[Federal Register Volume 62, Number 1 (Thursday, January 2, 1997)]
[Rules and Regulations]
[Pages 26-31]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33093]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[BPD-788-F]
RIN 0938-AH12


Medicare Program; Electronic Cost Reporting for Skilled Nursing 
Facilities and Home Health Agencies

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

ACTION: Final rule.

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SUMMARY: This final rule adds the requirement that, for cost reporting 
periods ending on or after February 1, 1997, most skilled nursing 
facilities and home health agencies must submit cost reports currently 
required under the Medicare regulations in a standardized electronic 
format. This rule also allows a delay or waiver of this requirement 
where implementation would result in financial hardship for a provider. 
The provisions of this rule allow for more accurate preparation and 
more efficient processing of cost reports.

DATES: This final rule is effective February 1, 1997. This rule is 
applicable for cost reporting periods ending on or after February 1, 
1997.

FOR FURTHER INFORMATION CONTACT: Tom Talbott, (410) 786-4592.

SUPPLEMENTARY INFORMATION:

I. Background

    Generally, under the Medicare program, skilled nursing facilities 
(SNFs) and home health agencies (HHAs) are paid for the reasonable 
costs of the covered items and services they furnish to Medicare 
beneficiaries. Sections 1815(a) and 1833(e) of the Social Security Act 
(the Act) provide that no payments will be made to a provider unless it 
has furnished the

[[Page 27]]

information, requested by the Secretary, needed to determine the amount 
of payments due the provider. In general, providers submit this 
information through cost reports that cover a 12-month period. Rules 
governing the submission of cost reports are set forth in Federal 
regulations at 42 CFR 413.20 and 42 CFR 413.24.
    Under Sec. 413.20(a), all providers participating in the Medicare 
program are required to maintain sufficient financial records and 
statistical data for proper determination of costs payable under the 
program. In addition, providers must use standardized definitions and 
follow accounting, statistical, and reporting practices that are widely 
accepted in the health care industry and related fields. Under 
Secs. 413.20(b) and 413.24(f), providers are required to submit cost 
reports annually, with the reporting period based on the provider's 
accounting year. Additionally, under Sec. 412.52, all hospitals 
participating in the prospective payment system must meet cost 
reporting requirements set forth at Secs. 413.20 and 413.24.
    Section 1886(f)(1)(B)(i) of the Act required the Secretary to place 
into effect a standardized electronic cost reporting system for all 
hospitals participating in the Medicare program. This provision was 
effective for hospital cost reporting periods beginning on or after 
October 1, 1989. On May 25, 1994, we published a final rule with 
comment period in the Federal Register implementing the electronic cost 
reporting requirement for hospitals (59 FR 26960). On June 27, 1995, we 
published a final rule that responded to comments on the May 25, 1994 
final rule with comment period (60 FR 33123).

II. Provisions of the Proposed Regulations

    On December 5, 1995, we published a proposed rule in the Federal 
Register (60 FR 62237) that proposed to require SNFs and HHAs to submit 
cost reports in a standardized electronic format for cost reporting 
periods beginning on or after October 1, 1995. We also proposed that if 
a SNF or HHA believes that implementation of the electronic submission 
requirement would cause a financial hardship, it may submit a written 
request for a waiver or a delay of these requirements.
    We stated that we essentially would apply the current hospital 
electronic cost reporting requirements to SNFs and HHAs. Hospitals 
participating in Medicare must submit cost reports in a uniform 
electronic format for cost reporting periods beginning on or after 
October 1, 1989. These hospital cost reports must be electronically 
transmitted to the intermediary in American Standard Code for 
Information Interchange (ASCII) format. In addition to the electronic 
file, hospitals were initially required to submit a hard copy of the 
full cost report, which was later changed to a hard copy of a one-page 
settlement summary, a statement of certain worksheet totals found in 
the electronic file, and a statement signed by the hospital's 
administrator or chief financial officer certifying the accuracy of the 
electronic file (Sec. 413.24(f)(4)(iii)). Further, to preserve the 
integrity of the electronic file, we specified procedures regarding the 
processing of the electronic cost report once it is submitted to the 
intermediary. In addition, the provider's electronic program must be 
able to disclose that changes have been made to the provider's as-filed 
cost report. We proposed to apply these same hospital electronic cost 
reporting requirements to SNFs and HHAs.
    In the proposed rule, we discussed in detail the benefits of 
requiring electronic cost reports for SNFs and HHAs. The use of 
electronically prepared cost reports will be beneficial for SNFs and 
HHAs because the cost reporting software for these reports will 
virtually eliminate computational errors and substantially reduce 
preparation time. The use of cost reporting software will also save 
time when the provider discovers that it needs to change individual 
entries in the cost report.

