[Federal Register Volume 60, Number 123 (Tuesday, June 27, 1995)]
[Rules and Regulations]
[Pages 33137-33143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15340]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 413

[BPD-794-F]
RIN 0938-AG55


Medicare Program; Date for Filing Medicare Cost Reports

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

ACTION: Final rule.

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SUMMARY: This final rule extends the time frame providers have to file 
cost reports from no later than 3 months after the close of the period 
covered by the report to no later than 5 months after the close of that 
period. This change is necessary to ensure that providers have an 
adequate amount of time to file complete and accurate cost reports. We 
are also defining what HCFA considers to be an ``acceptable'' cost 
report submission.

EFFECTIVE DATE: These regulations are effective June 27, 1995. Thus, 
for cost reporting periods ending before June 27, 1995, cost reports 
continue to be due no later than 3 months following the close of the 
cost reporting period. For cost reporting periods ending on or after 
June 27, 1995, cost reports are due no later than 5 months following 
the close of the cost reporting period.

FOR FURTHER INFORMATION CONTACT: Katie Walker (410) 966-7278.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1815(a) of the Social Security Act (the Act) requires that 
each provider participating in the Medicare program submit information 
(as requested by the Secretary) in order to determine the amount of 
payment due to the provider for services furnished under the Medicare 
program. Implementing regulations at 42 CFR 413.24(f) require that 
participating providers submit cost reports that generally cover a 
consecutive 12-month period of the provider's operations. Section 102 
of the Provider Reimbursement Manual, Part II (PRM-II), states that a 
provider may select any annual period for Medicare cost reporting 
purposes regardless of the reporting period it uses for other purposes. 
Once a provider has informed the Health Care Financing Administration 
(HCFA) of its selection, HCFA requires it to report annually thereafter 
for periods ending on the same date unless that provider's intermediary 
approves a change in the provider's reporting period. The intermediary 
makes interim payments to the provider during the provider's cost 
reporting year. Based on the annual cost report, a retroactive 
adjustment is made after the end of the provider's cost reporting year 
to bring the interim payments made during the period into agreement 
with the reimbursable amount payable to the provider. Section 
413.24(f)(2)(i) specifies that cost reports are due on or before the 
last day of the third month following the close of the period covered 
by the report. Section 413.24(f)(2)(ii) states that the intermediary 
may grant a 30-day extension of the due date, for good cause, after 
first obtaining the approval of HCFA. Section 104.A.2 of the PRM 
requires that in order to obtain an extension, the provider must submit 
a written request and obtain written approval from its intermediary 
before the cost report due date.
    A provider that voluntarily or involuntarily terminates its 
participation in the Medicare program, or experiences a change of 
ownership, must file a cost report no later than 45 days following the 
effective date of the termination of the provider agreement or the 
change of ownership, as required by Sec. 413.24(f)(2)(iii). HCFA will 
not grant an extension of the cost report due date in either of these 
situations.
    To ensure timely receipt of the cost reports, section 2231.1 of the 
Medicare Intermediary Manual, Part 2, requires that the intermediary 
send a ``reminder'' letter to the provider at the end of the second 
month following the end of the [[Page 33138]] cost reporting period. 
The letter advises the provider of the due date for filing the cost 
report and informs the provider that its interim payments will be 
reduced or suspended if the cost report is not received on or before 
the last day of the third month following the close of the period 
covered by the report. However, under Sec. 413.24(f)(2)(ii), the 
provider may, for good cause, request that the intermediary grant a 30-
day extension of the due date of the cost report. If the intermediary 
does not receive the cost report by the required due date (including an 
extension if approved), the intermediary sends the first of three 
``demand'' letters to the provider requesting the submission of the 
provider's cost report and informing the provider of the percentage by 
which its interim payment rate will be reduced. The letter also states 
that further delay in filing the cost report will result in an 
additional reduction in the interim rate and, ultimately, a suspension 
of interim payments.
    HCFA regulations at 42 CFR 405.376 set forth specific rules for the 
payment of interest on Medicare overpayments and underpayments. 
Interest is assessed unless the intermediary recoups the overpayment or 
the intermediary pays the provider an amount equal to the underpayment 
within 30 days of a ``final determination.'' When a provider does not 
file its cost report timely, all interim payments advanced for the 
period are considered overpayments, and a final determination is deemed 
to occur on the day after the date the cost report was due. Interest 
accrues on the deemed overpayment until the provider files the cost 
report, after which the usual audit rules and procedures regarding 
overpayment determinations apply.
    HCFA has established a Provider Statistical and Reimbursement 
System (PS&R) to assist intermediaries in reconciling provider cost 
reports. This system provides a number of reports to be used in 
developing and auditing provider cost reports. HCFA prepares the 
reports for each participating provider. These reports contain Medicare 
charge and reimbursement information compiled by the provider's fiscal 
year. One of these reports, the Provider Summary Report, is sent to 
providers by their intermediaries in order to assist the providers in 
preparing their cost reports. The Provider Summary Report contains 
information about charges, Medicare patient days, coinsurance, etc. 
HCFA requires the intermediaries to furnish the Provider Summary Report 
to each provider within 60 days following the end of the provider's 
fiscal year. The provider then has 30 days to submit its completed cost 
report to its intermediary (60 days if an extension has been granted.)
    Another system that provides useful cost report data is the 
Hospital Cost Report Information System (HCRIS). For purposes of 
maintaining the HCRIS data base, Medicare intermediaries currently must 
submit an extract of provider cost report data to HCFA within either 
180 days of the end of the hospital cost reporting period or 60 days of 
receipt of the cost report from the provider, whichever is later.

