vision or hearing assistive devices.
    (c) Pressure sores. Based on the comprehensive assessment of a 
resident, the facility must ensure that--
    (1) A resident who enters the facility without pressure sores does 
not develop pressure sores unless the individual's clinical condition 
demonstrates that they were unavoidable; and
    (2) A resident having pressure sores receives necessary treatment 
and services to promote healing, prevent infection and prevent new sores 
from developing.
    (d) Urinary Incontinence. Based on the resident's comprehensive 
assessment, the facility must ensure that--
    (1) A resident who enters the facility without an indwelling 
catheter is not

[[Page 510]]

catheterized unless the resident's clinical condition demonstrates that 
catheterization was necessary; and
    (2) A resident who is incontinent of bladder receives appropriate 
treatment and services to prevent urinary tract infections and to 
restore as much normal bladder function as possible.
    (e) Range of motion. Based on the comprehensive assessment of a 
resident, the facility must ensure that--
    (1) A resident who enters the facility without a limited range of 
motion does not experience reduction in range of motion unless the 
resident's clinical condition demonstrates that a reduction in range of 
motion is unavoidable; and
    (2) A resident with a limited range of motion receives appropriate 
treatment and services to increase range of motion and/or to prevent 
further decrease in range of motion.
    (f) Mental and Psychosocial functioning. Based on the comprehensive 
assessment of a resident, the facility must ensure that--
    (1) A resident who displays mental or psychosocial adjustment 
difficulty, receives appropriate treatment and services to correct the 
assessed problem, and
    (2) A resident whose assessment did not reveal a mental or 
psychosocial adjustment difficulty does not display a pattern of 
decreased social interaction and/or increased withdrawn, angry, or 
depressive behaviors, unless the resident's clinical condition 
demonstrates that such a pattern was unavoidable.
    (g) Naso-gastric tubes. Based on the comprehensive assessment of a 
resident, the facility must ensure that--
    (1) A resident who has been able to eat enough alone or with 
assistance is not fed by naso-gastric tube unless the resident's 
clinical condition demonstrates that use of a naso-gastric tube was 
unavoidable; and
    (2) A resident who is fed by a naso-gastric or gastrostomy tube 
receives the appropriate treatment and services to prevent aspiration 
pneumonia, diarrhea, vomiting, dehydration, metabolic abnormalities, and 
nasal-pharyngeal ulcers and to restore, if possible, normal eating 
skills.
    (h) Accidents. The facility must ensure that--
    (1) The resident environment remains as free of accident hazards as 
is possible; and
    (2) Each resident receives adequate supervision and assistance 
devices to prevent accidents.
    (i) Nutrition. Based on a resident's comprehensive assessment, the 
facility must ensure that a resident--
    (1) Maintains acceptable parameters of nutritional status, such as 
body weight and protein levels, unless the resident's clinical condition 
demonstrates that this is not possible; and
    (2) Receives a therapeutic diet when there is a nutritional problem.
    (j) Hydration. The facility must provide each resident with 
sufficient fluid intake to maintain proper hydration and health.
    (k) Special needs. The facility must ensure that residents receive 
proper treatment and care for the following special services:
    (1) Injections;
    (2) Parenteral and enteral fluids;
    (3) Colostomy, ureterostomy, or ileostomy care;
    (4) Tracheostomy care;
    (5) Tracheal suctioning;
    (6) Respiratory care;
    (7) Foot care; and
    (8) Prostheses.
    (l) Unnecessary drugs--(1) General. Each resident's drug regimen 
must be free from unnecessary drugs. An unnecessary drug is any drug 
when used:
    (i) In excessive dose (including duplicate drug therapy); or
    (ii) For excessive duration; or
    (iii) Without adequate monitoring; or
    (iv) Without adequate indications for its use; or
    (v) In the presence of adverse consequences which indicate the dose 
should be reduced or discontinued; or
    (vi) Any combinations of the reasons above.
    (2) Antipsychotic Drugs. Based on a comprehensive assessment of a 
resident, the facility must ensure that--
    (i) Residents who have not used antipsychotic drugs are not given 
these drugs unless antipsychotic drug therapy is necessary to treat a 
specific condition as diagnosed and documented in the clinical record; 
and
    (ii) Residents who use antipsychotic drugs receive gradual dose 
reductions,

[[Page 511]]

and behavioral interventions, unless clinically contraindicated, in an 
effort to discontinue these drugs.
    (m) Medication Errors. The facility must ensure that--
    (1) It is free of medication error rates of five percent or greater; 
and
    (2) Residents are free of any significant medication errors.

[56 FR 48873, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.30  Nursing services.

    The facility must have sufficient nursing staff to provide nursing 
and related services to attain or maintain the highest practicable 
physical, mental, and psychosocial well-being of each resident, as 
determined by resident assessments and individual plans of care.
    (a) Sufficient staff. (1) The facility must provide services by 
sufficient numbers of each of the following types of personnel on a 24-
hour basis to provide nursing care to all residents in accordance with 
resident care plans:
    (i) Except when waived under paragraph (c) of this section, licensed 
nurses; and
    (ii) Other nursing personnel.
    (2) Except when waived under paragraph (c) of this section, the 
facility must designate a licensed nurse to serve as a charge nurse on 
each tour of duty.
    (b) Registered nurse. (1) Except when waived under paragraph (c) or 
(d) of this section, the facility must use the services of a registered 
nurse for at least 8 consecutive hours a day, 7 days a week.
    (2) Except when waived under paragraph (c) or (d) of this section, 
the facility must designate a registered nurse to serve as the director 
of nursing on a full time basis.
    (3) The director of nursing may serve as a charge nurse only when 
the facility has an average daily occupancy of 60 or fewer residents.
    (c) Nursing facilities: Waiver of requirement to provide licensed 
nurses on a 24-hour basis. To the extent that a facility is unable to 
meet the requirements of paragraphs (a)(2) and (b)(1) of this section, a 
State may waive such requirements with respect to the facility if--
    (1) The facility demonstrates to the satisfaction of the State that 
the facility has been unable, despite diligent efforts (including 
offering wages at the community prevailing rate for nursing facilities), 
to recruit appropriate personnel;
    (2) The State determines that a waiver of the requirement will not 
endanger the health or safety of individuals staying in the facility;
    (3) The State finds that, for any periods in which licensed nursing 
services are not available, a registered nurse or a physician is 
obligated to respond immediately to telephone calls from the facility;
    (4) A waiver granted under the conditions listed in paragraph (c) of 
this section is subject to annual State review;
    (5) In granting or renewing a waiver, a facility may be required by 
the State to use other qualified, licensed personnel;
    (6) The State agency granting a waiver of such requirements provides 
notice of the waiver to the State long term care ombudsman (established 
under section 307(a)(12) of the Older Americans Act of 1965) and the 
protection and advocacy system in the State for the mentally ill and 
mentally retarded; and
    (7) The nursing facility that is granted such a waiver by a State 
notifies residents of the facility (or, where appropriate, the guardians 
or legal representatives of such residents) and members of their 
immediate families of the waiver.
    (d) SNFs: Waiver of the requirement to provide services of a 
registered nurse for more than 40 hours a week.
    (1) The Secretary may waive the requirement that a SNF provide the 
services of a registered nurse for more than 40 hours a week, including 
a director of nursing specified in paragraph (b) of this section, if the 
Secretary finds that--
    (i) The facility is located in a rural area and the supply of 
skilled nursing facility services in the area is not sufficient to meet 
the needs of individuals residing in the area;
    (ii) The facility has one full-time registered nurse who is 
regularly on duty at the facility 40 hours a week; and
    (iii) The facility either--

[[Page 512]]

    (A) Has only patients whose physicians have indicated (through 
physicians' orders or admission notes) that they do not require the 
services of a registered nurse or a physician for a 48-hours period, or
    (B) Has made arrangements for a registered nurse or a physician to 
spend time at the facility, as determined necessary by the physician, to 
provide necessary skilled nursing services on days when the regular 
full-time registered nurse is not on duty;
    (iv) The Secretary provides notice of the waiver to the State long 
term care ombudsman (established under section 307(a)(12) of the Older 
Americans Act of 1965) and the protection and advocacy system in the 
State for the mentally ill and mentally retarded; and
    (v) The facility that is granted such a waiver notifies residents of 
the facility (or, where appropriate, the guardians or legal 
representatives of such residents) and members of their immediate 
families of the waiver.
    (2) A waiver of the registered nurse requirement under paragraph 
(d)(1) of this section is subject to annual renewal by the Secretary.

[56 FR 48873, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.35  Dietary services.

    The facility must provide each resident with a nourishing, 
palatable, well-balanced diet that meets the daily nutritional and 
special dietary needs of each resident.
    (a) Staffing. The facility must employ a qualified dietitian either 
full-time, part-time, or on a consultant basis.
    (1) If a qualified dietitian is not employed full-time, the facility 
must designate a person to serve as the director of food service who 
receives frequently scheduled consultation from a qualified dietitian.
    (2) A qualified dietitian is one who is qualified based upon either 
registration by the Commission on Dietetic Registration of the American 
Dietetic Association, or on the basis of education, training, or 
experience in identification of dietary needs, planning, and 
implementation of dietary programs.
    (b) Sufficient staff. The facility must employ sufficient support 
personnel competent to carry out the functions of the dietary service.
    (c) Menus and nutritional adequacy. Menus must--
    (1) Meet the nutritional needs of residents in accordance with the 
recommended dietary allowances of the Food and Nutrition Board of the 
National Research Council, National Academy of Sciences;
    (2) Be prepared in advance; and
    (3) Be followed.
    (d) Food. Each resident receives and the facility provides--
    (1) Food prepared by methods that conserve nutritive value, flavor, 
and appearance;
    (2) Food that is palatable, attractive, and at the proper 
temperature;
    (3) Food prepared in a form designed to meet individual needs; and
    (4) Substitutes offered of similar nutritive value to residents who 
refuse food served.
    (e) Therapeutic diets. Therapeutic diets must be prescribed by the 
attending physician.
    (f) Frequency of meals. (1) Each resident receives and the facility 
provides at least three meals daily, at regular times comparable to 
normal mealtimes in the community.
    (2) There must be no more than 14 hours between a substantial 
evening meal and breakfast the following day, except as provided in (4) 
below.
    (3) The facility must offer snacks at bedtime daily.
    (4) When a nourishing snack is provided at bedtime, up to 16 hours 
may elapse between a substantial evening meal and breakfast the 
following day if a resident group agrees to this meal span, and a 
nourishing snack is served.
    (g) Assistive devices. The facility must provide special eating 
equipment and utensils for residents who need them.
    (h) Sanitary conditions. The facility must--
    (1) Procure food from sources approved or considered satisfactory by 
Federal, State, or local authorities;
    (2) Store, prepare, distribute, and serve food under sanitary 
conditions; and
    (3) Dispose of garbage and refuse properly.

[56 FR 48874, Sept. 26, 1991]

[[Page 513]]



Sec. 483.40  Physician services.

    A physician must personally approve in writing a recommendation that 
an individual be admitted to a facility. Each resident must remain under 
the care of a physician.
    (a) Physician supervision. The facility must ensure that--
    (1) The medical care of each resident is supervised by a physician; 
and
    (2) Another physician supervises the medical care of residents when 
their attending physician is unavailable.
    (b) Physician visits. The physician must--
    (1) Review the resident's total program of care, including 
medications and treatments, at each visit required by paragraph (c) of 
this section;
    (2) Write, sign, and date progress notes at each visit; and
    (3) Sign and date all orders.
    (c) Frequency of physician visits.
    (1) The resident must be seen by a physician at least once every 30 
days for the first 90 days after admission, and at least once every 60 
days thereafter.
    (2) A physician visit is considered timely if it occurs not later 
than 10 days after the date the visit was required.
    (3) Except as provided in paragraphs (c)(4) and (f) of this section, 
all required physician visits must be made by the physician personally.
    (4) At the option of the physician, required visits in SNFs after 
the initial visit may alternate between personal visits by the physician 
and visits by a physician assistant, nurse practitioner, or clinical 
nurse specialist in accordance with paragraph (e) of this section.
    (d) Availability of physicians for emergency care. The facility must 
provide or arrange for the provision of physician services 24 hours a 
day, in case of an emergency.
    (e) Physician delegation of tasks in SNFs. (1) Except as specified 
in paragraph (e)(2) of this section, a physician may delegate tasks to a 
physician assistant, nurse practitioner, or clinical nurse specialist 
who--
    (i) Meets the applicable definition in Sec. 491.2 of this chapter 
or, in the case of a clinical nurse specialist, is licensed as such by 
the State;
    (ii) Is acting within the scope of practice as defined by State law; 
and
    (iii) Is under the supervision of the physician.
    (2) A physician may not delegate a task when the regulations specify 
that the physician must perform it personally, or when the delegation is 
prohibited under State law or by the facility's own policies.
    (f) Performance of physician tasks in NFs. At the option of the 
State, any required physician task in a NF (including tasks which the 
regulations specify must be performed personally by the physician) may 
also be satisfied when performed by a nurse practitioner, clinical nurse 
specialist, or physician assistant who is not an employee of the 
facility but who is working in collaboration with a physician.

[56 FR 48875, Sept. 26, 1991]



Sec. 483.45  Specialized rehabilitative services.

    (a) Provision of services. If specialized rehabilitative services 
such as but not limited to physical therapy, speech-language pathology, 
occupational therapy, and mental health rehabilitative services for 
mental illness and mental retardation, are required in the resident's 
comprehensive plan of care, the facility must--
    (1) Provide the required services; or
    (2) Obtain the required services from an outside resource (in 
accordance with Sec. 483.75(h) of this part) from a provider of 
specialized rehabilitative services.
    (b) Qualifications. Specialized rehabilitative services must be 
provided under the written order of a physician by qualified personnel.

[56 FR 48875, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.55  Dental services.

    The facility must assist residents in obtaining routine and 24-hour 
emergency dental care.
    (a) Skilled nursing facilities. A facility (1) Must provide or 
obtain from an outside resource, in accordance with Sec. 483.75(h) of 
this part, routine and emergency dental services to meet the needs of 
each resident;

[[Page 514]]

    (2) May charge a Medicare resident an additional amount for routine 
and emergency dental services;
    (3) Must if necessary, assist the resident--
    (i) In making appointments; and
    (ii) By arranging for transportation to and from the dentist's 
office; and
    (4) Promptly refer residents with lost or damaged dentures to a 
dentist.
    (b) Nursing facilities. The facility (1) Must provide or obtain from 
an outside resource, in accordance with Sec. 483.75(h) of this part, the 
following dental services to meet the needs of each resident:
    (i) Routine dental services (to the extent covered under the State 
plan); and
    (ii) Emergency dental services;
    (2) Must, if necessary, assist the resident--
    (i) In making appointments; and
    (ii) By arranging for transportation to and from the dentist's 
office; and
    (3) Must promptly refer residents with lost or damaged dentures to a 
dentist.

[56 FR 48875, Sept. 26, 1991]



Sec. 483.60  Pharmacy services.

    The facility must provide routine and emergency drugs and 
biologicals to its residents, or obtain them under an agreement 
described in Sec. 483.75(h) of this part. The facility may permit 
unlicensed personnel to administer drugs if State law permits, but only 
under the general supervision of a licensed nurse.
    (a) Procedures. A facility must provide pharmaceutical services 
(including procedures that assure the accurate acquiring, receiving, 
dispensing, and administering of all drugs and biologicals) to meet the 
needs of each resident.
    (b) Service consultation. The facility must employ or obtain the 
services of a licensed pharmacist who--
    (1) Provides consultation on all aspects of the provision of 
pharmacy services in the facility;
    (2) Establishes a system of records of receipt and disposition of 
all controlled drugs in sufficient detail to enable an accurate 
reconciliation; and
    (3) Determines that drug records are in order and that an account of 
all controlled drugs is maintained and periodically reconciled.
    (c) Drug regimen review. (1) The drug regimen of each resident must 
be reviewed at least once a month by a licensed pharmacist.
    (2) The pharmacist must report any irregularities to the attending 
physician and the director of nursing, and these reports must be acted 
upon.
    (d) Labeling of drugs and biologicals. Drugs and biologicals used in 
the facility must be labeled in accordance with currently accepted 
professional principles, and include the appropriate accessory and 
cautionary instructions, and the expiration date when applicable.
    (e) Storage of drugs and biologicals.
    (1) In accordance with State and Federal laws, the facility must 
store all drugs and biologicals in locked compartments under proper 
temperature controls, and permit only authorized personnel to have 
access to the keys.
    (2) The facility must provide separately locked, permanently affixed 
compartments for storage of controlled drugs listed in Schedule II of 
the Comprehensive Drug Abuse Prevention and Control Act of 1976 and 
other drugs subject to abuse, except when the facility uses single unit 
package drug distribution systems in which the quantity stored is 
minimal and a missing dose can be readily detected.

[56 FR 48875, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.65  Infection control.

    The facility must establish and maintain an infection control 
program designed to provide a safe, sanitary, and comfortable 
environment and to help prevent the development and transmission of 
disease and infection.
    (a) Infection control program. The facility must establish an 
infection control program under which it--
    (1) Investigates, controls, and prevents infections in the facility;
    (2) Decides what procedures, such as isolation, should be applied to 
an individual resident; and
    (3) Maintains a record of incidents and corrective actions related 
to infections.

[[Page 515]]

    (b) Preventing spread of infection. (1) When the infection control 
program determines that a resident needs isolation to prevent the spread 
of infection, the facility must isolate the resident.
    (2) The facility must prohibit employees with a communicable disease 
or infected skin lesions from direct contact with residents or their 
food, if direct contact will transmit the disease.
    (3) The facility must require staff to wash their hands after each 
direct resident contact for which handwashing is indicated by accepted 
professional practice.
    (c) Linens. Personnel must handle, store, process, and transport 
linens so as to prevent the spread of infection.

[56 FR 48876, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.70  Physical environment.

    The facility must be designed, constructed, equipped, and maintained 
to protect the health and safety of residents, personnel and the public.
    (a) Life safety from fire. Except as provided in paragraph (a)(1) or 
(a)(3) of this section, the facility must meet the applicable provisions 
of the 1985 edition of the Life Safety Code of the National Fire 
Protection Association (which is incorporated by reference). 
Incorporation of the 1985 edition of the National Fire Protection 
Association's Life Safety Code (published February 7, 1985; ANSI/NFPA) 
was approved by the Director of the Federal Register in accordance with 
5 U.S.C. 552(a) and 1 CFR part 51 that govern the use of incorporations 
by reference.\1\
---------------------------------------------------------------------------

    \1\ The Code is available for inspection at the Office of the 
Federal Register Information Center, room 8301, 1110 L Street NW., 
Washington, DC Copies may be obtained from the National Fire Protection 
Association, Batterymarch Park, Quincy, MA 02200. If any changes in this 
code are also to be incorporated by reference, a notice to that effect 
will be published in the Federal Register.
---------------------------------------------------------------------------

    (1) A facility is considered to be in compliance with this 
requirement as long as the facility--
    (i) On November 26, 1982, complied with or without waivers, with the 
requirements of the 1967 or 1973 editions of the Life Safety Code and 
continues to remain in compliance with those editions of the Code; or
    (ii) On May 9, 1988, complied, with or without waivers, with the 
1981 edition of the Life Safety Code and continues to remain in 
compliance with that edition of the Code.
    (2) After consideration of State survey agency findings, CMS may 
waive specific provisions of the Life Safety Code which, if rigidly 
applied would result in unreasonable hardship upon the facility, but 
only if the waiver does not adversely affect the health and safety of 
residents or personnel.
    (3) The provisions of the Life Safety Code do not apply in a State 
where CMS finds, in accordance with applicable provisions of sections 
1819(d)(2)(B)(ii) and 1919(d)(2)(B)(ii) of the Act, that a fire and 
safety code imposed by State law adequately protects patients, residents 
and personnel in long term care facilities.
    (b) Emergency power. (1) An emergency electrical power system must 
supply power adequate at least for lighting all entrances and exits; 
equipment to maintain the fire detection, alarm, and extinguishing 
systems; and life support systems in the event the normal electrical 
supply is interrupted.
    (2) When life support systems are used, the facility must provide 
emergency electrical power with an emergency generator (as defined in 
NFPA 99, Health Care Facilities) that is located on the premises.
    (c) Space and equipment. The facility must--
    (1) Provide sufficient space and equipment in dining, health 
services, recreation, and program areas to enable staff to provide 
residents with needed services as required by these standards and as 
identified in each resident's plan of care; and
    (2) Maintain all essential mechanical, electrical, and patient care 
equipment in safe operating condition.
    (d) Resident rooms. Resident rooms must be designed and equipped for 
adequate nursing care, comfort, and privacy of residents.
    (1) Bedrooms must--
    (i) Accommodate no more than four residents;

[[Page 516]]

    (ii) Measure at least 80 square feet per resident in multiple 
resident bedrooms, and at least 100 square feet in single resident 
rooms;
    (iii) Have direct access to an exit corridor;
    (iv) Be designed or equipped to assure full visual privacy for each 
resident;
    (v) In facilities initially certified after March 31, 1992, except 
in private rooms, each bed must have ceiling suspended curtains, which 
extend around the bed to provide total visual privacy in combination 
with adjacent walls and curtains;
    (vi) Have at least one window to the outside; and
    (vii) Have a floor at or above grade level.
    (2) The facility must provide each resident with--
    (i) A separate bed of proper size and height for the convenience of 
the resident;
    (ii) A clean, comfortable mattress;
    (iii) Bedding appropriate to the weather and climate; and
    (iv) Functional furniture appropriate to the resident's needs, and 
individual closet space in the resident's bedroom with clothes racks and 
shelves accessible to the resident.
    (3) CMS, or in the case of a nursing facility the survey agency, may 
permit variations in requirements specified in paragraphs (d)(1) (i) and 
(ii) of this section relating to rooms in individual cases when the 
facility demonstrates in writing that the variations--
    (i) Are in accordance with the special needs of the residents; and
    (ii) Will not adversely affect residents' health and safety.
    (e) Toilet facilities. Each resident room must be equipped with or 
located near toilet and bathing facilities.
    (f) Resident call system. The nurse's station must be equipped to 
receive resident calls through a communication system from--
    (1) Resident rooms; and
    (2) Toilet and bathing facilities.
    (g) Dining and resident activities. The facility must provide one or 
more rooms designated for resident dining and activities. These rooms 
must--
    (1) Be well lighted;
    (2) Be well ventilated, with nonsmoking areas identified;
    (3) Be adequately furnished; and
    (4) Have sufficient space to accommodate all activities.
    (h) Other environmental conditions. The facility must provide a 
safe, functional, sanitary, and comfortable environment for the 
residents, staff and the public. The facility must--
    (1) Establish procedures to ensure that water is available to 
essential areas when there is a loss of normal water supply;
    (2) Have adequate outside ventilation by means of windows, or 
mechanical ventilation, or a combination of the two;
    (3) Equip corridors with firmly secured handrails on each side; and
    (4) Maintain an effective pest control program so that the facility 
is free of pests and rodents.

[56 FR 48876, Sept. 26, 1991, as amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.75  Administration.

    A facility must be administered in a manner that enables it to use 
its resources effectively and efficiently to attain or maintain the 
highest practicable physical, mental, and psychosocial well-being of 
each resident.
    (a) Licensure. A facility must be licensed under applicable State 
and local law.
    (b) Compliance with Federal, State, and local laws and professional 
standards. The facility must operate and provide services in compliance 
with all applicable Federal, State, and local laws, regulations, and 
codes, and with accepted professional standards and principles that 
apply to professionals providing services in such a facility.
    (c) Relationship to other HHS regulations. In addition to compliance 
with the regulations set forth in this subpart, facilities are obliged 
to meet the applicable provisions of other HHS regulations, including 
but not limited to those pertaining to nondiscrimination on the basis of 
race, color, or national origin (45 CFR part 80); nondiscrimination on 
the basis of handicap (45 CFR part 84); nondiscrimination on the basis 
of age (45 CFR part 91); protection of human subjects of research (45 
CFR part 46); and fraud and abuse (42 CFR part 455). Although these 
regulations

[[Page 517]]

are not in themselves considered requirements under this part, their 
violation may result in the termination or suspension of, or the refusal 
to grant or continue payment with Federal funds.
    (d) Governing body. (1) The facility must have a governing body, or 
designated persons functioning as a governing body, that is legally 
responsible for establishing and implementing policies regarding the 
management and operation of the facility; and
    (2) The governing body appoints the administrator who is--
    (i) Licensed by the State where licensing is required; and
    (ii) Responsible for management of the facility.
    (e) Required training of nursing aides--(1) Definitions.
    Licensed health professional means a physician; physician assistant; 
nurse practitioner; physical, speech, or occupational therapist; 
physical or occupational therapy assistant; registered professional 
nurse; licensed practical nurse; or licensed or certified social worker.
    Nurse aide means any individual providing nursing or nursing-related 
services to residents in a facility who is not a licensed health 
professional, a registered dietitian, or someone who volunteers to 
provide such services without pay.
    (2) General rule. A facility must not use any individual working in 
the facility as a nurse aide for more than 4 months, on a full-time 
basis, unless:
    (i) That individual is competent to provide nursing and nursing 
related services; and
    (ii)(A) That individual has completed a training and competency 
evaluation program, or a competency evaluation program approved by the 
State as meeting the requirements of Secs. 483.151-483.154 of this part; 
or
    (B) That individual has been deemed or determined competent as 
provided in Sec. 483.150 (a) and (b).
    (3) Non-permanent employees. A facility must not use on a temporary, 
per diem, leased, or any basis other than a permanent employee any 
individual who does not meet the requirements in paragraphs (e)(2) (i) 
and (ii) of this section.
    (4) Competency. A facility must not use any individual who has 
worked less than 4 months as a nurse aide in that facility unless the 
individual--
    (i) Is a full-time employee in a State-approved training and 
competency evaluation program;
    (ii) Has demonstrated competence through satisfactory participation 
in a State-approved nurse aide training and competency evaluation 
program or competency evaluation program; or
    (iii) Has been deemed or determined competent as provided in 
Sec. 483.150 (a) and (b).
    (5) Registry verification. Before allowing an individual to serve as 
a nurse aide, a facility must receive registry verification that the 
individual has met competency evaluation requirements unless--
    (i) The individual is a full-time employee in a training and 
competency evaluation program approved by the State; or
    (ii) The individual can prove that he or she has recently 
successfully completed a training and competency evaluation program or 
competency evaluation program approved by the State and has not yet been 
included in the registry. Facilities must follow up to ensure that such 
an individual actually becomes registered.
    (6) Multi-State registry verification. Before allowing an individual 
to serve as a nurse aide, a facility must seek information from every 
State registry established under sections 1819(e)(2)(A) or 1919(e)(2)(A) 
of the Act the facility believes will include information on the 
individual.
    (7) Required retraining. If, since an individual's most recent 
completion of a training and competency evaluation program, there has 
been a continuous period of 24 consecutive months during none of which 
the individual provided nursing or nursing-related services for monetary 
compensation, the individual must complete a new training and competency 
evaluation program or a new competency evaluation program.
    (8) Regular in-service education. The facility must complete a 
performance review of every nurse aide at least once every 12 months, 
and must provide regular in-service education based on the

[[Page 518]]

outcome of these reviews. The in-service training must--
    (i) Be sufficient to ensure the continuing competence of nurse 
aides, but must be no less than 12 hours per year;
    (ii) Address areas of weakness as determined in nurse aides' 
performance reviews and may address the special needs of residents as 
determined by the facility staff; and
    (iii) For nurse aides providing services to individuals with 
cognitive impairments, also address the care of the cognitively 
impaired.
    (f) Proficiency of Nurse aides. The facility must ensure that nurse 
aides are able to demonstrate competency in skills and techniques 
necessary to care for residents' needs, as identified through resident 
assessments, and described in the plan of care.
    (g) Staff qualifications. (1) The facility must employ on a full-
time, part-time or consultant basis those professionals necessary to 
carry out the provisions of these requirements.
    (2) Professional staff must be licensed, certified, or registered in 
accordance with applicable State laws.
    (h) Use of outside resources. (1) If the facility does not employ a 
qualified professional person to furnish a specific service to be 
provided by the facility, the facility must have that service furnished 
to residents by a person or agency outside the facility under an 
arrangement described in section 1861(w) of the Act or (with respect to 
services furnished to NF residents and dental services furnished to SNF 
residents) an agreement described in paragraph (h)(2) of this section.
    (2) Arrangements as described in section 1861(w) of the Act or 
agreements pertaining to services furnished by outside resources must 
specify in writing that the facility assumes responsibility for--
    (i) Obtaining services that meet professional standards and 
principles that apply to professionals providing services in such a 
facility; and
    (ii) The timeliness of the services.
    (i) Medical director. (1) The facility must designate a physician to 
serve as medical director.
    (2) The medical director is responsible for--
    (i) Implementation of resident care policies; and
    (ii) The coordination of medical care in the facility.
    (j) Level B requirement: Laboratory services. (1) The facility must 
provide or obtain laboratory services to meet the needs of its 
residents. The facility is responsible for the quality and timeliness of 
the services.
    (i) If the facility provides its own laboratory services, the 
services must meet the applicable requirements for laboratories 
specified in part 493 of this chapter.
    (ii) If the facility provides blood bank and transfusion services, 
it must meet the applicable requirements for laboratories specified in 
part 493 of this chapter.
    (iii) If the laboratory chooses to refer specimens for testing to 
another laboratory, the referral laboratory must be certified in the 
appropriate specialties and subspecialties of services in accordance 
with the requirements of part 493 of this chapter.
    (iv) If the facility does not provide laboratory services on site, 
it must have an agreement to obtain these services from a laboratory 
that meets the applicable requirements of part 493 of this chapter.
    (2) The facility must--
    (i) Provide or obtain laboratory services only when ordered by the 
attending physician;
    (ii) Promptly notify the attending physican of the findings;
    (iii) Assist the resident in making transportation arrangements to 
and from the source of service, if the resident needs asistance; and
    (iv) File in the resident's clinical record laboratory reports that 
are dated and contain the name and address of the testing laboratory.
    (k) Radiology and other diagnostic services. (1) The facility must 
provide or obtain radiology and other diagnostic services to meet the 
needs of its residents. The facility is responsible for the quality and 
timeliness of the services.
    (i) If the facility provides its own diagnostic services, the 
services must meet the applicable conditions of participation for 
hospitals contained in Sec. 482.26 of this subchapter.

[[Page 519]]

    (ii) If the facility does not provide its own diagnostic services, 
it must have an agreement to obtain these services from a provider or 
supplier that is approved to provide these services under Medicare.
    (2) The facility must--
    (i) Provide or obtain radiology and other diagnostic services only 
when ordered by the attending physician;
    (ii) Promptly notify the attending physician of the findings;
    (iii) Assist the resident in making transportation arrangements to 
and from the source of service, if the resident needs assistance; and
    (iv) File in the resident's clinical record signed and dated reports 
of x-ray and other diagnostic services.
    (l) Clinical records. (1) The facility must maintain clinical 
records on each resident in accordance with accepted professional 
standards and practices that are--
    (i) Complete;
    (ii) Accurately documented;
    (iii) Readily accessible; and
    (iv) Systematically organized.
    (2) Clinical records must be retained for--
    (i) The period of time required by State law; or
    (ii) Five years from the date of discharge when there is no 
requirement in State law; or
    (iii) For a minor, three years after a resident reaches legal age 
under State law.
    (3) The facility must safeguard clinical record information against 
loss, destruction, or unauthorized use;
    (4) The facility must keep confidential all information contained in 
the resident's records, regardless of the form or storage method of the 
records, except when release is required by--
    (i) Transfer to another health care institution;
    (ii) Law;
    (iii) Third party payment contract; or
    (iv) The resident.
    (5) The clinical record must contain--
    (i) Sufficient information to identify the resident;
    (ii) A record of the resident's assessments;
    (iii) The plan of care and services provided;
    (iv) The results of any preadmission screening conducted by the 
State; and
    (v) Progress notes.
    (m) Disaster and emergency preparedness. (1) The facility must have 
detailed written plans and procedures to meet all potential emergencies 
and disasters, such as fire, severe weather, and missing residents.
    (2) The facility must train all employees in emergency procedures 
when they begin to work in the facility, periodically review the 
procedures with existing staff, and carry out unannounced staff drills 
using those procedures.
    (n) Transfer agreement. (1) In accordance with section 1861(l) of 
the Act, the facility (other than a nursing facility which is located in 
a State on an Indian reservation) must have in effect a written transfer 
agreement with one or more hospitals approved for participation under 
the Medicare and Medicaid programs that reasonably assures that--
    (i) Residents will be transferred from the facility to the hospital, 
and ensured of timely admission to the hospital when transfer is 
medically appropriate as determined by the attending physician; and
    (ii) Medical and other information needed for care and treatment of 
residents, and, when the transferring facility deems it appropriate, for 
determining whether such residents can be adequately cared for in a less 
expensive setting than either the facility or the hospital, will be 
exchanged between the institutions.
    (2) The facility is considered to have a transfer agreement in 
effect if the facility has attempted in good faith to enter into an 
agreement with a hospital sufficiently close to the facility to make 
transfer feasible.
    (o) Quality assessment and assurance. (1) A facility must maintain a 
quality assessment and assurance committee consisting of--
    (i) The director of nursing services;
    (ii) A physician designated by the facility; and
    (iii) At least 3 other members of the facility's staff.
    (2) The quality assessment and assurance committee--

[[Page 520]]

    (i) Meets at least quarterly to identify issues with respect to 
which quality assessment and assurance activities are necessary; and
    (ii) Develops and implements appropriate plans of action to correct 
identified quality deficiencies.
    (3) A State or the Secretary may not require disclosure of the 
records of such committee except in so far as such disclosure is related 
to the compliance of such committee with the requirements of this 
section.
    (4) Good faith attempts by the committee to identify and correct 
quality deficiencies will not be used as a basis for sanctions.
    (p) Disclosure of ownership. (1) The facility must comply with the 
disclosure requirements of Secs. 420.206 and 455.104 of this chapter.
    (2) The facility must provide written notice to the State agency 
responsible for licensing the facility at the time of change, if a 
change occurs in--
    (i) Persons with an ownership or control interest, as defined in 
Secs. 420.201 and 455.101 of this chapter;
    (ii) The officers, directors, agents, or managing employees;
    (iii) The corporation, association, or other company responsible for 
the management of the facility; or
    (iv) The facility's administrator or director of nursing.
    (3) The notice specified in paragraph (p)(2) of this section must 
include the identity of each new individual or company.

[56 FR 48877, Sept. 26, 1991, as amended at 56 FR 48918, Sept. 26, 1991; 
57 FR 7136, Feb. 28, 1992; 57 FR 43925, Sept. 23, 1992; 59 FR 56237, 
Nov. 10, 1994; 63 FR 26311, May 12, 1998]



Subpart C--Preadmission Screening and Annual Review of Mentally Ill and 
                      Mentally Retarded Individuals

    Source: 57 FR 56506, Nov. 30, 1992, unless otherwise noted.



Sec. 483.100  Basis.

    The requirements of Secs. 483.100 through 483.138 governing the 
State's responsibility for preadmission screening and annual resident 
review (PASARR) of individuals with mental illness and mental 
retardation are based on section 1919(e)(7) of the Act.



Sec. 483.102  Applicability and definitions.

    (a) This subpart applies to the screening or reviewing of all 
individuals with mental illness or mental retardation who apply to or 
reside in Medicaid certified NFs regardless of the source of payment for 
the NF services, and regardless of the individual's or resident's known 
diagnoses.
    (b) Definitions. As used in this subpart--
    (1) An individual is considered to have a serious mental illness 
(MI) if the individual meets the following requirements on diagnosis, 
level of impairment and duration of illness:
    (i) Diagnosis. The individual has a major mental disorder 
diagnosable under the Diagnostic and Statistical Manual of Mental 
Disorders, 3rd edition, revised in 1987.
    Incorporation of the 1987 edition of the Diagnostic and Statistical 
Manual of Mental Disorders, 3rd edition, was approved by the Director of 
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 
51 that govern the use of incorporation by reference.\1\
---------------------------------------------------------------------------

    \1\ The Diagnostic and Statistical Manual of Mental Disorders is 
available for inspection at the Centers for Medicare & Medicaid 
Services, room 132, East High Rise Building, 6325 Security Boulevard, 
Baltimore, Maryland, or at the Office of the Federal Register, suite 
700, 800 North Capitol St. NW., Washington, DC. Copies may be obtained 
from the American Psychiatric Association, Division of Publications and 
Marketing, 1400 K Street, NW., Washington, DC 20005.
---------------------------------------------------------------------------

    This mental disorder is--
    (A) A schizophrenic, mood, paranoid, panic or other severe anxiety 
disorder; somatoform disorder; personality disorder; other psychotic 
disorder; or another mental disorder that may lead to a chronic 
disability; but
    (B) Not a primary diagnosis of dementia, including Alzheimer's 
disease or a related disorder, or a non-primary diagnosis of dementia 
unless the primary diagnosis is a major mental disorder as defined in 
paragraph (b)(1)(i)(A) of this section.
    (ii) Level of impairment. The disorder results in functional 
limitations in major life activities within the past 3

[[Page 521]]

to 6 months that would be appropriate for the individual's developmental 
stage. An individual typically has at least one of the following 
characteristics on a continuing or intermittent basis:
    (A) Interpersonal functioning. The individual has serious difficulty 
interacting appropriately and communicating effectively with other 
persons, has a possible history of altercations, evictions, firing, fear 
of strangers, avoidance of interpersonal relationships and social 
isolation;
    (B) Concentration, persistence, and pace. The individual has serious 
difficulty in sustaining focused attention for a long enough period to 
permit the completion of tasks commonly found in work settings or in 
work-like structured activities occurring in school or home settings, 
manifests difficulties in concentration, inability to complete simple 
tasks within an established time period, makes frequent errors, or 
requires assistance in the completion of these tasks; and
    (C) Adaptation to change. The individual has serious difficulty in 
adapting to typical changes in circumstances associated with work, 
school, family, or social interaction, manifests agitation, exacerbated 
signs and symptoms associated with the illness, or withdrawal from the 
situation, or requires intervention by the mental health or judicial 
system.
    (iii) Recent treatment. The treatment history indicates that the 
individual has experienced at least one of the following:
    (A) Psychiatric treatment more intensive than outpatient care more 
than once in the past 2 years (e.g., partial hospitalization or 
inpatient hospitalization); or
    (B) Within the last 2 years, due to the mental disorder, experienced 
an episode of significant disruption to the normal living situation, for 
which supportive services were required to maintain functioning at home, 
or in a residential treatment environment, or which resulted in 
intervention by housing or law enforcement officials.
    (2) An individual is considered to have dementia if he or she has a 
primary diagnosis of dementia, as described in the Diagnostic and 
Statistical Manual of Mental Disorders, 3rd edition, revised in 1987, or 
a non-primary diagnosis of dementia unless the primary diagnosis is a 
major mental disorder as defined in paragraph (b)(1)(i)(A) of this 
section.
    (3) An individual is considered to have mental retardation (MR) if 
he or she has--
    (i) A level of retardation (mild, moderate, severe or profound) 
described in the American Association on Mental Retardation's Manual on 
Classification in Mental Retardation (1983). Incorporation by reference 
of the 1983 edition of the American Association on Mental Retardation's 
Manual on Classification in Mental Retardation was approved by the 
Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 
1 CFR part 51 that govern the use of incorporations by reference;\2\ or
---------------------------------------------------------------------------

    \2\ The American Association on Mental Retardation's Manual on 
Classification in Mental Retardation is available for inspection at the 
Centers for Medicare & Medicaid Services, Room 132, East High Rise 
Building, 6325 Security Boulevard, Baltimore, Maryland, or at the Office 
of the Federal Register Information Center, Suite 700, 800 North Capitol 
St. NW., Washington, DC. Copies may be obtained from the American 
Association on Mental Retardation, 1719 Kalorama Rd., NW., Washington, 
DC 20009.
---------------------------------------------------------------------------

    (ii) A related condition as defined by Sec. 435.1009 of this 
chapter.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.104  State plan requirement.

    As a condition of approval of the State plan, the State must operate 
a preadmission screening and annual resident review program that meets 
the requirements of Secs. 483.100 through 438.138.



Sec. 483.106  Basic rule.

    (a) Requirement. The State PASARR program must require--(1) 
Preadmission screening of all individuals with mental illness or mental 
retardation who apply as new admissions to Medicaid NFs on or after 
January 1, 1989;

[[Page 522]]

    (2) Initial review, by April 1, 1990, of all current residents with 
mental retardation or mental illness who entered Medicaid NFs prior to 
January 1, 1989; and
    (3) At least annual review, as of April 1, 1990, of all residents 
with mental illness or mental retardation, regardless of whether they 
were first screened under the preadmission screening or annual resident 
review requirements.
    (b) Admissions, readmissions and interfacility transfers--(1) New 
admission. An individual is a new admission if he or she is admitted to 
any NF for the first time or does not qualify as a readmission. With the 
exception of certain hospital discharges described in paragraph (b)(2) 
of this section, new admissions are subject to preadmission screening.
    (2) Exempted hospital discharge. (i) An exempted hospital discharge 
means an individual--
    (A) Who is admitted to any NF directly from a hospital after 
receiving acute inpatient care at the hospital;
    (B) Who requires NF services for the condition for which he or she 
received care in the hospital; and
    (C) Whose attending physician has certified before admission to the 
facility that the individual is likely to require less than 30 days 
nursing facility services.
    (ii) If an individual who enters a NF as an exempted hospital 
discharge is later found to require more than 30 days of NF care, the 
State mental health or mental retardation authority must conduct an 
annual resident review within 40 calendar days of admission.
    (3) Readmissions. An individual is a readmission if he or she was 
readmitted to a facility from a hospital to which he or she was 
transferred for the purpose of receiving care. Readmissions are subject 
to annual resident review rather than preadmission screening.
    (4) Interfacility transfers--(i) An interfacility transfer occurs 
when an individual is transferred from one NF to another NF, with or 
without an intervening hospital stay. Interfacility transfers are 
subject to annual resident review rather than preadmission screening.
    (ii) In cases of transfer of a resident with MI or MR from a NF to a 
hospital or to another NF, the transferring NF is responsible for 
ensuring that copies of the resident's most recent PASARR and resident 
assessment reports accompany the transferring resident.
    (c) Purpose. The preadmission screening and annual resident review 
process must result in determinations based on a physical and mental 
evaluation of each individual with mental illness or mental retardation, 
that are described in Secs. 483.112 and 483.114.
    (d) Responsibility for evaluations and determinations. The PASARR 
determinations of whether an individual requires the level of services 
provided by a NF and whether specialized services are needed--
    (1) For individuals with mental illness, must be made by the State 
mental health authority and be based on an independent physical and 
mental evaluation performed by a person or entity other than the State 
mental health authority; and
    (2) For individuals with mental retardation, must be made by the 
State mental retardation or developmental disabilities authority.
    (e) Delegation of responsibility--(1) The State mental health and 
mental retardation authorities may delegate by subcontract or otherwise 
the evaluation and determination functions for which they are 
responsible to another entity only if--
    (i) The State mental health and mental retardation authorities 
retain ultimate control and responsibility for the performance of their 
statutory obligations;
    (ii) The two determinations as to the need for NF services and for 
specialized services are made, based on a consistent analysis of the 
data; and
    (iii) The entity to which the delegation is made is not a NF or an 
entity that has a direct or indirect affiliation or relationship with a 
NF.
    (2) The State mental retardation authority has responsibility for 
both the evaluation and determination functions for individuals with MR 
whereas the State mental health authority has responsibility only for 
the determination function.

[[Page 523]]

    (3) The evaluation of individuals with MI cannot be delegated by the 
State mental health authority because it does not have responsibility 
for this function. The evaluation function must be performed by a person 
or entity other than the State mental health authority. In designating 
an independent person or entity to perform MI evaluations, the State 
must not use a NF or an entity that has a direct or indirect affiliation 
or relationship with a NF.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.108  Relationship of PASARR to other Medicaid processes.

    (a) PASARR determinations made by the State mental health or mental 
retardation authorities cannot be countermanded by the State Medicaid 
agency, either in the claims process or through other utilization 
control/review processes or by the State survey and certification 
agency. Only appeals determinations made through the system specified in 
subpart E of this part may overturn a PASARR determination made by the 
State mental health or mental retardation authorities.
    (b) In making their determinations, however, the State mental health 
and mental retardation authorities must not use criteria relating to the 
need for NF care or specialized services that are inconsistent with this 
regulation and any supplementary criteria adopted by the State Medicaid 
agency under its approved State plan.
    (c) To the maximum extent practicable, in order to avoid duplicative 
testing and effort, the PASARR must be coordinated with the routine 
resident assessments required by Sec. 483.20(b).



Sec. 483.110  Out-of-State arrangements.

    (a) Basic rule. The State in which the individual is a State 
resident (or would be a State resident at the time he or she becomes 
eligible for Medicaid), as defined in Sec. 435.403 of this chapter, must 
pay for the PASARR and make the required determinations, in accordance 
with Sec. 431.52(b).
    (b) Agreements. A State may include arrangements for PASARR in its 
provider agreements with out-of-State facilities or reciprocal 
interstate agreements.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.112  Preadmission screening of applicants for admission to NFs.

    (a) Determination of need for NF services. For each NF applicant 
with MI or MR, the State mental health or mental retardation authority 
(as appropriate) must determine, in accordance with Sec. 483.130, 
whether, because of the resident's physical and mental condition, the 
individual requires the level of services provided by a NF.
    (b) Determination of need for specialized services. If the 
individual with mental illness or mental retardation is determined to 
require a NF level of care, the State mental health or mental 
retardation authority (as appropriate) must also determine, in 
accordance with Sec. 483.130, whether the individual requires 
specialized services for the mental illness or mental retardation, as 
defined in Sec. 483.120.
    (c) Timeliness--(1) Except as specified in paragraph (c)(4) of this 
section, a preadmission screening determination must be made in writing 
within an annual average of 7 to 9 working days of referral of the 
individual with MI or MR by whatever agent performs the Level I 
identification, under Sec. 483.128(a) of this part, to the State mental 
health or mental retardation authority for screening. (See 
Sec. 483.128(a) for discussion of Level I evaluation.)
    (2) The State may convey determinations verbally to nursing 
facilities and the individual and confirm them in writing.
    (3) The State may compute separate annual averages for the mentally 
ill and the mentally retarded/developmentally disabled populations.
    (4) The Secretary may grant an exception to the timeliness standard 
in paragraph (c)(1) of this section when the State--
    (i) Exceeds the annual average; and
    (ii) Provides justification satisfactory to the Secretary that a 
longer time period was necessary.

[[Page 524]]



Sec. 483.114  Annual review of NF residents.

    (a) Individuals with mental illness. For each resident of a NF who 
has mental illness, the State mental health authority must determine in 
accordance with Sec. 483.130 whether, because of the resident's physical 
and mental condition, the resident requires--
    (1) The level of services provided by--
    (i) A NF;
    (ii) An inpatient psychiatric hospital for individuals under age 21, 
as described in section 1905(h) of the Act; or
    (iii) An institution for mental diseases providing medical 
assistance to individuals age 65 or older; and
    (2) Specialized services for mental illness, as defined in 
Sec. 483.120.
    (b) Individuals with mental retardation. For each resident of a NF 
who has mental retardation, the State mental retardation or 
developmental disability authority must determine in accordance with 
Sec. 483.130 whether, because of his or her physical or mental 
condition, the resident requires--
    (1) The level of services provided by a NF or an intermediate care 
facility for the mentally retarded; and
    (2) Specialized services for mental retardation as defined in 
Sec. 483.120.
    (c) Frequency of review--(1) A review and determination must be 
conducted for each resident of a Medicaid NF who has mental illness or 
mental retardation not less often than annually.
    (2) ``Annually'' is defined as occurring within every fourth quarter 
after the previous preadmission screen or annual resident review.
    (d) April 1, 1990 deadline for initial reviews. The first set of 
annual reviews on residents who entered the NF prior to January 1, 1989, 
must be completed by April 1, 1990.



Sec. 483.116  Residents and applicants determined to require NF level of services.

    (a) Individuals needing NF services. If the State mental health or 
mental retardation authority determines that a resident or applicant for 
admission to a NF requires a NF level of services, the NF may admit or 
retain the individual.
    (b) Individuals needing NF services and specialized services. If the 
State mental health or mental retardation authority determines that a 
resident or applicant for admission requires both a NF level of services 
and specialized services for the mental illness or mental retardation--
    (1) The NF may admit or retain the individual; and
    (2) The State must provide or arrange for the provision of the 
specialized services needed by the individual while he or she resides in 
the NF.



Sec. 483.118  Residents and applicants determined not to require NF level of services.

    (a) Applicants who do not require NF services. If the State mental 
health or mental retardation authority determines that an applicant for 
admission to a NF does not require NF services, the applicant cannot be 
admitted. NF services are not a covered Medicaid service for that 
individual, and further screening is not required.
    (b) Residents who require neither NF services nor specialized 
services for MI or MR. If the State mental health or mental retardation 
authority determines that a resident requires neither the level of 
services provided by a NF nor specialized services for MI or MR, 
regardless of the length of stay in the facility, the State must--
    (1) Arrange for the safe and orderly discharge of the resident from 
the facility in accordance with Sec. 483.12(a); and
    (2) Prepare and orient the resident for discharge.
    (c) Residents who do not require NF services but require specialized 
services for MI or MR--(1) Long term residents. Except as otherwise may 
be provided in an alternative disposition plan adopted under section 
1919(e)(7)(E) of the Act, for any resident who has continuously resided 
in a NF for at least 30 months before the date of the determination, and 
who requires only specialized services as defined in Sec. 483.120, the 
State must, in consultation with the resident's family or legal 
representative and caregivers--
    (i) Offer the resident the choice of remaining in the facility or of 
receiving services in an alternative appropriate setting;

[[Page 525]]

    (ii) Inform the resident of the institutional and noninstitutional 
alternatives covered under the State Medicaid plan for the resident;
    (iii) Clarify the effect on eligibility for Medicaid services under 
the State plan if the resident chooses to leave the facility, including 
its effect on readmission to the facility; and
    (iv) Regardless of the resident's choice, provide for, or arrange 
for the provision of specialized services for the mental illness or 
mental retardation.
    (2) Short term residents. Except as otherwise may be provided in an 
alternative disposition plan adopted under section 1919(e)(7)(E) of the 
Act, for any resident who requires only specialized services, as defined 
in Sec. 483.120, and who has not continuously resided in a NF for at 
least 30 months before the date of the determination, the State must, in 
consultation with the resident's family or legal representative and 
caregivers--
    (i) Arrange for the safe and orderly discharge of the resident from 
the facility in accordance with Sec. 483.12(a);
    (ii) Prepare and orient the resident for discharge; and
    (iii) Provide for, or arrange for the provision of, specialized 
services for the mental illness or mental retardation.
    (3) For the purpose of establishing length of stay in a NF, the 30 
months of continuous residence in a NF or longer--
    (i) Is calculated back from the date of the first annual resident 
review determination which finds that the individual is not in need of 
NF level of services;
    (ii) May include temporary absences for hospitalization or 
therapeutic leave; and
    (iii) May consist of consecutive residences in more than one NF.



Sec. 483.120  Specialized services.

    (a) Definition--(1) For mental illness, specialized services means 
the services specified by the State which, combined with services 
provided by the NF, results in the continuous and aggressive 
implementation of an individualized plan of care that--
    (i) Is developed and supervised by an interdisciplinary team, which 
includes a physician, qualified mental health professionals and, as 
appropriate, other professionals.
    (ii) Prescribes specific therapies and activities for the treatment 
of persons experiencing an acute episode of serious mental illness, 
which necessitates supervision by trained mental health personnel; and
    (iii) Is directed toward diagnosing and reducing the resident's 
behavioral symptoms that necessitated institutionalization, improving 
his or her level of independent functioning, and achieving a functioning 
level that permits reduction in the intensity of mental health services 
to below the level of specialized services at the earliest possible 
time.
    (2) For mental retardation, specialized services means the services 
specified by the State which, combined with services provided by the NF 
or other service providers, results in treatment which meets the 
requirements of Sec. 483.440(a)(1).
    (b) Who must receive specialized services. The State must provide or 
arrange for the provision of specialized services, in accordance with 
this subpart, to all NF residents with MI or MR whose needs are such 
that continuous supervision, treatment and training by qualified mental 
health or mental retardation personnel is necessary, as identified by 
the screening provided in Sec. 483.130 or Secs. 483.134 and 483.136.
    (c) Services of lesser intensity than specialized services. The NF 
must provide mental health or mental retardation services which are of a 
lesser intensity than specialized services to all residents who need 
such services.



Sec. 483.122  FFP for NF services.

    (a) Basic rule. Except as otherwise may be provided in an 
alternative disposition plan adopted under section 1919(e)(7)(E) of the 
Act, FFP is available in State expenditures for NF services provided to 
a Medicaid eligible individual subject to the requirements of this part 
only if the individual has been determined--
    (1) To need NF care under Sec. 483.116(a) or

[[Page 526]]

    (2) Not to need NF services but to need specialized services, meets 
the requirements of Sec. 483.118(c)(1), and elects to stay in the NF.
    (b) FFP for late reviews. When a preadmission screening has not been 
performed prior to admission or an annual review is not performed 
timely, in accordance with Sec. 483.114(c), but either is performed at a 
later date, FFP is available only for services furnished after the 
screening or review has been performed, subject to the provisions of 
paragraph (a) of this section.



Sec. 483.124  FFP for specialized services.

    FFP is not available for specialized services furnished to NF 
residents as NF services.



Sec. 483.126  Appropriate placement.

    Placement of an individual with MI or MR in a NF may be considered 
appropriate only when the individual's needs are such that he or she 
meets the minimum standards for admission and the individual's needs for 
treatment do not exceed the level of services which can be delivered in 
the NF to which the individual is admitted either through NF services 
alone or, where necessary, through NF services supplemented by 
specialized services provided by or arranged for by the State.



Sec. 483.128  PASARR evaluation criteria.

    (a) Level I: Identification of individuals with MI or MR. The 
State's PASARR program must identify all individuals who are suspected 
of having MI or MR as defined in Sec. 483.102. This identification 
function is termed Level I. Level II is the function of evaluating and 
determining whether NF services and specialized services are needed. The 
State's performance of the Level I identification function must provide 
at least, in the case of first time identifications, for the issuance of 
written notice to the individual or resident and his or her legal 
representative that the individual or resident is suspected of having MI 
or MR and is being referred to the State mental health or mental 
retardation authority for Level II screening.
    (b) Adaptation to culture, language, ethnic origin. Evaluations 
performed under PASARR and PASARR notices must be adapted to the 
cultural background, language, ethnic origin and means of communication 
used by the individual being evaluated.
    (c) Participation by individual and family. PASARR evaluations must 
involve--
    (1) The individual being evaluated;
    (2) The individual's legal representative, if one has been 
designated under State law; and
    (3) The individual's family if--
    (i) Available; and
    (ii) The individual or the legal representative agrees to family 
participation.
    (d) Interdisciplinary coordination. When parts of a PASARR 
evaluation are performed by more than one evaluator, the State must 
ensure that there is interdisciplinary coordination among the 
evaluators.
    (e) The State's PASARR program must use at least the evaluative 
criteria of Sec. 483.130 (if one or both determinations can easily be 
made categorically as described in Sec. 483.130) or of Secs. 483.132 and 
483.134 or Sec. 483.136 (or, in the case of individuals with both MI and 
MR, Secs. 483.132, 483.134 and 483.136 if a more extensive 
individualized evaluation is required).
    (f) Data. In the case of individualized evaluations, information 
that is necessary for determining whether it is appropriate for the 
individual with MI or MR to be placed in an NF or in another appropriate 
setting should be gathered throughout all applicable portions of the 
PASARR evaluation (Secs. 483.132 and 483.134 and/or Sec. 483.136). The 
two determinations relating to the need for NF level of care and 
specialized services are interrelated and must be based upon a 
comprehensive analysis of all data concerning the individual.
    (g) Preexisting data. Evaluators may use relevant evaluative data, 
obtained prior to initiation of preadmission screening or annual 
resident review, if the data are considered valid and accurate and 
reflect the current functional status of the individual. However, in the 
case of individualized evaluations, to supplement and verify the 
currency and accuracy of existing data, the State's PASARR program may 
need to

[[Page 527]]

gather additional information necessary to assess proper placement and 
treatment.
    (h) Findings. For both categorical and individualized 
determinations, findings of the evaluation must correspond to the 
person's current functional status as documented in medical and social 
history records.
    (i) Evaluation report: Individualized determinations. For 
individualized PASARR determinations, findings must be issued in the 
form of a written evaluative report which--
    (1) Identifies the name and professional title of person(s) who 
performed the evaluation(s) and the date on which each portion of the 
evaluation was administered;
    (2) Provides a summary of the medical and social history, including 
the positive traits or developmental strengths and weaknesses or 
developmental needs of the evaluated individual;
    (3) If NF services are recommended, identifies the specific services 
which are required to meet the evaluated individual's needs, including 
services required in paragraph (i)(5) of this section;
    (4) If specialized services are not recommended, identifies any 
specific mental retardation or mental health services which are of a 
lesser intensity than specialized services that are required to meet the 
evaluated individual's needs;
    (5) If specialized services are recommended, identifies the specific 
mental retardation or mental health services required to meet the 
evaluated individual's needs; and
    (6) Includes the bases for the report's conclusions.
    (j) Evaluation report: Categorical determinations. For categorical 
PASARR determinations, findings must be issued in the form of an 
abbreviated written evaluative report which--
    (1) Identifies the name and professional title of the person 
applying the categorical determination and the data on which the 
application was made;
    (2) Explains the categorical determination(s) that has (have) been 
made and, if only one of the two required determinations can be made 
categorically, describes the nature of any further screening which is 
required;
    (3) Identifies, to the extent possible, based on the available data, 
NF services, including any mental health or specialized psychiatric 
rehabilitative services, that may be needed; and
    (4) Includes the bases for the report's conclusions.
    (k) Interpretation of findings to individual. For both categorical 
and individualized determinations, findings of the evaluation must be 
interpreted and explained to the individual and, where applicable, to a 
legal representative designated under State law.
    (l) Evaluation report. The evaluator must send a copy of the 
evaluation report to the--
    (1) Individual or resident and his or her legal representative;
    (2) Appropriate State authority in sufficient time for the State 
authorities to meet the times identified in Sec. 483.112(c) for PASs and 
Sec. 483.114(c) for ARRs;
    (3) Admitting or retaining NF;
    (4) Individual's attending physician; and
    (5) The discharging hospital if the individual is seeking NF 
admission from a hospital.
    (m) The evaluation may be terminated if the evaluator finds at any 
time during the evaluation that the individual being evaluated--
    (1) Does not have MI or MR; or
    (2) Has--
    (i) A primary diagnosis of dementia (including Alzheimer's Disease 
or a related disorder); or
    (ii) A non-primary diagnosis of dementia without a primary diagnosis 
that is a serious mental illness, and does not have a diagnosis of MR or 
a related condition.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.130  PASARR determination criteria.

    (a) Basis for determinations. Determinations made by the State 
mental health or mental retardation authority as to whether NF level of 
services and specialized services are needed must be based on an 
evaluation of data concerning the individual, as specified in paragraph 
(b) of this section.

[[Page 528]]

    (b) Types of determinations. Determinations may be--
    (1) Advance group determinations, in accordance with this section, 
by category that take into account that certain diagnoses, levels of 
severity of illness, or need for a particular service clearly indicate 
that admission to or residence in a NF is normally needed, or that the 
provision of specialized services is not normally needed; or
    (2) Individualized determinations based on more extensive 
individualized evaluations as required in Sec. 483.132, Sec. 483.134, or 
Sec. 483.136 (or, in the case of an individual having both MR and MI, 
Secs. 483.134 and 483.136).
    (c) Group determinations by category. Advance group determinations 
by category developed by the State mental health or mental retardation 
authorities may be made applicable to individuals by the NF or other 
evaluator following Level I review only if existing data on the 
individual appear to be current and accurate and are sufficient to allow 
the evaluator readily to determine that the individual fits into the 
category established by the State authorities (see Sec. 483.132(c)). 
Sources of existing data on the individual that could form the basis for 
applying a categorical determination by the State authorities would be 
hospital records, physician's evaluations, election of hospice status, 
records of community mental health centers or community mental 
retardation or developmental disability providers.
    (d) Examples of categories. Examples of categories for which the 
State mental health or mental retardation authority may make an advance 
group determination that NF services are needed are--
    (1) Convalescent care from an acute physical illness which--
    (i) Required hospitalization; and
    (ii) Does not meet all the criteria for an exempt hospital 
discharge, which is not subject to preadmission screening, as specified 
in Sec. 483.106(b)(2).
    (2) Terminal illness, as defined for hospice purposes in Sec. 418.3 
of this chapter;
    (3) Severe physical illnesses such as coma, ventilator dependence, 
functioning at a brain stem level, or diagnoses such as chronic 
obstructive pulmonary disease, Parkinson's disease, Huntington's 
disease, amyotrophic lateral sclerosis, and congestive heart failure 
which result in a level of impairment so severe that the individual 
could not be expected to benefit from specialized services;
    (4) Provisional admissions pending further assessment in cases of 
delirium where an accurate diagnosis cannot be made until the delirium 
clears;
    (5) Provisional admissions pending further assessment in emergency 
situations requiring protective services, with placement in a nursing 
facility not to exceed 7 days; and
    (6) Very brief and finite stays of up to a fixed number of days to 
provide respite to in-home caregivers to whom the individual with MI or 
MR is expected to return following the brief NF stay.
    (e) Time limits. The State may specify time limits for categorical 
determinations that NF services are needed and in the case of paragraphs 
(d)(4), (5) and (6) of this section, must specify a time limit which is 
appropriate for provisional admissions pending further assessment and 
for emergency situations and respite care. If an individual is later 
determined to need a longer stay than the State's limit allows, the 
individual must be subjected to an annual resident review before 
continuation of the stay may be permitted and payment made for days of 
NF care beyond the State's time limit.
    (f) The State mental health and mental retardation authorities may 
make categorical determinations that specialized services are not needed 
in the provisional, emergency and respite admission situations 
identified in Sec. 483.130(d)(4)-(6). In all other cases, except for 
Sec. 483.130(h), a determination that specialized services are not 
needed must be based on a more extensive individualized evaluation under 
Sec. 483.134 or Sec. 483.136.
    (g) Categorical determinations: No positive specialized treatment 
determinations. The State mental health and mental retardation 
authorities must not make categorical determinations that specialized 
services are needed. Such a determination must be based on a more 
extensive individualized evaluation under Sec. 483.134 or Sec. 483.136 
to determine

[[Page 529]]

the exact nature of the specialized services that are needed.
    (h) Categorical determinations: Dementia and MR. The State mental 
retardation authority may make categorical determinations that 
individuals with dementia, which exists in combination with mental 
retardation or a related condition, do not need specialized services.
    (i) If a State mental health or mental retardation authority 
determines NF needs by category, it may not waive the specialized 
services determination. The appropriate State authority must also 
determine whether specialized services are needed either by category (if 
permitted) or by individualized evaluations, as specified in 
Sec. 483.134 or Sec. 483.136.
    (j) Recording determinations. All determinations made by the State 
mental health and mental retardation authority, regardless of how they 
are arrived at, must be recorded in the individual's record.
    (k) Notice of determination. The State mental health or mental 
retardation authority must notify in writing the following entities of a 
determination made under this subpart:
    (1) The evaluated individual and his or her legal representative;
    (2) The admitting or retaining NF;
    (3) The individual or resident's attending physician; and
    (4) The discharging hospital, unless the individual is exempt from 
preadmission screening as provided for at Sec. 483.106(b)(2).
    (l) Contents of notice. Each notice of the determination made by the 
State mental health or mental retardation authority must include--
    (1) Whether a NF level of services is needed;
    (2) Whether specialized services are needed;
    (3) The placement options that are available to the individual 
consistent with these determinations; and
    (4) The rights of the individual to appeal the determination under 
subpart E of this part.
    (m) Placement options. Except as otherwise may be provided in an 
alternative disposition plan adopted under section 1919(e)(7)(E) of the 
Act, the placement options and the required State actions are as 
follows:
    (1) Can be admitted to a NF. Any applicant for admission to a NF who 
has MI or MR and who requires the level of services provided by a NF, 
regardless of whether specialized services are also needed, may be 
admitted to a NF, if the placement is appropriate, as determined in 
Sec. 483.126. If specialized services are also needed, the State is 
responsible for providing or arranging for the provision of the 
specialized services.
    (2) Cannot be admitted to a NF. Any applicant for admission to a NF 
who has MI or MR and who does not require the level of services provided 
by a NF, regardless of whether specialized services are also needed, is 
inappropriate for NF placement and must not be admitted.
    (3) Can be considered appropriate for continued placement in a NF. 
Any NF resident with MI or MR who requires the level of services 
provided by a NF, regardless of the length of his or her stay or the 
need for specialized services, can continue to reside in the NF, if the 
placement is appropriate, as determined in Sec. 483.126.
    (4) May choose to remain in the NF even though the placement would 
otherwise be inappropriate. Any NF resident with MI or MR who does not 
require the level of services provided by a NF but does require 
specialized services and who has continuously resided in a NF for at 
least 30 consecutive months before the date of determination may choose 
to continue to reside in the facility or to receive covered services in 
an alternative appropriate institutional or noninstitutional setting. 
Wherever the resident chooses to reside, the State must meet his or her 
specialized services needs. The determination notice must provide 
information concerning how, when, and by whom the various placement 
options available to the resident will be fully explained to the 
resident.
    (5) Cannot be considered appropriate for continued placement in a NF 
and must be discharged (short-term residents). Any NF resident with MI 
or MR who does not require the level of services provided by a NF but 
does require specialized services and who has resided in a NF

[[Page 530]]

for less than 30 consecutive months must be discharged in accordance 
with Sec. 483.12(a) to an appropriate setting where the State must 
provide specialized services. The determination notice must provide 
information on how, when, and by whom the resident will be advised of 
discharge arrangements and of his/her appeal rights under both PASARR 
and discharge provisions.
    (6) Cannot be considered appropriate for continued placement in a NF 
and must be discharged (short or long-term residents). Any NF resident 
with MI or MR who does not require the level of services provided by a 
NF and does not require specialized services regardless of his or her 
length of stay, must be discharged in accordance with Sec. 483.12(a). 
The determination notice must provide information on how, when, and by 
whom the resident will be advised of discharge arrangements and of his 
or her appeal rights under both PASARR and discharge provisions.
    (n) Specialized services needed in a NF. If a determination is made 
to admit or allow to remain in a NF any individual who requires 
specialized services, the determination must be supported by assurances 
that the specialized services that are needed can and will be provided 
or arranged for by the State while the individual resides in the NF.
    (o) Record retention. The State PASARR system must maintain records 
of evaluations and determinations, regardless of whether they are 
performed categorically or individually, in order to support its 
determinations and actions and to protect the appeal rights of 
individuals subjected to PASARR; and
    (p) Tracking system. The State PASARR system must establish and 
maintain a tracking system for all individuals with MI or MR in NFs to 
ensure that appeals and future reviews are performed in accordance with 
this subpart and subpart E.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.132  Evaluating the need for NF services and NF level of care (PASARR/NF).

    (a) Basic rule. For each applicant for admission to a NF and each NF 
resident who has MI or MR, the evaluator must assess whether--
    (1) The individual's total needs are such that his or her needs can 
be met in an appropriate community setting;
    (2) The individual's total needs are such that they can be met only 
on an inpatient basis, which may include the option of placement in a 
home and community-based services waiver program, but for which the 
inpatient care would be required;
    (3) If inpatient care is appropriate and desired, the NF is an 
appropriate institutional setting for meeting those needs in accordance 
with Sec. 483.126; or
    (4) If the inpatient care is appropriate and desired but the NF is 
not the appropriate setting for meeting the individual's needs in 
accordance with Sec. 483.126, another setting such as an ICF/MR 
(including small, community-based facilities), an IMD providing services 
to individuals aged 65 or older, or a psychiatric hospital is an 
appropriate institutional setting for meeting those needs.
    (b) Determining appropriate placement. In determining appropriate 
placement, the evaluator must prioritize the physical and mental needs 
of the individual being evaluated, taking into account the severity of 
each condition.
    (c) Data. At a minimum, the data relied on to make a determination 
must include:
    (1) Evaluation of physical status (for example, diagnoses, date of 
onset, medical history, and prognosis);
    (2) Evaluation of mental status (for example, diagnoses, date of 
onset, medical history, likelihood that the individual may be a danger 
to himself/herself or others); and
    (3) Functional assessment (activities of daily living).
    (d) Based on the data compiled in Sec. 483.132 and, as appropriate, 
in Secs. 483.134 and 483.136, the State mental health or mental 
retardation authority must determine whether an NF level of services is 
needed.



Sec. 483.134  Evaluating whether an individual with mental illness requires specialized services (PASARR/MI).

    (a) Purpose. The purpose of this section is to identify the minimum 
data needs and process requirements for the

[[Page 531]]

State mental health authority, which is responsible for determining 
whether or not the applicant or resident with MI, as defined in 
Sec. 483.102(b)(1) of this part, needs a specialized services program 
for mental illness as defined in Sec. 483.120.
    (b) Data. Minimum data collected must include--(1) A comprehensive 
history and physical examination of the person. The following areas must 
be included (if not previously addressed):
    (i) Complete medical history;
    (ii) Review of all body systems;
    (iii) Specific evaluation of the person's neurological system in the 
areas of motor functioning, sensory functioning, gait, deep tendon 
reflexes, cranial nerves, and abnormal reflexes; and
    (iv) In case of abnormal findings which are the basis for an NF 
placement, additional evaluations conducted by appropriate specialists.
    (2) A comprehensive drug history including current or immediate past 
use of medications that could mask symptoms or mimic mental illness.
    (3) A psychosocial evaluation of the person, including current 
living arrangements and medical and support systems.
    (4) A comprehensive psychiatric evaluation including a complete 
psychiatric history, evaluation of intellectual functioning, memory 
functioning, and orientation, description of current attitudes and overt 
behaviors, affect, suicidal or homicidal ideation, paranoia, and degree 
of reality testing (presence and content of delusions) and 
hallucinations.
    (5) A functional assessment of the individual's ability to engage in 
activities of daily living and the level of support that would be needed 
to assist the individual to perform these activities while living in the 
community. The assessment must determine whether this level of support 
can be provided to the individual in an alternative community setting or 
whether the level of support needed is such that NF placement is 
required.
    (6) The functional assessment must address the following areas: 
Self-monitoring of health status, self-administering and scheduling of 
medical treatment, including medication compliance, or both, self-
monitoring of nutritional status, handling money, dressing 
appropriately, and grooming.
    (c) Personnel requirements. (1) If the history and physical 
examination are not performed by a physician, then a physician must 
review and concur with the conclusions.
    (2) The State may designate the mental health professionals who are 
qualified--
    (i) To perform the evaluations required under paragraph (b) (2)-(6) 
of this section including the--
    (A) Comprehensive drug history;
    (B) Psychosocial evaluation;
    (C) Comprehensive psychiatric evaluation;
    (D) Functional assessment; and
    (ii) To make the determination required in paragraph (d) of this 
section.
    (d) Data interpretation. Based on the data compiled, a qualified 
mental health professional, as designated by the State, must validate 
the diagnosis of mental illness and determine whether a program of 
psychiatric specialized services is needed.



Sec. 483.136  Evaluating whether an individual with mental retardation requires specialized services (PASARR/MR).

    (a) Purpose. The purpose of this section is to identify the minimum 
data needs and process requirements for the State mental retardation 
authority to determine whether or not the applicant or resident with 
mental retardation, as defined in Sec. 483.102(b)(3) of this part, needs 
a continuous specialized services program, which is analogous to active 
treatment, as defined in Secs. 435.1009 and 483.440 of this chapter.
    (b) Data. Minimum data collected must include the individual's 
comprehensive history and physical examination results to identify the 
following information or, in the absence of data, must include 
information that permits a reviewer specifically to assess:
    (1) The individual's medical problems;
    (2) The level of impact these problems have on the individual's 
independent functioning;
    (3) All current medications used by the individual and the current 
response of the individual to any prescribed

[[Page 532]]

medications in the following drug groups:
    (i) Hypnotics,
    (ii) Antipsychotics (neuroleptics),
    (iii) Mood stabilizers and antidepressants,
    (iv) Antianxiety-sedative agents, and
    (v) Anti-Parkinson agents.
    (4) Self-monitoring of health status;
    (5) Self-administering and scheduling of medical treatments;
    (6) Self-monitoring of nutritional status;
    (7) Self-help development such as toileting, dressing, grooming, and 
eating;
    (8) Sensorimotor development, such as ambulation, positioning, 
transfer skills, gross motor dexterity, visual motor perception, fine 
motor dexterity, eye-hand coordination, and extent to which prosthetic, 
orthotic, corrective or mechanical supportive devices can improve the 
individual's functional capacity;
    (9) Speech and language (communication) development, such as 
expressive language (verbal and nonverbal), receptive language (verbal 
and nonverbal), extent to which non-oral communication systems can 
improve the individual's function capacity, auditory functioning, and 
extent to which amplification devices (for example, hearing aid) or a 
program of amplification can improve the individual's functional 
capacity;
    (10) Social development, such as interpersonal skills, recreation-
leisure skills, and relationships with others;
    (11) Academic/educational development, including functional learning 
skills;
    (12) Independent living development such as meal preparation, 
budgeting and personal finances, survival skills, mobility skills 
(orientation to the neighborhood, town, city), laundry, housekeeping, 
shopping, bedmaking, care of clothing, and orientation skills (for 
individuals with visual impairments);
    (13) Vocational development, including present vocational skills;
    (14) Affective development such as interests, and skills involved 
with expressing emotions, making judgments, and making independent 
decisions; and
    (15) The presence of identifiable maladaptive or inappropriate 
behaviors of the individual based on systematic observation (including, 
but not limited to, the frequency and intensity of identified 
maladaptive or inappropriate behaviors).
    (c) Data interpretation--(1) The State must ensure that a licensed 
psychologist identifies the intellectual functioning measurement of 
individuals with MR or a related condition.
    (2) Based on the data compiled in paragraph (b) of this section, the 
State mental retardation authority, using appropriate personnel, as 
designated by the State, must validate that the individual has MR or is 
a person with a related condition and must determine whether specialized 
services for mental retardation are needed. In making this 
determination, the State mental retardation authority must make a 
qualitative judgment on the extent to which the person's status 
reflects, singly and collectively, the characteristics commonly 
associated with the need for specialized services, including--
    (i) Inability to--
    (A) Take care of the most personal care needs;
    (B) Understand simple commands;
    (C) Communicate basic needs and wants;
    (D) Be employed at a productive wage level without systematic long 
term supervision or support;
    (E) Learn new skills without aggressive and consistent training;
    (F) Apply skills learned in a training situation to other 
environments or settings without aggressive and consistent training;
    (G) Demonstrate behavior appropriate to the time, situation or place 
without direct supervision; and
    (H) Make decisions requiring informed consent without extreme 
difficulty;
    (ii) Demonstration of severe maladaptive behavior(s) that place the 
person or others in jeopardy to health and safety; and
    (iii) Presence of other skill deficits or specialized training needs 
that necessitate the availability of trained MR

[[Page 533]]

personnel, 24 hours per day, to teach the person functional skills.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.138  Maintenance of services and availability of FFP.

    (a) Maintenance of services. If a NF mails a 30 day notice of its 
intent to transfer or discharge a resident, under Sec. 483.12(a) of this 
chapter, the agency may not terminate or reduce services until--
    (1) The expiration of the notice period; or
    (2) A subpart E appeal, if one has been filed, has been resolved.
    (b) Availability of FFP. FFP is available for expenditures for 
services provided to Medicaid recipients during--
    (1) The 30 day notice period specified in Sec. 483.12(a) of this 
chapter; or
    (2) During the period an appeal is in progress.



 Subpart D--Requirements That Must Be Met by States and State Agencies: 
              Nurse Aide Training and Competency Evaluation

    Source: 56 FR 48919, Sept. 26, 1991, unless otherwise noted.



Sec. 483.150  Statutory basis; Deemed meeting or waiver of requirements.

    (a) Statutory basis. This subpart is based on sections 1819(b)(5) 
and 1919(b)(5) of the Act, which establish standards for training nurse-
aides and for evaluating their competency.
    (b) Deemed meeting of requirements. A nurse aide is deemed to 
satisfy the requirement of completing a training and competency 
evaluation approved by the State if he or she successfully completed a 
training and competency evaluation program before July 1, 1989 if--
    (1) The aide would have satisfied this requirement if--
    (i) At least 60 hours were substituted for 75 hours in sections 
1819(f)(2) and 1919(f)(2) of the Act, and
    (ii) The individual has made up at least the difference in the 
number of hours in the program he or she completed and 75 hours in 
supervised practical nurse aide training or in regular in-service nurse 
aide education;

or
    (2) The individual was found to be competent (whether or not by the 
State) after the completion of nurse aide training of at least 100 hours 
duration.
    (c) Waiver of requirements. A State may--
    (1) Waive the requirement for an individual to complete a competency 
evaluation program approved by the State for any individual who can 
demonstrate to the satisfaction of the State that he or she has served 
as a nurse aide at one or more facilities of the same employer in the 
state for at least 24 consecutive months before December 19, 1989; or
    (2) Deem an individual to have completed a nurse aide training and 
competency evaluation program approved by the State if the individual 
completed, before July 1, 1989, such a program that the State determines 
would have met the requirements for approval at the time it was offered.

[56 FR 48919, Sept. 26, 1991; 56 FR 59331, Nov. 25, 1991, as amended at 
60 FR 50443, Sept. 29, 1995]



Sec. 483.151  State review and approval of nurse aide training and competency evaluation programs and competency evaluation programs.

    (a) State review and administration. (1) The State--
    (i) Must specify any nurse aide training and competency evaluation 
programs that the State approves as meeting the requirements of 
Sec. 483.152 and/or competency evaluations programs that the State 
approves as meeting the requirements of Sec. 483.154; and
    (ii) May choose to offer a nurse aide training and competency 
evaluation program that meets the requirements of Sec. 483.152 and/or a 
competency evaluation program that meets the requirements of 
Sec. 483.154.
    (2) If the State does not choose to offer a nurse aide training and 
competency evaluation program or competency evaluation program, the 
State must review and approve or disapprove nurse aide training and 
competency evaluation programs and nurse aide

[[Page 534]]

competency evaluation programs upon request.
    (3) The State survey agency must in the course of all surveys, 
determine whether the nurse aide training and competency evaluation 
requirements of Sec. 483.75(e) are met.
    (b) Requirements for approval of programs. (1) Before the State 
approves a nurse aide training and competency evaluation program or 
competency evaluation program, the State must--
    (i) Determine whether the nurse aide training and competency 
evaluation program meets the course requirements of Secs. 483.152:
    (ii) Determine whether the nurse aide competency evaluation program 
meets the requirements of Sec. 483.154; and
    (iii) In all reviews other than the initial review, visit the entity 
providing the program.
    (2) The State may not approve a nurse aide training and competency 
evaluation program or competency evaluation program offered by or in a 
facility which, in the previous two years--
    (i) In the case of a skilled nursing facility, has operated under a 
waiver under section 1819(b)(4)(C)(ii)(II) of the Act;
    (ii) In the case of a nursing facility, has operated under a waiver 
under section 1919(b)(4)(C)(ii) of the Act that was granted on the basis 
of a demonstration that the facility is unable to provide nursing care 
required under section 1919(b)(4)(C)(i) of the Act for a period in 
excess of 48 hours per week;
    (iii) Has been subject to an extended (or partial extended) survey 
under sections 1819(g)(2)(B)(i) or 1919(g)(2)(B)(i) of the Act;
    (iv) Has been assessed a civil money penalty described in section 
1819(h)(2)(B)(ii) of 1919(h)(2)(A)(ii) of the Act of not less than 
$5,000; or
    (v) Has been subject to a remedy described in sections 1819(h)(2)(B) 
(i) or (iii), 1819(h)(4), 1919(h)(1)(B)(i), or 1919(h)(2)(A) (i), (iii) 
or (iv) of the Act.
    (3) A State may not, until two years since the assessment of the 
penalty (or penalties) has elapsed, approve a nurse aide training and 
competency evaluation program or competency evaluation program offered 
by or in a facility that, within the two-year period beginning October 
1, 1988--
    (i) Had its participation terminated under title XVIII of the Act or 
under the State plan under title XIX of the Act;
    (ii) Was subject to a denial of payment under title XVIII or title 
XIX;
    (iii) Was assessed a civil money penalty of not less than $5,000 for 
deficiencies in nursing facility standards;
    (iv) Operated under temporary management appointed to oversee the 
operation of the facility and to ensure the health and safety of its 
residents; or
    (v) Pursuant to State action, was closed or had its residents 
transferred.
    (c) Time frame for acting on a request for approval. The State must, 
within 90 days of the date of a request under paragraph (a)(3) of this 
section or receipt of additional information from the requester--
    (1) Advise the requester whether or not the program has been 
approved; or
    (2) Request additional information form the requesting entity.
    (d) Duration of approval. The State may not grant approval of a 
nurse aide training and competency evaluation program for a period 
longer than 2 years. A program must notify the State and the State must 
review that program when there are substantive changes made to that 
program within the 2-year period.
    (e) Withdrawal of approval. (1) The State must withdraw approval of 
a nurse aide training and competency evaluation program or nurse aide 
competency evaluation program offered by or in a facility described in 
paragraph (b)(2) of this section.
    (2) The State may withdraw approval of a nurse aide training and 
competency evaluation program or nurse aide competency evaluation 
program if the State determines that any of the applicable requirements 
of Secs. 483.152 or 483.154 are not met by the program.
    (3) The State must withdraw approval of a nurse aide training and 
competency evaluation program or a nurse aide competency evaluation 
program if the entity providing the program refuses to permit 
unannounced visits by the State.
    (4) If a State withdraws approval of a nurse aide training and 
competency

[[Page 535]]

evaluation program or competency evaluation program--
    (i) The State must notify the program in writing, indicating the 
reason(s) for withdrawal of approval of the program.
    (ii) Students who have started a training and competency evaluation 
program from which approval has been withdrawn must be allowed to 
complete the course.



Sec. 483.152  Requirements for approval of a nurse aide training and competency evaluation program.

    (a) For a nurse aide training and competency evaluation program to 
be approved by the State, it must, at a minimum--
    (1) Consist of no less than 75 clock hours of training;
    (2) Include at least the subjects specified in paragraph (b) of this 
section;
    (3) Include at least 16 hours of supervised practical training. 
Supervised practical training means training in a laboratory or other 
setting in which the trainee demonstrates knowledge while performing 
tasks on an individual under the direct supervision of a registered 
nurse or a licensed practical nurse;
    (4) Ensure that--
    (i) Students do not perform any services for which they have not 
trained and been found proficient by the instructor; and
    (ii) Students who are providing services to residents are under the 
general supervision of a licensed nurse or a registered nurse;
    (5) Meet the following requirements for instructors who train nurse 
aides;
    (i) The training of nurse aides must be performed by or under the 
general supervision of a registered nurse who possesses a minimum of 2 
years of nursing experience, at least 1 year of which must be in the 
provision of long term care facility services;
    (ii) Instructors must have completed a course in teaching adults or 
have experience in teaching adults or supervising nurse aides;
    (iii) In a facility-based program, the training of nurse aides may 
be performed under the general supervision of the director of nursing 
for the facility who is prohibited from performing the actual training; 
and
    (iv) Other personnel from the health professions may supplement the 
instructor, including, but not limited to, registered nurses, licensed 
practical/vocational nurses, pharmacists, dietitians, social workers, 
sanitarians, fire safety experts, nursing home administrators, 
gerontologists, psychologists, physical and occupational therapists, 
activities specialists, speech/language/hearing therapists, and resident 
rights experts. Supplemental personnel must have at least 1 year of 
experience in their fields;
    (6) Contain competency evaluation procedures specified in 
Sec. 483.154.
    (b) The curriculum of the nurse aide training program must include--
    (1) At least a total of 16 hours of training in the following areas 
prior to any direct contact with a resident:
    (i) Communication and interpersonal skills;
    (ii) Infection control;
    (iii) Safety/emergency procedures, including the Heimlich maneuver;
    (iv) Promoting residents' independence; and
    (v) Respecting residents' rights.
    (2) Basic nursing skills;
    (i) Taking and recording vital signs;
    (ii) Measuring and recording height and weight;
    (iii) Caring for the residents' environment;
    (iv) Recognizing abnormal changes in body functioning and the 
importance of reporting such changes to a supervisor; and
    (v) Caring for residents when death is imminent.
    (3) Personal care skills, including, but not limited to--
    (i) Bathing;
    (ii) Grooming, including mouth care;
    (iii) Dressing;
    (iv) Toileting;
    (v) Assisting with eating and hydration;
    (vi) Proper feeding techniques;
    (vii) Skin care; and
    (viii) Transfers, positioning, and turning.
    (4) Mental health and social service needs:
    (i) Modifying aide's behavior in response to residents' behavior;

[[Page 536]]

    (ii) Awareness of developmental tasks associated with the aging 
process;
    (iii) How to respond to resident behavior;
    (iv) Allowing the resident to make personal choices, providing and 
reinforcing other behavior consistent with the resident's dignity; and
    (v) Using the resident's family as a source of emotional support.
    (5) Care of cognitively impaired residents:
    (i) Techniques for addressing the unique needs and behaviors of 
individual with dementia (Alzheimer's and others);
    (ii) Communicating with cognitively impaired residents;
    (iii) Understanding the behavior of cognitively impaired residents;
    (iv) Appropriate responses to the behavior of cognitively impaired 
residents; and
    (v) Methods of reducing the effects of cognitive impairments.
    (6) Basic restorative services:
    (i) Training the resident in self care according to the resident's 
abilities;
    (ii) Use of assistive devices in transferring, ambulation, eating, 
and dressing;
    (iii) Maintenance of range of motion;
    (iv) Proper turning and positioning in bed and chair;
    (v) Bowel and bladder training; and
    (vi) Care and use of prosthetic and orthotic devices.
    (7) Residents' Rights.
    (i) Providing privacy and maintenance of confidentiality;
    (ii) Promoting the residents' right to make personal choices to 
accommodate their needs;
    (iii) Giving assistance in resolving grievances and disputes;
    (iv) Providing needed assistance in getting to and participating in 
resident and family groups and other activities;
    (v) Maintaining care and security of residents' personal 
possessions;
    (vi) Promoting the resident's right to be free from abuse, 
mistreatment, and neglect and the need to report any instances of such 
treatment to appropriate facility staff;
    (vii) Avoiding the need for restraints in accordance with current 
professional standards.
    (c) Prohibition of charges. (1) No nurse aide who is employed by, or 
who has received an offer of employment from, a facility on the date on 
which the aide begins a nurse aide training and competency evaluation 
program may be charged for any portion of the program (including any 
fees for textbooks or other required course materials).
    (2) If an individual who is not employed, or does not have an offer 
to be employed, as a nurse aide becomes employed by, or receives an 
offer of employment from, a facility not later than 12 months after 
completing a nurse aide training and competency evaluation program, the 
State must provide for the reimbursement of costs incurred in completing 
the program on a pro rata basis during the period in which the 
individual is employed as a nurse aide.



Sec. 483.154  Nurse aide competency evaluation.

    (a) Notification to Individual. The State must advise in advance any 
individual who takes the competency evaluation that a record of the 
successful completion of the evaluation will be included in the State's 
nurse aid registry.
    (b) Content of the competency evaluation program--(1) Written or 
oral examinations. The competency evaluation must--
    (i) Allow an aide to choose between a written and an oral 
examination;
    (ii) Address each course requirement specified in Sec. 483.152(b);
    (iii) Be developed from a pool of test questions, only a portion of 
which is used in any one examination;
    (iv) Use a system that prevents disclosure of both the pool of 
questions and the individual competency evaluations; and
    (v) If oral, must be read from a prepared text in a neutral manner.
    (2) Demonstration of skills. The skills demonstration must consist 
of a demonstration of randomly selected items drawn from a pool 
consisting of the tasks generally performed by nurse aides. This pool of 
skills must include all of the personal care skills listed in 
Sec. 483.152(b)(3).

[[Page 537]]

    (c) Administration of the competency evaluation. (1) The competency 
examination must be administered and evaluated only by--
    (i) The State directly; or
    (ii) A State approved entity which is neither a skilled nursing 
facility that participates in Medicare nor a nursing facility that 
participates in Medicaid.
    (2) No nurse aide who is employed by, or who has received an offer 
of employment from, a facility on the date on which the aide begins a 
nurse aide competency evaluation program may be charged for any portion 
of the program.
    (3) If an individual who is not employed, or does not have an offer 
to be employed, as a nurse aide becomes employed by, or receives an 
offer of employment from, a facility not later than 12 months after 
completing a nurse aide competency evaluation program, the State must 
provide for the reimbursement of costs incurred in completing the 
program on a pro rata basis during the period in which the individual is 
employed as a nurse aide.
    (4) The skills demonstration part of the evaluation must be--
    (i) Performed in a facility or laboratory setting comparable to the 
setting in which the individual will function as a nurse aide; and
    (ii) Administered and evaluated by a registered nurse with at least 
one year's experience in providing care for the elderly or the 
chronically ill of any age.
    (d) Facility proctoring of the competency evaluation. (1) The 
competency evaluation may, at the nurse aide's option, be conducted at 
the facility in which the nurse aide is or will be employed unless the 
facility is described in Sec. 483.151(b)(2).
    (2) The State may permit the competency evaluation to be proctored 
by facility personnel if the State finds that the procedure adopted by 
the facility assures that the competency evaluation program--
    (i) Is secure from tampering;
    (ii) Is standardized and scored by a testing, educational, or other 
organization approved by the State; and
    (iii) Requires no scoring by facility personnel.
    (3) The State must retract the right to proctor nurse aide 
competency evaluations from facilities in which the State finds any 
evidence of impropriety, including evidence of tampering by facility 
staff.
    (e) Successful completion of the competency evaluation program. (1) 
The State must establish a standard for satisfactory completion of the 
competency evaluation. To complete the competency evaluation 
successfully an individual must pass both the written or oral 
examination and the skills demonstration.
    (2) A record of successful completion of the competency evaluation 
must be included in the nurse aide registry provided in Sec. 483.156 
within 30 days of the date if the individual is found to be competent.
    (f) Unsuccessful completion of the competency evaluation program. 
(1) If the individual does not complete the evaluation satisfactorily, 
the individual must be advised--
    (i) Of the areas which he or she; did not pass; and
    (ii) That he or she has at least three opportunities to take the 
evaluation.
    (2) The State may impose a maximum upon the number of times an 
individual upon the number of times an individual may attempt to 
complete the competency evaluation successfully, but the maximum may be 
no less than three.



Sec. 483.156  Registry of nurse aides.

    (a) Establishment of registry. The State must establish and maintain 
a registry of nurse aides that meets the requirement of this section. 
The registry--
    (1) Must include as a minimum the information contained in paragraph 
(c) of this section:
    (2) Must be sufficiently accessible to meet the needs of the public 
and health care providers promptly;
    (3) May include home health aides who have successfully completed a 
home health aide competency evaluation program approved by the State if 
home health aides are differentiated from nurse aides; and
    (4) Must provide that any response to an inquiry that includes a 
finding of abuse, neglect, or misappropriation of property also include 
any statement

[[Page 538]]

disputing the finding made by the nurse aide, as provided under 
paragraph (c)(1)(ix) of this section.
    (b) Registry operation. (1) The State may contract the daily 
operation and maintenance of the registry to a non-State entity. 
However, the State must maintain accountability for overall operation of 
the registry and compliance with these regulations.
    (2) Only the State survey and certification agency may place on the 
registry findings of abuse, neglect, or misappropriation of property.
    (3) The State must determine which individuals who (i) have 
successfully completed a nurse aide training and competency evaluation 
program or nurse aide competency evaluation program; (ii) have been 
deemed as meeting these requirements; or (iii) have had these 
requirements waived by the State do not qualify to remain on the 
registry because they have performed no nursing or nursing-related 
services for a period of 24 consecutive months.
    (4) The State may not impose any charges related to registration on 
individuals listed in the registry.
    (5) The State must provide information on the registry promptly.
    (c) Registry Content. (1) The registry must contain at least the 
following information on each individual who has successfully completed 
a nurse aide training and competency evaluation program which meets the 
requirements of Sec. 483.152 or a competency evaluation which meets the 
requirements of Sec. 483.154 and has been found by the State to be 
competent to function as a nurse aide or who may function as a nurse 
aide because of meeting criteria in Sec. 483.150:
    (i) The individual's full name.
    (ii) Information necessary to identify each individual;
    (iii) The date the individual became eligible for placement in the 
registry through successfully completing a nurse aide training and 
competency evaluation program or competency evaluation program or by 
meeting the requirements of Sec. 483.150; and
    (iv) The following information on any finding by the State survey 
agency of abuse, neglect, or misappropriation of property by the 
individual:
    (A) Documentation of the State's investigation, including the nature 
of the allegation and the evidence that led the State to conclude that 
the allegation was valid;
    (B) The date of the hearing, if the individual chose to have one, 
and its outcome; and
    (C) A statement by the individual disputing the allegation, if he or 
she chooses to make one; and
    (D) This information must be included in the registry within 10 
working days of the finding and must remain in the registry permanently, 
unless the finding was made in error, the individual was found not 
guilty in a court of law, or the State is notified of the individual's 
death.
    (2) The registry must remove entries for individuals who have 
performed no nursing or nursing-related services for a period of 24 
consecutive months, unless the individual's registry entry includes 
documented findings of abuse, neglect, or misappropriation of property.
    (d) Disclosure of information. The State must--
    (1) Disclose all of the information in Sec. 483.156(c)(1) (iii) and 
(iv) to all requesters and may disclose additional information it deems 
necessary; and
    (2) Promptly provide individuals with all information contained in 
the registry on them when adverse findings are placed on the registry 
and upon request. Individuals on the registry must have sufficient 
opportunity to correct any misstatements or inaccuracies contained in 
the registry.

[56 FR 48919, Sept. 26, 1991; 56 FR 59331, Nov. 25, 1991]



Sec. 483.158  FFP for nurse aide training and competency evaluation.

    (a) State expenditures for nurse aide training and competency 
evaluation programs and competency evaluation programs are 
administrative costs. They are matched as indicated in Sec. 433.15(b)(8) 
of this chapter.
    (b) FFP is available for State expenditures associated with nurse 
aide training and competency evaluation programs and competency 
evaluation programs only for--
    (1) Nurse aides employed by a facility;

[[Page 539]]

    (2) Nurse aides who have an offer of employment from a facility;
    (3) Nurse aides who become employed by a facility not later than 12 
months after completing a nurse aide training and competency evaluation 
program or competency evaluation program; or
    (4) Nurse aides who receive an offer of employment from a facility 
not later than 12 months after completing a nurse aide training and 
competency evaluation program or competency evaluation program.



Subpart E--Appeals of Discharges, Transfers, and Preadmission Screening 
           and Annual Resident Review (PASARR) Determinations

    Source: 57 FR 56514, Nov. 30, 1992, unless otherwise noted.



Sec. 483.200  Statutory basis.

    This subpart is based on sections 1819(e)(3) and (f)(3) and 
1919(e)(3) and (f)(3) of the Act, which require States to make 
available, to individuals who are discharged or transferred from SNFs or 
NFs, an appeals process that complies with guidelines issued by the 
Secretary.

[60 FR 50443, Sept. 29, 1995]



Sec. 483.202  Definitions.

    For purposes of this subpart and subparts B and C--
    Discharge means movement from an entity that participates in 
Medicare as a skilled nursing facility, a Medicare certified distinct 
part, an entity that participates in Medicaid as a nursing facility, or 
a Medicaid certified distinct part to a noninstitutional setting when 
the discharging facility ceases to be legally responsible for the care 
of the resident.
    Individual means an individual or any legal representative of the 
individual.
    Resident means a resident of a SNF or NF or any legal representative 
of the resident.
    Transfer means movement from an entity that participates in Medicare 
as a skilled nursing facility, a Medicare certified distinct part, an 
entity that participates in Medicaid as a nursing facility or a Medicaid 
certified distinct part to another institutional setting when the legal 
responsibility for the care of the resident changes from the 
transferring facility to the receiving facility.



Sec. 483.204  Provision of a hearing and appeal system.

    (a) Each State must provide a system for:
    (1) A resident of a SNF or a NF to appeal a notice from the SNF or 
NF of intent to discharge or transfer the resident; and
    (2) An individual who has been adversely affected by any PASARR 
determination made by the State in the context of either a preadmission 
screening or an annual resident review under subpart C of part 483 to 
appeal that determination.
    (b) The State must provide an appeals system that meets the 
requirements of this subpart, Sec. 483.12 of this part, and part 431 
subpart E of this chapter.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec. 483.206  Transfers, discharges and relocations subject to appeal.

    (a) ``Facility'' means a certified entity, either a Medicare SNF or 
a Medicaid NF (see Secs. 483.5 and 483.12(a)(1)).
    (b) A resident has appeal rights when he or she is transferred from-
-
    (1) A certified bed into a noncertified bed; and
    (2) A bed in a certified entity to a bed in an entity which is 
certified as a different provider.
    (c) A resident has no appeal rights when he or she is moved from one 
bed in the certified entity to another bed in the same certified entity.



 Subpart F--Requirements That Must be Met by States and State Agencies, 
                           Resident Assessment



Sec. 483.315  Specification of resident assessment instrument.

    (a) Statutory basis. Sections 1819(e)(5) and 1919(e)(5) of the Act 
require that a State specify the resident assessment instrument (RAI) to 
be used by long

[[Page 540]]

term care facilities in the State when conducting initial and periodic 
assessments of each resident's functional capacity, in accordance with 
Sec. 483.20.
    (b) State options in specifying an RAI. The RAI that the State 
specifies must be one of the following:
    (1) The instrument designated by CMS.
    (2) An alternate instrument specified by the State and approved by 
CMS, using the criteria specified in the State Operations Manual issued 
by CMS (CMS Pub. 7) which is available for purchase through the National 
Technical Information Service, 5285 Port Royal Rd., Springfield, VA 
22151.
    (c) State requirements in specifying an RAI.
    (1) Within 30 days after CMS notifies the State of the CMS-
designated RAI or changes to it, the State must do one of the following:
    (i) Specify the CMS-designated RAI.
    (ii) Notify CMS of its intent to specify an alternate instrument.
    (2) Within 60 days after receiving CMS approval of an alternate RAI, 
the State must specify the RAI for use by all long term care facilities 
participating in the Medicare and Medicaid programs.
    (3) After specifying an instrument, the State must provide periodic 
educational programs for facility staff to assist with implementation of 
the RAI.
    (4) A State must audit implementation of the RAI through the survey 
process.
    (5) A State must obtain approval from CMS before making any 
modifications to its RAI.
    (6) A State must adopt revisions to the RAI that are specified by 
CMS.
    (d) CMS-designated RAI. The CMS-designated RAI is published in the 
State Operations Manual issued by CMS (CMS Pub. 7), as updated 
periodically, and consists of the following:
    (1) The minimum data set (MDS) and common definitions.
    (2) The resident assessment protocols (RAPs) and triggers that are 
necessary to accurately assess residents, established by CMS.
    (3) The quarterly review, based on a subset of the MDS specified by 
CMS.
    (4) The requirements for use of the RAI that appear at Sec. 483.20.
    (e) Minimum data set (MDS). The MDS includes assessment in the 
following areas:
    (1) Identification and demographic information, which includes 
information to identify the resident and facility, the resident's 
residential history, education, the reason for the assessment, 
guardianship status and information regarding advance directives, and 
information regarding mental health history.
    (2) Customary routine, which includes the resident's lifestyle prior 
to admission to the facility.
    (3) Cognitive patterns, which include memory, decision making, 
consciousness, behavioral measures of delirium, and stability of 
condition.
    (4) Communication, which includes scales for measuring hearing and 
communication skills, information on how the resident expresses himself 
or herself, and stability of communicative ability.
    (5) Vision pattern, which includes a scale for measuring vision and 
vision problems.
    (6) Mood and behavior patterns, which include scales for measuring 
behavioral indicators and symptoms, and stability of condition.
    (7) Psychosocial well-being, which includes the resident's 
interpersonal relationships and adjustment factors.
    (8) Physical functioning and structural problems, which contains 
scales for measuring activities of daily living, mobility, potential for 
improvement, and stability of functioning.
    (9) Continence, which includes assessment scales for bowel and 
bladder incontinence, continence patterns, interventions, and stability 
of continence status.
    (10) Disease diagnoses and health conditions, which includes active 
medical diagnoses, physical problems, pain assessment, and stability of 
condition.
    (11) Dental and nutritional status, which includes information on 
height and weight, nutritional problems and accommodations, oral care 
and problems, and measure of nutritional intake.
    (12) Skin condition, which includes current and historical 
assessment of skin problems, treatments, and information regarding foot 
care.

[[Page 541]]

    (13) Activity pursuit, which gathers information on the resident's 
activity preferences and the amount of time spent participating in 
activities.
    (14) Medications, which contains information on the types and 
numbers of medications the resident receives.
    (15) Special treatments and procedures, which includes measurements 
of therapies, assessment of rehabilitation/restorative care, special 
programs and interventions, and information on hospital visits and 
physician involvement.
    (16) Discharge potential, which assesses the possibility of 
discharging the resident and discharge status.
    (17) Documentation of summary information regarding the additional 
assessment performed through the resident assessment protocols.
    (18) Documentation of participation in assessment.
    (f) Resident assessment protocols (RAPs). At a minimum, the RAPs 
address the following domains:
    (1) Delirium.
    (2) Cognitive loss.
    (3) Visual function.
    (4) Communication.
    (5) ADL functional/rehabilitation potential.
    (6) Urinary incontinence and indwelling catheter.
    (7) Psychosocial well-being.
    (8) Mood state.
    (9) Behavioral symptoms.
    (10) Activities.
    (11) Falls.
    (12) Nutritional status.
    (13) Feeding tubes.
    (14) Dehydration/fluid maintenance.
    (15) Dental care.
    (16) Pressure ulcers.
    (17) Psychotropic drug use.
    (18) Physical restraints.
    (g) Criteria for CMS approval of alternate instrument. To receive 
CMS approval, a State's alternate instrument must use the standardized 
format, organization, item labels and definitions, and instructions 
specified by CMS in the latest issuance of the State Operations Manual 
issued by CMS (CMS Pub. 7).
    (h) State MDS collection and data base requirements. (1) As part of 
facility survey responsibilities, the State must establish and maintain 
an MDS Database, and must do the following:
    (i) Use a system to collect, store, and analyze data that is 
developed or approved by CMS.
    (ii) Obtain CMS approval before modifying any parts of the CMS 
standard system other than those listed in paragraph (h)(2) of this 
section (which may not be modified).
    (iii) Specify to a facility the method of transmission of data to 
the State, and instruct the facility on this method.
    (iv) Upon receipt of data from a facility, edit the data, as 
specified by CMS, and ensure that a facility resolves errors.
    (v) At least monthly, transmit to CMS all edited MDS records 
received during that period, according to formats specified by CMS, and 
correct and retransmit rejected data as needed.
    (vi) Analyze data and generate reports, as specified by CMS.
    (2) The State may not modify any aspect of the standard system that 
pertains to the following:
    (i) Standard approvable RAI criteria specified in the State 
Operations Manual issued by CMS (CMS Pub. 7) (MDS item labels and 
definitions, RAPs and utilization guidelines).
    (ii) Standardized record formats and validation edits specified in 
the State Operations Manual issued by CMS (CMS Pub. 7).
    (iii) Standard facility encoding and transmission methods specified 
in the State Operations Manual issued by CMS (CMS Pub. 7).
    (i) State identification of agency that collects RAI data. The State 
must identify the component agency that collects RAI data, and ensure 
that this agency restricts access to the data except for the following:
    (1) Reports that contain no resident-identifiable data.
    (2) Transmission of data and reports to CMS.
    (3) Transmission of data and reports to the State agency that 
conducts surveys to ensure compliance with Medicare and Medicaid 
participation requirements, for purposes related to this function.
    (4) Transmission of data and reports to the State Medicaid agency 
for purposes directly related to the administration of the State 
Medicaid plan.

[[Page 542]]

    (5) Transmission of data and reports to other entities only when 
authorized as a routine use by CMS.
    (j) Resident-identifiable data. (1) The State may not release 
information that is resident-identifiable to the public.
    (2) The State may not release RAI data that is resident-identifiable 
except in accordance with a written agreement under which the recipient 
agrees to be bound by the restrictions described in paragraph (i) of 
this section.

[62 FR 67212, Dec. 23, 1997]



   Subpart G--Condition of Participation for the Use of Restraint or 
  Seclusion in Psychiatric Residential Treatment Facilities Providing 
       Inpatient Psychiatric Services for Individuals Under Age 21

    Source: 66 FR 7161, Jan. 22, 2001, unless otherwise noted.



Sec. 483.350  Basis and scope.

    (a) Statutory basis. Sections 1905(a)(16) and (h) of the Act provide 
that inpatient psychiatric services for individuals under age 21 include 
only inpatient services that are provided in an institution (or distinct 
part thereof) that is a psychiatric hospital as defined in section 
1861(f) of the Act or in another inpatient setting that the Secretary 
has specified in regulations. Additionally, the Children's Health Act of 
2000 (Pub. L. 106-310) imposes procedural reporting and training 
requirements regarding the use of restraints and involuntary seclusion 
in facilities, specifically including facilities that provide inpatient 
psychiatric services for children under the age of 21 as defined by 
sections 1905(a)(16) and (h) of the Act.
    (b) Scope. This subpart imposes requirements regarding the use of 
restraint or seclusion in psychiatric residential treatment facilities, 
that are not hospitals, providing inpatient psychiatric services to 
individuals under age 21.



Sec. 483.352  Definitions.

    For purposes of this subpart, the following definitions apply:
    Drug used as a restraint means any drug that--
    (1) Is administered to manage a resident's behavior in a way that 
reduces the safety risk to the resident or others;
    (2) Has the temporary effect of restricting the resident's freedom 
of movement; and
    (3) Is not a standard treatment for the resident's medical or 
psychiatric condition.
    Emergency safety intervention means the use of restraint or 
seclusion as an immediate response to an emergency safety situation.
    Emergency safety situation means unanticipated resident behavior 
that places the resident or others at serious threat of violence or 
injury if no intervention occurs and that calls for an emergency safety 
intervention as defined in this section.
    Mechanical restraint means any device attached or adjacent to the 
resident's body that he or she cannot easily remove that restricts 
freedom of movement or normal access to his or her body.
    Minor means a minor as defined under State law and, for the purpose 
of this subpart, includes a resident who has been declared legally 
incompetent by the applicable State court.
    Personal restraint means the application of physical force without 
the use of any device, for the purposes of restraining the free movement 
of a resident's body. The term personal restraint does not include 
briefly holding without undue force a resident in order to calm or 
comfort him or her, or holding a resident's hand to safely escort a 
resident from one area to another.
    Psychiatric Residential Treatment Facility means a facility other 
than a hospital, that provides psychiatric services, as described in 
subpart D of part 441 of this chapter, to individuals under age 21, in 
an inpatient setting.
    Restraint means a ``personal restraint,'' ``mechanical restraint,'' 
or ``drug used as a restraint'' as defined in this section.
    Seclusion means the involuntary confinement of a resident alone in a 
room or an area from which the resident is physically prevented from 
leaving.

[[Page 543]]

    Serious injury means any significant impairment of the physical 
condition of the resident as determined by qualified medical personnel. 
This includes, but is not limited to, burns, lacerations, bone 
fractures, substantial hematoma, and injuries to internal organs, 
whether self-inflicted or inflicted by someone else.
    Staff means those individuals with responsibility for managing a 
resident's health or participating in an emergency safety intervention 
and who are employed by the facility on a full-time, part-time, or 
contract basis.
    Time out means the restriction of a resident for a period of time to 
a designated area from which the resident is not physically prevented 
from leaving, for the purpose of providing the resident an opportunity 
to regain self-control.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28116, May 22, 2001]



Sec. 483.354  General requirements for psychiatric residential treatment facilities.

    A psychiatric residential treatment facility must meet the 
requirements in Sec. 441.151 through Sec. 441.182 of this chapter.



Sec. 483.356  Protection of residents.

    (a) Restraint and seclusion policy for the protection of residents. 
(1) Each resident has the right to be free from restraint or seclusion, 
of any form, used as a means of coercion, discipline, convenience, or 
retaliation.
    (2) An order for restraint or seclusion must not be written as a 
standing order or on an as-needed basis.
    (3) Restraint or seclusion must not result in harm or injury to the 
resident and must be used only--
    (i) To ensure the safety of the resident or others during an 
emergency safety situation; and
    (ii) Until the emergency safety situation has ceased and the 
resident's safety and the safety of others can be ensured, even if the 
restraint or seclusion order has not expired.
    (4) Restraint and seclusion must not be used simultaneously.
    (b) Emergency safety intervention. An emergency safety intervention 
must be performed in a manner that is safe, proportionate, and 
appropriate to the severity of the behavior, and the resident's 
chronological and developmental age; size; gender; physical, medical, 
and psychiatric condition; and personal history (including any history 
of physical or sexual abuse).
    (c) Notification of facility policy. At admission, the facility 
must--
    (1) Inform both the incoming resident and, in the case of a minor, 
the resident's parent(s) or legal guardian(s) of the facility's policy 
regarding the use of restraint or seclusion during an emergency safety 
situation that may occur while the resident is in the program;
    (2) Communicate its restraint and seclusion policy in a language 
that the resident, or his or her parent(s) or legal guardian(s) 
understands (including American Sign Language, if appropriate) and when 
necessary, the facility must provide interpreters or translators;
    (3) Obtain an acknowledgment, in writing, from the resident, or in 
the case of a minor, from the parent(s) or legal guardian(s) that he or 
she has been informed of the facility's policy on the use of restraint 
or seclusion during an emergency safety situation. Staff must file this 
acknowledgment in the resident's record; and
    (4) Provide a copy of the facility policy to the resident and in the 
case of a minor, to the resident's parent(s) or legal guardian(s).
    (d) Contact information. The facility's policy must provide contact 
information, including the phone number and mailing address, for the 
appropriate State Protection and Advocacy organization.



Sec. 483.358  Orders for the use of restraint or seclusion.

    (a) Orders for restraint or seclusion must be by a physician, or 
other licensed practitioner permitted by the State and the facility to 
order restraint or seclusion and trained in the use of emergency safety 
interventions. Federal regulations at 42 CFR 441.151 require that 
inpatient psychiatric services for recipients under age 21 be provided 
under the direction of a physician.

[[Page 544]]

    (b) If the resident's treatment team physician is available, only he 
or she can order restraint or seclusion.
    (c) A physician or other licensed practitioner permitted by the 
state and the facility to order restraint or seclusion must order the 
least restrictive emergency safety intervention that is most likely to 
be effective in resolving the emergency safety situation based on 
consultation with staff.
    (d) If the order for restraint or seclusion is verbal, the verbal 
order must be received by a registered nurse or other licensed staff 
such as a licensed practical nurse, while the emergency safety 
intervention is being initiated by staff or immediately after the 
emergency safety situation ends. The physician or other licensed 
practitioner permitted by the state and the facility to order restraint 
or seclusion must verify the verbal order in a signed written form in 
the resident's record. The physician or other licensed practitioner 
permitted by the state and the facility to order restraint or seclusion 
must be available to staff for consultation, at least by telephone, 
throughout the period of the emergency safety intervention.
    (e) Each order for restraint or seclusion must:
    (1) Be limited to no longer than the duration of the emergency 
safety situation; and
    (2) Under no circumstances exceed 4 hours for residents ages 18 to 
21; 2 hours for residents ages 9 to 17; or 1 hour for residents under 
age 9.
    (f) Within 1 hour of the initiation of the emergency safety 
intervention a physician, or other licensed practitioner trained in the 
use of emergency safety interventions and permitted by the state and the 
facility to assess the physical and psychological well being of 
residents, must conduct a face-to-face assessment of the physical and 
psychological well being of the resident, including but not limited to--
    (1) The resident's physical and psychological status;
    (2) The resident's behavior;
    (3) The appropriateness of the intervention measures; and
    (4) Any complications resulting from the intervention.
    (g) Each order for restraint or seclusion must include--
    (1) The name of the ordering physician or other licensed 
practitioner permitted by the state and the facility to order restraint 
or seclusion;
    (2) The date and time the order was obtained; and
    (3) The emergency safety intervention ordered, including the length 
of time for which the physician or other licensed practitioner permitted 
by the state and the facility to order restraint or seclusion authorized 
its use.
    (h) Staff must document the intervention in the resident's record. 
That documentation must be completed by the end of the shift in which 
the intervention occurs. If the intervention does not end during the 
shift in which it began, documentation must be completed during the 
shift in which it ends. Documentation must include all of the following:
    (1) Each order for restraint or seclusion as required in paragraph 
(g) of this section.
    (2) The time the emergency safety intervention actually began and 
ended.
    (3) The time and results of the 1-hour assessment required in 
paragraph (f) of this section.
    (4) The emergency safety situation that required the resident to be 
restrained or put in seclusion.
    (5) The name of staff involved in the emergency safety intervention.
    (i) The facility must maintain a record of each emergency safety 
situation, the interventions used, and their outcomes.
    (j) The physician or other licensed practitioner permitted by the 
state and the facility to order restraint or seclusion must sign the 
restraint or seclusion order in the resident's record as soon as 
possible.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28116, May 22, 2001]



Sec. 483.360  Consultation with treatment team physician.

    If a physician or other licensed practitioner permitted by the state 
and the facility to order restraint or seclusion orders the use of 
restraint or seclusion, that person must contact the resident's 
treatment team physician, unless the ordering physician is in fact the 
resident's treatment team physician. The

[[Page 545]]

person ordering the use of restraint or seclusion must--
    (a) Consult with the resident's treatment team physician as soon as 
possible and inform the team physician of the emergency safety situation 
that required the resident to be restrained or placed in seclusion; and
    (b) Document in the resident's record the date and time the team 
physician was consulted.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28117, May 22, 2001]



Sec. 483.362  Monitoring of the resident in and immediately after restraint.

    (a) Clinical staff trained in the use of emergency safety 
interventions must be physically present, continually assessing and 
monitoring the physical and psychological well-being of the resident and 
the safe use of restraint throughout the duration of the emergency 
safety intervention.
    (b) If the emergency safety situation continues beyond the time 
limit of the order for the use of restraint, a registered nurse or other 
licensed staff, such as a licensed practical nurse, must immediately 
contact the ordering physician or other licensed practitioner permitted 
by the state and the facility to order restraint or seclusion to receive 
further instructions.
    (c) A physician, or other licensed practitioner permitted by the 
state and the facility to evaluate the resident's well-being and trained 
in the use of emergency safety interventions, must evaluate the 
resident's well-being immediately after the restraint is removed.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28117, May 22, 2001]



Sec. 483.364  Monitoring of the resident in and immediately after seclusion.

    (a) Clinical staff, trained in the use of emergency safety 
interventions, must be physically present in or immediately outside the 
seclusion room, continually assessing, monitoring, and evaluating the 
physical and psychological well-being of the resident in seclusion. 
Video monitoring does not meet this requirement.
    (b) A room used for seclusion must--
    (1) Allow staff full view of the resident in all areas of the room; 
and
    (2) Be free of potentially hazardous conditions such as unprotected 
light fixtures and electrical outlets.
    (c) If the emergency safety situation continues beyond the time 
limit of the order for the use of seclusion, a registered nurse or other 
licensed staff, such as a licensed practical nurse, must immediately 
contact the ordering physician or other licensed practitioner permitted 
by the state and the facility to order restraint or seclusion to receive 
further instructions.
    (d) A physician, or other licensed practitioner permitted by the 
state and the facility to evaluate the resident's well-being and trained 
in the use of emergency safety interventions, must evaluate the 
resident's well-being immediately after the resident is removed from 
seclusion.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28117, May 22, 2001]



Sec. 483.366  Notification of parent(s) or legal guardian(s).

    If the resident is a minor as defined in this subpart:
    (a) The facility must notify the parent(s) or legal guardian(s) of 
the resident who has been restrained or placed in seclusion as soon as 
possible after the initiation of each emergency safety intervention.
    (b) The facility must document in the resident's record that the 
parent(s) or legal guardian(s) has been notified of the emergency safety 
intervention, including the date and time of notification and the name 
of the staff person providing the notification.



Sec. 483.368  Application of time out.

    (a) A resident in time out must never be physically prevented from 
leaving the time out area.
    (b) Time out may take place away from the area of activity or from 
other residents, such as in the resident's room (exclusionary), or in 
the area of activity or other residents (inclusionary).
    (c) Staff must monitor the resident while he or she is in time out.



Sec. 483.370  Postintervention debriefings.

    (a) Within 24 hours after the use of restraint or seclusion, staff 
involved in an emergency safety intervention and

[[Page 546]]

the resident must have a face-to-face discussion. This discussion must 
include all staff involved in the intervention except when the presence 
of a particular staff person may jeopardize the well-being of the 
resident. Other staff and the resident's parent(s) or legal guardian(s) 
may participate in the disussion when it is deemed appropriate by the 
facility. The facility must conduct such discussion in a language that 
is understood by the resident's parent(s) or legal guardian(s). The 
discussion must provide both the resident and staff the opportunity to 
discuss the circumstances resulting in the use of restraint or seclusion 
and strategies to be used by the staff, the resident, or others that 
could prevent the future use of restraint or seclusion.
    (b) Within 24 hours after the use of restraint or seclusion, all 
staff involved in the emergency safety intervention, and appropriate 
supervisory and administrative staff, must conduct a debriefing session 
that includes, at a minimum, a review and discussion of--
    (1) The emergency safety situation that required the intervention, 
including a discussion of the precipitating factors that led up to the 
intervention;
    (2) Alternative techniques that might have prevented the use of the 
restraint or seclusion;
    (3) The procedures, if any, that staff are to implement to prevent 
any recurrence of the use of restraint or seclusion; and
    (4) The outcome of the intervention, including any injuries that may 
have resulted from the use of restraint or seclusion.
    (c) Staff must document in the resident's record that both 
debriefing sessions took place and must include in that documentation 
the names of staff who were present for the debriefing, names of staff 
that were excused from the debriefing, and any changes to the resident's 
treatment plan that result from the debriefings.



Sec. 483.372  Medical treatment for injuries resulting from an emergency safety intervention.

    (a) Staff must immediately obtain medical treatment from qualified 
medical personnel for a resident injured as a result of an emergency 
safety intervention.
    (b) The psychiatric residential treatment facility must have 
affiliations or written transfer agreements in effect with one or more 
hospitals approved for participation under the Medicaid program that 
reasonably ensure that--
    (1) A resident will be transferred from the facility to a hospital 
and admitted in a timely manner when a transfer is medically necessary 
for medical care or acute psychiatric care;
    (2) Medical and other information needed for care of the resident in 
light of such a transfer, will be exchanged between the institutions in 
accordance with State medical privacy law, including any information 
needed to determine whether the appropriate care can be provided in a 
less restrictive setting; and
    (3) Services are available to each resident 24 hours a day, 7 days a 
week.
    (c) Staff must document in the resident's record, all injuries that 
occur as a result of an emergency safety intervention, including 
injuries to staff resulting from that intervention.
    (d) Staff involved in an emergency safety intervention that results 
in an injury to a resident or staff must meet with supervisory staff and 
evaluate the circumstances that caused the injury and develop a plan to 
prevent future injuries.



Sec. 483.374  Facility reporting.

    (a) Attestation of facility compliance. Each psychiatric residential 
treatment facility that provides inpatient psychiatric services to 
individuals under age 21 must attest, in writing, that the facility is 
in compliance with CMS's standards governing the use of restraint and 
seclusion. This attestation must be signed by the facility director.
    (1) A facility with a current provider agreement with the Medicaid 
agency must provide its attestation to the State Medicaid agency by July 
21, 2001.
    (2) A facility enrolling as a Medicaid provider must meet this 
requirement at the time it executes a provider agreement with the 
Medicaid agency.
    (b) Reporting of serious occurrences. The facility must report each 
serious occurrence to both the State Medicaid agency and, unless 
prohibited by State

[[Page 547]]

law, the State-designated Protection and Advocacy system. Serious 
occurrences that must be reported include a resident's death, a serious 
injury to a resident as defined in Sec. 483.352 of this part, and a 
resident's suicide attempt.
    (1) Staff must report any serious occurrence involving a resident to 
both the State Medicaid agency and the State-designated Protection and 
Advocacy system by no later than close of business the next business day 
after a serious occurrence. The report must include the name of the 
resident involved in the serious occurrence, a description of the 
occurrence, and the name, street address, and telephone number of the 
facility.
    (2) In the case of a minor, the facility must notify the resident's 
parent(s) or legal guardian(s) as soon as possible, and in no case later 
than 24 hours after the serious occurrence.
    (3) Staff must document in the resident's record that the serious 
occurrence was reported to both the State Medicaid agency and the State-
designated Protection and Advocacy system, including the name of the 
person to whom the incident was reported. A copy of the report must be 
maintained in the resident's record, as well as in the incident and 
accident report logs kept by the facility.
    (c) Reporting of deaths. In addition to the reporting requirements 
contained in paragraph (b) of this section, facilities must report the 
death of any resident to the Centers for Medicare & Medicaid Services 
(CMS) regional office.
    (1) Staff must report the death of any resident to the CMS regional 
office by no later than close of business the next business day after 
the resident's death.
    (2) Staff must document in the resident's record that the death was 
reported to the CMS regional office.

[66 FR 7161, Jan. 22, 2001, as amended at 66 FR 28117, May 22, 2001]



Sec. 483.376  Education and training.

    (a) The facility must require staff to have ongoing education, 
training, and demonstrated knowledge of--
    (1) Techniques to identify staff and resident behaviors, events, and 
environmental factors that may trigger emergency safety situations;
    (2) The use of nonphysical intervention skills, such as de-
escalation, mediation conflict resolution, active listening, and verbal 
and observational methods, to prevent emergency safety situations; and
    (3) The safe use of restraint and the safe use of seclusion, 
including the ability to recognize and respond to signs of physical 
distress in residents who are restrained or in seclusion.
    (b) Certification in the use of cardiopulmonary resuscitation, 
including periodic recertification, is required.
    (c) Individuals who are qualified by education, training, and 
experience must provide staff training.
    (d) Staff training must include training exercises in which staff 
members successfully demonstrate in practice the techniques they have 
learned for managing emergency safety situations.
    (e) Staff must be trained and demonstrate competency before 
participating in an emergency safety intervention.
    (f) Staff must demonstrate their competencies as specified in 
paragraph (a) of this section on a semiannual basis and their 
competencies as specified in paragraph (b) of this section on an annual 
basis.
    (g) The facility must document in the staff personnel records that 
the training and demonstration of competency were successfully 
completed. Documentation must include the date training was completed 
and the name of persons certifying the completion of training.
    (h) All training programs and materials used by the facility must be 
available for review by CMS, the State Medicaid agency, and the State 
survey agency.

Subpart H [Reserved]



Subpart I--Conditions of Participation for Intermediate Care Facilities 
                        for the Mentally Retarded

    Source: 53 FR 20496, June 3, 1988. Redesignated at 56 FR 48918, 
Sept. 26, 1991.

[[Page 548]]



Sec. 483.400  Basis and purpose.

    This subpart implements section 1905 (c) and (d) of the Act which 
gives the Secretary authority to prescribe regulations for intermediate 
care facility services in facilities for the mentally retarded or 
persons with related conditions.



Sec. 483.405  Relationship to other HHS regulations.

    In addition to compliance with the regulations set forth in this 
subpart, facilities are obliged to meet the applicable provisions of 
other HHS regulations, including but not limited to those pertaining to 
nondiscrimination on the basis of race, color, or national origin (45 
CFR Part 80), nondiscrimination on the basis of handicap (45 CFR Part 
84), nondiscrimination on the basis of age (45 CFR Part 91), protection 
of human subjects of research (45 CFR Part 46), and fraud and abuse (42 
CFR Part 455). Although those regulations are not in themselves 
considered conditions of participation under this Part, their violation 
may result in the termination or suspension of, or the refusal to grant 
or continue, Federal financial assistance.



Sec. 483.410  Condition of participation: Governing body and management.

    (a) Standard: Governing body. The facility must identify an 
individual or individuals to constitute the governing body of the 
facility. The governing body must--
    (1) Exercise general policy, budget, and operating direction over 
the facility;
    (2) Set the qualifications (in addition to those already set by 
State law, if any) for the administrator of the facility; and
    (3) Appoint the administrator of the facility.
    (b) Standard: Compliance with Federal, State, and local laws. The 
facility must be in compliance with all applicable provisions of 
Federal, State and local laws, regulations and codes pertaining to 
health, safety, and sanitation.
    (c) Standard: Client records. (1) The facility must develop and 
maintain a recordkeeping system that includes a separate record for each 
client and that documents the client's health care, active treatment, 
social information, and protection of the client's rights.
    (2) The facility must keep confidential all information contained in 
the clients' records, regardless of the form or storage method of the 
records.
    (3) The facility must develop and implement policies and procedures 
governing the release of any client information, including consents 
necessary from the client, or parents (if the client is a minor) or 
legal guardian.
    (4) Any individual who makes an entry in a client's record must make 
it legibly, date it, and sign it.
    (5) The facility must provide a legend to explain any symbol or 
abbreviation used in a client's record.
    (6) The facility must provide each identified residential living 
unit with appropriate aspects of each client's record.
    (d) Standard: Services provided under agreements with outside 
sources. (1) If a service required under this subpart is not provided 
directly, the facility must have a written agreement with an outside 
program, resource, or service to furnish the necessary service, 
including emergency and other health care.
    (2) The agreement must--
    (i) Contain the responsibilities, functions, objectives, and other 
terms agreed to by both parties; and
    (ii) Provide that the facility is responsible for assuring that the 
outside services meet the standards for quality of services contained in 
this subpart.
    (3) The facility must assure that outside services meet the needs of 
each client.
    (4) If living quarters are not provided in a facility owned by the 
ICF/MR, the ICF/MR remains directly responsible for the standards 
relating to physical environment that are specified in Sec. 483.470 (a) 
through (g), (j) and (k).
    (e) Standard: Licensure. The facility must be licensed under 
applicable State and local law.

[53 FR 20496, June 3, 1988. Redesignated at 56 FR 48918, Sept. 26, 1991, 
and amended at 57 FR 43925, Sept. 23, 1992]



Sec. 483.420  Condition of participation: Client protections.

    (a) Standard: Protection of clients' rights. The facility must 
ensure the

[[Page 549]]

rights of all clients. Therefore, the facility must--
    (1) Inform each client, parent (if the client is a minor), or legal 
guardian, of the client's rights and the rules of the facility;
    (2) Inform each client, parent (if the client is a minor), or legal 
guardian, of the client's medical condition, developmental and 
behavioral status, attendant risks of treatment, and of the right to 
refuse treatment;
    (3) Allow and encourage individual clients to exercise their rights 
as clients of the facility, and as citizens of the United States, 
including the right to file complaints, and the right to due process;
    (4) Allow individual clients to manage their financial affairs and 
teach them to do so to the extent of their capabilities;
    (5) Ensure that clients are not subjected to physical, verbal, 
sexual or psychological abuse or punishment;
    (6) Ensure that clients are free from unnecessary drugs and physical 
restraints and are provided active treatment to reduce dependency on 
drugs and physical restraints;
    (7) Provide each client with the opportunity for personal privacy 
and ensure privacy during treatment and care of personal needs;
    (8) Ensure that clients are not compelled to perform services for 
the facility and ensure that clients who do work for the facility are 
compensated for their efforts at prevailing wages and commensurate with 
their abilities;
    (9) Ensure clients the opportunity to communicate, associate and 
meet privately with individuals of their choice, and to send and receive 
unopened mail;
    (10) Ensure that clients have access to telephones with privacy for 
incoming and outgoing local and long distance calls except as 
contraindicated by factors identified within their individual program 
plans;
    (11) Ensure clients the opportunity to participate in social, 
religious, and community group activities;
    (12) Ensure that clients have the right to retain and use 
appropriate personal possessions and clothing, and ensure that each 
client is dressed in his or her own clothing each day; and
    (13) Permit a husband and wife who both reside in the facility to 
share a room.
    (b) Standard: Client finances. (1) The facility must establish and 
maintain a system that--
    (i) Assures a full and complete accounting of clients' personal 
funds entrusted to the facility on behalf of clients; and
    (ii) Precludes any commingling of client funds with facility funds 
or with the funds of any person other than another client.
    (2) The client's financial record must be available on request to 
the client, parents (if the client is a minor) or legal guardian.
    (c) Standard: Communication with clients, parents, and guardians. 
The facility must--
    (1) Promote participation of parents (if the client is a minor) and 
legal guardians in the process of providing active treatment to a client 
unless their participation is unobtainable or inappropriate;
    (2) Answer communications from clients' families and friends 
promptly and appropriately;
    (3) Promote visits by individuals with a relationship to the client 
(such as family, close friends, legal guardians and advocates) at any 
reasonable hour, without prior notice, consistent with the right of that 
client's and other clients' privacy, unless the interdisciplinary team 
determines that the visit would not be appropriate;
    (4) Promote visits by parents or guardians to any area of the 
facility that provides direct client care services to the client, 
consistent with the right of that client's and other clients' privacy;
    (5) Promote frequent and informal leaves from the facility for 
visits, trips, or vacations; and
    (6) Notify promptly the client's parents or guardian of any 
significant incidents, or changes in the client's condition including, 
but not limited to, serious illness, accident, death, abuse, or 
unauthorized absence.
    (d) Standard: Staff treatment of clients. (1) The facility must 
develop and implement written policies and procedures that prohibit 
mistreatment, neglect or abuse of the client.

[[Page 550]]

    (i) Staff of the facility must not use physical, verbal, sexual or 
psychological abuse or punishment.
    (ii) Staff must not punish a client by withholding food or hydration 
that contributes to a nutritionally adequate diet.
    (iii) The facility must prohibit the employment of individuals with 
a conviction or prior employment history of child or client abuse, 
neglect or mistreatment.
    (2) The facility must ensure that all allegations of mistreatment, 
neglect or abuse, as well as injuries of unknown source, are reported 
immediately to the administrator or to other officials in accordance 
with State law through established procedures.
    (3) The facility must have evidence that all alleged violations are 
thoroughly investigated and must prevent further potential abuse while 
the investigation is in progress.
    (4) The results of all investigations must be reported to the 
administrator or designated representative or to other officials in 
accordance with State law within five working days of the incident and, 
if the alleged violation is verified, appropriate corrective action must 
be taken.



Sec. 483.430  Condition of participation: Facility staffing.

    (a) Standard: Qualified mental retardation professional. Each 
client's active treatment program must be integrated, coordinated and 
monitored by a qualified mental retardation professional who--
    (1) Has at least one year of experience working directly with 
persons with mental retardation or other developmental disabilities; and
    (2) Is one of the following:
    (i) A doctor of medicine or osteopathy.
    (ii) A registered nurse.
    (iii) An individual who holds at least a bachelor's degree in a 
professional category specified in paragraph (b)(5) of this section.
    (b) Standard: Professional program services. (1) Each client must 
receive the professional program services needed to implement the active 
treatment program defined by each client's individual program plan. 
Professional program staff must work directly with clients and with 
paraprofessional, nonprofessional and other professional program staff 
who work with clients.
    (2) The facility must have available enough qualified professional 
staff to carry out and monitor the various professional interventions in 
accordance with the stated goals and objectives of every individual 
program plan.
    (3) Professional program staff must participate as members of the 
interdisciplinary team in relevant aspects of the active treatment 
process.
    (4) Professional program staff must participate in on-going staff 
development and training in both formal and informal settings with other 
professional, paraprofessional, and nonprofessional staff members.
    (5) Professional program staff must be licensed, certified, or 
registered, as applicable, to provide professional services by the State 
in which he or she practices. Those professional program staff who do 
not fall under the jurisdiction of State licensure, certification, or 
registration requirements, specified in Sec. 483.410(b), must meet the 
following qualifications:
    (i) To be designated as an occupational therapist, an individual 
must be eligible for certification as an occupational therapist by the 
American Occupational Therapy Association or another comparable body.
    (ii) To be designated as an occupational therapy assistant, an 
individual must be eligible for certification as a certified 
occupational therapy assistant by the American Occupational Therapy 
Association or another comparable body.
    (iii) To be designated as a physical therapist, an individual must 
be eligible for certification as a physical therapist by the American 
Physical Therapy Association or another comparable body.
    (iv) To be designated as a physical therapy assistant, an individual 
must be eligible for registration by the American Physical Therapy 
Association or be a graduate of a two year college-level program 
approved by the American Physical Therapy Association or another 
comparable body.
    (v) To be designated as a psychologist, an individual must have at 
least a

[[Page 551]]

master's degree in psychology from an accredited school.
    (vi) To be designated as a social worker, an individual must--
    (A) Hold a graduate degree from a school of social work accredited 
or approved by the Council on Social Work Education or another 
comparable body; or
    (B) Hold a Bachelor of Social Work degree from a college or 
university accredited or approved by the Council on Social Work 
Education or another comparable body.
    (vii) To be designated as a speech-language pathologist or 
audiologist, an individual must--
    (A) Be eligible for a Certificate of Clinical Competence in Speech-
Language Pathology or Audiology granted by the American Speech-Language-
Hearing Association or another comparable body; or
    (B) Meet the educational requirements for certification and be in 
the process of accumulating the supervised experience required for 
certification.
    (viii) To be designated as a professional recreation staff member, 
an individual must have a bachelor's degree in recreation or in a 
specialty area such as art, dance, music or physical education.
    (ix) To be designated as a professional dietitian, an individual 
must be eligible for registration by the American Dietetics Association.
    (x) To be designated as a human services professional an individual 
must have at least a bachelor's degree in a human services field 
(including, but not limited to: sociology, special education, 
rehabilitation counseling, and psychology).
    (xi) If the client's individual program plan is being successfully 
implemented by facility staff, professional program staff meeting the 
qualifications of paragraph (b)(5) (i) through (x) of this section are 
not required--
    (A) Except for qualified mental retardation professionals;
    (B) Except for the requirements of paragraph (b)(2) of this section 
concerning the facility's provision of enough qualified professional 
program staff; and
    (C) Unless otherwise specified by State licensure and certification 
requirements.
    (c) Standard: Facility staffing. (1) The facility must not depend 
upon clients or volunteers to perform direct care services for the 
facility.
    (2) There must be responsible direct care staff on duty and awake on 
a 24-hour basis, when clients are present, to take prompt, appropriate 
action in case of injury, illness, fire or other emergency, in each 
defined residential living unit housing--
    (i) Clients for whom a physician has ordered a medical care plan;
    (ii) Clients who are aggressive, assaultive or security risks;
    (iii) More than 16 clients; or
    (iv) Fewer than 16 clients within a multi-unit building.
    (3) There must be a responsible direct care staff person on duty on 
a 24 hour basis (when clients are present) to respond to injuries and 
symptoms of illness, and to handle emergencies, in each defined 
residential living unit housing--
    (i) Clients for whom a physician has not ordered a medical care 
plan;
    (ii) Clients who are not aggressive, assaultive or security risks; 
and
    (iii) Sixteen or fewer clients,
    (4) The facility must provide sufficient support staff so that 
direct care staff are not required to perform support services to the 
extent that these duties interfere with the exercise of their primary 
direct client care duties.
    (d) Standard: Direct care (residential living unit) staff. (1) The 
facility must provide sufficient direct care staff to manage and 
supervise clients in accordance with their individual program plans.
    (2) Direct care staff are defined as the present on-duty staff 
calculated over all shifts in a 24-hour period for each defined 
residential living unit.
    (3) Direct care staff must be provided by the facility in the 
following minimum ratios of direct care staff to clients:
    (i) For each defined residential living unit serving children under 
the age of 12, severely and profoundly retarded clients, clients with 
severe physical disabilities, or clients who are aggressive, assaultive, 
or security risks, or

[[Page 552]]

who manifest severely hyperactive or psychotic-like behavior, the staff 
to client ratio is 1 to 3.2.
    (ii) For each defined residential living unit serving moderately 
retarded clients, the staff to client ratio is 1 to 4.
    (iii) For each defined residential living unit serving clients who 
function within the range of mild retardation, the staff to client ratio 
is 1 to 6.4.
    (4) When there are no clients present in the living unit, a 
responsible staff member must be available by telephone.
    (e) Standard: Staff training program. (1) The facility must provide 
each employee with initial and continuing training that enables the 
employee to perform his or her duties effectively, efficiently, and 
competently.
    (2) For employees who work with clients, training must focus on 
skills and competencies directed toward clients' developmental, 
behavioral, and health needs.
    (3) Staff must be able to demonstrate the skills and techniques 
necessary to administer interventions to manage the inappropriate 
behavior of clients.
    (4) Staff must be able to demonstrate the skills and techniques 
necessary to implement the individual program plans for each client for 
whom they are responsible.



Sec. 483.440  Condition of participation: Active treatment services.

    (a) Standard: Active treatment. (1) Each client must receive a 
continuous active treatment program, which includes aggressive, 
consistent implementation of a program of specialized and generic 
training, treatment, health services and related services described in 
this subpart, that is directed toward--
    (i) The acquisition of the behaviors necessary for the client to 
function with as much self determination and independence as possible; 
and
    (ii) The prevention or deceleration of regression or loss of current 
optimal functional status.
    (2) Active treatment does not include services to maintain generally 
independent clients who are able to function with little supervision or 
in the absence of a continuous active treatment program.
    (b) Standard: Admissions, transfers, and discharge. (1) Clients who 
are admitted by the facility must be in need of and receiving active 
treatment services.
    (2) Admission decisions must be based on a preliminary evaluation of 
the client that is conducted or updated by the facility or by outside 
sources.
    (3) A preliminary evaluation must contain background information as 
well as currently valid assessments of functional developmental, 
behavioral, social, health and nutritional status to determine if the 
facility can provide for the client's needs and if the client is likely 
to benefit from placement in the facility.
    (4) If a client is to be either transferred or discharged, the 
facility must--
    (i) Have documentation in the client's record that the client was 
transferred or discharged for good cause; and
    (ii) Provide a reasonable time to prepare the client and his or her 
parents or guardian for the transfer or discharge (except in 
emergencies).
    (5) At the time of the discharge, the facility must--
    (i) Develop a final summary of the client's developmental, 
behavioral, social, health and nutritional status and, with the consent 
of the client, parents (if the client is a minor) or legal guardian, 
provide a copy to authorized persons and agencies; and
    (ii) Provide a post-discharge plan of care that will assist the 
client to adjust to the new living environment.
    (c) Standard: Individual program plan. (1) Each client must have an 
individual program plan developed by an interdisciplinary team that 
represents the professions, disciplines or service areas that are 
relevant to--
    (i) Identifying the client's needs, as described by the 
comprehensive functional assessments required in paragraph (c)(3) of 
this section; and
    (ii) Designing programs that meet the client's needs.
    (2) Appropriate facility staff must participate in interdisciplinary 
team meetings. Participation by other agencies serving the client is 
encouraged. Participation by the client, his or her

[[Page 553]]

parent (if the client is a minor), or the client's legal guardian is 
required unless that participation is unobtainable or inappropriate.
    (3) Within 30 days after admission, the interdisciplinary team must 
perform accurate assessments or reassessments as needed to supplement 
the preliminary evaluation conducted prior to admission. The 
comprehensive functional assessment must take into consideration the 
client's age (for example, child, young adult, elderly person) and the 
implications for active treatment at each stage, as applicable, and 
must--
    (i) Identify the presenting problems and disabilities and where 
possible, their causes;
    (ii) Identify the client's specific developmental strengths;
    (iii) Identify the client's specific developmental and behavioral 
management needs;
    (iv) Identify the client's need for services without regard to the 
actual availability of the services needed; and
    (v) Include physical development and health, nutritional status, 
sensorimotor development, affective development, speech and language 
development and auditory functioning, cognitive development, social 
development, adaptive behaviors or independent living skills necessary 
for the client to be able to function in the community, and as 
applicable, vocational skills.
    (4) Within 30 days after admission, the interdisciplinary team must 
prepare for each client an individual program plan that states the 
specific objectives necessary to meet the client's needs, as identified 
by the comprehensive assessment required by paragraph (c)(3) of this 
section, and the planned sequence for dealing with those objectives. 
These objectives must--
    (i) Be stated separately, in terms of a single behavioral outcome;
    (ii) Be assigned projected completion dates;
    (iii) Be expressed in behavioral terms that provide measurable 
indices of performance;
    (iv) Be organized to reflect a developmental progression appropriate 
to the individual; and
    (v) Be assigned priorities.
    (5) Each written training program designed to implement the 
objectives in the individual program plan must specify:
    (i) The methods to be used;
    (ii) The schedule for use of the method;
    (iii) The person responsible for the program;
    (iv) The type of data and frequency of data collection necessary to 
be able to assess progress toward the desired objectives;
    (v) The inappropriate client behavior(s), if applicable; and
    (vi) Provision for the appropriate expression of behavior and the 
replacement of inappropriate behavior, if applicable, with behavior that 
is adaptive or appropriate.
    (6) The individual program plan must also:
    (i) Describe relevant interventions to support the individual toward 
independence.
    (ii) Identify the location where program strategy information (which 
must be accessible to any person responsible for implementation) can be 
found.
    (iii) Include, for those clients who lack them, training in personal 
skills essential for privacy and independence (including, but not 
limited to, toilet training, personal hygiene, dental hygiene, self-
feeding, bathing, dressing, grooming, and communication of basic needs), 
until it has been demonstrated that the client is developmentally 
incapable of acquiring them.
    (iv) Identify mechanical supports, if needed, to achieve proper body 
position, balance, or alignment. The plan must specify the reason for 
each support, the situations in which each is to be applied, and a 
schedule for the use of each support.
    (v) Provide that clients who have multiple disabling conditions 
spend a major portion of each waking day out of bed and outside the 
bedroom area, moving about by various methods and devices whenever 
possible.
    (vi) Include opportunities for client choice and self-management.
    (7) A copy of each client's individual program plan must be made 
available to all relevant staff, including staff of

[[Page 554]]

other agencies who work with the client, and to the client, parents (if 
the client is a minor) or legal guardian.
    (d) Standard: Program implementation. (1) As soon as the 
interdisciplinary team has formulated a client's individual program 
plan, each client must receive a continuous active treatment program 
consisting of needed interventions and services in sufficient number and 
frequency to support the achievement of the objectives identified in the 
individual program plan.
    (2) The facility must develop an active treatment schedule that 
outlines the current active treatment program and that is readily 
available for review by relevant staff.
    (3) Except for those facets of the individual program plan that must 
be implemented only by licensed personnel, each client's individual 
program plan must be implemented by all staff who work with the client, 
including professional, paraprofessional and nonprofessional staff.
    (e) Standard: Program documentation. (1) Data relative to 
accomplishment of the criteria specified in client individual program 
plan objectives must be documented in measureable terms.
    (2) The facility must document significant events that are related 
to the client's individual program plan and assessments and that 
contribute to an overall understanding of the client's ongoing level and 
quality of functioning.
    (f) Standard: Program monitoring and change. (1) The individual 
program plan must be reviewed at least by the qualified mental 
retardation professional and revised as necessary, including, but not 
limited to situations in which the client--
    (i) Has successfully completed an objective or objectives identified 
in the individual program plan;
    (ii) Is regressing or losing skills already gained;
    (iii) Is failing to progress toward identified objectives after 
reasonable efforts have been made; or
    (iv) Is being considered for training towards new objectives.
    (2) At least annually, the comprehensive functional assessment of 
each client must be reviewed by the interdisciplinary team for relevancy 
and updated as needed, and the individual program plan must be revised, 
as appropriate, repeating the process set forth in paragraph (c) of this 
section.
    (3) The facility must designate and use a specially constituted 
committee or committees consisting of members of facility staff, 
parents, legal guardians, clients (as appropriate), qualified persons 
who have either experience or training in contemporary practices to 
change inappropriate client behavior, and persons with no ownership or 
controlling interest in the facility to--
    (i) Review, approve, and monitor individual programs designed to 
manage inappropriate behavior and other programs that, in the opinion of 
the committee, involve risks to client protection and rights;
    (ii) Insure that these programs are conducted only with the written 
informed consent of the client, parent (if the client is a minor), or 
legal guardian; and
    (iii) Review, monitor and make suggestions to the facility about its 
practices and programs as they relate to drug usage, physical 
restraints, time-out rooms, application of painful or noxious stimuli, 
control of inappropriate behavior, protection of client rights and 
funds, and any other area that the committee believes need to be 
addressed.
    (4) The provisions of paragraph (f)(3) of this section may be 
modified only if, in the judgment of the State survey agency, Court 
decrees, State law or regulations provide for equivalent client 
protection and consultation.



Sec. 483.450  Condition of participation: Client behavior and facility practices.

    (a) Standard: Facility practices--Conduct toward clients. (1) The 
facility must develop and implement written policies and procedures for 
the management of conduct between staff and clients. These policies and 
procedures must--
    (i) Promote the growth, development and independence of the client;
    (ii) Address the extent to which client choice will be accommodated 
in daily decision-making, emphasizing self-determination and self-
management, to the extent possible;

[[Page 555]]

    (iii) Specify client conduct to be allowed or not allowed; and
    (iv) Be available to all staff, clients, parents of minor children, 
and legal guardians.
    (2) To the extent possible, clients must participate in the 
formulation of these policies and procedures.
    (3) Clients must not discipline other clients, except as part of an 
organized system of self-government, as set forth in facility policy.
    (b) Standard: Management of inappropriate client behavior. (1) The 
facility must develop and implement written policies and procedures that 
govern the management of inappropriate client behavior. These policies 
and procedures must be consistent with the provisions of paragraph (a) 
of this section. These procedures must--
    (i) Specify all facility approved interventions to manage 
inappropriate client behavior;
    (ii) Designate these interventions on a hierarchy to be implemented, 
ranging from most positive or least intrusive, to least positive or most 
intrusive;
    (iii) Insure, prior to the use of more restrictive techniques, that 
the client's record documents that programs incorporating the use of 
less intrusive or more positive techniques have been tried 
systematically and demonstrated to be ineffective; and
    (iv) Address the following:
    (A) The use of time-out rooms.
    (B) The use of physical restraints.
    (C) The use of drugs to manage inappropriate behavior.
    (D) The application of painful or noxious stimuli.
    (E) The staff members who may authorize the use of specified 
interventions.
    (F) A mechanism for monitoring and controlling the use of such 
interventions.
    (2) Interventions to manage inappropriate client behavior must be 
employed with sufficient safeguards and supervision to ensure that the 
safety, welfare and civil and human rights of clients are adequately 
protected.
    (3) Techniques to manage inappropriate client behavior must never be 
used for disciplinary purposes, for the convenience of staff or as a 
substitute for an active treatment program.
    (4) The use of systematic interventions to manage inappropriate 
client behavior must be incorporated into the client's individual 
program plan, in accordance with Sec. 483.440(c) (4) and (5) of this 
subpart.
    (5) Standing or as needed programs to control inappropriate behavior 
are not permitted.
    (c) Standard: Time-out rooms. (1) A client may be placed in a room 
from which egress is prevented only if the following conditions are met:
    (i) The placement is a part of an approved systematic time-out 
program as required by paragraph (b) of this section. (Thus, emergency 
placement of a client into a time-out room is not allowed.)
    (ii) The client is under the direct constant visual supervision of 
designated staff.
    (iii) The door to the room is held shut by staff or by a mechanism 
requiring constant physical pressure from a staff member to keep the 
mechanism engaged.
    (2) Placement of a client in a time-out room must not exceed one 
hour.
    (3) Clients placed in time-out rooms must be protected from 
hazardous conditions including, but not limited to, presence of sharp 
corners and objects, uncovered light fixtures, unprotected electrical 
outlets.
    (4) A record of time-out activities must be kept.
    (d) Standard: Physical restraints. (1) The facility may employ 
physical restraint only--
    (i) As an integral part of an individual program plan that is 
intended to lead to less restrictive means of managing and eliminating 
the behavior for which the restraint is applied;
    (ii) As an emergency measure, but only if absolutely necessary to 
protect the client or others from injury; or
    (iii) As a health-related protection prescribed by a physician, but 
only if absolutely necessary during the conduct of a specific medical or 
surgical procedure, or only if absolutely necessary for client 
protection during the time that a medical condition exists.
    (2) Authorizations to use or extend restraints as an emergency must 
be:
    (i) In effect no longer than 12 consecutive hours; and

[[Page 556]]

    (ii) Obtained as soon as the client is restrained or stable.
    (3) The facility must not issue orders for restraint on a standing 
or as needed basis.
    (4) A client placed in restraint must be checked at least every 30 
minutes by staff trained in the use of restraints, released from the 
restraint as quickly as possible, and a record of these checks and usage 
must be kept.
    (5) Restraints must be designed and used so as not to cause physical 
injury to the client and so as to cause the least possible discomfort.
    (6) Opportunity for motion and exercise must be provided for a 
period of not less than 10 minutes during each two hour period in which 
restraint is employed, and a record of such activity must be kept.
    (7) Barred enclosures must not be more than three feet in height and 
must not have tops.
    (e) Standard: Drug usage. (1) The facility must not use drugs in 
doses that interfere with the individual client's daily living 
activities.
    (2) Drugs used for control of inappropriate behavior must be 
approved by the interdisciplinary team and be used only as an integral 
part of the client's individual program plan that is directed 
specifically towards the reduction of and eventual elimination of the 
behaviors for which the drugs are employed.
    (3) Drugs used for control of inappropriate behavior must not be 
used until it can be justified that the harmful effects of the behavior 
clearly outweigh the potentially harmful effects of the drugs.
    (4) Drugs used for control of inappropriate behavior must be--
    (i) Monitored closely, in conjunction with the physician and the 
drug regimen review requirement at Sec. 483.460(j), for desired 
responses and adverse consequences by facility staff; and
    (ii) Gradually withdrawn at least annually in a carefully monitored 
program conducted in conjunction with the interdisciplinary team, unless 
clinical evidence justifies that this is contraindicated.



Sec. 483.460  Condition of participation: Health care services.

    (a) Standard: Physician services.
    (1) The facility must ensure the availability of physician services 
24 hours a day.
    (2) The physician must develop, in coordination with licensed 
nursing personnel, a medical care plan of treatment for a client if the 
physician determines that an individual client requires 24-hour licensed 
nursing care. This plan must be integrated in the individual program 
plan.
    (3) The facility must provide or obtain preventive and general 
medical care as well as annual physical examinations of each client that 
at a minimum include the following:
    (i) Evaluation of vision and hearing.
    (ii) Immunizations, using as a guide the recommendations of the 
Public Health Service Advisory Commitee on Immunization Practices or of 
the Committee on the Control of Infectious Diseases of the American 
Academy of Pediatrics.
    (iii) Routine screening laboratory examinations as determined 
necessary by the physician, and special studies when needed.
    (iv) Tuberculosis control, appropriate to the facility's population, 
and in accordance with the recommendations of the American College of 
Chest Physicians or the section of diseases of the chest of the American 
Academy of Pediatrics, or both.
    (4) To the extent permitted by State law, the facility may utilize 
physician assistants and nurse practitioners to provide physician 
services as described in this section.
    (b) Standard: Physician participation in the individual program 
plan. A physician must participate in--
    (1) The establishment of each newly admitted client's initial 
individual program plan as required by Sec. 456.380 of this chapter that 
specified plan of care requirements for ICFs; and
    (2) If appropriate, physicians must participate in the review and 
update of an individual program plan as part of the interdisciplinary 
team process either in person or through written report to the 
interdisciplinary team.

[[Page 557]]

    (c) Standard: Nursing services. The facility must provide clients 
with nursing services in accordance with their needs. These services 
must include--
    (1) Participation as appropriate in the development, review, and 
update of an individual program plan as part of the interdisciplinary 
team process;
    (2) The development, with a physician, of a medical care plan of 
treatment for a client when the physician has determined that an 
individual client requires such a plan;
    (3) For those clients certified as not needing a medical care plan, 
a review of their health status which must--
    (i) Be by a direct physical examination;
    (ii) Be by a licensed nurse;
    (iii) Be on a quarterly or more frequent basis depending on client 
need;
    (iv) Be recorded in the client's record; and
    (v) Result in any necessary action (including referral to a 
physician to address client health problems).
    (4) Other nursing care as prescribed by the physician or as 
identified by client needs; and
    (5) Implementing, with other members of the interdisciplinary team, 
appropriate protective and preventive health measures that include, but 
are not limited to--
    (i) Training clients and staff as needed in appropriate health and 
hygiene methods;
    (ii) Control of communicable diseases and infections, including the 
instruction of other personnel in methods of infection control; and
    (iii) Training direct care staff in detecting signs and symptoms of 
illness or dysfunction, first aid for accidents or illness, and basic 
skills required to meet the health needs of the clients.
    (d) Standard: Nursing staff. (1) Nurses providing services in the 
facility must have a current license to practice in the State.
    (2) The facility must employ or arrange for licensed nursing 
services sufficient to care for clients health needs including those 
clients with medical care plans.
    (3) The facility must utilize registered nurses as appropriate and 
required by State law to perform the health services specified in this 
section.
    (4) If the facility utilizes only licensed practical or vocational 
nurses to provide health services, it must have a formal arrangement 
with a registered nurse to be available for verbal or onsite 
consultation to the licensed practical or vocational nurse.
    (5) Non-licensed nursing personnel who work with clients under a 
medical care plan must do so under the supervision of licensed persons.
    (e) Standard: Dental services. (1) The facility must provide or make 
arrangements for comprehensive diagnostic and treatment services for 
each client from qualified personnel, including licensed dentists and 
dental hygienists either through organized dental services in-house or 
through arrangement.
    (2) If appropriate, dental professionals must participate, in the 
development, review and update of an individual program plan as part of 
the interdisciplinary process either in person or through written report 
to the interdisciplinary team.
    (3) The facility must provide education and training in the 
maintenance of oral health.
    (f) Standard: Comprehensive dental diagnostic services. 
Comprehensive dental diagnostic services include--
    (1) A complete extraoral and intraoral examination, using all 
diagnostic aids necessary to properly evaluate the client's oral 
condition, not later than one month after admission to the facility 
(unless the examination was completed within twelve months before 
admission);
    (2) Periodic examination and diagnosis performed at least annually, 
including radiographs when indicated and detection of manifestations of 
systemic disease; and
    (3) A review of the results of examination and entry of the results 
in the client's dental record.
    (g) Standard: Comprehensive dental treatment. The facility must 
ensure comprehensive dental treatment services that include--
    (1) The availability for emergency dental treatment on a 24-hour-a-
day basis by a licensed dentist; and
    (2) Dental care needed for relief of pain and infections, 
restoration of

[[Page 558]]

teeth, and maintenance of dental health.
    (h) Standard: Documentation of dental services. (1) If the facility 
maintains an in-house dental service, the facility must keep a permanent 
dental record for each client, with a dental summary maintained in the 
client's living unit.
    (2) If the facility does not maintain an in-house dental service, 
the facility must obtain a dental summary of the results of dental 
visits and maintain the summary in the client's living unit.
    (i) Standard: Pharmacy services. The facility must provide or make 
arrangements for the provision of routine and emergency drugs and 
biologicals to its clients. Drugs and biologicals may be obtained from 
community or contract pharmacists or the facility may maintain a 
licensed pharmacy.
    (j) Standard: Drug regimen review. (1) A pharmacist with input from 
the interdisciplinary team must review the drug regimen of each client 
at least quarterly.
    (2) The pharmacist must report any irregularities in clients' drug 
regimens to the prescribing physician and interdisciplinary team.
    (3) The pharmacist must prepare a record of each client's drug 
regimen reviews and the facility must maintain that record.
    (4) An individual medication administration record must be 
maintained for each client.
    (5) As appropriate the pharmacist must participate in the 
development, implementation, and review of each client's individual 
program plan either in person or through written report to the 
interdisciplinary team.
    (k) Standard: Drug administration. The facility must have an 
organized system for drug administration that identifies each drug up to 
the point of administration. The system must assure that--
    (1) All drugs are administered in compliance with the physician's 
orders;
    (2) All drugs, including those that are self-administered, are 
administered without error;
    (3) Unlicensed personnel are allowed to administer drugs only if 
State law permits;
    (4) Clients are taught how to administer their own medications if 
the interdisciplinary team determines that self administration of 
medications is an appropriate objective, and if the physician does not 
specify otherwise;
    (5) The client's physician is informed of the interdisciplinary 
team's decision that self-administration of medications is an objective 
for the client;
    (6) No client self-administers medications until he or she 
demonstrates the competency to do so;
    (7) Drugs used by clients while not under the direct care of the 
facility are packaged and labeled in accordance with State law; and
    (8) Drug administration errors and adverse drug reactions are 
recorded and reported immediately to a physician.
    (l) Standard: Drug storage and recordkeeping. (1) The facility must 
store drugs under proper conditions of sanitation, temperature, light, 
humidity, and security.
    (2) The facility must keep all drugs and biologicals locked except 
when being prepared for administration. Only authorized persons may have 
access to the keys to the drug storage area. Clients who have been 
trained to self administer drugs in accordance with Sec. 483.460(k)(4) 
may have access to keys to their individual drug supply.
    (3) The facility must maintain records of the receipt and 
disposition of all controlled drugs.
    (4) The facility must, on a sample basis, periodically reconcile the 
receipt and disposition of all controlled drugs in schedules II through 
IV (drugs subject to the Comprehensive Drug Abuse Prevention and Control 
Act of 1970, 21 U.S.C. 801 et seq., as implemented by 21 CFR part 308).
    (5) If the facility maintains a licensed pharmacy, the facility must 
comply with the regulations for controlled drugs.
    (m) Standard: Drug labeling. (1) Labeling of drugs and biologicals 
must--
    (i) Be based on currently accepted professional principles and 
practices; and
    (ii) Include the appropriate accessory and cautionary instructions, 
as well as the expiration date, if applicable.
    (2) The facility must remove from use--
    (i) Outdated drugs; and

[[Page 559]]

    (ii) Drug containers with worn, illegible, or missing labels.
    (3) Drugs and biologicals packaged in containers designated for a 
particular client must be immediately removed from the client's current 
medication supply if discontinued by the physician.
    (n) Standard: Laboratory services. (1) If a facility chooses to 
provide laboratory services, the laboratory must meet the requirements 
specified in part 493 of this chapter.
    (2) If the laboratory chooses to refer specimens for testing to 
another laboratory, the referral laboratory must be certified in the 
appropriate specialties and subspecialities of service in accordance 
with the requirements of part 493 of this chapter.

[53 FR 20496, June 3, 1988, as amended at 57 FR 7136, Feb. 28, 1992]



Sec. 483.470  Condition of participation: Physical environment.

    (a) Standard: Client living environment. (1) The facility must not 
house clients of grossly different ages, developmental levels, and 
social needs in close physical or social proximity unless the housing is 
planned to promote the growth and development of all those housed 
together.
    (2) The facility must not segregate clients solely on the basis of 
their physical disabilities. It must integrate clients who have 
ambulation deficits or who are deaf, blind, or have seizure disorders, 
etc., with others of comparable social and intellectual development.
    (b) Standard: Client bedrooms. (1) Bedrooms must--
    (i) Be rooms that have at least one outside wall;
    (ii) Be equipped with or located near toilet and bathing facilities;
    (iii) Accommodate no more than four clients unless granted a 
variance under paragraph (b)(3) of this section;
    (iv) Measure at least 60 square feet per client in multiple client 
bedrooms and at least 80 square feet in single client bedrooms; and
    (v) In all facilities initially certified, or in buildings 
constructed or with major renovations or conversions on or after October 
3, 1988, have walls that extend from floor to ceiling.
    (2) If a bedroom is below grade level, it must have a window that--
    (i) Is usable as a second means of escape by the client(s) occupying 
the room; and
    (ii) Is no more than 44 inches (measured to the window sill) above 
the floor unless the facility is surveyed under the Health Care 
Occupancy Chapter of the Life Safety Code, in which case the window must 
be no more than 36 inches (measured to the window sill) above the floor.
    (3) The survey agency may grant a variance from the limit of four 
clients per room only if a physician who is a member of the 
interdisciplinary team and who is a qualified mental retardation 
professional--
    (i) Certifies that each client to be placed in a bedroom housing 
more than four persons is so severely medically impaired as to require 
direct and continuous monitoring during sleeping hours; and
    (ii) Documents the reasons why housing in a room of only four or 
fewer persons would not be medically feasible.
    (4) The facility must provide each client with--
    (i) A separate bed of proper size and height for the convenience of 
the client;
    (ii) A clean, comfortable, mattress;
    (iii) Bedding appropriate to the weather and climate; and
    (iv) Functional furniture appropriate to the client's needs, and 
individual closet space in the client's bedroom with clothes racks and 
shelves accessible to the client.
    (c) Standard: Storage space in bedroom. The facility must provide--
    (1) Space and equipment for daily out-of-bed activity for all 
clients who are not yet mobile, except those who have a short-term 
illness or those few clients for whom out-of-bed activity is a threat to 
health and safety; and
    (2) Suitable storage space, accessible to clients, for personal 
possessions, such as TVs, radios, prosthetic equipment and clothing.
    (d) Standard: Client bathrooms. The facility must--
    (1) Provide toilet and bathing facilities appropriate in number, 
size, and design to meet the needs of the clients;

[[Page 560]]

    (2) Provide for individual privacy in toilets, bathtubs, and 
showers; and
    (3) In areas of the facility where clients who have not been trained 
to regulate water temperature are exposed to hot water, ensure that the 
temperature of the water does not exceed 110[deg] Fahrenheit.
    (e) Standard: Heating and ventilation. (1) Each client bedroom in 
the facility must have--
    (i) At least one window to the outside; and
    (ii) Direct outside ventilation by means of windows, air 
conditioning, or mechanical ventilation.
    (2) The facility must--
    (i) Maintain the temperature and humidity within a normal comfort 
range by heating, air conditioning or other means; and
    (ii) Ensure that the heating apparatus does not constitute a burn or 
smoke hazard to clients.
    (f) Standard: Floors. The facility must have--
    (1) Floors that have a resilient, nonabrasive, and slip-resistant 
surface;
    (2) Nonabrasive carpeting, if the area used by clients is carpeted 
and serves clients who lie on the floor or ambulate with parts of their 
bodies, other than feet, touching the floor; and
    (3) Exposed floor surfaces and floor coverings that promote mobility 
in areas used by clients, and promote maintenance of sanitary 
conditions.
    (g) Standard: Space and equipment. The facility must--
    (1) Provide sufficient space and equipment in dining, living, health 
services, recreation, and program areas (including adequately equipped 
and sound treated areas for hearing and other evaluations if they are 
conducted in the facility) to enable staff to provide clients with 
needed services as required by this subpart and as identified in each 
client's individual program plan.
    (2) Furnish, maintain in good repair, and teach clients to use and 
to make informed choices about the use of dentures, eyeglasses, hearing 
and other communications aids, braces, and other devices identified by 
the interdisciplinary team as needed by the client.
    (3) Provide adequate clean linen and dirty linen storage areas.
    (h) Standard: Emergency plan and procedures. (1) The facility must 
develop and implement detailed written plans and procedures to meet all 
potential emergencies and disasters such as fire, severe weather, and 
missing clients.
    (2) The facility must communicate, periodically review, make the 
plan available, and provide training to the staff.
    (i) Standard: Evacuation drills. (1) The facility must hold 
evacuation drills at least quarterly for each shift of personnel and 
under varied conditions to--
    (i) Ensure that all personnel on all shifts are trained to perform 
assigned tasks;
    (ii) Ensure that all personnel on all shifts are familiar with the 
use of the facility's fire protection features; and
    (iii) Evaluate the effectiveness of emergency and disaster plans and 
procedures.
    (2) The facility must--
    (i) Actually evacuate clients during at least one drill each year on 
each shift;
    (ii) Make special provisions for the evacuation of clients with 
physical disabilities;
    (iii) File a report and evaluation on each evacuation drill;
    (iv) Investigate all problems with evacuation drills, including 
accidents, and take corrective action; and
    (v) During fire drills, clients may be evacuated to a safe area in 
facilities certified under the Health Care Occupancies Chapter of the 
Life Safety Code.
    (3) Facilities must meet the requirements of paragraphs (i)(1) and 
(2) of this section for any live-in and relief staff they utilize.
    (j) Standard: Fire protection--(1) General. (i) Except as specified 
in paragraph (j)(2) of this section, the facility must meet the 
applicable provisions of either the Health Care Occupancies Chapters or 
the Residential Board and Care Occupancies Chapter of the Life Safety 
Code (LSC) of the National Fire Protection Association, 1985 edition, 
which is incorporated by reference.\2\
---------------------------------------------------------------------------

    \2\ Incorporation of the 1985 edition of the National Fire 
Protection Association's Life Safety Code (published February 7, 1985; 
ANSI/NFPA 101) was approved by the Director of the Federal Register in 
accordance with 5 U.S.C. 552(a) and 1 CFR part 51 that govern the use of 
incorporations by reference. The Code is available for inspection at the 
Office of the Federal Register Information Center, 800 North Capitol 
Street, NW., suite 700, Washington, DC. Copies may be obtained from the 
National Fire Protection Association, Batterymarch Park, Quincy, Mass. 
02269.
    If any changes in this Code are also to be incorporated by 
reference, a notice to that effect will be published in the Federal 
Register.

---------------------------------------------------------------------------

[[Page 561]]

    (ii) The State survey agency may apply a single chapter of the LSC 
to the entire facility or may apply different chapters to different 
buildings or parts of buildings as permitted by the LSC.
    (iii) A facility that meets the LSC definition of a residential 
board and care occupancy and that has 16 or fewer beds, must have its 
evacuation capability evaluated in accordance with the Evacuation 
Difficulty Index of the LSC (appendix F).
    (2) Exceptions. (i) For facilities that meet the LSC definition of a 
health care occupancy:
    (A) The State survey agency may waive, for a period it considers 
appropriate, specific provisions of the LSC if--
    (1) The waiver would not adversely affect the health and safety of 
the clients; and
    (2) Rigid application of specific provisions would result in an 
unreasonable hardship for the facility.
    (B) The State survey agency may apply the State's fire and safety 
code instead of the LSC if the Secretary finds that the State has a code 
imposed by State law that adequately protects a facility's clients.
    (C) Compliance on November 26, 1982 with the 1967 edition of the LSC 
or compliance on April 18, 1986 with the 1981 edition of the LSC, with 
or without waivers, is considered to be compliance with this standard as 
long as the facility continues to remain in compliance with that edition 
of the Code.
    (ii) For facilities that meet the LSC definition of a residential 
board and care occupancy and that have more than 16 beds, the State 
survey agency may apply the State's fire and safety code as specified in 
paragraph (j)(2)(B) of this section.
    (k) Standard: Paint. The facility must--
    (1) Use lead-free paint inside the facility; and
    (2) Remove or cover interior paint or plaster containing lead so 
that it is not accessible to clients.
    (l) Standard: Infection control.
    (1) The facility must provide a sanitary environment to avoid 
sources and transmission of infections. There must be an active program 
for the prevention, control, and investigation of infection and 
communicable diseases.
    (2) The facility must implement successful corrective action in 
affected problem areas.
    (3) The facility must maintain a record of incidents and corrective 
actions related to infections.
    (4) The facility must prohibit employees with symptoms or signs of a 
communicable disease from direct contact with clients and their food.



Sec. 483.480  Condition of participation: Dietetic services.

    (a) Standard: Food and nutrition services. (1) Each client must 
receive a nourishing, well-balanced diet including modified and 
specially-prescribed diets.
    (2) A qualified dietitian must be employed either full-time, part-
time, or on a consultant basis at the facility's discretion.
    (3) If a qualified dietitian is not employed full-time, the facility 
must designate a person to serve as the director of food services.
    (4) The client's interdisciplinary team, including a qualified 
dietitian and physician, must prescribe all modified and special diets 
including those used as a part of a program to manage inappropriate 
client behavior.
    (5) Foods proposed for use as a primary reinforcement of adaptive 
behavior are evaluated in light of the client's nutritional status and 
needs.
    (6) Unless otherwise specified by medical needs, the diet must be 
prepared at least in accordance with the latest edition of the 
recommended dietary allowances of the Food and Nutrition Board of the 
National Research Council, National Academy of Sciences, adjusted for 
age, sex, disability and activity.

[[Page 562]]

    (b) Standard: Meal services. (1) Each client must receive at least 
three meals daily, at regular times comparable to normal mealtimes in 
the community with--
    (i) Not more than 14 hours between a substantial evening meal and 
breakfast of the following day, except on weekends and holidays when a 
nourishing snack is provided at bedtime, 16 hours may elapse between a 
substantial evening meal and breakfast; and
    (ii) Not less than 10 hours between breakfast and the evening meal 
of the same day, except as provided under paragraph (b)(1)(i) of this 
section.
    (2) Food must be served--
    (i) In appropriate quantity;
    (ii) At appropriate temperature;
    (iii) In a form consistent with the developmental level of the 
client; and
    (iv) With appropriate utensils.
    (3) Food served to clients individually and uneaten must be 
discarded.
    (c) Standard: Menus. (1) Menus must--
    (i) Be prepared in advance;
    (ii) Provide a variety of foods at each meal;
    (iii) Be different for the same days of each week and adjusted for 
seasonal changes; and
    (iv) Include the average portion sizes for menu items.
    (2) Menus for food actually served must be kept on file for 30 days.
    (d) Standard: Dining areas and service.
    The facility must--
    (1) Serve meals for all clients, including persons with ambulation 
deficits, in dining areas, unless otherwise specified by the 
interdisciplinary team or a physician;
    (2) Provide table service for all clients who can and will eat at a 
table, including clients in wheelchairs;
    (3) Equip areas with tables, chairs, eating utensils, and dishes 
designed to meet the developmental needs of each client;
    (4) Supervise and staff dining rooms adequately to direct self-help 
dining procedure, to assure that each client receives enough food and to 
assure that each client eats in a manner consistent with his or her 
developmental level: and
    (5) Ensure that each client eats in an upright position, unless 
otherwise specified by the interdisciplinary team or a physician.



PART 484--HOME HEALTH SERVICES--Table of Contents




                      Subpart A--General Provisions

Sec.
484.1 Basis and scope.
484.2 Definitions.
484.4 Personnel qualifications.

                        Subpart B--Administration

484.10 Condition of participation: Patient rights.
484.11 Condition of participation: Release of patient identifiable OASIS 
          information.
484.12 Condition of participation: Compliance with Federal, State, and 
          local laws, disclosure and ownership information, and accepted 
          professional standards and principles.
484.14 Condition of participation: Organization, services, and 
          administration.
484.16 Condition of participation: Group of professional personnel.
484.18 Condition of participation: Acceptance of patients, plan of care, 
          and medical supervision.
484.20 Condition of participation: Reporting OASIS information.

                    Subpart C--Furnishing of Services

484.30 Condition of participation: Skilled nursing services.
484.32 Condition of participation: Therapy services.
484.34 Condition of participation: Medical social services.
484.36 Condition of participation: Home health aide services.
484.38 Condition of participation: Qualifying to furnish outpatient 
          physical therapy or speech pathology services.
484.48 Condition of participation: Clinical records.
484.52 Condition of participation: Evaluation of the agency's program.
484.55 Condition of participation: Comprehensive assessment of patients.

Subpart D [Reserved]

     Subpart E--Prospective Payment System for Home Health Agencies

484.200 Basis and scope.
484.202 Definitions.
484.205 Basis of payment.
484.210 Data used for the calculation of the national prospective 60-day 
          episode payment.

[[Page 563]]

484.215 Initial establishment of the calculation of the national 60-day 
          episode payment.
484.220 Calculation of the national adjusted prospective 60-day episode 
          payment rate for case-mix and area wage levels.
484.225 Annual update of the national adjusted prospective 60-day 
          episode payment rate.
484.230 Methodology used for the calculation of the low-utilization 
          payment adjustment.
484.235 Methodology used for the calculation of the partial episode 
          payment adjustment.
484.237 Methodology used for the calculation of the significant change 
          in condition payment adjustment.
484.240 Methodology used for the calculation of the outlier payment.
484.245 Accelerated payments for home health agencies.
484.250 Patient assessment data.
484.260 Limitation on review.

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

    Source: 54 FR 33367, Aug. 14, 1989, unless otherwise noted.

    Editorial Note: Nomenclature changes affecting part 484 appear at 56 
FR 32973, July 18, 1991.



                      Subpart A--General Provisions



Sec. 484.1  Basis and scope.

    (a) Basis and scope. This part is based on the indicated provisions 
of the following sections of the Act:
    (1) Sections 1861(o) and 1891 establish the conditions that an HHA 
must meet in order to participate in Medicare.
    (2) Section 1861(z) specifies the Institutional planning standards 
that HHAs must meet.
    (3) Section 1895 provides for the establishment of a prospective 
payment system for home health services covered under Medicare.
    (b) This part also sets forth additional requirements that are 
considered necessary to ensure the health and safety of patients.

[60 FR 50443, Sept. 29, 1995, as amended at 65 FR 41211, July 3, 2000]



Sec. 484.2  Definitions.

    As used in this part, unless the context indicates otherwise--Bylaws 
or equivalent means a set of rules adopted by an HHA for governing the 
agency's operation.
    Branch office means a location or site from which a home health 
agency provides services within a portion of the total geographic area 
served by the parent agency. The branch office is part of the home 
health agency and is located sufficiently close to share administration, 
supervision, and services in a manner that renders it unnecessary for 
the branch independently to meet the conditions of participation as a 
home health agency.
    Clinical note means a notation of a contact with a patient that is 
written and dated by a member of the health team, and that describes 
signs and symptoms, treatment and drugs administered and the patient's 
reaction, and any changes in physical or emotional condition.
    HHA stands for home health agency.
    Nonprofit agency means an agency exempt from Federal income taxation 
under section 501 of the Internal Revenue Code of 1954.
    Parent home health agency means the agency that develops and 
maintains administrative controls of subunits and/or branch offices.
    Primary home health agency means the agency that is responsible for 
the services furnished to patients and for implementation of the plan of 
care.
    Progress note means a written notation, dated and signed by a member 
of the health team, that summarizes facts about care furnished and the 
patient's response during a given period of time.
    Proprietary agency means a private profit-making agency licensed by 
the State.
    Public agency means an agency operated by a State or local 
government.
    Subdivision means a component of a multi-function health agency, 
such as the home care department of a hospital or the nursing division 
of a health department, which independently meets the conditions of 
participation for HHAs. A subdivision that has subunits or branch 
offices is considered a parent agency.
    Subunit means a semi-autonomous organization that--
    (1) Serves patients in a geographic area different from that of the 
parent agency; and

[[Page 564]]

    (2) Must independently meet the conditions of participation for HHAs 
because it is too far from the parent agency to share administration, 
supervision, and services on a daily basis.
    Summary report means the compilation of the pertinent factors of a 
patient's clinical notes and progress notes that is submitted to the 
patient's physician.
    Supervision means authoritative procedural guidance by a qualified 
person for the accomplishment of a function or activity. Unless 
otherwise specified in this part, the supervisor must be on the premises 
to supervise an individual who does not meet the qualifications 
specified in Sec. 484.4.



