[Federal Register Volume 62, Number 100 (Friday, May 23, 1997)]
[Proposed Rules]
[Pages 28410-28413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13718]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Part 1001

RIN 0991-AA91


Health Care Programs, Fraud and Abuse; Intent To Form the 
Negotiated Rulemaking Committee for the Shared Risk Exception

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Intent to form negotiated rulemaking committee and notice of 
meetings.

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SUMMARY: We have been statutorily-mandated under section 216 of the 
Health Insurance Portability and Accountability Act (HIPAA) of 1996, to 
establish a negotiated rulemaking committee in accordance with the 
Negotiated Rulemaking Act and the Federal Advisory Committee Act 
(FACA). The committee's purpose would be to negotiate the development 
of the interim final rule addressing the shared risk exception, in 
section 216 of HIPAA, to the Federal health care programs' anti-
kickback provisions. The committee will consist of representatives of 
interests that are likely to be significantly affected by the interim 
rule. The committee will be assisted by an impartial facilitator. We 
are requesting public comments on whether we have properly identified 
interests that will be affected by key issues discussed below.

DATES: Comments will be considered if we receive them at the address 
provided below by no later than 5 p.m. on June 9, 1997.
    The meetings will be held at 9:00 a.m. on June 17-18, 1997, and 
July 28-30, 1997.

ADDRESSES: Please mail or deliver your written comments (1 original and 
3 copies) to the following address: Office of Inspector General, 
Department of Health and Human Services, Attention: OIG-33-NOI, Room 
5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code OIG-33-NOI. Comments received timely will be available for 
public inspections as they are received, generally beginning 
approximately 2 weeks after publication of a document, in Room 5550 of 
the Office of Inspector General at 330 Independence Avenue, S.W., 
Washington, D.C., on Monday through Friday of each week from 8:00 a.m. 
to 4:30 p.m., (202) 619-0335.
    The meetings will be held at the Holiday Inn Capitol, 550 C Street, 
SW., Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT:
Joel Schaer, (202) 619-0089, OIG Regulations Officer; Judy Ballard, 
(202) 690-7419, Convener.

SUPPLEMENTARY INFORMATION: 

I. Negotiated Rulemaking Act

    The Negotiated Rulemaking Act, Public Law 101-648 (5 U.S.C. 561-
569), establishes a framework for the conduct of negotiated rulemaking 
and encourages agencies to use negotiated rulemaking to enhance the 
informal rulemaking process. Under the Act, the head of an agency must 
consider whether--
     There is a need for a rule;
     There are a limited number of identifiable interests that 
will be significantly affected by the rule;
     There is a reasonable likelihood that a committee can be 
convened with a balanced representation of person who (1) Can 
adequately represent the interests identified, and (2) are willing to 
negotiate in good faith to reach a consensus on the rulemaking;
     There is reasonable likelihood that a committee will reach 
a consensus on the rulemaking within a fixed period of time;
     The negotiated rulemaking process will not unreasonably 
delay the development and issuance of a final rule;
     The agency has adequate resources and is willing to commit 
such resources, including technical assistance, to the committee; and
     The agency, to the maximum extent possible consistent with 
the legal obligations of the agency, will use the consensus of the 
committee with respect to developing the rule proposed by the agency 
for notice and comment.
    Negotiations are conducted by a committee chartered under the FACA 
(5 U.S.C. App. 2). The committee includes an agency representative and 
is assisted by an impartial facilitator. The goal of the committee is 
to reach consensus on the language or issues involved in a rule. If 
consensus is reached, it is used as the basis of the interim final 
rule. The process does not affect otherwise

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procedural requirements of the FACA, the Administrative Procedure Act 
and other statutes.

II. Subject and Scope of the Rule

A. Need for the Rule

    Section 216 of HIPAA (Public Law 104-191) mandates a negotiated 
rulemaking process for establishing standards for a statutory exception 
to the anti-kickback statute.

