[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Rules and Regulations]
[Pages 63740-63749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30057]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 401, 403, 405, 411, 413, 447, and 493

[BPO-118-FC]
RIN 0938-AC99


Medicare Program; Changes Concerning Suspension of Medicare 
Payments, and Determinations of Allowable Interest Expenses

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

ACTION: Final rule with comment period.

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SUMMARY: We are revising the Medicare regulations concerning suspension 
of Medicare payments and determination of allowable interest expenses. 
These changes are being made to conform the regulations with law and 
established policy, to provide necessary clarification, and to protect 
the Government's interests.

DATES: Effective date: These regulations are effective January 2, 1997.
    Comment Date: We are providing a comment period on the issues 
described in section V of this preamble. Written comments will be 
considered if we receive them at the appropriate address, as provided 
below, no later than 5 p.m. on January 31, 1997.

ADDRESSES: Mail written comments (an original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPO-118-FC, P.O. Box 26688, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (an original 
and three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept comments 
by facsimile (Fax) transmission. In commenting, please refer to file 
code BPO-118-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) 690-7890).


[[Page 63741]]


FOR FURTHER INFORMATION CONTACT: James Conrad (suspension of payments, 
fraud and abuse), (410) 786-6976; Ward Pleines (all other provisions), 
(410) 786-4528.

SUPPLEMENTARY INFORMATION:

I. Suspension of Medicare Payments

A. Background

    Sections 1815 (a) and (d) and 1833(j) of the Social Security Act 
(the Act) and the Federal Claims Collection Act of 1966, as amended, 
(31 U.S.C. 3711) allow a Medicare contractor (that is, an intermediary 
or carrier) that has the opportunity to offset an overpayment to do so. 
This provision is set forth in existing regulations at 42 CFR 401.607 
(a) and (d) and 405.1803(c). In addition, existing Sec. 405.370 
provides that payments authorized to be made to providers and suppliers 
under the Medicare program may be suspended, in whole or in part, by a 
Medicare contractor when the contractor has determined that the 
provider or supplier has been overpaid or when the contractor has 
reliable evidence that either an overpayment exists or that the 
payments to be made may not be correct. Existing Sec. 405.370(b), 
however, requires that, in order to proceed with a suspension of 
payment, the contractor must have determined that ``the suspension of 
payments, in whole or in part, is needed to protect the program against 
financial loss.'' Section 405.370 does not specify the disposition of 
suspended payments, nor do the regulations address how long payment may 
be suspended. Also, the existing regulations do not differentiate 
between the terms ``suspension of payments,'' ``offset,'' and 
``recoupment.''
    In addition, the existing regulations do not clearly specify the 
procedures applicable when fraud is suspected; they merely provide that 
payment may be suspended without advance notice and that the provider 
or supplier will be notified of the suspension and the reasons for it. 
(When the existing regulations were published (May 27, 1972, 37 FR 
10723), the HHS Office of Inspector General (OIG), which is responsible 
for conducting investigations involving fraud and willful 
misrepresentation, had not been created, and the Social Security 
Administration (SSA) administered the Medicare program. Suspension of 
Medicare payment based on fraud or abuse was accomplished by Medicare 
contractors in consultation with SSA, at the direction of the Bureau of 
Health Insurance, the SSA component then responsible for Medicare. 
Therefore, the regulations reflect only the role of intermediaries and 
carriers.)
    Under current law and delegations of authority, HCFA is responsible 
for operating the Medicare program. The OIG is responsible for 
conducting investigations and identifying wrongdoers and abusers of HHS 
programs so appropriate remedies can be applied, as well as identifying 
weaknesses or problems in the management of HHS programs. (See the 
Statements of Organization, Function, and Delegations of Authority, for 
HCFA and for OIG (49 FR 35247, published September 6, 1984, and 54 FR 
46775, published November 7, 1989, respectively).)

B. Provisions of Proposed Rule

    On August 22, 1988, we published a proposed rule, at 53 FR 31888, 
in which we proposed to eliminate the requirement that, before 
suspension of payment, the contractor make a determination that 
suspension of payments to a provider or supplier is needed to protect 
the program against financial loss. We also proposed clarifying our 
policy regarding the disposition of suspended payments. As proposed, 
suspended funds would first be applied to liquidate, in whole or in 
part, overpayments that are the basis for the suspension. Any remaining 
suspended funds would be applied to any other determined Medicare 
overpayments. In the absence of a further obligation to HHS (such as 
Medicaid overpayments) or other legal requirement (such as civil money 
penalties or an Internal Revenue Service levy), the excess would be 
released to the provider or supplier. Readers who are interested in the 
details of our proposals are referred to the proposed rule.

(Note that, in order to expedite certain changes that were contained in 
the August 1988 proposed rule, that is, proposed changes pertaining to 
the assessment of interest charges on overpayments and underpayments, 
we proceeded with them in a separate final rule, published in the 
Federal Register on July 10, 1991, at 56 FR 31332. The provisions of 
the July 1991 rule appear at Sec. 405.376. The remaining proposed 
changes are contained in this final rule.)

C. Summary of and Responses to Public Comments

    In response to the proposed rule, we received 12 items of 
correspondence, each containing comments on the issue of suspension of 
Medicare payments. The commenters included health care facilities, 
health care associations, a Medicare contractor, and an accounting 
firm. Three commenters believed that the changes would make suspension 
more effective, would reduce administrative costs, and would have 
little effect on current practice. The other commenters were primarily 
concerned with the cash flow problems that could result from the 
suspension of payment without a 30-day notice. Their specific concerns 
are presented below. Note that, unless otherwise indicated, references 
in our responses to sections of the regulations are to the sections in 
this final rule.
    Comment: Several commenters expressed concern that the proposed 
changes concerning suspension of Medicare payments in cases of 
overpayments would allow an intermediary or carrier to withhold all 
payment to a provider or supplier without notification until an 
overpayment was recouped and that this could have a devastating effect 
on the cash flow of providers and suppliers, possibly even causing 
bankruptcies.
    Response: There appears to be some confusion and misunderstanding 
of the scope of the changes we proposed to make in this area. We 
generally do not intend to suspend payments without at least a 15-day 
notice of this action to the provider or supplier. (There are three 
exceptions to giving prior notice: (1) When a suspension is imposed in 
accordance with section 1815(a) or section 1833(e) of the Act because 
the provider or supplier, respectively, has failed to submit 
information requested by the Medicare contractor that is needed to 
determine the amounts due the provider or supplier; (2) when we or the 
Medicare contractor determines that the Medicare Trust funds would be 
harmed by giving prior notice; and (3) at our discretion in cases 
involving fraud or misrepresentation.) Our proposal merely intended to 
eliminate the requirement for a separate determination that a 
suspension of payments is necessary to protect Medicare against 
financial loss before contractors can proceed with the suspension. In 
addition, in this final rule, we clarify that at least a 15-day notice 
to the provider or supplier is given in cases of recoupment or offset, 
terms that are defined in this rule.
    Payment is recouped or offset in those cases in which the amount of 
an overpayment has been determined, and any future payment to a 
provider or supplier will be offset (that is, applied) against the 
identified overpayment generally until the amount of the overpayment is 
recovered. Offset or recoupment constitutes constructive payment to the 
provider or supplier. Payment is suspended if we or the