Sec. 484.4  Personnel qualifications.

    Staff required to meet the conditions set forth in this part are 
staff who meet the qualifications specified in this section.
    Administrator, home health agency. A person who:
    (a) Is a licensed physician; or
    (b) Is a registered nurse; or
    (c) Has training and experience in health service administration and 
at least 1 year of supervisory or administrative experience in home 
health care or related health programs.
    Audiologist. A person who:
    (a) Meets the education and experience requirements for a 
Certificate of Clinical Competence in audiology granted by the American 
Speech-Language-Hearing Association; or
    (b) Meets the educational requirements for certification and is in 
the process of accumulating the supervised experience required for 
certification.
    Home health aide. Effective for services furnished after August 14, 
1990, a person who has successfully completed a State-established or 
other training program that meets the requirements of Sec. 484.36(a) and 
a competency evaluation program or State licensure program that meets 
the requirements of Sec. 484.36 (b) or (e), or a competency evaluation 
program or State licensure program that meets the requirements of 
Sec. 484.36 (b) or (e). An individual is not considered to have 
completed a training and competency evaluation program, or a competency 
evaluation program if, since the individual's most recent completion of 
this program(s), there has been a continuous period of 24 consecutive 
months during none of which the individual furnished services described 
in Sec. 409.40 of this chapter for compensation.
    Occupational therapist. A person who:
    (a) Is a graduate of an occupational therapy curriculum accredited 
jointly by the Committee on Allied Health Education and Accreditation of 
the American Medical Association and the American Occupational Therapy 
Association; or
    (b) Is eligible for the National Registration Examination of the 
American Occupational Therapy Association; or
    (c) Has 2 years of appropriate experience as an occupational 
therapist, and has achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that such determinations of proficiency do not apply 
with respect to persons initially licensed by a State or seeking initial 
qualification as an occupational therapist after December 31, 1977.
    Occupational therapy assistant. A person who:
    (a) Meets the requirements for certification as an occupational 
therapy assistant established by the American Occupational Therapy 
Association; or
    (b) Has 2 years of appropriate experience as an occupational therapy 
assistant, and has achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that such determinations of proficiency do not apply 
with respect to persons initially licensed by a State or seeking initial 
qualification as an occupational therapy assistant after December 31, 
1977.
    Physical therapist. A person who is licensed as a physical therapist 
by the State in which practicing, and
    (a) Has graduated from a physical therapy curriculum approved by:
    (1) The American Physical Therapy Association, or
    (2) The Committee on Allied Health Education and Accreditation of 
the American Medical Association, or
    (3) The Council on Medical Education of the American Medical 
Association

[[Page 565]]

and the American Physical Therapy Association; or
    (b) Prior to January 1, 1966,
    (1) Was admitted to membership by the American Physical Therapy 
Association, or
    (2) Was admitted to registration by the American Registry of 
Physical Therapist, or
    (3) Has graduated from a physical therapy curriculum in a 4-year 
college or university approved by a State department of education; or
    (c) Has 2 years of appropriate experience as a physical therapist, 
and has achieved a satifactory grade on a proficiency examination 
conducted, approved, or sponsored by the U.S. Public Health Service 
except that such determinations of proficiency do not apply with respect 
to persons initially licensed by a State or seeking qualification as a 
physical therapist after December 31, 1977; or
    (d) Was licensed or registered prior to January 1, 1966, and prior 
to January 1, 1970, had 15 years of full-time experience in the 
treatment of illness or injury through the practice of physical therapy 
in which services were rendered under the order and direction of 
attending and referring doctors of medicine or osteopathy; or
    (e) If trained outside the United States,
    (1) Was graduated since 1928 from a physical therapy curriculum 
approved in the country in which the curriculum was located and in which 
there is a member organization of the World Confederation for Physical 
Therapy.
    (2) Meets the requirements for membership in a member organization 
of the World Confederation for Physical Therapy,
    Physical therapy assistant. A person who is licensed as a physical 
therapy assistant, if applicable, by the State in which practicing, and
    (1) Has graduated from a 2-year college-level program approved by 
the American Physical Therapy Association; or
    (2) Has 2 years of appropriate experience as a physical therapy 
assistant, and has achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that these determinations of proficiency do not apply 
with respect to persons initially licensed by a State or seeking initial 
qualification as a physical therapy assistant after December 31, 1977.
    Physician. A doctor of medicine, osteophathy or podiatry legally 
authorized to practice medicine and surgery by the State in which such 
function or action is performed.
    Practical (vocational) nurse. A person who is licensed as a 
practical (vocational) nurse by the State in which practicing.
    Public health nurse. A registered nurse who has completed a 
baccalaureate degree program approved by the National League for Nursing 
for public health nursing preparation or postregistered nurse study that 
includes content aproved by the National League for Nursing for public 
health nursing preparation.
    Registered nurse (RN). A graduate of an approved school of 
professional nursing, who is licensed as a registered nurse by the State 
in which practicing.
    Social work assistant. A person who:
    (1) Has a baccalaureate degree in social work, psychology, 
sociology, or other field related to social work, and has had at least 1 
year of social work experience in a health care setting; or
    (2) Has 2 years of appropriate experience as a social work 
assistant, and has achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that these determinations of proficiency do not apply 
with respect to persons initially licensed by a State or seeking initial 
qualification as a social work assistant after December 31, 1977.
    Social worker. A person who has a master's degree from a school of 
social work accredited by the Council on Social Work Education, and has 
1 year of social work experience in a health care setting.
    Speech-language pathologist. A person who:
    (1) Meets the education and experience requirements for a 
Certificate of Clinical Competence in (speech pathology or audiology) 
granted by the American Speech-Language-Hearing Association; or

[[Page 566]]

    (2) Meets the educational requirements for certification and is in 
the process of accumulating the supervised experience required for 
certification.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32973, July 18, 1991]



                        Subpart B--Administration



Sec. 484.10  Condition of participation: Patient rights.

    The patient has the right to be informed of his or her rights. The 
HHA must protect and promote the exercise of these rights.
    (a) Standard: Notice of rights. (1) The HHA must provide the patient 
with a written notice of the patient's rights in advance of furnishing 
care to the patient or during the initial evaluation visit before the 
initiation of treatment.
    (2) The HHA must maintain documentation showing that it has complied 
with the requirements of this section.
    (b) Standard: Exercise of rights and respect for property and 
person. (1) The patient has the right to exercise his or her rights as a 
patient of the HHA.
    (2) The patient's family or guardian may exercise the patient's 
rights when the patient has been judged incompetent.
    (3) The patient has the right to have his or her property treated 
with respect.
    (4) The patient has the right to voice grievances regarding 
treatment or care that is (or fails to be) furnished, or regarding the 
lack of respect for property by anyone who is furnishing services on 
behalf of the HHA and must not be subjected to discrimination or 
reprisal for doing so.
    (5) The HHA must investigate complaints made by a patient or the 
patient's family or guardian regarding treatment or care that is (or 
fails to be) furnished, or regarding the lack of respect for the 
patient's property by anyone furnishing services on behalf of the HHA, 
and must document both the existence of the complaint and the resolution 
of the complaint.
    (c) Standard: Right to be informed and to participate in planning 
care and treatment. (1) The patient has the right to be informed, in 
advance about the care to be furnished, and of any changes in the care 
to be furnished.
    (i) The HHA must advise the patient in advance of the disciplines 
that will furnish care, and the frequency of visits proposed to be 
furnished.
    (ii) The HHA must advise the patient in advance of any change in the 
plan of care before the change is made.
    (2) The patient has the right to participate in the planning of the 
care.
    (i) The HHA must advise the patient in advance of the right to 
participate in planning the care or treatment and in planning changes in 
the care or treatment.
    (ii) The HHA complies with the requirements of subpart I of part 489 
of this chapter relating to maintaining written policies and procedures 
regarding advance directives. The HHA must inform and distribute written 
information to the patient, in advance, concerning its policies on 
advance directives, including a description of applicable State law. The 
HHA may furnish advance directives information to a patient at the time 
of the first home visit, as long as the information is furnished before 
care is provided.
    (d) Standard: Confidentiality of medical records. The patient has 
the right to confidentiality of the clinical records maintained by the 
HHA. The HHA must advise the patient of the agency's policies and 
procedures regarding disclosure of clinical records.
    (e) Standard: Patient liability for payment. (1) The patient has the 
right to be advised, before care is initiated, of the extent to which 
payment for the HHA services may be expected from Medicare or other 
sources, and the extent to which payment may be required from the 
patient. Before the care is initiated, the HHA must inform the patient, 
orally and in writing, of--
    (i) The extent to which payment may be expected from Medicare, 
Medicaid, or any other Federally funded or aided program known to the 
HHA;
    (ii) The charges for services that will not be covered by Medicare; 
and
    (iii) The charges that the individual may have to pay.
    (2) The patient has the right to be advised orally and in writing of 
any changes in the information provided in accordance with paragraph 
(e)(1) of this

[[Page 567]]

section when they occur. The HHA must advise the patient of these 
changes orally and in writing as soon as possible, but no later than 30 
calendar days from the date that the HHA becomes aware of a change.
    (f) Standard: Home health hotline. The patient has the right to be 
advised of the availability of the toll-free HHA hotline in the State. 
When the agency accepts the patient for treatment or care, the HHA must 
advise the patient in writing of the telephone number of the home health 
hotline established by the State, the hours of its operation, and that 
the purpose of the hotline is to receive complaints or questions about 
local HHAs. The patient also has the right to use this hotline to lodge 
complaints concerning the implementation of the advance directives 
requirements.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32973, July 18, 1991; 
57 FR 8203, Mar. 6, 1992; 60 FR 33293, June 27, 1995]



Sec. 484.11  Condition of participation: Release of patient identifiable OASIS information.

    The HHA and agent acting on behalf of the HHA in accordance with a 
written contract must ensure the confidentiality of all patient 
identifiable information contained in the clinical record, including 
OASIS data, and may not release patient identifiable OASIS information 
to the public.

[64 FR 3763, Jan. 25, 1999]



Sec. 484.12  Condition of participation: Compliance with Federal, State, and local laws, disclosure and ownership information, and accepted professional 
          standards and principles.

    (a) Standard: Compliance with Federal, State, and local laws and 
regulations. The HHA and its staff must operate and furnish services in 
compliance with all applicable Federal, State, and local laws and 
regulations. If State or applicable local law provides for the licensure 
of HHAs, an agency not subject to licensure is approved by the licensing 
authority as meeting the standards established for licensure.
    (b) Standard: Disclosure of ownership and management information. 
The HHA must comply with the requirements of Part 420, Subpart C of this 
chapter. The HHA also must disclose the following information to the 
State survey agency at the time of the HHA's initial request for 
certification, for each survey, and at the time of any change in 
ownership or management:
    (1) The name and address of all persons with an ownership or control 
interest in the HHA as defined in Secs. 420.201, 420.202, and 420.206 of 
this chapter.
    (2) The name and address of each person who is an officer, a 
director, an agent or a managing employee of the HHA as defined in 
Secs. 420.201, 420.202, and 420.206 of this chapter.
    (3) The name and address of the corporation, association, or other 
company that is responsible for the management of the HHA, and the name 
and address of the chief executive officer and the chairman of the board 
of directors of that corporation, association, or other company 
responsible for the management of the HHA.
    (c) Standard: Compliance with accepted professional standards and 
principles. The HHA and its staff must comply with accepted professional 
standards and principles that apply to professionals furnishing services 
in an HHA.



Sec. 484.14  Condition of participation: Organization, services, and administration.

    Organization, services furnished, administrative control, and lines 
of authority for the delegation of responsibility down to the patient 
care level are clearly set forth in writing and are readily 
identifiable. Administrative and supervisory functions are not delegated 
to another agency or organization and all services not furnished 
directly, including services provided through subunits are monitored and 
controlled by the parent agency. If an agency has subunits, appropriate 
administrative records are maintained for each subunit.
    (a) Standard: Services furnished. Part-time or intermittent skilled 
nursing services and at least one other therapeutic service (physical, 
speech, or occupational therapy; medical social services; or home health 
aide services) are made available on a visiting basis,

[[Page 568]]

in a place of residence used as a patient's home. An HHA must provide at 
least one of the qualifying services directly through agency employees, 
but may provide the second qualifying service and additional services 
under arrangements with another agency or organization.
    (b) Standard: Governing body. A governing body (or designated 
persons so functioning) assumes full legal authority and responsibility 
for the operation of the agency. The governing body appoints a qualified 
administrator, arranges for professional advice as required under 
Sec. 484.16, adopts and periodically reviews written bylaws or an 
acceptable equivalent, and oversees the management and fiscal affairs of 
the agency.
    (c) Standard: Administrator. The administrator, who may also be the 
supervising physician or registered nurse required under paragraph (d) 
of this section, organizes and directs the agency's ongoing functions; 
maintains ongoing liaison among the governing body, the group of 
professional personnel, and the staff; employs qualified personnel and 
ensures adequate staff education and evaluations; ensures the accuracy 
of public information materials and activities; and implements an 
effective budgeting and accounting system. A qualified person is 
authorized in writing to act in the absence of the administrator.
    (d) Standard: Supervising physician or registered nurse. The skilled 
nursing and other therapeutic services furnished are under the 
supervision and direction of a physician or a registered nurse (who 
preferably has at least 1 year of nursing experience and is a public 
health nurse). This person, or similarly qualified alternate, is 
available at all times during operating hours and participates in all 
activities relevant to the professional services furnished, including 
the development of qualifications and the assignment of personnel.
    (e) Standard: Personnel policies. Personnel practices and patient 
care are supported by appropriate, written personnel policies. Personnel 
records include qualifications and licensure that are kept current.
    (f) Standard: Personnel under hourly or per visit contracts. If 
personnel under hourly or per visit contracts are used by the HHA, there 
is a written contract between those personnel and the agency that 
specifies the following:
    (1) Patients are accepted for care only by the primary HHA.
    (2) The services to be furnished.
    (3) The necessity to conform to all applicable agency policies, 
including personnel qualifications.
    (4) The responsibility for participating in developing plans of 
care.
    (5) The manner in which services will be controlled, coordinated, 
and evaluated by the primary HHA.
    (6) The procedures for submitting clinical and progress notes, 
scheduling of visits, periodic patient evaluation.
    (7) The procedures for payment for services furnished under the 
contract.
    (g) Standard: Coordination of patient services. All personnel 
furnishing services maintain liaison to ensure that their efforts are 
coordinated effectively and support the objectives outlined in the plan 
of care. The clinical record or minutes of case conferences establish 
that effective interchange, reporting, and coordination of patient care 
does occur. A written summary report for each patient is sent to the 
attending physician at least every 60 days.
    (h) Standard: Services under arrangements. Services furnished under 
arrangements are subject to a written contract conforming with the 
requirements specified in paragraph (f) of this section and with the 
requirements of section 1861(w) of the Act (42 U.S.C. 1495x(w)).
    (i) Standard: Institutional planning. The HHA, under the direction 
of the governing body, prepares an overall plan and a budget that 
includes an annual operating budget and capital expenditure plan.
    (1) Annual operating budget. There is an annual operating budget 
that includes all anticipated income and expenses related to items that 
would, under generally accepted accounting principles, be considered 
income and expense items. However, it is not required that there be 
prepared, in connection with any budget, an item by item identification 
of the components of each type of anticipated income or expense.

[[Page 569]]

    (2) Capital expenditure plan. (i) There is a capital expenditure 
plan for at least a 3-year period, including the operating budget year. 
The plan includes and identifies in detail the anticipated sources of 
financing for, and the objectives of, each anticipated expenditure of 
more than $600,000 for items that would under generally accepted 
accounting principles, be considered capital items. In determining if a 
single capital expenditure exceeds $600,000, the cost of studies, 
surveys, designs, plans, working drawings, specifications, and other 
activities essential to the acquisition, improvement, modernization, 
expansion, or replacement of land, plant, building, and equipment are 
included. Expenditures directly or indirectly related to capital 
expenditures, such as grading, paving, broker commissions, taxes 
assessed during the construction period, and costs involved in 
demolishing or razing structures on land are also included. Transactions 
that are separated in time, but are components of an overall plan or 
patient care objective, are viewed in their entirety without regard to 
their timing. Other costs related to capital expenditures include title 
fees, permit and license fees, broker commissions, architect, legal, 
accounting, and appraisal fees; interest, finance, or carrying charges 
on bonds, notes and other costs incurred for borrowing funds.
    (ii) If the anticipated source of financing is, in any part, the 
anticipated payment from title V (Maternal and Child Health and Crippled 
Children's Services) or title XVIII (Medicare) or title XIX (Medicaid) 
of the Social Security Act, the plan specifies the following:
    (A) Whether the proposed capital expenditure is required to comform, 
or is likely to be required to conform, to current standards, criteria, 
or plans developed in accordance with the Public Health Service Act or 
the Mental Retardation Facilities and Community Mental Health Centers 
Construction Act of 1963.
    (B) Whether a capital expenditure proposal has been submitted to the 
designated planning agency for approval in accordance with section 1122 
of the Act (42 U.S.C. 1320a-1) and implementing regulations.
    (C) Whether the designated planning agency has approved or 
disapproved the proposed capital expenditure if it was presented to that 
agency.
    (3) Preparation of plan and budget. The overall plan and budget is 
prepared under the direction of the governing body of the HHA by a 
committee consisting of representatives of the governing body, the 
administrative staff, and the medical staff (if any) of the HHA.
    (4) Annual review of plan and budget. The overall plan and budget is 
reviewed and updated at least annually by the committee referred to in 
paragraph (i)(3) of this section under the direction of the governing 
body of the HHA.
    (j) Standard: Laboratory services. (1) If the HHA engages in 
laboratory testing outside of the context of assisting an individual in 
self-administering a test with an appliance that has been cleared for 
that purpose by the FDA, such testing must be in compliance with all 
applicable requirements of part 493 of this chapter.
    (2) If the HHA chooses to refer specimens for laboratory testing to 
another laboratory, the referral laboratory must be certified in the 
appropriate specialties and subspecialties of services in accordance 
with the applicable requirements of part 493 of this chapter.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32973, July 18, 1991; 
56 FR 51334, Oct. 11, 1991; 57 FR 7136, Feb. 28, 1992; 66 FR 32778, June 
18, 2001]



Sec. 484.16  Condition of participation: Group of professional personnel.

    A group of professional personnel, which includes at least one 
physician and one registered nurse (preferably a public health nurse), 
and with appropriate representation from other professional disciplines, 
establishes and annually reviews the agency's policies governing scope 
of services offered, admission and discharge policies, medical 
supervision and plans of care, emergency care, clinical records, 
personnel qualifications, and program evaluation. At least one member of 
the group is neither an owner nor an employee of the agency.

[[Page 570]]

    (a) Standard: Advisory and evaluation function. The group of 
professional personnel meets frequently to advise the agency on 
professional issues, to participate in the evaluation of the agency's 
program, and to assist the agency in maintaining liaison with other 
health care providers in the community and in the agency's community 
information program. The meetings are documented by dated minutes.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32974, July 18, 1991]



Sec. 484.18  Condition of participation: Acceptance of patients, plan of care, and medical supervision.

    Patients are accepted for treatment on the basis of a reasonable 
expectation that the patient's medical, nursing, and social needs can be 
met adequately by the agency in the patient's place of residence. Care 
follows a written plan of care established and periodically reviewed by 
a doctor of medicine, osteopathy, or podiatric medicine.
    (a) Standard: Plan of care. The plan of care developed in 
consultation with the agency staff covers all pertinent diagnoses, 
including mental status, types of services and equipment required, 
frequency of visits, prognosis, rehabilitation potential, functional 
limitations, activities permitted, nutritional requirements, medications 
and treatments, any safety measures to protect against injury, 
instructions for timely discharge or referral, and any other appropriate 
items. If a physician refers a patient under a plan of care that cannot 
be completed until after an evaluation visit, the physician is consulted 
to approve additions or modifications to the original plan. Orders for 
therapy services include the specific procedures and modalities to be 
used and the amount, frequency, and duration. The therapist and other 
agency personnel participate in developing the plan of care.
    (b) Standard: Periodic review of plan of care. The total plan of 
care is reviewed by the attending physician and HHA personnel as often 
as the severity of the patient's condition requires, but at least once 
every 60 days or more frequently when there is a beneficiary elected 
transfer; a significant change in condition resulting in a change in the 
case-mix assignment; or a discharge and return to the same HHA during 
the 60-day episode. Agency professional staff promptly alert the 
physician to any changes that suggest a need to alter the plan of care.
    (c) Standard: Conformance with physician orders. Drugs and 
treatments are administered by agency staff only as ordered by the 
physician. Verbal orders are put in writing and signed and dated with 
the date of receipt by the registered nurse or qualified therapist (as 
defined in Sec. 484.4 of this chapter) responsible for furnishing or 
supervising the ordered services. Verbal orders are only accepted by 
personnel authorized to do so by applicable State and Federal laws and 
regulations as well as by the HHA's internal policies.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32974, July 18, 1991; 
64 FR 3784, Jan. 25, 1999; 65 FR 41211, July 3, 2000]



Sec. 484.20  Condition of participation: Reporting OASIS information.

    HHAs must electronically report all OASIS data collected in 
accordance with Sec. 484.55.
    (a) Standard: Encoding OASIS data. The HHA must encode and be 
capable of transmitting OASIS data for each agency patient within 7 days 
of completing an OASIS data set.
    (b) Standard: Accuracy of encoded OASIS data. The encoded OASIS data 
must accurately reflect the patient's status at the time of assessment.
    (c) Standard: Transmittal of OASIS data. The HHA must--
    (1) Electronically transmit accurate, completed, encoded and locked 
OASIS data for each patient to the State agency or CMS OASIS contractor 
at least monthly;
    (2) For all assessments completed in the previous month, transmit 
OASIS data in a format that meets the requirements of paragraph (d) of 
this section;
    (3) Successfully transmit test data to the State agency or CMS OASIS 
contractor beginning March 26, 1999, and no later than April 26, 1999; 
and
    (4) Transmit data using electronic communications software that 
provides a direct telephone connection from the

[[Page 571]]

HHA to the State agency or CMS OASIS contractor.
    (d) Standard: Data Format. The HHA must encode and transmit data 
using the software available from CMS or software that conforms to CMS 
standard electronic record layout, edit specifications, and data 
dictionary, and that includes the required OASIS data set.

[64 FR 3763, Jan. 25, 1999]



                    Subpart C--Furnishing of Services



Sec. 484.30  Condition of participation: Skilled nursing services.

    The HHA furnishes skilled nursing services by or under the 
supervision of a registered nurse and in accordance with the plan of 
care.
    (a) Standard: Duties of the registered nurse. The registered nurse 
makes the initial evaluation visit, regularly reevaluates the patient's 
nursing needs, initiates the plan of care and necessary revisions, 
furnishes those services requiring substantial and specialized nursing 
skill, initiates appropriate preventive and rehabilitative nursing 
procedures, prepares clinical and progress notes, coordinates services, 
informs the physician and other personnel of changes in the patient's 
condition and needs, counsels the patient and family in meeting nursing 
and related needs, participates in in-service programs, and supervises 
and teaches other nursing personnel.
    (b) Standard: Duties of the licensed practical nurse. The licensed 
practical nurse furnishes services in accordance with agency policies, 
prepares clinical and progress notes, assists the physician and 
registered nurse in performing specialized procedures, prepares 
equipment and materials for treatments observing aseptic technique as 
required, and assists the patient in learning appropriate self-care 
techniques.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32974, July 18, 1991]



Sec. 484.32  Condition of participation: Therapy services.

    Any therapy services offered by the HHA directly or under 
arrangement are given by a qualified therapist or by a qualified therapy 
assistant under the supervision of a qualified therapist and in 
accordance with the plan of care. The qualified therapist assists the 
physician in evaluating level of function, helps develop the plan of 
care (revising it as necessary), prepares clinical and progress notes, 
advises and consults with the family and other agency personnel, and 
participates in in-service programs.
    (a) Standard: Supervision of physical therapy assistant and 
occupational therapy assistant. Services furnished by a qualified 
physical therapy assistant or qualified occupational therapy assistant 
may be furnished under the supervision of a qualified physical or 
occupational therapist. A physical therapy assistant or occupational 
therapy assistant performs services planned, delegated, and supervised 
by the therapist, assists in preparing clinical notes and progress 
reports, and participates in educating the patient and family, and in 
in-service programs.
    (b) Standard: Supervision of speech therapy services. Speech therapy 
services are furnished only by or under supervision of a qualified 
speech pathologist or audiologist.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32974, July 18, 1991]



Sec. 484.34  Condition of participation: Medical social services.

    If the agency furnishes medical social services, those services are 
given by a qualified social worker or by a qualified social work 
assistant under the supervision of a qualified social worker, and in 
accordance with the plan of care. The social worker assists the 
physician and other team members in understanding the significant social 
and emotional factors related to the health problems, participates in 
the development of the plan of care, prepares clinical and progress 
notes, works with the family, uses appropriate community resources, 
participates in discharge planning and in-service programs, and acts as 
a consultant to other agency personnel.



Sec. 484.36  Condition of participation: Home health aide services.

    Home health aides are selected on the basis of such factors as a 
sympathetic attitude toward the care of the sick, ability to read, 
write, and carry

[[Page 572]]

out directions, and maturity and ability to deal effectively with the 
demands of the job. They are closely supervised to ensure their 
competence in providing care. For home health services furnished (either 
directly or through arrangements with other organizations) after August 
14, 1990, the HHA must use individuals who meet the personnel 
qualifications specified in Sec. 484.4 for ``home health aide''.
    (a) Standard: Home health aide training--(1) Content and duration of 
training. The aide training program must address each of the following 
subject areas through classroom and supervised practical training 
totalling at least 75 hours, with at least 16 hours devoted to 
supervised practical training. The individual being trained must 
complete at least 16 hours of classroom training before beginning the 
supervisied practical training.
    (i) Communications skills.
    (ii) Observation, reporting and documentation of patient status and 
the care or service furnished.
    (iii) Reading and recording temperature, pulse, and respiration.
    (iv) Basic infection control procedures.
    (v) Basic elements of body functioning and changes in body function 
that must be reported to an aide's supervisor.
    (vi) Maintenance of a clean, safe, and healthy environment.
    (vii) Recognizing emergencies and knowledge of emergency procedures.
    (viii) The physical, emotional, and developmental needs of and ways 
to work with the populations served by the HHA, including the need for 
respect for the patient, his or her privacy and his or her property.
    (ix) Appropriate and safe techniques in personal hygiene and 
grooming that include--
    (A) Bed bath.
    (B) Sponge, tub, or shower bath.
    (C) Shampoo, sink, tub, or bed.
    (D) Nail and skin care.
    (E) Oral hygiene.
    (F) Toileting and elimination.
    (x) Safe transfer techniques and ambulation.
    (xi) Normal range of motion and positioning.
    (xii) Adequate nutrition and fluid intake.
    (xiii) Any other task that the HHA may choose to have the home 
health aide perform.
    ``Supervised practical training'' means training in a laboratory or 
other setting in which the trainee demonstrates knowledge while 
performing tasks on an individual under the direct supervision of a 
registered nurse or licensed practical nurse.
    (2) Conduct of training--(i) Organizations. A home health aide 
training program may be offered by any organization except an HHA that, 
within the previous 2 years has been found--
    (A) Out of compliance with requirements of this paragraph (a) or 
paragraph (b) of this section;
    (B) To permit an individual that does not meet the definition of 
``home health aide'' as specified in Sec. 484.4 to furnish home health 
aide services (with the exception of licensed health professionals and 
volunteers);
    (C) Has been subject to an extended (or partial extended) survey as 
a result of having been found to have furnished substandard care (or for 
other reasons at the discretion of the CMS or the State);
    (D) Has been assessed a civil monetary penalty of not less than 
$5,000 as an intermediate sanction;
    (E) Has been found to have compliance deficiencies that endanger the 
health and safety of the HHA's patients and has had a temporary 
management appointed to oversee the management of the HHA;
    (F) Has had all or part of its Medicare payments suspended; or
    (G) Under any Federal or State law within the 2-year period 
beginning on October 1, 1988--
    (1) Has had its participation in the Medicare program terminated;
    (2) Has been assessed a penalty of not less than $5,000 for 
deficiencies in Federal or State standards for HHAs;
    (3) Was subject to a suspension of Medicare payments to which it 
otherwise would have been entitled;
    (4) Had operated under a temporary management that was appointed to 
oversee the operation of the HHA and to ensure the health and safety of 
the HHA's patients; or

[[Page 573]]

    (5) Was closed or had it's residents transferred by the State.
    (ii) Qualifications for instructors. The training of home health 
aides and the supervision of home health aides during the supervised 
practical portion of the training must be performed by or under the 
general supervision of a registered nurse who possesses a minimum of 2 
years of nursing experience, at least 1 year of which must be in the 
provision of home health care. Other individuals may be used to provide 
instruction under the supervision of a qualified registered nurse.
    (3) Documentation of training. The HHA must maintain sufficient 
documentation to demonstrate that the requirements of this standard are 
met.
    (b) Standard: Competency evaluation and in-service training--(1) 
Applicability. An individual may furnish home health aide services on 
behalf of an HHA only after that individual has successfully completed a 
competency evaluation program as described in this paragraph. The HHA is 
responsible for ensuring that the individuals who furnish home health 
aide services on its behalf meet the competency evaluation requirements 
of this section.
    (2) Content and frequency of evaluations and amount of in-service 
training. (i) The competency evaluation must address each of the 
subjects listed in paragraph (a)(1) (ii) through (xiii) of this section.
    (ii) The HHA must complete a performance review of each home health 
aide no less frequently than every 12 months.
    (iii) The home health aide must receive at least 12 hours of in-
service training during each 12-month period. The in-service training 
may be furnished while the aide is furnishing care to the patient.
    (3) Conduct of evaluation and training--(i) Organizations. A home 
health aide competency evaluation program may be offered by any 
organization except as specified in paragraph (a)(2)(i) of this section.
    The in-service training may be offered by any organization.
    (ii) Evaluators and instructors. The competency evaluation must be 
performed by a registered nurse. The in-service training generally must 
be supervised by a registered nurse who possesses a minimum of 2 years 
of nursing experience at least 1 year of which must be in the provision 
of home health care.
    (iii) Subject areas. The subject areas listed at paragraphs (a)(1) 
(iii), (ix), (x), and (xi) of this section must be evaluated after 
observation of the aide's performance of the tasks with a patient. The 
other subject areas in paragraph (a)(1) of this section may be evaluated 
through written examination, oral examination, or after observation of a 
home health aide with a patient.
    (4) Competency determination. (i) A home health aide is not 
considered competent in any task for which he or she is evaluated as 
``unsatisfactory''. The aide must not perform that task without direct 
supervision by a licensed nurse until after he or she receives training 
in the task for which he or she was evaluated as ``unsatisfactory'' and 
passes a subsequent evaluation with ``satisfactory''.
    (ii) A home health aide is not considered to have successfully 
passed a competency evaluation if the aide has an ``unsatisfactory'' 
rating in more than one of the required areas.
    (5) Documentation of competency evaluation. The HHA must maintain 
documentation which demonstrates that the requirements of this standard 
are met.
    (6) Effective date. The HHA must implement a competency evaluation 
program that meets the requirements of this paragraph before February 
14, 1990. The HHA must provide the preparation necessary for the 
individual to successfully complete the competency evaluation program. 
After August 14, 1990, the HHA may use only those aides that have been 
found to be competent in accordance with Sec. 484.36(b).
    (c) Standard: Assignment and duties of the home health aide--(1) 
Assignment. The home health aide is assigned to a specific patient by 
the registered nurse. Written patient care instructions for the home 
health aide must be prepared by the registered nurse or other 
appropriate professional who is responsible for the supervision of the 
home health aide under paragraph (d) of this section.

[[Page 574]]

    (2) Duties. The home health aide provides services that are ordered 
by the physician in the plan of care and that the aide is permitted to 
perform under State law. The duties of a home health aide include the 
provision of hands-on personal care, performance of simple procedures as 
an extension of therapy or nursing services, assistance in ambulation or 
exercises, and assistance in administering medications that are 
ordinarily self-administered. Any home health aide services offered by 
an HHA must be provided by a qualified home health aide.
    (d) Standard: Supervision. (1) If the patient receives skilled 
nursing care, the registered nurse must perform the supervisory visit 
required by paragraph (d)(2) of this section. If the patient is not 
receiving skilled nursing care, but is receiving another skilled service 
(that is, physical therapy, occupational therapy, or speech-language 
pathology services), supervision may be provided by the appropriate 
therapist.
    (2) The registered nurse (or another professional described in 
paragraph (d)(1) of this section) must make an on-site visit to the 
patient's home no less frequently than every 2 weeks.
    (3) If home health aide services are provided to a patient who is 
not receiving skilled nursing care, physical or occupational therapy or 
speech-language pathology services, the registered nurse must make a 
supervisory visit to the patient's home no less frequently than every 60 
days. In these cases, to ensure that the aide is properly caring for the 
patient, each supervisory visit must occur while the home health aide is 
providing patient care.
    (4) If home health aide services are provided by an individual who 
is not employed directly by the HHA (or hospice), the services of the 
home health aide must be provided under arrangements, as defined in 
section 1861(w)(1) of the Act. If the HHA (or hospice) chooses to 
provide home health aide services under arrangements with another 
organization, the HHA's (or hospice's) responsibilities include, but are 
not limited to--
    (i) Ensuring the overall quality of the care provided by the aide;
    (ii) Supervision of the aide's services as described in paragraphs 
(d)(1) and (d)(2) of this section; and
    (iii) Ensuring that home health aides providing services under 
arrangements have met the training requirements of paragraphs (a) and 
(b) of this section.
    (e) Personal care attendant: Evaluation requirements--(1) 
Applicability. This paragraph applies to individuals who are employed by 
HHAs exclusively to furnish personal care attendant services under a 
Medicaid personal care benefit.
    (2) Rule. An individual may furnish personal care services, as 
defined in Sec. 440.170 of this chapter, on behalf of an HHA after the 
individual has been found competent by the State to furnish those 
services for which a competency evaluation is required by paragraph (b) 
of this section and which the individual is required to perform. The 
individual need not be determined competent in those services listed in 
paragraph (a) of this section that the individual is not required to 
furnish.

[54 FR 33367, August 14, 1989, as amended at 56 FR 32974, July 18, 1991; 
56 FR 51334, Oct. 11, 1991; 59 FR 65498, Dec. 20, 1994; 60 FR 39123, 
Aug. 1, 1995; 66 FR 32778, June 18, 2001]



Sec. 484.38  Condition of participation: Qualifying to furnish outpatient physical therapy or speech pathology services.

    An HHA that wishes to furnish outpatient physical therapy or speech 
pathology services must meet all the pertinent conditions of this part 
and also meet the additional health and safety requirements set forth in 
Secs. 485.711, 485.713, 485.715, 485.719, 485.723, and 485.727 of this 
chapter to implement section 1861(p) of the Act.

[54 FR 33367, Aug. 14, 1989, as amended at 60 FR 2329, Jan. 9, 1995; 60 
FR 11632, Mar. 2, 1995]



Sec. 484.48  Condition of participation: Clinical records.

    A clinical record containing pertinent past and current findings in 
accordance with accepted professional standards is maintained for every 
patient receiving home health services. In addition to the plan of care, 
the record contains appropriate identifying information; name of 
physician; drug,

[[Page 575]]

dietary, treatment, and activity orders; signed and dated clinical and 
progress notes; copies of summary reports sent to the attending 
physician; and a discharge summary. The HHA must inform the attending 
physician of the availability of a discharge summary. The discharge 
summary must be sent to the attending physician upon request and must 
include the patient's medical and health status at discharge.
    (a) Standards: Retention of records. Clinical records are retained 
for 5 years after the month the cost report to which the records apply 
is filed with the intermediary, unless State law stipulates a longer 
period of time. Policies provide for retention even if the HHA 
discontinues operations. If a patient is transferred to another health 
facility, a copy of the record or abstract is sent with the patient.
    (b) Standards: Protection of records. Clinical record information is 
safe-guarded against loss or unauthorized use. Written procedures govern 
use and removal of records and the conditions for release of 
information. Patient's written consent is required for release of 
information not authorized by law.

[54 FR 33367, Aug. 14, 1989, as amended at 60 FR 65498, Dec. 20, 1994]



Sec. 484.52  Condition of participation: Evaluation of the agency's program.

    The HHA has written policies requiring an overall evaluation of the 
agency's total program at least once a year by the group of professional 
personnel (or a committee of this group), HHA staff, and consumers, or 
by professional people outside the agency working in conjunction with 
consumers. The evaluation consists of an overall policy and 
administrative review and a clinical record review. The evaluation 
assesses the extent to which the agency's program is appropriate, 
adequate, effective, and efficient. Results of the evaluation are 
reported to and acted upon by those responsible for the operation of the 
agency and are maintained separately as administrative records.
    (a) Standard: Policy and administrative review. As a part of the 
evaluation process the policies and administrative practices of the 
agency are reviewed to determine the extent to which they promote 
patient care that is appropriate, adequate, effective, and efficient. 
Mechanisms are established in writing for the collection of pertinent 
data to assist in evaluation.
    (b) Standard: Clinical record review. At least quarterly, 
appropriate health professionals, representing at least the scope of the 
program, review a sample of both active and closed clinical records to 
determine whether established policies are followed in furnishing 
services directly or under arrangement. There is a continuing review of 
clinical records for each 60-day period that a patient receives home 
health services to determine adequacy of the plan of care and 
appropriateness of continuation of care.

[54 FR 33367, Aug. 14, 1989; 66 FR 32778, June 18, 2001]



Sec. 484.55  Condition of participation: Comprehensive assessment of patients.

    Each patient must receive, and an HHA must provide, a patient-
specific, comprehensive assessment that accurately reflects the 
patient's current health status and includes information that may be 
used to demonstrate the patient's progress toward achievement of desired 
outcomes. The comprehensive assessment must identify the patient's 
continuing need for home care and meet the patient's medical, nursing, 
rehabilitative, social, and discharge planning needs. For Medicare 
beneficiaries, the HHA must verify the patient's eligibility for the 
Medicare home health benefit including homebound status, both at the 
time of the initial assessment visit and at the time of the 
comprehensive assessment. The comprehensive assessment must also 
incorporate the use of the current version of the Outcome and Assessment 
Information Set (OASIS) items, using the language and groupings of the 
OASIS items, as specified by the Secretary.
    (a) Standard: Initial assessment visit. (1) A registered nurse must 
conduct an initial assessment visit to determine the immediate care and 
support needs of the patient; and, for Medicare patients, to determine 
eligibility for the Medicare home health benefit, including homebound 
status. The initial assessment visit must be held either

[[Page 576]]

within 48 hours of referral, or within 48 hours of the patient's return 
home, or on the physician-ordered start of care date.
    (2) When rehabilitation therapy service (speech language pathology, 
physical therapy, or occupational therapy) is the only service ordered 
by the physician, and if the need for that service establishes program 
eligibility, the initial assessment visit may be made by the appropriate 
rehabilitation skilled professional.
    (b) Standard: Completion of the comprehensive assessment. (1) The 
comprehensive assessment must be completed in a timely manner, 
consistent with the patient's immediate needs, but no later than 5 
calendar days after the start of care.
    (2) Except as provided in paragraph (b)(3) of this section, a 
registered nurse must complete the comprehensive assessment and for 
Medicare patients, determine eligibility for the Medicare home health 
benefit, including homebound status.
    (3) When physical therapy, speech-language pathology, or 
occupational therapy is the only service ordered by the physician, a 
physical therapist, speech-language pathologist or occupational 
therapist may complete the comprehensive assessment, and for Medicare 
patients, determine eligibility for the Medicare home health benefit, 
including homebound status. The occupational therapist may complete the 
comprehensive assessment if the need for occupational therapy 
establishes program eligibility.
    (c) Standard: Drug regimen review. The comprehensive assessment must 
include a review of all medications the patient is currently using in 
order to identify any potential adverse effects and drug reactions, 
including ineffective drug therapy, significant side effects, 
significant drug interactions, duplicate drug therapy, and noncompliance 
with drug therapy.
    (d) Standard: Update of the comprehensive assessment. The 
comprehensive assessment must be updated and revised (including the 
administration of the OASIS) as frequently as the patient's condition 
warrants due to a major decline or improvement in the patient's health 
status, but not less frequently than--
    (1) The last five days of every 60 days beginning with the start-of-
care date, unless there is a--
    (i) Beneficiary elected transfer;
    (ii) Significant change in condition resulting in a new case-mix 
assignment; or
    (iii) Discharge and return to the same HHA during the 60-day 
episode.
    (2) Within 48 hours of the patient's return to the home from a 
hospital admission of 24 hours or more for any reason other than 
diagnostic tests;
    (3) At discharge.
    (e) Standard: Incorporation of OASIS data items. The OASIS data 
items determined by the Secretary must be incorporated into the HHA's 
own assessment and must include: clinical record items, demographics and 
patient history, living arrangements, supportive assistance, sensory 
status, integumentary status, respiratory status, elimination status, 
neuro/emotional/behavioral status, activities of daily living, 
medications, equipment management, emergent care, and data items 
collected at inpatient facility admission or discharge only.

[64 FR 3784, Jan. 25, 1999, as amended at 65 FR 41211, July 3, 2000]

Subpart D [Reserved]



     Subpart E--Prospective Payment System for Home Health Agencies

    Source: 65 FR 41212, July 3, 2000, unless otherwise noted.



Sec. 484.200  Basis and scope.

    (a) Basis. This subpart implements section 1895 of the Act, which 
provides for the implementation of a prospective payment system (PPS) 
for HHAs for portions of cost reporting periods occurring on or after 
October 1, 2000.
    (b) Scope. This subpart sets forth the framework for the HHA PPS, 
including the methodology used for the development of the payment rates, 
associated adjustments, and related rules.



Sec. 484.202  Definitions.

    As used in this subpart--

[[Page 577]]

    Case-mix index means a scale that measures the relative difference 
in resource intensity among different groups in the clinical model.
    Discipline means one of the six home health disciplines covered 
under the Medicare home health benefit (skilled nursing services, home 
health aide services, physical therapy services, occupational therapy 
services, speech- language pathology services, and medical social 
services).
    Home health market basket index means an index that reflects changes 
over time in the prices of an appropriate mix of goods and services 
included in home health services.



Sec. 484.205  Basis of payment.

    (a) Method of payment. An HHA receives a national prospective 60-day 
episode payment of a predetermined rate for a home health service 
previously paid on a reasonable cost basis (except the osteoporosis drug 
defined in section 1861(kk) of the Act) as of August 5, 1997. The 
national 60-day episode payment is determined in accordance with 
Sec. 484.215. The national prospective 60-day episode payment is subject 
to the following adjustments and additional payments:
    (1) A low-utilization payment adjustment (LUPA) of a predetermined 
per-visit rate as specified in Sec. 484.230.
    (2) A partial episode payment (PEP) adjustment due to an intervening 
event defined as a beneficiary elected transfer or a discharge and 
return to the same HHA during the 60-day episode, that warrants a new 
60-day episode payment during an existing 60-day episode, that initiates 
the start of a new 60-day episode payment and a new physician 
certification of the new plan of care. The PEP adjustment is determined 
in accordance with Sec. 484.235.
    (3) A significant change in condition (SCIC) payment adjustment due 
to the intervening event defined as a significant change in the 
patient's condition during an existing 60-day episode. The SCIC 
adjustment occurs when a beneficiary experiences a significant change in 
condition during a 60-day episode that was not envisioned in the 
original plan of care. The SCIC adjustment is determined in accordance 
with Sec. 484.237.
    (4) An outlier payment is determined in accordance with 
Sec. 484.240.
    (b) Episode payment. The national prospective 60-day episode payment 
represents payment in full for all costs associated with furnishing home 
health services previously paid on a reasonable cost basis (except the 
osteoporosis drug listed in section 1861(m) of the Act as defined in 
section 1861(kk) of the Act) as of August 5, 1997 unless the national 
60-day episode payment is subject to a low-utilization payment 
adjustment set forth in Sec. 484.230, a partial episode payment 
adjustment set forth at Sec. 484.235, a significant change in condition 
payment set forth at Sec. 484.237, or an additional outlier payment set 
forth in Sec. 484.240. All payments under this system may be subject to 
a medical review adjustment reflecting beneficiary eligibility, medical 
necessity determinations, and HHRG assignment. DME provided as a home 
health service as defined in section 1861(m) of the Act continues to be 
paid the fee schedule amount.
    (1) Split percentage payment for initial episodes. The initial 
percentage payment for initial episodes is paid to an HHA at 60 percent 
of the case-mix and wage adjusted 60-day episode rate. The residual 
final payment for initial episodes is paid at 40 percent of the case-mix 
and wage adjusted 60-day episode rate. Split percentage payments are 
made in accordance with requirements at Sec. 409.43(c) of this chapter.
    (2) Split percentage payment for subsequent episodes. The initial 
percentage payment for subsequent episodes is paid to an HHA at 50 
percent of the case-mix and wage adjusted 60-day episode rate. The 
residual final payment for subsequent episodes is paid at 50 percent of 
the case-mix and wage adjusted 60-day episode rate. Split percentage 
payments are made in accordance with requirements at Sec. 409.43(c) of 
this chapter.
    (c) Low-utilization payment. An HHA receives a national 60-day 
episode payment of a predetermined rate for home health services 
previously paid on a reasonable cost basis as of August 5, 1997, unless 
CMS determines at the end of the 60-day episode that the HHA furnished 
minimal services to a patient

[[Page 578]]

during the 60-day episode. A low- utilization payment adjustment is 
determined in accordance with Sec. 484.230.
    (d) Partial episode payment adjustment. An HHA receives a national 
60-day episode payment of a predetermined rate for home health services 
previously paid on a reasonable cost basis as of August 5, 1997, unless 
CMS determines an intervening event, defined as a beneficiary elected 
transfer, or discharge and return to the same HHA during a 60-day 
episode, warrants a new 60-day episode payment. The PEP adjustment would 
not apply in situations of transfers among HHAs of common ownership as 
defined in Sec. 424.22 of this chapter. Those situations would be 
considered services provided under arrangement on behalf of the 
originating HHA by the receiving HHA with the common ownership interest 
for the balance of the 60-day episode. The common ownership exception to 
the transfer PEP adjustment does not apply if the beneficiary moves to a 
different MSA or Non-MSA during the 60-day episode before the transfer 
to the receiving HHA. The transferring HHA in situations of common 
ownership not only serves as a billing agent, but must also exercise 
professional responsibility over the arranged-for services in order for 
services provided under arrangements to be paid. The discharge and 
return to the same HHA during the 60-day episode is only recognized in 
those circumstances when a beneficiary reached the goals in the original 
plan of care. The original plan of care must have been terminated with 
no anticipated need for additional home health services for the balance 
of the 60-day episode. If the intervening event warrants a new 60-day 
episode payment and the new physician certification of a new plan of 
care, the initial HHA receives a partial episode payment adjustment 
reflecting the length of time the patient remained under its care. A 
partial episode payment adjustment is determined in accordance with 
Sec. 484.235.
    (e) Significant change in condition adjustment. The HHA receives a 
national 60-day episode payment of a predetermined rate for home health 
services paid on a reasonable cost basis as of August 5, 1997, unless 
CMS determines an intervening event defined as a beneficiary 
experiencing a significant change in condition during a 60-day episode 
that was not envisioned in the original plan of care occurred. In order 
to receive a new case-mix assignment for purposes of payment during the 
60-day episode, the HHA must complete an OASIS assessment and obtain the 
necessary physician change orders reflecting the significant change in 
the treatment approach in the patient's plan of care. The total 
significant change in condition payment adjustment is a proportional 
payment adjustment reflecting the time both prior and after the patient 
experienced a significant change in condition during the 60-day episode. 
A SCIC adjustment is determined in accordance with Sec. 484.237.
    (f) Outlier payment. An HHA receives a national 60-day episode 
payment of a predetermined rate for a home health service paid on a 
reasonable cost basis as of August 5, 1997, unless the imputed cost of 
the 60-day episode exceeds a threshold amount. The outlier payment is 
defined to be a proportion of the imputed costs beyond the threshold. An 
outlier payment is a payment in addition to the national 60-day episode 
payment. The total of all outlier payments is limited to 5 percent of 
total outlays under the HHA PPS. An outlier payment is determined in 
accordance with Sec. 484.240.



Sec. 484.210  Data used for the calculation of the national prospective 60-day episode payment.

    To calculate the national prospective 60-day episode payment, CMS 
uses the following:
    (a) Medicare cost data on the most recent audited cost report data 
available.
    (b) Utilization data based on Medicare claims.
    (c) An appropriate wage index to adjust for area wage differences.
    (d) The most recent projections of increases in costs from the HHA 
market basket index.
    (e) OASIS assessment data and other data that account for the 
relative resource utilization for different HHA Medicare patient case-
mix.

[[Page 579]]



Sec. 484.215  Initial establishment of the calculation of the national 60-day episode payment.

    (a) Determining an HHA's costs. In calculating the initial 
unadjusted national 60-day episode payment applicable for a service 
furnished by an HHA using data on the most recent available audited cost 
reports, CMS determines each HHA's costs by summing its allowable costs 
for the period. CMS determines the national mean cost per visit.
    (b) Determining HHA utilization. In calculating the initial 
unadjusted national 60-day episode payment, CMS determines the national 
mean utilization for each of the six disciplines using home health 
claims data.
    (c) Use of the market basket index. CMS uses the HHA market basket 
index to adjust the HHA cost data to reflect cost increases occurring 
between October 1, 1996 through September 30, 2001.
    (d) Calculation of the unadjusted national average prospective 
payment amount for the 60-day episode. CMS calculates the unadjusted 
national 60-day episode payment in the following manner:
    (1) By computing the mean national cost per visit.
    (2) By computing the national mean utilization for each discipline.
    (3) By multiplying the mean national cost per visit by the national 
mean utilization summed in the aggregate for the six disciplines.
    (4) By adding to the amount derived in paragraph (d)(3) of this 
section, amounts for nonroutine medical supplies, an OASIS adjustment 
for estimated ongoing reporting costs, an OASIS adjustment for the one 
time implementation costs associated with assessment scheduling form 
changes and amounts for Part B therapies that could have been unbundled 
to Part B prior to October 1, 2000. The resulting amount is the 
unadjusted national 60-day episode rate.
    (e) Standardization of the data for variation in area wage levels 
and case-mix. CMS standardizes--
    (1) The cost data described in paragraph (a) of this section to 
remove the effects of geographic variation in wage levels and variation 
in case-mix;
    (2) The cost data for geographic variation in wage levels using the 
hospital wage index; and
    (3) The cost data for HHA variation in case-mix using the case-mix 
indices and other data that indicate HHA case-mix.



Sec. 484.220  Calculation of the adjusted national prospective 60-day episode payment rate for case-mix and area wage levels.

    CMS adjusts the national prospective 60-day episode payment rate to 
account for--
    (a) HHA case-mix using a case-mix index to explain the relative 
resource utilization of different patients; and
    (b) Geographic differences in wage levels using an appropriate wage 
index based on the site of service of the beneficiary.



Sec. 484.225  Annual update of the unadjusted national prospective 60-day episode payment rate.

    (a) CMS updates the unadjusted national 60-day episode payment rate 
on a fiscal year basis.
    (b) For fiscal year 2001, the unadjusted national 60-day episode 
payment rate is adjusted using the latest available home health market 
basket index factors.
    (c) For fiscal years 2002 and 2003, the unadjusted national 
prospective 60-day episode payment rate is updated by a factor equal to 
the applicable home health market basket minus 1.1 percentage points.
    (d) For subsequent fiscal years, the unadjusted national rate is 
equal to the rate for the previous fiscal year increased by the 
applicable home health market basket index amount.



Sec. 484.230  Methodology used for the calculation of the low-utilization payment adjustment.

    An episode with four or fewer visits is paid the national per-visit 
amount by discipline updated annually by the applicable market basket 
for each visit type. The national per-visit amount is determined by 
using cost data set forth in Sec. 484.210(a) and adjusting by the 
appropriate wage index based on the site of service for the beneficiary.

[[Page 580]]



Sec. 484.235  Methodology used for the calculation of the partial episode payment adjustment.

    (a) CMS makes a PEP adjustment to the original 60-day episode 
payment that is interrupted by an intervening event described in 
Sec. 484.205(d).
    (b) The original 60-day episode payment is adjusted to reflect the 
length of time the beneficiary remained under the care of the original 
HHA based on the first billable visit date through and including the 
last billable visit date.
    (c) The partial episode payment is calculated by determining the 
actual days served by the original HHA as a proportion of 60 multiplied 
by the initial 60-day episode payment.



Sec. 484.237  Methodology used for the calculation of the significant change in condition payment adjustment.

    (a) CMS makes a SCIC payment adjustment to the original 60-day 
episode payment that is interrupted by the intervening event defined in 
Sec. 484.205(e).
    (b) The SCIC payment adjustment is calculated in two parts.
    (1) The first part of the SCIC payment adjustment reflects the 
adjustment to the level of payment prior to the significant change in 
the patient's condition during the 60-day episode. The first part of the 
SCIC adjustment is determined by taking the span of days (the first 
billable visit date through and including the last billable visit date) 
prior to the patient's significant change in condition as a proportion 
of 60 multiplied by the original episode amount.
    (2) The second part of the SCIC payment adjustment reflects the 
adjustment to the level of payment after the significant change in the 
patient's condition occurs during the 60-day episode. The second part of 
the SCIC adjustment is calculated by using the span of days (the first 
billable visit date through and including the last billable visit date) 
through the balance of the 60-day episode.
    (c) The initial percentage payment provided at the start of the 60-
day episode will be adjusted at the end of the episode to reflect the 
first and second parts of the total SCIC adjustment determined at the 
end of the 60-day episode.



Sec. 484.240  Methodology used for the calculation of the outlier payment.

    (a) CMS makes an outlier payment for an episode whose estimated cost 
exceeds a threshold amount for each case-mix group.
    (b) The outlier threshold for each case-mix group is the episode 
payment amount for that group, the PEP adjustment amount for the episode 
or the total significant change in condition adjustment amount for the 
episode plus a fixed dollar loss amount that is the same for all case-
mix groups.
    (c) The outlier payment is a proportion of the amount of estimated 
cost beyond the threshold.
    (d) CMS imputes the cost for each episode by multiplying the 
national per-visit amount of each discipline by the number of visits in 
the discipline and computing the total imputed cost for all disciplines.
    (e) The fixed dollar loss amount and the loss sharing proportion are 
chosen so that the estimated total outlier payment is no more than 5 
percent of total payment under home health PPS.



Sec. 484.245  Accelerated payments for home health agencies.

    (a) General rule. Upon request, an accelerated payment may be made 
to an HHA that is receiving payment under the home health prospective 
payment system if the HHA is experiencing financial difficulties because 
there is a delay by the intermediary in making payment to the HHA.
    (b) Approval of payment. An HHA's request for an accelerated payment 
must be approved by the intermediary and CMS.
    (c) Amount of payment. The amount of the accelerated payment is 
computed as a percentage of the net payment for unbilled or unpaid 
covered services.
    (d) Recovery of payment. Recovery of the accelerated payment is made 
by recoupment as HHA bills are processed or by direct payment by the 
HHA.



Sec. 484.250  Patient assessment data.

    An HHA must submit to CMS the OASIS data described at 
Sec. 484.55(b)(1) and (d)(1) in order for CMS to administer the payment 
rate methodologies described in Secs. 484.215, 484.230, 484.235, and 
484.237.

[[Page 581]]



Sec. 484.260  Limitation on review.

    An HHA is not entitled to judicial or administrative review under 
sections 1869 or 1878 of the Act, or otherwise, with regard to the 
establishment of the payment unit, including the national 60-day 
prospective episode payment rate, adjustments and outlier payments. An 
HHA is not entitled to the review regarding the establishment of the 
transition period, definition and application of the unit of payments, 
the computation of initial standard prospective payment amounts, the 
establishment of the adjustment for outliers, and the establishment of 
case-mix and area wage adjustment factors.



PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS--Table of Contents




Subpart A [Reserved]

    Subpart B--Conditions of Participation: Comprehensive Outpatient 
                        Rehabilitation Facilities

Sec.
485.50 Basis and scope.
485.51 Definition.
485.54 Condition of participation: Compliance with State and local laws.
485.56 Condition of participation: Governing body and administration.
485.58 Condition of participation: Comprehensive rehabilitation program.
485.60 Condition of participation: Clinical records.
485.62 Condition of participation: Physical environment.
485.64 Condition of participation: Disaster procedures.
485.66 Condition of participation: Utilization review plan.
485.70 Personnel qualifications.
485.74 Appeal rights.

Subparts C-E [Reserved]

Subpart F--Conditions of Participation: Critical Access Hospitals (CAHs)

485.601 Basis and scope.
485.602 Definitions.
485.603 Rural health network.
485.604 Personnel qualifications.
485.606 Designation and certification of CAHs.
485.608 Condition of participation: Compliance with Federal, State, and 
          local laws and regulations.
485.610 Condition of participation: Status and location.
485.612 Condition of participation: Compliance with hospital 
          requirements at the time of application.
485.616 Condition of participation: Agreements.
485.618 Condition of participation: Emergency services.
485.620 Condition of participation: Number of beds and length of stay.
485.623 Condition of participation: Physical plant and environment.
485.627 Condition of participation: Organizational structure.
485.631 Condition of participation: Staffing and staff responsibilities.
485.635 Condition of participation: Provision of services.
485.638 Condition of participation: Clinical records.
485.639 Condition of participation: Surgical services.
485.641 Condition of participation: Periodic evaluation and quality 
          assurance review.
485.643 Condition of participation: Organ, tissue, and eye procurement.
485.645 Special requirements for CAH providers of long-term care 
          services (``swing-beds'').

Subpart G [Reserved]

   Subpart H--Conditions of Participation for Clinics, Rehabilitation 
Agencies, and Public Health Agencies as Providers of Outpatient Physical 
             Therapy and Speech-Language Pathology Services

485.701 Basis and scope.
485.703 Definitions.
485.705 Personnel qualifications.
485.707 Condition of participation: Compliance with Federal, State, and 
          local laws.
485.709 Condition of participation: Administrative management.
485.711 Condition of participation: Plan of care and physician 
          involvement.
485.713 Condition of participation: Physical therapy services.
485.715 Condition of participation: Speech pathology services.
485.717 Condition of participation: Rehabilitation program.
485.719 Condition of participation: Arrangements for physical therapy 
          and speech pathology services to be performed by other than 
          salaried organization personnel.
485.721 Condition of participation: Clinical records.
485.723 Condition of participation: Physical environment.
485.725 Condition of participation: Infection control.
485.727 Condition of participation: Disaster preparedness.

[[Page 582]]

485.729 Condition of participation: Program evaluation.

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

    Source: 48 FR 56293, Dec. 15, 1982, unless otherwise noted. 
Redesignated at 50 FR 33034, Aug. 16, 1985.

Subpart A [Reserved]



    Subpart B--Conditions of Participation: Comprehensive Outpatient 
                        Rehabilitation Facilities



Sec. 485.50  Basis and scope.

    This subpart sets forth the conditions that facilities must meet to 
be certified as comprehensive outpatient rehabilitation facilities 
(CORFs) under section 1861(cc)(2) of the Social Security Act and be 
accepted for participation in Medicare in accordance with part 489 of 
this chapter.



Sec. 485.51  Definition.

    As used in this subpart, unless the context indicates otherwise, 
``comprehensive outpatient rehabilitation facility'', ``CORF'', or 
``facility'' means a nonresidential facility that--
    (a) Is established and operated exclusively for the purpose of 
providing diagnostic, therapeutic, and restorative services to 
outpatients for the rehabilitation of injured, disabled, or sick 
persons, at a single fixed location, by or under the supervision of a 
physician; and
    (b) Meets all the requirements of this subpart.



Sec. 485.54  Condition of participation: Compliance with State and local laws.

    The facility and all personnel who provide services must be in 
compliance with applicable State and local laws and regulations.
    (a) Standard: Licensure of facility. If State or local law provides 
for licensing, the facility must be currently licensed or approved as 
meeting the standards established for licensure.
    (b) Standard: Licensure of personnel. Personnel that provide service 
must be licensed, certified, or registered in accordance with applicable 
State and local laws.



Sec. 485.56  Condition of participation: Governing body and administration.

    The facility must have a governing body that assumes full legal 
responsibility for establishing and implementing policies regarding the 
management and operation of the facility.
    (a) Standard: Disclosure of ownership. The facility must comply with 
the provisions of part 420, subpart C of this chapter that require 
health care providers and fiscal agents to disclose certain information 
about ownership and control.
    (b) Standard: Administrator. The governing body must appoint an 
administrator who--
    (1) Is responsible for the overall management of the facility under 
the authority delegated by the governing body;
    (2) Implements and enforces the facility's policies and procedures;
    (3) Designates, in writing, an individual who, in the absence of the 
administrator, acts on behalf of the administrator; and
    (4) Retains professional and administrative responsibility for all 
personnel providing facility services.
    (c) Standard: Group of professional personnel. The facility must 
have a group of professional personnel associated with the facility 
that--
    (1) Develops and periodically reviews policies to govern the 
services provided by the facility; and
    (2) Consists of at least one physician and one professional 
representing each of the services provided by the facility.
    (d) Standard: Institutional budget plan. The facility must have an 
institutional budget plan that meets the following conditions:
    (1) It is prepared, under the direction of the governing body, by a 
committee consisting of representatives of the governing body and the 
administrative staff.
    (2) It provides for--
    (i) An annual operating budget prepared according to generally 
accepted accounting principles;
    (ii) A 3-year capital expenditure plan if expenditures in excess of 
$100,000 are anticipated, for that period, for the acquisition of land; 
the improvement of land, buildings, and equipment; and the

[[Page 583]]

replacement, modernization, and expansion of buildings and equipment; 
and
    (iii) Annual review and updating by the governing body.
    (e) Standard: Patient care policies. The facility must have written 
patient care policies that govern the services it furnishes. The patient 
care policies must include the following:
    (1) A description of the services the facility furnishes through 
employees and those furnished under arrangements.
    (2) Rules for and personnel responsibilities in handling medical 
emergencies.
    (3) Rules for the storage, handling, and administration of drugs and 
biologicals.
    (4) Criteria for patient admission, continuing care, and discharge.
    (5) Procedures for preparing and maintaining clinical records on all 
patients.
    (6) A procedure for explaining to the patient and the patient's 
family the extent and purpose of the services to be provided.
    (7) A procedure to assist the referring physician in locating 
another level of care for--patients whose treatment has terminated and 
who are discharged.
    (8) A requirement that patients accepted by the facility must be 
under the care of a physician.
    (9) A requirement that there be a plan of treatment established by a 
physician for each patient.
    (10) A procedure to ensure that the group of professional personnel 
reviews and takes appropriate action on recommendations from the 
utilization review committee regarding patient care policies.
    (f) Standard: Delegation of authority. The responsibility for 
overall administration, management, and operation must be retained by 
the facility itself and not delegated to others.
    (1) The facility may enter into a contract for purposes of 
assistance in financial management and may delegate to others the 
following and similar services:
    (i) Bookkeeping.
    (ii) Assistance in the development of procedures for billing and 
accounting systems.
    (iii) Assistance in the development of an operating budget.
    (iv) Purchase of supplies in bulk form.
    (v) The preparation of financial statements.
    (2) When the services listed in paragraph (f)(1) of this section are 
delegated, a contract must be in effect and:
    (i) May not be for a term of more than 5 years;
    (ii) Must be subject to termination within 60 days of written notice 
by either party;
    (iii) Must contain a clause requiring renegotiation of any provision 
that CMS finds to be in contravention to any new, revised or amended 
Federal regulation or law;
    (iv) Must state that only the facility may bill the Medicare 
program; and
    (v) May not include clauses that state or imply that the contractor 
has power and authority to act on behalf of the facility, or clauses 
that give the contractor rights, duties, discretions, or 
responsibilities that enable it to dictate the administration, 
mangement, or operations of the facility.



Sec. 485.58  Condition of participation: Comprehensive rehabilitation program.

    The facility must provide a coordinated rehabilitation program that 
includes, at a minimum, physicians' services, physical therapy services, 
and social or psychological services. The services must be furnished by 
personnel that meet the qualifications set forth in Sec. 485.70 and must 
be consistent with the plan of treatment and the results of 
comprehensive patient assessments.
    (a) Standard: Physician services. (1) A facility physician must be 
present in the facility for a sufficient time to--
    (i) Provide, in accordance with accepted principles of medical 
practice, medical direction, medical care services, and consultation;
    (ii) Establish the plan of treatment in cases where a plan has not 
been established by the referring physician;
    (iii) Assist in establishing and implementing the facility's patient 
care policies; and

[[Page 584]]

    (iv) Participate in plan of treatment reviews, patient case review 
conferences, comprehensive patient assessment and reassessments, and 
utilization review.
    (2) The facility must provide for emergency physician services 
during the facility operating hours.
    (b) Standard: Plan of treatment. For each patient, a physician must 
establish a plan of treatment before the facility initiates treatment. 
The plan of treatment must meet the following requirements:
    (1) It must delineate anticipated goals and specify the type, 
amount, frequency and duration of services to be provided.
    (2) It must be promptly evaluated after changes in the patient's 
condition and revised when necessary.
    (3) It must, if appropriate, be developed in consultation with the 
facility physician and the appropriate facility professional personnel.
    (4) It must be reviewed at least every 60 days by a facility 
physician who, when appropriate, consults with the professional 
personnel providing services. The results of this review must be 
communicated to the patient's referring physician for concurrence before 
treatment is continued or discontinued.
    (5) It must be revised if the comprehensive reassessment of the 
patient's status or the results of the patient case review conference 
indicate the need for revision.
    (c) Standard: Coordination of services. The facility must designate, 
in writing, a qualified professional to ensure that professional 
personnel coordinate their related activities and exchange information 
about each patient under their care. Mechanisms to assist in the 
coordination of services must include--
    (1) Providing to all personnel associated with the facility, a 
schedule indicating the frequency and type of services provided at the 
facility;
    (2) A procedure for communicating to all patient care personnel 
pertinent information concerning significant changes in the patient's 
status;
    (3) Periodic clinical record entries, noting at least the patient's 
status in relationship to goal attainment; and
    (4) Scheduling patient case review conferences for purposes of 
determining appropriateness of treatment, when indicated by the results 
of the initial comprehensive patient assessment, reassessment(s), the 
recommendation of the facility physician (or other physician who 
established the plan of treatment), or upon the recommendation of one of 
the professionals providing services.
    (d) Standard: Provision of services. (1) All patients must be 
referred to the facility by a physician who provides the following 
information to the facility before treatment is initiated:
    (i) The patient's significant medical history.
    (ii) Current medical findings.
    (iii) Diagnosis(es) and contraindications to any treatment modality.
    (iv) Rehabilitation goals, if determined.
    (2) Services may be provided by facility employees or by others 
under arrangements made by the facility.
    (3) The facility must have on its premises the necessary equipment 
to implement the plan of treatment and sufficient space to allow 
adequate care.
    (4) The services must be furnished by personnel that meet the 
qualifications of Sec. 485.70 and the number of qualified personnel must 
be adequate for the volume and diversity of services offered. Personnel 
that do not meet the qualifications specified in Sec. 485.70 may be used 
by the facility in assisting qualified staff. When a qualified 
individual is assisted by these personnel, the qualified individual must 
be on the premises, and must instruct these personnel in appropriate 
patient care service techniques and retain responsibility for their 
activities.
    (5) A qualified professional must initiate and coordinate the 
appropriate portions of the plan of treatment, monitor the patient's 
progress, and recommend changes, in the plan, if necessary.
    (6) A qualified professional representing each service made 
available at the facility must be either on the premises of the facility 
or must be available through direct telecommunication for consultation 
and assistance during the facility's operating hours. At least one 
qualified professional

[[Page 585]]

must be on the premises during the facility's operating hours.
    (7) All services must be provided consistent with accepted 
professional standards and practice.
    (e) Standard: Scope and site of services--(1) Basic requirements. 
The facility must provide all the CORF services required in the plan of 
treatment and, except as provided in paragraph (e)(2) of this section, 
must provide the services on its premises.
    (2) Exceptions. Physical therapy, occupational therapy, and speech 
pathology services furnished away from the premises of the CORF may be 
covered as CORF services if Medicare payment is not otherwise made for 
these services. In addition, a single home visit is covered if there is 
need to evaluate the potential impact of the home environment on the 
rehabilitation goals.
    (f) Standard: Patient assessment. Each qualified professional 
involved in the patient's care, as specified in the plan of treatment, 
must--
    (1) Carry out an initial patient assessment; and
    (2) In order to identify whether or not the current plan of 
treatment is appropriate, perform a patient reassessment after 
significant changes in the patient's status.
    (g) Standard: Laboratory services. (1) If the facility provides its 
own laboratory services, the services must meet the applicable 
requirements for laboratories specified in part 493 of this chapter.
    (2) If the facility chooses to refer specimens for laboratory 
testing, the referral laboratory must be certified in the appropriate 
specialties and subspecialties of services in accordance with the 
requirements of part 493 of this chapter.

[48 FR 56293, Dec. 15, 1982, as amended at 56 FR 8852, Mar. 1, 1991; 57 
FR 7137, Feb. 28, 1992]



Sec. 485.60  Condition of participation: Clinical records.

    The facility must maintain clinical records on all patients in 
accordance with accepted professional standards and practice. The 
clinical records must be completely, promptly, and accurately 
documented, readily accessible, and systematically organized to 
facilitate retrieval and compilation of information.
    (a) Standard: Content. Each clinical record must contain sufficient 
information to identify the patient clearly and to justify the diagnosis 
and treatment. Entries in the clinical record must be made as frequently 
as is necessary to insure effective treatment and must be signed by 
personnel providing services. All entries made by assistant level 
personnel must be countersigned by the corresponding professional. 
Documentation on each patient must be consolidated into one clinical 
record that must contain--
    (1) The initial assessment and subsequent reassessments of the 
patient's needs;
    (2) Current plan of treatment;
    (3) Identification data and consent or authorization forms;
    (4) Pertinent medical history, past and present;
    (5) A report of pertinent physical examinations if any;
    (6) Progress notes or other documentation that reflect patient 
reaction to treatment, tests, or injury, or the need to change the 
established plan of treatment; and
    (7) Upon discharge, a discharge summary including patient status 
relative to goal achievement, prognosis, and future treatment 
considerations.
    (b) Standard: Protection of clinical record information. The 
facility must safeguard clinical record information against loss, 
destruction, or unauthorized use. The facility must have procedures that 
govern the use and removal of records and the conditions for release of 
information. The facility must obtain the patient's written consent 
before releasing information not required to be released by law.
    (c) Standard: Retention and preservation. The facility must retain 
clinical record information for 5 years after patient discharge and must 
make provision for the maintenance of such records in the event that it 
is no longer able to treat patients.



Sec. 485.62  Condition of participation: Physical environment.

    The facility must provide a physical environment that protects the 
health

[[Page 586]]

and safety or patients, personnel, and the public.
    (a) Standard: Safety and comfort of patients. The physical premises 
of the facility and those areas of its surrounding physical structure 
that are used by the patients (including at least all stairwells, 
corridors and passageways) must meet the following requirements:
    (1) Applicable Federal, State, and local building, fire, and safety 
codes must be met.
    (2) Fire extinguishers must be easily accessible and fire 
regulations must be prominently posted.
    (3) A fire alarm system with local (in-house) capability must be 
functional, and where power is generated by electricity, an alternate 
power source with automatic triggering must be present.
    (4) Lights, supported by an emergency power source, must be placed 
at exits.
    (5) A sufficient number of staff to evacuate patients during a 
disaster must be on the premises of the facility whenever patients are 
being treated.
    (6) Lighting must be sufficient to carry out services safely; room 
temperature must be maintained at comfortable levels; and ventilation 
through windows, mechanical means, or a combination of both must be 
provided.
    (7) Safe and sufficient space must be available for the scope of 
services offered.
    (b) Standard: Sanitary environment. The facility must maintain a 
sanitary environment and establish a program to identify, investigate, 
prevent, and control the cause of patient infections.
    (1) The facility must establish written policies and procedures 
designed to control and prevent infection in the facility and to 
investigate and identify possible causes of infection.
    (2) The facility must monitor the infection control program to 
ensure that the staff implement the policies and procedures and that the 
policies and procedures are consistent with current practices in the 
field.
    (3) The facility must make available at all times a quantity of 
laundered linen adequate for proper care and comfort of patients. Linens 
must be handled, stored, and processed in a mannner that prevents the 
spread of infection.
    (4) Provisions must be in effect to ensure that the facility's 
premises are maintained free of rodent and insect infestation.
    (c) Standard: Maintenance of equipment, physical location, and 
grounds. The facility must establish a written preventive maintenance 
program to ensure that--
    (1) All equipment is properly maintained and equipment needing 
periodic calibration is calibrated consistent with the manufacturer's 
recommendations; and
    (2) The interior of the facility, the exterior of the physical 
structure housing the facility, and the exterior walkways and parking 
areas are clean and orderly and maintained free of any defects that are 
a hazard to patients, personnel, and the public.
    (d) Standard: Access for the physically impaired. The facility must 
ensure the following:
    (1) Doorways, stairwells, corridors, and passageways used by 
patients are--
    (i) Of adequate width to allow for easy movement of all patients 
(including those on stretchers or in wheelchairs); and
    (ii) In the case of stairwells, equipped with firmly attached 
handrails on at least one side.
    (2) At least one toilet facility is accessible and constructed to 
allow utilization by ambulatory and nonambulatory individuals.
    (3) At least one entrance is usable by individuals in wheelchairs.
    (4) In multi-story buildings, elevators are accessible to and usable 
by the physically impaired on the level that they use to enter the 
building and all levels normally used by the patients of the facility.
    (5) Parking spaces are large enough and close enough to the facility 
to allow safe access by the physically impaired.



Sec. 485.64  Condition of participation: Disaster procedures.

    The facility must have written policies and procedures that 
specifically define the handling of patients, personnel, records, and 
the public during disasters. All personnel associated with

[[Page 587]]

the facility must be knowledgeable with respect to these procedures, be 
trained in their application, and be assigned specific responsibilities.
    (a) Standard: Disaster plan. The facility's written disaster plan 
must be developed and maintained with assistance of qualified fire, 
safety, and other appropriate experts. The plan must include--
    (1) Procedures for prompt transfer of casualties and records;
    (2) Procedures for notifying community emergency personnel (for 
example, fire department, ambulance, etc.);
    (3) Instructions regarding the location and use of alarm systems and 
signals and fire fighting equipment; and
    (4) Specification of evacuation routes and procedures for leaving 
the facility.
    (b) Standard: Drills and staff training. (1) The facility must 
provide ongoing training and drills for all personnel associated with 
the facility in all aspects of disaster preparedness.
    (2) All new personnel must be oriented and assigned specific 
responsibilities regarding the facility's disaster plan within two weeks 
of their first workday.



Sec. 485.66  Condition of participation: Utilization review plan.

    The facility must have in effect a written utilization review plan 
that is implemented at least each quarter, to assess the necessity of 
services and promotes the most efficient use of services provided by the 
facility.
    (a) Standard: Utilization review committee. The utilization review 
committee, consisting of the group of professional personnel specified 
in Sec. 485.56(c), a committee of this group, or a group of similar 
composition, comprised by professional personnel not associated with the 
facility, must carry out the utilization review plan.
    (b) Standard: Utilization review plan. The utilization review plan 
must contain written procedures for evaluating--
    (1) Admissions, continued care, and discharges using, at a minimum, 
the criteria established in the patient care policies;
    (2) The applicability of the plan of treatment to established goals; 
and
    (3) The adequacy of clinical records with regard to--
    (i) Assessing the quality of services provided; and
    (ii) Determining whether the facility's policies and clinical 
practices are compatible and promote appropriate and efficient 
utilization of services.



Sec. 485.70  Personnel qualifications.

    This section sets forth the qualifications that must be met, as a 
condition of participation, under Sec. 485.58, and as a condition of 
coverage of services under Sec. 410.100 of this chapter.
    (a) A facility physician must be a doctor of medicine or osteopathy 
who--
    (1) Is licensed under State law to practice medicine or surgery; and
    (2) Has had, subsequent to completing a 1-year hospital internship, 
at least 1 year of training in the medical management of patients 
requiring rehabilitation services; or
    (3) Has had at least 1 year of full-time or part-time experience in 
a rehabilitation setting providing physicians' services similar to those 
required in this subpart.
    (b) A licensed practical nurse must be licensed as a practical or 
vocational nurse by the State in which practicing, if applicable.
    (c) An occupational therapist and an occupational therapist 
assistant must meet the qualifications set forth in Sec. 405.1202(f) and 
(g) of this chapter.
    (d) An orthotist must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Have successfully completed a training program in orthotics that 
is jointly recognized by the American Council on Education and the 
American Board for Certification in Orthotics and Prosthetics; and
    (3) Be eligible to take that Board's certification examination in 
orthotics.
    (e) A physical therapist and a physical therapist assistant must 
meet the qualifications set forth in paragraphs (b) and (c) of 
Sec. 485.705.
    (f) A prosthetist must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Have successfully completed a training program in prosthetics 
that is jointly recognized by the American

[[Page 588]]

Council on Education and the American Board for Certification in 
Orthotics and Prosthetics; and
    (3) Be eligible to take that Board's certification examination in 
prosthetics.
    (g) A psychologist must be certified or licensed by the State in 
which he or she is practicing, if that State requires certification or 
licensing, and must hold a masters degree in psychology from and 
educational institution approved by the State in which the institution 
is located.
    (h) A registered nurse must be a graduate of an approved school of 
nursing and be licensed as a registered nurse by the State in which 
practicing, if applicable.
    (i) A rehabilitation counselor must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Hold at least a bachelor's degree; and
    (3) Be eligible to take the certification examination administered 
by the Commission on Rehabilitation Counselor Certification.
    (j) A respiratory therapist must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Have successfully completed a training program accredited by the 
Committee on Allied Health Education and Accreditation (CAHEA) in 
collaboration with the Joint Review Committee for Respiratory Therapy 
Education; and
    (3) Either--
    (i) Be eligible to take the registry examination for respiratory 
therapists administered by the National Board for Respiratory Therapy, 
Inc.; or
    (ii) Have equivalent training and experience as determined by the 
National Board for Respiratory Therapy, Inc.
    (k) A respiratory therapy technician must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Have successfully completed a training program accredited by the 
Committees on Allied Health Education and Accreditation (CAHEA) in 
collaboration with the Joint Review Committee for Respiratory Therapy 
Education; and
    (3) Either--
    (i) Be eligible to take the certification examination for 
respiratory therapy technicians administered by the National Board for 
Respiratory Therapy, Inc,; or
    (ii) Have equivalent training and experience as determined by the 
National Board for Respiratory Therapy, Inc.
    (l) A social worker must--
    (1) Be licensed by the State in which practicing, if applicable;
    (2) Hold at least a bachelor's degree from a school accredited or 
approved by the Council on Social Work Education; and
    (3) Have 1 year of social work experience in a health care setting.
    (m) A speech-language pathologist must meet the qualifications set 
forth in Sec. 485.705(f) of this chapter.

[48 FR 56293, Dec. 15, 1982. Redesignated and amended at 50 FR 33034, 
Aug. 16, 1985; 51 FR 41352, Nov. 14, 1986; 60 FR 2327, Jan. 9, 1995]



Sec. 485.74  Appeal rights.

    The appeal provisions set forth in part 498 of this chapter, for 
providers, are applicable to any entity that is participating or seeks 
to participate in the Medicare program as a CORF.

[48 FR 56293, Dec. 15, 1982, as amended at 52 FR 22454, June 12, 1987]

Subparts C-E [Reserved]



Subpart F--Conditions of Participation: Critical Access Hospitals (CAHs)

    Source: 58 FR 30671, May 26, 1993, unless otherwise noted.



Sec. 485.601  Basis and scope.

    (a) Statutory basis. This subpart is based on section 1820 of the 
Act which sets forth the conditions for designating certain hospitals as 
CAHs.
    (b) Scope. This subpart sets forth the conditions that a hospital 
must meet to be designated as a CAH.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.602  Definitions.

    As used in this subpart, unless the context indicates otherwise:

[[Page 589]]

    Direct services means services provided by employed staff of the 
CAH, not services provided through arrangements or agreements.

[59 FR 45403, Sept. 1, 1994, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.603  Rural health network.

    A rural health network is an organization that meets the following 
specifications:
    (a) It includes--
    (1) At least one hospital that the State has designated or plans to 
designate as a CAH; and
    (2) At least one hospital that furnishes acute care services.
    (b) The members of the organization have entered into agreements 
regarding--
    (1) Patient referral and transfer;
    (2) The development and use of communications systems, including, 
where feasible, telemetry systems and systems for electronic sharing of 
patient data; and
    (3) The provision of emergency and nonemergency transportation among 
members.
    (c) Each CAH has an agreement with respect to credentialing and 
quality assurance with at least--
    (1) One hospital that is a member of the network when applicable;
    (2) One QIO or equivalent entity; or
    (3) One other appropriate and qualified entity identified in the 
State rural health care plan.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46035, Aug. 29, 1997; 63 
FR 26359, May 12, 1998]



Sec. 485.604  Personnel qualifications.

    Staff that furnish services in a CAH must meet the applicable 
requirements of this section.
    (a) Clinical nurse specialist. A clinical nurse specialist must be a 
person who performs the services of a clinical nurse specialist as 
authorized by the State, in accordance with State law or the State 
regulatory mechanism provided by State law.
    (b) Nurse practitioner. A nurse practitioner must be a registered 
professional nurse who is currently licensed to practice in the State, 
who meets the State's requirements governing the qualification of nurse 
practitioners, and who meets one of the following conditions:
    (1) Is currently certified as a primary care nurse practitioner by 
the American Nurses' Association or by the National Board of Pediatric 
Nurse Practitioners and Associates.
    (2) Has successfully completed a 1 academic year program that--
    (i) Prepares registered nurses to perform an expanded role in the 
delivery of primary care;
    (ii) Includes at least 4 months (in the aggregate) of classroom 
instruction and a component of supervised clinical practice; and
    (iii) Awards a degree, diploma, or certificate to persons who 
successfully complete the program.
    (3) Has successfully completed a formal educational program (for 
preparing registered nurses to perform an expanded role in the delivery 
of primary care) that does not meet the requirements of paragraph (a)(2) 
of this section, and has been performing an expanded role in the 
delivery of primary care for a total of 12 months during the 18-month 
period immediately preceding June 25, 1993.
    (c) Physician assistant. A physician assistant must be a person who 
meets the applicable State requirements governing the qualifications for 
assistants to primary care physicians, and who meets at least one of the 
following conditions:
    (1) Is currently certified by the National Commission on 
Certification of Physician Assistants to assist primary care physicians.
    (2) Has satisfactorily completed a program for preparing physician 
assistants that--
    (i) Was at least one academic year in length;
    (ii) Consisted of supervised clinical practice and at least 4 months 
(in the aggregate) of classroom instruction directed toward preparing 
students to deliver health care; and
    (iii) Was accredited by the American Medical Association's Committee 
on Allied Health Education and Accreditation.
    (3) Has satisfactorily completed a formal educational program (for 
preparing physician assistants) that does

[[Page 590]]

not meet the requirements of paragraph (c)(2) of this section and has 
been assisting primary care physicians for a total of 12 months during 
the 18-month period immediately preceding June 25, 1993.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.606  Designation and certification of CAHs.

    (a) Criteria for State designation. (1) A State that has established 
a Medicare rural hospital flexibility program described in section 
1820(c) of the Act may designate one or more facilities as CAHs if each 
facility meets the CAH conditions of participation in this subpart F.
    (2) The State must not deny any hospital that is otherwise eligible 
for designation as a CAH under this paragraph (a) solely because the 
hospital has entered into an agreement under which the hospital may 
provide posthospital SNF care as described in Sec. 482.66 of this 
chapter.
    (b) Criteria for CMS certification. CMS certifies a facility as a 
CAH if--
    (1) The facility is designated as a CAH by the State in which it is 
located and has been surveyed by the State survey agency or by CMS and 
found to meet all conditions of participation in this Part and all other 
applicable requirements for participation in Part 489 of this chapter.
    (2) The facility is a medical assistance facility operating in 
Montana or a rural primary care hospital designated by CMS before August 
5, 1997, and is otherwise eligible to be designated as a CAH by the 
State under the rules in this subpart.

[62 FR 46036, Aug. 29, 1997, as amended at 63 FR 26359, May 12, 1998]



Sec. 485.608  Condition of participation: Compliance with Federal, State, and local laws and regulations.

    The CAH and its staff are in compliance with applicable Federal, 
State and local laws and regulations.
    (a) Standard: Compliance with Federal laws and regulations. The CAH 
is in compliance with applicable Federal laws and regulations related to 
the health and safety of patients.
    (b) Standard: Compliance with State and local laws and regulations. 
All patient care services are furnished in accordance with applicable 
State and local laws and regulations.
    (c) Standard: Licensure of CAH. The CAH is licensed in accordance 
with applicable Federal, State and local laws and regulations.
    (d) Standard: Licensure, certification or registration of personnel. 
Staff of the CAH are licensed, certified, or registered in accordance 
with applicable Federal, State, and local laws and regulations.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.610  Condition of participation: Status and location.

    (a) Standard: Status. The facility is--
    (1) A currently participating hospital that meets all conditions of 
participation set forth in this subpart;
    (2) A recently closed facility, provided that the facility--
    (i) Was a hospital that ceased operations on or after the date that 
is 10 years before November 29, 1999; and
    (ii) Meets the criteria for designation under this subpart as of the 
effective date of its designation; or
    (3) A health clinic or a health center (as defined by the State) 
that--
    (i) Is licensed by the State as a health clinic or a health center;
    (ii) Was a hospital that was downsized to a health clinic or a 
health center; and
    (iii) As of the effective date of its designation, meets the 
criteria for designation set forth in this subpart.
    (b) Standard: Location in a rural area or treatment as rural. The 
CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this 
section.
    (1) The CAH meets the following requirements:
    (i) The CAH is located outside any area that is a Metropolitan 
Statistical Area, as defined by the Office of Management and Budget, or 
that has been recognized as urban under Sec. 412.62(f) of this chapter;
    (ii) The CAH is not deemed to be located in an urban area under 
Sec. 412.63(b) of this chapter; and
    (iii) The CAH has not been classified as an urban hospital for 
purposes of the

[[Page 591]]

standardized payment amount by CMS or the Medicare Geographic 
Classification Review Board under Sec. 412.230(e) of this chapter, and 
is not among a group of hospitals that have been redesignated to an 
adjacent urban area under Sec. 412.232 of this chapter.
    (2) The CAH is located within a Metropolitan Statistical Area, as 
defined by the Office of Management and Budget, but is being treated as 
being located in a rural area in accordance with Sec. 412.103 of this 
chapter.
    (c) Standard: Location relative to other facilities or necessary 
provider certification. The CAH is located more than a 35-mile drive 
(or, in the case of mountainous terrain or in areas with only secondary 
roads available, a 15-mile drive) from a hospital or another CAH, or the 
CAH is certified by the State as being a necessary provider of health 
care services to residents in the area.

[62 FR 46036, Aug. 29, 1997, as amended at 65 FR 47052, Aug. 1, 2000; 66 
FR 39938, Aug. 1, 2001]



Sec. 485.612  Condition of participation: Compliance with hospital requirements at the time of application.

    Except for recently closed facilities as described in 
Sec. 485.610(a)(2), or health clinics or health centers as described in 
Sec. 485.610(a)(3), the facility is a hospital that has a provider 
agreement to participate in the Medicare program as a hospital at the 
time the hospital applies for designation as a CAH.

[66 FR 32196, June 13, 2001]



Sec. 485.616  Condition of participation: Agreements.

    (a) Standard: Agreements with network hospitals. In the case of a 
CAH that is a member of a rural health network as defined in 
Sec. 485.603 of this chapter, the CAH has in effect an agreement with at 
least one hospital that is a member of the network for--
    (1) Patient referral and transfer;
    (2) The development and use of communications systems of the 
network, including the network's system for the electronic sharing of 
patient data, and telemetry and medical records, if the network has in 
operation such a system; and
    (3) The provision of emergency and nonemergency transportation 
between the facility and the hospital.
    (b) Standard: Agreements for credentialing and quality assurance. 
Each CAH that is a member of a rural health network shall have an 
agreement with respect to credentialing and quality assurance with at 
least--
    (1) One hospital that is a member of the network;
    (2) One QIO or equivalent entity; or
    (3) One other appropriate and qualified entity identified in the 
State rural health care plan.

[62 FR 46036, Aug. 29, 1997]



Sec. 485.618  Condition of participation: Emergency services.

    The CAH provides emergency care necessary to meet the needs of its 
inpatients and outpatients.
    (a) Standard: Availability. Emergency services are available on a 
24-hours a day basis.
    (b) Standard: Equipment, supplies, and medication. Equipment, 
supplies, and medication used in treating emergency cases are kept at 
the CAH and are readily available for treating emergency cases. The 
items available must include the following:
    (1) Drugs and biologicals commonly used in life-saving procedures, 
including analgesics, local anesthetics, antibiotics, anticonvulsants, 
antidotes and emetics, serums and toxoids, antiarrythmics, cardiac 
glycosides, antihypertensives, diuretics, and electrolytes and 
replacement solutions.
    (2) Equipment and supplies commonly used in life-saving procedures, 
including airways, endotracheal tubes, ambu bag/valve/mask, oxygen, 
tourniquets, immobilization devices, nasogastric tubes, splints, IV 
therapy supplies, suction machine, defibrillator, cardiac monitor, chest 
tubes, and indwelling urinary catheters.
    (c) Standard: Blood and blood products. The facility provides, 
either directly or under arrangements, the following:
    (1) Services for the procurement, safekeeping, and transfusion of 
blood, including the availability of blood products needed for 
emergencies on a 24-hours a day basis.
    (2) Blood storage facilities that meet the requirements of 42 CFR 
part 493,

[[Page 592]]

subpart K, and are under the control and supervision of a pathologist or 
other qualified doctor of medicine or osteopathy. If blood banking 
services are provided under an arrangement, the arrangement is approved 
by the facility's medical staff and by the persons directly responsible 
for the operation of the facility.
    (d) Standard: Personnel. There must be a doctor of medicine or 
osteopathy, a physician assistant, or a nurse practitioner with training 
or experience in emergency care on call and immediately available by 
telephone or radio contact, and available on site within the following 
timeframes:
    (1) Within 30 minutes, on a 24-hour a day basis, if the CAH is 
located in an area other than an area described in paragraph (d)(2) of 
this section; or
    (2) Within 60 minutes, on a 24-hour a day basis, if all of the 
following requirements are met:
    (i) The CAH is located in an area designated as a frontier area 
(that is, an area with fewer than six residents per square mile based on 
the latest population data published by the Bureau of the Census) or in 
an area that meets criteria for a remote location adopted by the State 
in its rural health care plan, and approved by CMS, under section 
1820(b) of the Act.
    (ii) The State has determined under criteria in its rural health 
care plan that allowing an emergency response time longer than 30 
minutes is the only feasible method of providing emergency care to 
residents of the area served by the CAH.
    (iii) The State maintains documentation showing that the response 
time of up to 60 minutes at a particular CAH it designates is justified 
because other available alternatives would increase the time needed to 
stabilize a patient in an emergency.
    (e) Standard: Coordination with emergency response systems. The CAH 
must, in coordination with emergency response systems in the area, 
establish procedures under which a doctor of medicine or osteopathy is 
immediately available by telephone or radio contact on a 24-hours a day 
basis to receive emergency calls, provide information on treatment of 
emergency patients, and refer patients to the CAH or other appropriate 
locations for treatment.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997; 64 
FR 41544, July 30, 1999]



Sec. 485.620  Condition of participation: Number of beds and length of stay.

    (a) Standard: Number of beds. Except as permitted for CAHs having 
swing-bed agreements under Sec. 485.645 of this chapter, the CAH 
maintains no more than 15 inpatient beds.
    (b) Standard: Length of stay. The CAH provides acute inpatient care 
for a period that does not exceed, on an annual average basis, 96 hours 
per patient.

[62 FR 46036, Aug. 29, 1997, as amended at 65 FR 47052, Aug. 1, 2000]



Sec. 485.623  Condition of participation: Physical plant and environment.

    (a) Standard: Construction. The CAH is constructed, arranged, and 
maintained to ensure access to and safety of patients, and provides 
adequate space for the provision of direct services.
    (b) Standard: Maintenance. The CAH has housekeeping and preventive 
maintenance programs to ensure that--
    (1) All essential mechanical, electrical, and patient-care equipment 
is maintained in safe operating condition;
    (2) There is proper routine storage and prompt disposal of trash;
    (3) Drugs and biologicals are appropriately stored;
    (4) The premises are clean and orderly; and
    (5) There is proper ventilation, lighting, and temperature control 
in all pharmaceutical, patient care, and food preparation areas.
    (c) Standard: Emergency procedures. The CAH assures the safety of 
patients in non-medical emergencies by--
    (1) Training staff in handling emergencies, including prompt 
reporting of fires, extinguishing of fires, protection and, where 
necessary, evacuation of patients, personnel, and guests, and 
cooperation with fire fighting and disaster authorities;
    (2) Providing for emergency power and lighting in the emergency room 
and for battery lamps and flashlights in other areas;
    (3) Providing for an emergency fuel and water supply; and

[[Page 593]]

    (4) Taking other appropriate measures that are consistent with the 
particular conditions of the area in which the CAH is located.
    (d) Standard: Life safety from fire--(1) Except as provided in 
paragraphs (d)(2) and (d)(3) of this section, the CAH must meet the 
requirements of chapter 12, New Health Care Occupancy, or chapter 13, 
Existing Health Care Occupancy, of the 1985 edition of the Life Safety 
Code of the National Fire Protection Association. Incorporation by 
reference of the 1985 edition of the National Fire Protection 
Association's Life Safety Code (published February 7, 1985; ANSI/NFPA 
101) was approved by the Director of the Federal Register in accordance 
with 5 U.S.C. 552(a) and 1 CFR part 51. The Code is available for 
inspection at the CMS Information Resource Center, 7500 Security 
Boulevard, Room C2-07-13, Central Building, Baltimore, MD 21244-1850, 
and the Office of the Federal Register, 800 North Capitol Street, NW., 
suite 700, Washington, DC. Copies may be obtained from the National Fire 
Protection Association, Batterymarch Park, Quincy, Mass. 02209. If any 
changes in this code are also to be incorporated by reference, a 
document to that effect will be published in the Federal Register.
    (2) Any CAH that as a hospital on or before November 26, 1982, 
complied, with or without waivers, with the requirements of the 1967 
edition of the Life Safety Code, or after November 26, 1982 and on or 
before May 9, 1988, complied with the 1981 edition of the Life Safety 
Code, is considered to be in compliance with this standard as long as 
the CAH continues to remain in compliance with that edition of the Code. 
The 1967 and 1981 Life Safety Codes are available for inspection at the 
CMS Information Resource Center, 7500 Security Boulevard, Room C2-07-13, 
Central Building, Baltimore, MD 21244-1850.
    (3) After consideration of State survey agency findings, CMS may 
waive specific provisions of the Life Safety Code that, if rigidly 
applied, would result in unreasonable hardship on the CAH, but only if 
the waiver does not adversely affect the health and safety of patients.
    (4) The CAH maintains written evidence of regular inspection and 
approval by State or local fire control agencies.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46036, 46037, Aug. 29, 
1997]



Sec. 485.627  Condition of participation: Organizational structure.

    (a) Standard: Governing body or responsible individual. The CAH has 
a governing body or an individual that assumes full legal responsibility 
for determining, implementing and monitoring policies governing the 
CAH's total operation and for ensuring that those policies are 
administered so as to provide quality health care in a safe environment.
    (b) Standard: Disclosure. The CAH discloses the names and addresses 
of--
    (1) Its owners, or those with a controlling interest in the CAH or 
in any subcontractor in which the CAH directly or indirectly has a 5 
percent or more ownership interest, in accordance with subpart C of part 
420 of this chapter;
    (2) The person principally responsible for the operation of the CAH; 
and
    (3) The person responsible for medical direction.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.631  Condition of participation: Staffing and staff responsibilities.

    (a) Standard: Staffing--(1) The CAH has a professional health care 
staff that includes one or more doctors of medicine or osteopathy, and 
may include one or more physician assistants, nurse practitioners, or 
clinical nurse specialists.
    (2) Any ancillary personnel are supervised by the professional 
staff.
    (3) The staff is sufficient to provide the services essential to the 
operation of the CAH.
    (4) A doctor of medicine or osteopathy, nurse practitioner, clinical 
nurse specialist, or physician assistant is available to furnish patient 
care services at all times the CAH operates.
    (5) A registered nurse, clinical nurse specialist, or licensed 
practical nurse is on duty whenever the CAH has one or more inpatients.

[[Page 594]]

    (b) Standard: Responsibilities of the doctor of medicine or 
osteopathy. (1) The doctor of medicine or osteopathy--
    (i) Provides medical direction for the CAH's health care activities 
and consultation for, and medical supervision of, the health care staff;
    (ii) In conjunction with the physician assistant and/or nurse 
practitioner member(s), participates in developing, executing, and 
periodically reviewing the CAH's written policies governing the services 
it furnishes.
    (iii) In conjunction with the physician assistant and/or nurse 
practitioner members, periodically reviews the CAH's patient records, 
provides medical orders, and provides medical care services to the 
patients of the CAH; and
    (iv) Periodically reviews and signs the records of patients cared 
for by nurse practitioners, clinical nurse specialists, or physician 
assistants.
    (2) A doctor of medicine or osteopathy is present for sufficient 
periods of time, at least once in every 2 week period (except in 
extraordinary circumstances) to provide the medical direction, medical 
care services, consultation, and supervision described in this 
paragraph, and is available through direct radio or telephone 
communication for consultation, assistance with medical emergencies, or 
patient referral. The extraordinary circumstances are documented in the 
records of the CAH. A site visit is not required if no patients have 
been treated since the latest site visit.
    (c) Standard: Physician assistant, nurse practitioner, and clinical 
nurse specialist responsibilities. (1) The physician assistant, the 
nurse practitioner, or clinical nurse specialist members of the CAH's 
staff--
    (i) Participate in the development, execution and periodic review of 
the written policies governing the services the CAH furnishes; and
    (ii) Participate with a doctor of medicine or osteopathy in a 
periodic review of the patients' health records.
    (2) The physician assistant, nurse practitioner, or clinical nurse 
specialist performs the following functions to the extent they are not 
being performed by a doctor of medicine or osteopathy:
    (i) Provides services in accordance with the CAH's policies.
    (ii) Arranges for, or refers patients to, needed services that 
cannot be furnished at the CAH, and assures that adequate patient health 
records are maintained and transferred as required when patients are 
referred.
    (3) Whenever a patient is admitted to the CAH by a nurse 
practitioner, physician assistant, or clinical nurse specialist, a 
doctor of medicine or osteopathy on the staff of the CAH is notified of 
the admission.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.635  Condition of participation: Provision of services.

    (a) Standard: Patient care policies. (1) The CAH's health care 
services are furnished in accordance with appropriate written policies 
that are consistent with applicable State law.
    (2) The policies are developed with the advice of a group of 
professional personnel that includes one or more doctors of medicine or 
osteopathy and one or more physician assistants, nurse practitioners, or 
clinical nurse specialists, if they are on staff under the provisions of 
Sec. 485.631(a)(1); at least one member is not a member of the CAH 
staff.
    (3) The policies include the following: (i) A description of the 
services the CAH furnishes directly and those furnished through 
agreement or arrangement.
    (ii) Policies and procedures for emergency medical services.
    (iii) Guidelines for the medical management of health problems that 
include the conditions requiring medical consultation and/or patient 
referral, the maintenance of health care records, and procedures for the 
periodic review and evaluation of the services furnished by the CAH.
    (iv) Rules for the storage, handling, dispensation, and 
administration of drugs and biologicals. These rules must provide that 
there is a drug storage area that is administered in accordance with 
accepted professional principles, that current and accurate records are 
kept of the receipt and disposition of all scheduled drugs, and that 
outdated,

[[Page 595]]

mislabeled, or otherwise unusable drugs are not available for patient 
use.
    (v) Procedures for reporting adverse drug reactions and errors in 
the administration of drugs.
    (vi) A system for identifying, reporting, investigating and 
controlling infections and communicable diseases of patients and 
personnel.
    (vii) If the CAH furnishes inpatient services, procedures that 
ensure that the nutritional needs of inpatients are met in accordance 
with recognized dietary practices and the orders of the practitioner 
responsible for the care of the patients, and that the requirement of 
Sec. 483.25(i) is met with respect to inpatients receiving posthospital 
SNF care.
    (4) These policies are reviewed at least annually by the group of 
professional personnel required under paragraph (a)(2) of this section, 
and reviewed as necessary by the CAH.
    (b) Standard: Direct services--(1) General. The CAH staff furnishes, 
as direct services, those diagnostic and therapeutic services and 
supplies that are commonly furnished in a physician's office or at 
another entry point into the health care delivery system, such as a low 
intensity hospital outpatient department or emergency department. These 
direct services include medical history, physical examination, specimen 
collection, assessment of health status, and treatment for a variety of 
medical conditions.
    (2) Laboratory services. The CAH provides, as direct services, basic 
laboratory services essential to the immediate diagnosis and treatment 
of the patient that meet the standards imposed under section 353 of the 
Public Health Service Act (42 U.S.C. 236a). (See the laboratory 
requirements specified in part 493 of this chapter.) The services 
provided include:
    (i) Chemical examination of urine by stick or tablet method or both 
(including urine ketones);
    (ii) Hemoglobin or hematocrit;
    (iii) Blood glucose:
    (iv) Examination of stool specimens for occult blood;
    (v) Pregnancy tests; and
    (vi) Primary culturing for transmittal to a certified laboratory.
    (3) Radiology services. Radiology services furnished at the CAH are 
provided as direct services by staff qualified under State law, and do 
not expose CAH patients or staff to radiation hazards.
    (4) Emergency procedures. In accordance with the requirements of 
Sec. 485.618, the CAH provides as direct services medical emergency 
procedures as a first response to common life-threatening injuries and 
acute illness.
    (c) Standard: Services provided through agreements or arrangements. 
(1) The CAH has agreements or arrangements (as appropriate) with one or 
more providers or suppliers participating under Medicare to furnish 
other services to its patients, including--
    (i) Inpatient hospital care;
    (ii) Services of doctors of medicine or osteopathy; and
    (iii) Additional or specialized diagnostic and clinical laboratory 
services that are not available at the CAH.
    (iv) Food and other services to meet inpatients' nutritional needs 
to the extent these services are not provided directly by the CAH.
    (2) If the agreements or arrangements are not in writing, the CAH is 
able to present evidence that patients referred by the CAH are being 
accepted and treated.
    (3) The CAH maintains a list of all services furnished under 
arrangements or agreements. The list describes the nature and scope of 
the services provided.
    (4) The person principally responsible for the operation of the CAH 
under Sec. 485.627(b)(2) of this chapter is also responsible for the 
following:
    (i) Services furnished in the CAH whether or not they are furnished 
under arrangements or agreements.
    (ii) Ensuring that a contractor of services (including one for 
shared services and joint ventures) furnishes services that enable the 
CAH to comply with all applicable conditions of participation and 
standards for the contracted services.
    (d) Standard: Nursing services. Nursing services must meet the needs 
of patients.
    (1) A registered nurse must provide (or assign to other personnel) 
the nursing care of each patient, including patients at a SNF level of 
care in a

[[Page 596]]

swing-bed CAH. The care must be provided in accordance with the 
patient's needs and the specialized qualifications and competence of the 
staff available.
    (2) A registered nurse or, where permitted by State law, a physician 
assistant, must supervise and evaluate the nursing care for each 
patient, including patients at a SNF level of care in a swing-bed CAH.
    (3) All drugs, biologicals, and intravenous medications must be 
administered by or under the supervision of a registered nurse, a doctor 
of medicine or osteopathy, or, where permitted by State law, a physician 
assistant, in accordance with written and signed orders, accepted 
standards of practice, and Federal and State laws.
    (4) A nursing care plan must be developed and kept current for each 
inpatient.

[58 FR 30671, May 26, 1993; 58 FR 49935, Sept. 24, 1993, as amended at 
59 FR 45403, Sept. 1, 1994; 62 FR 46037, Aug. 29, 1997]



Sec. 485.638  Conditions of participation: Clinical records.

    (a) Standard: Records system.--(1) The CAH maintains a clinical 
records system in accordance with written policies and procedures.
    (2) The records are legible, complete, accurately documented, 
readily accessible, and systematically organized.
    (3) A designated member of the professional staff is responsible for 
maintaining the records and for ensuring that they are completely and 
accurately documented, readily accessible, and systematically organized.
    (4) For each patient receiving health care services, the CAH 
maintains a record that includes, as applicable--
    (i) Identification and social data, evidence of properly executed 
informed consent forms, pertinent medical history, assessment of the 
health status and health care needs of the patient, and a brief summary 
of the episode, disposition, and instructions to the patient;
    (ii) Reports of physical examinations, diagnostic and laboratory 
test results, including clinical laboratory services, and consultative 
findings;
    (iii) All orders of doctors of medicine or osteopathy or other 
practitioners, reports of treatments and medications, nursing notes and 
documentation of complications, and other pertinent information 
necessary to monitor the patient's progress, such as temperature 
graphics, progress notes describing the patient's response to treatment; 
and
    (iv) Dated signatures of the doctor of medicine or osteopathy or 
other health care professional.
    (b) Standard: Protection of record information--(1) The CAH 
maintains the confidentiality of record information and provides 
safeguards against loss, destruction, or unauthorized use.
    (2) Written policies and procedures govern the use and removal of 
records from the CAH and the conditions for the release of information.
    (3) The patient's written consent is required for release of 
information not required by law.
    (c) Standard: Retention of records. The records are retained for at 
least 6 years from date of last entry, and longer if required by State 
statute, or if the records may be needed in any pending proceeding.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 485.639  Condition of participation: Surgical services.

    Surgical procedures must be performed in a safe manner by qualified 
practitioners who have been granted clinical privileges by the governing 
body of the CAH in accordance with the designation requirements under 
paragraph (a) of this section.
    (a) Designation of qualified practitioners. The CAH designates the 
practitioners who are allowed to perform surgery for CAH patients, in 
accordance with its approved policies and procedures, and with State 
scope of practice laws. Surgery is performed only by--
    (1) A doctor of medicine or osteopathy, including an osteopathic 
practitioner recognized under section 1101(a)(7) of the Act;
    (2) A doctor of dental surgery or dental medicine; or
    (3) A doctor of podiatric medicine.
    (b) Anesthetic risk and evaluation. (1) A qualified practitioner, as 
specified in paragraph (a) of this section, must examine the patient 
immediately before surgery to evaluate the risk of the procedure to be 
performed.

[[Page 597]]

    (2) A qualified practitioner, as specified in paragraph (c) of this 
section, must examine each patient before surgery to evaluate the risk 
of anesthesia.
    (3) Before discharge from the CAH, each patient must be evaluated 
for proper anesthesia recovery by a qualified practitioner, as specified 
in paragraph (c) of this section.
    (c) Administration of anesthesia. The CAH designates the person who 
is allowed to administer anesthesia to CAH patients in accordance with 
its approved policies and procedures and with State scope-of-practice 
laws.
    (1) Anesthesia must be administered by only--
    (i) A qualified anesthesiologist;
    (ii) A doctor of medicine or osteopathy other than an 
anesthesiologist; including an osteopathic practitioner recognized under 
section 1101(a)(7) of the Act;
    (iii) A doctor of dental surgery or dental medicine;
    (iv) A doctor of podiatric medicine;
    (v) A certified registered nurse anesthetist (CRNA), as defined in 
Sec. 410.69(b) of this chapter;
    (vi) An anesthesiologist's assistant, as defined in Sec. 410.69(b) 
of this chapter; or
    (vii) A supervised trainee in an approved educational program, as 
described in Secs. 413.85 or 413.86 of this chapter.
    (2) In those cases in which a CRNA administers the anesthesia, the 
anesthetist must be under the supervision of the operating practitioner 
except as provided in paragraph (e) of this section. An 
anesthesiologist's assistant who administers anesthesia must be under 
the supervision of an anesthesiologist.
    (d) Discharge. All patients are discharged in the company of a 
responsible adult, except those exempted by the practitioner who 
performed the surgical procedure.
    (e) Standard: State exemption. (1) A CAH may be exempted from the 
requirement for physician supervision of CRNAs as described in paragraph 
(c)(2) of this section, if the State in which the CAH is located submits 
a letter to CMS signed by the Governor, following consultation with the 
State's Boards of Medicine and Nursing, requesting exemption from 
physician supervision for CRNAs. The letter from the Governor must 
attest that he or she has consulted with the State Boards of Medicine 
and Nursing about issues related to access to and the quality of 
anesthesia services in the State and has concluded that it is in the 
best interests of the State's citizens to opt-out of the current 
physician supervision requirement, and that the opt-out is consistent 
with State law.
    (2) The request for exemption and recognition of State laws and the 
withdrawal of the request may be submitted at any time, and are 
effective upon submission.

[60 FR 45851, Sept. 1, 1995, as amended at 62 FR 46037, Aug. 29, 1997; 
66 FR 39938, Aug. 1, 2001; 66 FR 56769, Nov. 13, 2001]



Sec. 485.641  Condition of participation: Periodic evaluation and quality assurance review.

    (a) Standard: Periodic evaluation--(1) The CAH carries out or 
arranges for a periodic evaluation of its total program. The evaluation 
is done at least once a year and includes review of--
    (i) The utilization of CAH services, including at least the number 
of patients served and the volume of services;
    (ii) A representative sample of both active and closed clinical 
records; and
    (iii) The CAH's health care policies.
    (2) The purpose of the evaluation is to determine whether the 
utilization of services was appropriate, the established policies were 
followed, and any changes are needed.
    (b) Standard: Quality assurance. The CAH has an effective quality 
assurance program to evaluate the quality and appropriateness of the 
diagnosis and treatment furnished in the CAH and of the treatment 
outcomes. The program requires that--
    (1) All patient care services and other services affecting patient 
health and safety, are evaluated;
    (2) Nosocomial infections and medication therapy are evaluated;
    (3) The quality and appropriateness of the diagnosis and treatment 
furnished by nurse practitioners, clinical nurse specialists, and 
physician assistants at the CAH are evaluated by a

[[Page 598]]

member of the CAH staff who is a doctor of medicine or osteopathy or by 
another doctor of medicine or osteopathy under contract with the CAH;
    (4) The quality and appropriateness of the diagnosis and treatment 
furnished by doctors of medicine or osteopathy at the CAH are evaluated 
by--
    (i) One hospital that is a member of the network, when applicable;
    (ii) One QIO or equivalent entity; or
    (iii) One other appropriate and qualified entity identified in the 
State rural health care plan; and
    (5)(i) The CAH staff considers the findings of the evaluations, 
including any findings or recommendations of the QIO, and takes 
corrective action if necessary.
    (ii) The CAH also takes appropriate remedial action to address 
deficiencies found through the quality assurance program.
    (iii) The CAH documents the outcome of all remedial action.

[58 FR 30671, May 26, 1993, as amended at 62 FR 46037, Aug. 29, 1997; 63 
FR 26359, May 12, 1998]



Sec. 485.643  Condition of participation: Organ, tissue, and eye procurement.

    The CAH must have and implement written protocols that:
    (a) Incorporate an agreement with an OPO designated under part 486 
of this chapter, under which it must notify, in a timely manner, the OPO 
or a third party designated by the OPO of individuals whose death is 
imminent or who have died in the CAH. The OPO determines medical 
suitability for organ donation and, in the absence of alternative 
arrangements by the CAH, the OPO determines medical suitability for 
tissue and eye donation, using the definition of potential tissue and 
eye donor and the notification protocol developed in consultation with 
the tissue and eye banks identified by the CAH for this purpose;
    (b) Incorporate an agreement with at least one tissue bank and at 
least one eye bank to cooperate in the retrieval, processing, 
preservation, storage and distribution of tissues and eyes, as may be 
appropriate to assure that all usable tissues and eyes are obtained from 
potential donors, insofar as such an agreement does not interfere with 
organ procurement;
    (c) Ensure, in collaboration with the designated OPO, that the 
family of each potential donor is informed of its option to either 
donate or not donate organs, tissues, or eyes. The individual designated 
by the CAH to initiate the request to the family must be a designated 
requestor. A designated requestor is an individual who has completed a 
course offered or approved by the OPO and designed in conjunction with 
the tissue and eye bank community in the methodology for approaching 
potential donor families and requesting organ or tissue donation;
    (d) Encourage discretion and sensitivity with respect to the 
circumstances, views, and beliefs of the families of potential donors;
    (e) Ensure that the CAH works cooperatively with the designated OPO, 
tissue bank and eye bank in educating staff on donation issues, 
reviewing death records to improve identification of potential donors, 
and maintaining potential donors while necessary testing and placement 
of potential donated organs, tissues, and eyes take place.
    (f) For purposes of these standards, the term ``organ'' means a 
human kidney, liver, heart, lung, pancreas, or intestines (or 
multivisceral organs).

[65 FR 47110, Aug. 1, 2000, as amended at 66 FR 39938, Aug. 1, 2001]



Sec. 485.645  Special requirements for CAH providers of long-term care services (``swing-beds'')

    A CAH must meet the following requirements in order to be granted an 
approval from CMS to provided post-hospital SNF care, as specified in 
Sec. 409.30 of this chapter, and to be paid for SNF-level services, in 
accordance with paragraph (c) of this section.
    (a) Eligibility. A CAH must meet the following eligibility 
requirements:
    (1) The facility has been certified as a CAH by CMS under 
Sec. 485.606(b) of this subpart; and
    (2) The facility provides not more than 25 inpatient beds, and the 
number of beds used at any time for acute care inpatient services does 
not exceed 15 beds. Any bed of a unit of the facility that is licensed 
as distinct-part SNF at the time the facility applies to the

[[Page 599]]

State for designation as a CAH is not counted under paragraph (a) of 
this section.
    (b) Facilities participating as rural primary care hospitals (RPCHs) 
on September 30, 1997. These facilities must meet the following 
requirements:
    (1) Notwithstanding paragraph (a) of this section, a CAH that 
participated in Medicare as a RPCH on September 30, 1997, and on that 
date had in effect an approval from CMS to use its inpatient facilities 
to provide post-hospital SNF care may continue in that status under the 
same terms, conditions and limitations that were applicable at the time 
those approvals were granted.
    (2) A CAH that was granted swing-bed approval under paragraph (b)(1) 
of this section may request that its application to be a CAH and swing-
bed provider be reevaluated under paragraph (a) of this section. If this 
request is approved, the approval is effective not earlier than October 
1, 1997. As of the date of approval, the CAH no longer has any status 
under paragraph (b)(1) of this section and may not request reinstatement 
under paragraph (b)(1) of this section.
    (c) Payment. Payment for inpatient RPCH services to a CAH that has 
qualified as a CAH under the provisions in paragraph (a) of this section 
is made in accordance with Sec. 413.70 of this chapter. Payment for 
post-hospital SNF-level of care services is made in accordance with the 
payment provisions in Sec. 413.114 of this chapter.
    (d) SNF services. The CAH is substantially in compliance with the 
following SNF requirements contained in subpart B of part 483 of this 
chapter:
    (1) Residents rights (Sec. 483.10(b)(3) through (b)(6), (d) (e), 
(h), (i), (j)(1)(vii) and (viii), (l), and (m) of this chapter).
    (2) Admission, transfer, and discharge rights (Sec. 483.12(a) of 
this chapter).
    (3) Resident behavior and facility practices (Sec. 483.13 of this 
chapter).
    (4) Patient activities (Sec. 483.15(f) of this chapter), except that 
the services may be directed either by a qualified professional meeting 
the requirements of Sec. 485.15(f)(2), or by an individual on the 
facility staff who is designated as the activities director and who 
serves in consultation with a therapeutic recreation specialist, 
occupational therapist, or other professional with experience or 
education in recreational therapy.
    (5) Social services (Sec. 483.15(g) of this chapter).
    (6) Comprehensive assessment, comprehensive care plan, and discharge 
planning (Sec. 483.20(b), (k), and (l) of this chapter, except that the 
CAH is not required to use the resident assessment instrument (RAI) 
specified by the State that is required under Sec. 483.20(b), or to 
comply with the requirements for frequency, scope, and number of 
assessments prescribed in Sec. 413.343(b) of this chapter).
    (7) Specialized rehabilitative services (Sec. 483.45 of this 
chapter).
    (8) Dental services (Sec. 483.55 of this chapter).
    (9) Nutrition (Sec. 483.25(i) of this chapter).

[63 FR 26359, May 12, 1998 as amended at 64 FR 41544, July 30, 1999; 67 
FR 50120, Aug. 1, 2002]

Subpart G [Reserved]



   Subpart H--Conditions of Participation for Clinics, Rehabilitation 
Agencies, and Public Health Agencies as Providers of Outpatient Physical 
             Therapy and Speech-Language Pathology Services



Sec. 485.701  Basis and scope.

    This subpart implements section 1861(p)(4) of the Act, which--
    (a) Defines outpatient physical therapy and speech pathology 
services;
    (b) Imposes requirements with respect to adequate program, 
facilities, policies, staffing, and clinical records; and
    (c) Authorizes the Secretary to establish by regulation other health 
and safety requirements.

[60 FR 2327, Jan. 9, 1995]



Sec. 485.703  Definitions.

    Clinic. A facility that is established primarily to furnish 
outpatient physician services and that meets the following tests of 
physician involvement:

[[Page 600]]

    (1) The medical services are furnished by a group of three or more 
physicians practicing medicine together.
    (2) A physician is present during all hours of operation of the 
clinic to furnish medical services, as distinguished from purely 
administrative services.
    Organization. A clinic, rehabilitation agency, or public health 
agency.
    Public health agency. An official agency established by a State or 
local government, the primary function of which is to maintain the 
health of the population served by performing environmental health 
services, preventive medical services, and in certain cases, therapeutic 
services.
    Rehabilitation agency. An agency that--
    (1) Provides an integrated multidisciplinary rehabilitation program 
designed to upgrade the physical functioning of handicapped disabled 
individuals by bringing specialized rehabilitation staff together to 
perform as a team; and
    (2) Provides at least the following services:
    (i) Physical therapy or speech-language pathology services.
    (ii) Social or vocational adjustment services.
    Supervision. Authoritative procedural guidance that is for the 
accomplishment of a function or activity and that--
    (1) Includes initial direction and periodic observation of the 
actual performance of the function or activity; and
    (2) Is furnished by a qualified person--
    (i) Whose sphere of competence encompasses the particular function 
or activity; and
    (ii) Who (unless otherwise provided in this subpart) is on the 
premises if the person performing the function or activity does not meet 
the assistant-level practitioner qualifications specified in 
Sec. 485.705.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 53 FR 12015, Apr. 12, 1988; 54 FR 38679, Sept. 20, 1989. 
Redesignated and amended at 60 FR 2326, 2327, Jan. 9, 1995; 60 FR 50447, 
Sept. 29, 1995]



Sec. 485.705  Personnel qualifications.

    (a) General qualification requirements. Except as specified in 
paragraphs (b) and (c) of this section, all personnel who are involved 
in the furnishing of outpatient physical therapy, occupational therapy, 
and speech-language pathology services directly by or under arrangements 
with an organization must be legally authorized (licensed or, if 
applicable, certified or registered) to practice by the State in which 
they perform the functions or actions, and must act only within the 
scope of their State license or State certification or registration.
    (b) Exception for Federally defined qualifications. The following 
Federally defined qualifications must be met:
    (1) For a physician, the qualifications and conditions as defined in 
section 1861(r) of the Act and the requirements in part 484 of this 
chapter.
    (2) For a speech-language pathologist, the qualifications specified 
in section 1861(11)(1) of the Act and the requirements in part 484 of 
this chapter.
    (c) Exceptions when no State Licensing laws or State certification 
or registration requirements exist. If no State licensing laws or State 
certification or registration requirements exist for the profession, the 
following requirements must be met--
    (1) An administrator is a person who has a bachelor's degree and:
    (i) Has experience or specialized training in the administration of 
health institutions or agencies; or
    (ii) Is qualified and has experience in one of the professional 
health disciplines.
    (2) An occupational therapist must meet the requirements in part 484 
of this chapter.
    (3) An occupational therapy assistant must meet the requirements in 
part 484 of this chapter.
    (4) A physical therapist must meet the requirements in part 484 of 
this chapter.
    (5) A physical therapist assistant must meet the requirements in 
part 484 of this chapter.
    (6) A social worker must meet the requirements in part 484 of this 
chapter.
    (7) A vocational specialist is a person who has a baccalaureate 
degree and--

[[Page 601]]

    (i) Two years experience in vocational counseling in a 
rehabilitation setting such as a sheltered workshop, State employment 
service agency, etc.; or
    (ii) At least 18 semester hours in vocational rehabilitation, 
educational or vocational guidance, psychology, social work, special 
education or personnel administration, and 1 year of experience in 
vocational counseling in a rehabilitation setting; or
    (iii) A master's degree in vocational counseling.
    (8) A nurse practitioner is a person who must:
    (i) Be a registered professional nurse who is authorized by the 
State in which the services are furnished to practice as a nurse 
practitioner in accordance with State law; and
    (ii) Be certified as a nurse practitioner by a recognized national 
certifying body that has established standards for nurse practitioners; 
or
    (iii) Be a registered professional nurse who is authorized by the 
State in which the services are furnished to practice as a nurse 
practitioner in accordance with State law and have been granted a 
Medicare billing number as a nurse practitioner by December 31, 2000; or
    (iv) Be a nurse practitioner who on or after January 1, 2001, 
applies for a Medicare billing number for the first time and meets the 
standards for nurse practitioners in paragraphs (c)(8)(i) and (c)(8)(ii) 
of this section; or
    (v) Be a nurse practitioner who on or after January 1, 2003, applies 
for a Medicare billing number for the first time and possesses a 
master's degree in nursing and meets the standards for nurse 
practitioners in paragraphs (b)(1)(i) and (b)(1)(ii) of this section.
    (9) A clinical nurse specialist is a person who must:
    (i) Be a registered nurse who is currently licensed to practice in 
the State where he or she practices and be authorized to perform the 
services of a clinical nurse specialist in accordance with State law;
    (ii) Have a master's degree in a defined clinical area of nursing 
from an accredited educational institution; and,
    (iii) Be certified as a clinical nurse specialist by the American 
Nurses Credentialing Center.
    (10) A physician assistant is a person who:
    (i) Has graduated from a physician assistant educational program 
that is accredited by the Commission on Accreditation of Allied Health 
Education Programs; or
    (ii) Has passed the national certification examination that is 
administered by the National Commission on Certification of Physician 
Assistants; and
    (iii) Is licensed by the State to practice as a physician assistant.

[63 FR 58912, Nov. 2, 1998; 64 FR 25457, May 12, 1999; 64 FR 59442, Nov. 
2, 1999]



Sec. 485.707  Condition of participation: Compliance with Federal, State, and local laws.

    The organization and its staff are in compliance with all applicable 
Federal, State, and local laws and regulations.
    (a) Standard: Licensure of organization. In any State in which State 
or applicable local law provides for the licensing of organizations, a 
clinic, rehabilitation agency, or public health agency is licensed in 
accordance with applicable laws.
    (b) Standard: Licensure or registration of personnel. Staff of the 
organization are licensed or registered in accordance with applicable 
laws.

[41 FR 20865, May 21, 1976, unless otherwise noted. Redesignated at 42 
FR 52826, Sept. 30, 1977. Further redesignated and amended at 60 FR 
2326, 2327, Jan. 9, 1995]



Sec. 485.709  Condition of participation: Administrative management.

    The clinic or rehabilitation agency has an effective governing body 
that is legally responsible for the conduct of the clinic or 
rehabilitation agency. The governing body designates an administrator, 
and establishes administrative policies.
    (a) Standard: Governing body. There is a governing body (or 
designated person(s) so functioning) which assumes full legal 
responsibility for the overall conduct of the clinic or rehabilitation 
agency and for compliance with applicable laws and regulations. The name

[[Page 602]]

of the owner(s) of the clinic or rehabilitation agency is fully 
disclosed to the State agency. In the case of corporations, the names of 
the corporate officers are made known.
    (b) Standard: Administrator. The governing body--
    (1) Appoints a qualified full-time administrator;
    (2) Delegates to the administrator the internal operation of the 
clinic or rehabilitation agency in accordance with written policies;
    (3) Defines clearly the administrator's responsibilities for 
procurement and direction of personnel; and
    (4) Designates a competent individual to act during temporary 
absence of the administrator.
    (c) Standard: Personnel policies. Personnel practices are supported 
by appropriate written personnel policies that are kept current. 
Personnel records include the qualifications of all professional and 
assistant level personnel, as well as evidence of State licensure if 
applicable.
    (d) Standard: Patient care policies. Patient care practices and 
procedures are supported by written policies established by a group of 
professional personnel including one or more physicians associated with 
the clinic or rehabilitation agency, one or more qualified physical 
therapists (if physical therapy services are provided), and one or more 
qualified speech pathologists (if speech pathology services are 
provided). The policies govern the outpatient physical therapy and/or 
speech pathology services and related services that are provided. These 
policies are evaluated at least annually by the group of professional 
personnel, and revised as necessary based upon this evaluation.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 53 FR 12015, Apr. 12, 1988. Redesignated and amended at 
60 FR 2326, 2327, Jan. 9, 1995; 60 FR 50447, Sept. 29, 1995]



Sec. 485.711  Condition of participation: Plan of care and physician involvement.

    For each patient in need of outpatient physical therapy or speech 
pathology services there is a written plan of care established and 
periodically reviewed by a physician, or by a physical therapist or 
speech pathologist respectively. The organization has a physician 
available to furnish necessary medical care in case of emergency.
    (a) Standard: Medical history and prior treatment. The following are 
obtained by the organization before or at the time of initiation of 
treatment:
    (1) The patient's significant past history.
    (2) Current medical findings, if any.
    (3) Diagnosis(es), if established.
    (4) Physician's orders, if any.
    (5) Rehabilitation goals, if determined.
    (6) Contraindications, if any.
    (7) The extent to which the patient is aware of the diagnosis(es) 
and prognosis.
    (8) If appropriate, the summary of treatment furnished and results 
achieved during previous periods of rehabilitation services or 
institutionalization.
    (b) Standard: Plan of care. (1) For each patient there is a written 
plan of care established by the physician or by the physical therapist 
or speech-language pathologist who furnishes the services.
    (2) The plan of care for physical therapy or speech pathology 
services indicates anticipated goals and specifies for those services 
the--
    (i) Type;
    (ii) Amount;
    (iii) Frequency; and
    (iv) Duration.
    (3) The plan of care and results of treatment are reviewed by the 
physician or by the individual who established the plan at least as 
often as the patient's condition requires, and the indicated action is 
taken. (For Medicare patients, the plan must be reviewed by a physician, 
nurse practitioner, clinical nurse specialist, or physician assistant at 
least every 30 days, in accordance with Sec. 410.61(e) of this chapter.)
    (4) Changes in the plan of care are noted in the clinical record. If 
the patient has an attending physician, the therapist or speech-language 
pathologist who furnishes the services promptly notifies him or her of 
any change in the patient's condition or in the plan of care.

[[Page 603]]

    (c) Standard: Emergency care. The organization provides for one or 
more doctors of medicine or osteopathy to be available on call to 
furnish necessary medical care in case of emergency. The established 
procedures to be followed by personnel in an emergency cover immediate 
care of the patient, persons to be notified, and reports to be prepared.

[54 FR 38679, Sept. 20, 1989. Redesignated and amended at 60 FR 2326, 
2327, Jan. 9, 1995; 63 FR 58913, Nov. 2, 1998]



Sec. 485.713  Condition of participation: Physical therapy services.

    If the organization offers physical therapy services, it provides an 
adequate program of physical therapy and has an adequate number of 
qualified personnel and the equipment necessary to carry out its program 
and to fulfill its objectives.
    (a) Standard: Adequate program. (1) The organization is considered 
to have an adequate outpatient physical therapy program if it can:
    (i) Provide services using therapeutic exercise and the modalities 
of heat, cold, water, and electricity;
    (ii) Conduct patient evaluations; and
    (iii) Administer tests and measurements of strength, balance, 
endurance, range of motion, and activities of daily living.
    (2) A qualified physical therapist is present or readily available 
to offer supervision when a physical therapist assistant furnishes 
services.
    (i) If a qualified physical therapist is not on the premises during 
all hours of operation, patients are scheduled so as to ensure that the 
therapist is present when special skills are needed, for example, for 
evaluation and reevaluation.
    (ii) When a physical therapist assistant furnishes services off the 
organization's premises, those services are supervised by a qualified 
physical therapist who makes an onsite supervisory visit at least once 
every 30 days.
    (b) Standard: Facilities and equipment. The organization has the 
equipment and facilities required to provide the range of services 
necessary in the treatment of the types of disabilities it accepts for 
service.
    (c) Standard: Personnel qualified to provide physical therapy 
services. Physical therapy services are provided by, or under the 
supervision of, a qualified physical therapist. The number of qualified 
physical therapists and qualified physical therapist assistants is 
adequate for the volume and diversity of physical therapy services 
offered. A qualified physical therapist is on the premises or readily 
available during the operating hours of the organization.
    (d) Standard: Supportive personnel. If personnel are available to 
assist qualified physical therapists by performing services incident to 
physical therapy that do not require professional knowledge and skill, 
these personnel are instructed in appropriate patient care services by 
qualified physical therapists who retain responsibility for the 
treatment prescribed by the attending physician.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, 2327, Jan. 9, 1995; 60 
FR 50447, Sept. 29, 1995]



Sec. 485.715  Condition of participation: Speech pathology services.

    If speech pathology services are offered, the organization provides 
an adequate program of speech pathology and has an adequate number of 
qualified personnel and the equipment necessary to carry out its program 
and to fulfill its objectives.
    (a) Standard: Adequate program. The organization is considered to 
have an adequate outpatient speech pathology program if it can provide 
the diagnostic and treatment services to effectively treat speech 
disorders.
    (b) Standard: Facilities and equipment. The organization has the 
equipment and facilities required to provide the range of services 
necessary in the treatment of the types of speech disorders it accepts 
for service.
    (c) Standard: Personnel qualified to provide speech pathology 
services. Speech pathology services are given or supervised by a 
qualified speech pathologist and the number of qualified speech 
pathologists is adequate for the volume and diversity of speech 
pathology services offered. At least one qualified speech pathologist is 
present at all

[[Page 604]]

times when speech pathology services are furnished.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326-2328, Jan. 9, 1995]



Sec. 485.717  Condition of participation: Rehabilitation program.

    This condition and its standards apply only to a rehabilitation 
agency's own patients, not to patients of hospitals, skilled nursing 
facilities (SNFs), or Medicaid nursing facilities (NFs) to whom the 
agency furnishes services. (The hospital, SNF, or NF is responsible for 
ensuring that qualified staff furnish services for which they arrange or 
contract for their patients.) The rehabilitation agency provides, in 
addition to physical therapy and speech-language pathology services, 
social or vocational adjustment services to all of its patients who need 
them. The agency provides for special qualified staff to evaluate the 
social and vocational factors, to counsel and advise on the social or 
vocational problems that arise from the patient's illness or injury, and 
to make appropriate referrals for needed services.
    (a) Standard: Qualification of staff. The agency's social or 
vocational adjustment services are furnished as appropriate, by 
qualified psychologists, qualified social workers, or qualified 
vocational specialists. Social or vocational adjustment services may be 
performed by a qualified psychologist or qualified social worker. 
Vocational adjustment services may be furnished by a qualified 
vocational specialist.
    (b) Standard: Arrangements for social or vocational adjustment 
services. (1) If a rehabilitation agency does not provide social or 
vocational adjustment services through salaried employees, it may 
provide those services through a written contract with others who meet 
the requirements and responsibilities set forth in this subpart for 
salaried personnel.
    (2) The contract must specify the term of the contract and the 
manner of termination or renewal and provide that the agency retains 
responsibility for the control and supervision of the services.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 56 FR 46562, Sept. 13, 1991. Redesignated and amended at 
60 FR 2326, 2328, Jan. 9, 1995; 60 FR 11632, Mar. 2, 1995; 60 FR 50447, 
Sept. 29, 1995]



Sec. 485.719  Condition of participation: Arrangements for physical therapy and speech pathology services to be performed by other than salaried organization 
          personnel.

    (a) Conditions. If an organization provides outpatient physical 
therapy or speech pathology services under an arrangement with others, 
the services are to be furnished in accordance with the terms of a 
written contract, which provides that the organization retains of 
professional and administrative responsibility for, and control and 
supervision of, the services.
    (b) Standard: Contract provisions. The contract--
    (1) Specifies the term of the contract and the manner of termination 
or renewal;
    (2) Requires that personnel who furnish the services meet the 
requirements that are set forth in this subpart for salaried personnel; 
and
    (3) Provides that the contracting outside resource may not bill the 
patient or Medicare for the services. This limitation is based on 
section 1861(w)(1) of the Act, which provides that--
    (i) Only the provider may bill the beneficiary for covered services 
furnished under arrangements; and
    (ii) Receipt of Medicare payment by the provider, on behalf of an 
entitled individual, discharges the liability of the individual or any 
other person to pay for those services.

[56 FR 46562, Sept. 13, 1991. Redesignated and amended at 60 FR 2326, 
2328, Jan. 9, 1995; 60 FR 50447, Sept. 29, 1995]



Sec. 485.721  Condition of participation: Clinical records.

    The organization maintains clinical records on all patients in 
accordance with accepted professional standards, and practices. The 
clinical records are

[[Page 605]]

completely and accurately documented, readily accessible, and 
systematically organized to facilitate retrieving and compiling 
information.
    (a) Standard: Protection of clinical record information. The 
organization recognizes the confidentiality of clinical record 
information and provides safeguards against loss, destruction, or 
unauthorized use. Written procedures govern the use and removal of 
records and the conditions for release of information. The patient's 
written consent is required for release of information not authorized by 
law.
    (b) Standard: Content. The clinical record contains sufficient 
information to identify the patient clearly, to justify the 
diagnosis(es) and treatment, and to document the results accurately. All 
clinical records contain the following general categories of data:
    (1) Documented evidence of the assessment of the needs of the 
patient, of an appropriate plan of care, and of the care and services 
furnished.
    (2) Identification data and consent forms.
    (3) Medical history.
    (4) Report of physical examinations, if any.
    (5) Observations and progress notes.
    (6) Reports of treatments and clinical findings.
    (7) Discharge summary including final diagnosis(es) and prognosis.
    (c) Standard: Completion of records and centralization of reports. 
Current clinical records and those of discharged patients are completed 
promptly. All clinical information pertaining to a patient is 
centralized in the patient's clinical record. Each physician signs the 
entries that he or she makes in the clinical record.
    (d) Standard: Retention and preservation. Clinical records are 
retained for at least:
    (1) The period determined by the respective State statute, or the 
statute of limitations in the State; or
    (2) In the absence of a State statute--
    (i) Five years after the date of discharge; or
    (ii) In the case of a minor, 3 years after the patient becomes of 
age under State law or 5 years after the date of discharge, whichever is 
longer.
    (e) Standard: Indexes. Clinical records are indexed at least 
according to name of patient to facilitate acquisition of statistical 
medical information and retrieval of records for research or 
administrative action.
    (f) Standard: Location and facilities. The organization maintains 
adequate facilities and equipment, conveniently located, to provide 
efficient processing of clinical records (reviewing, indexing, filing, 
and prompt retrieval).

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326-2328, Jan. 9, 1995]



Sec. 485.723  Condition of participation: Physical environment.

    The building housing the organization is constructed, equipped, and 
maintained to protect the health and safety of patients, personnel, and 
the public and provides a functional, sanitary, and comfortable 
environment.
    (a) Standard: Safety of patients. The organization satisfies the 
following requirements:
    (1) It complies with all applicable State and local building, fire, 
and safety codes.
    (2) Permanently attached automatic fire-extinguishing systems of 
adequate capacity are installed in all areas of the premises considered 
to have special fire hazards. Fire extinguishers are conveniently 
located on each floor of the premises. Fire regulations are prominently 
posted.
    (3) Doorways, passageways and stairwells negotiated by patients are:
    (i) Of adequate width to allow for easy movement of all patients 
(including those on stretchers or in wheelchairs), (ii) free from 
obstruction at all times, and (iii) in the case of stairwells, equipped 
with firmly attached handrails on at least one side.
    (4) Lights are placed at exits and in corridors used by patients and 
are supported by an emergency power source.
    (5) A fire alarm system with local alarm capability and, where 
applicable, an emergency power source, is functional.
    (6) At least two persons are on duty on the premises of the 
organization whenever a patient is being treated.
    (7) No occupancies or activities undesirable or injurious to the 
health and

[[Page 606]]

safety of patients are located in the building.
    (b) Standard: Maintenance of equipment, building, and grounds. The 
organization establishes a written preventive-maintenance program to 
ensure that--
    (1) The equipment is operative, and is properly calibrated; and
    (2) The interior and exterior of the building are clean and orderly 
and maintained free of any defects that are a potential hazard to 
patients, personnel, and the public.
    (c) Standard: Other environmental considerations. The organization 
provides a functional, sanitary, and comfortable environment for 
patients, personnel, and the public.
    (1) Provision is made for adequate and comfortable lighting levels 
in all areas; limitation of sounds at comfort levels; a comfortable room 
temperature; and adequate ventilation through windows, mechanical means, 
or a combination of both.
    (2) Toilet rooms, toilet stalls, and lavatories are accessible and 
constructed so as to allow use by nonambulatory and semiambulatory 
individuals.
    (3) Whatever the size of the building, there is an adequate amount 
of space for the services provided and disabilities treated, including 
reception area, staff space, examining room, treatment areas, and 
storage.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326-2328, Jan. 9, 1995]



Sec. 485.725  Condition of participation: Infection control.

    The organization that provides outpatient physical therapy services 
establishes an infection-control committee of representative 
professional staff with responsibility for overall infection control. 
All necessary housekeeping and maintenance services are provided to 
maintain a sanitary and comfortable environment and to help prevent the 
development and transmission of infection.
    (a) Standard: Infection-control committee. The infection-control 
committee establishes policies and procedures for investigating, 
controlling, and preventing infections in the organization and monitors 
staff performance to ensure that the policies and procedures are 
executed.
    (b) All personnel follow written procedures for effective aseptic 
techniques. The procedures are reviewed annually and revised if 
necessary to improve them.
    (c) Standard: Housekeeping. (1) The organization employs sufficient 
housekeeping personnel and provides all necessary equipment to maintain 
a safe, clean, and orderly interior. A full-time employee is designated 
as the one responsible for the housekeeping services and for supervision 
and training of housekeeping personnel.
    (2) An organization that has a contract with an outside resource for 
housekeeping services may be found to be in compliance with this 
standard provided the organization or outside resource or both meet the 
requirements of the standard.
    (d) Standard: Linen. The organization has available at all times a 
quantity of linen essential for proper care and comfort of patients. 
Linens are handled, stored, processed, and transported in such a manner 
as to prevent the spread of infection.
    (e) Standard: Pest control. The organization's premises are 
maintained free from insects and rodents through operation of a pest-
control program.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, 2328, Jan. 9, 1995; 60 
FR 50447, Sept. 29, 1995]



Sec. 485.727  Condition of participation: Disaster preparedness.

    The organization has a written plan, periodically rehearsed, with 
procedures to be followed in the event of an internal or external 
disaster and for the care of casualties (patients and personnel) arising 
from a disaster.
    (a) Standard: Disaster plan. The organization has a written plan in 
operation, with procedures to be followed in the event of fire, 
explosion, or other disaster. The plan is developed and maintained with 
the assistance of qualified fire, safety, and other appropriate experts, 
and includes:
    (1) Transfer of casualties and records;
    (2) The location and use of alarm systems and signals;
    (3) Methods of containing fire;

[[Page 607]]

    (4) Notification of appropriate persons; and
    (5) Evacuation routes and procedures.
    (b) Standard: Staff training and drills. All employees are trained, 
as part of their employment orientation, in all aspects of preparedness 
for any disaster. The disaster program includes orientation and ongoing 
training and drills for all personnel in all procedures so that each 
employee promptly and correctly carries out his assigned role in case of 
a disaster.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 53 FR 12015, Apr. 12, 1988. Redesignated and amended at 
60 FR 2326-2327, 2329, Jan. 9, 1995]



Sec. 485.729  Condition of participation: Program evaluation.

    The organization has procedures that provide for a systematic 
evaluation of its total program to ensure appropriate utilization of 
services and to determine whether the organization's policies are 
followed in providing services to patients through employees or under 
arrangements with others.
    (a) Standard: Clinical-record review. A sample of active and closed 
clinical records is reviewed quarterly by the appropriate health 
professionals to ensure that established policies are followed in 
providing services.
    (b) Standard: Annual statistical evaluation. An evaluation is 
conducted annually of statistical data such as number of different 
patients treated, number of patient visits, condition on admission and 
discharge, number of new patients, number of patients by diagnosis(es), 
sources of referral, number and cost of units of service by treatment 
given, and total staff days or work hours by discipline.

[41 FR 20865, May 21, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326-2327, 2329, Jan. 9, 1995]



PART 486--CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED BY SUPPLIERS--Table of Contents




                      Subpart A--General Provisions

Sec.
486.1 Basis and scope.

Subpart B [Reserved]

       Subpart C--Conditions for Coverage: Portable X-Ray Services

486.100 Condition for coverage: Compliance with Federal, State, and 
          local laws and regulations.
486.102 Condition for coverage: Supervision by a qualified physician.
486.104 Condition for coverage: Qualifications, orientation, and health 
          of technical personnel.
486.106 Condition for coverage: Referral for service and preservation of 
          records.
486.108 Condition for coverage: Safety standards.
486.110 Condition for coverage: Inspection of equipment.

Subpart D--Conditions for Coverage: Outpatient Physical Therapy Services 
        Furnished by Physical Therapists in Independent Practice

486.150 Condition for coverage: General requirements.
486.151 Condition for coverage: Supervision.
486.153 Condition for coverage: Compliance with Federal, State, and 
          local laws.
486.155 Condition for coverage: Plan of care.
486.157 Condition for coverage: Physical therapy services.
486.159 Condition for coverage: Coordination of services with other 
          organizations, agencies, or individuals.
486.161 Condition for coverage: Clinical records.
486.163 Condition for coverage--physical environment.

Subparts E-F [Reserved]

   Subpart G--Conditions for Coverage: Organ Procurement Organizations

486.301 Basis and scope.
486.302 Definitions.
486.304 General requirements.
486.306 Qualifications for designation as an OPO.
486.307 OPO service area size designation and documentation 
          requirements.
486.308 Condition: Participation in organ procurement and 
          transplantation network.
486.309 Recertification from January 1, 2002 through December 31, 2005.
486.310 Condition: Adherence to performance standards.
486.314 Effect of failure to meet requirements.
486.316 Designation of one OPO for each service area.
486.318 Changes in ownership or service area.

[[Page 608]]

486.325 Termination of agreement with CMS.

Appendix A to Subpart G of Part 486--Guidelines for Preventing 
          Transmission of Human Immunodeficiency Virus Through 
          Transplantation of Human Tissue and Organs

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



                      Subpart A--General Provisions



Sec. 486.1  Basis and scope.

    (a) Statutory basis. This part is based on the following sections of 
the Act:

    1138(b)--for coverage of organ procurement services.
    1861(p)--for coverage of outpatient physical therapy services 
furnished by physical therapists in independent practice.
    1861(s) (3), (15), and (17)--for coverage of portable X-ray 
services.


    (b) Scope. (1) This part sets forth the conditions for coverage of 
certain specialized services that are furnished by suppliers and that 
are not specified in other portions of this chapter.
    (2) The conditions for coverage of other specialized services 
furnished by suppliers are set forth in the following regulations which, 
unless otherwise indicated, are part of this chapter:
    (i) Ambulatory surgical center (ASC) services--Part 416.
    (ii) Ambulance services--Part 410, subpart B.
    (iii) ESRD services--Part 405, subpart U.
    (iv) Laboratory services--Part 493.
    (v) Mammography services--Part 410, subpart B (Sec. 410.34) and 21 
CFR Part 900, subpart B, of the Food and Drug Administration 
regulations.
    (vi) Rural health clinic and Federally qualified health center 
services--Part 491, subpart A.

[60 FR 50447, Sept. 29, 1995]

Subpart B [Reserved]



       Subpart C--Conditions for Coverage: Portable X-Ray Services

    Authority: Secs. 1102, 1861(s) (3), (11) and (12), 1864, and 1871 of 
the Social Security Act (42 U.S.C. 1302, 1395x(s) (3), (11), and (12), 
1395aa and 1395hh).

    Source: 34 FR 388, Jan. 10, 1969, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977. Further redesignated and 
amended at 60 FR 2326, Jan. 9, 1995.



Sec. 486.100  Condition for coverage: Compliance with Federal, State, and local laws and regulations.

    The supplier of portable X-ray services is in conformity with all 
applicable Federal, State, and local laws and regulations.
    (a) Standard--licensure or registration of supplier. In any State in 
which State or applicable local law provides for the licensure or 
registration of suppliers of X-ray services, the supplier is (1) 
licensed or registered pursuant to such law, or (2) approved by the 
agency of the State or locality responsible for licensure or 
registration as meeting the standards established for such licensure or 
registration.
    (b) Standard--licensure or registration of personnel. All personnel 
engaged in operating portable X-ray equipment are currently licensed or 
registered in accordance with all applicable State and local laws.
    (c) Standard--licensure or registration of equipment. All portable 
X-ray equipment used in providing portable X-ray services is licensed or 
registered in accordance with all applicable State and local laws.
    (d) Standard--conformity with other Federal, State, and local laws 
and regulations. The supplier of portable X-ray services agrees to 
render such services in conformity with Federal, State, and local laws 
relating to safety standards.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, Jan. 9, 1995; 60 FR 
45086, Aug. 30, 1995]



Sec. 486.102  Condition for coverage: Supervision by a qualified physician.

    Portable X-ray services are provided under the supervision of a 
qualified physician.
    (a) Standard--physician supervision. The performance of the 
roentgenologic procedures is subject to the supervision of a physician 
who meets the requirements of paragraph (b) of this section

[[Page 609]]

and one of the following requirements is met:
    (1) The supervising physician owns the equipment and it is operated 
only by his employees, or
    (2) The supervising physician certifies annually that he 
periodically checks the procedural manuals and observes the operators' 
performance, that he has verified that equipment and personnel meet 
applicable Federal, State, and local licensure and registration 
requirements and that safe operating procedures are used.
    (b) Standard--qualifications of the physician supervisor. Portable 
X-ray services are provided under the supervision of a licensed doctor 
of medicine or licensed doctor of osteopathy who is qualified by 
advanced training and experience in the use of X-rays for diagnostic 
purposes, i.e., he (1) is certified in radiology by the American Board 
of Radiology or by the American Osteopathic Board of Radiology or 
possesses qualifications which are equivalent to those required for such 
certification, or (2) is certified or meets the requirements for 
certification in a medical specialty in which he has become qualified by 
experience and training in the use of X-rays for diagnostic purposes, or 
(3) specializes in radiology and is recognized by the medical community 
as a specialist in radiology.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, Jan. 9, 1995; 60 FR 
45086, Aug. 30, 1995]



Sec. 486.104  Condition for coverage: Qualifications, orientation and health of technical personnel.

    Portable X-ray services are provided by qualified technologists.
    (a) Standard--qualifications of technologists. All operators of the 
portable X-ray equipment meet the requirements of paragraph (a) (1), 
(2), or (3) of this section:
    (1) Successful completion of a program of formal training in X-ray 
technology of not less than 24 months' duration in a school approved by 
the Council on Education of the American Medical Association or by the 
American Osteopathic Association, or have earned a bachelor's or 
associate degree in radiologic technology from an accredited college or 
university.
    (2) For those whose training was completed prior to July 1, 1966, 
but on or after July 1, 1960: Successful completion of 24 full months of 
training and/or experience under the direct supervision of a physician 
who is certified in radiology by the American College of Radiology or 
who possesses qualifications which are equivalent to those required for 
such certification, and at least 12 full months of pertinent portable X-
ray equipment operation experience in the 5 years prior to January 1, 
1968.
    (3) For those whose training was completed prior to July 1, 1960: 
Successful completion of 24 full months of training and/or experience of 
which at least 12 full months were under the direct supervision of a 
physician who is certified in radiology by the American College of 
Radiology or who possesses qualifications which are equivalent to those 
required for such certification, and at least 12 full months of 
pertinent portable X-ray equipment operation experience in the 5 years 
prior to January 1, 1968.
    (b) Standard--personnel orientation. The supplier of portable X-ray 
services has an orientation program for personnel, based on a procedural 
manual which is: Available to all members of the staff, incorporates 
relevant portions of professionally recognized documents, and includes 
instruction in all of the following:
    (1) Precautions to be followed to protect the patient from 
unnecessary exposure to radiation;
    (2) Precautions to be followed to protect an individual supporting 
the patient during X-ray procedures from unnecessary exposure to 
radiation;
    (3) Precautions to be followed to protect other individuals in the 
surrounding environment from exposure to radiation;
    (4) Precautions to be followed to protect the operator of portable 
X-ray equipment from unnecessary exposure to radiation;
    (5) Considerations in determining the area which will receive the 
primary beam;

[[Page 610]]

    (6) Determination of the time interval at which to check personnel 
radiation monitors;
    (7) Use of the personnel radiation monitor in providing an 
additional check on safety of equipment;
    (8) Proper use and maintenance of equipment;
    (9) Proper maintenance of records;
    (10) Technical problems which may arise and methods of solution;
    (11) Protection against electrical hazards;
    (12) Hazards of excessive exposure to radiation.
    (c) Standard: Employee records. Records are maintained and include 
evidence that--
    (1) Each employee is qualified for his or her position by means of 
training and experience; and
    (2) Employees receive adequate health supervision.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 53 FR 12015, Apr. 12, 1988; 60 FR 45086, Aug. 30, 1995]



Sec. 486.106  Condition for coverage: Referral for service and preservation of records.

    All portable X-ray services performed for Medicare beneficiaries are 
ordered by a doctor of medicine or doctor of osteopathy and records are 
properly preserved.
    (a) Standard--referral by a physician. Portable X-ray examinations 
are performed only on the order of a doctor of medicine or doctor of 
osteopathy licensed to practice in the State. The supplier's records 
show that:
    (1) The X-ray test was ordered by a licensed doctor of medicine or 
doctor of osteopathy, and
    (2) Such physician's written, signed order specifies the reason an 
X-ray test is required, the area of the body to be exposed, the number 
of radiographs to be obtained, and the views needed; it also includes a 
statement concerning the condition of the patient which indicates why 
portable X-ray services are necessary.
    (b) Standard--records of examinations performed. The supplier makes 
for each patient a record of the date of the X-ray examination, the name 
of the patient, a description of the procedures ordered and performed, 
the referring physician, the operator(s) of the portable X-ray equipment 
who performed the examination, the physician to whom the radiograph was 
sent, and the date it was sent.
    (c) Standard--preservation of records. Such reports are maintained 
for a period of at least 2 years, or for the period of time required by 
State law for such records (as distinguished from requirements as to the 
radiograph itself), whichever is longer.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, Jan. 9, 1995; 60 FR 
45086, Aug. 30, 1995]



Sec. 486.108  Condition for coverage: Safety standards.

    X-ray examinations are conducted through the use of equipment which 
is free of unnecessary hazards for patients, personnel, and other 
persons in the immediate environment, and through operating procedures 
which provide minimum radiation exposure to patients, personnel, and 
other persons in the immediate environment.
    (a) Standard--tube housing and devices to restrict the useful beam. 
The tube housing is of diagnostic type. Diaphragms, cones, or adjustable 
collimators capable of restricting the useful beam to the area of 
clinical interest are used and provide the same degree of protection as 
is required of the housing.
    (b) Standard--total filtration. (1) The aluminum equivalent of the 
total filtration in the primary beam is not less than that shown in the 
following table except when contraindicated for a particular diagnostic 
procedure.

------------------------------------------------------------------------
                                             Total filtration (inherent
              Operating kVp                         plus added)
------------------------------------------------------------------------
Below 50 kVp.............................  0.5 millimeters aluminum.
50-70 kVp................................  1.5 millimeters aluminum.
Above 70 kVp.............................  2.5 millimeters aluminum.
------------------------------------------------------------------------

    (2) If the filter in the machine is not accessible for examination 
or the total filtration is unknown, it can be assumed that the 
requirements are met if the half-value layer is not less than that shown 
in the following table:

------------------------------------------------------------------------
              Operating kVp                       Half-value layer
------------------------------------------------------------------------
50 kVp...................................  0.6 millimeters aluminum.

[[Page 611]]

 
70 kVp...................................  1.6 millimeters aluminum.
90 kVp...................................  2.6 millimeters aluminum.
100 kVp..................................  2.8 millimeters aluminum.
110 kVp..................................  3.0 millimeters aluminum.
120 kVp..................................  3.3 millimeters aluminum.
------------------------------------------------------------------------

    (c) Standard--termination of exposure. A device is provided to 
terminate the exposure after a preset time or exposure.
    (d) Standard--control panel. The control panel provides a device 
(usually a milliammeter or a means for an audible signal to give 
positive indication of the production of X-rays whenever the X-ray tube 
is energized. The control panel includes appropriate indicators 
(labelled control settings and/or meters) which show the physical 
factors (such as kVp, mA, exposure time or whether timing is automatic) 
used for the exposure.
    (e) Standard--exposure control switch. The exposure control switch 
is of the dead-man type and is so arranged that the operator can stand 
at least 6 feet from the patient and well away from the useful beam.
    (f) Standard--protection against electrical hazards. Only shockproof 
equipment is used. All electrical equipment is grounded.
    (g) Standard--mechanical supporting or restraining devices. 
Mechanical supporting or restraining devices are provided so that such 
devices can be used when a patient must be held in position for 
radiography.
    (h) Standard--protective gloves and aprons. Protective gloves and 
aprons are provided so that when the patient must be held by an 
individual, that individual is protected with these shielding devices.
    (i) Standard--restriction of the useful beam. Diaphragms, cones, or 
adjustable collimators are used to restrict the useful beam to the area 
of clinical interest.
    (j) Standard--personnel monitoring. A device which can be worn to 
monitor radiation exposure (e.g., a film badge) is provided to each 
individual who operates portable X-ray equipment. The device is 
evaluated for radiation exposure to the operator at least monthly and 
appropriate records are maintained by the supplier of portable X-ray 
services of radiation exposure measured by such a device for each 
individual.
    (k) Standard--personnel and public protection. No individual 
occupationally exposed to radiation is permitted to hold patients during 
exposures except during emergencies, nor is any other individual 
regularly used for this service. Care is taken to assure that pregnant 
women do not assist in portable X-ray examinations.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, Jan. 9, 1995; 60 FR 
45086, Aug. 30, 1995]



Sec. 486.110  Condition for coverage: Inspection of equipment.

    Inspections of all X-ray equipment and shielding are made by 
qualified individuals at intervals not greater than every 24 months.
    (a) Standard--qualified inspectors. Inspections are made at least 
every 24 months by a radiation health specialist who is on the staff of 
or approved by an appropriate State or local government agency.
    (b) Standard--records of inspection and scope of inspection. The 
supplier maintains records of current inspections which include the 
extent to which equipment and shielding are in compliance with the 
safety standards outlined in Sec. 486.108.

[34 FR 388, Jan. 10, 1969. Redesignated at 42 FR 52826, Sept. 30, 1977. 
Further redesignated and amended at 60 FR 2326, Jan. 9, 1995; 60 FR 
45086, Aug. 30, 1995; 60 FR 50447, Sept. 29, 1995]



Subpart D--Conditions for Coverage: Outpatient Physical Therapy Services 
        Furnished by Physical Therapists in Independent Practice



Sec. 486.150  Condition for coverage: General requirements.

    In order to be covered under Medicare as a supplier of outpatient 
physical therapy services, a physical therapist in independent practice 
must meet the following requirements:
    (a) Be licensed in the State in which he or she practices.
    (b) Meet one of the personnel qualifications specified in 
Sec. 485.705(b).

[[Page 612]]

    (c) Furnish services under the circumstances described in 
Sec. 410.60 of this chapter.
    (d) Meet the requirements of this subpart.

[60 FR 2329, Jan. 9, 1995]



Sec. 486.151  Condition for coverage: Supervision.

    The services are furnished by or under the direct supervision of a 
qualified physical therapist in independent practice.

[60 FR 2329, Jan. 9, 1995]



Sec. 486.153  Condition for coverage: Compliance with Federal, State, and local laws.

    The physical therapist in independent practice and staff, if any, 
are in compliance with all applicable Federal, State, and local laws and 
regulations.
    (a) Standard: Licensure of facility. In any State in which State or 
applicable local law provides for the licensing of the facility of a 
physical therapist, such facility is:
    (1) Licensed pursuant to such law; or
    (2) If not subject to licensure, is approved (by the agency of such 
State or locality responsible for licensing) as meeting the standards 
established for such licensing.
    (b) Standard: Licensure or registration of personnel. The physical 
therapist in independent practice and staff, if any, are licensed or 
registered in accordance with applicable laws.

[41 FR 20865, May 21, 1976, unless otherwise noted. Redesignated at 42 
FR 52826, Sept. 30, 1977. Redesignated and amended at 60 FR 2326, 2329, 
Jan. 9, 1995]



Sec. 486.155  Condition for coverage: Plan of care.

    For each patient, a written plan of care is established and 
periodically reviewed by the individual who established it.
    (a) Standard: Medical history and prior treatment. The physical 
therapist obtains the following information before or at the time of 
initiation of treatment:
    (1) The patient's significant past history.
    (2) Diagnosis(es), if established.
    (3) Physician's orders, if any.
    (4) Rehabilitation goals and potential for their achievement.
    (5) Contraindications, if any.
    (6) The extent to which the patient is aware of the diagnosis(es) 
and prognosis.
    (7) If appropriate, the summary of treatment provided and results 
achieved during previous periods of physical therapy services or 
institutionalization.
    (b) Standard: Plan of care. (1) For each patient there is a written 
plan of care that is established by the physician or by the physical 
therapist who furnishes the services.
    (2) The plan indicates anticipated goals and specifies for physical 
therapy services the--
    (i) Type;
    (ii) Amount;
    (iii) Frequency; and
    (iv) Duration.
    (3) The plan of care and results of treatment are reviewed by the 
physician or by the therapist at least as often as the patient's 
condition requires, and the indicated action is taken.
    (4) Changes in the plan of care are noted in the clinical record. If 
the patient has an attending physician, the therapist who furnishes the 
services promptly notifies him or her of any change in the patient's 
condition or in the plan of care. (For Medicare patients, the plan must 
be reviewed by a physician in accordance with Sec. 410.61(e).)

[54 FR 38679, Sept. 20, 1989. Redesignated and amended at 60 FR 2326, 
2329, Jan. 9, 1995]



Sec. 486.157  Condition for coverage: Physical therapy services.

    The physical therapist in independent practice provides an adequate 
program of physical therapy services and has the facilities and 
equipment necessary to carry out the services offered.
    (a) Standard: Adequate program. The physical therapist will be 
considered to have an adequate physical therapy program when services 
can be provided, utilizing therapeutic exercise and the modalities of 
heat, cold, water, and electricity; patient evaluations are

[[Page 613]]

conducted; and tests and measurements of strength, balance, endurance, 
range of motion, and activities of daily living are administered.
    (b) Standard: Supervision of physical therapy services. Physical 
therapy services are provided by, or under the supervision of, a 
qualified physical therapist.

[41 FR 20865, May 21, 1976, unless otherwise noted. Redesignated at 42 
FR 52826, Sept. 30, 1977. Redesignated and amended at 60 FR 2326, 2329, 
Jan. 9, 1995]



Sec. 486.159  Condition for coverage: Coordination of services with other organizations, agencies, or individuals.

    The physical therapist coordinates her physical therapy services 
with the health and medical services the patient receives from 
organizations or agencies or other individual practitioners through 
exchange of information that meets the following standard:
    If a patient is receiving or has recently received, from other 
sources, services related to the physical therapy program, the physical 
therapist exchanges pertinent documented information with those other 
sources--
    (a) On a regular basis;
    (b) Subject to the requirements for protection of the 
confidentiality of medical records, as set forth in Sec. 485.721 of this 
chapter; and
    (c) With the aim of ensuring that the services effectively 
complement one another.

[60 FR 2329, Jan. 9, 1995]



Sec. 486.161  Condition for coverage: Clinical records.

    The physical therapist in independent practice maintains clinical 
records on all patients in accordance with accepted professional 
standards and practices. The clinical records are completely and 
accurately documented, readily accessible, and systematically organized 
to facilitate retrieving and compiling information.
    (a) Standard: Protection of clinical record information. Clinical-
record information is recognized as confidential and is safeguarded 
against loss, destruction, or unauthorized use. Written procedures 
govern use and removal of records and include conditions for release of 
information. A patient's written consent is required for release of 
information not authorized by law.
    (b) Standard: Content. The clinical record contains sufficient 
information to identify the patient clearly, to justify the 
diagnosis(es) and treatment, and to document the results accurately. All 
clinical records contain the following general categories of data:
    (1) Documented evidence of the assessment of the needs of the 
patient, of an appropriate plan of care, and of the care and services 
provided,
    (2) Identification data and consent forms,
    (3) Medical history,
    (4) Report of physical examination(s), if any,
    (5) Observations and progress notes,
    (6) Reports of treatments and clinical findings, and
    (7) Discharge summary including final diagnosis(es) and prognosis.
    (c) Standard: Completion of records and centralization of reports. 
Current clinical records and those of discharged patients are completed 
promptly. All clinical information pertaining to a patient is 
centralized in the patient's clinical record.
    (d) Standard: Retention and preservation. Clinical records are 
retained for a period of time not less than:
    (1) That determined by the respective State statute or the statute 
of limitations in the State, or
    (2) In the absence of a State statute: (i) 5 years after the date of 
discharge or, (ii) in the case of a minor, 3 years after the patient 
becomes of age under State law, or 5 years after the date of discharge, 
whichever is longer.
    (e) Standard: Indexes. Clinical records are indexed at least 
according to name of patient to facilitate acquisition of statistical 
clinical information and retrieval of records for administrative action.

[41 FR 20865, May 21, 1976, unless otherwise noted. Redesignated at 42 
FR 52826, Sept. 30, 1977. Redesignated and amended at 60 FR 2326, 2329, 
Jan. 9, 1995]



Sec. 486.163  Condition for coverage--physical environment.

    The physical environment of the office or facility of the physical 
therapist

[[Page 614]]

in independent practice affords a functional, sanitary, safe, and 
comfortable surrounding for patients, personnel, and the public.
    (a) Standard: Building construction. The construction of the 
building housing the physical therapy office meets all applicable State 
and local building, fire, and safety codes.
    (b) Standard: Maintenance of the physical therapy office and 
equipment. There is a written preventive-maintenance program to ensure 
that equipment is operative and that the physical therapy office is 
clean and orderly. All essential mechanical, electrical, and patient-
care equipment is maintained in safe operating condition, and is 
properly calibrated.
    (c) Standard: Other environmental considerations. The building 
housing the physical therapy office is accessible to, and functional 
for, patients, personnel, and the public. Written effective procedures 
in aseptic techniques are followed by all personnel and the procedures 
are reviewed annually, and when necessary, revised.
    (d) The physical therapist is alert to the possibility of fire and 
other nonmedical emergencies and has written plans that include--
    (1) The means for leaving the office and the building safely, 
demonstrated, for example, by fire exit signs; and
    (2) Other provisions necessary to ensure the safety of patients.

[41 FR 20865, May 21, 1976, unless otherwise noted. Redesignated at 42 
FR 52826, Sept. 30, 1977. Redesignated and amended at 60 FR 2326, 2329, 
Jan. 9, 1995]

Subparts E-F [Reserved]



   Subpart G--Conditions for Coverage: Organ Procurement Organizations

    Source: 53 FR 6549, Mar. 1, 1988, unless otherwise noted. 
Redesignated at 60 FR 50447, Sept. 29, 1995.



Sec. 486.301  Basis and scope.

    (a) Statutory Basis. (1) Section 1138(b) of the Act sets forth the 
requirements that an organ procurement organization must meet to have 
its organ procurement services to hospitals covered under Medicare and 
Medicaid. These include certification as a ``qualified'' organ 
procurement organization (OPO) and designation as the OPO for a 
particular service area.
    (2) Section 371(b) of the PHS Act sets forth the requirements for 
certification and the functions that a qualified OPO is expected to 
perform.
    (b) Scope. This subpart sets forth--
    (1) The conditions and requirements that an OPO must meet;
    (2) The procedures for certification and designation of OPOs; and
    (3) The terms of the agreement with CMS, and the basis for, and the 
effect of, termination of the agreement.
    (4) The requirements for an OPO to be recertified for the 
performance data cycle from January 1, 2002 through December 31, 2005.

[61 FR 19743, May 2, 1996, as amended at 66 FR 67111, Dec. 28, 2001]



Sec. 486.302  Definitions.

    As used in this subpart, the following definitions apply:
    Certification or recertification means a CMS determination that an 
entity meets the standards for a qualified OPO at Sec. 486.304 of this 
subpart and is eligible for designation if it meets the additional 
conditions for designation at Secs. 486.306 and 486.308. No payment 
ensues from certification alone.
    Designation or redesignation means CMS approval of an OPO for 
Medicare and Medicaid payment purposes under section 1138(b)(1)(F) of 
the Act. The terms are used interchangeably except when otherwise 
specifically indicated.
    Entire standard metropolitan statistical area means a metropolitan 
statistical area, a consolidated metropolitan statistical area, or a 
primary statistical area listed in the State and Metropolitan Area Data 
Book published by the U.S. Bureau of the Census.
    Open area means a service area for which CMS has notified the public 
that it is accepting applications for designation.
    Organ means a human kidney, liver, heart, lung, pancreas, or 
intestines (or multivisceral organs).
    Organ procurement organization means an organization that performs 
or coordinates the performance of retrieving, preserving and 
transporting organs

[[Page 615]]

and maintains a system of locating prospective recipients for available 
organs.
    Potential donor means a person who dies in circumstances (causes and 
conditions of death, and age at death) that are generally acceptable for 
donation of at least one solid organ if the donor can be identified 
timely and permission for donation can be obtained.
    Service area means a geographical area of sufficient size to assure 
maximum effectiveness in the procurement and equitable distribution of 
organs and that either includes an entire standard metropolitan 
statistical area or does not include any part of such an area and that 
meets the standards of this subpart.
    Transplant center means a hospital certified by Medicare to furnish 
directly, for a specific organ(s), transplant and other medical and 
surgical specialty services required for the care of transplant 
patients.

[53 FR 6549, Mar. 1, 1988, as amended at 59 FR 46514, Sept. 8, 1994. 
Redesignated and amended at 60 FR 50447, 50448, Sept. 29, 1995; 66 FR 
39938, Aug. 1, 2001]



Sec. 486.304  General requirements.

    (a) Designation--a condition for payment. Payment may be made under 
the Medicare and Medicaid programs for organ procurement costs 
attributable to payments made by an OPO only if the organization has 
been designated by the Secretary as an OPO, payment to which may be 
treated as organ procurement costs for reimbursement of hospitals under 
Medicare and Medicaid.
    (b) Requirements for designated status. To be the designated OPO for 
a service area, an entity must do the following:
    (1) Submit to CMS a written application for designation, using the 
application form prescribed by CMS.
    (2) Be certified as a qualified OPO.
    (3) Participate in the Organ Procurement and Transplantation Network 
as specified in Sec. 486.308.
    (4) Enter into an agreement with CMS that meets the requirements set 
forth in paragraph (c) of this section.
    (5) Upon its initial designation, meet the requirements at 
Sec. 486.310(a)(3) or Sec. 486.310(b)(4), as appropriate, concerning 
working relationships with hospitals or transplant centers. During the 
initial designation period, the OPO is not required to demonstrate 
compliance with Secs. 486.310(a)(1) and (a)(2) or Sec. 486.310(b)(1), 
which set forth performance standards for OPOs.
    (6) To be redesignated after an initial designation period, comply 
with all the requirements of this subpart, including those at 
Sec. 486.310, which set forth performance standards for OPOs.
    (7) Obtain CMS approval before entering into any change of 
ownership, merger, consolidation, or change in its service area (see 
Sec. 486.318, which sets forth requirements concerning approval for 
changes in ownership and service area). Failure to do so could result in 
termination.
    (8) Enter into a working relationship with any hospitals, including 
transplant centers, in the OPO's service area that request a working 
relationship.
    (c) Agreement with CMS. An OPO must enter into an agreement with 
CMS. The agreement is effective upon submission by the OPO and 
acceptance by CMS, but may be terminated by either party. If an OPO 
agreement is terminated, payment for organ procurement services 
attributable to that OPO will not be made for services furnished on or 
after the effective date of termination. In the agreement, the OPO must 
agree to do the following:
    (1) Maintain compliance with the requirements of titles XVIII and 
XIX of the Act, section 1138 of the Act, and applicable regulations, 
including the conditions set forth in this subpart, and the regulations 
of the OPTN approved and issued by the Secretary, and to report promptly 
to the Secretary any failure to do so.
    (2) File a cost report in accordance with Sec. 413.24(f) of this 
chapter within 3 months after the end of each fiscal year.
    (3) Permit CMS to designate an intermediary to determine the interim 
payment rate payable to the transplant hospitals for services provided 
by the OPO and to make a determination of reasonable cost based on the 
cost report it files.
    (4) Provide budget or cost projection information as may be required 
to establish an initial interim payment rate.

[[Page 616]]

    (5) Pay to CMS amounts that have been paid by CMS to transplant 
hospitals as Medicare payment for organ recovery fees and that are 
determined to be in excess of the reasonable cost of the services 
provided by the OPO.
    (6) Not charge an individual for items or services for which that 
individual is entitled to have payment made under the Medicare program.
    (7) Maintain and make available to CMS, the Comptroller General, or 
their designees data that show the number of organs procured and 
transplanted.
    (8) Maintain data in a format that can be readily continued by a 
successor OPO and turn over to CMS copies of all records, data, and 
software necessary to ensure uninterrupted service by a successor OPO 
that may be designated for all or part of its service area. Records and 
data subject to this requirement include records on individual donors 
(including identifying data and data on organs retrieved), records on 
transplant candidates (including identifying data and data on immune 
system and other medical indications), and procedural manuals and other 
materials used in conducting OPO operations. Donor records must include 
at least information identifying the donor (for example, name, address, 
date of birth, social security number), the organs and tissues (when 
applicable) retrieved, date of the organ retrieval, and test results.
    (d) When OPOs may apply for designation. Entities may apply for 
designation whenever a service area becomes an open area.
    (e) Designation periods--(1) General. An OPO is normally designated 
for 2 years. A designation period may not exceed 2 years but may be 
shorter.
    (2) Redesignation. Redesignation must occur at least every 2 years 
and be completed before the end of an existing designation period.
    (3) Interim designation. CMS may designate an organization for an 
interim designation period if the period is needed in order for CMS to 
make a final designation determination.
    (i) The interim designee may be either the OPO previously designated 
for the service area or another organization.
    (ii) The interim designation period does not exceed 180 days after 
the normal designation period has expired.
    (iii) The interim designee must meet all requirements of section 
371(b) of the Public Health Service Act (42 U.S.C. 273(b)) regarding 
qualified OPOs and must not be out of compliance with the requirements 
of section 1138(b)(1) (B) through (E) of the Act regarding requirements 
for payment of organ procurement costs under title XVIII or title XIX of 
the Act.

[53 FR 6549, Mar. 1, 1988, as amended at 59 FR 46514, Sept. 8, 1994 
Redesignated and amended at 60 FR 50447, 50448, Sept. 29, 1995; 60 FR 
53877, Oct. 18, 1995; 61 FR 19743, May 2, 1996]



Sec. 486.306  Qualifications for designation as an OPO.