III. Discussion of Public Comments

    We received six timely comments in response to the proposed rule. 
The majority of the commenters supported our proposal but had some 
questions and concerns regarding its implementation. A summary of these 
comments and our responses follow:

Waivers and Exclusions

    Comment. Several commenters requested clarification of the 
requirement for granting a waiver of electronic filing due to financial 
hardship. While some commenters suggested that we develop a defined set 
of criteria for determining when the requirement for electronic filing 
would impose a financial hardship on a provider, others supported our 
proposal of a case-by-case review of waiver requests. One commenter 
suggested that, in addition to financial hardship, waivers should be 
automatically granted for providers with low Medicare utilization.
    Commenters supporting case-by-case review advised us to remain 
flexible in making determinations of financial hardship until we have 
the experience and data to determine whether set criteria are 
necessary. Another commenter supporting our proposal noted that most 
providers have, or have access to, a computer and recommended that as 
part of a waiver request, a provider should be required to include a 
statement certifying that it does not own, rent, or have access to a 
computer.
    Commenters opposing case-by-case review were concerned that, based 
on hospitals' experiences with electronic filing, few waivers would be 
granted. These commenters asserted that it would be best to establish 
specific criteria for the waiver process.
    Response. We do not believe that the development of specific 
criteria for waiver requests is appropriate. For example, a 
characteristic such as a provider's size alone may not necessarily be a 
reliable indicator that electronic cost reporting would impose a 
financial hardship since even the smallest SNFs and HHAs are quite 
likely to already be using computer equipment. Thus, we believe that an 
individualized review of each waiver request based on the totality of 
the provider's financial situation would be the most effective method 
for making determinations. Factors that we may consider in determining 
whether to grant a waiver include whether the provider has access to a 
computer, the provider's size, level of Medicare utilization, and 
financial status.
    Regarding the commenters concern that, like hospitals, few waivers 
will be granted for SNFs and HHAs, we wish to point out that the small 
number of electronic reporting waivers granted to hospitals is 
attributed to the small number of hospitals that have requested them. 
We have received only 10 waiver electronic reporting requests from 
hospitals (of approximately 7,000 hospitals required to file 
electronically) since we implemented electronic reporting. All 10 
hospitals have been granted waivers. We note that hospitals must 
request the waiver every year. We anticipate receiving numerous 
requests from SNFs and HHAs. There are large differences in the 
financial structure between hospitals and long-term care providers. 
Hospitals provide many services that are not provided by SNFs and HHAs. 
Additionally, virtually all hospitals have, or have access to, computer 
equipment, which may or may not be the case for SNFs and HHAs. As we 
did with hospitals, we anticipate granting hardship waivers for 
providers with low Medicare utilization and

[[Page 28]]