[[Page 63742]]

Medicare contractor has determined that the provider or supplier has 
been overpaid but the actual amount of the overpayment has not yet been 
determined. Therefore, additional effort is required before the amount 
of the overpayment can be determined. We believe that the notice 
requirement provides ample time for providers and suppliers to submit 
evidence to the intermediary or carrier to prevent suspension, 
recoupment, or offset and to avoid cash flow problems. However, in 
response to the commenters' concerns and in an effort to eliminate 
confusion, in this final rule we have--
     Added, at Sec. 405.370, the following definitions of 
``suspension of payment,'' ``offset,'' and ``recoupment.''
    Offset. The recovery by Medicare of a non-Medicare debt by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. (Examples are Public Health Service debts or Medicaid 
debts recovered by HCFA).
    Recoupment. The recovery by Medicare of any outstanding Medicare 
debt by reducing present or future Medicare payments and applying the 
amount withheld to the indebtedness.
    Suspension of payment. The withholding of payment by an 
intermediary or carrier from a provider or supplier of an approved 
Medicare payment amount before a determination of the amount of the 
overpayment exists.
     Reorganized and revised the provisions related to 
suspension of payment in order to set forth our policy more clearly 
(see Sec. 405.372, ``Proceeding for suspension of payment''). These 
changes from the proposed rule have been made to improve the 
readability of the regulations and to clearly set forth the existing 
process and policy; we have not made any substantive changes that were 
not included in our proposed rule or that are not being made in 
response to public comment. (Note that, because of the restructuring of 
the provisions related to suspension, it was necessary to also 
reorganize and revise other provisions set forth in existing 
Secs. 405.370 through 405.373. Again, in accomplishing this 
reorganization, we have not made any substantive changes that were not 
included in our proposed rule or that are not being made in response to 
public comment.) We will, however, consider timely comments from anyone 
who believes that, in making these changes, we have unintentionally 
altered the meaning.
     Revised existing Sec. 405.374, ``Collection and compromise 
of claims for overpayment'' by changing the section heading to 
``Suspension and termination of collection action and compromise of 
claims for overpayment'' to better describe the section's contents (and 
redesignated it as Sec. 405.376). For the same reason, we have revised 
the headings of paragraph (e) (from ``Basis for terminations'' to 
``Basis for termination of collection action'') and paragraph (f) (from 
``Basis for suspension'' to ``Basis for suspension of collection 
action'').
     Revised existing Sec. 405.375, ``Withholding Medicare 
payments to recover Medicaid overpayments'' (and redesignated it as 
Sec. 405.377), to clarify our policy with regard to withholding 
Medicare payments to offset Medicaid overpayments.
    We are also taking this opportunity to create two separate 
provisions to address two separate situations concerning failure to 
furnish information. Current regulations at Sec. 405.371(d) (``Failure 
to furnish information requested'') provide for suspending payments in 
all situations in which information is not supplied, including when a 
provider fails to file a cost report. It has been our long-standing 
policy that, if a provider has failed to timely file an acceptable cost 
report, payment is immediately suspended until an acceptable cost 
report is filed. This regulation and policy are based on sections 
1815(a) and 1833(e) of the Act. Section 1815(a) provides, in part, that 
``no  * * * payments shall be made to any provider unless it has 
furnished such information as the Secretary may request in order to 
determine the amounts due such provider under this part [Medicare Part 
A] for the period with respect to which the amounts are being paid or 
any prior period.'' Section 1833(e) of the Act contains similar 
language with respect to payments made under Part B of Medicare.
    In this final rule we set forth a separate provision, new 
Sec. 405.371(c), specifically addressing the suspension of payments in 
the case of unfiled cost reports. Section 405.371(c) specifies that, if 
a provider has failed to timely file an acceptable cost report, payment 
to the provider is immediately suspended until a cost report is filed 
and determined by the intermediary to be acceptable. This section 
further specifies that, in the case of an unfiled cost report, the 
provisions of Sec. 405.372 (``Proceeding for suspension of payment'') 
do not apply. We believe that this is consistent with the above-cited 
mandate that ``no payment shall be made * * * unless it has furnished 
such information * * *.''
    In addition, we are retaining, with editorial modifications, the 
provision in current regulations at Sec. 405.371(d) to apply to all 
instances of failure to supply information except those in which a cost 
report is not filed. This provision is set forth at Sec. 405.372(a)(2) 
in this final rule. As in the current regulations, it specifies that 
the prior notice and rebuttal provisions do not apply if the provider 
failed to submit evidence requested by the intermediary that is needed 
to determine the amounts due the provider under the Medicare program. 
However, unlike new Sec. 405.371(c) (``Suspension in the case of 
unfiled cost reports''), the time limitation on suspension established 
by this final rule, and discussed in the response to the following 
comment, applies.
    Comment: Since immediate suspension of payments could cause great 
hardship to many Medicare providers and suppliers, one commenter 
believed it only fair to continue the requirement of a separate 
determination that suspension is needed to protect the program from 
financial loss.
    Response: As discussed above, all providers and suppliers will 
generally receive prior notification of the suspension, recoupment, or 
offset action and have at least 15 days to reply. The notification of 
overpayment will state that, if there is no reply within the timeframe 
specified in the notification, the Medicare contractor will then begin 
action. If no reply is received from the provider or supplier, we 
believe that suspension is required to protect a program such as 
Medicare or Medicaid from financial loss and that it is not necessary 
to make a separate determination on that fact. Even if a reply is 
received, suspension may be required, and a separate determination is 
unnecessary.
    If the provider or supplier submits a statement as to why a 
suspension of payment, recoupment, or offset should not be put into 
effect, the intermediary or carrier will have 15 days from the date the 
statement is received to consider the statement and make a 
determination whether the facts justify a suspension, or removal of a 
suspension already initiated. Suspension, however, will not be delayed 
in order to review any statement submitted.
    In further response to the concerns expressed by the commenters, we 
have decided to impose a limitation upon how long we will suspend 
payment pending a determination whether or not an overpayment exists 
and in matters involving fraud or willful misrepresentation. The 
purpose of suspending payment is to verify whether, and how much, 
payment was