B. Subject and Scope of the Rule

    The Federal health care programs' anti-kickback statute, set forth 
in section 1128B(b) of the Social Security Act (the Act), provides 
criminal penalties for individuals or entities that knowingly and 
willfully offer, pay, solicit or receive bribes, kickbacks or other 
remuneration in order to induce business reimbursed by Medicare or 
other Federal health care programs. In addition, for violations of 
section 1128B(b), the Department has the authority to exclude a person 
or entity from participation in the Medicare or State health care 
programs, in accordance with section 1128(b)(7) of the Act.
    Because the statutory language of the anti-kickback statute is 
quite broad, there was concern that many innocuous or even beneficial 
arrangements would be covered by the statute. As a result, section 14 
of Public Law 100-93, the Medicare and Medicaid Patient and Program 
Protection Act of 1987, authorized the promulgation of regulations 
``specifying payment practices that shall not be treated as a criminal 
offense under section 1128B(b) of the Social Security Act and shall not 
serve as the basis for an exclusion under section 1128(b)(7) of such 
Act.'' These have come to be known as the ``safe harbor'' regulations. 
To date, we have promulgated two final rules that have established 13 
specific areas for ``safe harbor'' protection under the anti-kickback 
statute (July 21, 1991 (56 FR 35952) and January 25, 1996 (61 FR 
2122)).
    Section 216 of HIPAA specifically amends section 128B(b)(3)(F) of 
the Act to include a new statutory exception for risk-sharing 
arrangements. The provision establishes a new statutory exception from 
liability under the anti-kickback statute for remuneration between an 
eligible organization under section 1876 of the Act and an individual 
or entity providing items or services, or any combination thereof, in 
accordance with a written agreement between these parties. The 
provision also allows remuneration between an organization and an 
individual or entity if a written agreement places the individual or 
entity at ``substantial financial risk'' for the cost or utilization of 
the items or services provided. Section 216 requires the Department, in 
consultation with the Department of Justice, to engage in a negotiated 
rulemaking process to establish standards related to this exception for 
risk-sharing arrangements. The factors to be considered are (1) The 
level of risk appropriate to the size and type of arrangement; (2) the 
frequency of assessment and distribution of incentives; (3) the level 
of capital contribution; and (4) the extent to which the risk-sharing 
arrangement provides incentives to control the cost and quality of 
health care services.

C. Issues and Questions To Be Resolved

    We anticipate some discussions about the basic approach to the 
rule, including what policy issues are properly considered in 
determining whether arrangements should be excepted from the anti-
kickback provisions, whether flexibility or certainty in the rule is 
more important, and whether the definitions of terms used in the 
exception must be consistent with use of those terms in other contexts. 
In addition, we anticipate discussion on a limited number of specific 
issues.
Specific Issues for Discussion
    The negotiated rulemaking will address the following specific 
issues.
     How is the term ``written agreement'' to be defined?
    We expect discussion on whether the agreement should be of minimum 
duration, what the agreement should contain and whether unwritten side 
agreements should be prohibited.
     What does the term ``eligible organization under section 
1876 of the Social Security Act'' mean?
    We expect discussion on whether this phrase is limited to Medicare 
risk contractors (and to arrangements for services provided under 
Medicare contracts) or has a broader meaning. In addition, we expect 
discussions on whether the first part of the exception applies to 
remuneration only if it is in accordance with an agreement where an 
``eligible organization'' is a party, or also if in accordance with 
``lower level'' agreements, such as one between a physician and a 
physician group practice that has an agreement with a health 
maintenance organization. There may also be some discussion of the term 
``organization'' as used in the second part of the exception.
     What is an ``individual or entity providing items or 
services or a combination thereof''?
    We expect discussion on whether this includes entities such as drug 
companies or device manufacturers providing combinations of items and 
services, and when this constitutes ``bundling'' that would be harmful 
to the Federal health care programs without further protections. We 
also expect to address whether the services must be health care 
services or could be other services, such as marketing services.
     What constitutes ``substantial financial risk for the cost 
of utilization of items or service''?
    The legislative history of the exception lists certain factors 
(such as the level of capital contribution) to be taken into account in 
determining whether the risk is substantial. We expect discussion on 
how these factors should be taken into account, what constitutes risk 
(for example, should bonuses and withholds be treated the same), and 
whether special treatment should be given to encourage providers to 
assume risk where they do not ordinarily do so or where risk is 
difficult to measure. In addition, we anticipate discussion about how 
to take into account the total risk-sharing arrangement between the 
parties.
Issues Outside the Scope of the Rule
    With regard to parameters outside the scope of the rule, the OIG 
does not plan to negotiate the following issues--
     Whether any existing regulatory exceptions to the anti-
kickback provisions (safe harbors) should be amended, or proposed safe 
harbors enacted;
     Whether any other new safe harbors should be enacted; or
     How the OIG should implement a requirement that it issue 
advisory opinions.
    In addition, the OIG will not agree to adopt any practices or 
concepts that do not contain adequate controls on potential abuse or 
manipulation.
    We invite public comment on issues not identified.

