[Federal Register Volume 59, Number 173 (Thursday, September 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21993]


[[Page Unknown]]

[Federal Register: September 8, 1994]


DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405, 482, and 485

[BPD-646-IFC]
RIN 0938-AE48

 

Medicare and Medicaid Programs; Conditions of Coverage for Organ 
Procurement Organizations

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Interim final rule with comment.

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SUMMARY: This interim final rule with comment sets forth changes to the 
conditions of coverage for organ procurement organizations (OPOs). It 
redefines an OPO service area, revises the qualifications for the Board 
of Directors, specifies the assistance to be provided by an OPO to 
hospitals in establishing and implementing protocols governing organ 
procurement activity, requires an OPO to establish criteria for 
allocating organs, and requires an OPO to ensure that tests are 
performed on prospective organ donors to prevent the acquisition of 
organs that are infected with the etiologic agent for Acquired Immune 
Deficiency Syndrome. These changes are required by the Health Omnibus 
Programs Extension Act of 1988 (Public Law 100-607) and the Transplant 
Amendments Act of 1990 (Public Law 101-616).
    We also clarify the distinction between certification and 
designation and amend the criteria with respect to compliance with 
performance standards, change of ownership, and termination procedures.

DATES: Effective date: This final rule is effective October 11, 1994.
    Comment date: Written comments submitted in response to this final 
rule will be considered if we receive them at the appropriate address, 
as provided below, no later than 5 p.m. on November 7, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-646-IFC, P.O. Box 26688, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Ave., SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD 21207.

    Due to staffing and resource limitations, we cannot accept comments 
by facsimile (FAX) transmission. In commenting, please refer to file 
code BPD-646-FC. Comments received timely will be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, in Room 309-G of the 
Department's offices at 200 Independence Ave., SW., Washington, DC, on 
Monday through Friday of each week from 8:30 a.m. to 5 p.m. (phone: 
202-245-7890).

FOR FURTHER INFORMATION CONTACT: Claude Mone, (410) 966-5666.

SUPPLEMENTARY INFORMATION:

I. Background

    The Social Security Amendments of 1972 (Public Law 92-603) extended 
Medicare coverage to individuals with end stage renal disease who 
require dialysis or kidney transplantation. Section 1881 of the Social 
Security Act (the Act) provides for Medicare payment for kidney 
transplantation. Medicare also covers certain other organ transplants 
that HCFA has determined are ``reasonable and necessary'', under 
section 1862 of the Act, and pays for those transplants and related 
organ procurement services.
    Section 1138(b) of the Act, as added by section 9318 of the Omnibus 
Budget Reconciliation Act of 1986 (Public Law 99-509), sets forth the 
statutory qualifications and requirements an organ procurement 
organization (OPO) must meet in order for the costs of its services in 
procuring organs for hospitals and transplant centers to be payable 
under the Medicare and Medicaid programs. The corresponding regulations 
are found at 42 CFR part 485 (``Conditions of Participation and 
Conditions for Coverage: Specialized Providers'') under subpart D 
(``Conditions of Coverage: Organ Procurement Organizations'').
    These regulations were published in the Federal Register on March 
1, 1988 (53 FR 6550). In general, Sec. 485.303(a) states that payment 
may be made under the Medicare and Medicaid programs for organ 
procurement costs attributable to payments to an OPO only if the 
organization has been designated by the Secretary as meeting the 
conditions for coverage as an OPO. OPOs are not generally paid directly 
for organ procurement costs; rather, the transplanting hospital pays 
those costs to the OPO and claims them on its cost report. However, the 
OPO does have to file a cost report with us at the end of its fiscal 
year, at which time we settle with it any overpayment or underpayment 
it has made vis-a-vis hospitals during the cost year. To be designated 
as an OPO, Sec. 485.303(b) requires that an organization--
     Apply to HCFA in writing using the application form 
prescribed by HCFA;
     Meet the qualifications listed at Sec. 485.304 
(``Condition: Qualifications required of an organization for it to be a 
designated organ procurement organization''); and
     As specified in Sec. 485.305, be a member of, have 
executed a written agreement with, and abide by the regulations of the 
Organ Procurement and Transplantation Network (OPTN) established in 
accordance with section 372 (42 U.S.C. 274) of the Public Health 
Service Act.
    The Health Omnibus Programs Extension Act of 1988 (Public Law 100-
607) was enacted on November 4, 1988. The Transplant Amendments Act of 
1988, Title IV of Public Law 100-607, amends section 371 of the Public 
Health Service Act (42 U.S.C. 273), which defines OPOs.
    Specifically, section 402(c)(1)(A) of Public Law 100-607 amended 
section 371(b)(1)(E) of the Public Health Service Act (42 U.S.C. 
273(b)(1)(E)). It revised the definition of the ``service area'' that 
must be encompassed by an entity in order for the entity to be 
recognized by us as an OPO. Before enactment of Public Law 100-607, the 
law provided that, unless the service area comprised an entire State, 
it had to be of sufficient size to include ``at least 50 potential 
organ donors'' each year. Section 402 of Public Law 100-607 revised 
section 371 of the Public Health Service Act (42 U.S.C. 273) to require 
the service area to be large enough that the OPO ``can reasonably 
expect to procure organs from not less than 50 donors each year''. 
Under section 371, we would determine whether the OPO can ``reasonably 
expect'' to procure organs from not less than 50 donors.
    We have determined that this change would have resulted in a 
substantial number of existing OPOs failing to qualify for 
redesignation, because we interpret the requirement that the OPO ``can 
reasonably expect to procure organs from not less than 50 donors'' to 
be more stringent than the requirement that the service area include 
``at least 50 potential organ donors.'' According to a Departmental 
study cited in the Report of the Committee on Energy and Commerce on a 
precursor to the 1988 Public Health Service Act legislation, the 
Transplant Amendments Act of 1987 (H.R. Rep. No. 383, 100th Cong., 1st 
Sess. 5-6 (1987)), the average OPO was, at the time of the report, 
procuring organs from only 44 donors per year. (Because more than one 
organ may be obtained from a donor, the average number of organs 
obtained per OPO per year is about 110.)
    Most of the currently designated OPOs were scheduled for 
redesignation beginning in March 1990 and would have been required to 
meet the new requirement imposed by Public Law 100-607. Contacts with 
many of the designated OPOs and with representatives of the Association 
of Organ Procurement Organizations (AOPO) revealed that almost one-half 
of the OPOs would not have been able to meet the new requirement. It 
was also the opinion of some organ procurement and transplantation 
experts that many of the OPOs that would not have a realistic 
expectation of procuring organs from at least 50 donors were 
nonetheless effective and efficient entities. The Department and other 
interested parties sought statutory relief to avoid disruption to the 
nation's organ procurement system. On April 23, 1990, Public Law 101-
274 was passed. It postponed to January 1, 1992, the effective date of 
section 402(c)(1)(A) of Public Law 100-607, which changed the 
definition of ``service area.'' Therefore, the ``at least 50 potential 
donors'' requirement would have remained in full force and effect until 
that date. But, the Transplant Amendments Act of 1990 (Public Law 101-
616) was enacted on November 16, 1990. It further amended section 
371(b)(1)(E) of the Public Health Service Act (42 U.S.C. 273(b)(1)(E)) 
to require an OPO to have a defined service area that is of sufficient 
size to assure maximum effectiveness in the procurement and equitable 
distribution of organs, and that either includes an entire metropolitan 
statistical area or does not include any part of the area. Section 
201(d)(2) of Public Law 101-616 required the Secretary to publish a 
proposed definition of ``service area'' by February 14, 1991, and final 
regulations defining ``service area'' by November 16, 1991.
    Section 201(d)(1) of Public Law 101-616 redesignated section 
371(b)(2) of the Public Health Service Act as section 371(b)(3). That 
section sets forth the functions an OPO must carry out. However, the 
Congress did not amend two textual references in section 371(b)(1) to 
the OPO functions formerly specified in paragraph (2). Since that was 
clearly an oversight and failure to read the section 371(b)(1) text as 
if those ``paragraph (2)'' references had been changed to ``paragraph 
(3)'' would make part of the statute meaningless, we are using the 
corrected references in this document.

II. Provisions of the Proposed Regulations

    On June 21, 1991, we published a Notice of Proposed Rulemaking in 
the Federal Register (56 FR 28513). In it, we proposed implementing 
section 402 of Public Law 100-607 and section 201 of Public Law 101-616 
by amending certain sections of part 482, which sets forth the Medicare 
conditions of participation for hospitals, and subpart D of part 485, 
which sets forth the Medicare and Medicaid conditions of coverage for 
OPOs, to conform them to the statute.
    In addition to the provisions that are necessary to implement these 
statutes, we proposed some other amendments to current regulations that 
are derived from our experience in administering the OPO program and 
that are not related to either piece of legislation. The most 
noteworthy of these latter provisions deals with change of ownership 
and termination. To clarify our operational policies with regard to 
change of ownership and terminations, we proposed to add two new 
provisions to the current regulations. Specific provisions of these new 
sections and of related sections are discussed in more detail below.
    We proposed revising paragraph (c)(5)(ii) of Sec. 482.12 
(``Condition of participation: Governing body.'') to state that no 
hospital will be considered to be out of compliance with section 
1138(a)(1)(B) of the Act or with the requirements at 
Sec. 482.12(c)(5)(ii), 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 so notified the hospital in writing.
    We proposed amending Sec. 485.301, which sets forth the basis and 
scope of part 485, subpart D, by deleting the unnecessary reference to 
section 9318 of Public Law 99-509. In Sec. 485.302 (``Definitions.''), 
we proposed to change the definition of ``service area'' by including 
new statutory language for the initial designation and redesignation of 
OPOs. We proposed using the phrase ``is of sufficient size to assure 
maximum effectiveness in the procurement and equitable distribution of 
organs'' as opposed to the current phrase ``at least 50 potential organ 
donors.'' We proposed several criteria for evaluating the sufficiency 
of an OPO's size. We discuss those factors below. We proposed expanding 
Sec. 485.302 to include definitions for ``certification'' or 
``recertification'', ``designation'' or ``redesignation'', and ``open 
area.''
    Section 485.303 sets forth general qualifications for OPOs. We 
proposed that paragraph (c) of Sec. 485.303 be amended and a new 
Sec. 485.303(d) added to clarify the requirement for compliance with 
performance standards at Sec. 485.306(a)(1) and (a)(2). Paragraph (e) 
of Sec. 485.303 would state that an OPO must obtain our approval before 
entering into any change of ownership, merger, consolidation, or change 
in its service area. Failure to do so could result in termination. We 
proposed that a new paragraph (f) set forth the specific terms of the 
agreement each OPO must have with us.
    We proposed that paragraph (d) of Sec. 485.304 (``Condition: 
Qualifications required of an organization for it to be a designated 
organ procurement organization.'') be amended to change the requirement 
for an OPO in a service area of less than 2.5 million in population to 
show that its area yields 50 or more potential donors per year to show 
that the area ``is of sufficient size to ensure maximum effectiveness 
in the procurement and equitable distribution of organs * * *.'' The 
``less than 2.5 million in population'' stipulation would be deleted. 
We also proposed that Sec. 485.304(f)(3) be amended to allow either a 
physician or an individual with a doctorate degree in a biological 
science with knowledge, experience, or skill in the field of 
histocompatibility to serve on an OPO's board of directors or on an 
advisory board. The current Sec. 485.304(f)(3) requires that the 
individual be a physician.
    We proposed that Sec. 485.304(i) be revised to require an OPO to 
have a system to allocate donated organs equitably among transplant 
patients according to established medical criteria. Additionally, we 
proposed to add provisions to Sec. 485.304 that would require OPOs to 
assist hospitals in establishing and implementing protocols for making 
routine inquiries about organ donations by potential donors and ensure 
that donors are tested for human immunodeficiency virus (HIV) 
reactivity, consistent with OPTN rules and Center for Disease Control 
and Prevention (CDC) guidelines for solid organ donations.
    We proposed that Sec. 485.305 (``Condition: Organ Procurement and 
Transplantation Network participation.'') be amended to: (1) Define 
``rules and requirements of the OPTN,'' and (2) include the requirement 
that OPTN rules be approved by the Secretary in order for them to be 
binding on OPOs participating in Medicare or Medicaid.
    We proposed that paragraph (a) of Sec. 485.306 (``Condition: 
Performance standards for organ procurement organizations.'') be 
revised to state that we will not ``redesignate'' (it currently reads 
``recertify'') any OPO that fails to meet the performance standards 
contained in the section. Paragraph (b) would be expanded to set forth 
language that makes a distinction between an OPO designated for the 
first time and a redesignated OPO with respect to the exemption from 
meeting the performance standards in Sec. 485.306(a) for the first two 
years.
    We proposed that Sec. 485.307 (``Failure to meet requirements.'') 
be revised and restructured. It would continue to state that a newly 
designated OPO is exempt from meeting the performance standards at 
Sec. 485.306(a)(1) and (a)(2) for 2 years. We proposed deleting the 
statement in the current Sec. 485.307 that an OPO whose payment is 
suspended or whose agreement is terminated may appeal the action. The 
appeal right for termination actions would be included in the new 
Sec. 485.311(c).
    We proposed that the section heading of Sec. 485.308 (``Designation 
of one OPO for each service area.'') be revised to read ``OPO service 
area requirements'', and that paragraph (a) be amended to provide that 
an entity may apply for designated status only when the service area is 
open, as described in Sec. 485.302.
    We proposed a new Sec. 485.309 (``Changes in ownership or service 
area.'') to clarify the term ``change of ownership'' in terms of 
changes in partnership, transfer of an unincorporated proprietorship, 
merger, and consolidation. Paragraph (b) of Sec. 485.309 would state 
that if our approval of a change in ownership is not obtained, the OPO 
agreement may be terminated and could result in our declaring that 
service area to be an open area. If a change of ownership results in 
the creation of a new entity, the 2-year exception provision at 
Sec. 485.303(c) is applicable. However, if a change in ownership does 
not create a new entity, but consists of the absorption of one OPO by 
another, the 2-year exception does not apply. When two or more OPOs 
request our approval to merge or consolidate, we are under no 
obligation to declare an open area. Paragraph (c) of Sec. 485.309 would 
state that if our approval of an expansion of the service area is not 
obtained, we may declare only the unauthorized expanded area to be an 
open area.
    We proposed a new Sec. 485.311 (``Terminations.'') to set forth 
conditions for both voluntary and involuntary termination, describe the 
effects of termination on payment and service area, set forth 
procedures for giving public notice of termination, and set forth 
procedures concerning reinstatement. Section 485.311 would also state 
that the OPO may appeal its termination in accordance with the 
provisions set forth in part 498 (``Appeals Procedures for 
Determinations that Affect Participation in the Medicare Program'').