II. Summary of Provisions of the Proposed Regulation

    On May 25, 1994, we published a proposed rule in the Federal 
Register (59 FR 26998) to extend the due date for filing Medicare cost 
reports from 3 months following the close of a provider's cost 
reporting period to 5 months following the close of a provider's cost 
reporting period. The proposed rule also defined what HCFA considers to 
be an ``acceptable'' cost report submission. Presented below is a 
detailed explanation of these proposals and several related issues that 
were discussed in the proposed rule.

A. Due Dates for Filing Cost Report

    In response to objections from providers that believe the current 
3-month time frame for filing cost reports creates an undue burden on 
their financial departments, we proposed to increase the amount of time 
a provider has to file its cost report. Presently, under 
Sec. 413.24(f)(2)(i), a provider must file its cost report on or before 
the last day of the third month following the close of the period 
covered by the report. We proposed that a provider would be required to 
file an acceptable cost report, as defined at new Sec. 413.24(f)(5), on 
or before the last day of the fifth month following the close of the 
period covered by the report. For cost reporting periods ending on a 
day other than the last day of a month, cost reports would be due 150 
days after the last day of the cost reporting period. (In accordance 
with Sec. 405.376(e)(3), interest would not begin to accrue until the 
day following the due date of the report.)
    We also proposed to change the regulations at Sec. 413.24(f)(2)(ii) 
that allow an intermediary to grant, for good cause, a 30-day extension 
of the due date after first obtaining the approval of HCFA. Instead, we 
proposed that extensions may be granted by the intermediary only when a 
provider's operations are significantly adversely affected due to 
extraordinary circumstances over which the provider has no control. An 
example of such extraordinary circumstances might be a flood or a fire 
that forced a provider to cease operations and transfer its patients 
temporarily to other providers outside of the impacted area. The 
intermediary would still be required to obtain HCFA approval.
    In conjunction with these changes, we proposed to delete 
Sec. 413.24(f)(2)(iii), which now states that the cost report from a 
provider that voluntarily or involuntarily ceases to participate in the 
Medicare program or experiences a change of ownership is due no later 
than 45 days following the effective date of the termination of the 
provider agreement or change of ownership. Instead, providers in these 
circumstances would be permitted the same amount of time to file a cost 
report as other providers.

B. Acceptable Cost Report Submissions

    We proposed to define at Sec. 413.24(f)(5) what HCFA considers to 
be an acceptable cost report submission. Provisions of the proposed 
definition are as follows:
     All providers: The provider must complete and submit the 
required cost reporting forms, including all necessary signatures, and 
also must submit all supporting documentation required by the 
intermediary (for example, the HCFA Form 339, Provider Cost Report 
Reimbursement Questionnaire, and copies of audited financial 
statements).
     Providers that are required to file electronic cost 
reports: In addition to completing and submitting the required cost 
reporting forms, the provider also must submit its cost report in an 
electronic cost report format in conformance with the requirements 
contained in section 130 of the Electronic Cost Report (ECR) 
Specifications Manual (unless the provider has received an exemption 
from HCFA.) These requirements include the electronic file passing all 
of the level-1 edits contained in the ECR Specifications Manual. An 
acceptable cost report submission also must include all of the 
appropriate signatures. (Additional instructions concerning electronic 
submission of cost reports can be found at Sec. 413.24(f)(4), as set 
forth in our May 25, 1994 final rule with comment period (59 FR 
26960).)
    In addition, we proposed that the intermediary is to make a 
determination of acceptability within 30 days of receipt of the cost 
report. If the intermediary considers the cost report unacceptable, the 
intermediary returns it to the provider with a letter explaining the 
reasons for the rejection (for example, the cost report failed a 
[[Page 33139]] level-1 edit or included incomplete documentation). When 
the cost report is rejected, it is deemed an unacceptable submission 
and treated as if a report had never been filed. The intermediary would 
also inform the provider of the consequences of filing a late cost 
report, that is, interest would be assessed on all overpayments. 
Furthermore, if a provider does not file its cost report timely, all 
interim payments advanced for the period are considered overpayments, 
and the provider's interim payments would be suspended. Given the 
additional filing time, we believe providers should have sufficient 
time to complete and submit an acceptable cost report. Thus, we 
proposed to suspend all payments if the cost report is not filed within 
the 5-month timeframe. The provider should make the necessary 
corrections to the cost report and resubmit the cost report to the 
intermediary as quickly as possible.