    To be designated as the OPO for a service area, an organization 
must, at the time of application and throughout the period of its 
designation, meet the following requirements:
    (a) Be a nonprofit entity that is exempt from Federal income 
taxation under section 501 of the Internal Revenue Code of 1986.
    (b) Have accounting and other fiscal procedures necessary to assure 
the fiscal stability of the organization, including procedures to obtain 
payment for kidneys and non-renal organs provided to transplant centers.
    (c) Have an agreement with the Secretary to be reimbursed under 
Medicare for the procurement of covered organs.
    (d) Document that it has a defined service area that meets the 
requirements of Sec. 486.307.
    (e) Have a director and such other staff, including an organ 
donation coordinator and an organ procurement specialist, necessary to 
obtain organs effectively from donors in its service area.
    (f) Have a board of directors or an advisory board that has the 
authority to recommend policies relating to the donation, procurement, 
and distribution of organs. While an OPO may have more than one board, 
the members specified in paragraphs (f)(1) through (f)(5) of this 
section must be members of a single board. The board of directors or 
advisory board must be composed of the following:

[[Page 617]]

    (1) Members who represent hospital administrators, tissue banks, 
voluntary health associations in its service area and either intensive 
care or emergency room personnel.
    (2) Members who represent the public residing in that area.
    (3) A physician with knowledge, experience, or skill in the field of 
human histocompatibility, or an individual with a doctorate degree in a 
biological science and with knowledge, experience, or skills in the 
field of human histocompatibility.
    (4) A neurosurgeon or another physician with knowledge or skills in 
the field of neurology.
    (5) A transplant surgeon from each transplant center in its service 
area with which the OPO has arrangements to coordinate its activities.
    (g) To identify potential organ donors, have documented evidence 
that--(1) It has a working relationship with at least 75 percent of the 
hospitals that participate in the Medicare and Medicaid programs in its 
service area and that have an operating room and the equipment and 
personnel for retrieving organs; and
    (2) It conducts systematic efforts intended to acquire all usable 
organs from potential donors.
    (h) Arrange for the appropriate tissue typing of donated organs.
    (i) Have a system to equitably allocate donated organs among 
transplant patients that is consistent with--
    (1) ``Guidelines for Preventing Transmission of Human 
Immunodeficiency Virus Through Transplantation of Human Tissue and 
Organs'' issued by the Centers for Disease Control and Prevention (CDC) 
that are appended to this subpart; and
    (2) Rules of the Organ Procurement and Transplantation Network 
(OPTN), see Sec. 486.308.
    (j) Provide or arrange for the transportation of donated organs to 
transplant centers.
    (k) Have arrangements to coordinate its activities with transplant 
centers in the area.
    (l) Have arrangements to cooperate with tissue banks for the 
retrieval, processing, preservation, storage and distribution of tissues 
as may be appropriate to assure that all usable tissues are obtained 
from potential donors.
    (m) Maintain and make available upon request of the Secretary, the 
Comptroller General, or their designees data that relate to the 
performance standards.
    (n) Maintain data in a format that can be readily used by a 
successor OPO and agree to turn over to the Secretary copies of all 
records and data necessary to assure uninterrupted service by a 
successor OPO newly designated by CMS.
    (o) Have a procedure for ensuring the confidentiality of patient 
records. Information from or copies of records may be released only to 
authorized individuals and the OPO must ensure that unauthorized 
individuals cannot gain access to or alter patient records. Original 
medical records may be released by the OPO only in accordance with 
Federal or State laws, court orders, or subpoenas.
    (p) Conduct and participate in professional education concerning 
organ procurement.
    (q) Ensure that appropriate donor screening and infection tests, 
consistent with OPTN standards and the CDC guidelines that are appended 
to this subpart, are performed by a laboratory that is certified in the 
appropriate specialty or subspecialty of service in accordance with part 
493 of this chapter, including tests to prevent the acquisition of 
organs that are infected with the etiologic agent for acquired immune 
deficiency syndrome.
    (r) Assist hospitals in establishing and implementing protocols for 
making routine inquiries about organ donations by potential donors.
    (s) Ensure that donors are tested for human immunodeficiency viral 
markers consistent with OPTN rules and the CDC guidelines appended to 
this subpart for solid organ donation.
    (t) Submit accurate data to CMS within 15 days following the end of 
a calendar year (unless otherwise notified) giving information on the 
following:
    (1) Population of designated service area based on the most recent 
U.S. Bureau of the Census data.
    (2) Number of actual donors.
    (3) Number of kidneys procured.

[[Page 618]]

    (4) Number of kidneys transplanted.
    (5) Number of extrarenal organs by type procured.
    (6) Number of extrarenal organs by type transplanted.

[53 FR 6550, March 1, 1988; 53 FR 9172, March 21, 1988; 53 FR 18987, May 
26, 1988; 57 FR 7137, Feb. 28, 1992; 59 FR 46515, Sept. 8, 1994. 
Redesignated and amended at 60 FR 50447, 50448, Sept. 29, 1995; 61 FR 
19743, May 2, 1996]



Sec. 486.307  OPO service area size designation and documentation requirements.

    (a) General documentation requirement. An OPO must make available to 
CMS documentation verifying that the OPO meets the requirements of 
paragraphs (b) through (d) of this section at the time of application 
and throughout the period of its designation.
    (b) Boundary designation. The defined service area either includes 
an entire Metropolitan Statistical Area or a New England County 
Metropolitan Area as specified by the Director of the Office of 
Management and Budget or does not include any part of such an area.
    (c) Service area location and characteristics. An OPO must precisely 
define and document a proposed service area's location through the 
following information:
    (1) The names of counties (or parishes in Louisiana) served or, if 
the service area includes an entire State, the name of the State.
    (2) Geographic boundaries of the service area for which U.S. 
population statistics are available.
    (3) Total population in service area.
    (4) The number of and the names of acute care hospitals in the 
service area with an operating room and the equipment and personnel to 
retrieve organs.
    (d) Sufficient size requirements. (1) Before January 1, 1996, an OPO 
must demonstrate that it can procure organs from at least 50 potential 
donors per calendar year or that its service area comprises an entire 
State.
    (2) Beginning January 1, 1996, an OPO must meet at least one of the 
following requirements:
    (i) Its service area must include an entire State or official U.S. 
territory.
    (ii) It must either procure organs from an average of at least 24 
donors per calendar year in the 2 years before the year of redesignation 
or request and be granted an exception to this requirement under 
paragraph (d)(3) or (d)(4) of this section.
    (iii) In the case of an OPO operating exclusively in a noncontiguous 
U.S. State, a U.S. territory, or a U.S. commonwealth, such as Hawaii or 
Puerto Rico, it must procure organs at the rate of 50 percent of the 
national average of all OPOs for kidney procurement per million 
population and for kidney transplantation per million population.
    (iv) If it is an entity that has not been previously designated as 
an OPO, it must demonstrate that it can procure organs from at least 50 
potential donors per calendar year.
    (3) CMS may grant an OPO an exception to paragraph (d)(2)(ii) of 
this section if the OPO can demonstrate that--
    (i) It failed to meet the requirement because of unusual 
circumstances beyond its control;
    (ii) It has historically maintained a service area of sufficient 
size to meet the criterion in paragraph (d)(2)(ii) of this section; and
    (iii) It has a specific plan to meet the size criterion in paragraph 
(d)(2)(ii) of this section in the future.
    (4) During the 1996 redesignation process only, CMS may grant an 
exception to paragraph (d)(2)(ii) of this section to an OPO that can 
demonstrate that--
    (i) It meets the performance criteria in Sec. 486.310(b); and
    (ii) It has a specific plan to meet the service area size criterion 
in paragraph (d)(2)(ii) of this section by the 1998 redesignation 
period.

[61 FR 19744, May 2, 1996]



Sec. 486.308  Condition: Participation in organ procurement and transplantation network.

    In order to be designated as the OPO for its service area, and to 
continue to be the designated OPO once designated, an OPO must be a 
member of, have a written agreement with, and abide by the rules of the 
OPTN established and operated in accordance with section 372 of the 
Public Health Service (PHS) Act (42 U.S.C. 274). The term ``rules of the 
OPTN'' means those rules provided for in regulations issued by the 
Secretary in accordance with section 372 of the

[[Page 619]]

PHS Act. No OPO is considered to be out of compliance with section 
1138(b)(1)(D) of the Act or this section unless the Secretary has given 
the OPTN formal notice that he or she approves the decision to exclude 
the entity from the OPTN and also has notified the entity in writing.

[59 FR 46516, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995]



Sec. 486.309  Recertification from January 1, 2002 through December 31, 2005.

    An OPO will be considered to be recertified for the period of 
January 1, 2002 through December 31, 2005 if an entity meets, or has 
met, the standards to be a qualified OPO within a four year period 
ending December 31, 2001 and has an agreement with the Secretary that 
was scheduled to terminate on July 31, 2002. Agreements based on this 
recertification will end on July 31, 2006.

[66 FR 67111, Dec. 28, 2001]



Sec. 486.310  Condition: Adherence to performance standards.

    (a) Standards before January 1, 1996. Before January 1, 1996, OPOs 
must meet the following performance standards:
    (1) Each OPO must procure within its service area a minimum ratio of 
23 cadaveric kidneys per million population of its service area for each 
12-month period surveyed.
    (2) Each OPO must provide a minimum ratio of cadaveric kidneys 
procured in its service area and transplanted (either locally or 
exported and transplanted) of 19 cadaveric kidneys per million 
population of its service area for each 12-month period surveyed.
    (b) Standards beginning on January 1, 1996. Except as specified in 
paragraph (c) of this section, each OPO must achieve at least 75 percent 
of the national mean for four of the following five performance 
categories, averaged over the 2 calendar years before the year of 
redesignation:
    (1) Number of actual donors per million population.
    (2) Number of kidneys recovered per million population.
    (3) Number of extrarenal organs recovered per million population.
    (4) Number of kidneys transplanted per million population.
    (5) Number of extrarenal organs transplanted per million population.
    (c) Exceptions and exemptions--(1) Exception based on location. OPOs 
operating exclusively in a noncontiguous U.S. State, a U.S. territory, 
or a U.S. commonwealth, such as Hawaii or Puerto Rico, may be granted an 
exception from the performance standards of paragraph (b) of this 
section because of special geographically related characteristics, such 
as difficulty in transporting organs to the mainland, that impede 
satisfaction of the national rate of organ procurement. They must meet a 
standard of 50 percent of the national average of all OPOs for kidneys 
recovered and transplanted per million population.
    (2) Exception because of lack of competition for a service area. CMS 
may continue to designate an OPO that does not meet the standards under 
paragraph (b) of this section for a service area if no OPO that meets 
the performance and qualification requirements is willing to accept 
responsibility for the service area and if the designated OPO submits an 
acceptable corrective action plan in accordance with paragraph (d) of 
this section.
    (3) Exception for 1996 transition period. During the 1996 
designation period only, CMS may continue to designate for a service 
area an OPO that does not meet the standards under paragraph (b) of this 
section if the OPO:
    (i) Meets three of the criteria in paragraphs (b)(1) through (b)(5) 
of this section; and
    (ii) Submits an acceptable corrective action plan in accordance with 
paragraph (d) of this section.
    (d) Corrective action plans and corrected information--(1) 
Corrective action plans. (i) If a designated OPO does not meet the 
standards of paragraph (a) of this section, it may submit to the 
appropriate CMS regional office a corrective action plan explaining why 
it failed to meet them and specifying the actions it will take to ensure 
it meets those standards in the future.
    (ii) CMS will not accept corrective action plans from an OPO for 
failure to

[[Page 620]]

meet the standards specified in paragraph (b) of this section unless the 
OPO continues to be designated under paragraph (c)(2) or (c)(3) of this 
section.
    (2) Corrected information. An OPO may request correction of the 
information required by Sec. 486.306(e) from CMS throughout the two-year 
designation period. CMS will evaluate the OPO's request and may seek 
input from other sources, such as hospital personnel, neighboring OPOs, 
the OPTN contractor, and the Census Bureau as necessary to verify the 
OPO's information before making the changes requested by the OPO. In 
addition, CMS will notify an OPO if it does not meet the performance 
standards based on the information reported. Any OPO so notified may 
provide corrected information for consideration within 30 days of 
receipt of a notice of failure to meet the standards.

[59 FR 46516, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995; 61 FR 19744, May 2, 1996]



Sec. 486.314  Effect of failure to meet requirements.

    Failure to continue to meet any of the requirements in Secs. 486.306 
and 486.308 or to meet the performance standards in Sec. 486.310 may 
result in termination of the OPO's agreement with CMS.

[59 FR 46517, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995; 61 FR 19745, May 2, 1996]



Sec. 486.316  Designation of one OPO for each service area.

    (a) CMS designates only one OPO per service area. Applications for 
designation are accepted only during a period when the service area is 
an open area. A service area is open for competition once the existing 
designation period has expired, when the existing designated status of 
the OPO for that service area has been terminated, or when no OPO has 
been designated for the area. CMS may also declare the service area open 
in the event an OPO ceases to operate or CMS has reasonable ground for 
anticipating it will cease to operate. In cases of urgent need (such as 
evidence of medically or ethically unsound practices), CMS may terminate 
its agreement with an OPO immediately. The service area remains open 
until an OPO is designated for it. If more than one organization applies 
and substantially meets the requirements of Sec. 486.306 in a given 
service area, CMS considers other factors in reaching a decision 
concerning which organization to designate. These factors follow:
    (1) Prior performance, including the previous year's experience in 
terms of the number of organs retrieved and wasted and the average cost 
per organ;
    (2) Actual number of donors compared to the number of potential 
donors;
    (3) The nature of relationships and degree of involvement with 
hospitals in the organization's service area;
    (4) Bed capacity associated with the hospitals with which the 
organizations have a working relationship;
    (5) Willingness and ability to place organs within the service area; 
and
    (6) Proximity of the organization to the donor hospitals.
    (b) An organization that applies to CMS to be the designated OPO for 
its service area and that is not designated may appeal its 
nondesignation under part 498 of this chapter.
    (c) After January 1, 1996, a hospital must enter into an agreement 
only with the OPO designated to serve the area in which the hospital is 
located unless CMS has granted the hospital a waiver under paragraphs 
(d) through (g) of this section to be serviced by another OPO.
    (d) If CMS changes the OPO designated for an area, hospitals located 
in that area must enter into agreements with the newly designated OPO or 
submit a request for a waiver in accordance with paragraph (e) of this 
section within 30 days of notice of the change in designation.
    (e) A hospital may request and CMS may grant a waiver permitting the 
hospital to have an agreement with a designated OPO other than the OPO 
designated for the service area in which the hospital is located. To 
qualify for a waiver, the hospital must submit data to CMS establishing 
that--
    (1) The waiver is expected to increase organ donations; and
    (2) The waiver will ensure equitable treatment of patients referred 
for

[[Page 621]]

transplants within the service area served by the hospital's designated 
OPO and within the service area served by the OPO with which the 
hospital seeks to enter into an agreement.
    (f) In making a determination on waiver requests, CMS considers:
    (1) Cost effectiveness;
    (2) Improvements in quality;
    (3) Changes in a hospital's designated OPO due to changes in the 
metropolitan service area designations, if applicable; and
    (4) The length and continuity of a hospital's relationship with an 
OPO other than the hospital's designated OPO.
    (g) A hospital may continue to operate under its existing agreement 
with an out-of-area OPO while CMS is processing the waiver request. If a 
waiver request is denied, a hospital must enter into an agreement with 
the designated OPO within 30 days of notification of the final 
determination.

[59 FR 46517, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995; 61 FR 19745, May 2, 1996]



Sec. 486.318  Changes in ownership or service area.

    (a) OPO requirements. (1) A designated OPO considering a change in 
ownership or in its service area must notify CMS before putting it into 
effect. This notification is required to ensure that the entity, as 
changed, will continue to satisfy Medicare and Medicaid requirements. A 
change in ownership takes place if there is the merger of one entity 
into another or the consolidation of one entity with another.
    (2) A designated OPO considering a change in its service area must 
obtain prior CMS approval. In the case of a service area change that 
results from a change of ownership due to merger or consolidation, the 
entities must submit anew the information required in an application for 
designation, or other written documentation CMS determines to be 
necessary for designation.
    (b) CMS requirements. (1) If CMS finds that the entity has changed 
to such an extent that it no longer satisfies the prerequisites for OPO 
designation, CMS may terminate the OPO's agreement and declare the OPO's 
service area to be an open area.
    (2) If CMS finds that the changed entity continues to satisfy the 
prerequisites for OPO designation, the period of designation of the 
changed entity is the remaining designation term of the OPO that was 
reorganized. If more than one designated OPO is involved in the 
reorganization, the remaining designation term is ordinarily the longest 
of the remaining periods. CMS may determine, however, that a shorter 
period applies if it decides that a shorter period is in the best 
interest of the Medicare and Medicaid programs. The performance 
standards of Sec. 486.310 apply at the end of this remaining period.

[59 FR 46517, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995]



Sec. 486.325  Terminations of agreement with CMS.

    (a) Types--(1) Voluntary termination. If an OPO wishes to terminate 
its agreement, it must send written notice of its intention with the 
proposed effective date to CMS. CMS may approve the proposed date, set a 
different date no later than 6 months after the proposed effective date, 
or set a date less than 6 months after the proposed date if it 
determines that it would not disrupt services to the service area or 
otherwise interfere with the effective and efficient administration of 
the Medicare and Medicaid programs. If CMS determines that a designated 
OPO has ceased to furnish organ procurement services to its service 
area, the cessation of services is deemed to constitute a voluntary 
termination by the OPO, effective on a date determined by CMS.
    (2) Involuntary termination. CMS may terminate an agreement if it 
finds that an OPO no longer meets the conditions for coverage in this 
subpart, or is not in substantial compliance with any other applicable 
Federal regulations or provisions of titles XI, XVIII, or title XIX of 
the Act. CMS may also terminate an agreement immediately in cases of 
urgent need, such as the discovery of unsound medical practices.
    (b) Notice to OPO. CMS gives notice of termination to an OPO at 
least 90 days before the effective date stated in the notice.

[[Page 622]]

    (c) Appeal right. The OPO may appeal the termination in accordance 
with the provisions set forth in part 498, which sets forth appeals 
procedures for determinations that affect participation in the Medicare 
and Medicaid programs.
    (d) Effects of termination. When an OPO agreement is terminated--
    (1) Medicare and Medicaid payments may not be made for organ 
procurement services the OPO furnishes on or after the effective date of 
termination; and
    (2) CMS will accept applications from any entity to be the 
designated OPO for that area.
    (e) Public notice. In the case of voluntary termination, the OPO 
must give prompt public notice of the date of termination, and such 
information regarding the effect of that termination as CMS may require, 
through publication in local newspapers in the service area. In the case 
of involuntary termination, CMS gives notice of the date of termination.
    (f) Reinstatement. CMS may, at its discretion, designate an OPO 
whose agreement was previously terminated if CMS finds that the cause 
for termination has been removed, is satisfied that it is not likely to 
recur, has not designated another OPO for the service area, and finds 
that the OPO meets all the necessary requirements for designation.

[59 FR 46517, Sept. 8, 1994. Redesignated and amended at 60 FR 50447, 
50448, Sept. 29, 1995; 61 FR 19745, May 2, 1996]

[[Page 623]]

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[61 FR 19745, May 2, 1996]



PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES--Table of Contents




                      Subpart A--General Provisions

Sec.
488.1 Definitions.
488.2 Statutory basis.
488.3 Conditions of participation; conditions for coverage; and long-
          term care requirements.
488.4 Application and reapplication procedures for accreditation 
          organizations.
488.5 Effect of JCAHO or AOA accreditation of hospitals.
488.6 Other national accreditation programs for hospitals and other 
          providers and suppliers.
488.7 Validation survey.
488.8 Federal review of accreditation organizations.
488.9 Onsite observation of accreditation organization operations.
488.10 State survey agency review: Statutory provisions.
488.11 State survey agency functions.
488.12 Effect of survey agency certification.
488.14 Effect of QIO review.
488.18 Documentation of findings.
488.20 Periodic review of compliance and approval.
488.24 Certification of noncompliance.
488.26 Determining compliance.

[[Page 638]]

488.28 Providers or suppliers, other than SNFs and NFs, with 
          deficiencies.

                     Subpart B--Special Requirements

488.52 [Reserved]
488.54 Temporary waivers applicable to hospitals.
488.56 Temporary waivers applicable to skilled nursing facilities.
488.60 Special procedures for approving end stage renal disease 
          facilities.
488.64 Remote facility variances for utilization review requirements.
488.68 State Agency responsibilities for OASIS collection and data base 
          requirements.

                 Subpart C--Survey Forms and Procedures

488.100 Long term care survey forms, Part A.
488.105 Long term care survey forms, Part B.
488.110 Procedural guidelines.
488.115 Care guidelines.

Subpart D--Reconsideration of Adverse Determinations--Deeming Authority 
for Accreditation Organizations and CLIA Exemption of Laboratories Under 
                             State Programs

488.201 Reconsideration.
488.203 Withdrawal of request for reconsideration.
488.205 Right to informal hearing.
488.207 Informal hearing procedures.
488.209 Hearing officer's findings.
488.211 Final reconsideration determination.

    Subpart E--Survey and Certification of Long-Term Care Facilities

488.300 Statutory basis.
488.301 Definitions.
488.303 State plan requirement.
488.305 Standard surveys.
488.307 Unannounced surveys.
488.308 Survey frequency.
488.310 Extended survey.
488.312 Consistency of survey results.
488.314 Survey teams.
488.318 Inadequate survey performance.
488.320 Sanctions for inadequate survey performance.
488.325 Disclosure of results of surveys and activities.
488.330 Certification of compliance or noncompliance.
488.331 Informal dispute resolution.
488.332 Investigation of complaints of violations and monitoring of 
          compliance.
488.334 Educational programs.
488.335 Action on complaints of resident neglect and abuse, and 
          misappropriation of resident property.

Subpart F--Enforcement of Compliance For Long-Term Care Facilities with 
                              Deficiencies

488.400 Statutory basis.
488.401 Definitions.
488.402 General provisions.
488.404 Factors to be considered in selecting remedies.
488.406 Available remedies.
488.408 Selection of remedies.
488.410 Action when there is immediate jeopardy.
488.412 Action when there is no immediate jeopardy.
488.414 Action when there is repeated substandard quality of care.
488.415 Temporary management.
488.417 Denial of payment for all new admissions.
488.418 Secretarial authority to deny all payments.
488.422 State monitoring.
488.424 Directed plan of correction.
488.425 Directed inservice training.
488.426 Transfer of residents, or closure of the facility and transfer 
          of residents.
488.430 Civil money penalties: Basis for imposing penalty.
488.432 Civil money penalties: When a penalty is collected.
488.434 Civil money penalties: Notice of penalty.
488.436 Civil money penalties: Waiver of hearing, reduction of penalty 
          amount.
488.438 Civil money penalties: Amount of penalty.
488.440 Civil money penalties: Effective date and duration of penalty.
488.442 Civil money penalties: Due date for payment of penalty.
488.444 Civil money penalties: Settlement of penalties.
488.450 Continuation of payments to a facility with deficiencies.
488.452 State and Federal disagreements involving findings not in 
          agreement in non-State operated NFs and dually participating 
          facilities when there is no immediate jeopardy.
488.454 Duration of remedies.
488.456 Termination of provider agreement.

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

    Source: 53 FR 22859, June 17, 1988, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 488.1  Definitions.

    As used in this part--

[[Page 639]]

    Accredited provider or supplier means a provider or supplier that 
has voluntarily applied for and has been accredited by a national 
accreditation program meeting the requirements of and approved by CMS in 
accordance with Sec. 488.5 or Sec. 488.6.
    Act means the Social Security Act.
    AOA stands for the American Osteopathic Association.
    Certification is a recommendation made by the State survey agency on 
the compliance of providers and suppliers with the conditions of 
participation, requirements (for SNFs and NFs), and conditions of 
coverage.
    Conditions for coverage means the requirements suppliers must meet 
to participate in the Medicare program.
    Conditions of participation means the requirements providers other 
than skilled nursing facilities must meet to participate in the Medicare 
program and includes conditions of certification for rural health 
clinics.
    Full review means a survey of a hospital for compliance with all 
conditions of participation for hospitals.
    JCAHO stands for the Joint Commission on Accreditation of Healthcare 
Organizations.
    Medicare condition means any condition of participation or for 
coverage, including any long term care requirements.
    Provider of services or provider means a hospital, critical access 
hospital, skilled nursing facility, nursing facility, home health 
agency, hospice, comprehensive outpatient rehabilitation facility, or 
provider of outpatient physical therapy or speech pathology services.
    Rate of disparity means the percentage of all sample validation 
surveys for which a State survey agency finds noncompliance with one or 
more Medicare conditions and no comparable condition level deficiency 
was cited by the accreditation organization, where it is reasonable to 
conclude that the deficiencies were present at the time of the 
accreditation organization's most recent surveys of providers or 
suppliers of the same type.
    Example: Assume that during a validation review period State survey 
agencies perform validation surveys at 200 facilities of the same type 
(for example, ambulatory surgical centers, home health agencies) 
accredited by the same accreditation organization. The State survey 
agencies find 60 of the facilities out of compliance with one or more 
Medicare conditions, and it is reasonable to conclude that these 
deficiencies were present at the time of the most recent survey by an 
accreditation organization. The accreditation organization, however, has 
found deficiencies comparable to the condition level deficiencies at 
only 22 of the 60 facilities. These validation results would yield ((60-
22)/200) a rate of disparity of 19 percent.
    Reasonable assurance means that an accreditation organization has 
demonstrated to CMS's satisfaction that its requirements, taken as a 
whole, are at least as stringent as those established by CMS, taken as a 
whole.
    State includes the District of Columbia, the Commonwealth of Puerto 
Rico, the Virgin Islands, Guam, and American Samoa.
    State survey agency means the State health agency or other 
appropriate State or local agency used by HFCA to perform survey and 
review functions for Medicare.
    Substantial allegation of noncompliance means a complaint from any 
of a variety of sources (including complaints submitted in person, by 
telephone, through written correspondence, or in newspaper or magazine 
articles) that, if substantiated, would affect the health and safety of 
patients and raises doubts as to a provider's or supplier's 
noncompliance with any Medicare condition.
    Supplier means any of the following: Independent laboratory; 
portable X-ray services physical therapist in independent practice; ESRD 
facility; rural health clinic; Federally qualified health center; or 
chiropractor.
    Validation review period means the one year period during which CMS 
conducts a review of the validation surveys and evaluates the results of 
the most recent surveys performed by the accreditation organization.

[53 FR 22859, June 17, 1988, as amended at 54 FR 5373, Feb. 2, 1989; 56 
FR 48879, Sept. 26, 1991; 57 FR 24982, June 12, 1992; 58 FR 30676, May 
26, 1993; 58 FR 61838, Nov. 23, 1993; 62 FR 46037, Aug. 29, 1997]

[[Page 640]]



Sec. 488.2  Statutory basis.

    This part is based on the indicated provisions of the following 
sections of the Act:

    1128--Exclusion of entities from participation in Medicare.
    1128A--Civil money penalties.
    1814--Conditions for, and limitations on, payment for Part A 
services.
    1819--Requirements for SNFs.
    1861(f)--Requirements for psychiatric hospitals.
    1861(z)--Institutional planning standards that hospitals and SNFs 
must meet.
    1861(ee)--Discharge planning guidelines for hospitals.
    1861(ss)(2)--Accreditation of religious nonmedical health care 
institutions.
    1864--Use of State survey agencies.
    1865--Effect of accreditation.
    1880--Requirements for hospitals and SNFs of the Indian Health 
Service.
    1883--Requirements for hospitals that provide SNF care.
    1902--Requirements for participation in the Medicaid program.
    1913--Medicaid requirements for hospitals that provide NF care.
    1919--Medicaid requirements for NFs.

[60 FR 50443, Sept. 29, 1995, as amended at 64 FR 67052, Nov. 30, 1999]



Sec. 488.3  Conditions of participation; conditions for coverage; and long-term care requirements.

    (a) Basic rules. In order to be approved for participation in or 
coverage under the Medicare program, a prospective provider or supplier 
must:
    (1) Meet the applicable statutory definition in section 1138(b), 
1819, 1832(a)(2)(F), 1861, 1881, or 1919 of the Act; and
    (2) Be in compliance with the applicable conditions or long-term 
care requirements prescribed in subpart N, Q or U of part 405, part 416, 
subpart C of part 418, part 482, part 483, part 484, part 485, subpart A 
of part 491, or part 494 of this chapter.
    (b) Special Conditions. (1) The Secretary, after consultation with 
the JCAHO or AOA, may issue conditions of participation for hospitals 
higher or more precise than those of either those accrediting bodies.
    (2) The Secretary may, at a State's request, approve health and 
safety requirements for providers and suppliers in that State, which are 
higher than those otherwise applied in the Medicare program.
    (3) If a State or political subdivision imposes higher requirements 
on institutions as a condition for the purchase of health services under 
a State Medicaid Plan approved under Title XIX of the Act, (or if Guam, 
Puerto Rico, or the Virgin Islands does so under a State plan for Old 
Age Assistance under Title I of the Act, or for Aid to the Aged, Blind, 
and Disabled under the original Title XVI of the Act), the Secretary is 
required to impose similar requirements as a condition for payment under 
Medicare in that State or political subdivision.

[53 FR 22859, June 17, 1988, as amended at 58 FR 61838, Nov. 23, 1993]



Sec. 488.4  Application and reapplication procedures for accreditation organizations.

    (a) A national accreditation organization applying for approval of 
deeming authority for Medicare requirements under Sec. 488.5 or 488.6 of 
this subpart must furnish to CMS the information and materials specified 
in paragraphs (a)(1) through (10) of this section. A national 
accreditation organization reapplying for approval must furnish to CMS 
whatever information and materials from paragraphs (a)(1) through (10) 
of this section that CMS requests. The materials and information are--
    (1) The types of providers and suppliers for which the organization 
is requesting approval;
    (2) A detailed comparison of the organization's accreditation 
requirements and standards with the applicable Medicare requirements 
(for example, a crosswalk);
    (3) A detailed description of the organization's survey process, 
including--
    (i) Frequency of the surveys performed;
    (ii) Copies of the organization's survey forms, guidelines and 
instructions to surveyors;
    (iii) Accreditation survey review process and the accreditation 
status decision-making process;
    (iv) Procedures used to notify accredited facilities of deficiencies 
and the

[[Page 641]]

procedures used to monitor the correction of deficiencies in accredited 
facilities; and
    (v) Whether surveys are announced or unannounced;
    (4) Detailed information about the individuals who perform surveys 
for the accreditation organization, including--
    (i) The size and composition of accreditation survey teams for each 
type of provider and supplier accredited;
    (ii) The education and experience requirements surveyors must meet;
    (iii) The content and frequency of the in-service training provided 
to survey personnel;
    (iv) The evaluation systems used to monitor the performance of 
individual surveyors and survey teams; and
    (v) Policies and procedures with respect to an individual's 
participation in the survey or accreditation decision process of any 
facility with which the individual is professionally or financially 
affiliated;
    (5) A description of the organization's data management and analysis 
system with respect to its surveys and accreditation decisions, 
including the kinds of reports, tables, and other displays generated by 
that system;
    (6) The organization's procedures for responding to and for the 
investigation of complaints against accredited facilities, including 
policies and procedures regarding coordination of these activities with 
appropriate licensing bodies and ombudsmen programs;
    (7) The organization's policies and procedures with respect to the 
withholding or removal of accreditation status for facilities that fail 
to meet the accreditation organization's standards or requirements, and 
other actions taken by the organization in response to noncompliance 
with its standards and requirements;
    (8) A description of all types (for example, full, partial, type of 
facility, etc.) and categories (provisional, conditional, temporary, 
etc.) of accreditation offered by the organization, the duration of each 
type and category of accreditation and a statement specifying the types 
and categories of accreditation for which approval of deeming authority 
is sought;
    (9) A list of all currently accredited facilities, the type and 
category of accreditation currently held by each facility, and the 
expiration date of each facility's current accreditation; and
    (10) A list of all full and partial accreditation surveys scheduled 
to be performed by the organization.
    (b) The accreditation organization must also submit the following 
supporting documentation--
    (1) A written presentation that demonstrates the organization's 
ability to furnish CMS with electronic data in ASCII comparable code;
    (2) A resource analysis that demonstrates that the organization's 
staffing, funding and other resources are adequate to perform the 
required surveys and related activities; and
    (3) A statement acknowledging that as a condition for approval of 
deeming authority, the organization will agree to--
    (i) Notify CMS in writing of any facility that has had its 
accreditation revoked, withdrawn, or revised, or that has had any other 
remedial or adverse action taken against it by the accreditation 
organization within 30 days of any such action taken;
    (ii) Notify all accredited facilities within 10 days of CMS's 
withdrawal of the organization's approval of deeming authority;
    (iii) Notify CMS in writing at least 30 days in advance of the 
effective date of any proposed changes in accreditation requirements;
    (iv) Within 30 days of a change in CMS requirements, submit to CMS 
an acknowledgement of CMS's notification of the change as well as a 
revised crosswalk reflecting the new requirements and inform CMS about 
how the organization plans to alter its requirements to conform to CMS's 
new requirements;
    (v) Permit its surveyors to serve as witnesses if CMS takes an 
adverse action based on accreditation findings;
    (vi) [Reserved]
    (vii) Notify CMS in writing within ten days of a deficiency 
identified in any accreditation entity where the deficiency poses an 
immediate jeopardy to the entity's patients or residents or a hazard to 
the general public; and
    (viii) Conform accreditation requirements to changes in Medicare 
requirements.

[[Page 642]]

    (c) If CMS determines that additional information is necessary to 
make a determination for approval or denial of the accreditation 
organization's application for deeming authority, the organization will 
be notified and afforded an opportunity to provide the additional 
information.
    (d) CMS may visit the organization's offices to verify 
representations made by the organization in its application, including, 
but not limited to, review of documents and interviews with the 
organization's staff.
    (e) The accreditation organization will receive a formal notice from 
CMS stating whether the request for deeming authority has been approved 
or denied, the rationale for any denial, and reconsideration and 
reapplication procedures.
    (f) An accreditation organization may withdraw its application for 
approval of deeming authority at any time before the formal notice 
provided for in paragraph (e) of this section is received.
    (g) Except as provided in paragraph (i) of this section, an 
accreditation organization that has been notified that its request for 
deeming authority has been denied may request a reconsideration of that 
determination in accordance with subpart D of this part.
    (h) Except as provided in paragraph (i) of this section, any 
accreditation organization whose request for approval of deeming 
authority has been denied may resubmit its application if the 
organization--
    (1) Has revised its accreditation program to address the rationale 
for denial of its previous request;
    (2) Can demonstrate that it can provide reasonable assurance that 
its accredited facilities meet applicable Medicare requirements; and
    (3) Resubmits the application in its entirety.
    (i) If an accreditation organization has requested, in accordance 
with part 488, subpart D of this chapter, a reconsideration of CMS's 
determination that its request for deeming approval is denied, it may 
not submit a new application for deeming authority for the type of 
provider or supplier that is at issue in the reconsideration until the 
reconsideration is administratively final.

[58 FR 61838, Nov. 23, 1993]



Sec. 488.5  Effect of JCAHO or AOA accreditation of hospitals.

    (a) Deemed to meet. Institutions accredited as hospitals by the 
JCAHO or AOA are deemed to meet all of the Medicare conditions of 
participation for hospitals, except--
    (1) The requirement for utilization review as specified in section 
1861(e)(6) of the Act and in Sec. 482.30 of this chapter;
    (2) The additional special staffing and medical records requirements 
that are considered necessary for the provision of active treatment in 
psychiatric hospitals (section 1861(f) of the Act) and implementing 
regulations; and
    (3) Any requirements under section 1861(e) of the Act and 
implementing regulations that CMS, after consulting with JCAHO or AOA, 
identifies as being higher or more precise than the requirements for 
accreditation (section 1865(a)(4) of the Act).
    (b) Deemed status for providers and suppliers that participate in 
the Medicaid program. Eligibility for Medicaid participation can be 
established through Medicare deemed status for providers and suppliers 
that are not required under Medicaid regulations to comply with any 
requirements other than Medicare participation requirements for that 
provider r supplier type.
    (c) Release and use of hospital accreditation surveys.
    (1) A hospital deemed to meet program requirements must authorize 
its accreditation organization to release to CMS and the State survey 
agency a copy of its most current accreditation survey together with any 
other information related to the survey that CMS may require (including 
corrective action plans).
    (2) CMS may use a validation survey, an accreditation survey or 
other information related to the survey to determine that a hospital 
does not meet the Medicare conditions of participation.
    (3) CMS may disclose the survey and information related to the 
survey to the extent that the accreditation survey and related survey 
information are

[[Page 643]]

related to an enforcement action taken by CMS.

[58 FR 61840, Nov. 23, 1993]



Sec. 488.6  Other national accreditation programs for hospitals and other providers and suppliers.

    (a) In accordance with the requirements of this subpart, a national 
accreditation program for hospitals; psychiatric hospitals; SNFs; HHAs; 
ASCs; RHCs; CORFs; hospices; religious nonmedical health care 
institutions; screening mammography services; critical access hospitals; 
or clinic, rehabilitation agency, or public health agency providers of 
outpatient physical therapy, occupational therapy or speech pathology 
services may provide reasonable assurance to CMS that it requires the 
providers or suppliers it accredits to meet requirements that are at 
least as stringent as the Medicare conditions when taken as a whole. In 
such a case, CMS may deem the providers or suppliers the program 
accredits to be in compliance with the appropriate Medicare conditions. 
These providers and suppliers are subject to validation surveys under 
Sec. 488.7 of this subpart. CMS will publish notices in the Federal 
Register in accordance with Sec. 488.8(b) identifying the programs and 
deeming authority of any national accreditation program and the 
providers or suppliers it accredits. The notice will describe how the 
accreditation organization's accreditation program provides reasonable 
assurance that entities accredited by the organization meet Medicare 
requirements. (See Sec. 488.5 for requirements concerning hospitals 
accredited by JCAHO or AOA.)
    (b) Eligibility for Medicaid participation can be established 
through Medicare deemed status for providers and suppliers that are not 
required under Medicaid regulations to comply with any requirements 
other than Medicare participation requirements for that provider or 
supplier type.
    (c)(1) A provider or supplier deemed to meet program requirements 
under paragraph (a) of this section must authorize its accreditation 
organization to release to CMS and the State survey agency a copy of its 
most current accreditation survey, together with any information related 
to the survey that CMS may require (including corrective action plans).
    (2) CMS may determine that a provider or supplier does not meet the 
Medicare conditions on the basis of its own investigation of the 
accreditation survey or any other information related to the survey.
    (3) Upon written request, CMS may disclose the survey and 
information related to the survey--
    (i) Of any HHA; or
    (ii) Of any other provider or supplier specified at paragraph (a) of 
this section if the accreditation survey and related survey information 
relate to an enforcement action taken by CMS.

[58 FR 61840, Nov. 23, 1993, as amended at 62 FR 46037, Aug. 29, 1997; 
64 FR 67052, Nov. 30, 1999]



Sec. 488.7  Validation survey.

    (a) Basis for survey. CMS may require a survey of an accredited 
provider or supplier to validate its organization's accreditation 
process. These surveys will be conducted on a representative sample 
basis, or in response to substantial allegations of noncompliance.
    (1) When conducted on a representative sample basis, the survey is 
comprehensive and addresses all Medicare conditions or is focused on a 
specific condition or conditions.
    (2) When conducted in response to a substantial allegation, the 
State survey agency surveys for any condition that CMS determines is 
related to the allegations.
    (3) If the State survey agency substantiates a deficiency and CMS 
determines that the provider or supplier is out of compliance with any 
Medicare condition, the State survey agency conducts a full Medicare 
survey.
    (b) Effect of selection for survey. A provider or supplier selected 
for a validation survey must--
    (1) Authorize the validation survey to take place; and
    (2) Authorize the State survey agency to monitor the correction of 
any deficiencies found through the validation survey.
    (c) Refusal to cooperate with survey. If a provider or supplier 
selected for a validation survey fails to comply with the requirements 
specified in paragraph (b) of this section, it will no

[[Page 644]]

longer be deemed to meet the Medicare conditions but will be subject to 
full review by the State survey agency in accordance with Sec. 488.11 
and may be subject to termination of its provider agreement under 
Sec. 489.53 of this chapter.
    (d) Consequences of finding of noncompliance. If a validation survey 
results in a finding that the provider or supplier is out of compliance 
with one or more Medicare conditions, the provider or supplier will no 
longer be deemed to meet any Medicare conditions. Specifically, the 
provider or supplier will be subject to the participation and 
enforcement requirements applied to all providers or suppliers that are 
found out of compliance following a State agency survey under 
Sec. 488.24 and to full review by a State agency survey in accordance 
with Sec. 488.11 and may be subject to termination of the provider 
agreement under Sec. 439.53 of this chapter and any other applicable 
intermediate sanctions and remedies.
    (e) Reinstating effect of accreditation. An accredited provider or 
supplier will again be deemed to meet the Medicare conditions in 
accordance with this section if--
    (1) It withdraws any prior refusal to authorize its accreditation 
organization to release a copy of the provider's or supplier's current 
accreditation survey;
    (2) It withdraws any prior refusal to allow a validation survey; and
    (3) CMS finds that the provider or supplier meets all the applicable 
Medicare conditions. If CMS finds that an accredited facility meets the 
Life Safety Code Standard by virtue of a plan of correction, the State 
survey agency will continue to monitor the facility until it is in 
compliance with the Life Safety Code Standard.

[58 FR 61840, Nov. 23, 1993]



Sec. 488.8  Federal review of accreditation organizations.

    (a) Review and approval of national accreditation organization. 
CMS's review and evaluation of a national accreditation organization 
will be conducted in accordance with, but will not necessarily be 
limited to, the following general criteria--
    (1) The equivalency of an accreditation organization's accreditation 
requirements of an entity to the comparable CMS requirements for the 
entity;
    (2) The organization's survey process to determine--
    (i) The composition of the survey team, surveyor qualifications, and 
the ability of the organization to provide continuing surveyor training;
    (ii) The comparability of survey procedures to those of State survey 
agencies, including survey frequency, and the ability to investigate and 
respond appropriately to complaints against accredited facilities;
    (iii) The organization's procedures for monitoring providers or 
suppliers found by the organization to be out of compliance with program 
requirements. These monitoring procedures are to be used only when the 
organization identifies noncompliance. If noncompliance is identified 
through validation surveys, the State survey agency monitors corrections 
as specified at Sec. 488.7(b)(3);
    (iv) The ability of the organization to report deficiencies to the 
surveyed facilities and respond to the facility's plan of correction in 
a timely manner;
    (v) The ability of the organization to provide CMS with electronic 
data in ASCII comparable code and reports necessary for effective 
validation and assessment of the organization survey process;
    (vi) The adequacy of staff and other resources;
    (vii) The organization's ability to provide adequate funding for 
performing required surveys; and
    (viii) The organization's policies with respect to whether surveys 
are announced or unannounced; and
    (3) The accreditation organization's agreement to provide CMS with a 
copy of the most current accreditation survey together with any other 
information related to the survey as CMS may require (including 
corrective action plans).
    (b) Notice and comment. (1) CMS will publish a proposed notice in 
the Federal Register whenever it contemplates approving an accreditation 
organization's application for deeming authority. The proposed notice 
will

[[Page 645]]

specify the basis for granting approval of deeming authority and the 
types of providers and suppliers accredited by the organization for 
which deeming authority would be approved. The proposed notice will also 
describe how the accreditation organization's accreditation program 
provides reasonable assurance that entities accredited by the 
organization meet Medicare requirements. The proposed notice will also 
provide opportunity for public comment.
    (2) CMS will publish a final notice in the Federal Register whenever 
it grants deeming authority to a national accreditation organization. 
Publication of the final notice will follow publication of the proposed 
notice by at least six months. The final notice will specify the 
effective date of the approval of deeming authority and the term of 
approval (which will not exceed six years).
    (c) Effects of approval of an accreditation organization. CMS will 
deem providers and suppliers accredited by an approved accreditation 
organization to meet the Medicare conditions for which the approval of 
deeming authority has specifically been granted. The deeming authority 
will take effect 90 days following the publication of the final notice.
    (d) Continuing Federal oversight of equivalency of an accreditation 
organization and removal of deeming authority. This paragraph 
establishes specific criteria and procedures for continuing oversight 
and for removing the approval of deeming authority of a national 
accreditation organization.
    (1) Comparability review. CMS will compare the equivalency of an 
accreditation organization's accreditation requirements to the 
comparable CMS requirements if--
    (i) CMS imposes new requirements or changes its survey process;
    (ii) An accreditation organization proposes to adopt new 
requirements or change its survey process. An accreditation organization 
must provide written notification to CMS at least 30 days in advance of 
the effective date of any proposed changes in its accreditation 
requirements or survey process; and
    (iii) An accreditation organization's approval has been in effect 
for the maximum term specified by CMS in the final notice.
    (2) Validation review. Following the end of a validation review 
period, CMS will identify any accreditation programs for which--
    (i) Validation survey results indicate a rate of disparity between 
certifications of the accreditation organization and certification of 
the State agency of 20 percent or more; or
    (ii) Validation survey results, irrespective of the rate of 
disparity, indicate widespread or systematic problems in an 
organization's accreditation process that provide evidence that there is 
no longer reasonable assurance that accredited entities meet Medicare 
requirements.
    (3) Reapplication procedures. (i) Every six years, or sooner as 
determined by CMS, an approved accreditation organization must reapply 
for continued approval of deeming authority. CMS will notify the 
organization of the materials the organization must submit as part of 
the reapplication procedure.
    (ii) An accreditation organization that is not meeting the 
requirements of this subpart, as determined through a comparability 
review, must furnish CMS, upon request and at any time, with the 
reapplication materials CMS requests. CMS will establish a deadline by 
which the materials are to be submitted.
    (e) Notice. If a comparability or validation review reveals 
documentation that an accreditation organization is not meeting the 
requirements of this subpart, CMS will provide written notice to the 
organization indicating that its deeming authority approval may be in 
jeopardy and that a deeming authority review is being initiated. The 
notice provides the following information--
    (1) A statement of the requirements, instances, rates or patterns of 
discrepancies that were found as well as other related documentation;
    (2) An explanation of CMS's deeming authority review on which the 
final determination is based;
    (3) A description of the process available if the accreditation 
organization wishes an opportunity to explain or

[[Page 646]]

justify the findings made during the comparability or validation review;
    (4) A description of the possible actions that may be imposed by CMS 
based on the findings from the validation review; and
    (5) The reapplication materials the organization must submit and the 
deadline for their submission.
    (f) Deeming authority review. (1) CMS will conduct a review of an 
accreditation organization's accreditation program if the comparability 
or validation review produces findings as described at paragraph (d)(1) 
or (2), respectively, of this section. CMS will review as appropriate 
either or both--
    (i) The requirements of the accreditation organization; or
    (ii) The criteria described in paragraph (a)(1) of this section to 
reevaluate whether the accreditation organization continues to meet all 
these criteria.
    (2) If CMS determines, following the deeming authority review, that 
the accreditation organization has failed to adopt requirements 
comparable to CMS's or submit new requirements timely, the accreditation 
organization may be given a conditional approval of its deeming 
authority for a probationary period of up to 180 days to adopt 
comparable requirements.
    (3) If CMS determines, following the deeming authority review, that 
the rate of disparity identified during the validation review meets 
either of the criteria set forth in paragraph (d)(2) of this section 
CMS--
    (i) May give the accreditation organization conditional approval of 
its deeming authority during a probationary period of up to one year 
(whether or not there are also noncomparable requirements) that will be 
effective 30 days following the date of this determination;
    (ii) Will require the accreditation organization to release to CMS 
upon its request any facility-specific data that is required by CMS for 
continued monitoring:
    (iii) Will require the accreditation organization to provide CMS 
with a survey schedule for the purpose of intermittent onsite monitoring 
by CMS staff, State surveyors, or both; and
    (iv) Will publish in the Medicare Annual Report to Congress the name 
of any accreditation organization given a probationary period by CMS.
    (4) Within 60 days after the end of any probationary period, CMS 
will make a final determination as to whether or not an accreditation 
program continues to meet the criteria described at paragraph (a)(1) of 
this section and will issue an appropriate notice (including reasons for 
the determination) to the accreditation organization and affected 
providers or suppliers. This determination will be based on any of the 
following--
    (i) The evaluation of the most current validation survey and review 
findings. The evaluation must indicate an acceptable rate of disparity 
of less than 20 percent between the certifications of the accreditation 
organization and the certifications of the State agency as described at 
paragraph (d)(2)(i) of this section in order for the accreditation 
organization to retain its approval;
    (ii) The evaluation of facility-specific data, as necessary, as well 
as other related information;
    (iii) The evaluation of an accreditation organization's surveyors in 
terms of qualifications, ongoing training composition of survey team, 
etc.;
    (iv) The evaluation of survey procedures; or
    (v) The accreditation requirements.
    (5) If the accreditation program has not made improvements 
acceptable to CMS during the probationary period, CMS may remove 
recognition of deemed authority effective 30 days from the date that it 
provides written notice to the organization that its deeming authority 
will be removed.
    (6) The existence of any validation review, deeming authority 
review, probationary period, or any other action by CMS, does not affect 
or limit the conducting of any validation survey.
    (7) CMS will publish a notice in the Federal Register containing a 
justification of the basis for removing the deeming authority from an 
accreditation organization. The notice will provide the reasons the 
accreditation organization's accreditation program no longer meets 
Medicare requirements.
    (8) After CMS removes approval of an accreditation organization's 
deeming

[[Page 647]]

authority, an affected provider's or supplier's deemed status continues 
in effect 60 days after the removal of approval. CMS may extend the 
period for an additional 60 days for a provider or supplier if it 
determines that the provider or supplier submitted an application within 
the initial 60 day timeframe to another approved accreditation 
organization or to CMS so that a certification of compliance with 
Medicare conditions can be determined.
    (9) Failure to comply with the timeframe requirements specified in 
paragraph (f)(8) of this section will jeopardize a provider's or 
supplier's participation in the Medicare program and where applicable in 
the Medicaid program.
    (g) If at any time CMS determines that the continued approval of 
deeming authority of any accreditation organization poses an immediate 
jeopardy to the patients of the entities accredited by that 
organization, or such continued approval otherwise constitutes a 
significant hazard to the public health, CMS may immediately withdraw 
the approval of deeming authority of that accreditation organization.
    (h) Any accreditation organization dissatisfied with a determination 
to remove its deeming authority may request a reconsideration of that 
determination in accordance with subpart D of this part.

[58 FR 61841, Nov. 23, 1993]



Sec. 488.9  Onsite observation of accreditation organization operations.

    As part of the application review process, the validation review 
process, or the continuing oversight of an accreditation organization's 
performance, CMS may conduct an onsite inspection of the accreditation 
organization's operations and offices to verify the organization's 
representations and to assess the organization's compliance with its own 
policies and procedures. The onsite inspection may include, but is not 
limited to, the review of documents, auditing meetings concerning the 
accreditation process, the evaluation of survey results or the 
accreditation decision-making process, and interviews with the 
organization's staff.

[58 FR 61842, Nov. 23, 1993]



Sec. 488.10  State survey agency review: Statutory provisions.

    (a) Section 1864(a) of the Act requires the Secretary to enter into 
an agreement with any State that is able and willing to do so, under 
which appropriate State or local survey agencies will determine whether:
    (1) Providers or prospective providers meet the Medicare conditions 
of participation or requirements (for SNFs and NFs);
    (2) Suppliers meet the conditions for coverage; and
    (3) Rural health clinics meet the conditions of certification.
    (b) Section 1865(a) of the Act provides that if an institution is 
accredited as a hospital by the JCAHO, it will be deemed to meet the 
conditions of participation:
    (1) Except those specified in Sec. 488.5;
    (2) Provided that such hospital, if it is included within a 
validation survey, authorizes the JCAHO to release to CMS (on a 
confidential basis) upon request a copy of the most current JCAHO 
accreditation survey.
    (c) Section 1864(c) of the Act authorizes the Secretary to enter 
into agreements with State survey agencies for the purpose of conducting 
validation surveys in hospitals accredited by the JCAHO. Section 1865(b) 
provides that an accredited hospital which is found after a validation 
survey to have significant deficiencies related to the health and safety 
of patients will no longer be deemed to meet the conditions of 
participation.
    (d) Section 1865(a) of the Act also provides that if CMS finds that 
accreditation of a hospital; psychiatric hospital; SNF; HHA; hospice; 
ASC; RHC; CORF; laboratory; screening mammography service; critical 
access hospital; or clinic, rehabilitation agency, or public health 
agency provider of outpatient physical therapy, occupational therapy, or 
speech pathology services by any national accreditation organization 
provides reasonable assurance that any or all Medicare conditions are

[[Page 648]]

met, CMS may treat the provider or supplier as meeting the conditions.

[53 FR 22859, June 17, 1988, as amended at 56 FR 48879, Sept. 26, 1991; 
58 FR 61842, Nov. 23, 1993; 62 FR 46037, Aug. 29, 1997]



Sec. 488.11  State survey agency functions.

    State and local agencies that have agreements under section 1864(a) 
of the Act perform the following functions:
    (a) Survey and make recommendations regarding the issues listed in 
Sec. 488.10.
    (b) Conduct validation surveys of accredited facilities as provided 
in Sec. 488.7.
    (c) Perform other surveys and carry out other appropriate activities 
and certify their findings to CMS.
    (d) Make recommendations regarding the effective dates of provider 
agreements and supplier approvals in accordance with Sec. 489.13 of this 
chapter.

[62 FR 43936, Aug. 18, 1997]



Sec. 488.12  Effect of survey agency certification.

    Certifications by the State survey agency represent recommendations 
to CMS.
    (a) On the basis of these recommendations, CMS will determine 
whether:
    (1) A provider or supplier is eligible to participate in or be 
covered under the Medicare program; or
    (2) An accredited hospital is deemed to meet the Medicare conditions 
of participation or is subject to full review by the State survey 
agency.
    (b) Notice of CMS's determination will be sent to the provider or 
supplier.



Sec. 488.14  Effect of QIO review.

    When a QIO is conducting review activities under section 1154 of the 
Act and part 466 of this chapter, its activities are in lieu of the 
utilization review and evaluation activities required of health care 
institutions under sections 1861(e)(6), and 1861(k) of the Act.

[59 FR 56237, Nov. 10, 1994]



Sec. 488.18  Documentation of findings.

    (a) The findings of the State agency with respect to each of the 
conditions of participation, requirements (for SNFs and NFs), or 
conditions for coverage must be adequately documented. When the State 
agency certifies to the Secretary that a provider or supplier is not in 
compliance with the conditions or requirements (for SNFs and NFs), and 
therefore not eligible to participate in the program, such documentation 
includes, in addition to the description of the specific deficiencies 
which resulted in the agency's recommendation, any provider or supplier 
response.
    (b) If a provider or supplier is certified by the State agency as in 
compliance with the conditions or participation requirements (for SNFs 
and NFs) or as meeting the requirements for special certification (see 
Sec. 488.54), with deficiencies not adversely affecting the health and 
safety of patients, the following information will be incorporated into 
the finding:
    (1) A statement of the deficiencies that were found.
    (2) A description of further action that is required to remove the 
deficiencies.
    (3) A time-phased plan of correction developed by the provider and 
supplier and concurred with by the State agency.
    (4) A scheduled time for a resurvey of the institution or agency to 
be conducted by the State agency within 90 days following the completion 
of the survey.
    (c) If, on the basis of the State certification, the Secretary 
determines that the provider or supplier is eligible to participate, the 
information described in paragraph (b) of this section will be 
incorporated into a notice of eligibility to the provider or supplier.
    (d) If the State agency receives information to the effect that a 
hospital or a critical access hospital (as defined in section 
1861(mm)(1) of the Act) has violated Sec. 489.24 of this chapter, the 
State agency is to report the information to CMS promptly.

[39 FR 2251, Jan. 17, 1974. Redesignated at 39 FR 11419, Mar. 28, 1974, 
and further redesignated at 42 FR 52826, Sept. 30, 1977. Redesignated at 
53 FR 23100, June 17, 1988; 59 FR 32120, June 22, 1994; 59 FR 56237, 
Nov. 10, 1994; 62 FR 46037, Aug. 29, 1997]

    Effective Date Note: At 59 FR 32120, June 22, 1994, in Sec. 488.18, 
paragraph (d) was added,

[[Page 649]]

and will not become effective until the information collection 
requirements are approved by the Office of Management and Budget.



Sec. 488.20  Periodic review of compliance and approval.

    (a) Determinations by CMS to the effect that a provider or supplier 
is in compliance with the conditions of participation, or requirements 
(for SNFs and NFs), or the conditions for coverage are made as often as 
CMS deems necessary and may be more or less than a 12-month period, 
except for SNFs, NFs and HHAs. (See Sec. 488.308 for special rules for 
SNFs and NFs.)
    (b) The responsibilities of State survey agencies in the review and 
certification of compliance are as follows:
    (1) Resurvey providers or suppliers as frequently as necessary to 
ascertain compliance and confirm the correction of deficiencies;
    (2) Review reports prepared by a Professional Standards Review 
Organization (authorized under Part B Title XI of the Act) or a State 
inspection of care team (authorized under Title XIX of the Act) 
regarding the quality of a facility's care;
    (3) Evaluate reports that may pertain to the health and safety of 
patients; and
    (4) Take appropriate actions that may be necessary to achieve 
compliance or certify noncompliance to CMS.
    (c) A State survey agency certification to CMS that a provider or 
supplier is no longer in compliance with the conditions of participation 
or requirements (for SNFs and NFs) or conditions for coverage will 
supersede the State survey agency's previous certification.

(Secs. 1102, 1814, 1861, 1863 through 1866, 1871, and 1881; 42 U.S.C. 
1302, 1395f, 1395x, 1395z through 1395cc, 1395hh, and 1395rr)

[45 FR 74833, Nov. 12, 1981. Redesignated and amended at 53 FR 23100, 
June 17, 1988, and further amended at 54 FR 5373, Feb. 2, 1989; 56 FR 
48879, Sept. 26, 1991; 59 FR 56237, Nov. 10, 1994]



Sec. 488.24  Certification of noncompliance.

    (a) Special rules for certification of noncompliance for SNFs and 
NFs are set forth in Sec. 488.330.
    (b) The State agency will certify that a provider or supplier is not 
or is no longer in compliance with the conditions of participation or 
conditions for coverage where the deficiencies are of such character as 
to substantially limit the provider's or supplier's capacity to furnish 
adequate care or which adversely affect the health and safety of 
patients; or
    (c) If CMS determines that an institution or agency does not qualify 
for participation or coverage because it is not in compliance with the 
conditions of participation or conditions for coverage, or if a 
provider's agreement is terminated for that reason, the institution or 
agency has the right to request that the determination be reviewed. 
(Appeals procedures are set forth in Part 498 of this chapter.)

[59 FR 56237, Nov. 10, 1994]



Sec. 488.26  Determining compliance.

    (a) Additional rules for certification of compliance for SNFs and 
NFs are set forth in Sec. 488.330.
    (b) The decision as to whether there is compliance with a particular 
requirement, condition of participation, or condition for coverage 
depends upon the manner and degree to which the provider or supplier 
satisfies the various standards within each condition. Evaluation of a 
provider's or supplier's performance against these standards enables the 
State survey agency to document the nature and extent of deficiencies, 
if any, with respect to a particular function, and to assess the need 
for improvement in relation to the prescribed conditions.
    (c) The State survey agency must adhere to the following principles 
in determining compliance with participation requirements:
    (1) The survey process is the means to assess compliance with 
Federal health, safety and quality standards;
    (2) The survey process uses resident outcomes as the primary means 
to establish the compliance status of facilities. Specifically surveyors 
will directly observe the actual provision of care and services to 
residents, and the effects of that care, to assess whether the care 
provided meets the needs of individual residents;
    (3) Surveyors are professionals who use their judgment, in concert 
with

[[Page 650]]

Federal forms and procedures, to determine compliance;
    (4) Federal procedures are used by all surveyors to ensure uniform 
and consistent application and interpretation of Federal requirements;
    (5) Federal forms are used by all surveyors to ensure proper 
recording of findings and to document the basis for the findings.
    (d) The State survey agency must use the survey methods, procedures, 
and forms that are prescribed by CMS.
    (e) The State survey agency must ensure that a facility's actual 
provision of care and services to residents and the effects of that care 
on residents are assessed in a systematic manner.

[59 FR 56237, Nov. 10, 1994]



Sec. 488.28  Providers or suppliers, other than SNFs and NFs, with deficiencies.

    (a) If a provider or supplier is found to be deficient with respect 
to one or more of the standards in the conditions of participation or 
conditions for coverage, it may participate in or be covered under the 
Health Insurance for the Aged and Disabled Program only if the facility 
has submitted an acceptable plan of correction for achieving compliance 
within a reasonable period of time acceptable to the Secretary.
    (b) The existing deficiencies noted either individually or in 
combination neither jeopardize the health and safety of patients nor are 
of such character as to seriously limit the provider's capacity to 
render adequate care.
    (c)(1) If it is determined during a survey that a provider or 
supplier is not in compliance with one or more of the standards, it is 
granted a reasonable time to achieve compliance.
    (2) The amount of time depends upon the--
    (i) Nature of the deficiency; and
    (ii) State survey agency's judgment as to the capabilities of the 
facility to provide adequate and safe care.
    (d) Ordinarily a provider or supplier is expected to take the steps 
needed to achieve compliance within 60 days of being notified of the 
deficiencies but the State survey agency may recommend that additional 
time be granted by the Secretary in individual situations, if in its 
judgment, it is not reasonable to expect compliance within 60 days, for 
example, a facility must obtain the approval of its governing body, or 
engage in competitive bidding.

[59 FR 56237, Nov. 10, 1994]



                     Subpart B--Special Requirements



Sec. 488.52  [Reserved]



Sec. 488.54  Temporary waivers applicable to hospitals.

    (a) General provisions. If a hospital is found to be out of 
compliance with one or more conditions of participation for hospitals, 
as specified in part 482 of this chapter, a temporary waiver may be 
granted by CMS. CMS may extend a temporary waiver only if such a waiver 
would not jeopardize or adversely affect the health and safety of 
patients. The waiver may be issued for any one year period or less under 
certain circumstances. The waiver may be withdrawn earlier if CMS 
determines this action is necessary to protect the health and safety of 
patients. A waiver may be granted only if:
    (1) The hospital is located in a rural area. This includes all areas 
not delineated as ``urban'' by the Bureau of the Census, based on the 
most recent census;
    (2) The hospital has 50 or fewer inpatient hospital beds;
    (3) The character and seriousness of the deficiencies do not 
adversely affect the health and safety of patients; and
    (4) The hospital has made and continues to make a good faith effort 
to comply with personnel requirements consistent with any waiver.
    (b) Minimum compliance requirements. Each case will have to be 
decided on its individual merits, and while the degree and extent of 
compliance will vary, the institution must, as a minimum, meet all of 
the statutory conditions in section 1861(e)(1)-(8), in addition to 
meeting such other requirements as the Secretary finds necessary under 
section 1861(e)(9). (For further information relating to the exception 
in section 1861(e)(5) of the Act, see paragraph (c) of this section.)
    (c) Temporary waiver of 24-hour nursing requirement of 24-hour 
registered nurse requirement. CMS may waive the requirement contained in 
section

[[Page 651]]

1861(e)(5) that a hospital must provide 24-hour nursing service 
furnished or supervised by a registered nurse. Such a waiver may be 
granted when the following criteria are met:
    (1) The hospital's failure to comply fully with the 24-hour nursing 
requirement is attributable to a temporary shortage of qualified nursing 
personnel in the area in which the hospital is located.
    (2) A registered nurse is present on the premises to furnish or 
supervise the nursing services during at least the daytime shift, 7 days 
a week.
    (3) The hospital has in charge, on all tours of duty not covered by 
a registered nurse, a licensed practical (vocational) nurse.
    (4) The hospital complies with all requirements specified in 
paragraph (a) of this section.
    (d) Temporary waiver for technical personnel. CMS may waive 
technical personnel requirements, issued under section 1861(e)(9) of the 
Act, contained in the Conditions of Participation; Hospitals (part 482 
of this chapter). Such a waiver must take into account the availability 
of technical personnel and the educational opportunities for technical 
personnel in the area in which the hospital is located. CMS may also 
limit the scope of services furnished by a hospital in conjunction with 
the waiver in order not to adversely affect the health and safety of the 
patients. In addition, the hospital must also comply with all 
requirements specified in paragraph (a) of this section.

[39 FR 2251, Jan. 17, 1974. Redesignated at 39 FR 11419, Mar. 28, 1974, 
and amended at 41 FR 27962, July 8, 1976. Further redesignated at 42 FR 
52826, Sept. 30, 1977, and amended at 47 FR 31531, July 20, 1982; 51 FR 
22041, June 17, 1986. Redesignated at 53 FR 23100, June 17, 1988]



Sec. 488.56  Temporary waivers applicable to skilled nursing facilities.

    (a) Waiver of 7-day registered nurse requirement. To the extent that 
Sec. 483.30 of this chapter requires any skilled nursing facility to 
engage the services of a registered nurse more than 40 hours a week, the 
Secretary may waive such requirement for such periods as he deems 
appropriate if, based upon documented findings of the State agency, he 
determines that:
    (1) Such facility is located in a rural area and the supply of 
skilled nursing facility services in such area is not sufficient to meet 
the needs of individual patients therein,
    (2) Such facility has at least one fulltime registered nurse who is 
regularly on duty at such facility 40 hours a week, and
    (3) Such facility (i) has only patients whose attending physicians 
have indicated (through physicians' orders or admission notes) that each 
such patient does not require the services of a registered nurse for a 
48-hour period, or (ii) has made arrangements for a registered nurse or 
a physician to spend such time at the facility as is determined 
necessary by the patient's attending physician to provide necessary 
services on days when the regular fulltime registered nurse is not on 
duty.
    (4) Such facility has made and continues to make a good faith effort 
to comply with the more than 40-hour registered nurse requirement, but 
such compliance is impeded by the unavailability of registered nurses in 
the area.
    (b) Waiver of medical director requirement. To the extent that 
Sec. 488.75(i) of this chapter requires any skilled nursing facility to 
engage the services of a medical director either part-time or full-time, 
the Secretary may waive such requirement for such periods as he deems 
appropriate if, based upon documented findings of the State agency, he 
determines that:
    (1) Such facility is located in an area where the supply of 
physicians is not sufficient to permit compliance with this requirement 
without seriously reducing the availability of physician services within 
the area, and
    (2) Such facility has made and continues to make a good faith effort 
to comply with Sec. 488.75(i) of this chapter, but such compliance is 
impeded by the unavailability of physicians in the area.

[39 FR 35777, Oct. 3, 1974. Redesignated and amended at 42 FR 52826, 
Sept. 30, 1977. Further redesignated and amended at 53 FR 23100, June 
17, 1988, and further amended at 56 FR 48879, Sept. 26, 1991; 57 FR 
43925, Sept. 23, 1992]

[[Page 652]]



Sec. 488.60  Special procedures for approving end stage renal disease facilities.

    (a) Considerations for approval. An ESRD facility which wishes to be 
approved for coverage, or which wishes any expansion of dialysis 
services to be approved for coverage in accordance with subpart U of 
part 405, must secure the Secretary's determination thereunder. In 
addition to the certification by the State agency referred to in 
Sec. 488.12 of this part, data furnished by network organizations and 
recommendations of the Public Health Service, concerning the 
contribution of a facility to the furnishing of end-stage renal disease 
services in its network and concerning the facility's compliance with 
professional norms and standards (see subpart U of part 405), shall be 
considered by the Secretary in determining whether to approve a facility 
for coverage or for any expansion of services under the End-Stage Renal 
Disease Program. The facility will also be required to submit data 
pertaining to its qualifications for approval or for any expansion of 
services, for consideration in the Secretary's determination.
    (b) Determining compliance with minimal utilization rates: Time 
limitations--(1) Unconditional status. A facility which meets minimal 
utilization requirements will be assigned this status as long as it 
continues to meet these requirements.
    (2) Conditional status. A conditional status may be granted to a 
facility for not more than four consecutive calendar years and will not 
be renewable (see Sec. 405.2122(b) of this chapter). Its status may be 
examined each calendar year to ascertain its compliance with Subpart U.
    (3) Exception status. Under unusual circumstances (see Sec. 405.2122 
(b) of this chapter) the Secretary may grant a time-limited exception to 
a facility which is not in compliance with the minimal utilization 
rate(s) for either unconditional status or conditional status. This 
exception status may be granted, and may be renewed on an annual basis, 
under circumstances where rigid application of minimal utilization rate 
requirements would adversely affect the achievement of ESRD program 
objectives.
    (c) New applicant. A facility which has not previously participated 
in the ESRD program must submit a plan detailing how it expects to meet 
the conditional minimal utilization rate status by the end of the second 
calendar year of its operation under the program and meet the 
unconditional minimal utilization rate status by the end of the fourth 
calendar year of its operation under the program.
    (d) Notification. The Secretary will notify each facility and its 
network coordinating council of its initial and its subsequent minimal 
utilization rate classification.
    (e) Failure to meet minimal utilization rate. A facility failing to 
meet standards for unconditional status or conditional status, or if 
applicable, for exception status, will be so notified at the time of 
such classification.
    (f) Interim regulations participant. A facility previously 
participating under the interim regulations will not be approved under 
the program established by subpart U until it has demonstrated that it 
meets all the applicable requirements of this subpart, including the 
appropriate minimal utilization rate. It may continue under the interim 
program only for a period not to exceed 1 year from the effective date 
of these amendments (see Sec. 405.2100(c) of this chapter). During this 
period it may demonstrate its ability to meet the appropriate minimal 
utilization rate. Failure to qualify under this subpart will 
automatically terminate coverage of such facility's services under the 
ESRD program at the end of such year.

[41 FR 22510, June 3, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and further amended at 45 FR 58124, Sept. 2, 1980. Redesignated and 
amended at 53 FR 23100, June 17, 1988]



Sec. 488.64  Remote facility variances for utilization review requirements.

    (a) As used in this section:
    (1) An ``available'' individual is one who:
    (i) Possesses the necessary professional qualifications;
    (ii) Is not precluded from participating by reason of financial 
interest in any such facility or direct responsibility for the care of 
the patients being reviewed or, in the case of a skilled

[[Page 653]]

nursing facility, employment by the facility; and
    (iii) Is not precluded from effective participation by the distance 
between the facility and his residence, office, or other place of work. 
An individual whose residence, office, or other place of work is more 
than approximately one hour's travel time from the facility shall be 
considered precluded from effective participation.
    (2) ``Adjacent facility'' means a health care facility located 
within a 50-mile radius of the facility which requests a variance.
    (b) The Secretary may grant a requesting facility a variance from 
the time frames set forth in Secs. 405.1137(d) of this chapter and 
482.30 as applicable, within which reviews all of cases must be 
commenced and completed, upon a showing satisfactory to the Secretary 
that the requesting facility has been unable to meet one or more of the 
requirements of Sec. 405.1137 of this chapter or Sec. 482.30 of this 
chapter, as applicable, by reason of insufficient medical and other 
professional personnel available to conduct the utilization review 
required by Sec. 405.1137 of this chapter or Sec. 482.30 of this 
chapter, as applicable.
    (c) The request for variance shall document the requesting 
facility's inability to meet the requirements for which a variance is 
requested and the facility's good faith efforts to comply with the 
requirements contained in Sec. 405.1137 of this chapter or Sec. 482.30 
of this chapter, as applicable.
    (d) The request shall include an assurance by the requesting 
facility that it will continue its good faith efforts to meet the 
requirements contained in Sec. 405.1137 of this chapter or Sec. 482.30 
of this chapter, as applicable.
    (e) A revised utilization review plan for the requesting facility 
shall be submitted concurrently with the request for a variance. The 
revised plan shall specify the methods and procedures which the 
requesting facility will use, if a variance is granted, to assure:
    (1) That effective and timely control will be maintained over the 
utilization of services; and
    (2) That reviews will be conducted so as to improve the quality of 
care provided to patients.
    (f) The request for a variance shall include:
    (1) The name, location, and type (e.g., hospital, skilled nursing 
facility) of the facility for which the variance is requested;
    (2) The total number of patient admissions and average daily patient 
census at the facility within the previous six months;
    (3) The total number of title XVIII and title XIX patient admissions 
and the average daily patient census of title XVIII and title XIX 
patients in the facility within the previous six months;
    (4) As relevant to the request, the names of all physicians on the 
active staff of the facility and the names of all other professional 
personnel on the staff of the facility, or both;
    (5) The name, location, and type of each adjacent facility (e.g., 
hospital, skilled nursing facility);
    (6) The distance and average travel time between the facility and 
each adjacent facility;
    (7) As relevant to the request, the location of practice of 
available physicians and the estimated number of other available 
professional personnel, or both (see paragraph (a)(1)(iii) of this 
section);
    (8) Documentation by the facility of its attempt to obtain the 
services of available physicians or other professional personnel, or 
both; and
    (9) A statement of whether a QIO exists in the area where the 
facility is located.
    (g) The Secretary shall promptly notify the facility of the action 
taken on the request. Where a variance is in effect, the validation of 
utilization review pursuant to Sec. 405.1137 of this chapter or 
Sec. 482.30 shall be made with reference to the revised utilization 
review plan submitted with the request for variance.
    (h) The Secretary, in granting a variance, will specify the period 
for which the variance has been granted; such period will not exceed one 
year. A request for a renewal shall be submitted not later than 30 days 
prior to the expiration of the variance and shall contain all 
information required by paragraphs (c), (d), and (f) of this section. 
Renewal of the variance will be contingent upon

[[Page 654]]

the facility's continuing to meet the provisions of this section.

[40 FR 30818, July 23, 1975. Redesignated at 42 FR 52826, Sept. 30, 
1977; 51 FR 22041, June 17, 1986; 51 FR 27847, Aug. 4, 1986; 51 FR 
43197, Dec. 1, 1986. Redesignated and amended at 53 FR 23100, June 17, 
1988]



Sec. 488.68  State Agency responsibilities for OASIS collection and data base requirements.

    As part of State agency survey responsibilities, the State agency or 
other entity designated by CMS has overall responsibility for fulfilling 
the following requirements for operating the OASIS system:
    (a) Establish and maintain an OASIS database. The State agency or 
other entity designated by CMS must--
    (1) Use a standard system developed or approved by CMS to collect, 
store, and analyze data;
    (2) Conduct basic system management activities including hardware 
and software maintenance, system back-up, and monitoring the status of 
the database; and
    (3) Obtain CMS approval before modifying any parts of the CMS 
standard system including, but not limited to, standard CMS-approved--
    (i) OASIS data items;
    (ii) Record formats and validation edits; and
    (iii) Agency encoding and transmission methods.
    (b) Analyze and edit OASIS data. The State agency or other entity 
designated by CMS must--
    (1) Upon receipt of data from an HHA, edit the data as specified by 
CMS and ensure that the HHA resolves errors within the limits specified 
by CMS;
    (2) At least monthly, make available for retrieval by CMS all edited 
OASIS records received during that period, according to formats 
specified by CMS, and correct and retransmit previously rejected data as 
needed; and
    (3) Analyze data and generate reports as specified by CMS.
    (c) Ensure accuracy of OASIS data. The State agency must audit the 
accuracy of the OASIS data through the survey process.
    (d) Restrict access to OASIS data. The State agency or other entity 
designated by CMS must do the following:
    (1) Ensure that access to data is restricted except for the 
transmission of data and reports to--
    (i) CMS;
    (ii) The State agency component that conducts surveys for purposes 
related to this function; and
    (iii) Other entities if authorized by CMS.
    (2) Ensure that patient identifiable OASIS data is released only to 
the extent that it is permitted under the Privacy Act of 1974.
    (e) Provide training and technical support for HHAs. The State 
agency or other entity designated by CMS must--
    (1) Instruct each HHA on the administration of the data set, 
privacy/confidentiality of the data set, and integration of the OASIS 
data set into the facility's own record keeping system;
    (2) Instruct each HHA on the use of software to encode and transmit 
OASIS data to the State;
    (3) Specify to a facility the method of transmission of data to the 
State, and instruct the facility on this method.
    (4) Monitor each HHA's ability to transmit OASIS data.
    (5) Provide ongoing technical assistance and general support to HHAs 
in implementing the OASIS reporting requirements specified in the 
conditions of participation for home health agencies; and
    (6) Carry out any other functions as designated by CMS necessary to 
maintain OASIS data on the standard State system.

[64 FR 3763, Jan. 25, 1999]



                 SUBPART C--SURVEY FORMS AND PROCEDURES



Sec. 488.100  Long term care survey forms, Part A.

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Sec. 488.105  Long term care survey forms, Part B.

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Sec. 488.110  Procedural guidelines.

    SNF/ICF Survey Process. The purpose for implementing a new SNF/ICF 
survey process is to assess whether the quality of care, as intended by 
the law and regulations, and as needed by the resident, is actually 
being provided in nursing homes. Although the onsite review procedures 
have been changed, facilities must continue to meet all applicable 
Conditions/Standards, in order to participate in Medicare/Medicaid 
programs. That is, the methods used to

[[Page 749]]

compile information about compliance with law and regulations are 
changed; the law and regulations themselves are not changed. The new 
process differs from the traditional process, principally in terms of 
its emphasis on resident outcomes. In ascertaining whether residents 
grooming and personal hygiene needs are met, for example, surveyors will 
no longer routinely evaluate a facility's written policies and 
procedures. Instead, surveyors will observe residents in order to make 
that determination. In addition, surveyors will confirm, through 
interviews with residents and staff, that such needs are indeed met on a 
regular basis. In most reviews, then, surveyors will ascertain whether 
the facility is actually providing the required and needed care and 
services, rather than whether the facility is capable of providing the 
care and services.

 The Outcome-Oriented Survey Process--Skilled Nursing Facilities (SNFs) 
                 and Intermediate Care Facilities (ICFs)

    (a) General.
    (b) The Survey Tasks.
    (c) Task 1--Entrance Conference.
    (d) Task 2--Resident Sample--Selection Methodology.
    (e) Task 3--Tour of the Facility.
    (f) Task 4--Observation/Interview/Medical Record Review (including 
drug regimen review).
    (g) Task 5--Drug Pass Observation.
    (h) Task 6--Dining Area and Eating Assistance Observation.
    (i) Task 7--Forming the Deficiency Statement.
    (j) Task 8--Exit Conference.
    (k) Plan of Correction.
    (l) Followup Surveys.
    (m) Role of Surveyor.
    (n) Confidentiality and Respect for Resident Privacy.
    (o) Team Composition.
    (p) Type of Facility-Application of SNF or ICF Regulations.
    (q) Use of Part A and Part B of the Survey Report.

    (a) General. A complete SNF/ICF facility survey consists of three 
components:
    [sbull] Life Safety Code requirements;
    [sbull] Administrative and structural requirements (Part A of the 
Survey Report, Form CMS-525); and
    [sbull] Direct resident care requirements (Part B of the Survey 
Report, Form CMS-519), along with the related worksheets (CMS-520 
through 524).
    Use this survey process for all surveys of SNFs and ICFs--whether 
freestanding, distinct parts, or dually certified. Do not use this 
process for surveys of Intermediate Care Facilities for Mentally 
Retarded (ICFs/MR), swing-bed hospitals or skilled nursing sections of 
hospitals that are not separately certified as SNF distinct parts. Do 
not announce SNF/ICF surveys ahead of time.
    (b) The Survey Tasks. Listed below are the survey tasks for easy 
reference:
    [sbull] Task 1. Entrance Conference.
    [sbull] Task 2. Resident Sample--Selection Methodology.
    [sbull] Task 3. Tour of the Facility. Resident Needs. Physical 
Environment. Meeting with Resident Council Representatives. Tour 
Summation and Focus of Remaining Survey Activity.
    [sbull] Task 4. Observation/Interview/Medical Record. Review of Each 
Individual in the Resident Sample (including drug regimen review).
    [sbull] Task 5. Drug Pass Observation.
    [sbull] Task 6. Dining Area and Eating Assistance Observation.
    [sbull] Task 7. Forming the Deficiency Statement (if necessary).
    [sbull] Task 8. Exit Conference.
    (c) Task 1--Entrance Conference. Perform these activities during the 
entrance conference in every certification and recertification survey:
    [sbull] Introduce all members of the team to the facility staff, if 
possible, even though the whole team may not be present for the entire 
entrance conference. (All surveyors wear identification tags.)
    [sbull] Explain the SNF/ICF survey process as resident centered in 
focus, and outline the basic steps.
    [sbull] Ask the facility for a list showing names of residents by 
room number with each of the following care needs/treatments identified 
for each resident to whom they apply:

--Decubitus care
--Restraints
--Catheters
--Injections
--Parenteral fluids
--Rehabilitation service

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--Colostomy/ileostomy care
--Respiratory care
--Tracheostomy care
--Suctioning
--Tube feeding

    Use this list for selecting the resident sample.
    [sbull] Ask the facility to complete page 2 of Form CMS-519 
(Resident Census) as soon as possible, so that the information can 
further orient you to the facility's population. In a survey of a SNF 
with a distinct part ICF, you may collect two sets of census data. 
However, consolidate the information when submitting it to the regional 
office. You may modify the Resident Census Form to include the numbers 
of licensed and certified beds, if necessary.
    [sbull] Ask the facility to post signs on readily viewed areas (at 
least one on each floor) announcing that State surveyors are in the 
facility performing an ``inspection,'' and are available to meet with 
residents in private. Also indicate the name and telephone number of the 
State agency. Hand-printed signs with legible, large letters are 
acceptable.
    [sbull] If the facility has a Resident Council, make mutually 
agreeable arrangements to meet privately with the president and officers 
and other individuals they might invite.
    [sbull] Inform the facility that interviews with residents and 
Resident Councils are conducted privately, unless they independently 
request otherwise, in order to enhance the development of rapport as 
well as to allay any resident anxiety. Tell the facility that 
information is gathered from interviews, the tour, observations, 
discussions, record review, and facility officials. Point out that the 
facility will be given an opportunity to respond to all findings.
    (d) Task 2--Resident Sample--Selection Methodology. This methodology 
is aimed at formulating a sample that reflects the actual distribution 
of care needs/treatments in the facility population.
    Primarily performed on a random basis, it also ensures 
representation in the sample of certain care needs and treatments that 
are assessed during the survey.
    (1) Sample Size. Calculate the size of the sample according to the 
following guide:

------------------------------------------------------------------------
                                              Number of residents in
    Number of residents in facility                 sample\1\
------------------------------------------------------------------------
0-60 residents.........................  25% of residents (minimum--10).
61-120 residents.......................  20% of residents (minimum--15).
121-200 residents......................  15% of residents (minimum--24).
201+ residents.........................  10% of residents (minimum--30).
 
------------------------------------------------------------------------
\1\ Maximum--50.

    Note that the calculation is based on the resident census, not beds. 
After determining the appropriate sample size, select residents for the 
sample in a random manner. You may, for example, select every fifth 
resident from the resident census, beginning at a random position on the 
list. For surveys of dually certified facilities or distinct part SNFs/
ICFs, first use the combined SNF/ICF population to calculate the size of 
the sample, and then select a sample that reflects the proportions of 
SNF and ICF residents in the facility's overall population.
    (2) Special Care Needs/Treatments. The survey form specifies several 
care needs/treatments that must always be reviewed when they apply to 
any facility residents. These include:

[sbull] Decubitus Care
[sbull] Restraints
[sbull] Catheters
[sbull] Injections, Parenteral Fluids, Colostomy/Ileostomy, Respiratory 
    Care, Tracheostomy Care, Suctioning, Tube Feeding
[sbull] Rehabilitative Services (physical therapy, speech pathology and 
    audiology services, occupational therapy)

    Due to the relatively low prevalence of these care needs/treatments, 
appropriate residents may be either under-

represented or entirely omitted from the sample. Therefore, determine 
during the tour how many residents in the random selection fall into 
each of these care categories. Then, compare the number of such 
residents in the random selection with the total number of residents in 
the facility with each specified care need/treatment (based on either 
the resident census or other information provided by the facility).
    Review no less than 25 percent of the residents in each of these 
special care needs/treatments categories. For example, if the facility 
has 10 residents with

[[Page 751]]

decubitus ulcers, but only one of these residents is selected randomly, 
review two more residents with decubitis ulcers (25% of 10 equals 2.5, 
so review a total of 3). Or, if the facility has two residents who 
require tube feeding, neither of whom is in the random selection, review 
the care of at least one of the these residents. This can be 
accomplished in the following manner:
    Conduct in-depth reviews of the randomly selected residents and then 
perform limited reviews of additional residents as needed to cover the 
specified care categories. Such reviews are limited to the care and 
services related to the pertinent care areas only, e.g., catheters, 
restraints, or colostomy. Utilize those worksheets or portions of 
worksheets which are appropriate to the limited review. Refer to the 
Care Guidelines, as a resource document, when appropriate.
    Always keep in mind that neither the random selection approach nor 
the review of residents within the specified care categories precludes 
investigation of other resident care situations that you believe might 
pose a serious threat to a resident's health or safety. Add to the 
sample, as appropriate.
    (e) Task 3--Tour of the Facility. (1) Purpose. Conduct the tour in 
order to:
    [sbull] Develop an overall picture of the types and patterns of care 
delivery present within the facility;
    [sbull] View the physical environment; and
    [sbull] Ascertain whether randomly selected residents are 
communicative and willing to be interviewed.
    (2) Protocol. You may tour the entire facility as a team or 
separately, as long as all areas of the facility are examined by at 
least one team member. Success of the latter approach, however, is 
largely dependent on open intra-team communication and the ability of 
each team member to identify situations for further review by the team 
member of the appropriate discipline. You may conduct the tour with or 
without facility staff accompanying you, as you prefer. Facilities, 
however, vary in staff member availability. Record your notes on the 
Tour Notes Worksheet, Form CMS-521.
    Allow approximately three hours for the tour. Converse with 
residents, family members/significant others (if present), and staff, 
asking open-ended questions in order to confirm observations, obtain 
additional information, or corroborate information, (e.g., accidents, 
odors, apparent inappropriate dress, adequacy and appropriateness of 
activities). Converse sufficiently with residents selected for in-depth 
review to ascertain whether they are willing to be interviewed and are 
communicative. Observe staff interactions with other staff members as 
well as with residents for insight into matters such as resident rights 
and assignments of staff responsibilities.
    Always knock and/or get permission before entering a room or 
interrupting privacy. If you wish to inspect a resident's skin, observe 
a treatment procedure, or observe a resident who is exposed, courteously 
ask permission from the resident if she/he comprehends, or ask 
permission from the staff nurse if the resident cannot communicate. Do 
not do ``hands-on'' monitoring such as removal of dressings; ask staff 
to remove a dressing or handle a resident.
    (3) Resident Needs. While touring, focus on the residents' needs--
physical, emotional, psychosocial, or spiritual--and whether those needs 
are being met. Refer to the following list as needed:

--Personal hygiene, grooming, and appropriate dress
--Position
--Assistive and other restorative devices
--Rehabilitation issues
--Functional limitations in ADL
--Functional limitations in gait, balance and coordination
--Hydration and nutritional status
--Resident rights
--Activity for time of day (appropriate or inappropriate)
--Emotional status
--Level of orientation
--Awareness of surroundings
--Behaviors
--Cleanliness of immediate environment (wheelchair, bed, bedside table, 
    etc.)
--Odors
--Adequate clothing and care supplies as well as maintenance and 
    cleanliness of same

    (4) Review of the Physical Environment. As you tour each resident's 
room and

[[Page 752]]

auxiliary rooms, also examine them in connection with the physical 
environment requirements. You need not document physical environment on 
the Tour Notes Worksheet. Instead, you may note any negative findings 
directly on the Survey Report Form in the remarks section.
    (5) Meeting With Resident Council Representatives. If a facility has 
a Resident Council, one or more surveyors meet with the respresentatives 
in a private area. Facility staff members do not attend unless 
specifically requested by the Council. Explain the purpose of the survey 
and briefly outline the steps in the survey process, i.e., entrance 
conference * * * exit conference. Indicate your interest in learning 
about the strengths of the facility in addition to any complaints or 
shortcomings. State that this meeting is one part of the information 
gathering; the findings have not yet been completed nor the conclusions 
formulated. Explain further, however, that the official survey findings 
are usually available within three months after the completion of the 
survey, and give the telephone number of the State agency office.
    Use this meeting to ascertain strengths and/or problems, if any, 
from the consumer's perspective, as well as to develop additional 
information about aspects of care and services gleaned during the tour 
that were possibly substandard.
    Conduct the meeting in a manner that allows for comments about any 
aspect of the facility. (See the section on Interview Procedures.) Use 
open-ended questions such as:

    [sbull] ``What is best about this home?''
    [sbull] ``What is worst?''
    [sbull] ``What would you like to change?''

    In order to get more detail, use questions such as:

    [sbull] ``Can you be more specific?''
    [sbull] ``Can you give me an example?''
    [sbull] ``What can anyone else tell me about this?''

    If you wish to obtain information about a topic not raised by the 
residents, use an approach like the following:

    [sbull] ``Tell me what you think about the food/staff/cleanliness 
here.''
    [sbull] ``What would make it better?''
    [sbull] ``What don't you like? What do you like?''

    (6) Tour Summation and Focus of Remaining Survey Activity. When the 
tour is completed, review the resident census data provided by the 
facility. Determine if the care categories specified in the section on 
Resident Sample are sufficiently represented in the random selection, 
make adjustments as needed, and complete the listing of residents on the 
worksheet labeled ``Residents Selected for In-depth Review'', Form CMS-
520.
    Transcribe notes of a negative nature onto the SRF in the 
``Remarks'' column under the appropriate rule. Findings from a later 
segment in the survey or gathered by another surveyor may combine to 
substantiate a deficiency. You need not check ``met'' or ``not met'' at 
this point in the survey. Discuss significant impressions/conclusions at 
the completion of each subsequent survey task, and transfer any negative 
findings onto the Survey Report Form in the Remarks section.
    (f) Task 4--Observation/Interview/Medical Record Review (including 
drug regimen review). Perform the in-depth review of each individual in 
the resident sample in order to ascertain whether the facility is 
meeting resident needs. Evaluate specific indicators for each resident, 
utilizing the front and back of the ``Observation/Interview/Record 
Review (OIRR)'' worksheet, Form CMS-524. You may prefer to perform the 
record review first, complete resident/staff/family observations and 
interviews, and finally, return to the record for any final unresolved 
issues. On the other hand, you may prefer to do the interviews first. 
Either method is acceptable. Whenever possible, however, complete one 
resident's observation/interview/medical record review and document the 
OIRR before moving onto another resident. If because of the facility 
layout, it is more efficient to do more than one record review at a 
time, limit such record review to two or three residents so your 
familiarity with the particular resident and continuity of the OIRR are 
not compromised.
    (1) Observation. Conduct observations concurrently with interviews 
of residents, family/significant others, and

[[Page 753]]

discussions with direct care staff [of the various disciplines involved. 
In multi-facility operations, whenever possible, observe staff that is 
regularly assigned to the facility in order to gain an understanding of 
the care and services usually provided.] Maintain respect for resident 
privacy. Minimize disruption of the operations of the facility or 
impositions upon any resident as much as possible. Based upon your 
observations of the residents' needs, gather information about any of 
the following areas, as appropriate:

Bowel and bladder training
Catheter care
Restraints
Injections
Parenteral fluids
Tube feeding/gastrostomy
Colostomy/ileostomy
Respiratory therapy
Tracheostomy care
Suctioning

    (2) Interviews. Interview each resident in private unless he/she 
independently requests that a facility staff member or other individual 
be present. Conduct the in-depth interview in a nonthreatening and 
noninvasive fashion so as to decrease anxiety and defensiveness. The 
open-ended approach described in the section on the Resident Council is 
also appropriate for the in-depth interview. While prolonged time 
expenditure is not usually a worthwhile use of resources or the 
resident's time, do allow time initially to establish rapport.
    At each interview:

    [sbull] Introduce yourself.
    [sbull] Address the resident by name.
    [sbull] Explain in simple terms the reason for your visit (e.g., to 
assure that the care and services are adequate and appropriate for each 
resident).
    [sbull] Briefly outline the process--entrance conference, tour, 
interviews, observations, review of medical records, resident 
interviews, and exit conference.
    [sbull] Mention that the selection of a particular resident for an 
interview is not meant to imply that his/her care is substandard or that 
the facility provides substandard care. Also mention that most of those 
interviewed are selected randomly.
    [sbull] Assure that you will strive for anonymity for the resident 
and that the interview is used in addition to medical records, 
observations, discussions, etc., to capture an accurate picture of the 
treatment and care provided by the facility. Explain that the official 
findings of the survey are usually available to the public about three 
months after completion of the survey, but resident names are not given 
to the public.
    [sbull] When residents experience difficulty expressing themselves:

--Avoid pressuring residents to verbalize
--Accept and respond to all communication
--Ignore mistakes in word choice
--Allow time for recollection of words
--Encourage self-expression through any means available

    [sbull] When interviewing residents with decreased receptive 
capacity:

--Speak slowly and distinctly
--Speak at conversational voice level
--Sit within the resident's line of vision
[sbull] Listen to all resident information/allegations without judgment. 
    Information gathered subsequently may substantiate or repudiate an 
    allegation.

    The length of the interview varies, depending on the condition and 
wishes of the resident and the amount of information supplied. Expect 
the average interview, however, to last approximately 15 minutes. 
Courteously terminate an interview whenever the resident is unable or 
unwilling to continue, or is too confused or disoriented to continue. 
Do, however, perform the other activities of this task (observation and 
record review). If, in spite of your conversing during the tour, you 
find that less than 40 percent of the residents in your sample are 
sufficiently alert and willing to be interviewed, try to select 
replacements so that a complete OIRR is performed for a group this size, 
if possible. There may be situations, however, where the resident 
population has a high percentage of confused individuals and this 
percentage is not achievable. Expect that the information from confused 
individuals can be, but is not necessarily, less

[[Page 754]]

reliable than that from more alert individuals.
    Include the following areas in the interview of each resident in the 
sample:

Activities of daily living
Grooming/hygiene
Nutrition/dietary
Restorative/rehabilitation care and services
Activities
Social services
Resident rights

    Refer to the Care Guidelines ``evaluation factors'' as a resource 
for possible elements to consider when focusing on particular aspects of 
care and resident needs.
    Document information obtained from the interviews/observations on 
the OIRR Worksheet. Record in the ``Notes'' section any additional 
information you may need in connection with substandard care or 
services. Unless the resident specifically requests that he/she be 
identified, do not reveal the source of the information gleaned from the 
interview.
    (3) Medical Record Review. The medical record review is a three-part 
process, which involves first reconciling the observation/interview 
findings with the record, then reconciling the record against itself, 
and lastly performing the drug regimen review.
    Document your findings on the OIRR Worksheet, as appropriate, and 
summarize on the Survey Report Form the findings that are indicative of 
problematic or substandard care. Be alert for repeated similar instances 
of substandard care developing as the number of completed OIRR 
Worksheets increases.

    Note: The problems related to a particular standard or condition 
could range from identical (e.g., meals not in accordance with dietary 
plan) to different but related (e.g., nursing services--lapse in care 
provided to residents with catheters, to residents with contractures, to 
residents needing assistance for personal hygiene and residents with 
improperly applied restraints).

    (i) Reconciling the observation/interview findings with the record. 
Determine if:

    [sbull] An assessment has been performed.
    [sbull] A plan with goals has been developed.
    [sbull] The interventions have been carried out.
    [sbull] The resident has been evaluated to determine the 
effectiveness of the interventions.

    For example, if a resident has developed a decubitus ulcer while in 
the facility, record review can validate staff and resident interviews 
regarding the facility's attempts at prevention. Use your own judgment; 
review as much of the record(s) as necessary to evaluate the care 
planning. Note that facilities need not establish specific areas in the 
record stating ``Assessment,'' ``Plan,'' ``Intervention,'' or 
``Evaluation'' in order for the documentation to be considered adequate.
    (ii) Reconciling the record with itself. Determine:

    [sbull] If the resident has been properly assessed for all his/her 
needs.
    [sbull] That normal and routine nursing practices such as periodic 
weights, temperatures, blood pressures, etc., are performed as required 
by the resident's conditions.

    (iii) Performing the drug regimen review. The purpose of the drug 
regimen review is to determine if the pharmacist has reviewed the drug 
regimen on a monthly basis. Follow the procedures in Part One of 
Appendix N, Surveyor Procedures for Pharmaceutical Service Requirements 
in Long-Term Care Facilities. Fill in the appropriate boxes on the top 
left hand corner of the reverse side of the OIRR Worksheet, Form CMS-
524. Appendix N lists many irregularities that can occur. Review at 
least six different indicators on each survey. However, the same six 
indicators need not be reviewed on every survey.

    Note: If you detect irregularities and the documentation 
demonstrates that the pharmacist has notified the attending physician, 
do not cite a deficiency. Do, however, bring the irregularity to the 
attention of the medical director or other facility official, and note 
the official's name and date of notification on the Survey Report Form.
    (g) Task 5--Drug Pass Observation. The purpose of the drug pass 
observation is to observe the actual preparation and administration of 
medications to residents. With this approach, there is no doubt that the 
errors detected, if any, are errors in drug administration, not

[[Page 755]]

documentation. Follow the procedure in Part Two of Appendix N, Surveyor 
Procedures for Pharmaceutical Service Requirements in Long-Term Care 
Facilities, and complete the Drug Pass Worksheet, Form CMS-522. Be as 
neutral and unobtrusive as possible during the drug pass observation. 
Whenever possible, select one surveyor, who is a Registered Nurse or a 
pharmacist, to observe the drug pass of approximately 20 residents. In 
facilities where fewer than 20 residents are receiving medications, 
review as many residents receiving medications as possible. Residents 
selected for the in-depth review need not be included in the group 
chosen for the drug pass; however, their whole or partial inclusion is 
acceptable. In order to get a balanced view of a facility's practices, 
observe more than one person administering a drug pass, if feasible. 
This might involve observing the morning pass one day in Wing A, for 
example, and the morning pass the next day in Wing B.
    Transfer findings noted on the ``Drug Pass'' worksheet to the SRF 
under the appropriate rule. If your team concludes that the facility's 
medication error rate is 5 percent or more, cite the deficiency under 
Nursing Services/Administration of Drugs. Report the error rate under 
F209. If the deficiency is at the standard level, cite it in Nursing 
Services, rather than Pharmacy.
    (h) Task 6--Dining Area and Eating Assistance Observation. The 
purpose of this task is to ascertain the extent to which the facility 
meets dietary needs, particularly for those who require eating 
assistance. This task also yields information about staff interaction 
with residents, promptness and appropriateness of assistance, adaptive 
equipment usage and availability, as well as appropriateness of dress 
and hygiene for meals.
    For this task, use the worksheet entitled ``Dining Area and Eating 
Assistance Observation'' (Form CMS-523). Observe two meals; for a 
balanced view, try to observe meals at different times of the day. For 
example, try to observe a breakfast and a dinner rather than two 
breakfasts. Give particular care to performing observations as 
unobtrusively as possible. Chatting with residents and sitting down 
nearby may help alleviate resident anxiety over the observation process.
    Select a minimum of five residents for each meal observation and 
include residents who have their meals in their rooms. Residents 
selected for the in-depth review need not be included in the dining and 
eating assistance observation; however, their whole or partial inclusion 
is acceptable. Ascertain the extent to which the facility assesses, 
plans, and evaluates the nutritional care of residents and eating 
assistance needs by reviewing the sample of 10 or more residents. If you 
are unable to determine whether the facility meets the standards from 
the sample reviewed, expand the sample and focus on the specific area(s) 
in question, until you can formulate a conclusion about the extent of 
compliance. As with the other survey tasks, transfer the findings noted 
on the ``Dining & Eating Assistance Observation'' worksheet to the 
Survey Report Form.
    (i) Task 7--Forming the Deficiency Statement. (1) General. The 
Survey Report Form contains information about all of the negative 
findings of the survey. Be sure to transfer to the Survey Report Form 
data from the tour, drug pass observation, dining area and eating 
assistance observation, as well as in-depth review of the sample of 
residents. Transfer only those findings which could possibly contribute 
to a determination that the facility is deficient in a certain area.
    Meet as a group in a pre-exit conference to discuss the findings and 
make conclusions about the deficiencies, subject to information provided 
by facility officials that may further explain the situation. Review the 
summaries/conclusions from each task and decide whether any further 
information and/or documentation is necessary to substantiate a 
deficiency. As the facility for additional information for clarification 
about particular findings, if necessary. Always consider information 
provided by the facility. If the facility considers as acceptable, 
practices which you believe are not acceptable, ask the facility to 
backup its contention with suitable reference material or sources and 
submit them for your consideration.

[[Page 756]]

    (2) Analysis. Analyze the findings on the Survey Report Form for the 
degree of severity, frequency of occurrence and impact on delivery of 
care or quality of life. The threshold at which the frequency of 
occurrences amounts to a deficiency varies from situation to situation. 
One occurrence directly related to a life-threatening or fatal outcome 
can be cited as a deficiency. On the other hand, a few sporadic 
occurrences may have so slight an impact on delivery of care or quality 
of life that they do not warrant a deficiency citation. Review carefully 
all the information gathered. What may appear during observation as a 
pattern, may or may not be corroborated by records, staff, and 
residents. For example, six of the 32 residents in the sample are 
dressed in mismatched, poorly buttoned clothes. A few of the six are 
wearing slippers without socks. A few others are wearing worn clothes. 
Six occurrences might well be indicative of a pattern of susbstandard 
care. Close scrutiny of records, discussions with staff, and interviews 
reveal, however, that the six residents are participating in dressing 
retraining programs. Those residents who are without socks, chose to do 
so. The worn clothing items were also chosen--they are favorites.
    Combinations of substandard care such as poor grooming of a number 
of residents, lack of ambulation of a number of residents, lack of 
attention to positioning, poor skin care, etc., can yield a deficiency 
in nursing services just as 10 out of 10 residents receiving substandard 
care for decubiti yields a deficiency.
    (3) Deficiencies Alleged by Staff or Residents. If staff or 
residents allege deficiencies, but records, interviews, and observation 
fail to confirm the situation, it is unlikely that a deficiency exists. 
Care and services that are indeed confirmed by the survey to be in 
compliance with the regulatory requirements, but considered deficient by 
residents or staff, cannot be cited as deficient for certification 
purposes. On the other hand, if an allegation is of a very serious 
nature (e.g., resident abuse) and the tools of record review and 
observation are not effective because the problem is concealed, obtain 
as much information as possible or necessary to ascertain compliance, 
and cite accordingly. Residents, family, or former employees may be 
helpful for information gathering.
    (4) Composing the Deficiency Statement. Write the deficiency 
statement in terms specific enough to allow a reasonably knowledgeable 
person to understand the aspect(s) of the requirement(s) that is (are) 
not met. Do not delve into the facility's policies and procedures to 
determine or speculate on the root cause of a deficiency, or sift 
through various alternatives in an effort to prescribe an acceptable 
remedy. Indicate the data prefix tag and regulatory citation, followed 
by a summary of the deficiency and supporting findings using resident 
identifiers, not resident names, as in the following example.

    F102 SNF 405.1123(b).--Each resident has not had a physician's visit 
at least once every 30 days for the first 90 days after admission. 
Resident 1602 has not been seen by a physician since she was 
admitted 50 days ago. Her condition has deteriorated since that time 
(formulation of decubiti, infections).

    When the data prefix tag does not repeat the regulations, also 
include a short phrase that describes the prefix tag (e.g., F117 
decubitus ulcer care). List the data tags in numerical order, whenever 
possible.
    (j) Task 8--Exit Conference. The purpose of the exit conference is 
to inform the facility of survey findings and to arrange for a plan of 
correction, if needed. Keep the tone of the exit conference consistent 
with the character of the survey process--inspection and enforcement. 
Tactful, business-like, professional presentation of the findings is of 
paramount importance. Recognize that the facility may wish to respond to 
various findings. Although deficiency statements continue to depend, in 
part, on surveyor professional judgment, support your conclusions with 
resident-specific examples (identifiers other than names) whenever you 
can do so without compromising confidentiality. Before formally citing 
deficiencies, discuss any allegations or findings that could not be 
substantiated during earlier tasks in the process. For example, if 
information is gathered that suggests a newly hired

[[Page 757]]

R.N. is not currently licensed, ask the facility officials to present 
current licensure information for the nurse in question. Identify 
residents when the substandard care is readily observed or discerned 
through record review. Ensure that the facility improves the care 
provided to all affected residents, not only the identified residents. 
Make clear to the facility that during a follow-up visit the surveyors 
may review residents other than those with significant problems from the 
original sample, in order to see that the facility has corrected the 
problems overall. Do not disclose the source of information provided 
during interviews, unless the resident has specifically requested you to 
inform the facility of his/her comments or complaints. In accordance 
with your Agency's policy, present the Statement of Deficiencies, form 
CMS-2567, on site or after supervisory review, no later than 10 calendar 
days following the survey.
    (k) Plan of Correction. Explain to the facility that your role is to 
identify care and services which are not consistent with the regulatory 
requirements, rather than to ascertain the root causes of deficiencies. 
Each facility is expected to review its own care delivery. Subsequent to 
the exit conference, each facility is required to submit a plan of 
correction that identifies necessary changes in operation that will 
assure correction of the cited deficiencies. In reviewing and accepting 
a proposed plan of correction, apply these criteria:

    [sbull] Does the facility have a reasonable approach for correcting 
the deficiencies?
    [sbull] Is there a high probability that the planned action will 
result in compliance?
    [sbull] Is compliance expected timely?

    Plans of correction specific to residents identified on the 
deficiency statement are acceptable only where the deficiency is 
determined to be unique to that resident and not indicative of a 
possible systemic problem. For example, as a result of an aide being 
absent, two residents are not ambulated three times that day as called 
for in their care plans. A plan of correction that says ``Ambulate John 
Jones and Mary Smith three times per day,'' is not acceptable. An 
acceptable plan of correction would explain changes made to the 
facility's staffing and scheduling in order to gurantee that staff is 
available to provide all necessary services for all residents.
    Acceptance of the plan of correction does not absolve the facility 
of the responsibility for compliance should the implementation not 
result in correction and compliance. Acceptance indicates the State 
agency's acknowledgement that the facility indicated a willingness and 
ability to make corrections adequately and timely.
    Allow the facility up to 10 days to prepare and submit the plan of 
correction to the State agency, however, follow your SA policy if the 
timeframe is shorter. Retain the various survey worksheets as well as 
the Survey Report Form at the State agency. Forward the deficiency 
statement to the CMS regional office.
    (l) Follow-up Surveys. The purpose of the follow-up survey is to re-
evaluate the specific types of care or care delivery patterns that were 
cited as deficient during the original survey. Ascertain the corrective 
status of all deficiencies cited on the CMS-2567. Because this survey 
process focuses on the actual provision of care and services, revisits 
are almost always necessary to ascertain whether the deficienicies have 
indeed been corrected. The nature of the deficiencies dictates the scope 
of the follow-up visit. Use as many tasks or portions of the Survey 
Report Form(s) as needed to ascertain compliance status. For example, 
you need not perform another drug pass if no drug related deficiencies 
were cited on the initial survey. Similarly, you need not repeat the 
dining area and eating assistance observations if no related problems 
were identified. All or some of the aspects of the observation/
interview/medical record review, however, are likely to be appropriate 
for the follow-up survey.
    When selecting the resident sample for the follow-up, determine the 
sample size using the same formula as used earlier in the survey, with 
the following exceptions:

    [sbull] The maximum sample size is 30 residents, rather than 50.

[[Page 758]]

    [sbull] The minimum sample size of 10 residents does not apply if 
only one care category was cited as deficient and the total number of 
residents in the facility in that category was less than 10 (e.g., 
deficiency cited under catheter care and only five residents have 
catheters).

    Include in the sample those residents who, in your judgment, are 
appropriate for reviewing vis-a-vis the cited substandard care. If 
possible, include some residents identified as receiving substandard 
care during the initial survey. If after completing the follow-up 
activities you determine that the cited deficiencies were not corrected, 
initiate adverse action procedures, as appropriate.
    (m) Role of Surveyor. The survey and certification process is 
intended to determine whether providers and suppliers meet program 
participation requirements. The primary role of the surveyor, then, is 
to assess the quality of care and services and to relate those findings 
to statutory and regulatory requirements for program participation.
    When you find substandard care or services in the course of a 
survey, carefully document your findings. Explain the deficiency in 
sufficient detail so that the facility officials understand your 
rationale. If the cause of the deficiency is obvious, share the 
information with the provider. For example, if you cite a deficiency for 
restraints (F118), indicate that restraints were applied backwards on 
residents 1621, 1634, 1646, etc.
    In those instances where the cause is not obvious, do not delve into 
the facility's policies and procedures to determine the root cause of 
any deficiency. Do not recommend or prescribe an acceptable remedy. The 
provider is responsible for deciding on and implementing the action(s) 
necessary for achieving compliance. For the restraint situation in the 
example above, you would not ascertain whether the improper application 
was due to improper training or lack of training, nor would you attempt 
to identify the staff member who applied the restraints. It is the 
provider's responsibility to make the necessary changes or corrections 
to ensure that the restriants are applied properly.
    A secondary role for the surveyor is to provide general consultation 
to the provider/consumer community. This includes meeting with provider/
consumer associations and other groups as well as participating in 
seminars. It also includes informational activities, whereby you respond 
to oral or written inquiries about required outcomes in care and 
services.
    (n) Confidentiality and Respect for Resident Privacy. Conduct the 
survey in a manner that allows for the greatest degree of 
confidentiality for residents, particularly regarding the information 
gathered during the in-depth interviews. When recording observations 
about care and resident conditions, protect the privacy of all 
residents. Use a code such as resident identifier number rather than 
names on worksheets whenever possible. Never use a resident's name on 
the Deficiency Statement, Form CMS-2567. Block out resident names, if 
any, from any document that is disclosed to the facility, individual or 
organization.
    When communicating to the facility about substandard care, fully 
identify the resident(s) by name if the situation was identified through 
observation or record review. Improperly applied restraints, expired 
medication, cold food, gloves not worn for a sterile procedure, and diet 
inconsistent with order, are examples of problems which can be 
identified to the facility by resident name. Information about injuries 
due to broken equipment, prolonged use of restraints, and opened mail is 
less likely to be obtained through observation or record review. Do not 
reveal the source of information unless actually observed, discovered in 
the record review, or requested by the resident or family.
    (o) Team Composition. Whenever possible, use the following survey 
team model:

                        SNF/ICF Survey Team Model

    In facilities with 200 beds or less, the team size may range from 2 
to 4 members. If the team size is:

    [sbull] 2 members: The team has at least one RN plus another RN or a 
dietitian or a pharmacist.

[[Page 759]]

    [sbull] 3-4 member: In addition to the composition described above, 
the team has one or two members of any discipline such as a social 
worker, sanitarian, etc.

    If the facility has over 200 beds and the survey will last more than 
2 days, the team size may be greater than 4 members. Select additional 
disciplines as appropriate to the facility's compliance history.
    Average onsite time per survey: 60 person hours (Number of surveyors 
multiplied by the number of hours on site)
    Preferably, team members have gerontological training and 
experience. Any member may serve as the team leader, consistent with 
State agency procedures. In followup surveys, select disciplines based 
on major areas of correction. Include a social worker, for example, if 
the survey revealed major psychosocial problems. This model does not 
consider integrated survey and Inspection of Care review teams, which 
typically would be larger.
    (p) Type of Facility--Application of SNF or ICF Regulations. Apply 
the regulations to the various types of facilities in the following 
manner:

[sbull] Freestanding Skilled   Apply SNF regulations.
 Nursing Facility (SNF)
[sbull] Freestanding           Apply ICF regulations.
 Intermediate Care Facility
 (ICF)
[sbull] SNF Distinct Part of   Apply SNF regulations.
 a Hospital
[sbull] ICF Distinct Part of   Apply ICF regulations.
 a Hospital
[sbull] Dually Certified SNF/  Apply SNF regulations and 442.346(b).
 ICF
[sbull] Freestanding SNF with  Apply SNF regulations for SNF unit.
 ICF Distinct Part             Apply ICF regulations for ICF distinct
 (Regardless of the             part.
 proportion of SNF and ICF     Apply both SNF and ICF regulations for
 beds, the facility type is     shared services (e.g., dietary).
 determined by the higher      If the same deficiency occurs in both the
 level of care. Therefore,      SNF and ICF components of the facility,
 LTC facilities with distinct   cite both SNF and ICF regulations.
 parts are defined as SNFs     If the deficiency occurs in the SNF part
 with ICF distinct parts.)      only, cite only the SNF regulation.
                               If the deficiency occurs in the ICF part
                                only, cite only the ICF regulation.
 

    (q) Use of Part A and Part B of the Survey Report. (1) Use of Part A 
(CMS-525).--Use Part A for initial certification surveys only, except 
under the following circumstances:

    [sbull] When a terminated facility requests program participation 60 
days or more after termination. Treat this situation as a request for 
initial certification and complete Part A of the survey report in 
addition to Part B.
    [sbull] If an ICF with a favorable compliance history requests to 
covert a number of beds to SNF level, complete both Part A and Part B 
for compliance with the SNF requirements. If distinct part status is at 
issue, also examine whether it meets the criteria for certification as a 
distinct part.

    (i) Addendum for Outpatient Physical Therapy (OPT) or Speech 
Pathology Services. Use the Outpatient Physical Therapy--Speech 
Pathology SRF (CMS-1893) as an addendum to Part A.
    (ii) Resurvey of Participating Facilities. Do not use Part A for 
resurveys of participating SNFs and ICFs. A determination of compliance, 
based on documented examination of the written policies and procedures 
and other pertinent documents during the initial survey, establishes the 
facility's compliance status with Part A requirements. This does not 
preclude citing deficiencies if they pertain to administrative or 
structural requirements from Part A that are uncovered incidental to a 
Part B survey. As an assurance measure, however, each facility at the 
time of recertification must complete an affidavit (on the CMS-1516) 
attesting that no substantive changes have occurred that would affect 
compliance. Each facility must also agree to notify the State agency 
immediately of any upcoming changes in its organization or management 
which may affect its compliance status. If a new administrator is unable 
to complete the affidavit, proceed with the survey using the Part B form 
and worksheets; do not use the Part A form. The survey cannot be 
considered complete, however, until the affidavit is signed. If the 
facility fails to complete the affidavit, it cannot participate in the 
program.
    (iii) Substantial Changes in a Facility's Organization and 
Management. If you receive such information, review the changes to 
ensure compliance with the regulations. Request copies of the 
appropriate documents (e.g., written policies and procedures, personnel 
qualifications, or agreements) if they were

[[Page 760]]

not submitted. If the changes have made continued compliance seem 
doubtful, determine through a Part B survey whether deficiencies have 
resulted. Cite any deficiencies on the CMS-2567 and follow the usual 
procedures.
    (2) Use of Part B (CMS-519). Use Part B and the worksheets for all 
types of SNF and ICF surveys--initials, recertifications, followup, 
complaints, etc.
    The worksheets are:

[sbull] CMS-520--Residents Selected for Indepth Review
[sbull] CMS-521--Tour Notes Worksheet
[sbull] CMS-522--Drug Pass Worksheet
[sbull] CMS-523--Dining Area and Eating Assistance Worksheet
[sbull] CMS-5245--Observation/Interview/Record Review Worksheet

    For complaint investigations, perform a full or partial Part B 
survey based on the extent of the allegations. If the complaint alleges 
substandard care in a general fashion or in a variety of services and 
care areas, perform several tasks or a full Part B survey, as needed. If 
the complaint is of a more specific nature, such as an allegation of 
improper medications, perform an appropriate partial Part B survey, such 
as a drug pass review and a review of selected medical records.



Sec. 488.115  Care guidelines.

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Subpart D--Reconsideration of Adverse Determinations--Deeming Authority 
for Accreditation Organizations and CLIA Exemption of Laboratories Under 
                             State Programs

    Source: 57 FR 34012, July 31, 1992, unless otherwise noted.



Sec. 488.201  Reconsideration.

    (a) Right to reconsideration. (1) A national accreditation 
organization dissatisfied with a determination that its accreditation 
requirements do not provide (or do not continue to provide) reasonable 
assurance that the entities accredited by the accreditation organization 
meet the applicable long-term care requirements, conditions for 
coverage, conditions of certification, conditions of participation, or 
CLIA condition level requirements is entitled to a reconsideration as 
provided in this subpart.
    (2) A State dissatisfied with a determination that the requirements 
it imposes on laboratories in that State and under the laws of that 
State do not provide (or do not continue to provide) reasonable 
assurance that laboratories licensed or approved by the State meet 
applicable CLIA requirements is entitled to a reconsideration as 
provided in this subpart.
    (b) Eligibility for reconsideration. CMS will reconsider any 
determination to deny, remove or not renew the approval of deeming 
authority to private accreditation organizations, or any determination 
to deny, remove or not renew the approval of a State laboratory program 
for the purpose of exempting the State's laboratories from CLIA 
requirements, if the accreditation organization or State files a written 
request for a reconsideration in accordance with paragraphs (c) and (d) 
of this section.
    (c) Manner and timing of request for reconsideration. (1) A national 
accreditation organization or a State laboratory program described in 
paragraph (b), dissatisfied with a determination with respect to its 
deeming authority, or, in the case of a State, a determination with 
respect to the exemption of the laboratories in the State from CLIA 
requirements, may request a reconsideration of the determination by 
filing a request with CMS either directly by its authorized officials or 
through its legal representative. The request must be filed within 60 
days of the receipt of notice of an adverse determination or nonrenewal 
as provided in subpart A of part 488 or subpart E of part 493, as 
applicable.
    (2) Reconsideration procedures are available after the effective 
date of the decision to deny, remove, or not renew the approval of an 
accreditation organization or State laboratory program.
    (d) Content of request. The request for reconsideration must specify 
the findings or issues with which the accreditation organization or 
State disagrees and the reasons for the disagreement.

[57 FR 34012, July 31, 1992, as amended at 58 FR 61843, Nov. 23, 1993]



Sec. 488.203  Withdrawal of request for reconsideration.

    A requestor may withdraw its request for reconsideration at any time 
before the issuance of a reconsideration determination.



Sec. 488.205  Right to informal hearing.

    In response to a request for reconsideration, CMS will provide the 
accreditation organization or the State laboratory program the 
opportunity for an informal hearing as described in Sec. 488.207 that 
will--
    (a) Be conducted by a hearing officer appointed by the Administrator 
of CMS; and
    (b) Provide the accreditation organization or State laboratory 
program the opportunity to present, in writing or in person, evidence or 
documentation to refute the determination to deny approval, or to 
withdraw or not renew deeming authority or the exemption of a State's 
laboratories from CLIA requirements.



Sec. 488.207  Informal hearing procedures.

    (a) CMS will provide written notice of the time and place of the 
informal hearing at least 10 days before the scheduled date.
    (b) The informal reconsideration hearing will be conducted in 
accordance with the following procedures--

[[Page 899]]

    (1) The hearing is open to CMS and the organization requesting the 
reconsideration, including--
    (i) Authorized representatives;
    (ii) Technical advisors (individuals with knowledge of the facts of 
the case or presenting interpretation of the facts); and
    (iii) Legal counsel;
    (2) The hearing is conducted by the hearing officer who receives 
testimony and documents related to the proposed action;
    (3) Testimony and other evidence may be accepted by the hearing 
officer even though it would be inadmissable under the usual rules of 
court procedures;
    (4) Either party may call witnesses from among those individuals 
specified in paragraph (b)(1) of this section; and
    (5) The hearing officer does not have the authority to compel by 
subpoena the production of witnesses, papers, or other evidence.



Sec. 488.209  Hearing officer's findings.

    (a) Within 30 days of the close of the hearing, the hearing officer 
will present the findings and recommendations to the accreditation 
organization or State laboratory program that requested the 
reconsideration.
    (b) The written report of the hearing officer will include--
    (1) Separate numbered findings of fact; and
    (2) The legal conclusions of the hearing officer.



Sec. 488.211  Final reconsideration determination.

    (a) The hearing officer's decision is final unless the 
Administrator, within 30 days of the hearing officer's decision, chooses 
to review that decision.
    (b) The Administrator may accept, reject or modify the hearing 
officer's findings.
    (c) Should the Administrator choose to review the hearing officer's 
decision, the Administrator will issue a final reconsideration 
determination to the accreditation organization or State laboratory 
program on the basis of the hearing officer's findings and 
recommendations and other relevant information.
    (d) The reconsideration determination of the Administrator is final.
    (e) A final reconsideration determination against an accreditation 
organization or State laboratory program will be published by CMS in the 
Federal Register.



    Subpart E--Survey and Certification of Long-Term Care Facilities

    Source: 59 FR 56238, Nov. 10, 1994, unless otherwise noted.



Sec. 488.300  Statutory basis.

    Sections 1819 and 1919 of the Act establish requirements for 
surveying SNFs and NFs to determine whether they meet the requirements 
for participation in the Medicare and Medicaid programs.



Sec. 488.301  Definitions.

    As used in this subpart--
    Abbreviated standard survey means a survey other than a standard 
survey that gathers information primarily through resident-centered 
techniques on facility compliance with the requirements for 
participation. An abbreviated standard survey may be premised on 
complaints received; a change of ownership, management, or director of 
nursing; or other indicators of specific concern.
    Abuse means the willful infliction of injury, unreasonable 
confinement, intimidation, or punishment with resulting physical harm, 
pain or mental anguish.
    Deficiency means a SNF's or NF's failure to meet a participation 
requirement specified in the Act or in part 483, subpart B of this 
chapter.
    Dually participating facility means a facility that has a provider 
agreement in both the Medicare and Medicaid programs.
    Extended survey means a survey that evaluates additional 
participation requirements subsequent to finding substandard quality of 
care during a standard survey.
    Facility means a SNF or NF, or a distinct part SNF or NF, in 
accordance with Sec. 483.5 of this chapter.

[[Page 900]]

    Immediate family means husband or wife; natural or adoptive parent, 
child or sibling; stepparent, stepchild, stepbrother, or stepsister; 
father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-
law, or sister-in-law; grandparent or grandchild.
    Immediate jeopardy means a situation in which the provider's 
noncompliance with one or more requirements of participation has caused, 
or is likely to cause, serious injury, harm, impairment, or death to a 
resident.
    Misappropriation of resident property means the deliberate 
misplacement, exploitation, or wrongful, temporary or permanent use of a 
resident's belongings or money without the resident's consent.
    Neglect means failure to provide goods and services necessary to 
avoid physical harm, mental anguish, or mental illness.
    Noncompliance means any deficiency that causes a facility to not be 
in substantial compliance.
    Nurse aide means an individual, as defined in Sec. 483.75(e)(1) of 
this chapter.
    Nursing facility (NF) means a Medicaid nursing facility.
    Partial extended survey means a survey that evaluates additional 
participation requirements subsequent to finding substandard quality of 
care during an abbreviated standard survey.
    Skilled nursing facility (SNF) means a Medicare nursing facility.
    Standard survey means a periodic, resident-centered inspection which 
gathers information about the quality of service furnished in a facility 
to determine compliance with the requirements for participation.
    Substandard quality of care means one or more deficiencies related 
to participation requirements under Sec. 483.13, Resident behavior and 
facility practices, Sec. 483.15, Quality of life, or Sec. 483.25, 
Quality of care of this chapter, which constitute either immediate 
jeopardy to resident health or safety; a pattern of or widespread actual 
harm that is not immediate jeopardy; or a widespread potential for more 
than minimal harm, but less than immediate jeopardy, with no actual 
harm.
    Substantial compliance means a level of compliance with the 
requirements of participation such that any identified deficiencies pose 
no greater risk to resident health or safety than the potential for 
causing minimal harm.
    Validation survey means a survey conducted by the Secretary within 2 
months following a standard survey, abbreviated standard survey, partial 
extended survey, or extended survey for the purpose of monitoring State 
survey agency performance.



Sec. 488.303  State plan requirement.

    (a) A State plan must provide that the requirements of this subpart 
and subpart F of this part are met, to the extent that those 
requirements apply to the Medicaid program.
    (b) A State may establish a program to reward, through public 
recognition, incentive payments, or both, nursing facilities that 
provide the highest quality care to Medicaid residents. For purposes of 
section 1903(a)(7) of the Social Security Act, proper expenses incurred 
by a State in carrying out such a program are considered to be expenses 
necessary for the proper and efficient administration of the State plan.
    (c) A State must conduct periodic educational programs for the staff 
and residents (and their representatives) of NFs in order to present 
current regulations, procedures, and policies under this subpart and 
subpart F of this part.
    (d) Required remedies for a non-State operated NF. A State must 
establish, in addition to termination of the provider agreement, the 
following remedies or an approved alternative to the following remedies 
for imposition against a non-State operated NF:
    (1) Temporary management.
    (2) Denial of payment for new admissions.
    (3) Civil money penalties.
    (4) Transfer of residents.
    (5) Closure of the facility and transfer of residents.
    (6) State monitoring.
    (e) Optional remedies for a non-State operated NF. A State may 
establish the following remedies for imposition against a non-State 
operated NF:
    (1) Directed plan of correction.
    (2) Directed in-service training.
    (3) Alternative or additional State remedies.
    (f) Alternative or additional State remedies. If a State uses 
remedies that

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are in addition to those specified in paragraph (d) or (e) of this 
section, or alternative to those specified in paragraph (d) of this 
section (other than termination of participation), it must--
    (1) Specify those remedies in the State plan; and
    (2) Demonstrate to CMS's satisfaction that those alternative 
remedies are as effective in deterring noncompliance and correcting 
deficiencies as the remedies listed in paragraphs (d) and (e) of this 
section.

[59 FR 56238, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.305  Standard surveys.

    (a) For each SNF and NF, the State survey agency must conduct 
standard surveys that include all of the following:
    (1) A case-mix stratified sample of residents;
    (2) A survey of the quality of care furnished, as measured by 
indicators of medical, nursing, and rehabilitative care, dietary and 
nutrition services, activities and social participation, and sanitation, 
infection control, and the physical environment;
    (3) An audit of written plans of care and residents' assessments to 
determine the accuracy of such assessments and the adequacy of such 
plans of care; and
    (4) A review of compliance with residents' rights requirements set 
forth in sections 1819(c) and 1919(c) of the Act.
    (b) The State survey agency's failure to follow the procedures set 
forth in this section will not invalidate otherwise legitimate 
determinations that a facility's deficiencies exist.



Sec. 488.307  Unannounced surveys.

    (a) Basic rule. All standard surveys must be unannounced.
    (b) Review of survey agency's scheduling and surveying procedures. 
(1) CMS reviews on an annual basis each State survey agency's scheduling 
and surveying procedures and practices to ensure that survey agencies 
avoid giving notice of a survey through the scheduling procedures and 
the conduct of the surveys.
    (2) CMS takes corrective action in accordance with the nature and 
complexity of the problem when survey agencies are found to have 
notified a SNF or NF through their scheduling or procedural policies. 
Sanctions for inadequate survey performance are in accordance with 
Sec. 488.320.
    (c) Civil money penalties. An individual who notifies a SNF or NF, 
or causes a SNF or NF to be notified, of the time or date on which a 
standard survey is scheduled to be conducted is subject to a Federal 
civil money penalty not to exceed $2,000.



Sec. 488.308  Survey frequency.

    (a) Basic period. The survey agency must conduct a standard survey 
of each SNF and NF not later than 15 months after the last day of the 
previous standard survey.
    (b) Statewide average interval. (1) The statewide average interval 
between standard surveys must be 12 months or less, computed in 
accordance with paragraph (d) of this section.
    (2) CMS takes corrective action in accordance with the nature of the 
State survey agency's failure to ensure that the 12-month statewide 
average interval requirement is met. CMS's corrective action is in 
accordance with Sec. 488.320.
    (c) Other surveys. The survey agency may conduct a survey as 
frequently as necessary to--
    (1) Determine whether a facility complies with the participation 
requirements; and
    (2) Confirm that the facility has corrected deficiencies previously 
cited.
    (d) Computation of statewide average interval. The statewide average 
interval is computed at the end of each Federal fiscal year by comparing 
the last day of the most recent standard survey for each participating 
facility to the last day of each facility's previous standard survey.
    (e) Special surveys. (1) The survey agency may conduct a standard or 
an abbreviated standard survey to determine whether certain changes have 
caused a decline in the quality of care furnished by a SNF or a NF, 
within 60 days of a change in the following:
    (i) Ownership;
    (ii) Entity responsible for management of a facility (management 
firm);
    (iii) Nursing home administrator; or

[[Page 902]]

    (iv) Director of nursing.
    (2) The survey agency must review all complaint allegations and 
conduct a standard or an abbreviated standard survey to investigate 
complaints of violations of requirements by SNFs and NFs if its review 
of the allegation concludes that--
    (i) A deficiency in one or more of the requirements may have 
occurred; and
    (ii) Only a survey can determine whether a deficiency or 
deficiencies exist.
    (3) The survey agency does not conduct a survey if the complaint 
raises issues that are outside the purview of Federal participation 
requirements.



Sec. 488.310  Extended survey.

    (a) Purpose of survey. The purpose of an extended survey is to 
identify the policies and procedures that caused the facility to furnish 
substandard quality of care.
    (b) Scope of extended survey. An extended survey includes all of the 
following:
    (1) Review of a larger sample of resident assessments than the 
sample used in a standard survey.
    (2) Review of the staffing and in-service training.
    (3) If appropriate, examination of the contracts with consultants.
    (4) A review of the policies and procedures related to the 
requirements for which deficiencies exist.
    (5) Investigation of any participation requirement at the discretion 
of the survey agency.
    (c) Timing and basis for survey. The survey agency must conduct an 
extended survey not later than 14 calendar days after completion of a 
standard survey which found that the facility had furnished substandard 
quality of care.



Sec. 488.312  Consistency of survey results.

    CMS does and the survey agency must implement programs to measure 
accuracy and improve consistency in the application of survey results 
and enforcement remedies.



Sec. 488.314  Survey teams.

    (a) Team composition. (1) Surveys must be conducted by a 
multidisciplinary team of professionals, which must include a registered 
nurse.
    (2) Examples of professionals include, but are not limited to, 
physicians, physician assistants, nurse practitioners, physical, speech, 
or occupational therapists, registered professional nurses, dieticians, 
sanitarians, engineers, licensed practical nurses, or social workers.
    (3) The State determines what constitutes a professional, subject to 
CMS approval.
    (4) Any of the following circumstances disqualifies a surveyor for 
surveying a particular facility:
    (i) The surveyor currently works, or, within the past two years, has 
worked as an employee, as employment agency staff at the facility, or as 
an officer, consultant, or agent for the facility to be surveyed.
    (ii) The surveyor has any financial interest or any ownership 
interest in the facility.
    (iii) The surveyor has an immediate family member who has a 
relationship with a facility described in paragraphs (a)(4)(i) or 
paragraph (a)(4)(ii) of this section.
    (iv) The surveyor has an immediate family member who is a resident 
in the facility to be surveyed. For purposes of this section, an 
immediate family member is defined at Sec. 488.301 of this part.
    (b) CMS training. CMS provides comprehensive training to surveyors, 
including at least the following:
    (1) Application and interpretation of regulations for SNFs and NFs.
    (2) Techniques and survey procedures for conducting standard and 
extended surveys.
    (3) Techniques for auditing resident assessments and plans of care.
    (c) Required surveyor training. (1) Except as specified in paragraph 
(c)(3) of this section, the survey agency may not permit an individual 
to serve as a member of a survey team unless the individual has 
successfully completed a training and testing program prescribed by the 
Secretary.
    (2) The survey agency must have a mechanism to identify and respond 
to in-service training needs of the surveyors.

[[Page 903]]

    (3) The survey agency may permit an individual who has not completed 
a training program to participate in a survey as a trainee if 
accompanied on-site by a surveyor who has successfully completed the 
required training and testing program.

[59 FR 56238, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.318  Inadequate survey performance.

    (a) CMS considers survey performance to be inadequate if the State 
survey agency--
    (1) Indicates a pattern of failure to--
    (i) Identify deficiencies and the failure cannot be explained by 
changed conditions in the facility or other case specific factors;
    (ii) Cite only valid deficiencies;
    (iii) Conduct surveys in accordance with the requirements of this 
subpart; or
    (iv) Use Federal standards, protocols, and the forms, methods and 
procedures specified by CMS in manual instructions; or
    (2) Fails to identify an immediate jeopardy situation.
    (b) Inadequate survey performance does not--
    (1) Relieve a SNF or NF of its obligation to meet all requirements 
for program participation; or
    (2) Invalidate adequately documented deficiencies.



Sec. 488.320  Sanctions for inadequate survey performance.

    (a) Annual assessment of survey performance. CMS assesses the 
performance of the State's survey and certification program annually.
    (b) Sanctions for inadequate survey performance. When a State 
demonstrates inadequate survey performance, as specified in 
Sec. 488.318, CMS notifies the survey agency of the inadequacy and takes 
action in accordance with paragraphs (c) and (d) of this section.
    (c) Medicaid facilities. (1) For a pattern of failure to identify 
deficiencies in Medicaid facilities, CMS--
    (i) Reduces FFP, as specified in paragraph (e) of this section, and 
if appropriate;
    (ii) Provides for training of survey teams.
    (2) For other survey inadequacies in Medicaid facilities, CMS 
provides for training of survey teams.
    (d) Medicare facilities. For all survey inadequacies in Medicare 
facilities, CMS--
    (1) Requires that the State survey agency submit a plan of 
correction;
    (2) Provides for training of survey teams;
    (3) Provides technical assistance on scheduling and procedural 
policies;
    (4) Provides CMS-directed scheduling; or
    (5) Initiates action to terminate the agreement between the 
Secretary and the State under section 1864 of the Act, either in whole 
or in part.
    (e) Reduction of FFP. In reducing FFP for inadequate survey 
performance, CMS uses the formula specified in section 1919(g)(3)(C) of 
the Act, that is 33 percent multiplied by a fraction--
    (1) The numerator of which is equal to the total number of residents 
in the NFs that CMS found to be noncompliant during validation surveys 
for that quarter; and
    (2) The denominator of which is equal to the total number of 
residents in the NFs in which CMS conducted validation surveys during 
that quarter.
    (f) Appeal of FFP reduction. When a State is dissatisfied with CMS's 
determination to reduce FFP, the State may appeal the determination to 
the Departmental Appeals Board, using the procedures specified in 45 CFR 
part 16.



Sec. 488.325  Disclosure of results of surveys and activities.

    (a) Information which must be provided to public. As provided in 
sections 1819(g)(5) and 1919(g)(5) of the Act, the following information 
must be made available to the public, upon the public's request, by the 
State or CMS for all surveys and certifications of SNFs and NFs:
    (1) Statements of deficiencies and providers' comments.
    (2) A list of isolated deficiencies that constitute no actual harm, 
with the potential for minimal harm.
    (3) Approved plans of correction.
    (4) Statements that the facility did not submit an acceptable plan 
of correction or failed to comply with the conditions of imposed 
remedies.

[[Page 904]]

    (5) Final appeal results.
    (6) Notice of termination of a facility.
    (7) Medicare and Medicaid cost reports.
    (8) Names of individuals with direct or indirect ownership interest 
in a SNF or NF, as defined in Sec. 420.201 of this chapter.
    (9) Names of individuals with direct or indirect ownership interest 
in a SNF or NF, as defined in Sec. 420.201 of this chapter, who have 
been found guilty by a court of law of a criminal offense in violation 
of Medicare or Medicaid law.
    (b) Charge to public for information. CMS and the State may charge 
the public for specified services with respect to requests for 
information in accordance with--
    (1) Section 401.140 of this chapter, for Medicare; or
    (2) State procedures, for Medicaid.
    (c) How public can request information. The public may request 
information in accordance with disclosure procedures specified in 45 CFR 
part 5.
    (d) When information must be disclosed. The disclosing agency must 
make available to the public, upon the public's request, information 
concerning all surveys and certifications of SNFs and NFs, including 
statements of deficiencies, separate listings of any isolated 
deficiencies that constitute no actual harm, with the potential for 
minimal harm, and plans of correction (which contain any provider 
response to the deficiency statement) within 14 calendar days after each 
item is made available to the facility.
    (e) Procedures for responding to requests. The procedures and time 
periods for responding to requests are in accordance with--
    (1) Section 401.136 of this chapter for documents maintained by CMS; 
and
    (2) State procedures for documents maintained by the State.
    (f) Information that must be provided to the State's long-term care 
ombudsman. The State must provide the State's long-term care ombudsman 
with the following:
    (1) A statement of deficiencies reflecting facility noncompliance, 
including a separate list of isolated deficiencies that constitute no 
harm with the potential for minimal harm.
    (2) Reports of adverse actions specified at Sec. 488.406 imposed on 
a facility.
    (3) Written response by the provider.
    (4) A provider's request for an appeal and the results of any 
appeal.
    (g) Information which must be provided to State by a facility with 
substandard quality of care. (1) To provide for the notice to physicians 
required under sections 1819(g)(5)(C) and 1919(g)(5)(C) of the Act, not 
later than 10 working days after receiving a notice of substandard 
quality of care, a SNF or NF must provide the State with a list of--
    (i) Each resident in the facility with respect to which such finding 
was made; and
    (ii) The name and address of his or her attending physician.
    (2) Failure to disclose the information timely will result in 
termination of participation or imposition of alternative remedies.
    (h) Information the State must provide to attending physician and 
State board. Not later than 20 calendar days after a SNF or NF complies 
with paragraph (g) of this section, the State must provide written 
notice of the noncompliance to--
    (1) The attending physician of each resident in the facility with 
respect to which a finding of substandard quality of care was made; and
    (2) The State board responsible for licensing the facility's 
administrator.
    (i) Access to information by State Medicaid fraud control unit. The 
State must provide access to any survey and certification information 
incidental to a SNF's or NF's participation in Medicare or Medicaid upon 
written request by the State Medicaid fraud control unit established 
under part 1007, of this title, consistent with current State laws.

[59 FR 56238, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.330  Certification of compliance or noncompliance.

    (a) General rules--(1) Responsibility for certification. (i) The 
State survey agency surveys all facilities for compliance or 
noncompliance with requirements for long term care facilities. The 
survey by the State survey agency may be followed by a Federal 
validation survey.

[[Page 905]]

    (A) The State certifies the compliance or noncompliance of non-State 
operated NFs. Regardless of the State entity doing the certification, it 
is final, except in the case of a complaint or validation survey 
conducted by CMS, or CMS review of the State's findings.
    (B) CMS certifies the compliance or noncompliance of all State-
operated facilities.
    (C) The State survey agency certifies the compliance or 
noncompliance of a non-State operated SNF, subject to the approval of 
CMS.
    (D) The State survey agency certifies compliance or noncompliance 
for a dually participating SNF/NF. In the case of a disagreement between 
CMS and the State survey agency, a finding of noncompliance takes 
precedence over that of compliance.
    (ii) In the case of a validation survey, the Secretary's 
determination as to the facility's noncompliance is binding, and takes 
precedence over a certification of compliance resulting from the State 
survey.
    (2) Basis for certification. (i) Certification by the State is based 
on the survey agency findings.
    (ii) Certification by CMS is based on either the survey agency 
findings (in the case of State-operated facilities), or, in the case of 
a validation survey, on CMS's own survey findings.
    (b) Effect of certification--(1) Certification of compliance. A 
certification of compliance constitutes a determination that the 
facility is in substantial compliance and is eligible to participate in 
Medicaid as a NF, or in Medicare as a SNF, or in Medicare and Medicaid 
as a dually participating facility.
    (2) Certification of noncompliance. A certification of noncompliance 
requires denial of participation for prospective providers and 
enforcement action for current providers in accordance with subpart F of 
this part. Enforcement action must include one of the following:
    (i) Termination of any Medicare or Medicaid provider agreements that 
are in effect.
    (ii) Application of alternative remedies instead of, or in addition 
to, termination procedures.
    (c) Notice of certification of noncompliance and resulting action. 
The notice of certification of noncompliance is sent in accordance with 
the timeframes specified in Sec. 488.402(f), and resulting action is 
issued by CMS, except when the State is taking the action for a non-
State operated NF.
    (d) Content of notice of certification of noncompliance. The notice 
of certification of noncompliance is sent in accordance with the 
timeframes specified in Sec. 488.402(f) and includes information on all 
of the following:
    (1) Nature of noncompliance.
    (2) Any alternative remedies to be imposed under subpart F of this 
part.
    (3) Any termination or denial of participation action to be taken 
under this part.
    (4) The appeal rights available to the facility under this part.
    (5) Timeframes to be met by the provider and certifying agency with 
regard to each of the enforcement actions or appeal procedures addressed 
in the notice.
    (e) Appeals. (1) Notwithstanding any provision of State law, the 
State must impose remedies promptly on any provider of services 
participating in the Medicaid program--
    (i) After promptly notifying the facility of the deficiencies and 
impending remedy or remedies; and
    (ii) Except for civil money penalties, during any pending hearing 
that may be requested by the provider of services.
    (2) CMS imposes remedies promptly on any provider of services 
participating in the Medicare or Medicaid program or any provider of 
services participating in both the Medicare and Medicaid programs--
    (i) After promptly notifying the facility of the deficiencies and 
impending remedy or remedies; and
    (ii) Except for civil money penalties, during any pending hearing 
that may be requested by the provider of services.
    (3) The provisions of part 498 of this chapter apply when the 
following providers request a hearing on a denial of participation, or 
certification of noncompliance leading to an enforcement remedy 
(including termination of the provider agreement), except State 
monitoring:
    (i) All State-operated facilities;

[[Page 906]]

    (ii) SNFs and dually participating SNF/NFs; and
    (iii) Any other facilities subject to a CMS validation survey or CMS 
review of the State's findings.
    (4) The provisions of part 431 of this chapter apply when a non-
State operated Medicaid NF, which has not received a CMS validation 
survey or CMS review of the State's findings, requests a hearing on the 
State's denial of participation, termination of provider agreement, or 
certification of noncompliance leading to an alternative remedy, except 
State monitoring.
    (f) Provider agreements. CMS or the Medicaid agency may execute a 
provider agreement when a prospective provider is in substantial 
compliance with all the requirements for participation for a SNF or NF, 
respectively.
    (g) Special rules for Federal validation surveys. (1) CMS may make 
independent certifications of a NF's, SNF's, or dually participating 
facility's noncompliance based on a CMS validation survey.
    (2) CMS issues the notice of actions affecting facilities for which 
CMS did validation surveys.
    (3) For non-State-operated NFs and non-State-operated dually 
participating facilities, any disagreement between CMS and the State 
regarding the timing and choice of remedies is resolved in accordance 
with Sec. 488.452.
    (4) Either CMS or the survey agency, at CMS's option, may revisit 
the facility to ensure that corrections are made.

[59 FR 56238, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.331  Informal dispute resolution.

    (a) Opportunity to refute survey findings. (1) For non-Federal 
surveys, the State must offer a facility an informal opportunity, at the 
facility's request, to dispute survey findings upon the facility's 
receipt of the official statement of deficiencies.
    (2) For Federal surveys, CMS offers a facility an informal 
opportunity, at the facility's request, to dispute survey findings upon 
the facility's receipt of the official statement of deficiencies.
    (b)(1) Failure of the State or CMS, as appropriate, to complete 
informal dispute resolution timely cannot delay the effective date of 
any enforcement action against the facility.
    (2) A facility may not seek a delay of any enforcement action 
against it on the grounds that informal dispute resolution has not been 
completed before the effective date of the enforcement action.
    (c) If a provider is subsequently successful, during the informal 
dispute resolution process, at demonstrating that deficiencies should 
not have been cited, the deficiencies are removed from the statement of 
deficiencies and any enforcement actions imposed solely as a result of 
those cited deficiencies are rescinded.
    (d) Notification. Upon request, CMS does and the State must provide 
the facility with written notification of the informal dispute 
resolution process.



Sec. 488.332  Investigation of complaints of violations and monitoring of compliance.

    (a) Investigation of complaints. (1) The State survey agency must 
establish procedures and maintain adequate staff to investigate 
complaints of violations of participation requirements.
    (2) The State survey agency takes appropriate precautions to protect 
a complainant's anonymity and privacy, if possible.
    (3) If arrangements have been made with other State components for 
investigation of complaints, the State must have a means of 
communicating information among appropriate entities, and the State 
survey agency retains responsibility for the investigation process.
    (4) If, after investigating a complaint, the State has reason to 
believe that an identifiable individual neglected or abused a resident, 
or misappropriated a resident's property, the State survey agency must 
act on the complaint in accordance with Sec. 488.335.
    (b) On-site monitoring. The State survey agency conducts on-site 
monitoring on an as necessary basis when--
    (1) A facility is not in substantial compliance with the 
requirements and is in the process of correcting deficiencies;
    (2) A facility has corrected deficiencies and verification of 
continued substantial compliance is needed; or

[[Page 907]]

    (3) The survey agency has reason to question the substantial 
compliance of the facility with a requirement of participation.
    (c) Composition of the investigative team. A State may use a 
specialized team, which may include an attorney, auditor and appropriate 
health professionals, to identify, survey, gather and preserve evidence, 
and administer remedies to noncompliant facilities.



Sec. 488.334  Educational programs.

    A State must conduct periodic educational programs for the staff and 
residents (and their representatives) of SNFs and NFs in order to 
present current regulations, procedures, and policies on the survey, 
certification and enforcement process under this subpart and subpart F 
of this part.



Sec. 488.335  Action on complaints of resident neglect and abuse, and misappropriation of resident property.

    (a) Investigation. (1) The State must review all allegations of 
resident neglect and abuse, and misappropriation of resident property 
and follow procedures specified in Sec. 488.332.
    (2) If there is reason to believe, either through oral or written 
evidence that an individual used by a facility to provide services to 
residents could have abused or neglected a resident or misappropriated a 
resident's property, the State must investigate the allegation.
    (3) The State must have written procedures for the timely review and 
investigation of allegations of resident abuse and neglect, and 
misappropriation of resident property.
    (b) Source of complaints. The State must review all allegations 
regardless of the source.
    (c) Notification--(1) Individuals to be notified. If the State makes 
a preliminary determination, based on oral or written evidence and its 
investigation, that the abuse, neglect or misappropriation of property 
occurred, it must notify in writing--
    (i) The individuals implicated in the investigation; and
    (ii) The current administrator of the facility in which the incident 
occurred.
    (2) Timing of the notice. The State must notify the individuals 
specified in paragraph (c)(1) of this section in writing within 10 
working days of the State's investigation.
    (3) Contents of the notice. The notice must include the--
    (i) Nature of the allegation(s);
    (ii) Date and time of the occurrence;
    (iii) Right to a hearing;
    (iv) Intent to report the substantiated findings in writing, once 
the individual has had the opportunity for a hearing, to the nurse aide 
registry or appropriate licensure authority;
    (v) Fact that the individual's failure to request a hearing in 
writing within 30 days from the date of the notice will result in 
reporting the substantiated findings to the nurse aide registry or 
appropriate licensure authority.
    (vi) Consequences of waiving the right to a hearing;
    (vii) Consequences of a finding through the hearing process that the 
alleged resident abuse or neglect, or misappropriation of resident 
property did occur; and
    (viii) Fact that the individual has the right to be represented by 
an attorney at the individual's own expense.
    (d) Conduct of hearing. (1) The State must complete the hearing and 
the hearing record within 120 days from the day it receives the request 
for a hearing.
    (2) The State must hold the hearing at a reasonable place and time 
convenient for the individual.
    (e) Factors beyond the individual's control. A State must not make a 
finding that an individual has neglected a resident if the individual 
demonstrates that such neglect was caused by factors beyond the control 
of the individual.
    (f) Report of findings. If the finding is that the individual has 
neglected or abused a resident or misappropriated resident property or 
if the individual waives the right to a hearing, the State must report 
the findings in writing within 10 working days to--
    (1) The individual;
    (2) The current administrator of the facility in which the incident 
occurred; and
    (3) The administrator of the facility that currently employs the 
individual, if different than the facility in which the incident 
occurred;

[[Page 908]]

    (4) The licensing authority for individuals used by the facility 
other than nurse aides, if applicable; and
    (5) The nurse aide registry for nurse aides. Only the State survey 
agency may report the findings to the nurse aide registry, and this must 
be done within 10 working days of the findings, in accordance with 
Sec. 483.156(c) of this chapter. The State survey agency may not 
delegate this responsibility.
    (g) Contents and retention of report of finding to the nurse aide 
registry. (1) The report of finding must include information in 
accordance with Sec. 483.156(c) of this chapter.
    (2) The survey agency must retain the information as specified in 
paragraph (g)(1) of this section, in accordance with the procedures 
specified in Sec. 483.156(c) of this chapter.
    (h) Survey agency responsibility. (1) The survey agency must 
promptly review the results of all complaint investigations and 
determine whether or not a facility has violated any requirements in 
part 483, subpart B of this chapter.
    (2) If a facility is not in substantial compliance with the 
requirements in part 483, subpart B of this chapter, the survey agency 
initiates appropriate actions, as specified in subpart F of this part.

[59 FR 56238, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Subpart F--Enforcement of Compliance for Long-Term Care Facilities with 
                              Deficiencies

    Source: 59 FR 56243, Nov. 10, 1994, unless otherwise noted.



Sec. 488.400  Statutory basis.

    Sections 1819(h) and 1919(h) of the Act specify remedies that may be 
used by the Secretary or the State respectively when a SNF or a NF is 
not in substantial compliance with the requirements for participation in 
the Medicare and Medicaid programs. These sections also provide for 
ensuring prompt compliance and specify that these remedies are in 
addition to any others available under State or Federal law, and, except 
for civil money penalties, are imposed prior to the conduct of a 
hearing.



Sec. 488.401  Definitions.

    As used in this subpart--
    New admission means a resident who is admitted to the facility on or 
after the effective date of a denial of payment remedy and, if 
previously admitted, has been discharged before that effective date. 
Residents admitted before the effective date of the denial of payment, 
and taking temporary leave, are not considered new admissions, nor 
subject to the denial of payment.
    Plan of correction means a plan developed by the facility and 
approved by CMS or the survey agency that describes the actions the 
facility will take to correct deficiencies and specifies the date by 
which those deficiencies will be corrected.

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.402  General provisions.

    (a) Purpose of remedies. The purpose of remedies is to ensure prompt 
compliance with program requirements.
    (b) Basis for imposition and duration of remedies. When CMS or the 
State chooses to apply one or more remedies specified in Sec. 488.406, 
the remedies are applied on the basis of noncompliance found during 
surveys conducted by CMS or by the survey agency.
    (c) Number of remedies. CMS or the State may apply one or more 
remedies for each deficiency constituting noncompliance or for all 
deficiencies constituting noncompliance.
    (d) Plan of correction requirement. (1) Except as specified in 
paragraph (d)(2) of this section, regardless of which remedy is applied, 
each facility that has deficiencies with respect to program requirements 
must submit a plan of correction for approval by CMS or the survey 
agency.
    (2) Isolated deficiencies. A facility is not required to submit a 
plan of correction when it has deficiencies that are isolated and have a 
potential for minimal harm, but no actual harm has occurred.
    (e) Disagreement regarding remedies. If the State and CMS disagree 
on the decision to impose a remedy, the disagreement is resolved in 
accordance with Sec. 488.452.

[[Page 909]]

    (f) Notification requirements--(1) Except when the State is taking 
action against a non-State operated NF, CMS or the State (as authorized 
by CMS) gives the provider notice of the remedy, including the--
    (i) Nature of the noncompliance;
    (ii) Which remedy is imposed;
    (iii) Effective date of the remedy; and
    (iv) Right to appeal the determination leading to the remedy.
    (2) When a State is taking action against a non-State operated NF, 
the State's notice must include the same information required by CMS in 
paragraph (f)(1) of this section.
    (3) Immediate jeopardy--2 day notice. Except for civil money 
penalties and State monitoring imposed when there is immediate jeopardy, 
for all remedies specified in Sec. 488.406 imposed when there is 
immediate jeopardy, the notice must be given at least 2 calendar days 
before the effective date of the enforcement action.
    (4) No immediate jeopardy--15 day notice. Except for civil money 
penalties and State monitoring, notice must be given at least 15 
calendar days before the effective date of the enforcement action in 
situations in which there is no immediate jeopardy.
    (5) Date of enforcement action. The 2-and 15-day notice periods 
begin when the facility receives the notice.
    (6) Civil money penalties. For civil money penalties, the notices 
must be given in accordance with the provisions of Secs. 488.434 and 
488.440.
    (7) State monitoring. For State monitoring, no prior notice is 
required.

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995, as amended at 
64 FR 13360, Mar. 18, 1999]



Sec. 488.404  Factors to be considered in selecting remedies.

    (a) Initial assessment. In order to select the appropriate remedy, 
if any, to apply to a facility with deficiencies, CMS and the State 
determine the seriousness of the deficiencies.
    (b) Determining seriousness of deficiencies. To determine the 
seriousness of the deficiency, CMS considers and the State must consider 
at least the following factors:
    (1) Whether a facility's deficiencies constitute--
    (i) No actual harm with a potential for minimal harm;
    (ii) No actual harm with a potential for more than minimal harm, but 
not immediate jeopardy;
    (iii) Actual harm that is not immediate jeopardy; or
    (iv) Immediate jeopardy to resident health or safety.
    (2) Whether the deficiencies--
    (i) Are isolated;
    (ii) Constitute a pattern; or
    (iii) Are widespread.
    (c) Other factors which may be considered in choosing a remedy 
within a remedy category. Following the initial assessment, CMS and the 
State may consider other factors, which may include, but are not limited 
to the following:
    (1) The relationship of the one deficiency to other deficiencies 
resulting in noncompliance.
    (2) The facility's prior history of noncompliance in general and 
specifically with reference to the cited deficiencies.



Sec. 488.406  Available remedies.

    (a) General. In addition to the remedy of termination of the 
provider agreement, the following remedies are available:
    (1) Temporary management.
    (2) Denial of payment including--
    (i) Denial of payment for all individuals, imposed by CMS, to a--
    (A) Skilled nursing facility, for Medicare;
    (B) State, for Medicaid; or
    (ii) Denial of payment for all new admissions.
    (3) Civil money penalties.
    (4) State monitoring.
    (5) Transfer of residents.
    (6) Closure of the facility and transfer of residents.
    (7) Directed plan of correction.
    (8) Directed in-service training.
    (9) Alternative or additional State remedies approved by CMS.
    (b) Remedies that must be established. At a minimum, and in addition 
to termination of the provider agreement, the State must establish the 
following remedies or approved alternatives to the following remedies:
    (1) Temporary management.
    (2) Denial of payment for new admissions.
    (3) Civil money penalties.

[[Page 910]]

    (4) Transfer of residents.
    (5) Closure of the facility and transfer of residents.
    (6) State monitoring.
    (c) State plan requirement. If a State wishes to use remedies for 
noncompliance that are either additional or alternative to those 
specified in paragraphs (a) or (b) of this section, it must--
    (1) Specify those remedies in the State plan; and
    (2) Demonstrate to CMS's satisfaction that those remedies are as 
effective as the remedies listed in paragraph (a) of this section, for 
deterring noncompliance and correcting deficiencies.
    (d) State remedies in dually participating facilities. If the 
State's remedy is unique to the State plan and has been approved by CMS, 
then that remedy, as imposed by the State under its Medicaid authority, 
may be imposed by CMS against the Medicare provider agreement of a 
dually participating facility.

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.408  Selection of remedies.

    (a) Categories of remedies. In this section, the remedies specified 
in Sec. 488.406(a) are grouped into categories and applied to 
deficiencies according to how serious the noncompliance is.
    (b) Application of remedies. After considering the factors specified 
in Sec. 488.404, as applicable, if CMS and the State choose to impose 
remedies, as provided in paragraphs (c)(1), (d)(1) and (e)(1) of this 
section, for facility noncompliance, instead of, or in addition to, 
termination of the provider agreement, CMS does and the State must 
follow the criteria set forth in paragraphs (c)(2), (d)(2), and (e)(2) 
of this section, as applicable.
    (c) Category 1. (1) Category 1 remedies include the following:
    (i) Directed plan of correction.
    (ii) State monitoring.
    (iii) Directed in-service training.
    (2) CMS does or the State must apply one or more of the remedies in 
Category 1 when there--
    (i) Are isolated deficiencies that constitute no actual harm with a 
potential for more than minimal harm but not immediate jeopardy; or
    (ii) Is a pattern of deficiencies that constitutes no actual harm 
with a potential for more than minimal harm but not immediate jeopardy.
    (3) Except when the facility is in substantial compliance, CMS or 
the State may apply one or more of the remedies in Category 1 to any 
deficiency.
    (d) Category 2. (1) Category 2 remedies include the following:
    (i) Denial of payment for new admissions.
    (ii) Denial of payment for all individuals imposed only by CMS.
    (iii) Civil money penalties of $50-3,000 per day.
    (iv) Civil money penalty of $1,000-$10,000 per instance of 
noncompliance.
    (2) CMS applies one or more of the remedies in Category 2, or, 
except for denial of payment for all individuals, the State must apply 
one or more of the remedies in Category 2 when there are--
    (i) Widespread deficiencies that constitute no actual harm with a 
potential for more than minimal harm but not immediate jeopardy; or
    (ii) One or more deficiencies that constitute actual harm that is 
not immediate jeopardy.
    (3) CMS or the State may apply one or more of the remedies in 
Category 2 to any deficiency except when--
    (i) The facility is in substantial compliance; or
    (ii) CMS or the State imposes a civil money penalty for a deficiency 
that constitutes immediate jeopardy, the penalty must be in the upper 
range of penalty amounts, as specified in Sec. 488.438(a).
    (e) Category 3. (1) Category 3 remedies include the following:
    (i) Temporary management.
    (ii) Immediate termination.
    (iii) Civil money penalties of $3,050-$10,000 per day.
    (iv) Civil money penalty of $1,000-$10,000 per instance of 
noncompliance.
    (2) When there are one or more deficiencies that constitute 
immediate jeopardy to resident health or safety--
    (i) CMS does and the State must do one or both of the following:
    (A) Impose temporary management; or
    (B) Terminate the provider agreement;

[[Page 911]]

    (ii) CMS and the State may impose a civil money penalty of $3,050-
$10,000 per day or $1,000-$10,000 per instance of noncompliance, in 
addition to imposing the remedies specified in paragraph (e)(2)(i) of 
this section.
    (3) When there are widespread deficiencies that constitute actual 
harm that is not immediate jeopardy, CMS and the State may impose 
temporary management, in addition to Category 2 remedies.
    (f) Plan of correction. (1) Except as specified in paragraph (f)(2) 
of this section, each facility that has a deficiency with regard to a 
requirement for long term care facilities must submit a plan of 
correction for approval by CMS or the State, regardless of--
    (i) Which remedies are imposed; or
    (ii) The seriousness of the deficiencies.
    (2) When there are only isolated deficiencies that CMS or the State 
determines constitute no actual harm with a potential for minimal harm, 
the facility need not submit a plan of correction.
    (g) Appeal of a certification of noncompliance. (1) A facility may 
appeal a certification of noncompliance leading to an enforcement 
remedy.
    (2) A facility may not appeal the choice of remedy, including the 
factors considered by CMS or the State in selecting the remedy, 
specified in Sec. 488.404.

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995, as amended at 
64 FR 13360, Mar. 18, 1999]



Sec. 488.410  Action when there is immediate jeopardy.

    (a) If there is immediate jeopardy to resident health or safety, the 
State must (and CMS does) either terminate the provider agreement within 
23 calendar days of the last date of the survey or appoint a temporary 
manager to remove the immediate jeopardy. The rules for appointment of a 
temporary manager in an immediate jeopardy situation are as follows:
    (1) CMS does and the State must notify the facility that a temporary 
manager is being appointed.
    (2) If the facility fails to relinquish control to the temporary 
manager, CMS does and the State must terminate the provider agreement 
within 23 calendar days of the last day of the survey, if the immediate 
jeopardy is not removed. In these cases, State monitoring may be imposed 
pending termination.
    (3) If the facility relinquishes control to the temporary manager, 
the State must (and CMS does) notify the facility that, unless it 
removes the immediate jeopardy, its provider agreement will be 
terminated within 23 calendar days of the last day of the survey.
    (4) CMS does and the State must terminate the provider agreement 
within 23 calendar days of the last day of survey if the immediate 
jeopardy has not been removed.
    (b) CMS or the State may also impose other remedies, as appropriate.
    (c)(1) In a NF or dually participating facility, if either CMS or 
the State finds that a facility's noncompliance poses immediate jeopardy 
to resident health or safety, CMS or the State must notify the other of 
such a finding.
    (2) CMS will or the State must do one or both of the following:
    (i) Take immediate action to remove the jeopardy and correct the 
noncompliance through temporary management.
    (ii) Terminate the facility's participation under the State plan. If 
this is done, CMS will also terminate the facility's participation in 
Medicare if it is a dually participating facility.
    (d) The State must provide for the safe and orderly transfer of 
residents when the facility is terminated.
    (e) If the immediate jeopardy is also substandard quality of care, 
the State survey agency must notify attending physicians and the State 
board responsible for licensing the facility administrator of the 
finding of substandard quality of care, as specified in Sec. 488.325(h).

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.412  Action when there is no immediate jeopardy.

    (a) If a facility's deficiencies do not pose immediate jeopardy to 
residents' health or safety, and the facility is not in substantial 
compliance, CMS or the

[[Page 912]]

State may terminate the facility's provider agreement or may allow the 
facility to continue to participate for no longer than 6 months from the 
last day of the survey if--
    (1) The State survey agency finds that it is more appropriate to 
impose alternative remedies than to terminate the facility's provider 
agreement;
    (2) The State has submitted a plan and timetable for corrective 
action approved by CMS; and
    (3) The facility in the case of a Medicare SNF or the State in the 
case of a Medicaid NF agrees to repay to the Federal government payments 
received after the last day of the survey that first identified the 
deficiencies if corrective action is not taken in accordance with the 
approved plan of correction.
    (b) If a facility does not meet the criteria for continuation of 
payment under paragraph (a) of this section, CMS will and the State must 
terminate the facility's provider agreement.
    (c) CMS does and the State must deny payment for new admissions when 
a facility is not in substantial compliance 3 months after the last day 
of the survey.
    (d) CMS terminates the provider agreement for SNFs and NFs, and 
stops FFP to a State for a NF for which participation was continued 
under paragraph (a) of this section, if the facility is not in 
substantial compliance within 6 months of the last day of the survey.

[59 FR 56243, Nov. 10, 1994; 60 FR 50118, Sept. 28, 1995]



Sec. 488.414  Action when there is repeated substandard quality of care.

    (a) General. If a facility has been found to have provided 
substandard quality of care on the last three consecutive standard 
surveys, as defined in Sec. 488.305, regardless of other remedies 
provided--
    (1) CMS imposes denial of payment for all new admissions, as 
specified in Sec. 488.417, or denial of all payments, as specified in 
Sec. 488.418;
    (2) The State must impose denial of payment for all new admissions, 
as specified in Sec. 488.417; and
    (3) CMS does and the State survey agency must impose State 
monitoring, as specified in Sec. 488.422, until the facility has 
demonstrated to the satisfaction of CMS or the State, that it is in 
substantial compliance with all requirements and will remain in 
substantial compliance with all requirements.
    (b) Repeated noncompliance. For purposes of this section, repeated 
noncompliance is based on the repeated finding of substandard quality of 
care and not on the basis that the substance of the deficiency or the 
exact tag number for the deficiency was repeated.
    (c) Standard surveys to which this provision applies. Standard 
surveys completed by the State survey agency on or after October 1, 
1990, are used to determine whether the threshold of three consecutive 
standard surveys is met.
    (d) Program participation. (1) The determination that a certified 
facility has repeated instances of substandard quality of care is made 
without regard to any variances in the facility's program participation 
(that is, any standard survey completed for Medicare, Medicaid or both 
programs will be considered).
    (2) Termination would allow the count of repeated substandard 
quality of care surveys to start over.
    (3) Change of ownership. (i) A facility may not avoid a remedy on 
the basis that it underwent a change of ownership.
    (ii) In a facility that has undergone a change of ownership, CMS 
does not and the State may not restart the count of repeated substandard 
quality of care surveys unless the new owner can demonstrate to the 
satisfaction of CMS or the State that the poor past performance no 
longer is a factor due to the change in ownership.
    (e) Facility alleges corrections or achieves compliance after 
repeated substandard quality of care is identified. (1) If a penalty is 
imposed for repeated substandard quality of care, it will continue until 
the facility has demonstrated to the satisfaction of CMS or the State 
that it is in substantial compliance with the requirements and that it 
will remain in substantial compliance with the requirements for a period 
of time specified by CMS or the State.
    (2) A facility will not avoid the imposition of remedies or the 
obligation to demonstrate that it will remain in compliance when it--

[[Page 913]]

    (i) Alleges correction of the deficiencies cited in the most recent 
standard survey; or
    (ii) Achieves compliance before the effective date of the remedies.



Sec. 488.415  Temporary management.

    (a) Definition. Temporary management means the temporary appointment 
by CMS or the State of a substitute facility manager or administrator 
with authority to hire, terminate or reassign staff, obligate facility 
funds, alter facility procedures, and manage the facility to correct 
deficiencies identified in the facility's operation.
    (b) Qualifications. The temporary manager must--
    (1) Be qualified to oversee correction of deficiencies on the basis 
of experience and education, as determined by the State;
    (2) Not have been found guilty of misconduct by any licensing board 
or professional society in any State;
    (3) Have, or a member of his or her immediate family have, no 
financial ownership interest in the facility; and
    (4) Not currently serve or, within the past 2 years, have served as 
a member of the staff of the facility.
    (c) Payment of salary. The temporary manager's salary--
    (1) Is paid directly by the facility while the temporary manager is 
assigned to that facility; and
    (2) Must be at least equivalent to the sum of the following--
    (i) The prevailing salary paid by providers for positions of this 
type in what the State considers to be the facility's geographic area;
    (ii) Additional costs that would have reasonably been incurred by 
the provider if such person had been in an employment relationship; and
    (iii) Any other costs incurred by such a person in furnishing 
services under such an arrangement or as otherwise set by the State.
    (3) May exceed the amount specified in paragraph (c)(2) of this 
section if the State is otherwise unable to attract a qualified 
temporary manager.
    (d) Failure to relinquish authority to temporary management--(1) 
Termination of provider agreement. If a facility fails to relinquish 
authority to the temporary manager as described in this section, CMS 
will or the State must terminate the provider agreement in accordance 
with Sec. 488.456.
    (2) Failure to pay salary of temporary manager. A facility's failure 
to pay the salary of the temporary manager is considered a failure to 
relinquish authority to temporary management.
    (e) Duration of temporary management. Temporary management ends when 
the facility meets any of the conditions specified in Sec. 488.454(c).



Sec. 488.417  Denial of payment for all new admissions.

    (a) Optional denial of payment. Except as specified in paragraph (b) 
of this section, CMS or the State may deny payment for all new 
admissions when a facility is not in substantial compliance with the 
requirements, as defined in Sec. 488.401, as follows:
    (1) Medicare facilities. In the case of Medicare facilities, CMS may 
deny payment to the facility.
    (2) Medicaid facilities. In the case of Medicaid facilities--
    (i) The State may deny payment to the facility; and
    (ii) CMS may deny payment to the State for all new Medicaid 
admissions to the facility.
    (b) Required denial of payment. CMS does or the State must deny 
payment for all new admissions when--
    (1) The facility is not in substantial compliance, as defined in 
Sec. 488.401, 3 months after the last day of the survey identifying the 
noncompliance; or
    (2) The State survey agency has cited a facility with substandard 
quality of care on the last three consecutive standard surveys.
    (c) Resumption of payments: Repeated instances of substandard 
quality of care. When a facility has repeated instances of substandard 
quality of care, payments to the facility or, under Medicaid, CMS 
payments to the State on behalf of the facility, resume on the date 
that--
    (1) The facility achieves substantial compliance as indicated by a 
revisit or written credible evidence acceptable to CMS (for all 
facilities except non-State operated NFs against which CMS is imposing 
no remedies) or the State (for

[[Page 914]]

non-State operated NFs against which CMS is imposing no remedies); and
    (2) CMS (for all facilities except non-State operated NFs against 
which CMS is imposing no remedies) or the State (for non-State operated 
NFs against which CMS is imposing no remedies) believes that the 
facility is capable of remaining in substantial compliance.
    (d) Resumption of payments: No repeated instances of substandard 
quality of care. When a facility does not have repeated instances of 
substandard quality of care, payments to the facility or, under 
Medicaid, CMS payments to the State on behalf of the facility, resume 
prospectively on the date that the facility achieves substantial 
compliance, as indicated by a revisit or written credible evidence 
acceptable to CMS (under Medicare) or the State (under Medicaid).
    (e) Restriction. No payments to a facility or, under Medicaid, CMS 
payments to the State on behalf of the facility, are made for the period 
between the date that the--
    (1) Denial of payment remedy is imposed; and
    (2) Facility achieves substantial compliance, as determined by CMS 
or the State.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995]



Sec. 488.418  Secretarial authority to deny all payments.

    (a) CMS option to deny all payment. If a facility has not met a 
requirement, in addition to the authority to deny payment for all new 
admissions as specified in Sec. 488.417, CMS may deny any further 
payment for all Medicare residents in the facility and to the State for 
all Medicaid residents in the facility.
    (b) Prospective resumption of payment. Except as provided in 
paragraphs (d) and (e) of this section, if the facility achieves 
substantial compliance, CMS resumes payment prospectively from the date 
that it verifies as the date that the facility achieved substantial 
compliance.
    (c) Restriction on payment after denial of payment is imposed. If 
payment to the facility or to the State resumes after denial of payment 
for all residents, no payment is made for the period between the date 
that--
    (1) Denial of payment was imposed; and
    (2) CMS verifies as the date that the facility achieved substantial 
compliance.
    (d) Retroactive resumption of payment. Except when a facility has 
repeated instances of substandard quality of care, as specified in 
paragraph (e) of this section, when CMS or the State finds that the 
facility was in substantial compliance before the date of the revisit, 
or before CMS or the survey agency received credible evidence of such 
compliance, payment is resumed on the date that substantial compliance 
was achieved, as determined by CMS.
    (e) Resumption of payment--repeated instances of substandard care. 
When CMS denies payment for all Medicare residents for repeated 
instances of substandard quality of care, payment is resumed when--
    (1) The facility achieved substantial compliance, as indicated by a 
revisit or written credible evidence acceptable to CMS; and
    (2) CMS believes that the facility will remain in substantial 
compliance.



Sec. 488.422  State monitoring.

    (a) A State monitor--
    (1) Oversees the correction of deficiencies specified by CMS or the 
State survey agency at the facility site and protects the facility's 
residents from harm;
    (2) Is an employee or a contractor of the survey agency;
    (3) Is identified by the State as an appropriate professional to 
monitor cited deficiencies;
    (4) Is not an employee of the facility;
    (5) Does not function as a consultant to the facility; and
    (6) Does not have an immediate family member who is a resident of 
the facility to be monitored.
    (b) A State monitor must be used when a survey agency has cited a 
facility with substandard quality of care deficiencies on the last 3 
consecutive standard surveys.
    (c) State monitoring is discontinued when--
    (1) The facility has demonstrated that it is in substantial 
compliance

[[Page 915]]

with the requirements, and, if imposed for repeated instances of 
substandard quality of care, will remain in compliance for a period of 
time specified by CMS or the State; or
    (2) Termination procedures are completed.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995]



Sec. 488.424  Directed plan of correction.

    CMS, the State survey agency, or the temporary manager (with CMS or 
State approval) may develop a plan of correction and CMS, the State, or 
the temporary manager require a facility to take action within specified 
timeframes.



Sec. 488.425  Directed inservice training.

    (a) Required training. CMS or the State agency may require the staff 
of a facility to attend an inservice training program if--
    (1) The facility has a pattern of deficiencies that indicate 
noncompliance; and
    (2) Education is likely to correct the deficiencies.
    (b) Action following training. After the staff has received 
inservice training, if the facility has not achieved substantial 
compliance, CMS or the State may impose one or more other remedies 
specified in Sec. 488.406.
    (c) Payment. The facility pays for directed inservice training.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995]



Sec. 488.426  Transfer of residents, or closure of the facility and transfer of residents.

    (a) Transfer of residents, or closure of the facility and transfer 
of residents in an emergency. In an emergency, the State has the 
authority to--
    (1) Transfer Medicaid and Medicare residents to another facility; or
    (2) Close the facility and transfer the Medicaid and Medicare 
residents to another facility.
    (b) Required transfer when a facility's provider agreement is 
terminated. When the State or CMS terminates a facility's provider 
agreement, the State arranges for the safe and orderly transfer of all 
Medicare and Medicaid residents to another facility.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995]



Sec. 488.430  Civil money penalties: Basis for imposing penalty.

    (a) CMS or the State may impose a civil money penalty for either the 
number of days a facility is not in substantial compliance with one or 
more participation requirements or for each instance that a facility is 
not in substantial compliance, regardless of whether or not the 
deficiencies constitute immediate jeopardy.
    (b) CMS or the State may impose a civil money penalty for the number 
of days of past noncompliance since the last standard survey, including 
the number of days of immediate jeopardy.

[59 FR 56243, Nov. 10, 1994, as amended at 64 FR 13360, Mar. 18, 1999]



Sec. 488.432  Civil money penalties: When a penalty is collected.

    (a) When facility requests a hearing. (1) A facility must request a 
hearing on the determination of the noncompliance that is the basis for 
imposition of the civil money penalty within the time specified in one 
of the following sections:
    (i) Section 498.40 of this chapter for a
    (A) SNF;
    (B) Dually participating facility;
    (C) State-operated NF; or
    (D) Non-State operated NF against which CMS is imposing remedies.
    (ii) Section 431.153 of this chapter for a non-State operated NF 
that is not subject to imposition of remedies by CMS.
    (2)(i) If a facility requests a hearing within the time specified in 
paragraph (a)(1) of this section, for a civil money penalty imposed per 
day, CMS or the State initiates collection of the penalty when there is 
a final administrative decision that upholds CMS's or the State's 
determination of noncompliance after the facility achieves substantial 
compliance or is terminated.
    (ii) If a facility requests a hearing for a civil money penalty 
imposed per instance of noncompliance within the time specified in 
paragraph (a)(1) of this section, CMS or the State initiates collection 
of the penalty when there is

[[Page 916]]

a final administrative decision that upholds CMS's or the State's 
determination of noncompliance.
    (b) When a facility does not request a hearing for a civil money 
penalty imposed per day. (1) If a facility does not request a hearing in 
accordance with paragraph (a) of this section, CMS or the State 
initiates collection of the penalty when the facility--
    (i) Achieves substantial compliance; or
    (ii) Is terminated.
    (2) When a facility does not request a hearing for a civil money 
penalty imposed per instance of noncompliance. If a facility does not 
request a hearing in accordance with paragraph (a) of this section, CMS 
or the State initiates collection of the penalty when the time frame for 
requesting a hearing expires.
    (c) When a facility waives a hearing. (1) If a facility waives, in 
writing, its right to a hearing as specified in Sec. 488.436, for a 
civil money penalty imposed per day, CMS or the State initiates 
collection of the penalty when the facility--
    (i) Achieves substantial compliance; or (ii) Is terminated.
    (2) If a facility waives, in writing, its right to a hearing as 
specified in Sec. 488.436, for a civil money penalty imposed per 
instance of noncompliance, CMS or the State initiates collection of the 
penalty upon receipt of the facility's notification.
    (d) Accrual and computation of penalties for a facility that--
    (1) Requests a hearing or does not request a hearing are specified 
in Sec. 488.440;
    (2) Waives its right to a hearing in writing, are specified in 
Secs. 488.436(b) and 488.440.
    (e) The collection of civil money penalties is made as provided in 
Sec. 488.442.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995, as amended at 
64 FR 13360, Mar. 18, 1999]



Sec. 488.434  Civil money penalties: Notice of penalty.