providers with reimbursement systems that would be too costly to 
program (for example, all inclusive rate providers who are not required 
to file electronically). Each waiver request will be handled on a case-
by-case basis and waivers will be granted when a provider has 
documented appropriately its financial hardship.
    We note that if a provider subject to the requirements and not 
granted a hardship exemption does not submit its cost report 
electronically, Medicare payments to that provider may be suspended 
under the provisions of sections 1815(a) and 1833(e) of the Act. These 
sections of the Act provide that no Medicare payments will be made to a 
provider unless it has furnished the information, requested by the 
Secretary, that is needed to determine the amount of payments due the 
provider under the Medicare program. Section 405.371(d) provides for 
suspension of Medicare payments to a provider by the intermediary if 
the provider fails to submit information requested by the intermediary 
that is needed to determine the amount due the provider under the 
Medicare program. The general procedures that are followed when 
Medicare payment to a provider is suspended for failure to submit 
information needed by the intermediary to determine Medicare payment 
are located in section 2231 of the Medicare Intermediary Manual (HCFA 
Pub. 13). Those procedures include timeframes for ``demand letters'' to 
providers. Demand letters remind providers to file timely and complete 
cost reports and explain possible adjustments of Medicare payments to a 
provider and the right to request a 30-day extension of the due date.
    Comment. One commenter suggested that, to avoid unnecessary 
administrative costs and delays, the fiscal intermediary instead of 
HCFA should have responsibility for granting waiver requests.
    Response. We believe that our process for making waiver 
determinations is the most efficient and will allow each provider 
seeking a waiver to receive an individualized review of its request. As 
explained later, we have extended the deadline for filing waiver 
requests. The revised process specifies that the waiver request, 
including supporting documentation, must be submitted to a provider's 
intermediary no later than 30 days after the end of the provider's cost 
reporting period. The intermediary will review the request and forward 
it, with a recommendation for approval or denial, to the HCFA central 
office within 30 days of its receipt of the request. HCFA central 
office will either approve or deny the request by response to the 
intermediary within 60 days of receipt of the request from the 
intermediary.
    Comment. Some commenters expressed concern with the proposed 
deadline for filing waiver requests of 120 days before the end of the 
provider's cost reporting period. One commenter noted that the deadline 
should not be set before the end of the reporting period because the 
level of Medicare utilization can vary from month to month. Another 
commenter suggested that the time limits be modified to be more 
accommodating until HCFA has further experience with the impact of 
electronic cost reporting on SNFs and HHAs.
    Response. We have reconsidered our proposed policy in light of 
these comments and the fact that we have decided to extend the due date 
for filing electronic cost reports in this final rule (as discussed 
under the section on ``Implementation Date''). We agree with the 
commenters that it is appropriate to allow providers a longer time 
period within which to submit waiver requests. We have revised 
Sec. 413.24(f)(4)(v) to provide that a provider may submit a written 
request for delay or waiver with necessary supporting documentation to 
its intermediary no later than 30 days after the end of its cost 
reporting period.
    Comment. One commenter suggested that in lieu of a waiver, we 
should allow the hardware and software costs as ``below the line'' cost 
expenses by modifying the Medicare cost report to allow the provider to 
enter the software costs directly into reimbursable costs and to treat 
the hardware similarly, as a capital expense.
    Response. The use of electronic cost reporting software and the 
costs associated with it is similar to a provider hiring an accounting 
firm to complete its cost report. We do not make separate payments for 
these types of costs; rather we include the costs as administrative and 
general costs. Similarly, for those providers that have to purchase 
computer equipment, in accordance with existing regulations governing 
payment of provider costs, Medicare will pay for the cost of the 
equipment as an overhead cost.
    Comment. One commenter inquired about the effect of the rule on 
hospital-based HHAs. The commenter asked if hospital-based facilities 
will be required to submit a separate cost report. Another commenter 
requested clarification as to whether providers under the prospective 
payment system would be required to file electronically. Specifically, 
the commenter asked that we clarify our statement in the proposed rule 
that a SNF that furnishes fewer than 1,500 Medicare covered days in a 
cost reporting period would not be subject to the electronic cost 
reporting requirement (60 FR 62238).
    Response. The electronic cost reporting provision will only apply 
to those providers that are required to file a full Medicare cost 
report. Providers that are required to file less than a full cost 
report (that is, low or no Medicare utilization) will not file 
electronically but will be required to request a waiver of the 
requirement to file electronically. Hospital-based SNFs and HHAs file 
electronically through the hospital, would continue to do so, and would 
not file separately as a result of this regulation. We did not intend 
to exclude SNFs that are paid prospectively and that file their cost 
reports on Form 2540S. While Sec. 413.321 defines the Form 2540S as a 
simplified cost reporting form, the form does not meet the definition 
of a less than full cost report as discussed above. Absent a waiver, 
these SNFs will be required to file their cost reports electronically. 
Software will be available from HCFA and from commercial vendors that 
meet the requirements for electronic filing.