[[Page 63743]]

actually due the provider for past claims and to ensure that, if a 
provider or supplier was overpaid, sufficient funds are available to 
recover the overpayment. These actions are clearly necessary to protect 
the Trust Funds from loss. It is implicit that, when payment is 
suspended, determinations of overpayment, or of fraud or willful 
misrepresentation, should be made promptly. Accordingly, because it is 
appropriate that a provider or supplier receive a prompt determination 
so that it may receive any balances actually due after application of 
recoupment or offset, we have decided to limit suspension of Medicare 
payment to 180 days, with a possible extension of up to 180 additional 
days being granted to the intermediary, carrier, or OIG by HCFA. This 
period will enable us or the carrier or intermediary, as the case may 
be, to investigate and to determine the amounts of any Medicare 
overpayments or, in cases involving the OIG, for the OIG to complete 
its investigation, while protecting the Medicare Trust Funds. At the 
same time, providers and suppliers have the security of knowing that 
the suspension may culminate in an appealable determination within a 
specific period of time if the claims are subsequently denied. (A 
decision to suspend payment is not an initial determination subject to 
appeal under Secs. 405.704, 405.803, or 405.1803.)
    In addition, we recognize that there may be special circumstances 
in which the specified time limit (that is, 180 days plus up to 180 
additional days) may not be sufficient. Therefore, we may grant an 
exception to the time limits in the following situations:
     The case has been referred to, and is being considered by, 
the OIG for administrative action, that is, civil money penalties.
     The Department of Justice, generally through the United 
States Attorney with jurisdictional responsibility, submits a written 
request to HCFA that the suspension be continued based on the ongoing 
investigation and anticipated filing of criminal and/or civil actions. 
At a minimum, the request must include the following:
    *Identification of the entity under suspension.
    *The amount of time needed for continued suspension in order to 
implement the criminal and/or civil proceedings.
    *A statement of why and/or how criminal and/or civil actions may be 
affected if the requested extension is not granted.
    Once a determination is made, any overpayments will be recouped or 
offset, first from suspended funds, then from any other monies owed the 
debtor in accordance with usual Medicare program rules. (See, for 
example, Sec. 401.607(a)). Note that, in contrast to the decision to 
suspend payment, an overpayment determination is an initial 
determination, subject to appeal, but that appeals do not delay 
recoupment. Also note that, as defined in this final rule at 
Sec. 405.370, recoupment may constitute 100 percent of any monies due 
if the debt to Medicare is equal to or greater than the amounts 
payable. Nonetheless, for the very reasons raised by the commenters, 
Medicare usually does not impose 100 percent recoupment in the absence 
of a basis for doing so, such as the debtor's failure to respond to a 
demand letter.
    Under current law and delegations of authority, HCFA is responsible 
for operating the Medicare program. This includes making determinations 
whether to suspend payment. In cases of suspected fraud or willful 
misrepresentation, the determination whether to suspend is generally 
made after consultation with the OIG, the Medicare contractor, U.S. 
Attorney, and other law enforcement agencies as appropriate to the 
case. Where the OIG or other law enforcement agency requests 
suspension, the requesting agency must advise us of the basis for the 
request. Thus, although the OIG is responsible for identifying, 
investigating, and pursuing matters of fraud and abuse, HCFA is 
responsible for determining whether there is reliable evidence of an 
overpayment, whether to suspend payment, and, if the decision is to 
suspend payment, whether advance notice of the suspension should be 
given. (If advance notice is to be given, we usually direct the 
Medicare contractor to give the notice.) The Medicare contractor is 
responsible for promptly determining the overpayment. Once the amount 
of an overpayment is determined, the suspended payments are applied to 
recoup the overpayment. Although the Medicare contractor may implement 
a suspension, offset, or recoupment, HCFA is the real party in interest 
and is responsible for the actions.
    This final rule clarifies that our decision regarding whether to 
suspend payment may be based on information provided by the 
intermediary, carrier, a law enforcement agency, or other source. We 
will normally provide at least a 15-day delay before suspension is 
imposed. However, when it appears that the Medicare Trust Funds would 
be harmed by providing this notice or in matters involving fraud or 
misrepresentation, suspension may be imposed without prior notice. (We 
believe, however, that suspension without prior notice would be the 
exception.)

II. Determination of Allowable Interest Expense

A. Background

    Under the Medicare program, health care providers not subject to 
the prospective payment system generally are paid for the reasonable 
costs of the covered items and services they furnish to Medicare 
beneficiaries. Section 1861(v)(1)(A) of the Act defines reasonable 
costs as the cost actually incurred, excluding any cost unnecessary in 
the efficient delivery of needed health services. Section 1861(v)(1)(A) 
also provides that reasonable costs be determined in accordance with 
regulations that establish the methods to be used and the items to be 
included for purposes of determining which costs are allowable for 
various types or classes of institutions, agencies, and services.
    Providers may generally include interest expense (the cost incurred 
for the use of funds borrowed for patient care-related purposes) in 
allowable costs, but, under existing Sec. 413.153(b)(2)(iii), allowable 
interest expense must be reduced by investment income. Additionally, 
this section of the regulations provides that investment income from 
gifts and grants (whether restricted or unrestricted) is not used to 
reduce interest expense if the gift and grant funds are held separate 
and not commingled with other funds. The latter provision was intended 
to ensure that providers maintain the discrete nature of the grant 
funds and to facilitate the intermediaries' application of proper 
payment principles to the resulting investment income.
    Section 1134 of the Act, which was added by section 901 of the 
Omnibus Reconciliation Act of 1980 (ORA '80), Public Law 96-499, 
provides that, in the case of nonprofit hospitals, interest income from 
grants, gifts, or endowments, that have not been designated by the 
donor to be used to defray specific operating costs, is not to be 
offset against interest income.
    The provisions of section 901 of ORA '80, as well as our 
established position on commingling of funds, were incorporated in 
Transmittal No. 279 issued in January 1983. This transmittal, which 
revised section 202.6 of the Provider Reimbursement Manual (HCFA Pub. 
15-1), permits the pooling of funds for investment purposes, provided 
adequate records are maintained to enable the proper identification of 
funds