    (a) CMS notice of penalty. (1) CMS sends a written notice of the 
penalty to the facility for all facilities except non-State operated NFs 
when the State is imposing the penalty.
    (2) Content of notice. The notice that CMS sends includes--
    (i) The nature of the noncompliance;
    (ii) The statutory basis for the penalty;
    (iii) The amount of penalty per day of noncompliance or the amount 
of the penalty per instance of noncompliance;
    (iv) Any factors specified in Sec. 488.438(f) that were considered 
when determining the amount of the penalty;
    (v) The date of the instance of noncompliance or the date on which 
the penalty begins to accrue;
    (vi) When the penalty stops accruing, if applicable;
    (vii) When the penalty is collected; and
    (viii) Instructions for responding to the notice, including a 
statement of the facility's right to a hearing, and the implication of 
waiving a hearing, as provided in Sec. 488.436.
    (b) State notice of penalty. (1) The State must notify the facility 
in accordance with State procedures for all non-State operated NFs when 
the State takes the action.
    (2) The State's notice must--
    (i) Be in writing; and
    (ii) Include, at a minimum, the information specified in paragraph 
(a)(2) of this section.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995, as amended at 
64 FR 13360, Mar. 18, 1999]



Sec. 488.436  Civil money penalties: Waiver of hearing, reduction of penalty amount.

    (a) Waiver of a hearing. The facility may waive the right to a 
hearing, in writing, within 60 days from the date of the notice imposing 
the civil money penalty.
    (b) Reduction of penalty amount. (1) If the facility waives its 
right to a hearing in accordance with the procedures specified in 
paragraph (a) of this section, CMS or the State reduces the civil money 
penalty amount by 35 percent.
    (2) If the facility does not waive its right to a hearing in 
accordance with the procedures specified in paragraph

[[Page 917]]

(a) of this section, the civil money penalty is not reduced by 35 
percent.

[59 FR 56243, Nov. 10, 1994; 62 FR 44221, Aug. 20, 1997]



Sec. 488.438  Civil money penalties: Amount of penalty.

    (a) Amount of penalty. (1) The penalties are within the following 
ranges, set at $50 increments:
    (i) Upper range--$3,050-$10,000. Penalties in the range of $3,050-
$10,000 per day are imposed for deficiencies constituting immediate 
jeopardy, and as specified in paragraph (d)(2) of this section.
    (ii) Lower range--$50-$3,000. Penalties in the range of $50-$3,000 
per day are imposed for deficiencies that do not constitute immediate 
jeopardy, but either caused actual harm, or caused no actual harm, but 
have the potential for more than minimal harm.
    (2) Per instance penalty. When penalties are imposed for an instance 
of noncompliance, the penalties will be in the range of $1,000-$10,000 
per instance.
    (b) Basis for penalty amount. The amount of penalty is based on 
CMS's or the State's assessment of factors listed in paragraph (f) of 
this section.
    (c) Decreased penalty amounts. Except as specified in paragraph 
(d)(2) of this section, if immediate jeopardy is removed, but the 
noncompliance continues, CMS or the State will shift the penalty amount 
imposed per day to the lower range.
    (d) Increased penalty amounts. (1) Before a hearing requested in 
accordance with Sec. 488.432(a), CMS or the State may propose to 
increase the per day penalty amount for facility noncompliance which, 
after imposition of a lower level penalty amount, becomes sufficiently 
serious to pose immediate jeopardy.
    (2) CMS does and the State must increase the per day penalty amount 
for any repeated deficiencies for which a lower level penalty amount was 
previously imposed, regardless of whether the increased penalty amount 
would exceed the range otherwise reserved for nonimmediate jeopardy 
deficiencies.
    (e) Review of the penalty. When an administrative law judge or State 
hearing officer (or higher administrative review authority) finds that 
the basis for imposing a civil money penalty exists, as specified in 
Sec. 488.430, the administrative law judge or State hearing officer (or 
higher administrative review authority) may not--
    (1) Set a penalty of zero or reduce a penalty to zero;
    (2) Review the exercise of discretion by CMS or the State to impose 
a civil money penalty; and
    (3) Consider any factors in reviewing the amount of the penalty 
other than those specified in paragraph (f) of this section.
    (f) Factors affecting the amount of penalty. In determining the 
amount of penalty, CMS does or the State must take into account the 
following factors:
    (1) The facility's history of noncompliance, including repeated 
deficiencies.
    (2) The facility's financial condition.
    (3) The factors specified in Sec. 488.404.
    (4) The facility's degree of culpability. Culpability for purposes 
of this paragraph includes, but is not limited to, neglect, 
indifference, or disregard for resident care, comfort or safety. The 
absence of culpability is not a mitigating circumstance in reducing the 
amount of the penalty.

[59 FR 56243, Nov. 10, 1994, as amended at 64 FR 13360, Mar. 18, 1999]



Sec. 488.440  Civil money penalties: Effective date and duration of penalty.

    (a)(1) The per day civil money penalty may start accruing as early 
as the date that the facility was first out of compliance, as determined 
by CMS or the State.
    (2) A civil money penalty for each instance of noncompliance is 
imposed in a specific amount for that particular deficiency .
    (b) The per day civil money penalty is computed and collectible, as 
specified in Secs. 488.432 and 488.442, for the number of days of 
noncompliance until the date the facility achieves substantial 
compliance, or, if applicable, the date of termination when--
    (1) CMS's or the State's decision of noncompliance is upheld after a 
final administrative decision;
    (2) The facility waives its right to a hearing in accordance with 
Sec. 488.436; or
    (3) The time for requesting a hearing has expired and CMS or the 
State has

[[Page 918]]

not received a hearing request from the facility.
    (c) The entire penalty, whether imposed on a per day or per instance 
basis, is due and collectible as specified in the notice sent to the 
provider under paragraphs (d) and (e) of this section.
    (d)(1) When a civil money penalty is imposed on a per day basis and 
the facility achieves substantial compliance, CMS does or the State must 
send a separate notice to the facility containing the following 
information:
    (i) The amount of penalty per day.
    (ii) The number of days involved.
    (iii) The total amount due.
    (iv) The due date of the penalty.
    (v) The rate of interest assessed on the unpaid balance beginning on 
the due date, as provided in Sec. 488.442.
    (2) When a civil money penalty is imposed for an instance of 
noncompliance, CMS does or the State must send a separate notice to the 
facility containing the following information:
    (i) The amount of the penalty.
    (ii) The total amount due.
    (iii) The due date of the penalty.
    (iv) The rate of interest assessed on the unpaid balance beginning 
on the due date, as provided in Sec. 488.442.
    (e) In the case of a facility for which the provider agreement has 
been terminated and on which a civil money penalty was imposed on a per 
day basis, CMS does or the State must send this penalty information 
after the--
    (1) Final administrative decision is made;
    (2) Facility has waived its right to a hearing in accordance with 
Sec. 488.436; or
    (3) Time for requesting a hearing has expired and CMS or the state 
has not received a hearing request from the facility.
    (f) Accrual of penalties when there is no immediate jeopardy. (1) In 
the case of noncompliance that does not pose immediate jeopardy, the 
daily accrual of per day civil money penalties is imposed for the days 
of noncompliance prior to the notice specified in Sec. 488.434 and an 
additional period of no longer than 6 months following the last day of 
the survey.
    (2) After the period specified in paragraph (f)(1) of this section, 
if the facility has not achieved substantial compliance, CMS terminates 
the provider agreement and the State may terminate the provider 
agreement.
    (g)(1) In a case when per day civil money penalties are imposed, 
when a facility has deficiencies that pose immediate jeopardy, CMS does 
or the State must terminate the provider agreement within 23 calendar 
days after the last day of the survey if the immediate jeopardy remains.
    (2) The accrual of the civil money penalty imposed on a per day 
basis stops on the day the provider agreement is terminated.
    (h)(1) If an on-site revisit is necessary to confirm substantial 
compliance and the provider can supply documentation acceptable to CMS 
or the State agency that substantial compliance was achieved on a date 
preceding the revisit, penalties imposed on a per day basis only accrue 
until that date of correction for which there is written credible 
evidence.
    (2) If an on-site revisit is not necessary to confirm substantial 
compliance, penalties imposed on a per day basis only accrue until the 
date of correction for which CMS or the State receives and accepts 
written credible evidence.

[59 FR 56243, Nov. 10, 1994, as amended at 64 FR 13361, Mar. 18, 1999]



Sec. 488.442  Civil money penalties: Due date for payment of penalty.

    (a) When payments are due for a civil money penalty imposed on a per 
day basis--(1) After a final administrative decision. A civil money 
penalty payment is due 15 days after a final administrative decision is 
made when--
    (i) The facility achieves substantial compliance before the final 
administrative decision; or
    (ii) The effective date of termination occurs before the final 
administrative decision.
    (2) When no hearing was requested. A civil money penalty payment is 
due 15 days after the time period for requesting a hearing has expired 
and a hearing request was not received when--
    (i) The facility achieved substantial compliance before the hearing 
request was due; or
    (ii) The effective date of termination occurs before the hearing 
request was due.

[[Page 919]]

    (3) After a request to waive a hearing. A civil money penalty 
payment is due 15 days after receipt of the written request to waive a 
hearing when--
    (i) The facility achieved substantial compliance before CMS or the 
State received the written waiver of hearing; or
    (ii) The effective date of termination occurs before CMS or the 
State received the written waiver of hearing.
    (4) After substantial compliance is achieved. A civil money penalty 
payment is due 15 days after substantial compliance is achieved when--
    (i) The final administrative decision is made before the facility 
came into substantial compliance;
    (ii) The facility did not file a timely hearing request before it 
came into substantial compliance; or
    (iii) The facility waived its right to a hearing before it came into 
substantial compliance;
    (5) After the effective date of termination. A civil money penalty 
payment is due 15 days after the effective date of termination, if 
before the effective date of termination--
    (i) The final administrative decision was made;
    (ii) The time for requesting a hearing has expired and the facility 
did not request a hearing; or
    (iii) The facility waived its right to a hearing.
    (6) In the cases specified in paragraph (a)(4) of this section, the 
period of noncompliance may not extend beyond 6 months from the last day 
of the survey.
    (b) When payments are due for a civil money penalty imposed for an 
instance of noncompliance. Payment of a civil money penalty is due 15 
days after one of the following dates:
    (1) The final administrative decision is made;
    (2) The time for requesting a hearing has expired and the facility 
did not request a hearing; or
    (3) The facility waived its right to a hearing.
    (c) Deduction of penalty from amount owed. The amount of the 
penalty, when determined, may be deducted from any sum then or later 
owing by CMS or the State to the facility.
    (d) Interest--(1) Assessment. Interest is assessed on the unpaid 
balance of the penalty, beginning on the due date.
    (2) Medicare interest. Medicare rate of interest is the higher of--
    (i) The rate fixed by the Secretary of the Treasury after taking 
into consideration private consumer rates of interest prevailing on the 
date of the notice of the penalty amount due (published quarterly in the 
Federal Register by HHS under 45 CFR 30.13(a)); or
    (ii) The current value of funds (published annually in the Federal 
Register by the Secretary of the Treasury, subject to quarterly 
revisions).
    (3) Medicaid interest. The interest rate for Medicaid is determined 
by the State.
    (e) Penalties collected by CMS. Civil money penalties and 
corresponding interest collected by CMS from--
    (1) Medicare-participating facilities are deposited as miscellaneous 
receipts of the United States Treasury; and
    (2) Medicaid-participating facilities are returned to the State.
    (f) Collection from dually participating facilities. Civil money 
penalties collected from dually participating facilities are deposited 
as miscellaneous receipts of the United States Treasury and returned to 
the State in proportion commensurate with the relative proportions of 
Medicare and Medicaid beds at the facility actually in use by residents 
covered by the respective programs on the date the civil money penalty 
begins to accrue.
    (g) Penalties collected by the State. Civil money penalties 
collected by the State must be applied to the protection of the health 
or property of residents of facilities that the State or CMS finds 
noncompliant, such as--
    (1) Payment for the cost of relocating residents to other 
facilities;
    (2) State costs related to the operation of a facility pending 
correction of deficiencies or closure; and
    (3) Reimbursement of residents for personal funds or property lost 
at a facility as a result of actions by the facility or by individuals 
used by the facility to provide services to residents.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995, as amended at 
64 FR 13361, Mar. 18, 1999]

[[Page 920]]



Sec. 488.444  Civil money penalties: Settlement of penalties.

    (a) CMS has authority to settle cases at any time prior to a final 
administrative decision for Medicare-only SNFs, State-operated 
facilities, or other facilities for which CMS's enforcement action 
prevails, in accordance with Sec. 488.330.
    (b) The State has the authority to settle cases at any time prior to 
the evidentiary hearing decision for all cases in which the State's 
enforcement action prevails.



Sec. 488.450  Continuation of payments to a facility with deficiencies.

    (a) Criteria. (1) CMS may continue payments to a facility not in 
substantial compliance for the periods specified in paragraph (c) of 
this section if the following criteria are met:
    (i) The State survey agency finds that it is more appropriate to 
impose alternative remedies than to terminate the facility;
    (ii) The State has submitted a plan and timetable for corrective 
action approved by CMS; and
    (iii) The facility, in the case of a Medicare SNF, or the State, in 
the case of a Medicaid NF, agrees to repay the Federal government 
payments received under this provision if corrective action is not taken 
in accordance with the approved plan and timetable for corrective 
action.
    (2) CMS or the State may terminate the SNF or NF agreement before 
the end of the correction period if the criteria in paragraph (a)(1) of 
this section are not met.
    (b) Cessation of payments. If termination is not sought, either by 
itself or along with another remedy or remedies, or any of the criteria 
set forth in paragraph (a)(1) of this section are not met or agreed to 
by either the facility or the State, the facility or State will receive 
no Medicare or Federal Medicaid payments, as applicable, from the last 
day of the survey.
    (c) Period of continued payments. If the conditions in paragraph 
(a)(1) of this section are met, CMS may continue payments to a Medicare 
facility or to the State for a Medicaid facility with noncompliance that 
does not constitute immediate jeopardy for up to 6 months from the last 
day of the survey.
    (d) Failure to achieve substantial compliance. If the facility does 
not achieve substantial compliance by the end of the period specified in 
paragraph (c) of this section,
    (1) CMS will--
    (i) Terminate the provider agreement of the Medicare SNF in 
accordance with Sec. 488.456; or
    (ii) Discontinue Federal funding to the SNF for Medicare; and
    (iii) Discontinue FFP to the State for the Medicaid NF.
    (2) The State may terminate the provider agreement for the NF.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995]



Sec. 488.452  State and Federal disagreements involving findings not in agreement in non-State operated NFs and dually participating facilities when there is no 
          immediate jeopardy.

    The following rules apply when CMS and the State disagree over 
findings of noncompliance or application of remedies in a non-State 
operated NF or dually participating facility:
    (a) Disagreement over whether facility has met requirements. (1) The 
State's finding of noncompliance takes precedence when--
    (i) CMS finds that a NF or a dually participating facility is in 
substantial compliance with the participation requirements; and
    (ii) The State finds that a NF or dually participating facility has 
not achieved substantial compliance.
    (2) CMS's findings of noncompliance take precedence when--
    (i) CMS finds that a NF or a dually participating facility has not 
achieved substantial compliance; and
    (ii) The State finds that a NF or a dually participating facility is 
in substantial compliance with the participation requirements.
    (3) When CMS's survey findings take precedence, CMS may--
    (i) Impose any of the alternative remedies specified in 
Sec. 488.406;
    (ii) Terminate the provider agreement subject to the applicable 
conditions of Sec. 488.450; and
    (iii) Stop FFP to the State for a NF.

[[Page 921]]

    (b) Disagreement over decision to terminate. (1) CMS's decision to 
terminate the participation of a facility takes precedence when--
    (i) Both CMS and the State find that the facility has not achieved 
substantial compliance; and
    (ii) CMS, but not the State, finds that the facility's participation 
should be terminated. CMS will permit continuation of payment during the 
period prior to the effective date of termination not to exceed 6 
months, if the applicable conditions of Sec. 488.450 are met.
    (2) The State's decision to terminate a facility's participation and 
the procedures for appealing such termination, as specified in 
Sec. 431.153(c) of this chapter, takes precedence when--
    (i) The State, but not CMS, finds that a NF's participation should 
be terminated; and
    (ii) The State's effective date for the termination of the NF's 
provider agreement is no later than 6 months after the last day of 
survey.
    (c) Disagreement over timing of termination of facility. The State's 
timing of termination takes precedence if it does not occur later than 6 
months after the last day of the survey when both CMS and the State find 
that--
    (1) A facility is not in substantial compliance; and
    (2) The facility's participation should be terminated.
    (d) Disagreement over remedies. (1) When CMS or the State, but not 
both, establishes one or more remedies, in addition to or as an 
alternative to termination, the additional or alternative remedies will 
also apply when--
    (i) Both CMS and the State find that a facility has not achieved 
substantial compliance; and
    (ii) Both CMS and the State find that no immediate jeopardy exists.
    (2) Overlap of remedies. When CMS and the State establish one or 
more remedies, in addition to or as an alternative to termination, only 
the CMS remedies apply when both CMS and the State find that a facility 
has not achieved substantial compliance.
    (e) Regardless of whether CMS's or the State's decision controls, 
only one noncompliance and enforcement decision is applied to the 
Medicaid agreement, and for a dually participating facility, that same 
decision will apply to the Medicare agreement.



Sec. 488.454  Duration of remedies.

    (a) Except as specified in paragraphs (b) and (d) of this section, 
alternative remedies continue until--
    (1) The facility has achieved substantial compliance, as determined 
by CMS or the State based upon a revisit or after an examination of 
credible written evidence that it can verify without an on-site visit; 
or
    (2) CMS or the State terminates the provider agreement.
    (b) In the cases of State monitoring and denial of payment imposed 
for repeated substandard quality of care, remedies continue until--
    (1) CMS or the State determines that the facility has achieved 
substantial compliance and is capable of remaining in substantial 
compliance; or
    (2) CMS or the State terminates the provider agreement.
    (c) In the case of temporary management, the remedy continues until-
-
    (1) CMS or the State determines that the facility has achieved 
substantial compliance and is capable of remaining in substantial 
compliance;
    (2) CMS or the State terminates the provider agreement; or
    (3) The facility which has not achieved substantial compliance 
reassumes management control. In this case, CMS or the State initiates 
termination of the provider agreement and may impose additional 
remedies.
    (d) In the case of a civil money penalty imposed for an instance of 
noncompliance, the remedy is the specific amount of the civil money 
penalty imposed for the particular deficiency.
    (e) If the facility can supply documentation acceptable to CMS or 
the State survey agency that it was in substantial compliance and was 
capable of remaining in substantial compliance, if necessary, on a date 
preceding that of the revisit, the remedies terminate on the date that 
CMS or the State can verify as the date that substantial

[[Page 922]]

compliance was achieved and the facility demonstrated that it could 
maintain substantial compliance, if necessary.

[59 FR 56243, Nov. 10, 1994; 60 FR 50119, Sept. 28, 1995, as amended at 
64 FR 13361, Mar. 18, 1999]



Sec. 488.456  Termination of provider agreement.

    (a) Effect of termination. Termination of the provider agreement 
ends--
    (1) Payment to the facility; and
    (2) Any alternative remedy.
    (b) Basis for termination. (1) CMS and the State may terminate a 
facility's provider agreement if a facility--
    (i) Is not in substantial compliance with the requirements of 
participation, regardless of whether or not immediate jeopardy is 
present; or
    (ii) Fails to submit an acceptable plan of correction within the 
timeframe specified by CMS or the State.
    (2) CMS and the State terminate a facility's provider agreement if a 
facility--
    (i) Fails to relinquish control to the temporary manager, if that 
remedy is imposed by CMS or the State; or
    (ii) Does not meet the eligibility criteria for continuation of 
payment as set forth in Sec. 488.412(a)(1).
    (c) Notice of termination. Before terminating a provider agreement, 
CMS does and the State must notify the facility and the public--
    (1) At least 2 calendar days before the effective date of 
termination for a facility with immediate jeopardy deficiencies; and
    (2) At least 15 calendar days before the effective date of 
termination for a facility with non-immediate jeopardy deficiencies that 
constitute noncompliance.
    (d) Procedures for termination. (1) CMS terminates the provider 
agreement in accordance with procedures set forth in Sec. 489.53 of this 
chapter; and
    (2) The State must terminate the provider agreement of a NF in 
accordance with procedures specified in parts 431 and 442 of this 
chapter.



PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL--Table of Contents




                      Subpart A--General Provisions

Sec.
489.1 Statutory basis.
489.2 Scope of part.
489.3 Definitions.
489.10 Basic requirements.
489.11 Acceptance of a provider as a participant.
489.12 Decision to deny an agreement.
489.13 Effective date of agreement or approval.
489.18 Change of ownership or leasing: Effect on provider agreement.

              Subpart B--Essentials of Provider Agreements

489.20 Basic commitments.
489.21 Specific limitations on charges.
489.22 Special provisions applicable to prepayment requirements.
489.23 Specific limitation on charges for services provided to certain 
          enrollees of fee-for-service FEHB plans.
489.24 Special responsibilities of Medicare hospitals in emergency 
          cases.
489.25 Special requirements concerning CHAMPUS and CHAMPVA programs.
489.26 Special requirements concerning veterans.
489.27 Beneficiary notice of discharge rights.
489.28 Special capitalization requirements for HHAs.

                      Subpart C--Allowable Charges

489.30 Allowable charges: Deductibles and coinsurance.
489.31 Allowable charges: Blood.
489.32 Allowable charges: Noncovered and partially covered services.
489.34 Allowable charges: Hospitals participating in State reimbursement 
          control systems or demonstration projects.
489.35 Notice to intermediary.

              Subpart D--Handling of Incorrect Collections

489.40 Definition of incorrect collection.
489.41 Timing and methods of handling.
489.42 Payment of offset amounts to beneficiary or other person.

 Subpart E--Termination of Agreement and Reinstatement After Termination

489.52 Termination by the provider.
489.53 Termination by CMS.
489.54 Termination by the OIG.
489.55 Exceptions to effective date of termination.

[[Page 923]]

489.57 Reinstatement after termination.

              Subpart F--Surety Bond Requirements for HHAs

489.60 Definitions.
489.61 Basic requirement for surety bonds.
489.62 Requirement waived for Government-operated HHAs.
489.63 Parties to the bond.
489.64 Authorized Surety and exclusion of surety companies.
489.65 Amount of the bond.
489.66 Additional requirements of the surety bond.
489.67 Term and type of bond.
489.68 Effect of failure to obtain, maintain, and timely file a surety 
          bond.
489.69 Evidence of compliance.
489.70 Effect of payment by the Surety.
489.71 Surety's standing to appeal Medicare determinations.
489.72 Effect of review reversing CMS's determination.
489.73 Effect of conditions of payment.
489.74 Incorporation into existing provider agreements.

Subparts G-H [Reserved]

                      Subpart I--Advance Directives

489.100 Definition.
489.102 Requirements for providers.
489.104 Effective dates.

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

    Source: 45 FR 22937, Apr. 4, 1980, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 489.1  Statutory basis.

    This part implements section 1866 of the Social Security Act. 
Section 1866 specifies the terms of provider agreements, the grounds for 
terminating a provider agreement, the circumstances under which payment 
for new admissions may be denied, and the circumstances under which 
payment may be withheld for failure to make timely utilization review. 
The following other sections of that Act are also pertinent.
    (a) Section 1861 defines the services covered under Medicare and the 
providers that may be reimbursed for furnishing those services.
    (b) Section 1864 provides for the use of State survey agencies to 
ascertain whether certain entities meet the conditions of participation.
    (c) Section 1871 authorizes the Secretary to prescribe regulations 
for the administration of the Medicare program.
    (d) Although section 1866 of the Act speaks only to providers and 
provider agreements, the effective date rules in this part are made 
applicable also to the approval of suppliers that meet the requirements 
specified in Sec. 489.13.
    (e) Section 1861(o)(7) of the Act requires each HHA to provide CMS 
with a surety bond.

[45 FR 22937, Apr. 4, 1980, as amended at 51 FR 24492, July 3, 1986; 62 
FR 43936, Aug. 18, 1997; 63 FR 312, Jan. 5, 1998]



Sec. 489.2  Scope of part.

    (a) Subpart A of this part sets forth the basic requirements for 
submittal and acceptance of a provider agreement under Medicare. Subpart 
B of this part specifies the basic commitments and limitations that the 
provider must agree to as part of an agreement to provide services. 
Subpart C specifies the limitations on allowable charges to 
beneficiaries for deductibles, coinsurance, copayments, blood, and 
services that must be part of the provider agreement. Subpart D of this 
part specifies how incorrect collections are to be handled. Subpart F 
sets forth the circumstances and procedures for denial of payments for 
new admissions and for withholding of payment as an alternative to 
termination of a provider agreement.
    (b) The following providers are subject to the provisions of this 
part:
    (1) Hospitals.
    (2) Skilled nursing facilities (SNFs).
    (3) Home health agencies (HHAs).
    (4) Clinics, rehabilitation agencies, and public health agencies.
    (5) Comprehensive outpatient rehabilitation facilities (CORFs).
    (6) Hospices.
    (7) Critical access hospital (CAHs).
    (8) Community mental health centers (CMHCs).
    (c)(1) Clinics, rehabilitation agencies, and public health agencies 
may enter into provider agreements only for furnishing outpatient 
physical therapy, and speech pathology services.

[[Page 924]]

    (2) CMHCs may enter into provider agreements only to furnish partial 
hospitalization services.

[45 FR 22937, Apr. 4, 1980, as amended at 47 FR 56297, Dec. 15, 1982; 48 
FR 56036, Dec. 15, 1983; 51 FR 24492, July 3, 1986; 58 FR 30676, May 26, 
1993; 59 FR 6578, Feb. 11, 1994; 62 FR 46037, Aug. 29, 1997]



Sec. 489.3  Definitions.

    For purposes of this part--
    Immediate jeopardy means a situation in which the provider's 
noncompliance with one or more requirements of participation has caused, 
or is likely to cause, serious injury, harm, impairment, or death to a 
resident.
    Provider agreement means an agreement between CMS and one of the 
providers specified in Sec. 489.2(b) to provide services to Medicare 
beneficiaries and to comply with the requirements of section 1866 of the 
Act.

[48 FR 39837, Sept. 1, 1983, as amended at 51 FR 24492, July 3, 1986; 54 
FR 5373, Feb. 2, 1989; 59 FR 56250, Nov. 10, 1994; 60 FR 50119, Sept. 
28, 1995]



Sec. 489.10  Basic requirements.

    (a) Any of the providers specified in Sec. 489.2 may request 
participation in Medicare. In order to be accepted, it must meet the 
conditions of participation or requirements (for SNFs) set forth in this 
section and elsewhere in this chapter.
    (b) In order to participate in the Medicare program, the provider 
must meet the applicable civil rights requirements of:
    (1) Title VI of the Civil Rights Act of 1964, as implemented by 45 
CFR part 80, which provides that no person in the United States shall, 
on the ground of race, color, or national origin, be excluded from 
participation in, be denied the benefits of, or be subject to 
discrimination under, any program or activity receiving Federal 
financial assistance (section 601);
    (2) Section 504 of the Rehabilitation Act of 1973, as implemented by 
45 CFR part 84, which provides that no qualified handicapped person 
shall, on the basis of handicap, be excluded from participation in, be 
denied the benefits of, or otherwise be subject to discrimination under 
any program or activity receiving Federal financial assistance;
    (3) The Age Discrimination Act of 1975, as implemented by 45 CFR 
part 90, which is designed to prohibit discrimination on the basis of 
age in programs or activities receiving Federal financial assistance. 
The Age Discrimination Act also permits federally assisted programs and 
activities, and recipients of Federal funds, to continue to use certain 
age distinctions, and factors other than age, that meet the requirements 
of the Age Discrimination Act and 45 CFR part 90; and
    (4) Other pertinent requirements of the Office of Civil Rights of 
HHS.
    (c) In order for a hospital, SNF, HHA, or hospice to be accepted, it 
must also meet the advance directives requirements specified in subpart 
I of this part.
    (d) The State survey agency will ascertain whether the provider 
meets the conditions of participation or requirements (for SNFs) and 
make its recommendations to CMS.
    (e) In order for a home health agency to be accepted, it must also 
meet the surety bond requirements specified in subpart F of this part.
    (f) In order for a home health agency to be accepted as a new 
provider, it must also meet the capitalization requirements specified in 
subpart B of this part.

[58 FR 61843, Nov. 23, 1993, as amended at 59 FR 6578, Feb. 11, 1994; 63 
FR 312, Jan. 5, 1998]



Sec. 489.11  Acceptance of a provider as a participant.

    (a) Action by CMS. If CMS determines that the provider meets the 
requirements, it will send the provider--
    (1) Written notice of that determination; and
    (2) Two copies of the provider agreement.
    (b) Action by provider. If the provider wishes to participate, it 
must return both copies of the agreement, duly signed by an authorized 
official, to CMS, together with a written statement indicating whether 
it has been adjudged insolvent or bankrupt in any State or Federal 
court, or whether any insolvency or bankruptcy actions are pending.
    (c) Notice of acceptance. If CMS accepts the agreement, it will 
return one

[[Page 925]]

copy to the provider with a written notice that--
    (1) Indicates the dates on which it was signed by the provider's 
representative and accepted by CMS; and
    (2) Specifies the effective date of the agreement.

[45 FR 22937, Apr. 4, 1980, as amended at 59 FR 56251, Nov. 10, 1994; 62 
FR 43937, Aug. 18, 1997]



Sec. 489.12  Decision to deny an agreement.

    (a) Bases for denial. CMS may refuse to enter into an agreement for 
any of the following reasons:
    (1) Principals of the prospective provider have been convicted of 
fraud (see Sec. 420.204 of this chapter);
    (2) The prospective provider has failed to disclose ownership and 
control interests in accordance with Sec. 420.206 of this chapter; or
    (3) The prospective provider is unable to give satisfactory 
assurance of compliance with the requirements of title XVIII of the Act.
    (b) [Reserved]
    (c) Compliance with civil rights requirements. CMS will not enter 
into a provider agreement if the provider fails to comply with civil 
rights requirements set forth in 45 CFR parts 80, 84, and 90, subject to 
the provisions of Sec. 489.10.

[45 FR 22937, Apr. 4, 1980, as amended at 51 FR 34833, Sept. 30, 1986; 
54 FR 4027, Jan. 27. 1989; 59 FR 6578, Feb. 11, 1994; 59 FR 56251, Nov. 
10, 1994]



Sec. 489.13  Effective date of agreement or approval.

    (a) Applicability--(1) General rule. Except as provided in paragraph 
(a)(2) of this section, this section applies to Medicare provider 
agreements with, and supplier approval of, entities that, as a basis for 
participation in Medicare--
    (i) Are subject to survey and certification by CMS or the State 
survey agency; or
    (ii) Are deemed to meet Federal requirements on the basis of 
accreditation by an accrediting organization whose program has CMS 
approval at the time of accreditation survey and accreditation decision.
    (2) Exceptions. (i) For an agreement with a community mental health 
center (CMHC) or a Federally qualified health center (FQHC), the 
effective date is the date on which CMS accepts a signed agreement which 
assures that the CMHC or FQHC meets all Federal requirements.
    (ii) A Medicare supplier approval of a laboratory is effective only 
while the laboratory has in effect a valid CLIA certificate issued under 
part 493 of this chapter, and only for the specialty and subspecialty 
tests it is authorized to perform.
    (b) All Federal requirements are met on the date of survey. The 
agreement or approval is effective on the date the survey (including the 
Life Safety Code survey, if applicable) is completed, if on that date 
the provider or supplier meets all applicable Federal requirements as 
set forth in this chapter. (If the agreement or approval is time-
limited, the new agreement or approval is effective on the day following 
expiration of the current agreement or approval.)
    (c) All Federal requirements are not met on the date of survey. If 
on the date the survey is completed the provider or supplier fails to 
meet any of the requirements specified in paragraph (b) of this section, 
the following rules apply:
    (1) For an agreement with an SNF, the effective date is the date on 
which--
    (i) The SNF is in substantial compliance (as defined in Sec. 488.301 
of this chapter) with the requirements for participation; and
    (ii) CMS or the State survey agency receives from the SNF, if 
applicable, an approvable waiver request.
    (2) For an agreement with, or an approval of, any other provider or 
supplier, (except those specified in paragraph (a)(2) of this section), 
the effective date is the earlier of the following:
    (i) The date on which the provider or supplier meets all 
requirements.
    (ii) The date on which a provider or supplier is found to meet all 
conditions of participation or coverage, but has lower level 
deficiencies, and CMS or the State survey agency receives an acceptable 
plan of correction for the lower level deficiencies, or an approvable 
waiver request, or both. (The date

[[Page 926]]

of receipt is the effective date regardless of when CMS approves the 
plan of correction or the waiver request, or both.)
    (d) Accredited provider or supplier requests participation in the 
Medicare program--(1) General rule. If the provider or supplier is 
currently accredited by a national accrediting organization whose 
program had CMS approval at the time of accreditation survey and 
accreditation decision, and on the basis of accreditation, CMS has 
deemed the provider or supplier to meet Federal requirements, the 
effective date depends on whether the provider or supplier is subject to 
requirements in addition to those included in the accrediting 
organization's approved program.
    (i) Provider or supplier subject to additional requirements. If the 
provider or supplier is subject to additional requirements, the 
effective date of the agreement or approval is the date on which the 
provider or supplier meets all requirements, including the additional 
requirements.
    (ii) Provider or supplier not subject to additional requirements. 
For a provider or supplier that is not subject to additional 
requirements, the effective date is the date of the provider's or 
supplier's initial request for participation if on that date the 
provider or supplier met all Federal requirements.
    (2) Special rule: Retroactive effective date. If a provider or 
supplier meets the requirements of paragraphs (d)(1) and (d)(1)(i) or 
(d)(1)(ii) of this section, the effective date may be retroactive for up 
to one year to encompass dates on which the provider or supplier 
furnished, to a Medicare beneficiary, covered services for which it has 
not been paid.

[62 FR 43936, Aug. 18, 1997]



Sec. 489.18  Change of ownership or leasing: Effect on provider agreement.

    (a) What constitutes change of ownership--(1) Partnership. In the 
case of a partnership, the removal, addition, or substitution of a 
partner, unless the partners expressly agree otherwise, as permitted by 
applicable State law, constitutes change of ownership.
    (2) Unincorporated sole proprietorship. Transfer of title and 
property to another party constitutes change of ownership.
    (3) Corporation. The merger of the provider corporation into another 
corporation, or the consolidation of two or more corporations, resulting 
in the creation of a new corporation constitutes change of ownership. 
Transfer of corporate stock or the merger of another corporation into 
the provider corporation does not constitute change of ownership.
    (4) Leasing. The lease of all or part of a provider facility 
constitutes change of ownership of the leased portion.
    (b) Notice to CMS. A provider who is contemplating or negotiating a 
change of ownership must notify CMS.
    (c) Assignment of agreement. When there is a change of ownership as 
specified in paragraph (a) of this section, the existing provider 
agreement will automatically be assigned to the new owner.
    (d) Conditions that apply to assigned agreements. An assigned 
agreement is subject to all applicable statutes and regulations and to 
the terms and conditions under which it was originally issued including, 
but not limited to, the following:
    (1) Any existing plan of correction.
    (2) Compliance with applicable health and safety standards.
    (3) Compliance with the ownership and financial interest disclosure 
requirements of part 420, subpart C, of this chapter.
    (4) Compliance with civil rights requirements set forth in 45 CFR 
Parts 80, 84, and 90.
    (e) Effect of leasing. The provider agreement will be assigned to 
the lessee only to the extent of the leased portion of the facility.

[45 FR 22937, Apr. 4, 1980, as amended at 59 FR 56251, Nov. 10, 1994]



              Subpart B--Essentials of Provider Agreements



Sec. 489.20  Basic commitments.

    The provider agrees to the following:
    (a) To limit its charges to beneficiaries and to other individuals 
on their behalf, in accordance with provisions of subpart C of this 
part.
    (b) To comply with the requirements of subpart D of this part for 
the return

[[Page 927]]

or other disposition of any amounts incorrectly collected from a 
beneficiary or any other person in his or her behalf.
    (c) To comply with the requirements of Sec. 420.203 of this chapter 
when it hires certain former employees of intermediaries.
    (d) In the case of a hospital or a CAH that furnishes services to 
Medicare beneficiaries, either to furnish directly or to make 
arrangements (as defined in Sec. 409.3 of this chapter) for all 
Medicare-covered services to inpatients and outpatients of a hospital or 
a CAH except the following:
    (1) Physicians' services that meet the criteria of Sec. 415.102(a) 
of this chapter for payment on a reasonable charge basis.
    (2) Physician assistant services, as defined in section 
1861(s)(2)(K)(i) of the Act, that are furnished after December 31, 1990.
    (3) Nurse practitioner and clinical nurse specialist services, as 
defined in section 1861(s)(2)(K)(ii) of the Act.
    (4) Certified nurse-midwife services, as defined in section 1861(ff) 
of the Act, that are furnished after December 31, 1990.
    (5) Qualified psychologist services, as defined in section 1861(ii) 
of the Act, that are furnished after December 31, 1990.
    (6) Services of an anesthetist, as defined in Sec. 410.69 of this 
chapter.
    (e) In the case of a hospital or CAH that furnishes inpatient 
hospital services or inpatient CAH services for which payment may be 
made under Medicare, to maintain an agreement with a QIO for that 
organization to review the admissions, quality, appropriateness, and 
diagnostic information related to those inpatient services. The 
requirement of this paragraph (e) applies only if, for the area in which 
the hospital or CAH is located, there is a QIO that has a contract with 
CMS under part B of title XI of the Act.
    (f) To maintain a system that, during the admission process, 
identifies any primary payers other than Medicare, so that incorrect 
billing and Medicare overpayments can be prevented.
    (g) To bill other primary payers before billing Medicare except when 
the primary payer is a liability insurer and except as provided in 
paragraph (j) of this section.
    (h) If the provider receives payment for the same services from 
Medicare and another payer that is primary to Medicare, to reimburse 
Medicare any overpaid amount within 60 days.
    (i) If the provider receives, from a payer that is primary to 
Medicare, a payment that is reduced because the provider failed to file 
a proper claim--
    (1) To bill Medicare for an amount no greater than would have been 
payable as secondary payment if the primary insurer's payment had been 
based on a proper claim; and
    (2) To charge the beneficiary only: (i) The amount it would have 
been entitled to charge if it had filed a proper claim and received 
payment based on such a claim; and
    (ii) An amount equal to any third party payment reduction 
attributable to failure to file a proper claim, but only if the provider 
can show that--
    (A) It failed to file a proper claim solely because the beneficiary, 
for any reason other than mental or physical incapacity, failed to give 
the provider the necessary information; or
    (B) The beneficiary, who was responsible for filing a proper claim, 
failed to do so for any reason other than mental or physical incapacity.
    (j) In the State of Oregon, because of a court decision, and in the 
absence of a reversal on appeal or a statutory clarification overturning 
the decision, hospitals may bill liability insurers first. However, if 
the liability insurer does not pay ``promptly'', as defined in 
Sec. 411.50 of this chapter, the hospital must withdraw its claim or 
lien and bill Medicare for covered services.
    (k) In the case of home health agencies that provide home health 
services to Medicare beneficiaries under subpart E of part 409 and 
subpart C f part 410 of this chapter, to offer to furnish catheters, 
catheter supplies, ostomy bags, and supplies related to ostomy care to 
any individual who requires them as part of their furnishing of home 
health services.
    (l) In the case of a hospital as defined in Sec. 489.24(b) to comply 
with Sec. 489.24.
    (m) In the case of a hospital as defined in Sec. 489.24(b), to 
report to CMS or the State survey agency any time it

[[Page 928]]

has reason to believe it may have received an individual who has been 
transferred in an unstable emergency medical condition from another 
hospital in violation of the requirements of Sec. 489.24(d).
    (n) In the case of inpatient hospital services, to participate in 
any health plan contracted for under 10 U.S.C. 1079 or 1086 or 38 U.S.C. 
613, in accordance with Sec. 489.25.
    (o) In the case of inpatient hospital services, to admit veterans 
whose admission has been authorized under 38 U.S.C. 603, in accordance 
with Sec. 489.26.
    (p) In the case of a hospital that participates in the Medicare 
program, to comply with Sec. 489.27 by giving each beneficiary a notice 
about his or her discharge rights at or about the time of the 
individual's admission.
    (q) In the case of a hospital as defined in Sec. 489.24(b)--
    (1) To post conspicuously in any emergency department or in a place 
or places likely to be noticed by all individuals entering the emergency 
department, as well as those individuals waiting for examination and 
treatment in areas other than traditional emergency departments (that 
is, entrance, admitting area, waiting room, treatment area), a sign (in 
a form specified by the Secretary) specifying rights of individuals 
under Section 1867 of the Act with respect to examination and treatment 
for emergency medical conditions and women in labor; and
    (2) To post conspicuously (in a form specified by the Secretary) 
information indicating whether or not the hospital or rural primary care 
hospital participates in the Medicaid program under a State plan 
approved under title XIX.
    (r) In the case of a hospital as defined in Sec. 489.24(b) 
(including both the transferring and receiving hospitals), to maintain--
    (1) Medical and other records related to individuals transferred to 
or from the hospital for a period of 5 years from the date of the 
transfer;
    (2) A list of physicians who are on call for duty after the initial 
examination to provide treatment necessary to stabilize an individual 
with an emergency medical condition; and
    (3) A central log on each individual who comes to the emergency 
department, as defined in Sec. 489.24(b), seeking assistance and whether 
he or she refused treatment, was refused treatment, or whether he or she 
was transferred, admitted and treated, stabilized and transferred, or 
discharged.
    (s) In the case of an SNF, either to furnish directly or make 
arrangements (as defined in Sec. 409.3 of this chapter) for any 
physical, occupational, or speech-language therapy services furnished to 
a resident of the SNF under Sec. 411.15(p) of this chapter (regardless 
of whether the resident is in a covered Part A stay), and also either to 
furnish directly or make arrangements for all other Medicare-covered 
services furnished to a resident during a covered Part A stay, except 
the following:
    (1) Physicians' services that meet the criteria of Sec. 415.102(a) 
of this chapter for payment on a fee schedule basis.
    (2) Services performed under a physician's supervision by a 
physician assistant who meets the applicable definition in section 
1861(aa)(5) of the Act.
    (3) Services performed by a nurse practitioner or clinical nurse 
specialist who meets the applicable definition in section 1861(aa)(5) of 
the Act and is working in collaboration (as defined in section 
1861(aa)(6) of the Act) with a physician.
    (4) Services performed by a certified nurse-midwife, as defined in 
section 1861(gg) of the Act.
    (5) Services performed by a qualified psychologist, as defined in 
section 1861(ii) of the Act.
    (6) Services performed by a certified registered nurse anesthetist, 
as defined in section 1861(bb) of the Act.
    (7) Dialysis services and supplies, as defined in section 
1861(s)(2)(F) of the Act, and those ambulance services that are 
furnished in conjunction with them.
    (8) Erythropoietin (EPO) for dialysis patients, as defined in 
section 1861(s)(2)(O) of the Act.
    (9) Hospice care, as defined in section 1861(dd) of the Act.
    (10) An ambulance trip that initially conveys an individual to the 
SNF to be admitted as a resident, or that conveys an individual from the 
SNF in connection with one of the circumstances specified in 
Sec. 411.15(p)(3)(i) through

[[Page 929]]

(p)(3)(iv) of this chapter as ending the individual's status as an SNF 
resident.
    (11) The transportation costs of electrocardiogram equipment (HCPCS 
code R0076), but only with respect to those electrocardiogram test 
services furnished during 1998.
    (12) Those chemotherapy items identified, as of July 1, 1999, by 
HCPCS codes J9000-J9020; J9040-J9151; J9170-J9185; J9200-J9201; J9206-
J9208; J9211; J9230-J9245; and J9265-J9600.
    (13) Those chemotherapy administration services identified, as of 
July 1, 1999, by HCPCS codes 36260-36262; 36489; 36530-36535; 36640; 
36823; and 96405-96542.
    (14) Those radioisotope services identified, as of July 1, 1999, by 
HCPCS codes 79030-79440.
    (15) Those customized prosthetic devices (including artificial limbs 
and their components) identified, as of July 1, 1999, by HCPCS codes 
L5050-L5340; L5500-L5611; L5613-L5986; L5988; L6050-L6370; L6400-6880; 
L6920-L7274; and L7362-L7366, which are delivered for a resident's use 
during a stay in the SNF and intended to be used by the resident after 
discharge from the SNF.

[45 FR 22937, Apr. 4, 1980, as amended at 48 FR 39837, Sept. 1, 1983; 49 
FR 323, Jan. 3, 1984; 54 FR 41747, Oct. 11, 1989; 57 FR 36018, Aug. 12, 
1992; 58 FR 30677, May 26, 1993; 59 FR 32120, June 22, 1994; 60 FR 
63189, Dec. 8, 1995; 62 FR 46037, Aug. 29, 1997; 63 FR 26312, May 12, 
1998; 65 FR 18548, Apr. 7, 2000; 65 FR 46796, July 31, 2000; 66 FR 
39601, July 31, 2001]

    Effective Date Note: At 59 FR 32120, June 22, 1994, in Sec. 489.20, 
paragraphs (l) through (r) were added. Paragraphs (m), (r)(2) and (r)(3) 
contain information collection and recordkeeping requirements and will 
not become effective until approved by the Office of Management and 
Budget.



Sec. 489.21  Specific limitations on charges.

    Except as specified in subpart C of this part, the provider agrees 
not to charge a beneficiary for any of the following:
    (a) Services for which the beneficiary is entitled to have payment 
made under Medicare.
    (b) Services for which the beneficiary would be entitled to have 
payment made if the provider--
    (1) Had in its files the required certification and recertification 
by a physician relating to the services furnished to the beneficiary;
    (2) Had furnished the information required by the intermediary in 
order to determine the amount due the provider on behalf of the 
individual for the period with respect to which payment is to be made or 
any prior period;
    (3) Had complied with the provisions requiring timely utilization 
review of long stay cases so that a limitation on days of service has 
not been imposed under section 1866(d) of the Act (see subpart K of part 
405 and part 482 of this chapter for utilization review requirements); 
and
    (4) Had obtained, from the beneficiary or a person acting on his or 
her behalf, a written request for payment to be made to the provider, 
and had properly filed that request. (If the beneficiary or person on 
his or her behalf refuses to execute a written request, the provider may 
charge the beneficiary for all services furnished to him or her.)
    (c) Inpatient hospital services furnished to a beneficiary who 
exhausted his or her Part A benefits, if CMS reimburses the provider for 
those services.
    (d) Custodial care and services not reasonable and necessary for the 
diagnosis or treatment of illness or injury, if--
    (1) The beneficiary was without fault in incurring the expenses; and
    (2) The determination that payment was incorrect was not made until 
after the third year following the year in which the payment notice was 
sent to the beneficiary.
    (e) Inpatient hospital services for which a beneficiary would be 
entitled to have payment made under Part A of Medicare but for a denial 
or reduction in payments under regulations at Sec. 412.48 of this 
chapter or under section 1886(f) of the Act.
    (f) Items and services furnished to a hospital inpatient (other than 
physicians' services as described in Sec. 415.102(a) of this chapter or 
the services of an anesthetist as described in Sec. 405.553(b)(4) of 
this chapter) for which Medicare payment would be made if furnished by 
the hospital or by other providers or suppliers under arrangements made 
with them by the hospital. For this purpose, a charge by another

[[Page 930]]

provider or supplier for such an item or service is treated as a charge 
by the hospital for the item or service, and is also prohibited.
    (g) [Reserved]
    (h) Items and services (other than those described in 
Secs. 489.20(s)(1) through (15)) required to be furnished under 
Sec. 489.20(s) to a resident of an SNF (defined in Sec. 411.15(p) of 
this chapter), for which Medicare payment would be made if furnished by 
the SNF or by other providers or suppliers under arrangements made with 
them by the SNF. For this purpose, a charge by another provider or 
supplier for such an item or service is treated as a charge by the SNF 
for the item or service, and is also prohibited.

[49 FR 324, Jan. 3, 1984, as amended at 51 FR 22052, June 17, 1986; 52 
FR 27765, July 23, 1987; 60 FR 63189, Dec. 8, 1995; 64 FR 41683, July 
30, 1999; 65 FR 46796, July 31, 2000; 65 FR 62646, Oct. 19, 2000; 66 FR 
39601, July 31, 2001]



Sec. 489.22  Special provisions applicable to prepayment requirements.

    (a) A provider may not require an individual entitled to hospital 
insurance benefits to prepay in part or in whole for inpatient services 
as a condition of admittance as an inpatient, except where it is clear 
upon admission that payment under Medicare, Part A cannot be made.
    (b) A provider may not deny covered inpatient services to an 
individual entitled to have payment made for those services on the 
ground of inability or failure to pay a requested amount at or before 
admission.
    (c) A provider may not evict, or threaten to evict, an individual 
for inability to pay a deductible or a coinsurance amount required under 
Medicare.
    (d) A provider may not charge an individual for (1) its agreement to 
admit or readmit the individual on some specified future date for 
covered impatient services; or (2) for failure to remain an inpatient 
for any agreed-upon length of time or for failure to give advance notice 
of departure from the provider's facilities.



Sec. 489.23  Specific limitation on charges for services provided to certain enrollees of fee-for-service FEHB plans.

    A provider that furnishes inpatient hospital services to a retired 
Federal worker age 65 or older who is enrolled in a fee-for-service FEHB 
plan and who is not covered under Medicare Part A, must accept, as 
payment in full, an amount that approximates as closely as possible the 
Medicare inpatient hospital prospective payment system (PPS) rate 
established under part 412. The payment to the provider is composed of a 
payment from the FEHB plan and a payment from the enrollee. This 
combined payment approximates the Medicare PPS rate. The payment from 
the FEHB plan approximates, as closely as possible, the Medicare PPS 
rate minus any applicable enrollee deductible, coinsurance, or copayment 
amount. The payment from the enrollee is equal to the applicable 
deductible, coinsurance, or copayment amount.

[62 FR 56111, Oct. 29, 1997]



Sec. 489.24  Special responsibilities of Medicare hospitals in emergency cases.

    (a) General. In the case of a hospital that has an emergency 
department, if any individual (whether or not eligible for Medicare 
benefits and regardless of ability to pay) comes by him or herself or 
with another person to the emergency department and a request is made on 
the individual's behalf for examination or treatment of a medical 
condition by qualified medical personnel (as determined by the hospital 
in its rules and regulations), the hospital must provide for an 
appropriate medical screening examination within the capability of the 
hospital's emergency department, including ancillary services routinely 
available to the emergency department, to determine whether or not an 
emergency medical condition exists. The examinations must be conducted 
by individuals determined qualified by hospital by-laws or rules and 
regulations and who meet the requirements of Sec. 482.55 concerning

[[Page 931]]

emergency services personnel and direction.
    (b) Definitions. As used in this subpart--
    Capacity means the ability of the hospital to accommodate the 
individual requesting examination or treatment of the transferred 
individual. Capacity encompasses such things as numbers and availability 
of qualified staff, beds and equipment and the hospital's past practices 
of accommodating additional patients in excess of its occupancy limits.
    Comes to the emergency department means, with respect to an 
individual requesting examination or treatment, that the individual is 
on the hospital property. For purposes of this section, ``property'' 
means the entire main hospital campus as defined in Sec. 413.65(b) of 
this chapter, including the parking lot, sidewalk, and driveway, as well 
as any facility or organization that is located off the main hospital 
campus but has been determined under Sec. 413.65 of this chapter to be a 
department of the hospital. The responsibilities of hospitals with 
respect to these off-campus facilities or organizations are described in 
paragraph (i) of this section. Property also includes ambulances owned 
and operated by the hospital even if the ambulance is not on hospital 
grounds. An individual in a nonhospital-owned ambulance on hospital 
property is considered to have come to the hospital's emergency 
department. An individual in a nonhospital-owned ambulance off hospital 
property is not considered to have come to the hospital's emergency 
department even if a member of the ambulance staff contacts the hospital 
by telephone or telemetry communications and informs the hospital that 
they want to transport the individual to the hospital for examination 
and treatment. In these situations, the hospital may deny access if it 
is in ``diversionary status,'' that is, it does not have the staff or 
facilities to accept any additional emergency patients. If, however, the 
ambulance staff disregards the hospital's instructions and transports 
the individual on to hospital property, the individual is considered to 
have come to the emergency department.
    Emergency medical condition means--
    (i) A medical condition manifesting itself by acute symptoms of 
sufficient severity (including severe pain, psychiatric disturbances 
and/or symptoms of substance abuse) such that the absence of immediate 
medical attention could reasonably be expected to result in--
    (A) Placing the health of the individual (or, with respect to a 
pregnant woman, the health of the woman or her unborn child) in serious 
jeopardy;
    (B) Serious impairment to bodily functions; or
    (C) Serious dysfunction of any bodily organ or part; or
    (ii) With respect to a pregnant woman who is having contractions--
    (A) That there is inadequate time to effect a safe transfer to 
another hospital before delivery; or
    (B) That transfer may pose a threat to the health or safety of the 
woman or the unborn child.
    Hospital includes a critical access hospital as defined in section 
1861(mm)(1) of the Act.
    Hospital with an emergency department means a hospital that offers 
services for emergency medical conditions (as defined in this paragraph) 
within its capability to do so.
    Labor means the process of childbirth beginning with the latent or 
early phase of labor and continuing through the delivery of the 
placenta. A woman experiencing contractions is in true labor unless a 
physician certifies that, after a reasonable time of observation, the 
woman is in false labor.
    Participating hospital means (i) a hospital or (ii) a critical 
access hospital as defined in section 1861(mm)(1) of the Act that has 
entered into a Medicare provider agreement under section 1866 of the 
Act.
    Stabilized means, with respect to an ``emergency medical condition'' 
as defined in this section under paragraph (i) of that definition, that 
no material deterioration of the condition is likely, within reasonable 
medical probability, to result from or occur during the transfer of the 
individual from a facility or, with respect to an ``emergency medical 
condition'' as defined in this section under paragraph (ii) of that 
definition, that the woman has delivered the child and the placenta.

[[Page 932]]

    To stabilize means, with respect to an ``emergency medical 
condition'' as defined in this section under paragraph (i) of that 
definition, to provide such medical treatment of the condition necessary 
to assure, within reasonable medical probability, that no material 
deterioration of the condition is likely to result from or occur during 
the transfer of the individual from a facility or that, with respect to 
an ``emergency medical condition'' as defined in this section under 
paragraph (ii) of that definition, the woman has delivered the child and 
the placenta.
    Transfer means the movement (including the discharge) of an 
individual outside a hospital's facilities at the direction of any 
person employed by (or affiliated or associated, directly or indirectly, 
with) the hospital, but does not include such a movement of an 
individual who (i) has been declared dead, or (ii) leaves the facility 
without the permission of any such person.
    (c) Necessary stabilizing treatment for emergency medical 
conditions--(1) General. If any individual (whether or not eligible for 
Medicare benefits) comes to a hospital and the hospital determines that 
the individual has an emergency medical condition, the hospital must 
provide either--
    (i) Within the capabilities of the staff and facilities available at 
the hospital, for further medical examination and treatment as required 
to stabilize the medical condition; or
    (ii) For transfer of the individual to another medical facility in 
accordance with paragraph (d) of this section.
    (2) Refusal to consent to treatment. A hospital meets the 
requirements of paragraph (c)(1)(i) of this section with respect to an 
individual if the hospital offers the individual the further medical 
examination and treatment described in that paragraph and informs the 
individual (or a person acting on the individual's behalf) of the risks 
and benefits to the individual of the examination and treatment, but the 
individual (or a person acting on the individual's behalf) refuses to 
consent to the examination and treatment. The medical record must 
contain a description of the examination, treatment, or both if 
applicable, that was refused by or on behalf of the individual. The 
hospital must take all reasonable steps to secure the individual's 
written informed refusal (or that of the person acting on his or her 
behalf). The written document should indicate that the person has been 
informed of the risks and benefits of the examination or treatment, or 
both.
    (3) Delay in examination or treatment. A participating hospital may 
not delay providing an appropriate medical screening examination 
required under paragraph (a) of this section or further medical 
examination and treatment required under paragraph (c) in order to 
inquire about the individual's method of payment or insurance status.
    (4) Refusal to consent to transfer. A hospital meets the 
requirements of paragraph (c)(1)(ii) of this section with respect to an 
individual if the hospital offers to transfer the individual to another 
medical facility in accordance with paragraph (d) of this section and 
informs the individual (or a person acting on his or her behalf) of the 
risks and benefits to the individual of the transfer, but the individual 
(or a person acting on the individual's behalf) refuses to consent to 
the transfer. The hospital must take all reasonable steps to secure the 
individual's written informed refusal (or that of a person acting on his 
or her behalf). The written document must indicate the person has been 
informed of the risks and benefits of the transfer and state the reasons 
for the individual's refusal. The medical record must contain a 
description of the proposed transfer that was refused by or on behalf of 
the individual.
    (d) Restricting transfer until the individual is stabilized--(1) 
General. If an individual at a hospital has an emergency medical 
condition that has not been stabilized (as defined in paragraph (b) of 
this section), the hospital may not transfer the individual unless--
    (i) The transfer is an appropriate transfer (within the meaning of 
paragraph (d)(2) of this section); and
    (ii)(A) The individual (or a legally responsible person acting on 
the individual's behalf) requests the transfer, after being informed of 
the hospital's obligations under this section and of the risk of 
transfer. The request must be in writing and indicate the reasons for 
the request as well as indicate that

[[Page 933]]

he or she is aware of the risks and benefits of the transfer;
    (B) A physician (within the meaning of section 1861(r)(1) of the 
Act) has signed a certification that, based upon the information 
available at the time of transfer, the medical benefits reasonably 
expected from the provision of appropriate medical treatment at another 
medical facility outweigh the increased risks to the individual or, in 
the case of a woman in labor, to the woman or the unborn child, from 
being transferred. The certification must contain a summary of the risks 
and benefits upon which it is based; or
    (C) If a physician is not physically present in the emergency 
department at the time an individual is transferred, a qualified medical 
person (as determined by the hospital in its by-laws or rules and 
regulations) has signed a certification described in paragraph 
(d)(1)(ii)(B) of this section after a physician (as defined in section 
1861(r)(1) of the Act) in consultation with the qualified medical 
person, agrees with the certification and subsequently countersigns the 
certification. The certification must contain a summary of the risks and 
benefits upon which it is based.
    (2) A transfer to another medical facility will be appropriate only 
in those cases in which--
    (i) The transferring hospital provides medical treatment within its 
capacity that minimizes the risks to the individual's health and, in the 
case of a woman in labor, the health of the unborn child;
    (ii) The receiving facility--
    (A) Has available space and qualified personnel for the treatment of 
the individual; and
    (B) Has agreed to accept transfer of the individual and to provide 
appropriate medical treatment;
    (iii) The transferring hospital sends to the receiving facility all 
medical records (or copies thereof) related to the emergency condition 
which the individual has presented that are available at the time of the 
transfer, including available history, records related to the 
individual's emergency medical condition, observations of signs or 
symptoms, preliminary diagnosis, results of diagnostic studies or 
telephone reports of the studies, treatment provided, results of any 
tests and the informed written consent or certification (or copy 
thereof) required under paragraph (d)(1)(ii) of this section, and the 
name and address of any on-call physician (described in paragraph (f) of 
this section) who has refused or failed to appear within a reasonable 
time to provide necessary stabilizing treatment. Other records (e.g., 
test results not yet available or historical records not readily 
available from the hospital's files) must be sent as soon as practicable 
after transfer; and
    (iv) The transfer is effected through qualified personnel and 
transportation equipment, as required, including the use of necessary 
and medically appropriate life support measures during the transfer.
    (3) A participating hospital may not penalize or take adverse action 
against a physician or a qualified medical person described in paragraph 
(d)(1)(ii)(C) of this section because the physician or qualified medical 
person refuses to authorize the transfer of an individual with an 
emergency medical condition that has not been stabilized, or against any 
hospital employee because the employee reports a violation of a 
requirement of this section.
    (e) Recipient hospital responsibilities. A participating hospital 
that has specialized capabilities or facilities (including, but not 
limited to, facilities such as burn units, shock-trauma units, neonatal 
intensive care units, or (with respect to rural areas) regional referral 
centers) may not refuse to accept from a referring hospital within the 
boundaries of the United States an appropriate transfer of an individual 
who requires such specialized capabilities or facilities if the 
receiving hospital has the capacity to treat the individual.
    (f) Termination of provider agreement. If a hospital fails to meet 
the requirements of paragraph (a) through (e) of this section, CMS may 
terminate the provider agreement in accordance with Sec. 489.53.
    (g) Consultation with Quality Improvement Organizations (QIOs)--(1) 
General. Except as provided in paragraph (g)(3) of this section, in 
cases where a medical opinion is necessary to determine a physician's or 
hospital's liability

[[Page 934]]

under section 1867(d)(1) of the Act, CMS requests the appropriate QIO 
(with a contract under Part B of title XI of the Act) to review the 
alleged section 1867(d) violation and provide a report on its findings 
in accordance with paragraph (g)(2)(iv) and (v) of this section. CMS 
provides to the QIO all information relevant to the case and within its 
possession or control. CMS, in consultation with the OIG, also provides 
to the QIO a list of relevant questions to which the QIO must respond in 
its report.
    (2) Notice of review and opportunity for discussion and additional 
information. The QIO shall provide the physician and hospital reasonable 
notice of its review, a reasonable opportunity for discussion, and an 
opportunity for the physician and hospital to submit additional 
information before issuing its report. When a QIO receives a request for 
consultation under paragraph (g)(1) of this section, the following 
provisions apply--
    (i) The QIO reviews the case before the 15th calendar day and makes 
its tentative findings.
    (ii) Within 15 calendar days of receiving the case, the QIO gives 
written notice, sent by certified mail, return receipt requested, to the 
physician or the hospital (or both if applicable).
    (iii)(A) The written notice must contain the following information:
    (1) The name of each individual who may have been the subject of the 
alleged violation.
    (2) The date on which each alleged violation occurred.
    (3) An invitation to meet, either by telephone or in person, to 
discuss the case with the QIO, and to submit additional information to 
the QIO within 30 calendar days of receipt of the notice, and a 
statement that these rights will be waived if the invitation is not 
accepted. The QIO must receive the information and hold the meeting 
within the 30-day period.
    (4) A copy of the regulations at 42 CFR 489.24.
    (B) For purposes of paragraph (g)(2)(iii)(A) of this section, the 
date of receipt is presumed to be 5 days after the certified mail date 
on the notice, unless there is a reasonable showing to the contrary.
    (iv) The physician or hospital (or both where applicable) may 
request a meeting with the QIO. This meeting is not designed to be a 
formal adversarial hearing or a mechanism for discovery by the physician 
or hospital. The meeting is intended to afford the physician and/or the 
hospital a full and fair opportunity to present the views of the 
physician and/or hospital regarding the case. The following provisions 
apply to that meeting:
    (A) The physician and/or hospital has the right to have legal 
counsel present during that meeting. However, the QIO may control the 
scope, extent, and manner of any questioning or any other presentation 
by the attorney. The QIO may also have legal counsel present.
    (B) The QIO makes arrangements so that, if requested by CMS or the 
OIG, a verbatim transcript of the meeting may be generated. If CMS or 
OIG requests a transcript, the affected physician and/or the affected 
hospital may request that CMS provide a copy of the transcript.
    (C) The QIO affords the physician and/or the hospital an opportunity 
to present, with the assistance of counsel, expert testimony in either 
oral or written form on the medical issues presented. However, the QIO 
may reasonably limit the number of witnesses and length of such 
testimony if such testimony is irrelevant or repetitive. The physician 
and/or hospital, directly or through counsel, may disclose patient 
records to potential expert witnesses without violating any non-
disclosure requirements set forth in part 476 of this chapter.
    (D) The QIO is not obligated to consider any additional information 
provided by the physician and/or the hospital after the meeting, unless, 
before the end of the meeting, the QIO requests that the physician and/
or hospital submit additional information to support the claims. The QIO 
then allows the physician and/or the hospital an additional period of 
time, not to exceed 5 calendar days from the meeting, to submit the 
relevant information to the QIO.
    (v) Within 60 calendar days of receiving the case, the QIO must 
submit to CMS a report on the QIO's findings.

[[Page 935]]

CMS provides copies to the OIG and to the affected physician and/or the 
affected hospital. The report must contain the name of the physician 
and/or the hospital, the name of the individual, and the dates and times 
the individual arrived at and was transferred (or discharged) from the 
hospital. The report provides expert medical opinion regarding whether 
the individual involved had an emergency medical condition, whether the 
individual's emergency medical condition was stabilized, whether the 
individual was transferred appropriately, and whether there were any 
medical utilization or quality of care issues involved in the case.
    (vi) The report required under paragraph (g)(2)(v) of this section 
should not state an opinion or conclusion as to whether section 1867 of 
the Act or Sec. 489.24 has been violated.
    (3) If a delay would jeopardize the health or safety of individuals 
or when there was no screening examination, the QIO review described in 
this section is not required before the OIG may impose civil monetary 
penalties or an exclusion in accordance with section 1867(d)(1) of the 
Act and 42 CFR part 1003 of this title.
    (4) If the QIO determines after a preliminary review that there was 
an appropriate medical screening examination and the individual did not 
have an emergency medical condition, as defined by paragraph (b) of this 
section, then the QIO may, at its discretion, return the case to CMS and 
not meet the requirements of paragraph (g) except for those in paragraph 
(g)(2)(v).
    (h) Release of QIO assessments. Upon request, CMS may release a QIO 
assessment to the physician and/or hospital, or the affected individual, 
or his or her representative. The QIO physician's identity is 
confidential unless he or she consents to its release. (See 
Secs. 476.132 and 476.133 of this chapter.)
    (i) Off-campus departments. If an individual comes to a facility or 
organization that is located off the main hospital campus but has been 
determined under Sec. 413.65 of this chapter to be a department of the 
hospital and a request is made on the individual's behalf for 
examination or treatment of a potential emergency medical condition as 
otherwise described in paragraph (a) of this section, the hospital is 
obligated in accordance with the rules in this paragraph to provide the 
individual with an appropriate medical screening examination and any 
necessary stabilizing treatment or an appropriate transfer.
    (1) Capability of the hospital. The capability of the hospital 
includes that of the hospital as a whole, not just the capability of the 
off-campus department. Except for cases described in paragraph 
(i)(3)(ii) of this section, the obligation of a hospital under this 
section must be discharged within the hospital as a whole. However, the 
hospital is not required to locate additional personnel or staff to off-
campus departments to be on standby for possible emergencies.
    (2) Protocols for off-campus departments. The hospital must 
establish protocols for the handling of individuals with potential 
emergency conditions at off-campus departments. These protocols must 
provide for direct contact between personnel at the off-campus 
department and emergency personnel at the main hospital campus and may 
provide for dispatch of practitioners, when appropriate, from the main 
hospital campus to the off-campus department to provide screening or 
stabilization services. Any contact with emergency personnel at the main 
hospital campus should either be made after or concurrently with the 
actions needed to arrange an appropriate transfer under paragraph 
(i)(3)(ii) of this section if contacting the main hospital campus prior 
to transfer would significantly jeopardize the life or health of the 
individual.
    (i) If the off-campus department is an urgent care center, primary 
care center, or other facility that is routinely staffed by physicians, 
RNs, or LPNs, these department personnel must be trained, and given 
appropriate protocols, for the handling of emergency cases. At least one 
individual on duty at the off-campus department during its regular hours 
of operation must be designated as a qualified medical person as 
described in paragraph (d) of this section. The qualified medical person 
must initiate screening of individuals who come to the off-campus 
department with a potential emergency medical condition, and may be able 
to

[[Page 936]]

complete the screening and provide any necessary stabilizing treatment 
at the off-campus department, or to arrange an appropriate transfer.
    (ii) If the off-campus department is a physical therapy, radiology, 
or other facility not routinely staffed with physicians, RNs, or LPNs, 
the department's personnel must be given protocols that direct them to 
contact emergency personnel at the main hospital campus for direction. 
Under this direction, and in accordance with protocols established in 
advance by the hospital, the personnel at the off-campus department must 
describe patient appearance and report symptoms and, if appropriate, 
either arrange transportation of the individual to the main hospital 
campus in accordance with paragraph (i)(3)(i) of this section or assist 
in an appropriate transfer as described in paragraphs (i)(3)(ii) and 
(d)(2) of this section.
    (3) Movement or appropriate transfer from off-campus departments--
(i) If the main hospital campus has the capability required by the 
individual and movement of the individual to the main campus would not 
significantly jeopardize the life or health of the individual, the 
personnel at the off-campus department must assist in arranging this 
movement. Movement of the individual to the main campus of the hospital 
is not considered a transfer under this section, since the individual is 
simply being moved from one department of a hospital to another 
department or facility of the same hospital.
    (ii) If transfer of an individual with a potential emergency 
condition to a medical facility other than the main hospital campus is 
warranted, either because the main hospital campus does not have the 
specialized capability or facilities required by the individual, or 
because the individual's condition is deteriorating so rapidly that 
taking the time needed to move the individual to the main hospital 
campus would significantly jeopardize the life or health of the 
individual, personnel at the off-campusdepartment must, in accordance 
with protocols established in advance by the hospital, assist in 
arranging an appropriate transfer of the individual to a medical 
facility other than the main hospital. The protocols must include 
procedures and agreements established in advance with other hospitals or 
medical facilities in the area of the off-campus department to 
facilitate these appropriate transfers. Such a transfer would require--
    (A) That there be either a request by or on behalf of the individual 
as described in paragraph (d)(1)(ii)(A) of this section or a 
certification by a physician or a qualified medical person as described 
in paragraph (d)(1)(ii)(B) or (d)(1)(ii)(C) of this section; and
    (B) That the transfer comply with the requirements described in 
paragraph (d)(2) of this section.
    (iii) If the individual is being appropriately transferred to 
another medical facility from the off-campus department, the requirement 
for the provision of medical treatment in paragraph (d)(2)(i) of this 
section would be met by provision of medical treatment within the 
capability of the transferring off-campus department.

[59 FR 32120, June 22, 1994, as amended at 62 FR 46037, Aug. 29, 1997; 
65 FR 18548, Apr. 7, 2000; 65 FR 59748, Oct. 6, 2000; 66 FR 1599, Jan. 
9, 2001; 66 FR 59923, Nov. 30, 2001]

    Effective Date Note: At 59 FR 32120, June 22, 1994, Sec. 489.24 was 
added. Paragraphs (d) and (g) contain information collection and 
recordkeeping requirements and will not become effective until approved 
by the Office of Management and Budget.



Sec. 489.25  Special requirements concerning CHAMPUS and CHAMPVA programs.

    For inpatient services, a hospital that participates in the Medicare 
program must participate in any health plan contracted under 10 U.S.C. 
1079 or 1086 (Civilian Health and Medical Program of the Uniformed 
Services) and under 38 U.S.C. 613 (Civilian Health and Medical Program 
of the Veterans Administration) and accept the CHAMPUS/CHAMPVA-
determined allowable amount as payment in full, less applicable 
deductible, patient cost-share, and noncovered items. Hospitals must 
meet the requirements of 32 CFR part 199 concerning program benefits 
under the Department of Defense. This section applies to inpatient 
services furnished to beneficiaries admitted on or after January 1, 
1987.

[59 FR 32123, June 22, 1994]

[[Page 937]]



Sec. 489.26  Special requirements concerning veterans.

    For inpatient services, a hospital that participates in the Medicare 
program must admit any veteran whose admission is authorized by the 
Department of Veterans Affairs under 38 U.S.C. 603 and must meet the 
requirements of 38 CFR part 17 concerning admissions practices and 
payment methodology and amounts. This section applies to services 
furnished to veterans admitted on and after July 1, 1987.

[59 FR 32123, June 22, 1994]



Sec. 489.27  Beneficiary notice of discharge rights.

    A hospital that participates in the Medicare program must furnish 
each Medicare beneficiary, or an individual acting on his or her behalf, 
the notice of discharge rights CMS supplies to the hospital to implement 
section 1866(a)(1)(M) of the Act. The hospital must provide timely 
notice during the course of the hospital stay. For purposes of this 
paragraph, the course of the hospital stay may begin with the provision 
of a package of information regarding scheduled preadmission testing and 
registration for a planned hospital admission. The hospital must be able 
to demonstrate compliance with this requirement.

[61 FR 46225, Aug. 30, 1996, as amended at 62 FR 46037, Aug. 29, 1997]



Sec. 489.28  Special capitalization requirements for HHAs.

    (a) Basic rule. An HHA entering the Medicare program on or after 
January 1, 1998, including a new HHA as a result of a change of 
ownership, if the change of ownership results in a new provider number 
being issued, must have available sufficient funds, which we term 
``initial reserve operating funds,'' to operate the HHA for the three 
month period after its Medicare provider agreement becomes effective, 
exclusive of actual or projected accounts receivable from Medicare or 
other health care insurers.
    (b) Standard. Initial reserve operating funds are sufficient to meet 
the requirement of this section if the total amount of such funds is 
equal to or greater than the product of the actual average cost per 
visit of three or more similarly situated HHAs in their first year of 
operation (selected by CMS for comparative purposes) multiplied by the 
number of visits projected by the HHA for its first three months of 
operation--or 22.5 percent (one fourth of 90 percent) of the average 
number of visits reported by the comparison HHAs--whichever is greater.
    (c) Method. CMS, through the intermediary, will determine the amount 
of the initial reserve operating funds using reported cost and visit 
data from submitted cost reports for the first full year of operation 
from at least three HHAs that the intermediary serves that are 
comparable to the HHA that is seeking to enter the Medicare program, 
considering such factors as geographic location and urban/rural status, 
number of visits, provider-based versus free-standing, and proprietary 
versus non-proprietary status. The determination of the adequacy of the 
required initial reserve operating funds is based on the average cost 
per visit of the comparable HHAs, by dividing the sum of total reported 
costs of the HHAs in their first year of operation by the sum of the 
HHAs' total reported visits. The resulting average cost per visit is 
then multiplied by the projected visits for the first three months of 
operation of the HHA seeking to enter the program, but not less than 90 
percent of average visits for a three month period for the HHAs used in 
determining the average cost per visit.
    (d) Required proof of availability of initial reserve operating 
funds. The HHA must provide CMS with adequate proof of the availability 
of initial reserve operating funds. Such proof, at a minimum, will 
include a copy of the statement(s) of the HHA's savings, checking, or 
other account(s) that contains the funds, accompanied by an attestation 
from an officer of the bank or other financial institution that the 
funds are in the account(s) and that the funds are immediately available 
to the HHA. In some cases, an HHA may have all or part of the initial 
reserve operating funds in cash equivalents. For the purpose of this 
section, cash equivalents are short-term, highly liquid investments that 
are readily convertible to known amounts of cash and

[[Page 938]]

that present insignificant risk of changes in value. A cash equivalent 
that is not readily convertible to a known amount of cash as needed 
during the initial three month period for which the initial reserve 
operating funds are required does not qualify in meeting the initial 
reserve operating funds requirement. Examples of cash equivalents for 
the purpose of this section are Treasury bills, commercial paper, and 
money market funds. As with funds in a checking, savings, or other 
account, the HHA also must be able to document the availability of any 
cash equivalents. CMS later may require the HHA to furnish another 
attestation from the financial institution that the funds remain 
available, or, if applicable, documentation from the HHA that any cash 
equivalents remain available, until a date when the HHA will have been 
surveyed by the State agency or by an approved accrediting organization. 
The officer of the HHA who will be certifying the accuracy of the 
information on the HHA's cost report must certify what portion of the 
required initial reserve operating funds is non-borrowed funds, 
including funds invested in the business by the owner. That amount must 
be at least 50 percent of the required initial reserve operating funds. 
The remainder of the reserve operating funds may be secured through 
borrowing or line of credit from an unrelated lender.
    (e) Borrowed funds. If borrowed funds are not in the same account(s) 
as the HHA's own non-borrowed funds, the HHA also must provide proof 
that the borrowed funds are available for use in operating the HHA, by 
providing, at a minimum, a copy of the statement(s) of the HHA's 
savings, checking, or other account(s) containing the borrowed funds, 
accompanied by an attestation from an officer of the bank or other 
financial institution that the funds are in the account(s) and are 
immediately available to the HHA. As with the HHA's own (that is, non-
borrowed) funds, CMS later may require the HHA to establish the current 
availability of such borrowed funds, including furnishing an attestation 
from a financial institution or other source, as may be appropriate, and 
to establish that such funds will remain available until a date when the 
HHA will have been surveyed by the State agency or by an approved 
accrediting organization.
    (f) Line of credit. If the HHA chooses to support the availability 
of a portion of the initial reserve operating funds with a line of 
credit, it must provide CMS with a letter of credit from the lender. CMS 
later may require the HHA to furnish an attestation from the lender that 
the HHA, upon its certification into the Medicare program, continues to 
be approved to borrow the amount specified in the letter of credit.
    (g) Provider agreement. CMS does not enter into a provider agreement 
with an HHA unless the HHA meets the initial reserve operating funds 
requirement of this section.

[63 FR 312, Jan. 5, 1998]



                      Subpart C--Allowable Charges



Sec. 489.30  Allowable charges: Deductibles and coinsurance.

    (a) Part A deductible and coinsurance. The provider may charge the 
beneficiary or other person on his or her behalf:
    (1) The amount of the inpatient hospital deductible or, if less, the 
actual charges for the services;
    (2) The amount of inpatient hospital coinsurance applicable for each 
day the individual is furnished inpatient hospital services after the 
60th day, during a benefit period; and
    (3) The posthospital SNF care coinsurance amount.
    (4) In the case of durable medical equipment (DME) furnished as a 
home health service, 20 percent of the customary charge for the service.
    (b) Part B deductible and coinsurance. (1) The basic allowable 
charges are the $75 deductible and 20 percent of the customary (insofar 
as reasonable) charges in excess of that deductible.
    (2) For hospital outpatient services, the allowable deductible 
charges depend on whether the hospital can determine the beneficiary's 
deductible status.
    (i) If the hospital is unable to determine the deductible status, it 
may charge the beneficiary its full customary charges up to $75.

[[Page 939]]

    (ii) If the beneficiary provides official information as to 
deductible status, the hospital may charge only the unmet portion of the 
deductible.
    (3) In either of the cases discussed in paragraph (b)(2) of this 
section, the hospital is required to file with the intermediary, on a 
form prescribed by CMS, information as to the services, charges, and 
amounts collected.
    (4) The intermediary must reimburse the beneficiary if reimbursement 
is authorized and credit the expenses to the beneficiary's deductible if 
the deductible has not yet been met.
    (5) In the case of DME furnished as a home health service under 
Medicare Part B, the coinsurance is 20 percent of the customary (insofar 
as reasonable) charge for the services, with the following exception: If 
the DME is used DME purchased by or on behalf of the beneficiary at a 
price at least 25 percent less than the reasonable charge for comparable 
new equipment, no coinsurance is required.

[45 FR 22937, Apr. 4, 1980, as amended at 51 FR 41350, Nov. 14, 1986]



Sec. 489.31  Allowable charges: Blood.

    (a) Limitations on charges. (1) A provider may charge the 
beneficiary (or other person on his or her behalf) only for the first 
three pints of blood or units of packed red cells furnished under 
Medicare Part A during a calendar year, or furnished under Medicare Part 
B during a calendar year.
    (2) The charges may not exceed the provider's customary charges.
    (3) The provider may not charge for any whole blood or packed red 
cells in any of the circumstances specified in Sec. 409.87(c)(2) of this 
chapter.
    (b) Offset for excessive charges. If the charge exceeds the cost to 
the provider, that excess will be deducted from any Medicare payments 
due the provider.

[56 FR 23022, May 20, 1991, as amended at 57 FR 36018, Aug. 12, 1992]



Sec. 489.32  Allowable charges: Noncovered and partially covered services.

    (a) Services requested by beneficiary. If services furnished at the 
request of a beneficiary (or his or her representative) are more 
expensive than, or in excess of, services covered under Medicare--
    (1) A provider may charge the beneficiary an amount that does not 
exceed the difference between--
    (i) The provider's customary charges for the services furnished; and
    (ii) The provider's customary charges for the kinds and amounts of 
services that are covered under Medicare.
    (2) A provider may not charge for the services unless they have been 
requested by the beneficiary (or his or her representative) nor require 
a beneficiary to request services as a condition of admission.
    (3) To avoid misunderstanding and disputes, a provider must inform 
any beneficiary who requests a service for which a charge will be made 
that there will be a specified charge for that service.
    (b) Services not requested by the beneficiary. For special 
provisions that apply when a provider customarily furnishes more 
expensive services, see Sec. 413.35 of this chapter.

[45 FR 22937, Apr. 4, 1980, as amended at 51 FR 34833, Sept. 30, 1986]



Sec. 489.34  Allowable charges: Hospitals participating in State reimbursement control systems or demonstration projects.

    A hospital receiving payment for a covered hospital stay under 
either a State reimbursement control system approved under 1886(c) of 
the Act or a demonstration project authorized under section 402(a) of 
Pub. L. 90-248 (42 U.S.C. 1395b-1) or section 222(a) of Pub. L. 92-603 
(42 U.S.C. 1395b-1 (note)) and that would otherwise be subject to the 
prospective payment system set forth in part 412 of this chapter may 
charge a beneficiary for noncovered services as follows:
    (a) For the custodial care and medically unnecessary services 
described in Sec. 412.42(c) of this chapter, after the conditions of 
Sec. 412.42(c)(1) through (c)(4) are met; and
    (b) For all other services in accordance with the applicable rules 
of this subpart C.

[54 FR 41747, Oct. 11, 1989]

[[Page 940]]



Sec. 489.35  Notice to intermediary.

    The provider must inform its intermediary of any amounts collected 
from a beneficiary or from other persons on his or her behalf.



              Subpart D--Handling of Incorrect Collections



Sec. 489.40  Definition of incorrect collection.

    (a) As used in this subpart, ``incorrect collections'' means any 
amounts collected from a beneficiary (or someone on his or her behalf) 
that are not authorized under subpart C of this part.
    (b) A payment properly made to a provider by an individual not 
considered entitled to Medicare benefits will be deemed to be an 
``incorrect collection'' when the individual is found to be 
retroactively entitled to benefits.



Sec. 489.41  Timing and methods of handling.

    (a) Refund. Prompt refund to the beneficiary or other person is the 
preferred method of handling incorrect collections.
    (b) Setting aside. If the provider cannot refund within 60 days from 
the date on the notice of incorrect collection, it must set aside an 
amount, equal to the amount incorrectly collected, in a separate account 
identified as to the individual to whom the payment is due. This amount 
incorrectly collected must be carried on the provider's records in this 
manner until final disposition is made in accordance with the applicable 
State law.
    (c) Notice to, and action by, intermediary. (1) The provider must 
notify the intermediary of the refund or setting aside required under 
paragraphs (a) and (b) of this section.
    (2) If the provider fails to refund or set aside the required 
amounts, they may be offset against amounts otherwise due the provider.



Sec. 489.42  Payment of offset amounts to beneficiary or other person.

    (a) In order to carry out the commitment to refund amounts 
incorrectly collected, CMS may determine that amounts offset in 
accordance with Sec. 489.41 are to be paid directly to the beneficiary 
or other person from whom the provider received the incorrect 
collection, if:
    (1) CMS finds that the provider has failed, following written 
request, to refund the amount of the incorrect collection to the 
beneficiary or other person; and
    (2) The provider agreement has been terminated in accordance with 
the provisions of subpart E of this part.
    (b) Before making a determination to make payment under paragraph 
(a) of this section, CMS will give written notice to the provider (1) 
explaining that an incorrect collection was made and the amount; (2) 
requesting the provider to refund the incorrect collection to the 
beneficiary or other person; and (3) advising of CMS's intention to make 
a determination under paragraph (a) of this section.
    (c) The notice will afford an authorized official of the provider an 
opportunity to submit, within 20 days from the date on the notice, 
written statement or evidence with respect to the incorrect collection 
and/or offset amounts. CMS will consider any written statement or 
evidence in making a determination.
    (d) Payment to a beneficiary or other person under the provisions of 
paragraph (a) of this section:
    (1) Will not exceed the amount of the incorrect collection; and
    (2) May be considered as payment made to the provider.



 Subpart E--Termination of Agreement and Reinstatement After Termination



Sec. 489.52  Termination by the provider.

    (a) Notice to CMS. (1) A provider that wishes to terminate its 
agreement must send CMS written notice of its intent.
    (2) The notice may state the intended date of termination which must 
be the first day of a month.
    (b) Termination date. (1) If the notice does not specify a date, or 
the date is not acceptable to CMS, CMS may set a date that will not be 
more than 6 months from the date on the provider's notice of intent.
    (2) CMS may accept a termination date that is less than 6 months 
after

[[Page 941]]

the date on the provider's notice if it determines that to do so would 
not unduly disrupt services to the community or otherwise interfere with 
the effective and efficient administration of the Medicare program.
    (3) A cessation of business is deemed to be a termination by the 
provider, effective with the date on which it stopped providing services 
to the community.
    (c) Public notice. (1) The provider must give notice to the public 
at least 15 days before the effective date of termination.
    (2) The notice must be published in one or more local newspapers and 
must--
    (i) Specify the termination date; and
    (ii) Explain to what extent services may continue after that date, 
in accordance with the exceptions set forth in Sec. 489.55.



Sec. 489.53  Termination by CMS.

    (a) Basis for termination of agreement with any provider. CMS may 
terminate the agreement with any provider if CMS finds that any of the 
following failings is attributable to that provider:
    (1) It is not complying with the provisions of title XVIII and the 
applicable regulations of this chapter or with the provisions of the 
agreement.
    (2) It places restrictions on the persons it will accept for 
treatment and it fails either to exempt Medicare beneficiaries from 
those restrictions or to apply them to Medicare beneficiaries the same 
as to all other persons seeking care.
    (3) It no longer meets the appropriate conditions of participation 
or requirements (for SNFs and NFs) set forth elsewhere in this chapter.
    (4) It fails to furnish information that CMS finds necessary for a 
determination as to whether payments are or were due under Medicare and 
the amounts due.
    (5) It refuses to permit examination of its fiscal or other records 
by, or on behalf of CMS, as necessary for verification of information 
furnished as a basis for payment under Medicare.
    (6) It failed to furnish information on business transactions as 
required in Sec. 420.205 of this chapter.
    (7) It failed at the time the agreement was entered into or renewed 
to disclose information on convicted individuals as required in 
Sec. 420.204 of this chapter.
    (8) It failed to furnish ownership information as required in 
Sec. 420.206 of this chapter.
    (9) It failed to comply with civil rights requirements set forth in 
45 CFR parts 80, 84, and 90.
    (10) In the case of a hospital or a critical access hospital as 
defined in section 1861(mm)(1) of the Act that has reason to believe it 
may have received an individual transferred by another hospital in 
violation of Sec. 489.24(d), the hospital failed to report the incident 
to CMS or the State survey agency.
    (11) In the case of a hospital requested to furnish inpatient 
services to CHAMPUS or CHAMPVA beneficiaries or to veterans, it failed 
to comply with Sec. 489.25 or Sec. 489.26, respectively.
    (12) It failed to furnish the notice of discharge rights as required 
by Sec. 489.27.
    (13) It refuses to permit photocopying of any records or other 
information by, or on behalf of CMS, as necessary to determine or verify 
compliance with participation requirements.
    (14) The hospital knowingly and willfully fails to accept, on a 
repeated basis, an amount that approximates the Medicare rate 
established under the inpatient hospital prospective payment system, 
minus any enrollee deductibles or copayments, as payment in full from a 
fee-for-service FEHB plan for inpatient hospital services provided to a 
retired Federal enrollee of a fee-for-service FEHB plan, age 65 or 
older, who does not have Medicare Part A benefits.
    (b) Termination of agreements with certain hospitals. In the case of 
a hospital or critical access hospital that has an emergency department, 
as defined in Sec. 489.24(b), CMS may terminate the provider agreement 
if--
    (1) The hospital fails to comply with the requirements of 
Sec. 489.24 (a) through (e), which require the hospital to examine, 
treat, or transfer emergency medical condition cases appropriately, and 
require that hospitals with specialized capabilities or facilities 
accept an appropriate transfer; or

[[Page 942]]

    (2) The hospital fails to comply with Sec. 489.20(m), (q), and (r), 
which require the hospital to report suspected violations of 
Sec. 489.24(d), to post conspicuously in emergency departments or in a 
place or places likely to be noticed by all individuals entering the 
emergency departments, as well as those individuals waiting for 
examination and treatment in areas other than traditional emergency 
departments, (that is, entrance, admitting area, waiting room, treatment 
area), signs specifying rights of individuals under this subpart, to 
post conspicuously information indicating whether or not the hospital 
participates in the Medicaid program, and to maintain medical and other 
records related to transferred individuals for a period of 5 years, a 
list of on-call physicians for individuals with emergency medical 
conditions, and a central log on each individual who comes to the 
emergency department seeking assistance.
    (c) Notice of termination--(1) Timing: Basic rule. Except as 
provided in paragraph (c)(2) of this section, CMS gives the provider 
notice of termination at least 15 days before the effective date of 
termination of the provider agreement.
    (2) Timing exceptions: Immediate jeopardy situations--(i) Hospital 
with emergency department. If CMS finds that a hospital with an 
emergency department is in violation of Sec. 489.24, paragraphs (a) 
through (e), and CMS determines that the violation poses immediate 
jeopardy to the health or safety of individuals who present themselves 
to the hospital for emergency services, CMS--
    (A) Gives the hospital a preliminary notice indicating that its 
provider agreement will be terminated in 23 days if it does not correct 
the identified deficiencies or refute the finding; and
    (B) Gives a final notice of termination, and concurrent notice to 
the public, at least 2 , but not more than 4, days before the effective 
date of termination of the provider agreement.
    (ii) Skilled nursing facilities (SNFs). For an SNF with deficiencies 
that pose immediate jeopardy to the health or safety of residents, CMS 
gives notice at least 2 days before the effective date of termination of 
the provider agreement.
    (3) Content of notice. The notice states the reasons for, and the 
effective date of, the termination, and explains the extent to which 
services may continue after that date, in accordance with Sec. 489.55.
    (4) Notice to public. CMS concurrently gives notice of the 
termination to the public.
    (d) Appeal by the provider. A provider may appeal the termination of 
its provider agreement by CMS in accordance with part 498 of this 
chapter.

[51 FR 24492, July 3, 1986, as amended at 52 FR 22454, June 12, 1987; 54 
FR 5373, Feb. 2, 1989; 56 FR 48879, Sept. 26, 1991; 59 FR 32123, June 
22, 1994; 59 FR 56251, Nov. 10, 1994; 60 FR 45851, Sept. 1, 1995; 60 FR 
50119, Sept. 28, 1995; 62 FR 43937, Aug. 18, 1997; 62 FR 46037, Aug. 29, 
1997; 62 FR 56111, Oct. 29, 1997]



Sec. 489.54  Termination by the OIG.

    (a) Basis for termination. (1) The OIG may terminate the agreement 
of any provider if the OIG finds that any of the following failings can 
be attributed to that provider.
    (i) It has knowingly and willfully made, or caused to be made, any 
false statement or representation of a material fact for use in an 
application or request for payment under Medicare.
    (ii) It has submitted, or caused to be submitted, requests for 
Medicare payment of amounts that substantially exceed the costs it 
incurred in furnishing the services for which payment is requested.
    (iii) It has furnished services that the OIG has determined to be 
substantially in excess of the needs of individuals or of a quality that 
fails to meet professionally recognized standards of health care. The 
OIG will not terminate a provider agreement under paragraph (a) if CMS 
has waived a disallowance with respect to the services in question on 
the grounds that the provider and the beneficiary could not reasonably 
be expected to know that payment would not be made. (The rules for 
determining such lack of knowledge are set forth in Secs. 405.330 
through 405.334 of this chapter.)
    (b) Notice of termination. The OIG will give the provider notice of 
termination at least 15 days before the effective

[[Page 943]]

date of termination of the agreement, and will concurrently give notice 
of termination to the public.
    (c) Appeal by the provider. A provider may appeal a termination of 
its agreement by the OIG in accordance with subpart O of part 405 of 
this chapter.
    (d) Other applicable rules. The termination of a provider agreement 
by the OIG is subject to the additional procedures specified in 
Secs. 1001.105 through 1001.109 of this title for notice and appeals.

[51 FR 24492, July 3, 1986, as amended at 51 FR 34788, Sept. 30, 1986]



Sec. 489.55  Exceptions to effective date of termination.

    Payment is available for up to 30 days after the effective date of 
termination for--
    (a) Inpatient hospital services (including inpatient psychiatric 
hospital services) and posthospital extended care services furnished to 
a beneficiary who was admitted before the effective date of termination; 
and
    (b) Home health services and hospice care furnished under a plan 
established before the effective date of termination.1
---------------------------------------------------------------------------

    \1\ For termination before July 18, 1984, payment was available 
through the calendar year in which the termination was effective.

[50 FR 37376, Sept. 13, 1985]



Sec. 489.57  Reinstatement after termination.

    When a provider agreement has been terminated by CMS under 
Sec. 489.53, or by the OIG under Sec. 489.54, a new agreement with that 
provider will not be accepted unless CMS or the OIG, as appropriate, 
finds--
    (a) That the reason for termination of the previous agreement has 
been removed and there is reasonable assurance that it will not recur; 
and
    (b) That the provider has fulfilled, or has made satisfactory 
arrangements to fulfill, all of the statutory and regulatory 
responsibilities of its previous agreement.

[51 FR 24493, July 3, 1986]



              Subpart F--Surety Bond Requirements for HHAs

    Source: 63 FR 313, Jan. 5, 1998, unless otherwise noted.



Sec. 489.60  Definitions.

    As used in this subpart unless the context indicates otherwise--
    Assessment means a sum certain that CMS may assess against an HHA in 
lieu of damages under Titles XI, XVIII, or XXI of the Social Security 
Act or under regulations in this chapter.
    Assets includes but is not limited to any listing that identifies 
Medicare beneficiaries to whom home health services were furnished by a 
participating or formerly participating HHA.
    Civil money penalty means a sum certain that CMS has the authority 
to impose on an HHA as a penalty under Titles XI, XVIII, or XXI of the 
Social Security Act or under regulations in this chapter.
    Participating home health agency means a ``home health agency'' 
(HHA), as that term is defined by section 1861(o) of the Social Security 
Act, that also meets the definition of a ``provider'' set forth at 
Sec. 400.202 of this chapter.
    Rider means a notice issued by a Surety that a change in the bond 
has occurred or will occur.
    Surety bond means one or more bonds issued by one or more surety 
companies under 31 U.S.C. 9304 to 9308 and 31 CFR parts 223, 224, and 
225, provided the bond otherwise meets the requirements of this section.
    Unpaid civil money penalty or assessment means a civil money penalty 
or assessment imposed by CMS on an HHA under Titles XI, XVIII, or XXI of 
the Social Security Act, plus accrued interest, that, after the HHA or 
Surety has exhausted all administrative appeals, remains unpaid (because 
the civil money penalty or assessment has not been paid to, or offset or 
compromised by, CMS) and is not the subject of a written arrangement, 
acceptable to CMS, for payment by the HHA. In the event a written 
arrangement for payment, acceptable to CMS, is made,

[[Page 944]]

an unpaid civil money penalty or assessment also means such civil money 
penalty or assessment, plus accrued interest, that remains due 60 days 
after the HHA's default on such arrangement.
    Unpaid claim means a Medicare overpayment for which the HHA is 
responsible, plus accrued interest, that, 90 days after the date of the 
agency's notice to the HHA of the overpayment, remains due (because the 
overpayment has not been paid to, or recouped or compromised by, CMS) 
and is not the subject of a written arrangement, acceptable to CMS, for 
payment by the HHA. In the event a written arrangement for payment, 
acceptable to CMS, is made, an unpaid claim also means a Medicare 
overpayment for which the HHA is responsible, plus accrued interest, 
that remains due 60 days after the HHA's default on such arrangement.

[63 FR 313, Jan. 5, 1998, as amended at 63 FR 29655, June 1, 1998]



Sec. 489.61  Basic requirement for surety bonds.

    Except as provided in Sec. 489.62, each HHA that is a Medicare 
participating HHA, or that seeks to become a Medicare participating HHA, 
must obtain a surety bond (and furnish to CMS a copy of such surety 
bond) that meets the requirements of this subpart F and CMS's 
instructions.



Sec. 489.62  Requirement waived for Government-operated HHAs.

    An HHA operated by a Federal, State, local, or tribal government 
agency is deemed to have provided CMS with a comparable surety bond 
under State law, and CMS therefore waives the requirements of this 
subpart with respect to such an HHA if, during the preceding 5 years the 
HHA has--
    (a) Not had any unpaid claims or unpaid civil money penalties or 
assessments; and
    (b) Not had any of its claims referred by CMS to the Department of 
Justice or the General Accounting Office in accordance with part 401 of 
this chapter.

[63 FR 313, Jan. 5, 1998, as amended at 63 FR 29655, June 1, 1998]



Sec. 489.63  Parties to the bond.

    The surety bond must name the HHA as Principal, CMS as Obligee, and 
the surety company (and its heirs, executors, administrators, successors 
and assignees, jointly and severally) as Surety.



Sec. 489.64  Authorized Surety and exclusion of surety companies.

    (a) An HHA may obtain a surety bond required under Sec. 489.61 only 
from an authorized Surety.
    (b) An authorized Surety is a surety company that--
    (1) Has been issued a Certificate of Authority by the U.S. 
Department of the Treasury in accordance with 31 U.S.C. 9304 to 9308 and 
31 CFR parts 223, 224, and 225 as an acceptable surety on Federal bonds 
and the Certificate has neither expired nor been revoked; and
    (2) Has not been determined by CMS to be an unauthorized Surety for 
the purpose of an HHA obtaining a surety bond under this section.
    (c) CMS determines that a surety company is an unauthorized Surety 
under this section--
    (1) If, upon request by CMS, the surety company fails to furnish 
timely confirmation of the issuance of, and the validity and accuracy of 
information appearing on, a surety bond an HHA presents to CMS that 
shows the surety company as Surety on the bond;
    (2) If, upon presentation by CMS to the surety company of a request 
for payment on a surety bond and of sufficient evidence to establish the 
surety company's liability on the bond, the surety company fails to 
timely pay CMS in full the amount requested, up to the face amount of 
the bond; or
    (3) For other good cause.
    (d) Any determination CMS makes under paragraph (c) of this section 
is effective immediately when notice of the determination is published 
in the Federal Register and remains in effect until a notice of 
reinstatement is published in the Federal Register.
    (e) Any determination CMS makes under paragraph (c) of this section 
does not affect the Surety's liability under any surety bond issued by a 
surety company to an HHA before notice of

[[Page 945]]

such determination is published in accordance with paragraph (d) of this 
section.
    (f) A determination by CMS that a surety company is an unauthorized 
Surety under this section is not a debarment, suspension, or exclusion 
for the purposes of Executive Order No. 12549 (3 CFR, 1986 comp., p. 
189).



Sec. 489.65  Amount of the bond.

    (a) Basic rule. The amount of the surety bond must be $50,000 or 15 
percent of the Medicare payments made by CMS to the HHA in the HHA's 
most recent fiscal year for which a cost report has been accepted by 
CMS, whichever is greater.
    (b) Computation of the 15 percent: Participating HHA.
    The 15 percent is computed as follows:
    (1) For the initial bond--on the basis of Medicare payments made by 
CMS to the HHA in the HHA's most recent fiscal year as shown in the 
HHA's most recent cost report that has been accepted by CMS. If the 
initial bond will cover less than a full fiscal year, the computation of 
the 15 percent will be based on the number of months of the fiscal year 
that the bond will cover.
    (2) For subsequent bonds--on the basis of Medicare payments made by 
CMS in the most recent fiscal year for which a cost report has been 
accepted. However, if payments in the first six months of the current 
fiscal year differ from such an amount by more than 25 percent, then the 
amount of the bond is 15 percent of such payments projected on an 
annualized basis.
    (c) Computation of 15 percent: An HHA that seeks to become a 
participating HHA by obtaining assets or ownership interest. For an HHA 
that seeks to become a participating HHA by purchasing the assets or the 
ownership interest of a participating or formerly participating HHA, the 
15 percent is computed on the basis of Medicare payments made by CMS to 
the participating or formerly participating HHA in the most recent 
fiscal year that a cost report has been accepted.
    (d) Change of ownership. For an HHA that undergoes a change of 
ownership the 15 percent is computed on the basis of Medicare payments 
made by CMS to the HHA for the most recently accepted cost report.
    (e) An HHA that seeks to become a participating HHA without 
obtaining assets or ownership interest. For an HHA that seeks to become 
a participating HHA without purchasing the assets or the ownership 
interest of a participating or formerly participating HHA, the 15 
percent computation does not apply.
    (f) Exception to the basic rule. If an HHA's overpayment in the most 
recently accepted cost report exceeds 15 percent of annual payments, CMS 
may require the HHA to secure a bond in an amount up to or equal to the 
amount of overpayment, provided the amount of the bond is not less than 
$50,000.
    (g) Expiration of the 15 percent provision. For an annual surety 
bond, or for a rider on a continuous surety bond, that is required to be 
submitted on or after June 1, 2005, notwithstanding any reference in 
this subpart to 15 percent as a basis for determining the amount of the 
bond, the amount of the bond or rider, as applicable, must be $50,000 or 
such amount as CMS specifies in accordance with paragraph (f) of this 
section, whichever amount is greater.

[63 FR 313, Jan. 5, 1998, as amended at 63 FR 29655, June 1, 1998]



Sec. 489.66  Additional requirements of the surety bond.

    The surety bond that an HHA obtains under this subpart must meet the 
following additional requirements:
    (a) The bond must guarantee that within 30 days of receiving written 
notice from CMS of an unpaid claim or unpaid civil money penalty or 
assessment, which notice contains sufficient evidence to establish the 
Surety's liability under the bond, the Surety will pay CMS, up to the 
stated amount of the bond--
    (1) The full amount of any unpaid claim, plus accrued interest, for 
which the HHA is responsible; and
    (2) The full amount of any unpaid civil money penalty or assessment 
imposed by CMS on the HHA, plus accrued interest.
    (b) The bond must provide the following:
    (1) The Surety is liable for unpaid claims, unpaid civil money 
penalties,

[[Page 946]]

and unpaid assessments that are discovered when the surety bond is in 
effect, regardless of when the payment, overpayment, or other event 
giving rise to the claim, civil money penalty, or assessment occurred, 
provided CMS makes a written demand for payment from the Surety during, 
or within 90 days after, the term of the bond.
    (2) If the HHA fails to furnish a bond meeting the requirements of 
this subpart F for the year following expiration of the term of an 
annual bond, or if the HHA fails to submit a rider when a rider is 
required to be submitted under this subpart, or if the HHA's provider 
agreement is terminated, the last bond or rider, as applicable, 
submitted by the HHA to CMS, which bond or applicable rider meets the 
requirements of this subpart, remains effective and the Surety remains 
liable for unpaid claims, civil money penalties, and assessments that--
    (i) CMS determines or imposes on or asserts against the HHA based on 
overpayments or other events that took place during or prior to the term 
of the last bond or rider; and
    (ii) Were determined or imposed during the 2 years following the 
date the HHA failed to submit a bond or required rider or the date the 
HHA's provider agreement is terminated, whichever is later.
    (c) The bond must provide that the Surety's liability to CMS under 
the bond is not extinguished by any action of the HHA, the Surety, or 
CMS, including but not necessarily limited to any of the following 
actions:
    (1) Action by the HHA or the Surety to terminate or limit the scope 
or term of the bond. The Surety's liability may be extinguished, 
however, when--
    (i) The Surety furnishes CMS with notice of such action not later 
than 10 days after receiving notice from the HHA of action by the HHA to 
terminate or limit the scope of the bond, or not later than 60 days 
before the effective date of such action by the Surety; or
    (ii) The HHA furnishes CMS with a new bond that meets the 
requirements of this subpart.
    (2) The Surety's failure to continue to meet the requirements of 
Sec. 489.64(a) or CMS's determination that the surety company is an 
unauthorized Surety under Sec. 489.64(b).
    (3) Termination of the HHA's provider agreement.
    (4) Any action by CMS to suspend, offset, or otherwise recover 
payments to the HHA.
    (5) Any action by the HHA to--
    (i) Cease operation;
    (ii) Sell or transfer any asset or ownership interest;
    (iii) File for bankruptcy; or
    (iv) Fail to pay the Surety.
    (6) Any fraud, misrepresentation, or negligence by the HHA in 
obtaining the surety bond or by the Surety (or by the Surety's agent, if 
any) in issuing the surety bond, except that any fraud, 
misrepresentation, or negligence by the HHA in identifying to the Surety 
(or to the Surety's agent) the amount of Medicare payments upon which 
the amount of the surety bond is determined will not cause the Surety's 
liability to CMS to exceed the amount of the bond.
    (7) The HHA's failure to exercise available appeal rights under 
Medicare or to assign such rights to the Surety.
    (d) The bond must provide that actions under the bond may be brought 
by CMS or by CMS's fiscal intermediaries.
    (e) The bond must provide the Surety's name, street address or post 
office box number, city, state, and zipcode to which the CMS notice 
provided for in paragraph (a) of this section is to be sent.

[63 FR 313, Jan. 5, 1998, as amended at 63 FR 29655, June 1, 1998]



Sec. 489.67  Term and type of bond.

    (a) Each participating HHA that does not meet the criteria for 
waiver under Sec. 489.62 must submit to CMS in a form as CMS may 
specify, a surety bond for a term beginning January 1, 1998. If an 
annual bond is submitted for the initial term, it must be effective 
through the end of the HHA's current fiscal year.
    (b) Type of bond. The type of bond required to be submitted by an 
HHA under this subpart may be either--
    (1) An annual bond (that is, a bond that specifies an effective 
annual period corresponding to the HHA's fiscal year); or

[[Page 947]]

    (2) A continuous bond (that is, a bond that remains in full force 
and effect from term to term unless it is terminated or canceled as 
provided for in the bond or as otherwise provided by law) that is 
updated by the Surety, via the issuance of a rider, for a particular 
fiscal year for which the bond amount has changed or will change.
    (c) HHA that seeks to become a participating HHA.
    (1) An HHA that seeks to become a participating HHA must submit a 
surety bond with its enrollment application (Form CMS-855, OMB number 
0938-0685). The term of the initial surety bond must be effective from 
the effective date of provider agreement as specified in Sec. 489.13 of 
this part. However, if the effective date of the provider agreement is 
less than 30 days before the end of the HHA's current fiscal year, the 
HHA may obtain a bond effective through the end of the next fiscal year, 
provided the amount of the bond is the greater of $75,000 or 20 percent 
of the amount determined from the computation specified in 
Sec. 489.65(c) as applicable.
    (2) An HHA that seeks to become a participating HHA through the 
purchase or transfer of assets or ownership interest of a participating 
or formerly participating HHA must also ensure that the surety bond is 
effective from the date of such purchase or transfer.
    (d) Change of ownership. An HHA that undergoes a change of ownership 
must submit the surety bond to CMS not later than the effective date of 
the change of ownership and the bond must be effective from the 
effective date of the change of ownership through the remainder of the 
HHA's fiscal year.
    (e) Government-operated HHA that loses its waiver. A government-
operated HHA that, as of January 1, 1998, meets the criteria for waiver 
under Sec. 489.62 but thereafter is determined by CMS to not meet such 
criteria, must submit a surety bond to CMS within 60 days after it 
receives notice from CMS that it no longer meets the criteria for 
waiver.
    (f) Change of Surety. An HHA that obtains a replacement surety bond 
from a different Surety to cover the remaining term of a previously 
obtained bond must submit the new surety bond to CMS within 30 days of 
obtaining the bond from the new Surety.

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

[63 FR 315, Jan. 5, 1998, as amended at 63 FR 10731, Mar. 4, 1998; 63 FR 
29656, June 1, 1998; 63 FR 41171, July 31, 1998]



Sec. 489.68  Effect of failure to obtain, maintain, and timely file a surety bond.

    (a) The failure of a participating HHA to obtain, file timely, and 
maintain a surety bond in accordance with this subpart F and CMS's 
instructions is sufficient under Sec. 489.53(a)(1) for CMS to terminate 
the HHA's provider agreement.
    (b) The failure of an HHA seeking to become a participating HHA to 
obtain and file timely a surety bond in accordance with this Subpart F 
and CMS's instructions is sufficient under Sec. 489.12(a)(3) for CMS to 
refuse to enter into a provider agreement with the HHA.



Sec. 489.69  Evidence of compliance.

    (a) CMS may at any time require an HHA to make a specific showing of 
being in compliance with the requirements of this Subpart F and may 
require the HHA to submit such additional evidence as CMS considers 
sufficient to demonstrate the HHA's compliance.
    (b) If requested by CMS to do so, the failure of an HHA to timely 
furnish sufficient evidence to CMS to demonstrate compliance with the 
requirements of this Subpart F is sufficient for CMS to terminate the 
HHA's provider agreement under Sec. 489.53(a)(1) or to refuse to enter 
into a provider agreement with the HHA under Sec. 489.12(a)(3), as 
applicable.



Sec. 489.70  Effect of payment by the Surety.

    A Surety's payment to CMS under a bond for an unpaid claim or an 
unpaid civil money penalty or assessment, constitutes--
    (a) Collection of the unpaid claim or unpaid civil money penalty or 
assessment (to the extent the Surety's payment on the bond covers such 
unpaid claim, civil money penalty, or assessment); and

[[Page 948]]

    (b) A basis for termination of the HHA's provider agreement under 
Sec. 489.53(a)(1).



Sec. 489.71  Surety's standing to appeal Medicare determinations.

    A Surety has standing to appeal any matter that the HHA could 
appeal, provided the Surety satisfies all jurisdictional and procedural 
requirements that would otherwise have applied to the HHA, and provided 
the HHA is not, itself, actively pursuing its appeal rights under this 
chapter, and provided further that, with respect to unpaid claims, the 
Surety has paid CMS all amounts owed to CMS by the HHA on such unpaid 
claims, up to the amount of the bond.

[63 FR 29656, June 1, 1998]



Sec. 489.72  Effect of review reversing determination.

    In the event a Surety has paid CMS on the basis of liability 
incurred under a bond obtained by an HHA under this subpart F, and to 
the extent the HHA that obtained such bond (or the Surety under 
Sec. 489.71) is subsequently successful in appealing the determination 
that was the basis of the unpaid claim or unpaid civil money penalty or 
assessment that caused the Surety to pay CMS under the bond, CMS will 
refund to the Surety the amount the Surety paid to CMS to the extent 
such amount relates to the matter that was successfully appealed by the 
HHA (or by the Surety), provided all review, including judicial review, 
has been completed on such matter. Any additional amounts owing as a 
result of the appeal will be paid to the HHA.



Sec. 489.73  Effect of conditions of payment.

    If a Surety has paid an amount to CMS on the basis of liability 
incurred under a bond obtained by an HHA under this subpart F, and CMS 
subsequently collects from the HHA, in whole or in part, on such unpaid 
claim, civil money penalty, or assessment that was the basis for the 
Surety's liability, CMS reimburses the Surety such amount as CMS 
collected from the HHA, up to the amount paid by the Surety to CMS, 
provided the Surety has no other liability to CMS under the bond.


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

[63 FR 29656, June 1, 1998]



Sec. 489.74  Incorporation into existing provider agreements.

    The requirements of this subpart F are deemed to be incorporated 
into existing HHA provider agreements effective January 1, 1998.

[63 FR 315, Jan. 5, 1998. Redesignated at 63 FR 29656, June 1, 1998]

Subparts G- H [Reserved]



                      Subpart I--Advance Directives

    Source: 57 FR 8203, Mar. 6, 1992, unless otherwise noted.



Sec. 489.100  Definition.

    For purposes of this part, advance directive means a written 
instruction, such as a living will or durable power of attorney for 
health care, recognized under State law (whether statutory or as 
recognized by the courts of the State), relating to the provision of 
health care when the individual is incapacitated.



Sec. 489.102  Requirements for providers.

    (a) Hospitals, critical access hospitals, skilled nursing 
facilities, nursing facilities, home health agencies, providers of home 
health care (and for Medicaid purposes, providers of personal care 
services), and hospices must maintain written policies and procedures 
concerning advance directives with respect to all adult individuals 
receiving medical care by or through the provider and are required to:
    (1) Provide written information to such individuals concerning--
    (i) An individual's rights under State law (whether statutory or 
recognized by the courts of the State) to make decisions concerning such 
medical care, including the right to accept or refuse medical or 
surgical treatment and the right to formulate, at the individual's 
option, advance directives. Providers are permitted to contract with 
other entities to furnish this information but

[[Page 949]]

are still legally responsible for ensuring that the requirements of this 
section are met. Providers are to update and disseminate amended 
information as soon as possible, but no later than 90 days from the 
effective date of the changes to State law; and
    (ii) The written policies of the provider or organization respecting 
the implementation of such rights, including a clear and precise 
statement of limitation if the provider cannot implement an advance 
directive on the basis of conscience. At a minimum, a provider's 
statement of limitation should:
    (A) Clarify any differences between institution-wide conscience 
objections and those that may be raised by individual physicians;
    (B) Identify the state legal authority permitting such objection; 
and
    (C) Describe the range of medical conditions or procedures affected 
by the conscience objection.
    (2) Document in a prominent part of the individual's current medical 
record, or patient care record in the case of an individual in a 
religious nonmedical health care institution, whether or not the 
individual has executed an advance directive;
    (3) Not condition the provision of care or otherwise discriminate 
against an individual based on whether or not the individual has 
executed an advance directive;
    (4) Ensure compliance with requirements of State law (whether 
statutory or recognized by the courts of the State) regarding advance 
directives. The provider must inform individuals that complaints 
concerning the advance directive requirements may be filed with the 
State survey and certification agency;
    (5) Provide for education of staff concerning its policies and 
procedures on advance directives; and
    (6) Provide for community education regarding issues concerning 
advance directives that may include material required in paragraph 
(a)(1) of this section, either directly or in concert with other 
providers and organizations. Separate community education materials may 
be developed and used, at the discretion of providers. The same written 
materials do not have to be provided in all settings, but the material 
should define what constitutes an advance directive, emphasizing that an 
advance directive is designed to enhance an incapacitated individual's 
control over medical treatment, and describe applicable State law 
concerning advance directives. A provider must be able to document its 
community education efforts.
    (b) The information specified in paragraph (a) of this section is 
furnished:
    (1) In the case of a hospital, at the time of the individual's 
admission as an inpatient.
    (2) In the case of a skilled nursing facility at the time of the 
individual's admission as a resident.
    (3)(i) In the case of a home health agency, in advance of the 
individual coming under the care of the agency. The HHA may furnish 
advance directives information to a patient at the time of the first 
home visit, as long as the information is furnished before care is 
provided.
    (ii) In the case of personal care services, in advance of the 
individual coming under the care of the personal care services provider. 
The personal care provider may furnish advance directives information to 
a patient at the time of the first home visit, as long as the 
information is furnished before care is provided.
    (4) In the case of a hospice program, at the time of initial receipt 
of hospice care by the individual from the program.
    (c) The providers listed in paragraph (a) of this section--
    (1) Are not required to provide care that conflicts with an advance 
directive.
    (2) Are not required to implement an advance directive if, as a 
matter of conscience, the provider cannot implement an advance directive 
and State law allows any health care provider or any agent of such 
provider to conscientiously object.
    (d) Prepaid or eligible organizations (as specified in sections 
1833(a)(1)(A) and 1876(b) of the Act) must meet the requirements 
specified in Sec. 417.436 of this chapter.
    (e) If an adult individual is incapacitated at the time of admission 
or at

[[Page 950]]

the start of care and is unable to receive information (due to the 
incapacitating conditions or a mental disorder) or articulate whether or 
not he or she has executed an advance directive, then the provider may 
give advance directive information to the individual's family or 
surrogate in the same manner that it issues other materials about 
policies and procedures to the family of the incapacitated individual or 
to a surrogate or other concerned persons in accordance with State law. 
The provider is not relieved of its obligation to provide this 
information to the individual once he or she is no longer incapacitated 
or unable to receive such information. Follow-up procedures must be in 
place to provide the information to the individual directly at the 
appropriate time.

[57 FR 8203, Mar. 6, 1992, as amended at 59 FR 45403, Sept. 1, 1994; 60 
FR 33294, June 27, 1995; 62 FR 46037, Aug. 29, 1997; 64 FR 67052, Nov. 
30, 1999]



Sec. 489.104  Effective dates.

    These provisions apply to services furnished on or after December 1, 
1991 payments made under section 1833(a)(1)(A) of the Act on or after 
December 1, 1991, and contracts effective on or after December 1, 1991.



PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES--Table of Contents




Subpart A--Rural Health Clinics: Conditions for Certification; and FQHCs 
                         Conditions for Coverage

Sec.
491.1 Purpose and scope.
491.2 Definitions.
491.3 Certification procedures.
491.4 Compliance with Federal, State and local laws.
491.5 Location of clinic.
491.6 Physical plant and environment.
491.7 Organizational structure.
491.8 Staffing and staff responsibilities.
491.9 Provision of services.
491.10 Patient health records.
491.11 Program evaluation.

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302); 
and sec. 353 of the Public Health Service Act (42 U.S.C. 263a).

    Editorial Note: Nomenclature changes to part 491 appear at 61 FR 
14658, Apr. 3, 1996.



Subpart A--Rural Health Clinics: Conditions for Certification; and FQHCs 
                         Conditions for Coverage



Sec. 491.1  Purpose and scope.

    This subpart sets forth the conditions that rural health clinics or 
FQHCs must meet in order to qualify for reimbursement under Medicare 
(title XVIII of the Social Security Act) and that rural health clinics 
must meet in order to qualify for reimbursement under Medicaid (title 
XIX of the Act).

[57 FR 24982, June 12, 1992]



Sec. 491.2  Definitions.

    As used in this subpart, unless the context indicates otherwise:
    Direct services means services provided by the clinic's staff.
    FQHC means an entity as defined in Sec. 405.2401(b).
    Nurse practitioner means a registered professional nurse who is 
currently licensed to practice in the State, who meets the State's 
requirements governing the qualifications of nurse practitioners, and 
who meets one of the following conditions:
    (1) Is currently certified as a primary care nurse practitioner by 
the American Nurses' Association or by the National Board of Pediatric 
Nurse Practitioners and Associates; or
    (2) Has satisfactorily completed a formal 1 academic year 
educational program that:
    (i) Prepares registered nurses to perform an expanded role in the 
delivery of primary care;
    (ii) Includes at least 4 months (in the aggregate) of classroom 
instruction and a component of supervised clinical practice; and
    (iii) Awards a degree, diploma, or certificate to persons who 
successfully complete the program; or
    (3) Has successfully completed a formal educational program (for 
preparing registered nurses to perform an expanded role in the delivery 
of primary care) that does not meet the requirements of paragraph (b)(2) 
of this section, and has been performing an expanded role in the 
delivery of primary care for a total of 12 months during the

[[Page 951]]

18-month period immediately preceding the effective date of this 
subpart.
    Physician means a doctor of medicine or osteopathy legally 
authorized to practice medicine or surgery in the State.
    Physician assistant means a person who meets the applicable State 
requirements governing the qualifications for assistants to primary care 
physicians, and who meets at least one of the following conditions:
    (1) Is currently certified by the National Commission on 
Certification of Physician Assistants to assist primary care physicians; 
or
    (2) Has satisfactorily completed a program for preparing physician's 
assistants that:
    (i) Was at least 1 academic year in length;
    (ii) Consisted of supervised clinical practice and at least 4 months 
(in the aggregate) of classroom instruction directed toward preparing 
students to deliver health care; and
    (iii) Was accredited by the American Medical Association's Committee 
on Allied Health Education and Accreditation; or
    (3) Has satisfactorily completed a formal educational program (for 
preparing physician assistants) that does not meet the requirements of 
paragraph (d)(2) of this section and assisted primary care physicians 
for a total of 12 months during the 18-month period that ended on 
December 31, 1986.
    Rural area means an area that is not delineated as an urbanized area 
by the Bureau of the Census.
    Rural health clinic or clinic means a clinic that is located in a 
rural area designated as a shortage area, is not a rehabilitation agency 
or a facility primarily for the care and treatment of mental diseases, 
and meets all other requirements of this subpart.
    Shortage area means a defined geographic area designated by the 
Department as having either a shortage of personal health services 
(under section 1302(7) of the Public Health Service Act) or a shortage 
of primary medical care manpower (under section 332 of that Act).
    Secretary means the Secretary of Health and Human Services, or any 
official to whom he has delegated the pertinent authority.


(Secs. 1102, 1833 and 1902(a)(13), Social Security Act: 49 Stat. 647, 91 
Stat. 1485 (42 U.S.C. 1302, 1395l and 1396(a)(13)))

[43 FR 5375, Feb. 8, 1978, as amended at 43 FR 30528, July 14, 1978. 
Redesignated at 50 FR 33034, Aug. 16, 1985, and further amended at 56 FR 
8854, Mar. 1, 1991; 57 FR 24982, June 12, 1992]



Sec. 491.3  Certification procedures.

    A rural health clinic will be certified for participation in 
Medicare in accordance with subpart S of 42 CFR part 405. The Secretary 
will notify the State Medicaid agency whenever he has certified or 
denied certification under Medicare for a prospective rural health 
clinic in that State. A clinic certified under Medicare will be deemed 
to meet the standards for certification under Medicaid.



Sec. 491.4  Compliance with Federal, State and local laws.

    The rural health clinic or FQHC and its staff are in compliance with 
applicable Federal, State and local laws and regulations.
    (a) Licensure of clinic or center. The clinic or center is licensed 
pursuant to applicable State and local law.
    (b) Licensure, certification or registration of personnel. Staff of 
the clinic or center are licensed, certified or registered in accordance 
with applicable State and local laws.

[57 FR 24982, June 12, 1992]



Sec. 491.5  Location of clinic.

    (a) Basic requirements. (1) An RHC is located in a rural area that 
is designated as a shortage area.
    (2) An FQHC is located in a rural or urban area that is designated 
as either a shortage area or an area that has a medically underserved 
population.
    (3) Both the RHC and the FQHC may be permanent or mobile units.
    (i) Permanent unit. The objects, equipment, and supplies necessary 
for the provision of the services furnished directly by the clinic or 
center are housed in a permanent structure.
    (ii) Mobile unit. The objects, equipment, and supplies necessary for 
the

[[Page 952]]

provision of the services furnished directly by the clinic or center are 
housed in a mobile structure, which has fixed, scheduled location(s).
    (iii) Permanent unit in more than one location. If clinic or center 
services are furnished at permanent units in more than one location, 
each unit is independently considered for approval as a rural health 
clinic or for approval as an FQHC.
    (b) Exceptions. (1) CMS does not disqualify an RHC approved under 
this subpart if the area in which it is located subsequently fails to 
meet the definition of a rural, shortage area.
    (2) A private, nonprofit facility that meets all other conditions of 
this subpart except for location in a shortage area will be certified 
if, on July 1, 1977, it was operating in a rural area that is determined 
by the Secretary (on the basis of the ratio of primary care physicians 
to the general population) to have an insufficient supply of physicians 
to meet the needs of the area served.
    (3) Determinations on these exceptions will be made by the Secretary 
upon application by the facility.
    (c) Criteria for designation of rural areas. (1) Rural areas are 
areas not delineated as urbanized areas in the last census conducted by 
the Census Bureau.
    (2) Excluded from the rural area classification are:
    (i) Central cities of 50,000 inhabitants or more;
    (ii) Cities with at least 25,000 inhabitants which, together with 
contiguous areas having stipulated population density, have combined 
populations of 50,000 and constitute, for general economic and social 
purposes, single communities;
    (iii) Closely settled territories surrounding cities and 
specifically designated by the Census Bureau as urban.
    (3) Included in the rural area classification are those portions of 
extended cities that the Census Bureau has determined to be rural.
    (d) Criteria for designation of shortage areas. (1) The criteria for 
determination of shortage of personal health services (under section 
1302(7) of the Public Health Services Act), are:
    (i) The ratio of primary care physicians practicing within the area 
to the resident population;
    (ii) The infant mortality rate;
    (iii) The percent of the population 65 years of age or older; and
    (iv) The percent of the population with a family income below the 
poverty level.
    (2) The criteria for determination of shortage of primary medical 
care manpower (under section 332(a)(1)(A) of the Public Health Services 
Act) are:
    (i) The area served is a rational area for the delivery of primary 
medical care services;
    (ii) The ratio of primary care physicians practicing within the area 
to the resident population; and
    (iii) The primary medical care manpower in contiguous areas is 
overutilized, excessively distant, or inaccessible to the population in 
this area.
    (e) Medically underserved population. A medically underserved 
population includes the following:
    (1) A population of an urban or rural area that is designated by PHS 
as having a shortage of personal health services.
    (2) A population group that is designated by PHS as having a 
shortage of personal health services.
    (f) Requirements specific to FQHCs. An FQHC approved for 
participation in Medicare must meet one of the following criteria:
    (1) Furnish services to a medically underserved population.
    (2) Be located in a medically underserved area, as demonstrated by 
an application approved by PHS.

    Cross Reference: See 42 CFR 110.203(g) (41 FR 45718, Oct. 15, 1976) 
and 42 CFR Part 5 (42 FR 1586, Jan. 10, 1978).

[43 FR 5375, Feb. 8, 1978. Redesignated at 50 FR 33034, Aug. 16, 1985, 
and amended at 57 FR 24982, June 12, 1992; 61 FR 14658, Apr. 3, 1996]



Sec. 491.6  Physical plant and environment.

    (a) Construction. The clinic or center is constructed, arranged, and 
maintained to insure access to and safety of patients, and provides 
adequate space for the provision of direct services.
    (b) Maintenance. The clinic or center has a preventive maintenance 
program to ensure that:

[[Page 953]]

    (1) All essential mechanical, electrical and patient-care equipment 
is maintained in safe operating condition;
    (2) Drugs and biologicals are appropriately stored; and
    (3) The premises are clean and orderly.
    (c) Emergency procedures. The clinic or center assures the safety of 
patients in case of non-medical emergencies by:
    (1) Training staff in handling emergencies;
    (2) Placing exit signs in appropriate locations; and
    (3) Taking other appropriate measures that are consistent with the 
particular conditions of the area in which the clinic or center is 
located.

[57 FR 24983, June 12, 1992]



Sec. 491.7  Organizational structure.

    (a) Basic requirements. (1) The clinic or center is under the 
medical direction of a physician, and has a health care staff that meets 
the requirements of Sec. 491.8.
    (2) The organization's policies and its lines of authority and 
responsibilities are clearly set forth in writing.
    (b) Disclosure. The clinic or center discloses the names and 
addresses of:
    (1) Its owners, in accordance with section 1124 of the Social 
Security Act (42 U.S.C. 132 A-3);
    (2) The person principally responsible for directing the operation 
of the clinic or center; and
    (3) The person responsible for medical direction.

[57 FR 24983, June 12, 1992]



Sec. 491.8  Staffing and staff responsibilities.

    (a) Staffing. (1) The clinic or center has a health care staff that 
includes one or more physicians. Rural health clinic staffs must also 
include one or more physician's assistants or nurse practitioners.
    (2) The physician member of the staff may be the owner of the rural 
health clinic, an employee of the clinic or center, or under agreement 
with the clinic or center to carry out the responsibilities required 
under this section.
    (3) The physician assistant, nurse practitioner, nurse-midwife, 
clinical social worker, or clinical psychologist member of the staff may 
be the owner or an employee of the clinic or center, or may furnish 
services under contract to the center.
    (4) The staff may also include ancillary personnel who are 
supervised by the professional staff.
    (5) The staff is sufficient to provide the services essential to the 
operation of the clinic or center.
    (6) A physician, nurse practitioner, physician assistant, nurse-
midwife, clinical social worker, or clinical psychologist is available 
to furnish patient care services at all times the clinic or center 
operates. In addition, for rural health clinics, a nurse practitioner or 
a physician assistant is available to furnish patient care services at 
least 60 percent of the time the clinic operates.
    (b) Physician responsibilities. (1) The physician:
    (i) Except for services furnished by a clinical psychologist in an 
FQHC, which State law permits to be provided without physician 
supervision, provides medical direction for the clinic's or center's 
health care activities and consultation for, and medical supervision of, 
the health care staff.
    (ii) In conjunction with the physician's assistant and/or nurse 
practitioner member(s), participates in developing, executing, and 
periodically reviewing the clinic's or center's written policies and the 
services provided to Federal program patients; and
    (iii) Periodically reviews the clinic's or center's patient records, 
provides medical orders, and provides medical care services to the 
patients of the clinic or center.
    (2) A physician is present for sufficient periods of time, at least 
once in every 2 week period (except in extraordinary circumstances), to 
provide the medical direction, medical care services, consultation and 
supervision described in paragraph (b)(1) of this section and is 
available through direct telecommunication for consultation, assistance 
with medical emergencies, or patient referral. The extraordinary 
circumstances are documented in the records of the clinic or center.
    (c) Physician assistant and nurse practitioner responsibilities. (1) 
The physician assistant and the nurse practitioner

[[Page 954]]

members of the clinic's or center's staff:
    (i) Participate in the development, execution and periodic review of 
the written policies governing the services the clinic or center 
furnishes;
    (ii) Participate with a physician in a periodic review of the 
patients' health records.
    (2) The physician assistant or nurse practitioner performs the 
following functions, to the extent they are not being performed by a 
physician:
    (i) Provides services in accordance with the clinic's or center's 
policies;
    (ii) Arranges for, or refers patients to, needed services that 
cannot be provided at the clinic or center; and
    (iii) Assures that adequate patient health records are maintained 
and transferred as required when patients are referred.

[57 FR 24983, June 12, 1992, as amended at 61 FR 14658, Apr. 3, 1996]



Sec. 491.9  Provision of services.

    (a) Basic requirements. (1) All services offered by the clinic or 
center are furnished in accordance with applicable Federal, State, and 
local laws; and
    (2) The clinic or center is primarily engaged in providing 
outpatient health services and meets all other conditions of this 
subpart.
    (3) The laboratory requirements in paragraph (c)(2) of this section 
apply to RHCs, but do not apply to FQHCs.
    (b) Patient care policies. (1) The clinic's or center's health care 
services are furnished in accordance with appropriate written policies 
which are consistent with applicable State law.
    (2) The policies are developed with the advice of a group of 
professional personnel that includes one or more physicians and one or 
more physician assistants or nurse practitioners. At least one member is 
not a member of the clinic or center staff.
    (3) The policies include:
    (i) A description of the services the clinic or center furnishes 
directly and those furnished through agreement or arrangement.
    (ii) Guidelines for the medical management of health problems which 
include the conditions requiring medical consultation and/or patient 
referral, the maintenance of health care records, and procedures for the 
periodic review and evaluation of the services furnished by the clinic 
or center.
    (iii) Rules for the storage, handling, and administration of drugs 
and biologicals.
    (4) These policies are reviewed at least annually by the group of 
professional personnel required under paragraph (b)(2) of this section 
and reviewed as necessary by the clinic or center.
    (c) Direct services--(1) General. The clinic or center staff 
furnishes those diagnostic and therapeutic services and supplies that 
are commonly furnished in a physician's office or at the entry point 
into the health care delivery system. These include medical history, 
physical examination, assessment of health status, and treatment for a 
variety of medical conditions.
    (2) Laboratory. These requirements apply to RHCs but not to FQHCs. 
The RHC provides laboratory services in accordance with part 493 of this 
chapter, which implements the provisions of section 353 of the Public 
Health Service Act. The RHC provides basic laboratory services essential 
to the immediate diagnosis and treatment of the patient, including:
    (i) Chemical examinations of urine by stick or tablet method or both 
(including urine ketones);
    (ii) Hemoglobin or hematocrit;
    (iii) Blood glucose;
    (iv) Examination of stool specimens for occult blood;
    (v) Pregnancy tests; and
    (vi) Primary culturing for transmittal to a certified laboratory.
    (3) Emergency. The clinic or center provides medical emergency 
procedures as a first response to common life-threatening injuries and 
acute illness and has available the drugs and biologicals commonly used 
in life saving procedures, such as analgesics, anesthetics (local), 
antibiotics, anticonvulsants, antidotes and emetics, serums and toxoids.
    (d) Services provided through agreements or arrangements. (1) The 
clinic or center has agreements or arrangements with one or more 
providers or suppliers participating under Medicare or Medicaid to 
furnish other services to its patients, including:

[[Page 955]]

    (i) Inpatient hospital care;
    (ii) Physician(s) services (whether furnished in the hospital, the 
office, the patient's home, a skilled nursing facility, or elsewhere); 
and
    (iii) Additional and specialized diagnostic and laboratory services 
that are not available at the clinic or center.
    (2) If the agreements are not in writing, there is evidence that 
patients referred by the clinic or center are being accepted and 
treated.

[57 FR 24983, June 12, 1992, as amended at 58 FR 63536, Dec. 2, 1993]



Sec. 491.10  Patient health records.

    (a) Records system. (1) The clinic or center maintains a clinical 
record system in accordance with written policies and procedures.
    (2) A designated member of the professional staff is responsible for 
maintaining the records and for insuring that they are completely and 
accurately documented, readily accessible, and systematically organized.
    (3) For each patient receiving health care services, the clinic or 
center maintains a record that includes, as applicable:
    (i) Identification and social data, evidence of consent forms, 
pertinent medical history, assessment of the health status and health 
care needs of the patient, and a brief summary of the episode, 
disposition, and instructions to the patient;
    (ii) Reports of physical examinations, diagnostic and laboratory 
test results, and consultative findings;
    (iii) All physician's orders, reports of treatments and medications, 
and other pertinent information necessary to monitor the patient's 
progress;
    (iv) Signatures of the physician or other health care professional.
    (b) Protection of record information. (1) The clinic or center 
maintains the confidentiality of record information and provides 
safeguards against loss, destruction or unauthorized use.
    (2) Written policies and procedures govern the use and removal of 
records from the clinic or center and the conditions for release of 
information.
    (3) The patient's written consent is required for release of 
information not authorized to be released without such consent.
    (c) Retention of records. The records are retained for at least 6 
years from date of last entry, and longer if required by State statute.


(Secs. 1102, 1833 and 1902(a)(13), Social Security Act; 49 Stat. 647, 91 
Stat. 1485 (42 U.S.C. 1302, 13951 and 1396a(a)(13)))

[43 FR 30529, July 14, 1978. Redesignated at 50 FR 33034, Aug. 16, 1985, 
as amended at 57 FR 24984, June 12, 1992]



Sec. 491.11  Program evaluation.

    (a) The clinic or center carries out, or arranges for, an annual 
evaluation of its total program.
    (b) The evaluation includes review of:
    (1) The utilization of clinic or center services, including at least 
the number of patients served and the volume of services;
    (2) A representative sample of both active and closed clinical 
records; and
    (3) The clinic's or center's health care policies.
    (c) The purpose of the evaluation is to determine whether:
    (1) The utilization of services was appropriate;
    (2) The established policies were followed; and
    (3) Any changes are needed.
    (d) The clinic or center staff considers the findings of the 
evaluation and takes corrective action if necessary.

[57 FR 24984, June 12, 1992]



PART 493--LABORATORY REQUIREMENTS--Table of Contents




                      Subpart A--General Provisions

Sec.
493.1 Basis and scope.
493.2 Definitions.
493.3 Applicability.
493.5 Categories of tests by complexity.
493.15 Laboratories performing waived tests.
493.17 Test categorization.
493.19 Provider-performed microscopy (PPM) procedures.
493.20 Laboratories performing tests of moderate complexity.
493.25 Laboratories performing tests of high complexity.

[[Page 956]]

                    Subpart B--Certificate of Waiver

493.35 Application for a certificate of waiver.
493.37 Requirements for a certificate of waiver.
493.39 Notification requirements for laboratories issued a certificate 
          of waiver.

Subpart C--Registration Certificate, Certificate for Provider-performed 
          Microscopy Procedures, and Certificate of Compliance

493.43 Application for registration certificate, certificate for 
          provider-performed microscopy (PPM) procedures, and 
          certificate of compliance.
493.45 Requirements for a registration certificate.
493.47 Requirements for a certificate for provider-performed microscopy 
          (PPM) procedures.
493.49 Requirements for a certificate of compliance.
493.51 Notification requirements for laboratories issued a certificate 
          of compliance.
493.53 Notification requirements for laboratories issued a certificate 
          for provider-performed microscopy (PPM) procedures.

                 Subpart D--Certificate of Accreditation

493.55 Application for registration certificate and certificate of 
          accreditation.
493.57 Requirements for a registration certificate.
493.61 Requirements for a certificate of accreditation.
493.63 Notification requirements for laboratories issued a certificate 
          of accreditation.

     Subpart E--Accreditation by a Private, Nonprofit Accreditation 
  Organization or Exemption Under an Approved State Laboratory Program

493.551 General requirements for laboratories.
493.553 Approval process (application and reapplication) for 
          accreditation organizations and State licensure programs.
493.555 Federal review of laboratory requirements.
493.557 Additional submission requirements.
493.559 Publication of approval of deeming authority or CLIA exemption.
493.561 Denial of application or reapplication.
493.563 Validation inspections--Basis and focus.
493.565 Selection for validation inspection--laboratory 
          responsibilities.
493.567 Refusal to cooperate with validation inspection.
493.569 Consequences of a finding of noncompliance as a result of a 
          validation inspection.
493.571 Disclosure of accreditation, State and CMS validation inspection 
          results.
493.573 Continuing Federal oversight of private nonprofit accreditation 
          organizations and approved State licensure programs.
493.575 Removal of deeming authority or CLIA exemption and final 
          determination review.

                    Subpart F--General Administration

493.602 Scope of subpart.
493.606 Applicability of subpart.
493.638 Certificate fees.
493.639 Fee for revised certificate.
493.643 Fee for determination of program compliance.
493.645 Additional fee(s) applicable to approved State laboratory 
          programs and laboratories issued a certificate of 
          accreditation, certificate of waiver, or certificate for PPM 
          procedures.
493.646 Payment of fees.
493.649 Methodology for determining fee amount.

Subpart G [Reserved]

    Subpart H--Participation in Proficiency Testing for Laboratories 
  Performing Tests of Moderate Complexity (Including the Subcategory), 
           High Complexity, or Any Combination of These Tests

493.801 Condition: Enrollment and testing of samples.
493.803 Condition: Successful participation.
493.807 Condition: Reinstatement of laboratories performing tests of 
          moderate complexity (including the subcategory), high 
          complexity, or any combination of these tests, after failure 
          to participate successfully.

   Proficiency Testing by Specialty and Subspecialty for Laboratories 
  Performing Tests of Moderate Complexity (Including the Subcategory), 
           High Complexity, or Any Combination of These Tests

493.821 Condition: Microbiology.
493.823 Standard; Bacteriology.
493.825 Standard; Mycobacteriology.
493.827 Standard; Mycology.
493.829 Standard; Parasitology.
493.831 Standard; Virology.
493.833 Condition: Diagnostic immunology.
493.835 Standard; Syphilis serology.
493.837 Standard; General immunology.
493.839 Condition: Chemistry.
493.841 Standard; Routine chemistry.
493.843 Standard; Endocrinology.
493.845 Standard; Toxicology.
493.849 Condition: Hematology.

[[Page 957]]

493.851 Standard; Hematology.
493.853 Condition: Pathology.
493.855 Standard; Cytology: gynecologic examinations.
493.857 Condition: Immunohematology.
493.859 Standard; ABO group and D (Rho) typing.
493.861 Standard; Unexpected antibody detection.
493.863 Standard; Compatibility testing.
493.865 Standard; Antibody identification.

Subpart I--Proficiency Testing Programs for Tests of Moderate Complexity 
  (Including the Subcategory), High Complexity, or Any Combination of 
                               These Tests

493.901 Approval of proficiency testing programs.
493.903 Administrative responsibilities.
493.905 Nonapproved proficiency testing programs.

       Proficiency Testing Programs by Specialty and Subspecialty

493.909 Microbiology.
493.911 Bacteriology.
493.913 Mycobacteriology.
493.915 Mycology.
493.917 Parasitology.
493.919 Virology.
493.921 Diagnostic immunology.
493.923 Syphilis serology.
493.927 General immunology.
493.929 Chemistry.
493.931 Routine chemistry.
493.933 Endocrinology.
493.937 Toxicology.
493.941 Hematology (including routine hematology and coagulation).
493.945 Cytology; gynecologic examinations.
493.959 Immunohematology.

 Subpart J--Patient Test Management for Moderate Complexity (Including 
  the Subcategory), High Complexity, or Any Combination of These Tests

493.1101 Condition: Patient test management; moderate complexity 
          (including the subcategory), or high complexity testing, or 
          any combination of these tests.
493.1103 Standard; Procedures for specimen submission and handling.
493.1105 Standard; Test requisition.
493.1107 Standard; Test records.
493.1109 Standard; Test report.
493.1111 Standard; Referral of specimens.

 Subpart K--Quality Control for Tests of Moderate Complexity (Including 
  the Subcategory), High Complexity, or Any Combination of These Tests

493.1201 Condition: General quality control; moderate complexity 
          (including the subcategory) or high complexity testing, or any 
          combination of these tests.
493.1202 Standard; Moderate or high complexity testing, or both: 
          Effective from September 1, 1992 to December 31, 2002.
493.1203 Standard; Moderate or high complexity testing, or both: 
          Effective beginning December 31, 2002.
493.1204 Standard; Facilities.
493.1205 Standard; Test methods, equipment, instrumentation, reagents, 
          materials, and supplies.
493.1211 Standard; Procedure manual.
493.1213 Standard; Establishment and verification of method performance 
          specifications.
493.1215 Standard; Equipment maintenance and function checks.
493.1217 Standard; Calibration and calibration verification procedures.
493.1218 Standard; Control procedures.
493.1219 Standard; Remedial actions.
493.1221 Standard; Quality control records.
493.1223 Condition: Quality control--specialties and subspecialties for 
          tests of moderate or high complexity, or both.
493.1225 Condition: Microbiology.
493.1227 Condition: Bacteriology.
493.1229 Condition: Mycobacteriology.
493.1231 Condition: Mycology.
493.1233 Condition: Parasitology.
493.1235 Condition: Virology.
493.1237 Condition: Diagnostic immunology.
493.1239 Condition: Syphilis serology.
493.1241 Condition: General immunology.
493.1243 Condition: Chemistry.
493.1245 Condition: Routine chemistry.
493.1247 Condition: Endocrinology.
493.1249 Condition: Toxicology.
493.1251 Condition: Urinalysis.
493.1253 Condition: Hematology.
493.1255 Condition: Pathology.
493.1257 Condition: Cytology.
493.1259 Condition: Histopathology.
493.1261 Condition: Oral pathology.
493.1263 Condition: Radiobioassay.
493.1265 Condition: Histocompatibility.
493.1267 Condition: Clinical cytogenetics.
493.1269 Condition: Immunohematology.
493.1271 Condition: Transfusion services and bloodbanking.

[[Page 958]]

493.1273 Standard; Immunohematological collection, processing, dating 
          periods, labeling and distribution of blood and blood 
          products.
493.1275 Standard; Blood and blood products storage facilities.
493.1277 Standard; Arrangement for services.
493.1279 Standard; Provision of testing.
493.1283 Standard; Retention of samples of transfused blood.
493.1285 Standard; Investigation of transfusion reactions.

Subpart L [Reserved]

Subpart M--Personnel for Moderate Complexity (Including the Subcategory) 
                       and High Complexity Testing

493.1351 General.

 Laboratories Performing Provider-Performed Microscopy (PPM) Procedures

493.1353 Scope.
493.1355 Condition: Laboratories performing PPM procedures; laboratory 
          director.
493.1357 Standard; laboratory director qualifications.
493.1359 Standard; PPM laboratory director responsibilities.
493.1361 Condition: Laboratories performing PPM procedures; testing 
          personnel.
493.1363 Standard; PPM testing personnel qualifications.
493.1365 Standard; PPM testing personnel responsibilities.

           Laboratories Performing Moderate Complexity Testing

493.1403 Condition: Laboratories performing moderate complexity testing; 
          laboratory director.
493.1405 Standard; Laboratory director qualifications.
493.1406 Standard; Laboratory director qualifications on or before 
          February 28, 1992.
493.1407 Standard; Laboratory director responsibilities.
493.1409 Condition: Laboratories performing moderate complexity testing; 
          technical consultant.
493.1411 Standard; Technical consultant qualifications.
493.1413 Standard; Technical consultant responsibilities.
493.1415 Condition: Laboratories performing moderate complexity testing; 
          clinical consultant.
493.1417 Standard; Clinical consultant qualifications.
493.1419 Standard; Clinical consultant responsibilities.
493.1421 Condition: Laboratories performing moderate complexity testing; 
          testing personnel.
493.1423 Standard; Testing personnel qualifications.
493.1425 Standard; Testing personnel responsibilities.

             Laboratories Performing High Complexity Testing

493.1441 Condition: Laboratories performing high complexity testing; 
          laboratory director.
493.1443 Standard; Laboratory director qualifications.
493.1445 Standard; Laboratory director responsibilities.
493.1447 Condition: Laboratories performing high complexity testing; 
          technical supervisor.
493.1449 Standard; Technical supervisor qualifications.
493.1451 Standard; Technical supervisor responsibilities.
493.1453 Condition: Laboratories performing high complexity testing; 
          clinical consultant.
493.1455 Standard; Clinical consultant qualifications.
493.1457 Standard; Clinical consultant responsibilities.
493.1459 Condition: Laboratories performing high complexity testing; 
          general supervisor.
493.1461 Standard; General supervisor qualifications.
493.1462 General supervisor qualifications on or before February 28, 
          1992.
493.1463 Standard; General supervisor responsibilities.
493.1467 Condition: Laboratories performing high complexity testing; 
          cytology general supervisor.
493.1469 Standard; Cytology general supervisor qualifications.
493.1471 Standard; Cytology general supervisor responsibilities.
493.1481 Condition: Laboratories performing high complexity testing; 
          cytotechnologist.
493.1483 Standard; Cytotechnologist qualifications.
493.1485 Standard; Cytotechnologist responsibilities.
493.1487 Condition: Laboratories performing high complexity testing; 
          testing personnel.
493.1489 Standard; Testing personnel qualifications.
493.1491 Technologist qualifications on or before February 28, 1992.
493.1495 Standard; Testing personnel responsibilities.

[[Page 959]]

Subparts N-O [Reserved]

  Subpart P--Quality Assurance for Moderate Complexity (Including the 
  Subcategory) or High Complexity Testing, or Any Combination of These 
                                  Tests

493.1701 Condition: Quality assurance; moderate complexity (including 
          the subcategory) or high complexity testing, or any 
          combination of these tests.
493.1703 Standard; Patient test management assessment.
493.1705 Standard; Quality control assessment.
493.1707 Standard; Proficiency testing assessment.
493.1709 Standard; Comparison of test results.
493.1711 Standard; Relationship of patient information to patient test 
          results.
493.1713 Standard; Personnel assessment.
493.1715 Standard; Communications.
493.1717 Standard; Complaint investigations.
493.1719 Standard; Quality assurance review with staff.
493.1721 Standard; Quality assurance records.

                          Subpart Q--Inspection

493.1771 Condition: Inspection requirements applicable to all CLIA-
          certified and CLIA-exempt laboratories.
493.1773 Standard: Basic inspection requirements for all laboratories 
          issued a CLIA certificate and CLIA-exempt laboratories.
493.1775 Standard: Inspection of laboratories issued a certificate of 
          waiver or a certificate for provider-performed microscopy 
          procedures.
493.1777 Standard: Inspection of laboratories that have requested or 
          have been issued a certificate of compliance.
493.1780 Standard: Inspection of CLIA-exempt laboratories or 
          laboratories requesting or issued a certificate of 
          accreditation.

                    Subpart R--Enforcement Procedures

493.1800 Basis and scope.
493.1804 General considerations.
493.1806 Available sanctions: All laboratories.
493.1807 Additional sanctions: Laboratories that participate in 
          Medicare.
493.1808 Adverse action on any type of CLIA certificate: Effect on 
          Medicare approval.
493.1809 Limitation on Medicaid payment.
493.1810 Imposition and lifting of alternative sanctions.
493.1812 Action when deficiencies pose immediate jeopardy.
493.1814 Action when deficiencies are at the condition level but do not 
          pose immediate jeopardy.
493.1816 Action when deficiencies are not at the condition level.
493.1820 Ensuring timely correction of deficiencies.
493.1826 Suspension of part of Medicare payments.
493.1828 Suspension of all Medicare payments.
493.1832 Directed plan of correction and directed portion of a plan of 
          correction.
493.1834 Civil money penalty.
493.1836 State onsite monitoring.
493.1838 Training and technical assistance for unsuccessful 
          participation in proficiency testing.
493.1840 Suspension, limitation, or revocation of any type of CLIA 
          certificate.
493.1842 Cancellation of Medicare approval.
493.1844 Appeals procedures.
493.1846 Civil action.
493.1850 Laboratory registry.

Subpart S [Reserved]

                        Subpart T--Consultations

493.2001 Establishment and function of the Clinical Laboratory 
          Improvement Advisory Committee.

    Authority: Sec. 353 of the Public Health Service Act, secs. 1102, 
1861(e), the sentence following sections 1861(s)(11) through 1861(s)(16) 
of the Social Security Act (42 U.S.C. 263a, 1302, 1395x(e), the sentence 
following 1395x(s)(11) through 1395x(s)(16)).

    Source: 55 FR 9576, Mar. 14, 1990, unless otherwise noted.



                      Subpart A--General Provisions

    Source: 57 FR 7139, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1  Basis and scope.

    This part sets forth the conditions that all laboratories must meet 
to be certified to perform testing on human specimens under the Clinical 
Laboratory Improvement Amendments of 1988 (CLIA). It implements sections 
1861 (e) and (j), the sentence following section 1861(s)(13), and 
1902(a)(9) of the Social Security Act, and section 353 of the Public 
Health Service Act. This part applies to all laboratories as defined 
under ``laboratory'' in Sec. 493.2 of this part. This part also applies 
to laboratories seeking payment under the Medicare and Medicaid 
programs. The

[[Page 960]]

requirements are the same for Medicare approval as for CLIA 
certification.



Sec. 493.2  Definitions.

    As used in this part, unless the context indicates otherwise--
    Accredited institution means a school or program which--
    (a) Admits as regular student only persons having a certificate of 
graduation from a school providing secondary education, or the 
recognized equivalent of such certificate;
    (b) Is legally authorized within the State to provide a program of 
education beyond secondary education;
    (c) Provides an educational program for which it awards a bachelor's 
degree or provides not less than a 2-year program which is acceptable 
toward such a degree, or provides an educational program for which it 
awards a master's or doctoral degree;
    (d) Is accredited by a nationally recognized accrediting agency or 
association.
    This definition includes any foreign institution of higher education 
that HHS or its designee determines meets substantially equivalent 
requirements.
    Accredited laboratory means a laboratory that has voluntarily 
applied for and been accredited by a private, nonprofit accreditation 
organization approved by CMS in accordance with this part;
    Adverse action means the imposition of a principal or alternative 
sanction by CMS.
    ALJ stands for Administrative Law Judge.
    Alternative sanctions means sanctions that may be imposed in lieu of 
or in addition to principal sanctions. The term is synonymous with 
``intermediate sanctions'' as used in section 1846 of the Act.
    Analyte means a substance or constituent for which the laboratory 
conducts testing.
    Approved accreditation organization for laboratories means a 
private, nonprofit accreditation organization that has formally applied 
for and received CMS's approval based on the organization's compliance 
with this part.
    Approved State laboratory program means a licensure or other 
regulatory program for laboratories in a State, the requirements of 
which are imposed under State law, and the State laboratory program has 
received CMS approval based on the State's compliance with this part.
    Authorized person means an individual authorized under State law to 
order tests or receive test results, or both.
    Challenge means, for quantitative tests, an assessment of the amount 
of substance or analyte present or measured in a sample. For qualitative 
tests, a challenge means the determination of the presence or the 
absence of an analyte, organism, or substance in a sample.
    CLIA means the Clinical Laboratory Improvement Amendments of 1988.
    CLIA certificate means any of the following types of certificates 
issued by CMS or its agent:
    (1) Certificate of compliance means a certificate issued to a 
laboratory after an inspection that finds the laboratory to be in 
compliance with all applicable condition level requirements, or reissued 
before the expiration date, pending an appeal, in accordance with 
Sec. 493.49, when an inspection has found the laboratory to be out of 
compliance with one or more condition level requirements.
    (2) Certificate for provider-performed microscopy (PPM) procedures 
means a certificate issued or reissued before the expiration date, 
pending an appeal, in accordance with Sec. 493.47, to a laboratory in 
which a physician, midlevel practitioner or dentist performs no tests 
other than PPM procedures and, if desired, waived tests listed in 
Sec. 493.15(c).
    (3) Certificate of accreditation means a certificate issued on the 
basis of the laboratory's accreditation by an accreditation organization 
approved by CMS (indicating that the laboratory is deemed to meet 
applicable CLIA requirements) or reissued before the expiration date, 
pending an appeal, in accordance with Sec. 493.61, when a validation or 
complaint survey has found the laboratory to be noncompliant with one or 
more CLIA conditions.
    (4) Certificate of registration or registration certificate means a 
certificate issued or reissued before the expiration date, pending an 
appeal, in accordance

[[Page 961]]

with Sec. 493.45, that enables the entity to conduct moderate or high 
complexity laboratory testing or both until the entity is determined to 
be in compliance through a survey by CMS or its agent; or in accordance 
with Sec. 493.57 to an entity that is accredited by an approved 
accreditation organization.
    (5) Certificate of waiver means a certificate issued or reissued 
before the expiration date, pending an appeal, in accordance with 
Sec. 493.37, to a laboratory to perform only the waived tests listed at 
Sec. 493.15(c).
    CLIA-exempt laboratory means a laboratory that has been licensed or 
approved by a State where CMS has determined that the State has enacted 
laws relating to laboratory requirements that are equal to or more 
stringent than CLIA requirements and the State licensure program has 
been approved by CMS in accordance with subpart E of this part.
    Condition level deficiency means noncompliance with one or more 
condition level requirements.
    Condition level requirements means any of the requirements 
identified as ``conditions'' in subparts G through Q of this part.
    Credible allegation of compliance means a statement or documentation 
that--
    (1) Is made by a representative of a laboratory that has a history 
of having maintained a commitment to compliance and of taking corrective 
action when required;
    (2) Is realistic in terms of its being possible to accomplish the 
required corrective action between the date of the exit conference and 
the date of the allegation; and
    (3) Indicates that the problem has been resolved.
    Dentist means a doctor of dental medicine or doctor of dental 
surgery licensed by the State to practice dentistry within the State in 
which the laboratory is located.
    Equivalency means that an accreditation organization's or a State 
laboratory program's requirements, taken as a whole, are equal to or 
more stringent than the CLIA requirements established by CMS, taken as 
whole. It is acceptable for an accreditation organization's or State 
laboratory program's requirements to be organized differently or 
otherwise vary from the CLIA requirements, as long as (1) all of the 
requirements taken as a whole would provide at least the same protection 
as the CLIA requirements taken as a whole; and (2) a finding of 
noncompliance with respect to CLIA requirements taken as a whole would 
be matched by a finding of noncompliance with the accreditation or State 
requirements taken as a whole.
    CMS agent means an entity with which CMS arranges to inspect 
laboratories and assess laboratory activities against CLIA requirements 
and may be a State survey agency, a private, nonprofit organization 
other than an approved accreditation organization, a component of HHS, 
or any other governmental component CMS approves for this purpose. In 
those instances where all of the laboratories in a State are exempt from 
CLIA requirements, based on the approval of a State's exemption request, 
the State survey agency is not the CMS agent.
    HHS means the Department of Health and Human Services, or its 
designee.
    Immediate jeopardy means a situation in which immediate corrective 
action is necessary because the laboratory's noncompliance with one or 
more condition level requirements has already caused, is causing, or is 
likely to cause, at any time, serious injury or harm, or death, to 
individuals served by the laboratory or to the health or safety of the 
general public. This term is synonymous with imminent and serious risk 
to human health and significant hazard to the public health.
    Intentional violation means knowing and willful noncompliance with 
any CLIA condition.
    Kit means all components of a test that are packaged together.
    Laboratory means a facility for the biological, microbiological, 
serological, chemical, immunohematological, hematological, biophysical, 
cytological, pathological, or other examination of materials derived 
from the human body for the purpose of providing information for the 
diagnosis, prevention, or treatment of any disease or impairment of, or 
the assessment of the health of, human beings. These examinations also 
include procedures to

[[Page 962]]

determine, measure, or otherwise describe the presence or absence of 
various substances or organisms in the body. Facilities only collecting 
or preparing specimens (or both) or only serving as a mailing service 
and not performing testing are not considered laboratories.
    Midlevel practitioner means a nurse midwife, nurse practitioner, or 
physician assistant, licensed by the State within which the individual 
practices, if such licensing is required in the State in which the 
laboratory is located.
    Operator means the individual or group of individuals who oversee 
all facets of the operation of a laboratory and who bear primary 
responsibility for the safety and reliability of the results of all 
specimen testing performed in that laboratory. The term includes--
    (1) A director of the laboratory if he or she meets the stated 
criteria; and
    (2) The members of the board of directors and the officers of a 
laboratory that is a small corporation under subchapter S of the 
Internal Revenue Code.
    Owner means any person who owns any interest in a laboratory except 
for an interest in a laboratory whose stock and/or securities are 
publicly traded. (That is e.g., the purchase of shares of stock or 
securities on the New York Stock Exchange in a corporation owning a 
laboratory would not make a person an owner for the purpose of this 
regulation.)
    Party means a laboratory affected by any of the enforcement 
procedures set forth in this subpart, by CMS or the OIG, as appropriate.
    Performance characteristic means a property of a test that is used 
to describe its quality, e.g., accuracy, precision, analytical 
sensitivity, analytical specificity, reportable range, reference range, 
etc.
    Performance specification means a value or range of values for a 
performance characteristic, established or verified by the laboratory, 
that is used to describe the quality of patient test results.
    Physician means an individual with a doctor of medicine, doctor of 
osteopathy, or doctor of podiatric medicine degree who is licensed by 
the State to practice medicine, osteopathy, or podiatry within the State 
in which the laboratory is located.
    Principal sanction means the suspension, limitation, or revocation 
of any type of CLIA certificate or the cancellation of the laboratory's 
approval to receive Medicare payment for its services.
    Prospective laboratory means a laboratory that is operating under a 
registration certificate or is seeking any of the three other types of 
CLIA certificates.
    Rate of disparity means the percentage of sample validation 
inspections for a specific accreditation organization or State where 
CMS, the State survey agency or other CMS agent finds noncompliance with 
one or more condition level requirements but no comparable deficiencies 
were cited by the accreditation organization or the State, and it is 
reasonable to conclude that the deficiencies were present at the time of 
the most recent accreditation organization or State licensure 
inspection.

    Example: Assume the State survey agency, CMS or other CMS agent 
performs 200 sample validation inspections for laboratories accredited 
by a single accreditation organization or licensed in an exempt State 
during a validation review period and finds that 60 of the 200 
laboratories had one or more condition level requirements out of 
compliance. CMS reviews the validation and accreditation organization's 
or State's inspections of the validated laboratories and determines that 
the State or accreditation organization found comparable deficiencies in 
22 of the 60 laboratories and it is reasonable to conclude that 
deficiencies were present in the remaining 38 laboratories at the time 
of the accreditation organization's or State's inspection. Thirty-eight 
divided by 200 equals a 19 percent rate of disparity.

    Referee laboratory means a laboratory currently in compliance with 
applicable CLIA requirements, that has had a record of satisfactory 
proficiency testing performance for all testing events for at least one 
year for a specific test, analyte, subspecialty, or specialty and has 
been designated by an HHS approved proficiency testing program as a 
referee laboratory for analyzing proficiency testing specimens for the 
purpose of determining the correct response for the specimens in a 
testing

[[Page 963]]

event for that specific test, analyte, subspecialty, or specialty.
    Reference range means the range of test values expected for a 
designated population of individuals, e.g., 95 percent of individuals 
that are presumed to be healthy (or normal).
    Sample in proficiency testing means the material contained in a 
vial, on a slide, or other unit that contains material to be tested by 
proficiency testing program participants. When possible, samples are of 
human origin.
    State includes, for purposes of this part, each of the 50 States, 
the District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands and a political subdivision of a State where the State, acting 
pursuant to State law, has expressly delegated powers to the political 
subdivision sufficient to authorize the political subdivision to act for 
the State in enforcing requirements equal to or more stringent than CLIA 
requirements.
    State licensure means the issuance of a license to, or the approval 
of, a laboratory by a State laboratory program as meeting standards for 
licensing or approval established under State law.
    State licensure program means a State laboratory licensure or 
approval program.
    State survey agency means the State health agency or other 
appropriate State or local agency that has an agreement under section 
1864 of the Social Security Act and is used by CMS to perform surveys 
and inspections.
    Substantial allegation of noncompliance means a complaint from any 
of a variety of sources (including complaints submitted in person, by 
telephone, through written correspondence, or in newspaper or magazine 
articles) that, if substantiated, would have an impact on the health and 
safety of the general public or of individuals served by a laboratory 
and raises doubts as to a laboratory's compliance with any condition 
level requirement.
    Target value for quantitative tests means either the mean of all 
participant responses after removal of outliers (those responses greater 
than 3 standard deviations from the original mean) or the mean 
established by definitive or reference methods acceptable for use in the 
National Reference System for the Clinical Laboratory (NRSCL) by the 
National Committee for the Clinical Laboratory Standards (NCCLS). In 
instances where definitive or reference methods are not available or a 
specific method's results demonstrate bias that is not observed with 
actual patient specimens, as determined by a defensible scientific 
protocol, a comparative method or a method group (``peer'' group) may be 
used. If the method group is less than 10 participants, ``target value'' 
means the overall mean after outlier removal (as defined above) unless 
acceptable scientific reasons are available to indicate that such an 
evaluation is not appropriate.
    Unsatisfactory proficiency testing performance means failure to 
attain the minimum satisfactory score for an analyte, test, 
subspecialty, or specialty for a testing event.
    Unsuccessful participation in proficiency testing means any of the 
following:
    (1) Unsatisfactory performance for the same analyte in two 
consecutive or two out of three testing events.
    (2) Repeated unsatisfactory overall testing event scores for two 
consecutive or two out of three testing events for the same specialty or 
subspecialty.
    (3) An unsatisfactory testing event score for those subspecialties 
not graded by analyte (that is, bacteriology, mycobacteriology, 
virology, parasitology, mycology, blood compatibility, immunohematology, 
or syphilis serology) for the same subspecialty for two consecutive or 
two out of three testing events.
    (4) Failure of a laboratory performing gynecologic cytology to meet 
the standard at Sec. 493.855.
    Unsuccessful proficiency testing performance means a failure to 
attain the minimum satisfactory score for an analyte, test, 
subspecialty, or specialty for two consecutive or two of three 
consecutive testing events.
    Validation review period means the one year time period during which 
CMS conducts validation inspections and

[[Page 964]]

evaluates the results of the most recent surveys performed by an 
accreditation organization or State laboratory program.

[57 FR 7139, Feb. 28, 1992, as amended at 57 FR 7236, Feb. 28, 1992; 57 
FR 34013, July 31, 1992; 57 FR 35761, Aug. 11, 1992; 58 FR 5220, Jan. 
19, 1993; 58 FR 48323, Sept. 15, 1993; 60 FR 20043, Apr. 24, 1995; 63 FR 
26732, May 14, 1998]



Sec. 493.3  Applicability.

    (a) Basic rule. Except as specified in paragraph (b) of this 
section, a laboratory will be cited as out of compliance with section 
353 of the Public Health Service Act unless it--
    (1) Has a current, unrevoked or unsuspended certificate of waiver, 
registration certificate, certificate of compliance, certificate for PPM 
procedures, or certificate of accreditation issued by HHS applicable to 
the category of examinations or procedures performed by the laboratory; 
or
    (2) Is CLIA-exempt.
    (b) Exception. These rules do not apply to components or functions 
of--
    (1) Any facility or component of a facility that only performs 
testing for forensic purposes;
    (2) Research laboratories that test human specimens but do not 
report patient specific results for the diagnosis, prevention or 
treatment of any disease or impairment of, or the assessment of the 
health of individual patients; or
    (3) Laboratories certified by the National Institutes on Drug Abuse 
(NIDA), in which drug testing is performed which meets NIDA guidelines 
and regulations. However, all other testing conducted by a NIDA-
certified laboratory is subject to this rule.
    (c) Federal laboratories. Laboratories under the jurisdiction of an 
agency of the Federal Government are subject to the rules of this part, 
except that the Secretary may modify the application of such 
requirements as appropriate.

[57 FR 7139, Feb. 28, 1992, as amended at 58 FR 5221, Jan. 19, 1993; 60 
FR 20043, Apr. 24, 1995]



Sec. 493.5  Categories of tests by complexity.

    (a) Laboratory tests are categorized as one of the following:
    (1) Waived tests.
    (2) Tests of moderate complexity, including the subcategory of PPM 
procedures.
    (3) Tests of high complexity.
    (b) A laboratory may perform only waived tests, only tests of 
moderate complexity, only PPM procedures, only tests of high complexity 
or any combination of these tests.
    (c) Each laboratory must be either CLIA-exempt or possess one of the 
following CLIA certificates, as defined in Sec. 493.2:
    (1) Certificate of registration or registration certificate.
    (2) Certificate of waiver.
    (3) Certificate for PPM procedures.
    (4) Certificate of compliance.
    (5) Certificate of accreditation.

[60 FR 20043, Apr. 24, 1995]



Sec. 493.15  Laboratories performing waived tests.

    (a) Requirement. Tests for certificate of waiver must meet the 
descriptive criteria specified in paragraph (b) of this section.
    (b) Criteria. Test systems are simple laboratory examinations and 
procedures which--
    (1) Are cleared by FDA for home use;
    (2) Employ methodologies that are so simple and accurate as to 
render the likelihood of erroneous results negligible; or
    (3) Pose no reasonable risk of harm to the patient if the test is 
performed incorrectly.
    (c) Certificate of waiver tests. A laboratory may qualify for a 
certificate of waiver under section 353 of the PHS Act if it restricts 
the tests that it performs to one or more of the following tests or 
examinations (or additional tests added to this list as provided under 
paragraph (d) of this section) and no others:
    (1) Dipstick or Tablet Reagent Urinalysis (non-automated) for the 
following:
    (i) Bilirubin;
    (ii) Glucose;
    (iii) Hemoglobin;
    (iv) Ketone;
    (v) Leukocytes;
    (vi) Nitrite;
    (vii) pH;
    (viii) Protein;
    (ix) Specific gravity; and

[[Page 965]]

    (x) Urobilinogen.
    (2) Fecal occult blood;
    (3) Ovulation tests--visual color comparison tests for human 
luteinizing hormone;
    (4) Urine pregnancy tests--visual color comparison tests;
    (5) Erythrocyte sedimentation rate--non-automated;
    (6) Hemoglobin--copper sulfate--non-automated;
    (7) Blood glucose by glucose monitoring devices cleared by the FDA 
specifically for home use;
    (8) Spun microhematocrit; and
    (9) Hemoglobin by single analyte instruments with self-contained or 
component features to perform specimen/reagent interaction, providing 
direct measurement and readout.
    (d) Revisions to criteria for test categorization and the list of 
waived tests. HHS will determine whether a laboratory test meets the 
criteria listed under paragraph (b) of this section for a waived test. 
Revisions to the list of waived tests approved by HHS will be published 
in the Federal Register in a notice with opportunity for comment.
    (e) Laboratories eligible for a certificate of waiver must--
    (1) Follow manufacturers' instructions for performing the test; and
    (2) Meet the requirements in subpart B, Certificate of Waiver, of 
this part.

[57 FR 7139, Feb. 28, 1992, as amended at 58 FR 5221, Jan. 19, 1993]



Sec. 493.17  Test categorization.

    (a) Categorization by criteria. Notices will be published in the 
Federal Register which list each specific test system, assay, and 
examination categorized by complexity. Using the seven criteria 
specified in this paragraph for categorizing tests of moderate or high 
complexity, each specific laboratory test system, assay, and examination 
will be graded for level of complexity by assigning scores of 1, 2, or 3 
within each criteria. The score of ``1'' indicates the lowest level of 
complexity, and the score of ``3'' indicates the highest level. These 
scores will be totaled. Test systems, assays or examinations receiving 
scores of 12 or less will be categorized as moderate complexity, while 
those receiving scores above 12 will be categorized as high complexity.

    Note: A score of ``2'' will be assigned to a criteria heading when 
the characteristics for a particular test are intermediate between the 
descriptions listed for scores of ``1'' and ``3.''

    (1) Knowledge.
    (i) Score 1. (A) Minimal scientific and technical knowledge is 
required to perform the test; and
    (B) Knowledge required to perform the test may be obtained through 
on-the-job instruction.
    (ii) Score 3. Specialized scientific and technical knowledge is 
essential to perform preanalytic, analytic or postanalytic phases of the 
testing.
    (2) Training and experience.
    (i) Score 1. (A) Minimal training is required for preanalytic, 
analytic and postanalytic phases of the testing process; and
    (B) Limited experience is required to perform the test.
    (ii) Score 3. (A) Specialized training is essential to perform the 
preanalytic, analytic or postanalytic testing process; or
    (B) Substantial experience may be necessary for analytic test 
performance.
    (3) Reagents and materials preparation.
    (i) Score 1. (A) Reagents and materials are generally stable and 
reliable; and
    (B) Reagents and materials are prepackaged, or premeasured, or 
require no special handling, precautions or storage conditions.
    (ii) Score 3. (A) Reagents and materials may be labile and may 
require special handling to assure reliability; or
    (B) Reagents and materials preparation may include manual steps such 
as gravimetric or volumetric measurements.
    (4) Characteristics of operational steps. (i) Score 1. Operational 
steps are either automatically executed (such as pipetting, temperature 
monitoring, or timing of steps), or are easily controlled.

[[Page 966]]

    (ii) Score 3. Operational steps in the testing process require close 
monitoring or control, and may require special specimen preparation, 
precise temperature control or timing of procedural steps, accurate 
pipetting, or extensive calculations.
    (5) Calibration, quality control, and proficiency testing materials.
    (i) Score 1. (A) Calibration materials are stable and readily 
available;
    (B) Quality control materials are stable and readily available; and
    (C) External proficiency testing materials, when available, are 
stable.
    (ii) Score 3. (A) Calibration materials, if available, may be 
labile;
    (B) Quality control materials may be labile, or not available; or
    (C) External proficiency testing materials, if available, may be 
labile.
    (6) Test system troubleshooting and equipment maintenance.
    (i) Score 1. (A) Test system troubleshooting is automatic or self-
correcting, or clearly described or requires minimal judgment; and
    (B) Equipment maintenance is provided by the manufacturer, is seldom 
needed, or can easily be performed.
    (ii) Score 3. (A) Troubleshooting is not automatic and requires 
decision-making and direct intervention to resolve most problems; or
    (B) Maintenance requires special knowledge, skills, and abilities.
    (7) Interpretation and judgment. (i) Score 1. (A) Minimal 
interpretation and judgment are required to perform preanalytic, 
analytic and postanalytic processes; and
    (B) Resolution of problems requires limited independent 
interpretation and judgment; and
    (ii) Score 3. (A) Extensive independent interpretation and judgment 
are required to perform the preanalytic, analytic or postanalytic 
processes; and
    (B) Resolution of problems requires extensive interpretation and 
judgment.
    (b) Revisions to the criteria for categorization. The Clinical 
Laboratory Improvement Advisory Committee, as defined in subpart T of 
this part, will conduct reviews upon request of HHS and recommend to HHS 
revisions to the criteria for categorization of tests.
    (c) Process for device/test categorization utilizing the scoring 
system under Sec. 493.17(a). (1)(i) For new commercial test systems, 
assays, or examinations, the manufacturer, as part of its 510(k) and PMA 
application to FDA, will submit supporting data for device/test 
categorization. FDA will determine the complexity category, notify the 
manufacturers directly, and will simultaneously inform both CMS and CDC 
of the device/test category. FDA will consult with CDC concerning test 
categorization in the following three situations:
    (A) When categorizing previously uncategorized new technology;
    (B) When FDA determines it to be necessary in cases involving a 
request for a change in categorization; and
    (C) If a manufacturer requests review of a categorization decision 
by FDA in accordance with 21 CFR 10.75.
    (ii) Test categorization will be effective as of the notification to 
the applicant.
    (2) For test systems, assays, or examinations not commercially 
available, a laboratory or professional group may submit a written 
request for categorization to PHS. These requests will be forwarded to 
CDC for evaluation; CDC will determine complexity category and notify 
the applicant, CMS, and FDA of the categorization decision. In the case 
of request for a change of category or for previously uncategorized new 
technology, PHS will receive the request application and forward it to 
CDC for categorization.
    (3) A request for recategorization will be accepted for review if it 
is based on new information not previously submitted in a request for 
categorization or recategorization by the same applicant and will not be 
considered more frequently than once per year.
    (4) If a laboratory test system, assay or examination does not 
appear on the lists of tests in the Federal Register notices, it is 
considered to be a test of high complexity until PHS, upon request, 
reviews the matter and notifies the applicant of its decision. Test 
categorization is effective as of the notification to the applicant.
    (5) PHS will publish revisions periodically to the list of moderate 
and high complexity tests in the Federal

[[Page 967]]

Register in a notice with opportunity for comment.

[57 FR 7139, Feb. 28, 1992, as amended at 58 FR 5222, Jan. 19, 1993]



Sec. 493.19  Provider-performed microscopy (PPM) procedures.