C. Related Issues
    As a result of the proposed regulation changes, the timing of 
provider reminder letters, PS&R Summary Reports and the submission of 
HCRIS data would also be affected. Therefore, we stated our intention 
to revise the Medicare Intermediary Manual and the PRM as necessary to 
account for these changes.
     Reminder Letters. Because we proposed to lengthen the 
amount of time a provider has to file its cost report, we also 
indicated that we would change the deadline for the intermediaries to 
send reminder letters to providers to notify them that cost reports are 
due. The revised deadline would be by the end of the fourth month after 
the close of the cost reporting period. The reminder letter may be sent 
at the same time an intermediary sends the PS&R Summary Report to the 
providers, but an intermediary may not send the reminder letter before 
sending the PS&R Summary Report. The reminder letter will inform the 
provider that if the cost report is not received by the end of the 
fifth month following the close of the cost reporting period (or 150 
days, whichever is applicable), the provider's interim payments will be 
suspended in their entirety the following day, rather than just reduced 
(as the Medicare Intermediary Manual now provides).
     PS&R Summary Report. In conjunction with the change in the 
cost report due dates, we also stated our intention to revise our 
Manual instructions to extend the time that HCFA allows the 
intermediaries to furnish the PS&R Summary Report to providers. 
Intermediaries would be required to furnish the PS&R Summary Report by 
the last day of the fourth month following the end of the provider's 
cost reporting period, instead of 60 days following the end of the 
provider's cost reporting period, as is currently the practice. For 
cost reporting periods ending on a day other than the last day of a 
month, intermediaries would be required to furnish the PS&R Summary 
Report by the 120th day following the end of a provider's cost 
reporting period. If the provider receives the PS&R Summary Report 
later than the last day of the fourth month (or the 120th day, if 
applicable) following the end of its cost reporting period, the 
provider would have 30 days from receipt to file its cost report. Thus, 
under the proposed policy, a provider still would have 30 days after 
receipt of the PS&R Summary Report to complete and submit the cost 
report to the intermediary.
     HCRIS Data. Presently, the intermediary must submit HCRIS 
data to HCFA within either 180 days of the end of the hospital cost 
reporting period or 60 days of receipt of the cost report from the 
provider, whichever is later. In conjunction with the proposed 
extension of the deadline for filing a cost report, we indicated that 
we would revise the Medicare Intermediary Manual to instruct 
intermediaries to submit HCRIS data to HCFA within 210 days of the last 
day of the hospital cost reporting period.
    In addition, we stated our intention to revise our Manual 
instructions to specify that if the intermediary is late in sending the 
PS&R Summary Report to the providers, the amount of time for the 
intermediary to submit the HCRIS data would be reduced by the same 
number of days the PS&R Summary Report was late. For example, if the 
intermediary sends the PS&R Summary Report to the provider 10 days 
late, the provider would still have 30 days from receipt of the PS&R 
Summary Report to file its cost report. However, the time remaining for 
the intermediary to submit the HCRIS data would be reduced by a 
corresponding 10 days (that is, from 60 to 50 days following receipt of 
the cost report.) In such cases, the intermediary still would have a 
total of 210 days from the end of the hospital cost reporting period to 
submit HCRIS data to HCFA.
    As noted above, the overall effect of the proposal to extend the 
time frame for providers to file cost reports would be that HCFA would 
not have access to updated HCRIS data until 210 days after the end of a 
given cost reporting period. This change would not delay significantly 
the availability of the analytical files (which are updated quarterly) 
in HCRIS, and it should improve the accuracy of initial cost report 
data.