Implementation Date

    Comment. Commenters were concerned that the proposed implementation 
date for filing electronic cost reports beginning on or after October 
1, 1995, was too aggressive and would not allow sufficient time for 
providers with short period cost reports to file electronically.
    Response. We agree that the proposed implementation date should be 
revised. The new effective date will be timed to coincide with the 
completion of the installment of and training on the free software and 
electronic specifications.__ We anticipate that the software will be 
ready for distribution in time for providers to become accustomed to 
using it before they submit their cost reports for cost reporting 
periods ending on or after February 1, 1997. Thus, we are revising the 
implementation date to require SNFs and HHAs to begin filing their cost 
reports electronically for cost reporting periods ending on or after 
February 1, 1997. We believe that this revised implementation date will 
avoid prolonged extensions for short period cost reports. We also 
believe that providers with cost reporting periods ending on February 
1, 1997 (and who thus must file their cost reports by June 30, 1997), 
will have ample time to do what is needed to file an electronic cost 
report by June 30, 1997.

[[Page 29]]

Cost Reporting Software

    Comment. One commenter inquired about how providers will be paid 
for the cost of the electronic cost reporting software. Other 
commenters questioned the adequacy of the software offered by HCFA and 
its efficiency in performing electronic filing. These commenters' 
concerns were based on the difficulties experienced by hospitals in 
using the cost reporting software provided by HCFA. Another commenter 
suggested that the software be available at least 6 months before the 
implementation date for electronic filing to allow providers time to 
install the software and train staff. Additionally, one commenter 
advised that free software should be available for SNFs under the 
prospective payment system. Finally, commenters suggested that we 
develop software for billing and for the Provider Cost Report 
Reimbursement Questionnaire (Form 339).
    Response. HCFA will provide software, free of charge, to any 
provider that requests it. Alternatively, providers may purchase the 
software from any HCFA-approved software vendor. To obtain the free 
software, providers may contact their intermediaries or send a written 
request to the following address: Health Care Financing Administration, 
Division of Cost Principles and Reporting, Room C5-02-23, Central 
Building, 7500 Security Boulevard, Baltimore, MD 21244-1850. We note 
that, as with the cost of computer equipment, Medicare will pay for the 
cost of the software as an overhead cost through the cost report based 
on Medicare utilization.
    Regarding commenters' concerns about the adequacy of the cost 
reporting software, we note that while there were some difficulties 
with application of the free software for hospitals, the hospital cost 
report is extremely complex and requires extensive reporting for a 
number of Medicare services that are not provided by SNFs and HHAs. 
Thus, we do not anticipate having similar types of problems with cost 
reporting software for SNFs and HHAs because these providers generally 
file less complicated cost reports. The free software will not be 
developed to compete with commercial software packages. Rather, the 
software offered by HCFA will enable a provider with access to a 
computer to meet the requirements by filing an electronic data set to 
the fiscal intermediary in order to generate a cost report. We expect 
that the software will be a series of input screens that are designed 
to assimilate the cost reporting forms. Once the prescribed data are 
entered, these same data can be forwarded to the intermediary to 
produce a completed cost report. As stated above, we anticipate that 
the software will be ready for distribution in time to allow providers 
to install the software and train staff.
    While we do not currently require that providers submit bills in an 
electronic format, we strongly encourage electronic billing. We note 
that fiscal intermediaries can accept electronic bills prepared with 
commercially available software that meets Medicare specifications. 
Fiscal intermediaries also provide free software for submission of 
Medicare billing data. Providers should contact their intermediary's 
electronic billing department for information about this software. 
Additionally, we are currently in the process of developing a software 
package for the Form 339.