    (a) Requirement. To be categorized as a PPM procedure, the procedure 
must meet the criteria specified in paragraph (b) of this section.
    (b) Criteria. Procedures must meet the following specifications:
    (1) The examination must be personally performed by one of the 
following practitioners:
    (i) A physician during the patient's visit on a specimen obtained 
from his or her own patient or from a patient of a group medical 
practice of which the physician is a member or an employee.
    (ii) A midlevel practitioner, under the supervision of a physician 
or in independent practice only if authorized by the State, during the 
patient's visit on a specimen obtained from his or her own patient or 
from a patient of a clinic, group medical practice, or other health care 
provider of which the midlevel practitioner is a member or an employee.
    (iii) A dentist during the patient's visit on a specimen obtained 
from his or her own patient or from a patient of a group dental practice 
of which the dentist is a member or an employee.
    (2) The procedure must be categorized as moderately complex.
    (3) The primary instrument for performing the test is the 
microscope, limited to bright-field or phase-contrast microscopy.
    (4) The specimen is labile or delay in performing the test could 
compromise the accuracy of the test result.
    (5) Control materials are not available to monitor the entire 
testing process.
    (6) Limited specimen handling or processing is required.
    (c) Provider-performed microscopy (PPM) examinations. A laboratory 
may qualify to perform tests under this section if it restricts PPM 
examinations to one or more of the following procedures (or additional 
procedures added to this list as provided under paragraph (d) of this 
section), waived tests and no others:
    (1) All direct wet mount preparations for the presence or absence of 
bacteria, fungi, parasites, and human cellular elements.
    (2) All potassium hydroxide (KOH) preparations.
    (3) Pinworm examinations.
    (4) Fern tests.
    (5) Post-coital direct, qualitative examinations of vaginal or 
cervical mucous.
    (6) Urine sediment examinations.
    (7) Nasal smears for granulocytes.
    (8) Fecal leukocyte examinations.
    (9) Qualitative semen analysis (limited to the presence or absence 
of sperm and detection of motility).
    (d) Revisions to criteria and the list of PPM procedures.
    (1) The CLIAC conducts reviews upon HHS' request and recommends to 
HHS revisions to the criteria for categorization of procedures.
    (2) HHS determines whether a laboratory procedure meets the criteria 
listed under paragraph (b) of this section for a PPM procedure. 
Revisions to the list of PPM procedures proposed by HHS are published in 
the Federal Register as a notice with an opportunity for public comment.
    (e) Laboratory requirements. Laboratories eligible to perform PPM 
examinations must--
    (1) Meet the applicable requirements in subpart C or subpart D, and 
subparts F, H, J, K, M, and P of this part.
    (2) Be subject to inspection as specified under subpart Q of this 
part.

[60 FR 20044, Apr. 24, 1995]



Sec. 493.20  Laboratories performing tests of moderate complexity.

    (a) A laboratory may qualify for a certificate to perform tests of 
moderate complexity provided that it restricts its test performance to 
waived tests or examinations and one or more tests or examinations 
meeting criteria for tests of moderate complexity including the 
subcategory of PPM procedures.
    (b) A laboratory that performs tests or examinations of moderate 
complexity must meet the applicable requirements in subpart C or subpart 
D, and subparts F, H, J, K, M, P, and Q of

[[Page 968]]

this part. Under a registration certificate or certificate of 
compliance, laboratories also performing PPM procedures must meet the 
inspection requirements at Sec. 493.1777.
    (c) If the laboratory also performs waived tests, compliance with 
subparts H, J, K, M, and P of this part is not applicable to the waived 
tests. However, the laboratory must comply with the requirements in 
Secs. 493.15(e) and 493.1775.

[60 FR 20044, Apr. 24, 1995]



Sec. 493.25  Laboratories performing tests of high complexity.

    (a) A laboratory must obtain a certificate for tests of high 
complexity if it performs one or more tests that meet the criteria for 
tests of high complexity as specified in Sec. 493.17(a).
    (b) A laboratory performing one or more tests of high complexity 
must meet the applicable requirements of subpart C or subpart D, and 
subparts F, H, J, K, M, P, and Q of this part.
    (c) If the laboratory also performs tests of moderate complexity, 
the applicable requirements of subparts H, J, K, M, P, and Q of this 
part must be met. Under a registration certificate or certificate of 
compliance, PPM procedures must meet the inspection requirements at 
Sec. 493.1777.
    (d) If the laboratory also performs waived tests, the requirements 
of subparts H, J, K, M, and P are not applicable to the waived tests. 
However, the laboratory must comply with the requirements in 
Secs. 493.15(e) and 493.1775.

[57 FR 7139, Feb. 28, 1992, as amended at 60 FR 20044, Apr. 24, 1995]



                    Subpart B--Certificate of Waiver

    Source: 57 FR 7142, Feb. 28, 1992, unless otherwise noted.



Sec. 493.35  Application for a certificate of waiver.

    (a) Filing of application. Except as specified in paragraph (b) of 
this section, a laboratory performing only one or more waived tests 
listed in Sec. 493.15 must file a separate application for each 
laboratory location.
    (b) Exceptions. (1) Laboratories that are not at a fixed location, 
that is, laboratories that move from testing site to testing site, such 
as mobile units providing laboratory testing, health screening fairs, or 
other temporary testing locations may be covered under the certificate 
of the designated primary site or home base, using its address.
    (2) Not-for-profit or Federal, State, or local government 
laboratories that engage in limited (not more than a combination of 15 
moderately complex or waived tests per certificate) public health 
testing may file a single application.
    (3) Laboratories within a hospital that are located at contiguous 
buildings on the same campus and under common direction may file a 
single application or multiple applications for the laboratory sites 
within the same physical location or street address.
    (c) Application format and contents. The application must--
    (1) Be made to HHS or its designee on a form or forms prescribed by 
HHS;
    (2) Be signed by an owner, or by an authorized representative of the 
laboratory who attests that the laboratory will be operated in 
accordance with requirements established by the Secretary under section 
353 of the PHS Act; and
    (3) Describe the characteristics of the laboratory operation and the 
examinations and other test procedures performed by the laboratory 
including--
    (i) The name and the total number of test procedures and 
examinations performed annually (excluding tests the laboratory may run 
for quality control, quality assurance or proficiency testing purposes;
    (ii) The methodologies for each laboratory test procedure or 
examination performed, or both; and
    (iii) The qualifications (educational background, training, and 
experience) of the personnel directing and supervising the laboratory 
and performing the laboratory examinations and test procedures.
    (d) Access requirements. Laboratories that perform one or more 
waived tests listed in Sec. 493.15(c) and no other tests must meet the 
following conditions:
    (1) Make records available and submit reports to HHS as HHS may 
reasonably require to determine compliance with this section and 
Sec. 493.15(e);

[[Page 969]]

    (2) Agree to permit announced and unannounced inspections by HHS in 
accordance with subpart Q of this part under the following 
circumstances:
    (i) When HHS has substantive reason to believe that the laboratory 
is being operated in a manner that constitutes an imminent and serious 
risk to human health.
    (ii) To evaluate complaints from the public.
    (iii) On a random basis to determine whether the laboratory is 
performing tests not listed in Sec. 493.15.
    (iv) To collect information regarding the appropriateness of waiver 
of tests listed in Sec. 493.15.
    (e) Denial of application. If HHS determines that the application 
for a certificate of waiver is to be denied, HHS will--
    (1) Provide the laboratory with a written statement of the grounds 
on which the denial is based and an opportunity for appeal, in 
accordance with the procedures set forth in subpart R of this part;
    (2) Notify a laboratory that has its application for a certificate 
of waiver denied that it cannot operate as a laboratory under the PHS 
Act unless the denial is overturned at the conclusion of the 
administrative appeals process provided by subpart R; and
    (3) Notify the laboratory that it is not eligible for payment under 
the Medicare and Medicaid programs.

[57 FR 7142, Feb. 28, 1992, as amended at 58 FR 5222, Jan. 19, 1993; 60 
FR 20044, Apr. 24, 1995]



Sec. 493.37  Requirements for a certificate of waiver.

    (a) HHS will issue a certificate of waiver to a laboratory only if 
the laboratory meets the requirements of Sec. 493.35.
    (b) Laboratories issued a certificate of waiver--
    (1) Are subject to the requirements of this subpart and 
Sec. 493.15(e) of subpart A of this part; and
    (2) Must permit announced or unannounced inspections by HHS in 
accordance with subpart Q of this part.
    (c) Laboratories must remit the certificate of waiver fee specified 
in subpart F of this part.
    (d) In accordance with subpart R of this part, HHS will suspend or 
revoke or limit a laboratory's certificate of waiver for failure to 
comply with the requirements of this subpart. In addition, failure to 
meet the requirements of this subpart will result in suspension or 
denial of payments under Medicare and Medicaid in accordance with 
subpart R of this part.
    (e)(1) A certificate of waiver issued under this subpart is valid 
for no more than 2 years. In the event of a non-compliance determination 
resulting in HHS action to revoke, suspend, or limit the laboratory's 
certificate of waiver, HHS will provide the laboratory with a statement 
of grounds on which the determination of non-compliance is based and 
offer an opportunity for appeal as provided in subpart R of this part.
    (2) If the laboratory requests a hearing within the time specified 
by HHS, it retains its certificate of waiver or reissued certificate of 
waiver until a decision is made by an administrative law judge, as 
specified in subpart R of this part, except when HHS finds that 
conditions at the laboratory pose an imminent and serious risk to human 
health.
    (3) For laboratories receiving payment from the Medicare or Medicaid 
program, such payments will be suspended on the effective date specified 
in the notice to the laboratory of a non-compliance determination even 
if there has been no appeals decision issued.
    (f) A laboratory seeking to renew its certificate of waiver must--
    (1) Complete the renewal application prescribed by HHS and return it 
to HHS not less than 9 months nor more than 1 year before the expiration 
of the certificate; and
    (2) Meet the requirements of Secs. 493.35 and 493.37.
    (g) A laboratory with a certificate of waiver that wishes to perform 
examinations or tests not listed in the waiver test category must meet 
the requirements set forth in subpart C or subpart D of this part, as 
applicable.

[57 FR 7142, Feb. 28, 1992, as amended at 58 FR 5222, Jan. 19, 1993; 60 
FR 20045, Apr. 24, 1995]

[[Page 970]]



Sec. 493.39  Notification requirements for laboratories issued a certificate of waiver.

    Laboratories performing one or more tests listed in Sec. 493.15 and 
no others must notify HHS or its designee--
    (a) Before performing and reporting results for any test or 
examination that is not specified under Sec. 493.15 for which the 
laboratory does not have the appropriate certificate as required in 
subpart C or subpart D of this part, as applicable; and
    (b) Within 30 days of any change(s) in--
    (1) Ownership;
    (2) Name;
    (3) Location; or
    (4) Director.

[57 FR 7142, Feb. 28, 1992, as amended at 60 FR 20045, Apr. 24, 1995]



Subpart C--Registration Certificate, Certificate for Provider-performed 
          Microscopy Procedures, and Certificate of Compliance

    Source: 57 FR 7143, Feb. 28, 1992, unless otherwise noted.



Sec. 493.43  Application for registration certificate, certificate for provider-performed microscopy (PPM) procedures, and certificate of compliance.

    (a) Filing of application. Except as specified in paragraph (b) of 
this section, all laboratories performing tests of moderate complexity 
(including the subcategory) or high complexity, or any combination of 
these tests, must file a separate application for each laboratory 
location.
    (b) Exceptions. (1) Laboratories that are not at a fixed location, 
that is, laboratories that move from testing site to testing site, such 
as mobile units providing laboratory testing, health screening fairs, or 
other temporary testing locations may be covered under the certificate 
of the designated primary site or home base, using its address.
    (2) Not-for-profit or Federal, State, or local government 
laboratories that engage in limited (not more than a combination of 15 
moderately complex or waived tests per certificate) public health 
testing may file a single application.
    (3) Laboratories within a hospital that are located at contiguous 
buildings on the same campus and under common direction may file a 
single application or multiple applications for the laboratory sites 
within the same physical location or street address.
    (c) Application format and contents. The application must--(1) Be 
made to HHS or its designee on a form or forms prescribed by HHS;
    (2) Be signed by an owner, or by an authorized representative of the 
laboratory who attests that the laboratory will be operated in 
accordance with the requirements established by the Secretary under 
section 353 of the Public Health Service Act; and
    (3) Describe the characteristics of the laboratory operation and the 
examinations and other test procedures performed by the laboratory 
including--
    (i) The name and total number of test procedures and examinations 
performed annually (excluding waived tests or tests for quality control, 
quality assurance or proficiency testing purposes);
    (ii) The methodologies for each laboratory test procedure or 
examination performed, or both;
    (iii) The qualifications (educational background, training, and 
experience) of the personnel directing and supervising the laboratory 
and performing the examinations and test procedures.
    (d) Access and reporting requirements. All laboratories must make 
records available and submit reports to HHS as HHS may reasonably 
require to determine compliance with this section.

[57 FR 7143, Feb. 28, 1992, as amended at 58 FR 5222, Jan. 19, 1993; 58 
FR 39155, July 22, 1993; 60 FR 20045, Apr. 24, 1995]



Sec. 493.45  Requirements for a registration certificate.

    Laboratories performing only waived tests, PPM procedures, or any 
combination of these tests, are not required to obtain a registration 
certificate.
    (a) A registration certificate is required--(1) Initially for all 
laboratories performing test procedures of moderate

[[Page 971]]

complexity (other than the subcategory of PPM procedures) or high 
complexity, or both; and
    (2) For all laboratories that have been issued a certificate of 
waiver or certificate for PPM procedures that intend to perform tests of 
moderate or high complexity, or both, in addition to those tests listed 
in Sec. 493.15(c) or specified as PPM procedures.
    (b) HHS will issue a registration certificate if the laboratory--
    (1) Complies with the requirements of Sec. 493.43;
    (2) Agrees to notify HHS or its designee within 30 days of any 
changes in ownership, name, location, director or technical supervisor 
(laboratories performing high complexity testing only);
    (3) Agrees to treat proficiency testing samples in the same manner 
as it treats patient specimens; and
    (4) Remits the fee for the registration certificate, as specified in 
subpart F of this part.
    (c) Prior to the expiration of the registration certificate, a 
laboratory must--
    (1) Remit the certificate fee specified in subpart F of this part;
    (2) Be inspected by HHS as specified in subpart Q of this part; and
    (3) Demonstrate compliance with the applicable requirements of this 
subpart and subparts H, J, K, M, P, and Q of this part.
    (d) In accordance with subpart R of this part, HHS will initiate 
suspension or revocation of a laboratory's registration certificate and 
will deny the laboratory's application for a certificate of compliance 
for failure to comply with the requirements set forth in this subpart. 
HHS may also impose certain alternative sanctions. In addition, failure 
to meet the requirements of this subpart will result in suspension of 
payments under Medicare and Medicaid as specified in subpart R of this 
part.
    (e) A registration certificate is--
    (1) Valid for a period of no more than two years or until such time 
as an inspection to determine program compliance can be conducted, 
whichever is shorter; and
    (2) Not renewable; however, the registration certificate may be 
reissued if compliance has not been determined by HHS prior to the 
expiration date of the registration certificate.
    (f) In the event of a noncompliance determination resulting in an 
HHS denial of a laboratory's certificate of compliance application, HHS 
will provide the laboratory with a statement of grounds on which the 
noncompliance determination is based and offer an opportunity for appeal 
as provided in subpart R.
    (g) If the laboratory requests a hearing within the time specified 
by HHS, it retains its registration certificate or reissued registration 
certificate until a decision is made by an administrative law judge as 
provided in subpart R of this part, except when HHS finds that 
conditions at the laboratory pose an imminent and serious risk to human 
health.
    (h) For laboratories receiving payment from the Medicare or Medicaid 
program, such payments will be suspended on the effective date specified 
in the notice to the laboratory of denial of the certificate application 
even if there has been no appeals decision issued.

[57 FR 7143, Feb. 28, 1992, as amended at 58 FR 5223, Jan. 19, 1993; 60 
FR 20045, Apr. 24, 1995]



Sec. 493.47  Requirements for a certificate for provider-performed microscopy (PPM) procedures.

    (a) A certificate for PPM procedures is required--
    (1) Initially for all laboratories performing test procedures 
specified as PPM procedures; and
    (2) For all certificate of waiver laboratories that intend to 
perform only test procedures specified as PPM procedures in addition to 
those tests listed in Sec. 493.15(c).
    (b) HHS will issue a certificate for PPM procedures if the 
laboratory--
    (1) Complies with the requirements of Sec. 493.43; and
    (2) Remits the fee for the certificate, as specified in subpart F of 
this part.
    (c) Laboratories issued a certificate for PPM procedures are subject 
to--
    (1) The notification requirements of Sec. 493.53;
    (2) The applicable requirements of this subpart and subparts H, J, 
K, M, and P of this part; and

[[Page 972]]

    (3) Inspection only under the circumstances specified under 
Sec. 493.1776, but are not routinely inspected to determine compliance 
with the requirements specified in paragraphs (c) (1) and (2) of this 
section.
    (d) In accordance with subpart R of this part, HHS will initiate 
suspension, limitation, or revocation of a laboratory's certificate for 
PPM procedures for failure to comply with the applicable requirements 
set forth in this subpart. HHS may also impose certain alternative 
sanctions. In addition, failure to meet the requirements of this subpart 
may result in suspension of all or part of payments under Medicare and 
Medicaid, as specified in subpart R of this part.
    (e) A certificate for PPM procedures is valid for a period of no 
more than 2 years.

[58 FR 5223, Jan. 19, 1993, as amended at 60 FR 20045, Apr. 24, 1995]



Sec. 493.49  Requirements for a certificate of compliance.

    A certificate of compliance may include any combination of tests 
categorized as high complexity or moderate complexity or listed in 
Sec. 493.15(c) as waived tests. Moderate complexity tests may include 
those specified as PPM procedures.
    (a) HHS will issue a certificate of compliance to a laboratory only 
if the laboratory--
    (1) Meets the requirements of Secs. 493.43 and 493.45;
    (2) Remits the certificate fee specified in subpart F of this part; 
and
    (3) Meets the applicable requirements of this subpart and subparts 
H, J, K, M, P, and Q of this part.
    (b) Laboratories issued a certificate of compliance--
    (1) Are subject to the notification requirements of Sec. 493.51; and
    (2) Must permit announced or unannounced inspections by HHS in 
accordance with subpart Q of this part--
    (i) To determine compliance with the applicable requirements of this 
part;
    (ii) To evaluate complaints;
    (iii) When HHS has substantive reason to believe that tests are 
being performed, or the laboratory is being operated in a manner that 
constitutes an imminent and serious risk to human health; and
    (iv) To collect information regarding the appropriateness of tests 
listed in Sec. 493.15 or tests categorized as moderate complexity 
(including the subcategory) or high complexity.
    (c) Failure to comply with the requirements of this subpart will 
result in--
    (1) Suspension, revocation or limitation of a laboratory's 
certificate of compliance in accordance with subpart R of this part; and
    (2) Suspension or denial of payments under Medicare and Medicaid in 
accordance with subpart R of this part.
    (d) A certificate of compliance issued under this subpart is valid 
for no more than 2 years.
    (e) In the event of a noncompliance determination resulting in an 
HHS action to revoke, suspend or limit the laboratory's certificate of 
compliance, HHS will--
    (1) Provide the laboratory with a statement of grounds on which the 
determination of noncompliance is based; and
    (2) Offer an opportunity for appeal as provided in subpart R of this 
part. If the laboratory requests a hearing within 60 days of the notice 
of sanction, it retains its certificate of compliance or reissued 
certificate of compliance until a decision is made by an administrative 
law judge (ALJ) as provided in subpart R of this part, except when HHS 
finds that conditions at the laboratory pose an imminent and serious 
risk to human health or when the criteria at Sec. 493.1840(a) (4) and 
(5) are met.
    (f) For laboratories receiving payment from the Medicare or Medicaid 
program, such payments will be suspended on the effective date specified 
in the notice to the laboratory of a noncompliance determination even if 
there has been no appeals decision issued.
    (g) A laboratory seeking to renew its certificate of compliance 
must--
    (1) Complete and return the renewal application to HHS 9 to 12 
months prior to the expiration of the certificate of compliance; and
    (2) Meet the requirements of Sec. 493.43 and paragraphs (a)(2) and 
(b)(2) of this section.

[[Page 973]]

    (h) If HHS determines that the application for the renewal of a 
certificate of compliance must be denied or limited, HHS will notify the 
laboratory in writing of the--
    (1) Basis for denial of the application; and
    (2) Opportunity for appeal as provided in subpart R of this part.
    (i) If the laboratory requests a hearing within the time period 
specified by HHS, the laboratory retains its certificate of compliance 
or reissued certificate of compliance until a decision is made by an ALJ 
as provided in subpart R, except when HHS finds that conditions at the 
laboratory pose an imminent and serious risk to human health.
    (j) For laboratories receiving payment from the Medicare or Medicaid 
program, such payments will be suspended on the effective date specified 
in the notice to the laboratory of nonrenewal of the certificate of 
compliance even if there has been no appeals decision issued.

[60 FR 20045, Apr. 24, 1995]



Sec. 493.51  Notification requirements for laboratories issued a certificate of compliance.

    Laboratories issued a certificate of compliance must meet the 
following conditions:
    (a) Notify HHS or its designee within 30 days of any change in--
    (1) Ownership;
    (2) Name;
    (3) Location;
    (4) Director; or
    (5) Technical supervisor (laboratories performing high complexity 
only).
    (b) Notify HHS no later than 6 months after performing any test or 
examination within a specialty or subspecialty area that is not included 
on the laboratory's certificate of compliance, so that compliance with 
requirements can be determined.
    (c) Notify HHS no later than 6 months after any deletions or changes 
in test methodologies for any test or examination included in a 
specialty or subspecialty, or both, for which the laboratory has been 
issued a certificate of compliance.

[57 FR 7143, Feb. 28, 1992, as amended at 60 FR 20046, Apr. 24, 1995]



Sec. 493.53  Notification requirements for laboratories issued a certificate for provider-performed microscopy (PPM) procedures.

    Laboratories issued a certificate for PPM procedures must notify HHS 
or its designee--
    (a) Before performing and reporting results for any test of moderate 
or high complexity, or both, in addition to tests specified as PPM 
procedures or any test or examination that is not specified under 
Sec. 493.15(c), for which it does not have a registration certificate as 
required in subpart C or subpart D, as applicable, of this part; and
    (b) Within 30 days of any change in--
    (1) Ownership;
    (2) Name;
    (3) Location; or
    (4) Director.

[58 FR 5224, Jan. 19, 1993, as amended at 60 FR 20046, Apr. 24, 1995]



                 Subpart D--Certificate of Accreditation

    Source: 57 FR 7144, Feb. 28, 1992, unless otherwise noted.



Sec. 493.55  Application for registration certificate and certificate of accreditation.

    (a) Filing of application. A laboratory may be issued a certificate 
of accreditation in lieu of the applicable certificate specified in 
subpart B or subpart C of this part provided the laboratory--
    (1) Meets the standards of a private non-profit accreditation 
program approved by HHS in accordance with subpart E; and
    (2) Files a separate application for each location, except as 
specified in paragraph (b) of this section.
    (b) Exceptions. (1) Laboratories that are not at fixed locations, 
that is, laboratories that move from testing site to testing site, such 
as mobile units providing laboratory testing, health screening fairs, or 
other temporary testing locations may be covered under the certificate 
of the designated primary site or home base, using its address.
    (2) Not-for-profit or Federal, State, or local government 
laboratories that engage in limited (not more than a

[[Page 974]]

combination of 15 moderately complex or waived tests per certificate) 
public health testing may file a single application.
    (3) Laboratories within a hospital that are located at contiguous 
buildings on the same campus and under common direction may file a 
single application or multiple applications for the laboratory sites 
within the same physical location or street address.
    (c) Application format and contents. The application must--(1) Be 
made to HHS on a form or forms prescribed by HHS;
    (2) Be signed by an owner or authorized representative of the 
laboratory who attests that the laboratory will be operated in 
accordance with the requirements established by the Secretary under 
section 353 of the Public Health Service Act; and
    (3) Describe the characteristics of the laboratory operation and the 
examinations and other test procedures performed by the laboratory 
including--
    (i) The name and total number of tests and examinations performed 
annually (excluding waived tests and tests for quality control, quality 
assurance or proficiency testing purposes);
    (ii) The methodologies for each laboratory test procedure or 
examination performed, or both; and
    (iii) The qualifications (educational background, training, and 
experience) of the personnel directing and supervising the laboratory 
and performing the laboratory examinations and test procedures.
    (d) Access and reporting requirements. All laboratories must make 
records available and submit reports to HHS as HHS may reasonably 
require to determine compliance with this section.

[57 FR 7144, Feb. 28, 1992, as amended at 58 FR 5224, Jan. 19, 1993; 58 
FR 39155, July 22, 1993; 60 FR 20046, Apr. 24, 1995]



Sec. 493.57  Requirements for a registration certificate.

    A registration certificate is required for all laboratories seeking 
a certificate of accreditation, unless the laboratory holds a valid 
certificate of compliance issued by HHS.
    (a) HHS will issue a registration certificate if the laboratory--
    (1) Complies with the requirements of Sec. 493.55;
    (2) Agrees to notify HHS within 30 days of any changes in ownership, 
name, location, director, or supervisor (laboratories performing high 
complexity testing only);
    (3) Agrees to treat proficiency testing samples in the same manner 
as it treats patient specimens; and
    (4) Remits the fee for the registration certificate specified in 
subpart F of this part.
    (b)(1) The laboratory must provide HHS with proof of accreditation 
by an approved accreditation program--
    (i) Within 11 months of issuance of the registration certificate; or
    (ii) Prior to the expiration of the certificate of compliance.
    (2) If such proof of accreditation is not supplied within this 
timeframe, the laboratory must meet, or continue to meet, the 
requirements of Sec. 493.49.
    (c) In accordance with subpart R of this part, HHS will initiate 
suspension, revocation, or limitation of a laboratory's registration 
certificate and will deny the laboratory's application for a certificate 
of accreditation for failure to comply with the requirements set forth 
in this subpart. In addition, failure to meet the requirements of this 
subpart will result in suspension or denial of payments under Medicare 
and Medicaid as specified in subpart R of this part.
    (d) A registration certificate is valid for a period of no more than 
2 years. However, it may be reissued if the laboratory is subject to 
subpart C of this part, as specified in Sec. 493.57(b)(2) and compliance 
has not been determined by HHS before the expiration date of the 
registration certificate.
    (e) In the event that the laboratory does not meet the requirements 
of this subpart, HHS will--
    (1) Deny a laboratory's request for certificate of accreditation;
    (2) Notify the laboratory if it must meet the requirements for a 
certificate as defined in subpart C of this part;
    (3) Provide the laboratory with a statement of grounds on which the 
application denial is based;
    (4) Offer an opportunity for appeal on the application denial as 
provided in subpart R of this part. If the laboratory

[[Page 975]]

requests a hearing within the time specified by HHS, the laboratory will 
retain its registration certificate or reissued registration certificate 
until a decision is made by an administrative law judge as provided in 
subpart R, unless HHS finds that conditions at the laboratory pose an 
imminent and serious risk to human health; and
    (5) For those laboratories receiving payment from the Medicare or 
Medicaid program, such payments will be suspended on the effective date 
specified in the notice to the laboratory of denial of the request even 
if there has been no appeals decision issued.

[57 FR 7144, Feb. 28, 1992, as amended at 60 FR 20046, Apr. 24, 1995]



Sec. 493.61  Requirements for a certificate of accreditation.

    (a) HHS will issue a certificate of accreditation to a laboratory if 
the laboratory--
    (1) Meets the requirements of Sec. 493.57 or, if applicable, 
Sec. 493.49 of subpart C of this part; and
    (2) Remits the certificate of accreditation fee specified in subpart 
F of this part.
    (b) Laboratories issued a certificate of accreditation must--
    (1) Treat proficiency testing samples in the same manner as patient 
samples;
    (2) Meet the requirements of Sec. 493.63;
    (3) Comply with the requirements of the approved accreditation 
program;
    (4) Permit random sample validation and complaint inspections as 
required in subpart Q of this part;
    (5) Permit HHS to monitor the correction of any deficiencies found 
through the inspections specified in paragraph (b)(4) of this section;
    (6) Authorize the accreditation program to release to HHS the 
laboratory's inspection findings whenever HHS conducts random sample or 
complaint inspections; and
    (7) Authorize its accreditation program to submit to HHS the results 
of the laboratory's proficiency testing.
    (c) A laboratory failing to meet the requirements of this section--
    (1) Will no longer meet the requirements of this part by virtue of 
its accreditation in an approved accreditation program;
    (2) Will be subject to full determination of compliance by HHS;
    (3) May be subject to suspension, revocation or limitation of the 
laboratory's certificate of accreditation or certain alternative 
sanctions; and
    (4) May be subject to suspension of payments under Medicare and 
Medicaid as specified in subpart R.
    (d) A certificate of accreditation issued under this subpart is 
valid for no more than 2 years. In the event of a non-compliance 
determination as a result of a random sample validation or complaint 
inspection, a laboratory will be subject to a full review by HHS in 
accordance with Sec. 488.11 of this chapter.
    (e) Failure to meet the applicable requirements of part 493, will 
result in an action by HHS to suspend, revoke or limit the certificate 
of accreditation. HHS will--
    (1) Provide the laboratory with a statement of grounds on which the 
determination of noncompliance is based;
    (2) Notify the laboratory if it is eligible to apply for a 
certificate as defined in subpart C of this part; and
    (3) Offer an opportunity for appeal as provided in subpart R of this 
part.
    (f) If the laboratory requests a hearing within the time frame 
specified by HHS--
    (1) It retains its certificate of accreditation or reissued 
certificate of accreditation until a decision is made by an 
administrative law judge as provided in subpart R of this part, unless 
HHS finds that conditions at the laboratory pose an imminent and serious 
risk to human health; and
    (2) For those laboratories receiving payments from the Medicare or 
Medicaid program, such payments will be suspended on the effective date 
specified in the notice to the laboratory even if there has been no 
appeals decision issued.
    (g) In the event the accreditation organization's approval is 
removed by HHS, the laboratory will be subject to the applicable 
requirements of subpart C of this part or Sec. 493.57.
    (h) A laboratory seeking to renew its certificate of accreditation 
must--
    (1) Complete and return the renewal application to HHS 9 to 12 
months prior to the expiration of the certificate of accreditation;

[[Page 976]]

    (2) Meet the requirements of this subpart; and
    (3) Submit the certificate of accreditation fee specified in subpart 
F of this part.
    (i) If HHS determines that the renewal application for a certificate 
of accreditation is to be denied or limited, HHS will notify the 
laboratory in writing of--
    (1) The basis for denial of the application;
    (2) Whether the laboratory is eligible for a certificate as defined 
in subpart C of this part;
    (3) The opportunity for appeal on HHS's action to deny the renewal 
application for certificate of accreditation as provided in subpart R of 
this part. If the laboratory requests a hearing within the time frame 
specified by HHS, it retains its certificate of accreditation or 
reissued certificate of accreditation until a decision is made by an 
administrative law judge as provided in subpart R of this part, unless 
HHS finds that conditions at the laboratory pose an imminent and serious 
risk to human health; and
    (4) Suspension of payments under Medicare or Medicaid for those 
laboratories receiving payments under the Medicare or Medicaid programs.

[57 FR 7144, Feb. 28, 1992, as amended at 58 FR 5224, Jan. 19, 1993]



Sec. 493.63  Notification requirements for laboratories issued a certificate of accreditation.

    Laboratories issued a certificate of accreditation must:
    (a) Notify HHS and the approved accreditation program within 30 days 
of any changes in--
    (1) Ownership;
    (2) Name;
    (3) Location; or
    (4) Director.
    (b) Notify the approved accreditation program no later than 6 months 
after performing any test or examination within a specialty or 
subspecialty area that is not included in the laboratory's 
accreditation, so that the accreditation organization can determine 
compliance and a new certificate of accreditation can be issued.
    (c) Notify the accreditation program no later than 6 months after of 
any deletions or changes in test methodologies for any test or 
examination included in a specialty or subspecialty, or both, for which 
the laboratory has been issued a certificate of accreditation.



     Subpart E--Accreditation by a Private, Nonprofit Accreditation 
  Organization or Exemption Under an Approved State Laboratory Program

    Source: 63 FR 26732, May 14, 1998, unless otherwise noted.



Sec. 493.551  General requirements for laboratories.

    (a) Applicability. CMS may deem a laboratory to meet all applicable 
CLIA program requirements through accreditation by a private nonprofit 
accreditation program (that is, grant deemed status), or may exempt from 
CLIA program requirements all State licensed or approved laboratories in 
a State that has a State licensure program established by law, if the 
following conditions are met:
    (1) The requirements of the accreditation organization or State 
licensure program are equal to, or more stringent than, the CLIA 
condition-level requirements specified in this part, and the laboratory 
would meet the condition-level requirements if it were inspected against 
these requirements.
    (2) The accreditation program or the State licensure program meets 
the requirements of this subpart and is approved by CMS.
    (3) The laboratory authorizes the approved accreditation 
organization or State licensure program to release to CMS all records 
and information required and permits inspections as outlined in this 
part.
    (b) Meeting CLIA requirements by accreditation. A laboratory seeking 
to meet CLIA requirements through accreditation by an approved 
accreditation organization must do the following:
    (1) Obtain a certificate of accreditation as required in subpart D 
of this part.
    (2) Pay the applicable fees as required in subpart F of this part.

[[Page 977]]

    (3) Meet the proficiency testing (PT) requirements in subpart H of 
this part.
    (4) Authorize its PT organization to furnish to its accreditation 
organization the results of the laboratory's participation in an 
approved PT program for the purpose of monitoring the laboratory's PT 
and for making the annual PT results, along with explanatory information 
required to interpret the PT results, available on a reasonable basis, 
upon request of any person. A laboratory that refuses to authorize 
release of its PT results is no longer deemed to meet the condition-
level requirements and is subject to a full review by CMS, in accordance 
with subpart Q of this part, and may be subject to the suspension or 
revocation of its certificate of accreditation under Sec. 493.1840.
    (5) Authorize its accreditation organization to release to CMS or a 
CMS agent the laboratory's PT results that constitute unsuccessful 
participation in an approved PT program, in accordance with the 
definition of ``unsuccessful participation in an approved PT program,'' 
as specified in Sec. 493.2 of this part, when the laboratory has failed 
to achieve successful participation in an approved PT program.
    (6) Authorize its accreditation organization to release to CMS a 
notification of the actions taken by the organization as a result of the 
unsuccessful participation in a PT program within 30 days of the 
initiation of the action. Based on this notification, CMS may take an 
adverse action against a laboratory that fails to participate 
successfully in an approved PT program.
    (c) Withdrawal of laboratory accreditation. After an accreditation 
organization has withdrawn or revoked its accreditation of a laboratory, 
the laboratory retains its certificate of accreditation for 45 days 
after the laboratory receives notice of the withdrawal or revocation of 
the accreditation, or the effective date of any action taken by CMS, 
whichever is earlier.



Sec. 493.553  Approval process (application and reapplication) for accreditation organizations and State licensure programs.

    (a) Information required. An accreditation organization that applies 
or reapplies to CMS for deeming authority, or a State licensure program 
that applies or reapplies to CMS for exemption from CLIA program 
requirements of licensed or approved laboratories within the State, must 
provide the following information:
    (1) A detailed comparison of the individual accreditation, or 
licensure or approval requirements with the comparable condition-level 
requirements; that is, a crosswalk.
    (2) A detailed description of the inspection process, including the 
following:
    (i) Frequency of inspections.
    (ii) Copies of inspection forms.
    (iii) Instructions and guidelines.
    (iv) A description of the review and decision-making process of 
inspections.
    (v) A statement concerning whether inspections are announced or 
unannounced.
    (vi) A description of the steps taken to monitor the correction of 
deficiencies.
    (3) A description of the process for monitoring PT performance, 
including action to be taken in response to unsuccessful participation 
in a CMS-approved PT program.
    (4) Procedures for responding to and for the investigation of 
complaints against its laboratories.
    (5) A list of all its current laboratories and the expiration date 
of their accreditation or licensure, as applicable.
    (6) Procedures for making PT information available (under State 
confidentiality and disclosure requirements, if applicable) including 
explanatory information required to interpret PT results, on a 
reasonable basis, upon request of any person.
    (b) CMS action on an application or reapplication. If CMS receives 
an application or reapplication from an accreditation organization, or 
State licensure program, CMS takes the following actions:
    (1) CMS determines if additional information is necessary to make a 
determination for approval or denial of the application and notifies the 
accreditation organization or State to afford it an opportunity to 
provide the additional information.

[[Page 978]]

    (2) CMS may visit the accreditation organization or State licensure 
program offices to review and verify the policies and procedures 
represented in its application and other information, including, but not 
limited to, review and examination of documents and interviews with 
staff.
    (3) CMS notifies the accreditation organization or State licensure 
program indicating whether CMS approves or denies the request for 
deeming authority or exemption, respectively, and the rationale for any 
denial.
    (c) Duration of approval. CMS approval may not exceed 6 years.
    (d) Withdrawal of application. The accreditation organization or 
State licensure program may withdraw its application at any time before 
official notification, specified at Sec. 493.553(b)(3).



Sec. 493.555  Federal review of laboratory requirements.

    CMS's review of an accreditation organization or State licensure 
program includes, but is not limited to, an evaluation of the following:
    (a) Whether the organization's or State's requirements for 
laboratories are equal to, or more stringent than, the condition-level 
requirements for laboratories.
    (b) The organization's or State's inspection process to determine 
the comparability of the full inspection and complaint inspection 
procedures and requirements to those of CMS, including, but not limited 
to, inspection frequency and the ability to investigate and respond to 
complaints against its laboratories.
    (c) The organization's or State's agreement with CMS that requires 
it to do the following:
    (1) Notify CMS within 30 days of the action taken, of any laboratory 
that has--
    (i) Had its accreditation or licensure suspended, withdrawn, 
revoked, or limited;
    (ii) In any way been sanctioned; or
    (iii) Had any adverse action taken against it.
    (2) Notify CMS within 10 days of any deficiency identified in an 
accredited or CLIA-exempt laboratory if the deficiency poses an 
immediate jeopardy to the laboratory's patients or a hazard to the 
general public.
    (3) Notify CMS, within 30 days, of all newly--
    (i) Accredited laboratories (or laboratories whose areas of 
specialty/subspecialty testing have changed); or
    (ii) Licensed laboratories, including the specialty/subspecialty 
areas of testing.
    (4) Notify each accredited or licensed laboratory within 10 days of 
CMS's withdrawal of the organization's deeming authority or State's 
exemption.
    (5) Provide CMS with inspection schedules, as requested, for 
validation purposes.



Sec. 493.557  Additional submission requirements.

    (a) Specific requirements for accreditation organizations. In 
addition to the information specified in Secs. 493.553 and 493.555, as 
part of the approval and review process, an accreditation organization 
applying or reapplying for deeming authority must also provide the 
following:
    (1) The specialty or subspecialty areas for which the organization 
is requesting deeming authority and its mechanism for monitoring 
compliance with all requirements equivalent to condition-level 
requirements within the scope of the specialty or subspecialty areas.
    (2) A description of the organization's data management and analysis 
system with respect to its inspection and accreditation decisions, 
including the kinds of routine reports and tables generated by the 
systems.
    (3) Detailed information concerning the inspection process, 
including, but not limited to the following:
    (i) The size and composition of individual accreditation inspection 
teams.
    (ii) Qualifications, education, and experience requirements that 
inspectors must meet.
    (iii) The content and frequency of training provided to inspection 
personnel, including the ability of the organization to provide 
continuing education and training to inspectors.
    (4) Procedures for removal or withdrawal of accreditation status for 
laboratories that fail to meet the organization's standards.

[[Page 979]]

    (5) A proposed agreement between CMS and the accreditation 
organization with respect to the notification requirements specified in 
Sec. 493.555(c).
    (6) Procedures for monitoring laboratories found to be out of 
compliance with its requirements. (These monitoring procedures must be 
used only when the accreditation organization identifies noncompliance. 
If noncompliance is identified through validation inspections, CMS or a 
CMS agent monitors corrections, as authorized at Sec. 493.565(d)).
    (7) A demonstration of its ability to provide CMS with electronic 
data and reports in compatible code, including the crosswalk specified 
in Sec. 493.553(a)(1), that are necessary for effective validation and 
assessment of the organization's inspection process.
    (8) A demonstration of its ability to provide CMS with electronic 
data, in compatible code, related to the adverse actions resulting from 
PT results constituting unsuccessful participation in PT programs as 
well as data related to the PT failures, within 30 days of the 
initiation of adverse action.
    (9) A demonstration of its ability to provide CMS with electronic 
data, in compatible code, for all accredited laboratories, including the 
area of specialty or subspecialty.
    (10) Information defining the adequacy of numbers of staff and other 
resources.
    (11) Information defining the organization's ability to provide 
adequate funding for performing required inspections.
    (12) Any facility-specific data, upon request by CMS, which 
includes, but is not limited to, the following:
    (i) PT results that constitute unsuccessful participation in a CMS-
approved PT program.
    (ii) Notification of the adverse actions or corrective actions 
imposed by the accreditation organization as a result of unsuccessful PT 
participation.
    (13) An agreement to provide written notification to CMS at least 30 
days in advance of the effective date of any proposed change in its 
requirements.
    (14) An agreement to disclose any laboratory's PT results upon 
reasonable request by any person.
    (b) Specific requirements for a State licensure program. In addition 
to requirements in Secs. 493.553 and 493.555, as part of the approval 
and review process, when a State licensure program applies or reapplies 
for exemption from the CLIA program, the State must do the following:
    (1) Demonstrate to CMS that it has enforcement authority and 
administrative structures and resources adequate to enforce its 
laboratory requirements.
    (2) Permit CMS or a CMS agent to inspect laboratories in the State.
    (3) Require laboratories in the State to submit to inspections by 
CMS or a CMS agent as a condition of licensure or approval.
    (4) Agree to pay the cost of the validation program administered in 
that State as specified in Secs. 493.645(a) and 493.646(b).
    (5) Take appropriate enforcement action against laboratories found 
by CMS not to be in compliance with requirements equivalent to CLIA 
requirements.
    (6) Submit for Medicare and Medicaid payment purposes, a list of the 
specialties and subspecialties of tests performed by each laboratory.
    (7) Submit a written presentation that demonstrates the agency's 
ability to furnish CMS with electronic data in compatible code, 
including the crosswalk specified in Sec. 493.553(a)(1).
    (8) Submit a statement acknowledging that the State will notify CMS 
through electronic transmission of the following:
    (i) Any laboratory that has had its licensure or approval revoked or 
withdrawn or has been in any way sanctioned by the State within 30 days 
of taking the action.
    (ii) Changes in licensure or inspection requirements.
    (iii) Changes in specialties or subspecialties under which any 
licensed laboratory in the State performs testing.
    (9) Provide information for the review of the State's enforcement 
procedures for laboratories found to be out of compliance with the 
State's requirements.
    (10) Submit information that demonstrates the ability of the State 
to provide CMS with the following:

[[Page 980]]

    (i) Electronic data and reports in compatible code with the adverse 
or corrective actions resulting from PT results that constitute 
unsuccessful participation in PT programs.
    (ii) Other data that CMS determines are necessary for validation and 
assessment of the State's inspection process requirements.
    (11) Agree to provide CMS with written notification of any changes 
in its licensure/approval and inspection requirements.
    (12) Agree to disclose any laboratory's PT results in accordance 
with a State's confidentiality requirements.
    (13) Agree to take the appropriate enforcement action against 
laboratories found by CMS not to be in compliance with requirements 
comparable to condition-level requirements and report these enforcement 
actions to CMS.
    (14) If approved, reapply to CMS every 2 years to renew its exempt 
status and to renew its agreement to pay the cost of the CMS-
administered validation program in that State.



Sec. 493.559  Publication of approval of deeming authority or CLIA exemption.

    (a) Notice of deeming authority or exemption. CMS publishes a notice 
in the Federal Register when it grants deeming authority to an 
accreditation organization or exemption to a State licensure program.
    (b) Contents of notice. The notice includes the following:
    (1) The name of the accreditation organization or State licensure 
program.
    (2) For an accreditation organization:
    (i) The specific specialty or subspecialty areas for which it is 
granted deeming authority.
    (ii) A description of how the accreditation organization provides 
reasonable assurance to CMS that a laboratory accredited by the 
organization meets CLIA requirements equivalent to those in this part 
and would meet CLIA requirements if the laboratory had not been granted 
deemed status, but had been inspected against condition-level 
requirements.
    (3) For a State licensure program, a description of how the 
laboratory requirements of the State are equal to, or more stringent 
than, those specified in this part.
    (4) The basis for granting deeming authority or exemption.
    (5) The term of approval, not to exceed 6 years.



Sec. 493.561  Denial of application or reapplication.

    (a) Reconsideration of denial. (1) If CMS denies a request for 
approval, an accreditation organization or State licensure program may 
request, within 60 days of the notification of denial, that CMS 
reconsider its original application or application for renewal, in 
accordance with part 488, subpart D.
    (2) If the accreditation organization or State licensure program 
requests a reconsideration of CMS's determination to deny its request 
for approval or reapproval, it may not submit a new application until 
CMS issues a final reconsideration determination.
    (b) Resubmittal of a request for approval-- accreditation 
organization. An accreditation organization may resubmit a request for 
approval if a final reconsideration determination is not pending and the 
accreditation program meets the following conditions:
    (1) It has revised its accreditation program to address the 
rationale for denial of its previous request.
    (2) It demonstrates that it can provide reasonable assurance that 
its accredited facilities meet condition-level requirements.
    (3) It resubmits the application in its entirety.
    (c) Resubmittal of request for approval--State licensure program. 
The State licensure program may resubmit a request for approval if a 
final reconsideration determination is not pending and it has taken the 
necessary action to address the rationale for any previous denial.



Sec. 493.563  Validation inspections--Basis and focus.

    (a) Basis for validation inspection--(1) Laboratory with a 
certificate of accreditation. (i) CMS or a CMS agent may conduct an 
inspection of an accredited laboratory that has been issued a 
certificate of accreditation on a representative sample basis or in 
response to a

[[Page 981]]

substantial allegation of noncompliance.
    (ii) CMS uses the results of these inspections to validate the 
accreditation organization's accreditation process.
    (2) Laboratory in a State with an approved State licensure program. 
(i) CMS or a CMS agent may conduct an inspection of any laboratory in a 
State with an approved State licensure program on a representative 
sample basis or in response to a substantial allegation of 
noncompliance.
    (ii) The results of these inspections are used to validate the 
appropriateness of the exemption of that State's licensed or approved 
laboratories from CLIA program requirements.
    (b) Validation inspection conducted on a representative sample 
basis. (1) If CMS or a CMS agent conducts a validation inspection on a 
representative sample basis, the inspection is comprehensive, addressing 
all condition-level requirements, or it may be focused on a specific 
condition-level requirement.
    (2) The number of laboratories sampled is sufficient to allow a 
reasonable estimate of the performance of the accreditation organization 
or State.
    (c) Validation inspection conducted in response to a substantial 
allegation of noncompliance. (1) If CMS or a CMS agent conducts a 
validation inspection in response to a substantial allegation of 
noncompliance, the inspection focuses on any condition-level requirement 
that CMS determines to be related to the allegation.
    (2) If CMS or a CMS agent substantiates a deficiency and determines 
that the laboratory is out of compliance with any condition-level 
requirement, CMS or a CMS agent conducts a full CLIA inspection.
    (d) Inspection of operations and offices. As part of the validation 
review process, CMS may conduct an onsite inspection of the operations 
and offices to verify the following:
    (1) The accreditation organization's representations and to assess 
the accreditation organization's compliance with its own policies and 
procedures.
    (2) The State's representations and to assess the State's compliance 
with its own policies and procedures, including verification of State 
enforcement actions taken on the basis of validation inspections 
performed by CMS or a CMS agent.
    (e) Onsite inspection of an accreditation organization. An onsite 
inspection of an accreditation organization may include, but is not 
limited to, the following:
    (1) A review of documents.
    (2) An audit of meetings concerning the accreditation process.
    (3) Evaluation of accreditation inspection results and the 
accreditation decision-making process.
    (4) Interviews with the accreditation organization's staff.
    (f) Onsite inspection of a State licensure program. An onsite 
inspection of a State licensure program office may include, but is not 
limited to, the following:
    (1) A review of documents.
    (2) An audit of meetings concerning the licensure or approval 
process.
    (3) Evaluation of State inspection results and the licensure or 
approval decision-making process.
    (4) Interviews with State employees.



Sec. 493.565  Selection for validation inspection--laboratory responsibilities.

    A laboratory selected for a validation inspection must do the 
following:
    (a) Authorize its accreditation organization or State licensure 
program, as applicable, to release to CMS or a CMS agent, on a 
confidential basis, a copy of the laboratory's most recent full, and any 
subsequent partial inspection.
    (b) Authorize CMS or a CMS agent to conduct a validation inspection.
    (c) Provide CMS or a CMS agent with access to all facilities, 
equipment, materials, records, and information that CMS or a CMS agent 
determines have a bearing on whether the laboratory is being operated in 
accordance with the requirements of this part, and permit CMS or a CMS 
agent to copy material or require the laboratory to submit material.
    (d) If the laboratory possesses a valid certificate of 
accreditation, authorize CMS or a CMS agent to monitor the correction of 
any deficiencies found through the validation inspection.

[[Page 982]]



Sec. 493.567  Refusal to cooperate with validation inspection.

    (a) Laboratory with a certificate of accreditation. (1) A laboratory 
with a certificate of accreditation that refuses to cooperate with a 
validation inspection by failing to comply with the requirements in 
Sec. 493.565--
    (i) Is subject to full review by CMS or a CMS agent, in accordance 
with this part; and
    (ii) May be subject to suspension, revocation, or limitation of its 
certificate of accreditation under this part.
    (2) A laboratory with a certificate of accreditation is again deemed 
to meet the condition-level requirements by virtue of its accreditation 
when the following conditions exist:
    (i) The laboratory withdraws any prior refusal to authorize its 
accreditation organization to release a copy of the laboratory's current 
accreditation inspection, PT results, or notification of any adverse 
actions resulting from PT failure.
    (ii) The laboratory withdraws any prior refusal to allow a 
validation inspection.
    (iii) CMS finds that the laboratory meets all the condition-level 
requirements.
    (b) CLIA-exempt laboratory. If a CLIA-exempt laboratory fails to 
comply with the requirements specified in Sec. 493.565, CMS notifies the 
State of the laboratory's failure to meet the requirements.



Sec. 493.569  Consequences of a finding of noncompliance as a result of a validation inspection.

    (a) Laboratory with a certificate of accreditation. If a validation 
inspection results in a finding that the accredited laboratory is out of 
compliance with one or more condition-level requirements, the laboratory 
is subject to--
    (1) The same requirements and survey and enforcement processes 
applied to laboratories that are not accredited and that are found out 
of compliance following an inspection under this part; and
    (2) Full review by CMS, in accordance with this part; that is, the 
laboratory is subject to the principal and alternative sanctions in 
Sec. 493.1806.
    (b) CLIA-exempt laboratory. If a validation inspection results in a 
finding that a CLIA-exempt laboratory is out of compliance with one or 
more condition-level requirements, CMS directs the State to take 
appropriate enforcement action.



Sec. 493.571  Disclosure of accreditation, State and CMS validation inspection results.

    (a) Accreditation organization inspection results. CMS may disclose 
accreditation organization inspection results to the public only if the 
results are related to an enforcement action taken by the Secretary.
    (b) State inspection results. Disclosure of State inspection results 
is the responsibility of the approved State licensure program, in 
accordance with State law.
    (c) CMS validation inspection results. CMS may disclose the results 
of all validation inspections conducted by CMS or its agent.



Sec. 493.573  Continuing Federal oversight of private nonprofit accreditation organizations and approved State licensure programs.

    (a) Comparability review. In addition to the initial review for 
determining equivalency of specified organization or State requirements 
to the comparable condition-level requirements, CMS reviews the 
equivalency of requirements in the following cases:
    (1) When CMS promulgates new condition-level requirements.
    (2) When CMS identifies an accreditation organization or a State 
licensure program whose requirements are no longer equal to, or more 
stringent than, condition-level requirements.
    (3) When an accreditation organization or State licensure program 
adopts new requirements.
    (4) When an accreditation organization or State licensure program 
adopts changes to its inspection process, as required by 
Sec. 493.575(b)(1), as applicable.
    (5) Every 6 years, or sooner if CMS determines an earlier review is 
required.
    (b) Validation review. Following the end of a validation review 
period, CMS evaluates the validation inspection results for each 
approved accreditation

[[Page 983]]

organization and State licensure program.
    (c) Reapplication procedures. (1) Every 6 years, or sooner, as 
determined by CMS, an approved accreditation organization must reapply 
for continued approval of deeming authority and a State licensure 
program must reapply for continued approval of a CLIA exemption. CMS 
provides notice of the materials that must be submitted as part of the 
reapplication procedure.
    (2) An accreditation organization or State licensure program that 
does not meet the requirements of this subpart, as determined through a 
comparability or validation review, must furnish CMS, upon request, with 
the reapplication materials CMS requests. CMS establishes a deadline by 
which the materials must be submitted.
    (d) Notice. (1) CMS provides written notice, as appropriate, to the 
following:
    (i) An accreditation organization indicating that its approval may 
be in jeopardy if a comparability or validation review reveals that it 
is not meeting the requirements of this subpart and CMS is initiating a 
review of the accreditation organization's deeming authority.
    (ii) A State licensure program indicating that its CLIA exemption 
may be in jeopardy if a comparability or validation review reveals that 
it is not meeting the requirements of this subpart and that a review is 
being initiated of the CLIA exemption of the State's laboratories.
    (2) The notice contains the following information:
    (i) A statement of the discrepancies that were found as well as 
other related documentation.
    (ii) An explanation of CMS's review process on which the final 
determination is based and a description of the possible actions, as 
specified in Sec. 493.575, that CMS may impose based on the findings 
from the comparability or validation review.
    (iii) A description of the procedures available if the accreditation 
organization or State licensure program, as applicable, desires an 
opportunity to explain or justify the findings made during the 
comparability or validation review.
    (iv) The reapplication materials that the accreditation organization 
or State licensure program must submit and the deadline for that 
submission.



Sec. 493.575  Removal of deeming authority or CLIA exemption and final determination review.

    (a) CMS review. CMS conducts a review of the following:
    (1) A deeming authority review of an accreditation organization's 
program if the comparability or validation review produces findings, as 
described at Sec. 493.573. CMS reviews, as appropriate, the criteria 
described in Secs. 493.555 and 493.557(a) to reevaluate whether the 
accreditation organization continues to meet all these criteria.
    (2) An exemption review of a State's licensure program if the 
comparability or validation review produces findings, as described at 
Sec. 493.573. CMS reviews, as appropriate, the criteria described in 
Secs. 493.555 and 493.557(b) to reevaluate whether the licensure program 
continues to meet all these criteria.
    (3) A review of an accreditation organization or State licensure 
program, at CMS's discretion, if validation review findings, 
irrespective of the rate of disparity, indicate widespread or systematic 
problems in the organization's accreditation or State's licensure 
process that provide evidence that the requirements, taken as a whole, 
are no longer equivalent to CLIA requirements, taken as a whole.
    (4) A review of the accreditation organization or State licensure 
program whenever validation inspection results indicate a rate of 
disparity of 20 percent or more between the findings of the organization 
or State and those of CMS or a CMS agent for the following periods:
    (i) One year for accreditation organizations.
    (ii) Two years for State licensure programs.
    (b) CMS action after review. Following the review, CMS may take the 
following action:
    (1) If CMS determines that the accreditation organization or State 
has failed to adopt requirements equal to, or more stringent than, CLIA 
requirements, CMS may give a conditional approval for a probationary 
period of its

[[Page 984]]

deeming authority to an organization 30 days following the date of CMS's 
determination, or exempt status to a State within 30 days of CMS's 
determination, both not to exceed 1 year, to afford the organization or 
State an opportunity to adopt equal or more stringent requirements.
    (2) If CMS determines that there are widespread or systematic 
problems in the organization's or State's inspection process, CMS may 
give conditional approval during a probationary period, not to exceed 1 
year, effective 30 days following the date of the determination.
    (c) Final determination. CMS makes a final determination as to 
whether the organization or State continues to meet the criteria 
described in this subpart and issues a notice that includes the reasons 
for the determination to the organization or State within 60 days after 
the end of any probationary period. This determination is based on an 
evaluation of any of the following:
    (1) The most recent validation inspection and review findings. To 
continue to be approved, the organization or State must meet the 
criteria of this subpart.
    (2) Facility-specific data, as well as other related information.
    (3) The organization's or State's inspection procedures, surveyors' 
qualifications, ongoing education, training, and composition of 
inspection teams.
    (4) The organization's accreditation requirements, or the State's 
licensure or approval requirements.
    (d) Date of withdrawal of approval. CMS may withdraw its approval of 
the accreditation organization or State licensure program, effective 30 
days from the date of written notice to the organization or State of 
this proposed action, if improvements acceptable to CMS have not been 
made during the probationary period.
    (e) Continuation of validation inspections. The existence of any 
validation review, probationary status, or any other action, such as a 
deeming authority review, by CMS does not affect or limit the conduct of 
any validation inspection.
    (f) Federal Register notice. CMS publishes a notice in the Federal 
Register containing a justification for removing the deeming authority 
from an accreditation organization, or the CLIA-exempt status of a State 
licensure program.
    (g) Withdrawal of approval-effect on laboratory status--(1) 
Accredited laboratory. After CMS withdraws approval of an accreditation 
organization's deeming authority, the certificate of accreditation of 
each affected laboratory continues in effect for 60 days after it 
receives notification of the withdrawal of approval.
    (2) CLIA-exempt laboratory. After CMS withdraws approval of a State 
licensure program, the exempt status of each licensed or approved 
laboratory in the State continues in effect for 60 days after a 
laboratory receives notification from the State of the withdrawal of 
CMS's approval of the program.
    (3) Extension. After CMS withdraws approval of an accreditation 
organization or State licensure program, CMS may extend the period for 
an additional 60 days for a laboratory if it determines that the 
laboratory submitted an application for accreditation to an approved 
accreditation organization or an application for the appropriate 
certificate to CMS or a CMS agent before the initial 60-day period ends.
    (h) Immediate jeopardy to patients. (1) If at any time CMS 
determines that the continued approval of deeming authority of any 
accreditation organization poses immediate jeopardy to the patients of 
the laboratories accredited by the organization, or continued approval 
otherwise constitutes a significant hazard to the public health, CMS may 
immediately withdraw the approval of deeming authority for that 
accreditation organization.
    (2) If at any time CMS determines that the continued approval of a 
State licensure program poses immediate jeopardy to the patients of the 
laboratories in that State, or continued approval otherwise constitutes 
a significant hazard to the public health, CMS may immediately withdraw 
the approval of that State licensure program.

[[Page 985]]

    (i) Failure to pay fees. CMS withdraws the approval of a State 
licensure program if the State fails to pay the applicable fees, as 
specified in Secs. 493.645(a) and 493.646(b).
    (j) State refusal to take enforcement action. (1) CMS may withdraw 
approval of a State licensure program if the State refuses to take 
enforcement action against a laboratory in that State when CMS 
determines it to be necessary.
    (2) A laboratory that is in a State in which CMS has withdrawn 
program approval is subject to the same requirements and survey and 
enforcement processes that are applied to a laboratory that is not 
exempt from CLIA requirements.
    (k) Request for reconsideration. Any accreditation organization or 
State that is dissatisfied with a determination to withdraw approval of 
its deeming authority or remove approval of its State licensure program, 
as applicable, may request that CMS reconsider the determination, in 
accordance with subpart D of part 488.



                    Subpart F--General Administration

    Source: 57 FR 7138 and 7213, Feb. 28, 1992, unless otherwise noted.



Sec. 493.602  Scope of subpart.

    This subpart sets forth the methodology for determining the amount 
of the fees for issuing the appropriate certificate, and for determining 
compliance with the applicable standards of the Public Health Service 
Act (the PHS Act) and the Federal validation of accredited laboratories 
and of CLIA-exempt laboratories.

[60 FR 20047, Apr. 24, 1995]



Sec. 493.606  Applicability of subpart.

    The rules of this subpart are applicable to those laboratories 
specified in Sec. 493.3.

[58 FR 5212, Jan. 19, 1993]



Sec. 493.638  Certificate fees.

    (a) Basic rule. Laboratories must pay a fee for the issuance of a 
registration certificate, certificate for PPM procedures, certificate of 
waiver, certificate of accreditation, or a certificate of compliance, as 
applicable. Laboratories must also pay a fee to reapply for a 
certificate for PPM procedures, certificate of waiver, certificate of 
accreditation, or a certificate of compliance. The total of fees 
collected by HHS under the laboratory program must be sufficient to 
cover the general costs of administering the laboratory certification 
program under section 353 of the PHS Act.
    (1) For registration certificates and certificates of compliance, 
the costs include issuing the certificates, collecting the fees, 
evaluating and monitoring proficiency testing programs, evaluating which 
procedures, tests or examinations meet the criteria for inclusion in the 
appropriate complexity category, and implementing section 353 of the PHS 
Act.
    (2) For a certificate of waiver, the costs include issuing the 
certificate, collecting the fees, determining if a certificate of waiver 
should be issued, evaluating which tests qualify for inclusion in the 
waived category, and other direct administrative costs.
    (3) For a certificate for PPM procedures, the costs include issuing 
the certificate, collecting the fees, determining if a certificate for 
PPM procedures should be issued, evaluating which procedures meet the 
criteria for inclusion in the subcategory of PPM procedures, and other 
direct administrative costs.
    (4) For a certificate of accreditation, the costs include issuing 
the certificate, collecting the fees, evaluating the programs of 
accrediting bodies, and other direct administrative costs.
    (b) Fee amount. The fee amount is set annually by HHS on a calendar 
year basis and is based on the category of test complexity, or on the 
category of test complexity and schedules or ranges of annual laboratory 
test volume (excluding waived tests and tests performed for quality 
control, quality assurance, and proficiency testing purposes) and 
specialties tested, with the amounts of the fees in each schedule being 
a function of the costs for all aspects of general administration of 
CLIA as set forth in Sec. 493.649 (b) and (c). This fee is assessed and 
payable at least biennially. The methodology used

[[Page 986]]

to determine the amount of the fee is found in Sec. 493.649. The amount 
of the fee applicable to the issuance of the registration certificate or 
the issuance or renewal of the certificate for PPM procedures, 
certificate of waiver, certificate of accreditation, or certificate of 
compliance is the amount in effect at the time the application is 
received. Upon receipt of an application for a certificate, HHS or its 
designee notifies the laboratory of the amount of the required fee for 
the requested certificate.

[60 FR 20047, Apr. 24, 1995]



Sec. 493.639  Fee for revised certificate.

    (a) If, after a laboratory is issued a registration certificate, it 
changes its name or location, the laboratory must pay a fee to cover the 
cost of issuing a revised registration certificate. The fee for the 
revised registration certificate is based on the cost to issue the 
revised certificate to the laboratory.
    (b) A laboratory must pay a fee to cover the cost of issuing a 
revised certificate in any of the following circumstances:
    (1) The fee for issuing an appropriate revised certificate is based 
on the cost to issue the revised certificate to the laboratory as 
follows:
    (i) If a laboratory with a certificate of waiver wishes to perform 
tests in addition to those listed in Sec. 493.15(c) as waived tests, it 
must, as set forth in Sec. 493.638, pay an additional fee for the 
appropriate certificate to cover the additional testing.
    (ii) If a laboratory with a certificate for PPM procedures wishes to 
perform tests in addition to those specified as PPM procedures or listed 
in Sec. 493.15(c) as waived tests, it must, as set forth in 
Sec. 493.638, pay an additional fee for the appropriate certificate to 
cover the additional testing.
    (2) A laboratory must pay a fee to cover the cost of issuing a 
revised certificate when--
    (i) A laboratory changes its name, location, or its director; or
    (ii) A laboratory deletes services or wishes to add services and 
requests that its certificate be changed. (An additional fee is also 
required under Sec. 493.643(d) if it is necessary to determine 
compliance with additional requirements.)

[57 FR 7213, Feb. 28, 1992, as amended at 60 FR 20047, Apr, 24, 1995]



Sec. 493.643  Fee for determination of program compliance.

    (a) Fee requirement. In addition to the fee required under 
Sec. 493.638, a laboratory subject to routine inspections must pay a fee 
to cover the cost of determining program compliance. Laboratories issued 
a certificate for PPM procedures, certificate of waiver, or a 
certificate of accreditation are not subject to this fee for routine 
inspections.
    (b) Costs included in the fee. Included in the fee for determining 
program compliance is the cost of evaluating qualifications of 
personnel; monitoring proficiency testing; conducting onsite 
inspections; documenting deficiencies; evaluating laboratories' plans to 
correct deficiencies; and necessary administrative costs. HHS sets the 
fee amounts annually on a calendar year basis. Laboratories are 
inspected biennially; therefore, fees are assessed and payable 
biennially. If additional expenses are incurred to conduct follow up 
visits to verify correction of deficiencies, to impose sanctions, and/or 
for surveyor preparation for and attendance at ALJ hearings, HHS 
assesses an additional fee to include these costs. The additional fee is 
based on the actual resources and time necessary to perform the 
activities.
    (c) Classification of laboratories that require inspection for 
purpose of determining amount of fee. (1) There are ten classifications 
(schedules) of laboratories for the purpose of determining the fee 
amount a laboratory is assessed. Each laboratory is placed into one of 
the ten following schedules based on the laboratory's scope and volume 
of testing (excluding tests performed for quality control, quality 
assurance, and proficiency testing purposes).
    (i) (A) Schedule A Low Volume. The laboratory performs not more than 
2,000 laboratory tests annually.
    (B) Schedule A. The laboratory performs tests in no more than 3 
specialties of service with a total annual volume of more than 2,000 but 
not more than 10,000 laboratory tests.

[[Page 987]]

    (ii) Schedule B. The laboratory performs tests in at least 4 
specialties of service with a total annual volume of not more than 
10,000 laboratory tests.
    (iii) Schedule C. The laboratory performs tests in no more 3 
specialties of service with a total annual volume of more than 10,000 
but not more than 25,000 laboratory tests.
    (iv) Schedule D. The laboratory performs tests in at least 4 
specialties with a total annual volume of more than 10,000 but not more 
than 25,000 laboratory tests.
    (v) Schedule E. The laboratory performs more than 25,000 but not 
more than 50,000 laboratory tests annually.
    (vi) Schedule F. The laboratory performs more than 50,000 but not 
more than 75,000 laboratory tests annually.
    (vii) Schedule G. The laboratory performs more than 75,000 but not 
more than 100,000 laboratory tests annually.
    (viii) Schedule H. The laboratory performs more than 100,000 but not 
more than 500,000 laboratory tests annually.
    (ix) Schedule I. The laboratory performs more than 500,000 but not 
more than 1,000,000 laboratory tests annually.
    (x) Schedule J. The laboratory performs more than 1,000,000 
laboratory tests annually.
    (2) For purposes of determining a laboratory's classification under 
this section, a test is a procedure or examination for a single analyte. 
(Tests performed for quality control, quality assurance, and proficiency 
testing are excluded from the laboratory's total annual volume). Each 
profile (that is, group of tests) is counted as the number of separate 
procedures or examinations; for example, a chemistry profile consisting 
of 18 tests is counted as 18 separate procedures or tests.
    (3) For purposes of determining a laboratory's classification under 
this section, the specialties and subspecialties of service for 
inclusion are:
    (i) The specialty of Microbiology, which includes one or more of the 
following subspecialties:
    (A) Bacteriology.
    (B) Mycobacteriology.
    (C) Mycology.
    (D) Parasitology.
    (E) Virology.
    (ii) The specialty of Serology, which includes one or more of the 
following subspecialties:
    (A) Syphilis Serology.
    (B) General immunology
    (iii) The specialty of Chemistry, which includes one or more of the 
following subspecialties:
    (A) Routine chemistry.
    (B) Endocrinology.
    (C) Toxicology.
    (D) Urinalysis.
    (iv) The specialty of Hematology.
    (v) The specialty of Immunohematology, which includes one or more of 
the following subspecialties:
    (A) ABO grouping and Rh typing.
    (B) Unexpected antibody detection.
    (C) Compatibility testing.
    (D) Unexpected antibody identification.
    (vi) The specialty of Pathology, which includes the following 
subspecialties:
    (A) Cytology.
    (B) Histopathology.
    (C) Oral pathology.
    (vii) The specialty of Radiobioassay.
    (viii) The specialty of Histocompatibility.
    (ix) The specialty of Cytogenetics.
    (d) Additional fees. (1) If after a certificate of compliance is 
issued, a laboratory adds services and requests that its certificate be 
upgraded, the laboratory must pay an additional fee if, in order to 
determine compliance with additional requirements, it is necessary to 
conduct an inspection, evaluate personnel, or monitor proficiency 
testing performance. The additional fee is based on the actual resources 
and time necessary to perform the activities. HHS revokes the 
laboratory's certificate for failure to pay the compliance determination 
fee.
    (2) If it is necessary to conduct a complaint investigation, impose 
sanctions, or conduct a hearing, HHS assesses the laboratory holding a 
certificate of compliance a fee to cover the cost of these activities. 
If a complaint investigation results in a complaint being 
unsubstantiated, or if an HHS adverse action is overturned at the 
conclusion of the administrative appeals process, the government's costs 
of these activities are not imposed upon

[[Page 988]]

the laboratory. Costs for these activities are based on the actual 
resources and time necessary to perform the activities and are not 
assessed until after the laboratory concedes the existence of 
deficiencies or an ALJ rules in favor of HHS. HHS revokes the 
laboratory's certificate of compliance for failure to pay the assessed 
costs.

[57 FR 7138 and 7213, Feb. 28, 1992, as amended at 60 FR 20047, Apr. 24, 
1995]



Sec. 493.645  Additional fee(s) applicable to approved State laboratory programs and laboratories issued a certificate of accreditation, certificate of waiver, 
          or certificate for PPM procedures.

    (a) Approved State laboratory programs. State laboratory programs 
approved by HHS are assessed a fee for the following:
    (1) Costs of Federal inspections of laboratories in that State (that 
is, CLIA-exempt laboratories) to verify that standards are being 
enforced in an appropriate manner.
    (2) Costs incurred for investigations of complaints against the 
State's CLIA-exempt laboratories if the complaint is substantiated.
    (3) Costs of the State's prorata share of general overhead to 
develop and implement CLIA.
    (b) Accredited laboratories. (1) In addition to the certificate fee, 
a laboratory that is issued a certificate of accreditation is also 
assessed a fee to cover the cost of evaluating individual laboratories 
to determine overall whether an accreditation organization's standards 
and inspection policies are equivalent to the Federal program. All 
accredited laboratories share in the cost of these inspections. These 
costs are the same as those that are incurred when inspecting 
nonaccredited laboratories.
    (2) If a laboratory issued a certificate of accreditation has been 
inspected and followup visits are necessary because of identified 
deficiencies, HHS assesses the laboratory a fee to cover the cost of 
these visits. The fee is based on the actual resources and time 
necessary to perform the followup visits. HHS revokes the laboratory's 
certificate of accreditation for failure to pay the assessed fee.
    (c) If, in the case of a laboratory that has been issued a 
certificate of accreditation, certificate of waiver, or certificate for 
PPM procedures, it is necessary to conduct a complaint investigation, 
impose sanctions, or conduct a hearing, HHS assesses that laboratory a 
fee to cover the cost of these activities. Costs are based on the actual 
resources and time necessary to perform the activities and are not 
assessed until after the laboratory concedes the existence of 
deficiencies or an ALJ rules in favor of HHS. HHS revokes the 
laboratory's certificate for failure to pay the assessed costs. If a 
complaint investigation results in a complaint being unsubstantiated, or 
if an HHS adverse action is overturned at the conclusion of the 
administrative appeals process, the costs of these activities are not 
imposed upon the laboratory.

[60 FR 20047, Apr. 24, 1995]



Sec. 493.646  Payment of fees.

    (a) Except for CLIA-exempt laboratories, all laboratories are 
notified in writing by HHS or its designee of the appropriate fee(s) and 
instructions for submitting the fee(s), including the due date for 
payment and where to make payment. The appropriate certificate is not 
issued until the applicable fees have been paid.
    (b) For State-exempt laboratories, HHS estimates the cost of 
conducting validation surveys within the State for a 2-year period. HHS 
or its designee notifies the State by mail of the appropriate fees, 
including the due date for payment and the address of the United States 
Department of Treasury designated commercial bank to which payment must 
be made. In addition, if complaint investigations are conducted in 
laboratories within these States and are substantiated, HHS bills the 
State(s) the costs of the complaint investigations.

[57 FR 7138 and 7213, Feb. 28, 1992, as amended at 60 FR 20048, Apr. 24, 
1995]



Sec. 493.649  Methodology for determining fee amount.

    (a) General rule. The amount of the fee in each schedule for 
compliance determination inspections is based on the average hourly rate 
(which includes

[[Page 989]]

the costs to perform the required activities and necessary 
administration costs) multiplied by the average number of hours required 
or, if activities are performed by more than one of the entities listed 
in paragraph (b) of this section, the sum of the products of the 
applicable hourly rates multiplied by the average number of hours 
required by the entity to perform the activity. The fee for issuance of 
the registration certificate or certificate of compliance is based on 
the laboratory's scope and volume of testing.
    (b) Determining average hourly rates used in fee schedules. Three 
different entities perform activities related to the issuance or 
reissuance of any certificate. HHS determines the average hourly rates 
for the activities of each of these entities.
    (1) State survey agencies. The following costs are included in 
determining an average hourly rate for the activities performed by State 
survey agencies:
    (i) The costs incurred by the State survey agencies in evaluating 
personnel qualifications and monitoring each laboratory's participation 
in an approved proficiency testing program. The cost of onsite 
inspections and monitoring activities is the hourly rate derived as a 
result of an annual budget negotiation process with each State. The 
hourly rate encompasses salary costs (as determined by each State's 
civil service pay scale) and fringe benefit costs to support the 
required number of State inspectors, management and direct support 
staff.
    (ii) Travel costs necessary to comply with each State's 
administrative requirements and other direct costs such as equipment, 
printing, and supplies. These costs are established based on historical 
State requirements.
    (iii) Indirect costs as negotiated by HHS.
    (2) Federal agencies. The hourly rate for activities performed by 
Federal agencies is the most recent average hourly cost to HHS to staff 
and support a full time equivalent employee. Included in this cost are 
salary and fringe benefit costs, necessary administrative costs, such as 
printing, training, postage, express mail, supplies, equipment, computer 
system and building service charges associated with support services 
provided by organizational components such as a computer center, and any 
other oversight activities necessary to support the program.
    (3) HHS contractors. The hourly rate for activities performed by HHS 
contractors is the average hourly rate established for contractor 
assistance based on an independent government cost estimate for the 
required workload. This rate includes the cost of contractor support to 
provide proficiency testing programs to laboratories that do not 
participate in an approved proficiency testing program, provide 
specialized assistance in the evaluation of laboratory performance in an 
approved proficiency testing program, perform assessments of cytology 
testing laboratories, conduct special studies, bill and collect fees, 
issue certificates, establish accounting, monitoring and reporting 
systems, and assist with necessary surveyor training.
    (c) Determining number of hours. The average number of hours used to 
determine the overall fee in each schedule is HHS's estimate, based on 
historical experience, of the average time needed by each entity to 
perform the activities for which it is responsible.

[57 FR 7138 and 7213, Feb. 28, 1992, as amended at 60 FR 20048, Apr. 24, 
1995]

Subpart G [Reserved]



    Subpart H--Participation in Proficiency Testing for Laboratories 
  Performing Tests of Moderate Complexity (Including the Subcategory), 
           High Complexity, or Any Combination of These Tests

    Source: 57 FR 7146, Feb. 28, 1992, unless otherwise noted.



Sec. 493.801  Condition: Enrollment and testing of samples.

    Each laboratory must enroll in a proficiency testing (PT) program 
that meets the criteria in subpart I of this part and is approved by 
HHS. The laboratory must enroll in an approved program or programs for 
each of the specialties and subspecialties for which it seeks 
certification. The laboratory

[[Page 990]]

must test the samples in the same manner as patients' specimens. For 
laboratories subject to 42 CFR part 493 published on March 14, 1990 (55 
FR 9538) prior to September 1, 1992, the rules of this subpart are 
effective on September 1, 1992. For all other laboratories, the rules of 
this subpart are effective January 1, 1994.
    (a) Standard; Enrollment. The laboratory must--
    (1) Notify HHS of the approved program or programs in which it 
chooses to participate to meet proficiency testing requirements of this 
subpart.
    (2)(i) Designate the program(s) to be used for each specialty, 
subspecialty, and analyte or test to determine compliance with this 
subpart if the laboratory participates in more than one proficiency 
testing program approved by CMS; and
    (ii) For those tests performed by the laboratory that are not 
included in subpart I of this part, a laboratory must establish and 
maintain the accuracy of its testing procedures, in accordance with 
Sec. 493.1709.
    (3) For each specialty, subspecialty and analyte or test, 
participate in one approved proficiency testing program or programs, for 
one year before designating a different program and must notify CMS 
before any change in designation; and
    (4) Authorize the proficiency testing program to release to HHS all 
data required to--
    (i) Determine the laboratory's compliance with this subpart; and
    (ii) Make PT results available to the public as required in section 
353(f)(3)(F) of the Public Health Service Act.
    (b) Standard; Testing of proficiency testing samples. The laboratory 
must examine or test, as applicable, the proficiency testing samples it 
receives from the proficiency testing program in the same manner as it 
tests patient specimens.
    (1) The samples must be examined or tested with the laboratory's 
regular patient workload by personnel who routinely perform the testing 
in the laboratory, using the laboratory's routine methods. The 
individual testing or examining the samples and the laboratory director 
must attest to the routine integration of the samples into the patient 
workload using the laboratory's routine methods.
    (2) The laboratory must test samples the same number of times that 
it routinely tests patient samples.
    (3) Laboratories that perform tests on proficiency testing samples 
must not engage in any inter-laboratory communications pertaining to the 
results of proficiency testing sample(s) until after the date by which 
the laboratory must report proficiency testing results to the program 
for the testing event in which the samples were sent. Laboratories with 
multiple testing sites or separate locations must not participate in any 
communications or discussions across sites/locations concerning 
proficiency testing sample results until after the date by which the 
laboratory must report proficiency testing results to the program.
    (4) The laboratory must not send PT samples or portions of samples 
to another laboratory for any analysis which it is certified to perform 
in its own laboratory. Any laboratory that CMS determines intentionally 
referred its proficiency testing samples to another laboratory for 
analysis will have its certification revoked for at least one year. Any 
laboratory that receives proficiency testing samples from another 
laboratory for testing must notify CMS of the receipt of those samples.
    (5) The laboratory must document the handling, preparation, 
processing, examination, and each step in the testing and reporting of 
results for all proficiency testing samples. The laboratory must 
maintain a copy of all records, including a copy of the proficiency 
testing program report forms used by the laboratory to record 
proficiency testing results including the attestation statement provided 
by the PT program, signed by the analyst and the laboratory director, 
documenting that proficiency testing samples were tested in the same 
manner as patient specimens, for a minimum of two years from the date of 
the proficiency testing event.
    (6) PT is required for only the test system, assay, or examination 
used as

[[Page 991]]

the primary method for patient testing during the PT event.

[57 FR 7146, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.803  Condition: Successful participation.

    (a) Each laboratory performing tests of moderate complexity 
(including the subcategory) and/or high complexity must successfully 
participate in a proficiency testing program approved by CMS, if 
applicable, as described in subpart I of this part for each specialty, 
subspecialty, and analyte or test in which the laboratory is certified 
under CLIA.
    (b) Except as specified in paragraph (c) of this section, if a 
laboratory fails to participate successfully in proficiency testing for 
a given specialty, subspecialty, analyte or test, as defined in this 
section, or fails to take remedial action when an individual fails 
gynecologic cytology, CMS imposes sanctions, as specified in subpart R 
of this part.
    (c) If a laboratory fails to perform successfully in a CMS-approved 
proficiency testing program, for the initial unsuccessful performance, 
CMS may direct the laboratory to undertake training of its personnel or 
to obtain technical assistance, or both, rather than imposing 
alternative or principle sanctions except when one or more of the 
following conditions exists:
    (1) There is immediate jeopardy to patient health and safety.
    (2) The laboratory fails to provide CMS or a CMS agent with 
satisfactory evidence that it has taken steps to correct the problem 
identified by the unsuccessful proficiency testing performance.
    (3) The laboratory has a poor compliance history.

[57 FR 7146, Feb. 28, 1992, as amended at 60 FR 20048, Apr. 24, 1995; 63 
FR 26737, May 14, 1998]



Sec. 493.807  Condition: Reinstatement of laboratories performing tests of moderate complexity (including the subcategory), high complexity, or any combination 
          of these tests, after failure to participate successfully.

    (a) If a laboratory's certificate is suspended or limited or its 
Medicare or Medicaid approval is cancelled or its Medicare or Medicaid 
payments are suspended because it fails to participate successfully in 
proficiency testing for one or more specialties, subspecialties, analyte 
or test, or voluntarily withdraws its certification under CLIA for the 
failed specialty, subspecialty, or analyte, the laboratory must then 
demonstrate sustained satisfactory performance on two consecutive 
proficiency testing events, one of which may be on site, before CMS will 
consider it for reinstatement for certification and Medicare or Medicaid 
approval in that specialty, subspecialty, analyte or test.
    (b) The cancellation period for Medicare and Medicaid approval or 
period for suspension of Medicare or Medicaid payments or suspension or 
limitation of certification under CLIA for the failed specialty, 
subspecialty, or analyte or test is for a period of not less than six 
months from the date of cancellation, limitation or suspension of the 
CLIA certificate.

[58 FR 5228, Jan. 19, 1993, as amended at 60 FR 20048, Apr. 24, 1995]

   Proficiency Testing by Specialty and Subspecialty for Laboratories 
  Performing Tests of Moderate Complexity (Including the Subcategory), 
           High Complexity, or Any Combination of These Tests



Sec. 493.821  Condition: Microbiology.

    The specialty of microbiology includes, for purposes of proficiency 
testing, the subspecialties of bacteriology, mycobacteriology, mycology, 
parasitology and virology.

[[Page 992]]



Sec. 493.823  Standard; Bacteriology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) Remedial action must be taken and documented, and the 
documentation must be maintained by the laboratory for two years from 
the date of participation in the proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.825  Standard; Mycobacteriology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) Remedial action must be taken and documented, and the 
documentation must be maintained by the laboratory for two years from 
the date of participation in the proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.827  Standard; Mycology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame

[[Page 993]]

for submitting proficiency testing results of the suspension of patient 
testing and the circumstances associated with failure to perform tests 
on proficiency testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) Remedial action must be taken and documented, and the 
documentation must be maintained by the laboratory for two years from 
the date of participation in the proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.829  Standard; Parasitology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) Remedial action must be taken and documented, and the 
documentation must be maintained by the laboratory for two years from 
the date of participation in the proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.831  Standard; Virology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure

[[Page 994]]

to participate, the laboratory must undertake appropriate training and 
employ the technical assistance necessary to correct problems associated 
with a proficiency testing failure.
    (2) For any unsatisfactory testing events, remedial action must be 
taken and documented, and the documentation must be maintained by the 
laboratory for two years from the date of participation in the 
proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.833  Condition: Diagnostic immunology.

    The specialty of diagnostic immunology includes for purposes of 
proficiency testing the subspecialties of syphilis serology and general 
immunology.



Sec. 493.835  Standard; Syphilis serology.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) For any unacceptable testing event score, remedial action must 
be taken and documented, and the documentation must be maintained by the 
laboratory for two years from the date of participation in the 
proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.837  Standard; General immunology.

    (a) Failure to attain a score of at least 80 percent of acceptable 
responses for each analyte in each testing event is unsatisfactory 
analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory analyte or test performance or testing 
event

[[Page 995]]

for reasons other than a failure to participate, the laboratory must 
undertake appropriate training and employ the technical assistance 
necessary to correct problems associated with a proficiency testing 
failure.
    (2) For any unacceptable analyte or testing event score, remedial 
action must be taken and documented, and the documentation must be 
maintained by the laboratory for two years from the date of 
participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
or test in two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.
    (g) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.839  Condition: Chemistry.

    The specialty of chemistry includes for the purposes of proficiency 
testing the subspecialties of routine chemistry, endocrinology, and 
toxicology.



Sec. 493.841  Standard; Routine chemistry.

    (a) Failure to attain a score of at least 80 percent of acceptable 
responses for each analyte in each testing event is unsatisfactory 
analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory analyte or test performance or testing 
event for reasons other than a failure to participate, the laboratory 
must undertake appropriate training and employ the technical assistance 
necessary to correct problems associated with a proficiency testing 
failure.
    (2) For any unacceptable analyte or testing event score, remedial 
action must be taken and documented, and the documentation must be 
maintained by the laboratory for two years from the date of 
participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
or test in two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.
    (g) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.843  Standard; Endocrinology.

    (a) Failure to attain a score of at least 80 percent of acceptable 
responses for each analyte in each testing event is unsatisfactory 
analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame

[[Page 996]]

for submitting proficiency testing results of the suspension of patient 
testing and the circumstances associated with failure to perform tests 
on proficiency testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory analyte or test performance or testing 
event for reasons other than a failure to participate, the laboratory 
must undertake appropriate training and employ the technical assistance 
necessary to correct problems associated with a proficiency testing 
failure.
    (2) For any unacceptable analyte or testing event score, remedial 
action must be taken and documented, and the documentation must be 
maintained by the laboratory for two years from the date of 
participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
or test in two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.
    (g) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.845  Standard; Toxicology.

    (a) Failure to attain a score of at least 80 percent of acceptable 
responses for each analyte in each testing event is unsatisfactory 
analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory analyte or test performance or testing 
event for reasons other than a failure to participate, the laboratory 
must undertake appropriate training and employ the technical assistance 
necessary to correct problems associated with a proficiency testing 
failure.
    (2) For any unacceptable analyte or testing event score, remedial 
action must be taken and documented, and the documentation must be 
maintained by the laboratory for two years from the date of 
participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
or test in two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.
    (g) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.849  Condition: Hematology.

    The specialty of hematology, for the purpose of proficiency testing, 
is not subdivided into subspecialties of testing.



Sec. 493.851  Standard; Hematology.

    (a) Failure to attain a score of at least 80 percent of acceptable 
responses for each analyte in each testing event is unsatisfactory 
analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.

[[Page 997]]

    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory analyte or test performance or testing 
event for reasons other than a failure to participate, the laboratory 
must undertake appropriate training and employ the technical assistance 
necessary to correct problems associated with a proficiency testing 
failure.
    (2) For any unacceptable analyte or testing event score, remedial 
action must be taken and documented, and the documentation must be 
maintained by the laboratory for two years from the date of 
participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
in two consecutive events or two out of three consecutive testing events 
is unsuccessful performance.
    (g) Failure to achieve an overall testing event score of 
satisfactory performance for two consecutive testing events or two out 
of three consecutive testing events is unsuccessful performance.



Sec. 493.853  Condition: Pathology.

    The specialty of pathology includes, for purposes of proficiency 
testing, the subspecialty of cytology limited to gynecologic 
examinations.



Sec. 493.855  Standard; Cytology: gynecologic examinations.

    To participate successfully in a cytology proficiency testing 
program for gynecologic examinations (Pap smears), the laboratory must 
meet the requirements of paragraphs (a) through (c) of this section.
    (a) The laboratory must ensure that each individual engaged in the 
examination of gynecologic preparations is enrolled in a proficiency 
testing program approved by CMS by January 1, 1995, if available in the 
State in which he or she is employed. The laboratory must ensure that 
each individual is tested at least once per year and obtains a passing 
score. To ensure this annual testing of individuals, an announced or 
unannounced testing event will be conducted on-site in each laboratory 
at least once each year. Laboratories will be notified of the time of 
each announced on-site testing event at least 30 days prior to each 
event. Additional testing events will be conducted as necessary in each 
State or region for the purpose of testing individuals who miss the on-
site testing event and for retesting individuals as described in 
paragraph (b) of this section.
    (b) The laboratory must ensure that each individual participates in 
an annual testing event that involves the examination of a 10-slide test 
set as described in Sec. 493.945. Individuals who fail this testing 
event are retested with another 10-slide test set as described in 
paragraphs (b)(1) and (b)(2) of this section. Individuals who fail this 
second test are subsequently retested with a 20-slide test set as 
described in paragraphs (b)(2) and (b)(3) of this section. Individuals 
are given not more than 2 hours to complete a 10-slide test and not more 
than 4 hours to complete a 20-slide test. Unexcused failure to appear by 
an individual for a retest will result in test failure with resulting 
remediation and limitations on slide examinations as specified in 
(b)(1), (b)(2), and (b)(3) of this section.
    (1) An individual is determined to have failed the annual testing 
event if he or she scores less than 90 percent on a 10-slide test set. 
For an individual who fails an annual proficiency testing event, the 
laboratory must schedule a

[[Page 998]]

retesting event which must take place not more than 45 days after 
receipt of the notification of failure.
    (2) An individual is determined to have failed the second testing 
event if he or she scores less than 90 percent on a 10-slide test set. 
For an individual who fails a second testing event, the laboratory must 
provide him or her with documented, remedial training and education in 
the area of failure, and must assure that all gynecologic slides 
evaluated subsequent to the notice of failure are reexamined until the 
individual is again retested with a 20-slide test set and scores at 
least 90 percent. Reexamination of slides must be documented.
    (3) An individual is determined to have failed the third testing 
event if he or she scores less than 90 percent on a 20-slide test set. 
An individual who fails the third testing event must cease examining 
gynecologic slide preparations immediately upon notification of test 
failure and may not resume examining gynecologic slides until the 
laboratory assures that the individual obtains at least 35 hours of 
documented, formally structured, continuing education in diagnostic 
cytopathology that focuses on the examination of gynecologic 
preparations, and until he or she is retested with a 20-slide test set 
and scores at least 90 percent.
    (c) If a laboratory fails to ensure that individuals are tested or 
those who fail a testing event are retested, or fails to take required 
remedial actions as described in paragraphs (b)(1), (b)(2) or (b)(3) of 
this section, CMS will initiate intermediate sanctions or limit the 
laboratory's certificate to exclude gynecologic cytology testing under 
CLIA, and, if applicable, suspend the laboratory's Medicare and Medicaid 
payments for gynecologic cytology testing in accordance with subpart R 
of this part.

[57 FR 7146, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993; 59 
FR 62609, Dec. 6, 1994]



Sec. 493.857  Condition: Immunohematology.

    The specialty of immunohematology includes four subspecialties for 
the purposes of proficiency testing: ABO group and D (Rho) typing; 
unexpected antibody detection; compatibility testing; and antibody 
identification.



Sec. 493.859  Standard; ABO group and D (Rho) typing.

    (a) Failure to attain a score of at least 100 percent of acceptable 
responses for each analyte or test in each testing event is 
unsatisfactory analyte performance for the testing event.
    (b) Failure to attain an overall testing event score of at least 100 
percent is unsatisfactory performance.
    (c) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (d) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (e)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) For any unacceptable analyte or unsatisfactory testing event 
score, remedial action must be taken and documented, and the 
documentation must be maintained by the laboratory for two years from 
the date of participation in the proficiency testing event.
    (f) Failure to achieve satisfactory performance for the same analyte 
in two consecutive testing events or two out of three consecutive 
testing events is unsuccessful performance.

[[Page 999]]

    (g) Failure to achieve an overall testing event score of 
satisfactory for two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.



Sec. 493.861  Standard; Unexpected antibody detection.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) For any unsatisfactory testing event score, remedial action must 
be taken and documented, and the documentation must be maintained by the 
laboratory for two years from the date of participation in the 
proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory for two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.



Sec. 493.863  Standard; Compatibility testing.

    (a) Failure to attain an overall testing event score of at least 100 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance and results in a score of 0 for the testing event. 
Consideration may be given to those laboratories failing to participate 
in a testing event only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) For any unsatisfactory testing event score, remedial action must 
be taken and documented, and the documentation must be maintained by the 
laboratory for two years from the date of participation in the 
proficiency testing event.
    (e) Failure to achieve an overall testing event score of 
satisfactory for two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.



Sec. 493.865  Standard; Antibody identification.

    (a) Failure to attain an overall testing event score of at least 80 
percent is unsatisfactory performance.
    (b) Failure to participate in a testing event is unsatisfactory 
performance

[[Page 1000]]

and results in a score of 0 for the testing event. Consideration may be 
given to those laboratories failing to participate in a testing event 
only if--
    (1) Patient testing was suspended during the time frame allotted for 
testing and reporting proficiency testing results;
    (2) The laboratory notifies the inspecting agency and the 
proficiency testing program within the time frame for submitting 
proficiency testing results of the suspension of patient testing and the 
circumstances associated with failure to perform tests on proficiency 
testing samples; and
    (3) The laboratory participated in the previous two proficiency 
testing events.
    (c) Failure to return proficiency testing results to the proficiency 
testing program within the time frame specified by the program is 
unsatisfactory performance and results in a score of 0 for the testing 
event.
    (d)(1) For any unsatisfactory testing event for reasons other than a 
failure to participate, the laboratory must undertake appropriate 
training and employ the technical assistance necessary to correct 
problems associated with a proficiency testing failure.
    (2) For any unsatisfactory testing event score, remedial action must 
be taken and documented, and the documentation must be maintained by the 
laboratory for two years from the date of participation in the 
proficiency testing event.
    (e) Failure to identify the same antibody in two consecutive or two 
out of three consecutive testing events is unsuccessful performance.
    (f) Failure to achieve an overall testing event score of 
satisfactory for two consecutive testing events or two out of three 
consecutive testing events is unsuccessful performance.



Subpart I--Proficiency Testing Programs for Tests of Moderate Complexity 
  (Including the Subcategory), High Complexity, or Any Combination of 
                               These Tests

    Source: 57 FR 7151, Feb. 28, 1992, unless otherwise noted.



Sec. 493.901  Approval of proficiency testing programs.

    In order for a proficiency testing program to receive HHS approval, 
the program must be offered by a private nonprofit organization or a 
Federal or State agency, or entity acting as a designated agent for the 
State. An organization, Federal, or State program seeking approval or 
reapproval for its program for the next calendar year must submit an 
application providing the required information by July 1 of the current 
year. The organization, Federal, or State program must provide technical 
assistance to laboratories seeking to qualify under the program, and 
must, for each specialty, subspecialty, and analyte or test for which it 
provides testing--
    (a) Assure the quality of test samples, appropriately evaluate and 
score the testing results, and identify performance problems in a timely 
manner;
    (b) Demonstrate to HHS that it has--
    (1) The technical ability required to--
    (i) Prepare or purchase samples from manufacturers who prepare the 
samples in conformance with the appropriate good manufacturing practices 
required in 21 CFR parts 606, 640, and 820; and
    (ii) Distribute the samples, using rigorous quality control to 
assure that samples mimic actual patient specimens when possible and 
that samples are homogeneous, except for specific subspecialties such as 
cytology, and will be stable within the time frame for analysis by 
proficiency testing participants;
    (2) A scientifically defensible process for determining the correct 
result for each challenge offered by the program;
    (3) A program of sufficient annual challenge and with the frequency 
specified in Secs. 493.909 through 493.959 to establish that a 
laboratory has met minimum performance requirements;
    (4) The resources needed to provide Statewide or nationwide reports 
to regulatory agencies on individual's performance for gynecologic 
cytology and on individual laboratory performance on testing events, 
cumulative reports and scores for each laboratory or individual, and 
reports of specific laboratory failures using grading criteria 
acceptable to HHS. These reports must be

[[Page 1001]]

provided to HHS on a timely basis when requested;
    (5) Provisions to include on each proficiency testing program report 
form used by the laboratory to record testing event results, an 
attestation statement that proficiency testing samples were tested in 
the same manner as patient specimens with a signature block to be 
completed by the individual performing the test as well as by the 
laboratory director;
    (6) A mechanism for notifying participants of the PT shipping 
schedule and for participants to notify the proficiency testing program 
within three days of the expected date of receipt of the shipment that 
samples have not arrived or are unacceptable for testing. The program 
must have provisions for replacement of samples that are lost in transit 
or are received in a condition that is unacceptable for testing; and
    (7) A process to resolve technical, administrative, and scientific 
problems about program operations;
    (c) Meet the specific criteria for proficiency testing programs 
listed by specialty, subspecialty, and analyte or test contained in 
Secs. 493.901 through 493.959 for initial approval and thereafter 
provide HHS, on an annual basis, with the information necessary to 
assure that the proficiency testing program meets the criteria required 
for approval; and
    (d) Comply with all applicable packaging, shipment, and notification 
requirements of 42 CFR part 72.

[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.903  Administrative responsibilities.

    The proficiency testing program must--
    (a)(1) Provide HHS or its designees and participating laboratories 
with an electronic or a hard copy, or both, of reports of proficiency 
testing results and all scores for each laboratory's performance in a 
format as required by and approved by CMS for each CLIA-certified 
specialty, subspecialty, and analyte or test within 60 days after the 
date by which the laboratory must report proficiency testing results to 
the proficiency testing program.
    (2) Provide HHS with reports of PT results and scores of individual 
performance in cytology and provide copies of reports to participating 
individuals, and to all laboratories that employ the individuals, within 
15 working days of the testing event;
    (b) Furnish to HHS cumulative reports on an individual laboratory's 
performance and aggregate data on CLIA-certified laboratories for the 
purpose of establishing a system to make the proficiency testing 
program's results available, on a reasonable basis, upon request of any 
person, and include such explanatory information as may be appropriate 
to assist in the interpretation of the proficiency testing program's 
results;
    (c) Provide HHS with additional information and data upon request 
and submit such information necessary for HHS to conduct an annual 
evaluation to determine whether the proficiency testing program 
continues to meet the requirements of Secs. 493.901 through 493.959;
    (d) Maintain records of laboratories' performance for a period of 
five years or such time as may be necessary for any legal proceedings; 
and
    (e) Provide HHS with an annual report and, if needed, an interim 
report which identifies any previously unrecognized sources of 
variability in kits, instruments, methods, or PT samples, which 
adversely affect the programs' ability to evaluate laboratory 
performance.

[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.905  Nonapproved proficiency testing programs.

    If a proficiency testing program is determined by HHS to fail to 
meet any criteria contained in Secs. 493.901 through 493.959 for 
approval of the proficiency testing program, CMS will notify the program 
and the program must notify all laboratories enrolled of the nonapproval 
and the reasons for nonapproval within 30 days of the notification.

[[Page 1002]]

       Proficiency Testing Programs by Specialty and Subspecialty



Sec. 493.909  Microbiology.

    The subspecialties under the specialty of microbiology for which a 
program may offer proficiency testing are bacteriology, 
mycobacteriology, mycology, parasitology and virology. Specific criteria 
for these subspecialties are found at Secs. 493.911 through 493.919.



Sec. 493.911  Bacteriology.

    (a) Types of services offered by laboratories. In bacteriology, for 
proficiency testing purposes, there are five types of laboratories:
    (1) Those that interpret Gram stains or perform primary inoculation, 
or both; and refer cultures to another laboratory appropriately 
certified for the subspecialty of bacteriology for identification;
    (2) Those that use direct antigen techniques to detect an organism 
and may also interpret Gram stains or perform primary inoculation, or 
perform any combination of these;
    (3) Those that, in addition to interpreting Gram stains, performing 
primary inoculations, and using direct antigen tests, also isolate and 
identify aerobic bacteria from throat, urine, cervical, or urethral 
discharge specimens to the genus level and may also perform 
antimicrobial susceptibility tests on selected isolated microorganisms;
    (4) Those that perform the services in paragraph (a)(3) of this 
section and also isolate and identify aerobic bacteria from any source 
to the species level and may also perform antimicrobial susceptibility 
tests; and
    (5) Those that perform the services in paragraph (a)(4) of this 
section and also isolate and identify anaerobic bacteria from any 
source.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing for bacteriology, the annual program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The samples 
may be provided to the laboratory through mailed shipments or, at HHS' 
option, may be provided to HHS or its designee for on-site testing. For 
the types of laboratories specified in paragraph (a) of this section, an 
annual program must include samples that contain organisms that are 
representative of the six major groups of bacteria: anaerobes, 
Enterobacteriaceae, gram-positive bacilli, gram-positive cocci, gram-
negative cocci, and miscellaneous gram-negative bacteria, as 
appropriate. The specific organisms included in the samples may vary 
from year to year. The annual program must include samples for bacterial 
antigen detection, bacterial isolation and identification, Gram stain, 
and antimicrobial susceptibility testing.
    (1) An approved program must furnish HHS with a description of 
samples that it plans to include in its annual program no later than six 
months before each calendar year. At least 50 percent of the samples 
must be mixtures of the principal organism and appropriate normal flora. 
The program must include other important emerging pathogens (as 
determined by HHS) and either organisms commonly occurring in patient 
specimens or opportunistic pathogens. The program must include the 
following two types of samples; each type of sample must meet the 50 
percent mixed culture criterion:
    (i) Samples that require laboratories to report only organisms that 
the testing laboratory considers to be a principal pathogen that is 
clearly responsible for a described illness (excluding immuno-
compromised patients). The program determines the reportable isolates, 
including antimicrobial susceptibility for any designated isolate; and
    (ii) Samples that require laboratories to report all organisms 
present. Samples must contain multiple organisms frequently found in 
specimens such as urine, blood, abscesses, and aspirates where multiple 
isolates are clearly significant or where specimens are derived from 
immuno-compromised patients. The program determines the reportable 
isolates.
    (2) An approved program may vary over time. For example, the types 
of organisms that might be included in an approved program over time 
are--

Anaerobes:
    Bacteroides fragilis group
    Clostridium perfringens

[[Page 1003]]

    Peptostreptococcus anaerobius
    Enterobacteriaceae
    Citrobacter freundii
    Enterobacter aerogenes
    Escherichia coli
    Klebsiella pneumoniae
    Proteus mirabilis
    Salmonella typhimurium
    Serratia marcescens
    Shigella sonnei
    Yersinia enterocolitica
Gram-positive bacilli:
    Listeria monocytogenes
    Corynebacterium species CDC Group JK
Gram-positive cocci:
    Staphylococcus aureus
    Streptococcus Group A
    Streptococcus Group B
    Streptococcus Group D (S. bovis and enterococcus)
    Streptococcus pneumoniae
Gram-negative cocci:
    Branhamella catarrhalis
    Neisseria gonorrhoeae
    Neisseria meningitidis
Miscellaneous Gram-negative bacteria:
    Campylobacter jejuni
    Haemophilis influenza, Type B
    Pseudomonas aeruginosa

    (3) For antimicrobial susceptibility testing, the program must 
provide at least one sample per testing event that includes gram-
positive or gram-negative strains that have a predetermined pattern of 
sensitivity or resistance to the common antimicrobial agents.
    (c) Evaluation of a laboratory's performance. HHS approves only 
those programs that assess the accuracy of a laboratory's responses in 
accordance with paragraphs (c) (1) through (7) of this section.
    (1) The program determines staining characteristics to be 
interpreted by Gram stain. The program determines the reportable 
bacteria to be detected by direct antigen techniques or isolation. To 
determine the accuracy of a laboratory's response for Gram stain 
interpretation, direct antigen detection, identification, or 
antimicrobial susceptibility testing, the program must compare the 
laboratory's response for each sample with the response which reflects 
agreement of either 90 percent of ten or more referee laboratories or 90 
percent or more of all participating laboratories.
    (2) To evaluate a laboratory's response for a particular sample, the 
program must determine a laboratory's type of service in accordance with 
paragraph (a) of this section. A laboratory must isolate and identify 
the organisms to the same extent it performs these procedures on patient 
specimens. A laboratory's performance will be evaluated on the basis of 
its final answer, for example, a laboratory specified in paragraph 
(a)(3) of this section will be evaluated on the basis of the average of 
its scores for paragraphs (c)(3) through (c)(6) as determined in 
paragraph (c)(7) of this section.
    (3) Since laboratories may incorrectly report the presence of 
organisms in addition to the correctly identified principal organism(s), 
the grading system must provide a means of deducting credit for 
additional erroneous organisms that are reported. Therefore, the total 
number of correct responses for organism isolation and identification 
submitted by the laboratory divided by the number of organisms present 
plus the number of incorrect organisms reported by the laboratory must 
be multiplied by 100 to establish a score for each sample in each 
testing event. For example, if a sample contained one principal organism 
and the laboratory reported it correctly but reported the presence of an 
additional organism, which was not considered reportable, the sample 
grade would be 1/(1+1)x100=50 percent.
    (4) For antimicrobial susceptibility testing, a laboratory must 
indicate which drugs are routinely included in its test panel when 
testing patient samples. A laboratory's performance will be evaluated 
for only those antibiotics for which service is offered. A correct 
response for each antibiotic will be determined as described in 
Secs. 493.911(c) (1) using criteria such as the guidelines established 
by the National Committee for Clinical Laboratory Standards. Grading is 
based on the number of correct susceptibility responses reported by the 
laboratory divided by the actual number of correct susceptibility 
responses determined by the program, multiplied by 100. For example, if 
a laboratory offers susceptibility testing for Enterobacteriaceae using 
amikacin, cephalothin, and tobramycin, and the organism in the 
proficiency testing sample is an Enterobacteriaceae, and the laboratory 
reports correct responses for two of

[[Page 1004]]

three antimicrobial agents, the laboratory's grade would be 2/3x100=67 
percent.
    (5) The performance criterion for qualitative antigen tests is the 
presence or absence of the bacterial antigen. The score for antigen 
tests is the number of correct responses divided by the number of 
samples to be tested for the antigen, multiplied by 100.
    (6) The performance criteria for Gram stain is staining reaction, 
i.e., gram positive or gram negative. The score for Gram stain is the 
number of correct responses divided by the number of challenges to be 
tested, multiplied by 100.
    (7) The score for a testing event in bacteriology is the average of 
the scores determined under paragraphs (c)(3) through (c)(6) of this 
section kbased on the type of service offered by the laboratory.

[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.913  Mycobacteriology.

    (a) Types of services offered by laboratories. In mycobacteriology, 
there are five types of laboratories for proficiency testing purposes:
    (1) Those that interpret acid-fast stains and refer specimen to 
another laboratory appropriately certified in the subspecialty of 
mycobacteriology;
    (2) Those that interpret acid-fast stains, perform primary 
inoculation, and refer cultures to another laboratory appropriately 
certified in the subspecialty of mycobacteriology for identification;
    (3) Those that interpret acid-fast stains, isolate and perform 
identification and/or antimycobacterial susceptibility of Mycobacterium 
tuberculosis, but refer other mycobacteria species to another laboratory 
appropriately certified in the subspecialty of mycobacteriology for 
identification and/or susceptibility tests;
    (4) Those that interpret acid-fast stains, isolate and identify all 
mycobacteria to the extent required for correct clinical diagnosis, but 
refer antimycobacterial susceptibility tests to another laboratory 
appropriately certified in the subspecialty of mycobacteriology; and
    (5) Those that interpret acid-fast stains, isolate and identify all 
mycobacteria to the extent required for correct clinical diagnosis, and 
perform antimycobacterial susceptibility tests on the organisms 
isolated.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing for mycobacteriology, the annual program must 
provide a minimum of five samples per testing event. There must be at 
least two testing events per year. The samples may be provided through 
mailed shipments or, at HHS' option, provided to HHS or its designee for 
on-site testing events. For types of laboratories specified in 
paragraphs (a)(1) and (a) (3) through (5) of this section, an annual 
program must include samples that contain species that are 
representative of the 5 major groups (complexes) of mycobacteria 
encountered in human specimens. The specific mycobacteria included in 
the samples may vary from year to year.
    (1) An approved program must furnish HHS and its agents with a 
description of samples that it plans to include in its annual program no 
later than six months before each calendar year. At least 50 percent of 
the samples must be mixtures of the principal mycobacteria and 
appropriate normal flora. The program must include mycobacteria commonly 
occurring in patient specimens and other important emerging mycobacteria 
(as determined by HHS). The program determines the reportable isolates 
and correct responses for antimycobacterial susceptibility for any 
designated isolate.
    (2) An approved program may vary over time. For example, the types 
of mycobacteria that might be included in an approved program over time 
are--

TB
    Mycobacterium tuberculosis
    Mycobacterium bovis
Group I
    Mycobacterium kansasii
Group II
    Mycobacterium szulgai
Group III
    Mycobacterium avium-intracellulare
    Mycobacterium terrae
Group IV
    Mycobacterium fortuitum


[[Page 1005]]


    (3) For antimycobacterial susceptibility testing, the program must 
provide at least one sample per testing event that includes 
mycobacterium tuberculosis that has a predetermined pattern of 
sensitivity or resistance to the common antimycobacterial agents.
    (4) For laboratories specified in paragraphs (a)(1) and (a)(2), the 
program must provide at least five samples per testing event that 
includes challenges that are acid-fast and challenges which do not 
contain acid-fast organisms.
    (c) Evaluation of a laboratory's performance. HHS approves only 
those programs that assess the accuracy of a laboratory's response in 
accordance with paragraphs (c)(1) through (6) of this section.
    (1) The program determines the reportable mycobacteria to be 
detected by acid-fast stain, for isolation and identification, and for 
antimycobacterial susceptibility. To determine the accuracy of a 
laboratory's response, the program must compare the laboratory's 
response for each sample with the response that reflects agreement of 
either 90 percent of ten or more referee laboratories or 90 percent or 
more of all participating laboratories.
    (2) To evaluate a laboratory's response for a particular sample, the 
program must determine a laboratory's type of service in accordance with 
paragraph (a) of this section. A laboratory must interpret acid-fast 
stains and isolate and identify the organisms to the same extent it 
performs these procedures on patient specimens. A laboratory's 
performance will be evaluated on the basis of the average of its scores 
as determined in paragraph (c)(6) of this section.
    (3) Since laboratories may incorrectly report the presence of 
organisms in addition to the correctly identified principal organism(s), 
the grading system must provide a means of deducting credit for 
additional erroneous organisms reported. Therefore, the total number of 
correct responses submitted by the laboratory divided by the number of 
organisms present plus the number of incorrect organisms reported by the 
laboratory must be multiplied by 100 to establish a score for each 
sample in each testing event. For example, if a sample contained one 
principal organism and the laboratory reported it correctly but reported 
the presence of an additional organism, which was not present, the 
sample grade would be

1/(1+1)x100=50 percent
    (4) For antimycobacterial susceptibility testing, a laboratory must 
indicate which drugs are routinely included in its test panel when 
testing patient samples. A laboratory's performance will be evaluated 
for only those antibiotics for which susceptibility testing is routinely 
performed on patient specimens. A correct response for each antibiotic 
will be determined as described in Sec. 493.913(c)(1). Grading is based 
on the number of correct susceptibility responses reported by the 
laboratory divided by the actual number of correct susceptibility 
responses as determined by the program, multiplied by 100. For example, 
if a laboratory offers susceptibility testing using three 
antimycobacterial agents and the laboratory reports correct response for 
two of the three antimycobacterial agents, the laboratory's grade would 
be \2/3\x100=67 percent.
    (5) The performance criterion for qualitative tests is the presence 
or absence of acid-fast organisms. The score for acid-fast organism 
detection is the number of correct responses divided by the number of 
samples to be tested, multiplied by 100.
    (6) The score for a testing event in mycobacteriology is the average 
of the scores determined under paragraphs (c)(3) through (c)(5) of this 
section based on the type of service offered by the laboratory.

[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.915  Mycology.

    (a) Types of services offered by laboratories. In mycology, there 
are four types of laboratories for proficiency testing purposes that may 
perform different levels of service for yeasts, dimorphic fungi, 
dermatophytes, and aerobic actinomycetes:
    (1) Those that isolate and identify only yeasts and/or dermatophytes 
to the genus level;
    (2) Those that isolate and identify yeasts and/or dermatophytes to 
the species level;

[[Page 1006]]

    (3) Those that isolate and perform identification of all organisms 
to the genus level; and
    (4) Those that isolate and perform identification of all organisms 
to the species level.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing for mycology, the annual program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The samples 
may be provided through mailed shipments or, at HHS' option, may be 
provided to HHS or its designee for on-site testing. An annual program 
must include samples that contain organisms that are representative of 
five major groups of fungi: Yeast or yeast-like fungi; dimorphic fungi; 
dematiaceous fungi; dermatophytes; and saprophytes, including 
opportunistic fungi. The specific fungi included in the samples may vary 
from year to year.
    (1) An approved program must, before each calendar year, furnish HHS 
with a description of samples that it plans to include in its annual 
program no later than six months before each calendar year. At least 50 
percent of the samples must be mixtures of the principal organism and 
appropriate normal background flora. Other important emerging pathogens 
(as determined by HHS) and organisms commonly occurring in patient 
specimens must be included periodically in the program.
    (2) An approved program may vary over time. As an example, the types 
of organisms that might be included in an approved program over time 
are--

Candida albicans
Candida (other species)
Cryptococcus neoformans
Sporothrix schenckii
Exophiala jeanselmei
Fonsecaea pedrosoi
Microsporum sp.
Acremonium sp.
Trichophvton sp.
Aspergillus fumigatus
Nocardia sp.
Blastomyces dermatitidis \1\
Zygomycetes sp.
    Note: \1\ Provided as a nonviable sample.

    (c) Evaluation of a laboratory's performance. HHS approves only 
those programs that assess the accuracy of a laboratory's response, in 
accordance with paragraphs (c)(1) through (5) of this section.
    (1) The program determines the reportable organisms. To determine 
the accuracy of a laboratory's response, the program must compare the 
laboratory's response for each sample with the response that reflects 
agreement of either 90 percent of ten or more referee laboratories or 90 
percent or more of all participating laboratories.
    (2) To evaluate a laboratory's response for a particular sample, the 
program must determine a laboratory's type of service in accordance with 
paragraph (a) of this section. A laboratory must isolate and identify 
the organisms to the same extent it performs these procedures on patient 
specimens.
    (3) Since laboratories may incorrectly report the presence of 
organisms in addition to the correctly identified principal organism(s), 
the grading system must deduct credit for additional erroneous organisms 
reported. Therefore, the total number of correct responses submitted by 
the laboratory divided by the number of organisms present plus the 
number of incorrect organisms reported by the laboratory must be 
multiplied by 100 to establish a score for each sample in each shipment 
or testing event. For example, if a sample contained one principal 
organism and the laboratory reported it correctly but reported the 
presence of an additional organism, which was not present, the sample 
grade would be 1/(1+1)x100=50 percent.
    (4) The score for the antigen tests is the number of correct 
responses divided by the number of samples to be tested for the antigen, 
multiplied by 100.
    (5) The score for a testing event is the average of the sample 
scores as determined under paragraph (c)(3) or (c)(4), or both, of this 
section.

[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5228, Jan. 19, 1993]



Sec. 493.917  Parasitology.

    (a) Types of services offered by laboratories. In parasitology there 
are two types of laboratories for proficiency testing purposes--

[[Page 1007]]

    (1) Those that determine the presence or absence of parasites by 
direct observation (wet mount) and/or pinworm preparations and, if 
necessary, refer specimens to another laboratory appropriately certified 
in the subspecialty of parasitology for identification;
    (2) Those that identify parasites using concentration preparations 
and/or permanent stains.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing in parasitology, a program must provide a minimum of 
five samples per testing event. There must be at least three testing 
events at approximately equal intervals per year. The samples may be 
provided through mailed shipments or, at HHS's option, may be provided 
to HHS or its designee for on-site testing. An annual program must 
include samples that contain parasites that are commonly encountered in 
the United States as well as those recently introduced into the United 
States. Other important emerging pathogens (as determined by HHS) and 
parasites commonly occurring in patient specimens must be included 
periodically in the program.
    (1) An approved program must, before each calendar year furnish HHS 
with a description of samples that it plans to include in its annual 
program no later than six months before each calendar year. Samples must 
include both formalinized specimens and PVA (polyvinyl alcohol) fixed 
specimens as well as blood smears, as appropriate for a particular 
parasite and stage of the parasite. The majority of samples must contain 
protozoa or helminths or a combination of parasites. Some samples must 
be devoid of parasites.
    (2) An approved program may vary over time. As an example, the types 
of parasites that might be included in an approved program over time 
are--

Enterobius vermicularis
Entamoeba histolytica
Entamoeba coli
Giardia lamblia
Endolimax nana
Dientamoeba fragilis
Iodamoeba butschli
Chilomastix mesnili
Hookworm
Ascaris lumbricoides
Strongyloides stercoralis
Trichuris trichiura
Diphyllobothrium latum
Cryptosporidium sp.
Plasmodium falciparum

    (3) For laboratories specified in paragraph (a)(1) of this section, 
the program must provide at least five samples per testing event that 
include challenges which contain parasites and challenges that are 
devoid of parasites.
    (c) Evaluation of a laboratory's performance. HHS approves only 
those programs that assess the accuracy of a laboratory's responses in 
accordance with paragraphs (c)(1) through (6) of this section.
    (1) The program must determine the reportable parasites. It may 
elect to establish a minimum number of parasites to be identified in 
samples before they are reported. Parasites found in rare numbers by 
referee laboratories are not considered in scoring a laboratory's 
performance; such findings are neutral. To determine the accuracy of a 
laboratory's response, the program must compare the laboratory's 
response with the response that reflects agreement of either 90 percent 
of ten or more referee laboratories or 90 percent or more of all 
participating laboratories.
    (2) To evaluate a laboratory's response for a particular sample, the 
program must determine a laboratory's type of service in accordance with 
paragraph (a) of this section. A laboratory must determine the presence 
or absence of a parasite(s) or concentrate and identify the parasites to 
the same extent it performs these procedures on patient specimens.
    (3) Since laboratories may incorrectly report the presence of 
parasites in addition to the correctly identified principal parasite(s), 
the grading system must deduct credit for these additional erroneous 
parasites reported and not found in rare numbers by the program's 
referencing process. Therefore, the total number of correct responses 
submitted by the laboratory divided by the number of parasites present 
plus the number of incorrect parasites reported by the laboratory must 
be multiplied by 100 to establish a score for each sample in each 
testing event. For example, if a sample contained one principal parasite 
and the laboratory reported it correctly but reported the presence of an 
additional parasite,

[[Page 1008]]

which was not present, the sample grade would be

1/(1+1)x100=50 percent.
    (4) The criterion for acceptable performance for qualitative 
parasitology examinations is presence or absence of a parasite(s).
    (5) The score for parasitology is the number of correct responses 
divided by the number of samples to be tested, multiplied by 100.
    (6) The score for a testing event is the average of the sample 
scores as determined under paragraphs (c)(3) through (c)(5) of this 
section.



Sec. 493.919  Virology.

    (a) Types of services offered by laboratories. In virology, there 
are two types of laboratories for proficiency testing purposes--
    (1) Those that only perform tests that directly detect viral 
antigens or structures, either in cells derived from infected tissues or 
free in fluid specimens; and
    (2) Those that are able to isolate and identify viruses and use 
direct antigen techniques.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing in virology, a program must provide a minimum of 
five samples per testing event. There must be at least three testing 
events at approximately equal intervals per year. The samples may be 
provided to the laboratory through mailed shipments or, at HHS's option, 
may be provided to HHS or its designee for on-site testing. An annual 
program must include viral species that are the more commonly identified 
viruses. The specific organisms found in the samples may vary from year 
to year. The annual program must include samples for viral antigen 
detection and viral isolation and identification.
    (1) An approved program must furnish HHS with a description of 
samples that it plans to include in its annual program no later than six 
months before each calendar year. The program must include other 
important emerging viruses (as determined by HHS) and viruses commonly 
occurring in patient specimens.
    (2) An approved program may vary over time. For example, the types 
of viruses that might be included in an approved program over time are 
the more commonly identified viruses such as Herpes simplex, respiratory 
syncytial virus, adenoviruses, enteroviruses, and cytomegaloviruses.
    (c) Evaluation of laboratory's performance. HHS approves only those 
programs that assess the accuracy of a laboratory's response in 
accordance with paragraphs (c)(1) through (5) of this section.
    (1) The program determines the reportable viruses to be detected by 
direct antigen techniques or isolated by laboratories that perform viral 
isolation procedures. To determine the accuracy of a laboratory's 
response, the program must compare the laboratory's response for each 
sample with the response that reflects agreement of either 90 percent of 
ten or more referee laboratories or 90 percent or more of all 
participating laboratories.
    (2) To evaluate a laboratory's response for a particular sample, the 
program must determine a laboratory's type of service in accordance with 
paragraph (a) of this section. A laboratory must isolate and identify 
the viruses to the same extent it performs these procedures on patient 
specimens.
    (3) Since laboratories may incorrectly report the presence of 
viruses in addition to the correctly identified principal virus, the 
grading system must provide a means of deducting credit for additional 
erroneous viruses reported. Therefore, the total number of correct 
responses determined by virus culture techniques submitted by the 
laboratory divided by the number of viruses present plus the number of 
incorrect viruses reported by the laboratory must be multiplied by 100 
to establish a score for each sample in each testing event. For example, 
if a sample contained one principal virus and the laboratory reported it 
correctly but reported the presence of an additional virus, which was 
not present, the sample grade would be 1/(1+1)x100=50 percent.
    (4) The performance criterion for qualitative antigen tests is 
presence or absence of the viral antigen. The score for the antigen 
tests is the number of

[[Page 1009]]

correct responses divided by the number of samples to be tested for the 
antigen, multiplied by 100.
    (5) The score for a testing event is the average of the sample 
scores as determined under paragraph (c)(3) and (c)(4) of this section.



Sec. 493.921  Diagnostic immunology.

    The subspecialties under the specialty of immunology for which a 
program may offer proficiency testing are syphilis serology and general 
immunology. Specific criteria for these subspecialties are found at 
Secs. 493.923 and 493.927.



Sec. 493.923  Syphilis serology.

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing in syphilis serology, a program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The samples 
may be provided through mailed shipments or, at HHS' option, may be 
provided to HHS or its designee for on-site testing. An annual program 
must include samples that cover the full range of reactivity from highly 
reactive to non-reactive.
    (b) Evaluation of test performance. HHS approves only those programs 
that assess the accuracy of a laboratory's responses in accordance with 
paragraphs (b)(1) through (4) of this section.
    (1) To determine the accuracy of a laboratory's response for 
qualitative and quantitative syphilis tests, the program must compare 
the laboratory's response with the response that reflects agreement of 
either 90 percent of ten or more referee laboratories or 90 percent or 
more of all participating laboratories. The proficiency testing program 
must indicate the minimum concentration, by method, that will be 
considered as indicating a positive response. The score for a sample in 
syphilis serology is the average of scores determined under paragraphs 
(b)(2) and (b)(3) of this section.
    (2) For quantitative syphilis tests, the program must determine the 
correct response for each method by the distance of the response from 
the target value. After the target value has been established for each 
response, the appropriateness of the response must be determined by 
using fixed criteria. The criterion for acceptable performance for 
quantitative syphilis serology tests is the target value [plusmn] 
1 dilution.
    (3) The criterion for acceptable performance for qualitative 
syphilis serology tests is reactive or nonreactive.
    (4) To determine the overall testing event score, the number of 
correct responses must be averaged using the following formula:

 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.927  General immunology.

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing for immunology, the annual program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The annual 
program must provide samples that cover the full range of reactivity 
from highly reactive to nonreactive. The samples may be provided through 
mailed shipments or, at HHS' option, may be provided to HHS or its 
designee for on-site testing.
    (b) Challenges per testing event. The minimum number of challenges 
per testing event the program must provide for each analyte or test 
procedure is five. Analytes or tests for which laboratory performance is 
to be evaluated include:

                        Analyte or Test Procedure

Alpha-l antitrypsin
Alpha-fetoprotein (tumor marker)
Antinuclear antibody
Antistreptolysin O
Anti-human immunodeficiency virus (HIV)
Complement C3
Complement C4
Hepatitis markers (HBsAg, anti-HBc, HBeAg)
IgA
IgG

[[Page 1010]]

IgE
IgM
Infectious mononucleosis
Rheumatoid factor
Rubella

    (c) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
responses in accordance with paragraphs (c)(1) through (5) of this 
section.
    (1) To determine the accuracy of a laboratory's response for 
quantitative and qualitative immunology tests or analytes, the program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 90 percent of ten or more 
referee laboratories or 90 percent or more of all participating 
laboratories. The proficiency testing program must indicate the minimum 
concentration that will be considered as indicating a positive response. 
The score for a sample in general immunology is either the score 
determined under paragraph (c)(2) or (3) of this section.
    (2) For quantitative immunology analytes or tests, the program must 
determine the correct response for each analyte by the distance of the 
response from the target value. After the target value has been 
established for each response, the appropriateness of the response must 
be determined by using either fixed criteria or the number of standard 
deviations (SDs) the response differs from the target value.

                   Criteria for Acceptable Performance

    The criteria for acceptable performance are--

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
Alpha-1 antitrypsin.......................  Target value [plusmn]3 SD.
Alpha-fetoprotein (tumor marker)..........  Target value [plusmn]3 SD.
Antinuclear antibody......................  Target value +/-2 dilutions
                                             or positive or negative.
Antistreptolysin O........................  Target value +/-2 dilution
                                             or positive or negative.
Anti-Human Immunodeficiency virus.........  Reactive or nonreactive.
Complement C3.............................  Target value [plusmn]3 SD.
Complement C4.............................  Target value [plusmn]3 SD.
Hepatitis (HBsAg, anti-HBc, HBeAg)........  Reactive (positive) or
                                             nonreactive (negative).
IgA.......................................  Target value [plusmn]3 SD.
IgE.......................................  Target value [plusmn]3 SD.
IgG.......................................  Target value +/-25%.
IgM.......................................  Target value [plusmn]3 SD.
Infectious mononucleosis..................  Target value +/-2 dilutions
                                             or positive or negative.
Rheumatoid factor.........................  Target value +/-2 dilutions
                                             or positive or negative.
Rubella...................................  Target value +/-2 dilutions
                                             or immune or nonimmune or
                                             positive or negative.
------------------------------------------------------------------------

    (3) The criterion for acceptable performance for qualitative general 
immunology tests is positive or negative.
    (4) To determine the analyte testing event score, the number of 
acceptable analyte responses must be averaged using the following 
formula:

 
  Number of acceptable responses for the
                  analyte                    x100=Analyte score for the
-------------------------------------------         testing event
Total number of challenges for the analyte
------------------------------------------------------------------------
 

    (5) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:

 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.929  Chemistry.

    The subspecialties under the specialty of chemistry for which a 
proficiency testing program may offer proficiency testing are routine 
chemistry, endocrinology, and toxicology. Specific criteria for these 
subspecialties are listed in Secs. 493.931 through 493.939.



Sec. 493.931  Routine chemistry.

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing for routine chemistry, a program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The annual 
program must provide samples that cover the clinically relevant range of 
values that would be expected in patient specimens. The specimens

[[Page 1011]]

may be provided through mailed shipments or, at HHS' option, may be 
provided to HHS or its designee for on-site testing.
    (b) Challenges per testing event. The minimum number of challenges 
per testing event a program must provide for each analyte or test 
procedure listed below is five serum, plasma or blood samples.

                        Analyte or Test Procedure

Alanine aminotransferase (ALT/SGPT)
Albumin
Alkaline phosphatase
Amylase
Aspartate aminotransferase (AST/SGOT)
Bilirubin, total
Blood gas (pH, pO2, and pCO2)
Calcium, total
Chloride
Cholesterol, total
Cholesterol, high density lipoprotein
Creatine kinase
Creatine kinase, isoenzymes
Creatinine
Glucose (Excluding measurements on devices cleared by FDA for home use)
Iron, total
Lactate dehydrogenase (LDH)
LDH isoenzymes
Magnesium
Potassium
Sodium
Total Protein
Triglycerides
Urea Nitrogen
Uric Acid

    (c) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
responses in accordance with paragraphs (c)(1) through (5) of this 
section.
    (1) To determine the accuracy of a laboratory's response for 
qualitative and quantitative chemistry tests or analytes, the program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 90 percent of ten or more 
referee laboratories or 90 percent or more of all participating 
laboratories. The score for a sample in routine chemistry is either the 
score determined under paragraph (c)(2) or (3) of this section.
    (2) For quantitative chemistry tests or analytes, the program must 
determine the correct response for each analyte by the distance of the 
response from the target value. After the target value has been 
established for each response, the appropriateness of the response must 
be determined by using either fixed criteria based on the percentage 
difference from the target value or the number of standard deviations 
(SDs) the response differs from the target value.

                   Criteria for Acceptable Performance

    The criteria for acceptable performance are--

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
Alanine aminotransferase (ALT/SGPT).......  Target value [plusmn]20%.
Albumin...................................  Target value [plusmn]10%.
Alkaline phosphatase......................  Target value [plusmn]30%.
Amylase...................................  Target value [plusmn]30%.
Aspartate aminotransferase (AST/SGOT).....  Target value [plusmn]20%.
Bilirubin, total..........................  Target value [plusmn]0.4 mg/
                                             dL or [plusmn]20%
                                             (greater).
Blood gas pO2.............................  Target value [plusmn]3 SD.
pCO2......................................  Target value [plusmn]5 mm Hg
                                             or +/-8% (greater).
pH........................................  Target value [plusmn]0.04.
Calcium, total............................  Target value [plusmn]1.0 mg/
                                             dL.
Chloride..................................  Target value [plusmn]5%.
Cholesterol, total........................  Target value [plusmn]10%.
Cholesterol, high density lipoprotein.....  Target value [plusmn]30%.
Creatine kinase...........................  Target value [plusmn]30%.
Creatine kinase isoenzymes................  MB elevated (presence or
                                             absence) or Target value
                                             [plusmn]3SD.
Creatinine................................  Target value [plusmn]0.3 mg/
                                             dL or [plusmn]15%
                                             (greater).
Glucose (excluding glucose performed on     Target value [plusmn]6 mg/dl
 monitoring devices cleared by FDA for       or [plusmn]10% (greater).
 home use.
Iron, total...............................  Target value [plusmn]20%.
Lactate dehydrogenase (LDH)...............  Target value [plusmn]20%.
LDH isoenzymes............................  LDH1/LDH2 (+ or -) or Target
                                             value [plusmn] 30%.
Magnesium.................................  Target value [plusmn]25%.
Potassium.................................  Target value [plusmn]0.5
                                             mmol/L.
Sodium....................................  Target value [plusmn]4 mmol/
                                             L.
Total Protein.............................  Target value [plusmn]10%.
Triglycerides.............................  Target value [plusmn]25%.
Urea nitrogen.............................  Target value [plusmn]2 mg/dL
                                             or [plusmn]9% (greater).
Uric acid.................................  Target value [plusmn]17%.
------------------------------------------------------------------------

    (3) The criterion for acceptable performance for qualitative routine 
chemistry tests is positive or negative.
    (4) To determine the analyte testing event score, the number of 
acceptable analyte responses must be averaged using the following 
formula:

[[Page 1012]]



 
  Number of acceptable responses for the
                  analyte                    x100=Analyte score for the
-------------------------------------------         testing event
Total number of challenges for the analyte
------------------------------------------------------------------------
 

    (5) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:

 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 



Sec. 493.933  Endocrinology.

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing for endocrinology, a program must provide a minimum 
of five samples per testing event. There must be at least three testing 
events at approximately equal intervals per year. The annual program 
must provide samples that cover the clinically relevant range of values 
that would be expected in patient specimens. The samples may be provided 
through mailed shipments or, at HHS' option, may be provided to HHS or 
its designee for on-site testing.
    (b) Challenges per testing event. The minimum number of challenges 
per testing event a program must provide for each analyte or test 
procedure is five serum, plasma, blood, or urine samples.

Analyte or Test
Cortisol
Free Thyroxine
Human Chorionic gonadotropin (excluding urine pregnancy tests done by 
visual color comparison categorized as waived tests)
T3 Uptake
Triiodothyronine
Thyroid-stimulating hormone
Thyroxine

    (c) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
responses in accordance with paragraphs (c)(1) through (5) of this 
section.
    (1) To determine the accuracy of a laboratory's response for 
qualitative and quantitative endocrinology tests or analytes, a program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 90 percent of ten or more 
referee laboratories or 90 percent or more of all participating 
laboratories. The score for a sample in endocrinology is either the 
score determined under paragraph (c)(2) or (c)(3) of this section.
    (2) For quantitative endocrinology tests or analytes, the program 
must determine the correct response for each analyte by the distance of 
the response from the target value. After the target value has been 
established for each response, the appropriateness of the response must 
be determined by using either fixed criteria based on the percentage 
difference from the target value or the number of standard deviations 
(SDs) the response differs from the target value.

                   Criteria for Acceptable Performance

    The criteria for acceptable performance are--

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
Cortisol..................................  Target value +/-25%.
Free Thyroxine............................  Target value +/-3 SD.
Human Chorionic Gonadotropin (excluding     Target value +/-3 SD
 urine pregnancy tests done by visual        positive or negative.
 color comparison categorized as waived
 tests).
T3 Uptake.................................  Target value +/-3 SD.
Triiodothyronine..........................  Target value +/-3 SD.
Thyroid-stimulating hormone...............  Target value +/-3 SD.
Thyroxine.................................  Target value +/-20% or 1.0
                                             mcg/dL (greater).
------------------------------------------------------------------------

    (3) The criterion for acceptable performance for qualitative 
endocrinology tests is positive or negative.
    (4) To determine the analyte testing event score, the number of 
acceptable analyte responses must be averaged using the following 
formula:

 
  Number of acceptable responses for the
                  analyte                    x100=Analyte score for the
-------------------------------------------         testing event
Total number of challenges for the analyte
------------------------------------------------------------------------
 


[[Page 1013]]

    (5) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:

 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.937  Toxicology.

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing for toxicology, the annual program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The annual 
program must provide samples that cover the clinically relevant range of 
values that would be expected in specimens of patients on drug therapy 
and that cover the level of clinical significance for the particular 
drug. The samples may be provided through mailed shipments or, at HHS' 
option, may be provided to HHS or its designee for on-site testing.
    (b) Challenges per testing event. The minimum number of challenges 
per testing event a program must provide for each analyte or test 
procedure is five serum, plasma, or blood samples.

                        Analyte or Test Procedure

Alcohol (blood)
Blood lead
Carbamazepine
Digoxin
Ethosuximide
Gentamicin
Lithium
Phenobarbital
Phenytoin
Primidone
Procainamide
 (and metabolite)
Quinidine
Theophylline
Tobramycin
Valproic Acid

    (c) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
responses in accordance with paragraphs (c)(1) through (4) of this 
section.
    (1) To determine the accuracy of a laboratory's responses for 
quantitative toxicology tests or analytes, the program must compare the 
laboratory's response for each analyte with the response that reflects 
agreement of either 90 percent of ten or more referee laboratories or 90 
percent or more of all participating laboratories. The score for a 
sample in toxicology is the score determined under paragraph (c)(2) of 
this section.
    (2) For quantitative toxicology tests or analytes, the program must 
determine the correct response for each analyte by the distance of the 
response from the target value. After the target value has been 
established for each response, the appropriateness of the response must 
be determined by using fixed criteria based on the percentage difference 
from the target value

                   Criteria for Acceptable Performance

    The criteria for acceptable performance are:

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
Alcohol, blood............................  Target Value [plusmn] 25%.
Blood lead................................  Target Value [plusmn]10% or
                                             4 mcg/dL (greater).
Carbamazepine.............................  Target Value [plusmn] 25%.
Digoxin...................................  Target Value [plusmn] 20% or
                                             [plusmn] 0.2 ng/mL
                                             (greater).
Ethosuximide..............................  Target Value [plusmn] 20%.
Gentamicin................................  Target Value [plusmn] 25%.
Lithium...................................  Target Value [plusmn] 0.3
                                             mmol/L or [plusmn] 20%
                                             (greater).
Phenobarbital.............................  Target Value [plusmn] 20%
Phenytoin.................................  Target Value [plusmn] 25%.
Primidone.................................  Target Value [plusmn] 25%.
Procainamide (and metabolite).............  Target Value [plusmn] 25%.
Quinidine.................................  Target Value [plusmn] 25%.
Tobramycin................................  Target Value [plusmn] 25%.
Theophylline..............................  Target Value [plusmn] 25%.
Valproic Acid.............................  Target Value [plusmn] 25%.
------------------------------------------------------------------------

    (3) To determine the analyte testing event score, the number of 
acceptable analyte responses must be averaged using the following 
formula:

 
  Number of acceptable responses for the
                  analyte                    x100=Analyte score for the
-------------------------------------------         testing event
Total number of challenges for the analyte
------------------------------------------------------------------------
 

    (4) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:

[[Page 1014]]



 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.941  Hematology (including routine hematology and coagulation).

    (a) Program content and frequency of challenge. To be approved for 
proficiency testing for hematology, a program must provide a minimum of 
five samples per testing event. There must be at least three testing 
events at approximately equal intervals per year. The annual program 
must provide samples that cover the full range of values that would be 
expected in patient specimens. The samples may be provided through 
mailed shipments or, at HHS' option, may be provided to HHS and or its 
designee for on-site testing.
    (b) Challenges per testing event. The minimum number of challenges 
per testing event a program must provide for each analyte or test 
procedure is five.

                        Analyte or Test Procedure

Cell identification or white blood cell differential
Erythrocyte count
Hematocrit (excluding spun microhematocrit)
Hemoglobin
Leukocyte count
Platelet count
Fibrinogen
Partial thromboplastin time
Prothrombin time

    (1) An approved program for cell identification may vary over time. 
The types of cells that might be included in an approved program over 
time are--

Neutrophilic granulocytes
Eosinophilic granulocytes
Basophilic granulocytes
Lymphocytes
Monocytes
Major red and white blood cell abnormalities
Immature red and white blood cells

    (2) White blood cell differentials should be limited to the 
percentage distribution of cellular elements listed above.
    (c) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
responses in accordance with paragraphs (c) (1) through (5) of this 
section.
    (1) To determine the accuracy of a laboratory's responses for 
qualitative and quantitative hematology tests or analytes, the program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 90 percent of ten or more 
referee laboratories or 90 percent or more of all participating 
laboratories. The score for a sample in hematology is either the score 
determined under paragraph (c) (2) or (3) of this section.
    (2) For quantitative hematology tests or analytes, the program must 
determine the correct response for each analyte by the distance of the 
response from the target value. After the target value has been 
established for each response, the appropriateness of the response is 
determined using either fixed criteria based on the percentage 
difference from the target value or the number of standard deviations 
(SDs) the response differs from the target value.

                   Criteria for Acceptable Performance

    The criteria for acceptable performance are:

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
Cell identification.......................  90% or greater consensus on
                                             identification.
White blood cell differential.............  Target +/- 3SD based on the
                                             percentage of different
                                             types of white blood cells
                                             in the samples.
Erythrocyte count.........................  Target +/-6%.
Hematocrit (Excluding spun hematocrits)...  Target +/-6%.
Hemoglobin................................  Target +/-7%.
Leukocyte count...........................  Target +/-15%.
Platelet count............................  Target +/-25%.
Fibrinogen................................  Target +/- 20%.
Partial thromboplastin time...............  Target +/-15%.
Prothrombin time..........................  Target +/-15%.
------------------------------------------------------------------------

    (3) The criterion for acceptable performance for the qualitative 
hematology test is correct cell identification.
    (4) To determine the analyte testing event score, the number of 
acceptable

[[Page 1015]]

analyte responses must be averaged using the following formula:

 
  Number of acceptable responses for the
                  analyte                     x100=Analyte score for the
-------------------------------------------         testing event
Total number of challenges for the analyte
------------------------------------------------------------------------
 

    (5) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:

 
  Number of acceptable responses for all
                challenges
-------------------------------------------   x100=Testing event score
      Total number of all challenges
------------------------------------------------------------------------
 


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.945  Cytology; gynecologic examinations.

    (a) Program content and frequency of challenge. (1) To be approved 
for proficiency testing for gynecologic examinations (Pap smears) in 
cytology, a program must provide test sets composed of 10- and 20-glass 
slides. Proficiency testing programs may obtain slides for test sets 
from cytology laboratories, provided the slides have been retained by 
the laboratory for the required period specified in Sec. 493.1257. If 
slide preparations are still subject to retention by the laboratory, 
they may be loaned to a proficiency testing program if the program 
provides the laboratory with documentation of the loan of the slides and 
ensures that slides loaned to it are retrievable upon request. Each test 
set must include at least one slide representing each of the response 
categories described in paragraph (b)(3)(ii)(A) of this section, and 
test sets should be comparable so that equitable testing is achieved 
within and between proficiency testing providers.
    (2) To be approved for proficiency testing in gynecologic cytology, 
a program must provide announced and unannounced on-site testing for 
each individual at least once per year and must provide an initial 
retesting event for each individual within 45 days after notification of 
test failure and subsequent retesting events within 45 days after 
completion of remedial action described in Sec. 493.855.
    (b) Evaluation of an individual's performance. HHS approves only 
those programs that assess the accuracy of each individual's responses 
on both 10- and 20-slide test sets in which the slides have been 
referenced as specified in paragraph (b)(1) of this section.
    (1) To determine the accuracy of an individual's response on a 
particular challenge (slide), the program must compare the individual's 
response for each slide preparation with the response that reflects the 
predetermined consensus agreement or confirmation on the diagnostic 
category, as described in the table in paragraph (b)(3)(ii)(A) of this 
section. For all slide preparations, a 100% consensus agreement among a 
minimum of three physicians certified in anatomic pathology is required. 
In addition, for premalignant and malignant slide preparations, 
confirmation by tissue biopsy is required either by comparison of the 
reported biopsy results or reevaluation of biopsy slide material by a 
physician certified in anatomic pathology.
    (2) An individual qualified as a technical supervisor under 
Sec. 493.1449 (b) or (k) who routinely interprets gynecologic slide 
preparations only after they have been examined by a cytotechnologist 
can either be tested using a test set that has been screened by a 
cytotechnologist in the same laboratory or using a test set that has not 
been screened. A technical supervisor who screens and interprets slide 
preparations that have not been previously examined must be tested using 
a test set that has not been previously screened.
    (3) The criteria for acceptable performance are determined by using 
the scoring system in paragraphs (b)(3) (i) and (ii) of this section.
    (i) Each slide set must contain 10 or 20 slides with point values 
established for each slide preparation based on the significance of the 
relationship of the interpretation of the slide to a clinical condition 
and whether the participant in the testing event is a cytotechnologist 
qualified under

[[Page 1016]]

Sec. Sec. 493.1469 or 493.1483 or functioning as a technical supervisor 
in cytology qualified under Sec. 493.1449 (b) or (k) of this part.
    (ii) The scoring system rewards or penalizes the participants in 
proportion to the distance of their answers from the correct response or 
target diagnosis and the penalty or reward is weighted in proportion to 
the severity of the lesion.
    (A) The four response categories for reporting proficiency testing 
results and their descriptions are as follows:

------------------------------------------------------------------------
             Category                            Description
------------------------------------------------------------------------
A.................................  Unsatisfactory for diagnosis due to:
                                    (1) Scant cellularity.
                                    (2) Air drying.
                                    (3) Obscuring material (blood,
                                     inflammatory cells, or lubricant).
B.................................  Normal or Benign Changes--includes:
                                    (1) Normal, negative or within
                                     normal limits.
                                    (2) Infection other than Human
                                     Papillomavirus (HPV) (e.g.,
                                     Trichomonas vaginalis, changes or
                                     morphology consistent with Candida
                                     spp., Actinomyces spp. or Herpes
                                     simplex virus).
                                    (3) Reactive and reparative changes
                                     (e.g., inflammation, effects of
                                     chemotherapy or radiation).
C.................................  Low Grade Squamous Intraepithelial
                                     Lesion--includes:
                                    (1) Cellular changes associated with
                                     HPV.
                                    (2) Mild dysplasia/CIN-1.
D.................................  High Grade Lesion and Carcinoma--
                                     includes:
                                    (1) High grade squamous
                                     intraepithelial lesions which
                                     include moderate dysplasia/CIN-2
                                     and severe dysplasia/carcinoma in-
                                     situ/CIN-3.
                                    (2) Squamous cell carcinoma.
                                    (3) Adenocarcinoma and other
                                     malignant neoplasms.
------------------------------------------------------------------------

    (B) In accordance with the criteria for the scoring system, the 
charts in paragraphs (b)(3)(ii)(C) and (D) of this section, for 
technical supervisors and cytotechnologists, respectively, provide a 
maximum of 10 points for a correct response and a maximum of minus five 
(-5) points for an incorrect response on a 10-slide test set. For 
example, if the correct response on a slide is ``high grade squamous 
intraepithelial lesion'' (category ``D'' on the scoring system chart) 
and an examinee calls it ``normal or negative'' (category ``B'' on the 
scoring system chart), then the examinee's point value on that slide is 
calculated as minus five (-5). Each slide is scored individually in the 
same manner. The individual's score for the testing event is determined 
by adding the point value achieved for each slide preparation, dividing 
by the total points for the testing event and multiplying by 100.
    (C) Criteria for scoring system for a 10-slide test set. (See table 
at (b)(3)(ii)(A) of this section for a description of the response 
categories.) For technical supervisors qualified under Sec. 493.1449(b) 
or (k):

------------------------------------------------------------------------
                Examinee's response:                   A    B    C    D
------------------------------------------------------------------------
Correct response category:
  A.................................................   10    0    0    0
  B.................................................    5   10    0    0
  C.................................................    5    0   10    5
  D.................................................    0    5    5   10
------------------------------------------------------------------------

    (D) Criteria for scoring system for a 10-slide test set. (See table 
at paragraph (b)(3)(ii)(A) of this section for a description of the 
response categories.) For cytotechnologists qualified under 
Secs. 493.1469 or 493.1483:

------------------------------------------------------------------------
                Examinee's response:                   A    B    C    D
------------------------------------------------------------------------
Correct response category:
  A.................................................   10    0    5    5
  B.................................................    5   10    5    5
  C.................................................    5    0   10   10
  D.................................................    0   -5   10   10
------------------------------------------------------------------------

    (E) In accordance with the criteria for the scoring system, the 
charts in paragraphs (b)(3)(ii)(F) and (G) of this section, for 
technical supervisors and cytotechnologists, respectively, provide 
maximums of 5 points for a correct response and minus ten (-10) points 
for an incorrect response on a 20-slide test set.
    (F) Criteria for scoring system for a 20-slide test set. (See table 
at paragraph (b)(3)(ii)(A) of this section for a description of the 
response categories.) For technical supervisors qualified under 
Sec. 493.1449(b) or (k):

------------------------------------------------------------------------
             Examinee's response:                 A      B      C     D
------------------------------------------------------------------------
Correct response category:
  A...........................................   5         0   0     0
  B...........................................   2.5       5   0     0
  C...........................................   2.5       0   5     2.5
  D...........................................   0       -10   2.5   5
------------------------------------------------------------------------


[[Page 1017]]

    (G) Criteria for scoring system for a 20-slide test set. (See table 
at (b)(3)(ii)(A) of this section for a description of the response 
categories.) For cytotechnologists qualified under Secs. 493.1469 or 
493.1483:

------------------------------------------------------------------------
              Examinee's response:                 A     B      C     D
------------------------------------------------------------------------
Correct response category:
  A............................................   5        0   2.5   2.5
  B............................................   2.5      5   2.5   2.5
  C............................................   2.5      0   5     5
  D............................................   0      -10   5     5
------------------------------------------------------------------------


[57 FR 7151, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.959  Immunohematology.

    (a) Types of services offered by laboratories. In immunohematology, 
there are four types of laboratories for proficiency testing purposes--
    (1) Those that perform ABO group and/or D (Rho) typing;
    (2) Those that perform ABO group and/or D (Rho) typing, and 
unexpected antibody detection;
    (3) Those that in addition to paragraph (a)(2) of this section 
perform compatibility testing; and
    (4) Those that perform in addition to paragraph (a)(3) of this 
section antibody identification.
    (b) Program content and frequency of challenge. To be approved for 
proficiency testing for immunohematology, a program must provide a 
minimum of five samples per testing event. There must be at least three 
testing events at approximately equal intervals per year. The annual 
program must provide samples that cover the full range of interpretation 
that would be expected in patient specimens. The samples may be provided 
through mailed shipments or, at HHS' option, may be provided to HHS or 
its designee for on-site testing.
    (c) Challenges per testing event. The minimum number of challenges 
per testing event a program must provide for each analyte or test 
procedure is five.

                        Analyte or Test Procedure

ABO group (excluding subgroups)
D (Rho) typing
Unexpected antibody detection
Compatibility testing
Antibody identification

    (d) Evaluation of a laboratory's analyte or test performance. HHS 
approves only those programs that assess the accuracy of a laboratory's 
response in accordance with paragraphs (d)(1) through (5) of this 
section.
    (1) To determine the accuracy of a laboratory's response, a program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 100 percent of ten or more 
referee laboratories or 95 percent or more of all participating 
laboratories except for unexpected antibody detection and antibody 
identification. To determine the accuracy of a laboratory's response for 
unexpected antibody detection and antibody identification, a program 
must compare the laboratory's response for each analyte with the 
response that reflects agreement of either 95 percent of ten or more 
referee laboratories or 95 percent or more of all participating 
laboratories. The score for a sample in immunohematology is either the 
score determined under paragraph (d)(2) or (3) of this section.
    (2) Criteria for acceptable performance. The criteria for acceptable 
performance are--

------------------------------------------------------------------------
                                               Criteria for acceptable
              Analyte or test                        performance
------------------------------------------------------------------------
ABO group.................................  100% accuracy.
D (Rho) typing............................  100% accuracy.
Unexpected antibody detection.............  80% accuracy.
Compatibility testing.....................  100% accuracy.
Antibody identification...................  80% accuracy.
------------------------------------------------------------------------

    (3) The criterion for acceptable performance for qualitative 
immunohematology tests is positive or negative.
    (4) To determine the analyte testing event score, the number of 
acceptable analyte responses must be averaged using the following 
formula:


 
Number of acceptable responses for the analytex100=Analyte score for the
                              testing event
-------------------------------------------------------------------------
               Total number of challenges for the analyte
-------------------------------------------------------------------------
 

    (5) To determine the overall testing event score, the number of 
correct responses for all analytes must be averaged using the following 
formula:


[[Page 1018]]



 
   Number of acceptable responses for all challengesx100=Testing event
                                  score
-------------------------------------------------------------------------
                     Total number of all challenges
-------------------------------------------------------------------------
 



 Subpart J--Patient Test Management for Moderate Complexity (Including 
  the Subcategory), High Complexity, or Any Combination of These Tests

    Source: 57 FR 7162, Feb, 28, 1992, unless otherwise noted.



Sec. 493.1101  Condition: Patient test management; moderate complexity (including the subcategory), or high complexity testing, or any combination of these 
          tests.

    Each laboratory performing moderate complexity (including the 
subcategory) or high complexity testing, or any combination of these 
tests, must employ and maintain a system that provides for proper 
patient preparation; proper specimen collection, identification, 
preservation, transportation, and processing; and accurate result 
reporting. This system must assure optimum patient specimen integrity 
and positive identification throughout the preanalytic (pre-testing), 
analytic (testing), and postanalytic (post-testing) processes and must 
meet the standards as they apply to the testing performed.

[60 FR 20048, Apr. 24, 1995]



Sec. 493.1103  Standard; Procedures for specimen submission and handling.

    (a) The laboratory must have available and follow written policies 
and procedures for each of the following, if applicable: Methods used 
for the preparation of patients; specimen collection; specimen labeling; 
specimen preservation; conditions for specimen transportation; and 
specimen processing. Such policies and procedures must assure positive 
identification and optimum integrity of the patient specimens from the 
time the specimen(s) are collected until testing has been completed and 
the results reported.
    (b) If the laboratory accepts referral specimens, written 
instructions must be available to clients and must include, as 
appropriate, the information specified in paragraph (a) of this section.
    (c) Oral explanation of instructions to patients for specimen 
collection, including patient preparation, may be used as a supplement 
to written instructions where applicable.

[57 FR 7162, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.1105  Standard; Test requisition.

    The laboratory must perform tests only at the written or electronic 
request of an authorized person. Oral requests for laboratory tests are 
permitted only if the laboratory subsequently requests written 
authorization for testing within 30 days. The laboratory must maintain 
the written authorization or documentation of efforts made to obtain a 
written authorization. Records of test requisitions or test 
authorizations must be retained for a minimum of two years. The 
patient's chart or medical record, if used as the test requisition, must 
be retained for a minimum of two years and must be available to the 
laboratory at the time of testing and available to HHS upon request. The 
laboratory must assure that the requisition or test authorization 
includes--
    (a) The patient's name or other unique identifier;
    (b) The name and address or other suitable identifiers of the 
authorized person requesting the test and, if appropriate, the 
individual responsible for utilizing the test results or the name and 
address of the laboratory submitting the specimen, including, as 
applicable, a contact person to enable the reporting of imminent life 
threatening laboratory results or panic values;
    (c) The test(s) to be performed;
    (d) The date of specimen collection;
    (e) For Pap smears, the patient's last menstrual period, age or date 
of birth, and indication of whether the patient had a previous abnormal 
report, treatment or biopsy; and
    (f) Any additional information relevant and necessary to a specific 
test

[[Page 1019]]

to assure accurate and timely testing and reporting of results.

[57 FR 7162, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.1107  Standard; Test records.

    The laboratory must maintain a record system to ensure reliable 
identification of patient specimens as they are processed and tested to 
assure that accurate test results are reported. These records must 
identify the personnel performing the testing procedure. Records of 
patient testing, including, if applicable, instrument printouts, must be 
retained for at least two years. Immunohematology records and 
transfusion records must be retained for no less than five years in 
accordance with 21 CFR part 606, subpart I. In addition, records of 
blood and blood product testing must be maintained for a period not less 
than five years after processing records have been completed, or six 
months after the latest expiration date, whichever is the later date, in 
accordance with 21 CFR 606.160(d). The record system must provide 
documentation of information specified in Sec. 493.1105 (a) through (f) 
and include--
    (a) The patient identification number, accession number, or other 
unique identification of the specimen;
    (b) The date and time of specimen receipt into the laboratory;
    (c) The condition and disposition of specimens that do not meet the 
laboratory's criteria for specimen acceptability; and
    (d) The records and dates of all specimen testing, including the 
identity of the personnel who performed the test(s), which are necessary 
to assure proper identification and accurate reporting of patient test 
results.

[57 FR 7162, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.1109  Standard; Test report.

    The laboratory report must be sent promptly to the authorized 
person, the individual responsible for using the test results or 
laboratory that initially requested the test. The original report or an 
exact duplicate of each test report, including final and preliminary 
report, must be retained by the testing laboratory for a period of at 
least two years after the date of reporting. Immunohematology reports 
and transfusion records must be retained by the laboratory for a period 
of no less than five years in accordance with 21 CFR part 606, subpart 
I. In addition, records of blood and blood product testing must be 
maintained for a period not less than five years after processing 
records have been completed, or six months after the latest expiration 
date, whichever is the later date, in accordance with 21 CFR 606.160(d). 
For pathology, test reports must be retained for a period of at least 
ten years after the date of reporting. This information may be 
maintained as part of the patient's chart or medical record which must 
be readily available to the laboratory and to HHS upon request.
    (a) The laboratory must have adequate systems in place to report 
results in a timely, accurate, reliable and confidential manner, and, 
ensure patient confidentiality throughout those parts of the total 
testing process that are under the laboratory's control.
    (b) The test report must indicate the name and address of the 
laboratory location at which the test was performed, the test performed, 
the test result and, if applicable, the units of measurement.
    (c) The laboratory must indicate on the test report any information 
regarding the condition and disposition of specimens that do not meet 
the laboratory's criteria for acceptability.
    (d) Pertinent ``reference'' or ``normal'' ranges, as determined by 
the laboratory performing the tests, must be available to the authorized 
person who ordered the tests or the individual responsible for utilizing 
the test results.
    (e) The results or transcripts of laboratory tests or examinations 
must be released only to authorized persons or the individual 
responsible for utilizing the test results.
    (f) The laboratory must develop and follow written procedures for 
reporting imminent life-threatening laboratory results or panic values. 
In addition, the laboratory must immediately alert the individual or 
entity requesting the test

[[Page 1020]]

or the individual responsible for utilizing the test results when any 
test result indicates an imminent life-threatening condition.
    (g) The laboratory must, upon request, make available to clients a 
list of test methods employed by the laboratory and, in accordance with 
Sec. 493.1213, as applicable, the performance specifications of each 
method used to test patient specimens. In addition, information that may 
affect the interpretation of test results, such as test interferences, 
must be provided upon request. Pertinent updates on testing information 
must be provided to clients whenever changes occur that affect the test 
results or interpretation of test results.
    (h) The original report or exact duplicates of test reports must be 
maintained by the laboratory in a manner that permits ready 
identification and timely accessibility.

[57 FR 7162, Feb. 28, 1992, as amended at 58 FR 5229, Jan. 19, 1993]



Sec. 493.1111  Standard; Referral of specimens.

    A laboratory must refer specimens for testing only to a laboratory 
possessing a valid certificate authorizing the performance of testing in 
the specialty or subspecialty of service for the level of complexity in 
which the referred test is categorized.
    (a) The referring laboratory must not revise results or information 
directly related to the interpretation of results provided by the 
testing laboratory.
    (b) The referring laboratory may permit each testing laboratory to 
send the test result directly to the authorized person who initially 
requested the test. The referring laboratory must retain or be able to 
produce an exact duplicate of each testing laboratory's report.
    (c) The authorized person who orders a test or procedure must be 
notified by the referring laboratory of the name and address of each 
laboratory location at which a test was performed.



 Subpart K--Quality Control for Tests of Moderate Complexity (Including 
  the Subcategory), High Complexity, or Any Combination of These Tests

    Source: 57 FR 7163, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1201  Condition: General quality control; moderate complexity (including the subcategory) or high complexity testing, or any combination of these 
          tests.

    (a) Applicability of subpart K of this part. Subpart K is divided 
into two sections, general quality control and quality control for 
specialties and subspecialties. The quality control requirements are 
specified in Secs. 493.1201 through 493.1285 unless--
    (1) An alternative procedure specified in the manufacturer's 
protocol has been cleared by the Food and Drug Administration (FDA) as 
meeting certain CLIA requirements for general quality control and 
specialty/subspecialty quality control, and the manufacturer's 
instructions contain the following statement,
    Unless this device is modified by a laboratory, the laboratory's 
compliance with these quality control instructions will satisfy the 
applicable requirements of 42 CFR 493.1203(b).

or
    (2) HHS approves an equivalent procedure that is specified in 
Appendix C of the State Operations Manual (CMS Pub. 7).
    (b) The laboratory must establish and follow written quality control 
procedures for monitoring and evaluating the quality of the analytical 
testing process of each method to assure the accuracy and reliability of 
patient test results and reports. The laboratory must meet the 
applicable standards in Secs. 493.1202 through 493.1221 of this subpart, 
unless an alternative procedure specified in the manufacturer's protocol 
has been cleared by the Food and Drug Administration (FDA) as meeting 
certain CLIA requirements for quality control or HHS approves an 
equivalent procedure specified in appendix C of the State Operations 
Manual (CMS

[[Page 1021]]

Pub. 7). CMS Pub. 7 is available from the Technical Information Service, 
U.S. Department of Commerce, 5825 Port Royal Road, Springfield, VA 
22161, telephone number (703) 487-4630.

[58 FR 5230, Jan. 19, 1993, as amended at 60 FR 20048, Apr. 24, 1995]



Sec. 493.1202  Standard; Moderate or high complexity testing, or both: Effective from September 1, 1992 to December 31, 2002.

    (a) For each test of high complexity performed, the laboratory must 
meet all applicable standards of this subpart.
    (b) For each test of moderate complexity performed using a 
standardized method, or method developed in-house, a device not subject 
to clearance by the FDA (including any commercially distributed 
instrument, kit or test system subject to the Food, Drug and Cosmetic 
Act marketed prior to the Medical Device Amendments, Public Law 94-295, 
enacted on May 28, 1976, and those identified in 21 CFR parts 862, 864, 
and 866 as exempt from FDA premarket review), or using an instrument, 
kit or test system cleared by the FDA through the premarket notification 
(510(k)) or premarket approval (PMA) process for in-vitro diagnostic use 
but modified by the laboratory, the laboratory must meet all applicable 
standards of this subpart.
    (c) For all other tests of moderate complexity performed using an 
instrument, kit or test system cleared by the FDA through the premarket 
notification (510(k)) or premarket approval (PMA) process for in-vitro 
diagnostic use, the laboratory must--(1) Follow the manufacturer's 
instructions for instrument or test system operation and test 
performance;
    (2) Have a procedure manual describing the processes for testing and 
reporting patient test results;
    (3) Perform and document calibration procedures or check calibration 
at least once every six months;
    (4) Perform and document control procedures using at least two 
levels of control materials each day of testing;
    (5) Perform and document applicable specialty and subspecialty 
control procedures as specified under Sec. 493.1223;
    (6) Perform and document that remedial action has been taken when 
problems or errors are identified as specified in Sec. 493.1219; and
    (7) Maintain records of all quality control activities for two 
years. Quality control records for immunohematology and blood and blood 
products must be maintained as specified in Sec. 493.1221.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5230, Jan. 19, 1993]



Sec. 493.1203  Standard; Moderate or high complexity testing, or both: Effective beginning December 31, 2002.

    For each moderate or high complexity test performed, the laboratory 
will be in compliance with this section if it:
    (a) Meets all applicable quality control requirements specified in 
this subpart when using a standardized method, a method developed in-
house, a device not subject to clearance by the FDA (including any 
commercially distributed instrument, kit or test system subject to the 
Food, Drug and Cosmetic Act marketed prior to the Medical Device 
Amendments, Public Law 94-295, enacted on May 28, 1976, and those 
identified in 21 CFR parts 862, 864, and 866 as exempt from FDA 
premarket review), a manufacturer's product modified by the laboratory, 
or a device (instrument, kit or test system) not cleared by the FDA as 
meeting certain CLIA quality control requirements; or
    (b) Follows manufacturer's instructions when using a device 
(instrument, kit, or test system) cleared by the FDA as meeting the CLIA 
requirements for quality control located at Secs. 493.1215, 493.1217, 
and 493.1223, and applicable parts of Secs. 493.1205, 493.1211 and 
493.1218. In addition, the laboratory must comply with the requirements 
of Secs. 493.1204, 493.1213, 493.1219, and 493.1221 and those parts of 
Secs. 493.1205, 493.1211, and 493.1218 that are unique to the laboratory 
facility and cannot be met by following manufacturer's instructions.

[58 FR 5230, Jan. 19, 1993]



Sec. 493.1204  Standard; Facilities.

    The laboratory must provide the space and environmental conditions 
necessary for conducting the services offered.

[[Page 1022]]

    (a) The laboratory must be constructed, arranged, and maintained to 
ensure the space, ventilation, and utilities necessary for conducting 
all phases of testing, including the preanalytic (pre-testing), analytic 
(testing), and postanalytic (post-testing), as appropriate.
    (b) Safety precautions must be established, posted, and observed to 
ensure protection from physical, chemical, biochemical and electrical 
hazards and biohazardous materials.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5230, Jan. 19, 1993]



Sec. 493.1205  Standard; Test methods, equipment, instrumentation, reagents, materials, and supplies.

    The laboratory must utilize test methods, equipment, 
instrumentation, reagents, materials, and supplies that provide accurate 
and reliable test results and test reports.
    (a) Test methodologies and equipment must be selected and testing 
performed in a manner that provides test results within the laboratory's 
stated performance specifications for each test method as determined 
under Sec. 493.1213.
    (b) The laboratory must have appropriate and sufficient equipment, 
instruments, reagents, materials, and supplies for the type and volume 
of testing performed and for the maintenance of quality during the 
preanalytic, analytic, and postanalytic phases of testing.
    (c) The laboratory must define criteria for those conditions that 
are essential for proper storage of reagents and specimens, and accurate 
and reliable test system operation and test result reporting.
    (1) These conditions include, if applicable--
    (i) Water quality;
    (ii) Temperature;
    (iii) Humidity; and
    (iv) Protection of equipment and instrumentation from fluctuations 
and interruptions in electrical current that adversely affect patient 
test results and test reports.
    (2) Remedial actions taken to correct conditions that fail to meet 
the criteria specified in paragraph (c)(1) of this section must be 
documented.
    (d) Reagents, solutions, culture media, control materials, 
calibration materials and other supplies, as appropriate, must be 
labeled to indicate--
    (1) Identity and, when significant, titer, strength or 
concentration;
    (2) Recommended storage requirements;
    (3) Preparation and expiration date; and
    (4) Other pertinent information required for proper use.
    (e) Reagents, solutions, culture media, control materials, 
calibration materials and other supplies must be prepared, stored, and 
handled in a manner to ensure that--
    (1) Reagents, solutions, culture media, controls, calibration 
materials and other supplies are not used when they have exceeded their 
expiration date, have deteriorated or are of substandard quality. The 
laboratory must comply with the FDA product dating requirements of 21 
CFR 610.53 for blood products and other biologicals, and labeling 
requirements, as cited in 21 CFR 809.10 for all other in vitro 
diagnostics. Any exception to the product dating requirements in 21 CFR 
610.53 will be granted by the FDA in the form of an amendment of the 
product license, in accordance with 21 CFR 610.53(d). All exceptions 
must be documented by the laboratory; and
    (2) Components of reagent kits of different lot numbers are not 
interchanged unless otherwise specified by the manufacturer.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5230, Jan. 19, 1993]



Sec. 493.1211  Standard; Procedure manual.

    (a) A written procedure manual for the performance of all analytical 
methods used by the laboratory must be readily available and followed by 
laboratory personnel. Textbooks may be used as supplements to these 
written descriptions but may not be used in lieu of the laboratory's 
written procedures for testing or examining specimens.
    (b) The procedure manual must include, when applicable to the test 
procedure:

[[Page 1023]]

    (1) Requirements for specimen collection and processing, and 
criteria for specimen rejection;
    (2) Procedures for microscopic examinations, including the detection 
of inadequately prepared slides;
    (3) Step-by-step performance of the procedure, including test 
calculations and interpretation of results;
    (4) Preparation of slides, solutions, calibrators, controls, 
reagents, stains and other materials used in testing;
    (5) Calibration and calibration verification procedures;
    (6) The reportable range for patient test results as established or 
verified in Sec. 493.1213;
    (7) Control procedures;
    (8) Remedial action to be taken when calibration or control results 
fail to meet the laboratory's criteria for acceptability;
    (9) Limitations in methodologies, including interfering substances;
    (10) Reference range (normal values);
    (11) Imminent life-threatening laboratory results or ``panic 
values'';
    (12) Pertinent literature references;
    (13) Appropriate criteria for specimen storage and preservation to 
ensure specimen integrity until testing is completed;
    (14) The laboratory's system for reporting patient results 
including, when appropriate, the protocol for reporting panic values;
    (15) Description of the course of action to be taken in the event 
that a test system becomes inoperable; and
    (16) Criteria for the referral of specimens including procedures for 
specimen submission and handling as described in Sec. 493.1103.
    (c) Manufacturers' package inserts or operator manuals may be used, 
when applicable, to meet the requirements of paragraphs (b)(1) through 
(b)(13) of this section. Any of the items under paragraphs (b)(1) 
through (b)(13) of this section not provided by the manufacturer must be 
provided by the laboratory.
    (d) Procedures must be approved, signed, and dated by the director.
    (e) Procedures must be re-approved, signed and dated if the 
directorship of the laboratory changes.
    (f) Each change in a procedure must be approved, signed, and dated 
by the current director of the laboratory.
    (g) The laboratory must maintain a copy of each procedure with the 
dates of initial use and discontinuance. These records must be retained 
for two years after a procedure has been discontinued.



Sec. 493.1213  Standard; Establishment and verification of method performance specifications.

    Prior to reporting patient test results, the laboratory must verify 
or establish, for each method, the performance specifications for the 
following performance characteristics: accuracy; precision; analytical 
sensitivity and specificity, if applicable; the reportable range of 
patient test results; the reference range(s) (normal values); and any 
other applicable performance characteristic.
    (a) The provisions of this section are not retroactive. Laboratories 
are not required to verify or establish performance specifications for 
any test method of moderate or high complexity in use prior to September 
1, 1992.
    (b)(1) Each laboratory that introduces a new procedure for patient 
testing using a device (instrument, kit, or test system) cleared by the 
FDA as meeting certain CLIA requirements for quality control, must 
demonstrate that, prior to reporting patient test results, it can obtain 
the performance specifications for accuracy, precision, and reportable 
range of patient test results, comparable to those established by the 
manufacturer. The laboratory must also verify that the manufacturer's 
reference range is appropriate for the laboratory's patient population.
    (2) Each laboratory that introduces a new method or device as 
specified in either Sec. 493.1202(a) or (b), or Sec. 493.1203(a), must, 
prior to reporting patient test results--
    (i) Verify or establish for each method the performance 
specifications for the following performance characteristics, as 
applicable:
    (A) Accuracy;
    (B) Precision;
    (C) Analytical sensitivity;
    (D) Analytical specificity to include interfering substances;
    (E) Reportable range of patient test results;
    (F) Reference range(s); and

[[Page 1024]]

    (G) Any other performance characteristic required for test 
performance.
    (ii) Based upon the performance specifications verified or 
established in accordance with paragraph (b)(2)(i) of this section, 
establish calibration and control procedures for patient testing as 
required under Secs. 493.1217 and 493.1218.
    (c) The laboratory must have documentation of the verification or 
establishment of all applicable test performance specifications.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5230, Jan. 19, 1993]



Sec. 493.1215  Standard; Equipment maintenance and function checks.

    The laboratory must perform equipment maintenance and function 
checks that include electronic, mechanical and operational checks 
necessary for the proper test performance and test result reporting of 
equipment, instruments and test systems, to assure accurate and reliable 
test results and reports.
    (a) Maintenance of equipment, instruments, and test systems. (1) For 
manufacturers' equipment, instruments or test systems cleared by the FDA 
as meeting certain CLIA requirements for quality control, the laboratory 
must--
    (i) Perform maintenance as defined by the manufacturer and with at 
least the frequency specified by the manufacturer; and
    (ii) Document all maintenance performed.
    (2) For methods or devices, as specified in either Sec. 493.1202(a) 
or (b) or Sec. 493.1203(a), the laboratory must--
    (i) Establish a maintenance protocol that ensures equipment, 
instrument, and test system performance necessary for accurate and 
reliable test results and test result reporting;
    (ii) Perform maintenance with at least the frequency specified in 
paragraph (a)(2)(i) of this section; and
    (iii) Document all maintenance performed.
    (b) Function checks of equipment, instruments, and test systems. (1) 
For manufacturers' equipment, instruments, or test systems cleared by 
the FDA as meeting certain CLIA requirements for quality control, the 
laboratory must--
    (i) Perform function checks as defined by the manufacturer and with 
at least the frequency specified by the manufacturer; and
    (ii) Document all function checks performed.
    (2) For methods or devices, as specified in either Sec. 493.1202 (a) 
or (b) or Sec. 493.1203(a), the laboratory must--
    (i) Define a function check protocol that ensures equipment, 
instrument, and test system performance necessary for accurate and 
reliable test results and test result reporting;
    (ii) Perform function checks including background or baseline checks 
specified in paragraph (b)(2)(i) of this section. Function checks must 
be within the laboratory's established limits before patient testing is 
conducted; and
    (iii) Document all function checks performed.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5231, Jan. 19, 1993; 58 
FR 39155, July 22, 1993]



Sec. 493.1217  Standard; Calibration and calibration verification procedures.

    Calibration and calibration verification procedures are required to 
substantiate the continued accuracy of the test method throughout the 
laboratory's reportable range for patient test rests. Calibration is the 
process of testing and adjusting an instrument, kit, or test system to 
provide a known relationship between the measurement response and the 
value of the substance that is being measured by the test procedure. 
Calibration verification is the assaying of calibration materials in the 
same manner as patient samples to confirm that the calibration of the 
instrument, kit, or test system has remained stable throughout the 
laboratory's reportable range for patient test results. The reportable 
range of patient test results is the range of test result values over 
which the laboratory can establish or verify the accuracy of the 
instrument, kit or test system measurement response. Calibration and 
calibration verification must be performed and documented as required in 
this section unless otherwise specified in Secs. 493.1223 through 
493.1285.
    (a) For laboratory test procedures that are performed using 
instruments, kits, or test systems that have been

[[Page 1025]]

cleared by the FDA as meeting certain CLIA requirements for quality 
control, the laboratory must, at a minimum, follow the manufacturer's 
instructions for calibration and calibration verification procedures 
using calibration materials specified by the manufacturer.
    (b) For each method or device, as specified in either Sec. 493.1202 
(a) or (b) or Sec. 493.1203(a), the laboratory must--
    (1) Perform calibration procedures--
    (i) At a minimum, in accordance with manufacturer's instructions, if 
provided, using calibration materials provided or specified, as 
appropriate, and with at least the frequency recommended by the 
manufacturer; and
    (ii) In accordance with criteria established by the laboratory, as 
required under Sec. 493.1213(b)(2)(i)--
    (A) Including the number, type and concentration of calibration 
materials, acceptable limits for calibration, and the frequency of 
calibration; and
    (B) Using calibration materials appropriate for the methodology and, 
if possible, traceable to a reference method or reference material of 
known value; and
    (iii) Whenever calibration verification fails to meet the 
laboratory's acceptable limits for calibration verification; and
    (2) Perform calibration verification procedures--
    (i) In accordance with the manufacturer's calibration verification 
instructions when they meet or exceed the requirements specified in 
paragraph (b)(2)(ii) of this section; or
    (ii) In accordance with criteria established by the laboratory--
    (A) Including the number, type, and concentration of calibration 
materials, acceptable limits for calibration verification and frequency 
of calibration verification;
    (B) Using calibration materials appropriate for--
    (1) The methodology and, if possible, traceable to a reference 
method or reference material of known value; and
    (2) Verifying the laboratory's established reportable range of 
patient test results, which must include at least a minimal (or zero) 
value, a mid-point value, and a maximum value at the upper limit of that 
range; and
    (C) At least once every six months and whenever any of the following 
occur:
    (1) A complete change of reagents for a procedure is introduced, 
unless the laboratory can demonstrate that changing reagent lot numbers 
does not affect the range used to report patient test results, and 
control values are not adversely affected by reagent lot number changes;

    Note: If reagents are obtained from a manufacturer and all of the 
reagents for a test are packaged together, the laboratory is not 
required to perform calibration verification for each package of 
reagents, provided the packages of reagents are received in the same 
shipment and contain the same lot number.