III. Discussion of Public Comments

    We received 38 timely items of correspondence in response to the 
June 21, 1991, proposed rule. Twenty-one were from OPOs, seven from 
national associations, three from private individuals, one from a 
transplant physician, one from a member of the Congress, and five from 
hospitals. The comments and our responses to these comments follow:

General Comments

    Comment: Several commenters noted that the proposed rule lists many 
options for consideration. They requested that we publish a new 
proposed rule once we narrow the criteria to those we actually intend 
to utilize. One national organization suggested that we convene a 2-day 
meeting of the leadership of the transplant community to discuss the 
available options and to reach consensus.
    Response: The proposed rule did include a broad range of proposed 
qualifying and performance criteria. Nonetheless, it presented the 
options we have selected in this interim final rule. While the 
suggested 2-day meeting of the leadership of the transplant community 
may be helpful, we believe that we already have been able to elicit a 
wide range of interested public comment through the rulemaking process. 
Among those commenters that supported a system of challenging 
performance standards in order to promote effectiveness of organ 
procurement and distribution, there was considerable agreement. Thus, 
we believe we have obtained sufficient hard data and opinions to 
formulate this rule. The comment has merit, however, in that the 
proposal set forth varied options for setting qualifying and 
performance standards. Therefore, we are affording another opportunity 
for the public to comment on this interim final rule. In doing so, we 
would emphasize that comments will be most useful if they are specific 
and provide substantiating data.
    Comment: Two commenters noted the value that emergency medical 
services (EMS) staff can play in procuring organ donations. They 
suggested several criteria they believe would be effective in 
increasing organ donors.
    Response: We believe that Federally-required use of EMS staff in 
the organ donation process is neither desirable nor necessary at this 
time. Section 1138(a)(1)(A) of the Act requires all Medicare and 
Medicaid participating hospitals to develop protocols for encouraging 
organ donation. Under section 1138(a)(1)(A)(i), these protocols must 
encompass means for making families of potential organ donors aware of 
the option of organ or tissue donation and of their right to decline. 
Under section 1138(a)(1)(A)(ii), the protocols must ``encourage 
discretion and sensitivity with respect to the circumstances, views, 
and beliefs of such families''. We think that the encouragement and 
facilitation of organ procurement (which the Federal Government has 
strongly supported for many years) can be approached in varying ways 
and that individuals and institutions (such as hospitals and OPOs) 
directly engaged in this activity, as well as States, are generally 
best able to construct and implement appropriate and effective means 
for achieving these goals in their particular circumstances. Further, 
OPOs are free to establish educational contacts with EMS personnel in 
the community, and we encourage them to do so.

Section 482.12 (``Condition of Participation: Governing Body.'')

    Comment: One commenter suggested we clarify the language at 
Sec. 482.12(c)(5)(ii), which sets forth participation in the OPTN as 
one of the Medicare conditions of participation for hospitals, to be 
consistent with language in Sec. 485.305, which sets forth 
participation in the OPTN as one of the Medicare and Medicaid 
conditions for coverage for OPOs. While both sections require 
compliance with the rules of the OPTN, only Sec. 485.305 defines the 
term ``rules of the OPTN'' as those rules provided for in regulations 
issued by the Secretary.
    Response: We agree, and we have made this clarification.

Section 485.302 (``Definitions.'')

    Comment: Several commenters objected to the ``open area'' concept. 
They believed that once an area has been designated to an OPO, there 
should be no recompetition for it unless the designated OPO's agreement 
is terminated.
    Response: We do not agree. Lack of competition would create a 
``closed shop'' atmosphere, and new organizations would not have an 
opportunity to thrive. We believe that we have an obligation to provide 
an opportunity for new organizations to apply, instead of automatically 
redesignating the existing OPOs. We have found that competition is 
generally healthy and often results in improvements. Thus, we are 
retaining this provision in this interim final rule with comment.
    Comment: One commenter did not appear to understand the distinction 
between certification and designation, since he believed that HCFA 
would not designate an uncertified OPO or certify an OPO and then fail 
to designate it. He suggested that a single word be used to limit 
confusion.
    Response: ``Certification'' signifies that a HCFA regional office 
has found that an entity meets the standards for a ``qualified OPO'' 
under section 371(b) of the Public Health Service Act (42 U.S.C. 
273(b)) and Sec. 485.303 of these regulations. Section 1138(b)(1)(A) of 
the Act establishes ``certification'' or ``recertification'' as one of 
several prerequisites for ``designation'' under section 1138(b)(1)(F). 
Thus, a ``certified OPO'' is eligible for ``designation.'' After 
completing its survey, the regional office may find that more than one 
entity in a given service area meets the standards for OPO 
``certification.'' The regional office recommends to HCFA's central 
office which entity should be ``designated.'' ``Designation'' 
represents our approval of an OPO under section 1138(b)(1)(F) for 
Medicare and Medicaid payment purposes. Entities may be designated only 
if they meet all requirements of section 1138(b)(1)(A) through (E). 
Even if more than one OPO has been certified in a given service area, 
section 1138(b)(2) of the Act permits us to designate only one OPO per 
service area.
    Comment: Several commenters expressed concern with the requirement 
that recertification be completed every 2 years. Many of these 
commenters recommended that minimum recertification take place every 3 
years.
    Response: Section 1138(b)(1)(A) of the Act requires that 
recertification be completed at least every 2 years. Thus, while we 
have the authority to provide for more frequent recertification, we may 
not legally provide for a recertification period that is less frequent 
than once every 2 years.

Section 485.303 (``Condition: Organ Procurement Organization 
Designations--General.'')

    As discussed in sections that follow, comments on our proposed rule 
suggested various standards for evaluating whether an entity should 
become, and remain, a designated OPO. After thorough consideration, we 
have concluded that we could improve our standards for determining 
which entities should be designated as OPOs and for measuring OPO 
effectiveness in organ procurement. The new qualification standards 
applicable for designations beginning in 1996 would require OPOs to 
procure organs from an average of at least 24 donors per calendar year 
in the 2 years preceding designation or have a service area that 
encompasses an entire State. Separate rules would apply to 
noncontiguous States and other jurisdictions, and to entities not 
previously designated as an OPO. We have established three performance 
standards for these entities. The primary performance standard would 
require that OPOs achieve at least 75 percent of the national mean for 
four of the five following categories: 1) Actual donors per million 
population, 2) number of kidneys recovered per million population, 3) 
extrarenal organs recovered per million population, 4) number of 
kidneys transplanted per million population, and 5) actual number of 
extrarenal organs transplanted per million population.
    Additional performance standards would require OPOs to procure 
organs from an average of at least 24 donors per calendar year in the 2 
preceding calendar years and to maintain an average procurement ratio 
of 3 organs per donor. Simply stated, these criteria compare each 
entity with other OPOs by setting a minimum level of organ procurement. 
They consider an entity's history for the past 2 years. These measures 
will be applied beginning with designations made in calendar year 1996.
    We have determined that, in the meantime, the most effective means 
for determining service areas and whether entities qualify and are 
performing as designated OPOs are essentially the same criteria 
currently published in 42 CFR part 485, subpart D. We have modified 
those criteria to delete the requirement that a service area comprise 
at least 2.5 million population. We discuss later in this preamble (in 
our discussion of Sec. 485.304) our reasons for believing that a 
minimum population base is no longer necessary. Generally stated, until 
1996, an entity may qualify as an OPO if it can demonstrate that its 
service area can produce a potential 50 donors per year or that it 
comprises an entire State. Application of those rules until the 1996 
designation cycle will allow a smooth transition, giving OPOs ample 
time to meet the new criteria. At the same time, we will not run the 
risk of disrupting the effectiveness of current OPO operations.
    In the Transplant Amendments Act of 1990, the Congress recognized 
the difficult task of adequately defining what constitutes an effective 
OPO and gives the Secretary broad authority to define the OPO service 
area under section 371(b)(1)(E) of the Public Health Service Act. It 
was motivated by a concern to challenge entities to do more and better 
while at the same time not abruptly change course and, thereby, 
possibly derail effective entities. We believe the rules we have 
adopted in this interim final rule serve both those purposes. We 
continue, however, to solicit comments on: (1) The appropriateness of 
these performance standards, in particular the primary standard, (2) 
the future impact of the primary and other standards on the transplant 
industry and patient care, and (3) what constitutes a desirable level 
of OPO terminations and consolidations (taking into account the 
benefits of a competitive OPO marketplace) and the cost-effectiveness 
objectives of the statute.
    Comment: Several commenters expressed concern with the proposed and 
existing requirement that, in order to be redesignated, an OPO must 
comply with the performance standards for OPOs. They believed that an 
OPO should be provided an opportunity to improve its performance before 
losing its designation. They proposed providing an opportunity to 
submit a corrective action plan and providing an opportunity to 
demonstrate that the OPO can indeed improve to meet the performance 
standards.
    Response: We agree that there may be extenuating circumstances that 
could prevent an otherwise efficient and effective OPO from meeting all 
of the performance standards at the time of redesignation. As we state 
elsewhere in this preamble, we recognize the concern that some OPOs may 
not be able to meet our standards. In doing so, we have allowed OPOs to 
submit corrective action plans for the standards listed in Sec. 485.306 
(a), (b)(2), or (b)(3), explaining why the standard or standards were 
not met and setting forth actions they will take to ensure that they 
meet those standards in the future. We are permitting this because we 
believe the standards at Sec. 485.306 (a)(1), (a)(2), (b)(2), and 
(b)(3) are static numbers and would not necessarily recognize dynamic 
conditions that may be happening in the organ transplant field. 
Therefore, we believe that it is acceptable to permit an OPO to submit 
an explanation for not meeting the standards during a designation 
period and to submit a corrective action plan.
    We believe, however, that it is reasonable to expect an efficient 
and effective OPO to be able to meet the primary performance standard 
set forth in Sec. 485.306(b)(1) in order to be redesignated. That 
paragraph requires OPOs to procure organs at the rate of 75 percent of 
the national average for four of the five criteria listed above. It is 
modeled after the AOPO standard. (We refer the reader elsewhere in the 
preamble to the comments and responses dealing with the section on 
performance standards for an indepth discussion of all of the standards 
in that section, the rationale for their use, effective dates, 
exceptions, and corrective action plan options.) The level of 
performance set by this standard will enable us to evaluate an OPO 
relative to its peers. Instead of evaluating OPOs solely on the basis 
of an absolute criterion, OPOs will be measured against a realistic and 
attainable standard. Therefore, at Sec. 485.303(d) in this interim 
final rule with comment period, we are requiring that OPOs meet the 
HCFA performance standards at Sec. 485.306.
    Comment: One commenter suggested that the proposed language in 
Sec. 485.303(f)(5) may be unclear, in that it was not limited to 
acquisition fees. The proposed Sec. 485.303(f)(5) stated that an OPO, 
in order to enter into an agreement with us, must agree to ``Pay to 
HCFA amounts that have been paid by HCFA to transplant hospitals and 
that are determined to be in excess of the reasonable cost of the 
services provided by the OPO.'' The commenter recommended adding the 
statement ``as Medicare reimbursement for organ recovery fees'' as a 
modifier of payment to transplant hospitals.
    Response: We agree. Our intent was to recover only acquisition 
fees. We have made appropriate changes to the regulation.
    Comment: The proposed regulation would require OPOs to maintain 
data in a format that can be readily assumed by a successor OPO and to 
turn over to us copies of all records and data necessary to ensure 
uninterrupted service by a successor OPO that is newly designated. One 
commenter noted that software licensure and other proprietary interests 
may make such a requirement difficult.
    Response: It is incumbent upon the OPO to maintain data that can be 
readily assumed by a successor OPO and turned over to us. Therefore, 
OPOs must not maintain their data in a format that would interfere with 
meeting this requirement. If an OPO chooses to use software that has 
licensure requirements that prohibit data transfer, it must ensure that 
the data can be transferred readily to an alternative generally 
available format.