III. Discussion of Public Comments

    We received 43 timely comments on the May 25, 1994 proposed rule 
(59 FR 26998) from providers, intermediaries, certified public 
accounting firms, and others. In general, commenters expressed strong 
support for our proposals. Specific questions raised by commenters are 
addressed below.
    Comment: Many commenters asked when the new deadline for filing 
cost reports would take effect.
    Response: This final rule is effective June 27, 1995. How the new 
5-month deadline affects individual providers will depend on when a 
provider's cost reporting period ends. That is, a provider with a cost 
reporting period that ends before the effective date of this final rule 
must file its report on or before the last day of the third month 
following the close of the period covered by the report. A provider 
with a cost reporting period that ends on or after the effective date 
of this final rule must file its cost report on or before the last day 
of the fifth month following the close of the period covered by the 
report (or, if applicable, within 150 days of the last day of the cost 
reporting period).
    Comment: One commenter asked that we clarify when a cost report is 
considered to be filed, for purposes of meeting the filing deadline. 
The commenter believes that the timeliness of a cost report should be 
determined based on when a provider sends the report rather than when 
the intermediary receives it. The commenter also requested 
clarification on when the 30-day period begins for an intermediary to 
determine the acceptability of a cost report.
    Response: In accordance with section 2219.4C of the Medicare 
Intermediary Manual, a cost report must be postmarked by its due date 
to be considered timely filed. This requirement applies regardless of 
whether the provider furnishes a hard copy of its cost report or a 
diskette version. If a cost report is due on a Saturday, Sunday, or 
Federal holiday, the cost report is considered timely filed if 
postmarked by the following work day.
    The 30 days for an intermediary to determine the acceptability of a 
cost report begins on the date that the intermediary receives the cost 
report, rather than the date the provider files it. (We generally allow 
up to a 7-day grace period between the postmarked date and the date the 
cost report is received [[Page 33140]] by the intermediary.) If a 
provider files a cost report early and receives a notice of rejection 
before the end of the fifth month, the provider would have the 
remaining days in that 5-month period to file a corrected cost report. 
If the corrected cost report is filed by the end of the fifth month, it 
would be considered timely. If a provider files a cost report that is 
rejected by the intermediary, and the provider subsequently is unable 
to file a corrected report before the 5-month period has elapsed, the 
cost report is considered late. The intermediary then initiates the 
suspension of interim payments and assessment of interest against 
payments made to the provider for the fiscal period.
    Comment: One commenter suggested that we eliminate the instructions 
in Section 2413.A.3 of the PRM-I that permit an additional 30 days for 
filing a certified cost report.
    Response: Under the new due date policy set forth in this rule, all 
cost reports are due no later than 5 months following the close of a 
provider's cost reporting period. In view of this change, we believe 
that the additional 30 days for filing a certified cost report is no 
longer necessary. Thus, as the commenter suggested, we intend to revise 
the manual accordingly.
    Comment: Several commenters pointed out that providers may be 
required to file cost reports sooner than 5 months after the close of a 
cost reporting period. For example, one commenter cited a New York 
State requirement that providers file cost reports within 4 months of 
the close of their cost reporting periods, rather than within the 
Federal deadline of 5 months. Thus, the commenter believes that 
affected providers would need the PS&R Summary Reports no later than 3 
months following the end of their cost reporting periods instead of the 
4 months reflected in our revised policy.
    Another commenter believes that providers that are reimbursed on a 
cost basis may choose to file their cost reports sooner than 5 months 
after the close of their cost reporting periods in order to avoid 
possible delays in lump sum adjustments and interim rate adjustments.
    Response: We recognize that there may be State requirements, or 
other requirements, that a provider file its cost report sooner than 5 
months from the last day of its cost reporting period. In these 
situations, a provider should contact the intermediary and request that 
the intermediary furnish the PS&R Summary Report to the provider 30 
days before the due date of the cost report. We emphasize that it is 
the provider's responsibility to ascertain from the intermediary the 
amount of time needed for the intermediary to submit the PS&R Summary 
Report. The provider should make any such request early enough (as 
determined by the intermediary) to give the intermediary sufficient 
time to provide the PS&R Summary Report to the provider in time for the 
provider to meet its filing due date. Once again, each intermediary 
determines the amount of time it needs to submit the PS&R to the 
provider.
    Thus, our general policy in situations where providers need their 
PS&R Summary Reports before they would normally receive them is that 
each provider should contact its intermediary to obtain the PS&R on an 
expedited basis. However, this policy could prove cumbersome in 
situations where most or all of an intermediary's providers face a 