[[Page 63744]]

and investment income applicable to each.
    Existing Sec. 413.153(b)(2)(iii) excludes the following types of 
income from the interest expense offset requirements:
     Investment income from separately held and noncommingled 
gifts and grants.
     Income from a provider's funded depreciation.
     Income from qualified employee pension funds.
     Interest received as a result of judicial review by a 
Federal court.
    Under our current operating policy, investment income from a 
provider's deferred compensation funds and self-insurance funds that 
meet the program's qualifying compensation plans provided in section 
2140 of the Provider Reimbursement Manual and the qualifying criteria 
for self-insurance funds described in subsection 2162.7 of the Manual 
must become part of those funds and, as such, is unavailable for offset 
against interest expense.

B. Provisions of the Proposed Regulations

    We proposed to revise Sec. 413.153(b)(2)(iii) to modify the 
restriction against commingling to permit the pooling of grant, gift, 
or endowment funds for investment purposes for all providers, rather 
than only the nonprofit hospitals referenced in section 1134 of the 
Act. This change was proposed to conform the regulations to our current 
operating policy as set forth in section 202.6 of the Provider 
Reimbursement Manual (HCFA Pub. 15-1).
    As a conforming change, we also proposed to remove the regulations 
text located at Sec. 413.5(c)(3). This section contains outdated 
statements concerning offsetting of restricted grants, gifts, and 
income from endowments and ceased being effective with cost reporting 
periods beginning on or after October 1, 1983.
    We also proposed to make a technical change to the regulations at 
Sec. 413.90(b)(2) to remove the provision that required the offset of 
research grant funds (used for usual patient care purposes in 
conjunction with basic medical and hospital research) against usual 
patient care costs. This provision became obsolete with cost reporting 
periods beginning on or after October 1, 1983.
    We further proposed to clarify Sec. 413.153(b)(2)(iii) by adding to 
the exclusions from interest expense offset investment income on--
     A provider's deferred compensation plans; and
     Self-insurance trust funds.
    Because established program policy has always required that 
investment income earned on a provider's deferred compensation fund 
(Provider Reimbursement Manual, section 2140 ff.) or self-insurance 
fund (section 2162.7) become part of those funds, it is unavailable for 
offset against interest expense. We simply proposed to add these 
exclusions from interest expense offset to the regulations text to 
conform it to the established policy.

C. Analyses of and Responses to Public Comments

    We received a comment on these proposals with the following 
concern:
    Comment: The commenter requested that the proposed clarification of 
Sec. 413.153(b)(2)(iii) to permit the pooling of funds from grants and 
gifts be further modified to explicitly include monies from funded 
depreciation for nonprofit hospitals.
    Response: Section 413.153(b)(2)(iii) never prohibited the 
commingling of funded depreciation monies for investment purposes by 
either proprietary or nonprofit providers. Therefore, we believe that 
the change suggested by the commenter is unnecessary.

III. Provisions of the Final Rule

    This final rule with comment period incorporates those provisions 
of the August 1988 proposed rule that were not incorporated into the 
regulations by the July 10, 1991 final rule, with the changes listed 
below. The rationale for these changes has been discussed above in our 
responses to comments.
     We include definitions of the terms ``offset,'' 
``recoupment,'' and ``suspension of payment.'' (See Sec. 405.370.)
     We clarify that at least a 15-day notice to the provider 
or supplier is given in cases of recoupment or offset, as well as in 
cases of suspension of payment. (See Sec. 405.374(a).)
     We limit the duration of a suspension of payment. (See 
Sec. 405.372(d).)
     We clarify the procedures applicable to suspension of 
payment when fraud or willful misrepresentation is suspected. (See 
Sec. 405.372 (a) and (e).)
    In addition to the above changes, which were discussed in the 
responses to comments, we make the following clarifying, conforming, 
and technical changes:
     We revise Sec. 401.601, which sets forth the basis and 
scope of subpart F (Claims Collection and Compromise) of part 401 
(General Administrative Requirements). Paragraph (d) of this section 
identifies, as related regulations, HHS regulations applicable to HCFA 
that generally implement the Federal Claims Collection Act (FCCA) for 
the Department and are located at 45 CFR part 30. We add a statement to 
paragraph (d) to clarify that those regulations apply only to the 
extent HCFA regulations do not address a situation.
     We revise Sec. 401.607 (Claims collection). Paragraph 
(d)(1) of this section states that ``[i]n conformity with 4 CFR 102.3, 
HCFA may offset, where possible, the amount of a claim against the 
amount of * * * monies that a debtor is receiving or is due from the 
Federal government.'' The ``conformity'' phrase was included to reflect 
that offset of Medicare debts is consistent with general FCCA 
regulations. It was not intended to impose additional requirements not 
included in HCFA's FCCA regulations. It has come to our attention, 
however, that this phrase has caused confusion. Therefore, in order to 
eliminate this confusion, we remove the phrase.
     In Sec. 405.1803, ``Intermediary determination and notice 
of amount of program reimbursement,'' we revise paragraph (c), 
currently titled ``Use of notice as basis for recovery of 
overpayments,'' to conform it to the terminology and process this rule 
establishes in Secs. 405.370 through 405.377. First, we change the word 
``recovery'' wherever it appears in paragraph (c) to ``recoupment''. 
Second, we replace the phrase ``including the suspending of further 
payments to the provider in order to recover, or to aid in the recovery 
of,'' with ``including recoupment under Sec. 405.373 from ongoing 
payment to the provider of''. Third, we make a minor editorial change 
to break the existing first sentence into two sentences. Finally, 
because the cross reference made by the last sentence is no longer 
correct and we believe a cross reference is not necessary, we remove 
the last sentence.
     We make a number of technical changes (such as revising 
cross-reference citations because of the redesignations made by this 
final rule) that do not affect the substance of the provisions.

IV. 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 a final rule with comment period will not have 
a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, all providers and suppliers are 
considered to be small entities.