Section 485.304 (``Condition: Qualifications Required of an 
Organization for It To Be a Designated Organ Procurement 
Organization.'')

    Comment: One commenter noted that redistricting of service areas to 
meet qualification standards would eliminate productive relationships 
that have been established. The commenter recommended retaining current 
service area assignments.
    Response: We have no intention of changing OPO service areas 
unnecessarily. However, the statute requires that the Secretary ensure 
that OPO designations maximize effectiveness in the procurement and 
distribution of organs. If an OPO has established an effective 
relationship in its service area, there is no reason to believe that 
these regulations in themselves would disrupt that effective 
relationship. On the other hand, if an OPO is not operating effectively 
in an area, the area may be awarded to a different OPO during an open 
area competition.
    Comment: Several commenters expressed concern that, in cases where 
Metropolitan Statistical Areas (MSAs) cross State lines, an OPO will 
not receive a Statewide service area designation if part of an MSA in 
the State is in another OPO's service area.
    Response: We continue to believe that Statewide service area 
designations are appropriate. They have been recognized in the OPO 
program by the Congress, which has not indicated dissatisfaction with 
the use of such an area. Under prior statutory authority, such a 
service area was required to include an entire State. Generally, the 
term ``State'' is construed to include all the State's political 
subdivisions. Indeed, under the prior law (section 371(b)(1)(E) of the 
Public Health Service Act), the Congress did not allow us to break up 
an MSA to achieve a Statewide service area.
    We believe that a Statewide service area should continue to be a 
qualifying criterion and represents vital political, historical, and 
cultural identities that can potentially serve to encourage organ 
donation and procurement. Thus, in places where an OPO serves the 
population of an entire State, we believe that the service area would 
meet the statutory requirement of promoting maximum effectiveness in 
the procurement and equitable distribution of organs. Consequently, we 
are retaining this as one of the qualifying criteria. However, an OPO 
servicing a State where a portion is located in another OPO's service 
area due to MSA boundaries cannot qualify under the ``entire State'' 
criterion, but may still qualify as an OPO by meeting other 
qualification criteria in Sec. 485.304(d).
    We note that an OPO, in reporting the population of its service 
area, must use the most recent available census data. In reporting 
population, an OPO must report its population within the service area 
designated by us. If an OPO believes that use of such population 
numbers results in its failure to comply with one or more of the 
performance standards, it is permitted to demonstrate or document to us 
why some other population number would be more appropriate.
    Comment: Some commenters expressed concern that, if a hospital 
located within an OPO's designated service area enters into an 
agreement with some other OPO, it would affect the first OPO's ability 
to meet one or more performance standards.
    Response: We recognize the potential impact on an OPO's performance 
if a hospital in its service area affiliates with another OPO. An OPO 
faced with this situation may provide documentation to us that may 
justify use of an adjustment to compensate for the lower population 
base. We request comments on whether the ``lost'' population should be 
attributed to another OPO.
    Comment: Many commenters expressed concern with the proposal to 
base qualification on a minimum population base. Some noted that there 
is no correlation between population size and OPO effectiveness. Other 
commenters noted that there is no evidence that ``bigger is better,'' 
and some provided data supporting the effectiveness of OPOs with a 
relatively sparse population service area.
    Response: After reviewing the data presented by these commenters, 
we are persuaded that across-the-board qualifying criteria based on 
population of the service area may not be the best alternative and that 
there are some OPOs that can be very effective in the procurement of 
organs serving a smaller population area. Therefore, we will not use 
population base as a condition for qualification.
    Comment: Some commenters said that we should not use 50 actual 
donors per year as a qualification criterion because it would be 
extremely disruptive to OPOs, would force inappropriate mergers, and is 
not supported by data as a measure of effectiveness.
    Response: We agree that a 50 actual donors per year criterion would 
be, in all likelihood, severely disruptive to OPOs. Indeed, it was 
congressional concern about such a result that led to the 1990 
amendments. The commenters' concern for use of the 50 actual donors per 
year criterion focuses on severely disadvantaging existing OPOs. For 
designations made in 1996 and thereafter, in the continental United 
States, we have defined an efficient and effective service area as one 
that includes an entire State or is of sufficient size to produce an 
average of at least 24 donors per year over a 2-year period and that 
meets other performance standards. We have provided alternative 
criteria for OPOs operating in a noncontiguous U.S. State, territory, 
or commonwealth that allows the OPO to qualify if it procures organs at 
the rate of 50 percent of the national average of all OPOs for kidney 
procurement per million population and for kidney transplant per 
million population. We note, however, that these criteria would 
preclude entities that are not existing OPOs from qualifying as 
Medicare-participating OPOs. Therefore, we are providing that the 
service areas of entities that have not previously been designated must 
have the potential to produce 50 donors per calendar year. The applying 
entity must demonstrate this potential. This is the minimum requirement 
for entry into the OPO field formerly established by the Congress for 
all OPOs, and under which virtually all existing OPOs have entered and 
continued in the program. We believe the standard by which experienced 
designated OPOs should be measured should be increased and, therefore, 
have strengthened the standard that will be applied to designations 
occurring in 1996 or later. Nonetheless, we believe the 50-potential 
donor criterion remains a reasonable and flexible measure by which to 
determine whether new entities are initially qualified to serve as 
designated OPOs and to determine whether currently designated OPOs 
continue to qualify until the 1996 designation cycle. Newly designated 
OPOs will be subject to the routine performance standards beginning 2 
years after the OPO has been first designated.
    Comment: Although many commenters supported no qualifying criteria 
for service area designations, most commenters noted that, if 
qualifying criteria were required, the proposal of specifying a minimum 
number of donors per year is the preferable option. Of the total 38 
comments, 14 specifically commented on this issue. Of the 14, 10 of the 
commenters believed that 24 donors per year was a reasonable indicator 
that a service area could potentially result in effective OPO 
designation. This indicator would not preclude OPOs with relatively 
small population areas from continuing involvement with Medicare and 
Medicaid, if they were effective in securing adequate donors from that 
small population. Others supported a lower threshold, such as 20. They 
stated that a number of the current OPOs maintain a small service area 
but are very effective in procuring organs within that area.
    Response: Section 371(b)(1)(E) of the Public Health Service Act 
requires that an OPO have a ``defined service area that is of 
sufficient size to assure maximum effectiveness in the procurement and 
equitable distribution of organs''. The Congress intended the Secretary 
to further define ``service area'' in regulations under section 
201(d)(2) of Public Law 101-616. We believe the Congress expected the 
new regulations to set forth a measure of effectiveness that could be 
monitored to ensure that effectiveness is being maintained. To that 
end, we believe that establishing qualifying criteria for service area 
designations meets the intent of the Congress.
    We have discussed elsewhere in this preamble the commenters' 
reactions to various proposals suggested in the June 21, 1991, proposed 
rule. While numerous comments offered valuable suggestions, we have 
concluded that it is essential to have a reasonably objective 
measurement for this standard. We believe a numerical standard, 
representing the number of organs actually procured by existing OPOs, 
best satisfies these objectives for existing entities.
    The nature of organ procurement at this time has made it difficult 
to determine precisely what such a minimum number should be. In 
determining that, we consulted data submitted by AOPO for calendar 
years 1991 and 1992. The report covered the substantial majority of 
OPOs designated during that period. In fact, 98 percent reported. That 
data showed that the overwhelming majority of existing OPOs reporting 
had procured organs from more than 24 donors a year. Of those 
reporting, only 8 had procured organs from fewer than 24, and those 
OPOs were generally close to the 24-mark (5 of the 8 had 22 or 23).
    Several commenters suggested that 24 donors-per-year should 
constitute a minimum. Some believed that should be an absolute minimum; 
others believed that it should be a generally applicable minimum, but 
that exceptions should be allowed or that it should be considered along 
with other factors.
    Our long-standing concern and efforts, in response to congressional 
enactments and continuing strong interest in the organ procurement 
program, has been to increase and maximize the level of organ 
procurement. Nonetheless, in this still young field, determining a 
single correct way to do this has been difficult. We must take 
competing legitimate concerns into account. First, we must encourage 
all OPOs to make greater efforts to increase the level of organ 
procurement and distribution and to do so efficiently and equitably. At 
the same time, we want to avoid discouraging or impeding OPOs that are 
making an important contribution to organ procurement and distribution 
and are working to improve their level of performance but that, for 
various legitimate reasons, have not been able to achieve a particular 
prescribed numerical standard to this point.
    Based on these factors, we have determined that, beginning with 
designations occurring in 1996, an entity that has had the experience 
of operating as a designated OPO must show that it has procured organs 
from at least 24 donors per year during the 2 calendar years 
immediately preceding a new designation (for example, 1994 and 1995 for 
a 1996 designation). Because circumstances can vary somewhat from year 
to year, we will allow the OPO to average the number of donors over the 
2-year period. We will apply this standard for designations made in 
1996 and later years. This will allow all designated OPOs 2 full 
calendar years, 1994 and 1995, to achieve this standard. In the 
meantime, OPOs seeking designation will have to demonstrate that they 
meet the requirements of Sec. 485.304(d)(1)(i) for a service area. We 
emphasize that the 24 donors per year is a minimum standard. We will, 
from time to time, make available the relevant national procurement 
statistics so that existing and prospective OPOs will be aware of the 
qualifying and performance requirements they must meet.
    Comment: One commenter suggested the regulation specify whether the 
``year'' that is used to derive the numbers of procurements is a 
calendar year, fiscal year, or any 12-month period.
    Response: We agree that the regulations should be as unambiguous as 
possible. Most of our relevant OPO data is collected on a calendar year 
basis. For this reason, we are specifying that the calendar year be 
used for qualifying criteria and performance standards.
    Comment: Some commenters noted that a well-functioning and 
productive OPO could have a year when, through no fault of its own, it 
could not meet the 24-donor qualifying standard. They suggested that 
the criteria be evaluated over a 2-year period.
    Response: We agree that unforeseen circumstances could result in an 
OPO missing the threshold qualification criteria in any given year. 
However, we believe that it is important that a numerical criterion be 
employed in establishing OPO service area qualifications. We believe 
that the qualification criteria should consist of a service area that 
historically has averaged at least 24 donors per year. This is a 
reasonable number because, as we stated previously, most OPO areas 
currently meet this criterion. Beginning January 1, 1996, all entities 
must procure organs from an average of at least 24 donors per calendar 
year in the 2 years prior to the year of designation. In 1996, the 
number of donors from whom organs are procured will be based upon 1994 
and 1995 data. If an OPO is involved in a merger during this 2-year 
period, the criterion will be applied by combining the data from the 
entities involved in the merger.
    In summary, based on the foregoing comments, we have decided that 
the minimum service area designations will be based on areas that 
include at least an entire State, or areas which have historically 
averaged donations of organs from at least 24 donors per year.
    Statewide service areas must include the entire State. Because 
section 371(b)(1)(E) of the Public Health Service Act prohibits the 
Secretary from breaking up an MSA if the MSA crosses State lines, the 
entire MSA must be included in one OPO's service area. An OPO cannot be 
considered to include an entire State if an MSA containing selected 
counties in that State has been designated to another OPO in a 
bordering State.
    Comment: Several commenters wrote in support of the proposed change 
regarding histocompatibility, which would permit the board of directors 
or advisory board composition requirement to be met by either a 
physician or by an individual with a doctorate degree in a biological 
science. One commenter suggested, however, that the regulations be 
further modified to ensure that the knowledge and experience in 
histocompatibility be current. Another expressed concern that it is 
equally important to recognize that other health professionals (such as 
registered nurses and social workers) also have much to share in terms 
of setting local organ donation policy. Another commenter requested 
that the regulations be further modified to ensure that the individual 
meeting the histocompatibility requirement serve on the OPO board which 
is responsible for making policy decisions.
    Response: We would expect that OPOs would generally meet the 
histocompatibility requirement through an individual with current 
experience in the field. We believe that the most important point is 
that the skills of someone trained in histocompatibility are used. 
Therefore, we do not believe it is necessary to modify the regulations 
in this regard. We also think it is important to provide some 
flexibility to an OPO in the staffing requirements in order that it may 
respond to local situations.
    We believe that a multidisciplinary board approach helps to ensure 
equitable access to donated organs. In fact, the regulations specify 
that the board of directors or advisory board of an OPO must include 
members who represent hospital administrators, tissue banks, voluntary 
health associations in its service area, and either intensive care or 
emergency room personnel. In response to concerns about use of other 
health professionals, certainly registered nurses and social workers 
could be represented in one or more of these groups. Consequently, we 
are not adopting suggestions to further change the requirement.
    With respect to the concern that the regulation requires that an 
individual with histocompatibility experience serve on the board that 
sets OPO policy, we believe that the intent of the regulations is met 
regardless of which board the OPO chooses to use in meeting the 
histocompatibility requirement. In an effort to be responsive to these 
comments, we have reviewed carefully the statutory provision regarding 
the board issue. While we do not have specific public comments 
regarding this particular issue, we realize there is concern by some 
OPOs about whether an OPO can satisfy the statutory board composition 
requirements by combining the membership of two boards--a board of 
directors and an advisory board. We recognize that many OPOs presently 
combine the membership of two such boards to achieve the diversity of 
composition which section 371(b)(1)(G)(i) of the Public Health Service 
Act mandates (42 CFR 485.304(f)). Also, we had assumed that this 
practice met statutory requirements.
    In reviewing this issue again, as part of the concerns raised 
during the public comment period, we believe a different conclusion 
must be drawn. We believe the statute dictates that the prescribed 
representation must be achieved on a single board. The statute speaks 
in the singular of a board which ``is composed'' of the designated 
representatives (the OPO ``has a board of directors or an advisory 
board which--(i) is composed of (I) members who represent * * *''). 
Moreover, the Committee Conference Report (H.R. Cong. Rep. No. 1127, 
98th Cong., 2d Sess., 15-16 (1984)) (1984 U.S. Code Cong. & Admin. News 
3991-3992), in part, states the following:

    The conference agreement eliminates the requirement in the House 
amendment that OPOs eligible to receive grant support have a board 
of directors whose participants are specified in statute. The 
conferees believe that public and professional confidence in the OPO 
system will be an essential factor if improvements in organ 
procurement are to be made. Accordingly, each OPO should solicit the 
active involvement of the community in which it operates in 
developing operating policies. The conference agreement requires 
that each OPO establish either an advisory board or board of 
directors composed of hospital administrators, intensive care or 
emergency room personnel, tissue banks, and voluntary health 
associations in its service area; members of the public; physicians 
with knowledge in the fields of histocompatibility and neurology; 
and a transplant surgeon from each transplant center affiliated with 
the OPO. * * * OPOs should, subject to review by the advisory 
committee, adopt standards of quality for the acquisition of organs 
which will give transplant surgeons confidence that the organs they 
receive are suitable for transplantation. The conferees recognize 
that as nonprofit entities, OPOs will have a board of directors to 
establish organizational policy. If an OPO's board of directors 
meets the criteria required, the conferees do not intend that OPOs 
establish a separate and redundant advisory entity.

    To the extent that any OPO does not now possess a single board 
meeting the conditions of section 371(b)(1)(G), we would permit the OPO 
that has been using two boards to submit a corrective action plan and 
would provide a sufficient amount of time in which the OPO can come 
into compliance with the statute. We should add that this does not 
preclude an OPO from having additional advisory boards or governing 
boards, as long as all the provisions at Sec. 485.304(f) are achieved 
by a single board.
    Comment: One commenter noted that decisions regarding acceptance of 
an organ for transplant are routinely made by the transplant center. 
Therefore, the commenter believed that equitable allocation is a shared 
responsibility between the OPO and the transplant center.
    Response: We acknowledge that transplant centers share a role in 
the equitable distribution of organs under section 1138(a)(1)(A) and 
(B) of the Act. Nonetheless, the OPO has a specific statutory 
responsibility to allocate organs equitably under section 371(b)(3)(E) 
of the Public Health Service Act. In addition, the OPTN has a 
significant statutory role in equitable distribution under section 
372(b)(2)(D) of the Public Health Service Act to ``assist [OPOs] in the 
nationwide distribution of organs equitably among transplant 
patients''.
    Comment: One commenter noted that the proposed regulations did not 
define ``equitable distribution'' of organs. The commenter recommended 
that we adopt the following definition of equitable distribution: ``the 
most medically suited and logistically feasible organ candidate within 
the OPO geographic OPTN region shall have preference to a donated organ 
before any local or non-regional candidates are considered.''
    Response: There has been considerable debate regarding the priority 
of local, regional, and national distribution of organs by some OPOs 
and by the OPTN. To the extent a definition in regulations would be 
appropriate, that question will be addressed in the forthcoming 
proposed rule on the OPTN regulations.
    Comment: Two commenters expressed concern with the language in 
proposed Sec. 485.304(r) (designated as Sec. 485.304(s) in this interim 
final rule) regarding testing to prevent the acquisition of organs 
infected with the etiologic agent for AIDS. One commenter noted that 
the CDC establishes guidelines for a wide variety of entities and 
suggested we reference the CDC specific guidelines for ``solid organ 
donations.''
    Response: We are limiting the reference to CDC guidelines to those 
specific to solid organ donations.
    Comment: One commenter believed that, because of the incubation 
period before a donor would test HIV positive and other factors 
inherent in the disease, it is not possible to prevent the transmission 
of AIDS with 100 percent assurance. Because of this concern, the 
commenter suggested that we use language similar to that in paragraph 
(d) of Sec. 493.1265 (``Condition: Histocompatibility.''), which states 
that, for laboratories performing tests for organ transplantation to be 
approved for Medicare and Medicaid coverage, the laboratory must ensure 
that the donor is tested for HIV reactivity unless the recipient waives 
the tests because of medical circumstances. This language is thought to 
be more technically correct.
    Response: At the time this comment was made, the commenter was 
correct. However, regulations published on February 28, 1992 (57 FR 
7002) implementing the Clinical Laboratory Improvement Amendments of 
1988 (CLIA) addresses the commenters concern. We are revising proposed 
Sec. 485.304(r) (now designated as Sec. 485.304(s)) to refer 
specifically to the CDC guidelines on solid organ donations. We have 
also revised it to use some of the same terminology as used in 
paragraph (d) of Sec. 493.1265. We believe that neither revision 
changes the intent or substance of the proposed requirement; the 
revisions simply clarify it. Paragraph (s) of Sec. 485.304 now reads 
that an OPO must: ``Ensure donors are tested for human immunodeficiency 
virus reactivity consistent with OPTN rules and CDC guidelines for 
solid organ donation.'' It should be noted that the governing 
provision, section 371(b)(3)(C) of the Public Health Service Act, says 
that OPOs must test for the virus ``to prevent the acquisition of 
organs that are infected.'' We are not accepting the recommended 
language that would permit a waiver of the tests by the recipient, 
because we believe the statutory requirement does not provide for such 
a waiver nor do the regulations implementing CLIA.
    Comment: One commenter recommended that we require that organ 
recipients be periodically tested to determine whether they are HIV 
positive. Another commenter, who also supported HIV testing, said that 
obtaining an accurate medical and social patient history is equally 
important in preventing the transmission of communicable disease and 
suggested that we make this a requirement too.
    Response: We agree that an accurate medical and social patient 
history is an important measure to discourage the transmission of 
infected organs, and that organ recipients be periodically tested to 
determine whether they are HIV positive.
    Although there are existing recommendations for the prevention of 
HIV transmission through transplantation, involving donors and 
recipients, in 1991, the U.S. Public Health Service formed a workgroup 
to address the need for additional federal oversight of organ and 
tissue transplantation. The workgroup concluded that further 
recommendations should be made. As of this writing, those revised 
guidelines are expected to be published by the CDC in 1994. Both of the 
above issues suggested by the commenters are addressed in these 
guidelines. We would expect both hospitals and OPOs to follow the 
recommendations. We are not, however, including these requirements in 
the regulations.

Section 485.305 (``Condition: Organ Procurement and Transplantation 
Network Participation.'')

    Comment: One commenter expressed strong support for the proposed 
requirement that the ``rules and requirements of the OPTN'' means those 
rules and requirements that have been approved and issued by the 
Secretary.
    Response: The Secretary is developing proposed rules to implement 
section 372 of the Public Health Service Act, which provides for the 
operation of the OPTN. Those regulations will establish a framework for 
Departmental oversight of the OPTN and its rules and requirements. Of 
course, public comments will be invited on the proposed framework. 
(Note that, in order to be more specific and to be consistent with 
terminology used by the Public Health Service (PHS), we have revised 
proposed Sec. 485.305. In this interim final rule, we specify that 
``rules of the OPTN'' means ``those rules provided for in regulations 
issued by the Secretary in accordance with section 372 of the PHS 
Act.''

Section 485.306 (``Condition: Performance Standards for Organ 
Procurement Organizations.'')