III. Affected Interests and Potential Participants

    The convener has proposed, and we have agreed to accept, the 
following organizations as negotiation participants. We believe these 
organizations represent an appropriate mix of interests and backgrounds 
affected.

American Association of Health Plans
American Association of Retired Persons
American Health Care Association
American Hospital Association
American Medical Association

[[Page 28412]]

American Medical Group Association
Blue Cross Blue Shield Association
Consumer Coalition on Quality in Health Care
Coordinated Care Coalition
Department of Justice
Federation of American Health Systems
Health Industry Manufacturers Association
Heath Insurance Association of America
National Association of Community Health Centers
Independent Insurance Agents of America/National Association of Health 
Underwriters
National Association of Medicaid Fraud Control Units
National Association of State Medicaid Directors
Nation Rural Health Association
Pharmaceutical Research and Manufacturers Association
The IPA Association of America

    The interests identified included law enforcement agencies, health 
programs, health plans, provider organizations, health care 
professionals and consumers. In determining whether the potential 
effect of the rule on provider and professional groups which sought to 
participate is ``significant,'' we considered the extent to which--
     Items or services provided by group members are covered by 
the relevant programs;
     Group members are entering into risk-sharing arrangements;
     The anti-kickback provisions have been applied to 
prosecute or prohibit arrangements which group members have used or 
considered using (either where one party is an ``eligible 
organization'' or where risk-sharing may be involved); and
     The group actively lobbied for the exception or commented 
on related provisions. We also sought to reflect differences in the 
type of risk that might be assumed and in the ways individuals or 
entities organize to provide items or services.
    The intent in establishing the negotiating committee is that all 
interests are represented, not necessarily all parties. We believe this 
proposed list of participants represents all interests associated with 
the rule to be negotiated. We invite comment on this list of 
negotiation participants.

IV. Schedule for the Negotiation

    We have set a deadline of 6 months beginning with the date of the 
first meeting for the committee to complete work on developing the 
interim final rule. We intend to terminate the activities of the 
committee if it does not appear likely to reach consensus within this 
time period.
    The first meeting is schedule for June 17-18, 1997 at the Holiday 
Inn Capitol, 550 C Street, S.W., Washington, D.C. 20024. The first 
day's meeting will begin at 9:00 a.m. The purpose of this meeting will 
be discuss in detail how the negotiations will proceed and how the 
committee will function. The committee will--
     Agree to ground rules for committee operation;
     Hear presentations on the anti-kickback statute and 
related provisions, as well as what risk-sharing arrangements are being 
developed;
     Determine how best to address the principal issues; and
     If time permits, begin to address those issues.
    A second meeting is scheduled for July 28-30, 1997 at the Holiday 
Inn Capitol, 550 C Street, S.W., Washington, D.C. 20024, beginning at 
9:00 a.m. We expect that by this meeting the committee can complete 
action on any procedural matters outstanding from the organizational 
meeting, and either begin or continue to address the issues.
    Subsequent meetings of the committee would be held approximately 
one month apart, in the Washington, D.C. area.