[[Page 63745]]

    In addition, section 1102(b) of the Act requires the Secretary to 
prepare a regulatory impact analysis if a rule may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This 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.
    Elimination of the requirement at existing Sec. 405.370(b) that an 
intermediary or carrier make a prior determination that a suspension of 
payment is needed to protect the Medicare program against financial 
loss may have an adverse economic effect on some providers and 
suppliers. However, we do not believe that this policy will affect a 
significant number of providers and suppliers. Additionally, the time 
limits on suspension established by this final rule may mitigate the 
adverse effect of our modifications to Sec. 405.370(b).
    In addition to the changes previously discussed in the notice of 
proposed rulemaking, we have made certain clarifying changes. We do not 
anticipate any economic effects resulting from our clarifications of 
already existing policy.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102 of the Act since we have determined, and the Secretary 
certifies, that this rule will not result in a significant economic 
impact on a substantial number of small entities and will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

V. Public Comment Period

    We have made certain changes from the proposed rule to improve the 
readability of the regulations and to clearly set forth the existing 
process and policy. In doing so, we have not made any substantive 
changes to existing regulations that were not included in our proposed 
rule or that are not being made in response to public comment on the 
proposed rule. While a prior public comment period is not required in 
this case, we are granting the public an opportunity to comment on 
these changes. As stated earlier, we are providing 60-day comment 
period on the following:
    (1) The differences between suspension, recoupment, and offset.
    (2) The fact that suspension or offset or recoupment will not be 
delayed beyond the date stated in the notice from the intermediary or 
carrier in order to review any statement submitted.
    (3) The inclusion of time limits on the period during which payment 
may be suspended.
    (4) The clarification of applicable procedures in the case of 
suspension of payment if fraud or willful misrepresentation is 
suspected.
    (5) The creation of two separate provisions concerning suspension 
of payment for failure to furnish information.
    (6) The reorganization of the provisions.
    Because of the large number of items of correspondence we normally 
receive on regulations, we cannot acknowledge or respond to them 
individually. We will, however, consider all comments concerning the 
issues noted directly above that are received by the date and time 
specified in the ``DATES'' section of this preamble. If we proceed with 
a subsequent document, we will respond to the comments in the preamble 
to that document.

List of Subjects

42 CFR Part 401

    Claims, Freedom of information, Health facilities, Medicare, 
Privacy.

42 CFR Part 403

    Health insurance, Hospitals, Intergovernmental relations, Medicare, 
Reporting and recordkeeping requirements.

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 411

    Kidney diseases, Medicare, Physician referral, Reporting and 
recordkeeping requirements.

42 CFR Part 413

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

42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 493

    Grant programs--health, Health facilities, Laboratories, Medicaid, 
Medicare, Reporting and recordkeeping requirements.

    42 CFR chapter IV is amended as follows:

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

    A. Part 405 is amended as set forth below:

Subpart C--Suspension of Payment, Recovery of Overpayments, and 
Repayment of Scholarships and Loans

    1. The authority citation for subpart C continues to read as 
follows:

    Authority: Secs. 1102, 1815, 1833, 1842, 1866, 1870, 1871, 1879 
and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1395l, 
1395u, 1395cc, 1395gg, 1395hh, 1395pp and 1395ccc) and 31 U.S.C. 
3711.

    2. The undesignated center heading preceding Sec. 405.370 is 
revised to read as follows:

SUSPENSION AND RECOUPMENT OF PAYMENT TO PROVIDERS AND SUPPLIERS AND 
COLLECTION AND COMPROMISE OF OVERPAYMENTS

    3. Sections 405.370 through 405.373 are redesignated as 
Secs. 405.371 through 405.374, respectively, and current Secs. 405.374 
through 405.376 are redesignated as Sec. 405.376 through 405.378, 
respectively.
    4. New Secs. 405.370 and 405.375 are added, and redesignated 
Secs. 405.371 through 405.374 are revised, to read as follows:


Sec. 405.370   Definitions.

    For purposes of this subpart, the following definitions apply:
    Offset. The recovery by Medicare of a non-Medicare debt by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. (Examples are Public Health Service debts or Medicaid 
debts recovered by HCFA).
    Recoupment. The recovery by Medicare of any outstanding Medicare 
debt by reducing present or future Medicare payments and applying the 
amount withheld to the indebtedness.
    Suspension of payment. The withholding of payment by an 
intermediary or carrier from a provider or supplier of an approved 
Medicare payment amount before a determination of the amount of the 
overpayment exists.

[[Page 63746]]

Sec. 405.371   Suspension, offset, and recoupment of Medicare payments 
to providers and suppliers of services.

    (a) General. Medicare payments to providers and suppliers, as 
authorized under this subchapter (excluding payments to beneficiaries), 
may be--
    (1) Suspended, in whole or in part, by HCFA, an intermediary, or a 
carrier if HCFA, the intermediary, or the carrier possesses reliable 
information that an overpayment or fraud or willful misrepresentation 
exists or that the payments to be made may not be correct, although 
additional evidence may be needed for a determination; or
    (2) Offset or recouped, in whole or in part, by an intermediary or 
a carrier if the intermediary, carrier, or HCFA has determined that the 
provider or supplier to whom payments are to be made has been overpaid.
    (b) Steps necessary for suspension of payment, offset, and 
recoupment. Except as provided in paragraph (c) of this section, HCFA, 
the intermediary, or carrier suspends payments only after it has 
complied with the procedural requirements set forth at Sec. 405.372. 
The intermediary or carrier offsets or recoups payments only after it 
has complied with the procedural requirements set forth at 
Sec. 405.373.
    (c) Suspension of payment in the case of unfiled cost reports. If a 
provider has failed to timely file an acceptable cost report, payment 
to the provider is immediately suspended until a cost report is filed 
and determined by the intermediary to be acceptable. In the case of an 
unfiled cost report, the provisions of Sec. 405.372 do not apply. (See 
Sec. 405.372(a)(2) concerning failure to furnish other information.)


Sec. 405.372   Proceeding for suspension of payment.