Audit Adjustments

    Comment. One commenter questioned the provision in proposed 
Sec. 413.24(f)(4)(iii), which requires that the fiscal intermediary 
must return the as-filed cost report to the provider for correction if 
it does not pass all specified edits. The commenter believed that 
requiring intermediaries to send rejected cost reports back to the 
provider would impose a burden because the provider would have to do a 
complete review of the cost report in order to identify and correct the 
error. The commenter suggested that we allow the intermediary 
discretion in determining whether to send a cost report back to the 
provider.
    Response. This section provides that the intermediary must reject a 
cost report that does not pass all specified edits. This provision is 
not intended to prohibit the intermediary from making audit adjustments 
to the provider's cost report. Rather, an intermediary must reject a 
cost report that fails a ``level one'' edit (for example, when the 
settlement amount on the hard copy cost report and the amount contained 
in the electronic file are different). Cost reports that fail level one 
edits result in incorrect settlement data that cannot be corrected by 
the intermediary for legal reasons. The cost report is the submission 
of the provider and must maintain its originality throughout the cost 
report settlement process.
    Comment. One commenter recommended that intermediaries not require 
providers to submit more than one hard copy of the cost report in 
addition to the electronic file.
    Response. During a transition period, we will require providers to 
submit a hard copy of the completed full cost report forms in addition 
to the electronic file (as we did for hospitals). Requiring a hard copy 
will allow the provider and the intermediary to compare data on the 
hard copy cost report to data in the electronic file to ensure accuracy 
and proper programming. Once providers and intermediaries become 
accustomed to the use of the electronic cost reporting software, we 
will no longer require that a hard copy of the full cost report be 
filed. After the transition period, SNFs and HHAs subject to the 
electronic reporting requirement will be required to file a hard copy 
of the one-page settlement sheet, a statement of certain worksheet 
totals found in the electronic file, and a statement signed by their 
administrator or chief financial officer certifying the accuracy of the 
electronic file.

IV. Provisions of the Final Rule

    In this final rule we are adopting the provisions as proposed with 
three revisions. Specifically, in response to a public comment, we are 
revising Sec. 413.24(f)(4) (ii) and (iv) to change the implementation 
date. These sections now provide that, effective for cost reporting 
periods beginning on or after February 1, 1997, SNFs and HHAs must 
submit cost reports in a standardized electronic format. Additionally, 
we are revising Sec. 413.24(f)(4)(v) to clarify that providers with low 
or no Medicare utilization may request a waiver of electronic cost 
reporting. We are making another revision to Sec. 413.24(f)(4)(v) to 
specify that a provider may submit a written request for a delay or a 
waiver with necessary supporting documentation to its intermediary no 
later than 30 days after the end of its cost reporting period.

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 such as this will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, all providers and small businesses 
that distribute cost-report software to providers are considered small 
entities. HCFA's intermediaries are not considered small entities for 
purposes of the RFA.
    In addition, section 1102(b) of the Social Security Act requires us 
to prepare a regulatory impact analysis for any final rule that may 
have a significant impact on the operation of a substantial number of 
small rural hospitals. Such an analysis must conform to the provisions 
of section 604

[[Page 30]]