similar State-imposed deadline, possibly resulting in a large volume of 
individual requests for expedited PS&Rs. In such a situation, we would 
strongly encourage the State to work with affected intermediaries and 
providers to develop a more efficient means of addressing a widespread 
need for PS&Rs before the reports are required under Medicare.
    As a commenter suggested, some providers may wish to file their 
cost reports earlier than the 5-month deadline of their own accord. 
These providers too should contact their intermediaries with their 
requests that the PS&R Summary Reports be furnished earlier than the 
usual timeframe of 4 months after the close of a provider's cost 
reporting period. The providers should request the PS&R in time to 
allow the fiscal intermediary no less than 30 days to prepare the PS&R.
    We note that an intermediary is required to provide only one PS&R 
Summary Report to each provider. If a provider that requests its PS&R 
Summary Report early subsequently requests a later PS&R, the subsequent 
version of the PS&R will be furnished by the intermediary at the 
provider's expense.
    Comment: Several commenters believe that we should include 
situations that reasonably impact the provider's ability to file its 
cost report timely, such as changes in key provider personnel, among 
the acceptable ``circumstances beyond the provider's control'' for 
granting an extension to a provider for filing its cost report. Other 
commenters are concerned that an intermediary's operations (such as 
audits, desk reviews, and settlements) could impact on a provider's 
ability to timely file cost reports.
    Response: Under revised Sec. 413.24(f)(2)(ii), an extension of the 
due date for filing a cost report may be granted by the intermediary 
only when a provider's operations are significantly adversely affected 
due to extraordinary circumstances over which the provider has no 
control, such as flood or fire. Although this policy constitutes a more 
stringent standard for a filing extension than the ``good cause'' 
criterion that has been in effect, we believe that this change is 
reasonable and necessary in conjunction with the change to a 5-month 
deadline for filing the cost report. Even for providers that routinely 
have obtained 30-day ``good cause'' filing extensions beyond the 
previous 3-month deadline, the new 5-month deadline allows 
approximately 30 additional days to file a cost report.
    We recognize that personnel changes create workload problems for 
the provider. In general, however, we consider personnel changes and 
varying workload demands to be acknowledged parts of any provider's 
business operations rather than ``circumstance over which a provider 
has no control.''
    With regard to the commenters' concern that an intermediary's 
operations may impact on a provider's ability to file cost reports on a 
timely basis, we note that in any case where an intermediary is late in 
furnishing a PS&R Summary Report, a provider would always be allowed 30 
days after receipt of the PS&R Summary Report to complete and submit 
its cost report to the intermediary.
    As always, intermediaries and HCFA will consider requests for 
extensions on a case-by-case basis. As the regulations reflect, 
however, in view of the additional time now permitted for filing a cost 
report, we believe the standard for requesting an extension should be 
stringent.
    Comment: Two commenters objected to our proposal that the deadline 
for a provider that is changing ownership or terminating to file its 
cost report be extended from 45 days to 5 months following change of 
ownership or termination. The commenters believe that this change may 
result in the intermediary finding it difficult to collect overpayments 
made to the provider.
    Response: Our experience is that the current 45-day timeframe for a 
provider that is changing ownership or terminating often is not 
sufficient for an intermediary to supply the provider with its PS&R 
Summary Report and then for the provider to submit an accurate cost 
report to its intermediary. We believe that extending the due date for 
these providers' cost reports to 5 [[Page 33141]] months following the 
date of termination or change of ownership, consistent with the 
requirement for other providers, will allow these providers sufficient 
time to gather and reconcile their data and submit complete and 
accurate cost reports. Although we recognize that the extension in the 
filing timeframe may result in difficulties in collecting overpayments, 
on balance, we believe that these potential problems are outweighed by 
the advantages of a consistent policy and more accurate reporting. 
Intermediaries should be aware of the potential for overpayment and, in 
the event of an overpayment, should begin collection of any overpayment 
at the earliest possible time.
    Comment: Many commenters addressed our proposal that an 
intermediary submit the PS&R Summary Report to a provider within 4 
months (or 120 days) of the close of the provider's cost reporting 
period. Several commenters requested that the due date for the PS&R 
Summary Report continue to be 60 days following the close of a 
provider's cost reporting period; others requested that the due date be 
extended to 90 days rather than the proposed 120 days. These commenters 
believe that extending the due date for the PS&R Summary Report from 60 
days to 120 days offers obvious benefits to the intermediary. However, 
the commenters stated that it is not equitable to give the intermediary 
an additional 2 months to provide the PS&R Summary Report to the 
provider, while the provider must continue to file its cost report 
within 30 days of receipt of the PS&R Summary Report.
    Response: The purpose of the PS&R Summary Report is to assist the 