    Comment: Some commenters expressed concern with the formula-based 
approach to performance monitoring. Some said the current system is 
working well. Others said the proposed formula was very complex and not 
likely to be understood by many. They also expressed concern that the 
formula failed to consider some important factors in organ procurement, 
such as HIV infection rate and trauma rate for the area. In addition, 
they expressed concern that the weighting of individual factors appears 
to be arbitrary.
    Response: Although we continue to believe there is merit in a 
formula-based approach to performance monitoring, we have decided not 
to go forward with one at this time. There are significant advantages 
to the formula. The factors in the formula significantly influence 
expected donation rates. They are relatively stable for a given area 
over time, published by reputable sources, and readily available. 
Nevertheless, the commenters suggested valid problems with using them. 
We believe, in principle, it would be reasonable to add the cited 
factors to the formula. It would, however, be extremely difficult in 
most cases to do so because the factors suggested by the commenters are 
subject to continuous change and are not indisputably available from a 
single source on a timely basis. Further, adding additional factors to 
the formula would complicate it.
    Comment: Several commenters expressed concern over current 
performance standards that require a minimum ratio of 23 cadaveric 
kidneys procured per million population and transplantation of 19 
cadaveric kidneys per million population. They recommended that we not 
adopt these standards because these are static measures in an industry 
where national norms are increasingly dynamic. The commenters suggested 
we adopt the AOPO performance standard, which is based on population 
and potential activity benchmarks.
    Response: We agree that the AOPO standard, which is tied to 
national norms and represents dynamic numbers, is an important one. We 
also believe that the use of multiple performance standards can be most 
beneficial. We believe that standards that represent more static 
numbers can assist in measuring the effectiveness of an OPO if combined 
with multiple standards based on national norms. This is especially 
true since we have the flexibility to revise any static numerical 
criteria, should state-of-the-art organ procurement practices make them 
no longer appropriate. Therefore, we have accepted the commenters' 
suggestion that we adopt the AOPO performance standard. An indepth 
discussion of that standard is provided in response to other comments 
in this section of the preamble.
    Comment: Some commenters noted that the current performance 
criteria for kidneys were too low to be an adequate measure of 
effectiveness for OPOs, because nearly all OPOs currently exceed this 
threshold. One commenter presented data supporting increasing the 
threshold criteria to 28 cadaveric kidneys procured per million 
population of service area and 25 kidneys transplanted.
    Response: We agree with the commenters that the current performance 
criteria for kidneys (23 cadaveric kidneys procured per million 
population and 19 cadaveric kidneys transplanted per million 
population) are too low to adequately measure effectiveness in other 
than extremely poorly performing OPOs. Based on our data, we estimate 
that the national average of kidneys recovered by designated OPOs per 
million population has exceeded 28 since 1986. Nonetheless, we believe 
these criteria are sufficient to be retained until the 1996 designation 
cycle in order to maintain some performance criteria while transition 
to the new standards. As stated elsewhere in this preamble, we have 
decided to use criteria based on 75 percent of the national average. 
The national average for kidneys recovered per million for combined 
years 1991 and 1992 was 35.5. Seventy-five percent of that figure 
yields an average of 26.6. Therefore, we believe we have responded to 
the commenters' concerns in adopting these new standards.
    Comment: Several commenters expressed concern with the proposal to 
establish specific performance criteria for hearts and livers. They 
noted that data are not available at this time to permit calculation of 
specific extrarenal organ criteria. Further, they said that such 
criteria would not credit OPOs for efforts to procure other extrarenal 
organs, such as lungs, heart-lung, and pancreas. If extrarenal criteria 
are necessary, most commenters recommended that the criteria not be 
specific to organ type.
    Response: We acknowledge the concern of these commenters; relying 
on specific heart and liver performance criteria alone would not 
evaluate appropriately an OPO's full extrarenal experience in that some 
extrarenal organs would not be recognized. In addition, we believe that 
current data is insufficient to establish numerical thresholds for 
heart and liver procurement. Consequently, we are not proceeding with 
the proposal to establish specific heart and liver performance criteria 
at this time.
    Nonetheless, we continue to believe that some performance criteria 
should be established to evaluate an OPO's extrarenal activities. Some 
commenters proposed an alternative to our proposal. Several commenters 
suggested evaluating the number of organs procured per donor; three 
organs per donor was a recommended number. They noted that this measure 
would provide an OPO with flexibility to focus procurement efforts at 
harvesting multiple organs without being penalized for donors with 
unusable hearts or livers.
    We believe the alternative proposed by the commenters of 
establishing performance criteria based on average number of organs 
procured per donor is adequate to meet our intent. This is especially 
true given the fact that data available for 1992 indicate that the 
national average is 3.3 organs per donor. Therefore, beginning in 1996, 
we are requiring that OPOs meet performance criteria of procuring an 
average of 3 viable (with the intent to transplant) solid organs per 
cadaveric donor. Tissue harvesting, such as eyes or bone, is not 
included for purposes of this standard because they are not included in 
the definition of an organ at Sec. 485.302 (``Definitions.''). In 
calculating the organ per donor average, kidneys, as well as extrarenal 
organs will be counted. However, in the rare case when organs are 
removed en bloc and transplanted en bloc, such as a pair of kidneys or 
lungs, the pair will be counted as only a single organ. This method of 
counting organs is standard procedure for OPOs. We do invite public 
comment on this criterion. We are particularly interested in comments 
with respect to whether variance in age plays a significant role in 
determining the number of organs procured from a single donor and its 
impact on OPO's meeting the criterion of three donors per organ.
    Comment: Several commenters expressed concern with the proposal to 
develop a cost per organ performance standard. They had numerous 
concerns with this alternative, including wide variation in costs among 
OPOs, lack of standardization in cost reporting, and differences 
between hospital-based and independent OPOs.
    Response: We are convinced that additional research is necessary 
before we proceed with development of a cost effectiveness performance 
standard.
    Comment: Some commenters supported a cost effectiveness standard, 
expressing concern with the widely varying cost of organ acquisition 
and noting that in some cases it appears to be excessive. One commenter 
recommended standardization of acquisition fees and, ultimately, 
payment based on diagnosis related group (DRG). Another commenter 
recommended that payment be made directly to the OPO for kidney 
acquisition.
    Response: We agree that there is wide variation in organ 
acquisition costs for a number of reasons, including geographical 
differences, different accounting systems, and varying degrees of 
efficiency. We do not believe, however, there is sufficient information 
available at this time to establish a cost effectiveness standard for 
OPOs. Payment for organ procurement costs, such as inclusion in the 
DRG, is not germane to this proposed regulation. We will, however, take 
the suggestion under consideration.
    Comment: Generally, the commenters favored the performance criteria 
proposal set forth by AOPO, as mentioned in the discussion of a 
previous comment. To reiterate this proposal, for redesignations made 
in 1996 and thereafter, an OPO would be required to demonstrate that it 
achieved at least 75 percent of the national mean for per capita organ 
recovery in four of the following performance categories averaged over 
the 2-calendar-year period preceding the year of designation:
     Actual donors per million population.
     Number of kidneys recovered per million population.
     Number of kidneys transplanted per million population.
     Extrarenal organs recovered per million population.
     Actual number of extrarenal organs transplanted per 
million population.
    Some commenters noted that this proposal would keep pace with 
changes in the industry in future years, as it is based on national 
averages. Thus, as the national average procurement rate increases, the 
standards would rise accordingly and would be equally rigorous for the 
OPOs. It is generally accepted in the industry that organs recovered 
for research purposes should not be counted when compiling these data.
    Response: We are adopting the AOPO proposal in this interim final 
rule as the ``primary performance standard'' which must be met by OPOs. 
We believe that a threshold set at 75 percent of the mean provides 
ample opportunity for variation in OPO performance and recognizes 
individual structural and size differences while ensuring that some 
objective measure of effectiveness is met.
    For combined calendar years 1991 and 1992, we have national data, 
which are provided below, for the five categories of the primary 
performance standard: 

------------------------------------------------------------------------
                                                        Average   75% of
                       Standard                                  average
------------------------------------------------------------------------
Actual donors per million.............................     19.1     14.3
Kidneys recovered per million.........................     35.5     26.6
Kidneys transplanted per million......................     32.5     24.4
Extrarenal organs recovered per million...............     27.6     20.7
Extrarenal organs transplanted per million............     25.9     19.4
------------------------------------------------------------------------