    (a) Notice of intention to suspend--(1) General rule. Except as 
provided in paragraphs (a)(2) through (a)(4) of this section, if the 
intermediary, carrier, or HCFA has determined that a suspension of 
payments under Sec. 405.371(a)(1) should be put into effect, the 
intermediary or carrier must notify the provider or supplier of the 
intention to suspend payments, in whole or in part, and the reasons for 
making the suspension.
    (2) Failure to furnish information. The notice requirement of 
paragraph (a)(1) of this section does not apply if the intermediary or 
carrier suspends payments to a provider or supplier in accordance with 
section 1815(a) or section 1833(e) of the Act, respectively, because 
the provider or supplier has failed to submit information requested by 
the intermediary or carrier that is needed to determine the amounts due 
the provider or supplier. (See Sec. 405.371(c) concerning failure to 
file timely acceptable cost reports.)
    (3) Harm to Trust Funds. A suspension of payment may be imposed 
without prior notice if HCFA, the intermediary, or carrier determines 
that the Medicare Trust Funds would be harmed by giving prior notice. 
HCFA may base its determination on an intermediary's or carrier's 
belief that giving prior notice would hinder the possibility of 
recovering the money.
    (4) Fraud or misrepresentation. If the intended suspension of 
payment involves suspected fraud or misrepresentation, HCFA determines 
whether to impose the suspension and if prior notice is appropriate. 
HCFA directs the intermediary or carrier as to the timing and content 
of the notification to the provider or supplier. HCFA is the real party 
in interest and is responsible for the decision. HCFA may base its 
decision on information from the intermediary, carrier, law enforcement 
agencies, or other sources. HCFA determines whether the information is 
reliable.
    (b) Rebuttal--(1) If prior notice is required. If prior notice is 
required under paragraph (a) of this section, the intermediary or 
carrier must give the provider or supplier an opportunity for rebuttal 
in accordance with Sec. 405.374. If a rebuttal statement is received 
within the specified time period, the suspension of payment goes into 
effect on the date stated in the notice, and the procedures and 
provisions set forth in Sec. 405.375 apply. If by the end of the period 
specified in the notice no statement has been received, the suspension 
goes into effect automatically, and the procedures set forth in 
paragraph (c) of this section are followed.
    (2) If prior notice is not required. If, under the provisions of 
paragraphs (a)(2) through (a)(4) of this section, a suspension of 
payment is put into effect without prior notice to the provider or 
supplier, the intermediary or carrier must, once the suspension is in 
effect, give the provider or supplier an opportunity to submit a 
rebuttal statement as to why the suspension should be removed.
    (c) Subsequent action. If a suspension of payment is put into 
effect, the intermediary, carrier, or HCFA takes timely action after 
the suspension to obtain the additional evidence it may need to make a 
determination as to whether an overpayment exists or the payments may 
be made. The intermediary, carrier, or HCFA makes all reasonable 
efforts to expedite the determination. As soon as the determination is 
made, the intermediary or carrier informs the provider or supplier and, 
if appropriate, the suspension is rescinded or any existing recoupment 
or offset is adjusted to take into account the determination.
    (d) Duration of suspension of payment--(1) General rule. Except as 
provided in paragraphs (d)(2) and (d)(3) of this section, a suspension 
of payment is limited to 180 days, starting with the date the 
suspension begins.
    (2) 180-day extension. (i) An intermediary, a carrier, or, in cases 
of fraud and misrepresentation, OIG or a law enforcement agency, may 
request a one-time only extension of the suspension period for up to 
180 additional days if it is unable to complete its examination of the 
information or investigation, as appropriate, within the 180-day time 
limit. The request must be submitted in writing to HCFA.
    (ii) Upon receipt of a request for an extension, HCFA notifies the 
provider or supplier of the requested extension. HCFA then either 
extends the suspension of payment for up to an additional 180 days or 
determines that the suspended payments are to be released to the 
provider or supplier.
    (3) Exceptions to the time limits. (i) The time limits specified in 
paragraphs (d)(1) and (d)(2) of this section do not apply if the case 
has been referred to, and is being considered by, the OIG for 
administrative action (for example, civil money penalties).
    (ii) HCFA may grant an extension in addition to the extension 
provided under paragraph (d)(2) of this section if the Department of 
Justice submits a written request to HCFA that the suspension of 
payment be continued based on the ongoing investigation and anticipated 
filing of criminal and/or civil actions. At a minimum, the request must 
include the following:
    (A) Identification of the entity under suspension.
    (B) The amount of time needed for continued suspension in order to 
implement the criminal and/or civil proceedings.
    (C) A statement of why and/or how criminal and/or civil actions may 
be affected if the requested extension is not granted.
    (e) Disposition of suspended payments. Payments suspended under the 
authority of Sec. 405.371(b) are first applied to reduce or eliminate 
any overpayments determined by the intermediary, carrier, or HCFA, 
including any interest assessed under the provisions of Sec. 405.378, 
and then applied to reduce any other obligation

[[Page 63747]]

to HCFA or to HHS. In the absence of a legal requirement that the 
excess be paid to another entity, the excess is released to the 
provider or supplier.


Sec. 405.373  Proceeding for offset or recoupment.

    (a) General rule. Except as specified in paragraph (b) of this 
section, if the intermediary, carrier, or HCFA has determined that an 
offset or recoupment of payments under Sec. 405.371(a)(2) should be put 
into effect, the intermediary or carrier must--
    (1) Notify the provider or supplier of its intention to offset or 
recoup payment, in whole or in part, and the reasons for making the 
offset or recoupment; and
    (2) Give the provider or supplier an opportunity for rebuttal in 
accordance with Sec. 405.374.
    (b) Paragraph (a) of this section does not apply if the 
intermediary, after furnishing a provider a written notice of the 
amount of program reimbursement in accordance with Sec. 405.1803, 
recoups payment under paragraph (c) of Sec. 405.1803. (For provider 
rights in this circumstance, see Secs. 405.1809, 405.1811, 405.1815, 
405.1835, and 405.1843.)
    (c) Actions following receipt of rebuttal statement. If a provider 
or supplier submits, in accordance with Sec. 405.374, a statement as to 
why an offset or recoupment should not be put into effect on the date 
specified in the notice, the intermediary or carrier must comply with 
the time limits and notification requirements of Sec. 405.375.
    (d) No rebuttal statement received. If, by the end of the time 
period specified in the notice, no statement has been received, the 
recoupment or offset goes into effect automatically.
    (e) Duration of recoupment or offset. If a recoupment or offset is 
put into effect, it remains in effect until the earliest of the 
following:
    (1) The overpayment and any assessed interest are liquidated.
    (2) The intermediary or carrier obtains a satisfactory agreement 
from the provider or supplier for liquidation of the overpayment.
    (3) The intermediary or carrier, on the basis of subsequently 
acquired evidence or otherwise, determines that there is no 
overpayment.


Sec. 405.374  Opportunity for rebuttal.