providers in reconciling their data so that they can prepare and file 
an accurate and timely cost report. We realize that providers would 
like to receive the PS&R Summary Reports as early as possible. We note, 
however, that the providers should be maintaining ongoing records to be 
used for cost reporting purposes and the PS&R Summary Report should be 
used as a tool in reconciling these ongoing records. In our opinion, 30 
days is ample time for this reconciliation.
    We believe that providing an additional 60 days for intermediaries 
to submit PS&R Summary Reports to providers ensures that intermediaries 
can furnish more accurate and complete PS&R data to providers, which in 
turn results in providers requiring less time to reconcile the PS&R 
data with their records. In addition, under the new timeframes, 
providers will have 2 more months to prepare their books and records, 
complete the necessary audits, and develop the financial statements and 
reports that are needed before they can complete the cost reporting 
forms.
    Of course, if the PS&R is received later than 120 days after the 
end of the cost reporting period, a provider still would have 30 days 
from the date of receipt to file its cost report.
    Comment: One commenter requested that manual instructions be 
updated to assist intermediaries in completing the PS&R Summary Report.
    Response: The Medicare Intermediary Manual, Part 2, is being 
revised to provide updated instructions for completing the PS&R Summary 
Report.
    Comment: Several commenters believe that 210 days is insufficient 
time for an intermediary to submit HCRIS data to HCFA.
    Response: Presently, the intermediary must submit HCRIS data to 
HCFA within either 180 days of the end of the hospital cost reporting 
period or 60 days of receipt of the cost report from the provider, 
whichever is later. The current 180-day deadline for an intermediary to 
submit HCRIS data to HCFA is based on the following: (1) 90 days for a 
provider to file its cost report, (2) 30 days for an extension of time 
to file (available to providers with good cause), and (3) an additional 
60 days for the intermediary to submit HCRIS data to HCFA. In 
conjunction with the extension of the deadline for filing a cost 
report, we are revising the Intermediary Manual to instruct 
intermediaries to submit HCRIS data to HCFA within 210 days of the last 
day of the hospital cost reporting period. The revised deadline is 
based on the following: (1) 150 days for filing a cost report; and (2) 
60 days for submission of HCRIS data to HCFA.
    Thus, both the current process, and the new process being 
implemented through this final rule, give intermediaries 60 days after 
cost reports are filed to submit HCRIS data to HCFA. The change from an 
overall time frame for the submission of HCRIS data of 180 days after 
the close of a cost reporting period to 210 days after the close of a 
cost reporting period is a logical end product of the 2-month increase 
in the timeframe for a provider to file its cost report combined with 
the elimination of the routine 30-day filing extension.
    These changes in no way increase the burden or time constraints on 
intermediaries. Rather, we believe that these changes will ease the 
burden on intermediaries by allowing them additional time to prepare 
PS&R Summary Reports, resulting in more accurate and complete PS&R data 
to the providers, in turn producing more accurate cost reports back to 
the intermediaries. We note that the continuing growth in the 
proportion of cost reports being filed electronically should also 
produce more accurate cost reporting. With these increases in accuracy, 
intermediaries should have to expend fewer resources in determining the 
acceptability of cost reports, and intermediary requests to providers 
for additional data to meet HCRIS requirements should be minimized. 
Therefore, we believe the overall 210-day timeframe for reporting HCRIS 
data is sufficient.
    Comment: Several intermediaries are concerned about workload 
demands that result from a large percentage of providers having cost 
reporting periods that end at the same time. The commenters are 
concerned that, with a large percentage of their providers having 
common year ending dates, the time allotted for the intermediary to 
determine the acceptability of these cost reports is insufficient.
    One commenter is concerned that its current workload patterns will 
be disrupted by our revised policy of allowing providers an additional 
2 months to submit their cost reports.
    Response: We recognize that some intermediaries have many providers 
with common year-ending dates, resulting in cyclical increases in an 
intermediary's workload. The change in the cost reporting deadline will 
have an impact on when these cyclical periods of increased workload 
occur, but not on the amount of work involved. In fact, as discussed 
above, the extended time frames for cost report submission should 
result in increased accuracy and, consequently, fewer resources being 
expended by the intermediary in determining the acceptability of the 
provider's cost report. The requirement that hospitals file their cost 
reports electronically (see our May 25, 1994 final rule (59 FR 26960)), 
combined with the continued growth in electronic filing among other 
providers, will also contribute to reducing the workload associated 
with determining the acceptability of cost reports. Thus, we believe 
that intermediaries should be able to determine the acceptability of 
cost reports within 30 days of receiving them, even when the 
intermediary receives many reports concurrently.
    We recognize that the current workload patterns of intermediaries 
will undergo a one-time disruption as a result of the new cost 