    These data are provided as an illustration of how the primary 
performance standard is applied. These particular figures are not 
necessarily used to measure OPO performance.
    As we explained in detail in our earlier response dealing with 
setting reasonable objective measurements, our long-standing concern 
has been to increase and maximize the level of organ procurement. At 
the same time, we reiterate the competing concern to avoid discouraging 
or impeding OPOs that are making an important contribution to organ 
procurement. Therefore, the primary performance standard requires that 
each OPO achieve at least 75 percent of the national mean for four of 
the five performance categories averaged over the 2 full calendar years 
preceding the year of designation.
    The Congress recognized that some OPOs were not operating in an 
efficient and effective manner. It expressed an intent that we 
establish challenging, definite standards to ensure that designated 
OPOs would be capable of helping to invigorate organ procurement and 
distribution in this country. (See Sen. Rep. No. 530, 101st Cong., 2nd 
Sess. 19-22 (1990).) It charged the Department with the difficult task 
of articulating standards that would produce such results, while, at 
the same time, taking into account diverse, sometimes competing, 
factors. We believe that the threshold of 75 percent of the national 
mean provides a reasonably liberal criterion that reflects the state-
of-the-art on an ongoing basis, is based on the experience of peers for 
a comparable population base, and best implements the statute.
    We are especially concerned about the few OPOs that operate in a 
United States (U.S.) commonwealth or U.S. territory or in a State that 
is not part of the contiguous continental U.S. For example, most OPOs 
arrange for the transplant surgeons or members of the transplant team 
to retrieve an organ that is to be used in a transplant they will 
perform. Generally, air transportation among the continental States is 
adequate for organ retrieval and transportation to a viable recipient. 
But, in a noncontiguous State, territory, or commonwealth, this can 
present a preservation problem. Notifying and assembling a team to fly 
long distances to the site, retrieve the organ or organs and return to 
the transplant center is very time consuming and, especially in the 
case of hearts and livers, may not be practical. We believe the 
criteria to be met in the primary performance standard could create a 
potential hardship for these noncontiguous, geographically limited 
areas because organ preservation technology currently is not adequate 
to maintain organ viability for the time required to transport the 
organ to a recipient. Therefore, we have established a different 
performance standard for these areas, which is discussed later in this 
preamble. At the present time, we are aware that Hawaii and Puerto 
Rico, for example, would meet this exception.
    In summary, any OPO (except one located in a noncontiguous U.S. 
State, a U.S. territory, or the Commonwealth of Puerto Rico) that does 
not meet the primary performance standard will lose its designation 
without an opportunity to submit a corrective action plan. We will, 
however, notify the OPO of its failure to meet the primary performance 
standard and provide a 30-day period for the OPO to correct any 
erroneous information that it may have submitted that is relevant to 
the determination. If loss of designation were to occur, however, an 
OPO can appeal the decision under the appeal provision at paragraph (c) 
of Sec. 485.311 (``Terminations.''). We will advise all OPOs of the 
performance numbers applicable to 1994 and succeeding years as soon as 
the data are available. Also, we will reevaluate this rule within 2 
years after it becomes effective to determine whether the standard 
should be adjusted.
    Comment: One commenter stated that we should use two standard 
deviations from the mean as the statistical basis for adopting the AOPO 
performance threshold instead of 75 percent of the national mean for 
per capita organ recovery in four of the five AOPO performance 
categories. He suggested that his alternative is a better approach to 
accounting for variation.
    Response: We believe that the proposal to set the threshold at 75 
percent of the mean is superior to the two standard deviations 
alternative. We note that statistically, thresholds set at two standard 
deviations would capture 95 percent of a normal distribution. Thus, 
setting the performance standard at this level would result in 95 
percent of the OPOs making the criteria and 5 percent not making the 
criteria regardless of how poorly or how well these OPOs were 
performing. In other words, the lowest producing OPO would be 
automatically subject to termination each rating period, even if it 
were operating productively and effectively.
    By setting the performance threshold at 75 percent of the mean, we 
will identify all those OPOs that are performing significantly below 
the national average. It may be that all OPOs will perform at or above 
the standard in any given period. On the other hand, if any OPOs are 
not performing at least the 75 percent level, these will be identified 
and we can try to determine whether the standard needs revision or the 
OPOs' operations need scrutiny.
    Comment: One commenter recommended adding a sixth standard to the 
AOPO list. The additional standard suggested is the mean number of 
organs per donor.
    Response: We recognize that the mean number of organs per donor is 
a valuable performance standard, and we have established a measurement 
of organs per donor as a separate standard as discussed above.
    Comment: Several commenters noted that, in theory, there may be 
some merit to the proposal of basing performance criteria on the ratio 
of hospital deaths, as proposed. However, most noted that additional 
study is necessary before implementing such a standard.
    Response: We agree that additional study is necessary before 
proceeding with this idea. We do not have sufficient data to determine 
appropriate ratios. Moreover, none of the commenters offered 
information that would identify the current ratio. Consequently, we are 
not proceeding with this proposal at this time.
    Comment: Two commenters recommended that we develop a performance 
criterion based on the volume of referrals brought to fruition. They 
believe this would be a true measure of an OPO's effectiveness without 
depending on measures such as service area size and population served.
    Response: There are currently no data from which to determine the 
appropriate threshold for such a criterion. Therefore, we have not 
adopted this suggestion.
    Comment: Some commenters noted that a hospital is not required to 
enter into an agreement with the OPO designated for its area. They said 
that failure of hospitals to participate with the OPOs designated for 
their respective areas creates difficulties for OPOs in meeting 
performance criteria, especially those proposals based on population 
serviced. The commenters suggested that each hospital be required to 
participate with the OPO designated for its area. Alternatively, they 
suggested that performance criteria be adjusted to consider only the 
hospitals and the population actually being serviced by the OPO rather 
than the entire service area.
    Response: The purpose of the proposed rule was to seek public 
comment on the Department's proposals to implement various legislative 
amendments concerning OPO issues, primarily those regarding the 
definition of ``service area.'' We did not intend to open for comment 
areas of longstanding policy, such as the policy that permits a 
hospital to have an agreement with any designated OPO, not just the one 
designated for its area.
    We received several comments on this issue, however, in which 
commenters expressed strong sentiment that a hospital be required to 
have an agreement only with the designated OPO in its particular 
service area. Similarly, we received letters expressing strong support 
for the current policy. Possible policies with regard to hospital 
affiliation with a designated OPO include the following:
     A hospital must affiliate with the OPO in its service 
area.
     A hospital must affiliate with some OPO.
     A hospital may affiliate only with the OPO in its service 
area, but is not required to affiliate.
     A hospital may affiliate with any OPO, but is not required 
to affiliate.
    In a system in which success is based largely on goodwill between 
hospital and OPO personnel, the most flexible policy is likely to 
produce the most donors. Therefore, it seems, the Federal policy should 
be the one which allows hospitals to affiliate with the OPOs of their 
choice without requiring affiliation. That policy is currently in 
effect. Commenters are requested to provide any evidence that shows 
that the continuation of this policy would have a detrimental effect on 
organ donation.
    As noted above, an OPO may provide documentation to us that may 
justify use of an adjustment to compensate for a lower population base 
caused by hospital affiliation with another OPO for purposes of 
determining its compliance with the performance standards.
    Comment: One commenter expressed concern that performance criteria 
could result in potential donor families being subject to undue 
pressure to donate merely for the OPO to make the grade, resulting in a 
negative impact on organ procurement nationally.
    Response: We do not believe that the families of potential donors 
should be subject to undue pressure from OPOs. We believe that OPO 
staff are sensitive to the seriousness of the donor question in their 
behavior with potential donors. Therefore, we do not expect to find 
that OPOs will respond inappropriately to the performance standards. 
Should we encounter such a problem, we will take necessary action to 
correct the situation, such as the development of additional standards 
that measure the appropriateness of an OPO's practices in initiating a 
request for organ donation.
    Comment: Two commenters noted that, because of the special 
transportation circumstances inherent in their isolation from the 
mainland U.S., population limitations, and the availability of special 
surgical skills, an OPO in Hawaii would not be able to meet the 
qualification or performance requirements. They requested that an 
exception to the criteria be granted for the OPO in Hawaii.
    Response: We acknowledge that special circumstances prevent OPOs 
such as those in Hawaii and Puerto Rico from meeting many of the 
proposed qualification and performance criteria. As mentioned earlier, 
most transplant teams send in their own surgeons to retrieve organs. 
Therefore, we have established an exception to the standards for OPOs 
operating in certain geographically limited areas to take into account 
their unique circumstances. The service area and performance standards 
that those OPOs that are not part of the contiguous U.S., such as 
Hawaii and Puerto Rico, must meet to be designated are as follows:
     They must enter into a working relationship with any 
hospital or transplant center in their respective service areas that 
requests a working relationship.
     Beginning January 1, 1996, they must meet a standard of 50 
percent of the national average of all OPOs for kidney procurement per 
million population and for kidney transplantation per million 
population. (NOTE: They must meet all statutory requirements for OPOs 
except that we may give them a different service area and performance 
standard.)
    In developing this standard, we believe there is no reason to 
exempt these OPOs from requirements related to operating an efficient 
and effective OPO. It should be noted, however, that while this 
standard was selected arbitrarily, we believe it to be reasonable for 
these OPOs to perform at least half as well as the national mean in 
recovering and transplanting kidneys. There may be other areas besides 
Hawaii and Puerto Rico with similar limitations. Public comments are 
invited on whether other areas should be exempted or provided lower 
numerical standards as well.
    Comment: One commenter, an OPO that was formed through the 
consolidation of six former hospital-based OPOs, said that established 
and new OPOs should be subject to the same performance criteria.
    Response: In part, we agree with this commenter. If an OPO is the 
result of a merger of two or more previously designated OPOs, the 
performance standards in Sec. 485.306 will be applied, but the entity 
can satisfy it by combining the figures for the merged entities. We 
will not, however, apply such performance standards to a totally new 
organization that has no previous record until its first redesignation 
cycle, since it will have developed no track record and will have had 
no start-up period. Rather, we will apply the qualifying criteria in 
Sec. 485.304 to the organization.
    Comment: Some commenters expressed concern with the effective date 
of the performance standards. They said that application of these rules 
at the next redesignation period would constitute ``retrospective 
rulemaking,'' since OPOs would not have had an opportunity to alter 
their practices to meet the standards. Some commenters recommended 
delaying application for at least 12 months after publication; others 
believed OPOs should not be held accountable for the revised standards 
until at least 2 years after publication, that is, until their second 
redesignation period.
    Response: In discussing the qualifying and performance standards at 
various points elsewhere in the preamble, we have set forth the 
criteria and rationale for establishing such policies. In doing so, we 
are cognizant of the concerns expressed by the commenters regarding 
having an adequate opportunity to become compliant with the new rules. 
To that end, in both the qualifying criteria and performance standards, 
we have established implementation dates to remove concerns about 
``retrospective rulemaking.'' That is, the new standards will not apply 
until the 1996 redesignation cycle. We believe this addresses 
adequately the commenters' concerns about an OPO's ability to be in 
compliance with the new standards at the time of redesignation.

Section 485.307 (``Failure To Meet Requirements.'')

    Comment: One commenter said that we should not terminate an OPO 
regardless of performance standards. The commenter believed that this 
would leave an area without a functioning OPO and that an inefficient 
OPO is better than no OPO at all.
    Response: We believe that an OPO that does not meet the primary 
performance standard should not be redesignated. This action would not 
result in no OPO service in the area; rather, we think that it is 
likely that at least one qualified entity would file for the area 
during an open area announcement. Even if no competing qualified OPO 
applies for the area, hospitals could receive OPO services by entering 
into an agreement with any designated OPO.
    Comment: Several commenters expressed concern with the proposed 
changes that would delete the current provision that provides for a 
reasonable opportunity for an OPO that does not meet the requirements 
to correct the deficiency. The commenters stated that they believe that 
an opportunity for correction and/or explanation of the variation 
rather than not redesignating an OPO would result in more efficient 
operation.
    Response: The regulations (Sec. 485.307) state that, if the OPO 
does not meet the requirements in Secs. 485.304 and 485.305 and the 
primary performance standard at the time of recertification, we may 
terminate the OPO. We are not required to terminate the agreement of an 
OPO not meeting the standards. As we stated above, we intend to 
consider only our primary performance standard and the statutory 
criteria as a mandatory prerequisite for designation or redesignation. 
An OPO not meeting other performance standards will be given an 
opportunity to present an explanation for the situation and to submit a 
corrective action plan for meeting the standards in the future. In 
addition, OPOs not meeting the primary performance standard will have 
30 days in which to correct any information that may be erroneous.
    Open area notification would be made at each OPO's recertification 
time. We envision that, in those cases where an OPO has not met the 
standards, its explanation and corrective action plan would be 
considered along with the qualifications of any other OPO interested in 
the open area. Failure to redesignate the current OPO would result in 
those cases in which we determine that the current OPO does not meet 
the applicable requirements.

Section 485.309 (``Changes in Ownership or Service Area.'')

    Comment: One commenter did not understand the addition of 
Sec. 485.309, because he was under the impression that, by law, an OPO 
must be a nonprofit organization, and we mentioned partnerships and 
sole proprietorships.
    Response: Section 371(b)(1)(A) of the Public Health Service Act 
requires an OPO to be a ``nonprofit entity.'' Current regulations at 
Sec. 485.304(a) define that to mean ``a nonprofit entity that is exempt 
from Federal income taxation under section 501 of the Internal Revenue 
Code of 1986''. Section 501(a) of the tax law addresses primarily 
corporations, although other forms of organizations are included. Since 
the problems intended to be addressed by proposed Sec. 485.309(a) have 
resulted principally from corporate mergers and consolidations, we 
believe the language in the proposed rule on proprietorships and 
partnerships is unnecessary. Therefore, this interim final rule 
addresses only mergers and consolidations.
    Comment: One commenter felt that mergers should be given priority 
over other proposals for a service area.
    Response: We do not believe we should categorically prefer one type 
of application over another, depending upon whether the applicant has 
merged or consolidated. The determination as to which OPO is designated 
depends upon a demonstration that the OPO meets the applicable 
requirements set forth in regulations. At Sec. 485.308 (``Designation 
of one OPO for each service area.''), we have described the criteria we 
will use when more than one OPO applies for a service area.

Section 485.311 (``Terminations.'')

    Comment: We specifically invited comment on the proposal to 
designate an OPO whose agreement was terminated if we find that the 
cause for the termination has been removed, if we are satisfied that it 
is not likely to recur, and if no other OPO has been designated for the 
service area. One commenter said that we should avoid termination, but 
that, if it is necessary, ``reinstatement'' should not be an option. 
The commenter believes that the area should revert to ``open area'' 
status.
    Response: When an OPO's agreement with us is terminated, the 
service area does revert to an ``open area.'' If the area is an open 
area (that is, no other qualified OPO has been designated for it), the 
terminated OPO can present evidence that the cause for the termination 
has been removed, and if the OPO meets all requirements for 
designation, we believe that the OPO could be designated.
    Comment: One commenter said that in the case of termination, public 
notice should not be made until the OPO has been through the appeal 
process and the determination to terminate has been upheld.
    Response: As we pointed out above, we intend to apply the existing 
appeal process at part 498 to termination of the OPO's agreement with 
us. It is our policy that a termination is treated as final despite any 
appeal filing. Therefore, we will issue notice of the termination 
effective with the date of the termination.
    Appeal proceedings can take several years to complete. We believe 
that it is necessary to expeditiously issue a notice of open area and 
begin the process of securing a qualified OPO for the service area as 
soon as possible.
    Comment: Several commenters objected to the deletion of the current 
Sec. 485.307(b), which provides for an appeal under part 498 (``Appeals 
Procedures for Determinations that Affect Participation in the Medicare 
Program'') of this chapter when an OPO's agreement with us is 
terminated. They believe that an appeal proceeding must be included not 
only for termination based on failure to meet requirements, but also on 
service area determinations.
    Response: Although we proposed deleting the appeal language at 
Sec. 485.307(b), we also proposed placing identical language at 
Sec. 485.311(c) on termination. These appeal proceedings are similar 
for all disputes involving entities participating in Medicare and 
Medicaid, not just OPOs. Generally, they provide for an independent 
determination based on a written and oral presentation of evidence. 
Appeals on service area determinations will be included in such appeal 
proceedings.
    Comment: One commenter suggested that the period in which to appeal 
a determination should be 90 days.
    Response: As noted above, we believe that the existing procedures 
for termination of participation in Medicare and Medicaid should be 
applicable to OPOs as well. These procedures provide for 60 days in 
which to file an appeal.