V. Formation of the Negotiating Committee

A. Procedure for Establishing an Advisory Committee

    As a general rule, an agency of the Federal Government is required 
to comply with the requirements of FACA when it establishes or uses a 
group that includes nonfederal members as a source of advice. Under 
FACA, an advisory committee is established once the charter has been 
approved by the Secretary. We will not begin negotiations until the 
charter is approved.

B. Participants

    The number of participants in the group should not exceed 25. A 
number larger than this could make it difficult to conduct effective 
negotations. One purpose of this notice to help determine whether the 
interim final rule would significantly affect interests not adequately 
represented by the proposed participants. We do not believe that each 
potentially affected organization or individual must necessarily have 
its own representative. However, each interest must be adequately 
represented. Moreover, we must be satisfied that the group as a whole 
reflects a proper balance and mix of interests.

C. Requests for Representation

    If, in response to this notice, an additional individual or 
representative of an interest requests membership or representation in 
the negotiating group, we will determine, in consultation with the 
convener, whether that individual or representative should be added to 
the group. We will make that decision based on whether the individual 
or interest--
     Would be significantly affected by the rule; and
     Is already adequately represented in the negotiating 
group.

D. Establishing the Committee

    After reviewing any comments on this notice and any requests for 
representation, we will take the final steps to form the committee.

VI. Negotiation Procedures

    When the committee is formed, the following procedures and 
guidelines will apply, unless they are modified as a result of comments 
received on this notice or during the negotiating process.

A. Facilitator

    We will use an impartial facilitator. The facilitator will not be 
involved with the substantive development or enforcement of the 
regulation. The facilitator's role is to--
     Chair negotiating sessions;
     Help the negotiation process run smoothly; and
     Help participants define and reach consensus.

B. Good Faith Negotiations

    Participants must be willing to negotiate in good faith and be 
authorized to do so. We believe this must be accomplished by selection 
of senior officials as participants. We believe senior officials are 
best suited to represent the interests and viewpoint of their 
organizations. This applies to the OIG as well, and we are designating 
D. McCarty Thornton, Chief Counsel to the Inspector General, to 
represent the OIG.

C. Administrative Support

    We will supply logistical, administrative and management support. 
If deemed necessary and appropriate, we will provide technical support 
to the committee in gathering and analyzing additional data or 
information.

D. Meetings

    Meetings will be held at the Holiday Inn Capitol, 550 C Street, 
S.W., Washington, D.C. 20024 at the convenience of the committee. We 
are announcing the first two meetings through this notice, and will 
announce

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committee meetings and agendas through further notices in the Federal 
Register. Unless announced otherwise, meetings are open to the public.

E. Committee Procedures

    Under the general guidance and direction of the facilitator, and 
subject to any applicable legal requirements, the members will 
establish the detailed procedures for committee meetings that they 
consider most appropriate.

F. Defining Consensus

    The goal of the negotiating process is consensus. Under the 
Negotiated Rulemaking Act, consensus means that each interest concurs 
in the result, unless the term is defined otherwise by the committee. 
We expect the participants to fashion their working definition of this 
term.

G. Failure of Advisory Committee To Reach Consensus

    If the committee is unable to reach consensus, the OIG will proceed 
to develop an interim final rule. Parties to the negotiation may 
withdraw at any time. If this happens, the remaining committee members 
and the OIG will evaluate whether the committee should continue.

H. Record of Meetings

    In accordance with FACA's requirements, minutes of all committee 
meetings will be kept. The minutes will be placed in the public 
rulemaking record.

I. Other Information

    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Dated: April 11, 1997.
June Gibbs Brown,
Inspector General.

    Approved: May 19, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-13718 Filed 5-21-97; 10:02 am]
BILLING CODE 4150-04-M