reporting deadline. In the short-term, this change may inconvenience 
some intermediaries, while benefiting others, depending to some extent 
on when cost reporting years end for each [[Page 33142]] intermediary's 
various providers. In the long run, however, we believe that extending 
the cost reporting deadline and the accompanying increases in the 
accuracy of cost reports, should prove advantageous to both 
intermediaries and providers.
    Comment: A commenter is concerned that electronically-filed cost 
reports may not be compatible with intermediary software, possibly 
making it difficult for an intermediary to produce a hard copy of the 
cost report. The commenter also requested further clarification 
regarding rejection of the cost report for failure to pass level-1 
edits as well as for failure to furnish the supporting documentation 
that a provider must submit with the cost report.
    Response: As discussed in section II.B of this preamble, a provider 
that files an electronic cost report must submit its cost report in an 
electronic format in conformance with the requirements contained in 
section 130 of the Electronic Cost Report (ECR) Specifications Manual 
(unless the provider has received an exemption from HCFA.) These 
requirements include the electronic file passing all of the fatal 
(level-1) edits contained in the ECR Specifications Manual.
    The criteria for an acceptable electronic cost report also are 
addressed in chapter 1 of the PRM-II, which discusses the required 
format for electronic filing and the procedures for specialized 
providers, such as providers with all-inclusive rate structures and 
low-Medicare utilization providers. (See Chapter 28 of the PRM-II for 
the specified level-1 edits.) All Automated Data Reporting (ADR) 
vendors and commercial vendors must adhere to these edits when 
developing the software used by the provider to create the electronic 
cost report file. In view of the requirement that vendor, provider and 
intermediary software be compatible, and the requirement that an 
acceptable cost report must pass all level-1 edits, we do not 
anticipate that intermediaries will have difficulty in producing a hard 
copy of the cost reports.
    The requirements for supporting documentation that each provider 
type must submit with its cost report are set forth in various chapters 
of the PRM-II. In the May 25, 1994 proposed rule (59 FR 27002), we 
specified under proposed Sec. 413.24(f)(5)(i) that in order for a cost 
report submission to be considered acceptable, a provider must submit 
the required cost reporting forms and all supporting documentation 
required by program instructions. Under proposed 413.24(f)(5)(iii), any 
cost report not considered acceptable would be rejected and thus 
treated as if it had never been filed.
    As we considered the public comments and developed this final rule, 
we realized that it was not necessary or efficient for an intermediary 
to reject a cost report summarily based solely on the initial absence 
of complete supporting documentation. Therefore, we have revised 
proposed Sec. 413.24 by deleting the provision that a cost report must 
include all required supporting documentation to be considered 
acceptable and thus avoid rejection. We believe that this change will 
benefit both intermediaries and providers by permitting the 
intermediary's review process to continue in cases where a provider 
inadvertently fails to submit complete supporting documentation.
    We emphasize that, despite this change, providers remain 
responsible for submitting all supporting documentation required under 
applicable program instructions. However, we are instructing 
intermediaries that a cost report is to be rejected for lack of 
supporting documentation only if it does not include the Provider Cost 
Reimbursement Questionnaire (HCFA Form 339). Additionally, cost reports 
for teaching hospitals will be rejected for lack of supporting 
documentation if the cost report does not include a copy of the Intern 
and Resident Information System (IRIS) diskette. These requirements now 
are specified in the Uniform Desk Review Program published in Part 4 of 
the Medicare Intermediary Manual, and we are now setting them forth 
under Sec. 413.24(f)(5) as well. Otherwise, if a cost report does not 
include required supporting documentation, the intermediary contacts 
the provider in writing and requests the missing supporting 
documentation. If the documentation is not received from the provider 
within 15 days from the date of receipt of the intermediary request 
(allowing 7 days for mailing), the intermediary may begin suspending 
payments until the supporting documentation is received. We are 
revising the Medicare Intermediary Manual and chapter 1 of the PRM-II 
to reflect this policy.
    Comment: One commenter stated that the requirement that a provider 
submit supporting documentation may be in conflict with the American 
Institute of Certified Public Accountant (AICPA) recommendations 
concerning proper disclosure. The commenter believes that the required 
supporting documentation could be considered confidential.
    Response: To carry out the settlement process, an intermediary must 
request sufficient documentation to assure the accuracy and 
allowability of costs reported on the cost report. We do not believe 
that this information is necessarily confidential in nature. 
Nevertheless, the intermediary will retain the data and maintain its 
confidentiality. Generally, the release of provider information is 
limited to that information contained in the provider's cost report. 
Supporting documentation, or documentation obtained through audit, is 
not considered releasable to the public under the Freedom of 
Information Act.
IV. Provisions of the Final Regulations