IV. Provisions of this Interim Final Rule with Comment

    We are adopting as final the proposed regulations which we 
published on June 21, 1991, in the Federal Register (56 FR 28513), with 
the following changes.
     We clarify the language at Sec. 482.12(c)(5)(ii), which 
sets forth participation in the OPTN as one of the Medicare conditions 
of participation for hospitals, to be consistent with the language at 
Sec. 485.305, which sets forth participation in the OPTN as one of the 
Medicare conditions for coverage of OPOs.
     In Sec. 485.302, we have shortened the definitions of 
certification or recertification and open area. We have moved some of 
the provisions that had appeared in these definitions in the proposed 
rule to other appropriate sections of the subpart. We shortened the 
definition of interim designation period and moved it to 
Sec. 485.303(e)(3)(ii) of the interim final rule. We also have 
clarified the definition of designation or redesignation by citing the 
statutory basis for payment of organ procurement costs under Medicare 
and Medicaid. We clarify the use of these terms, by adding that 
designation and redesignation are used interchangeably except when 
otherwise specifically indicated.
     We have revised Sec. 485.303 to add clarity, improve its 
readability, and to specify that, to be initially designated as an OPO, 
an organization must be certified as a qualified OPO. This addition 
reflects section 1138(b)(1)(A) of the Act, which establishes 
certification or recertification as one of several prerequisites for 
designation. In addition, we have included in Sec. 485.303 provisions 
that had been included under Sec. 485.302 (``Definitions'') in the 
proposed rule. That is, we specify that redesignation must occur at 
least every 2 years and be completed before the end of an existing 
designation period. With regard to interim designations, we specify 
that the interim period does not exceed 60 days after the normal 
designation period has expired. We have also made the following 
changes:

--Proposed paragraph (e) of Sec. 485.303 specified that an OPO must 
obtain HCFA approval before entering into any change of ownership, 
assignment, merger, consolidation, or change in its service area. In 
this interim final rule, we have removed the reference to assignment 
because we believe assignment does not occur in the OPO context.
--We have added the clarifying phrase ``for organ procurement services 
attributable to that OPO'' in the sentence at proposed Sec. 485.303(f) 
in which we state that, if an OPO's agreement is terminated, payment 
will not be made for services furnished on or after the effective date 
of termination. (In this interim final rule that provision is 
designated as Sec. 485.303(c).)
--We have clarified proposed Sec. 485.303(f)(5) (Sec. 485.303(c)(5) in 
the interim final rule) by adding the phrase ``as Medicare payment for 
organ recovery fees''. Section 485.303(c)(5) requires OPOs to agree to 
pay to us amounts that have been paid by us 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.

     We have made the following changes to Sec. 485.304:

--We have revised proposed Sec. 485.304(d) to improve its readability 
and to provide that, for designations in 1996 and thereafter, an OPO's 
service area must include an entire State or the OPO must procure 
organs from an average of at least 24 donors per calendar year in the 2 
years before the year of designation. We provide for the phasing in of 
this requirement and specify that before January 1, 1996, an entity 
must demonstrate that the service area has the potential to produce 50 
donors per calendar year. We provide an OPO operating in a 
noncontiguous U.S. State, a U.S. territory, or a U.S. commonwealth, 
such as Hawaii or Puerto Rico, with a specified alternative standard 
beginning January 1, 1996. We also provide that if an entity has not 
previously operated as a Medicare-certified OPO, it must demonstrate 
that it can procure organs from at least 50 potential donors per 
calendar year. These changes have been discussed in section III of this 
preamble.
--In Sec. 485.304(i), we changed the requirement that OPOs have a 
system ``to allocate organs equitably among transplant centers and 
patients'' by eliminating the words ``centers and''. This is consistent 
with section 371(b)(3)(E) of the Public Health Service Act.
--In the proposed rule, Sec. 485.304(r) reads that an OPO must: 
``Assure appropriate tests consistent with OPTN standards and CDC 
guidelines are performed to prevent the acquisition of organs that are 
infected with the etiologic agent for acquired immune deficiency 
syndrome.'' We have revised it (and designated it as Sec. 485.304(s)) 
to refer specifically to OPTN rules and to the CDC guidelines on solid 
organ donations. This amendment to the proposed rule does not change 
its substance.
--In order to enable us to verify an OPO's compliance with the 
performance standards, we have added paragraph (t) to Sec. 485.304. It 
requires OPOs to submit accurate data to us within 15 days following 
the end of a calendar year (unless otherwise notified), giving 
information on the--
+Population of designated service areas based on the most recent U.S. 
Bureau of the Census data;
+ Number of actual organ donors;
+ Number of kidneys procured;
+ Number of kidneys transplanted;
+ Number of extrarenal organs by type procured; and
+ Number of extrarenal organs transplanted.

     We are making the following changes to proposed 
Sec. 485.305:

--As discussed in section III of this preamble, we are defining ``rules 
of the OPTN'' rather than ``rules and requirements of the OPTN.''
--We are removing the sentence that reads ``In order to be binding on 
hospitals participating in Medicare or Medicaid, the Secretary must 
have given formal approval to the rule or requirement.'' That statement 
is unnecessary, given our definition of ``rules of the OPTN.''

     As discussed in section III of this preamble, we are 
revising proposed Sec. 485.306 to do the following:

--Specify the performance standards that OPOs must meet before January 
1, 1996. The standards are those currently set forth at Sec. 485.306 
(a)(1) and (a)(2).
--Set forth performance standards (described in section III of this 
preamble) that OPOs must meet beginning January 1, 1996.
--Add that, for the purpose of measuring adherence to the performance 
standards, organs removed en bloc and transplanted en bloc, are counted 
as a single organ.
--Permit submission by the OPO of documentation to justify the use of 
an adjustment to compensate for a reduced population base.
--Grant an exception from some of the performance standards to OPOs 
operating outside the contiguous U.S.

    Section 485.306 continues to require that each OPO enter into a 
working relationship with any hospital or transplant center in the 
OPO's service area that requests a working relationship.
     At Sec. 485.308(a), we are inserting, with a minor 
revision, the language that, in the proposed rule, appeared in the 
definition for ``open area'' at Sec. 485.302. In the third sentence, we 
replaced ``terminate an OPO immediately'' with ``terminate an OPO's 
agreement with HCFA immediately''. This reflects that it is the 
agreement that is terminated.
     We are restructuring Sec. 485.309 for ease of reference.
     In addition to the above changes, minor editorial changes 
(that do not change the substance) have been made for clarification.

V. Regulatory Impact Statement

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare a regulatory flexibility analysis, unless the 
Secretary certifies that an interim final rule with comment will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, all organ procurement organizations 
are considered to be small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis if an interim final rule with comment may 
have a significant impact on the operations of a substantial number of 
small rural hospitals. Such an analysis must conform to the provisions 
of section 604 of the RFA. For purposes of section 1102(b) of the Act, 
we define a small rural hospital as a hospital that is located outside 
of a Metropolitan Statistical Area and has fewer than 50 beds.
    This interim final rule with comment sets forth changes required by 
Public Law 100-607 and Public Law 101-616. Originally, section 402 of 
Public Law 101-607 revised section 371 of the Public Health Service Act 
(42 U.S.C. 273) to require the service area encompassed by an entity to 
be large enough that the OPO could reasonably expect to procure organs 
from not less than 50 donors each year. This change would have resulted 
in a substantial number of existing OPOs failing to meet this 
requirement. Public Law 101-616 amended the Public Health Service Act 
to require an OPO to have a defined service area that is of sufficient 
size to ensure maximum effectiveness in the procurement and equitable 
distribution of organs.
    We expect that the implementation of the other provisions of this 
interim final rule with comment may cause some OPOs to accrue some 
additional costs. For example, new Sec. 485.304(r) of the regulation 
will require an OPO to ensure that tests are performed on sera from 
prospective organ donors to prevent the acquisition of organs that are 
infected with the etiologic agent for AIDS. We believe, however, that 
any additional costs are minimal compared to the improvement these 
provisions will have on the quality of health care for organ 
recipients.
    We have determined, and the Secretary certifies, that this interim 
final rule with comment will not have a significant effect on a 
substantial number of small entities. Also, OPOs (independent and 
hospital-based) are not considered small rural hospitals since OPOs 
generally service large geographical areas. Therefore, a regulatory 
flexibility analysis under the RFA and a rural impact analysis under 
section 1102(b) of the Act are not required.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

VI. Information Collection Requirements

    Regulations at Secs. 485.303 (c)(2), (c)(4), (c)(7), and (c)(8), at 
Secs. 485.304 (d), (o), (p), and (t), at Secs. 485.305, 485.306, 
485.309(a), and at Secs. 485.311 (a)(1) and (e) contain information 
collection and recordkeeping requirements that are subject to review by 
the Office of Management and Budget (OMB) under the Paperwork Reduction 
Act of 1980 (44 U.S.C. 3501 et seq.). The information collection 
requirements concern quantifiable data for submission to us that 
document an OPO's statement that its service area is of sufficient size 
to ensure maximum effectiveness in the procurement and equitable 
distribution of organs, and that either includes an entire metropolitan 
statistical area or does not include any part of such an area. Public 
reporting burden for this collection of information is estimated to be 
4,206 hours per submission. A notice will be published in the Federal 
Register after approval is obtained.

VII. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on a rule, we are not able to acknowledge or respond to them 
individually. However, we will consider all comments that we receive by 
the date and time specified in the ``DATES'' section of this preamble, 
and, if we proceed with a final rule, we will respond to the comments 
in the preamble of that rule.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Kidney diseases, 
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
areas, X-rays.

42 CFR Part 482

    Hospitals, Medicaid, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 485

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 42 CFR chapter IV is 
amended as follows:

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

Subpart U--Conditions for Coverage of Suppliers of End-Stage Renal 
Disease (ESRD) Services

    A. Part 405, subpart U, is amended as set forth below:
    1. The authority citation for subpart U, part 405 is revised to 
read as follows:

    Authority: Secs. 1102, 1138, 1861, 1862(a), 1871, 1874, and 1881 
of the Social Security Act (42 U.S.C. 1302, 1320b-8, 1395x, 
1395y(a), 1395hh, 1395kk, and 1395rr), unless otherwise noted.

    2. In Sec. 405.2163, the introductory text is republished and 
paragraph (f) is revised to read as follows:


Sec. 405.2163  Condition: Minimal service requirements for a renal 
dialysis facility or renal dialysis center.

    The facility must provide dialysis services, as well as adequate 
laboratory, social, and dietetic services to meet the needs of the ESRD 
patient.
* * * * *
    (f) Standard: Participation in recipient registry. The dialysis 
facility or center participates in a patient registry program with an 
OPO designated or redesignated under part 485, subpart D of this 
chapter, for patients who are awaiting cadaveric donor transplantation.
* * * * *
    3. In Sec. 405.2170 introductory text, ``Renal Transplantation 
Center'' is revised to ``renal transplantation center''.
    4. In Sec. 405.2171, the following changes are made:
    a. In paragraphs (a) and (d)(1), ``Renal Transplantation Center'' 
is revised to ``renal transplantation center''.
    b. The section heading, the introductory text, and paragraph (e) 
are revised to read as follows:


Sec. 405.2171  Condition: Minimal service requirements for a renal 
transplantation center.

    Kidney transplantation is furnished directly by a hospital that is 
participating as a provider of services in the Medicare program and is 
approved by HCFA as a renal transplantation center. The renal 
transplantation center is under the overall direction of a hospital 
administrator and medical staff; if operated by an organizational 
subsidiary, it is under the direction of an administrator and medical 
staff member (or committee) who are directly responsible to the 
hospital administrator and medical staff, respectively. Patients are 
accepted for transplantation only on the order of a physician and their 
care continues under the supervision of a physician.
* * * * *
    (e) Standard: Organ procurement. A renal transplantation center 
using the services of an organ procurement organization designated or 
redesignated under part 485, subpart D of this chapter to obtain donor 
organs has a written agreement covering these services. The renal 
transplantation center agrees to notify HCFA in writing within 30 days 
of the termination of the agreement.

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

    B. Part 482 is amended as set forth below:
    1. The authority citation for part 482 is revised to read as 
follows:

    Authority: Secs. 1102, 1138, 1814(a)(6), 1861 (e), (f), (k), 
(r), (v)(1)(G), (z), and (ee), 1864, 1871, 1883, 1886, 1902(a)(30), 
and 1905(a) of the Social Security Act (42 U.S.C. 1302, 1320b-8, 
1395f(a)(6), 1395x (e), (f), (k), (r), (v)(1)(G), (z), and (ee), 
1395aa, 1395hh, 1395tt, 1395ww, 1396a(a)(30), and 1396(a)).