    (2) There is major preventive maintenance or replacement of critical 
parts that may influence test performance;
    (3) Controls reflect an unusual trend or shift or are outside of the 
laboratory's acceptable limits and other means of assessing and 
correcting unacceptable control values have failed to identify and 
correct the problem; or
    (4) The laboratory's established schedule for verifying the 
reportable range for patient test results requires more frequent 
calibration verification than specified in paragraphs (b)(2)(ii)(C) (1), 
(2), or (3) of this section; and
    (3) Document all calibration and calibration verification procedures 
performed.

[58 FR 5231, Jan. 19, 1993]



Sec. 493.1218  Standard; Control procedures.

    Control procedures are performed on a routine basis to monitor the 
stability of the method or test system; control and calibration 
materials provide a means to indirectly assess the accuracy and 
precision of patient test results. Control procedures must be performed 
as defined in this section unless otherwise specified in Secs. 493.1223 
through 493.1285 of this subpart.
    (a) For each device cleared by the FDA as meeting certain CLIA 
requirements for quality control, the laboratory must, at a minimum, 
follow the manufacturer's instructions for control procedures. In 
addition, the laboratory must meet the requirements under

[[Page 1026]]

paragraphs (c) through (e) of this section and, as applicable, paragraph 
(f) of this section.
    (b) For each device, as specified in either Sec. 493.1202 (a) or (b) 
or Sec. 493.1203(a), the laboratory must evaluate instrument and reagent 
stability and operator variance in determining the number, type, and 
frequency of testing calibration or control materials and establish 
criteria for acceptability used to monitor test performance during a run 
of patient specimen(s). A run is an interval within which the accuracy 
and precision of a testing system is expected to be stable, but cannot 
be greater than 24 hours or less than the frequency recommended by the 
manufacturer. For each procedure, the laboratory must monitor test 
performance using calibration materials or control materials or a 
combination thereof.
    (1) For qualitative tests, the laboratory must include a positive 
and negative control with each run of patient specimens.
    (2) For quantitative tests, the laboratory must include at least two 
samples of different concentrations of either calibration materials, 
control materials, or a combination thereof with the frequency 
determined in Sec. 493.1218(b), but not less frequently than once each 
run of patient specimens.
    (3) For electrophoretic determinations--
    (i) At least one control sample must be used in each electrophoretic 
cell; and
    (ii) The control sample must contain fractions representative of 
those routinely reported in patient specimens.
    (4) Each day of use, the laboratory must evaluate the detection 
phase of direct antigen systems using an appropriate positive and 
negative control material (organism or antigen extract). When direct 
antigen systems include an extraction phase, the system must be checked 
each day of use using a positive organism.
    (5) If calibration materials and control materials are not 
available, the laboratory must have an alternative mechanism to assure 
the validity of patient test results.
    (c) Control samples must be tested in the same manner as patient 
specimens.
    (d) When calibration or control materials are used, statistical 
parameters (e.g., mean and standard deviation) for each lot number of 
calibration material and each lot of control material must be determined 
through repetitive testing.
    (1) The stated values of an assayed control material may be used as 
the target values provided the stated values correspond to the 
methodology and instrumentation employed by the laboratory and are 
verified by the laboratory.
    (2) Statistical parameters for unassayed materials must be 
established over time by the laboratory through concurrent testing with 
calibration materials or control materials having previously determined 
statistical parameters.
    (e) Control results must meet the laboratory's criteria for 
acceptability prior to reporting patient test results.
    (f) Reagent and supply checks. (1) The laboratory must check each 
batch or shipment of reagents, discs, stains, antisera and 
identification systems (systems using two or more substrates) when 
prepared or opened for positive and negative reactivity, as well as 
graded reactivity if applicable.
    (2) Each day of use (unless otherwise specified in this subpart), 
the laboratory must test staining materials for intended reactivity to 
ensure predictable staining characteristics.
    (3) The laboratory must check fluorescent stains for positive and 
negative reactivity each time of use (unless otherwise specified in this 
subpart).
    (4) The laboratory must check each batch or shipment of media for 
sterility, if it is intended to be sterile, and sterility is required 
for testing. Media must also be checked for its ability to support 
growth, and as appropriate, selectivity/inhibition and/or biochemical 
response. The laboratory may use manufacturer's control checks of media 
provided the manufacturer's product insert specifies that the 
manufacturer's quality control checks meet the National Committee for 
Clinical Laboratory Standards (NCCLS) for media quality control. The 
laboratory must document that the physical characteristics of the media 
are not compromised and report any deterioration

[[Page 1027]]

in the media to the manufacturer. The laboratory must follow the 
manufacturer's specifications for using the media and be responsible for 
the test results.

    Note: A batch of media (solid, semi-solid, or liquid) consists of 
all tubes, plates, or containers of the same medium prepared at the same 
time and in the same laboratory; or, if received from an outside source 
or commercial supplier, consists of all of the plates, tubes or 
containers of the same medium that have the same lot numbers and are 
received in a single shipment.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5232, Jan. 19, 1993]



Sec. 493.1219  Standard; Remedial actions.

    Remedial action policies and procedures must be established by the 
laboratory and applied as necessary to maintain the laboratory's 
operation for testing patient specimens in a manner that assures 
accurate and reliable patient test results and reports. The laboratory 
must document all remedial actions taken when--
    (a) Test systems do not meet the laboratory's established 
performance specifications, as determined in Sec. 493.1213 of this 
section, which include but are not limited to--
    (1) Equipment or methodologies that perform outside of established 
operating parameters or performance specifications;
    (2) Patient test values that are outside of the laboratory's 
reportable range of patient test results; and
    (3) The determination that the laboratory's reference range for a 
test procedure is inappropriate for the laboratory's patient population.
    (b) Results of control and calibration materials fail to meet the 
laboratory's established criteria for acceptability. All patient test 
results obtained in the unacceptable test run or since the last 
acceptable test run must be evaluated to determine if patient test 
results have been adversely affected and the laboratory must take the 
remedial action necessary to ensure the reporting of accurate and 
reliable patient test results;
    (c) The laboratory cannot report patient test results within its 
established time frames. The laboratory must determine, based on the 
urgency of the patient test(s) requested, the need to notify the 
appropriate individual of the delayed testing; and
    (d) Errors in the reported patient test results are detected. The 
laboratory must--
    (1) Promptly notify the authorized person ordering or individual 
utilizing the test results of reporting errors;
    (2) Issue corrected reports promptly to the authorized person 
ordering the test or the individual utilizing the test results; and
    (3) Maintain exact duplicates of the original report as well as the 
corrected report for two years.



Sec. 493.1221  Standard; Quality control records.

    The laboratory must document and maintain records of all quality 
control activities specified in Secs. 493.1202 through 493.1285 of this 
subpart and retain records for at least two years. Immunohematology 
quality control records must be maintained for a period of no less than 
five years. In addition, quality control records for blood and blood 
products must be maintained for a period not less than five years after 
processing records have been completed, or six months after the latest 
expiration date, whichever is the later date, in accordance with 21 CFR 
606.160(d).



Sec. 493.1223  Condition: Quality control--specialties and subspecialties for tests of moderate or high complexity, or both.

    The laboratory must establish and follow written quality control 
procedures for monitoring and evaluating the quality of the analytical 
testing process of each method to assure the accuracy and reliability of 
patient test results and reports. Except as specified in 
Sec. 493.1202(c), the laboratory must meet the applicable general 
requirements specified in Secs. 493.1201 through 493.1221. In addition, 
the laboratory must meet the applicable requirements of Secs. 493.1225 
through 493.1285 unless an alternative procedure specified in the 
manufacturer's protocol has been cleared by the Food and Drug 
Administration (FDA) as meeting certain CLIA requirements for quality 
control or CMS approves an equivalent procedure

[[Page 1028]]

specified in appendix C of the State Operations Manual (CMS Pub. 7). 
Failure to meet any of the applicable conditions in Secs. 493.1225 
through 493.1285 will result in intermediate sanctions, loss of Medicare 
or Medicaid approval, and/or revocation of CLIA certification for the 
entire specialty or subspecialty to which the condition applies, in 
accordance with subpart R of this part.

[58 FR 5232, Jan. 19, 1993]



Sec. 493.1225  Condition: Microbiology.

    The laboratory must meet the applicable quality control requirements 
in Secs. 493.1201 through 493.1221 and in Secs. 493.1227 through 
493.1235 of this subpart for the subspecialties for which it is 
certified under the specialty of microbiology.



Sec. 493.1227  Condition: Bacteriology.

    To meet the quality control requirements for bacteriology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 and with paragraphs (a) through (c) of 
this section. All quality control activities must be documented.
    (a) The laboratory must check positive and negative reactivity with 
control organisms--
    (1) Each day of use for catalase, coagulase, beta-lactamase, and 
oxidase reagents and DNA probes;
    (2) Each week of use for Gram and acid-fast stains, bacitracin, 
optochin, ONPG, X, and V discs or strips; and
    (3) Each month of use for antisera.
    (b) Each week of use, the laboratory must check XV discs or strips 
with a positive control organism.
    (c) For antimicrobial susceptibility tests, the laboratory must 
check each new batch of media and each lot of antimicrobial discs 
before, or concurrent with, initial use, using approved reference 
organisms.
    (1) The laboratory's zone sizes or minimum inhibitory concentration 
for reference organisms must be within established limits before 
reporting patient results.
    (2) Each day tests are performed, the laboratory must use the 
appropriate control organism(s) to check the procedure.



Sec. 493.1229  Condition: Mycobacteriology.

    To meet the quality control requirements for mycobacteriology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) Each day of use, the laboratory must check the iron uptake test 
with at least one acid-fast organism that produces a positive reaction 
and with an organism that produces a negative reaction and check all 
other reagents or test procedures used for mycobacteria identification 
with at least one acid-fast organism that produces a positive reaction.
    (b) The laboratory must check fluorochrome acid-fast stains for 
positive and negative reactivity each week of use.
    (c) The laboratory must check acid-fast stains each week of use with 
an acid-fast organism that produces a positive reaction.
    (d) For susceptibility tests performed on Mycobacterium tuberculosis 
isolates, the laboratory must check the procedure each week of use with 
a strain of Mycobacterium tuberculosis susceptible to all 
antimycobacterial agents tested.



Sec. 493.1231  Condition: Mycology.

    To meet the quality control requirements for mycology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) Each day of use, the laboratory using the auxanographic medium 
for nitrate assimilation must check the nitrate reagent with a peptone 
control.
    (b) Each week of use, the laboratory must check all reagents used 
with biochemical tests and other test procedures for mycological 
identification with an organism that produces a positive reaction.
    (c) Each week of use, the laboratory must check acid-fast stains for 
positive and negative reactivity.
    (d) For susceptibility tests, the laboratory must test each drug 
each day

[[Page 1029]]

of use with at least one control strain that is susceptible to the drug. 
The laboratory must establish control limits. Criteria for acceptable 
control results must be met prior to reporting patient results.



Sec. 493.1233  Condition: Parasitology.

    To meet the quality control requirements for parasitology, the 
laboratory must comply with the applicable requirements of 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (c) of this section. All quality control activities must be 
documented.
    (a) The laboratory must have available a reference collection of 
slides or photographs, and, if available, gross specimens for 
identification of parasites and use these references in the laboratory 
for appropriate comparison with diagnostic specimens.
    (b) The laboratory must calibrate and use the calibrated ocular 
micrometer for determining the size of ova and parasites, if size is a 
critical parameter.
    (c) Each month of use, the laboratory must check permanent stains 
using a fecal sample control that will demonstrate staining 
characteristics.



Sec. 493.1235  Condition: Virology.

    To meet the quality control requirements for virology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (c) of this section. All quality control activities must be 
documented.
    (a) The laboratory must have available host systems for the 
isolation of viruses and test methods for the identification of viruses 
that cover the entire range of viruses that are etiologically related to 
clinical diseases for which services are offered.
    (b) The laboratory must maintain records that reflect the systems 
used and the reactions observed.
    (c) In tests for the identification of viruses, the laboratory must 
simultaneously culture uninoculated cells or cell substrate controls as 
a negative control to detect erroneous identification results.



Sec. 493.1237  Condition: Diagnostic immunology.

    The laboratory must meet the applicable quality control requirements 
in Secs. 493.1201 through 493.1221 and Secs. 493.1239 through 493.1241 
of this subpart for the subspecialties for which it is certified under 
the specialty of diagnostic immunology.



Sec. 493.1239  Condition: Syphilis serology.

    To meet the quality control requirements for syphilis serology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (e) of this section. All quality control activities must be 
documented.
    (a) For laboratories performing syphilis testing, the equipment, 
glassware, reagents, controls, and techniques for tests for syphilis 
must conform to manufacturers' specifications.
    (b) The laboratory must run serologic tests on patient specimens 
concurrently with a positive serum control of known titer or controls of 
graded reactivity plus a negative control.
    (c) The laboratory must employ positive and negative controls that 
evaluate all phases of the test system to ensure reactivity and uniform 
dosages.
    (d) The laboratory may not report test results unless the 
predetermined reactivity pattern of the controls is observed.
    (e) All facilities manufacturing blood and blood products for 
transfusion or serving as referral laboratories for these facilities 
must meet the syphilis serology testing requirements of 21 CFR 640.5(a).



Sec. 493.1241  Condition: General immunology.

    To meet the quality control requirements for general immunology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) The laboratory must run serologic tests on patient specimens 
concurrently with a positive serum control of

[[Page 1030]]

known titer or controls of graded reactivity, if applicable, plus a 
negative control.
    (b) The laboratory must employ controls that evaluate all phases of 
the test system (antigens, complement, erythrocyte indicator systems, 
etc.) to ensure reactivity and uniform dosages when positive and 
negative controls alone are not sufficient.
    (c) The laboratory may not report test results unless the 
predetermined reactivity pattern of the controls is observed.
    (d) All facilities manufacturing blood and blood products for 
transfusion or serving as referral laboratories for these facilities 
must meet--
    (1) The HIV testing requirements of 21 CFR 610.45; and
    (2) Hepatitis testing requirements of 21 CFR 610.40.



Sec. 493.1243  Condition: Chemistry.

    The laboratory must meet the applicable quality control requirements 
in Secs. 493.1201 through 493.1221 and Secs. 493.1245 through 493.1249 
of this subpart for the subspecialties for which it is certified under 
the specialty of chemistry.



Sec. 493.1245  Condition: Routine chemistry.

    To meet the quality control requirements for routine chemistry, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221. All quality control activities must be 
documented. In addition, for blood gas analyses, the laboratory must--
    (a) Calibrate or verify calibration according to the manufacturer's 
specifications and with at least the frequency recommended by the 
manufacturer;
    (b) Test one sample of control material each eight hours of testing;
    (c) Use a combination of calibrators and control materials that 
include both low and high values on each day of testing; and
    (d) Include one sample of calibration material or control material 
each time patients are tested unless automated instrumentation 
internally verifies calibration at least every thirty minutes.



Sec. 493.1247  Condition: Endocrinology.

    To meet the quality control requirements for endocrinology, the 
laboratory must comply with the applicable requirements contained in 
Secs. 493.1201 through 493.1221 of this subpart. All quality control 
activities must be documented.



Sec. 493.1249  Condition: Toxicology.

    To meet the quality control requirements for toxicology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart. All quality control 
activities must be documented. In addition, for drug abuse screening 
using thin layer chromatography--
    (a) Each plate must be spotted with at least one sample of 
calibration material containing all drug groups identified by thin layer 
chromatography which the laboratory reports; and
    (b) At least one control sample must be included in each chamber, 
and the control sample must be processed through each step of patient 
testing, including extraction procedures.



Sec. 493.1251  Condition: Urinalysis.

    Except for those tests categorized as waived, to meet the quality 
control requirements for urinalysis, the laboratory must comply with the 
applicable requirements in Secs. 493.1201 through 493.1221.

[58 FR 5232, Jan. 19, 1993]



Sec. 493.1253  Condition: Hematology.

    To meet the quality control requirements for hematology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) Cell counts performed manually using a hemocytometer must be 
tested in duplicate. One control is required for each eight hours of 
operation.
    (b) For non-manual hematology testing systems, excluding 
coagulation, the laboratory must include two levels of controls each 
eight hours of operation.
    (c) For all non-manual coagulation testing systems, the laboratory 
must include two levels of control each eight

[[Page 1031]]

hours of operation and each time a change in reagents occurs.
    (d) For manual coagulation tests--
    (1) Each individual performing tests must test two levels of 
controls before testing patient samples and each time a change in 
reagents occurs; and
    (2) Patient and control specimens must be tested in duplicate.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5232, Jan. 19, 1993]



Sec. 493.1255  Condition: Pathology.

    The laboratory must meet the applicable quality control requirements 
in Secs. 493.1201 through 493.1221 and Secs. 493.1257 through 493.1261 
of this subpart for the subspecialties for which it is certified under 
the specialty of pathology. All quality control activities must be 
documented.



Sec. 493.1257  Condition: Cytology.

    To meet the quality control requirements for cytology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and paragraphs (a) 
through (g) of this section.
    (a) The laboratory must assure that--
    (1) All gynecologic smears are stained using a Papanicolaou or 
modified Papanicolaou staining method;
    (2) Effective measures are taken to prevent cross-contamination 
between gynecologic and nongynecologic specimens during the staining 
process;
    (3) Nongynecologic specimens that have a high potential for cross-
contamination are stained separately from other nongynecologic 
specimens, and the stains are filtered or changed following staining;
    (4) Diagnostic interpretations are not reported on unsatisfactory 
smears; and
    (5) All cytology slide preparations are evaluated on the premises of 
a laboratory certified to conduct testing in the subspecialty of 
cytology.
    (b) The laboratory is responsible for ensuring that--
    (1) Each individual engaged in the evaluation of cytology 
preparations by nonautomated microscopic technique examines no more than 
100 slides (one patient per slide, gynecologic or nongynecologic, or 
both) in a 24 hour period, irrespective of the site or laboratory. This 
limit represents an absolute maximum number of slides and is not to be 
employed as a performance target for each individual. Previously 
examined negative, reactive, reparative, atypical, premalignant or 
malignant gynecologic cases as defined in paragraph (c)(1) of this 
section, previously examined nongynecologic cytology preparations, and 
tissues patholoty slides examined by a technical supervisor qualified 
under Sec. 493.1449 (b) or (k) are not included in the 100 slide limit. 
(For this section, all references to technical supervisor refer to 
individuals qualified under Secs. 493.1449 (b) and (k).);
    (2) For purposes of workload calculations, each slide preparation 
(gynecologic and nongynecologic) made using automated, semi-automated, 
or other liquid-based slide preparatory techniques which result in cell 
dispersion over one-half or less of the total available slide area and 
which is examined by nonautomated microscopic technique counts as one-
half slide.
    (3) Records are maintained of the total number of slides examined by 
each individual during each 24 hour period, irrespective of the site or 
laboratory, and the number of hours each individual spends examining 
slides in the 24 hour period;
    (i) The maximum number of 100 slides described in paragraph (b)(1) 
of this section is examined in no less than an 8 hour workday;
    (ii) For the purposes of establishing workload limits for 
individuals examining slides by nonautomated microscopic technique on 
other than an 8 hour workday basis (includes full-time employees with 
duties other than slide examination and part-time employees), a period 
of 8 hours must be used to prorate the number of slides that may be 
examined. Use the formula--

 
                    No. of hours examining slidesx100
-------------------------------------------------------------------------
                                    8
-------------------------------------------------------------------------
 


to determine maximum slide volume to be examined.

    (c) The individual qualified under Secs. 493.1449 (b) or (k) who 
provides technical supervision of cytology must ensure that--

[[Page 1032]]

    (1) All gynecologic smears interpreted to be showing reactive or 
reparative changes, atypical squamous or glandular cells of undetermined 
significance, or to be in the premalignant (dysplasia, cervical 
intraepithelial neoplasia or all squamous intraepithelial lesions 
including human papillomavirus-associated changes) or malignant category 
are confirmed by a technical supervisor in cytology. The report must be 
signed to reflect the review or, if a computer report is generated with 
signature, it must reflect an electronic signature authorized by the 
technical supervisor in cytology;
    (2) All nongynecologic cytologic preparations are reviewed by the 
technical supervisor in cytology. The report must be signed to reflect 
technical supervisory review or, if a computer report is generated with 
signature, it must reflect an electronic signature authorized by the 
technical supervisor;
    (3) The slide examination performance of each cytotechnologist is 
evaluated and documented, including performance evaluation through the 
re-examination of normal and negative cases and feedback on the 
reactive, reparative, atypical, malignant or premalignant cases as 
defined in paragraph (c)(1) of this section; and
    (4) A maximum number of slides, not to exceed the maximum workload 
limit described in paragraph (b) of this section is established by the 
technical supervisor for each individual examining slide preparations by 
nonautomated microscopic technique.
    (i) The actual workload limit must be documented for each individual 
and established in accordance with the individual's capability based on 
the performance evaluation as described in paragraph (c)(3) of this 
section.
    (ii) Records are available to document that each individual's 
workload limit is reassessed at least every 6 months and adjusted when 
necessary.
    (d) The laboratory must establish and follow a program designed to 
detect errors in the performance of cytologic examinations and the 
reporting of results.
    (1) The laboratory must establish a program that includes a review 
of slides from at least 10 percent of the gynecologic cases interpreted 
to be negative for reactive, reparative, atypical, premalignant or 
malignant conditions as defined in paragraph (c)(1) of this section that 
are examined by each individual not qualified under Secs. 493.1449 (b) 
or (k). This review must be done by a technical supervisor in cytology, 
a cytology general supervisor qualified under Sec. 493.1469, or a 
cytotechnologist qualified under Sec. 493.1483 who has the experience 
specified in Sec. 493.1469(b)(2).
    (i) The review must include negative cases selected at random from 
the total caseload and from patients or groups of patients that are 
identified as having a high probability of developing cervical cancer, 
based on available patient information;
    (ii) Records of initial examinations and rescreening results must be 
available; and
    (iii) The review must be completed before reporting patient results 
on those cases selected.
    (2) The laboratory must compare clinical information, when 
available, with cytology reports and must compare all malignant and 
premalignant (as defined in paragraph (c)(1) of this section) gynecology 
reports with the histopathology report, if available in the laboratory 
(either on-site or in storage), and determine the causes of any 
discrepancies.
    (3) For each patient with a current high grade intraepithelial 
lesion or above (moderate dysplasia or CIN-2 or above), the laboratory 
must review all normal or negative gynecologic specimens received within 
the previous five years, if available in the laboratory (either on-site 
or in storage). If significant discrepancies are found that would affect 
patient care, the laboratory must notify the patient's physician and 
issue an amended report.
    (4) The laboratory must establish and document an annual statistical 
evaluation of the number of cytology cases examined, number of specimens 
processed by specimen type, volume of patient cases reported by 
diagnosis (including the number reported as unsatisfactory for 
diagnostic interpretation), number of gynecologic cases where cytology 
and available histology are discrepant, the number of gynecologic cases 
where any rescreen

[[Page 1033]]

of a normal or negative specimen results in reclassification as 
malignant or premalignant, as defined in paragraph (c)(1) of the 
section, and the number of gynecologic cases for which histology results 
were unavailable to compare with malignant or premalignant cytology 
cases as defined in paragraph (c)(1) of this section.
    (5) The laboratory must evaluate the case reviews of each individual 
examining slides against the laboratory's overall statistical values, 
document any discrepancies, including reasons for the deviation, and 
document corrective action, if appropriate.
    (e) The laboratory report must--
    (1) Clearly distinguish specimens or smears, or both, that are 
unsatisfactory for diagnostic interpretation; and
    (2) Contain narrative descriptive nomenclature for all results.
    (f) Corrected reports issued by the laboratory must indicate the 
basis for correction.
    (g) The laboratory must retain all slide preparations for five years 
from the date of examination, or slides may be loaned to proficiency 
testing programs, in lieu of maintaining them for this time period, 
provided the laboratory receives written acknowledgment of the receipt 
of slides by the proficiency testing program and maintains the 
acknowledgment to document the loan of such slides. Documentation for 
slides loaned or referred for purposes other than proficiency testing 
must also be maintained. All slides must be retrievable upon request.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5232, Jan. 19, 1993; 58 
FR 39155, July 22, 1993]



Sec. 493.1259  Condition: Histopathology.

    To meet the quality control requirements for histopathology, a 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and paragraphs (a) 
through (e) of this section. All quality control activities must be 
documented.
    (a) A control slide of known reactivity must be included with each 
slide or group of slides for differential or special stains. Reaction(s) 
of the control slide with each special stain must be documented.
    (b) The laboratory must retain stained slides at least ten years 
from the date of examination and retain specimen blocks at least two 
years from the date of examination.
    (c) The laboratory must retain remnants of tissue specimens in a 
manner that assures proper preservation of the tissue specimens until 
the portions submitted for microscopic examination have been examined 
and a diagnosis made by an individual qualified under Secs. 493.1449(b) 
or 493.1449(l)(1) of this part. In addition, an individual who meets the 
requirements of Secs. 493.1449(b), 493.1449(l)(1) or 493.1449(l)(2), may 
examine and provide reports for specimens for skin pathology; an 
individual meeting the requirements of Secs. 493.1449(b) or 
493.1449(l)(3) may examine and provide reports for ophthalmic pathology; 
an individual meeting the requirements of Secs. 493.1449(b) or 
493.1449(m) may examine and provide reports for oral pathology 
specimens.
    (d) All tissue pathology reports must be signed by an individual 
qualified as specified in paragraph (c) of the section. If a computer 
report is generated with an electronic signature, it must be authorized 
by the individual qualified as specified in paragraph (c) of this 
section.
    (e) The laboratory must utilize acceptable terminology of a 
recognized system of disease nomenclature in reporting results.



Sec. 493.1261  Condition: Oral pathology.

    To meet the quality control requirements for oral pathology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 and Sec. 493.1259 of this subpart. All 
quality control activities must be documented.



Sec. 493.1263  Condition: Radiobioassay.

    To meet quality control requirements for radiobioassay, the 
laboratory must comply with the applicable requirements of 
Secs. 493.1201 through 493.1221 of this subpart. All quality control 
activities must be documented.

[[Page 1034]]



Sec. 493.1265  Condition: Histocompatibility.

    In addition to meeting the applicable requirements for general 
quality control in Secs. 493.1201 through 493.1221, for quality control 
for general immunology in Sec. 493.1241 of this subpart and for 
immunohematology in Sec. 493.1269 of this subpart, the laboratory must 
comply with the applicable requirements in paragraphs (a) through (d) of 
this section. All quality control activities must be documented.
    (a) For renal allotransplantation, the laboratory must meet the 
following requirements:
    (1) The laboratory must have available and follow criteria for--
    (i) Selecting appropriate patient serum samples for crossmatching;
    (ii) The technique used in crossmatching;
    (iii) Preparation of donor lymphocytes for crossmatching; and
    (iv) Reporting crossmatch results;
    (2) The laboratory must--
    (i) Have available results of final crossmatches before an organ or 
tissue is transplanted; and
    (ii) Make a reasonable attempt and document efforts to have 
available serum specimens for all potential transplant recipients at 
initial typing, for periodic screening, for pre-transplantation 
crossmatch and following sensitizing events, such as transfusion and 
transplant loss;
    (3) The laboratory's storage and maintenance of both recipient sera 
and reagents must--
    (i) Be at an acceptable temperature range for sera and components;
    (ii) Use a temperature alarm system and have an emergency plan for 
alternate storage; and
    (iii) Ensure that all specimens are properly identified and easily 
retrievable;
    (4) The laboratory's reagent typing sera inventory (applicable only 
to locally constructed trays) must indicate source, bleeding date and 
identification number, and volume remaining;
    (5) The laboratory must properly label and store cells, complement, 
buffer, dyes, etc.;
    (6) The laboratory must--
    (i) HLA type all potential transplant recipients;
    (ii) Type cells from organ donors referred to the laboratory; and
    (iii) Have available and follow a policy that establishes when 
antigen redefinition and retyping are required;
    (7) The laboratory must have available and follow criteria for--
    (i) The preparation of lymphocytes for HLA-A, B and DR typing;
    (ii) Selecting typing reagents, whether locally or commercially 
prepared;
    (iii) The assignment of HLA antigens; and
    (iv) Assuring that reagents used for typing recipients and donors 
are adequate to define all major and International Workshop HLA-A,B and 
DR specificities for which reagents are readily available;
    (8) The laboratory must--
    (i) Screen potential transplant recipient sera for preformed HLA-A 
and B antibodies with a suitable lymphocyte panel on sera collected;
    (A) At the time of the recipient's initial HLA typing; and
    (B) Thereafter, following sensitizing events and upon request; and
    (ii) Use a suitable cell panel for screening patient sera (antibody 
screen), a screen that contains all the major HLA specificities and 
common splits--
    (A) If the laboratory does not use commercial panels, it must 
maintain a list of individuals for fresh panel bleeding; and
    (B) If the laboratory uses frozen panels, it must have a suitable 
storage system;
    (9) The laboratory must check--
    (i) Each typing tray using--
    (A) Positive control sera;
    (B) Negative control sera; and
    (C) Positive controls for specific cell types when applicable (i.e., 
T cells, B cells, and monocytes); and
    (ii) Each compatibility test (i.e. mixed lymphocyte cultures, 
homozygous typing cells or DNA analysis) and typing for disease-
associated antigens using controls to monitor the test components and 
each phase of the test system to ensure an acceptable performance level;
    (10) Compatibility testing for cellularly-defined antigens must 
utilize

[[Page 1035]]

techniques such as the mixed lymphocyte culture test, homozygous typing 
cells or DNA analysis;
    (11) If the laboratory reports the recipient's or donor's, or both, 
ABO blood group and D(Rho) typing, the testing must be performed in 
accordance with Sec. 493.1269 of this subpart;
    (12) If the laboratory utilizes immunologic reagents (such as 
antibodies or complement) to remove contaminating cells during the 
isolation of lymphocytes or lymphocyte subsets, the efficacy of the 
methods must be verified with appropriate quality control procedures;
    (13) At least once each month, the laboratory must have each 
individual performing tests evaluate a previously tested specimen as an 
unknown to verify his or her ability to reproduce test results. Records 
of the results for each individual must be maintained; and
    (14) The laboratory must participate in at least one national or 
regional cell exchange program, if available, or develop an exchange 
system with another laboratory in order to validate inter-laboratory 
reproducibility.
    (b) If the laboratory performs histocompatibility testing for--
    (1) Transfusions and other non-renal transplantation, excluding bone 
marrow and living transplants, all the requirements specified in this 
section, as applicable, except for the performance of mixed lymphocyte 
cultures, must be met;
    (2) Bone marrow transplantation, all the requirements specified in 
this section, including the performance of mixed lymphocyte cultures or 
other augmented testing to evaluate class II compatibility, must be met; 
and
    (3) Non-renal solid organ transplantation, the results of final 
crossmatches must be available before transplantation when the recipient 
has demonstrated presensitization by prior serum screening except for 
emergency situations. The laboratory must document the circumstances, if 
known, under which emergency transplants are performed, and records must 
reflect any information concerning the transplant provided to the 
laboratory by the patient's physician.
    (c) Laboratories performing HLA typing for disease-associated 
studies must meet all the requirements specified in this section except 
for the performance of mixed lymphocyte cultures, antibody screening and 
crossmatching.
    (d) For laboratories performing organ donor HIV testing the 
requirements of Sec. 493.1241 of this subpart for the transfusion of 
blood and blood products must be met.

[57 FR 7163, Feb. 28, 1992, as amended at 58 FR 5233, Jan. 19, 1993]



Sec. 493.1267  Condition: Clinical cytogenetics.

    To meet the quality control requirements for clinical cytogenetics, 
the laboratory must comply with the applicable requirements of 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) When determination of sex is performed by X and Y chromatin 
counts, these counts must be based on an examination of an adequate 
number of cells. Confirmatory testing such as full chromosome analysis 
must be performed for all atypical results.
    (b) The laboratory must have records that reflect the media used and 
document the reactions observed, number of cells counted, the number of 
cells karyotyped, the number of chromosomes counted for each metaphase 
spread, and the quality of the banding; that the resolution is 
sufficient to support the reported results; and that an adequate number 
of karyotypes are prepared for each patient.
    (c) The laboratory also must have policies and procedures for 
assuring an accurate and reliable patient sample identification during 
the process of accessioning, cell preparation, photographing or other 
image reproduction technique, and photographic printing, and storage and 
reporting of results or photographs.
    (d) The laboratory report must include the summary and 
interpretation of the observations and number of cells counted and 
analyzed and the use of appropriate nomenclature.

[[Page 1036]]



Sec. 493.1269  Condition: Immunohematology.

    To meet the quality control requirements for immunohematology, the 
laboratory must comply with the applicable requirements in 
Secs. 493.1201 through 493.1221 of this subpart and with paragraphs (a) 
through (d) of this section. All quality control activities must be 
documented.
    (a) The laboratory must perform ABO group and D(Rho) typing, 
unexpected antibody detection, antibody identification and compatibility 
testing in accordance with manufacturer's instructions, if provided, and 
as applicable, with 21 CFR part 606 (with the exception of 21 CFR 
606.20a, Personnel) and 21 CFR part 640 et seq.
    (b) The laboratory must perform ABO group by concurrently testing 
unknown red cells with anti-A and anti-B grouping reagents. For 
confirmation of ABO group, the unknown serum must be tested with known 
A1 and B red cells.
    (c) The laboratory must determine the D(Rho) type by testing unknown 
red cells with anti-D (anti-Rho) blood grouping reagent.
    (d) If required in the manufacturer's package insert for anti-D 
reagents, the laboratory must employ a control system capable of 
detecting false positive D(Rho) test results.



Sec. 493.1271  Condition: Transfusion services and bloodbanking.

    If a facility provides services for the transfusion of blood and 
blood products, the facility must be under the adequate control and 
technical supervision of the pathologist or other doctor of medicine or 
osteopathy meeting the qualifications in subpart M for technical 
supervision in immunohematology. The facility must ensure that there are 
facilities for procurement, safekeeping and transfusion of blood and 
blood products and that blood and blood products must be available to 
meet the needs of the physicians responsible for the diagnosis, 
management, and treatment of patients. The facility meets this condition 
by complying with the standards in Sec. Sec. 493.1273 through 493.1285.

[58 FR 5233, Jan. 19, 1993]



Sec. 493.1273  Standard; Immunohematological collection, processing, dating periods, labeling and distribution of blood and blood products.

    In addition to the requirements in paragraphs (a) through (d) of 
this section, the facility must also meet the applicable quality control 
requirements in Secs. 493.1201 through 493.1221 of this part.
    (a) Blood and blood product collection, processing and distribution 
must comply with 21 CFR part 640 and 21 CFR part 606, and the testing 
laboratory must meet the applicable requirements of part 493.
    (b) Dating periods for blood and blood products must conform to 21 
CFR 610.53.
    (c) Labeling of blood and blood products must conform to 21 CFR part 
606, subpart G.
    (d) Policies to ensure positive identification of a blood or blood 
product recipient must be established, documented, and followed.



Sec. 493.1275  Standard; Blood and blood products storage facilities.

    (a) The blood and blood products must be stored under appropriate 
conditions, which include an adequate temperature alarm system that is 
regularly inspected.
    (1) An audible alarm system must monitor proper blood and blood 
product storage temperature over a 24-hour period; and
    (2) Inspections of the alarm system must be documented.
    (b) If blood is stored or maintained for transfusion outside of a 
monitored refrigerator, the facility must ensure and document that 
storage conditions, including temperature, are appropriate to prevent 
deterioration of the blood or blood product.



Sec. 493.1277  Standard; Arrangement for services.

    In the case of services provided outside the blood bank, the 
facility must have an agreement reviewed and approved by the director 
that governs the procurement, transfer and availability of blood and 
blood products.

[[Page 1037]]



Sec. 493.1279  Standard; Provision of testing.

    There must be provision for prompt ABO blood group, D(Rho) type, 
unexpected antibody detection and compatibility testing in accordance 
with Sec. 493.1269 of this subpart and for laboratory investigation of 
transfusion reactions, either through the facility or under arrangement 
with an approved facility on a continuous basis, under the supervision 
of a pathologist or other doctor of medicine or osteopathy meeting the 
qualifications of Secs. 493.1449(b) or 493.1449(q).



Sec. 493.1283  Standard; Retention of samples of transfused blood.

    According to the facility's established procedures, samples of each 
unit of transfused blood must be retained for further testing in the 
event of reactions. The facility must promptly dispose of blood not 
retained for further testing that has passed its expiration date.



Sec. 493.1285  Standard; Investigation of transfusion reactions.

    The facility, according to its established procedures, must promptly 
investigate all transfusion reactions occurring in all facilities for 
which it has investigational responsibility and make recommendations to 
the medical staff regarding improvements in transfusion procedures. The 
facility must document that all necessary remedial actions are taken to 
prevent future recurrences of transfusion reactions and that all 
policies and procedures are reviewed to assure that they are adequate to 
ensure the safety of individuals being transfused within the facility.

Subpart L [Reserved]



Subpart M--Personnel for Moderate Complexity (Including the Subcategory) 
                       and High Complexity Testing

    Source: 57 FR 7172, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1351  General.

    This subpart consists of the personnel requirements that must be met 
by laboratories performing moderate complexity testing, PPM procedures, 
high complexity testing, or any combination of these tests.

[60 FR 20049, Apr. 24, 1995]

 Laboratories Performing Provider-Performed Microscopy (PPM) Procedures

    Source: 60 FR 20049, Apr. 24, 1995, unless otherwise noted.



Sec. 493.1353  Scope.

    In accordance with Sec. 493.19(b), the moderate complexity 
procedures specified as PPM procedures are considered such only when 
personally performed by a health care provider during a patient visit in 
the context of a physical examination. PPM procedures are subject to the 
personnel requirements in Secs. 493.1355 through 493.1365.



Sec. 493.1355  Condition: Laboratories performing PPM procedures; laboratory director.

    The laboratory must have a director who meets the qualification 
requirements of Sec. 493.1357 and provides overall management and 
direction in accordance with Sec. 493.1359.



Sec. 493.1357  Standard; laboratory director qualifications.

    The laboratory director must be qualified to manage and direct the 
laboratory personnel and the performance of PPM procedures as specified 
in Sec. 493.19(c) and must be eligible to be an operator of a laboratory 
within the requirements of subpart R of this part.
    (a) The laboratory director must possess a current license as a 
laboratory director issued by the State in which the laboratory is 
located, if the licensing is required.
    (b) The laboratory director must meet one of the following 
requirements:
    (1) Be a physician, as defined in Sec. 493.2.
    (2) Be a midlevel practitioner, as defined in Sec. 493.2, authorized 
by a State to practice independently in the State in which the 
laboratory is located.

[[Page 1038]]

    (3) Be a dentist, as defined in Sec. 493.2.



Sec. 493.1359  Standard; PPM laboratory director responsibilities.

    The laboratory director is responsible for the overall operation and 
administration of the laboratory, including the prompt, accurate, and 
proficient reporting of test results. The laboratory director must--
    (a) Direct no more than five laboratories; and
    (b) Ensure that any procedure listed under Sec. 493.19(c)--
    (1) Is personally performed by an individual who meets the 
qualification requirements in Sec. 493.1363; and
    (2) Is performed in accordance with applicable requirements in 
subparts H, J, K, M, and P of this part.



Sec. 493.1361  Condition: Laboratories performing PPM procedures; testing personnel.

    The laboratory must have a sufficient number of individuals who meet 
the qualification requirements of Sec. 493.1363 to perform the functions 
specified in Sec. 493.1365 for the volume and complexity of testing 
performed.



Sec. 493.1363  Standard: PPM testing personnel qualifications.

    Each individual performing PPM procedures must--
    (a) Possess a current license issued by the State in which the 
laboratory is located if the licensing is required; and
    (b) Meet one of the following requirements:
    (1) Be a physician, as defined in Sec. 493.2.
    (2) Be a midlevel practitioner, as defined in Sec. 493.2, under the 
supervision of a physician or in independent practice if authorized by 
the State in which the laboratory is located.
    (3) Be a dentist as defined in Sec. 493.2 of this part.



Sec. 493.1365  Standard; PPM testing personnel responsibilities.

    The testing personnel are responsible for specimen processing, test 
performance, and for reporting test results. Any PPM procedure must be--
    (a) Personally performed by one of the following practitioners:
    (1) A physician during the patient's visit on a specimen obtained 
from his or her own patient or from a patient of a group medical 
practice of which the physician is a member or employee.
    (2) A midlevel practitioner, under the supervision of a physician or 
in independent practice if authorized by the State in which the 
laboratory is located, during the patient's visit on a specimen obtained 
from his or her own patient or from the patient of a clinic, group 
medical practice, or other health care provider, in which the midlevel 
practitioner is a member or an employee.
    (3) A dentist during the patient's visit on a specimen obtained from 
his or her own patient or from a patient of a group dental practice of 
which the dentist is a member or an employee; and
    (b) Performed using a microscope limited to a brightfield or a 
phase/contrast microscope.

           Laboratories Performing Moderate Complexity Testing



Sec. 493.1403  Condition: Laboratories performing moderate complexity testing; laboratory director.

    The laboratory must have a director who meets the qualification 
requirements of Sec. 493.1405 of this subpart and provides overall 
management and direction in accordance with Sec. 493.1407 of this 
subpart.



Sec. 493.1405  Standard; Laboratory director qualifications.

    The laboratory director must be qualified to manage and direct the 
laboratory personnel and the performance of moderate complexity tests 
and must be eligible to be an operator of a laboratory within the 
requirements of subpart R of this part.
    (a) The laboratory director must possess a current license as a 
laboratory director issued by the State in which the laboratory is 
located, if such licensing is required; and
    (b) The laboratory director must--
    (1) (i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and

[[Page 1039]]

    (ii) Be certified in anatomic or clinical pathology, or both, by the 
American Board of Pathology or the American Osteopathic Board of 
Pathology or possess qualifications that are equivalent to those 
required for such certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have had laboratory training or experience consisting of:
    (A) At least one year directing or supervising non-waived laboratory 
testing; or
    (B) Beginning September 1, 1993, have at least 20 continuing medical 
education credit hours in laboratory practice commensurate with the 
director responsibilities defined in Sec. 493.1407; or
    (C) Laboratory training equivalent to paragraph (b)(2)(ii)(B) of 
this section obtained during medical residency. (For example, physicians 
certified either in hematology or hematology and medical oncology by the 
American Board of Internal Medicine); or
    (3) Hold an earned doctoral degree in a chemical, physical, 
biological, or clinical laboratory science from an accredited 
institution; and
    (i) Be certified by the American Board of Medical Microbiology, the 
American Board of Clinical Chemistry, the American Board of Bioanalysis, 
or the American Board of Medical Laboratory Immunology; or
    (ii) Have had at least one year experience directing or supervising 
non-waived laboratory testing;
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution;
    (ii) Have at least one year of laboratory training or experience, or 
both in non-waived testing; and
    (iii) In addition, have at least one year of supervisory laboratory 
experience in non-waived testing; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical, or 
biological science or medical technology from an accredited institution;
    (ii) Have at least 2 years of laboratory training or experience, or 
both in non-waived testing; and
    (iii) In addition, have at least 2 years of supervisory laboratory 
experience in non-waived testing;
    (6) Be serving as a laboratory director and must have previously 
qualified or could have qualified as a laboratory director under 
Sec. 493.1406; or
    (7) On or before February 28, 1992, qualified under State law to 
direct a laboratory in the State in which the laboratory is located.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5233, Jan. 19, 1993]



Sec. 493.1406  Standard; Laboratory director qualifications on or before February 28, 1992.

    The laboratory director must be qualified to manage and direct the 
laboratory personnel and test performance.
    (a) The laboratory director must possess a current license as a 
laboratory director issued by the State, if such licensing exists; and
    (b) The laboratory director must:
    (1) Be a physician certified in anatomical or clinical pathology (or 
both) by the American Board of Pathology or the American Osteopathic 
Board of Pathology or possess qualifications that are equivalent to 
those required for such certification;
    (2) Be a physician who:
    (i) Is certified by the American Board of Pathology or the American 
Osteopathic Board of Pathology in at least one of the laboratory 
specialties; or
    (ii) Is certified by the American Board of Medical Microbiology, the 
American Board of Clinical Chemistry, the American Board of Bioanalysis, 
or other national accrediting board in one of the laboratory 
specialties; or
    (iii) Is certified by the American Society of Cytology to practice 
cytopathology or possesses qualifications that are equivalent to those 
required for such certification; or
    (iv) Subsequent to graduation, has had 4 or more years of full-time 
general laboratory training and experience of which at least 2 years 
were spent acquiring proficiency in one of the laboratory specialties;

[[Page 1040]]

    (3) For the subspecialty of oral pathology only, be certified by the 
American Board of Oral Pathology, American Board of Pathology or the 
American Osteopathic Board of Pathology or possesses qualifications that 
are equivalent to those required for certification;
    (4) Hold an earned doctoral degree from an accredited institution 
with a chemical, physical, or biological science as a major subject and
    (i) Is certified by the American Board of Medical Microbiology, the 
American Board of Clinical Chemistry, the American Board of Bioanalysis, 
or other national accrediting board acceptable to HHS in one of the 
laboratory specialties; or
    (ii) Subsequent to graduation, has had 4 or more years of full-time 
general laboratory training and experience of which at least 2 years 
were spent acquiring proficiency in one of the laboratory specialties;
    (5) With respect to individuals first qualifying before July 1, 
1971, have been responsible for the direction of a laboratory for 12 
months between July 1, 1961, and January 1, 1968, and, in addition, 
either:
    (i) Was a physician and subsequent to graduation had at least 4 
years of pertinent full-time laboratory experience;
    (ii) Held a master's degree from an accredited institution with a 
chemical, physical, or biological science as a major subject and 
subsequent to graduation had at least 4 years of pertinent full-time 
laboratory experience;
    (iii) Held a bachelor's degree from an accredited institution with a 
chemical, physical, or biological science as a major subject and 
subsequent to graduation had at least 6 years of pertinent full-time 
laboratory experience; or
    (iv) Achieved a satisfactory grade through an examination conducted 
by or under the sponsorship of the U.S. Public Health Service on or 
before July 1, 1970; or
    (6) Qualify under State law to direct the laboratory in the State in 
which the laboratory is located.

    Note: The January 1, 1968 date for meeting the 12 months' laboratory 
direction requirement in paragraph (b)(5) of this section may be 
extended 1 year for each year of full-time laboratory experience 
obtained before January 1, 1958 required by State law for a laboratory 
director license. An exception to the July 1, 1971 qualifying date in 
paragraph (b)(5) of this section was made provided that the individual 
requested qualification approval by October 21, 1975 and had been 
employed in a laboratory for at least 3 years of the 5 years preceding 
the date of submission of his qualifications.

[58 FR 5233, Jan. 19, 1993]



Sec. 493.1407  Standard; Laboratory director responsibilities.

    The laboratory director is responsible for the overall operation and 
administration of the laboratory, including the employment of personnel 
who are competent to perform test procedures, and record and report test 
results promptly, accurate, and proficiently and for assuring compliance 
with the applicable regulations.
    (a) The laboratory director, if qualified, may perform the duties of 
the technical consultant, clinical consultant, and testing personnel, or 
delegate these responsibilities to personnel meeting the qualifications 
of Secs. 493.1409, 493.1415, and 493.1421, respectively.
    (b) If the laboratory director reapportions performance of his or 
her responsibilities, he or she remains responsible for ensuring that 
all duties are properly performed.
    (c) The laboratory director must be accessible to the laboratory to 
provide onsite, telephone or electronic consultation as needed.
    (d) Each individual may direct no more than five laboratories.
    (e) The laboratory director must--
    (1) Ensure that testing systems developed and used for each of the 
tests performed in the laboratory provide quality laboratory services 
for all aspects of test performance, which includes the preanalytic, 
analytic, and postanalytic phases of testing;
    (2) Ensure that the physical plant and environmental conditions of 
the laboratory are appropriate for the testing performed and provide a 
safe environment in which employees are protected from physical, 
chemical, and biological hazards;
    (3) Ensure that--
    (i) The test methodologies selected have the capability of providing 
the quality of results required for patient care;

[[Page 1041]]

    (ii) Verification procedures used are adequate to determine the 
accuracy, precision, and other pertinent performance characteristics of 
the method; and
    (iii) Laboratory personnel are performing the test methods as 
required for accurate and reliable results;
    (4) Ensure that the laboratory is enrolled in an HHS approved 
proficiency testing program for the testing performed and that--
    (i) The proficiency testing samples are tested as required under 
subpart H of this part;
    (ii) The results are returned within the timeframes established by 
the proficiency testing program;
    (iii) All proficiency testing reports received are reviewed by the 
appropriate staff to evaluate the laboratory's performance and to 
identify any problems that require corrective action; and
    (iv) An approved corrective action plan is followed when any 
proficiency testing results are found to be unacceptable or 
unsatisfactory;
    (5) Ensure that the quality control and quality assurance programs 
are established and maintained to assure the quality of laboratory 
services provided and to identify failures in quality as they occur;
    (6) Ensure the establishment and maintenance of acceptable levels of 
analytical performance for each test system;
    (7) Ensure that all necessary remedial actions are taken and 
documented whenever significant deviations from the laboratory's 
established performance specifications are identified, and that patient 
test results are reported only when the system is functioning properly;
    (8) Ensure that reports of test results include pertinent 
information required for interpretation;
    (9) Ensure that consultation is available to the laboratory's 
clients on matters relating to the quality of the test results reported 
and their interpretation concerning specific patient conditions;
    (10) Employ a sufficient number of laboratory personnel with the 
appropriate education and either experience or training to provide 
appropriate consultation, properly supervise and accurately perform 
tests and report test results in accordance with the personnel 
responsibilities described in this subpart;
    (11) Ensure that prior to testing patients' specimens, all personnel 
have the appropriate education and experience, receive the appropriate 
training for the type and complexity of the services offered, and have 
demonstrated that they can perform all testing operations reliably to 
provide and report accurate results;
    (12) Ensure that policies and procedures are established for 
monitoring individuals who conduct preanalytical, analytical, and 
postanalytical phases of testing to assure that they are competent and 
maintain their competency to process specimens, perform test procedures 
and report test results promptly and proficiently, and whenever 
necessary, identify needs for remedial training or continuing education 
to improve skills;
    (13) Ensure that an approved procedure manual is available to all 
personnel responsible for any aspect of the testing process; and
    (14) Specify, in writing, the responsibilities and duties of each 
consultant and each person, engaged in the performance of the 
preanalytic, analytic, and postanalytic phases of testing, that 
identifies which examinations and procedures each individual is 
authorized to perform, whether supervision is required for specimen 
processing, test performance or results reporting, and whether 
consultant or director review is required prior to reporting patient 
test results.



Sec. 493.1409  Condition: Laboratories performing moderate complexity testing; technical consultant.

    The laboratory must have a technical consultant who meets the 
qualification requirements of Sec. 493.1411 of this subpart and provides 
technical oversight in accordance with Sec. 493.1413 of this subpart.



Sec. 493.1411  Standard; Technical consultant qualifications.

    The laboratory must employ one or more individuals who are qualified 
by

[[Page 1042]]

education and either training or experience to provide technical 
consultation for each of the specialties and subspecialties of service 
in which the laboratory performs moderate complexity tests or 
procedures. The director of a laboratory performing moderate complexity 
testing may function as the technical consultant provided he or she 
meets the qualifications specified in this section.
    (a) The technical consultant must possess a current license issued 
by the State in which the laboratory is located, if such licensing is 
required.
    (b) The technical consultant must--
    (1) (i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in anatomic or clinical pathology, or both, by the 
American Board of Pathology or the American Osteopathic Board of 
Pathology or possess qualifications that are equivalent to those 
required for such certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least one year of laboratory training or experience, or 
both in non-waived testing, in the designated specialty or subspecialty 
areas of service for which the technical consultant is responsible (for 
example, physicians certified either in hematology or hematology and 
medical oncology by the American Board of Internal Medicine are 
qualified to serve as the technical consultant in hematology); or
    (3)(i) Hold an earned doctoral or master's degree in a chemical, 
physical, biological or clinical laboratory science or medical 
technology from an accredited institution; and
    (ii) Have at least one year of laboratory training or experience, or 
both in non-waived testing, in the designated specialty or subspecialty 
areas of service for which the technical consultant is responsible; or
    (4)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 2 years of laboratory training or experience, or 
both in non-waived testing, in the designated specialty or subspecialty 
areas of service for which the technical consultant is responsible.

    Note: The technical consultant requirements for ``laboratory 
training or experience, or both'' in each specialty or subspecialty may 
be acquired concurrently in more than one of the specialties or 
subspecialties of service, excluding waived tests. For example, an 
individual who has a bachelor's degree in biology and additionally has 
documentation of 2 years of work experience performing tests of moderate 
complexity in all specialties and subspecialties of service, would be 
qualified as a technical consultant in a laboratory performing moderate 
complexity testing in all specialties and subspecialties of service.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5234, Jan. 19, 1993]



Sec. 493.1413  Standard; Technical consultant responsibilities.

    The technical consultant is responsible for the technical and 
scientific oversight of the laboratory. The technical consultant is not 
required to be onsite at all times testing is performed; however, he or 
she must be available to the laboratory on an as needed basis to provide 
consultation, as specified in paragraph (a) of this section.
    (a) The technical consultant must be accessible to the laboratory to 
provide on-site, telephone, or electronic consultation; and
    (b) The technical consultant is responsible for--
    (1) Selection of test methodology appropriate for the clinical use 
of the test results;
    (2) Verification of the test procedures performed and the 
establishment of the laboratory's test performance characteristics, 
including the precision and accuracy of each test and test system;
    (3) Enrollment and participation in an HHS approved proficiency 
testing program commensurate with the services offered;
    (4) Establishing a quality control program appropriate for the 
testing performed and establishing the parameters for acceptable levels 
of analytic performance and ensuring that these levels are maintained 
throughout the

[[Page 1043]]

entire testing process from the initial receipt of the specimen, through 
sample analysis and reporting of test results;
    (5) Resolving technical problems and ensuring that remedial actions 
are taken whenever test systems deviate from the laboratory's 
established performance specifications;
    (6) Ensuring that patient test results are not reported until all 
corrective actions have been taken and the test system is functioning 
properly;
    (7) Identifying training needs and assuring that each individual 
performing tests receives regular in-service training and education 
appropriate for the type and complexity of the laboratory services 
performed;
    (8) Evaluating the competency of all testing personnel and assuring 
that the staff maintain their competency to perform test procedures and 
report test results promptly, accurately and proficiently. The 
procedures for evaluation of the competency of the staff must include, 
but are not limited to--
    (i) Direct observations of routine patient test performance, 
including patient preparation, if applicable, specimen handling, 
processing and testing;
    (ii) Monitoring the recording and reporting of test results;
    (iii) Review of intermediate test results or worksheets, quality 
control records, proficiency testing results, and preventive maintenance 
records;
    (iv) Direct observation of performance of instrument maintenance and 
function checks;
    (v) Assessment of test performance through testing previously 
analyzed specimens, internal blind testing samples or external 
proficiency testing samples; and
    (vi) Assessment of problem solving skills; and
    (9) Evaluating and documenting the performance of individuals 
responsible for moderate complexity testing at least semiannually during 
the first year the individual tests patient specimens. Thereafter, 
evaluations must be performed at least annually unless test methodology 
or instrumentation changes, in which case, prior to reporting patient 
test results, the individual's performance must be reevaluated to 
include the use of the new test methodology or instrumentation.



Sec. 493.1415  Condition: Laboratories performing moderate complexity testing; clinical consultant.

    The laboratory must have a clinical consultant who meets the 
qualification requirements of Sec. 493.1417 of this part and provides 
clinical consultation in accordance with Sec. 493.1419 of this part.



Sec. 493.1417  Standard; Clinical consultant qualifications.

    The clinical consultant must be qualified to consult with and render 
opinions to the laboratory's clients concerning the diagnosis, treatment 
and management of patient care. The clinical consultant must--
    (a) Be qualified as a laboratory director under Sec. 493.1405(b) 
(1), (2), or (3)(i); or
    (b) Be a doctor of medicine, doctor of osteopathy or doctor of 
podiatric medicine and possess a license to practice medicine, 
osteopathy or podiatry in the State in which the laboratory is located.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5234, Jan. 19, 1993]



Sec. 493.1419  Standard; Clinical consultant responsibilities.

    The clinical consultant provides consultation regarding the 
appropriateness of the testing ordered and interpretation of test 
results. The clinical consultant must--
    (a) Be available to provide clinical consultation to the 
laboratory's clients;
    (b) Be available to assist the laboratory's clients in ensuring that 
appropriate tests are ordered to meet the clinical expectations;
    (c) Ensure that reports of test results include pertinent 
information required for specific patient interpretation; and
    (d) Ensure that consultation is available and communicated to the 
laboratory's clients on matters related to the quality of the test 
results reported and their interpretation concerning specific patient 
conditions.

[[Page 1044]]



Sec. 493.1421  Condition: Laboratories performing moderate complexity testing; testing personnel.

    The laboratory must have a sufficient number of individuals who meet 
the qualification requirements of Sec. 493.1423, to perform the 
functions specified in Sec. 493.1425 for the volume and complexity of 
tests performed.



Sec. 493.1423  Standard; Testing personnel qualifications.

    Each individual performing moderate complexity testing must--
    (a) Possess a current license issued by the State in which the 
laboratory is located, if such licensing is required; and
    (b) Meet one of the following requirements:
    (1) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located or have earned a doctoral, master's, or bachelor's degree in a 
chemical, physical, biological or clinical laboratory science, or 
medical technology from an accredited institution; or
    (2) Have earned an associate degree in a chemical, physical or 
biological science or medical laboratory technology from an accredited 
institution; or
    (3) Be a high school graduate or equivalent and have successfully 
completed an official military medical laboratory procedures course of 
at least 50 weeks duration and have held the military enlisted 
occupational specialty of Medical Laboratory Specialist (Laboratory 
Technician); or
    (4)(i) Have earned a high school diploma or equivalent; and
    (ii) Have documentation of training appropriate for the testing 
performed prior to analyzing patient specimens. Such training must 
ensure that the individual has--
    (A) The skills required for proper specimen collection, including 
patient preparation, if applicable, labeling, handling, preservation or 
fixation, processing or preparation, transportation and storage of 
specimens;
    (B) The skills required for implementing all standard laboratory 
procedures;
    (C) The skills required for performing each test method and for 
proper instrument use;
    (D) The skills required for performing preventive maintenance, 
troubleshooting and calibration procedures related to each test 
performed;
    (E) A working knowledge of reagent stability and storage;
    (F) The skills required to implement the quality control policies 
and procedures of the laboratory;
    (G) An awareness of the factors that influence test results; and
    (H) The skills required to assess and verify the validity of patient 
test results through the evaluation of quality control sample values 
prior to reporting patient test results.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5234, Jan. 19, 1993]



Sec. 493.1425  Standard; Testing personnel responsibilities.

    The testing personnel are responsible for specimen processing, test 
performance, and for reporting test results.
    (a) Each individual performs only those moderate complexity tests 
that are authorized by the laboratory director and require a degree of 
skill commensurate with the individual's education, training or 
experience, and technical abilities.
    (b) Each individual performing moderate complexity testing must--
    (1) Follow the laboratory's procedures for specimen handling and 
processing, test analyses, reporting and maintaining records of patient 
test results;
    (2) Maintain records that demonstrate that proficiency testing 
samples are tested in the same manner as patient samples;
    (3) Adhere to the laboratory's quality control policies, document 
all quality control activities, instrument and procedural calibrations 
and maintenance performed;
    (4) Follow the laboratory's established corrective action policies 
and procedures whenever test systems are not within the laboratory's 
established acceptable levels of performance;

[[Page 1045]]

    (5) Be capable of identifying problems that may adversely affect 
test performance or reporting of test results and either must correct 
the problems or immediately notify the technical consultant, clinical 
consultant or director; and
    (6) Document all corrective actions taken when test systems deviate 
from the laboratory's established performance specifications.

             Laboratories Performing High Complexity Testing



Sec. 493.1441  Condition: Laboratories performing high complexity testing; laboratory director.

    The laboratory must have a director who meets the qualification 
requirements of Sec. 493.1443 of this subpart and provides overall 
management and direction in accordance with Sec. 493.1445 of this 
subpart.



Sec. 493.1443  Standard; Laboratory director qualifications.

    The laboratory director must be qualified to manage and direct the 
laboratory personnel and performance of high complexity tests and must 
be eligible to be an operator of a laboratory within the requirements of 
subpart R.
    (a) The laboratory director must possess a current license as a 
laboratory director issued by the State in which the laboratory is 
located, if such licensing is required; and
    (b) The laboratory director must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in anatomic or clinical pathology, or both, by the 
American Board of Pathology or the American Osteopathic Board of 
Pathology or possess qualifications that are equivalent to those 
required for such certification; or
    (2) Be a doctor of medicine, a doctor of osteopathy or doctor of 
podiatric medicine licensed to practice medicine, osteopathy or podiatry 
in the State in which the laboratory is located; and
    (i) Have at least one year of laboratory training during medical 
residency (for example, physicians certified either in hematology or 
hematology and medical oncology by the American Board of Internal 
Medicine); or
    (ii) Have at least 2 years of experience directing or supervising 
high complexity testing; or
    (3) Hold an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited institution 
and--
    (i) Be certified by the American Board of Medical Microbiology, the 
American Board of Clinical Chemistry, the American Board of Bioanalysis, 
the American Board of Medical Laboratory Immunology or other board 
deemed comparable by HHS; or
    (ii) Until December 31, 2002, must have at least--
    (A) Two years of laboratory training or experience, or both;
    (B) Two years of experience directing or supervising high complexity 
testing; and
    (C) On December 31, 2002, individuals must meet the qualifications 
specified in paragraph (b)(3)(i) of this section;
    (4) Be serving as a laboratory director and must have previously 
qualified or could have qualified as a laboratory director under 
regulations at 42 CFR 493.1415, published March 14, 1990 at 55 FR 9538, 
on or before February 28, 1992; or
    (5) On or before February 28, 1992, be qualified under State law to 
direct a laboratory in the State in which the laboratory is located; or
    (6) For the subspecialty of oral pathology, be certified by the 
American Board of Oral Pathology, American Board of Pathology, the 
American Osteopathic Board of Pathology, or possess qualifications that 
are equivalent to those required for certification.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5234, Jan. 19, 1993; 59 
FR 62609, Dec. 6, 1994; 62 FR 25858, May 12, 1997; 63 FR 55034, Oct. 14, 
1998; 65 FR 82944, Dec. 29, 2000]



Sec. 493.1445  Standard; Laboratory director responsibilities.

    The laboratory director is responsible for the overall operation and 
administration of the laboratory, including the employment of personnel 
who are competent to perform test procedures, record and report test 
results promptly, accurately and proficiently,

[[Page 1046]]

and for assuring compliance with the applicable regulations.
    (a) The laboratory director, if qualified, may perform the duties of 
the technical supervisor, clinical consultant, general supervisor, and 
testing personnel, or delegate these responsibilities to personnel 
meeting the qualifications under Secs. 493.1447, 493.1453, 493.1459, and 
493.1487, respectively.
    (b) If the laboratory director reapportions performance of his or 
her responsibilities, he or she remains responsible for ensuring that 
all duties are properly performed.
    (c) The laboratory director must be accessible to the laboratory to 
provide onsite, telephone or electronic consultation as needed.
    (d) Each individual may direct no more than five laboratories.
    (e) The laboratory director must--
    (1) Ensure that testing systems developed and used for each of the 
tests performed in the laboratory provide quality laboratory services 
for all aspects of test performance, which includes the preanalytic, 
analytic, and postanalytic phases of testing;
    (2) Ensure that the physical plant and environmental conditions of 
the laboratory are appropriate for the testing performed and provide a 
safe environment in which employees are protected from physical, 
chemical, and biological hazards;
    (3) Ensure that--
    (i) The test methodologies selected have the capability of providing 
the quality of results required for patient care;
    (ii) Verification procedures used are adequate to determine the 
accuracy, precision, and other pertinent performance characteristics of 
the method; and
    (iii) Laboratory personnel are performing the test methods as 
required for accurate and reliable results;
    (4) Ensure that the laboratory is enrolled in an HHS-approved 
proficiency testing program for the testing performed and that--
    (i) The proficiency testing samples are tested as required under 
subpart H of this part;
    (ii) The results are returned within the timeframes established by 
the proficiency testing program;
    (iii) All proficiency testing reports received are reviewed by the 
appropriate staff to evaluate the laboratory's performance and to 
identify any problems that require corrective action; and
    (iv) An approved corrective action plan is followed when any 
proficiency testing result is found to be unacceptable or 
unsatisfactory;
    (5) Ensure that the quality control and quality assurance programs 
are established and maintained to assure the quality of laboratory 
services provided and to identify failures in quality as they occur;
    (6) Ensure the establishment and maintenance of acceptable levels of 
analytical performance for each test system;
    (7) Ensure that all necessary remedial actions are taken and 
documented whenever significant deviations from the laboratory's 
established performance characteristics are identified, and that patient 
test results are reported only when the system is functioning properly;
    (8) Ensure that reports of test results include pertinent 
information required for interpretation;
    (9) Ensure that consultation is available to the laboratory's 
clients on matters relating to the quality of the test results reported 
and their interpretation concerning specific patient conditions;
    (10) Ensure that a general supervisor provides on-site supervision 
of high complexity test performance by testing personnel qualified under 
Sec. 493.1489(b)(4);
    (11) Employ a sufficient number of laboratory personnel with the 
appropriate education and either experience or training to provide 
appropriate consultation, properly supervise and accurately perform 
tests and report test results in accordance with the personnel 
responsibilities described in this subpart;
    (12) Ensure that prior to testing patients' specimens, all personnel 
have the appropriate education and experience, receive the appropriate 
training for the type and complexity of the services offered, and have 
demonstrated that they can perform all

[[Page 1047]]

testing operations reliably to provide and report accurate results;
    (13) Ensure that policies and procedures are established for 
monitoring individuals who conduct preanalytical, analytical, and 
postanalytical phases of testing to assure that they are competent and 
maintain their competency to process specimens, perform test procedures 
and report test results promptly and proficiently, and whenever 
necessary, identify needs for remedial training or continuing education 
to improve skills;
    (14) Ensure that an approved procedure manual is available to all 
personnel responsible for any aspect of the testing process; and
    (15) Specify, in writing, the responsibilities and duties of each 
consultant and each supervisor, as well as each person engaged in the 
performance of the preanalytic, analytic, and postanalytic phases of 
testing, that identifies which examinations and procedures each 
individual is authorized to perform, whether supervision is required for 
specimen processing, test performance or result reporting and whether 
supervisory or director review is required prior to reporting patient 
test results.



Sec. 493.1447  Condition: Laboratories performing high complexity testing; technical supervisor.

    The laboratory must have a technical supervisor who meets the 
qualification requirements of Sec. 493.1449 of this subpart and provides 
technical supervision in accordance with Sec. 493.1451 of this subpart.



Sec. 493.1449  Standard; Technical supervisor qualifications.

    The laboratory must employ one or more individuals who are qualified 
by education and either training or experience to provide technical 
supervision for each of the specialties and subspecialties of service in 
which the laboratory performs high complexity tests or procedures. The 
director of a laboratory performing high complexity testing may function 
as the technical supervisor provided he or she meets the qualifications 
specified in this section.
    (a) The technical supervisor must possess a current license issued 
by the State in which the laboratory is located, if such licensing is 
required; and
    (b) The laboratory may perform anatomic and clinical laboratory 
procedures and tests in all specialties and subspecialties of services 
except histocompatibility and clinical cytogenetics services provided 
the individual functioning as the technical supervisor--
    (1) Is a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (2) Is certified in both anatomic and clinical pathology by the 
American Board of Pathology or the American Osteopathic Board of 
Pathology or Possesses qualifications that are equivalent to those 
required for such certification.
    (c) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of bacteriology, 
the individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least one year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of bacteriology; or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum

[[Page 1048]]

of 6 months experience in high complexity testing within the 
subspecialty of bacteriology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of bacteriology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical, or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of bacteriology.
    (d) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of 
mycobacteriology, the individual functioning as the technical supervisor 
must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor or 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycobacteriology; or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycobacteriology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycobacteriology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycobacteriology.
    (e) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of mycology, the 
individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycology; or

[[Page 1049]]

    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both in high complexity testing within the speciality of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of mycology.
    (f) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of parasitology, 
the individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least one year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of parasitology;
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of parasitology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of parasitology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of parasitology.
    (g) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of virology, the 
individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and

[[Page 1050]]

    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of virology; or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of virology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of virology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing within the specialty of microbiology 
with a minimum of 6 months experience in high complexity testing within 
the subspecialty of virology.
    (h) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the specialty of diagnostic 
immunology, the individual functioning as the technical supervisor must-
-
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing for the specialty of diagnostic 
immunology; or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of diagnostic 
immunology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of diagnostic 
immunology; or
    (5) (i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of diagnostic 
immunology.
    (i) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the specialty of chemistry, the 
individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing for the specialty of chemistry; or

[[Page 1051]]

    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of chemistry; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of chemistry; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of chemistry.
    (j) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the specialty of hematology, the 
individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least one year of laboratory training or experience, or 
both, in high complexity testing for the specialty of hematology (for 
example, physicians certified either in hematology or hematology and 
medical oncology by the American Board of Internal Medicine); or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of hematology; or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of hematology; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of hematology.
    (k)(1) If the requirements of paragraph (b) of this section are not 
met and the laboratory performs tests in the subspecialty of cytology, 
the individual functioning as the technical supervisor must--
    (i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Meet one of the following requirements--
    (A) Be certified in anatomic pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (B) Be certified by the American Society of Cytology to practice 
cytopathology or possess qualifications that are equivalent to those 
required for such certification;
    (2) An individual qualified under Sec. 493.1449(b) or paragraph 
(k)(1) of this section may delegate some of the cytology technical 
supervisor responsibilities to an individual who is in the final year of 
full-time training leading to certification specified in paragraphs (b) 
or (k)(1)(ii)(A) of this section provided the technical supervisor 
qualified under Sec. 493.1449(b) or paragraph (k)(1) of this section 
remains ultimately responsible for ensuring that all of the 
responsibilities of the cytology technical supervisor are met.

[[Page 1052]]

    (l) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of histopathology, 
the individual functioning as the technical supervisor must--
    (1) Meet one of the following requirements:
    (i) (A) Be a doctor of medicine or a doctor of osteopathy licensed 
to practice medicine or osteopathy in the State in which the laboratory 
is located; and
    (B) Be certified in anatomic pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification;
    (ii) An individual qualified under Sec. 493.1449(b) or paragraph 
(l)(1) of this section may delegate to an individual who is a resident 
in a training program leading to certification specified in paragraph 
(b) or (l)(1)(i)(B) of this section, the responsibility for examination 
and interpretation of histopathology specimens.
    (2) For tests in dermatopathology, meet one of the following 
requirements:
    (i) (A) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located and--
    (B) Meet one of the following requirements:
    (1) Be certified in anatomic pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2) Be certified in dermatopathology by the American Board of 
Dermatology and the American Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (3) Be certified in dermatology by the American Board of Dermatology 
or possess qualifications that are equivalent to those required for such 
certification; or
    (ii) An individual qualified under Sec. 493.1449(b) or paragraph 
(l)(2)(i) of this section may delegate to an individual who is a 
resident in a training program leading to certification specified in 
paragraphs (b) or (l)(2)(i)(B) of this section, the responsibility for 
examination and interpretation of dermatopathology specimens.
    (3) For tests in ophthalmic pathology, meet one of the following 
requirements:
    (i)(A) Be a doctor of medicine or doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located and--
    (B) Must meet one of the following requirements:
    (1) Be certified in anatomic pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2) Be certified by the American Board of Ophthalmology or possess 
qualifications that are equivalent to those required for such 
certitication and have successfully completed at least 1 year of formal 
post-residency fellowship training in ophthalmic pathology; or
    (ii) An individual qualified under Sec. 493.1449(b) or paragraph 
(1)(3)(i) of this section may delegate to an individual who is a 
resident in a training program leading to certification specified in 
paragraphs (b) or (1)(3)(i)(B) of this section, the responsibility for 
examination and interpretation of ophthalmic specimens; or
    (m) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the subspecialty of oral pathology, 
the individual functioning as the technical supervisor must meet one of 
the following requirements:
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located and--
    (ii) Be certified in anatomic pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2) Be certified in oral pathology by the American Board of Oral 
Pathology or possess qualifications for such certification; or

[[Page 1053]]

    (3) An individual qualified under Sec. 493.1449(b) or paragraph (m) 
(1) or (2) of this section may delegate to an individual who is a 
resident in a training program leading to certification specified in 
paragraphs (b) or (m) (1) or (2) of this section, the responsibility for 
examination and interpretation of oral pathology specimens.
    (n) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the specialty of radiobioassay, the 
individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing for the specialty of radiobioassay; or
    (3)(i) Have an earned doctoral degree in a chemical, physical, 
biological or clinical laboratory science from an accredited 
institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing within the specialty of radiobioassay; 
or
    (4)(i) Have earned a master's degree in a chemical, physical, 
biological or clinical laboratory science or medical technology from an 
accredited institution; and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of radiobioassay; or
    (5)(i) Have earned a bachelor's degree in a chemical, physical or 
biological science or medical technology from an accredited institution; 
and
    (ii) Have at least 4 years of laboratory training or experience, or 
both, in high complexity testing for the specialty of radiobioassay.
    (o) If the laboratory performs tests in the specialty of 
histocompatibility, the individual functioning as the technical 
supervisor must either--
    (1)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have training or experience that meets one of the following 
requirements:
    (A) Have 4 years of laboratory training or experience, or both, 
within the specialty of histocompatibility; or
    (B)(1) Have 2 years of laboratory training or experience, or both, 
in the specialty of general immunology; and
    (2) Have 2 years of laboratory training or experience, or both, in 
the specialty of histocompatibility; or
    (2)(i) Have an earned doctoral degree in a biological or clinical 
laboratory science from an accredited institution; and
    (ii) Have training or experience that meets one of the following 
requirements:
    (A) Have 4 years of laboratory training or experience, or both, 
within the specialty of histocompatibility; or
    (B)(1) Have 2 years of laboratory training or experience, or both, 
in the specialty of general immunology; and
    (2) Have 2 years of laboratory training or experience, or both, in 
the specialty of histocompatibility.
    (p) If the laboratory performs tests in the specialty of clinical 
cytogenetics, the individual functioning as the technical supervisor 
must--
    (1)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have 4 years of training or experience, or both, in genetics, 2 
of which have been in clinical cytogenetics; or
    (2)(i) Hold an earned doctoral degree in a biological science, 
including biochemistry, or clinical laboratory science from an 
accredited institution; and
    (ii) Have 4 years of training or experience, or both, in genetics, 2 
of which have been in clinical cytogenetics.

[[Page 1054]]

    (q) If the requirements of paragraph (b) of this section are not met 
and the laboratory performs tests in the specialty of immunohematology, 
the individual functioning as the technical supervisor must--
    (1)(i) Be a doctor of medicine or a doctor of osteopathy licensed to 
practice medicine or osteopathy in the State in which the laboratory is 
located; and
    (ii) Be certified in clinical pathology by the American Board of 
Pathology or the American Osteopathic Board of Pathology or possess 
qualifications that are equivalent to those required for such 
certification; or
    (2)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located; and
    (ii) Have at least one year of laboratory training or experience, or 
both, in high complexity testing for the specialty of immunohematology.

    Note: The technical supervisor requirements for ``laboratory 
training or experience, or both'' in each specialty or subspecialty may 
be acquired concurrently in more than one of the specialties or 
subspecialties of service. For example, an individual, who has a 
doctoral degree in chemistry and additionally has documentation of 1 
year of laboratory experience working concurrently in high complexity 
testing in the specialties of microbiology and chemistry and 6 months of 
that work experience included high complexity testing in bacteriology, 
mycology, and mycobacteriology, would qualify as the technical 
supervisor for the specialty of chemistry and the subspecialties of 
bacteriology, mycology, and mycobacteriology.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5234, Jan. 19, 1993]



Sec. 493.1451  Standard: Technical supervisor responsibilities.

    The technical supervisor is responsible for the technical and 
scientific oversight of the laboratory. The technical supervisor is not 
required to be on site at all times testing is performed; however, he or 
she must be available to the laboratory on an as needed basis to provide 
supervision as specified in (a) of this section.
    (a) The technical supervisor must be accessible to the laboratory to 
provide on-site, telephone, or electronic consultation; and
    (b) The technical supervisor is responsible for--
    (1) Selection of the test methodology that is appropriate for the 
clinical use of the test results;
    (2) Verification of the test procedures performed and establishment 
of the laboratory's test performance characteristics, including the 
precision and accuracy of each test and test system;
    (3) Enrollment and participation in an HHS approved proficiency 
testing program commensurate with the services offered;
    (4) Establishing a quality control program appropriate for the 
testing performed and establishing the parameters for acceptable levels 
of analytic performance and ensuring that these levels are maintained 
throughout the entire testing process from the initial receipt of the 
specimen, through sample analysis and reporting of test results;
    (5) Resolving technical problems and ensuring that remedial actions 
are taken whenever test systems deviate from the laboratory's 
established performance specifications;
    (6) Ensuring that patient test results are not reported until all 
corrective actions have been taken and the test system is functioning 
properly;
    (7) Identifying training needs and assuring that each individual 
performing tests receives regular in-service training and education 
appropriate for the type and complexity of the laboratory services 
performed;
    (8) Evaluating the competency of all testing personnel and assuring 
that the staff maintain their competency to perform test procedures and 
report test results promptly, accurately and proficiently. The 
procedures for evaluation of the competency of the staff must include, 
but are not limited to--
    (i) Direct observations of routine patient test performance, 
including patient preparation, if applicable, specimen handling, 
processing and testing;
    (ii) Monitoring the recording and reporting of test results;
    (iii) Review of intermediate test results or worksheets, quality 
control records, proficiency testing results, and preventive maintenance 
records;

[[Page 1055]]

    (iv) Direct observation of performance of instrument maintenance and 
function checks;
    (v) Assessment of test performance through testing previously 
analyzed specimens, internal blind testing samples or external 
proficiency testing samples; and
    (vi) Assessment of problem solving skills; and
    (9) Evaluating and documenting the performance of individuals 
responsible for high complexity testing at least semiannually during the 
first year the individual tests patient specimens. Thereafter, 
evaluations must be performed at least annually unless test methodology 
or instrumentation changes, in which case, prior to reporting patient 
test results, the individual's performance must be reevaluated to 
include the use of the new test methodology or instrumentation.
    (c) In cytology, the technical supervisor or the individual 
qualified under Sec. 493.1449(k)(2)--
    (1) May perform the duties of the cytology general supervisor and 
the cytotechnologist, as specified in Secs. 493.1471 and 493.1485, 
respectively;
    (2) Must establish the workload limit for each individual examining 
slides;
    (3) Must reassess the workload limit for each individual examining 
slides at least every 6 months and adjust as necessary;
    (4) Must perform the functions specified in Sec. 493.1257(c);
    (5) Must ensure that each individual examining gynecologic 
preparations participates in an HHS approved cytology proficiency 
testing program, as specified in Sec. 493.945 and achieves a passing 
score, as specified in Sec. 493.855; and
    (6) If responsible for screening cytology slide preparations, must 
document the number of cytology slides screened in 24 hours and the 
number of hours devoted during each 24-hour period to screening cytology 
slides.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5235, Jan. 19, 1993]



Sec. 493.1453  Condition: Laboratories performing high complexity testing; clinical consultant.

    The laboratory must have a clinical consultant who meets the 
requirements of Sec. 493.1455 of this subpart and provides clinical 
consultation in accordance with Sec. 493.1457 of this subpart.



Sec. 493.1455  Standard; Clinical consultant qualifications.

    The clinical consultant must be qualified to consult with and render 
opinions to the laboratory's clients concerning the diagnosis, treatment 
and management of patient care. The clinical consultant must--
    (a) Be qualified as a laboratory director under Sec. 493.1443(b)(1), 
(2), or (3)(i) or, for the subspecialty of oral pathology, 
Sec. 493.1443(b)(6); or
    (b) Be a doctor of medicine, doctor of osteopathy, doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5235, Jan. 19, 1993]



Sec. 493.1457  Standard; Clinical consultant responsibilities.

    The clinical consultant provides consultation regarding the 
appropriateness of the testing ordered and interpretation of test 
results. The clinical consultant must--
    (a) Be available to provide consultation to the laboratory's 
clients;
    (b) Be available to assist the laboratory's clients in ensuring that 
appropriate tests are ordered to meet the clinical expectations;
    (c) Ensure that reports of test results include pertinent 
information required for specific patient interpretation; and
    (d) Ensure that consultation is available and communicated to the 
laboratory's clients on matters related to the quality of the test 
results reported and their interpretation concerning specific patient 
conditions.



Sec. 493.1459  Condition: Laboratories performing high complexity testing; general supervisor.

    The laboratory must have one or more general supervisors who are 
qualified under Sec. 493.1461 of this subpart to provide general 
supervision in accordance with Sec. 493.1463 of this subpart.

[[Page 1056]]



Sec. 493.1461  Standard: General supervisor qualifications.

    The laboratory must have one or more general supervisors who, under 
the direction of the laboratory director and supervision of the 
technical supervisor, provides day-to-day supervision of testing 
personnel and reporting of test results. In the absence of the director 
and technical supervisor, the general supervisor must be responsible for 
the proper performance of all laboratory procedures and reporting of 
test results.
    (a) The general supervisor must possess a current license issued by 
the State in which the laboratory is located, if such licensing is 
required; and
    (b) The general supervisor must be qualified as a--
    (1) Laboratory director under Sec. 493.1443; or
    (2) Technical supervisor under Sec. 493.1449.
    (c) If the requirements of paragraph (b)(1) or paragraph (b)(2) of 
this section are not met, the individual functioning as the general 
supervisor must--
    (1)(i) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located or have earned 
a doctoral, master's, or bachelor's degree in a chemical, physical, 
biological or clinical laboratory science, or medical technology from an 
accredited institution; and
    (ii) Have at least 1 year of laboratory training or experience, or 
both, in high complexity testing; or
    (2)(i) Qualify as testing personnel under Sec. 493.1489(b)(2); and
    (ii) Have at least 2 years of laboratory training or experience, or 
both, in high complexity testing; or
    (3)(i) Except as specified in paragraph (3)(ii) of this section, 
have previously qualified as a general supervisor under Sec. 493.1462 on 
or before February 28, 1992.
    (ii) Exception. An individual who achieved a satisfactory grade in a 
proficiency examination for technologist given by HHS between March 1, 
1986 and December 31, 1987, qualifies as a general supervisor if he or 
she meets the requirements of Sec. 493.1462 on or before January 1, 
1994.''
    (4) On or before September 1, 1992, have served as a general 
supervisor of high complexity testing and as of April 24, 1995--
    (i) Meet one of the following requirements:
    (A) Have graduated from a medical laboratory or clinical laboratory 
training program approved or accredited by the Accrediting Bureau of 
Health Education Schools (ABHES), the Commission on Allied Health 
Education Accreditation (CAHEA), or other organization approved by HHS.
    (B) Be a high school graduate or equivalent and have successfully 
completed an official U.S. military medical laboratory procedures course 
of at least 50 weeks duration and have held the military enlisted 
occupational specialty of Medical Laboratory Specialist (Laboratory 
Technician).
    (ii) Have at least 2 years of clinical laboratory training, or 
experience, or both, in high complexity testing; or
    (5) On or before September 1, 1992, have served as a general 
supervisor of high complexity testing and--
    (i) Be a high school graduate or equivalent; and
    (ii) Have had at least 10 years of laboratory training or 
experience, or both, in high complexity testing, including at least 6 
years of supervisory experience between September 1, 1982 and September 
1, 1992.
    (d) For blood gas analysis, the individual providing general 
supervision must--
    (1) Be qualified under Secs. 493.1461(b) (1) or (2), or 493.1461(c); 
or
    (2)(i) Have earned a bachelor's degree in respiratory therapy or 
cardiovascular technology from an accredited institution; and
    (ii) Have at least one year of laboratory training or experience, or 
both, in blood gas analysis; or
    (3)(i) Have earned an associate degree related to pulmonary function 
from an accredited institution; and
    (ii) Have at least two years of training or experience, or both in 
blood gas analysis.
    (e) The general supervisor requirement is met in histopathology, 
oral pathology, dermatopathology, and ophthalmic pathology because all 
tests and examinations, must be performed:

[[Page 1057]]

    (1) In histopathology, by an individual who is qualified as a 
technical supervisor under Secs. 493.1449(b) or 493.1449(l)(1);
    (2) In dermatopathology, by an individual who is qualified as a 
technical supervisor under Secs. 493.1449(b) or 493.1449(l) or (2);
    (3) In ophthalmic pathology, by an individual who is qualified as a 
technical supervisor under Secs. 493.1449(b) or 493.1449(1)(3); and
    (4) In oral pathology, by an individual who is qualified as a 
technical supervisor under Secs. 493.1449(b) or 493.1449(m).

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5235, Jan. 19, 1993; 58 
FR 39155, July 22, 1993; 60 FR 20049, Apr. 24, 1995]



Sec. 493.1462  General supervisor qualifications on or before February 28, 1992.

    To qualify as a general supervisor under Sec. 493.1461(c)(3), an 
individual must have met or could have met the following qualifications 
as they were in effect on or before February 28, 1992.
    (a) Each supervisor possesses a current license as a laboratory 
supervisor issued by the State, if such licensing exists; and
    (b) The laboratory supervisor--
    (1) Who qualifies as a laboratory director under 
Sec. 493.1406(b)(1), (2), (4), or (5) is also qualified as a general 
supervisor; therefore, depending upon the size and functions of the 
laboratory, the laboratory director may also serve as the laboratory 
supervisor; or
    (2)(i) Is a physician or has earned a doctoral degree from an 
accredited institution with a major in one of the chemical, physical, or 
biological sciences; and
    (ii) Subsequent to graduation, has had at least 2 years of 
experience in one of the laboratory specialties in a laboratory; or
    (3)(i) Holds a master's degree from an accredited institution with a 
major in one of the chemical, physical, or biological sciences; and
    (ii) Subsequent to graduation has had at least 4 years of pertinent 
full-time laboratory experience of which not less than 2 years have been 
spent working in the designated specialty in a laboratory; or
    (4)(i) Is qualified as a laboratory technologist under 
Sec. 493.1491; and
    (ii) After qualifying as a laboratory technologist, has had at least 
6 years of pertinent full-time laboratory experience of which not less 
than 2 years have been spent working in the designated laboratory 
specialty in a laboratory; or
    (5) With respect to individuals first qualifying before July 1, 
1971, has had at least 15 years of pertinent full-time laboratory 
experience before January 1, 1968; this required experience may be met 
by the substitution of education for experience.

[58 FR 39155, July 22, 1993]



Sec. 493.1463  Standard: General supervisor responsibilities.

    The general supervisor is responsible for day-to-day supervision or 
oversight of the laboratory operation and personnel performing testing 
and reporting test results.
    (a) The general supervisor--(1) Must be accessible to testing 
personnel at all times testing is performed to provide on-site, 
telephone or electronic consultation to resolve technical problems in 
accordance with policies and procedures established either by the 
laboratory director or technical supervisor;
    (2) Is responsible for providing day-to-day supervision of high 
complexity test performance by a testing personnel qualified under 
Sec. 493.1489;
    (3) Except as specified in paragraph (c) of this section, must be 
onsite to provide direct supervision when high complexity testing is 
performed by any individuals qualified under Sec. 493.1489(b)(5); and
    (4) Is responsible for monitoring test analyses and specimen 
examinations to ensure that acceptable levels of analytic performance 
are maintained.
    (b) The director or technical supervisor may delegate to the general 
supervisor the responsibility for--
    (1) Assuring that all remedial actions are taken whenever test 
systems deviate from the laboratory's established performance 
specifications;
    (2) Ensuring that patient test results are not reported until all 
corrective actions have been taken and the test system is properly 
functioning;

[[Page 1058]]

    (3) Providing orientation to all testing personnel; and
    (4) Annually evaluating and documenting the performance of all 
testing personnel.
    (c) Exception. For individuals qualified under Sec. 493.1489(b)(5), 
who were performing high complexity testing on or before January 19, 
1993, the requirements of paragraph (a)(3) of this section are not 
effective, provided that all high complexity testing performed by the 
individual in the absence of a general supervisor is reviewed within 24 
hours by a general supervisor qualified under Sec. 493.1461.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5235, Jan. 19, 1993; 60 
FR 20050, Apr. 24, 1995]



Sec. 493.1467  Condition: Laboratories performing high complexity testing; cytology general supervisor.

    For the subspecialty of cytology, the laboratory must have a general 
supervisor who meets the qualification requirements of Sec. 493.1469 of 
this subpart, and provides supervision in accordance with Sec. 493.1471 
of this subpart.



Sec. 493.1469  Standard: Cytology general supervisor qualifications.

    The cytology general supervisor must be qualified to supervise 
cytology services. The general supervisor in cytology must possess a 
current license issued by the State in which the laboratory is located, 
if such licensing is required, and must--
    (a) Be qualified as a technical supervisor under Sec. 493.1449 (b) 
or (k); or
    (b)(1) Be qualified as a cytotechnologist under Sec. 493.1483; and
    (2) Have at least 3 years of full-time (2,080 hours per year) 
experience as a cytotechnologist within the preceding 10 years.



Sec. 493.1471  Standard: Cytology general supervisor responsibilities.

    The technical supervisor of cytology may perform the duties of the 
cytology general supervisor or delegate the responsibilities to an 
individual qualified under Sec. 493.1469.
    (a) The cytology general supervisor is responsible for the day-to-
day supervision or oversight of the laboratory operation and personnel 
performing testing and reporting test results.
    (b) The cytology general supervisor must--
    (1) Be accessible to provide on-site, telephone, or electronic 
consultation to resolve technical problems in accordance with policies 
and procedures established by the technical supervisor of cytology;
    (2) Document the slide interpretation results of each gynecologic 
and nongynecologic cytology case he or she examined or reviewed (as 
specified under Sec. 493.1257(d));
    (3) For each 24-hour period, document the total number of slides he 
or she examined or reviewed in the laboratory as well as the total 
number of slides examined or reviewed in any other laboratory or for any 
other employer; and
    (4) Document the number of hours spent examining slides in each 24-
hour period.



Sec. 493.1481  Condition: Laboratories performing high complexity testing; cytotechnologist.

    For the subspecialty of cytology, the laboratory must have a 
sufficient number of cytotechnologists who meet the qualifications 
specified in Sec. 493.1483 to perform the functions specified in 
Sec. 493.1485.



Sec. 493.1483  Standard: Cytotechnologist qualifications.

    Each person examining cytology slide preparations must meet the 
qualifications of Sec. 493.1449 (b) or (k), or--
    (a) Possess a current license as a cytotechnologist issued by the 
State in which the laboratory is located, if such licensing is required; 
and
    (b) Meet one of the following requirements:
    (1) Have graduated from a school of cytotechnology accredited by the 
Committee on Allied Health Education and Accreditation or other 
organization approved by HHS; or
    (2) Be certified in cytotechnology by a certifying agency approved 
by HHS; or
    (3) Before September 1, 1992--
    (i) Have successfully completed 2 years in an accredited institution 
with at least 12 semester hours in science, 8 hours of which are in 
biology; and

[[Page 1059]]

    (A) Have had 12 months of training in a school of cytotechnology 
accredited by an accrediting agency approved by HHS; or
    (B) Have received 6 months of formal training in a school of 
cytotechnology accredited by an accrediting agency approved by HHS and 6 
months of full-time experience in cytotechnology in a laboratory 
acceptable to the pathologist who directed the formal 6 months of 
training; or
    (ii) Have achieved a satisfactory grade to qualify as a 
cytotechnologist in a proficiency examination approved by HHS and 
designed to qualify persons as cytotechnologists; or
    (4) Before September 1, 1994, have full-time experience of at least 
2 years or equivalent within the preceding 5 years examining slide 
preparations under the supervision of a physician qualified under 
Sec. 493.1449(b) or (k)(1), and before January 1, 1969, must have--
    (i) Graduated from high school;
    (ii) Completed 6 months of training in cytotechnology in a 
laboratory directed by a pathologist or other physician providing 
cytology services; and
    (iii) Completed 2 years of full-time supervised experience in 
cytotechnology; or
    (5)(i) On or before September 1, 1994, have full-time experience of 
at least 2 years or equivalent examining cytology slide preparations 
within the preceding 5 years in the United States under the supervision 
of a physician qualified under Sec. 493.1449(b) or (k)(1); and
    (ii) On or before September 1, 1995, have met the requirements in 
either paragraph (b)(1) or (2) of this section.

[57 FR 7172, Feb. 28, 1992, as amended at 59 FR 685, Jan. 6, 1994]



Sec. 493.1485  Standard; Cytotechnologist responsibilities.

    The cytotechnologist is responsible for documenting--
    (a) The slide interpretation results of each gynecologic and 
nongynecologic cytology case he or she examined or reviewed (as 
specified in Sec. 493.1257(d));
    (b) For each 24-hour period, the total number of slides examined or 
reviewed in the laboratory as well as the total number of slides 
examined or reviewed in any other laboratory or for any other employer; 
and
    (c) The number of hours spent examining slides in each 24-hour 
period.



Sec. 493.1487  Condition: Laboratories performing high complexity testing; testing personnel.

    The laboratory has a sufficient number of individuals who meet the 
qualification requirements of Sec. 493.1489 of this subpart to perform 
the functions specified in Sec. 493.1495 of this subpart for the volume 
and complexity of testing performed.



Sec. 493.1489  Standard; Testing personnel qualifications.

    Each individual performing high complexity testing must--
    (a) Possess a current license issued by the State in which the 
laboratory is located, if such licensing is required; and
    (b) Meet one of the following requirements:
    (1) Be a doctor of medicine, doctor of osteopathy, or doctor of 
podiatric medicine licensed to practice medicine, osteopathy, or 
podiatry in the State in which the laboratory is located or have earned 
a doctoral, master's or bachelor's degree in a chemical, physical, 
biological or clinical laboratory science, or medical technology from an 
accredited institution;
    (2)(i) Have earned an associate degree in a laboratory science, or 
medical laboratory technology from an accredited institution or--
    (ii) Have education and training equivalent to that specified in 
paragraph (b)(2)(i) of this section that includes--
    (A) At least 60 semester hours, or equivalent, from an accredited 
institution that, at a minimum, include either--
    (1) 24 semester hours of medical laboratory technology courses; or
    (2) 24 semester hours of science courses that include--
    (i) Six semester hours of chemistry;
    (ii) Six semester hours of biology; and
    (iii) Twelve semester hours of chemistry, biology, or medical 
laboratory technology in any combination; and
    (B) Have laboratory training that includes either of the following:

[[Page 1060]]

    (1) Completion of a clinical laboratory training program approved or 
accredited by the ABHES, the CAHEA, or other organization approved by 
HHS. (This training may be included in the 60 semester hours listed in 
paragraph (b)(2)(ii)(A) of this section.)
    (2) At least 3 months documented laboratory training in each 
specialty in which the individual performs high complexity testing.
    (3) Have previously qualified or could have qualified as a 
technologist under Sec. 493.1491 on or before February 28, 1992;
    (4) On or before April 24, 1995 be a high school graduate or 
equivalent and have either--
    (i) Graduated from a medical laboratory or clinical laboratory 
training program approved or accredited by ABHES, CAHEA, or other 
organization approved by HHS; or
    (ii) Successfully completed an official U.S. military medical 
laboratory procedures training course of at least 50 weeks duration and 
have held the military enlisted occupational specialty of Medical 
Laboratory Specialist (Laboratory Technician);
    (5)(i) Until September 1, 1997--
    (A) Have earned a high school diploma or equivalent; and
    (B) Have documentation of training appropriate for the testing 
performed before analyzing patient specimens. Such training must ensure 
that the individual has--
    (1) The skills required for proper specimen collection, including 
patient preparation, if applicable, labeling, handling, preservation or 
fixation, processing or preparation, transportation and storage of 
specimens;
    (2) The skills required for implementing all standard laboratory 
procedures;
    (3) The skills required for performing each test method and for 
proper instrument use;
    (4) The skills required for performing preventive maintenance, 
troubleshooting, and calibration procedures related to each test 
performed;
    (5) A working knowledge of reagent stability and storage;
    (6) The skills required to implement the quality control policies 
and procedures of the laboratory;
    (7) An awareness of the factors that influence test results; and
    (8) The skills required to assess and verify the validity of patient 
test results through the evaluation of quality control values before 
reporting patient test results; and
    (ii) As of September 1, 1997, be qualified under 
Sec. 493.1489(b)(1), (b)(2), or (b)(4), except for those individuals 
qualified under paragraph (b)(5)(i) of this section who were performing 
high complexity testing on or before April 24, 1995;
    (6) For blood gas analysis--
    (i) Be qualified under Sec. 493.1489(b)(1), (b)(2), (b)(3), (b)(4), 
or (b)(5);
    (ii) Have earned a bachelor's degree in respiratory therapy or 
cardiovascular technology from an accredited institution; or
    (iii) Have earned an associate degree related to pulmonary function 
from an accredited institution; or
    (7) For histopathology, meet the qualifications of Sec. 493.1449 (b) 
or (l) to perform tissue examinations.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5236, Jan. 19, 1993; 58 
FR 39155, July 22, 1993; 60 FR 20050, Apr. 24, 1995]



Sec. 493.1491  Technologist qualifications on or before February 28, 1992.

    In order to qualify as high complexity testing personnel under 
Sec. 493.1489(b)(3), the individual must have met or could have met the 
following qualifications for technologist as they were in effect on or 
before February 28, 1992. Each technologist must--
    (a) Possess a current license as a laboratory technologist issued by 
the State, if such licensing exists; and
    (b)(1) Have earned a bachelor's degree in medical technology from an 
accredited university; or
    (2) Have successfully completed 3 years of academic study (a minimum 
of 90 semester hours or equivalent) in an accredited college or 
university, which met the specific requirements for entrance into a 
school of medical technology accredited by an accrediting agency 
approved by the Secretary, and has successfully completed a course of 
training of at least 12 months in such a school; or

[[Page 1061]]

    (3) Have earned a bachelor's degree in one of the chemical, 
physical, or biological sciences and, in addition, has at least 1 year 
of pertinent full-time laboratory experience or training, or both, in 
the specialty or subspecialty in which the individual performs tests; or
    (4)(i) Have successfully completed 3 years (90 semester hours or 
equivalent) in an accredited college or university with the following 
distribution of courses--
    (A) For those whose training was completed before September 15, 
1963. At least 24 semester hours in chemistry and biology courses of 
which--
    (1) At least 6 semester hours were in inorganic chemistry and at 
least 3 semester hours were in other chemistry courses; and
    (2) At least 12 semester hours in biology courses pertinent to the 
medical sciences; or
    (B) For those whose training was completed after September 14, 1963.
    (1) 16 semester hours in chemistry courses that included at least 6 
semester hours in inorganic chemistry and that are acceptable toward a 
major in chemistry;
    (2) 16 semester hours in biology courses that are pertinent to the 
medical sciences and are acceptable toward a major in the biological 
sciences; and
    (3) 3 semester hours of mathematics; and
    (ii) Has experience, training, or both, covering several fields of 
medical laboratory work of at least 1 year and of such quality as to 
provide him or her with education and training in medical technology 
equivalent to that described in paragraphs (b)(1) and (2) of this 
section; or
    (5) With respect to individuals first qualifying before July 1, 
1971, the technologist--
    (i) Was performing the duties of a laboratory technologist at any 
time between July 1, 1961, and January 1, 1968, and
    (ii) Has had at least 10 years of pertinent laboratory experience 
prior to January 1, 1968. (This required experience may be met by the 
substitution of education for experience); or
    (6) Achieves a satisfactory grade in a proficiency examination 
approved by HHS.

[58 FR 39155, July 22, 1993]



Sec. 493.1495  Standard; Testing personnel responsibilities.

    The testing personnel are responsible for specimen processing, test 
performance and for reporting test results.
    (a) Each individual performs only those high complexity tests that 
are authorized by the laboratory director and require a degree of skill 
commensurate with the individual's education, training or experience, 
and technical abilities.
    (b) Each individual performing high complexity testing must--
    (1) Follow the laboratory's procedures for specimen handling and 
processing, test analyses, reporting and maintaining records of patient 
test results;
    (2) Maintain records that demonstrate that proficiency testing 
samples are tested in the same manner as patient specimens;
    (3) Adhere to the laboratory's quality control policies, document 
all quality control activities, instrument and procedural calibrations 
and maintenance performed;
    (4) Follow the laboratory's established policies and procedures 
whenever test systems are not within the laboratory's established 
acceptable levels of performance;
    (5) Be capable of identifying problems that may adversely affect 
test performance or reporting of test results and either must correct 
the problems or immediately notify the general supervisor, technical 
supervisor, clinical consultant, or director;
    (6) Document all corrective actions taken when test systems deviate 
from the laboratory's established performance specifications; and
    (7) Except as specified in paragraph (c) of this section, if 
qualified under Sec. 493.1489(b)(5), perform high complexity testing 
only under the onsite, direct supervision of a general supervisor 
qualified under Sec. 493.1461.
    (c) Exception. For individuals qualified under Sec. 493.1489(b)(5), 
who were performing high complexity testing on or

[[Page 1062]]

before January 19, 1993, the requirements of paragraph (b)(7) of this 
section are not effective, provided that all high complexity testing 
performed by the individual in the absence of a general supervisor is 
reviewed within 24 hours by a general supervisor qualified under 
Sec. 493.1461.

[57 FR 7172, Feb. 28, 1992, as amended at 58 FR 5236, Jan. 19, 1993; 60 
FR 20050, Apr. 24, 1995]

Subparts N-O [Reserved]



  Subpart P--Quality Assurance for Moderate Complexity (Including the 
  Subcategory) or High Complexity Testing, or Any Combination of These 
                                  Tests

    Source: 57 FR 7183, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1701  Condition: Quality assurance; moderate complexity (including the subcategory) or high complexity testing, or any combination of these tests.

    Each laboratory performing moderate complexity (including the 
subcategory) or high complexity testing, or any combination of these 
tests, must establish and follow written policies and procedures for a 
comprehensive quality assurance program that is designed to monitor and 
evaluate the ongoing and overall quality of the total testing process 
(preanalytic, analytic, postanalytic). The laboratory's quality 
assurance program must evaluate the effectiveness of its policies and 
procedures; identify and correct problems; assure the accurate, reliable 
and prompt reporting of test results; and assure the adequacy and 
competency of the staff. As necessary, the laboratory must revise 
policies and procedures based upon the results of those evaluations. The 
laboratory must meet the standards as they apply to the services 
offered, complexity of testing performed and test results reported, and 
the unique practices of each testing entity. All quality assurance 
activities must be documented.

[60 FR 20050, Apr. 24, 1995]



Sec. 493.1703  Standard; Patient test management assessment.

    The laboratory must have an ongoing mechanism for monitoring and 
evaluating the systems required under subpart J, Patient Test 
Management. The laboratory must monitor, evaluate, and revise, if 
necessary, based on the results of its evaluations, the following:
    (a) The criteria established for patient preparation, specimen 
collection, labeling, preservation and transportation;
    (b) The information solicited and obtained on the laboratory's test 
requisition for its completeness, relevance, and necessity for the 
testing of patient specimens;
    (c) The use and appropriateness of the criteria established for 
specimen rejection;
    (d) The completeness, usefulness, and accuracy of the test report 
information necessary for the interpretation or utilization of test 
results;
    (e) The timely reporting of test results based on testing priorities 
(STAT, routine, etc.); and
    (f) The accuracy and reliability of test reporting systems, 
appropriate storage of records and retrieval of test results.



Sec. 493.1705  Standard; Quality control assessment.

    The laboratory must have an ongoing mechanism to evaluate the 
corrective actions taken under Sec. 493.1219, Remedial actions. 
Ineffective policies and procedures must be revised based on the outcome 
of the evaluation. The mechanism must evaluate and review the 
effectiveness of corrective actions taken for--
    (a) Problems identified during the evaluation of calibration and 
control data for each test method;
    (b) Problems identified during the evaluation of patient test values 
for the purpose of verifying the reference range of a test method; and
    (c) Errors detected in reported results.



Sec. 493.1707  Standard; Proficiency testing assessment.

    Under subpart H of this part, Proficiency Testing, the corrective 
actions

[[Page 1063]]

taken for any unacceptable, unsatisfactory, or unsuccessful proficiency 
testing result(s) must be evaluated for effectiveness.



Sec. 493.1709  Standard; Comparison of test results.

    (a) If a laboratory performs the same test using different 
methodologies or instruments, or performs the same test at multiple 
testing sites, the laboratory must have a system that twice a year 
evaluates and defines the relationship between test results using the 
different methodologies, instruments, or testing sites.
    (b) If a laboratory performs tests that are not included under 
subpart I of this part, Proficiency Testing Programs, the laboratory 
must have a system for verifying the accuracy of its test results at 
least twice a year.

[58 FR 5236, Jan. 19, 1993]



Sec. 493.1711  Standard; Relationship of patient information to patient test results.

    For internal quality assurance, the laboratory must have a mechanism 
to identify and evaluate patient test results that appear inconsistent 
with relevant criteria such as--
    (a) Patient age;
    (b) Sex;
    (c) Diagnosis or pertinent clinical data, when provided;
    (d) Distribution of patient test results when available; and
    (e) Relationship with other test parameters, when available within 
the laboratory.



Sec. 493.1713  Standard; Personnel assessment.

    The laboratory must have an ongoing mechanism to evaluate the 
effectiveness of its policies and procedures for assuring employee 
competence and, if applicable, consultant competence.



Sec. 493.1715  Standard; Communications.

    The laboratory must have a system in place to document problems that 
occur as a result of breakdowns in communication between the laboratory 
and the authorized individual who orders or receives the results of test 
procedures or examinations. Corrective actions must be taken, as 
necessary, to resolve the problems and minimize communication 
breakdowns.

[58 FR 5236, Jan. 19, 1993]



Sec. 493.1717  Standard; Complaint investigations.

    The laboratory must have a system in place to assure that all 
complaints and problems reported to the laboratory are documented. 
Investigations of complaints must be made, when appropriate, and, as 
necessary, corrective actions are instituted.



Sec. 493.1719  Standard; Quality assurance review with staff.

    The laboratory must have a mechanism for documenting and assessing 
problems identified during quality assurance reviews and discussing them 
with the staff. The laboratory must take corrective actions that are 
necessary to prevent recurrences.



Sec. 493.1721  Standard; Quality assurance records.

    The laboratory must maintain documentation of all quality assurance 
activities including problems identified and corrective actions taken. 
All quality assurance records must be available to HHS and maintained 
for a period of 2 years.

[58 FR 5236, Jan. 19, 1993]



                          Subpart Q--Inspection

    Source: 57 FR 7184, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1771  Condition: Inspection requirements applicable to all CLIA-certified and CLIA-exempt laboratories.

    (a) Each laboratory issued a CLIA certificate must meet the 
requirements in Sec. 493.1773 and the specific requirements for its 
certificate type, as specified in Secs. 493.1775 through 493.1780.
    (b) All CLIA-exempt laboratories must comply with the inspection 
requirements in Secs. 493.1773 and 493.1780, when applicable.

[63 FR 26737, May 14, 1998]

[[Page 1064]]



Sec. 493.1773  Standard: Basic inspection requirements for all laboratories issued a CLIA certificate and CLIA-exempt laboratories.

    (a) A laboratory issued a certificate must permit CMS or a CMS agent 
to conduct an inspection to assess the laboratory's compliance with the 
requirements of this part. A CLIA-exempt laboratory and a laboratory 
that requests, or is issued a certificate of accreditation, must permit 
CMS or a CMS agent to conduct validation and complaint inspections.
    (b) General requirements. As part of the inspection process, CMS or 
a CMS agent may require the laboratory to do the following:
    (1) Test samples, including proficiency testing samples, or perform 
procedures.
    (2) Permit interviews of all personnel concerning the laboratory's 
compliance with the applicable requirements of this part.
    (3) Permit laboratory personnel to be observed performing all phases 
of the total testing process (preanalytic, analytic, and postanalytic).
    (4) Permit CMS or a CMS agent access to all areas encompassed under 
the certificate including, but not limited to, the following:
    (i) Specimen procurement and processing areas.
    (ii) Storage facilities for specimens, reagents, supplies, records, 
and reports.
    (iii) Testing and reporting areas.
    (5) Provide CMS or a CMS agent with copies or exact duplicates of 
all records and data it requires.
    (c) Accessible records and data. A laboratory must have all records 
and data accessible and retrievable within a reasonable time frame 
during the course of the inspection.
    (d) Requirement to provide information and data. A laboratory must 
provide, upon request, all information and data needed by CMS or a CMS 
agent to make a determination of the laboratory's compliance with the 
applicable requirements of this part.
    (e) Reinspection. CMS or a CMS agent may reinspect a laboratory at 
any time to evaluate the ability of the laboratory to provide accurate 
and reliable test results.
    (f) Complaint inspection. CMS or a CMS agent may conduct an 
inspection when there are complaints alleging noncompliance with any of 
the requirements of this part.
    (g) Failure to permit an inspection or reinspection. Failure to 
permit CMS or a CMS agent to conduct an inspection or reinspection 
results in the suspension or cancellation of the laboratory's 
participation in Medicare and Medicaid for payment, and suspension or 
limitation of, or action to revoke the laboratory's CLIA certificate, in 
accordance with subpart R of this part.

[63 FR 26737, May 14, 1998; 63 FR 32699, June 15, 1998]



Sec. 493.1775  Standard: Inspection of laboratories issued a certificate of waiver or a certificate for provider-performed microscopy procedures.

    (a) A laboratory that has been issued a certificate of waiver or a 
certificate for provider-performed microscopy procedures is not subject 
to biennial inspections.
    (b) If necessary, CMS or a CMS agent may conduct an inspection of a 
laboratory issued a certificate of waiver or a certificate for provider-
performed microscopy procedures at any time during the laboratory's 
hours of operation to do the following:
    (1) Determine if the laboratory is operated and testing is performed 
in a manner that does not constitute an imminent and serious risk to 
public health.
    (2) Evaluate a complaint from the public.
    (3) Determine whether the laboratory is performing tests beyond the 
scope of the certificate held by the laboratory.
    (4) Collect information regarding the appropriateness of tests 
specified as waived tests or provider-performed microscopy procedures.
    (c) The laboratory must comply with the basic inspection 
requirements of Sec. 493.1773.

[63 FR 26737, May 14, 1998]



Sec. 493.1777  Standard: Inspection of laboratories that have requested or have been issued a certificate of compliance.

    (a) Initial inspection. (1) A laboratory issued a registration 
certificate must

[[Page 1065]]

permit an initial inspection to assess the laboratory's compliance with 
the requirements of this part before CMS issues a certificate of 
compliance.
    (2) The inspection may occur at any time during the laboratory's 
hours of operation.
    (b) Subsequent inspections. (1) CMS or a CMS agent may conduct 
subsequent inspections on a biennial basis or with such other frequency 
as CMS determines to be necessary to ensure compliance with the 
requirements of this part.
    (2) CMS bases the nature of subsequent inspections on the 
laboratory's compliance history.
    (c) Provider-performed microscopy procedures. The inspection sample 
for review may include testing in the subcategory of provider-performed 
microscopy procedures.
    (d) Compliance with basic inspection requirements. The laboratory 
must comply with the basic inspection requirements of Sec. 493.1773.

[63 FR 26738, May 14, 1998]



Sec. 493.1780  Standard: Inspection of CLIA-exempt laboratories or laboratories requesting or issued a certificate of accreditation.

    (a) Validation inspection. CMS or a CMS agent may conduct a 
validation inspection of any accredited or CLIA-exempt laboratory at any 
time during its hours of operation.
    (b) Complaint inspection. CMS or a CMS agent may conduct a complaint 
inspection of a CLIA-exempt laboratory or a laboratory requesting or 
issued a certificate of accreditation at any time during its hours of 
operation upon receiving a complaint applicable to the requirements of 
this part.
    (c) Noncompliance determination. If a validation or complaint 
inspection results in a finding that the laboratory is not in compliance 
with one or more condition-level requirements, the following actions 
occur:
    (1) A laboratory issued a certificate of accreditation is subject to 
a full review by CMS, in accordance with subpart E of this part and 
Sec. 488.11 of this chapter.
    (2) A CLIA-exempt laboratory is subject to appropriate enforcement 
actions under the approved State licensure program.
    (d) Compliance with basic inspection requirements. CLIA-exempt 
laboratories and laboratories requesting or issued a certificate of 
accreditation must comply with the basic inspection requirements in 
Sec. 493.1773.

[63 FR 26738, May 14, 1998]



                    Subpart R--Enforcement Procedures

    Source: 57 FR 7237, Feb. 28, 1992, unless otherwise noted.



Sec. 493.1800  Basis and scope.

    (a) Statutory basis. (1) Section 1846 of the Act--
    (i) Provides for intermediate sanctions that may be imposed on 
laboratories that perform clinical diagnostic tests on human specimens 
when those laboratories are found to be out of compliance with one or 
more of the conditions for Medicare coverage of their services; and
    (ii) Requires the Secretary to develop and implement a range of such 
sanctions, including four that are specified in the statute.
    (2) The Clinical Laboratories Improvement Act of 1967 (section 353 
of the Public Health Service Act) as amended by CLIA '88--
    (i) Establishes requirements for all laboratories that perform 
clinical diagnostic tests on human specimens;
    (ii) Requires a Federal certification scheme to be applied to all 
such laboratories; and
    (iii) Grants the Secretary broad enforcement authority, including--
    (A) Use of intermediate sanctions;
    (B) Suspension, limitation, or revocation of the certificate of a 
laboratory that is out of compliance with one or more requirements for a 
certificate; and
    (C) Civil suit to enjoin any laboratory activity that constitutes a 
significant hazard to the public health.
    (3) Section 353 also--
    (i) Provides for imprisonment or fine for any person convicted of 
intentional violation of CLIA requirements;

[[Page 1066]]

    (ii) Specifies the administrative hearing and judicial review rights 
of a laboratory that is sanctioned under CLIA; and
    (iii) Requires the Secretary to publish annually a list of all 
laboratories that have been sanctioned during the preceding year.
    (b) Scope and applicability. This subpart sets forth--
    (1) The policies and procedures that CMS follows to enforce the 
requirements applicable to laboratories under CLIA and under section 
1846 of the Act; and
    (2) The appeal rights of laboratories on which CMS imposes 
sanctions.



Sec. 493.1804  General considerations.

    (a) Purpose. The enforcement mechanisms set forth in this subpart 
have the following purposes:
    (1) To protect all individuals served by laboratories against 
substandard testing of specimens.
    (2) To safeguard the general public against health and safety 
hazards that might result from laboratory activities.
    (3) To motivate laboratories to comply with CLIA requirements so 
that they can provide accurate and reliable test results.
    (b) Basis for decision to impose sanctions. (1) CMS's decision to 
impose sanctions is based on one or more of the following:
    (i) Deficiencies found by CMS or its agents in the conduct of 
inspections to certify or validate compliance with Federal requirements, 
or through review of materials submitted by the laboratory (e.g., 
personnel qualifications).
    (ii) Unsuccessful participation in proficiency testing.
    (2) CMS imposes one or more of the alternative or principal 
sanctions specified in Secs. 493.1806 and 493.1807 when CMS or CMS's 
agent finds that a laboratory has condition-level deficiencies.
    (c) Imposition of alternative sanctions. (1) CMS may impose 
alternative sanctions in lieu of, or in addition to principal sanctions, 
(CMS does not impose alternative sanctions on laboratories that have 
certificates of waiver because those laboratories are not inspected for 
compliance with condition-level requirements.)
    (2) CMS may impose alternative sanctions other than a civil money 
penalty after the laboratory has had an opportunity to respond, but 
before the hearing specified in Sec. 493.1844.
    (d) Choice of sanction: Factors considered. CMS bases its choice of 
sanction or sanctions on consideration of one or more factors that 
include, but are not limited to, the following, as assessed by the State 
or by CMS, or its agents:
    (1) Whether the deficiencies pose immediate jeopardy.
    (2) The nature, incidence, severity, and duration of the 
deficiencies or noncompliance.
    (3) Whether the same condition level deficiencies have been 
identified repeatedly.
    (4) The accuracy and extent of laboratory records (e.g., of remedial 
action) in regard to the noncompliance, and their availability to the 
State, to other CMS agents, and to CMS.
    (5) The relationship of one deficiency or group of deficiencies to 
other deficiencies.
    (6) The overall compliance history of the laboratory including but 
not limited to any period of noncompliance that occurred between 
certifications of compliance.
    (7) The corrective and long-term compliance outcomes that CMS hopes 
to achieve through application of the sanction.
    (8) Whether the laboratory has made any progress toward improvement 
following a reasonable opportunity to correct deficiencies.
    (9) Any recommendation by the State agency as to which sanction 
would be appropriate.
    (e) Number of alternative sanctions. CMS may impose a separate 
sanction for each condition level deficiency or a single sanction for 
all condition level deficiencies that are interrelated and subject to 
correction by a single course of action.
    (f) Appeal rights. The appeal rights of laboratories dissatisfied 
with the imposition of a sanction are set forth in Sec. 493.1844.

[57 FR 7237, Feb. 28, 1992; 57 FR 35761, Aug. 11, 1992, as amended at 60 
FR 20051, Apr. 24, 1995]

[[Page 1067]]



Sec. 493.1806  Available sanctions: All laboratories.

    (a) Applicability. CMS may impose one or more of the sanctions 
specified in this section on a laboratory that is out of compliance with 
one or more CLIA conditions.
    (b) Principal sanction. CMS may impose any of the three principal 
CLIA sanctions, which are suspension, limitation, or revocation of any 
type of CLIA certificate.
    (c) Alternative sanctions. CMS may impose one or more of the 
following alternative sanctions in lieu of or in addition to imposing a 
principal sanction, except on a laboratory that has a certificate of 
waiver.
    (1) Directed plan of correction, as set forth at Sec. 493.1832.
    (2) State onsite monitoring as set forth at Sec. 493.1836.
    (3) Civil money penalty, as set forth at Sec. 493.1834.
    (d) Civil suit. CMS may bring suit in the appropriate U.S. District 
Court to enjoin continuation of any activity of any laboratory 
(including a CLIA-exempt laboratory that has been found with 
deficiencies during a validation survey), if CMS has reason to believe 
that continuation of the activity would constitute a significant hazard 
to the public health.
    (e) Criminal sanctions. Under section 353(1) of the PHS Act, an 
individual who is convicted of intentionally violating any CLIA 
requirement may be imprisoned or fined.

[57 FR 7237, Feb. 28, 1992, as amended at 58 FR 5237, Jan. 19, 1993]



Sec. 493.1807  Additional sanctions: Laboratories that participate in Medicare.

    The following additional sanctions are available for laboratories 
that are out of compliance with one or more CLIA conditions and that 
have approval to receive Medicare payment for their services.
    (a) Principal sanction. Cancellation of the laboratory's approval to 
receive Medicare payment for its services.
    (b) Alternative sanctions. (1) Suspension of payment for tests in 
one or more specific specialties or subspecialties, performed on or 
after the effective date of sanction.
    (2) Suspension of payment for all tests in all specialties and 
subspecialties performed on or after the effective date of sanction.



Sec. 493.1808  Adverse action on any type of CLIA certificate: Effect on Medicare approval.

    (a) Suspension or revocation of any type of CLIA certificate. When 
CMS suspends or revokes any type of CLIA certificate, CMS concurrently 
cancels the laboratory's approval to receive Medicare payment for its 
services.
    (b) Limitation of any type of CLIA certificate. When CMS limits any 
type of CLIA certificate, CMS concurrently limits Medicare approval to 
only those specialties or subspecialties that are authorized by the 
laboratory's limited certificate.



Sec. 493.1809  Limitation on Medicaid payment.

    As provided in section 1902(a)(9)(C) of the Act, payment for 
laboratory services may be made under the State plan only if those 
services are furnished by a laboratory that has a CLIA certificate or is 
licensed by a State whose licensure program has been approved by the 
Secretary under this part.

[57 FR 7237, Feb. 28, 1992; 57 FR 35761, Aug. 11, 1992]



Sec. 493.1810  Imposition and lifting of alternative sanctions.

    (a) Notice of noncompliance and of proposed sanction: Content. If 
CMS or its agency identifies condition level noncompliance in a 
laboratory, CMS or its agent gives the laboratory written notice of the 
following:
    (1) The condition level noncompliance that it has identified.
    (2) The sanction or sanctions that CMS or its agent proposes to 
impose against the laboratory.
    (3) The rationale for the proposed sanction or sanctions.
    (4) The projected effective date and duration of the proposed 
sanction or sanctions.
    (5) The authority for the proposed sanction or sanctions.
    (6) The time allowed (at least 10 days) for the laboratory to 
respond to the notice.

[[Page 1068]]

    (b) Opportunity to respond. During the period specified in paragraph 
(a)(6) of this section, the laboratory may submit to CMS or its agent 
written evidence or other information against the imposition of the 
proposed sanction or sanctions.
    (c) Notice of imposition of sanction--(1) Content. CMS gives the 
laboratory written notice that acknowledges any evidence or information 
received from the laboratory and specifies the following:
    (i) The sanction or sanctions to be imposed against the laboratory.
    (ii) The authority and rationale for the imposing sanction or 
sanctions.
    (iii) The effective date and duration of sanction.
    (2) Timing. (i) If CMS or its agent determines that the deficiencies 
pose immediate jeopardy, CMS provides notice at least 5 days before the 
effective date of sanction.
    (ii) If CMS or its agent determines that the deficiencies do not 
pose immediate jeopardy, CMS provides notice at least 15 days before the 
effective date of the sanction.
    (d) Duration of alternative sanctions. An alternative sanction 
continues until the earlier of the following occurs:
    (1) The laboratory corrects all condition level deficiencies.
    (2) CMS's suspension, limitation, or revocation of the laboratory's 
CLIA certificate becomes effective.
    (e) Lifting of alternative sanctions--(1) General rule. Alternative 
sanctions are not lifted until a laboratory's compliance with all 
condition level requirements is verified.
    (2) Credible allegation of compliance. When a sanctioned laboratory 
submits a credible allegation of compliance, CMS's agent determines 
whether--
    (i) It can certify compliance on the basis of the evidence presented 
by the laboratory in its allegation; or
    (ii) It must revisit to verify whether the laboratory has, in fact, 
achieved compliance.
    (3) Compliance achieved before the date of revisit. If during a 
revisit, the laboratory presents credible evidence (as determined by CMS 
or its agent) that it achieved compliance before the date of revisit, 
sanctions are lifted as of that earlier date.



Sec. 493.1812  Action when deficiencies pose immediate jeopardy.

    If a laboratory's deficiencies pose immediate jeopardy, the 
following rules apply:
    (a) CMS requires the laboratory to take immediate action to remove 
the jeopardy and may impose one or more alternative sanctions to help 
bring the laboratory into compliance.
    (b) If the findings of a revisit indicate that a laboratory has not 
eliminated the jeopardy, CMS suspends or limits the laboratory's CLIA 
certificate no earlier than 5 days after the date of notice of 
suspension or limitation. CMS may later revoke the certificate.
    (c) In addition, if CMS has reason to believe that the continuation 
of any activity by any laboratory (either the entire laboratory 
operation or any specialty or subspecialty of testing) would constitute 
a significant hazard to the public health, CMS may bring suit and seek a 
temporary injunction or restraining order against continuation of that 
activity by the laboratory, regardless of the type of CLIA certificate 
the laboratory has and of whether it is State-exempt.



Sec. 493.1814  Action when deficiencies are at the condition level but do not pose immediate jeopardy.

    If a laboratory has condition level deficiencies that do not pose 
immediate jeopardy, the following rules apply:
    (a) Initial action. (1) CMS may cancel the laboratory's approval to 
receive Medicare payment for its services.
    (2) CMS may suspend, limit, or revoke the laboratory's CLIA 
certificate.
    (3) If CMS does not impose a principal sanction under paragraph 
(a)(1) or (a)(2) of this section, it imposes one or more alternative 
sanctions. In the case of unsuccessful participation in proficiency 
testing, CMS may impose the training and technical assistance 
requirement set forth at Sec. 493.1838 in lieu of, or in addition to, 
one or more alternative sanctions.
    (b) Failure to correct condition level deficiencies. If CMS imposes 
alternative sanctions for condition level deficiencies that do not pose 
immediate

[[Page 1069]]

jeopardy, and the laboratory does not correct the condition level 
deficiencies within 12 months after the last day of inspection, CMS--
    (1) Cancels the laboratory's approval to receive Medicare payment 
for its services, and discontinues the Medicare payment sanctions as of 
the day cancellation is effective.
    (2) Following a revisit which indicates that the laboratory has not 
corrected its condition level deficiencies, notifies the laboratory that 
it proposes to suspend, limit, or revoke the certificate, as specified 
in Sec. 493.1816(b), and the laboratory's right to hearing; and
    (3) May impose (or continue, if already imposed) any alternative 
sanctions that do not pertain to Medicare payments. (Sanctions imposed 
under the authority of section 353 of the PHS Act may continue for more 
than 12 months from the last date of inspection, while a hearing on the 
proposed suspension, limitation, or revocation of the certificate of 
compliance, registration certificate, certificate of accreditation, or 
certificate for PPM procedures is pending.)
    (c) Action after hearing. If a hearing decision upholds a proposed 
suspension, limitation, or revocation of a laboratory's CLIA 
certificate, CMS discontinues any alternative sanctions as of the day it 
makes the suspension, limitation, or revocation effective.

[57 FR 7237, Feb. 28, 1992, as amended at 60 FR 20051, Apr. 24, 1995]



Sec. 493.1816  Action when deficiencies are not at the condition level.

    If a laboratory has deficiencies, that are not at the condition 
level, the following rules apply:
    (a) Initial action. The laboratory must submit a plan of correction 
that is acceptable to CMS in content and time frames.
    (b) Failure to correct deficiencies. If, on revisit, it is found 
that the laboratory has not corrected the deficiencies within 12 months 
after the last day of inspection, the following rules apply:
    (1) CMS cancels the laboratory's approval to receive Medicare 
payment for its services.
    (2) CMS notifies the laboratory of its intent to suspend, limit, or 
revoke the laboratory's CLIA certificate and of the laboratory's right 
to a hearing.



Sec. 493.1820  Ensuring timely correction of deficiencies.

    (a) Timing of visits. CMS, the State survey agency or other CMS 
agent may visit the laboratory at any time to evaluate progress, and at 
the end of the period to determine whether all corrections have been 
made.
    (b) Deficiencies corrected before a visit. If during a visit, a 
laboratory produces credible evidence that it achieved compliance before 
the visit, the sanctions are lifted as of that earlier date.
    (c) Failure to correct deficiencies. If during a visit it is found 
that the laboratory has not corrected its deficiencies, CMS may propose 
to suspend, limit, or revoke the laboratory's CLIA certificate.
    (d) Additional time for correcting lower level deficiencies not at 
the condition level. If at the end of the plan of correction period all 
condition level deficiencies have been corrected, and there are 
deficiencies, that are not at the condition level, CMS may request a 
revised plan of correction. The revised plan may not extend beyond 12 
months from the last day of the inspection that originally identified 
the cited deficiencies.
    (e) Persistence of deficiencies. If at the end of the period covered 
by the plan of correction, the laboratory still has deficiencies, the 
rules of Secs. 493.1814 and 493.1816 apply.



Sec. 493.1826  Suspension of part of Medicare payments.

    (a) Application. (1) CMS may impose this sanction if a laboratory--
    (i) Is found to have condition level deficiencies with respect to 
one or more specialties or subspecialties of tests; and
    (ii) Agrees (in return for not having its Medicare approval 
cancelled immediately) not to charge Medicare beneficiaries or their 
private insurance carriers for the services for which Medicare payment 
is suspended.
    (2) CMS suspends Medicare payment for those specialities or 
subspecialties of tests for which the laboratory is out of compliance 
with Federal requirements.

[[Page 1070]]

    (b) Procedures. Before imposing this sanction, CMS provides notice 
of sanction and opportunity to respond in accordance with Sec. 493.1810.
    (c) Duration and effect of sanction. This sanction continues until 
the laboratory corrects the condition level deficiencies or CMS cancels 
the laboratory's approval to receive Medicare payment for its services, 
but in no event longer than 12 months.
    (1) If the laboratory corrects all condition level deficiencies, CMS 
resumes Medicare payment effective for all services furnished on or 
after the date the deficiencies are corrected.
    (2) [Reserved]

[57 FR 7237, Feb. 28, 1992; 57 FR 35761, Aug. 11, 1992]



Sec. 493.1828  Suspension of all Medicare payments.

    (a) Application. (1) CMS may suspend payment for all Medicare-
approved laboratory services when the laboratory has condition level 
deficiencies.
    (2) CMS suspends payment for all Medicare covered laboratory 
services when the following conditions are met:
    (i) Either--
    (A) The laboratory has not corrected its condition level 
deficiencies included in the plan of correction within 3 months from the 
last date of inspection; or
    (B) The laboratory has been found to have the same condition level 
deficiencies during three consecutive inspections; and
    (ii) The laboratory has chosen (in return for not having its 
Medicare approval immediately cancelled), to not charge Medicare 
beneficiaries or their private insurance carriers for services for which 
Medicare payment is suspended.
    (3) CMS suspends payment for services furnished on and after the 
effective date of sanction.
    (b) Procedures. Before imposing this sanction, CMS provides notice 
of sanction and opportunity to respond in accordance with Sec. 493.1810.
    (c) Duration and effect of sanction. (1) Suspension of payment 
continues until all condition level deficiencies are corrected, but 
never beyond twelve months.
    (2) If all the deficiencies are not corrected by the end of the 12 
month period, CMS cancels the laboratory's approval to receive Medicare 
payment for its services.



Sec. 493.1832  Directed plan of correction and directed portion of a plan of correction.

    (a) Application. CMS may impose a directed plan of correction as an 
alternative sanction for any laboratory that has condition level 
deficiencies. If CMS does not impose a directed plan of correction as an 
alternative sanction for a laboratory that has condition level 
deficiencies, it at least imposes a directed portion of a plan of 
correction when it imposes any of the following alternative sanctions:
    (1) State onsite monitoring.
    (2) Civil money penalty.
    (3) Suspension of all or part of Medicare payments.
    (b) Procedures--(1) Directed plan of correction. When imposing this 
sanction, CMS--
    (i) Gives the laboratory prior notice of the sanction and 
opportunity to respond in accordance with Sec. 493.1810;
    (ii) Directs the laboratory to take specific corrective action 
within specific time frames in order to achieve compliance; and
    (iii) May direct the laboratory to submit the names of laboratory 
clients for notification purposes, as specified in paragraph (b)(3) of 
this section.
    (2) Directed portion of a plan of correction. CMS may decide to 
notify clients of a sanctioned laboratory, because of the seriousness of 
the noncompliance (e.g., the existence of immediate jeopardy) or for 
other reasons. When imposing this sanction, CMS takes the following 
steps--
    (i) Directs the laboratory to submit to CMS, the State survey 
agency, or other CMS agent, within 10 calendar days after the notice of 
the alternative sanction, a list of names and addresses of all 
physicians, providers, suppliers, and other clients who have used some 
or all of the services of the laboratory since the last certification 
inspection or within any other timeframe specified by CMS.
    (ii) Within 30 calendar days of receipt of the information, may send 
to each

[[Page 1071]]

laboratory client, via the State survey agency, a notice containing the 
name and address of the laboratory, the nature of the laboratory's 
noncompliance, and the kind and effective date of the alternative 
sanction.
    (iii) Sends to each laboratory client, via the State survey agency, 
notice of the recission of an adverse action within 30 days of the 
rescission.
    (3) Notice of imposition of a principal sanction following the 
imposition of an alternative sanction. If CMS imposes a principal 
sanction following the imposition of an alternative sanction, and for 
which CMS has already obtained a list of laboratory clients, CMS may use 
that list to notify the clients of the imposition of the principal 
sanction.
    (c) Duration of a directed plan of correction. If CMS imposes a 
directed plan of correction, and on revisit it is found that the 
laboratory has not corrected the deficiencies within 12 months from the 
last day of inspection, the following rules apply:
    (1) CMS cancels the laboratory's approval for Medicare payment of 
its services, and notifies the laboratory of CMS's intent to suspend, 
limit, or revoke the laboratory's CLIA certificate.
    (2) The directed plan of correction continues in effect until the 
day suspension, limitation, or revocation of the laboratory's CLIA 
certificate.



Sec. 493.1834  Civil money penalty.

    (a) Statutory basis. Sections 1846 of the Act and 353(h)(2)(B) of 
the PHS Act authorize the Secretary to impose civil money penalties on 
laboratories. Section 1846(b)(3) of the Act specifically provides that 
incrementally more severe fines may be imposed for repeated or 
uncorrected deficiencies.
    (b) Scope. This section sets forth the procedures that CMS follows 
to impose a civil money penalty in lieu of, or in addition to, 
suspending, limiting, or revoking the certificate of compliance, 
registration certificate, certificate of accreditation, or certificate 
for PPM procedures of a laboratory that is found to have condition level 
deficiencies.
    (c) Basis for imposing a civil money penalty. CMS may impose a civil 
money penalty against any laboratory determined to have condition level 
deficiencies regardless of whether those deficiencies pose immediate 
jeopardy.
    (d) Amount of penalty--(1) Factors considered. In determining the 
amount of the penalty, CMS takes into account the following factors:
    (i) The nature, scope, severity, and duration of the noncompliance.
    (ii) Whether the same condition level deficiencies have been 
identified during three consecutive inspections.
    (iii) The laboratory's overall compliance history including but not 
limited to any period of noncompliance that occurred between 
certifications of compliance.
    (iv) The laboratory's intent or reason for noncompliance.
    (v) The accuracy and extent of laboratory records and their 
availability to CMS, the State survey agency, or other CMS agent.
    (2) Range of penalty amount.
    (i) For a condition level deficiency that poses immediate jeopardy, 
the range is $3,050-$10,000 per day of noncompliance or per violation.
    (ii) For a condition level deficiency that does not pose immediate 
jeopardy, the range is $50-$3,000 per day of noncompliance or per 
violation.
    (3) Decreased penalty amounts. If the immediate jeopardy is removed, 
but the deficiency continues, CMS shifts the penalty amount to the lower 
range.
    (4) Increased penalty amounts. CMS may, before the hearing, propose 
to increase the penalty amount for a laboratory that has deficiencies 
which, after imposition of a lower level penalty amount, become 
sufficiently serious to pose immediate jeopardy.
    (e) Procedures for imposition of civil money penalty--(1) Notice of 
intent. (i) CMS sends the laboratory written notice, of CMS's intent to 
impose a civil money penalty.
    (ii) The notice includes the following information:
    (A) The statutory basis for the penalty.
    (B) The proposed daily or per violation amount of the penalty.
    (C) The factors (as described in paragraph (d)(1) of this section) 
that CMS considered.
    (D) The opportunity for responding to the notice in accordance with 
Sec. 493.1810(c).

[[Page 1072]]

    (E) A specific statement regarding the laboratory's appeal rights.
    (2) Appeal rights. (i) The laboratory has 60 days from the date of 
receipt of the notice of intent to impose a civil money penalty to 
request a hearing in accordance with Sec. 493.1844(g).
    (ii) If the laboratory requests a hearing, all other pertinent 
provisions of Sec. 493.1844 apply.
    (iii) If the laboratory does not request a hearing, CMS may reduce 
the proposed penalty amount by 35 percent.
    (f) Accrual and duration of penalty--(1) Accrual of penalty. The 
civil money penalty begins accruing as follows:
    (i) 5 days after notice of intent if there is immediate jeopardy.
    (ii) 15 days after notice of intent if there is not immediate 
jeopardy.
    (2) Duration of penalty. The civil money penalty continues to accrue 
until the earliest of the following occurs:
    (i) The laboratory's compliance with condition level requirements is 
verified on the basis of the evidence presented by the laboratory in its 
credible allegation of compliance or at the time or revisit.
    (ii) Based on credible evidence presented by the laboratory at the 
time of revisit, CMS determines that compliance was achieved before the 
revisit. (In this situation, the money penalty stops accruing as of the 
date of compliance.)
    (iii) CMS suspends, limits, or revokes the laboratory's certificate 
of compliance, registration certificate, certificate of accreditation, 
or certificate for PPM procedures.
    (g) Computation and notice of total penalty amount--(1) Computation. 
CMS computes the total penalty amount after the laboratory's compliance 
is verified or CMS suspends, limits, or revokes the laboratory's CLIA 
certificate but in no event before--
    (i) The 60 day period for requesting a hearing has expired without a 
request or the laboratory has explicitly waived its right to a hearing; 
or
    (ii) Following a hearing requested by the laboratory, the ALJ issues 
a decision that upholds imposition of the penalty.
    (2) Notice of penalty amount and due date of penalty. The notice 
includes the following information:
    (i) Daily or per violation penalty amount.
    (ii) Number of days or violations for which the penalty is imposed.
    (iii) Total penalty amount.
    (iv) Due date for payment of the penalty.
    (h) Due date for payment of penalty. (1) Payment of a civil money 
penalty is due 15 days from the date of the notice specified in 
paragraph (g)(2) of this section.
    (2) CMS may approve a plan for a laboratory to pay a civil money 
penalty, plus interest, over a period of up to one year from the 
original due date.
    (i) Collection and settlement--(1) Collection of penalty amounts. 
(i) The determined penalty amount may be deducted from any sums then or 
later owing by the United States to the laboratory subject to the 
penalty.
    (ii) Interest accrues on the unpaid balance of the penalty, 
beginning on the due date. Interest is computed at the rate specified in 
Sec. 405.378(d) of this chapter.
    (2) Settlement. CMS has authority to settle any case at any time 
before the ALJ issues a hearing decision.

[57 FR 7237, Feb. 28, 1992, as amended at 60 FR 20051, Apr. 24, 1995; 61 
FR 63749, Dec. 2, 1996]



Sec. 493.1836  State onsite monitoring.

    (a) Application. (1) CMS may require continuous or intermittent 
monitoring of a plan of correction by the State survey agency to ensure 
that the laboratory makes the improvements necessary to bring it into 
compliance with the condition level requirements. (The State monitor 
does not have management authority, that is, cannot hire or fire staff, 
obligate funds, or otherwise dictate how the laboratory operates. The 
monitor's responsibility is to oversee whether corrections are made.)
    (2) The laboratory must pay the costs of onsite monitoring by the 
State survey agency.
    (i) The costs are computed by multiplying the number of hours of 
onsite monitoring in the laboratory by the hourly rate negotiated by CMS 
and the State.

[[Page 1073]]

    (ii) The hourly rate includes salary, fringe benefits, travel, and 
other direct and indirect costs approved by CMS.
    (b) Procedures. Before imposing this sanction, CMS provides notice 
of sanction and opportunity to respond in accordance with Sec. 493.1810.
    (c) Duration of sanction. (1) If CMS imposes onsite monitoring, the 
sanction continues until CMS determines that the laboratory has the 
capability to ensure compliance with all condition level requirements.
    (2) If the laboratory does not correct all deficiencies within 12 
months, and a revisit indicates that deficiencies remain, CMS cancels 
the laboratory's approval for Medicare payment for its services and 
notifies the laboratory of its intent to suspend, limit, or revoke the 
laboratory's certificate of compliance, registration certificate, 
certificate of accreditation, or certificate for PPM procedures.
    (3) If the laboratory still does not correct its deficiencies, the 
Medicare sanction continues until the suspension, limitation, or 
revocation of the laboratory's certificate of compliance, registration 
certificate, certificate of accreditation, or certificate for PPM 
procedures is effective.

[57 FR 7237, Feb. 28, 1992, as amended at 60 FR 20051, Apr. 24, 1995]



Sec. 493.1838  Training and technical assistance for unsuccessful participation in proficiency testing.

    If a laboratory's participation in proficiency testing is 
unsuccessful, CMS may require the laboratory to undertake training of 
its personnel, or to obtain necessary technical assistance, or both, in 
order to meet the requirements of the proficiency testing program. This 
requirement is separate from the principal and alternative sanctions set 
forth in Secs. 493.1806 and 493.1807.



Sec. 493.1840  Suspension, limitation, or revocation of any type of CLIA certificate.

    (a) Adverse action based on actions of the laboratory's owner, 
operator or employees. CMS may initiate adverse action to suspend, limit 
or revoke any CLIA certificate if CMS finds that a laboratory's owner or 
operator or one of its employees has--
    (1) Been guilty of misrepresentation in obtaining a CLIA 
certificate;
    (2) Performed, or represented the laboratory as entitled to perform, 
a laboratory examination or other procedure that is not within a 
category of laboratory examinations or other procedures authorized by 
its CLIA certificate;
    (3) Failed to comply with the certificate requirements and 
performance standards;
    (4) Failed to comply with reasonable requests by CMS for any 
information or work on materials that CMS concludes is necessary to 
determine the laboratory's continued eligibility for its CLIA 
certificate or continued compliance with performance standards set by 
CMS;
    (5) Refused a reasonable request by CMS or its agent for permission 
to inspect the laboratory and its operation and pertinent records during 
the hours that the laboratory is in operation;
    (6) Violated or aided and abetted in the violation of any provisions 
of CLIA and its implementing regulations;
    (7) Failed to comply with an alternative sanction imposed under this 
subpart; or
    (8) Within the preceding two-year period, owned or operated a 
laboratory that had its CLIA certificate revoked. (This provision 
applies only to the owner or operator, not to all of the laboratory's 
employees.)
    (b) Adverse action based on improper referrals in proficiency 
testing. If CMS determines that a laboratory has intentionally referred 
its proficiency testing samples to another laboratory for analysis, CMS 
revokes the laboratory's CLIA certificate for at least one year, and may 
also impose a civil money penalty.
    (c) Adverse action based on exclusion from Medicare. If the OIG 
excludes a laboratory from participation in Medicare, CMS suspends the 
laboratory's CLIA certificate for the period during which the laboratory 
is excluded.
    (d) Procedures for suspension or limitation--(1) Basic rule. Except 
as provided in paragraph (d)(2) of this section, CMS

[[Page 1074]]

does not suspend or limit a CLIA certificate until after an ALJ hearing 
decision (as provided in Sec. 493.1844) that upholds suspension or 
limitation.
    (2) Exceptions. CMS may suspend or limit a CLIA certificate before 
the ALJ hearing in any of the following circumstances:
    (i) The laboratory's deficiencies pose immediate jeopardy.
    (ii) The laboratory has refused a reasonable request for information 
or work on materials.
    (iii) The laboratory has refused permission for CMS or a CMS agent 
to inspect the laboratory or its operation.
    (e) Procedures for revocation. (1) CMS does not revoke any type of 
CLIA certificate until after an ALJ hearing that upholds revocation.
    (2) CMS may revoke a CLIA certificate after the hearing decision 
even if it had not previously suspended or limited that certificate.
    (f) Notice to the OIG. CMS notifies the OIG of any violations under 
paragraphs (a)(1), (a)(2), (a)(6), and (b) of this section within 30 
days of the determination of the violation.



Sec. 493.1842  Cancellation of Medicare approval.

    (a) Basis for cancellation. (1) CMS always cancels a laboratory's 
approval to receive Medicare payment for its services if CMS suspends or 
revokes the laboratory's CLIA certificate.
    (2) CMS may cancel the laboratory's approval under any of the 
following circumstances:
    (i) The laboratory is out of compliance with a condition level 
requirement.
    (ii) The laboratory fails to submit a plan of correction 
satisfactory to CMS.
    (iii) The laboratory fails to correct all its deficiencies within 
the time frames specified in the plan of correction.
    (b) Notice and opportunity to respond. Before canceling a 
laboratory's approval to receive Medicare payment for its services, CMS 
gives the laboratory--
    (1) Written notice of the rationale for, effective date, and effect 
of, cancellation;
    (2) Opportunity to submit written evidence or other information 
against cancellation of the laboratory's approval.
    This sanction may be imposed before the hearing that may be 
requested by a laboratory, in accordance with the appeals procedures set 
forth in Sec. 493.1844.
    (c) Effect of cancellation. Cancellation of Medicare approval 
terminates any Medicare payment sanctions regardless of the time frames 
originally specified.



Sec. 493.1844  Appeals procedures.

    (a) General rules. (1) The provisions of this section apply to all 
laboratories and prospective laboratories that are dissatisfied with any 
initial determination under paragraph (b) of this section.
    (2) Hearings are conducted in accordance with procedures set forth 
in subpart D of part 498 of this chapter, except that the authority to 
conduct hearings and issue decisions may be exercised by ALJs assigned 
to, or detailed to, the Departmental Appeals Board.
    (3) Any party dissatisfied with a hearing decision is entitled to 
request review of the decision as specified in subpart E of part 498 of 
this chapter, except that the authority to review the decision may be 
exercised by the Departmental Appeals Board.
    (4) When more than one of the actions specified in paragraph (b) of 
this section are carried out concurrently, the laboratory has a right to 
only one hearing on all matters at issue.
    (b) Actions that are initial determinations. The following actions 
are initial determinations and therefore are subject to appeal in 
accordance with this section:
    (1) The suspension, limitation, or revocation of the laboratory's 
CLIA certificate by CMS because of noncompliance with CLIA requirements.
    (2) The denial of a CLIA certificate.
    (3) The imposition of alternative sanctions under this subpart (but 
not the determination as to which alternative sanction or sanctions to 
impose).
    (4) The denial or cancellation of the laboratory's approval to 
receive Medicare payment for its services.
    (c) Actions that are not initial determinations. Actions that are 
not listed in paragraph (b) of this section are not

[[Page 1075]]

initial determinations and therefore are not subject to appeal under 
this section. They include, but are not necessarily limited to, the 
following:
    (1) The finding that a laboratory accredited by a CMS-approved 
accreditation organization is no longer deemed to meet the conditions 
set forth in subparts H, J, K, M, P, and Q of this part. However, the 
suspension, limitation or revocation of a certificate of accreditation 
is an initial determination and is appealable.
    (2) The finding that a laboratory determined to be in compliance 
with condition-level requirements but has deficiencies that are not at 
the condition level.
    (3) The determination not to reinstate a suspended CLIA certificate 
because the reason for the suspension has not been removed or there is 
insufficient assurance that the reason will not recur.
    (4) The determination as to which alternative sanction or sanctions 
to impose, including the amount of a civil money penalty to impose per 
day or per violation.
    (5) The denial of approval for Medicare payment for the services of 
a laboratory that does not have in effect a valid CLIA certificate.
    (6) The determination that a laboratory's deficiencies pose 
immediate jeopardy.
    (7) The amount of the civil money penalty assessed per day or for 
each violation of Federal requirements.
    (d) Effect of pending appeals--(1) Alternative sanctions. The 
effective date of an alternative sanction (other than a civil money 
penalty) is not delayed because the laboratory has appealed and the 
hearing or the hearing decision is pending.
    (2) Suspension, limitation, or revocation of a laboratory's CLIA 
certificate--(i) General rule. Except as provided in paragraph 
(d)(2)(ii) of this section, suspension, limitation, or revocation of a 
CLIA certificate is not effective until after a hearing decision by an 
ALJ is issued.
    (ii) Exceptions. (A) If CMS determines that conditions at a 
laboratory pose immediate jeopardy, the effective date of the suspension 
or limitation of a CLIA certificate is not delayed because the 
laboratory has appealed and the hearing or the hearing decision is 
pending.
    (B) CMS may suspend or limit a laboratory's CLIA certificate before 
an ALJ hearing or hearing decision if the laboratory has refused a 
reasonable request for information (including but not limited to billing 
information), or for work on materials, or has refused permission for 
CMS or a CMS agent to inspect the laboratory or its operation.
    (3) Cancellation of Medicare approval. The effective date of the 
cancellation of a laboratory's approval to receive Medicare payment for 
its services is not delayed because the laboratory has appealed and the 
hearing or hearing decision is pending.
    (4) Effect of ALJ decision. (i) An ALJ decision is final unless, as 
provided in paragraph (a)(3) of this section, one of the parties 
requests review by the Departmental Appeals Board within 60 days, and 
the Board reviews the case and issues a revised decision.
    (ii) If an ALJ decision upholds a suspension imposed because of 
immediate jeopardy, that suspension becomes a revocation.
    (e) Appeal rights for prospective laboratories--(1) Reconsideration. 
Any prospective laboratory dissatisfied with a denial of a CLIA 
certificate, or of approval for Medicare payment for its services, may 
initiate the appeals process by requesting reconsideration in accordance 
with Secs. 498.22 through 498.25 of this chapter.
    (2) Notice of reopening. If CMS reopens an initial or reconsidered 
determination, CMS gives the prospective laboratory notice of the 
revised determination in accordance with Sec. 498.32 of this chapter.
    (3) ALJ hearing. Any prospective laboratory dissatisfied with a 
reconsidered determination under paragraph (e)(1) of this section or a 
revised reconsidered determination under Sec. 498.30 of this chapter is 
entitled to a hearing before an ALJ, as specified in paragraph (a)(2) of 
this section.
    (4) Review of ALJ hearing decisions. Any prospective laboratory that 
is dissatisfied with an ALJ's hearing decision or dismissal of a request 
for hearing may file a written request for review by the Departmental 
Appeals

[[Page 1076]]

Board as provided in paragraph (a)(3) of this section.
    (f) Appeal rights of laboratories--(1) ALJ hearing. Any laboratory 
dissatisfied with the suspension, limitation, or revocation of its CLIA 
certificate, with the imposition of an alternative sanction under this 
subpart, or with cancellation of the approval to receive Medicare 
payment for its services, is entitled to a hearing before an ALJ as 
specified in paragraph (a)(2) of this section and has 60 days from the 
notice of sanction to request a hearing.
    (2) Review of ALJ hearing decisions. Any laboratory that is 
dissatisfied with an ALJ's hearing decision or dismissal of a request 
for hearing may file a written request for review by the Departmental 
Appeals Board, as provided in paragraph (a)(3) of this section.
    (3) Judicial review. Any laboratory dissatisfied with the decision 
to impose a civil money penalty or to suspend, limit, or revoke its CLIA 
certificate may, within 60 days after the decision becomes final, file 
with the U.S. Court of Appeals of the circuit in which the laboratory 
has its principal place of business, a petition for judicial review.
    (g) Notice of adverse action. (1) If CMS suspends, limits, or 
revokes a laboratory's CLIA certificate or cancels the approval to 
receive Medicare payment for its services, CMS gives notice to the 
laboratory, and may give notice to physicians, providers, suppliers, and 
other laboratory clients, according to the procedures set forth at 
Sec. 493.1832. In addition, CMS notifies the general public each time 
one of these principal sanctions is imposed.
    (2) The notice to the laboratory--
    (i) Sets forth the reasons for the adverse action, the effective 
date and effect of that action, and the appeal rights if any; and
    (ii) When the certificate is limited, specifies the specialties or 
subspecialties of tests that the laboratory is no longer authorized to 
perform, and that are no longer covered under Medicare.
    (3) The notice to other entities includes the same information 
except the information about the laboratory's appeal rights.
    (h) Effective date of adverse action. (1) When the laboratory's 
deficiencies pose immediate jeopardy, the effective date of the adverse 
action is at least 5 days after the date of the notice.
    (2) When CMS determines that the laboratory's deficiencies do not 
pose immediate jeopardy, the effective date of the adverse action is at 
least 15 days after the date of the notice.

[57 FR 7237, Feb. 28, 1992; 57 FR 35761, Aug. 11, 1992]



Sec. 493.1846  Civil action.

    If CMS has reason to believe that continuation of the activities of 
any laboratory, including a State-exempt laboratory, would constitute a 
significant hazard to the public health, CMS may bring suit in a U.S. 
District Court to enjoin continuation of the specific activity that is 
causing the hazard or to enjoin the continued operation of the 
laboratory if CMS deems it necessary. Upon proper showing, the court 
shall issue a temporary injunction or restraining order without bond 
against continuation of the activity.



Sec. 493.1850  Laboratory registry.

    (a) Once a year CMS makes available to physicians and to the general 
public specific information (including information provided to CMS by 
the OIG) that is useful in evaluating the performance of laboratories, 
including the following:
    (1) A list of laboratories that have been convicted, under Federal 
or State laws relating to fraud and abuse, false billing, or kickbacks.
    (2) A list of laboratories that have had their CLIA certificates 
suspended, limited, or revoked, and the reason for the adverse actions.
    (3) A list of persons who have been convicted of violating CLIA 
requirements, as specified in section 353(1) of the PHS Act, together 
with the circumstances of each case and the penalties imposed.
    (4) A list of laboratories on which alternative sanctions have been 
imposed, showing--
    (i) The effective date of the sanctions;
    (ii) The reasons for imposing them;
    (iii) Any corrective action taken by the laboratory; and
    (iv) If the laboratory has achieved compliance, the verified date of 
compliance.

[[Page 1077]]

    (5) A list of laboratories whose accreditation has been withdrawn or 
revoked and the reasons for the withdrawal or revocation.
    (6) All appeals and hearing decisions.
    (7) A list of laboratories against which CMS has brought suit under 
Sec. 493.1846 and the reasons for those actions.
    (8) A list of laboratories that have been excluded from 
participation in Medicare or Medicaid and the reasons for the exclusion.
    (b) The laboratory registry is compiled for the calendar year 
preceding the date the information is made available and includes 
appropriate explanatory information to aid in the interpretation of the 
data. It also contains corrections of any erroneous statements or 
information that appeared in the previous registry.

Subpart S [Reserved]



                        Subpart T--Consultations

    Source: 57 FR 7185, Feb. 28, 1992, unless otherwise noted.



Sec. 493.2001  Establishment and function of the Clinical Laboratory Improvement Advisory Committee.

    (a) HHS will establish a Clinical Laboratory Improvement Advisory 
Committee to advise and make recommendations on technical and scientific 
aspects of the provisions of this part 493.
    (b) The Clinical Laboratory Improvement Advisory Committee will be 
comprised of individuals involved in the provision of laboratory 
services, utilization of laboratory services, development of laboratory 
testing or methodology, and others as approved by HHS.
    (c) HHS will designate specialized subcommittees as necessary.
    (d) The Clinical Laboratory Improvement Advisory Committee or any 
designated subcommittees will meet as needed, but not less than once 
each year.
    (e) The Clinical Laboratory Improvement Advisory Committee or 
subcommittee, at the request of HHS, will review and make 
recommendations concerning:
    (1) Criteria for categorizing tests and examinations of moderate 
complexity (including the subcategory) and high complexity;
    (2) Determination of waived tests;
    (3) Personnel standards;
    (4) Patient test management, quality control, quality assurance 
standards;
    (5) Proficiency testing standards;
    (6) Applicability to the standards of new technology; and
    (7) Other issues relevant to part 493, if requested by HHS.
    (f) HHS will be responsible for providing the data and information, 
as necessary, to the members of the Clinical Laboratory Improvement 
Advisory Committee.

[57 FR 7185, Feb. 28, 1992, as amended at 58 FR 5237, Jan. 19, 1993; 60 
FR 20051, Apr. 24, 1995]



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




                      Subpart A--General Provisions

Sec.
498.1 Statutory basis.
498.2 Definitions.
498.3 Scope and applicability.
498.4 NFs subject to appeals process in part 498.
498.5 Appeal rights.
498.10 Appointment of representatives.
498.11 Authority of representatives.
498.13 Fees for services of representatives.
498.15 Charge for transcripts.
498.17 Filing of briefs with the ALJ or Departmental Appeals Board, and 
          opportunity for rebuttal.

      Subpart B--Initial, Reconsidered, and Revised Determinations

498.20 Notice and effect of initial determinations.
498.22 Reconsideration.
498.23 Withdrawal of request for reconsideration.
498.24 Reconsidered determination.
498.25 Notice and effect of reconsidered determination.

[[Page 1078]]

     Subpart C--Reopening of Initial or Reconsidered Determinations

498.30 Limitation on reopening.
498.32 Notice and effect of reopening and revision.

                           Subpart D--Hearings

498.40 Request for hearing.
498.42 Parties to the hearing.
498.44 Designation of hearing official.
498.45 Disqualification of Administrative Law Judge.
498.47 Prehearing conference.
498.48 Notice of prehearing conference.
498.49 Conduct of prehearing conference.
498.50 Record, order, and effect of prehearing conference.
498.52 Time and place of hearing.
498.53 Change in time and place of hearing.
498.54 Joint hearings.
498.56 Hearing on new issues.
498.58 Subpoenas.
498.60 Conduct of hearing.
498.61 Evidence.
498.62 Witnesses.
498.63 Oral and written summation.
498.64 Record of hearing.
498.66 Waiver of right to appear and present evidence.
498.68 Dismissal of request for hearing.
498.69 Dismissal for abandonment.
498.70 Dismissal for cause.
498.71 Notice and effect of dismissal and right to request review.
498.72 Vacating a dismissal of request for hearing.
498.74 Administrative Law Judge's decision.
498.76 Removal of hearing to Departmental Appeals Board.
498.78 Remand by the Administrative Law Judge.

              Subpart E--Departmental Appeals Board Review

498.80 Right to request Departmental Appeals Board review of 
          Administrative Law Judge's decision or dismissal.
498.82 Request for Departmental Appeals Board review.
498.83 Departmental Appeals Board action on request for review.
498.85 Procedures before the Departmental Appeals Board on review.
498.86 Evidence admissible on review.
498.88 Decision or remand by the Departmental Appeals Board.
498.90 Effect of Departmental Appeals Board decision.
498.95 Extension of time for seeking judicial review.

 Subpart F--Reopening of Decisions Made by Administrative Law Judges or 
                     the Departmental Appeals Board

498.100 Basis, timing, and authority for reopening an ALJ or Board 
          decision.
498.102 Revision of reopened decision.
498.103 Notice and effect of revised decision.

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

    Source: 52 FR 22446, June 12, 1987, unless otherwise noted.

    Editorial Note: Nomenclature changes appear at 61 FR 32349, June 24, 
1996.



                      Subpart A--General Provisions



Sec. 498.1  Statutory basis.

    (a) Section 1866(h) of the Act provides for a hearing and for 
judicial review of the hearing for any institution or agency 
dissatisfied with a determination that it is not a provider, or with any 
determination described in section 1866(b)(2) of the Act.
    (b) Section 1866(b)(2) of the Act lists determinations that serve as 
a basis for termination of a provider agreement.
    (c) Sections 1128 (a) and (b) of the Act provide for exclusion of 
certain individuals or entities because of conviction of crimes related 
to their participation in Medicare and section 1128(f) provides for 
hearing and judicial review for exclusions.
    (d) Section 1156 of the Act establishes certain obligations for 
practitioners and providers of health care services, and provides 
sanctions and penalties for those that fail to meet those obligations.
    (e)-(f) [Reserved]
    (g) Although Sec. 1866(h) of the Act is silent regarding appeal 
rights for suppliers and practitioners, the rules in this part include 
procedures for review of determinations that affect those two groups.
    (h) Section 1128A(c)(2) of the Act provides that the Secretary may 
not collect a civil money penalty until the affected entity has had 
notice and opportunity for a hearing.
    (i) Section 1819(h) of the Act--

[[Page 1079]]

    (1) Provides that, for SNFs found to be out of compliance with the 
requirements for participation, specified remedies may be imposed 
instead of, or in addition to, termination of the facility's Medicare 
provider agreement; and
    (2) Makes certain provisions of section 1128A of the Act applicable 
to civil money penalties imposed on SNFs.
    (j) Section 1891(e) of the Act provides that, for home health 
agencies (HHAs) found to be out of compliance with the conditions of 
participation, specified remedies may be imposed instead of, or in 
addition to, termination of the HHA's Medicare provider agreement.
    (k) Section 1891(f) of the Act--
    (1) Requires the Secretary to develop a range of such remedies; and
    (2) Makes certain provisions of section 1128A of the Act applicable 
to civil money penalties imposed on HHAs.

[52 FR 22446, June 12, 1987, as amended at 59 FR 56251, Nov. 10, 1994; 
61 FR 32349, June 24, 1996]



Sec. 498.2  Definitions.

    As used in this part--
    Affected party means a provider, prospective provider, supplier, 
prospective supplier, or practitioner that is affected by an initial 
determination or by any subsequent determination or decision issued 
under this part, and ``party'' means the affected party or CMS (or the 
OIG), as appropriate.
    ALJ stands for Administrative Law Judge.
    Departmental Appeals Board or Board means a Board established in the 
Office of the Secretary to provide impartial review of disputed 
decisions made by the operating components of the Department.
    OHA stands for the Social Security Administration's Office of 
Hearings and Appeals.
    OIG stands for the Department's Office of the Inspector General.
    Provider means a hospital, critical access hospital (CAH), skilled 
nursing facility (SNF), comprehensive outpatient rehabilitation facility 
(CORF), home health agency (HHA), or hospice, that has in effect an 
agreement to participate in Medicare, that has in effect an agreement to 
participate in Medicaid, or a clinic, rehabilitation agency, or public 
health agency that has a similar agreement but only to furnish 
outpatient physical therapy or outpatient speech pathology services, and 
prospective provider means any of the listed entities that seeks to 
participate in Medicare as a provider or to have any facility or 
organization determined to be a department of the provider or provider-
based entity under Sec. 413.65 of this chapter.
    Supplier means an independent laboratory, supplier of portable X-ray 
services, rural health clinic (RHC), Federally qualified health center 
(FQHC), ambulatory surgical center (ASC), organ procurement organization 
(OPO), an entity approved by CMS to furnish outpatient diabetes self-
management training, or end-stage renal disease (ESRD) treatment 
facility that is approved by CMS as meeting the conditions for coverage 
of its services, and prospective supplier means any of the listed 
entities that seeks to be approved for coverage of its services under 
Medicare. (However, for purposes of the sanctions and penalties that may 
be imposed by the OIG, the term supplier has the meaning specified in 
Sec. 1001.2 of this title.)

[52 FR 22446, June 12, 1987, as amended at 53 FR 6551, March 1, 1988; 57 
FR 24984, June 12, 1992; 58 FR 30677, May 26, 1993; 59 FR 6579, Feb. 11, 
1994; 59 FR 56251, Nov. 10, 1994; 61 FR 32350, June 24, 1996; 62 FR 
46037, Aug. 29, 1997; 65 FR 18549, Apr. 7, 2000; 65 FR 83154, Dec. 29, 
2000]



Sec. 498.3  Scope and applicability.

    (a) Scope. (1) This part sets forth procedures for reviewing initial 
determinations that CMS makes with respect to the matters specified in 
paragraph (b) of this section, and that the OIG makes with respect to 
the matters specified in paragraph (c) of this section. It also 
specifies, in paragraph (d) of this section, administrative actions that 
are not subject to appeal under this part.
    (2) The determinations listed in this section affect participation 
in the Medicare program. Many of the procedures of this part also apply 
to other determinations that do not affect participation in Medicare. 
Some examples follow:
    (i) CMS's determination to terminate an NF's Medicaid provider 
agreement.

[[Page 1080]]

    (ii) CMS's determination to cancel the approval of an ICF/MR under 
section 1910(b) of the Act.
    (iii) CMS's determination, under the Clinical Laboratory Improvement 
Act (CLIA), to impose alternative sanctions or to suspend, limit, or 
revoke the certificate of a laboratory even though it does not 
participate in Medicare.
    (3) The following parts of this chapter specify the applicability of 
the provisions of this part 498 to sanctions or remedies imposed on the 
indicated entities:
    (i) Part 431, subpart D--for nursing facilities (NFs).
    (ii) Part 488, subpart E (Sec. 488.330(e))--for SNFs and NFs.
    (iii) Part 493, subpart R (Sec. 493.1844)--for laboratories.
    (b) Initial determinations by CMS. CMS makes initial determinations 
with respect to the following matters:
    (1) Whether a prospective provider qualifies as a provider.
    (2) Whether a prospective department of a provider, remote location 
of a hospital, satellite facility, or provider-based entity qualifies 
for provider-based status under Sec. 413.65 of this chapter, or whether 
such a facility or entity currently treated as a department of a 
provider, remote location of a hospital, satellite facility, or a 
provider-based entity no longer qualifies for that status under 
Sec. 413.65 of this chapter.
    (3) Whether an institution is a hospital qualified to elect to claim 
payment for all emergency hospital services furnished in a calendar 
year.
    (4) Whether an institution continues to remain in compliance with 
the qualifications for claiming reimbursement for all emergency services 
furnished in a calendar year.
    (5) Whether a prospective supplier meets the conditions for coverage 
of its services as those conditions are set forth elsewhere in this 
chapter.
    (6) Whether the services of a supplier continue to meet the 
conditions for coverage.
    (7) Whether a physical therapist in independent practice or a 
chiropractor meets the requirements for coverage of his or her services 
as set forth in subpart D of part 486 of this chapter and Sec. 410.22 of 
this chapter, respectively.
    (8) The termination of a provider agreement in accordance with 
Sec. 489.53 of this chapter, or the termination of a rural health clinic 
agreement in accordance with Sec. 405.2404 of this chapter, or the 
termination of a Federally qualified health center agreement in 
accordance with Sec. 405.2436 of this chapter.
    (9) CMS's cancellation, under section 1910(b) of the Act, of an ICF/
MR's approval to participate in Medicaid.
    (10) Whether, for purposes of rate setting and reimbursement, an 
ESRD treatment facility is considered to be hospital-based or 
independent.
    (11) [Reserved]
    (12) Whether a hospital, skilled nursing facility, home health 
agency, or hospice program meets or contimues to meet the advance 
directives requirements specified in subpart I of part 489 of this 
chapter.
    (13) With respect to an SNF or NF, a finding of noncompliance that 
results in the imposition of a remedy specified in Sec. 488.406 of this 
chapter, except the State monitoring remedy.
    (14) The level of noncompliance found by CMS in a SNF or NF but only 
if a successful challenge on this issue would affect--
    (i) The range of civil money penalty amounts that CMS could collect 
(The scope of review during a hearing on imposition of a civil money 
penalty is set forth in Sec. 488.438(e) of this chapter); or
    (ii) A finding of substandard quality of care that results in the 
loss of approval for a SNF or NF of its nurse aide training program.
    (15) The effective date of a Medicare provider agreement or supplier 
approval.
    (16) The finding of substandard quality of care that leads to the 
loss by a SNF or NF of the approval of its nurse aide training program.
    (c) Initial determinations by the OIG. The OIG makes initial 
determinations with respect to the following matters:
    (1) The termination of a provider agreement in accordance with part 
1001, subpart C of this title.
    (2) The suspension, or exclusion from coverage and the denial of 
reimbursement for services furnished by a provider, practitioner, or 
supplier, because of fraud or abuse, or conviction of

[[Page 1081]]

crimes related to participation in the program, in accordance with part 
1001, subpart B of this title.
    (3) The imposition of sanctions in accordance with part 1004 of this 
title.
    (d) Administrative actions that are not initial determinations. 
Administrative actions that are not initial determination (and therefore 
not subject to appeal under this part) include but are not limited to 
the following:
    (1) The finding that a provider or supplier determined to be in 
compliance with the conditions or requirements for participation or for 
coverage has deficiencies.
    (2) The finding that a prospective provider does not meet the 
conditions of participation set forth elsewhere in this chapter, if the 
prospective provider is, nevertheless, approved for participation in 
Medicare on the basis of special access certification, as provided in 
subpart B of part 488 of this chapter.
    (3) The refusal to enter into a provider agreement because the 
prospective provider is unable to give satisfactory assurance of 
compliance with the requirements of title XVIII of the Act.
    (4) The finding that an entity that had its provider agreement 
terminated may not file another agreement because the reasons for 
terminating the previous agreement have not been removed or there is 
insufficient assurance that the reasons for the exclusion will not 
recur.
    (5) The determination not to reinstate a suspended or excluded 
practitioner, provider, or supplier because the reason for the 
suspension or exclusion has not been removed, or there is insufficient 
assurance that the reason will not recur.
    (6) The finding that the services of a laboratory are covered as 
hospital services or as physician's services, rather than as services of 
an independent laboratory, because the laboratory is not independent of 
the hospital or of the physician's office.
    (7) The refusal to accept for filing an election to claim payment 
for all emergency hospital services furnished in a calendar year because 
the institution--
    (i) Had previously charged an individual or other person for 
services furnished during that calendar year;
    (ii) Submitted the election after the close of that calendar year; 
or
    (iii) Had previously been notified of its failure to continue to 
comply.
    (8) The finding that the reason for the revocation of a supplier's 
right to accept assignment has not been removed or there is insufficient 
assurance that the reason will not recur.
    (9) The finding that a hospital accredited by the Joint Commission 
on Accreditation of Hospitals or the American Osteopathic Association is 
not in compliance with a condition of participation, and a finding that 
that hospital is no longer deemed to meet the conditions of 
participation.
    (10) With respect to an SNF or NF-(i) The finding that the SNF's or 
NF's deficiencies pose immediate jeopardy to the health or safety of its 
residents;
    (ii) Except as provided in paragraph (b)(13) of this section, a 
determination by CMS as to the facility's level of noncompliance; and
    (iii) The imposition of State monitoring.
    (11) The choice of alternative sanction or remedy to be imposed on a 
provider or supplier.
    (12) The determination that the accreditation requirements of a 
national accreditation organization do not provide (or do not continue 
to provide) reasonable assurance that the entities accredited by the 
accreditation organization meet the applicable long-term care 
requirements, conditions for coverage, conditions of certification, 
conditions of participation, or CLIA condition level requirements.
    (13) The determination that requirements imposed on a State's 
laboratories under the laws of that State do not provide (or do not 
continue to provide) reasonable assurance that laboratories licensed or 
approved by the State meet applicable CLIA requirements.
    (14) The choice of alternative sanction or remedy to be imposed on a 
provider or supplier.
    (15) A decision by the State survey agency as to when to conduct an 
initial survey of a prospective provider or supplier.
    (e) Exclusion of civil rights issues. The procedures in this subpart 
do not apply to the adjudication of issues relating to

[[Page 1082]]

a provider's compliance with civil rights requirements that are set 
forth in part 489 of this chapter. Those issues are handled through the 
Department's Office of Civil Rights.

[52 FR 22446, June 12, 1987, as amended at 52 FR 27765, July 23, 1987; 
53 FR 6551, March 1, 1988; 53 FR 6649, March 2, 1988; 54 FR 5373, Feb. 
2, 1989; 56 FR 8854, Mar. 1, 1991; 56 FR 48879, Sept. 26, 1991; 57 FR 
8204, Mar. 6, 1992; 57 FR 34021, July 31, 1992; 57 FR 43925, Sept. 23, 
1992; 59 FR 56251, Nov. 10, 1994; 60 FR 2330, Jan. 9, 1995; 60 FR 50120, 
Sept. 28, 1995; 61 FR 32350, June 24, 1996; 62 FR 43937, Aug. 18, 1997; 
64 FR 24957, May 10, 1999; 64 FR 39937, July 23, 1999; 64 FR 43295, Aug. 
10, 1999; 65 FR 18549, Apr. 7, 2000; 65 FR 62646, Oct. 19, 2000]



Sec. 498.4  NFs subject to appeals process in part 498.

    A NF is considered a provider for purposes of this part when it has 
in effect an agreement to participate in Medicaid, including an 
agreement to participate in both Medicaid and Medicare and it is a--
    (a) State-operated NF; or
    (b) Non State-operated NF that is subject to compliance action as a 
result of--
    (1) A validation survey by CMS; or
    (2) CMS's review of the State's survey findings.

[59 FR 56252, Nov. 10, 1994]



Sec. 498.5  Appeal rights.

    (a) Appeal rights of prospective providers. (1) Any prospective 
provider dissatisfied with an initial determination or revised initial 
determination that it does not qualify as a provider may request 
reconsideration in accordance with Sec. 498.22(a).
    (2) Any prospective provider dissatisfied with a reconsidered 
determination under paragraph (a)(1) of this section, or a revised 
reconsidered determination under Sec. 498.30, is entitled to a hearing 
before an ALJ.
    (b) Appeal rights of providers. Any provider dissatisfied with an 
initial determination to terminate its provider agreement is entitled to 
a hearing before an ALJ.
    (c) Appeal rights of providers and prospective providers. Any 
provider or prospective provider dissatisfied with a hearing decision 
may request Departmental Appeals Board review, and has a right to seek 
judicial review of the Board's decision.
    (d) Appeal rights of prospective suppliers. (1) Any prospective 
supplier dissatisfied with an initial determination or a revised initial 
determination that its services do not meet the conditions for coverage 
may request reconsideration in accordance with Sec. 498.22(a).
    (2) Any prospective supplier dissatisfied with a reconsidered 
determination under paragraph (d)(1) of this section, or a revised 
reconsidered determination under Sec. 498.30, is entitled to a hearing 
before an ALJ.
    (e) Appeal rights of suppliers. Any supplier dissatisfied with an 
initial determination that the services subject to the determination no 
longer meet the conditions for coverage, is entitled to a hearing before 
an ALJ.
    (f) Appeal rights of suppliers and prospective suppliers. (1) Any 
supplier or prospective supplier dissatisfied with the hearing decision 
may request Departmental Appeals Board review of the ALJ's decision.
    (2) Suppliers and prospective suppliers do not have a right to 
judicial review except as provided in paragraph (i) of this section.
    (g) Appeal rights for certain practitioners. A physical therapist in 
independent practice or a chiropractor dissatisfied with a determination 
that he or she does not meet the requirements for coverage of his or her 
services has the same appeal rights as suppliers have under paragraphs 
(d), (e) and (f) of this section.
    (h) Appeal rights for nonparticipating hospitals that furnish 
emergency services. A nonparticipating hospital dissatisfied with a 
determination or decision that it does not qualify to elect to claim 
payment for all emergency services furnished during a calendar year has 
the same appeal rights that providers have under paragraph (a), (b), and 
(c) of this section.
    (i) Appeal rights for suspended or excluded practitioners, 
providers, or suppliers. (1) Any practitioner, provider, or supplier who 
has been suspended, or whose services have been excluded from coverage 
in accordance with Sec. 498.3(c)(2), or has been sanctioned in 
accordance with Sec. 498.3(c)(3), is entitled to a hearing before an 
ALJ.