    This rule adopts the provisions of the proposed rule as final with 
the exception of one change at Sec. 413.24(f)(5)(i) concerning our 
proposed definition of an acceptable cost report submission. As 
discussed above in section III, we have eliminated the proposed 
requirement that a cost report must include all supporting 
documentation in order to be considered an acceptable submission.

V. Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) unless we certify that a final rule will not have a 
significant economic impact on a substantial number of small entities. 
This final rule extends from 3 months to 5 months after the close of a 
cost reporting period the time frame for providers to file their cost 
reports. It also defines what HCFA considers to be an ``acceptable'' 
cost report submission. Neither of these changes will have a 
significant economic impact on providers. Therefore, we have 
determined, and we certify, that this rule would not have a significant 
effect on a substantial number of small entities. Thus, we are not 
preparing a regulatory flexibility analysis.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact statement if a final rule may have a significant economic 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.
    We are not preparing a regulatory impact statement since we have 
determined, and we certify, that this final rule would not have a 
significant economic impact on the operations of a 
[[Page 33143]] substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget.

VI. Other Required Information

A. Waiver of 30-Day Delay in Effective Date

    We normally provide a delay in the effective date of 30 days after 
publication for final rules. However, we may waive the delay in the 
effective date if we find good cause that a delay in the effective date 
is impracticable, unnecessary, or contrary to the public interest.
    As explained above, this final rule extends the time frame for 
providers to file cost reports from 3 months after the close of a cost 
reporting period to 5 months after the close of a cost reporting 
period. We believe this change will be beneficial to providers and that 
a delay in implementing this change would serve no purpose. Thus, we 
have concluded that in this instance it would be unnecessary and 
contrary to the public interest to provide for a 30-day delay in the 
effective date of this final rule. Therefore, we find good cause to 
waive the usual 30-day delay in effective date.

B. Paperwork Reduction Act

    Section 413.24 contains information collection and recordkeeping 
requirements concerning provider cost reports 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 burdens associated 
with filing cost reports have been approved by OMB. This final rule 
merely changes the date on which cost reports are due and thus has no 
effect on the information collection and recordkeeping burden. However, 
the information collection and recordkeeping requirements contained in 
Sec. 413.24 are not effective until they have been approved by OMB. We 
will publish a notice in the Federal Register when OMB approval has 
been obtained. Organizations and individuals desiring to submit 
comments on the information collection and recordkeeping requirements 
set forth in Sec. 413.24 should direct them to the Office of Management 
and Budget, Human Resources and Housing Branch, Room 10235, New 
Executive Office Building, Washington, D.C., 20503, Attention: Allison 
Eydt (desk officer for HCFA).

List of Subjects in 42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

    42 CFR Chapter IV, part 413, is amended as follows:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES

    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Secs. 1102, 1122, 1814(b), 1815, 1833 (a), (i), and 
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act 
(42 U.S.C. 1302, 1320a-1, 1395f(b), 1395g, 13951 (a), (i), and (n), 
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).

Subpart B--Accounting Records and Reports

    2. In Sec. 413.24, paragraph (f)(2) is revised, and a new paragraph 
(f)(5) is added to read as follows:


Sec. 413.24  Adequate cost data and cost finding

* * * * *
    (f) * * *
    (2) Due dates for cost reports. (i) Cost reports are due on or 
before the last day of the fifth month following the close of the 
period covered by the report. For cost reports ending on a day other 
than the last day of the month, cost reports are due 150 days after the 
last day of the cost reporting period.
    (ii) Extensions of the due date for filing a cost report may be 
granted by the intermediary only when a provider's operations are 
significantly adversely affected due to extraordinary circumstances 
over which the provider has no control, such as flood or fire.
* * * * *
    (5) An acceptable cost report submission is defined as follows:
    (i) All providers--The provider, must complete and submit the 
required cost reporting forms, including all necessary signatures. A 
cost report is rejected for lack of supporting documentation only if it 
does not include the Provider Cost Reimbursement Questionnaire. 
Additionally, a cost report for a teaching hospital is rejected for 
lack of supporting documentation if the cost report does not include a 
copy of the Intern and Resident Information System diskette.
    (ii) For providers that are required to file electronic cost 
reports--In addition to the requirements of paragraphs (f)(4) and 
(f)(5)(i) of this section, the provider must submit its cost reports in 
an electronic cost report format in conformance with the requirements 
contained in the Electronic Cost Report (ECR) Specifications Manual 
(unless the provider has received an exemption from HCFA).
    (iii) The intermediary makes a determination of acceptability 
within 30 days of receipt of the provider's cost report. If the cost 
report is considered unacceptable, the intermediary returns the cost 
report with a letter explaining the reasons for the rejection. When the 
cost report is rejected, it is deemed an unacceptable submission and 
treated as if a report had never been filed.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 30, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-15340 Filed 6-26-95; 8:45 am]
BILLING CODE 4120-01-P