    2. In Sec. 482.12, the introductory text for the section is 
revised; paragraph (c) introductory text is republished; and paragraph 
(c)(5)(ii) is revised, to read as follows:


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.
* * * * *
    (c) Standard: Care of patients. In accordance with hospital policy, 
the governing body must ensure that the following requirements are met:
* * * * *
    (5) * * *
    (ii) In the case of a hospital in which organ transplants are 
performed, the hospital 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 for in regulations issued by the Secretary in accordance 
with section 372 of the PHS Act. No hospital is considered to be out of 
compliance with section 1138(a)(1)(B) of the Act or with the 
requirements in 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.
* * * * *

PART 485--CONDITIONS OF PARTICIPATION AND CONDITIONS FOR COVERAGE: 
SPECIALIZED PROVIDERS AND SUPPLIERS

    C. Part 485 is amended as set forth below.
    1. The authority citation for part 485 continues to read as 
follows:

    Authority: Secs. 1102, 1138, 1861 (aa), and (cc) and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1320b-8, 1395x (aa) and (cc), 
and 1395hh).

    2. The heading of part 485 is revised to read as above.
    3. Section 485.301 is revised to read as follows:


Sec. 485.301  Basis and scope.

    This subpart sets forth the qualifications and requirements an 
organ procurement organization (OPO) must meet in order for the costs 
of its services in procuring organs for hospitals to be payable under 
Medicare and Medicaid. Its statutory basis is section 1138(b) of the 
Act.

    4. In Sec. 485.302, the introductory text for this section is 
republished, the definition of service area is revised, and three new 
definitions are added in alphabetical order as follows:


Sec. 485.302  Definitions.

    As used in this subpart, the following definitions apply:
    Certification or recertification means a HCFA determination that an 
entity meets the standards for a qualified OPO at Sec. 485.303 of this 
subpart and is eligible for designation if it meets the additional 
conditions for designation at Secs. 485.304 and 485.305. No payment 
ensues from certification alone.
    Designation or redesignation means HCFA 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.
* * * * *
    Open area means a service area for which HCFA has notified the 
public that it is accepting applications for designation.
* * * * *
    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.
* * * * *
    5. In Sec. 485.303, a heading is added to paragraph (a), paragraphs 
(b) and (c) are revised, and new paragraphs (d) and (e) are added, to 
read as follows:


Sec. 485.303  Condition: Organ procurement organization designations--
general.

    (a) Designation--a condition for payment. * * *
    (b) Requirements for designated status. To be the designated OPO 
for a service area, an entity must do the following:
    (1) Submit to HCFA a written application for designation, using the 
application form prescribed by HCFA.
    (2) Be certified as a qualified OPO.
    (3) Participate in the Organ Procurement and Transplantation 
Network as specified in Sec. 485.305.
    (4) Enter into an agreement with HCFA that meets the requirements 
set forth in paragraph (c) of this section.
    (5) Upon its initial designation, meet the requirements at 
Sec. 485.306(a)(3) or Sec. 485.306(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. 485.306(a)(1) and (a)(2) or Sec. 485.306(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. 485.306, which set forth performance standards for OPOs.
    (7) Obtain HCFA approval before entering into any change of 
ownership, merger, consolidation, or change in its service area (see 
Sec. 485.309, which sets forth requirements concerning approval for 
changes in ownership and service area). Failure to do so could result 
in termination.
    (c) Agreement with HCFA. An OPO must enter into an agreement with 
HCFA. The agreement is effective upon submission by the OPO and 
acceptance by HCFA, 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 subpart D, part 485, 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 HCFA 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.
    (5) Pay to HCFA amounts that have been paid by HCFA 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 HCFA, 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 HCFA 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. HCFA may designate an organization for an 
interim designation period if the period is needed in order for HCFA 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 60 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.
    6. In Sec. 485.304, the following changes are made:
    a. The semicolon at the end of the following paragraphs is removed 
and a period added in its place: paragraphs (a) through (c), (d)(1), 
(d)(2), (d)(4), (e), (f)(1) through (f)(3), (f)(5), (g)(2), (h), (j) 
through (n).
    The semicolon and the word ``and'' at the end of the following 
paragraphs are removed and a period added in their place: paragraphs 
(d)(3), (f)(4), and (o).
    b. The introductory text of the section and paragraph (d) 
introductory text are revised; paragraphs (d)(1) through (d)(4) are 
redesignated as paragraphs (d)(3)(i) through (d)(3)(iv), respectively; 
new paragraphs (d)(1), (d)(2), and (d)(3) introductory text are added; 
paragraph (f) introductory text and paragraphs (f)(3) and (i) are 
revised; and new paragraphs (r) through (t) are added, to read as 
follows:


Sec. 485.304  Condition: Qualifications required of an organization for 
it to be a designated organ procurement organization.

    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:
* * * * *
    (d) Make available to HCFA documentation of its service area, as 
specified in paragraph (d)(3) of this section, that shows it meets the 
requirements of paragraphs (d)(1) and (d)(2) of this section.
    (1) The area is of sufficient size to ensure maximum effectiveness 
in the procurement and equitable distribution of organs.
    (i) Before January 1, 1996, an entity 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.
    (ii) Beginning January 1, 1996, an OPO must meet at least one of 
the following requirements:
    (A) Its service area must include an entire State.
    (B) It must procure organs from an average of at least 24 donors 
per calendar year in the 2 years before the year of designation.
    (C) In the case of an OPO operating in a noncontiguous U.S. State, 
a U.S. territory, or a U.S. commonwealth, such as Hawaii and 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.
    (D) 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.
    (2) The area either includes an entire metropolitan statistical 
area or does not include any part of such an area.
    (3) Documentation that precisely defines the proposed service area 
includes the following:
* * * * *
    (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 include the following:
* * * * *
    (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.
* * * * *
    (i) Have a system to equitably allocate donated organs among 
transplant patients that is consistent with Centers for Disease Control 
and Prevention (CDC) standards and with OPTN rules.
* * * * *
    (r) Assist hospitals in establishing and implementing protocols for 
making routine inquiries about organ donations by potential donors.
    (s) Ensure donors are tested for human immunodeficiency virus 
reactivity consistent with OPTN rules and CDC guidelines for solid 
organ donation.
    (t) Submit accurate data to HCFA 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.
    (4) Number of kidneys transplanted.
    (5) Number of extrarenal organs by type procured.
    (6) Number of extrarenal organs by type transplanted.
    7. Section 485.305 is revised to read as follows:


Sec. 485.305  Condition: Organ Procurement and Transplantation Network 
participation.

    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 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.
    8. Section 485.306 is revised to read as follows:


Sec. 485.306  Condition: Performance standards for organ procurement 
organizations.

    For the purpose of measuring OPOs' adherence to the performance 
standards in this section, organs removed en bloc and transplanted en 
bloc, such as a pair of kidneys or lungs, are counted as a single 
organ.
    (a) 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.
    (3) Each OPO must enter into a working relationship with any 
hospital or transplant center in the OPO's service area that requests a 
working relationship.
    (b) Beginning January 1, 1996, OPOs must meet the following 
performance standards:
    (1) Each OPO must achieve at least 75 percent of the national mean 
for four of the five performance categories specified in paragraphs 
(b)(1)(i) through (b)(1)(v) of this section averaged over 2 calendar 
years before the year of redesignation. The performance categories 
follow:
    (i) Actual donors per million population.
    (ii) Number of kidneys recovered per million population.
    (iii) Extrarenal organs recovered per million population.
    (iv) Number of kidneys transplanted per million population.
    (v) Number of extrarenal organs transplanted per million 
population.
    (2) Each OPO must procure organs from an average of at least 24 
donors per calendar year in the 2 calendar years before the year of 
redesignation.
    (3) Each OPO must maintain an average procurement ratio of three 
organs per donor.
    (4) Each OPO must enter into a working relationship with any 
hospital or transplant center in the OPO's service area that requests a 
working relationship.
    (c)(1) If, after designation, an OPO does not meet the performance 
standards listed in paragraph (a), paragraph (b)(2), or paragraph 
(b)(3) of this section, it may submit a corrective action plan 
explaining why the standard or standards were not met and setting forth 
actions it will take to ensure it meets those standards in the future. 
Corrective action plans must be submitted to the appropriate HCFA 
regional office. A corrective action plan will not be accepted for 
failure to meet the primary performance standard, that is, the standard 
set forth at Sec. 485.306(b)(1).
    (2) An OPO may submit corrected information, within 30 days from 
the date it was notified that it failed to meet the performance 
standards (such as an adjustment to its population base to account for 
hospitals that may affiliate with an OPO outside the service area).
    (3) If an OPO does not meet the performance standards listed in 
paragraph (a), paragraph (b)(2), or paragraph (b)(3) of this section, 
or, if it believes its population base has been affected by another 
OPO's having an agreement with one or more hospitals in its service 
area, the OPO may provide documentation to HCFA that may justify use of 
an adjustment to compensate for the reduced population base.
    (d) OPOs operating in a noncontiguous U.S. State, a U.S. territory, 
or a U.S. commonwealth, such as Hawaii and Puerto Rico, may be granted 
an exception from the performance standards listed in paragraphs 
(a)(1), (a)(2), and (b)(1) through (b)(3) 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. Nonetheless, they must meet the 
performance standard in paragraph (a)(3) or paragraph (b)(4) of this 
section. Beginning January 1, 1996, they must meet a standard of 50 
percent of the national average of all OPOs for kidneys recovered and 
transplanted per million population.
    (e) An OPO that has not previously been designated by HCFA for a 
particular service area is exempt from meeting the performance 
standards in paragraphs (b)(1) and (b)(2) of this section for its first 
2 years of designation as the OPO for that area. The performance 
standards are used to measure the OPO's qualifications to be designated 
or redesignated beginning 2 years after the OPO has been first 
designated for any portion of a service area.
    9. Section 485.307 is revised to read as follows:


Sec. 485.307  Failure to meet requirements.

    Failure to continue to meet any of the requirements in 
Secs. 485.304 and 485.305 or to meet the performance standards in 
Sec. 485.306(a) and (b) may result in termination of the OPO's 
agreement with HCFA.
    10. In Sec. 485.308, paragraph (a) introductory text is revised to 
read as follows:


Sec. 485.308  Designation of one OPO for each service area.

    (a) HCFA 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. HCFA may also declare the service area 
open in the event an OPO ceases to operate or HCFA has reasonable 
ground for anticipating it will cease to operate. In cases of urgent 
need (such as evidence of medically or ethically unsound practices), 
HCFA 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. 485.304 in a given service area, HCFA considers other factors in 
reaching a decision concerning which organization to designate. These 
factors follow:
* * * * *
    11. A new Sec. 485.309 is added to read as follows:


Sec. 485.309  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 HCFA 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 HCFA 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 HCFA determines to be 
necessary for designation.
    (b) HCFA requirements. (1) If HCFA finds that the entity has 
changed to such an extent that it no longer satisfies the prerequisites 
for OPO designation, HCFA may terminate the OPO's agreement and declare 
the OPO's service area to be an open area.
    (2) If HCFA 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. HCFA 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. 485.306 apply at the end of this remaining period.
    12. A new Sec. 485.311 is added to read as follows:


Sec. 485.311  Terminations.

    (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 HCFA. HCFA 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 HCFA 
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 HCFA.
    (2) Involuntary termination. HCFA 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. HCFA may also terminate an agreement immediately in cases of 
urgent need, such as the discovery of unsound medical practices.
    (b) Notice to OPO. HCFA gives notice of termination to an OPO at 
least 15 days before the effective date stated in the notice.
    (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) HCFA 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 HCFA may 
require, through publication in local newspapers in the service area. 
In the case of involuntary termination, HCFA gives notice of the date 
of termination.
    (f) Reinstatement. HCFA may, at its discretion, designate an OPO 
whose agreement was previously terminated if HCFA 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.

(Catalog of Federal Domestic Assistance Programs No 93.774, Medicare 
Supplementary Medical Insurance, and No. 13.714, Medical Assistance 
Program)

    Dated: November 2, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: May 16, 1994
Donna E. Shalala,
Secretary.
[FR Doc. 94-21993 Filed 9-7-94; 8:45 am]
BILLING CODE 4120-01-P