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 rural impact statement since we have determined, and 
certify, that this final rule will not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    As stated above, under Secs. 413.20(b) and 413.24(f), providers are 
required to submit cost reports annually, with reporting periods based 
on the provider's accounting year. This final rule will require SNFs 
and HHAs, like hospitals, to submit their Medicare cost reports in a 
standardized electronic format. We anticipate that this requirement 
will take effect for cost reporting periods ending on or after February 
1, 1997, meaning that the first electronic cost reports will be due 
June 30, 1997.
    Currently, approximately 75 percent of all SNFs and HHAs submit a 
hard copy of an electronically prepared cost report to the 
intermediary. We believe that the provisions of this final rule will 
have little or no effect on these providers, except to reduce the time 
involved in copying and collating a hard copy of the report for 
intermediaries. In addition to the 75 percent of providers that 
currently use electronic cost reporting, this rule will not affect 
those providers that do not file a full cost report and, as stated 
above, will not be required to submit cost reports electronically.
    This final rule may have an impact on those providers who do not 
prepare electronic cost reports, some of whom may have to purchase 
computer equipment, obtain the necessary software, and train staff to 
use the software. However, as discussed below, we believe that the 
potential impact of this final rule on those providers who do not 
prepare electronic cost reports will be insignificant.
    First, a small number of providers that do not submit electronic 
cost reports may have to purchase computer equipment to comply with the 
provisions of this final rule. However, even among the 25 percent of 
SNFs and HHAs that do not submit electronically prepared cost reports, 
we believe that most providers already have access to computer 
equipment, which they are now using for internal record keeping 
purposes, as well as for submitting electronically generated bills to 
their fiscal intermediaries, for example. Thus, we do not believe that 
obtaining computer equipment will be a major obstacle to electronic 
cost reporting for most providers. For those providers that will have 
to purchase computer equipment, we note that, in accordance with 
current regulations governing payment of provider costs, Medicare will 
pay for the cost of the equipment as an overhead cost.
    We recognize that a potential cost for providers that do not submit 
electronic cost reports will be that of training staff to use the 
software. Since most SNFs and HHAs currently use computers, we do not 
believe that training staff to use the new software will impose a large 
burden on providers. An additional cost will be the cost of the 
software offered by commercial vendors. However, providers could 
eliminate this cost by obtaining the free software from HCFA.
    The requirement that hospitals submit cost reports in a 
standardized electronic format has been in place since October 1989. 
Since that time, the accuracy of cost reports has increased and we have 
received very few requests for waivers. Additionally, we have not 
received any comments from the hospital industry indicating that the 
use of electronic cost reporting is overly burdensome. We believe that 
electronic cost reporting will be equally effective for SNFs and HHAs, 
with the benefits (such as increased accuracy and decreased preparation 
time) outweighing the costs of implementation for most providers.
    In conclusion, we have determined that this final rule will not 
have a significant effect on SNF and HHA costs because these providers 
will not be required to collect any additional data beyond that which 
the regulations currently specify; cost reporting software is available 
at no cost from HCFA to any provider that requests it; most SNFs and 
HHAs have some type of computer equipment through which they currently 
prepare electronic cost reports; and a waiver of the electronic cost 
reporting requirement will be available to providers for whom the 
requirement will impose a financial hardship. We note that, as with the 
cost of computer equipment, Medicare will pay for the cost of the 
software as an overhead cost through the cost report based on Medicare 
utilization. Therefore, SNFs and HHAs will only be affected to the 
extent that, absent a waiver, they will be required to submit cost 
reports in a standardized electronic format to their intermediary. A 
provider that does not comply with the provisions of this rule, as 
specified in the preamble, will be subject to sections 1815(a) and 
1833(e) of the Act, which provide that no payments will be made to a 
provider unless it has furnished the information requested by the 
Secretary that is needed to determine the amount of payments due the 
provider under Medicare.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget 
(OMB).

VI. Collection of Information Requirements

    The overall information collection and recordkeeping requirements 
associated with filing HHA costs reports (HCFA Form 1728) have been 
approved by OMB through October 1997 (OMB approval number 0938-0022). 
Additionally, OMB has approved the overall information collection and 
record keeping requirement associated with filing SNF costs reports 
(HCFA Form 2540) through May 1999 (OMB approval number 0938-0463).
    This final rule does not require SNFs and HHAs to report any 
information on the electronic cost report that is not already required 
in the Medicare cost reports currently submitted by these providers. 
Although this regulation does not impose any new information collection 
requirements per se, the new electronic format requires HCFA to 
resubmit the information collection requirements to OMB for approval.
    We estimate that the number of hours each provider will save by 
submitting an electronically prepared cost report instead of manually 
preparing and photocopying the cost report will be about 4.5 hours for 
each affected HHA and 9 hours for each affected SNF. Assuming that 
approximately 25 percent of all SNFs and HHAs will be affected, that 
is, roughly 3,000 SNFs and 2,000 HHAs, we estimate that SNFs will save 
approximately 27,000 hours per year completing cost reports and HHAs 
will save about 9,000 hours per year.
    This final rule does not need to be reviewed by OMB under the 
Paperwork Reduction Act of 1995.

List of Subjects in 42 CFR Part 413

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

    42 CFR part 413 is amended as set forth below:

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

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


[[Page 31]]


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

    2. Section 413.1 is amended by redesignating paragraphs (a)(1)(ii) 
(C) through (J) as paragraphs (a)(1)(ii) (D) through (K), respectively, 
and adding a new paragraph (a)(1)(ii)(C) to read as follows:


Sec. 413.1  Introduction.