[[Page 1083]]

    (2) Any suspended or excluded practitioner, provider, or supplier 
dissatisfied with a hearing decision may request Departmental Appeals 
Board review and has a right to seek judicial review of the Board's 
decision by filing an action in Federal district court.
    (j) Appeal rights for Medicaid ICFs/MR terminated by CMS. (1) Any 
Medicaid ICF/MR that has had its approval cancelled by CMS in accordance 
with Sec. 498.3(b)(8) has a right to a hearing before an ALJ, to request 
Departmental Appeals Board review of the hearing decision, and to seek 
judicial review of the Board's decision.
    (2) The Medicaid agreement remains in effect until the period for 
requesting a hearing has expired or, if the facility requests a hearing, 
until a hearing decision is issued, unless CMS--
    (i) Makes a written determination that continuation of provider 
status for the SNF or ICF constitutes an immediate and serious threat to 
the health and safety of patients and specifies the reasons for that 
determination; and
    (ii) Certifies that the facility has been notified of its 
deficiencies and has failed to correct them.
    (k) Appeal rights of NFs. Under the circumstances specified in 
Sec. 431.153 (g) and (h) of this chapter, an NF has a right to a hearing 
before an ALJ, to request Board review of the hearing decision, and to 
seek judicial review of the Board's decision.

[52 FR 22446, June 12, 1987, as amended at 57 FR 43925, Sept. 23, 1992; 
59 FR 56252, Nov. 10, 1994; 61 FR 32350, June 24, 1996]



Sec. 498.10  Appointment of representatives.

    (a) An affected party may appoint as its representative anyone not 
disqualified or suspended from acting as a representative in proceedings 
before the Secretary or otherwise prohibited by law.
    (b) If the representative appointed is not an attorney, the party 
must file written notice of the appointment with CMS, the ALJ, or the 
Departmental Appeals Board.
    (c) If the representative appointed is an attorney, the attorney's 
statement that he or she has the authority to represent the party is 
sufficient.



Sec. 498.11  Authority of representatives.

    (a) A representative appointed and qualified in accordance with 
Sec. 498.10 may, on behalf of the represented party--
    (1) Give and accept any notice or request pertinent to the 
proceedings set forth in this part;
    (2) Present evidence and allegations as to facts and law in any 
proceedings affecting that party to the same extent as the party; and
    (3) Obtain information to the same extent as the party.
    (b) A notice or request may be sent to the affected party, to the 
party's representative, or to both. A notice or request sent to the 
representative has the same force and effect as if it had been sent to 
the party.



Sec. 498.13  Fees for services of representatives.

    Fees for any services performed on behalf of an affected party by an 
attorney appointed and qualified in accordance with Sec. 498.10 are not 
subject to the provisions of section 206 of Title II of the Act, which 
authorizes the Secretary to specify or limit those fees.



Sec. 498.15  Charge for transcripts.

    A party that requests a transcript of prehearing or hearing 
proceedings or Board review must pay the actual or estimated cost of 
preparing the transcript unless, for good cause shown by that party, the 
payment is waived by the ALJ or the Departmental Appeals Board, as 
appropriate.

[52 FR 22446, June 12, 1987, as amended at 61 FR 51021, Sept. 30, 1996]



Sec. 498.17  Filing of briefs with the ALJ or Departmental Appeals Board, and opportunity for rebuttal.

    (a) Filing of briefs and related documents. If a party files a brief 
or related document such as a written argument, contention, suggested 
finding of fact, conclusion of law, or any other written statement, it 
must submit an original and one copy to the ALJ or the Departmental 
Appeals Board, as appropriate. The material may be filed by mail or in 
person and must include a statement certifying that a copy has been 
furnished to the other party.

[[Page 1084]]

    (b) Opportunity for rebuttal. (1) The other party will have 20 days 
from the date of mailing or personal service to submit any rebuttal 
statement or additional evidence. If a party submits a rebuttal 
statement or additional evidence, it must file an original and one copy 
with the ALJ or the Board and furnish a copy to the other party.
    (2) The ALJ or the Board will grant an opportunity to reply to the 
rebuttal statement only if the party shows good cause.



      Subpart B--Initial, Reconsidered, and Revised Determinations



Sec. 498.20  Notice and effect of initial determinations.

    (a) Notice of initial determination--(1) General rule. CMS or the 
OIG, as appropriate, mails notice of an initial determination to the 
affected party, setting forth the basis or reasons for the 
determination, the effect of the determination, and the party's right to 
reconsideration, if applicable, or to a hearing.
    (2) Special rules: Independent laboratories and suppliers of 
portable x-ray services. If CMS determines that an independent 
laboratory or a supplier of portable x-ray services no longer meets the 
conditions for coverage of some or all of its services, the notice--
    (i) Specifies an effective date of termination of coverage that is 
at least 15 days after the date of the notice;
    (ii) Is also sent to physicians, hospitals, and other parties that 
might use the services of the laboratory or supplier; and
    (iii) In the case of laboratories, specifies the categories of 
laboratory tests that are no longer covered.
    (3) Special rules: Nonparticipating hospitals that elect to claim 
payment for emergency services. If CMS determines that a 
nonparticipating hospital no longer qualifies to elect to claim payment 
for all emergency services furnished in a calendar year, the notice--
    (i) States the calendar year to which the determination applies;
    (ii) Specifies an effective date that is at least 5 days after the 
date of the notice; and
    (iii) Specifies that the determination applies to services 
furnished, in the specified calendar year, to patients accepted (as 
inpatients or outpatients) on or after the effective date of the 
determination.
    (4) Other special rules. Additional rules pertaining, for example, 
to content and timing of notice, notice to the public and to other 
entities, and time allowed for submittal of additional information, are 
set forth elsewhere in this chapter, as follows:

Part 405 Subpart X--for rural health clinics.
Part 416--for ambulatory surgical centers.
Part 489--for providers, when their provider agreements have been 
terminated.
Part 1001, Subpart B--for excluded or suspended providers, suppliers, 
physicians, or practitioners.
Part 1001, Subpart C--for providers, when their provider agreements are 
terminated by the OIG.
Part 1004--for sanctioned providers and practitioners.

    (b) Effect of initial determination. An initial determination is 
binding unless it is--
    (1) Reconsidered in accordance with Sec. 498.24;
    (2) Reversed or modified by a hearing decision in accordance with 
Sec. 498.78; or
    (3) Revised in accordance with Sec. 498.32 or Sec. 498.100.



Sec. 498.22  Reconsideration.

    (a) Right to reconsideration. CMS reconsiders any initial 
determination that affects a prospective provider or supplier, or a 
hospital seeking to qualify to claim payment for all emergency hospital 
services furnished in a calendar year, if the affected party files a 
written request in accordance with paragraphs (b) and (c) of this 
section. (None of the determinations made by the OIG are subject to 
reconsideration.)
    (b) Request for reconsideration: Manner and timing. The affected 
party specified in paragraph (a) of this section, if dissatisfied with 
the initial determination may request reconsideration by filing the 
request--
    (1) With CMS or with the State survey agency;
    (2) Directly or through its legal representative or other authorized 
official; and
    (3) Within 60 days from receipt of the notice of initial 
determination, unless the time is extended in accordance with paragraph 
(d) of this section. The

[[Page 1085]]

date of receipt will be presumed to be 5 days after the date on the 
notice unless there is a showing that it was, in fact, received earlier 
or later.
    (c) Content of request. The request for reconsideration must state 
the issues, or the findings of fact with which the affected party 
disagrees, and the reasons for disagreement.
    (d) Extension of time to file a request for reconsideration. (1) If 
the affected party is unable to file the request within the 60 days 
specified in paragraph (b) of this section, it may file a written 
request with CMS, stating the reasons why the request was not filed 
timely.
    (2) CMS will extend the time for filing a request for 
reconsideration if the affected party shows good cause for missing the 
deadline.



Sec. 498.23  Withdrawal of request for reconsideration.

    A request for reconsideration is considered withdrawn if the 
requestor files a written withdrawal request before CMS mails the notice 
of reconsidered determination, and CMS approves the withdrawal request.



Sec. 498.24  Reconsidered determination.

    When a request for reconsideration has been properly filed in 
accordance with Sec. 498.22, CMS--
    (a) Receives written evidence and statements that are relevant and 
material to the matters at issue and are submitted within a reasonable 
time after the request for reconsideration;
    (b) Considers the initial determination, the findings on which the 
initial determination was based, the evidence considered in making the 
initial determination, and any other written evidence submitted under 
paragraph (a) of this section, taking into account facts relating to the 
status of the prospective provider or supplier subsequent to the initial 
determination; and
    (c) Makes a reconsidered determination, affirming or modifying the 
initial determination and the findings on which it was based.



Sec. 498.25  Notice and effect of reconsidered determination.

    (a) Notice. (1) CMS mails notice of a reconsidered determination to 
the affected party.
    (2) The notice gives the reasons for the determination.
    (3) If the determination is adverse, the notice specifies the 
conditions or requirements of law or regulations that the affected party 
fails to meet, and informs the party of its right to a hearing.
    (b) Effect. A reconsidered determination is binding unless--
    (1) CMS or the OIG, as appropriate, further revises the revised 
determination; or
    (2) The revised determination is reversed or modified by a hearing 
decision.



     Subpart C--Reopening of Initial or Reconsidered Determinations



Sec. 498.30  Limitation on reopening.

    An initial or reconsidered determination that a prospective provider 
is a provider or that a hospital qualifies to elect to claim payment for 
all emergency services furnished in a calendar year may not be reopened. 
CMS or the OIG, as appropriate, may on its own initiative, reopen any 
other initial or reconsidered determination, within 12 months after the 
date of notice of the initial determination.



Sec. 498.32  Notice and effect of reopening and revision.

    (a) Notice. (1) CMS or the OIG, as appropriate, gives the affected 
party notice of reopening and of any revision of the reopened 
determination.
    (2) The notice of revised determination states the basis or reason 
for the revised determination.
    (3) If the determination is that a supplier or prospective supplier 
does not meet the conditions for coverage of its services, the notice 
specifies the conditions with respect to which the affected party fails 
to meet the requirements of law and regulations, and informs the party 
of its right to a hearing.
    (b) Effect. A revised determination is binding unless
    (1) The affected party requests a hearing before an ALJ; or
    (2) CMS or the OIG further revises the revised determination.

[[Page 1086]]



                           Subpart D--Hearings



Sec. 498.40  Request for hearing.

    (a) Manner and timing of request. (1) An affected party entitled to 
a hearing under Sec. 498.5 may file a request for a hearing with CMS or 
the OIG, as appropriate, or with OHA.
    (2) The affected party or its legal representative or other 
authorized official must file the request in writing within 60 days from 
receipt of the notice of initial, reconsidered, or revised determination 
unless that period is extended in accordance with paragraph (c) of this 
section. (Presumed date of receipt is determined in accordance with 
Sec. 498.22(b)(3)).
    (b) Content of request for hearing. The request for hearing must--
    (1) Identify the specific issues, and the findings of fact and 
conclusions of law with which the affected party disagrees; and
    (2) Specify the basis for contending that the findings and 
conclusions are incorrect.
    (c) Extension of time for filing a request for hearing. If the 
request was not filed within 60 days--
    (1) The affected party or its legal representative or other 
authorized official may file with the ALJ a written request for 
extension of time stating the reasons why the request was not filed 
timely.
    (2) For good cause shown, the ALJ may extend the time for filing the 
request for hearing.



Sec. 498.42  Parties to the hearing.

    The parties to the hearing are the affected party and CMS or the 
OIG, as appropriate.



Sec. 498.44  Designation of hearing official.

    (a) The Associate Commissioner for Hearings and Appeals, or his or 
her delegate designates an ALJ or a member or members of the 
Departmental Appeals Board to conduct the hearing.
    (b) If appropriate, the Associate Commissioner or the delegate may 
substitute another ALJ or another member or other members of the 
Departmental Appeals Board to conduct the hearing.
    (c) As used in this part, ``ALJ'' includes a member or members of 
the Departmental Appeals Board who are designated to conduct a hearing.



Sec. 498.45  Disqualification of Administrative Law Judge.

    (a) An ALJ may not conduct a hearing in a case in which he or she is 
prejudiced or partial to the affected party or has any interest in the 
matter pending for decision.
    (b) A party that objects to the ALJ designated to conduct the 
hearing must give notice of its objections at the earliest opportunity.
    (c) The ALJ will consider the objections and decide whether to 
withdraw or proceed with the hearing.
    (1) If the ALJ withdraws, another will be designated to conduct the 
hearing.
    (2) If the ALJ does not withdraw, the objecting party may, after the 
hearing, present its objections to the Departmental Appeals Board as 
reasons for changing, modifying, or reversing the ALJ's decision or 
providing a new hearing before another ALJ.



Sec. 498.47  Prehearing conference.

    (a) At any time before the hearing, the ALJ may call a prehearing 
conference for the purpose of delineating the issues in controversy, 
identifying the evidence and witnesses to be presented at the hearing, 
and obtaining stipulations accordingly.
    (b) On the request of either party or on his or her own motion, the 
ALJ may adjourn the prehearing conference and reconvene at a later date.



Sec. 498.48  Notice of prehearing conference.

    (a) Timing of notice. The ALJ will fix a time and place for the 
prehearing conference and mail written notice to the parties at least 10 
days before the scheduled date.
    (b) Content of notice. The notice will inform the parties of the 
purpose of the conference and specify what issues are sought to be 
resolved, agreed to, or excluded.
    (c) Additional issues. Issues other than those set forth in the 
notice of determination or the request for hearing

[[Page 1087]]

may be considered at the prehearing conference if----
    (1) Either party gives timely notice to that effect to the ALJ and 
the other party; or
    (2) The ALJ raises the issues in the notice of prehearing conference 
or at the conference.



Sec. 498.49  Conduct of prehearing conference.

    (a) The prehearing conference is open to the affected party or its 
representative, to the CMS or OIG representatives and their technical 
advisors, and to any other persons whose presence the ALJ considers 
necessary or proper.
    (b) The ALJ may accept the agreement of the parties as to the 
following:
    (1) Facts that are not in controversy.
    (2) Questions that have been resolved favorably to the affected 
party after the determination in dispute.
    (3) Remaining issues to be resolved.
    (c) The ALJ may request the parties to indicate the following:
    (1) The witnesses that will be present to testify at the hearing.
    (2) The qualifications of those witnesses.
    (3) The nature of other evidence to be submitted.



Sec. 498.50  Record, order, and effect of prehearing conference.

    (a) Record of prehearing conference. (1) A record is made of all 
agreements and stipulations entered into at the prehearing conference.
    (2) The record may be transcribed at the request of either party or 
the ALJ.
    (b) Order and opportunity to object. (1) The ALJ issues an order 
setting forth the results of the prehearing conference, including the 
agreements made by the parties as to facts not in controversy, the 
matters to be considered at the hearing, and the issues to be resolved.
    (2) Copies of the order are sent to all parties and the parties have 
10 days to file objections to the order.
    (3) After the 10 days have elapsed, the ALJ settles the order.
    (c) Effect of prehearing conference. The agreements and stipulations 
entered into at the prehearing conference are binding on all parties, 
unless a party presents facts that, in the opinion of the ALJ, would 
make an agreement unreasonable or inequitable.



Sec. 498.52  Time and place of hearing.

    (a) The ALJ fixes a time and place for the hearing and gives the 
parties written notice at least 10 days before the scheduled date.
    (b) The notice informs the parties of the general and specific 
issues to be resolved at the hearing.



Sec. 498.53  Change in time and place of hearing.

    (a) The ALJ may change the time and place for the hearing either on 
his or her own initiative or at the request of a party for good cause 
shown, or may adjourn or postpone the hearing.
    (b) The ALJ may reopen the hearing for receipt of new evidence at 
any time before mailing the notice of hearing decision.
    (c) The ALJ gives the parties reasonable notice of any change in 
time or place or any adjournment or reopening of the hearing.



Sec. 498.54  Joint hearings.

    When two or more affected parties have requested hearings and the 
same or substantially similar matters are at issue, the ALJ may, if all 
parties agree, fix a single time and place for the prehearing conference 
or hearing and conduct all proceedings jointly. If joint hearings are 
held, a single record of the preceedings is made and a separate decision 
issued with respect to each affected party.



Sec. 498.56  Hearing on new issues.

    (a) Basic rules. (1) Within the time limits specified in paragraph 
(b) of this section, the ALJ may, at the request of either party, or on 
his or her own motion, provide a hearing on new issues that impinge on 
the rights of the affected party.
    (2) The ALJ may consider new issues even if CMS or the OIG has not 
made initial or reconsidered determinations on them, and even if they 
arose after the request for hearing was filed or after a prehearing 
conference.
    (3) The ALJ may give notice of hearing on new issues at any time 
after the hearing request is filed and before the hearing record is 
closed.

[[Page 1088]]

    (b) Time limits. The ALJ will not consider any issue that arose on 
or after any of the following dates:
    (1) The effective date of the termination of a provider agreement.
    (2) The date on which it is determined that a supplier no longer 
meets the conditions for coverage of its services.
    (3) The effective date of the notice to a hospital of its failure to 
remain in compliance with the qualifications for claiming reimbursement 
for all emergency services furnished to Medicare beneficiaries during 
the calendar year.
    (4) The effective date of the suspension, or of the exclusion from 
coverage of services furnished by a suspended or excluded practitioner, 
provider, or supplier.
    (5) With respect to Medicaid SNFs or ICFs surveyed under section 
1910(c) of the Act--
    (i) The completion date of the survey or resurvey that is the basis 
for a proposed cancellation of approval; or
    (ii) If approval was cancelled before the hearings, because of 
immediate and serious threat to patient health and safety, the effective 
date of cancellation.
    (c) Notice and conduct of hearing on new issues. (1) Unless the 
affected party waives its right to appear and present evidence, notice 
of the time and place of hearing on any new issue will be given to the 
parties in accordance with Sec. 498.52.
    (2) After giving notice, the ALJ will, except as provided in 
paragraph (d) of this section, proceed to hearing on new issues in the 
same manner as on an issue raised in the request for hearing.
    (d) Remand to CMS or the OIG. At the request of either party, or on 
his or her own motion, in lieu of a hearing under paragraph (c) of this 
section, the ALJ may remand the case to CMS or the OIG for consideration 
of the new issue and, if appropriate, a determination. If necessary, the 
ALJ may direct CMS or the OIG to return the case to the ALJ for further 
proceedings.

[52 FR 22446, June 12, 1987, as amended at 53 FR 31335, Aug. 18, 1988]



Sec. 498.58  Subpoenas.

    (a) Basis for issuance. The ALJ, upon his or her own motion or at 
the request of a party, may issue subpoenas if they are reasonably 
necessary for the full presentation of a case.
    (b) Timing of request by a party. The party must file a written 
request for a subpoena with the ALJ at least 5 days before the date set 
for the hearing.
    (c) Content of request. The request must:
    (1) Identify the witnesses or documents to be produced;
    (2) Describe their addresses or location with sufficient 
particularity to permit them to be found; and
    (3) Specify the pertinent facts the party expects to establish by 
the witnesses or documents, and indicate why those facts could not be 
established without use of a subpoena.
    (d) Method of issuance. Subpoenas are issued in the name of the 
Secretary, who pays the cost of issuance and the fees and mileage of any 
subpoenaed witnesses.



Sec. 498.60  Conduct of hearing.

    (a) Participants in the hearing. The hearing is open to the parties 
and their representatives and technical advisors, and to any other 
persons whose presence the ALJ considers necessary or proper.
    (b) Hearing procedures. (1) The ALJ inquires fully into all of the 
matters at issue, and receives in evidence the testimony of witnesses 
and any documents that are relevant and material.
    (2) If the ALJ believes that there is relevant and material evidence 
available which has not been presented at the hearing, he may, at any 
time before mailing of notice of the decision, reopen the hearing to 
receive that evidence.
    (3) The ALJ decides the order in which the evidence and the 
arguments of the parties are presented and the conduct of the hearing.
    (c) Scope of review: Civil money penalty. In civil money penalty 
cases--
    (1) The scope of review is as specified in Sec. 488.438(e) of this 
chapter; and
    (2) CMS's determination as to the level of noncompliance of an SNF 
or NF must be upheld unless it is clearly erroneous.

[52 FR 22446, June 12, 1987, as amended at 61 FR 32350, June 24, 1996]

[[Page 1089]]



Sec. 498.61  Evidence.

    Evidence may be received at the hearing even though inadmissible 
under the rules of evidence applicable to court procedure. The ALJ rules 
on the admissibility of evidence.

[59 FR 56252, Nov. 10, 1994, as amended at 61 FR 32350, June 24, 1996]



Sec. 498.62  Witnesses.

    Witnesses at the hearing testify under oath or affirmation. The 
representative of each party is permitted to examine his or her own 
witnesses subject to interrogation by the representative of the other 
party. The ALJ may ask any questions that he or she deems necessary. The 
ALJ rules upon any objection made by either party as to the propriety of 
any question.



Sec. 498.63  Oral and written summation.

    The parties to a hearing are allowed a reasonable time to present 
oral summation and to file briefs or other written statements of 
proposed findings of fact and conclusions of law. Copies of any briefs 
or other written statements must be sent in accordance with Sec. 498.17.



Sec. 498.64  Record of hearing.

    A complete record of the proceedings at the hearing is made and 
transcribed in all cases.



Sec. 498.66  Waiver of right to appear and present evidence.

    (a) Waiver procedures. (1) If an affected party wishes to waive its 
right to appear and present evidence at the hearing, it must file a 
written waiver with the ALJ.
    (2) If the affected party wishes to withdraw a waiver, it may do so, 
for good cause, at any time before the ALJ mails notice of the hearing 
decision.
    (b) Effect of waiver. If the affected party waives the right to 
appear and present evidence, the ALJ need not conduct an oral hearing 
except in one of the following circumstances:
    (1) The ALJ believes that the testimony of the affected party or its 
representatives or other witnesses is necessary to clarify the facts at 
issue.
    (2) CMS or the OIG shows good cause for requiring the presentation 
of oral evidence.
    (c) Dismissal for failure to appear. If, despite the waiver, the ALJ 
sends notice of hearing and the affected party fails to appear, or to 
show good cause for the failure, the ALJ will dismiss the appeal in 
accordance with Sec. 498.69.
    (d) Hearing without oral testimony. When there is no oral testimony, 
the ALJ will--
    (1) Make a record of the relevant written evidence that was 
considered in making the determination being appealed, and of any 
additional evidence submitted by the parties;
    (2) Furnish to each party copies of the additional evidence 
submitted by the other party; and
    (3) Give both parties a reasonable opportunity for rebuttal.
    (e) Handling of briefs and related statements. If the parties submit 
briefs or other written statements of evidence or proposed findings of 
facts or conclusions of law, those documents will be handled in 
accordance with Sec. 498.17.



Sec. 498.68  Dismissal of request for hearing.

    (a) The ALJ may, at any time before mailing the notice of the 
decision, dismiss a hearing request if a party withdraws its request for 
a hearing or the affected party asks that its request be dismissed.
    (b) An affected party may request a dismissal by filing a written 
notice with the ALJ.



Sec. 498.69  Dismissal for abandonment.

    (a) The ALJ may dismiss a request for hearing if it is abandoned by 
the party that requested it.
    (b) The ALJ may consider a request for hearing to be abandoned if 
the party or its representative--
    (1) Fails to appear at the prehearing conference or hearing without 
having previously shown good cause for not appearing; and
    (2) Fails to respond, within 10 days after the ALJ sends a ``show 
cause'' notice, with a showing of good cause.



Sec. 498.70  Dismissal for cause.

    On his or her own motion, or on the motion of a party to the 
hearing, the

[[Page 1090]]

ALJ may dismiss a hearing request either entirely or as to any stated 
issue, under any of the following circumstances:
    (a) Res judicata. There has been a previous determination or 
decision with respect to the rights of the same affected party on the 
same facts and law pertinent to the same issue or issues which has 
become final either by judicial affirmance or, without judicial 
consideration, because the affected party did not timely request 
reconsideration, hearing, or review, or commence a civil action with 
respect to that determination or decision.
    (b) No right to hearing. The party requesting a hearing is not a 
proper party or does not otherwise have a right to a hearing.
    (c) Hearing request not timely filed. The affected party did not 
file a hearing request timely and the time for filing has not been 
extended.



Sec. 498.71  Notice and effect of dismissal and right to request review.

    (a) Notice of the ALJ's dismissal action is mailed to the parties. 
The notice advises the affected party of its right to request that the 
dismissal be vacated as provided in Sec. 498.72.
    (b) The dismissal of a request for hearing is binding unless it is 
vacated by the ALJ or the Departmental Appeals Board.



Sec. 498.72  Vacating a dismissal of request for hearing.

    An ALJ may vacate any dismissal of a request for hearing if a party 
files a request to that effect within 60 days from receipt of the notice 
of dismissal and shows good cause for vacating the dismissal. (Date of 
receipt is determined in accordance with Sec. 498.22(b)(3).)



Sec. 498.74  Administrative Law Judge's decision.

    (a) Timing, basis and content. As soon as practical after the close 
of the hearing, the ALJ issues a written decision in the case. The 
decision is based on the evidence of record and contains separate 
numbered findings of fact and conclusions of law.
    (b) Notice and effect. A copy of the decision is mailed to the 
parties and is binding on them unless--
    (1) A party requests review by the Departmental Appeals Board within 
the time period specified in Sec. 498.82, and the Board reviews the 
case;
    (2) The Departmental Appeals Board denies the request for review and 
the party seeks judicial review by filing an action in a United States 
District Court or, in the case of a civil money penalty, in a United 
States Court of Appeals;
    (3) The decision is revised by an ALJ or the Departmental Appeals 
Board; or
    (4) The decision is a recommended decision directed to the Board.

[52 FR 22446, June 12, 1987, as amended at 61 FR 32351, June 24, 1996]



Sec. 498.76  Removal of hearing to Departmental Appeals Board.

    (a) At any time before the ALJ receives oral testimony, the Board 
may remove to itself any pending request for a hearing.
    (b) Notice of removal is mailed to each party.
    (c) The Board conducts the hearing in accordance with the rules that 
apply to ALJ hearings under this subpart.



Sec. 498.78  Remand by the Administrative Law Judge.

    (a) If CMS or the OIG requests remand, and the affected party 
concurs in writing or on the record, the ALJ may remand any case 
properly before him or her to CMS or the OIG for a determination 
satisfactory to the affected party.
    (b) The ALJ may remand at any time before notice of hearing decision 
is mailed.



              Subpart E--Departmental Appeals Board Review



Sec. 498.80  Right to request Departmental Appeals Board review of Administrative Law Judge's decision or dismissal.

    Either of the parties has a right to request Departmental Appeals 
Board review of the ALJ's decision or dismissal order, and the parties 
are so informed in the notice of the ALJ's action.

[[Page 1091]]



Sec. 498.82  Request for Departmental Appeals Board review.

    (a) Manner and time of filing. (1) Any party that is dissatisfied 
with an ALJ's decision or dismissal of a hearing request, may file a 
written request for review by the Departmental Appeals Board.
    (2) The requesting party or its representative or other authorized 
official must file the request with the OHA within 60 days from receipt 
of the notice of decision or dismissal, unless the Board, for good cause 
shown by the requesting party, extends the time for filing. The rules 
set forth in Sec. 498.40(c) apply to extension of time for requesting 
Departmental Appeals Board review. (The date of receipt of notice is 
determined in accordance with Sec. 498.22(c)(3).)
    (b) Content of request for review. A request for review of an ALJ 
decision or dismissal must specify the issues, the findings of fact or 
conclusions of law with which the party disagrees, and the basis for 
contending that the findings and conclusions are incorrect.



Sec. 498.83  Departmental Appeals Board action on request for review.

    (a) Request by CMS or the OIG. The Departmental Appeals Board may 
dismiss, deny, or grant a request made by CMS or the OIG for review of 
an ALJ decision or dismissal.
    (b) Request by the affected party. The Board will grant the affected 
party's request for review unless it dismisses the request for one of 
the following reasons:
    (1) The affected party requests dismissal of its request for review.
    (2) The affected party did not file timely or show good cause for 
late filing.
    (3) The affected party does not have a right to review.
    (4) A previous determination or decision, based on the same facts 
and law, and regarding the same issue, has become final through judicial 
affirmance or because the affected party failed to timely request 
reconsideration, hearing, Board review, or judicial review, as 
appropriate.
    (c) Effect of dismissal. The dismissal of a request for Departmental 
Appeals Board review is binding and not subject to further review.
    (d) Review panel. If the Board grants a request for review of the 
ALJ's decision, the review will be conducted by a panel of at least two 
members of the Board, designated by the Chairperson or Deputy 
Chairperson, and one individual designated by the Secretary from the U.S 
Public Health Service.



Sec. 498.85  Procedures before the Departmental Appeals Board on review.

    The parties are given, upon request, a reasonable opportunity to 
file briefs or other written statements as to fact and law, and to 
appear before the Departmental Appeals Board to present evidence or oral 
arguments. Copies of any brief or other written statement must be sent 
in accordance with Sec. 498.17.



Sec. 498.86  Evidence admissible on review.

    (a) The Departmental Appeals Board may admit evidence into the 
record in addition to the evidence introduced at the ALJ hearing, (or 
the documents considered by the ALJ if the hearing was waived), if the 
Board considers that the additional evidence is relevant and material to 
an issue before it.
    (b) If it appears to the Board that additional relevant evidence is 
available, the Board will require that it be produced.
    (c) Before additional evidence is admitted into the record--
    (1) Notice is mailed to the parties (unless they have waived notice) 
stating that evidence will be received regarding specified issues; and
    (2) The parties are given a reasonable time to comment and to 
present other evidence pertinent to the specified issues.
    (d) If additional evidence is presented orally to the Board, a 
transcript is prepared and made available to any party upon request.



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

    (a) When the Departmental Appeals Board reviews an ALJ's decision or 
order of dismissal, or receives a case remanded by a court, the Board 
may either issue a decision or remand the

[[Page 1092]]

case to an ALJ for a hearing and decision or a recommended decision for 
final decision by the Board.
    (b) In a remanded case, the ALJ initiates additional proceedings and 
takes other actions as directed by the Board in its order of remand, and 
may take other action not inconsistent with that order.
    (c) Upon completion of all action called for by the remand order and 
any other consistent action, the ALJ promptly makes a decision or, as 
specified by the Board, certifies the case to the Board with a 
recommended decision.
    (d) The parties have 20 days from the date of a notice of a 
recommended decision to submit to the Board any exception, objection, or 
comment on the findings of fact, conclusions of law, and recommended 
decision.
    (e) After the 20-day period, the Board issues its decision adopting, 
modifying or rejecting the ALJ's recommended decision.
    (f) If the Board does not remand the case to an ALJ, the following 
rules apply:
    (1) The Board's decision--
    (i) Is based upon the evidence in the hearing record and any further 
evidence that the Board receives during its review;
    (ii) Is in writing and contains separate numbered findings of fact 
and conclusions of law; and
    (iii) May modify, affirm, or reverse the ALJ's decision.
    (2) A copy of the Board's decision is mailed to each party.



Sec. 498.90  Effect of Departmental Appeals Board decision.

    (a) General rule. The Board's decision is binding unless--
    (1) The affected party has a right to judicial review and timely 
files a civil action in a United States District Court or, in the case 
of a civil money penalty, in a United States Court of Appeals; or
    (2) The Board reopens and revises its decision in accordance with 
Sec. 498.102.
    (b) Right to judicial review. Section 498.5 specifies the 
circumstances under which an affected party has a right to seek judicial 
review.
    (c) Special rules: Civil money penalty.
    (1) Finality of Board's decision. When CMS imposes a civil money 
penalty, notice of the Board's decision (or denial of review) is the 
final administrative action that initiates the 60-day period for seeking 
judicial review.
    (2) Timing for collection of civil money penalty. For SNFs and NFs, 
the rules that apply are those set forth in subpart F of part 488 of 
this chapter.

[61 FR 32351, June 24, 1996]



Sec. 498.95  Extension of time for seeking judicial review.

    (a) Any affected party that is dissatisfied with an Departmental 
Appeals Board decision and is entitled to judicial review must commence 
civil action within 60 days from receipt of the notice of the Board's 
decision (as determined under Sec. 498.22(c)(3)), unless the Board 
extends the time in accordance with paragraph (c) of this section.
    (b) The request for extension must be filed in writing with the 
Board before the 60-day period ends.
    (c) For good cause shown, the Board may extend the time for 
commencing civil action.



 Subpart F--Reopening of Decisions Made by Administrative Law Judges or 
                     the Departmental Appeals Board



Sec. 498.100  Basis, timing, and authority for reopening an ALJ or Board decision.

    (a) Basis and timing for reopening. An ALJ of Departmental Appeals 
Board decision may be reopened, within 60 days from the date of the 
notice of decision, upon the motion of the ALJ or the Board or upon the 
petition of either party to the hearing.
    (b) Authority to reopen. (1) A decision of the Departmental Appeals 
Board may be reopened only by the Departmental Appeals Board.
    (2) A decision of an ALJ may be reopened by that ALJ, by another ALJ 
if that one is not available, or by the Departmental Appeals Board. For 
purposes of this paragraph, an ALJ is considered to be unavailable if 
the ALJ has died, terminated employment, or

[[Page 1093]]

been transferred to another duty station, is on leave of absence, or is 
unable to conduct a hearing because of illness.



Sec. 498.102  Revision of reopened decision.

    (a) Revision based on new evidence. If a reopened decision is to be 
revised on the basis of new evidence that was not included in the record 
of that decision, the ALJ or the Departmental Appeals Board--
    (1) Notifies the parties of the proposed revision; and
    (2) Unless the parties waive their right to hearing or appearance--
    (i) Grants a hearing in the case of an ALJ revision; and
    (ii) Grants opportunity to appear in the case of a Board revision.
    (b) Basis for revised decision and right to review. (1) If a revised 
decision is necessary, the ALJ or the Departmental Appeals Board, as 
appropriate, renders it on the basis of the entire record.
    (2) If the decision is revised by an ALJ, the Departmental Appeals 
Board may review that revised decision at the request of either party or 
on its own motion.



Sec. 498.103  Notice and effect of revised decision.

    (a) Notice. The notice mailed to the parties states the basis or 
reason for the revised decision and informs them of their right to 
Departmental Appeals Board review of an ALJ revised decision, or to 
judicial review of a Board reviewed decision.
    (b) Effect--(1) ALJ revised decision. An ALJ revised decision is 
binding unless it is reviewed by the Departmental Appeals Board.
    (2) Departmental Appeals Board revised decision. A Board revised 
decision is binding unless a party files a civil action in a district 
court of the United States within the time frames specified in 
Sec. 498.95.

[[Page 1095]]



                     CHAPTER V--OFFICE OF INSPECTOR
                          GENERAL--HEALTH CARE,
                        DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter V appear at 66 FR 
39452, July 31, 2001 and 67 FR 36540, May 24, 2002.

                    SUBCHAPTER A--GENERAL PROVISIONS
Part                                                                Page
1000            Introduction; General definitions...........        1097
                      SUBCHAPTER B--OIG AUTHORITIES
1001            Program integrity--Medicare and State health 
                    care programs...........................        1100
1002            Program integrity--State-initiated 
                    exclusions from Medicaid................        1145
1003            Civil money penalties, assessments and 
                    exclusions..............................        1148
1004            Imposition of sanctions on health care 
                    practitioners and providers of health 
                    care services by a Quality Improvement 
                    Organization............................        1163
1005            Appeals of exclusions, civil money penalties 
                    and assessments.........................        1172
1006            Investigational inquiries...................        1180
1007            State Medicaid fraud control units..........        1182
1008            Advisory opinions by the OIG................        1186

[[Page 1097]]



                    SUBCHAPTER A--GENERAL PROVISIONS



PART 1000--INTRODUCTION; GENERAL DEFINITIONS--Table of Contents




Subpart A [Reserved]

                         Subpart B--Definitions

Sec.
1000.10 General definitions.
1000.20 Definitions specific to Medicare.
1000.30 Definitions specific to Medicaid.

    Authority: 42 U.S.C. 1320 and 1395hh.

    Source: 51 FR 34766, Sept. 30, 1986, unless otherwise noted.

Subpart A [Reserved]



                         Subpart B--Definitions



Sec. 1000.10  General definitions.

    In this chapter, unless the context indicates otherwise--
    Act means the Social Security Act, and titles referred to are titles 
of that Act.
    Administrator means the Administrator, Centers for Medicare & 
Medicaid Services (CMS), formerly the Health Care Financing 
Administration (HCFA).
    Beneficiary means any individual eligible to have benefits paid to 
him or her, or on his or her behalf, under Medicare or any State health 
care program.
    CFR stands for Code of Federal Regulations.
    CMS stands for Centers for Medicare & Medicaid Services, formerly 
the Health Care Financing Administration (HCFA).
    Department means the Department of Health and Human Services (HHS), 
formerly the Department of Health, Education, and Welfare.
    Directly, as used in the definition of ``furnished'' in this 
section, means the provision of items and services by individuals or 
entities (including items and services provided by them, but 
manufactured, ordered or prescribed by another individual or entity) who 
submit claims to Medicare, Medicaid or other Federal health care 
programs.
    ESRD stands for end-stage renal disease.
    FR stands for Federal Register.
    Furnished refers to items or services provided or supplied, directly 
or indirectly, by any individual or entity. This includes items and 
services manufactured, distributed or otherwise provided by individuals 
or entities that do not directly submit claims to Medicare, Medicaid or 
other Federal health care programs, but that supply items or services to 
providers, practitioners or suppliers who submit claims to these 
programs for such items or services.
    HHS stands for the Department of Health and Human Services.
    HHA stands for home health agency.
    HMO stands for health maintenance organization.
    ICF stands for intermediate care facility.
    Indirectly, as used in the definition of ``furnished'' in this 
section, means the provision of items and services manufactured, 
distributed or otherwise supplied by individuals or entities who do not 
directly submit claims to Medicare, Medicaid or other Federal health 
care programs, but that provide items and services to providers, 
practitioners or suppliers who submit claims to these programs for such 
items and services. This term does not include individuals and entities 
that submit claims directly to these programs for items and services 
ordered or prescribed by another individual or entity.
    Inspector General means the Inspector General for Health and Human 
Services.
    Medicaid means medical assistance provided under a State plan 
approved under Title XIX of the Act.
    Medicare means the health insurance program for the aged and 
disabled under Title XVIII of the Act.
    OIG means the Office of Inspector General within HHS.
    QIO stands for Utilization and Quality Control Quality Improvement 
Organization.
    Secretary means the Secretary of Health and Human Services.

[[Page 1098]]

    SNF stands for skilled nursing facility.
    Social security benefits means monthly cash benefits payable under 
section 202 or 223 of the Act.
    SSA stands for Social Security Administration.
    United States means the fifty States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Mariana Islands.
    U.S.C. stands for United States Code.

[51 FR 34766, Sept. 30, 1986 as amended at 57 FR 3329, Jan. 29, 1992; 63 
FR 46685, Sept. 2, 1998; 66 FR 39452, July 31, 2001]



Sec. 1000.20  Definitions specific to Medicare.

    As used in connection with the Medicare program, unless the context 
indicates otherwise--
    Carrier means an entity that has a contract with CMS to determine 
and make Medicare payments for Part B benefits payable on a charge basis 
and to perform other related functions.
    Entitled means that an individual meets all the requirements for 
Medicare benefits.
    Hospital insurance benefits means payments on behalf of, and in rare 
circumstances directly to, an entitled individual for services that are 
covered under Part A of Title XVIII of the Act.
    Intermediary means an entity that has a contract with CMS to 
determine and make Medicare payments for Part A or Part B benefits 
payable on a cost basis and to perform other related functions.
    Medicare Part A means the hospital insurance program authorized 
under Part A of Title XVIII of the Act.
    Medicare Part B means the supplementary medical insurance program 
authorized under Part B of Title XVIII of the Act.
    Provider means a hospital, a skilled nursing facility, a 
comprehensive outpatient rehabilitation facility, a home health agency, 
or effective November 1, 1983 through September 30, 1986, a hospice that 
has in effect an agreement to participate in Medicare, or a clinic, a 
rehabilitation agency, or a public health agency that has a similar 
agreement but only to furnish outpatient physical therapy or speech 
pathology services.
    Railroad retirement benefits means monthly benefits payable to 
individuals under the Railroad Retirement Act of 1974 (45 U.S.C. 
beginning at section 231).
    Services means medical care or services and items, such as medical 
diagnosis and treatment, drugs and biologicals, supplies, appliances, 
and equipment, medical social services, and use of hospital or SNF 
facilities.
    Supplementary medical insurance benefits means payment to or on 
behalf of an entitled individual for services covered under Part B of 
Title XVIII of the Act.
    Supplier means a physician or other practitioner, or an entity other 
than a provider, that furnishes health care services under Medicare.

[51 FR 34766, Sept. 30, 1986, as amended at 57 FR 3329, Jan. 29, 1992]



Sec. 1000.30  Definitions specific to Medicaid.

    As used in connection with the Medicaid program, unless the context 
indicates otherwise--
    Applicant means an individual whose written application for Medicaid 
has been submitted to the agency determining Medicaid eligibility, but 
has not received final action. This includes an individual (who need not 
be alive at the time of application) whose application is submitted 
through a representative or a person acting responsibly for the 
individual.
    Federal financial participation (FFP) means the Federal Government's 
share of a State's expenditures under the Medicaid program.
    FMAP stands for the Federal medical assistance percentage, which is 
used to calculate the amount of Federal share of State expenditures for 
services.
    Medicaid agency or agency means the single State agency 
administering or supervising the administration of a State Medicaid 
plan.
    Provider means any individual or entity furnishing Medicaid services 
under a provider agreement with the Medicaid agency.
    Recipient means an individual who has been determined eligible for 
Medicaid.

[[Page 1099]]

    Services means the types of medical assistance specified in sections 
1905(a)(1) through (18) of the Act.
    State means the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa 
and the Northern Mariana Islands.
    State plan or the plan means a comprehensive written commitment by a 
Medicaid agency, submitted under section 1902(a) of the Act, to 
administer or supervise the administration of a Medicaid program in 
accordance with Federal requirements.

[[Page 1100]]



                      SUBCHAPTER B--OIG AUTHORITIES



PART 1001--PROGRAM INTEGRITY--MEDICARE AND STATE HEALTH CARE PROGRAMS--Table of Contents




                      Subpart A--General Provisions

Sec.
1001.1 Scope and purpose.
1001.2 Definitions.

                     Subpart B--Mandatory Exclusions

1001.101 Basis for liability.
1001.102 Length of exclusion.

                    Subpart C--Permissive Exclusions

1001.201 Conviction relating to program or health care fraud.
1001.301 Conviction relating to obstruction of an investigation.
1001.401 Conviction relating to controlled substances.
1001.501 License revocation or suspension.
1001.601 Exclusion or suspension under a Federal or State health care 
          program.
1001.701 Excessive claims or furnishing of unnecessary or substandard 
          items and services.
1001.801 Failure of HMOs and CMPs to furnish medically necessary items 
          and services.
1001.901 False or improper claims.
1001.951 Fraud and kickbacks and other prohibited activities.
1001.952 Exceptions.
1001.1001 Exclusion of entities owned or controlled by a sanctioned 
          person.
1001.1051 Exclusion of individuals with ownership or control interest in 
          sanctioned entities.
1001.1101 Failure to disclose certain information.
1001.1201 Failure to provide payment information.
1001.1301 Failure to grant immediate access.
1001.1401 Violations of PPS corrective action.
1001.1501 Default of health education loan or scholarship obligations.
1001.1601 Violations of the limitations on physician charges.
1001.1701 Billing for services of assistant at surgery during cataract 
          operations.

Appendix A to Subpart C of Part 1001

               Subpart D--Waivers and Effect of Exclusion

1001.1801 Waivers of exclusions.
1001.1901 Scope and effect of exclusion.

                      Subpart E--Notice and Appeals

1001.2001 Notice of intent to exclude.
1001.2002 Notice of exclusion.
1001.2003 Notice of proposal to exclude.
1001.2004 Notice to State agencies.
1001.2005 Notice to State licensing agencies.
1001.2006 Notice to others regarding exclusion.
1001.2007 Appeal of exclusions.

               Subpart F--Reinstatement into the Programs

1001.3001 Timing and method of request for reinstatement.
1001.3002 Basis for reinstatement.
1001.3003 Approval of request for reinstatement.
1001.3004 Denial of request for reinstatement.
1001.3005 Reversed or vacated decisions.

    Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j), 1395u(k), 
1395y(d), 1395y(e), 1395cc(b)(2) (D), (E) and (F), and 1395hh; and sec. 
2455, Pub.L. 103-355, 108 Stat. 3327 (31 U.S.C. 6101 note).

    Source: 57 FR 3330, Jan. 29, 1992, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 1001.1  Scope and purpose.

    (a) The regulations in this part specify certain bases upon which 
individuals and entities may, or in some cases must, be excluded from 
participation in Medicare, Medicaid and all other Federal health care 
programs. They also state the effect of exclusion, the factors that will 
be considered in determining the length of any exclusion, the provisions 
governing notices of exclusions, and the process by which an excluded 
individual or entity may seek reinstatement into the programs.
    (b) The regulations in this part are applicable to and binding on 
the Office of Inspector General (OIG) in imposing and proposing 
exclusions, as well as to Administrative Law Judges (ALJs), the 
Departmental Appeals Board (DAB), and federal courts in reviewing the 
imposition of exclusions by the OIG (and,

[[Page 1101]]

where applicable, in imposing exclusions proposed by the OIG).

[57 FR 3330, Jan. 29, 1992, as amended at 58 FR 5618, Jan. 22, 1993; 64 
FR 39426, July 22, 1999]



Sec. 1001.2  Definitions.

    Controlled substance means a drug or other substance, or immediate 
precursor:
    (a) Included in schedules I, II, III, IV or V of part B of 
subchapter I in 21 U.S.C. chapter 13, or
    (b) That is deemed a controlled substance by the law of any State.
    Convicted means that--
    (a) A judgment of conviction has been entered against an individual 
or entity by a Federal, State or local court, regardless of whether:
    (1) There is a post-trial motion or an appeal pending, or
    (2) The judgment of conviction or other record relating to the 
criminal conduct has been expunged or otherwise removed;
    (b) A Federal, State or local court has made a finding of guilt 
against an individual or entity;
    (c) A Federal, State or local court has accepted a plea of guilty or 
nolo contendere by an individual or entity; or
    (d) An individual or entity has entered into participation in a 
first offender, deferred adjudication or other program or arrangement 
where judgment of conviction has been withheld.
    Exclusion means that items and services furnished, ordered or 
prescribed by a specified individual or entity will not be reimbursed 
under Medicare, Medicaid and all other Federal health care programs 
until the individual or entity is reinstated by the OIG.
    Federal health care program means any plan or program providing 
health care benefits, whether directly through insurance or otherwise, 
that is funded directly, in whole or part, by the United States 
Government (other than the Federal Employees Health Benefits Program), 
or any State health care program as defined in this section.
    HHS means Department of Health and Human Services.
    Incarceration means imprisonment or any type of confinement with or 
without supervised release, including, but not limited to, community 
confinement, house arrest and home detention.
    OIG means Office of Inspector General of the Department of Health 
and Human Services.
    Patient means any individual who is receiving health care items or 
services, including any item or service provided to meet his or her 
physical, mental or emotional needs or well-being (including a resident 
receiving care in a facility as described in part 483 of this chapter), 
whether or not reimbursed under Medicare, Medicaid and any other Federal 
health care program and regardless of the location in which such item or 
service is provided.
    QIO means Utilization and Quality Control Quality Improvement 
Organization as created by the Tax Equity and Fiscal Responsibility Act 
of 1982 (42 U.S.C. 1320c-3).
    Professionally recognized standards of health care are Statewide or 
national standards of care, whether in writing or not, that professional 
peers of the individual or entity whose provision of care is an issue, 
recognize as applying to those peers practicing or providing care within 
a State. When the Department has declared a treatment modality not to be 
safe and effective, practitioners who employ such a treatment modality 
will be deemed not to meet professionally recognized standards of health 
care. This definition will not be construed to mean that all other 
treatments meet professionally recognized standards.
    Sole community physician means a physician who is the only physician 
who provides primary care services to Federal or State health care 
program beneficiaries within a defined service area.
    Sole source of essential specialized services in the community means 
that an individual or entity--
    (1) Is the only practitioner, supplier or provider furnishing 
specialized services in an area designated by the Health Resources 
Services Administration as a health professional shortage area for that 
medical specialty, as listed in 42 part 5, appendices B-F;
    (2) Is a sole community hospital, as defined in Sec. 412.92 of this 
title; or

[[Page 1102]]

    (3) Is the only source of specialized services in a reasonably 
defined service area where services by a non-specialist could not be 
substituted for the source without jeopardizing the health or safety of 
beneficiaries.
    State health care program means:
    (a) A State plan approved under title XIX of the Act (Medicaid),
    (b) Any program receiving funds under title V of the Act or from an 
allotment to a State under such title (Maternal and Child Health 
Services Block Grant program), or
    (c) Any program receiving funds under title XX of the Act or from 
any allotment to a State under such title (Block Grants to States for 
Social Services).
    State Medicaid Fraud Control Unit means a unit certified by the 
Secretary as meeting the criteria of 42 U.S.C. 1396b(q) and 
Sec. 1002.305 of this chapter.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46686, Sept. 2, 1998; 64 
FR 39426, July 22, 1999]



                     Subpart B--Mandatory Exclusions



Sec. 1001.101  Basis for liability.

    The OIG will exclude any individual or entity that--
    (a) Has been convicted of a criminal offense related to the delivery 
of an item or service under Medicare or a State health care program, 
including the performance of management or administrative services 
relating to the delivery of items or services under any such program;
    (b) Has been convicted, under Federal or State law, of a criminal 
offense related to the neglect or abuse of a patient, in connection with 
the delivery of a health care item or service, including any offense 
that the OIG concludes entailed, or resulted in, neglect or abuse of 
patients (the delivery of a health care item or service includes the 
provision of any item or service to an individual to meet his or her 
physical, mental or emotional needs or well-being, whether or not 
reimbursed under Medicare, Medicaid or any Federal health care program);
    (c) Has been convicted, under Federal or State law, of a felony that 
occurred after August 21, 1996, relating to fraud, theft, embezzlement, 
breach of fiduciary responsibility, or other financial misconduct--
    (1) In connection with the delivery of a health care item or 
service, including the performance of management or administrative 
services relating to the delivery of such items or services, or
    (2) With respect to any act or omission in a health care program 
(other than Medicare and a State health care program) operated by, or 
financed in whole or in part, by any Federal, State or local government 
agency; or
    (d) Has been convicted, under Federal or State law, of a felony that 
occurred after August 21, 1996 relating to the unlawful manufacture, 
distribution, prescription or dispensing of a controlled substance, as 
defined under Federal or State law. This applies to any individual or 
entity that--
    (1) Is, or has ever been, a health care practitioner, provider or 
supplier;
    (2) Holds, or has held, a direct or indirect ownership or control 
interest (as defined in section 1124(a)(3) of the Act) in an entity that 
is a health care provider or supplier, or is, or has ever been, an 
officer, director, agent or managing employee (as defined in section 
1126(b) of the Act) of such an entity; or
    (3) Is, or has ever been, employed in any capacity in the health 
care industry.

[63 FR 46686, Sept. 2, 1998, as amended at 67 FR 11932, Mar. 18, 2002]



Sec. 1001.102  Length of exclusion.

    (a) No exclusion imposed in accordance with Sec. 1001.101 will be 
for less than 5 years.
    (b) Any of the following factors may be considered to be aggravating 
and a basis for lengthening the period of exclusion--
    (1) The acts resulting in the conviction, or similar acts, that 
caused, or were intended to cause, a financial loss to a Government 
program or to one or more entities of $5,000 or more. (The entire amount 
of financial loss to such programs or entities, including any amounts 
resulting from similar acts not adjudicated, will be considered 
regardless of whether full or partial restitution has been made);

[[Page 1103]]

    (2) The acts that resulted in the conviction, or similar acts, were 
committed over a period of one year or more;
    (3) The acts that resulted in the conviction, or similar acts, had a 
significant adverse physical, mental or financial impact on one or more 
program beneficiaries or other individuals;
    (4) In convictions involving patient abuse or neglect, the action 
that resulted in the conviction was premeditated, was part of a 
continuing pattern of behavior, or consisted of non-consensual sexual 
acts;
    (5) The sentence imposed by the court included incarceration;
    (6) The convicted individual or entity has a prior criminal, civil 
or administrative sanction record;
    (7) The individual or entity has at any time been overpaid a total 
of $1,500 or more by Medicare, Medicaid or any other Federal health care 
programs as a result of intentional improper billings;
    (8) The individual or entity has previously been convicted of a 
criminal offense involving the same or similar circumstances; or
    (9) Whether the individual or entity was convicted of other offenses 
besides those which formed the basis for the exclusion, or has been the 
subject of any other adverse action by any Federal, State or local 
government agency or board, if the adverse action is based on the same 
set of circumstances that serves as the basis for imposition of the 
exclusion.
    (c) Only if any of the aggravating factors set forth in paragraph 
(b) of this section justifies an exclusion longer than 5 years, may 
mitigating factors be considered as a basis for reducing the period of 
exclusion to no less than 5 years. Only the following factors may be 
considered mitigating--
    (1) The individual or entity was convicted of 3 or fewer misdemeanor 
offenses, and the entire amount of financial loss (both actual loss and 
intended loss) to Medicare or any other Federal, State or local 
governmental health care program due to the acts that resulted in the 
conviction, and similar acts, is less than $1,500;
    (2) The record in the criminal proceedings, including sentencing 
documents, demonstrates that the court determined that the individual 
had a mental, emotional or physical condition before or during the 
commission of the offense that reduced the individual's culpability; or
    (3) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (i) Others being convicted or excluded from Medicare, Medicaid and 
all other Federal health care programs,
    (ii) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (iii) The imposition against anyone of a civil money penalty or 
assessment under part 1003 of this chapter.
    (d) In the case of an exclusion under this subpart, based on a 
conviction occurring on or after August 5, 1997, an exclusion will be--
    (1) For not less than 10 years if the individual has been convicted 
on one other occasion of one or more offenses for which an exclusion may 
be effected under section 1128(a) of the Act (The aggravating and 
mitigating factors in paragraphs (b) and (c) of this section can be used 
to impose a period of time in excess of the 10-year mandatory 
exclusion); or
    (2) Permanent if the individual has been convicted on two or more 
other occasions of one or more offenses for which an exclusion may be 
effected under section 1128(a) of the Act.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46686, Sept. 2, 1998; 63 
FR 57918, Oct. 29, 1998; 64 FR 39426, July 22, 1999; 67 FR 11932, Mar. 
18, 2002]



                    Subpart C--Permissive Exclusions



Sec. 1001.201  Conviction relating to program or health care fraud.

    (a) Circumstance for exclusion. The OIG may exclude an individual or 
entity convicted under Federal or State law of--
    (1) A misdemeanor relating to fraud, theft, embezzlement, breach of 
fiduciary responsibility, or other financial misconduct--
    (i) In connection with the delivery of any health care item or 
service, including the performance of management or

[[Page 1104]]

administrative services relating to the delivery of such items or 
services, or
    (ii) With respect to any act or omission in a health care program, 
other than Medicare and a State health care program, operated by, or 
financed in whole or in part by, any Federal, State or local government 
agency; or
    (2) Fraud, theft, embezzlement, breach of fiduciary responsibility, 
or other financial misconduct with respect to any act or omission in a 
program, other than a health care program, operated by or financed in 
whole or in part by any Federal, State or local government agency.
    (b) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will be for a period of 3 years, unless aggravating or 
mitigating factors listed in paragraphs (b)(2) and (b)(3) of this 
section form a basis for lengthening or shortening that period.
    (2) Any of the following factors may be considered to be aggravating 
and a basis for lengthening the period of exclusion--
    (i) The acts resulting in the conviction, or similar acts that 
caused, or reasonably could have been expected to cause, a financial 
loss of $5,000 or more to a Government program or to one or more other 
entities, or had a significant financial impact on program beneficiaries 
or other individuals. (The total amount of financial loss will be 
considered, including any amounts resulting from similar acts not 
adjudicated, regardless of whether full or partial restitution has been 
made);
    (ii) The acts that resulted in the conviction, or similar acts, were 
committed over a period of one year or more;
    (iii) The acts that resulted in the conviction, or similar acts, had 
a significant adverse physical or mental impact on one or more program 
beneficiaries or other individuals;
    (iv) The sentence imposed by the court included incarceration;
    (v) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (vi) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any Federal, State or 
local government agency or board, if the adverse action is based on the 
same set of circumstances that serves as the basis for the imposition of 
the exclusion.
    (3) Only the following factors may be considered as mitigating and a 
basis for reducing the period of exclusion--
    (i) The individual or entity was convicted of 3 or fewer offenses, 
and the entire amount of financial loss (both actual loss and reasonably 
expected loss) to a Government program or to other individuals or 
entities due to the acts that resulted in the conviction and similar 
acts is less than $1,500;
    (ii) The record in the criminal proceedings, including sentencing 
documents, demonstrates that the court determined that the individual 
had a mental, emotional or physical condition, before or during the 
commission of the offense, that reduced the individual's culpability;
    (iii) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare, Medicaid or 
any of the other Federal health care programs, or
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
    (iv) Alternative sources of the type of health care items or 
services furnished by the individual or entity are not available.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46687, Sept. 2, 1998; 64 
FR 39426, July 22, 1999; 67 FR 11932, Mar. 18, 2002; 67 FR 21579, May 1, 
2002]



Sec. 1001.301  Conviction relating to obstruction of an investigation.

    (a) Circumstance for exclusion. The OIG may exclude an individual or 
entity that has been convicted, under Federal or State law, in 
connection with the interference with or obstruction of any 
investigation into any criminal offense described in Secs. 1001.101 or 
1001.201.
    (b) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will be for a period of 3 years,

[[Page 1105]]

unless aggravating or mitigating factors listed in paragraphs (b)(2) and 
(b)(3) of this section form the basis for lengthening or shortening that 
period.
    (2) Any of the following factors may be considered to be aggravating 
and a basis for lengthening the period of exclusion--
    (i) The interference with, or obstruction of, the investigation 
caused the expenditure of significant additional time or resources;
    (ii) The interference or obstruction had a significant adverse 
mental, physical or financial impact on program beneficiaries or other 
individuals or on the Medicare, Medicaid or other Federal health care 
programs;
    (iii) The interference or obstruction also affected a civil or 
administrative investigation;
    (iv) The sentence imposed by the court included incarceration;
    (v) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (vi) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any Federal, State or 
local government agency or board, if the adverse action is based on the 
same set of circumstances that serves as the basis for the imposition of 
the exclusion.
    (3) Only the following factors may be considered as mitigating and a 
basis for reducing the period of exclusion--
    (i) The record of the criminal proceedings, including sentencing 
documents, demonstrates that the court determined that the individual 
had a mental, emotional or physical condition, before or during the 
commission of the offense, that reduced the individual's culpability;
    (ii) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare, Medicaid and 
all other Federal health care programs,
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
    (iii) Alternative sources of the type of health care items or 
services furnished by the individual or entity are not available.

[57 FR 3329, Jan. 29, 1992; 57 FR 9669, Mar. 20, 1992; 63 FR 46687, 
Sept. 2, 1998; 64 FR 39426, July 22, 1999]



Sec. 1001.401  Conviction relating to controlled substances.

    (a) Circumstance for exclusion. The OIG may exclude an individual or 
entity convicted under Federal or State law of a misdemeanor relating to 
the unlawful manufacture, distribution, prescription or dispensing of a 
controlled substance, as defined under Federal or State law. This 
section applies to any individual or entity that--
    (1) Is, or has ever been, a health care practitioner, provider or 
supplier;
    (2) Holds or has held a direct or indirect ownership or control 
interest, as defined in section 1124(a)(3) of the Act, in an entity that 
is a health care provider or supplier, or is or has been an officer, 
director, agent or managing employee, as defined in section 1126(b) of 
the Act, of such an entity; or
    (3) Is, or has ever been, employed in any capacity in the health 
care industry.
    (b) For purposes of this section, the definition of controlled 
substance will be the definition that applies to the law forming the 
basis for the conviction.
    (c) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will be for a period of 3 years, unless aggravating or 
mitigating factors listed in paragraphs (b)(2) and (b)(3) of this 
section form a basis for lengthening or shortening that period.
    (2) Any of the following factors may be considered to be aggravating 
and a basis for lengthening the period of exclusion--
    (i) The acts that resulted in the conviction or similar acts were 
committed over a period of one year or more;
    (ii) The acts that resulted in the conviction or similar acts had a 
significant adverse mental, physical or financial impact on program 
beneficiaries or other individuals or the Medicare, Medicaid or other 
Federal health care programs;

[[Page 1106]]

    (iii) The sentence imposed by the court included incarceration;
    (iv) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (v) Whether the individual or entity was convicted of other offenses 
besides those which formed the basis for the exclusion, or has been the 
subject of any other adverse action by any other Federal, State or local 
government agency or board, if the adverse action is based on the same 
set of circumstances that serves as the basis for the imposition of the 
exclusion.
    (3) Only the following factors may be considered as mitigating and a 
basis for shortening the period of exclusion--
    (i) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare, Medicaid and 
all other Federal health care programs,
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
    (ii) Alternative sources of the type of health care items or 
services furnished by the individual or entity are not available.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46687, Sept. 2, 1998; 64 
FR 39426, July 22, 1999]



Sec. 1001.501  License revocation or suspension.

    (a) Circumstance for exclusion. The OIG may exclude an individual or 
entity that has--
    (1) Had a license to provide health care revoked or suspended by any 
State licensing authority, or has otherwise lost such a license 
(including the right to apply for or renew such a license), for reasons 
bearing on the individual's or entity's professional competence, 
professional performance or financial integrity; or
    (2) Has surrendered such a license while a formal disciplinary 
proceeding concerning the individual's or entity's professional 
competence, professional performance or financial integrity was pending 
before a State licensing authority.
    (b) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will not be for a period of time less than the period 
during which an individual's or entity's license is revoked, suspended 
or otherwise not in effect as a result of, or in connection with, a 
State licensing agency action.
    (2) Any of the following factors may be considered aggravating and a 
basis for lengthening the period of exclusion--
    (i) The acts that resulted in the revocation, suspension or loss of 
the individual's or entity's license to provide health care had or could 
have had a significant adverse physical, emotional or financial impact 
on one or more program beneficiaries or other individuals;
    (ii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing;
    (iii) The acts, or similar acts, had or could have had a significant 
adverse impact on the financial integrity of the programs; or
    (iv) The individual or entity has been the subject of any other 
adverse action by any other Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion.
    (3) Only if any of the aggravating factors listed in paragraph 
(b)(2) of this section justifies a longer exclusion may mitigating 
factors be considered as a basis for reducing the period of exclusion to 
a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factors may be considered mitigating--
    (i) The individual's or entity's cooperation with a State licensing 
authority resulted in--
    (A) The sanctioning of other individuals or entities, or
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (ii) Alternative sources of the type of health care items or 
services furnished by the individual or entity are not available.

[[Page 1107]]

    (4) When an individual or entity has been excluded under this 
section, the OIG will consider a request for reinstatement in accordance 
with Sec. 1001.3001 if the individual or entity obtains a valid license 
in the State where the license was originally revoked, suspended, 
surrendered or otherwise lost.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46688, Sept. 2, 1998]



Sec. 1001.601  Exclusion or suspension under a Federal or State health care program.

    (a) Circumstance for exclusion. (1) The OIG may exclude an 
individual or entity suspended or excluded from participation, or 
otherwise sanctioned, under--
    (i) Any Federal program involving the provision of health care, or
    (ii) A State health care program, for reasons bearing on the 
individual's or entity's professional competence, professional 
performance or financial integrity.
    (2) The term ``or otherwise sanctioned'' in paragraph (a)(1) of this 
section is intended to cover all actions that limit the ability of a 
person to participate in the program at issue regardless of what such an 
action is called, and includes situations where an individual or entity 
voluntarily withdraws from a program to avoid a formal sanction.
    (b) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will not be for a period of time less than the period 
during which the individual or entity is excluded or suspended from a 
Federal or State health care program.
    (2) Any of the following factors may be considered aggravating and a 
basis for lengthening the period of exclusion--
    (i) The acts that resulted in the exclusion, suspension or other 
sanction under Medicare, Medicaid and all other Federal health care 
programs had, or could have had, a significant adverse impact on Federal 
or State health care programs or the beneficiaries of those programs or 
other individuals;
    (ii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (iii) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion.
    (3) Only if any of the aggravating factors set forth in paragraph 
(b)(2) of this section justifies a longer exclusion may mitigating 
factors be considered as a basis for reducing the period of exclusion to 
a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factors may be considered mitigating--
    (i) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) The sanctioning of other individuals or entities, or
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (ii) Alternative sources of the types of health care items or 
services furnished by the individual or entity are not available.
    (4) If the individual or entity is eligible to apply for 
reinstatement in accordance with Sec. 1001.3001 of this part, and the 
sole reason for the State denying reinstatement is the existing Medicare 
exclusion imposed by the OIG as a result of the original State action, 
the OIG will consider a request for reinstatement.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46688, Sept. 2, 1998]



Sec. 1001.701  Excessive claims or furnishing of unnecessary or substandard items and services.

    (a) Circumstance for exclusion. The OIG may exclude an individual or 
entity that has--
    (1) Submitted, or caused to be submitted, bills or requests for 
payments under Medicare or any of the State health care programs 
containing charges or costs for items or services furnished that are 
substantially in excess of such individual's or entity's usual charges 
or costs for such items or services; or

[[Page 1108]]

    (2) Furnished, or caused to be furnished, to patients (whether or 
not covered by Medicare or any of the State health care programs) any 
items or services substantially in excess of the patient's needs, or of 
a quality that fails to meet professionally recognized standards of 
health care.
    (b) The OIG's determination under paragraph (a)(2) of this section--
that the items or services furnished were excessive or of unacceptable 
quality--will be made on the basis of information, including sanction 
reports, from the following sources:
    (1) The QIO for the area served by the individual or entity;
    (2) State or local licensing or certification authorities;
    (3) Fiscal agents or contractors, or private insurance companies;
    (4) State or local professional societies; or
    (5) Any other sources deemed appropriate by the OIG.
    (c) Exceptions. An individual or entity will not be excluded for--
    (1) Submitting, or causing to be submitted, bills or requests for 
payment that contain charges or costs substantially in excess of usual 
charges or costs when such charges or costs are due to unusual 
circumstances or medical complications requiring additional time, 
effort, expense or other good cause; or
    (2) Furnishing, or causing to be furnished, items or services in 
excess of the needs of patients, when the items or services were ordered 
by a physician or other authorized individual, and the individual or 
entity furnishing the items or services was not in a position to 
determine medical necessity or to refuse to comply with the order of the 
physician or other authorized individual.
    (d) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will be for a period of 3 years, unless aggravating or 
mitigating factors set forth in paragraphs (d)(2) and (d)(3) of this 
section form a basis for lengthening or shortening the period. In no 
case may the period be shorter than 1 year for any exclusion taken in 
accordance with paragraph (a)(2) of this section.
    (2) Any of the following factors may be considered aggravating and a 
basis for lengthening the period of exclusion--
    (i) The violations were serious in nature, and occurred over a 
period of one year or more;
    (ii) The violations had a significant adverse physical, mental or 
financial impact on program beneficiaries or other individuals;
    (iii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing;
    (iv) The violation resulted in financial loss to Medicare, Medicaid 
and all other Federal health care programs of $1,500 or more; or
    (v) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion.
    (3) Only the following factors may be considered mitigating and a 
basis for reducing the period of exclusion--
    (i) There were few violations and they occurred over a short period 
of time; or
    (ii) Alternative sources of the type of health care items or 
services furnished by the individual or entity are not available.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46688, Sept. 2, 1998]



Sec. 1001.801  Failure of HMOs and CMPs to furnish medically necessary items and services.

    (a) Circumstances for exclusion. The OIG may exclude an entity--
    (1) That is a--
    (i) Health maintenance organization (HMO), as defined in section 
1903(m) of the Act, providing items or services under a State Medicaid 
Plan;
    (ii) Primary care case management system providing services, in 
accordance with a waiver approved under section 1915(b)(1) of the Act; 
or
    (iii) HMO or competitive medical plan providing items or services in 
accordance with a risk-sharing contract under section 1876 of the Act;
    (2) That has failed substantially to provide medically necessary 
items and services that are required under a plan,

[[Page 1109]]

waiver or contract described in paragraph (a)(1) of this section to be 
provided to individuals covered by such plan, waiver or contract; and
    (3) Where such failure has adversely affected or has a substantial 
likelihood of adversely affecting covered individuals.
    (b) The OIG's determination under paragraph (a)(2) of this section--
that the medically necessary items and services required under law or 
contract were not provided--will be made on the basis of information, 
including sanction reports, from the following sources:
    (1) The QIO or other quality assurance organization under contract 
with a State Medicaid plan for the area served by the HMO or competitive 
medical plan;
    (2) State or local licensing or certification authorities;
    (3) Fiscal agents or contractors, or private insurance companies;
    (4) State or local professional societies;
    (5) CMS's HMO compliance office; or
    (6) Any other sources deemed appropriate by the OIG.
    (c) Length of exclusion. (1) An exclusion imposed in accordance with 
this section will be for a period of 3 years, unless aggravating or 
mitigating factors set forth in paragraphs (c)(2) and (c)(3) of this 
section form a basis for lengthening or shortening the period.
    (2) Any of the following factors may be considered aggravating and a 
basis for lengthening the period of exclusion--
    (i) The entity failed to provide a large number or a variety of 
items or services;
    (ii) The failures occurred over a lengthy period of time;
    (iii) The entity's failure to provide a necessary item or service 
that had or could have had a serious adverse effect;
    (iv) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (v) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion.
    (3) Only the following factors may be considered as mitigating and a 
basis for reducing the period of exclusion--
    (i) There were few violations and they occurred over a short period 
of time; or
    (ii) Alternative sources of the type of health care items or 
services furnished by the entity are not available.
    (iii) The entity took corrective action upon learning of 
impermissible activities by an employee or contractor.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46688, Sept. 2, 1998]



Sec. 1001.901  False or improper claims.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
or entity that it determines has committed an act described in section 
1128A of the Act. The imposition of a civil money penalty or assessment 
is not a prerequisite for an exclusion under this section.
    (b) Length of exclusion. In determining the length of an exclusion 
imposed in accordance with this section, the OIG will consider the 
following factors--
    (1) The nature and circumstances surrounding the actions that are 
the basis for liability, including the period of time over which the 
acts occurred, the number of acts, whether there is evidence of a 
pattern and the amount claimed;
    (2) The degree of culpability;
    (3) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral);
    (4) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion; or
    (5) Other matters as justice may require.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46689, Sept. 2, 1998]



Sec. 1001.951  Fraud and kickbacks and other prohibited activities.

    (a) Circumstance for exclusion. (1) Except as provided for in 
paragraph (a)(2)(ii) of this section, the OIG may

[[Page 1110]]

exclude any individual or entity that it determines has committed an act 
described in section 1128B(b) of the Act.
    (2) With respect to acts described in section 1128B of the Act, the 
OIG--
    (i) May exclude any individual or entity that it determines has 
knowingly and willfully solicited, received, offered or paid any 
remuneration in the manner and for the purposes described therein, 
irrespective of whether the individual or entity may be able to prove 
that the remuneration was also intended for some other purpose; and
    (ii) Will not exclude any individual or entity if that individual or 
entity can prove that the remuneration that is the subject of the 
exclusion is exempted from serving as the basis for an exclusion.
    (b) Length of exclusion. (1) The following factors will be 
considered in determining the length of exclusion in accordance with 
this section--
    (i) The nature and circumstances of the acts and other similar acts;
    (ii) The nature and extent of any adverse physical, mental, 
financial or other impact the conduct had on program beneficiaries or 
other individuals or the Medicare, Medicaid and all other Federal health 
care programs;
    (iii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral);
    (iv) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion; or
    (v) Any other facts bearing on the nature and seriousness of the 
individual's or entity's misconduct.
    (2) It will be considered a mitigating factor if--
    (i) The individual had a documented mental, emotional, or physical 
condition before or during the commission of the prohibited act(s) that 
reduced the individual's culpability for the acts in question;
    (ii) The individual's or entity's cooperation with Federal or State 
officials resulted in the--
    (A) Sanctioning of other individuals or entities, or
    (B) Imposition of a civil money penalty against others; or
    (iii) Alternative sources of the type of health care items or 
services provided by the individual or entity are not available.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46689, Sept. 2, 1998; 67 
FR 11933, Mar. 18, 2002]



Sec. 1001.952  Exceptions.

    The following payment practices shall not be treated as a criminal 
offense under section 1128B of the Act and shall not serve as the basis 
for an exclusion:
    (a) Investment interests. As used in section 1128B of the Act, 
``remuneration'' does not include any payment that is a return on an 
investment interest, such as a dividend or interest income, made to an 
investor as long as all of the applicable standards are met within one 
of the following three categories of entities:
    (1) If, within the previous fiscal year or previous 12 month period, 
the entity possesses more than $50,000,000 in undepreciated net tangible 
assets (based on the net acquisition cost of purchasing such assets from 
an unrelated entity) related to the furnishing of health care items and 
services, all of the following five standards must be met--
    (i) With respect to an investment interest that is an equity 
security, the equity security must be registered with the Securities and 
Exchange Commission under 15 U.S.C. 781 (b) or (g).
    (ii) The investment interest of an investor in a position to make or 
influence referrals to, furnish items or services to, or otherwise 
generate business for the entity must be obtained on terms (including 
any direct or indirect transferability restrictions) and at a price 
equally available to the public when trading on a registered securities 
exchange, such as the New York Stock Exchange or the American Stock 
Exchange, or in accordance with the National Association of Securities 
Dealers Automated Quotation System.
    (iii) The entity or any investor must not market or furnish the 
entity's items or services (or those of another

[[Page 1111]]

entity as part of a cross referral agreement) to passive investors 
differently than to non-investors.
    (iv) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor in the entity) must not 
loan funds to or guarantee a loan for an investor who is in a position 
to make or influence referrals to, furnish items or services to, or 
otherwise generate business for the entity if the investor uses any part 
of such loan to obtain the investment interest.
    (v) The amount of payment to an investor in return for the 
investment interest must be directly proportional to the amount of the 
capital investment of that investor.
    (2) If the entity possesses investment interests that are held by 
either active or passive investors, all of the following eight 
applicable standards must be met--
    (i) No more than 40 percent of the value of the investment interests 
of each class of investment interests may be held in the previous fiscal 
year or previous 12 month period by investors who are in a position to 
make or influence referrals to, furnish items or services to, or 
otherwise generate business for the entity. (For purposes of paragraph 
(a)(2)(i) of this section, equivalent classes of equity investments may 
be combined, and equivalent classes of debt instruments may be 
combined.)
    (ii) The terms on which an investment interest is offered to a 
passive investor, if any, who is in a position to make or influence 
referrals to, furnish items or services to, or otherwise generate 
business for the entity must be no different from the terms offered to 
other passive investors.
    (iii) The terms on which an investment interest is offered to an 
investor who is in a position to make or influence referrals to, furnish 
items or services to, or otherwise generate business for the entity must 
not be related to the previous or expected volume of referrals, items or 
services furnished, or the amount of business otherwise generated from 
that investor to the entity.
    (iv) There is no requirement that a passive investor, if any, make 
referrals to, be in a position to make or influence referrals to, 
furnish items or services to, or otherwise generate business for the 
entity as a condition for remaining as an investor.
    (v) The entity or any investor must not market or furnish the 
entity's items or services (or those of another entity as part of a 
cross referral agreement) to passive investors differently than to non-
investors.
    (vi) No more than 40 percent of the entity's gross revenue related 
to the furnishing of health care items and services in the previous 
fiscal year or previous 12-month period may come from referrals or 
business otherwise generated from investors.
    (vii) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor in the entity) must not 
loan funds to or guarantee a loan for an investor who is in a position 
to make or influence referrals to, furnish items or services to, or 
otherwise generate business for the entity if the investor uses any part 
of such loan to obtain the investment interest.
    (viii) The amount of payment to an investor in return for the 
investment interest must be directly proportional to the amount of the 
capital investment (including the fair market value of any pre-
operational services rendered) of that investor.
    (3)(i) If the entity possesses investment interests that are held by 
either active or passive investors and is located in an underserved 
area, all of the following eight standards must be met--
    (A) No more than 50 percent of the value of the investment interests 
of each class of investments may be held in the previous fiscal year or 
previous 12-month period by investors who are in a position to make or 
influence referrals to, furnish items or services to, or otherwise 
generate business for, the entity. (For purposes of paragraph 
(a)(3)(i)(A) of this section, equivalent classes of equity investments 
may be combined, and equivalent classes of debt instruments may be 
combined.)
    (B) The terms on which an investment interest is offered to a 
passive investor, if any, who is in a position to make or influence 
referrals to, furnish items or services to, or otherwise generate 
business for the entity must be no different from the terms offered to 
other passive investors.

[[Page 1112]]

    (C) The terms on which an investment interest is offered to an 
investor who is in a position to make or influence referrals to, furnish 
items or services to, or otherwise generate business for the entity must 
not be related to the previous or expected volume of referrals, items or 
services furnished, or the amount of business otherwise generated from 
that investor to the entity.
    (D) There is no requirement that a passive investor, if any, make 
referrals to, be in a position to make or influence referrals to, 
furnish items or services to, or otherwise generate business for the 
entity as a condition for remaining as an investor.
    (E) The entity or any investor must not market or furnish the 
entity's items or services (or those of another entity as part of a 
cross-referral agreement) to passive investors differently than to non-
investors.
    (F) At least 75 percent of the dollar volume of the entity's 
business in the previous fiscal year or previous 12-month period must be 
derived from the service of persons who reside in an underserved area or 
are members of medically underserved populations.
    (G) The entity or any investor (or other individual or entity acting 
on behalf of the entity or any investor in the entity) must not loan 
funds to or guarantee a loan for an investor who is in a position to 
make or influence referrals to, furnish items or services to, or 
otherwise generate business for the entity if the investor uses any part 
of such loan to obtain the investment interest.
    (H) The amount of payment to an investor in return for the 
investment interest must be directly proportional to the amount of the 
capital investment (including the fair market value of any pre-
operational services rendered) of that investor.
    (ii) If an entity that otherwise meets all of the above standards is 
located in an area that was an underserved area at the time of the 
initial investment, but subsequently ceases to be an underserved area, 
the entity will be deemed to comply with paragraph (a)(3)(i) of this 
section for a period equal to the lesser of:
    (A) The current term of the investment remaining after the date upon 
which the area ceased to be an underserved area or
    (B) Three years from the date the area ceased to be an underserved 
area.
    (4) For purposes of paragraph (a) of this section, the following 
terms apply. Active investor means an investor either who is responsible 
for the day-to-day management of the entity and is a bona fide general 
partner in a partnership under the Uniform Partnership Act or who agrees 
in writing to undertake liability for the actions of the entity's agents 
acting within the scope of their agency. Investment interest means a 
security issued by an entity, and may include the following classes of 
investments: shares in a corporation, interests or units in a 
partnership or limited liability company, bonds, debentures, notes, or 
other debt instruments. Investor means an individual or entity either 
who directly holds an investment interest in an entity, or who holds 
such investment interest indirectly by, including but not limited to, 
such means as having a family member hold such investment interest or 
holding a legal or beneficial interest in another entity (such as a 
trust or holding company) that holds such investment interest. Passive 
investor means an investor who is not an active investor, such as a 
limited partner in a partnership under the Uniform Partnership Act, a 
shareholder in a corporation, or a holder of a debt security. 
Underserved area means any defined geographic area that is designated as 
a Medically Underserved Area (MUA) in accordance with regulations issued 
by the Department. Medically underserved population means a Medically 
Underserved Population (MUP) in accordance with regulations issued by 
the Department.
    (b) Space rental. As used in section 1128B of the Act, 
``remuneration'' does not include any payment made by a lessee to a 
lessor for the use of premises, as long as all of the following six 
standards are met--
    (1) The lease agreement is set out in writing and signed by the 
parties.
    (2) The lease covers all of the premises leased between the parties 
for the term of the lease and specifies the premises covered by the 
lease.
    (3) If the lease is intended to provide the lessee with access to 
the premises

[[Page 1113]]

for periodic intervals of time, rather than on a full-time basis for the 
term of the lease, the lease specifies exactly the schedule of such 
intervals, their precise length, and the exact rent for such intervals.
    (4) The term of the lease is for not less than one year.
    (5) The aggregate rental charge is set in advance, is consistent 
with fair market value in arms-length transactions and is not determined 
in a manner that takes into account the volume or value of any referrals 
or business otherwise generated between the parties for which payment 
may be made in whole or in part under Medicare, Medicaid or other 
Federal health care programs.
    (6) The aggregate space rented does not exceed that which is 
reasonably necessary to accomplish the commercially reasonable business 
purpose of the rental. Note that for purposes of paragraph (b) of this 
section, the term fair market value means the value of the rental 
property for general commercial purposes, but shall not be adjusted to 
reflect the additional value that one party (either the prospective 
lessee or lessor) would attribute to the property as a result of its 
proximity or convenience to sources of referrals or business otherwise 
generated for which payment may be made in whole or in part under 
Medicare, Medicaid and all other Federal health care programs.
    (c) Equipment rental. As used in section 1128B of the Act, 
``remuneration'' does not include any payment made by a lessee of 
equipment to the lessor of the equipment for the use of the equipment, 
as long as all of the following six standards are met--
    (1) The lease agreement is set out in writing and signed by the 
parties.
    (2) The lease covers all of the equipment leased between the parties 
for the term of the lease and specifies the equipment covered by the 
lease.
    (3) If the lease is intended to provide the lessee with use of the 
equipment for periodic intervals of time, rather than on a full-time 
basis for the term of the lease, the lease specifies exactly the 
schedule of such intervals, their precise length, and the exact rent for 
such interval.
    (4) The term of the lease is for not less than one year.
    (5) The aggregate rental charge is set in advance, is consistent 
with fair market value in arms-length transactions and is not determined 
in a manner that takes into account the volume or value of any referrals 
or business otherwise generated between the parties for which payment 
may be made in whole or in part under Medicare, Medicaid or all other 
Federal health care programs.
    (6) The aggregate equipment rental does not exceed that which is 
reasonably necessary to accomplish the commercially reasonable business 
purpose of the rental. Note that for purposes of paragraph (c) of this 
section, the term fair market value means that the value of the 
equipment when obtained from a manufacturer or professional distributor, 
but shall not be adjusted to reflect the additional value one party 
(either the prospective lessee or lessor) would attribute to the 
equipment as a result of its proximity or convenience to sources of 
referrals or business otherwise generated for which payment may be made 
in whole or in part under Medicare, Medicaid or other Federal health 
care programs.
    (d) Personal services and management contracts. As used in section 
1128B of the Act, ``remuneration'' does not include any payment made by 
a principal to an agent as compensation for the services of the agent, 
as long as all of the following seven standards are met--
    (1) The agency agreement is set out in writing and signed by the 
parties.
    (2) The agency agreement covers all of the services the agent 
provides to the principal for the term of the agreement and specifies 
the services to be provided by the agent.
    (3) If the agency agreement is intended to provide for the services 
of the agent on a periodic, sporadic or part-time basis, rather than on 
a full-time basis for the term of the agreement, the agreement specifies 
exactly the schedule of such intervals, their precise length, and the 
exact charge for such intervals.
    (4) The term of the agreement is for not less than one year.
    (5) The aggregate compensation paid to the agent over the term of 
the agreement is set in advance, is consistent with fair market value in 
arms-

[[Page 1114]]

length transactions and is not determined in a manner that takes into 
account the volume or value of any referrals or business otherwise 
generated between the parties for which payment may be made in whole or 
in part under Medicare, Medicaid or other Federal health care programs.
    (6) The services performed under the agreement do not involve the 
counselling or promotion of a business arrangement or other activity 
that violates any State or Federal law.
    (7) The aggregate services contracted for do not exceed those which 
are reasonably necessary to accomplish the commercially reasonable 
business purpose of the services.
    For purposes of paragraph (d) of this section, an agent of a 
principal is any person, other than a bona fide employee of the 
principal, who has an agreement to perform services for, or on behalf 
of, the principal.
    (e) Sale of practice. (1) As used in section 1128B of the Act, 
``remuneration'' does not include any payment made to a practitioner by 
another practitioner where the former practitioner is selling his or her 
practice to the latter practitioner, as long as both of the following 
two standards are met--
    (i) The period from the date of the first agreement pertaining to 
the sale to the completion of the sale is not more than one year.
    (ii) The practitioner who is selling his or her practice will not be 
in a professional position to make referrals to, or otherwise generate 
business for, the purchasing practitioner for which payment may be made 
in whole or in part under Medicare, Medicaid or other Federal health 
care programs after 1 year from the date of the first agreement 
pertaining to the sale.
    (2) As used in section 1128B of the Act, ``remuneration'' does not 
include any payment made to a practitioner by a hospital or other entity 
where the practitioner is selling his or her practice to the hospital or 
other entity, so long as the following four standards are met:
    (i) The period from the date of the first agreement pertaining to 
the sale to the completion date of the sale is not more than three 
years.
    (ii) The practitioner who is selling his or her practice will not be 
in a professional position after completion of the sale to make or 
influence referrals to, or otherwise generate business for, the 
purchasing hospital or entity for which payment may be made under 
Medicare, Medicaid or other Federal health care programs.
    (iii) The practice being acquired must be located in a Health 
Professional Shortage Area (HPSA), as defined in Departmental 
regulations, for the practitioner's specialty area.
    (iv) Commencing at the time of the first agreement pertaining to the 
sale, the purchasing hospital or entity must diligently and in good 
faith engage in commercially reasonable recruitment activities that:
    (A) May reasonably be expected to result in the recruitment of a new 
practitioner to take over the acquired practice within a one year period 
and
    (B) Will satisfy the conditions of the practitioner recruitment safe 
harbor in accordance with paragraph (n) of this section.
    (f) Referral services. As used in section 1128B of the Act, 
``remuneration'' does not include any payment or exchange of anything of 
value between an individual or entity (``participant'') and another 
entity serving as a referral service (``referral service''), as long as 
all of the following four standards are met--
    (1) The referral service does not exclude as a participant in the 
referral service any individual or entity who meets the qualifications 
for participation.
    (2) Any payment the participant makes to the referral service is 
assessed equally against and collected equally from all participants, 
and is only based on the cost of operating the referral service, and not 
on the volume or value of any referrals to or business otherwise 
generated by either party for the referral service for which payment may 
be made in whole or in part under Medicare, Medicaid or other Federal 
health care programs.
    (3) The referral service imposes no requirements on the manner in 
which the participant provides services to a referred person, except 
that the referral

[[Page 1115]]

service may require that the participant charge the person referred at 
the same rate as it charges other persons not referred by the referral 
service, or that these services be furnished free of charge or at 
reduced charge.
    (4) The referral service makes the following five disclosures to 
each person seeking a referral, with each such disclosure maintained by 
the referral service in a written record certifying such disclosure and 
signed by either such person seeking a referral or by the individual 
making the disclosure on behalf of the referral service--
    (i) The manner in which it selects the group of participants in the 
referral service to which it could make a referral;
    (ii) Whether the participant has paid a fee to the referral service;
    (iii) The manner in which it selects a particular participant from 
this group for that person;
    (iv) The nature of the relationship between the referral service and 
the group of participants to whom it could make the referral; and
    (v) The nature of any restrictions that would exclude such an 
individual or entity from continuing as a participant.
    (g) Warranties. As used in section 1128B of the Act, 
``remuneration'' does not include any payment or exchange of anything of 
value under a warranty provided by a manufacturer or supplier of an item 
to the buyer (such as a health care provider or beneficiary) of the 
item, as long as the buyer complies with all of the following standards 
in paragraphs (g)(1) and (g)(2) of this section and the manufacturer or 
supplier complies with all of the following standards in paragraphs 
(g)(3) and (g)(4) of this section--
    (1) The buyer must fully and accurately report any price reduction 
of the item (including a free item), which was obtained as part of the 
warranty, in the applicable cost reporting mechanism or claim for 
payment filed with the Department or a State agency.
    (2) The buyer must provide, upon request by the Secretary or a State 
agency, information provided by the manufacturer or supplier as 
specified in paragraph (g)(3) of this section.
    (3) The manufacturer or supplier must comply with either of the 
following two standards--
    (i) The manufacturer or supplier must fully and accurately report 
the price reduction of the item (including a free item), which was 
obtained as part of the warranty, on the invoice or statement submitted 
to the buyer, and inform the buyer of its obligations under paragraphs 
(a)(1) and (a)(2) of this section.
    (ii) Where the amount of the price reduction is not known at the 
time of sale, the manufacturer or supplier must fully and accurately 
report the existence of a warranty on the invoice or statement, inform 
the buyer of its obligations under paragraphs (g)(1) and (g)(2) of this 
section, and, when the price reduction becomes known, provide the buyer 
with documentation of the calculation of the price reduction resulting 
from the warranty.
    (4) The manufacturer or supplier must not pay any remuneration to 
any individual (other than a beneficiary) or entity for any medical, 
surgical, or hospital expense incurred by a beneficiary other than for 
the cost of the item itself.
    For purposes of paragraph (g) of this section, the term warranty 
means either an agreement made in accordance with the provisions of 15 
U.S.C. 2301(6), or a manufacturer's or supplier's agreement to replace 
another manufacturer's or supplier's defective item (which is covered by 
an agreement made in accordance with this statutory provision), on terms 
equal to the agreement that it replaces.
    (h) Discounts. As used in section 1128B of the Act, ``remuneration'' 
does not include a discount, as defined in paragraph (h)(5) of this 
section, on an item or service for which payment may be made in whole or 
in part under Medicare, Medicaid or other Federal health care programs 
for a buyer as long as the buyer complies with the applicable standards 
of paragraph (h)(1) of this section; a seller as long as the seller 
complies with the applicable standards of paragraph (h)(2) of this 
section; and an offeror of a discount who is not a seller under 
paragraph (h)(2) of this section so long as such offeror complies

[[Page 1116]]

with the applicable standards of paragraph (h)(3) of this section.
    (1) With respect to the following three categories of buyers, the 
buyer must comply with all of the applicable standards within one of the 
three following categories--
    (i) If the buyer is an entity which is a health maintenance 
organization (HMO) or a competitive medical plan (CMP) acting in 
accordance with a risk contract under section 1876(g) or 1903(m) of the 
Act, or under another State health care program, it need not report the 
discount except as otherwise may be required under the risk contract.
    (ii) If the buyer is an entity which reports its costs on a cost 
report required by the Department or a State health care program, it 
must comply with all of the following four standards--
    (A) The discount must be earned based on purchases of that same good 
or service bought within a single fiscal year of the buyer;
    (B) The buyer must claim the benefit of the discount in the fiscal 
year in which the discount is earned or the following year;
    (C) The buyer must fully and accurately report the discount in the 
applicable cost report; and
    (D) the buyer must provide, upon request by the Secretary or a State 
agency, information provided by the seller as specified in paragraph 
(h)(2)(ii) of this section, or information provided by the offeror as 
specified in paragraph (h)(3)(ii) of this section.
    (iii) If the buyer is an individual or entity in whose name a claim 
or request for payment is submitted for the discounted item or service 
and payment may be made, in whole or in part, under Medicare, Medicaid 
or other Federal health care programs (not including individuals or 
entities defined as buyers in paragraph (h)(1)(i) or (h)(1)(ii) of this 
section), the buyer must comply with both of the following standards--
    (A) The discount must be made at the time of the sale of the good or 
service or the terms of the rebate must be fixed and disclosed in 
writing to the buyer at the time of the initial sale of the good or 
service; and
    (B) the buyer (if submitting the claim) must provide, upon request 
by the Secretary or a State agency, information provided by the seller 
as specified in paragraph (h)(2)(iii)(B) of this section, or information 
provided by the offeror as specified in paragraph (h)(3)(iii)(A) of this 
section.
    (2) The seller is an individual or entity that supplies an item or 
service for which payment may be made, in whole or in part, under 
Medicare, Medicaid or other Federal health care programs to the buyer 
and who permits a discount to be taken off the buyer's purchase price. 
The seller must comply with all of the applicable standards within one 
of the following three categories--
    (i) If the buyer is an entity which is an HMO a CMP acting in 
accordance with a risk contract under section 1876(g) or 1903(m) of the 
Act, or under another State health care program, the seller need not 
report the discount to the buyer for purposes of this provision.
    (ii) If the buyer is an entity that reports its costs on a cost 
report required by the Department or a State agency, the seller must 
comply with either of the following two standards--
    (A) Where a discount is required to be reported to Medicare or a 
State health care program under paragraph (h)(1) of this section, the 
seller must fully and accurately report such discount on the invoice, 
coupon or statement submitted to the buyer; inform the buyer in a manner 
that is reasonably calculated to give notice to the buyer of its 
obligations to report such discount and to provide information upon 
request under paragraph (h)(1) of this section; and refrain from doing 
anything that would impede the buyer from meeting its obligations under 
this paragraph; or
    (B) Where the value of the discount is not known at the time of 
sale, the seller must fully and accurately report the existence of a 
discount program on the invoice, coupon or statement submitted to the 
buyer; inform the buyer in a manner reasonably calculated to give notice 
to the buyer of its obligations to report such discount and to provide 
information upon request under paragraph (h)(1) of this section; when 
the value of the discount becomes

[[Page 1117]]

known, provide the buyer with documentation of the calculation of the 
discount identifying the specific goods or services purchased to which 
the discount will be applied; and refrain from doing anything which 
would impede the buyer from meeting its obligations under this 
paragraph.
    (iii) If the buyer is an individual or entity not included in 
paragraph (h)(2)(i) or (h)(2)(ii) of this section, the seller must 
comply with either of the following two standards--
    (A) Where the seller submits a claim or request for payment on 
behalf of the buyer and the item or service is separately claimed, the 
seller must provide, upon request by the Secretary or a State agency, 
information provided by the offeror as specified in paragraph 
(h)(3)(iii)(A) of this section; or
    (B) Where the buyer submits a claim, the seller must fully and 
accurately report such discount on the invoice, coupon or statement 
submitted to the buyer; inform the buyer in a manner reasonably 
calculated to give notice to the buyer of its obligations to report such 
discount and to provide information upon request under paragraph (h)(1) 
of this section; and refrain from doing anything that would impede the 
buyer from meeting its obligations under this paragraph.
    (3) The offeror of a discount is an individual or entity who is not 
a seller under paragraph (h)(2) of this section, but promotes the 
purchase of an item or service by a buyer under paragraph (h)(1) of this 
section at a reduced price for which payment may be made, in whole or in 
part, under Medicare, Medicaid or other Federal health care programs. 
The offeror must comply with all of the applicable standards within the 
following three categories--
    (i) If the buyer is an entity which is an HMO or a CMP acting in 
accordance with a risk contract under section 1876(g) or 1903(m) of the 
Act, or under another State health care program, the offeror need not 
report the discount to the buyer for purposes of this provision.
    (ii) If the buyer is an entity that reports its costs on a cost 
report required by the Department or a State agency, the offeror must 
comply with the following two standards--
    (A) The offeror must inform the buyer in a manner reasonably 
calculated to give notice to the buyer of its obligations to report such 
a discount and to provide information upon request under paragraph 
(h)(1) of this section; and
    (B) The offeror of the discount must refrain from doing anything 
that would impede the buyer's ability to meet its obligations under this 
paragraph.
    (iii) If the buyer is an individual or entity in whose name a 
request for payment is submitted for the discounted item or service and 
payment may be made, in whole or in part, under Medicare, Medicaid or 
other Federal health care programs (not including individuals or 
entities defined as buyers in paragraph (h)(1)(i) or (h)(1)(ii) of this 
section), the offeror must comply with the following two standards--
    (A) The offeror must inform the individual or entity submitting the 
claim or request for payment in a manner reasonably calculated to give 
notice to the individual or entity of its obligations to report such a 
discount and to provide information upon request under paragraphs (h)(1) 
and (h)(2) of this section; and
    (B) The offeror of the discount must refrain from doing anything 
that would impede the buyer's or seller's ability to meet its 
obligations under this paragraph.
    (4) For purposes of this paragraph, a rebate is any discount the 
terms of which are fixed and disclosed in writing to the buyer at the 
time of the initial purchase to which the discount applies, but which is 
not given at the time of sale.
    (5) For purposes of this paragraph, the term discount means a 
reduction in the amount a buyer (who buys either directly or through a 
wholesaler or a group purchasing organization) is charged for an item or 
service based on an arms-length transaction. The term discount does not 
include--
    (i) Cash payment or cash equivalents (except that rebates as defined 
in paragraph (h)(4) of this section may be in the form of a check);
    (ii) Supplying one good or service without charge or at a reduced 
charge to induce the purchase of a different good or service, unless the 
goods and

[[Page 1118]]

services are reimbursed by the same Federal health care program using 
the same methodology and the reduced charge is fully disclosed to the 
Federal health care program and accurately reflected where appropriate, 
and as appropriate, to the reimbursement methodology;
    (iii) A reduction in price applicable to one payer but not to 
Medicare, Medicaid or other Federal health care programs;
    (iv) A routine reduction or waiver of any coinsurance or deductible 
amount owed by a program beneficiary;
    (v) Warranties;
    (vi) Services provided in accordance with a personal or management 
services contract; or
    (vii) Other remuneration, in cash or in kind, not explicitly 
described in paragraph (h)(5) of this section.
    (i) Employees. As used in section 1128B of the Act, ``remuneration'' 
does not include any amount paid by an employer to an employee, who has 
a bona fide employment relationship with the employer, for employment in 
the furnishing of any item or service for which payment may be made in 
whole or in part under Medicare, Medicaid or other Federal health care 
programs. For purposes of paragraph (i) of this section, the term 
employee has the same meaning as it does for purposes of 26 U.S.C. 
3121(d)(2).
    (j) Group purchasing organizations. As used in section 1128B of the 
Act, ``remuneration'' does not include any payment by a vendor of goods 
or services to a group purchasing organization (GPO), as part of an 
agreement to furnish such goods or services to an individual or entity 
as long as both of the following two standards are met--
    (1) The GPO must have a written agreement with each individual or 
entity, for which items or services are furnished, that provides for 
either of the following--
    (i) The agreement states that participating vendors from which the 
individual or entity will purchase goods or services will pay a fee to 
the GPO of 3 percent or less of the purchase price of the goods or 
services provided by that vendor.
    (ii) In the event the fee paid to the GPO is not fixed at 3 percent 
or less of the purchase price of the goods or services, the agreement 
specifies the amount (or if not known, the maximum amount) the GPO will 
be paid by each vendor (where such amount may be a fixed sum or a fixed 
percentage of the value of purchases made from the vendor by the members 
of the group under the contract between the vendor and the GPO).
    (2) Where the entity which receives the goods or service from the 
vendor is a health care provider of services, the GPO must disclose in 
writing to the entity at least annually, and to the Secretary upon 
request, the amount received from each vendor with respect to purchases 
made by or on behalf of the entity. Note that for purposes of paragraph 
(j) of this section, the term group purchasing organization (GPO) means 
an entity authorized to act as a purchasing agent for a group of 
individuals or entities who are furnishing services for which payment 
may be made in whole or in part under Medicare, Medicaid or other 
Federal health care programs, and who are neither wholly-owned by the 
GPO nor subsidiaries of a parent corporation that wholly owns the GPO 
(either directly or through another wholly-owned entity).
    (k) Waiver of beneficiary coinsurance and deductible amounts. As 
used in section 1128B of the Act, ``remuneration'' does not include any 
reduction or waiver of a Medicare or a State health care program 
beneficiary's obligation to pay coinsurance or deductible amounts as 
long as all of the standards are met within either of the following two 
categories of health care providers:
    (1) If the coinsurance or deductible amounts are owed to a hospital 
for inpatient hospital services for which Medicare pays under the 
prospective payment system, the hospital must comply with all of the 
following three standards--
    (i) The hospital must not later claim the amount reduced or waived 
as a bad debt for payment purposes under Medicare or otherwise shift the 
burden of the reduction or waiver onto Medicare, a State health care 
program, other payers, or individuals.
    (ii) The hospital must offer to reduce or waive the coinsurance or 
deductible

[[Page 1119]]

amounts without regard to the reason for admission, the length of stay 
of the beneficiary, or the diagnostic related group for which the claim 
for Medicare reimbursement is filed.
    (iii) The hospital's offer to reduce or waive the coinsurance or 
deductible amounts must not be made as part of a price reduction 
agreement between a hospital and a third-party payer (including a health 
plan as defined in paragraph (l)(2) of this section), unless the 
agreement is part of a contract for the furnishing of items or services 
to a beneficiary of a Medicare supplemental policy issued under the 
terms of section 1882(t)(1) of the Act.
    (2) If the coinsurance or deductible amounts are owed by an 
individual who qualifies for subsidized services under a provision of 
the Public Health Services Act or under titles V or XIX of the Act to a 
federally qualified health care center or other health care facility 
under any Public Health Services Act grant program or under title V of 
the Act, the health care center or facility may reduce or waive the 
coinsurance or deductible amounts for items or services for which 
payment may be made in whole or in part under part B of Medicare or a 
State health care program.
    (l) Increased coverage, reduced cost-sharing amounts, or reduced 
premium amounts offered by health plans. (1) As used in section 1128B of 
the Act, ``remuneration'' does not include the additional coverage of 
any item or service offered by a health plan to an enrollee or the 
reduction of some or all of the enrollee's obligation to pay the health 
plan or a contract health care provider for cost-sharing amounts (such 
as coinsurance, deductible, or copayment amounts) or for premium amounts 
attributable to items or services covered by the health plan, the 
Medicare program, or a State health care program, as long as the health 
plan complies with all of the standards within one of the following two 
categories of health plans:
    (i) If the health plan is a risk-based health maintenance 
organization, competitive medical plan, prepaid health plan, or other 
health plan under contract with CMS or a State health care program and 
operating in accordance with section 1876(g) or 1903(m) of the Act, 
under a Federal statutory demonstration authority, or under other 
Federal statutory or regulatory authority, it must offer the same 
increased coverage or reduced cost-sharing or premium amounts to all 
Medicare or State health care program enrollees covered by the contract 
unless otherwise approved by CMS or by a State health care program.
    (ii) If the health plan is a health maintenance organization, 
competitive medical plan, health care prepayment plan, prepaid health 
plan or other health plan that has executed a contract or agreement with 
CMS or with a State health care program to receive payment for enrollees 
on a reasonable cost or similar basis, it must comply with both of the 
following two standards--
    (A) The health plan must offer the same increased coverage or 
reduced cost-sharing or premium amounts to all Medicare or State health 
care program enrollees covered by the contract or agreement unless 
otherwise approved by CMS or by a State health care program; and
    (B) The health plan must not claim the costs of the increased 
coverage or the reduced cost-sharing or premium amounts as a bad debt 
for payment purposes under Medicare or a State health care program or 
otherwise shift the burden of the increased coverage or reduced cost-
sharing or premium amounts to the extent that increased payments are 
claimed from Medicare or a State health care program.
    (2) For purposes of paragraph (l) of this section, the terms--
    Contract health care provider means an individual or entity under 
contract with a health plan to furnish items or services to enrollees 
who are covered by the health plan, Medicare, or a State health care 
program.
    Enrollee means an individual who has entered into a contractual 
relationship with a health plan (or on whose behalf an employer, or 
other private or governmental entity has entered into such a 
relationship) under which the individual is entitled to receive 
specified health care items and services, or insurance coverage for such 
items and services, in return for payment of a premium or a fee.

[[Page 1120]]

    Health plan means an entity that furnishes or arranges under 
agreement with contract health care providers for the furnishing of 
items or services to enrollees, or furnishes insurance coverage for the 
provision of such items and services, in exchange for a premium or a 
fee, where such entity:
    (i) Operates in accordance with a contract, agreement or statutory 
demonstration authority approved by CMS or a State health care program;
    (ii) Charges a premium and its premium structure is regulated under 
a State insurance statute or a State enabling statute governing health 
maintenance organizations or preferred provider organizations;
    (iii) Is an employer, if the enrollees of the plan are current or 
retired employees, or is a union welfare fund, if the enrollees of the 
plan are union members; or
    (iv) Is licensed in the State, is under contract with an employer, 
union welfare fund, or a company furnishing health insurance coverage as 
described in conditions (ii) and (iii) of this definition, and is paid a 
fee for the administration of the plan which reflects the fair market 
value of those services.
    (m) Price reductions offered to health plans. (1) As used in section 
1128B of the Act, ``remuneration'' does not include a reduction in price 
a contract health care provider offers to a health plan in accordance 
with the terms of a written agreement between the contract health care 
provider and the health plan for the sole purpose of furnishing to 
enrollees items or services that are covered by the health plan, 
Medicare, or a State health care program, as long as both the health 
plan and contract health care provider comply with all of the applicable 
standards within one of the following four categories of health plans:
    (i) If the health plan is a risk-based health maintenance 
organization, competitive medical plan, or prepaid health plan under 
contract with CMS or a State agency and operating in accordance with 
section 1876(g) or 1903(m) of the Act, under a Federal statutory 
demonstration authority, or under other Federal statutory or regulatory 
authority, the contract health care provider must not claim payment in 
any form from the Department or the State agency for items or services 
furnished in accordance with the agreement except as approved by CMS or 
the State health care program, or otherwise shift the burden of such an 
agreement to the extent that increased payments are claimed from 
Medicare or a State health care program.
    (ii) If the health plan is a health maintenance organization, 
competitive medical plan, health care prepayment plan, prepaid health 
plan, or other health plan that has executed a contract or agreement 
with CMS or a State health care program to receive payment for enrollees 
on a reasonable cost or similar basis, the health plan and contract 
health care provider must comply with all of the following four 
standards--
    (A) The term of the agreement between the health plan and the 
contract health care provider must be for not less than one year;
    (B) The agreement between the health plan and the contract health 
care provider must specify in advance the covered items and services to 
be furnished to enrollees, and the methodology for computing the payment 
to the contract health care provider;
    (C) The health plan must fully and accurately report, on the 
applicable cost report or other claim form filed with the Department or 
the State health care program, the amount it has paid the contract 
health care provider under the agreement for the covered items and 
services furnished to enrollees; and
    (D) The contract health care provider must not claim payment in any 
form from the Department or the State health care program for items or 
services furnished in accordance with the agreement except as approved 
by CMS or the State health care program, or otherwise shift the burden 
of such an agreement to the extent that increased payments are claimed 
from Medicare or a State health care program.
    (iii) If the health plan is not described in paragraphs (m)(1)(i) or 
(m)(1)(ii) of this section and the contract health care provider is not 
paid on an at-risk, capitated basis, both the health plan and contract 
health care

[[Page 1121]]

provider must comply with all of the following six standards--
    (A) The term of the agreement between the health plan and the 
contract health care provider must be for not less than one year;
    (B) The agreement between the health plan and the contract health 
care provider must specify in advance the covered items and services to 
be furnished to enrollees, which party is to file claims or requests for 
payment with Medicare or the State health care program for such items 
and services, and the schedule of fees the contract health care provider 
will charge for furnishing such items and services to enrollees;
    (C) The fee schedule contained in the agreement between the health 
plan and the contract health care provider must remain in effect 
throughout the term of the agreement, unless a fee increase results 
directly from a payment update authorized by Medicare or the State 
health care program;
    (D) The party submitting claims or requests for payment from 
Medicare or the State health care program for items and services 
furnished in accordance with the agreement must not claim or request 
payment for amounts in excess of the fee schedule;
    (E) The contract health care provider and the health plan must fully 
and accurately report on any cost report filed with Medicare or a State 
health care program the fee schedule amounts charged in accordance with 
the agreement and, upon request, will report to the Medicare or a State 
health care program the terms of the agreement and the amounts paid in 
accordance with the agreement; and
    (F) The party to the agreement, which does not have the 
responsibility under the agreement for filing claims or requests for 
payment, must not claim or request payment in any form from the 
Department or the State health care program for items or services 
furnished in accordance with the agreement, or otherwise shift the 
burden of such an agreement to the extent that increased payments are 
claimed from Medicare or a State health care program.
    (iv) If the health plan is not described in paragraphs (m)(1)(i) or 
(m)(1)(ii) of this section, and the contract health care provider is 
paid on an at-risk, capitated basis, both the health plan and contract 
health care provider must comply with all of the following five 
standards--
    (A) The term of the agreement between the health plan and the 
contract health provider must be for not less than one year;
    (B) The agreement between the health plan and the contract health 
provider must specify in advance the covered items and services to be 
furnished to enrollees and the total amount per enrollee (which may be 
expressed in a per month or other time period basis) the contract health 
care provider will be paid by the health plan for furnishing such items 
and services to enrollees and must set forth any copayments, if any, to 
be paid by enrollees to the contract health care provider for covered 
services;
    (C) The payment amount contained in the agreement between the health 
care plan and the contract health care provider must remain in effect 
throughout the term of the agreement;
    (D) The contract health care provider and the health plan must fully 
and accurately report to the Medicare and State health care program upon 
request, the terms of the agreement and the amounts paid in accordance 
with the agreement; and
    (E) The contract health care provider must not claim or request 
payment in any form from the Department, a State health care program or 
an enrollee (other than copayment amounts described in paragraph 
(m)(2)(iv)(B) of this section) and the health plan must not pay the 
contract care provider in excess of the amounts described in paragraph 
(m)(2)(iv)(B) of this section for items and services covered by the 
agreement.
    (2) For purposes of this paragraph, the terms contract health care 
provider, enrollee, and health plan have the same meaning as in 
paragraph (l)(2) of this section.
    (n) Practitioner recruitment. As used in section 1128B of the Act, 
``remuneration'' does not include any payment or exchange of anything of 
value by an entity in order to induce a practitioner who has been 
practicing within his or

[[Page 1122]]

her current specialty for less than one year to locate, or to induce any 
other practitioner to relocate, his or her primary place of practice 
into a HPSA for his or her specialty area, as defined in Departmental 
regulations, that is served by the entity, as long as all of the 
following nine standards are met--
    (1) The arrangement is set forth in a written agreement signed by 
the parties that specifies the benefits provided by the entity, the 
terms under which the benefits are to be provided, and the obligations 
of each party.
    (2) If a practitioner is leaving an established practice, at least 
75 percent of the revenues of the new practice must be generated from 
new patients not previously seen by the practitioner at his or her 
former practice.
    (3) The benefits are provided by the entity for a period not in 
excess of 3 years, and the terms of the agreement are not renegotiated 
during this 3-year period in any substantial aspect; provided, however, 
that if the HPSA to which the practitioner was recruited ceases to be a 
HPSA during the term of the written agreement, the payments made under 
the written agreement will continue to satisfy this paragraph for the 
duration of the written agreement (not to exceed 3 years).
    (4) There is no requirement that the practitioner make referrals to, 
be in a position to make or influence referrals to, or otherwise 
generate business for the entity as a condition for receiving the 
benefits; provided, however, that for purposes of this paragraph, the 
entity may require as a condition for receiving benefits that the 
practitioner maintain staff privileges at the entity.
    (5) The practitioner is not restricted from establishing staff 
privileges at, referring any service to, or otherwise generating any 
business for any other entity of his or her choosing.
    (6) The amount or value of the benefits provided by the entity may 
not vary (or be adjusted or renegotiated) in any manner based on the 
volume or value of any expected referrals to or business otherwise 
generated for the entity by the practitioner for which payment may be 
made in whole or in part under Medicare, Medicaid or any other Federal 
health care programs.
    (7) The practitioner agrees to treat patients receiving medical 
benefits or assistance under any Federal health care program in a 
nondiscriminatory manner.
    (8) At least 75 percent of the revenues of the new practice must be 
generated from patients residing in a HPSA or a Medically Underserved 
Area (MUA) or who are part of a Medically Underserved Population (MUP), 
all as defined in paragraph (a) of this section.
    (9) The payment or exchange of anything of value may not directly or 
indirectly benefit any person (other than the practitioner being 
recruited) or entity in a position to make or influence referrals to the 
entity providing the recruitment payments or benefits of items or 
services payable by a Federal health care program.
    (o) Obstetrical malpractice insurance subsidies. As used in section 
1128B of the Act, ``remuneration'' does not include any payment made by 
a hospital or other entity to another entity that is providing 
malpractice insurance (including a self-funded entity), where such 
payment is used to pay for some or all of the costs of malpractice 
insurance premiums for a practitioner (including a certified nurse-
midwife as defined in section 1861(gg) of the Act) who engages in 
obstetrical practice as a routine part of his or her medical practice in 
a primary care HPSA, as long as all of the following seven standards are 
met--
    (1) The payment is made in accordance with a written agreement 
between the entity paying the premiums and the practitioner, which sets 
out the payments to be made by the entity, and the terms under which the 
payments are to be provided.
    (2)(i) The practitioner must certify that for the initial coverage 
period (not to exceed one year) the practitioner has a reasonable basis 
for believing that at least 75 percent of the practitioner's obstetrical 
patients treated under the coverage of the malpractice insurance will 
either--
    (A) Reside in a HPSA or MUA, as defined in paragraph (a) of this 
section; or
    (B) Be part of a MUP, as defined in paragraph (a) of this section.

[[Page 1123]]

    (ii) Thereafter, for each additional coverage period (not to exceed 
one year), at least 75 percent of the practitioner's obstetrical 
patients treated under the prior coverage period (not to exceed one 
year) must have--
    (A) Resided in a HPSA or MUA, as defined in paragraph (a) of this 
section; or
    (B) Been part of a MUP, as defined in paragraph (a) of this section.
    (3) There is no requirement that the practitioner make referrals to, 
or otherwise generate business for, the entity as a condition for 
receiving the benefits.
    (4) The practitioner is not restricted from establishing staff 
privileges at, referring any service to, or otherwise generating any 
business for any other entity of his or her choosing.
    (5) The amount of payment may not vary based on the volume or value 
of any previous or expected referrals to or business otherwise generated 
for the entity by the practitioner for which payment may be made in 
whole or in part under Medicare, Medicaid or any other Federal health 
care programs.
    (6) The practitioner must treat obstetrical patients who receive 
medical benefits or assistance under any Federal health care program in 
a nondiscriminatory manner.
    (7) The insurance is a bona fide malpractice insurance policy or 
program, and the premium, if any, is calculated based on a bona fide 
assessment of the liability risk covered under the insurance. For 
purposes of paragraph (o) of this section, costs of malpractice 
insurance premiums means:
    (i) For practitioners who engage in obstetrical practice full-time, 
any costs attributable to malpractice insurance; or
    (ii) For practitioners who engage in obstetrical practice on a part-
time or sporadic basis, the costs:
    (A) Attributable exclusively to the obstetrical portion of the 
practitioner's malpractice insurance and
    (B) Related exclusively to obstetrical services provided in a 
primary care HPSA.
    (p) Investments in group practices. As used in section 1128B of the 
Act, ``remuneration'' does not include any payment that is a return on 
an investment interest, such as a dividend or interest income, made to a 
solo or group practitioner investing in his or her own practice or group 
practice if the following four standards are met--
    (1) The equity interests in the practice or group must be held by 
licensed health care professionals who practice in the practice or 
group.
    (2) The equity interests must be in the practice or group itself, 
and not some subdivision of the practice or group.
    (3) In the case of group practices, the practice must:
    (i) Meet the definition of ``group practice'' in section 1877(h)(4) 
of the Social Security Act and implementing regulations; and
    (ii) Be a unified business with centralized decision-making, pooling 
of expenses and revenues, and a compensation/profit distribution system 
that is not based on satellite offices operating substantially as if 
they were separate enterprises or profit centers.
    (4) Revenues from ancillary services, if any, must be derived from 
``in-office ancillary services'' that meet the definition of such term 
in section 1877(b)(2) of the Act and implementing regulations.
    (q) Cooperative hospital service organizations. As used in section 
1128B of the Act, ``remuneration'' does not include any payment made 
between a cooperative hospital service organization (CHSO) and its 
patron-hospital, both of which are described in section 501(e) of the 
Internal Revenue Code of 1986 and are tax-exempt under section 501(c)(3) 
of the Internal Revenue Code, where the CHSO is wholly owned by two or 
more patron-hospitals, as long as the following standards are met--
    (1) If the patron-hospital makes a payment to the CHSO, the payment 
must be for the purpose of paying for the bona fide operating expenses 
of the CHSO, or
    (2) If the CHSO makes a payment to the patron-hospital, the payment 
must be for the purpose of paying a distribution of net earnings 
required to be made under section 501(e)(2) of the Internal Revenue Code 
of 1986.

[[Page 1124]]

    (r) Ambulatory surgical centers. As used in section 1128B of the 
Act, ``remuneration'' does not include any payment that is a return on 
an investment interest, such as a dividend or interest income, made to 
an investor, as long as the investment entity is a certified ambulatory 
surgical center (ASC) under part 416 of this title, whose operating and 
recovery room space is dedicated exclusively to the ASC, patients 
referred to the investment entity by an investor are fully informed of 
the investor's investment interest, and all of the applicable standards 
are met within one of the following four categories--
    (1) Surgeon-owned ASCs--If all of the investors are general surgeons 
or surgeons engaged in the same surgical specialty, who are in a 
position to refer patients directly to the entity and perform surgery on 
such referred patients; surgical group practices (as defined in this 
paragraph) composed exclusively of such surgeons; or investors who are 
not employed by the entity or by any investor, are not in a position to 
provide items or services to the entity or any of its investors, and are 
not in a position to make or influence referrals directly or indirectly 
to the entity or any of its investors, all of the following six 
standards must be met--
    (i) The terms on which an investment interest is offered to an 
investor must not be related to the previous or expected volume of 
referrals, services furnished, or the amount of business otherwise 
generated from that investor to the entity.
    (ii) At least one-third of each surgeon investor's medical practice 
income from all sources for the previous fiscal year or previous 12-
month period must be derived from the surgeon's performance of 
procedures (as defined in this paragraph).
    (iii) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor) must not loan funds to 
or guarantee a loan for an investor if the investor uses any part of 
such loan to obtain the investment interest.
    (iv) The amount of payment to an investor in return for the 
investment must be directly proportional to the amount of the capital 
investment (including the fair market value of any pre-operational 
services rendered) of that investor.
    (v) All ancillary services for Federal health care program 
beneficiaries performed at the entity must be directly and integrally 
related to primary procedures performed at the entity, and none may be 
separately billed to Medicare or other Federal health care programs.
    (vi) The entity and any surgeon investors must treat patients 
receiving medical benefits or assistance under any Federal health care 
program in a nondiscriminatory manner.
    (2) Single-Specialty ASCs--If all of the investors are physicians 
engaged in the same medical practice specialty who are in a position to 
refer patients directly to the entity and perform procedures on such 
referred patients; group practices (as defined in this paragraph) 
composed exclusively of such physicians; or investors who are not 
employed by the entity or by any investor, are not in a position to 
provide items or services to the entity or any of its investors, and are 
not in a position to make or influence referrals directly or indirectly 
to the entity or any of its investors, all of the following six 
standards must be met--
    (i) The terms on which an investment interest is offered to an 
investor must not be related to the previous or expected volume of 
referrals, services furnished, or the amount of business otherwise 
generated from that investor to the entity.
    (ii) At least one-third of each physician investor's medical 
practice income from all sources for the previous fiscal year or 
previous 12-month period must be derived from the surgeon's performance 
of procedures (as defined in this paragraph).
    (iii) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor) must not loan funds to 
or guarantee a loan for an investor if the investor uses any part of 
such loan to obtain the investment interest.
    (iv) The amount of payment to an investor in return for the 
investment must be directly proportional to the amount of the capital 
investment (including the fair market value of any

[[Page 1125]]

pre-operational services rendered) of that investor.
    (v) All ancillary services for Federal health care program 
beneficiaries performed at the entity must be directly and integrally 
related to primary procedures performed at the entity, and none may be 
separately billed to Medicare or other Federal health care programs.
    (vi) The entity and any physician investors must treat patients 
receiving medical benefits or assistance under any Federal health care 
program in a nondiscriminatory manner.
    (3) Multi-Specialty ASCs--If all of the investors are physicians who 
are in a position to refer patients directly to the entity and perform 
procedures on such referred patients; group practices, as defined in 
this paragraph, composed exclusively of such physicians; or investors 
who are not employed by the entity or by any investor, are not in a 
position to provide items or services to the entity or any of its 
investors, and are not in a position to make or influence referrals 
directly or indirectly to the entity or any of its investors, all of the 
following seven standards must be met--
    (i) The terms on which an investment interest is offered to an 
investor must not be related to the previous or expected volume of 
referrals, services furnished, or the amount of business otherwise 
generated from that investor to the entity.
    (ii) At least one-third of each physician investor's medical 
practice income from all sources for the previous fiscal year or 
previous 12-month period must be derived from the physician's 
performance of procedures (as defined in this paragraph).
    (iii) At least one-third of the procedures (as defined in this 
paragraph) performed by each physician investor for the previous fiscal 
year or previous 12-month period must be performed at the investment 
entity.
    (iv) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor) must not loan funds to 
or guarantee a loan for an investor if the investor uses any part of 
such loan to obtain the investment interest.
    (v) The amount of payment to an investor in return for the 
investment must be directly proportional to the amount of the capital 
investment (including the fair market value of any pre-operational 
services rendered) of that investor.
    (vi) All ancillary services for Federal health care program 
beneficiaries performed at the entity must be directly and integrally 
related to primary procedures performed at the entity, and none may be 
separately billed to Medicare or other Federal health care programs.
    (vii) The entity and any physician investors must treat patients 
receiving medical benefits or assistance under any Federal health care 
program in a nondiscriminatory manner.
    (4) Hospital/Physician ASCs--If at least one investor is a hospital, 
and all of the remaining investors are physicians who meet the 
requirements of paragraphs (r)(1), (r)(2) or (r)(3) of this section; 
group practices (as defined in this paragraph) composed of such 
physicians; surgical group practices (as defined in this paragraph); or 
investors who are not employed by the entity or by any investor, are not 
in a position to provide items or services to the entity or any of its 
investors, and are not in a position to refer patients directly or 
indirectly to the entity or any of its investors, all of the following 
eight standards must be met--
    (i) The terms on which an investment interest is offered to an 
investor must not be related to the previous or expected volume of 
referrals, services furnished, or the amount of business otherwise 
generated from that investor to the entity.
    (ii) The entity or any investor (or other individual or entity 
acting on behalf of the entity or any investor) must not loan funds to 
or guarantee a loan for an investor if the investor uses any part of 
such loan to obtain the investment interest.
    (iii) The amount of payment to an investor in return for the 
investment must be directly proportional to the amount of the capital 
investment (including the fair market value of any pre-operational 
services rendered) of that investor.

[[Page 1126]]

    (iv) The entity and any hospital or physician investor must treat 
patients receiving medical benefits or assistance under any Federal 
health care program in a nondiscriminatory manner.
    (v) The entity may not use space, including, but not limited to, 
operating and recovery room space, located in or owned by any hospital 
investor, unless such space is leased from the hospital in accordance 
with a lease that complies with all the standards of the space rental 
safe harbor set forth in paragraph (b) of this section; nor may it use 
equipment owned by or services provided by the hospital unless such 
equipment is leased in accordance with a lease that complies with the 
equipment rental safe harbor set forth in paragraph (c) of this section, 
and such services are provided in accordance with a contract that 
complies with the personal services and management contracts safe harbor 
set forth in paragraph (d) of this section.
    (vi) All ancillary services for Federal health care program 
beneficiaries performed at the entity must be directly and integrally 
related to primary procedures performed at the entity, and none may be 
separately billed to Medicare or other Federal health care programs.
    (vii) The hospital may not include on its cost report or any claim 
for payment from a Federal health care program any costs associated with 
the ASC (unless such costs are required to be included by a Federal 
health care program).
    (viii) The hospital may not be in a position to make or influence 
referrals directly or indirectly to any investor or the entity.
    (5) For purposes of paragraph (r) of this section, procedures means 
any procedure or procedures on the list of Medicare-covered procedures 
for ambulatory surgical centers in accordance with regulations issued by 
the Department and group practice means a group practice that meets all 
of the standards of paragraph (p) of this section. Surgical group 
practice means a group practice that meets all of the standards of 
paragraph (p) of this section and is composed exclusively of surgeons 
who meet the requirements of paragraph (r)(1) of this section.
    (s) Referral arrangements for specialty services. As used in section 
1128B of the Act, ``remuneration'' does not include any exchange of 
value among individuals and entities where one party agrees to refer a 
patient to the other party for the provision of a specialty service 
payable in whole or in part under Medicare, Medicaid or any other 
Federal health care programs in return for an agreement on the part of 
the other party to refer that patient back at a mutually agreed upon 
time or circumstance as long as the following four standards are met--
    (1) The mutually agreed upon time or circumstance for referring the 
patient back to the originating individual or entity is clinically 
appropriate.
    (2) The service for which the referral is made is not within the 
medical expertise of the referring individual or entity, but is within 
the special expertise of the other party receiving the referral.
    (3) The parties receive no payment from each other for the referral 
and do not share or split a global fee from any Federal health care 
program in connection with the referred patient.
    (4) Unless both parties belong to the same group practice as defined 
in paragraph (p) of this section, the only exchange of value between the 
parties is the remuneration the parties receive directly from third-
party payors or the patient compensating the parties for the services 
they each have furnished to the patient.
    (t) Price reductions offered to eligible managed care organizations. 
(1) As used in section 1128(B) of the Act, ``remuneration'' does not 
include any payment between:
    (i) An eligible managed care organization and any first tier 
contractor for providing or arranging for items or services, as long as 
the following three standards are met--
    (A) The eligible managed care organization and the first tier 
contractor have an agreement that:
    (1) Is set out in writing and signed by both parties;
    (2) Specifies the items and services covered by the agreement;

[[Page 1127]]

    (3) Is for a period of at least one year; and
    (4) Specifies that the first tier contractor cannot claim payment in 
any form directly or indirectly from a Federal health care program for 
items or services covered under the agreement, except for:
    (i) HMOs and competitive medical plans with cost-based contracts 
under section 1876 of the Act where the agreement with the eligible 
managed care organization sets out the arrangements in accordance with 
which the first tier contractor is billing the Federal health care 
program;
    (ii) Federally qualified HMOs without a contract under sections 1854 
or 1876 of the Act, where the agreement with the eligible managed care 
organization sets out the arrangements in accordance with which the 
first tier contractor is billing the Federal health care program; or
    (iii) First tier contractors that are Federally qualified health 
centers that claim supplemental payments from a Federal health care 
program.
    (B) In establishing the terms of the agreement, neither party gives 
or receives remuneration in return for or to induce the provision or 
acceptance of business (other than business covered by the agreement) 
for which payment may be made in whole or in part by a Federal health 
care program on a fee-for-service or cost basis.
    (C) Neither party to the agreement shifts the financial burden of 
the agreement to the extent that increased payments are claimed from a 
Federal health care program.
    (ii) A first tier contractor and a downstream contractor or between 
two downstream contractors to provide or arrange for items or services, 
as long as the following four standards are met--
    (A) The parties have an agreement that:
    (1) Is set out in writing and signed by both parties;
    (2) Specifies the items and services covered by the agreement;
    (3) Is for a period of at least one year; and
    (4) Specifies that the party providing the items or services cannot 
claim payment in any form from a Federal health care program for items 
or services covered under the agreement.
    (B) In establishing the terms of the agreement, neither party gives 
or receives remuneration in return for or to induce the provision or 
acceptance of business (other than business covered by the agreement) 
for which payment may be made in whole or in part by a Federal health 
care program on a fee-for-service or cost basis.
    (C) Neither party shifts the financial burden of the agreement to 
the extent that increased payments are claimed from a Federal health 
care program.
    (D) The agreement between the eligible managed care organization and 
first tier contractor covering the items or services that are covered by 
the agreement between the parties does not involve:
    (1) A Federally qualified health center receiving supplemental 
payments;
    (2) A HMO or CMP with a cost-based contract under section 1876 of 
the Act; or
    (3) A Federally qualified HMO, unless the items or services are 
covered by a risk based contract under sections 1854 or 1876 of the Act.
    (2) For purposes of this paragraph, the following terms are defined 
as follows:
    (i) Downstream contractor means an individual or entity that has a 
subcontract directly or indirectly with a first tier contractor for the 
provision or arrangement of items or services that are covered by an 
agreement between an eligible managed care organization and the first 
tier contractor.
    (ii) Eligible managed care organization \1\ means--
---------------------------------------------------------------------------

    \1\ The eligible managed care organizations in paragraphs 
(u)(2)(ii)(A)-(F) of this section are only eligible with respect to 
items or services covered by the contracts specified in those 
paragraphs.
---------------------------------------------------------------------------

    (A) A HMO or CMP with a risk or cost based contract in accordance 
with section 1876 of the Act;
    (B) Any Medicare Part C health plan that receives a capitated 
payment from Medicare and which must have its total Medicare beneficiary 
cost sharing approved by CMS under section 1854 of the Act;
    (C) Medicaid managed care organizations as defined in section 
1903(m)(1)(A)

[[Page 1128]]

that provide or arrange for items or services for Medicaid enrollees 
under a contract in accordance with section 1903(m) of the Act (except 
for fee-for-service plans or medical savings accounts);
    (D) Any other health plans that provide or arrange for items and 
services for Medicaid enrollees in accordance with a risk-based contract 
with a State agency subject to the upper payment limits in Sec. 447.361 
of this title or an equivalent payment cap approved by the Secretary;
    (E) Programs For All Inclusive Care For The Elderly (PACE) under 
sections 1894 and 1934 of the Act, except for for-profit demonstrations 
under sections 4801(h) and 4802(h) of Pub. L. 105-33; or
    (F) A Federally qualified HMO.
    (iii) First tier contractor means an individual or entity that has a 
contract directly with an eligible managed care organization to provide 
or arrange for items or services.
    (iv) Items and services means health care items, devices, supplies 
or services or those services reasonably related to the provision of 
health care items, devices, supplies or services including, but not 
limited to, non-emergency transportation, patient education, attendant 
services, social services (e.g., case management), utilization review 
and quality assurance. Marketing and other pre-enrollment activities are 
not ``items or services'' for purposes of this section.
    (u) Price reductions offered by contractors with substantial 
financial risk to managed care organizations. (1) As used in section 
1128(B) of the Act, ``remuneration'' does not include any payment 
between:
    (i) A qualified managed care plan and a first tier contractor for 
providing or arranging for items or services, where the following five 
standards are met--
    (A) The agreement between the qualified managed care plan and first 
tier contractor must:
    (1) Be in writing and signed by the parties;
    (2) Specify the items and services covered by the agreement;
    (3) Be for a period of a least one year;
    (4) Require participation in a quality assurance program that 
promotes the coordination of care, protects against underutilization and 
specifies patient goals, including measurable outcomes where 
appropriate; and
    (5) Specify a methodology for determining payment that is 
commercially reasonable and consistent with fair market value 
established in an arms-length transaction and includes the intervals at 
which payments will be made and the formula for calculating incentives 
and penalties, if any.
    (B) If a first tier contractor has an investment interest in a 
qualified managed care plan, the investment interest must meet the 
criteria of paragraph (a)(1) of this section.
    (C) The first tier contractor must have substantial financial risk 
for the cost or utilization of services it is obligated to provide 
through one of the following four payment methodologies:
    (1) A periodic fixed payment per patient that does not take into 
account the dates services are provided, the frequency of services, or 
the extent or kind of services provided;
    (2) Percentage of premium;
    (3) Inpatient Federal health care program diagnosis-related groups 
(DRGs) (other than those for psychiatric services);
    (4) Bonus and withhold arrangements, provided--
    (i) The target payment for first tier contractors that are 
individuals or non-institutional providers is at least 20 percent 
greater than the minimum payment, and for first tier contractors that 
are institutional providers, i.e., hospitals and nursing homes, is at 
least 10 percent greater than the minimum payment;
    (ii) The amount at risk, i.e., the bonus or withhold, is earned by a 
first tier contractor in direct proportion to the ratio of the 
contractor's actual utilization to its target utilization;
    (iii) In calculating the percentage in accordance with paragraph 
(u)(1)(i)(C)(4)(i) of this section, both the target payment amount and 
the minimum payment amount include any performance bonus, e.g., payments 
for timely submission of paperwork, continuing medical education, 
meeting attendance, etc., at a level achieved by 75 percent of the first 
tier contractors who are eligible for such payments;

[[Page 1129]]

    (iv) Payment amounts, including any bonus or withhold amounts, are 
reasonable given the historical utilization patterns and costs for the 
same or comparable populations in similar managed care arrangements; and
    (v) Alternatively, for a first tier contractor that is a physician, 
the qualified managed care plan has placed the physician at risk for 
referral services in an amount that exceeds the substantial financial 
risk threshold set forth in 42 CFR 417.479(f) and the arrangement is in 
compliance with the stop-loss and beneficiary survey requirements of 42 
CFR 417.479(g).
    (D) Payments for items and services reimbursable by Federal health 
care program must comply with the following two standards--
    (1) The qualified managed care plan (or in the case of a self-funded 
employer plan that contracts with a qualified managed care plan to 
provide administrative services, the self-funded employer plan) must 
submit the claims directly to the Federal health care program, in 
accordance with a valid reassignment agreement, for items or services 
reimbursed by the Federal health care program. (Notwithstanding the 
foregoing, inpatient hospital services, other than psychiatric services, 
will be deemed to comply if the hospital is reimbursed by a Federal 
health care program under a DRG methodology.)
    (2) Payments to first tier contractors and any downstream 
contractors for providing or arranging for items or services reimbursed 
by a Federal health care program must be identical to payment 
arrangements to or between such parties for the same items or services 
provided to other beneficiaries with similar health status, provided 
that such payments may be adjusted where the adjustments are related to 
utilization patterns or costs of providing items or services to the 
relevant population.
    (E) In establishing the terms of an arrangement--
    (1) Neither party gives or receives remuneration in return for or to 
induce the provision or acceptance of business (other than business 
covered by the arrangement) for which payment may be made in whole or in 
part by a Federal health care program on a fee-for-service or cost 
basis; and
    (2) Neither party to the arrangement shifts the financial burden of 
such arrangement to the extent that increased payments are claimed from 
a Federal health care program.
    (ii) A first tier contractor and a downstream contractor, or between 
downstream contractors, to provide or arrange for items or services, as 
long as the following three standards are met--
    (A) Both parties are being paid for the provision or arrangement of 
items or services in accordance with one of the payment methodologies 
set out in paragraph (u)(1)(i)(C) of this section;
    (B) Payment arrangements for items and services reimbursable by a 
Federal health care program comply with paragraph (u)(1)(i)(D) of this 
section; and
    (C) In establishing the terms of an arrangement--
    (1) Neither party gives or receives remuneration in return for or to 
induce the provision or acceptance of business (other than business 
covered by the arrangement) for which payment may be made in whole or in 
part by a Federal health care program on a fee-for-service or cost 
basis; and
    (2) Neither party to the arrangement shifts the financial burden of 
the arrangement to the extent that increased payments are claimed from a 
Federal health care program.
    (2) For purposes of this paragraph, the following terms are defined 
as follows:
    (i) Downstream contractor means an individual or entity that has a 
subcontract directly or indirectly with a first tier contractor for the 
provision or arrangement of items or services that are covered by an 
agreement between a qualified managed care plan and the first tier 
contractor.
    (ii) First tier contractor means an individual or entity that has a 
contract directly with a qualified managed care plan to provide or 
arrange for items or services.
    (iii) Is obligated to provide for a contractor refers to items or 
services:
    (A) Provided directly by an individual or entity and its employees;
    (B) For which an individual or entity is financially responsible, 
but which

[[Page 1130]]

are provided by downstream contractors;
    (C) For which an individual or entity makes referrals or 
arrangements; or
    (D) For which an individual or entity receives financial incentives 
based on its own, its provider group's, or its qualified managed care 
plan's performance (or combination thereof).
    (iv) Items and services means health care items, devices, supplies 
or services or those services reasonably related to the provision of 
health care items, devices, supplies or services including, but not 
limited to, non-emergency transportation, patient education, attendant 
services, social services (e.g., case management), utilization review 
and quality assurance. Marketing or other pre-enrollment activities are 
not ``items or services'' for purposes of this definition in this 
paragraph.
    (v) Minimum payment is the guaranteed amount that a provider is 
entitled to receive under an agreement with a first tier or downstream 
contractor or a qualified managed care plan.
    (vi) Qualified managed care plan means a health plan as defined in 
paragraph (l)(2) of this section that:
    (A) Provides a comprehensive range of health services;
    (B) Provides or arranges for--
    (1) Reasonable utilization goals to avoid inappropriate utilization;
    (2) An operational utilization review program;
    (3) A quality assurance program that promotes the coordination of 
care, protects against underutilization, and specifies patient goals, 
including measurable outcomes where appropriate;
    (4) Grievance and hearing procedures;
    (5) Protection of enrollees from incurring financial liability other 
than copayments and deductibles; and
    (6) Treatment for Federal health care program beneficiaries that is 
not different than treatment for other enrollees because of their status 
as Federal health care program beneficiaries; and
    (C) Covers a beneficiary population of which either--
    (1) No more than 10 percent are Medicare beneficiaries, not 
including persons for whom a Federal health care program is the 
secondary payer; or
    (2) No more than 50 percent are Medicare beneficiaries (not 
including persons for whom a Federal health care program is the 
secondary payer), provided that payment of premiums is on a periodic 
basis that does not take into account the dates services are rendered, 
the frequency of services, or the extent or kind of services rendered, 
and provided further that such periodic payments for the non-Federal 
health care program beneficiaries do not take into account the number of 
Federal health care program fee-for-service beneficiaries covered by the 
agreement or the amount of services generated by such beneficiaries.
    (vii) Target payment means the fair market value payment established 
through arms length negotiations that will be earned by an individual or 
entity that:
    (A) Is dependent on the individual or entity's meeting a utilization 
target or range of utilization targets that are set consistent with 
historical utilization rates for the same or comparable populations in 
similar managed care arrangements, whether based on its own, its 
provider group's or the qualified managed care plan's utilization (or a 
combination thereof); and
    (B) Does not include any bonus or fees that the individual or entity 
may earn from exceeding the utilization target.
    (v) Ambulance replenishing. (1) As used in section 1128B of the Act, 
``remuneration'' does not include any gift or transfer of drugs or 
medical supplies (including linens) by a hospital or other receiving 
facility to an ambulance provider for the purpose of replenishing 
comparable drugs or medical supplies (including linens) used by the 
ambulance provider (or a first responder) in connection with the 
transport of a patient by ambulance to the hospital or other receiving 
facility if all of the standards in paragraph (v)(2) of this section are 
satisfied and all of the applicable standards in either paragraph 
(v)(3)(i), (v)(3)(ii) or (v)(3)(iii) of this section are satisfied. 
However, to qualify under paragraph (v), the ambulance that is 
replenished must be used to provide emergency ambulance services an 
average of three times per week, as measured over a reasonable period of 
time. Drugs and medical supplies (including linens) initially used

[[Page 1131]]

by a first responder and replenished at the scene of the illness or 
injury by the ambulance provider that transports the patient to the 
hospital or other receiving facility will be deemed to have been used by 
the ambulance provider.
    (2) To qualify under paragraph (v) of this section, the ambulance 
replenishing arrangement must satisfy all of the following four 
conditions--
    (i)(A) Under no circumstances may the ambulance provider (or first 
responder) and the receiving facility both bill for the same replenished 
drug or supply. Replenished drugs or supplies may only be billed 
(including claiming bad debt) to a Federal health care program by either 
the ambulance provider (or first responder) or the receiving facility.
    (B) All billing or claims submission by the receiving facility, 
ambulance provider or first responder for replenished drugs and medical 
supplies used in connection with the transport of a Federal health care 
program beneficiary must comply with all applicable Federal health care 
program payment and coverage rules and regulations.
    (C) Compliance with paragraph (v)(2)(i)(B) of this section will be 
determined separately for the receiving facility and the ambulance 
provider (and first responder, if any), so long as the receiving 
facility, ambulance provider (or first responder) refrains from doing 
anything that would impede the other party or parties from meeting their 
obligations under paragraph (v)(2)(i)(B).
    (ii)(A) The receiving facility or ambulance provider, or both, must
    (1) Maintain records of the replenished drugs and medical supplies 
and the patient transport to which the replenished drugs and medical 
supplies related;
    (2) Provide a copy of such records to the other party within a 
reasonable time (unless the other party is separately maintaining 
records of the replenished drugs and medical supplies); and
    (3) Make those records available to the Secretary promptly upon 
request.
    (B) A pre-hospital care report (including, but not limited to, a 
trip sheet, patient care report or patient encounter report) prepared by 
the ambulance provider and filed with the receiving facility will meet 
the requirements of paragraph (v)(2)(ii)(A) of this section, provided 
that it documents the specific type and amount of medical supplies and 
drugs used on the patient and subsequently replenished.
    (C) For purposes of paragraph (v)(2)(ii) of this section, 
documentation may be maintained and, if required, filed with the other 
party in hard copy or electronically. If a replenishing arrangement 
includes linens, documentation need not be maintained for their 
exchange. If documentation is not maintained for the exchange of linens, 
the receiving facility will be presumed to have provided an exchange of 
comparable clean linens for soiled linens for each ambulance transport 
of a patient to the receiving facility. Records required under paragraph 
(v)(2)(ii)(A) of this section must be maintained for 5 years.
    (iii) The replenishing arrangement must not take into account the 
volume or value of any referrals or business otherwise generated between 
the parties for which payment may be made in whole or in part under any 
Federal health care program (other than the referral of the particular 
patient to whom the replenished drugs and medical supplies were 
furnished).
    (iv) The receiving facility and the ambulance provider otherwise 
comply with all Federal, State, and local laws regulating ambulance 
services, including, but not limited to, emergency services, and the 
provision of drugs and medical supplies, including, but not limited to, 
laws relating to the handling of controlled substances.
    (3) To qualify under paragraph (v) of this section, the arrangement 
must satisfy all of the standards in one of the following three 
categories:
    (i) General replenishing. (A) The receiving facility must replenish 
medical supplies or drugs on an equal basis for all ambulance providers 
that bring patients to the receiving facility in any one of the 
categories described in paragraph (v)(3)(i)(A)(1), (2), or (3) of this 
section. A receiving facility may offer replenishing to one or more of 
the categories and may offer different replenishing arrangements to 
different categories, so long as the replenishing is

[[Page 1132]]

conducted uniformly within each category. For example, a receiving 
facility may offer to replenish a broader array of drugs or supplies for 
ambulance providers that do no not charge for their services than for 
ambulance providers that charge for their services. Within each 
category, the receiving facility may limit its replenishing arrangements 
to the replenishing of emergency ambulance transports only. A receiving 
facility may offer replenishing to one or more of the categories--
    (1) All ambulance providers that do not bill any patient or insurer 
(including Federal health care programs) for ambulance services, 
regardless of the payor or the patient's ability to pay (i.e., ambulance 
providers, such as volunteer companies, that provide ambulance services 
without charge to any person or entity);
    (2) All not-for-profit and State or local government ambulance 
service providers (including, but not limited to, municipal and 
volunteer ambulance services providers); or
    (3) All ambulance service providers.
    (B)(1) The replenishing arrangement must be conducted in an open and 
public manner. A replenishing arrangement will be considered to be 
conducted in an open and public manner if one of the following two 
conditions are satisfied:
    (i) A written disclosure of the replenishing program is posted 
conspicuously in the receiving facility's emergency room or other 
location where the ambulance providers deliver patients and copies are 
made available upon request to ambulance providers, Government 
representatives, and members of the public (subject to reasonable 
photocopying charges). The written disclosure can take any reasonable 
form and should include the category of ambulance service providers that 
qualifies for replenishment; the drugs or medical supplies included in 
the replenishment program; and the procedures for documenting the 
replenishment. A sample disclosure form is included in Appendix A to 
subpart C of this part for illustrative purposes only. No written 
contracts between the parties are required for purposes of paragraph 
(v)(3)(i)(B)(1)(i) of this section; or
    (ii) The replenishment arrangement operates in accordance with a 
plan or protocol of general application promulgated by an Emergency 
Medical Services (EMS) Council or comparable entity, agency or 
organization, provided a copy of the plan or protocol is available upon 
request to ambulance providers, Government representatives and members 
of the public (subject to reasonable photocopying charges). While 
parties are encouraged to participate in collaborative, comprehensive, 
community-wide EMS systems to improve the delivery of EMS in their local 
communities, nothing in this paragraph shall be construed as requiring 
the involvement of such organizations or the development or 
implementation of ambulance replenishment plans or protocols by such 
organizations.
    (2) Nothing in this paragraph (v)(3)(i) shall be construed as 
requiring disclosure of confidential proprietary or financial 
information related to the replenishing arrangement (including, but not 
limited to, information about cost, pricing or the volume of replenished 
drugs or supplies) to ambulance providers or members of the general 
public.
    (ii) Fair market value replenishing. (A) Except as otherwise 
provided in paragraph (v)(3)(ii)(B) of this section, the ambulance 
provider must pay the receiving facility fair market value, based on an 
arms-length transaction, for replenished medical supplies; and
    (B) If payment is not made at the same time as the replenishing of 
the medical supplies, the receiving facility and the ambulance provider 
must make commercially reasonable payment arrangements in advance.
    (iii) Government mandated replenishing. The replenishing arrangement 
is undertaken in accordance with a State or local statute, ordinance, 
regulation or binding protocol that requires hospitals or receiving 
facilities in the area subject to such requirement to replenish 
ambulances that deliver patients to the hospital with drugs or medical 
supplies (including linens) that are used during the transport of that 
patient.
    (4) For purposes of paragraph (v) of this section--

[[Page 1133]]

    (i) A receiving facility is a hospital or other facility that 
provides emergency medical services.
    (ii) An ambulance provider is a provider or supplier of ambulance 
transport services that provides emergency ambulance services. The term 
does not include a provider of ambulance transport services that 
provides only non-emergency transport services.
    (iii) A first responder includes, but is not limited to, a fire 
department, paramedic service or search and rescue squad that responds 
to an emergency call (through 9-1-1 or other emergency access number) 
and treats the patient, but does not transport the patient to the 
hospital or other receiving facility.
    (iv) An emergency ambulance service is a transport by ambulance 
initiated as a result of a call through 9-1-1 or other emergency access 
number or a call from another acute care facility unable to provide the 
higher level care required by the patient and available at the receiving 
facility.
    (v) Medical supplies includes linens, unless otherwise provided.

[57 FR 3330, Jan. 29, 1992, as amended at 57 FR 52729, Nov. 5, 1992; 61 
FR 2135, Jan. 25, 1996; 64 FR 63513, Nov. 19, 1999; 64 FR 63551, Nov. 
19, 1999; 64 FR 71317, Dec. 21, 1999; 66 FR 62989, Dec. 4, 2001; 66 FR 
63749, Dec. 10, 2001; 67 FR 11933, Mar. 18, 2002]



Sec. 1001.1001  Exclusion of entities owned or controlled by a sanctioned person.

    (a) Circumstance for exclusion. (1) The OIG may exclude an entity 
if:
    (i) A person with a relationship with such entity--
    (A) Has been convicted of a criminal offense as described in 
sections 1128(a) and 1128(b) (1), (2) or (3) of the Act;
    (B) Has had civil money penalties or assessments imposed under 
section 1128A of the Act; or
    (C) Has been excluded from participation in Medicare or any of the 
State health care programs, and
    (ii) Such a person--
    (A)(1) Has a direct or indirect ownership interest (or any 
combination thereof) of 5 percent or more in the entity;
    (2) Is the owner of a whole or part interest in any mortgage, deed 
of trust, note or other obligation secured (in whole or in part) by the 
entity or any of the property assets thereof, in which whole or part 
interest is equal to or exceeds 5 percent of the total property and 
assets of the entity;
    (3) Is an officer or director of the entity, if the entity is 
organized as a corporation;
    (4) Is partner in the entity, if the entity is organized as a 
partnership;
    (5) Is an agent of the entity; or
    (6) Is a managing employee, that is, an individual (including a 
general manager, business manager, administrator or director) who 
exercises operational or managerial control over the entity or part 
thereof, or directly or indirectly conducts the day-to-day operations of 
the entity or part thereof, or
    (B) Was formerly described in paragraph (a)(1)(ii)(A) of this 
section, but is no longer so described because of a transfer of 
ownership or control interest to an immediate family member or a member 
of the person's household as defined in paragraph (a)(2) of this 
section, in anticipation of or following a conviction, assessment of a 
CMP, or imposition of an exclusion.
    (2) For purposes of this section, the term:
    Agent means any person who has express or implied authority to 
obligate or act on behalf of an entity.
    Immediate family member means, a person's husband or wife; natural 
or adoptive parent; child or sibling; stepparent, stepchild, stepbrother 
or stepsister; father-, mother-, daughter-, son-, brother- or sister-in-
law; grandparent or grandchild; or spouse of a grandparent or 
grandchild.
    Indirect ownership interest includes an ownership interest through 
any other entities that ultimately have an ownership interest in the 
entity in issue. (For example, an individual has a 10 percent ownership 
interest in the entity at issue if he or she has a 20 percent ownership 
interest in a corporation that wholly owns a subsidiary that is a 50 
percent owner of the entity in issue.)
    Member of household means, with respect to a person, any individual 
with whom they are sharing a common abode as part of a single family 
unit, including domestic employees and others who live together as a 
family unit. A roomer or boarder is not considered a member of 
household.

[[Page 1134]]

    Ownership interest means an interest in:
    (i) The capital, the stock or the profits of the entity, or
    (ii) Any mortgage, deed, trust or note, or other obligation secured 
in whole or in part by the property or assets of the entity.
    (b) Length of exclusion. (1) Except as provided in 
Sec. 1001.3002(c), exclusions under this section will be for the same 
period as that of the individual whose relationship with the entity is 
the basis for this exclusion, if the individual has been or is being 
excluded.
    (2) If the individual was not excluded, the length of the entity's 
exclusion will be determined by considering the factors that would have 
been considered if the individual had been excluded.
    (3) An entity excluded under this section may apply for 
reinstatement at any time in accordance with the procedures set forth in 
Sec. 1001.3001(a)(2).

[57 FR 3330, Jan. 29, 1992, as amended at 64 FR 39427, July 22, 1999]



Sec. 1001.1051  Exclusion of individuals with ownership or control interest in sanctioned entities.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
who--
    (1) Has a direct or indirect ownership or control interest in a 
sanctioned entity, and who knows or should know (as defined in section 
1128A(i)(6) of the Act) of the action constituting the basis for the 
conviction or exclusion set forth in paragraph (b) of this section; or
    (2) Is an officer or managing employee (as defined in section 
1126(b) of the Act) of such an entity.
    (b) For purposes of paragraph (a) of this section, the term 
``sanctioned entity'' means an entity that--
    (1) Has been convicted of any offense described in Secs. 1001.101 
through 1001.401 of this part; or
    (2) Has been terminated or excluded from participation in Medicare, 
Medicaid and all other Federal health care programs.
    (c) Length of exclusion. (1) If the entity has been excluded, the 
length of the individual's exclusion will be for the same period as that 
of the sanctioned entity with which the individual has the prohibited 
relationship.
    (2) If the entity was not excluded, the length of the individual's 
exclusion will be determined by considering the factors that would have 
been considered if the entity had been excluded.
    (3) An individual excluded under this section may apply for 
reinstatement in accordance with the procedures set forth in 
Sec. 1001.3001.

[63 FR 46689, Sept. 2, 1998]



Sec. 1001.1101  Failure to disclose certain information.

    (a) Circumstance for exclusion. The OIG may exclude any entity that 
did not fully and accurately, or completely, make disclosures as 
required by section 1124, 1124A or 1126 of the Act, and by part 455, 
subpart B and part 420, subpart C of this title.
    (b) Length of exclusion. The following factors will be considered in 
determining the length of an exclusion under this section--
    (1) The number of instances where full and accurate, or complete, 
disclosure was not made;
    (2) The significance of the undisclosed information;
    (3) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral);
    (4) Any other facts that bear on the nature or seriousness of the 
conduct;
    (5) The availability of alternative sources of the type of health 
care services provided by the entity; and
    (6) The extent to which the entity knew that the disclosures made 
were not full or accurate.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46689, Sept. 2, 1998]



Sec. 1001.1201  Failure to provide payment information.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
or entity that furnishes items or services for which payment may be made 
under Medicare or any of the State health care programs and that:
    (1) Fails to provide such information as is necessary to determine 
whether such payments are or were due and the amounts thereof, or
    (2) Has refused to permit such examination and duplication of its 
records

[[Page 1135]]

as may be necessary to verify such information.
    (b) Length of exclusion. The following factors will be considered in 
determining the length of an exclusion under this section--
    (1) The number of instances where information was not provided;
    (2) The circumstances under which such information was not provided;
    (3) The amount of the payments at issue;
    (4) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral); and
    (5) The availability of alternative sources of the type of health 
care items or services provided by the individual or entity.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46689, Sept. 2, 1998]



Sec. 1001.1301  Failure to grant immediate access.

    (a) Circumstance for exclusion. (1) The OIG may exclude any 
individual or entity that fails to grant immediate access upon 
reasonable request to--
    (i) The Secretary, a State survey agency or other authorized entity 
for the purpose of determining, in accordance with section 1864(a) of 
the Act, whether--
    (A) An institution is a hospital or skilled nursing facility;
    (B) An agency is a home health agency;
    (C) An agency is a hospice program;
    (D) A facility is a rural health clinic as defined in section 
1861(aa)(2) of the Act, or a comprehensive outpatient rehabilitation 
facility as defined in section 1861(cc)(2) of the Act;
    (E) A laboratory is meeting the requirements of section 1861(s) (15) 
and (16) of the Act, and section 353(f) of the Public Health Service 
Act;
    (F) A clinic, rehabilitation agency or public health agency is 
meeting the requirements of section 1861(p)(4) (A) or (B) of the Act;
    (G) An ambulatory surgical center is meeting the standards specified 
under section 1832(a)(2)(F)(i) of the Act;
    (H) A portable x-ray unit is meeting the requirements of section 
1861(s)(3) of the Act;
    (I) A screening mammography service is meeting the requirements of 
section 1834(c)(3) of the Act;
    (J) An end-stage renal disease facility is meeting the requirements 
of section 1881(b) of the Act;
    (K) A physical therapist in independent practice is meeting the 
requirements of section 1861(p) of the Act;
    (L) An occupational therapist in independent practice is meeting the 
requirements of section 1861(g) of the Act;
    (M) An organ procurement organization meets the requirements of 
section 1138(b) of the Act; or.
    (N) A rural primary care hospital meets the requirements of section 
1820(i)(2) of the Act;
    (ii) The Secretary, a State survey agency or other authorized entity 
to perform the reviews and surveys required under State plans in 
accordance with sections 1902(a)(26) (relating to inpatient mental 
hospital services), 1902(a)(31) (relating to intermediate care 
facilities for the mentally retarded), 1919(g) (relating to nursing 
facilities), 1929(i) (relating to providers of home and community care 
and community care settings), 1902(a)(33) and 1903(g) of the Act;
    (iii) The OIG for the purposes of reviewing records, documents and 
other data necessary to the performance of the Inspector General's 
statutory functions; or
    (iv) A State Medicaid fraud control unit for the purpose of 
conducting its activities.
    (2) For purposes of paragraphs (a)(1)(i) and (a)(1)(ii) of this 
section, the term--
    Failure to grant immediate access means the failure to grant access 
at the time of a reasonable request or to provide a compelling reason 
why access may not be granted.
    Reasonable request means a written request made by a properly 
identified agent of the Secretary, of a State survey agency or of 
another authorized entity, during hours that the facility, agency or 
institution is open for business.
    The request will include a statement of the authority for the 
request, the rights of the entity in responding to

[[Page 1136]]

the request, the definition of reasonable request and immediate access, 
and the penalties for failure to comply, including when the exclusion 
will take effect.
    (3) For purposes of paragraphs (a)(1)(iii) and (a)(1)(iv) of this 
section, the term--
    Failure to grant immediate access means:
    (i) Except where the OIG or State Medicaid fraud control unit 
reasonably believes that requested documents are about to be altered or 
destroyed, the failure to produce or make available for inspection and 
copying requested records upon reasonable request, or to provide a 
compelling reason why they cannot be produced, within 24 hours of such 
request;
    (ii) Where the OIG or State Medicaid fraud control unit has reason 
to believe that requested documents are about to be altered or 
destroyed, the failure to provide access to requested records at the 
time the request is made.
    Reasonable request means a written request for documents, signed by 
a designated representative of the OIG or the State Medicaid fraud 
control unit, and made by a properly identified agent of the OIG or a 
State Medicaid fraud control unit during reasonable business hours, 
where there is information to suggest that the individual or entity has 
violated statutory or regulatory requirements under titles V, XI, XVIII, 
XIX or XX of the Act. The request will include a statement of the 
authority for the request, the rights of the individual or entity in 
responding to the request, the definition of reasonable request and 
immediate access, and the effective date, length, and scope and effect 
of the exclusion that would be imposed for failure to comply with the 
request, and the earliest date that a request for reinstatement would be 
considered.
    (4) Nothing in this section shall in any way limit access otherwise 
authorized under State or Federal law.
    (b) Length of exclusion. (1) An exclusion of an individual under 
this section may be for a period equal to the sum of:
    (i) The length of the period during which the immediate access was 
not granted, and
    (ii) An additional period of up to 90 days.
    (2) The exclusion of an entity may be for a longer period than the 
period in which immediate access was not granted based on consideration 
of the following factors--
    (i) The impact of the failure to grant the requested immediate 
access on Medicare or any of the State health care programs, 
beneficiaries or the public;
    (ii) The circumstances under which such access was refused;
    (iii) The impact of the exclusion on Medicare, Medicaid or any of 
the other Federal health care programs, beneficiaries or the public; and
    (iv) Whether the entity has a documented history of criminal, civil 
or administrative wrongdoing (The lack of any prior record is to be 
considered neutral).
    (3) For purposes of paragraphs (b)(1) and (b)(2) of this section, 
the length of the period in which immediate access was not granted will 
be measured from the time the request is made, or from the time by which 
access was required to be granted, whichever is later.
    (c) The exclusion will be effective as of the date immediate access 
was not granted.

[57 FR 3330, Jan. 29, 1992, as amended at 58 FR 40753, July 30, 1993; 63 
FR 46689, Sept. 2, 1998; 64 FR 39427, July 22, 1999]



Sec. 1001.1401  Violations of PPS corrective action.

    (a) Circumstance for exclusion. The OIG may exclude any hospital 
that CMS determines has failed substantially to comply with a corrective 
action plan required by CMS under section 1886(f)(2)(B) of the Act.
    (b) Length of exclusion. The following factors will be considered in 
determining the length of exclusion under this section--
    (1) The impact of the hospital's failure to comply on Medicare, 
Medicaid or any of the other Federal health care programs, program 
beneficiaries or other individuals;
    (2) The circumstances under which the failure occurred;
    (3) The nature of the failure to comply;

[[Page 1137]]

    (4) The impact of the exclusion on Medicare, Medicaid or any of the 
other Federal health care programs, beneficiaries or the public; and
    (5) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral).

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46689, Sept. 2, 1998; 64 
FR 39427, July 22, 1999]



Sec. 1001.1501  Default of health education loan or scholarship obligations.

    (a) Circumstance for exclusion. (1) Except as provided in paragraph 
(a)(4) of this section, the OIG may exclude any individual that the 
Public Health Service (PHS) determines is in default on repayments of 
scholarship obligations or loans in connection with health professions 
education made or secured in whole or in part by the Secretary.
    (2) Before imposing an exclusion in accordance with paragraph (a)(1) 
of this section, the OIG must determine that PHS has taken all 
reasonable administrative steps to secure repayment of the loans or 
obligations. If PHS has offered a Medicare offset arrangement as 
required by section 1892 of the Act, the OIG will find that all 
reasonable steps have been taken.
    (3) The OIG will take into account access of beneficiaries to 
physicians' services for which payment may be made under Medicare, 
Medicaid or other Federal health care programs in determining whether to 
impose an exclusion.
    (4) The OIG will not exclude a physician who is the sole community 
physician or the sole source of essential specialized services in a 
community if a State requests that the physician not be excluded.
    (b) Length of exclusion. The individual will be excluded until such 
time as PHS notifies the OIG that the default has been cured or that 
there is no longer an outstanding debt. Upon such notice, the OIG will 
inform the individual of his or her right to apply for reinstatement.

[57 FR 3330, Jan. 29, 1992, as amended at 64 FR 39427, July 22, 1999; 67 
FR 11935, Mar. 18, 2002]



Sec. 1001.1601  Violations of the limitations on physician charges.

    (a) Circumstance for exclusion. (1) The OIG may exclude a physician 
whom it determines--
    (i) Is a non-participating physician under section 1842(j) of the 
Act;
    (ii) Furnished services to a beneficiary;
    (iii) Knowingly and willfully billed--
    (A) On a repeated basis for such services actual charges in excess 
of the maximum allowable actual charge determined in accordance with 
section 1842(j)(1)(C) of the Act for the period January 1, 1987 through 
December 31, 1990, or
    (B) Individuals enrolled under part B of title XVIII of the Act 
during the statutory freeze for actual charges in excess of such 
physician's actual charges determined in accordance with section 
1842(j)(1)(A) of the Act for the period July 1, 1984 to December 31, 
1986; and''
    (iv) Is not the sole community physician or sole source of essential 
specialized services in the community.
    (2) The OIG will take into account access of beneficiaries to 
physicians' services for which Medicare payment may be made in 
determining whether to impose an exclusion.
    (b) Length of exclusion. (1) In determining the length of an 
exclusion in accordance with this section, the OIG will consider the 
following factors--
    (i) The number of services for which the physician billed in excess 
of the maximum allowable charges;
    (ii) The number of beneficiaries for whom services were billed in 
excess of the maximum allowable charges;
    (iii) The amount of the charges that were in excess of the maximum 
allowable charges;
    (iv) Whether the physician has a documented history of criminal, 
civil or administrative wrongdoing (The lack of any prior record is to 
be considered neutral); and
    (v) The availability of alternative sources of the type of health 
care items or services furnished by the physician.
    (2) The period of exclusion may not exceed 5 years.

[57 FR 3329, Jan. 29, 1992; 57 FR 9669, Mar. 20, 1992, as amended at 63 
FR 46689, Sept. 2, 1998]

[[Page 1138]]



Sec. 1001.1701  Billing for services of assistant at surgery during cataract operations.

    (a) Circumstance for exclusion. The OIG may exclude a physician whom 
it determines--
    (1) Has knowingly and willfully presented or caused to be presented 
a claim, or billed an individual enrolled under Part B of the Medicare 
program (or his or her representative) for:
    (i) Services of an assistant at surgery during a cataract operation, 
or
    (ii) Charges that include a charge for an assistant at surgery 
during a cataract operation;
    (2) Has not obtained prior approval for the use of such assistant 
from the appropriate Utilization and Quality Control Quality Improvement 
Organization (QIO) or Medicare carrier; and
    (3) Is not the sole community physician or sole source of essential 
specialized services in the community.
    (b) The OIG will take into account access of beneficiaries to 
physicians' services for which Medicare payment may be made in 
determining whether to impose an exclusion.
    (c) Length of exclusion. (1) In determining the length of an 
exclusion in accordance with this section, the OIG will consider the 
following factors--
    (i) The number of instances for which claims were submitted or 
beneficiaries were billed for unapproved use of assistants during 
cataract operations;
    (ii) The amount of the claims or bills presented;
    (iii) The circumstances under which the claims or bills were made, 
including whether the services were medically necessary;
    (iv) Whether approval for the use of an assistant was requested from 
the QIO or carrier;
    (v) Whether the physician has a documented history of criminal, 
civil or administrative wrongdoing (The lack of any prior record is to 
be considered neutral); and
    (vi) The availability of alternative sources of the type of health 
care items or services furnished by the physician.
    (2) The period of exclusion may not exceed 5 years.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46690, Sept. 2, 1998]

                  Appendix A to Subpart C of Part 1001

    The following is a sample written disclosure for purposes of 
satisfying the requirements of Sec. 1001.952(v)(3)(i)(B)(1)(i) of this 
part. This form is for illustrative purposes only; parties may, but are 
not required to, adapt this sample written disclosure form.

                 Notice of Ambulance Restocking Program

    Hospital X offers the following ambulance restocking program:
    1. We will restock all ambulance providers (other than ambulance 
providers that do not provide emergency services) that bring patients to 
Hospital X [or to a subpart of Hospital X, such as the emergency room] 
in the following category or categories: [insert description of category 
of ambulances to be restocked, i.e., all ambulance providers, all 
ambulance providers that do not charge patients or insurers for their 
services, or all nonprofit and Government ambulance providers]. 
[Optional: We only offer restocking of emergency transports.]
    2. The restocking will include the following drugs and medical 
supplies, and linens, used for patient prior to delivery of the patient 
to Hospital X: [insert description of drugs and medical supplies, and 
linens to be restocked].
    3. The ambulance providers [will/will not] be required to pay for 
the restocked drugs and medical supplies, and linens.
    4. The restocked drugs and medical supplies, and linens, must be 
documented as follows: [insert description consistent with the 
documentation requirements described in Sec. 1001.952(v). By way of 
example only, documentation may be by a patient care report filed with 
the receiving facility within 24 hours of delivery of the patient that 
records the name of the patient, the date of the transport, and the 
relevant drugs and medical supplies.]
    5. This restocking program does not apply to the restocking of 
ambulances that only provide non-emergency services or to the general 
stocking of an ambulance provider's inventory.
    6. To ensure that Hospital X does not bill any Federal health care 
program for restocked drugs or supplies for which a participating 
ambulance provider bills or is eligible to bill, all participating 
ambulance providers must notify Hospital X if they intend to submit 
claims for restocked drugs or supplies to any Federal health care 
program. Participating ambulance providers must agree to work with 
Hospital X to ensure that only one party bills for a particular 
restocked drug or supply.
    7. All participants in this ambulance restocking arrangement that 
bill Federal health care programs for restocked drugs or supplies must 
comply with all applicable Federal program billing and claims filing 
rules and regulations.

[[Page 1139]]

    8. For further information about our restocking program or to obtain 
a copy of this notice, please contact [name] at [telephone number].

Dated:--------

/s/--------
Appropriate officer or official

[66 FR 62991, Dec. 4, 2001]



               Subpart D--Waivers and Effect of Exclusion



Sec. 1001.1801  Waivers of exclusions.

    (a) The OIG has the authority to grant or deny a request from a 
State health care program that an exclusion from that program be waived 
with respect to an individual or entity, except that no waiver may be 
granted with respect to an exclusion under Sec. 1001.101(b). The request 
must be in writing and from an individual directly responsible for 
administering the State health care program.
    (b) With respect to exclusions under Sec. 1001.101(a), a request 
from a State health care program for a waiver of the exclusion will only 
be considered if the individual or entity is the sole community 
physician or the sole source of essential specialized services in a 
community.
    (c) With respect to exclusions imposed under subpart C of this part, 
a request for waiver will only be granted if the OIG determines that 
imposition of the exclusion would not be in the public interest.
    (d) If the basis for the waiver ceases to exist, the waiver will be 
rescinded, and the individual or entity will be excluded for the period 
remaining on the exclusion, measured from the time the exclusion would 
have been imposed if the waiver had not been granted.
    (e) In the event a waiver is granted, it is applicable only to the 
program(s) for which waiver is requested.
    (f) The decision to grant, deny or rescind a request for a waiver is 
not subject to administrative or judicial review.
    (g) The Inspector General may waive the exclusion of an individual 
or entity from participation in the Medicare program in conjunction with 
granting a waiver requested by a State health care program. If a State 
program waiver is rescinded, the derivative waiver of the exclusion from 
Medicare is automatically rescinded.



Sec. 1001.1901  Scope and effect of exclusion.

    (a) Scope of exclusion. Exclusions of individuals and entities under 
this title will be from Medicare, Medicaid and any of the other Federal 
health care programs, as defined in Sec. 1001.2.
    (b) Effect of exclusion on excluded individuals and entities. (1) 
Unless and until an individual or entity is reinstated into the 
Medicare, Medicaid and other Federal health care programs in accordance 
with subpart F of this part, no payment will be made by Medicare, 
Medicaid or any of the other Federal health care programs for any item 
or service furnished, on or after the effective date specified in the 
notice period, by an excluded individual or entity, or at the medical 
direction or on the prescription of a physician or other authorized 
individual who is excluded when the person furnishing such item or 
service knew or had reason to know of the exclusion. This section 
applies regardless of whether an individual or entity has obtained a 
program provider number or equivalent, either as an individual or as a 
member of a group, prior to being reinstated.
    (2) An excluded individual or entity may not take assignment of an 
enrollee's claim on or after the effective date of exclusion.
    (3) An excluded individual or entity that submits, or causes to be 
submitted, claims for items or services furnished during the exclusion 
period is subject to civil money penalty liability under section 
1128A(a)(1)(D) of the Act, and criminal liability under section 
1128B(a)(3) of the Act and other provisions. In addition, submitting 
claims, or causing claims to be submitted or payments to be made for 
items or services furnished, ordered or prescribed, including 
administrative and management services or salary, may serve as the basis 
for denying reinstatement to the programs.
    (c) Exceptions to paragraph (b)(1) of this section. (1) If an 
enrollee of Part B of Medicare submits an otherwise payable claim for 
items or services furnished by an excluded individual or entity, or 
under the medical direction or

[[Page 1140]]

on the prescription of an excluded physician or other authorized 
individual after the effective date of exclusion, CMS will pay the first 
claim submitted by the enrollee and immediately notify the enrollee of 
the exclusion.
    (2) CMS will not pay an enrollee for items or services furnished by 
an excluded individual or entity, or under the medical direction or on 
the prescription of an excluded physician or other authorized individual 
more than 15 days after the date on the notice to the enrollee, or after 
the effective date of the exclusion, whichever is later.
    (3) Unless the Secretary determines that the health and safety of 
beneficiaries receiving services under Medicare, Medicaid or any of the 
other Federal health care programs warrants the exclusion taking effect 
earlier, payment may be made under such program for up to 30 days after 
the effective date of the exclusion for--
    (i) Inpatient institutional services furnished to an individual who 
was admitted to an excluded institution before the date of the 
exclusion,
    (ii) Home health services and hospice care furnished to an 
individual under a plan of care established before the effective date of 
the exclusion, and
    (iii) Any health care items that are ordered by a practitioner, 
provider or supplier from an excluded manufacturer before the effective 
date of the exclusion and delivered within 30 days of the effective date 
of such exclusion. (For the period October 2, 1998, to October 4, 1999, 
payment may be made under Medicare or a State health care program for up 
to 60 days after the effective date of the exclusion for any health care 
items that are ordered by a practitioner, provider or supplier from an 
excluded manufacturer before the effective date of such exclusion and 
delivered within 60 days of the effect of the exclusion.)
    (4) CMS will not pay any claims submitted by, or for items or 
services ordered or prescribed by, an excluded provider for dates of 
service 15 days or more after the notice of the provider's exclusion was 
mailed to the supplier.
    (5)(i) Notwithstanding the other provisions of this section, payment 
may be made under Medicare, Medicaid or other Federal health care 
programs for certain emergency items or services furnished by an 
excluded individual or entity, or at the medical direction or on the 
prescription of an excluded physician or other authorized individual 
during the period of exclusion. To be payable, a claim for such 
emergency items or services must be accompanied by a sworn statement of 
the person furnishing the items or services specifying the nature of the 
emergency and why the items or services could not have been furnished by 
an individual or entity eligible to furnish or order such items or 
services.
    (ii) Notwithstanding paragraph (c)(5)(i) of this section, no claim 
for emergency items or services will be payable if such items or 
services were provided by an excluded individual who, through an 
employment, contractual or any other arrangement, routinely provides 
emergency health care items or services.

[57 FR 3330, Jan. 29, 1992, as amended at 60 FR 32917, June 26, 1995; 63 
FR 46690, Sept. 2, 1998; 64 FR 39427, July 22, 1999]



                      Subpart E--Notice and Appeals



Sec. 1001.2001  Notice of intent to exclude.

    (a) Except as provided in paragraph (c) of this section, if the OIG 
proposes to exclude an individual or entity in accordance with subpart C 
of this part, or in accordance with subpart B of this part where the 
exclusion is for a period exceeding 5 years, it will send written notice 
of its intent, the basis for the proposed exclusion and the potential 
effect of an exclusion. Within 30 days of receipt of notice, which will 
be deemed to be 5 days after the date on the notice, the individual or 
entity may submit documentary evidence and written argument concerning 
whether the exclusion is warranted and any related issues.
    (b) If the OIG proposes to exclude an individual or entity under the 
provisions of Sec. 1001.701 or Sec. 1001.801 of this part, in 
conjunction with the submission of documentary evidence and written 
argument, an individual or entity may request an opportunity to present 
oral argument to an OIG official.
    (c) Exception. If the OIG proposes to exclude an individual or 
entity under the provisions of Secs. 1001.1301, 1001.1401 or

[[Page 1141]]

1001.1501 of this part, paragraph (a) of this section will not apply.
    (d) If an entity has a provider agreement under section 1866 of the 
Act, and the OIG proposes to terminate that agreement in accordance with 
section 1866(b)(2)(C) of the Act, the notice provided for in paragraph 
(a) of this section will so state.

[63 FR 46690, Sept. 2, 1998, as amended at 63 FR 57918, Oct. 29, 1998]



Sec. 1001.2002  Notice of exclusion.

    (a) Except as provided in Sec. 1001.2003, if the OIG determines that 
exclusion is warranted, it will send a written notice of this decision 
to the affected individual or entity.
    (b) The exclusion will be effective 20 days from the date of the 
notice.
    (c) The written notice will state--
    (1) The basis for the exclusion;
    (2) The length of the exclusion and, where applicable, the factors 
considered in setting the length;
    (3) The effect of the exclusion;
    (4) The earliest date on which the OIG will consider a request for 
reinstatement;
    (5) The requirements and procedures for reinstatement; and
    (6) The appeal rights available to the excluded individual or 
entity.
    (d) Paragraph (b) of this section does not apply to exclusions 
imposed in accordance with Sec. 1001.1301.
    (e) No later than 15 days prior to the final exhibit exchanges 
required under Sec. 1005.8 of this chapter, the OIG may amend its notice 
letter if information comes to light that justifies the imposition of a 
different period of exclusion other than the one proposed in the 
original notice letter.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46690, Sept. 2, 1998]



Sec. 1001.2003  Notice of proposal to exclude.