    (a) General rule. If prior notice of the suspension of payment, 
offset, or recoupment is given under Sec. 405.372 or Sec. 405.373, the 
intermediary or carrier must give the provider or supplier an 
opportunity, before the suspension, offset, or recoupment takes effect, 
to submit any statement (to include any pertinent information) as to 
why it should not be put into effect on the date specified in the 
notice. Except as provided in paragraph (b) of this section, the 
provider or supplier has at least 15 days following the date of 
notification to submit the statement.
    (b) Exception. The intermediary or carrier may for cause--
    (1) Impose a shorter period for rebuttal; or
    (2) Extend the time within which the statement must be submitted.


Sec. 405.375  Time limits for, and notification of, administrative 
determination after receipt of rebuttal statement.

    (a) Submission and disposition of evidence. If the provider or 
supplier submits a statement, under Sec. 405.374, as to why a 
suspension of payment, offset, or recoupment should not be put into 
effect, or, under Sec. 405.372(b)(2), why a suspension should be 
terminated, HCFA, the intermediary, or carrier must within 15 days, 
from the date the statement is received, consider the statement 
(including any pertinent evidence submitted), together with any other 
material bearing upon the case, and determine whether the facts justify 
the suspension, offset, or recoupment or, if already initiated, justify 
the termination of the suspension, offset, or recoupment. Suspension, 
offset, or recoupment is not delayed beyond the date stated in the 
notice in order to review the statement.
    (b) Notification of determination. The intermediary or carrier must 
send written notice of the determination made under paragraph (a) of 
this section to the provider or supplier. The notice must--
    (1) In the case of offset or recoupment, contain rationale for the 
determination; and
    (2) In the case of suspension of payment, contain specific findings 
on the conditions upon which the suspension is initiated, continued, or 
removed and an explanatory statement of the determination.
    (c) Determination is not appealable. A determination made under 
paragraph (a) of this section is not an initial determination and is 
not appealable.
    5. In redesignated Sec. 405.376, the heading of the section, 
paragraph (a), and the headings of paragraphs (e) and (f) are revised 
to read as follows:


Sec. 405.376  Suspension and termination of collection action and 
compromise of claims for overpayment.

    (a) Basis and purpose. This section contains requirements and 
procedures for the compromise of, or suspension or termination of 
collection action on, claims for overpayments against a provider or a 
supplier under the Medicare program. It is adopted under the authority 
of the Federal Claims Collection Act (31 U.S.C. 3711). Collection and 
compromise of claims against Medicare beneficiaries are explained at 20 
CFR 404.515.
* * * * *
    (e) Basis for termination of collection action.
* * * * *
    (f) Basis for suspension of collection action.
* * * * *
    6. Redesignated Sec. 405.377 is revised to read as follows:


Sec. 405.377  Withholding Medicare payments to recover Medicaid 
overpayments.

    (a) Basis and purpose. This section implements section 1885 of the 
Act, which provides for withholding Medicare payments to certain 
Medicaid providers that have not arranged to repay Medicaid 
overpayments as determined by the Medicaid State agency or have failed 
to provide information necessary to determine the amount (if any) of 
overpayments.
    (b) When withholding may be used. HCFA may withhold Medicare 
payment to offset Medicaid overpayments that a Medicaid agency has been 
unable to collect if--
    (1) The Medicaid agency has followed the procedure specified in 
Sec. 447.31 of this chapter; and
    (2) The institution or person is one described in paragraph (c) of 
this section and either--
    (i) Has not made arrangements satisfactory to the Medicaid agency 
to repay the overpayment; or
    (ii) Has not provided information to the Medicaid agency necessary 
to enable the agency to determine the existence or amount of Medicaid 
overpayment.
    (c) Institutions or persons affected. Withholding under paragraph 
(b) of this section may be made with respect to any of the following 
entities that has or had in effect an agreement with a Medicaid agency 
to furnish services under an approved Medicaid State plan:
    (1) An institutional provider that has in effect an agreement under 
section 1866 of the Act. (Part 489 (Provider and Supplier Agreements) 
implements section 1866 of the Act.)
    (2) A physician or supplier that has accepted payment on the basis 
of an assignment under section 1842(b)(3)(B)(ii) of the Act. (Section 
424.55 sets forth the conditions a supplier agrees to in accepting 
assignment.)

[[Page 63748]]

    (d) Amount to be withheld. (1) HCFA contacts the appropriate 
intermediary or carrier to determine the amount of Medicare payment to 
which the institution or person is entitled.
    (2) HCFA may require the intermediary or carrier to withhold 
Medicare payments to the institution or person by the lesser of the 
following amounts:
    (i) The amount of the Medicare payments to which the institution or 
person would otherwise be entitled.
    (ii) The total Medicaid overpayment to the institution or person.
    (e) Notice of withholding. If HCFA intends to withhold payments 
under this section, it notifies by certified mail, return receipt 
requested, the institution or person and the appropriate intermediary 
or carrier of the intention to withhold Medicare payments and follows 
the procedure in Sec. 405.374. The notice includes--
    (1) Identification of the institution or person; and
    (2) The amount of Medicaid overpayment to be withheld from payments 
to which the institution or person would otherwise be entitled under 
Medicare.
    (f) Termination of withholding. HCFA terminates the withholding 
if--
    (1) The Medicaid overpayment is completely recovered;
    (2) The institution or person enters into an agreement satisfactory 
to the Medicaid agency to repay the overpayment; or
    (3) The Medicaid agency determines that there is no overpayment 
based on newly acquired evidence or a subsequent audit.
    (g) Disposition of funds withheld. HCFA releases amounts withheld 
under this section to the Medicaid agency to be applied against the 
Medicaid overpayment made by the State agency.

Subpart R--Provider Reimbursement Determinations and Appeals

    7. The authority citation for part 405, subpart R continues to read 
as follows:

    Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 
405, 1302, 1395(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 
1395oo, and 1395ww).

    8. In Sec. 405.1803, paragraph (c) is revised to read as follows:


Sec. 405.1803  Intermediary determination and notice of amount of 
program reimbursement.

* * * * *
    (c) Use of notice as basis for recoupment of overpayments. The 
intermediary's determination contained in its notice is the basis for 
making the retroactive adjustment (required by Sec. 413.64(f) of this 
chapter) to any program payments made to the provider during the period 
to which the determination applies, including recoupment under 
Sec. 405.373 from ongoing payments to the provider of any overpayments 
to the provider identified in the determination. Recoupment is made 
notwithstanding any request for hearing on the determination the 
provider may make under Sec. 405.1811 or Sec. 405.1835.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

    B. Part 413 is amended as set forth below:
    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Sec. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).