    (a) Basis, scope, and applicability.
    (1) Statutory basis. * * *
    (ii) Additional requirements. * * *
    (C) Sections 1815(a) and 1833(e) of the Act provide the Secretary 
with authority to request information from providers to determine the 
amount of Medicare payment due providers.
* * * * *
    3. Section 413.24 is amended by redesignating existing paragraphs 
(f)(4)(i) through (f)(4)(iv) as paragraphs (f)(4)(ii) through 
(f)(4)(v); adding a new paragraph (f)(4)(i); and revising redesignated 
paragraphs (f)(4)(ii) through (f)(4)(v) to read as follows:


Sec. 413.24  Adequate cost data and cost finding.

* * * * *
    (f) Cost reports. * * *
    (4) Electronic submission of cost reports. (i) As used in this 
paragraph, ``provider'' means a hospital, skilled nursing facility, or 
home health agency.
    (ii) Effective for cost reporting periods beginning on or after 
October 1, 1989, for hospitals, and cost reporting periods ending on or 
after February 1, 1997, for skilled nursing facilities and home health 
agencies, a provider is required to submit cost reports in a 
standardized electronic format. The provider's electronic program must 
be capable of producing the HCFA standardized output file in a form 
that can be read by the fiscal intermediary's automated system. This 
electronic file, which must contain the input data required to complete 
the cost report and the data required to pass specified edits, is 
forwarded to the fiscal intermediary for processing through its system.
    (iii) The fiscal intermediary stores the provider's as-filed 
electronic cost report and may not alter that file for any reason. The 
fiscal intermediary makes a ``working copy'' of the as-filed electronic 
cost report to be used, as necessary, throughout the settlement process 
(that is, desk review, processing audit adjustments, final settlement, 
etc). The provider's electronic program must be able to disclose if any 
changes have been made to the as-filed electronic cost report after 
acceptance by the intermediary. If the as-filed electronic cost report 
does not pass all specified edits, the fiscal intermediary rejects the 
cost report and returns it to the provider for correction. For purposes 
of the requirements in paragraph (f)(2) of this section concerning due 
dates, an electronic cost report is not considered to be filed until it 
is accepted by the intermediary.
    (iv) Effective for cost reporting periods ending on or after 
September 30, 1994, for hospitals, and cost reporting periods ending on 
or after, February 1, 1997, for skilled nursing facilities and home 
health agencies, a provider must submit a hard copy of a settlement 
summary, a statement of certain worksheet totals found within the 
electronic file, and a statement signed by its administrator or chief 
financial officer certifying the accuracy of the electronic file or the 
manually prepared cost report. During a transition period, skilled 
nursing facilities and home health agencies must submit a hard copy of 
the completed cost report forms in addition to the electronic file. The 
following statement must immediately precede the dated signature of the 
provider's administrator or chief financial officer:

    I hereby certify that I have read the above certification 
statement and that I have examined the accompanying electronically 
filed or manually submitted cost report and the Balance Sheet 
Statement of Revenue and Expenses prepared by ________ (Provider 
Name(s) and Number(s)) for the cost reporting period beginning 
________ and ending ________ and that to the best of my knowledge 
and belief, this report and statement are true, correct, complete 
and prepared from the books and records of the provider in 
accordance with applicable instructions, except as noted. I further 
certify that I am familiar with the laws and regulations regarding 
the provision of health care services, and that the services 
identified in this cost report were provided in compliance with such 
laws and regulations.

    (v) A provider may request a delay or waiver of the electronic 
submission requirement in paragraph (f)(4)(ii) of this section if this 
requirement would cause a financial hardship or if the provider 
qualifies as a low or no Medicare utilization provider. The provider 
must submit a written request for delay or waiver with necessary 
supporting documentation to its intermediary no later than 30 days 
after the end of its cost reporting period. The intermediary reviews 
the request and forwards it, with a recommendation for approval or 
denial, to HCFA central office within 30 days of receipt of the 
request. HCFA central office either approves or denies the request and 
notifies the intermediary within 60 days of receipt of the request.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: September 27, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 96-33093 Filed 12-31-96; 8:45 am]
BILLING CODE 4120-01-P