    (a) Except as provided in paragraph (c) of this section, if the OIG 
proposes to exclude an individual or entity in accordance with 
Secs. 1001.901, 1001.951, 1001.1601 or 1001.1701, it will send written 
notice of this decision to the affected individual or entity. The 
written notice will provide the same information set forth in 
Sec. 1001.2002(c). If an entity has a provider agreement under section 
1866 of the Act, and the OIG also proposes to terminate that agreement 
in accordance with section 1866(b)(2)(C) of the Act, the notice will so 
indicate. The exclusion will be effective 60 days after the receipt of 
the notice (as defined in Sec. 1005.2 of this chapter) unless, within 
that period, the individual or entity files a written request for a 
hearing in accordance with part 1005 of this chapter. Such request must 
set forth--
    (1) The specific issues or statements in the notice with which the 
individual or entity disagrees;
    (2) The basis for that disagreement;
    (3) The defenses on which reliance is intended;
    (4) Any reasons why the proposed length of exclusion should be 
modified; and
    (5) Reasons why the health or safety of individuals receiving 
services under Medicare or any of the State health care programs does 
not warrant the exclusion going into effect prior to the completion of 
an administrative law judge (ALJ) proceeding in accordance with part 
1005 of this chapter.
    (b)(1) If the individual or entity does not make a written request 
for a hearing as provided for in paragraph (a) of this section, the OIG 
will send a notice of exclusion as described in Sec. 1001.2002.
    (2) If the individual or entity makes a timely written request for a 
hearing and the OIG determines that the health or safety of individuals 
receiving services under Medicare or any of the State health care 
programs does not warrant immediate exclusion, an exclusion will only go 
into effect, with the date of the ALJ's decision, if the ALJ upholds the 
decision to exclude.
    (c) If, prior to issuing a notice of proposal to exclude under 
paragraph (a) of this section, the OIG determines that the health or 
safety of individuals receiving services under Medicare or any of the 
State health care programs warrants the exclusion taking place prior to 
the completion of an ALJ proceeding in accordance with part 1005 of this 
chapter, the OIG will proceed under Secs. 1001.2001 and 1001.2002.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46690, Sept. 2, 1998; 65 
FR 24414, Apr. 26, 2000]

[[Page 1142]]



Sec. 1001.2004  Notice to State agencies.

    HHS will promptly notify each appropriate State agency administering 
or supervising the administration of each State health care program of:
    (a) The facts and circumstances of each exclusion, and
    (b) The period for which the State agency is being directed to 
exclude the individual or entity.



Sec. 1001.2005  Notice to State licensing agencies.

    (a) HHS will promptly notify the appropriate State(s) or local 
agencies or authorities having responsibility for the licensing or 
certification of an individual or entity excluded (or directed to be 
excluded) from participation of the facts and circumstances of the 
exclusion.
    (b) HHS will request that appropriate investigations be made and 
sanctions invoked in accordance with applicable State law and policy, 
and will request that the State or local agency or authority keep the 
Secretary and the OIG fully and currently informed with respect to any 
actions taken in response to the request.



Sec. 1001.2006  Notice to others regarding exclusion.

    (a) HHS will give notice of the exclusion and the effective date to 
the public, to beneficiaries (in accordance with Sec. 1001.1901(c)), 
and, as appropriate, to--
    (1) Any entity in which the excluded individual is known to be 
serving as an employee, administrator, operator, or in which the 
individual is serving in any other capacity and is receiving payment for 
providing services (The lack of this notice will not affect CMS's 
ability to deny payment for services);
    (2) State Medicaid Fraud Control Units;
    (3) Utilization and Quality Control Quality Improvement 
Organizations;
    (4) Hospitals, skilled nursing facilities, home health agencies and 
health maintenance organizations;
    (5) Medical societies and other professional organizations;
    (6) Contractors, health care prepayment plans, private insurance 
companies and other affected agencies and organizations;
    (7) The State and Area Agencies on Aging established under title III 
of the Older Americans Act;
    (8) The National Practitioner Data Bank.
    (9) Other Departmental operating divisions, Federal agencies, and 
other agencies or organizations, as appropriate.
    (b) In the case of an exclusion under Sec. 1001.101 of this chapter, 
if section 304(a)(5) of the Controlled Substances Act (21 U.S.C. 
824(a)(5)) applies, HHS will give notice to the Attorney General of the 
United States of the facts and circumstances of the exclusion and the 
length of the exclusion.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46690, Sept. 2, 1998]



Sec. 1001.2007  Appeal of exclusions.

    (a)(1) Except as provided in Sec. 1001.2003, an individual or entity 
excluded under this Part may file a request for a hearing before an ALJ 
only on the issues of whether:
    (i) The basis for the imposition of the sanction exists, and
    (ii) The length of exclusion is unreasonable.
    (2) When the OIG imposes an exclusion under subpart B of this part 
for a period of 5 years, paragraph (a)(1)(ii) of this section will not 
apply.
    (3) The request for a hearing should contain the information set 
forth in Sec. 1005.2(d) of this chapter.
    (b) The excluded individual or entity has 60 days from the receipt 
of notice of exclusion provided for in Sec. 1001.2002 to file a request 
for such a hearing.
    (c) The standard of proof at a hearing is preponderance of the 
evidence.
    (d) When the exclusion is based on the existence of a criminal 
conviction or a civil judgment imposing liability by Federal, State or 
local court, a determination by another Government agency, or any other 
prior determination where the facts were adjudicated and a final 
decision was made, the basis for the underlying conviction, civil 
judgment or determination is not reviewable and the individual or entity 
may not collaterally attack it either on substantive or procedural 
grounds in this appeal.

[[Page 1143]]

    (e) The procedures in part 1005 of this chapter will apply to the 
appeal.

[57 FR 3330, Jan. 29, 1992, as amended at 67 FR 11935, Mar. 18, 2002]



               Subpart F--Reinstatement into the Programs



Sec. 1001.3001  Timing and method of request for reinstatement.

    (a)(1) Except as provided in paragraphs (a)(2) and (a)(3) of this 
section or in Sec. 1001.501(b)(4) of this part, an excluded individual 
or entity (other than those excluded in accordance with Secs. 1001.1001 
and 1001.1501) may submit a written request for reinstatement to the OIG 
only after the date specified in the notice of exclusion. Obtaining a 
program provider number or equivalent does not reinstate eligibility.
    (2) An entity under Sec. 1001.1001 may apply for reinstatement prior 
to the date specified in the notice of exclusion by submitting a written 
request for reinstatement that includes documentation demonstrating that 
the standards set forth in Sec. 1001.3002(c) have been met.
    (3) Upon receipt of a written request, the OIG will require the 
requestor to furnish specific information and authorization to obtain 
information from private health insurers, peer review bodies, probation 
officers, professional associates, investigative agencies and such 
others as may be necessary to determine whether reinstatement should be 
granted.
    (4) Failure to furnish the required information or authorization 
will result in the continuation of the exclusion.
    (b) If a period of exclusion is reduced on appeal (regardless of 
whether further appeal is pending), the individual or entity may request 
reinstatement once the reduced exclusion period expires.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998]



Sec. 1001.3002  Basis for reinstatement.

    (a)(1) The OIG will authorize reinstatement if it determines that--
    (i) The period of exclusion has expired;
    (ii) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion have not recurred and will 
not recur; and
    (iii) There is no additional basis under sections 1128(a) or (b) or 
1128A of the Act for continuation of the exclusion.
    (2) Submitting claims or causing claims to be submitted or payments 
to be made by the programs for items or services furnished, ordered or 
prescribed, including administrative and management services or salary, 
may serve as the basis for denying reinstatement. This section applies 
regardless of whether an individual or entity has obtained a program 
provider number or equivalent, either as an individual or as a member of 
a group, prior to being reinstated.
    (b) In making the reinstatement determination, the OIG will 
consider--
    (1) Conduct of the individual or entity occurring prior to the date 
of the notice of exclusion, if not known to the OIG at the time of the 
exclusion;
    (2) Conduct of the individual or entity after the date of the notice 
of exclusion;
    (3) Whether all fines, and all debts due and owing (including 
overpayments) to any Federal, State or local government that relate to 
Medicare, Medicaid and all other Federal health care programs, have been 
paid or satisfactory arrangements have been made to fulfill obligations;
    (4) Whether CMS has determined that the individual or entity 
complies with, or has made satisfactory arrangements to fulfill, all of 
the applicable conditions of participation or supplier conditions for 
coverage under the statutes and regulations; and
    (5) [Reserved]
    (6) Whether the individual or entity has, during the period of 
exclusion, submitted claims, or caused claims to be submitted or payment 
to be made by any Federal health care program, for items or services the 
excluded party furnished, ordered or prescribed, including health care 
administrative services.
    (c) If the OIG determines that the criteria in paragraphs (a)(1)(ii) 
and (iii) of this section have been met, an entity excluded in 
accordance with

[[Page 1144]]

Sec. 1001.1001 will be reinstated upon a determination by the OIG that 
the individual whose conviction, exclusion or civil money penalty was 
the basis for the entity's exclusion--
    (1) Has properly reduced his or her ownership or control interest in 
the entity below 5 percent;
    (2) Is no longer an officer, director, agent or managing employee of 
the entity; or
    (3) Has been reinstated in accordance with paragraph (a) of this 
section or Sec. 1001.3005.
    (d) Reinstatement will not be effective until the OIG grants the 
request and provides notice under Sec. 1001.3003(a) of this part. 
Reinstatement will be effective as provided in the notice.
    (e) A determination with respect to reinstatement is not appealable 
or reviewable except as provided in Sec. 1001.3004.
    (f) An ALJ may not require reinstatement of an individual or entity 
in accordance with this chapter.

[57 FR 3330, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998; 64 
FR 39427, July 22, 1999]



Sec. 1001.3003  Approval of request for reinstatement.

    (a) If the OIG grants a request for reinstatement, the OIG will--
    (1) Give written notice to the excluded individual or entity 
specifying the date of reinstatement;
    (2) Notify CMS of the date of the individual's or entity's 
reinstatement;
    (3) Notify appropriate Federal and State agencies that administer 
health care programs that the individual or entity has been reinstated 
into all Federal health care programs; and
    (4) To the extent applicable, give notice to others that were 
originally notified of the exclusion.
    (b) A determination by the OIG to reinstate an individual or entity 
has no effect if a Federal health care program has imposed a longer 
period of exclusion under its own authorities.

[64 FR 39428, July 22, 1999]



Sec. 1001.3004  Denial of request for reinstatement.

    (a) If a request for reinstatement is denied, OIG will give written 
notice to the requesting individual or entity. Within 30 days of the 
date on the notice, the excluded individual or entity may submit:
    (1) Documentary evidence and written argument against the continued 
exclusion,
    (2) A written request to present written evidence and oral argument 
to an OIG official, or
    (3) Both documentary evidence and a written request.
    (b) After evaluating any additional evidence submitted by the 
excluded individual or entity (or at the end of the 30-day period, if 
none is submitted), the OIG will send written notice either confirming 
the denial, and indicating that a subsequent request for reinstatement 
will not be considered until at least one year after the date of denial, 
or approving the request consistent with the procedures set forth in 
Sec. 1001.3003(a).
    (c) The decision to deny reinstatement will not be subject to 
administrative or judicial review.



Sec. 1001.3005  Reversed or vacated decisions.

    (a) An individual or entity will be reinstated into Medicare, 
Medicaid and other Federal health care programs retroactive to the 
effective date of the exclusion when such exclusion is based on--
    (1) A conviction that is reversed or vacated on appeal;
    (2) An action by another agency, such as a State agency or licensing 
board, that is reversed or vacated on appeal; or
    (3) An OIG exclusion action that is reversed or vacated at any stage 
of an individual's or entity's administrative appeal process.
    (b) If an individual or entity is reinstated in accordance with 
paragraph (a) of this section, CMS and other Federal health care 
programs will make payment for services covered under such program that 
were furnished or performed during the period of exclusion.
    (c) The OIG will give notice of a reinstatement under this section 
in accordance with Sec. 1001.3003(a).
    (d) An action taken by the OIG under this section will not require 
any other

[[Page 1145]]

Federal health care program to reinstate the individual or entity if 
such program has imposed an exclusion under its own authority.
    (e) If an action which results in the retroactive reinstatement of 
an individual or entity is subsequently overturned, the OIG may reimpose 
the exclusion for the initial period of time, less the period of time 
that was served prior to the reinstatement of the individual or entity.

[57 FR 3330, Jan. 29, 1992, as amended at 64 FR 39428, July 22, 1999; 67 
FR 11935, Mar. 18, 2002]



PART 1002--PROGRAM INTEGRITY--STATE-INITIATED EXCLUSIONS FROM MEDICAID--Table of Contents




                      Subpart A--General Provisions

Sec.
1002.1 Scope and purpose.
1002.2 General authority.
1002.3 Disclosure by providers and State Medicaid agencies.
1002.100 State plan requirement.

                     Subpart B--Mandatory Exclusion

1002.203 Mandatory exclusion.

                    Subpart C--Permissive Exclusions

1002.210 Permissive exclusions; general authority.
1002.211 Effect of exclusion.
1002.212 State agency notifications.
1002.213 Appeals of exclusions.
1002.214 Basis for reinstatement after State agency-initiated exclusion.
1002.215 Action on request for reinstatement.

 Subpart D--Notification to OIG of State or Local Convictions of Crimes 
                            Against Medicaid

1002.230 Notification of State or local convictions of crimes against 
          Medicaid.

    Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7, 1396(a)(4)(A), 
1396(p)(1), 1396a(30), 1396a(39), 1396b(a)(6), 1396b(b)(3), 1396b(i)(2) 
and 1396b(q).

    Source: 57 FR 3343, Jan. 29, 1992, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 1002.1  Scope and purpose.

    The regulations in this part specify certain bases upon which 
individuals and entities may, or in some cases must, be excluded from 
participation in the Medicaid program. These regulations specifically 
address the authority of State agencies to exclude on their own 
initiative, regardless of whether the OIG has excluded an individual or 
entity under part 1001 of this chapter. These regulations also delineate 
the States' obligation to inform the OIG of certain Medicaid-related 
convictions.



Sec. 1002.2  General authority.

    (a) In addition to any other authority it may have, a State may 
exclude an individual or entity from participation in the Medicaid 
program for any reason for which the Secretary could exclude that 
individual or entity from participation in the Medicare, Medicaid and 
other Federal health care programs under sections 1128, 1128A or 
1866(b)(2) of the Social Security Act.
    (b) Nothing contained in this part should be construed to limit a 
State's own authority to exclude an individual or entity from Medicaid 
for any reason or period authorized by State law.

[57 FR 3343, Jan. 29, 1992, as amended at 64 FR 39428, July 22, 1999]



Sec. 1002.3  Disclosure by providers and State Medicaid agencies.

    (a) Information that must be disclosed. Before the Medicaid agency 
enters into or renews a provider agreement, or at any time upon written 
request by the Medicaid agency, the provider must disclose to the 
Medicaid agency the identity of any person described in 
Sec. 1001.1001(a)(1) of this chapter.
    (b) Notification to Inspector General. (1) The Medicaid agency must 
notify the Inspector General of any disclosures made under paragraph (a) 
of this section within 20 working days from the date it receives the 
information.
    (2) The agency must promptly notify the Inspector General of any 
action it takes on the provider's application for participation in the 
program.

[[Page 1146]]

    (3) The agency must also promptly notify the Inspector General of 
any action it takes to limit the ability of an individual or entity to 
participate in its program, regardless of what such an action is called. 
This includes, but is not limited to, suspension actions, settlement 
agreements and situations where an individual or entity voluntarily 
withdraws from the program to avoid a formal sanction.
    (c) Denial or termination of provider participation. (1) The 
Medicaid agency may refuse to enter into or renew an agreement with a 
provider if any person who has ownership or control interest in the 
provider, or who is an agent or managing employee of the provider, has 
been convicted of a criminal offense related to that person's 
involvement in any program established under Medicare, Medicaid or the 
title XX Services program.
    (2) The Medicaid agency may refuse to enter into, or terminate, a 
provider agreement if it determines that the provider did not fully and 
accurately make any disclosure required under paragraph (a) of this 
section.

[57 FR 3343, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998]



Sec. 1002.100  State plan requirement.

    The plan must provide that the requirements of this subpart are met. 
However, the provisions of these regulations are minimum requirements. 
The agency may impose broader sanctions if it has the authority to do so 
under State law.



                     Subpart B--Mandatory Exclusion



Sec. 1002.203  Mandatory exclusion.

    (a) The State agency, in order to receive Federal financial 
participation (FFP), must provide that it will exclude from 
participation any HMO, or entity furnishing services under a waiver 
approved under section 1915(b)(1) of the Act, if such organization or 
entity--
    (1) Could be excluded under Sec. 1001.1001 or Sec. 1001.1051 of this 
chapter, or
    (2) Has, directly or indirectly, a substantial contractual 
relationship with an individual or entity that could be excluded under 
Sec. 1001.1001 or Sec. 1001.1051 of this chapter.
    (b) As used in this section, the term--
    Exclude includes the refusal to enter into or renew a participation 
agreement or the termination of such an agreement.
    Substantial contractual relationship is one in which the sanctioned 
individual described in Sec. 1001.1001 of this chapter has direct or 
indirect business transactions with the organization or entity that, in 
any fiscal year, amount to more than $25,000 or 5 percent of the 
organization's or entity's total operating expenses, whichever is less. 
Business transactions include, but are not limited to, contracts, 
agreements, purchase orders, or leases to obtain services, supplies, 
equipment, space or salaried employment.

[57 FR 3343, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998]



                    Subpart C--Permissive Exclusions



Sec. 1002.210  Permissive exclusions; general authority.

    The State agency must have administrative procedures in place that 
enable it to exclude an individual or entity for any reason for which 
the Secretary could exclude such individual or entity under parts 1001 
or 1003 of this chapter. The period of such exclusion is at the 
discretion of the State agency.



Sec. 1002.211  Effect of exclusion.

    (a) Denial of payment. Except as provided for in 
Sec. 1001.1901(c)(3), (c)(4) and (c)(5)(i) of this chapter, no payment 
may be made by the State agency for any item or service furnished on or 
after the effective date specified in the notice by an excluded 
individual or entity, or at the medical direction or on the prescription 
of a physician who is excluded when a person furnishing such item or 
service knew, or had reason to know, of the exclusion.
    (b) Denial of FFP. FFP is not available where the State agency is 
required to deny payment under paragraph (a) of this section. FFP will 
be reinstated at such time as the excluded individual

[[Page 1147]]

or entity is reinstated in the Medicaid program.

[57 FR 3343, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998]



Sec. 1002.212  State agency notifications.

    When the State agency initiates an exclusion under Sec. 1002.210, it 
must provide to the individual or entity subject to the exclusion 
notification consistent with that required in subpart E of part 1001 of 
this chapter, and must notify other State agencies, the State medical 
licensing board (where applicable), the public, beneficiaries, and 
others as provided in Secs. 1001.2005 and 1001.2006 of this chapter.



Sec. 1002.213  Appeals of exclusions.

    Before imposing an exclusion under Sec. 1002.210, the State agency 
must give the individual or entity the opportunity to submit documents 
and written argument against the exclusion. The individual or entity 
must also be given any additional appeals rights that would otherwise be 
available under procedures established by the State.



Sec. 1002.214  Basis for reinstatement after State agency-initiated exclusion.

    (a) The provisions of this section and Sec. 1002.215 apply to the 
reinstatement in the Medicaid program of all individuals or entities 
excluded in accordance with Sec. 1002.210, if a State affords 
reinstatement opportunity to those excluded parties.
    (b) An individual or entity who has been excluded from Medicaid may 
be reinstated only by the Medicaid agency that imposed the exclusion.
    (c) An individual or entity may submit to the State agency a request 
for reinstatement at any time after the date specified in the notice of 
exclusion.



Sec. 1002.215  Action on request for reinstatement.

    (a) The State agency may grant reinstatement only if it is 
reasonably certain that the types of actions that formed the basis for 
the original exclusion have not recurred and will not recur. In making 
this determination, the agency will consider, in addition to any factors 
set forth in State law--
    (1) The conduct of the individual or entity occurring prior to the 
date of the notice of exclusion, if not known to the agency at the time 
of the exclusion;
    (2) The conduct of the individual or entity after the date of the 
notice of exclusion; and
    (3) Whether all fines, and all debts due and owing (including 
overpayments) to any Federal, State or local government that relate to 
Medicare or any of the State health care programs, have been paid, or 
satisfactory arrangements have been made, that fulfill these 
obligations.
    (b) Notice of action on request for reinstatement. (1) If the State 
agency approves the request for reinstatement, it must give written 
notice to the excluded party, and to all others who were informed of the 
exclusion in accordance with Sec. 1002.212, specifying the date on which 
Medicaid program participation may resume.
    (2) If the State agency does not approve the request for 
reinstatement, it will notify the excluded party of its decision. Any 
appeal of a denial of reinstatement will be in accordance with State 
procedures and need not be subject to administrative or judicial review, 
unless required by State law.



 Subpart D--Notification to OIG of State or Local Convictions of Crimes 
                            Against Medicaid



Sec. 1002.230  Notification of State or local convictions of crimes against Medicaid.

    (a) The State agency must notify the OIG whenever a State or local 
court has convicted an individual who is receiving reimbursement under 
Medicaid of a criminal offense related to participation in the delivery 
of health care items or services under the Medicaid program, except 
where the State Medicaid Fraud Control Unit (MFCU) has so notified the 
OIG.
    (b) If the State agency was involved in the investigation or 
prosecution of the case, it must send notice within 15 days after the 
conviction.

[[Page 1148]]

    (c) If the State agency was not so involved, it must give notice 
within 15 days after it learns of the conviction.



PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS AND EXCLUSIONS--Table of Contents




Sec.
1003.100 Basis and purpose.
1003.101 Definitions.
1003.102 Basis for civil money penalties and assessments.
1003.103 Amount of penalty.
1003.104 Amount of assessment.
1003.105 Exclusion from participation in Medicare, Medicaid and all 
          Federal health care programs.
1003.106 Determinations regarding the amount of the penalty and 
          assessment.
1003.107 Determinations regarding exclusion.
1003.108 Penalty, assessment, and exclusion not exclusive.
1003.109 Notice of proposed determination.
1003.110 Failure to request a hearing.
1003.114 Collateral estoppel.
1003.126 Settlement.
1003.127 Judicial review.
1003.128 Collection of penalty and assessment.
1003.129 Notice to other agencies.
1003.132 Limitations.
1003.133 Statistical sampling.
1003.134 Effect of exclusion.
1003.135 Reinstatement.

    Authority: 42 U.S.C. 1302, 1320-7, 1320a-7a, 1320b-10, 1395u(j), 
1395u(k), 1395cc(j), 1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d), 
1396b(m), 11131(c) and 11137(b)(2).

    Source: 51 FR 34777, Sept. 30, 1986, unless otherwise noted.



Sec. 1003.100  Basis and purpose.

    (a) Basis. This part implements sections 1128(c), 1128A, 1140, 
1876(i)(6), 1877(g), 1882(d) and 1903(m)(5) of the Social Security Act, 
and sections 421(c) and 427(b)(2) of Pub. L. 99-660 (42 U.S.C. 1320a-7, 
1320a-7a, 1320a-7(c), 1320b(10), 1395mm, 1395ss(d), 1396b(m), 11131(c) 
and 11137(b)(2)).
    (b) Purpose. This part--
    (1) Provides for the imposition of civil money penalties and, as 
applicable, assessments against persons who--
    (i) Have knowingly submitted certain prohibited claims under Federal 
health care programs;
    (ii) Seek payment in violation of the terms of an agreement or a 
limitation on charges or payments under the Medicare program, or a 
requirement not to charge in excess of the amount permitted under the 
Medicaid program;
    (iii) Give false or misleading information that might affect the 
decision to discharge a Medicare patient from the hospital;
    (iv)(A) Fail to report information concerning medical malpractice 
payments or who improperly disclose, use or permit access to information 
reported under part B of title IV of Public Law 99-660, and regulations 
specified in 45 CFR part 60, or
    (B) Are health plans and fail to report information concerning 
sanctions or other adverse actions imposed on providers as required to 
be reported to the Healthcare Integrity and Protection Data Bank (HIPDB) 
in accordance with section 1128E of the Act;
    (v) Misuse certain Departmental and Medicare and Medicaid program 
words, letters symbols or emblems;
    (vi) Violate a requirement of section 1867 of the Act or Sec. 489.24 
of this title;
    (vii) Substantially fail to provide an enrollee with required 
medically necessary items and services; engage in certain marketing, 
enrollment, reporting, claims payment, employment or contracting abuses; 
or do not meet the requirements for physician incentive plans for 
Medicare specified in Secs. 417.479(d) through (f) of this title;
    (viii) Present or cause to be presented a bill or claim for 
designated health services (as defined in Sec. 411.351 of this title) 
that they know, or should know, were furnished in accordance with a 
referral prohibited under Sec. 411.353 of this title;
    (ix) Have collected amounts that they know or should know were 
billed in violation of Sec. 411.353 of this title and have not refunded 
the amounts collected on a timely basis;
    (x) Are physicians or entities that enter into an arrangement or 
scheme that they know or should know has as a principal purpose the 
assuring of referrals by the physician to a particular entity which, if 
made directly, would violate the provisions of Sec. 411.353 of this 
title;
    (xi) Are excluded, and who retain an ownership or control interest 
of five percent or more in an entity participating in Medicare or a 
State health

[[Page 1149]]

care program, or who are officers or managing employees of such an 
entity (as defined in section 1126(b) of the Act);
    (xii) Offer inducements that they know or should know are likely to 
influence Medicare or State health care program beneficiaries to order 
or receive particular items or services;
    (xiii) Are physicians who knowingly misrepresent that a Medicare 
beneficiary requires home health services;
    (xiv) Have submitted, or caused to be submitted, certain prohibited 
claims, including claims for services rendered by excluded individuals 
employed by or otherwise under contract with such person, under one or 
more Federal health care programs; or
    (xv) Violate the Federal health care programs' anti-kickback statute 
as set forth in section 1128B of the Act.
    (2) Provides for the exclusion of persons from the Medicare or State 
health care programs against whom a civil money penalty or assessment 
has been imposed, and the basis for reinstatement of persons who have 
been excluded; and
    (3) Sets forth the appeal rights of persons subject to a penalty, 
assessment and exclusion.

[65 FR 24414, Apr. 26, 2000, as amended at 67 FR 11935, Mar. 18, 2002]



Sec. 1003.101  Definitions.

    For purposes of this part:
    Act means the Social Security Act.
    Adverse effect means medical care has not been provided and the 
failure to provide such necessary medical care has presented an imminent 
danger to the health, safety, or well-being of the patient or has placed 
the patient unnecessarily in a high-risk situation.
    ALJ means an Administrative Law Judge.
    Assessment means the amount described in Sec. 1003.104, and includes 
the plural of that term.
    Claim means an application for payment for an item or service to a 
Federal health care program (as defined in section 1128B(f) of the Act).
    CMS stands for Centers for Medicare & Medicaid Services, formerly 
the Health Care Financing Administration (HCFA).
    Contracting organization means a public or private entity, including 
of a health maintenance organization (HMO), competitive medical plan, or 
health insuring organization (HIO) which meets the requirements of 
section 1876(b) of the Act or is subject to the requirements in section 
1903(m)(2)(A) of the Act and which has contracted with the Department or 
a State to furnish services to Medicare beneficiaries or Medicaid 
recipients.
    Department means the Department of Health and Human Services.
    Enrollee means an individual who is eligible for Medicare or 
Medicaid and who enters into an agreement to receive services from a 
contracting organization that contracts with the Department under title 
XVIII or title XIX of the Act.
    Exclusion means the temporary or permanent barring of a person from 
participation in a Federal health care program (as defined in section 
1128B(f) of the Act).
    Inspector General means the Inspector General of the Department or 
his or her designees.
    Item or service includes--
    (a) any item, device, medical supply or service provided to a 
patient (i) which is listed in an itemized claim for program payment or 
a request for payment, or (ii) for which payment is included in other 
Federal or State health care reimbursement methods, such as a 
prospective payment system; and
    (b) in the case of a claim based on costs, any entry or omission in 
a cost report, books of account or other documents supporting the claim.
    Maternal and Child Health Services Block Grant program means the 
program authorized under Title V of the Act.
    Medicaid means the program of grants to the States for medical 
assistance authorized under title XIX of the Act.
    Medical malpractice claim or action means a written complaint or 
claim demanding payment based on a physician's, dentist's or other 
health care practitioner's provision of, or failure to provide health 
care services, and includes the filing of a cause of action based on the 
law of tort brought in any State or Federal court or other adjudicative 
body.

[[Page 1150]]

    Medicare means the program of health insurance for the aged and 
disabled authorized under Title XVIII of the Act.
    Participating hospital means (1) a hospital or (2) a rural primary 
care hospital as defined in section 1861(mm)(1) of the Act that has 
entered into a Medicare provider agreement under section 1866 of the 
Act.
    Penalty means the amount described in Sec. 1003.103 and includes the 
plural of that term.
    Person means an individual, trust or estate, partnership, 
corporation, professional association or corporation, or other entity, 
public or private.
    Physician incentive plan means any compensation arrangement between 
a contracting organization and a physician group that may directly or 
indirectly have the effect of reducing or limiting services provided 
with respect to enrollees in the organization.
    Preventive care, for purposes of the definition of the term 
Remuneration as set forth in this section and the preventive care 
exception to section 231(h) of HIPAA, means any service that--
    (1) Is a prenatal service or a post-natal well-baby visit or is a 
specific clinical service described in the current U.S. Preventive 
Services Task Force's Guide to Clinical Preventive Services, and
    (2) Is reimbursable in whole or in part by Medicare or an applicable 
State health care program.
    Remuneration, as set forth in Sec. 1003.102(b)(13) of this part, is 
consistent with the definition contained in section 1128A(i)(6) of the 
Act, and includes the waiver of coinsurance and deductible amounts (or 
any part thereof) and transfers of items or services for free or for 
other than fair market value. The term ``remuneration'' does not 
include--
    (1) The waiver of coinsurance and deductible amounts by a person, if 
the waiver is not offered as part of any advertisement or solicitation; 
the person does not routinely waive coinsurance or deductible amounts; 
and the person waives coinsurance and deductible amounts after 
determining in good faith that the individual is in financial need or 
failure by the person to collect coinsurance or deductible amounts after 
making reasonable collection efforts;
    (2) Any permissible practice as specified in section 1128B(b)(3) of 
the Act or in regulations issued by the Secretary;
    (3) Differentials in coinsurance and deductible amounts as part of a 
benefit plan design (as long as the differentials have been disclosed in 
writing to all beneficiaries, third party payers and providers), to whom 
claims are presented; or
    (4) Incentives given to individuals to promote the delivery of 
preventive care services where the delivery of such services is not tied 
(directly or indirectly) to the provision of other services reimbursed 
in whole or in part by Medicare or an applicable State health care 
program. Such incentives may include the provision of preventive care, 
but may not include--
    (i) Cash or instruments convertible to cash; or
    (ii) An incentive the value of which is disproportionally large in 
relationship to the value of the preventive care service (i.e., either 
the value of the service itself or the future health care costs 
reasonably expected to be avoided as a result of the preventive care).
    Request for payment means an application submitted by a person to 
any person for payment for an item or service.
    Respondent means the person upon whom the Department has imposed, or 
proposes to impose, a penalty, assessment or exclusion.
    Responsible physician means a physician who is responsible for the 
examination, treatment, or transfer of an individual who comes to a 
participating hospital's emergency department seeking assistance and 
includes a physician on call for the care of such individual.
    Secretary means the Secretary of the Department or his or her 
designees.
    Should know or should have known means that a person, with respect 
to information--
    (1) Acts in deliberate ignorance of the truth or falsity of the 
information; or
    (2) Acts in reckless disregard of the truth or falsity of the 
information. For purposes of this definition, no proof of specific 
intent to defraud is required.

[[Page 1151]]

    Social Services Block Grant program means the program authorized 
under title XX of the Social Security Act.
    State includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, the Northern Mariana Islands, and the 
Trust Territory of the Pacific Islands.
    State health care program means a State plan approved under title 
XIX of the Act, any program receiving funds under title V of the Act or 
from an allotment to a State under such title, or any program receiving 
funds under title XX of the Act or from an allotment to a State under 
such title.
    Timely basis means, in accordance with Sec. 1003.102(b)(9) of this 
part, the 60-day period from the time the prohibited amounts are 
collected by the individual or the entity.

[51 FR 34777, Sept. 30, 1986, as amended at 56 FR 28492, June 21, 1991; 
57 FR 3345, Jan. 29, 1992; 59 FR 32124, June 22, 1994; 59 FR 36086, July 
15, 1994; 60 FR 16584, Mar. 31, 1995; 61 FR 13449, Mar. 27, 1996; 65 FR 
24415, Apr. 26, 2000; 65 FR 35584, June 5, 2000; 66 FR 39452, July 31, 
2001; 67 FR 11935, Mar. 18, 2002]



Sec. 1003.102  Basis for civil money penalties and assessments.

    (a) The OIG may impose a penalty and assessment against any person 
whom it determines in accordance with this part has knowingly presented, 
or caused to be presented, a claim which is for--
    (1) An item or service that the person knew, or should have known, 
was not provided as claimed, including a claim that is part of a pattern 
or practice of claims based on codes that the person knows or should 
know will result in greater payment to the person than the code 
applicable to the item or service actually provided;
    (2) An item or service for which the person knew, or should have 
known, that the claim was false or fraudulent, including a claim for any 
item or service furnished by an excluded individual employed by or 
otherwise under contract with that person;
    (3) An item or service furnished during a period in which the person 
was excluded from participation in the Federal health care program to 
which the claim was made;
    (4) A physician's services (or an item or service) for which the 
person knew, or should have known, that the individual who furnished (or 
supervised the furnishing of) the service--
    (i) Was not licensed as a physician;
    (ii) Was licensed as a physician, but such license had been obtained 
through a misrepresentation of material fact (including cheating on an 
examination required for licensing); or
    (iii) Represented to the patient at the time the service was 
furnished that the physician was certified in a medical specialty board 
when he or she was not so certified;
    (5) A payment that such person knows, or should know, may not be 
made under Sec. 411.353 of this title; or
    (6) An item or service that a person knows or should know is 
medically unnecessary, and which is part of a pattern of such claims.
    (b) The OIG may impose a penalty, and where authorized, an 
assessment against any person (including an insurance company in the 
case of paragraphs (b)(5) and (b)(6) of this section) whom it determines 
in accordance with this part--
    (1) Has knowingly presented or caused to be presented a request for 
payment in violation of the terms of--
    (i) An agreement to accept payments on the basis of an assignment 
under section 1842(b)(3)(B)(ii) of the Act;
    (ii) An agreement with a State agency or other requirement of a 
State Medicaid plan not to charge a person for an item or service in 
excess of the amount permitted to be charged;
    (iii) An agreement to be a participating physician or supplier under 
section 1842(h)(1); or
    (iv) An agreement in accordance with section 1866(a)(1)(G) of the 
Act not to charge any person for inpatient hospital services for which 
payment had been denied or reduced under section 1886(f)(2) of the Act.
    (2)-(3) [Reserved]
    (4) Has knowingly given or caused to be given to any person, in the 
case of inpatient hospital services subject to the provisions of section 
1886 of the Act, information that he or she knew, or should have known, 
was false or misleading and that could reasonably

[[Page 1152]]

have been expected to influence the decision when to discharge such 
person or another person from the hospital.
    (5) Fails to report information concerning--
    (i) A payment made under an insurance policy, self-insurance or 
otherwise, for the benefit of a physician, dentist or other health care 
practitioner in settlement of, or in satisfaction in whole or in part 
of, a medical malpractice claim or action or a judgment against such a 
physician, dentist or other practitioner in accordance with section 421 
of Public Law 99-660 (42 U.S.C. 11131) and as required by regulations at 
45 CFR part 60; or
    (ii) An adverse action required to be reported to the Healthcare 
Integrity and Protection Data Bank as established by section 221 of 
Public Law 104-191 and set forth in section 1128E of the Act.
    (6) Improperly discloses, uses or permits access to information 
reported in accordance with part B of title IV of Pub. L. 99-660, in 
violation of section 427 of Pub. L. 99-660 (42 U.S.C. 11137) or 
regulations at 45 CFR part 60. (The disclosure of information reported 
in accordance with part B of title IV in response to a subpoena or a 
discovery request is considered to be an improper disclosure in 
violation of section 427 of Pub. L. 99-660. However, disclosure or 
release by an entity of original documents or underlying records from 
which the reported information is obtained or derived is not considered 
to be an improper disclosure in violation of section 427 of Pub. L. 99-
660.)
    (7) Has made use of the words, letters, symbols or emblems as 
defined in paragraph (b)(7)(i) of this section in such a manner that 
such person knew or should have known would convey, or in a manner which 
reasonably could be interpreted or construed as conveying, the false 
impression that an advertisement, solicitation or other item was 
authorized, approved or endorsed by the Department or CMS, or that such 
person or organization has some connection with or authorization from 
the Department or CMS. Civil money penalties--
    (i) May be imposed, regardless of the use of a disclaimer of 
affiliation with the United States Government, the Department or its 
programs, for misuse of--
    (A) The words ``Department of Health and Human Services,'' ``Health 
and Human Services,'' ``Centers for Medicare & Medicaid Services,'' 
``Medicare,'' or ``Medicaid,'' or any other combination or variation of 
such words;
    (B) The letters ``DHHS,'' ``HHS,'' or ``CMS,'' or any other 
combination or variation of such letters; or
    (C) A symbol or emblem of the Department or CMS (including the 
design of, or a reasonable facsimile of the design of, the Medicare 
card, the check used for payment of benefits under title II, or 
envelopes or other stationery used by the Department or CMS) or any 
other combination or variation of such symbols or emblems; and
    (ii) Will not be imposed against any agency or instrumentality of a 
State, or political subdivision of the State, that makes use of any 
symbol or emblem, or any words or letters which specifically identifies 
that agency or instrumentality of the State or political subdivision.
    (8) Is a contracting organization that CMS determines has committed 
an act or failed to comply with the requirements set forth in 
Sec. 417.500(a) or Sec. 434.67(a) of this title or failed to comply with 
the requirement set forth in Sec. 434.80(c) of this title.
    (9) Has not refunded on a timely basis, as defined in Sec. 1003.101 
of this part, amounts collected as the result of billing an individual, 
third party payer or other entity for a designated health service that 
was provided in accordance with a prohibited referral as described in 
Sec. 411.353 of this title.
    (10) Is a physician or entity that enters into--
    (i) A cross referral arrangement, for example, whereby the physician 
owners of entity ``X'' refer to entity ``Y,'' and the physician owners 
of entity ``Y'' refer to entity ``X'' in violation of Sec. 411.353 of 
this title, or
    (ii) Any other arrangement or scheme that the physician or entity 
knows, or should know, has a principal purpose of circumventing the 
prohibitions of Sec. 411.353 of this title.

[[Page 1153]]

    (11) Has violated section 1128B of the Act by unlawfully offering, 
paying, soliciting or receiving remuneration in return for the referral 
of business paid for by Medicare, Medicaid or other Federal health care 
programs.
    (12) Who is not an organization, agency or other entity, and who is 
excluded from participating in Medicare or a State health care program 
in accordance with sections 1128 or 1128A of the Act, and who--
    (i) Knows or should know of the action constituting the basis for 
the exclusion, and retains a direct or indirect ownership or control 
interest of five percent or more in an entity that participates in 
Medicare or a State health care program; or
    (ii) Is an officer or managing employee (as defined in section 
1126(b) of the Act) of such entity.
    (13) Offers or transfers remuneration (as defined in Sec. 1003.101 
of this part) to any individual eligible for benefits under Medicare or 
a State health care program, that such person knows or should know is 
likely to influence such individual to order or to receive from a 
particular provider, practitioner or supplier any item or service for 
which payment may be made, in whole or in part, under Medicare or a 
State health care program.
    (14) Is a physician and who executes a document falsely by 
certifying that a Medicare beneficiary requires home health services 
when the physician knows that the beneficiary does not meet the 
eligibility requirements set forth in sections 1814(a)(2)(C) or 
1835(a)(2)(A) of the Act.
    (15) Has knowingly and willfully presented, or caused to be 
presented, a bill or request for payment for items and services 
furnished to a hospital patient for which payment may be made under the 
Medicare or another Federal health care program, if that bill or request 
is inconsistent with an arrangement under section 1866(a)(1)(H) of the 
Act, or violates the requirements for such an arrangement.
    (c)(1) The Office of the Inspector General (OIG) may impose a 
penalty for violations of section 1867 of the Act or Sec. 489.24 of this 
title against--
    (i) Any participating hospital with an emergency department that--
    (A) Knowingly violates the statute on or after August 1, 1986 or;
    (B) Negligently violates the statute on or after May 1, 1991; and
    (ii) Any responsible physician who--
    (A) Knowingly violates the statute on or after August 1, 1986;
    (B) Negligently violates the statute on or after May 1, 1991;
    (C) Signs a certification under section 1867(c)(1)(A) of the Act if 
the physician knew or should have known that the benefits of transfer to 
another facility did not outweigh the risks of such a transfer; or
    (D) Misrepresents an individual's condition or other information, 
including a hospital's obligations under this section.
    (2) For purposes of this section, a responsible physician or 
hospital ``knowingly'' violates section 1867 of the Act if the 
responsible physician or hospital recklessly disregards, or deliberately 
ignores a material fact.
    (d)(1) In any case in which it is determined that more than one 
person was responsible for presenting or causing to be presented a claim 
as described in paragraph (a) of this section, each such person may be 
held liable for the penalty prescribed by this part, and an assessment 
may be imposed against any one such person or jointly and severally 
against two or more such persons, but the aggregate amount of the 
assessments collected may not exceed the amount that could be assessed 
if only one person was responsible.
    (2) In any case in which it is determined that more than one person 
was responsible for presenting or causing to be presented a request for 
payment or for giving false or misleading information as described in 
paragraph (b) of this section, each such person may be held liable for 
the penalty prescribed by this part.
    (3) In any case in which it is determined that more than one person 
was responsible for failing to report information that is required to be 
reported on a medical malpractice payment, or for improperly disclosing, 
using, or permitting access to information, as described in paragraphs 
(b)(5) and (b)(6) of this section, each such person may be held liable 
for the penalty prescribed by this part.

[[Page 1154]]

    (4) In any case in which it is determined that more than one 
responsible physician violated the provisions of section 1867 of the Act 
or of Sec. 489.24 of this title, a penalty may be imposed against each 
responsible physician.
    (5) Under this section, a principal is liable for penalties and 
assessments for the actions of his or her agent acting within the scope 
of the agency.
    (e) For purposes of this section, the term ``knowingly'' is defined 
consistent with the definition set forth in the Civil False Claims Act 
(31 U.S.C. 3729(b)), that is, a person, with respect to information, has 
actual knowledge of information, acts in deliberate ignorance of the 
truth or falsity of the information, or acts in reckless disregard of 
the truth or falsity of the information, and that no proof of specific 
intent to defraud is required.

[57 FR 3345, Jan. 29, 1992; 57 FR 9670, Mar. 20, 1992, as amended at 59 
FR 32124, June 22, 1994; 59 FR 36086, July 15, 1994; 60 FR 16584, Mar. 
31, 1995; 60 FR 58241, Nov. 27, 1995; 64 FR 39428, July 22, 1999; 65 FR 
18550, Apr. 7, 2000; 65 FR 24415, Apr. 26, 2000; 65 FR 35584, June 5, 
2000]



Sec. 1003.103  Amount of penalty.

    (a) Except as provided in paragraphs (b) through (k) of this 
section, the OIG may impose a penalty of not more than--
    (1) $2,000 for each wrongful act occurring before January 1, 1997 
that is subject to a determination under Sec. 1003.102; and
    (2) $10,000 for each wrongful act occurring on or after January 1, 
1997 that is subject to a determination under Sec. 1003.102.
    (b) The OIG may impose a penalty of not more than $15,000 for each 
person with respect to whom a determination was made that false or 
misleading information was given under Sec. 1003.102(b)(4), or for each 
item and service that is subject to a determination under 
Sec. 1003.102(a)(5) or Sec. 1003.102(b)(9) of this part. The OIG may 
impose a penalty of not more than $100,000 for each arrangement or 
scheme that is subject to a determination under Sec. 1003.102(b)(10) of 
this part.
    (c) The OIG may impose a penalty of not more than $11,000 \1\ for 
each payment for which there was a failure to report required 
information in accordance with Sec. 1003.102(b)(5), or for each improper 
disclosure, use or access to information that is subject to a 
determination under Sec. 1003.102(b)(6).
---------------------------------------------------------------------------

    \1\ As adjusted in accordance with the Federal Civil Monetary 
Penalty Inflation Adjustment Act of 1990 (Pub. L. 101-140), as amended 
by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134).
---------------------------------------------------------------------------

    (d)(1) The OIG may impose a penalty of not more than $5,000 for each 
violation resulting from the misuse of Departmental, CMS, Medicare or 
Medicaid program words, letters, symbols or emblems as described in 
Sec. 1003.102(b)(7) relating to printed media, and a penalty of not more 
than $25,000 in the case of such misuse related to a broadcast or 
telecast, that is related to a determination under Sec. 1003.102(b)(7).
    (2) For purposes of this paragraph, a violation is defined as--
    (i) In the case of a direct mailing solicitation or advertisement, 
each separate piece of mail which contains one or more words, letters, 
symbols or emblems related to a determination under Sec. 1003.102(b)(7);
    (ii) In the case of a printed solicitation or advertisement, each 
reproduction, reprinting or distribution of such item related to a 
determination under Sec. 1003.102(b)(7); and
    (iii) In the case of a broadcast or telecast, each airing of a 
single commercial or solicitation related to a determination under 
Sec. 1003.102(b)(7).
    (e) For violations of section 1867 of the Act or Sec. 489.24 of this 
title, the OIG may impose--
    (1) Against each participating hospital with an emergency 
department, a penalty of not more than $50,000 for each negligent 
violation occurring on or after May 1, 1991, except that if the 
participating hospital has fewer than 100 State-licensed, Medicare-
certified beds on the date the penalty is imposed, the penalty will not 
exceed $25,000; and
    (2) Against each responsible physician, a penalty of not more than 
$50,000 for each negligent violation occurring on or after May 1, 1991.

[[Page 1155]]

    (f)(1) The OIG may, in addition to or in lieu of other remedies 
available under law, impose a penalty of up to $25,000 for each 
determination by CMS that a contracting organization has--
    (i) Failed substantially to provide an enrollee with required 
medically necessary items and services and the failure adversely affects 
(or has the likelihood of adversely affecting) the enrollee;
    (ii) Imposed premiums on enrollees in excess of amounts permitted 
under section 1876 or title XIX of the Act;
    (iii) Acted to expel or to refuse to re-enroll a Medicare 
beneficiary in violation of the provisions of section 1876 of the Act 
and for reasons other than the beneficiary's health status or 
requirements for health care services;
    (iv) Misrepresented or falsified information furnished to an 
individual or any other entity under section 1876 or section 1903(m) of 
the Act;
    (v) Failed to comply with the requirements of section 1876(g)(6)(A) 
of the Act, regarding prompt payment of claims; or
    (vi) Failed to comply with the requirements of Secs. 417.479 (d) 
through (i) of this title for Medicare, and Secs. 417.479 (d) through 
(g) and (i) of this title for Medicaid, regarding certain prohibited 
incentive payments to physicians.
    (2) The OIG may, in addition to or in lieu of other remedies 
available under law, impose a penalty of up to $25,000 for each 
determination by CMS that a contracting organization with a contract 
under section 1876 of the Act--
    (i) Employs or contracts with individuals or entities excluded, 
under section 1128 or section 1128A of the Act, from participation in 
Medicare for the provision of health care, utilization review, medical 
social work, or administrative services; or
    (ii) Employs or contracts with any entity for the provision of 
services (directly or indirectly) through an excluded individual or 
entity.
    (3) The OIG may, in addition to or in lieu of other remedies 
available under law, impose a penalty of up to $100,000 for each 
determination that a contracting organization has--
    (i) Misrepresented or falsified information to the Secretary under 
section 1876 of the Act or to the State under section 1903(m) of the 
Act; or
    (ii) Acted to expel or to refuse to re-enroll a Medicaid recipient 
because of the individual's health status or requirements for health 
care services, or engaged in any practice that would reasonably be 
expected to have the effect of denying or discouraging enrollment 
(except as permitted by section 1876 or section 1903(m) of the Act) with 
the contracting organization by Medicare beneficiaries and Medicaid 
recipients whose medical condition or history indicates a need for 
substantial future medical services.
    (4) If enrolles are charged more than the allowable premium, the OIG 
will impose an additional penalty equal to double the amount of excess 
premium charged by the contracting organization. The excess premium 
amount will be deducted from the penalty and returned to the enrollee.
    (5) The OIG will impose an additional $15,000 penalty for each 
individual not enrolled when CMS determines that a contracting 
organization has committed a violation described in paragraph (f)(3)(ii) 
of this section.
    (6) For purposes of paragraph (f) of this section, a violation is 
each incident where a person has committed an act listed in 
Sec. 417.500(a) or Sec. 434.67(a) of this title, or failed to comply 
with a requirement set forth in Sec. 434.80(c) of this title.
    (g) The OIG may impose a penalty of not more than $25,000 against a 
health plan for failing to report information on an adverse action 
required to be reported to the Healthcare Integrity and Protection Data 
Bank in accordance with section 1128E of the Act and 
Sec. 1003.102(b)(5)(ii).
    (h) For each violation of Sec. 1003.102(b)(11), the OIG may impose--
    (1) A penalty of not more than $50,000, and
    (2) An assessment of up to three times the total amount of 
remuneration offered, paid, solicited or received, as specified in 
Sec. 1003.104(b).
    (i) For violations of Sec. 1003.102(b)(14) of this part, the OIG may 
impose a penalty of not more than the greater of--
    (1) $5,000, or
    (2) Three times the amount of Medicare payments for home health 
services

[[Page 1156]]

that are made with regard to the false certification of eligibility by a 
physician in accordance with sections 1814(a)(2)(C) or 1835(a)(2)(A) of 
the Act.
    (j) The OIG may impose a penalty of not more than $10,000 per day 
for each day that the prohibited relationship described in 
Sec. 1001.102(b)(12) of this part occurs.
    (k) For violations of section 1862(a)(14) of the Act and 
Sec. 1003.102(b)(15), the OIG may impose a penalty of not more than 
$2,000 for each bill or request for payment for items and services 
furnished to a hospital patient.

[57 FR 3346, Jan. 29, 1992, as amended at 59 FR 32125, June 22, 1994; 59 
FR 48566, Sept. 22, 1994; 60 FR 16584, Mar. 31, 1995; 60 FR 58241, Nov. 
27, 1995; 61 FR 13449, Mar. 27, 1996; 61 FR 52301, Oct. 7, 1996; 64 FR 
39429, July 22, 1999; 65 FR 18550, Apr. 7, 2000; 65 FR 24416, Apr. 26, 
2000; 65 FR 35584, June 5, 2000]



Sec. 1003.104  Amount of assessment.

    (a) The OIG may impose an assessment, where authorized, in 
accordance with Sec. 1003.102, of not more than--
    (1) Two times the amount for each item or service wrongfully claimed 
prior to January 1, 1997; and
    (2) Three times the amount for each item or service wrongfully 
claimed on or after January 1, 1997.
    (b) The assessment is in lieu of damages sustained by the Department 
or a State agency because of that claim.

[65 FR 24416, Apr. 26, 2000]



Sec. 1003.105  Exclusion from participation in Medicare, Medicaid and all Federal health care programs.

    (a)(1) Except as set forth in paragraph (b) of this section, the 
following persons may be subject, in lieu of or in addition to any 
penalty or assessment, to an exclusion from participation in Medicare 
for a period of time determined under Sec. 1003.107. There will be 
exclusions from Federal health care programs for the same period as the 
Medicare exclusion for any person who--
    (i) Is subject to a penalty or assessment under Sec. 1003.102(a), 
(b)(1), (b)(4), (b)(12), (b)(13) or (b)(15); or
    (ii) Commits a gross and flagrant, or repeated, violation of section 
1867 of the Act or Sec. 489.24 of this title on or after May 1, 1991. 
For purposes of this section, a gross and flagrant violation is one that 
presents an imminent danger to the health, safety or well-being of the 
individual who seeks emergency examination and treatment or places that 
individual unnecessarily in a high-risk situation.
    (b)(1)(i) With respect to any exclusion based on liability for a 
penalty or assessment under Sec. 1003.102 (a), (b)(1), or (b)(4), the 
OIG will consider an application from a State agency for a waiver if the 
person is the sole community physician or the sole source of essential 
specialized services in a community. With respect to any exclusion 
imposed under Sec. 1003.105(a)(1)(ii), the OIG will consider an 
application from a State agency for a waiver if the physician's 
exclusion from the State health care program would deny beneficiaries 
access to medical care or would otherwise cause hardship to 
beneficiaries.
    (ii) If a waiver is granted, it is applicable only to the State 
health care program for which the State requested the waiver.
    (iii) If the OIG subsequently obtains information that the basis for 
a waiver no longer exists, or the State agency submits evidence that the 
basis for the waiver no longer exists, the waiver will cease and the 
person will be excluded from the State health care program for the 
remainder of the period that the person is excluded from Medicare.
    (iv) The OIG notifies the State agency whether its request for a 
waiver has been granted or denied.
    (v) The decision to deny a waiver is not subject to administrative 
or judicial review.
    (2) For purposes of this section, the definitions contained in 
Sec. 1001.2 of this chapter for ``sole community physician'' and ``sole 
source of essential specialized services in a community'' apply.
    (c) When the Inspector General proposes to exclude a nursing 
facility from the Medicare and Medicaid programs, he or she will, at the 
same time he or she notifies the respondent, notify the appropriate 
State licensing authority, the State Office of Aging, the long-term care 
ombudsman, and the State

[[Page 1157]]

Medicaid agency of the Inspector General's intention to exclude the 
facility.

[59 FR 32125, June 22, 1994, as amended at 64 FR 39429, July 22, 1999; 
65 FR 24416, Apr. 26, 2000; 65 FR 35584, June 5, 2000]



Sec. 1003.106  Determinations regarding the amount of the penalty and assessment.

    (a) Amount of penalty. (1) In determining the amount of any penalty 
or assessment in accordance with Sec. 1003.102(a), (b)(1), (b)(4) and 
(b)(9) through (b)(14) of this part, the Department will take into 
account--
    (i) The nature of the claim, referral arrangement or other 
wrongdoing;
    (ii) The degree of culpability of the person against whom a civil 
money penalty is proposed;
    (iii) The history of prior offenses of the person against whom a 
civil money penalty is proposed;
    (iv) The financial condition of the person against whom a civil 
money penalty is proposed;
    (v) The completeness and timeliness of the refund with respect to 
Sec. 1003.102(b)(9);
    (vi) The amount of financial interest involved with respect to 
Sec. 1003.102(b)(12);
    (vii) The amount of remuneration offered or transferred with respect 
to Sec. 1003.102(b)(13); and
    (viii) Such other matters as justice may require.
    (2) In determining the amount of any penalty in accordance with 
Secs. 1003.102 (b)(5) and (b)(6), the Department will take into account-
-
    (i) The nature and circumstances of the failure to properly report 
information, or the improper disclosure of information, as required;
    (ii) The degree of culpability of the person in failing to provide 
timely and complete data or in improperly disclosing, using or 
permitting access to information, as appropriate;
    (iii) The materiality, or significance of omission, of the 
information to be reported, or the materiality of the improper 
disclosure of, or use of, or access to information, as appropriate;
    (iv) Any prior history of the person with respect to violations of 
these provisions; and
    (v) Such other matters as justice may require.
    (3)(i) In determining the amount of any penalty in accordance with 
Sec. 1003.102(b)(7), the OIG will take into account--
    (A) The nature and objective of the advertisement, solicitation or 
other communication, and the degree to which it has the capacity to 
deceive members of the public;
    (B) The degree of culpability of the individual, organization or 
entity in the use of the prohibited words, letters, symbols or emblems;
    (C) The frequency and scope of the violation, and whether a specific 
segment of the population was targeted;
    (D) The prior history of the individual, organization or entity in 
its willingness or refusal to comply with informal requests to correct 
violations;
    (E) The history of prior offenses of the individual, organization or 
entity in its misuse of Departmental and program words, letters, symbols 
and emblems;
    (F) The financial condition of the individual, organization or 
entity involved with the violation; and
    (G) Such other matters as justice may require.
    (ii) The use of a disclaimer of affiliation with the United States 
Government, the Department or its programs will not be considered as a 
mitigating factor in determining the amount of penalty in accordance 
with Sec. 1003.102(b)(7).
    (4) In determining the amount of any penalty in accordance with 
Sec. 1003.102(c), the OIG takes into account--
    (i) The degree of culpability of the respondent;
    (ii) The seriousness of the condition of the individual seeking 
emergency medical treatment;
    (iii) Any other instances where the respondent failed to provide 
appropriate emergency medical screening, stabilization and treatment of 
individuals coming to a hospital's emergency department or to effect an 
appropriate transfer;
    (iv) The respondent's financial condition;
    (v) The nature and circumstances of the violation; and

[[Page 1158]]

    (vi) Such other matters as justice may require.
    (5) In determining the appropriate amount of any penalty in 
accordance with Sec. 1003.103(f), the OIG will consider as appropriate--
    (i) The nature and scope of the required medically necessary item or 
service not provided and the circumstances under which it was not 
provided;
    (ii) The degree of culpability of the contracting organization;
    (iii) The seriousness of the adverse effect that resulted or could 
have resulted from the failure to provide required medically necessary 
care;
    (iv) The harm which resulted or could have resulted from the 
provision of care by a person that the contracting organization is 
expressly prohibited, under section 1876(i)(6) or section 1903(p)(2) of 
the Act, from contracting with or employing;
    (v) The harm which resulted or could have resulted from the 
contracting organization's expulsion or refusal to re-enroll a Medicare 
beneficiary or Medicaid recipient;
    (vi) The nature of the misrepresentation or fallacious information 
furnished by the contracting organization to the Secretary, State, 
enrollee or other entity under section 1876 or section 1903(m) of the 
Act;
    (vii) The extent to which the failure to provide medically necessary 
services could be attributed to a prohibited inducement to reduce or 
limit services under a physician incentive plan and the harm to the 
enrollee which resulted or could have resulted from such failure. It 
would be considered an aggravating factor if the contracting 
organization knowingly or routinely engaged in any prohibited practice 
which acted as an inducement to reduce or limit medically necessary 
services provided with respect to a specific enrollee in the 
organization;
    (viii) The history of prior offenses by the contracting organization 
or principals of the contracting organization, including whether, at any 
time prior to determination of the current violation or violations, the 
contracting organization or any of its principals were convicted of a 
criminal charge or were held liable for civil or administrative 
sanctions in connection with a program covered by this part or any other 
public or private program of payment for medical services; and
    (ix) Such other matters as justice may require.
    (b) Determining the amount of the penalty or assessment. As 
guidelines for taking into account the factors listed in paragraph 
(a)(1) of this section, the following circumstances are to be 
considered--
    (1) Nature and circumstances of the incident. It should be 
considered a mitigating circumstance if all the items or services or 
incidents subject to a determination under Sec. 1003.102 included in the 
action brought under this part were of the same type and occurred within 
a short period of time, there were few such items or services or 
incidents, and the total amount claimed or requested for such items or 
services was less than $1,000. It should be considered an aggravating 
circumstance if--
    (i) Such items or services or incidents were of several types, 
occurred over a lengthy period of time;
    (ii) There were many such items or services or incidents (or the 
nature and circumstances indicate a pattern of claims or requests for 
payment for such items or services or a pattern of incidents);
    (iii) The amount claimed or requested for such items or services was 
substantial; or
    (iv) The false or misleading information given resulted in harm to 
the patient, a premature discharge or a need for additional services or 
subsequent hospital admission.
    (2) Degree of culpability. It should be considered a mitigating 
circumstance if corrective steps were taken promptly after the error was 
discovered. It should be considered an aggravating circumstance if--
    (i) The respondent knew the item or service was not provided as 
claimed or if the respondent knew that the claim was false or 
fraudulent;
    (ii) The respondent knew that the items or services were furnished 
during a period that he or she had been excluded from participation and 
that no payment could be made as specified in

[[Page 1159]]

Sec. Sec. 1003.102(a)(3) and 1003.102(b)(12), or because payment would 
violate the terms of an assignment or an agreement with a State agency 
or other agreement or limitation on payment under Sec. 1003.102(b);
    (iii) The respondent knew that the information could reasonably be 
expected to influence the decision of when to discharge a patient from a 
hospital; or
    (iv) The respondent knew that the offer or transfer of remuneration 
described in Sec. 1003.102(b)(13) of this part would influence a 
beneficiary to order or receive from a particular provider, practitioner 
or supplier items or services reimbursable under Medicare or a State 
health care program.
    (3) Prior offenses. It should be considered an aggravating 
circumstance if at any time prior to the incident or presentation of any 
claim or request for payment which included an item or service subject 
to a determination under Sec. 1003.102, the respondent was held liable 
for criminal, civil or administrative sanctions in connection with a 
program covered by this part or any other public or private program of 
reimbursement for medical services.
    (4) Other wrongful conduct. It should be considered an aggravating 
circumstance if there is proof that a respondent engaged in wrongful 
conduct, other than the specific conduct upon which liability is based, 
relating to government programs or in connection with the delivery of a 
health care item or service. The statute of limitations governing civil 
money penalty proceedings will not apply to proof of other wrongful 
conduct as an aggravating circumstance.
    (5) Financial condition. In all cases, the resources available to 
the respondent will be considered when determining the amount of the 
penalty and assessment.
    (6) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature should be taken into account if, in the 
interests of justice, they require either a reduction of the penalty or 
assessment or an increase in order to assure the achievement of the 
purposes of this part.
    (c) In determining the amount of the penalty and assessment to be 
imposed for every item or service or incident subject to a determination 
under Secs. 1003.102(a), (b)(1) and (b)(4)--
    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently below the maximium permitted by Secs. 1003.103(a) 
and 1003.104, to reflect that fact.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently close or at the maximum permitted by 
Secs. 1003.103(a) and 1003.104, to reflect that fact.
    (3) Unless there are extraordinary mitigating circumstances, the 
aggregate amount of the penalty and assessment should never be less than 
double the approximate amount of damages and costs (as defined in 
paragraph (f) of this section) sustained by the United States, or any 
State, as a result of claims or incidents subject to a determination 
under Secs. 1003.102(a), (b)(1) and (b)(4).
    (d) In considering the factors listed in paragraph (a)(4) of this 
section for violations subject to a determination under 
Sec. 1003.103(e), the following circumstances are to be considered, as 
appropriate, in determining the amount of any penalty--
    (1) Degree of culpability. It would be a mitigating circumstance if 
the respondent hospital had appropriate policies and procedures in 
place, and had effectively trained all of its personnel in the 
requirements of section 1867 of the Act and Sec. 489.24 of this title, 
but an employee or responsible physician acted contrary to the 
respondent hospital's policies and procedures.
    (2) Seriousness of individual's condition. It would be an 
aggravating circumstance if the respondent's violation(s) occurred with 
regard to an individual who presented to the hospital a request for 
treatment of a medical condition that was clearly an emergency, as 
defined by Sec. 489.24(b) of this title.
    (3) Prior offenses. It would be an aggravating circumstance if there 
is evidence that at any time prior to the current violation(s) the 
respondent was found to have violated any provision of

[[Page 1160]]

section 1867 of the Act or Sec. 489.24 of this title.
    (4) Financial condition. In all cases, the resources available to 
the respondent would be considered when determining the amount of the 
penalty. A respondent's audited financial statements, tax returns or 
financial disclosure statements, as appropriate, will be reviewed by OIG 
in making a determination with respect to the respondent's financial 
condition.
    (5) Nature and circumstances of the incident. It would be considered 
a mitigating circumstance if an individual presented a request for 
treatment, but subsequently exhibited conduct that demonstrated a clear 
intent to leave the respondent hospital voluntarily. In reviewing such 
circumstances, the OIG would evaluate the respondent's efforts to--
    (i) Provide the services required by section 1867 of the Act and 
Sec. 489.24 of this title, despite the individual's withdrawal of the 
request for examination or treatment; and
    (ii) Document any attempts to inform the individual (or his or her 
representative) of the risks of leaving the respondent hospital without 
receiving an appropriate medical screening examination or treatment, and 
obtain written acknowledgment from the individual (or his or her 
representative) prior to the individual's departure from the respondent 
hospital that he or she is leaving contrary to medical advice.
    (6) Other matters as justice may require. (i) It would be considered 
a mitigating circumstance if the respondent hospital--
    (A) Developed and implemented a corrective action plan;
    (B) Took immediate appropriate action against any hospital personnel 
or responsible physician who violated section 1867 of the Act or 
Sec. 489.24 of this title prior to any investigation of the respondent 
hospital by CMS; or
    (C) Is a rural or publicly-owned facility that is faced with severe 
physician staffing and financial deficiencies.
    (ii) It would be considered an aggravating circumstance if an 
individual was severely harmed or died as a result, directly or 
indirectly, of the respondent's violation of section 1867 of the Act or 
Sec. 489.24 of this title.
    (iii) Other circumstances of an aggravating or mitigating nature 
will be taken into account if, in the interests of justice, they require 
either a reduction of the penalty or an increase in order to assure the 
achievement of the purposes of this part.
    (e) In considering the factors listed in paragraph (a)(5) of this 
section for violations subject to a determination under 
Sec. 1003.103(f), the following circumstances are to be considered, as 
appropriate, in determining the amount of any penalty--
    (f)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.
    (2) The amount imposed will not be less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including but not limited to 
the costs attributable to the investigation, prosecution and 
administrative review of the case.
    (3) Nothing in this section will limit the authority of the 
Department to settle any issue or case as provided by Sec. 1003.126, or 
to compromise any penalty and assessment as provided by Sec. 1003.128.

[57 FR 3347, Jan. 29, 1992, as amended at 59 FR 32125, June 22, 1994; 59 
FR 36086, July 15, 1994; 59 FR 48567, Sept. 22, 1994; 60 FR 16584, Mar. 
31, 1995; 60 FR 58241, Nov. 27, 1995; 61 FR 13449, Mar. 27, 1996; 64 FR 
39429, July 22, 1999; 65 FR 24416, Apr. 26, 2000; 67 FR 11935, Mar. 18, 
2002]



Sec. 1003.107  Determinations regarding exclusion.

    (a) In determining whether to exclude a person under this part and 
the duration of any exclusion, the Department considers the 
circumstances described in Sec. 1003.106(a).
    (b) With respect to determinations to exclude a person under 
Secs. 1003.102(a), (b)(1), (b)(4), (b)(12) or (b)(13) of this part, the 
Department considers those circumstances described in Sec. 1003.106(b). 
Where there are aggravating circumstances with respect to such 
determinations, the person should be excluded.

[[Page 1161]]

    (c) The guidelines set forth in this section are not binding. 
Nothing in this section limits the authority of the Department to settle 
any issue or case as provided by Sec. 1003.126 of this part.

[59 FR 32126, June 22, 1994, as amended at 65 FR 24418, Apr. 26, 2000]



Sec. 1003.108  Penalty, assessment, and exclusion not exclusive.

    Penalties, assessments, and exclusions imposed under this part are 
in addition to any other penalties prescribed by law.

[59 FR 32126, June 22, 1994]



Sec. 1003.109  Notice of proposed determination.

    (a) If the Inspector General proposes a penalty and, when 
applicable, assessment, or proposes to exclude a respondent from 
participation in a Federal health care program, as applicable, in 
accordance with this part, he or she must deliver or send by certified 
mail, return receipt requested, to the respondent written notice of his 
or her intent to impose a penalty, assessment and exclusion, as 
applicable. The notice includes--
    (1) Reference to the statutory basis for the penalty, assessment and 
exclusion;
    (2) A description of the claims, requests for payment, or incidents 
with respect to which the penalty, assessment and exclusion are proposed 
(except in cases where the Inspector General is relying upon statistical 
sampling in accordance with Sec. 1003.133 in which case the notice shall 
describe those claims and requests for payment comprising the sample 
upon which the Inspector General is relying and will also briefly 
describe the statistical sampling technique utilized by the Inspector 
General);
    (3) The reason why such claims, requests for payments or incidents 
subject the respondent to a penalty, assessment and exclusion;
    (4) The amount of the proposed penalty, assessment and the period of 
proposed exclusion (where applicable);
    (5) Any circumstances described in Sec. 1003.106 that were 
considered when determining the amount of the proposed penalty and 
assessment and the period of exclusion;
    (6) Instructions for responding to the notice, including--
    (i) A specific statement of respondent's right to a hearing, and
    (ii) A statement that failure to request a hearing within 60 days 
permits the imposition of the proposed penalty, assessment and exclusion 
without right of appeal; and
    (7) In the case of a notice sent to a respondent who has an 
agreement under section 1866 of the Act, the notice also indicates that 
the imposition of an exclusion may result in the termination of the 
provider's agreement in accordance with section 1866(b)(2)(C) of the 
Act.
    (b) Any person upon whom the Inspector General has proposed the 
imposition of a penalty, assessment or exclusion may appeal such 
proposed penalty, assessment or exclusion to the DAB in accordance with 
Sec. 1005.2 of this chapter. The provisions of part 1005 of this chapter 
govern such appeals.
    (c) If the respondent fails, within the time permitted, to exercise 
his or her right to a hearing under this section, any exclusion, 
penalty, or assessment becomes final.

[57 FR 3348, Jan. 29, 1992, as amended at 59 FR 32126, June 22, 1994; 64 
FR 39429, July 22, 1999; 65 FR 24418, Apr. 26, 2000]



Sec. 1003.110  Failure to request a hearing.

    If the respondent does not request a hearing within the time 
prescribed by Sec. 1003.109(a), the Inspector General may impose the 
proposed penalty, assessment, and exclusion, or any less severe penalty, 
assessment, and suspension. The Inspector General shall notify the 
respondent by certified mail, return receipt requested, of any penalty, 
assessment, and exclusion that has been imposed and of the means by 
which the respondent may satisfy the judgment. The respondent has no 
right to appeal a penalty, assessment, and exclusion, with respect to 
which he or she has not requested a hearing.

[51 FR 34777, Sept. 30, 1986, as amended at 57 FR 3348, Jan. 29, 1992]

[[Page 1162]]



Sec. 1003.114  Collateral estoppel.

    (a) Where a final determination pertaining to the respondent's 
liability under Sec. 1003.102 has been rendered in any proceeding in 
which the respondent was a party and had an opportunity to be heard, the 
respondent shall be bound by such determination in any proceeding under 
this part.
    (b) In a proceeding under this part that--
    (1) Is against a person who has been convicted (whether upon a 
verdict after trial or upon a plea of guilty or nolo contendere) of a 
Federal crime charging fraud or false statements, and
    (2) Involves the same transactions as in the criminal action, the 
person is estopped from denying the essential elements of the criminal 
offense.

[57 FR 3348, Jan. 29, 1992, as amended at 64 FR 39429, July 22, 1999]



Sec. 1003.126  Settlement.

    The Inspector General has exclusive authority to settle any issues 
or case, without consent of the ALJ.

[65 FR 24418, Apr. 26, 2000]



Sec. 1003.127  Judicial review.

    Section 1128A(e) of the Act authorizes judicial review of a penalty, 
assessment or exclusion that has become final. Judicial review may be 
sought by a respondent only with respect to a penalty, assessment or 
exclusion with respect to which the respondent filed an exception under 
Sec. 1005.21(c) of this chapter unless the failure or neglect to urge 
such exception will be excused by the court in accordance with section 
1128A(e) of the Act because of extraordinary circumstances.

[57 FR 3348, Jan. 29, 1992]



Sec. 1003.128  Collection of penalty and assessment.

    (a) Once a determination by the Secretary has become final, 
collection of any penalty and assessment will be the responsibility of 
CMS, except in the case of the Maternal and Child Health Services Block 
Grant program, where the collection will be the responsibility of the 
PHS, and in the case of the Social Services Block Grant program, where 
the collection will be the responsibility of the Office of Human 
Development Services.
    (b) A penalty or assessment imposed under this part may be 
compromised by the Inspector General, and may be recovered in a civil 
action brought in the United States district court for the district 
where the claim was presented, or where the respondent resides.
    (c) The amount of a penalty and assessment when finally determined, 
or the amount agreed upon in compromise, may be deducted from any sum 
then or later owing by the United States, or by a State agency, to the 
respondent.
    (d) Matters that were raised or that could have been raised in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States to 
collect a penalty under this part.

[51 FR 34777, Sept. 30, 1986, as amended at 57 FR 3349, Jan. 29, 1992; 
65 FR 24418, Apr. 26, 2000]



Sec. 1003.129  Notice to other agencies.

    Whenever a penalty, assessment or exclusion become final, the 
following organizations and entities will be notified about such action 
and the reasons for it--the appropriate State or local medical or 
professional association; the appropriate Quality Improvement 
Organization; as appropriate, the State agency responsible or the 
administration of each State health care program; the appropriate 
Medicare carrier or intermediary; the appropriate State or local 
licensing agency or organization (including the Medicare and Medicaid 
State survey agencies); and the long-term care ombudsman. In cases 
involving exclusions, notice will also be given to the public of the 
exclusion and its effective date.

[57 FR 3349, Jan. 29, 1992]



Sec. 1003.132  Limitations.

    No action under this part will be entertained unless commenced, in 
accordance with Sec. 1003.109(a) of this part, within 6 years from the 
date on which the claim was presented, the request for payment was made, 
or the incident occurred.

[57 FR 3349, Jan. 29, 1992]

[[Page 1163]]



Sec. 1003.133  Statistical sampling.

    (a) In meeting the burden of proof set forth in Sec. 1005.15, the 
Inspector General may introduce the results of a statistical sampling 
study as evidence of the number and amount of claims and/or requests for 
payment as described in Sec. 1003.102 that were presented or caused to 
be presented by respondent. Such a statistical sampling study, if based 
upon an appropriate sampling and computed by valid statistical methods, 
shall constitute prima facie evidence of the number and amount of claims 
or requests for payment as described in Sec. 1003.102.
    (b) Once the Inspector General has made a prima facie case as 
described in paragraph (a) of this section, the burden of production 
shall shift to respondent to produce evidence reasonably calculated to 
rebut the findings of the statistical sampling study. The Inspector 
General will then be given the opportunity to rebut this evidence.

[51 FR 34777, Sept. 30, 1986, as amended at 57 FR 3349, Jan. 29, 1992]



Sec. 1003.134  Effect of exclusion.

    The effect of an exclusion will be as set forth in Sec. 1001.1901 of 
this chapter.

[57 FR 3349, Jan. 29, 1992]



Sec. 1003.135  Reinstatement.

    A 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 the 
provisions of Secs. 1001.3001 through 1001.3004 of this chapter.

[57 FR 3349, Jan. 29, 1992]



PART 1004--IMPOSITION OF SANCTIONS ON HEALTH CARE PRACTITIONERS AND PROVIDERS OF HEALTH CARE SERVICES BY A QUALITY IMPROVEMENT ORGANIZATION--Table of Contents




                      Subpart A--General Provisions

Sec.
1004.1 Scope and definitions.

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

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

                     Subpart C--QIO Responsibilities

1004.30 Basic responsibilities.
1004.40 Action on identification of a violation.
1004.50 Meeting with a practitioner or other person.
1004.60 QIO finding of a violation.
1004.70 QIO action on final finding of a violation.
1004.80 QIO 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.

    Source: 60 FR 63640, Dec. 12, 1995, unless otherwise noted.



                      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 quality improvement organizations (QIOs) 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.

[[Page 1164]]

    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 
QIO.
    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 QIO.
    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 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

[[Page 1165]]

does not meet recognized professional standards of care, or is not 
supported by the necessary documentation of care as required by the QIO.
    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 QIO 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 QIO 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 the 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 for a period of no less than 1 
year; 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 of health care services (or 
services furnished at the medical direction or on the prescription of a 
physician) that were medically improper or unnecessary, required to pay 
an amount of up to $10,000 for each instance in which improper or 
unnecessary services were furnished or ordered (or 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.

[62 FR 23143, Apr. 29, 1997]



                     Subpart C--QIO Responsibilities



Sec. 1004.30  Basic responsibilities.

    (a) The QIO 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 QIO 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 QIO 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 QIO 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 QIO report to the OIG must comply with the provisions of 
Sec. 1004.80.
    (e) If a practitioner or other person relocates to another QIO area 
prior to a finding of a violation or sanction recommendation, and the 
originating QIO--
    (1) Is able to make a finding, the originating QIO must, as 
appropriate, close the case or forward a sanction recommendation to the 
OIG; or

[[Page 1166]]

    (2) Cannot make a finding, the originating QIO must forward all 
documentation regarding the case to the QIO with jurisdiction, and 
notify the practitioner or other person of this action.
    (f) The QIO 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 
QIO identifies the services or items. It must report the findings to the 
Centers for Medicare & Medicaid Services.



Sec. 1004.40  Action on identification of a violation.

    When a QIO 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 QIO 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 QIO could recomment to the OIG;
    (6) The right of the practitioner or other person to submit to the 
QIO within 30 days of receipt of the notice additional information or a 
written request for a meeting with the QIO 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 QIO 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 QIO in arriving at its 
finding except for QIO 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 QIO-
-
    (a) The QIO panel that meets with the practitioner or other person 
must consist of a minimum of 3 physicians;
    (b) No physician member of the QIO panel may be in direct economic 
competition with the practitioner or other person being considered for 
sanction;
    (c) The QIO must ensure that no physician member of the QIO panel 
has a substantial bias for or against the practitioner or other person 
being considered for sanction;
    (d) At least one member of the QIO 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 QIO that a practitioner or 
other person be sanctioned may not vote on that recommendation at the 
meeting;
    (g) The QIO may allow the practitioner or other person 5 working 
days after the meeting to provide the QIO 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.

[[Page 1167]]



Sec. 1004.60  QIO finding of a violation.

    (a) On the basis of any additional information received, the QIO 
will affirm or modify its finding. If the QIO 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 QIO. If the finding has been resolved to the 
QIO's satisfaction, the QIO may modify its initial finding or 
recommendation or close the case.
    (b) The QIO 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 QIO 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 QIO 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  QIO action on final finding of a violation.

    If the finding is not resolved to the QIO's satisfaction as 
specified in Sec. 1004.60(a), the QIO 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 QIO 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  QIO report to the OIG.

    (a) Manner of reporting. If the violation(s) identified by the QIO 
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 QIO 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 QIO'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 QIO's initial finding;
    (8) A copy of the CAP that was developed and documentation of the 
results of such plan;

[[Page 1168]]

    (9) The number of admissions by the practitioner or other person 
reviewed by the QIO during the period in which the violation(s) were 
identified;
    (10) The professional qualifications of the QIO's reviewers; and
    (11) The QIO's sanction recommendation.
    (c) QIO recommendation. The QIO 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; and
    (5) The county or counties in which the practitioner or other person 
furnishes services.

[60 FR 63640, Dec. 12, 1995, as amended at 62 FR 23143, Apr. 29, 1997]



Sec. 1004.90  Basis for recommended sanction.

    The QIO'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 QIO 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 QIO of the date it 
received the QIO's report and recommendation.
    (b) Review. The OIG will review the QIO report and recommendation to 
determine whether--
    (1) The QIO has followed the regulatory requirements of this part; 
and
    (2) A violation has occurred.
    (c) Rejection of the QIO recommendation. If the OIG decides that a 
sanction is not warranted, it will notify the QIO that recommended the 
sanction, the affected practitioner or other person, and the licensing 
board informed by the QIO 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 QIO;
    (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; and
    (7) Any other matters relevant to the particular case.
    (e) Exclusion sanction. If the QIO 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 QIO 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).

[60 FR 63640, Dec. 12, 1995, as amended at 62 FR 23143, Apr. 29, 1997]



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

[[Page 1169]]

    (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 notice--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. 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 same 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 has been violated, and the effective date 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

[[Page 1170]]

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 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 QIO that originated the sanction report;
    (2) QIOs 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 QIO 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 QIO 
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 sanction is also provided as specified in paragraph 
(e) of this section.

[60 FR 63640, Dec. 12, 1995; 61 FR 1841, Jan. 24, 1996, as amended at 62 
FR 23143, Apr. 29, 1997]



               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

[[Page 1171]]

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 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

[[Page 1172]]

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.



PART 1005--APPEALS OF EXCLUSIONS, CIVIL MONEY PENALTIES AND ASSESSMENTS--Table of Contents




Sec.
1005.1 Definitions.
1005.2 Hearing before an administrative law judge.
1005.3 Rights of parties.
1005.4 Authority of the ALJ.
1005.5 Ex parte contacts.
1005.6 Prehearing conferences.
1005.7 Discovery.
1005.8 Exchange of witness lists, witness statements and exhibits.
1005.9 Subpoenas for attendance at hearing.
1005.10 Fees.
1005.11 Form, filing and service of papers.
1005.12 Computation of time.
1005.13 Motions.
1005.14 Sanctions.
1005.15 The hearing and burden of proof.
1005.16 Witnesses.
1005.17 Evidence.
1005.18 The record.
1005.19 Post-hearing briefs.
1005.20 Initial decision.
1005.21 Appeal to DAB.
1005.22 Stay of initial decision.
1005.23 Harmless error.

    Authority: 42 U.S.C. 405(a), 405(b), 1302, 1320a-7, 1320a-7a and 
1320c-5.

    Source: 57 FR 3350, Jan. 29, 1992, unless otherwise noted.



Sec. 1005.1  Definitions.

    Civil money penalty cases refer to all proceedings arising under any 
of the statutory bases for which the OIG has been delegated authority to 
impose civil money penalties under Medicare or the State health care 
programs.
    DAB refers to the Departmental Appeals Board or its delegatee.
    Exclusion cases refer to all proceedings arising under any of the 
statutory bases for which the OIG has been delegated authority to impose 
exclusions under Medicare or the State health care programs.
    Inspector General (IG) means the Inspector General of the Department 
of Health and Human Services or his or her designees.

[57 FR 3350, Jan. 29, 1992, as amended at 65 FR 24418, Apr. 26, 2000]



Sec. 1005.2  Hearing before an administrative law judge.

    (a) A party sanctioned under any criteria specified in parts 1001, 
1003 and 1004 of this chapter may request a hearing before an ALJ.
    (b) In exclusion cases, the parties to the proceeding will consist 
of the petitioner and the IG. In civil money penalty cases, the parties 
to the proceeding will consist of the respondent and the IG.
    (c) The request for a hearing will be made in writing to the DAB; 
signed by the petitioner or respondent, or by his or her attorney; and 
sent by certified mail. The request must be filed within 60 days after 
the notice, provided in accordance with Secs. 1001.2002, 1001.203 or 
1003.109, is received by the petitioner or respondent. For purposes of 
this section, the date of receipt of the notice letter will be presumed 
to be 5 days after the date of such notice unless there is a reasonable 
showing to the contrary.
    (d) The request for a hearing will contain a statement as to the 
specific issues or findings of fact and conclusions of law in the notice 
letter with which the petitioner or respondent disagrees, and the basis 
for his or her contention that the specific issues or findings and 
conclusions were incorrect.
    (e) The ALJ will dismiss a hearing request where--
    (1) The petitioner's or the respondent's hearing request is not 
filed in a timely manner;
    (2) The petitioner or respondent withdraws his or her request for a 
hearing;

[[Page 1173]]

    (3) The petitioner or respondent abandons his or her request for a 
hearing; or
    (4) The petitioner's or respondent's hearing request fails to raise 
any issue which may properly be addressed in a hearing.

[57 FR 3350, Jan. 29, 1992, as amended at 65 FR 24418, Apr. 26, 2000]



Sec. 1005.3  Rights of parties.

    (a) Except as otherwise limited by this part, all parties may--
    (1) Be accompanied, represented and advised by an attorney;
    (2) Participate in any conference held by the ALJ;
    (3) Conduct discovery of documents as permitted by this part;
    (4) Agree to stipulations of fact or law which will be made part of 
the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (8) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing.
    (b) Fees for any services performed on behalf of a party by an 
attorney are not subject to the provisions of section 206 of title II of 
the Act, which authorizes the Secretary to specify or limit these fees.



Sec. 1005.4  Authority of the ALJ.

    (a) The ALJ will conduct a fair and impartial hearing, avoid delay, 
maintain order and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to--
    (1) Set and change the date, time and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses at 
hearings and the production of documents at or in relation to hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of documentary discovery as 
permitted by this part;
    (8) Regulate the course of the hearing and the conduct of 
representatives, parties, and witnesses;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment where there is no disputed issue of material fact; and
    (13) Conduct any conference, argument or hearing in person or, upon 
agreement of the parties, by telephone.
    (c) The ALJ does not have the authority to--
    (1) Find invalid or refuse to follow Federal statutes or regulations 
or secretarial delegations of authority;
    (2) Enter an order in the nature of a directed verdict;
    (3) Compel settlement negotiations;
    (4) Enjoin any act of the Secretary;
    (5) Review the exercise of discretion by the OIG to exclude an 
individual or entity under section 1128(b) of the Act, or determine the 
scope or effect of the exclusion,
    (6) Set a period of exclusion at zero, or reduce a period of 
exclusion to zero, in any case where the ALJ finds that an individual or 
entity committed an act described in section 1128(b) of the Act, or
    (7) Review the exercise of discretion by the OIG to impose a CMP, 
assessment or exclusion under part 1003 of this chapter.

[57 FR 3350, Jan. 29, 1992, as amended at 58 FR 5618, Jan. 22, 1993]



Sec. 1005.5  Ex parte contacts.

    No party or person (except employees of the ALJ's office) will 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking

[[Page 1174]]

routine questions concerning administrative functions or procedures.



Sec. 1005.6  Prehearing conferences.

    (a) The ALJ will schedule at least one prehearing conference, and 
may schedule additional prehearing conferences as appropriate, upon 
reasonable notice to the parties.
    (b) The ALJ may use prehearing conferences to discuss the following-
-
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleadings, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact or as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses to waive appearance at an oral hearing 
and to submit only documentary evidence (subject to the objection of 
other parties) and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery of documents as permitted by this part;
    (9) The time and place for the hearing;
    (10) Such other matters as may tend to encourage the fair, just and 
expeditious disposition of the proceedings; and
    (11) Potential settlement of the case.
    (c) The ALJ will issue an order containing the matters agreed upon 
by the parties or ordered by the ALJ at a prehearing conference.



Sec. 1005.7  Discovery.

    (a) A party may make a request to another party for production of 
documents for inspection and copying which are relevant and material to 
the issues before the ALJ.
    (b) For the purpose of this section, the term documents includes 
information, reports, answers, records, accounts, papers and other data 
and documentary evidence. Nothing contained in this section will be 
interpreted to require the creation of a document, except that requested 
data stored in an electronic data storage system will be produced in a 
form accessible to the requesting party.
    (c) Requests for documents, requests for admissions, written 
interrogatories, depositions and any forms of discovery, other than 
those permitted under paragraph (a) of this section, are not authorized.
    (d) This section will not be construed to require the disclosure of 
interview reports or statements obtained by any party, or on behalf of 
any party, of persons who will not be called as witnesses by that party, 
or analyses and summaries prepared in conjunction with the investigation 
or litigation of the case, or any otherwise privileged documents.
    (e)(1) When a request for production of documents has been received, 
within 30 days the party receiving that request will either fully 
respond to the request, or state that the request is being objected to 
and the reasons for that objection. If objection is made to part of an 
item or category, the part will be specified. Upon receiving any 
objections, the party seeking production may then, within 30 days or any 
other time frame set by the ALJ, file a motion for an order compelling 
discovery. (The party receiving a request for production may also file a 
motion for protective order any time prior to the date the production is 
due.)
    (2) The ALJ may grant a motion for protective order or deny a motion 
for an order compelling discovery if the ALJ finds that the discovery 
sought--
    (i) Is irrelevant,
    (ii) Is unduly costly or burdensome,
    (iii) Will unduly delay the proceeding, or
    (iv) Seeks privileged information.
    (3) The ALJ may extend any of the time frames set forth in paragraph 
(e)(1) of this section.
    (4) The burden of showing that discovery should be allowed is on the 
party seeking discovery.

[57 FR 3350, Jan. 29, 1992, as amended at 58 FR 5618, Jan. 22, 1993; 65 
FR 24418, Apr. 26, 2000; 65 FR 35584, June 5, 2000; 67 FR 11936, Mar. 
18, 2002]

[[Page 1175]]



Sec. 1005.8  Exchange of witness lists, witness statements and exhibits.

    (a) At least 15 days before the hearing, the ALJ will order the 
parties to exchange witness lists, copies of prior written statements of 
proposed witnesses and copies of proposed hearing exhibits, including 
copies of any written statements that the party intends to offer in lieu 
of live testimony in accordance with Sec. 1005.16.
    (b) (1) If at any time a party objects to the proposed admission of 
evidence not exchanged in accordance with paragraph (a) of this section, 
the ALJ will determine whether the failure to comply with paragraph (a) 
of this section should result in the exclusion of such evidence.
    (2) Unless the ALJ finds that extraordinary circumstances justified 
the failure to timely exchange the information listed under paragraph 
(a) of this section, the ALJ must exclude from the party's case-in-
chief:
    (i) The testimony of any witness whose name does not appear on the 
witness list, and
    (ii) Any exhibit not provided to the opposing party as specified in 
paragraph (a) of this section.
    (3) If the ALJ finds that extraordinary circumstances existed, the 
ALJ must then determine whether the admission of such evidence would 
cause substantial prejudice to the objecting party. If the ALJ finds 
that there is no substantial prejudice, the evidence may be admitted. If 
the ALJ finds that there is substantial prejudice, the ALJ may exclude 
the evidence, or at his or her discretion, may postpone the hearing for 
such time as is necessary for the objecting party to prepare and respond 
to the evidence.
    (c) Unless another party objects within a reasonable period of time 
prior to the hearing, documents exchanged in accordance with paragraph 
(a) of this section will be deemed to be authentic for the purpose of 
admissibility at the hearing.



Sec. 1005.9  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may make a motion requesting the ALJ to issue 
a subpoena if the appearance and testimony are reasonably necessary for 
the presentation of a party's case.
    (b) A subpoena requiring the attendance of an individual in 
accordance with paragraph (a) of this section may also require the 
individual (whether or not the individual is a party) to produce 
evidence authorized under Sec. 1005.7 of this part at or prior to the 
hearing.
    (c) When a subpoena is served by a respondent or petitioner on a 
particular individual or particular office of the OIG, the OIG may 
comply by designating any of its representatives to appear and testify.
    (d) A party seeking a subpoena will file a written motion not less 
than 30 days before the date fixed for the hearing, unless otherwise 
allowed by the ALJ for good cause shown. Such request will:
    (1) Specify any evidence to be produced,
    (2) Designate the witnesses, and
    (3) Describe the address and location with sufficient particularity 
to permit such witnesses to be found.
    (e) The subpoena will specify the time and place at which the 
witness is to appear and any evidence the witness is to produce.
    (f) Within 15 days after the written motion requesting issuance of a 
subpoena is served, any party may file an opposition or other response.
    (g) If the motion requesting issuance of a subpoena is granted, the 
party seeking the subpoena will serve it by delivery to the individual 
named, or by certified mail addressed to such individual at his or her 
last dwelling place or principal place of business.
    (h) The individual to whom the subpoena is directed may file with 
the ALJ a motion to quash the subpoena within 10 days after service.
    (i) The exclusive remedy for contumacy by, or refusal to obey a 
subpoena duly served upon, any person is specified in section 205(e) of 
the Social Security Act (42 U.S.C. 405(e)).

[57 FR 3350, Jan. 29, 1992, as amended at 65 FR 24418, Apr. 26, 2000]



Sec. 1005.10  Fees.

    The party requesting a subpoena will pay the cost of the fees and 
mileage of

[[Page 1176]]

any witness subpoenaed in the amounts that would be payable to a witness 
in a proceeding in United States District Court. A check for witness 
fees and mileage will accompany the subpoena when served, except that 
when a subpoena is issued on behalf of the IG, a check for witness fees 
and mileage need not accompany the subpoena.



Sec. 1005.11  Form, filing and service of papers.

    (a) Forms. (1) Unless the ALJ directs the parties to do otherwise, 
documents filed with the ALJ will include an original and two copies.
    (2) Every pleading and paper filed in the proceeding will contain a 
caption setting forth the title of the action, the case number, and a 
designation of the paper, such as motion to quash subpoena.
    (3) Every pleading and paper will be signed by, and will contain the 
address and telephone number of the party or the person on whose behalf 
the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed.
    (b) Service. A party filing a document with the ALJ or the Secretary 
will, at the time of filing, serve a copy of such document on every 
other party. Service upon any party of any document will be made by 
delivering a copy, or placing a copy of the document in the United 
States mail, postage prepaid and addressed, or with a private delivery 
service, to the party's last known address. When a party is represented 
by an attorney, service will be made upon such attorney in lieu of the 
party.
    (c) Proof of service. A certificate of the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.



Sec. 1005.12  Computation of time.

    (a) In computing any period of time under this part or in an order 
issued thereunder, the time begins with the day following the act, event 
or default, and includes the last day of the period unless it is a 
Saturday, Sunday or legal holiday observed by the Federal Government, in 
which event it includes the next business day.
    (b) When the period of time allowed is less than 7 days, 
intermediate Saturdays, Sundays and legal holidays observed by the 
Federal Government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional 5 days will be added to the time permitted for any 
response. This paragraph does not apply to requests for hearing under 
Sec. 1005.2.



Sec. 1005.13  Motions.

    (a) An application to the ALJ for an order or ruling will be by 
motion. Motions will state the relief sought, the authority relied upon 
and the facts alleged, and will be filed with the ALJ and served on all 
other parties.
    (b) Except for motions made during a prehearing conference or at the 
hearing, all motions will be in writing. The ALJ may require that oral 
motions be reduced to writing.
    (c) Within 10 days after a written motion is served, or such other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses has expired, except upon consent of the parties or 
following a hearing on the motion, but may overrule or deny such motion 
without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.



Sec. 1005.14  Sanctions.

    (a) The ALJ may sanction a person, including any party or attorney, 
for failing to comply with an order or procedure, for failing to defend 
an action or for other misconduct that interferes with the speedy, 
orderly or fair conduct of the hearing. Such sanctions will reasonably 
relate to the severity and nature of the failure or misconduct. Such 
sanction may include--
    (1) In the case of refusal to provide or permit discovery under the 
terms of this part, drawing negative factual inferences or treating such 
refusal as an admission by deeming the matter, or certain facts, to be 
established;
    (2) Prohibiting a party from introducing certain evidence or 
otherwise

[[Page 1177]]

supporting a particular claim or defense;
    (3) Striking pleadings, in whole or in part;
    (4) Staying the proceedings;
    (5) Dismissal of the action;
    (6) Entering a decision by default; and
    (7) Refusing to consider any motion or other action that is not 
filed in a timely manner.
    (b) In civil money penalty cases commenced under section 1128A of 
the Act or under any provision which incorporates section 1128A(c)(4) of 
the Act, the ALJ may also order the party or attorney who has engaged in 
any of the acts described in paragraph (a) of this section to pay 
attorney's fees and other costs caused by the failure or misconduct.



Sec. 1005.15  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the petitioner or respondent should be found liable 
under this part.
    (b) With regard to the burden of proof in civil money penalty cases 
under part 1003, in Quality Improvement Organization exclusion cases 
under part 1004, and in exclusion cases under Secs. 1001.701, 1001.901 
and 1001.951 of this chapter--
    (1) The respondent or petitioner, as applicable, bears the burden of 
going forward and the burden of persuasion with respect to affirmative 
defenses and any mitigating circumstances; and
    (2) The IG bears the burden of going forward and the burden of 
persuasion with respect to all other issues.
    (c) Burden of proof in all other exclusion cases. In all exclusion 
cases except those governed by paragraph (b) of this section, the ALJ 
will allocate the burden of proof as the ALJ deems appropriate.
    (d) The burden of persuasion will be judged by a preponderance of 
the evidence.
    (e) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.
    (f)(1) A hearing under this part is not limited to specific items 
and information set forth in the notice letter to the petitioner or 
respondent. Subject to the 15-day requirement under Sec. 1005.8, 
additional items and information, including aggravating or mitigating 
circumstances that arose or became known subsequent to the issuance of 
the notice letter, may be introduced by either party during its case-in-
chief unless such information or items are--
    (i) Privileged;
    (ii) Disqualified from consideration due to untimeliness in 
accordance with Sec. 1004.130(a)(2)(ii); or
    (iii) Deemed otherwise inadmissible under Sec. 1005.17.
    (2) After both parties have presented their cases, evidence may be 
admitted on rebuttal even if not previously exchanged in accordance with 
Sec. 1005.8.

[57 FR 3350, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998; 65 
FR 24418, Apr. 26, 2000]



Sec. 1005.16  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony (other than expert 
testimony) may be admitted in the form of a written statement. The ALJ 
may, at his or her discretion, admit prior sworn testimony of experts 
which has been subject to adverse examination, such as a deposition or 
trial testimony. Any such written statement must be provided to all 
other parties along with the last known address of such witnesses, in a 
manner that allows sufficient time for other parties to subpoena such 
witness for cross-examination at the hearing. Prior written statements 
of witnesses proposed to testify at the hearing will be exchanged as 
provided in Sec. 1005.8.
    (c) The ALJ will exercise reasonable control over the mode and order 
of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth,
    (2) Avoid repetition or needless consumption of time, and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination of witnesses as may be required for a full and true 
disclosure of the facts.

[[Page 1178]]

    (e) The ALJ may order witnesses excluded so that they cannot hear 
the testimony of other witnesses. This does not authorize exclusion of--
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or 
employee of the party appearing for the entity pro se or designated as 
the party's representative; or
    (3) An individual whose presence is shown by a party to be essential 
to the presentation of its case, including an individual engaged in 
assisting the attorney for the IG.

[57 FR 3350, Jan. 29, 1992, as amended at 67 FR 11936, Mar. 18, 2002]



Sec. 1005.17  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where appropriate, for example, to exclude unreliable 
evidence.
    (c) The ALJ must exclude irrelevant or immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or needless 
presentation of cumulative evidence.
    (e) Although relevant, evidence must be excluded if it is privileged 
under Federal law.
    (f) Evidence concerning offers of compromise or settlement made in 
this action will be inadmissible to the extent provided in Rule 408 of 
the Federal Rules of Evidence.
    (g) Evidence of crimes, wrongs or acts other than those at issue in 
the instant case is admissible in order to show motive, opportunity, 
intent, knowledge, preparation, identity, lack of mistake, or existence 
of a scheme. Such evidence is admissible regardless of whether the 
crimes, wrongs or acts occurred during the statute of limitations period 
applicable to the acts which constitute the basis for liability in the 
case, and regardless of whether they were referenced in the IG's notice 
sent in accordance with Secs. 1001.2002, 1001.2003 or 1003.109.
    (h) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (i) All documents and other evidence offered or taken for the record 
will be open to examination by all parties, unless otherwise ordered by 
the ALJ for good cause shown.
    (j) The ALJ may not consider evidence regarding the issue of 
willingness and ability to enter into and successfully complete a 
corrective action plan when such evidence pertains to matters occurring 
after the submittal of the case to the Secretary. The determination 
regarding the appropriateness of any corrective action plan is not 
reviewable.



Sec. 1005.18  The record.

    (a) The hearing will be recorded and transcribed. Transcripts may be 
obtained following the hearing from the ALJ.
    (b) The transcript of testimony, exhibits and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Secretary.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by any person, unless otherwise ordered by the ALJ for 
good cause shown.
    (d) For good cause, the ALJ may order appropriate redactions made to 
the record.



Sec. 1005.19  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing such briefs which are not to exceed 60 days from the 
date the parties receive the transcript of the hearing or, if 
applicable, the stipulated record. Such briefs may be accompanied by 
proposed findings of fact and conclusions of law. The ALJ may permit the 
parties to file reply briefs.



Sec. 1005.20  Initial decision.

    (a) The ALJ will issue an initial decision, based only on the 
record, which will contain findings of fact and conclusions of law.

[[Page 1179]]

    (b) The ALJ may affirm, increase or reduce the penalties, assessment 
or exclusion proposed or imposed by the IG, or reverse the imposition of 
the exclusion. In exclusion cases where the period of exclusion 
commenced prior to the hearing, any period of exclusion imposed by the 
ALJ will be deemed to commence on the date such exclusion originally 
went into effect.
    (c) The ALJ will issue the initial decision to all parties within 60 
days after the time for submission of post-hearing briefs and reply 
briefs, if permitted, has expired. The decision will be accompanied by a 
statement describing the right of any party to file a notice of appeal 
with the DAB and instructions for how to file such appeal. If the ALJ 
fails to meet the deadline contained in this paragraph, he or she will 
notify the parties of the reason for the delay and will set a new 
deadline.
    (d) Except for exclusion actions taken in accordance with 
Sec. 1001.2003 of this chapter and as provided in paragraph (e) of this 
section, unless the initial decision is appealed to the DAB, it will be 
final and binding on the parties 30 days after the ALJ serves the 
parties with a copy of the decision. If service is by mail, the date of 
service will be deemed to be 5 days from the date of mailing.
    (e) If an extension of time within which to appeal the initial 
decision is granted under Sec. 1005.21(a), except as provided in 
Sec. 1005.22(a), the initial decision will become final and binding on 
the day following the end of the extension period.

[57 FR 3350, Jan. 29, 1992, as amended at 65 FR 24418, Apr. 26, 2000]



Sec. 1005.21  Appeal to DAB.

    (a) Any party may appeal the initial decision of the ALJ to the DAB 
by filing a notice of appeal with the DAB within 30 days of the date of 
service of the initial decision. The DAB may extend the initial 30 day 
period for a period of time not to exceed 30 days if a party files with 
the DAB a request for an extension within the initial 30 day period and 
shows good cause.
    (b) If a party files a timely notice of appeal with the DAB, the ALJ 
will forward the record of the proceeding to the DAB.
    (c) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting the 
exceptions. Any party may file a brief in opposition to exceptions, 
which may raise any relevant issue not addressed in the exceptions, 
within 30 days of receiving the notice of appeal and accompanying brief. 
The DAB may permit the parties to file reply briefs.
    (d) There is no right to appear personally before the DAB or to 
appeal to the DAB any interlocutory ruling by the ALJ, except on the 
timeliness of a filing of the hearing request.
    (e) The DAB will not consider any issue not raised in the parties' 
briefs, nor any issue in the briefs that could have been raised before 
the ALJ but was not.
    (f) If any party demonstrates to the satisfaction of the DAB that 
additional evidence not presented at such hearing is relevant and 
material and that there were reasonable grounds for the failure to 
adduce such evidence at such hearing, the DAB may remand the matter to 
the ALJ for consideration of such additional evidence.
    (g) The DAB may decline to review the case, or may affirm, increase, 
reduce, reverse or remand any penalty, assessment or exclusion 
determined by the ALJ.
    (h) The standard of review on a disputed issue of fact is whether 
the initial decision is supported by substantial evidence on the whole 
record. The standard of review on a disputed issue of law is whether the 
initial decision is erroneous.
    (i) Within 60 days after the time for submission of briefs and reply 
briefs, if permitted, has expired, the DAB will issue to each party to 
the appeal a copy of the DAB's decision and a statement describing the 
right of any petitioner or respondent who is found liable to seek 
judicial review.
    (j) Except with respect to any penalty, assessment or exclusion 
remanded by the ALJ, the DAB's decision, including a decision to decline 
review of the initial decision, becomes final and binding 60 days after 
the date on which the DAB serves the parties with a copy of the 
decision. If service is by mail,

[[Page 1180]]

the date of service will be deemed to be 5 days from the date of 
mailing.
    (k) (1) Any petition for judicial review must be filed within 60 
days after the DAB serves the parties with a copy of the decision. If 
service is by mail, the date of service will be deemed to be 5 days from 
the date of mailing.
    (2) In compliance with 28 U.S.C. 2112(a), a copy of any petition for 
judicial review filed in any U.S. Court of Appeals challenging a final 
action of the DAB will be sent by certified mail, return receipt 
requested, to the Chief Counsel to the IG. The petition copy will be 
time-stamped by the clerk of the court when the original is filed with 
the court.
    (3) If the Chief Counsel to the IG receives two or more petitions 
within 10 days after the DAB issues its decision, the Chief Counsel to 
the IG will notify the U.S. Judicial Panel on Multidistrict Litigation 
of any petitions that were received within the 10-day period.

[57 FR 3350, Jan. 29, 1992, as amended at 63 FR 46691, Sept. 2, 1998; 65 
FR 24419, Apr. 26, 2000]



Sec. 1005.22  Stay of initial decision.

    (a) In a CMP case under section 1128A of the Act, the filing of a 
respondent's request for review by the DAB will automatically stay the 
effective date of the ALJ's decision.
    (b) (1) After the DAB renders a decision in a CMP case, pending 
judicial review, the respondent may file a request for stay of the 
effective date of any penalty or assessment with the ALJ. The request 
must be accompanied by a copy of the notice of appeal filed with the 
Federal court. The filing of such a request will automatically act to 
stay the effective date of the penalty or assessment until such time as 
the ALJ rules upon the request.
    (2) The ALJ may not grant a respondent's request for stay of any 
penalty or assessment unless the respondent posts a bond or provides 
other adequate security.
    (3) The ALJ will rule upon a respondent's request for stay within 10 
days of receipt.



Sec. 1005.23  Harmless error.

    No error in either the admission or the exclusion of evidence, and 
no error or defect in any ruling or order or in any act done or omitted 
by the ALJ or by any of the parties, including Federal representatives 
such as Medicare carriers and intermediaries and Quality Improvement 
Organizations, is ground for vacating, modifying or otherwise disturbing 
an otherwise appropriate ruling or order or act, unless refusal to take 
such action appears to the ALJ or the DAB inconsistent with substantial 
justice. The ALJ and the DAB at every stage of the proceeding will 
disregard any error or defect in the proceeding that does not affect the 
substantial rights of the parties.



PART 1006--INVESTIGATIONAL INQUIRIES--Table of Contents




Sec.
1006.1 Scope.
1006.2 Contents of subpoena.
1006.3 Service and fees.
1006.4 Procedures for investigational inquiries.
1006.5 Enforcement of a subpoena.

    Authority: 42 U.S.C. 405(d), 405(e), 1302 and 1320a-7a.

    Source: 57 FR 3354, Jan. 29, 1992, unless otherwise noted.



Sec. 1006.1  Scope.

    (a) The provisions in this part govern subpoenas issued by the 
Inspector General, or his or her delegates, in accordance with sections 
205(d) and 1128A(j) of the Act, and require the attendance and testimony 
of witnesses and the production of any other evidence at an 
investigational inquiry.
    (b) Such subpoenas may be issued in investigations under section 
1128A of the Act or under any other section of the Act that incorporates 
the provisions of section 1128A(j).
    (c) Nothing in this part is intended to apply to or limit the 
authority of the Inspector General, or his or her delegates, to issue 
subpoenas for the production of documents in accordance with 5 U.S.C. 
6(a)(4), App. 3.



Sec. 1006.2  Contents of subpoena.

    A subpoena issued under this part will--
    (a) State the name of the individual or entity to whom the subpoena 
is addressed;

[[Page 1181]]

    (b) State the statutory authority for the subpoena;
    (c) Indicate the date, time and place that the investigational 
inquiry at which the witness is to testify will take place;
    (d) Include a reasonably specific description of any documents or 
items required to be produced; and
    (e) If the subpoena is addressed to an entity, describe with 
reasonable particularity the subject matter on which testimony is 
required. In such event, the named entity will designate one or more 
individuals who will testify on its behalf, and will state as to each 
individual so designated that individual's name and address and the 
matters on which he or she will testify. The individual so designated 
will testify as to matters known or reasonably available to the entity.



Sec. 1006.3  Service and fees.

    (a) A subpoena under this part will be served by--
    (1) Delivering a copy to the individual named in the subpoena;
    (2) Delivering a copy to the entity named in the subpoena at its 
last principal place of business; or
    (3) Registered or certified mail addressed to such individual or 
entity at its last known dwelling place or principal place of business.
    (b) A verified return by the individual serving the subpoena setting 
forth the manner of service or, in the case of service by registered or 
certified mail, the signed return post office receipt, will be proof of 
service.
    (c) Witnesses will be entitled to the same fees and mileage as 
witnesses in the district courts of the United States (28 U.S.C. 1821 
and 1825). Such fees need not be paid at the time the subpoena is 
served.



Sec. 1006.4  Procedures for investigational inquiries.

    (a) Testimony at investigational inquiries will be taken under oath 
or affirmation.
    (b) Investigational inquiries are non-public investigatory 
proceedings. Attendance of non-witnesses is within the discretion of the 
OIG, except that--
    (1) A witness is entitled to be accompanied, represented and advised 
by an attorney; and
    (2) Representatives of the OIG are entitled to attend and ask 
questions.
    (c) A witness will have an opportunity to clarify his or her answers 
on the record following the questions by the OIG.
    (d) Any claim of privilege must be asserted by the witness on the 
record.
    (e) Objections must be asserted on the record. Errors of any kind 
that might be corrected if promptly presented will be deemed to be 
waived unless reasonable objection is made at the investigational 
inquiry. Except where the objection is on the grounds of privilege, the 
question will be answered on the record, subject to the objection.
    (f) If a witness refuses to answer any question not privileged or to 
produce requested documents or items, or engages in conduct likely to 
delay or obstruct the investigational inquiry, the OIG may seek 
enforcement of the subpoena under Sec. 1006.5.
    (g)(1) The proceedings will be recorded and transcribed.
    (2) The witness is entitled to a copy of the transcript, upon 
payment of prescribed costs, except that, for good cause, the witness 
may be limited to inspection of the official transcript of his or her 
testimony.
    (3)(i) The transcript will be submitted to the witness for 
signature.
    (ii) Where the witness will be provided a copy of the transcript, 
the transcript will be submitted to the witness for signature. The 
witness may submit to the OIG written proposed corrections to the 
transcript, with such corrections attached to the transcript. If the 
witness does not return a signed copy of the transcript or proposed 
corrections within 30 days of its being submitted to him or her for 
signature, the witness will be deemed to have agreed that the transcript 
is true and accurate.
    (iii) Where, as provided in paragraph (g)(2) of this section, the 
witness is limited to inspecting the transcript, the witness will have 
the opportunity at the time of inspection to propose corrections to the 
transcript, with corrections attached to the transcript. The

[[Page 1182]]

witness will also have the opportunity to sign the transcript. If the 
witness does not sign the transcript or offer corrections within 30 days 
of receipt of notice of the opportunity to inspect the transcript, the 
witness will be deemed to have agreed that the transcript is true and 
accurate.
    (iv) The OIG's proposed corrections the record of transcript will be 
attached to the transcript.
    (h) Testimony and other evidence obtained in an investigational 
inquiry may be used by the OIG or DHHS in any of its activities, and may 
be used or offered into evidence in any administrative or judicial 
proceeding.

[57 FR 3354, Jan. 29, 1992, as amended at 65 FR 24419, Apr. 26, 2000]



Sec. 1006.5  Enforcement of a subpoena.

    A subpoena to appear at an investigational inquiry is enforceable 
through the District Court of the United States and the district where 
the subpoenaed person is found, resides or transacts business.



PART 1007--STATE MEDICAID FRAUD CONTROL UNITS--Table of Contents




Sec.
1007.1 Definitions.
1007.3 Scope and purpose.
1007.5 Basic requirement.
1007.7 Organization and location requirements.
1007.9 Relationship to, and agreement with, the Medicaid agency.
1007.11 Duties and responsibilities of the unit.
1007.13 Staffing requirements.
1007.15 Applications, certification and recertification.
1007.17 Annual report.
1007.19 Federal financial participation (FFP).
1007.21 Other applicable HHS regulations.

    Authority: 42 U.S.C. 1396b(a)(6), 1396b(b)(3) and 1396b(q).

    Source: 57 FR 3355, Jan. 29, 1992, unless otherwise noted.



Sec. 1007.1  Definitions.

    As used in this part, unless otherwise indicated by the context:
    Employ or employee, as the context requires, means full-time duty 
intended to last at least a year. It includes an arrangement whereby an 
individual is on full-time detail or assignment to the unit from another 
government agency, if the detail or assignment is for a period of at 
least 1 year and involves supervision by the unit.
    Provider means an individual or entity that furnishes items or 
services for which payment is claimed under Medicaid.
    Unit means the State Medicaid fraud control unit.



Sec. 1007.3  Scope and purpose.

    This part implements sections 1903(a)(6), 1903(b)(3), and 1903(q) of 
the Social Security Act, as amended by the Medicare-Medicaid Anti-Fraud 
and Abuse Amendments (Pub. L. 95-142). The statute authorizes the 
Secretary to pay a State 90 percent of the costs of establishing and 
operating a State Medicaid fraud control unit, as defined by the 
statute, for the purpose of eliminating fraud in the State Medicaid 
program.



Sec. 1007.5  Basic requirement.

    A State Medicaid fraud control unit must be a single identifiable 
entity of the State government certified by the Secretary as meeting the 
requirements of Secs. 1007.7 through 1007.13 of this part.



Sec. 1007.7  Organization and location requirements.

    Any of the following three alternatives is acceptable:
    (a) The unit is located in the office of the State Attorney General 
or another department of State government which has Statewide authority 
to prosecute individuals for violations of criminal laws with respect to 
fraud in the provision or administration of medical assistance under a 
State plan implementing title XIX of the Act;
    (b) If there is no State agency with Statewide authority and 
capability for criminal fraud prosecutions, the unit has established 
formal procedures that assure that the unit refers suspected cases of 
criminal fraud in the State Medicaid program to the appropriate State 
prosecuting authority or authorities, and provides assistance and 
coordination to such authority or authorities in the prosecution of such 
cases; or

[[Page 1183]]

    (c) The unit has a formal working relationship with the office of 
the State Attorney General and has formal procedures for referring to 
the Attorney General suspected criminal violations occurring in the 
State Medicaid program and for effective coordination of the activities 
of both entities relating to the detection, investigation and 
prosecution of those violations. Under this requirement, the office of 
the State Attorney General must agree to assume responsibility for 
prosecuting alleged criminal violations referred to it by the unit. 
However, if the Attorney General finds that another prosecuting 
authority has the demonstrated capacity, experience and willingness to 
prosecute an alleged violation, he or she may refer a case to that 
prosecuting authority, as long as the Attorney General's Office 
maintains oversight responsibility for the prosecution and for 
coordination between the unit and the prosecuting authority.



Sec. 1007.9  Relationship to, and agreement with, the Medicaid agency.

    (a) The unit must be separate and distinct from the Medicaid agency.
    (b) No official of the Medicaid agency will have authority to review 
the activities of the unit or to review or overrule the referral of a 
suspected criminal violation to an appropriate prosecuting authority.
    (c) The unit will not receive funds paid under this part either from 
or through the Medicaid agency.
    (d) The unit will enter into an agreement with the Medicaid agency 
under which the Medicaid agency will agree to comply with all 
requirements of Sec. 455.21(a)(2) of this title.



Sec. 1007.11  Duties and responsibilities of the unit.

    (a) The unit will conduct a Statewide program for investigating and 
prosecuting (or referring for prosecution) violations of all applicable 
State laws pertaining to fraud in the administration of the Medicaid 
program, the provision of medical assistance, or the activities of 
providers of medical assistance under the State Medicaid plan.
    (b) (1) The unit will also review complaints alleging abuse or 
neglect of patients in health care facilities receiving payments under 
the State Medicaid plan and may review complaints of the 
misappropriation of patient's private funds in such facilities.
    (2) If the initial review indicates substantial potential for 
criminal prosecution, the unit will investigate the complaint or refer 
it to an appropriate criminal investigative or prosecutive authority.
    (3) If the initial review does not indicate a substantial potential 
for criminal prosecution, the unit will refer the complaint to an 
appropriate State agency.
    (c) If the unit, in carrying out its duties and responsibilities 
under paragraphs (a) and (b) of this section, discovers that 
overpayments have been made to a health care facility or other provider 
of medical assistance under the State Medicaid plan, the unit will 
either attempt to collect such overpayment or refer the matter to an 
appropriate State agency for collection.
    (d) Where a prosecuting authority other than the unit is to assume 
responsibility for the prosecution of a case investigated by the unit, 
the unit will insure that those responsible for the prosecutive decision 
and the preparation of the case for trial have the fullest possible 
opportunity to participate in the investigation from its inception and 
will provide all necessary assistance to the prosecuting authority 
throughout all resulting prosecutions.
    (e) The unit will make available to Federal investigators or 
prosecutors all information in its possession concerning fraud in the 
provision or administration of medical assistance under the State plan 
and will cooperate with such officials in coordinating any Federal and 
State investigations or prosecutions involving the same suspects or 
allegations.
    (f) The unit will safeguard the privacy rights of all individuals 
and will provide safeguards to prevent the misuse of information under 
the unit's control.



Sec. 1007.13  Staffing requirements.

    (a) The unit will employ sufficient professional, administrative, 
and support staff to carry out its duties and responsibilities in an 
effective and efficient manner. The staff must include:

[[Page 1184]]

    (1) One or more attorneys experienced in the investigation or 
prosecution of civil fraud or criminal cases, who are capable of giving 
informed advice on applicable law and procedures and providing effective 
prosecution or liaison with other prosecutors;
    (2) One or more experienced auditors capable of supervising the 
review of financial records and advising or assisting in the 
investigation of alleged fraud; and
    (3) A senior investigator with substantial experience in commercial 
or financial investigations who is capable of supervising and directing 
the investigative activities of the unit.
    (b) The unit will employ, or have available to it, professional 
staff who are knowledgeable about the provision of medical assistance 
under title XIX and about the operation of health care providers.



Sec. 1007.15  Applications, certification and recertification.

    (a) Initial application. In order to receive FFP under this part, 
the unit must submit to the Secretary, an application approved by the 
Governor, containing the following information and documentation--
    (1) A description of the applicant's organization, structure, and 
location within State government, and an indication of whether it seeks 
certification under Sec. 1007.7 (a), (b), or (c);
    (2) A statement from the State Attorney General that the applicant 
has authority to carry out the functions and responsibilities set forth 
in this part. If the applicant seeks certification under Sec. 1007.7(b), 
the statement must also specify either that--
    (i) There is no State agency with the authority to exercise 
Statewide prosecuting authority for the violations with which the unit 
is concerned, or
    (ii) Although the State Attorney General may have common law 
authority for Statewide criminal prosecutions, he or she has not 
exercised that authority;
    (3) A copy of whatever memorandum of agreement, regulation, or other 
document sets forth the formal procedures required under Sec. 1007.7(b), 
or the formal working relationship and procedures required under 
Sec. 1007.7(c);
    (4) A copy of the agreement with the Medicaid agency required under 
Sec. 1007.9;
    (5) A statement of the procedures to be followed in carrying out the 
functions and responsibilities of this part;
    (6) A projection of the caseload and a proposed budget for the 12-
month period for which certification is sought; and
    (7) Current and projected staffing, including the names, education, 
and experience of all senior professional staff already employed and job 
descriptions, with minimum qualifications, for all professional 
positions.
    (b) Conditions for, and notification of certification. (1) The 
Secretary will approve an application only if he or she has specifically 
approved the applicant's formal procedures under Sec. 1007.7 (b) or (c), 
if either of those provisions is applicable, and has specifically 
certified that the applicant meets the requirements of Sec. 1007.7;
    (2) The Secretary will promptly notify the applicant whether the 
application meets the requirements of this part and is approved. If the 
application is not approved, the applicant may submit an amended 
application at any time. Approval and certification will be for a period 
of 1 year.
    (c) Conditions for recertification. In order to continue receiving 
payments under this part, a unit must submit a reapplication to the 
Secretary at least 60 days prior to the expiration of the 12-month 
certification period. A reapplication must--
    (1) Advise the Secretary of any changes in the information or 
documentation required under paragraphs (a) (1) through (5) of this 
section;
    (2) Provide projected caseload and proposed budget for the 
recertification period; and
    (3) Include or reference the annual report required under 
Sec. 1007.17.
    (d) Basis for recertification. (1) The Secretary will consider the 
unit's reapplication, the reports required under Sec. 1007.17, and any 
other reviews or information he or she deems necessary or warranted, and 
will promptly notify the unit whether he or she has approved the 
reapplication and recertified the unit.

[[Page 1185]]

    (2) In reviewing the reapplication, the Secretary will give special 
attention to whether the unit has used its resources effectively in 
investigating cases of possible fraud, in preparing cases for 
prosecution, and in prosecuting cases or cooperating with the 
prosecuting authorities.

(Approved by the Office of Management and Budget under control number 
0990-0162)



Sec. 1007.17  Annual report.

    At least 60 days prior to the expiration of the certification 
period, the unit will submit to the Secretary a report covering the last 
12 months (the first 9 months of the certification period for the first 
annual report), and containing the following information--
    (a) The number of investigations initiated and the number completed 
or closed, categorized by type of provider;
    (b) The number of cases prosecuted or referred for prosecution; the 
number of cases finally resolved and their outcomes; and the number of 
cases investigated but not prosecuted or referred for prosecution 
because of insufficient evidence;
    (c) The number of complaints received regarding abuse and neglect of 
patients in health care facilities; the number of such complaints 
investigated by the unit; and the number referred to other identified 
State agencies;
    (d) The number of recovery actions initiated by the unit; the number 
of recovery actions referred to another agency; the total amount of 
overpayments identified by the unit; and the total amount of 
overpayments actually collected by the unit;
    (e) The number of recovery actions initiated by the Medicaid agency 
under its agreement with the unit, and the total amount of overpayments 
actually collected by the Medicaid agency under this agreement;
    (f) Projections for the succeeding 12 months for items listed in 
paragraphs (a) through (e) of this section;
    (g) The costs incurred by the unit; and
    (h) A narrative that evaluates the unit's performance; describes any 
specific problems it has had in connection with the procedures and 
agreements required under this part; and discusses any other matters 
that have impaired its effectiveness.

(Approved by the Office of Management and Budget under control number 
0990-0162)



Sec. 1007.19  Federal financial participation (FFP).

    (a) Rate of FFP. Subject to the limitation of this section, the 
Secretary will reimburse each State by an amount equal to 90 percent of 
the costs incurred by a certified unit which are attributable to 
carrying out its functions and responsibilities under this part.
    (b) Retroactive certification. The Secretary may grant certification 
retroactive to the date on which the unit first met all the requirements 
of the statute and of this part. For any quarter with respect to which 
the unit is certified, the Secretary will provide reimbursement for the 
entire quarter.
    (c) Amount of FFP. FFP for any quarter will not exceed the higher of 
$125,000 or one-quarter of 1 percent of the sums expended by the 
Federal, State, and local governments during the previous quarter in 
carrying out the State Medicaid program.
    (d) Costs subject to FFP. (1) FFP is available under this part for 
the expenditures attributable to the establishment and operation of the 
unit, including the cost of training personnel employed by the unit. 
Reimbursement will be limited to costs attributable to the specific 
responsibilities and functions set forth in this part in connection with 
the investigation and prosecution of suspected fraudulent activities and 
the review of complaints of alleged abuse or neglect of patients in 
health care facilities.
    (2) (i) Establishment costs are limited to clearly identifiable 
costs of personnel that--
    (A) Devote full time to the establishment of the unit which does 
achieve certification; and
    (B) Continue as full-time employees after the unit is certified.
    (ii) All establishment costs will be deemed made in the first 
quarter of certification.
    (e) Costs not subject to FFP. FFP is not available under this part 
for expenditures attributable to--

[[Page 1186]]

    (1) The investigation of cases involving program abuse or other 
failures to comply with applicable laws and regulations, if these cases 
do not involve substantial allegations or other indications of fraud;
    (2) Efforts to identify situations in which a question of fraud may 
exist, including the screening of claims, analysis of patterns of 
practice, or routine verification with recipients of whether services 
billed by providers were actually received;
    (3) The routine notification of providers that fraudulent claims may 
be punished under Federal or State law;
    (4) The performance by a person other than a full-time employee of 
the unit of any management function for the unit, any audit or 
investigation, any professional legal function, or any criminal, civil 
or administrative prosecution of suspected providers;
    (5) The investigation or prosecution of cases of suspected recipient 
fraud not involving suspected conspiracy with a provider; or
    (6) Any payment, direct or indirect, from the unit to the Medicaid 
agency, other than payments for the salaries of employees on detail to 
the unit.



Sec. 1007.21  Other applicable HHS regulations.

    Except as otherwise provided in this part, the following regulations 
from 45 CFR subtitle A apply to grants under this part:
    Part 16, subpart C--Department Grant Appeals Process--Special 
Provisions Applicable To Reconsideration of Disallowances [Note that 
this applies only to disallowance determinations and not to any other 
determinations, e.g., over certification or recertification];
    Part 74--Administration of Grants;
    Part 75--Informal Grant Appeals Procedures;
    Part 80--Nondiscrimination Under Programs Receiving Federal 
Assistance Through the Department of Health and Human Services, 
Effectuation of title VI of the Civil Rights Act of 1964;
    Part 81--Practice and Procedure for Hearings Under 45 CFR part 80;
    Part 84--Nondiscrimination on the Basis of Handicap in Programs and 
Activities Receiving or Benefiting From Federal Financial Assistance;
    Part 91--Nondiscrimination on the Basis of Age in HHS Programs or 
Activities Receiving Federal Financial Assistance.



PART 1008--ADVISORY OPINIONS BY THE OIG--Table of Contents




                      Subpart A--General Provisions

Sec.
1008.1 Basis and purpose.
1008.3 Effective period.
1008.5 Matters subject to advisory opinions.

     Subpart B--Preliminary Obligations and Responsibilities of the 
                            Requesting Party

1008.11 Who may submit a request.
1008.15 Facts subject to advisory opinions.
1008.18 Preliminary questions suggested for the requesting party.

                    Subpart C--Advisory Opinion Fees

1008.31 OIG fees for the cost of advisory opinions.
1008.33 Expert opinions from outside sources.

    Subpart D--Submission of a Formal Request for an Advisory Opinion

1008.36 Submission of a request.
1008.37 Disclosure of ownership and related information.
1008.38 Signed certifications by the requestor.
1008.39 Additional information.
1008.40 Withdrawal.

         Subpart E--Obligations and Responsibilities of the OIG

1008.41 OIG acceptance of the request.
1008.43 Issuance of a formal advisory opinion.
1008.45 Rescission, termination or modification.
1008.47 Disclosure.

          Subpart F--Scope and Effect of OIG Advisory Opinions

1008.51 Exclusivity of OIG advisory opinions.
1008.53 Affected parties.
1008.55 Admissibility of evidence.
1008.59 Range of the advisory opinion.

    Authority: 42 U.S.C. 1320a-7d(b).

    Source: 62 FR 7357, Feb. 19, 1997, unless otherwise noted.

[[Page 1187]]



                      Subpart A--General Provisions



Sec. 1008.1  Basis and purpose.

    (a) This part contains the specific procedures for the submission of 
requests by an individual or entity for advisory opinions to, and the 
issuance of advisory opinions by, the OIG, in consultation with the 
Department of Justice (DoJ), in accordance with section 1128D(b) of the 
Social Security Act (Act), 42 U.S.C. 1320a-7d(b). The OIG will issue 
such advisory opinions based on actual or proposed factual circumstances 
submitted by the requesting individual or entity, or by counsel on 
behalf of the requesting individual or entity, provided all other 
requirements of this part are satisfied (including the requirement that 
the requesting individual or entity provide the certifications required 
in accordance with Sec. 1008.38 of this part).
    (b) An individual or entity may request an advisory opinion from the 
OIG regarding any of five specific subject matters described in 
Sec. 1008.5 of this part.
    (c) The requesting party must provide a complete description of the 
facts as set forth in subpart B of this part, and pay the costs to the 
OIG of processing the request for an advisory opinion as set forth in 
subpart C of this part.
    (d) Nothing in this part limits the investigatory or prosecutorial 
authority of the OIG, DoJ or any other agency of the Government.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38324, July 16, 1998]



Sec. 1008.3  Effective period.

    The provisions in this part are applicable to requests for advisory 
opinions submitted on or after February 21, 1997, and before August 21, 
2000, and to any requests submitted during any other time period for 
which the OIG is required by law to issue advisory opinions.



Sec. 1008.5  Matters subject to advisory opinions.

    (a) An individual or entity may request an advisory opinion from the 
OIG regarding--
    (1) What constitutes prohibited remuneration within the meaning of 
section 1128B(b) of the Act;
    (2) Whether an arrangement, or proposed arrangement, satisfies the 
criteria set forth in section 1128B(b)(3) of the Act for activities that 
do not result in prohibited remuneration;
    (3) Whether an arrangement, or proposed arrangement, satisfies the 
criteria set forth in Sec. 1001.952 of this chapter for activities that 
do not result in prohibited remuneration;
    (4) What constitutes an inducement to reduce or limit services under 
section 1128A(b) of the Act to Medicare or Medicaid program 
beneficiaries; and
    (5) Whether any activity, or proposed activity, constitutes grounds 
for the imposition of a sanction under sections 1128, 1128A or 1128B of 
the Act.
    (b) Exceptions. The OIG will not address through the advisory 
opinion process--
    (1) What the fair market value will be, or whether fair market value 
was paid or received, for any goods, services or property; or
    (2) Whether an individual is a bona fide employee within the 
requirements of section 3121(d)(2) of the Internal Revenue Code of 1986.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38324, July 16, 1998]



     Subpart B--Preliminary Obligations and Responsibilities of the 
                            Requesting Party



Sec. 1008.11  Who may submit a request.

    Any individual or entity may submit a request to the OIG for an 
advisory opinion regarding an existing arrangement or one which the 
requestor in good faith specifically plans to undertake. The requestor 
must be a party to the arrangement, or proposed arrangement, that is the 
subject of the request.



Sec. 1008.15  Facts subject to advisory opinions.

    (a) The OIG will consider requests from a requesting party for 
advisory opinions regarding the application of specific facts to the 
subject matters set forth in Sec. 1008.5(a) of this part. The

[[Page 1188]]

facts must relate to an existing arrangement, or one which the requestor 
in good faith plans to undertake. The plans may be contingent upon 
receiving a favorable advisory opinion. The advisory opinion request 
should contain a complete description of the arrangement that the 
requestor is undertaking, or plans to undertake.
    (b) Requests presenting a general question of interpretation, posing 
a hypothetical situation, or regarding the activities of third parties 
do not qualify as advisory opinion requests.
    (c) Advisory opinion request will not be accepted, and/or opinions 
will not be issued when--
    (1) The request is not related to a named individual or entity;
    (2) The same, or substantially the same, course of action is under 
investigation, or is or has been the subject of a proceeding involving 
the Department of Health and Human Services or another governmental 
agency; or
    (3) An informed opinion cannot be made, or could be made only after 
extensive investigation, clinical study, testing, or collateral inquiry.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38324, July 16, 1998]



Sec. 1008.18  Preliminary questions suggested for the requesting party.

    (a) The OIG may establish and maintain a set of questions 
corresponding to the categories of opinion subject matter as set forth 
in Sec. 1008.5(a) of this part as appropriate. The questions will be 
designed to elicit specific information relevant to the advisory opinion 
being sought; however, answering the questions is voluntary.
    (b) Questions the OIG suggests that the requestor address may be 
obtained from the OIG. Requests should be made in writing, specify the 
subject matter, and be sent to the headquarter offices of the OIG.
    (c) When submitting a request for an advisory opinion, a requestor 
may answer the questions corresponding to the subject matter for which 
the opinion is requested. The extent to which any of the questions is 
not fully answered may effect the content of the advisory opinion.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38324, July 16, 1998]



                    Subpart C--Advisory Opinion Fees



Sec. 1008.31  OIG fees for the cost of advisory opinions.

    (a) Responsibility for fees. The requestor is responsible for paying 
a fee equal to the costs incurred by the Department in responding to the 
request for an advisory opinion.
    (b) Initial payment. A request for an advisory opinion must be 
accompanied by a check or money order payable to the Treasury of the 
United States for $250. This initial payment is non-refundable.
    (c) Calculation of costs: Prior to the issuance of the advisory 
opinion, the OIG will calculate the costs incurred by the Department in 
responding to the request. The calculation will include the costs of 
salaries and benefits payable to attorneys and others who have worked on 
the request in question, as well as administrative and supervisory 
support for such person. The OIG has the exclusive authority to 
determine the cost of responding to a request for an advisory opinion 
and such determination is not reviewable or waiveable.
    (d) Agreement to pay all costs. (1) By submitting the request for an 
advisory opinion, the requestor agrees, except as indicated in paragraph 
(d)(4) of this section, to pay all costs incurred by the OIG in 
responding to the request for an advisory opinion.
    (2) In its request for an advisory opinion, the requestor may 
request a written estimate of the cost involved in processing the 
advisory opinion. Within 10 business days of receipt of the request, the 
OIG will notify in writing of such estimate. Such estimate will not be 
binding on the Department, and the actual cost to be paid may be higher 
or lower than estimated. The time period for issuing the advisory 
opinion will be tolled from the time the OIG notifies the requestor of 
the estimate until the OIG receives written confirmation from the 
requestor that the requestor wants the OIG to continue processing the 
request. Such notice may include a new or revised triggering dollar 
amount, as set forth in paragraph (d)(3) of this section.
    (3) In its request for an advisory opinion, the requestor may 
designate a

[[Page 1189]]

triggering dollar amount. If the OIG estimates that the costs of 
processing the advisory opinion request have reached, or are likely to 
exceed, the designated triggering dollar amount, the OIG will notify the 
requestor. The requestor may revise its designated triggering dollar 
amount in writing in its response to notification of a cost estimate in 
accordance with paragraph (d)(2) of this section.
    (4) If the OIG notifies the requestor that the estimated cost of 
processing the request has reached or is likely to exceed the triggering 
dollar amount, the OIG will stop processing the request until such time 
as the requestor makes a written request for the OIG to continue 
processing the request. Any delay in the processing of the request for 
an advisory opinion attributable to these procedures will toll the time 
for issuance of an advisory opinion until the requestor asks the OIG to 
continue working on the request.
    (5) If the requestor chooses not to pay for completion of an 
advisory opinion, or withdraws the request, the requestor is still 
obligated to pay for all costs incurred and identified by the OIG 
attributable to processing the request for an advisory opinion up to 
that point.
    (6) If the costs incurred by the OIG in responding to the request 
are greater than the amount paid by the requestor, the OIG will, prior 
to the issuance of the advisory opinion, notify the requestor of any 
additional amount due. The OIG will not issue an advisory opinion until 
the full amount owed by the requestor has been paid. Once the requestor 
has paid the OIG the total amount due for the costs of processing the 
request, the OIG will issue the advisory opinion. The time period for 
issuing advisory opinions will be tolled from the time the OIG notifies 
the requestor of the amount owed until the time full payment is 
received.
    (e) Fees for outside experts. (1) In addition to the fees identified 
in this section, the requestor also must pay any required fees for 
expert opinions, if any, from outside sources, as described in 
Sec. 1008.33.
    (2) If the OIG determines that it is necessary to obtain expert 
advice to issue a requested advisory opinion, the OIG will notify the 
requestor of that fact and provide the identity of the appropriate 
expert and an estimate of the costs of the expert advice.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38324, July 16, 1998]



Sec. 1008.33  Expert opinions from outside sources.

    (a) The OIG may request expert advice from qualified sources on non-
legal issues if necessary to respond to the advisory opinion request. 
For example, the OIG may require the use of appropriate medical 
reviewers, such as quality improvement organizations, to obtain medical 
opinions on specific issues.
    (b) The time period for issuing an advisory opinion will be tolled 
from the time that the OIG notifies the requestor of the need for an 
outside expert opinion until the time the OIG receives the necessary 
expert opinion.
    (c) Once payment is made for the cost of the expert opinion, as set 
forth in Sec. 1008.31(e) of this part, either directly to the expert or 
otherwise, the OIG will arrange for a prompt expert review of the issue 
or issues in question. Regardless of the manner of payment, the expert's 
work and opinion will be subject to the sole direction of the OIG.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38325, July 16, 1998]



    Subpart D--Submission of a Formal Request for an Advisory Opinion



Sec. 1008.36  Submission of a request.

    (a) A request for a formal advisory opinion must be submitted in 
writing. An original and 2 copies of the request should be addressed to 
the headquarter offices of the OIG.
    (b) Each request for an advisory opinion must include--
    (1) To the extent known to the requestor, the identities, including 
the names and addresses, of the requestor and of all other actual and 
potential parties to the arrangement, that are the subject of the 
request for an advisory opinion;
    (2) The name, title, address, and daytime telephone number of a 
contact person who will be available to discuss the request for an 
advisory opinion with the OIG on behalf of the requestor;

[[Page 1190]]

    (3) A declaration of the subject category or categories as described 
in Sec. 1008.5 of this part for which the advisory opinion is requested. 
To the extent an individual or entity requests an advisory opinion in 
accordance with Secs. 1008.5(a)(3) or (a)(5) of this part, the 
requesting individual or entity should identify the specific subsections 
of sections 1128, 1128A or 1128B of the Act or the specific provision of 
Sec. 1001.952 of this chapter about which an advisory opinion is sought:
    (4) A complete and specific description of all relevant information 
bearing on the arrangement for which an advisory opinion is requested 
and on the circumstances of the conduct,\1\ including--
---------------------------------------------------------------------------

    \1\ The requestor is under an affirmative obligation to make full 
and true disclosure with respect to the facts regarding the advisory 
opinion being requested.
---------------------------------------------------------------------------

    (i) Background information,
    (ii) For existing arrangements, complete copies of all operative 
documents,
    (iii) For proposed arrangements, complete copies of all operative 
documents, if possible, and otherwise descriptions of proposed terms, 
drafts, or models of documents sufficient to permit the OIG to render an 
informed opinion,
    (iv) Detailed statements of all collateral or oral understandings, 
if any, and
    (v) If applicable, a designation of trade secrets or confidential 
commercial or financial information in the manner described in 45 CFR 
5.65;
    (5) Signed certifications by the requestor(s), as described in 
Sec. 1008.37 of this part;
    (6) A check or money order payable to the Treasury of the United 
States in the amount of $250, as discussed in Sec. 1008.31(b) of this 
part;
    (7) A declaration regarding whether an advisory opinion in 
accordance with part 411 of this title has been or will be requested 
from CMS about the arrangement that is the subject of the advisory 
opinion request; and
    (8) Each requesting party's Taxpayer Identification Number.

(Approved by the Office of Management and Budget under control number 
0990-0213)

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38325, July 16, 1998]



Sec. 1008.37  Disclosure of ownership and related information.

    Each individual or entity requesting an advisory opinion must supply 
full and complete information as to the identity of each entity owned or 
controlled by the individual or entity, and of each person with an 
ownership or control interest in the entity, as defined in section 
1124(a)(1) of the Social Security Act (42 U.S.C. 1320a-3(a)(1)) and part 
420 of this chapter.

(Approved by the Office of Management and Budget under control number 
0990-0213)

[67 FR 11936, Mar. 18, 2002]



Sec. 1008.38  Signed certifications by the requestor.

    (a) Every request must include the following signed certification 
from all requestors: ``With knowledge of the penalties for false 
statements provided by 18 U.S.C. 1001 and with knowledge that this 
request for an advisory opinion is being submitted to the Department of 
Health and Human Services, I certify that all of the information 
provided is true and correct, and constitutes a complete description of 
the facts regarding which an advisory opinion is sought, to the best of 
my knowledge and belief.''
    (b) If the advisory opinion relates to a proposed arrangement, the 
request must also include the following signed certification from all 
requestors: ``The arrangement described in this request for an advisory 
opinion is one that [the requestor(s)] in good faith plan(s) to 
undertake.'' This statement may be made contingent on a favorable OIG 
advisory opinion, in which case, the phrase ``if the OIG issues a 
favorable advisory opinion'' should be added to the certification.
    (c) The certification(s) must be signed by--
    (1) The requestor, if the requestor is an individual;
    (2) The chief executive officer, or comparable officer, of the 
requestor, if the requestor is a corporation;

[[Page 1191]]

    (3) The managing partner of the requestor, if the requestor is a 
partnership; or
    (4) The managing member, or comparable person, if the requestor is a 
limited liability company.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38325, July 16, 1998]



Sec. 1008.39  Additional information.

    (a) If the request for an advisory opinion does not contain all of 
the information required by Sec. 1008.36 of this part, or the OIG 
believes it needs more information prior to rendering an advisory 
opinion, the OIG may, at any time, request whatever additional 
information or documents it deems necessary. The time period for the 
issuance of an advisory opinion will be tolled from the time the OIG 
requests the additional information from the requestor until such time 
as the OIG determines that it has received the requested information.
    (b) The OIG may request additional information before or after the 
request for an advisory opinion has been accepted.
    (c) Additional information should be provided in writing and 
certified to be a true, correct and complete disclosure of the requested 
information in a manner equivalent to that described in Sec. 1008.38 of 
this part.
    (d) In connection with any request for an advisory opinion, the OIG 
or DoJ may conduct whatever independent investigation they believe 
appropriate.
    (e) Requesting parties are required to notify the OIG if they 
request an advisory opinion in accordance with part 411 of this title 
from CMS about the arrangement that is the subject of their advisory 
opinion request.
    (f) Where appropriate, after receipt of an advisory opinion request, 
the OIG may consult with the requesting parties to the extent the OIG 
deems necessary.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38325, July 16, 1998]



Sec. 1008.40  Withdrawal.

    The requestor of an advisory opinion may withdraw the request prior 
to the issuance of a formal advisory opinion by the OIG. The withdrawal 
must be written and must be submitted to the same address as the 
submitted request, as indicated in Secs. 1008.18(b) and 1008.36(a) of 
this part. Regardless of whether the request is withdrawn, the requestor 
must pay the costs expended by the OIG in processing the opinion, as 
discussed in Sec. 1008.31(d) of this part. The OIG reserves the right to 
retain any request for an advisory opinion, documents and information 
submitted to it under these procedures, and to use them for any 
governmental purposes.



         Subpart E--Obligations and Responsibilities of the OIG



Sec. 1008.41  OIG acceptance of the request.

    (a) Upon receipt of a request for an advisory opinion, the OIG will 
promptly make an initial determination whether the submission includes 
all of the information the OIG will require to process the request.
    (b) Within 10 working days of receipt of the request, the OIG will--
    (1) Formally accept the request for an advisory opinion,
    (2) Notify the requestor of what additional information is needed, 
or
    (3) Formally decline to accept the request.
    (c) If the requestor provides the additional information requested, 
or otherwise resubmits the request, the OIG will process the 
resubmission in accordance with paragraphs (a) and (b) of this section 
as if it was an initial request for an advisory opinion.
    (d) Upon acceptance of the request, the OIG will notify the 
requestor by regular U.S. mail of the date that the request for the 
advisory opinion was formally accepted.
    (e) The 60-day period for issuance of an advisory opinion set forth 
in Sec. 1008.43(c) of this part will not commence until the OIG has 
formally accepted the request for an advisory opinion.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38326, July 16, 1998]



Sec. 1008.43  Issuance of a formal advisory opinion.

    (a) An advisory opinion will be considered issued once payment is 
received

[[Page 1192]]

and it is dated, numbered, and signed by an authorized official of the 
OIG.
    (b) An advisory opinion will contain a description of the material 
facts provided to the OIG with regard to the arrangement for which an 
advisory opinion has been requested. The advisory opinion will state the 
OIG's opinion regarding the subject matter of the request based on the 
facts provided to the OIG. If necessary, to fully describe the 
arrangement, the OIG is authorized to include in the advisory opinion 
the material facts of the arrangement, notwithstanding that some of 
these facts could be considered confidential information or trade 
secrets within the meaning of 18 U.S.C. 1905.
    (c)(1) The OIG will issue an advisory opinion, in accordance with 
the provisions of this part, within 60 days after the request for an 
advisory opinion has been formally accepted;
    (2) If the 60th day falls on a Saturday, Sunday, or Federal holiday, 
the time period will end at the close of the next business day following 
the weekend or holiday;
    (3) The 60 day period will be tolled from the time the OIG--
    (i) Notifies the requestor that the costs have reached, or are 
likely to exceed, the triggering amount until the time when the OIG 
receives written notice from the requestor to continue processing the 
request;
    (ii) Requests additional information from the requestor until the 
time the OIG receives the requested information;
    (iii) Notifies the requestor of the full amount due until the time 
the OIG receives payment of the full amount owed; and
    (iv) Notifies the requestor of the need for expert advice until the 
time the OIG receives the expert advice.
    (d) After the OIG has notified the requestor of the full amount owed 
and the OIG has received full payment of that amount, the OIG will issue 
the advisory opinion and promptly mail it to the requestor by regular 
first class U.S. mail.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38326, July 16, 1998]



Sec. 1008.45  Rescission, termination or modification.

    (a) Any advisory opinion given by the OIG is without prejudice to 
the right of the OIG to reconsider the questions involved and, where the 
public interest requires, to rescind, terminate or modify the advisory 
opinion. Requestors will be given a preliminary notice of the OIG's 
intent to rescind, terminate or modify the opinion, and will be provided 
a reasonable opportunity to respond. A final notice of rescission, 
termination or modification will be given to the requestor so that the 
individual or entity may discontinue or modify, as the case may be, the 
course of action taken in accordance with the OIG advisory opinion.
    (b) For purposes of this part--
    (1) To rescind an advisory opinion means that the advisory opinion 
is revoked retroactively to the original date of issuance with the 
result that the advisory opinion will be deemed to have been without 
force and effect from the original date of issuance. Recission may occur 
only where relevant and material facts were not fully, completely and 
accurately disclosed to the OIG.
    (2) To terminate an advisory opinion means that the advisory opinion 
is revoked as of the termination date and is no longer in force and 
effect after the termination date. The OIG will not proceed against the 
requestor under this part if such action was promptly, diligently, and 
in good faith discontinued in accordance with reasonable time frames 
established by the OIG after consultation with the requestor.
    (3) To modify an advisory opinion means that the advisory opinion is 
amended, altered, or limited, and that the advisory opinion continues in 
full force and effect in modified form thereafter. The OIG will not 
proceed against the requestor under this part if such action was 
promptly, diligently, and in good faith modified in accordance with 
reasonable time frames established by the OIG after consultation with 
the requestor.

[63 FR 38326, July 16, 1998]

[[Page 1193]]



Sec. 1008.47  Disclosure.

    (a) Advisory opinions issued and released in accordance with the 
provisions set forth in this part will be available to the public.
    (b) Promptly after the issuance and release of an advisory opinion 
to the requestor, a copy of the advisory opinion will be available for 
public inspection between the hours of 10:00 a.m. and 3:00 p.m. on 
normal business days at the headquarter offices of the OIG and on the 
DHHS/OIG web site.
    (c) Any pre-decisional document, or part of such pre-decisional 
document, that is prepared by the OIG, DoJ, or any other Department or 
agency of the United States in connection with an advisory opinion 
request under the procedures set forth in this part generally will be 
exempt from disclosure under 5 U.S.C. 552, and will not be made publicly 
available.
    (d) Documents submitted by the requestor to the OIG in connection 
with a request for an advisory opinion may be available to the public in 
accordance with 5 U.S.C. 552 through procedures set forth in 45 CFR part 
5.
    (e) Nothing in this section will limit the OIG's right, in its 
discretion, to issue a press release or otherwise publicly disclose the 
identity of the requesting party or parties, and the nature of the 
action taken by the OIG upon the request.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38326, July 16, 1998]



          Subpart F--Scope and Effect of OIG Advisory Opinions



Sec. 1008.51  Exclusivity of OIG advisory opinions.

    The only method for obtaining a binding advisory opinion regarding 
any of the subject matters set forth in Sec. 1008.5(a) is through the 
procedures described in this part. No binding advisory opinion, oral or 
written, has or may be issued by the OIG regarding the specific matters 
set forth in Sec. 1008.5(a) except through written opinions issued in 
accordance with this part.



Sec. 1008.53  Affected parties.

    An advisory opinion issued by the OIG will have no application to 
any individual or entity that does not join in the request for the 
opinion. No individual or entity other than the requestor(s) may rely on 
an advisory opinion.



Sec. 1008.55  Admissibility of evidence.

    (a) The failure of a party to seek an advisory opinion may not be 
introduced into evidence to prove that the party intended to violate the 
provisions of sections 1128, 1128A or 1128B of the Act.
    (b) An advisory opinion may not be introduced into evidence by a 
person or entity that was not the requestor of the advisory opinion to 
prove that the person or entity did not violate the provisions of 
sections 1128, 1128A or 1128B of the Act or any other law.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38326, July 16, 1998]



Sec. 1008.59  Range of the advisory opinion.

    (a) An advisory opinion will state only the OIG's opinion regarding 
the subject matter of the request. If the arrangement for which an 
advisory opinion is requested is subject to approval or regulation by 
any other Federal, State or local government agency, such advisory 
opinion may not be taken to indicate the OIG's views on the legal or 
factual issues that may be raised before that agency. The OIG will not 
provide any legal opinion on questions or issues regarding an authority 
which is vested in other Federal, State or local government agencies.
    (b) An advisory opinion issued under this part will not bind or 
obligate any agency other than the Department. It will not affect the 
requestor's, or anyone else's, obligations to any other agency, or under 
any statutory or regulatory provision other than that which is the 
specific subject matter of the advisory opinion.

[62 FR 7357, Feb. 19, 1997, as amended at 63 FR 38326, July 16, 1998]


[[Page 1195]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Material Approved for Incorporation by Reference
  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Table of OMB Control Numbers
  List of CFR Sections Affected

[[Page 1197]]

            Material Approved for Incorporation by Reference

                     (Revised as of October 1, 2002)

  The Director of the Federal Register has approved under 5 U.S.C. 
552(a) and 1 CFR part 51 the incorporation by reference of the following 
publications. This list contains only those incorporations by reference 
effective as of the revision date of this volume. Incorporations by 
reference found within a regulation are effective upon the effective 
date of that regulation. For more information on incorporation by 
reference, see the preliminary pages of this volume.


42 CFR (PARTS 430-End)

CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 
HUMAN SERVICES
                                                                  42 CFR


American Association on Mental Retardation

  1719 Kalorama Road NW., Washington, DC 20009
Classification in Mental Retardation, 1983........            483.102(b)


American National Standards Institute

  25 West 43rd Street, Fourth floor, New York, NY 
  10036 Telephone: (212) 642-4900
ANSI A117.1-1971 Specifications for Making         442.330(a)(2) and (b)
  Buildings and Facilities Accessible to and 
  Usable by Physically Handicapped People.


American Psychiatric Association

  Division of Publications and Marketing, 1400 K 
  St., N.W., Washington, DC 20005
Diagnostic and Statistical Manual of Mental                   483.102(b)
  Disorders, Third Edition, Revised, 1987.


National Academy of Sciences

  Academy Press, 2101 Constitution Ave. NW., 
  Washington, DC 20418
Recommended Dietary Allowances Current Edition,            442.332(a)(1)
  1980 (9th Ed.).


National Fire Protection Association

  1 Batterymarch Park, Quincy, MA 02269-9101, 
  Telephone: (800) 344-3555
NFPA 101, Life Safety Code (1985 Edition).........            483.470(i)
NFPA 101, Life Safety Code (1997 Edition).........    403.744; 460.72(b)
NFPA Life Safety Code, Chapters 12 and 13, 1985...            485.623(d)
NFPA Standard No. 220, Standard on Type of                       442.323
  Building Construction (1979 Ed.).



[[Page 1199]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2002)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                          Title 2 [Reserved]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)
       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)

[[Page 1200]]

    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
    LXXIII  Department of Agriculture (Part 8301)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                          Title 6 [Reserved]



                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)

[[Page 1201]]

        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)

[[Page 1202]]

      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Immigration and Naturalization Service, Department of 
                Justice (Parts 1--599)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 1000-
                -1099)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Part 1800)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)

[[Page 1203]]

         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)

[[Page 1204]]

       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  United States Customs Service, Department of the 
                Treasury (Parts 1--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 1205]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 800-
                -899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 1600-
                -1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 1206]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

[[Page 1207]]

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Bureau of Alcohol, Tobacco and Firearms, Department of 
                the Treasury (Parts 1--299)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--199)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 0-
                -99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)

[[Page 1208]]

        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Pension and Welfare Benefits Administration, 
                Department of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 200-
                -399)
        IV  Secret Service, Department of the Treasury (Parts 400-
                -499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

[[Page 1209]]

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Corps of Engineers, Department of the Army (Parts 200-
                -399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

[[Page 1210]]

                        Title 35--Panama Canal

         I  Panama Canal Regulations (Parts 1--299)

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 300-
                -399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Part 1501)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--799)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)

[[Page 1211]]

       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-70)
       304  Payment from a Non-Federal Source for Travel Expenses 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

[[Page 1212]]

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10005)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)

[[Page 1213]]

     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Transportation (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 300-
                -399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)

[[Page 1214]]

        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  Panama Canal Commission (Parts 3500--3599)
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Part 
                5452)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Transportation (Parts 400--
                499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)

[[Page 1215]]

        XI  Bureau of Transportation Statistics, Department of 
                Transportation (Parts 1400--1499)
       XII  Transportation Security Administration, Department of 
                Transportation (Parts 1500--1599)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR



[[Page 1217]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2002)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development, United      22, II
     States
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Alcohol, Tobacco and Firearms, Bureau of          27, I
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII

[[Page 1218]]

Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs Service, United States                    19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII

[[Page 1219]]

  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I, IV, VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                5, III, LXXVII; 14, VI; 
                                                  48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II

[[Page 1220]]

Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulation          41, 101
  Federal Travel Regulation System                41, Subtitle F

[[Page 1221]]

  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Naturalization Service            8, I
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V

[[Page 1222]]

  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I, XI; 40, 
                                                  IV
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration and Naturalization Service          8, I
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Pension and Welfare Benefits Administration     29, XXV
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II

[[Page 1223]]

Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Panama Canal Commission                           48, 35
Panama Canal Regulations                          35, I
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
   Certain Employees
[[Page 1224]]

Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension and Welfare Benefits Administration       29, XXV
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II

[[Page 1225]]

  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Security Administration          49, XII
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol, Tobacco and Firearms, Bureau of        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs Service, United States                  19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 1227]]







                      Table of OMB Control Numbers



The OMB control numbers for chapter IV of title 42 appear in 
Sec. 400.310. Sections 400.300 and 400.310 are reprinted below for the 
convenience of the user.

 Subpart C--OMB Control Numbers for Approved Collections of Information

    Source: 49 FR 4477, Feb. 7, 1984, unless therwise noted.

Sec. 400.300  Scope.

    This subpart collects and displays control numbers assigned by the 
Office of Management and Budget (OMB) to collections of information 
contained in CMS regulations, in accordance with OMB's regulations for 
controlling paperwork burdens on the public, 5 CFR part 1320. CMS 
intends that the subpart comply with the requirements of section 3507(f) 
of the Paperwork Reduction Act of 1980, 44 U.S.C. chapter 35 which 
requires that agencies shall not engage in a ``collection of 
information'' without obtaining a control number from OMB.

Sec. 400.310  Display of currently valid OMB control numbers.

------------------------------------------------------------------------
                                                             Current OMB
Sections in 42 CFR that contain collections of information  control Nos.
------------------------------------------------------------------------
403.510...................................................    0938--0641
405.509...................................................    0938--0666
405.512...................................................    0938--0008
405.2112, 405.2123, 405.2134, 405.2136-405.2140, 405.2171.    0938--0386
409.43....................................................    0938--0365
410.105...................................................    0938--0267
411.25, 411.32............................................    0938--0564
411.54....................................................    0938--0558
411.165...................................................    0938--0564
411.404, 411.406..........................................    0938--0465
411.408...................................................    0938--0566
412.42....................................................    0938--0666
412.92....................................................    0938--0477
412.105...................................................    0938--0456
412.230, 412.232, 412.234, 412.236, 412.254, 412.260,         0938--0573
 412.266, 412.278.........................................
415.60....................................................     0938-0301
415.162...................................................     0938-0301
416.43....................................................    0938--0506
416.47....................................................    0938--0266
                                                                     and
                                                              0938--0506
417.126...................................................    0938--0472
417.436, 417.801..........................................    0938--0610
418.22, 418.24, 418.28, 418.56, 418.58, 418.70, 418.74....    0938--0302
418.30, 418.82, 418.83, 418.96, 418.100...................    0938--0475
418.96, 418.100...........................................    0938--0302
421.117...................................................    0938--0542
424.3.....................................................    0938--0008
424.5, 424.7, 424.20......................................    0938--0454
424.22....................................................    0938--0489
424.32, 424.34............................................    0938--0008
431.17....................................................    0938--0467
431.50, 431.52, 431.55....................................    0938--0247
431.107...................................................    0938--0610
431.306...................................................    0938--0467
431.625...................................................    0938--0247
431.630...................................................    0938--0445
431.800...................................................    0938--0247
431.806, 431.830, 431.432, 431.834, 431.836...............    0938--0438
432.50....................................................    0938--0459
433.36, 433.37............................................    0938--0247
433.68, 433.74............................................    0938--0618
433.110, 433.112-433.114, 433.116, 433.117, 433.119-          0938--0247
 433.121, 433.123, 433.127, 433.130, 433.131, 433.135.....
433.138...................................................    0938--0502
                                                              0938--0553
                                                                     and
                                                              0938--0555
433.139...................................................    0938--0459
                                                              0938--0554
                                                                     and
                                                              0938--0555
434.27....................................................    0938--0572
434.28....................................................    0938--0610
435.1, 435.910, 435.919, 435.920, 435.940, 435.945,           0938--0247
 435.948, 435.952, 435.953, 435.955, 435.960, 435.965,
 435.1003, 441.11, 441.15, 441.20.........................
441.56, 441.58, 441.60, 441.61............................    0938--0354
441.302...................................................    0938--0449
441.303...................................................    0938--0272
                                                                     and
                                                              0938--0449
441.351, 441.352, 441.353, 441.356, 441.365...............    0938--0613
442.505...................................................    0938--0366
447.31....................................................    0938--0287
447.45, 447.50, 447.51, 447.52............................    0938--0247
447.53....................................................    0938--0429
447.55....................................................    0938--0247
447.253...................................................    0938--0366
                                                              0938--0523
                                                                     and
                                                              0938--0556
447.255...................................................    0938--0193
447.272, 447.299..........................................    0938--0618
447.302, 447.331, 447.332, 447.333........................    0938--0247
456.80....................................................    0938--0247
456.654...................................................    0938--0445
456.700, 456.705, 456.709, 456.711, 456.712...............    0938--0659
462.102, 462.103..........................................    0938--0526
466.70, 466.72, 466.74....................................    0938--0445

[[Page 1228]]

 
466.78....................................................    0938--0445
                                                                     and
                                                              0938--0665
466.80, 466.94............................................    0938--0445
473.18, 473.34, 473.36, 473.42............................    0938--0443
476.104, 476.105, 476.116, 476.134........................    0938--0426
481.61....................................................    0938--0328
482.12, 482.21, 482.22, 482.27, 482.30, 482.41, 482.43,       0938--0328
 482.53, 482.56, 482.57, 482.60, 482.62...................
483.10....................................................    0938--0610
483.410, 483.420, 483.440, 483.460, 483.470...............    0938--0366
484.1, 484.2..............................................    0938--0365
484.10....................................................    0938--0365
                                                                     and
                                                              0938--0610
484.12, 484.14, 484.16, 484.18, 484.30, 484.32, 484.34,       0938--0365
 484.36, 484.48, 484.52...................................
485.56, 485.58, 485.60, 485.64, 485.66....................    0938--0267
                                                                     and
                                                              0938--0538
485.709, 485.711, 485.717, 485.719, 485.721, 487.723,         0938--0336
 485.725, 485.727.........................................
486.104, 486.106, 486.110.................................    0938--0338
486.155, 486.161, 486.163.................................    0938--0336
488.10....................................................    0938--0646
488.18....................................................    0938--0667
488.26....................................................    0938--0646
489.20....................................................    0938--0564
                                                                     and
                                                              0938--0667
489.24....................................................    0938--0334
                                                              0938--0663
                                                                     and
                                                              0938--0667
489.102...................................................    0938--0610
491.9, 491.10.............................................    0938--0334
493.35, 493.37, 493.39, 493.43, 493.45, 493.47, 493.49,
 493.51, 493.53,..........................................
493.55, 493.60, 493.61, 493.62, 493.63....................    0938--0612
493.614, 493.633, 494.634.................................    0938--0607
493.801-493.1285, 493.1425, 493.1701, 493.1703, 493.1705,     0938--0612
 493.1707, 493.1709, 493.1711, 493.1713, 493.1715,
 493.1717, 493.1719, 493.1721, 493.1775, 493.1776,
 493.1777, 493.1780, 493.2001.............................
494.52, 494.54, 494.56, 494.58, 494.64....................    0938--0608
498.22, 498.40, 498.58, 498.82............................    0938--0508
1004.40, 1004.50, 1004.60, 1004.70........................    0938--0444
------------------------------------------------------------------------


[60 FR 50445, Sept. 29, 1995, as amended at 60 FR 63188, Dec. 8, 1995]

[[Page 1229]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations which were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.

For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 
11 separate volumes.

                                  2001

42 CFR
                                                                   66 FR
                                                                    Page
Chapter IV
430.5 Added.........................................................6402
    Regulation at 66 FR 6402 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6402 eff. date delayed to 8-16-02..........43090
431.51 (a) introductory text, (b)(1) introductory text and (2) 
        amended; (a)(4) and (5) revised; (a)(6) added...............6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6402 eff. date delayed to 8-16-02..........43090
431.55 (c)(1)(i) amended............................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.200 Revised.....................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.201 Amended.....................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.220 (a) introductory text revised; (a)(1), (2) and (3) 
        amended; (a)(5) added.......................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.244 (f) revised.................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.636 Added.......................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
431.865 (b) amended.................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
433 Authority citation revised......................................2666
433.10 (c)(4) added.................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
433.11 Added........................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
434.1 (a) revised...................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.2 Amended.......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.6 (a)(1) amended................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.20--434.38 (Subpart C) Removed..................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776

[[Page 1230]]

    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.42 Removed......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.44 Removed......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.50--434.67 (Subpart E) Removed..................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.70 Revised......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.71 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.72 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.74 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.75 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.80 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.4 Amended.......................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
435.212 Amended; heading and introductory text revised..............6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.229 Added.......................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.326 Revised.....................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.910 (h) added...................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1001 (a) revised................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1002 (c) added..................................................2667
    (a) amended.....................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.1007 (b) and (e) revised; (f) added.............................2321
    (a) amended.....................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
    Regulation at 66 FR 2321 eff. date delayed.....................14343
435.1100--435.1102 (Subpart L) Added................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1101 Amended...................................................33822
436.3 Amended.......................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.229 Added.......................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.1001 (a) revised................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.1002 (c) added..................................................2669
    Regulation at 66 FR 2669 eff. date delayed..............11547, 31178
436.1100--436.1102 (Subpart L) Added................................2669
    Regulation at 66 FR 2669 eff. date delayed..............11547, 31178
436.1101 Amended...................................................33822
438 Added...........................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776

[[Page 1231]]

    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
440.168 Added.......................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
441 Clarification..................................................28116
441.151 Revised; interim............................................7160
    Regulation at 66 FR 7160 eff. date delayed.....................15800
447.46 Added........................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.53 (b) introductory text amended; (b)(6) removed; (e) added.....6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.58 Amended......................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.60 Added........................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.272 Revised.....................................................3175
    (e)(2)(ii)(A) revised; (e)(2)(ii)(D) added; eff. 11-5-01.......46399
447.304 (c) and note revised........................................3176
447.321 Revised.....................................................3176
    (e)(2)(ii)(A) revised; (e)(2)(ii)(D) added; eff. 11-5-01.......46399
447.361 Removed.....................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
457.1--457.170 (Subpart A) Added....................................2670
    Regulation at 66 FR 2670 eff. date delayed..............11547, 31178
457.60 Regulation at 66 FR 2671 delayed; (b)(2) revised; (b)(7) 
        and (8) amended; interim...................................33822
457.203 Added.......................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.204 (d)(2) revised..............................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.208 (a) revised.................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.234 Removed.....................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.300--457.380 (Subpart C) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.301 Regulation at 66 FR 2675 delayed; amended; interim.........33823
457.320 Regulation at 66 FR 2676 delayed; (b)(4) revised; interim 
                                                                   33823
457.340 Regulation at 66 FR 2676 delayed; (b) through (e) 
        redesignated as (c) through (f); new (b) added; interim....33823
457.350 Regulation at 66 FR 2677 delayed; (e)(4) and (g)(3) added; 
        (f)(5)(iii) removed........................................33823
457.355 Regulation at 66 FR 2678 delayed; introductory text and 
        (a) redesignated as (a) and (b); new (a) heading added; 
        new (b) revised; interim...................................33823
457.401--457.495 (Subpart D) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.450 Regulation at 66 FR 2680 delayed; revised; interim.........33823
457.495 Regulation at 66 FR 2680 delayed; (d) revised; interim.....33824
457.500--457.570 (Subpart E) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.505 Regulation at 66 FR 2681 delayed; (d)(1), (3) and (e) 
        revised; interim...........................................33824
457.540 Regulation at 66 FR 2682 delayed; (f) amended; interim.....33824
457.560 Regulation at 66 FR 2682 delayed; (a) and (b) removed; 
        amended....................................................33824
457.624 Removed.....................................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.700--457.750 (Subpart G) Added..................................2683

[[Page 1232]]

    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.750 Regulation at 66 FR 2684 delayed; (b)(7) removed; new 
        (b)(8) redesignated as new (b)(7); interim.................33824
457.800--457.810 (Subpart H) Added..................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.900--457.985 (Subpart I) Added..................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.940 Regulation at 66 FR 2685 delayed; (b)(1) and (d) amended; 
        interim....................................................33824
457.980 Regulation at 66 FR 2686 delayed; (a) and (b) designation 
        removed; interim...........................................33824
457.1000--457.1015 (Subpart J) Added................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.1000 Regulation at 66 FR 2686 delayed; (a)(1) and (2) amended; 
        interim....................................................33824
457.1005 Regulation at 66 FR 2687 delayed; heading amended; 
        interim....................................................33824
457.1010 Regulation at 66 FR 2687 delayed; heading amended; 
        interim....................................................33824
457.1100--457.1190 (Subpart K) Added................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.1120 Regulation at 66 FR 2687 delayed; revised; interim........33824
457.1130 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1140 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1150 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1160 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1170 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1180 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1190 Regulation at 66 FR 2688 delayed; amended; interim........33824
480.111 Regulation at 65 FR 83154 confirmed........................14861
482.52 (a) revised..................................................4686
    Regulation at 66 FR 4686 eff. date delayed.....................15352
    Regulation at 66 FR 4686 delayed to 11-14-01...................27598
    Regulation at 66 FR 4686 withdrawn.............................56768
    (a) revised; (c) added.........................................56769
483.350--483.376 (Subpart G) Added; interim.........................7161
    Regulation at 66 FR 7161 eff. date delayed.....................15800
483.352 Amended; interim...........................................28116
483.358 (a), (c), (d), (f) introductory text, (g)(1), (3) and (j) 
        revised; (b) amended; interim..............................28116
483.360 Introductory text revised; interim.........................28117
483.362 (b) and (c) revised; interim...............................28117
483.364 (c) and (d) revised; interim...............................28117
483.374 (c) added; interim.........................................28117
484.14 (g) amended.................................................32778
484.36 (d)(3) amended..............................................32778
484.52 (b) amended.................................................32778
485 Technical correction....................................13020, 13021
485.610 (a)(2)(ii) and (b) revised; (c) added......................39938
485.612 Revised; interim...........................................32196
485.639 (c) revised.................................................4687
    Regulation at 66 FR 4687 eff. date delayed.....................15352
    Regulation at 66 FR 4687 delayed to 11-14-01...................27598
    (b) revised....................................................39938
    Regulation at 66 FR 4687 withdrawn.............................56768
    (c) revised; (e) added.........................................56769
485.643 (f) revised................................................39938
486.301 (b)(4) added...............................................67111
486.302 Amended....................................................39938
486.309 Added......................................................67111
489 Technical correction............................................3497
489.20 (s) introductory text revised...............................39601
489.21 (h) revised.................................................39601
489.24 (i) corrected................................................1599
    (i)(2) introductory text and (ii) revised......................59923
498.2 Regulation at 65 FR 83154 confirmed..........................14861
Chapter V
Chapter V Nomenclature change......................................39452
1000.10 Amended....................................................39452
1001.952 (v) added.................................................62989

[[Page 1233]]

    (v)(4)(iii) corrected..........................................63749
1001.101--1001.1701 (Subpart C) Appendix A added...................62991
1003.101 Amended...................................................39452

                                  2002

  (Regulations published from January 1, 2002, through October 1, 2002)

42 CFR
                                                                   67 FR
                                                                    Page
Chapter I
430 Technical correction...........................................42609
430.5 Regulation at 66 FR 6402, 11546, 32276 and 43090 withdrawn 
                                                                   40988
     Added.........................................................41094
431 Technical correction...........................................42609
431.51 Regulation at 66 FR 6402, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a) introductory text, (b)(1) introductory text and (2) 
amended; (a)(4) and (5) revised; (a)(6) added......................41094
431.55 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (c)(1)(i) added................................................41094
431.200 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Revised........................................................41094
431.201 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Amended........................................................41095
431.220 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    (a) introductory text revised; (a)(1), (2) and (3) amended; 
(a)(5) and (6) added...............................................41095
431.244 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    (f) revised....................................................41095
434 Technical correction...........................................42609
434.1 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a) revised....................................................41095
434.2 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Amended........................................................41095
434.6 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a)(1) amended.................................................41095
434.20--434.38 (Subpart C) Regulation at 66 FR 6403, 11546, 32276 
        and 43090 withdrawn........................................40988
    (Subpart C) Removed............................................41095
434.42 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.44 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.50--434.67 (Subpart E) Regulation at 66 FR 6403, 11546, 32276 
        and 43090 withdrawn........................................40988
    Removed........................................................41095
434.70 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Revised........................................................41095
434.71 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.72 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   41095
    Removed........................................................41095
434.73 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.74 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.75 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.80 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
435 Technical correction...........................................42609
435.212 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Amended........................................................41095
435.326 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Revised........................................................41095

[[Page 1234]]

435.1002 Regulation at 66 FR 6404, 11546, 32276 and 43090 
        withdrawn..................................................40988
    (a) amended....................................................41095
438 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn.....40988
    Added..........................................................41095
    Technical correction...........................................42609
438.214 Corrected..................................................54532
440 Technical correction...........................................42609
440.168 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Added..........................................................41115
447 Technical correction...........................................42609
447.46 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Added..........................................................41115
447.53 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (b) introductory text amended; (b)(6) removed; (e) added.......41116
447.58 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Amended........................................................41116
447.60 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Added..........................................................41116
447.272 (b), (d), (e)(1)(ii) and (f) revised; (c)(1) removed; 
        (c)(2), (3), (e)(2)(ii)(C)(8) and (iii) redesignated as 
        (c)(1), (2), (e)(2)(iii) and (iv); (e)(2)(v) added..........2610
    Regulation at 67 FR 2610 eff. date delayed to 4-15-02..........12479
447.321 (b) through (d), (e)(1)(ii) and (f) revised; 
        (e)(2)(ii)(C)(8) and (iii) redesignated as (e)(2)(iii) and 
        (iv); (e)(2)(v) added.......................................2611
    Regulation at 67 FR 2611 eff. date delayed to 4-15-02..........12479
447.361 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Removed........................................................41116
460 Nomenclature change; eff. 10-31-02.............................61504
460.10--460.24 (Subpart B) Heading revised; eff. 10-31-02..........61504
460.10 Revised; eff. 10-31-02......................................61504
460.12 (a)(2) removed; eff. 10-31-02...............................61505
460.26 Added; eff. 10-31-02........................................61505
460.28 Added; eff. 10-31-02........................................61505
460.30 (b) revised; (c) added; eff. 10-31-02.......................61505
460.60 (b) and (c) revised; eff. 10-31-02..........................61505
460.68 (b) revised; (c) removed; eff. 10-31-02.....................61505
460.70 (b)(1)(i) and (e)(2) revised; (e)(5)(vi) through (ix) and 
        (f) added; eff. 10-31-02...................................61505
460.71 Added; eff. 10-31-02........................................61505
460.102 (d)(2)(iii) revised; (d)(3) amended; (f) and (g) removed; 
        eff. 10-31-02..............................................61506
476.71 (c)(2) revised..............................................56056
485.645 (d)(6) revised.............................................50120
489 Technical correction.............................11549, 13278, 15011
Chapter V
Chapter V Nomenclature change......................................36540
1001.101 (c) introductory text revised.............................11932
1001.102 (b)(1) and (c)(1) revised.................................11932
1001.201 (b)(2)(i) and (3)(i) revised..............................11932
    (b)(3)(i) revised..............................................21579
1001.951 (b)(1)(ii) revised........................................11933

[[Page 1235]]

1001.952 (b)(5), (c)(5), (d)(5), (e)(1)(ii), (2)(ii), (f)(2), (h) 
        introductory text, (1) introductory text, (iii) 
        introductory text, (2) introductory text, (3) introductory 
        text, (iii) introductory text, (5)(iii), (i), (n)(6), 
        (o)(5) and (s) introductory text revised; (b)(6), (c)(6) 
        and (j)(2) amended; (b) concluding text, (c) concluding 
        text and (j) concluding text removed.......................11933
1001.1501 (b) revised..............................................11935
1001.2007 (d) revised..............................................11935
1001.3005 (a) revised; (e) added...................................11935
1003.100 (b)(1)(iv), (xii) and (xiii) revised; (b)(1)(xiv) and 
        (xv) added.................................................11935
1003.101 Amended...................................................11935
1003.106 (a)(4)(iii) revised.......................................11935
1005.7 (e)(1) revised..............................................11936
1005.16 (b) revised................................................11936
1008.37 Revised....................................................11936


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