Sec. 413.5  [Amended]

    2. In Sec. 413.5, paragraph (c)(3) is removed and reserved.
    3. In Sec. 413.90, paragraph (b)(2) is revised to read as follows:


Sec. 413.90  Research costs.

* * * * *
    (b) Application. (1) * * *
    (2) If research is conducted in conjunction with, and as a part of, 
the care of patients, the costs of usual patient care and studies, 
analyses, surveys, and related activities to serve the provider's 
administrative and program needs are allowable costs in the 
determination of payment under Medicare.
    4. In Sec. 413.153, paragraph (a)(1) introductory text is 
republished, and paragraphs (a)(1)(ii) and (b)(2) are revised to read 
as follows:


Sec. 413.153  Interest expense.

    (a)(1) Principle. Necessary and proper interest on both current and 
capital indebtedness is an allowable cost. However, interest costs are 
not allowable if incurred as a result of--
    (i) * * *
    (ii) An interest assessment on a determined overpayment (as 
described in Sec. 405.377 of this chapter); or
* * * * *
    (b) Definitions. (1) * * *
    (2) Necessary. Necessary interest is interest that meets the 
following requirements:
    (i) It is incurred on a loan made to satisfy a financial need of 
the provider. Loans that result in excess funds or investments are not 
considered necessary.
    (ii) It is incurred on a loan made for a purpose reasonably related 
to patient care.
    (iii) It is reduced by investment income except income from--
    (A) Gifts, grants, and endowments, whether held separately or 
pooled with other funds;
    (B) Funded depreciation that meets the program's qualifying 
criteria;
    (C) The provider's qualified pension funds;
    (D) The provider's deferred compensation funds that meet the 
program's qualifying criteria; and
    (E) The provider's self-insurance trust funds that meet the 
program's qualifying criteria.
    (iv) It is not reduced by interest received as a result of judicial 
review by a Federal court (as described in Sec. 413.64(j)).
* * * * *
    C. Technical Amendments.

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

    1. The authority citation for part 401 is revised to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh). Subpart F is also issued under the 
authority of the Federal Claims Collection Act (31 U.S.C. 3711).


Sec. 401.601  [Amended]

    2. In Sec. 401.601, the following changes are made:
    a. The following sentence is added at the end of paragraph (d)(1): 
``These regulations apply only to the extent HCFA regulations do not 
address a situation.''
    b. In paragraph (d)(2)(iii), the phrase ``Secs. 405.374 and 
405.376'' is removed, and the phrase ``Secs. 405.377 and 405.378'' is 
added in its place.


Sec. 401.607  [Amended]

    3. In Sec. 401.607, in paragraph (d)(1), the phrase ``In conformity 
with 4 CFR 102.3,'' is removed.

PART 403--SPECIAL PROGRAMS AND PROJECTS

    4. The authority citation for part 403 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).


Sec. 403.310  [Amended]

    5. In Sec. 403.310, in the last sentence of paragraph (a), the 
citation ``Sec. 405.376'' is

[[Page 63749]]

removed, and the citation ``Sec. 405.378'' is added in its place.

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

Subpart G--Reconsiderations and Appeals Under Medicare Part A

    6. The authority citation for part 405, subpart G continues to read 
as follows:

    Authority: Secs. 1102, 1151, 1154, 1156, 1869(b), 1871, 1872, 
and 1879 of the Social Security Act (42 U.S.C. 1302, 1320c, 1320c-3, 
1320c-4, 1395ff(b), 1395hh, 1395ii, and 1395pp).


Sec. 405.705  [Amended]

    7. In Sec. 405.705, in paragraph (d), the following changes are 
made:
    a. The citation ``(31 U.S.C. 951-953)'' is removed, and the 
citation ``(31 U.S.C. 3711)'' is added in its place.
    b. The citation ``Sec. 405.374'' is removed, and the citation 
``Sec. 405.376'' is added in its place.


Sec. 405.1801  [Amended]

    8. In Sec. 405.1801, in paragraph (a)(4), the citation 
``Sec. 405.374'' is removed, and the citation ``Sec. 405.376'' is added 
in its place.

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

    9. The authority citation for part 411 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).


Sec. 411.28  [Amended]

    10. In Sec. 411.28, in paragraph (b), the citation ``Sec. 405.374'' 
is removed, and the citation ``Sec. 405.376'' is added in its place.


Sec. 413.20  [Amended]

    11. In Sec. 413.20, in paragraph (e), the citation 
``Sec. 405.371(a)'' is removed wherever it appears (twice), and the 
citation ``Sec. 405.372(a)'' is added in place of the first appearance, 
and ``Sec. 405.372(b)'' is added in place of the second appearance.


Sec. 413.153  [Amended]

    2. In Sec. 413.153, in paragraph (a)(1)(iii), the citation 
``Sec. 405.376'' is removed, and the citation ``Sec. 405.378'' is added 
in its place.

PART 447--PAYMENTS FOR SERVICES

    13. The authority citation for part 447 continues to read as 
follows:

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


Sec. 447.31  [Amended]

    14. In Sec. 447.31, in paragraph (a), the citation ``Sec. 405.375'' 
is removed, and the citation ``Sec. 405.377'' is added in its place.

PART 493--LABORATORY REQUIREMENTS

    15. The authority citation for part 493 continues to read as 
follows:

    Authority: Sec. 353 of the Public Health Service Act, secs. 
1102, 1861(e), the sentence following 1861(s)(11), 1861(s)(12), 
1861(s)(13), 1861(s)(14), 1861(s)(15), and 1861(s)(16) of the Social 
Security Act (42 U.S.C. 263a, 1302, 1395x(e), the sentence following 
1395x(s)(11), 1395(s)(12), 1395(s)(13), 1395(s)(14), 1395(s)(15), 
and 1395(s)(16)).


Sec. 493.1834  [Amended]

    16. In Sec. 493.1834, in paragraph (i)(1)(ii), the citation 
``Sec. 405.376(d)'' is removed, and the citation ``Sec. 405.378(d)'' is 
added in its place.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: July 30, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: August 16, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-30057 Filed 11-29-96; 8:45 am]
BILLING CODE 4120-01-P